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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 29, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from
______ to ______.
Commission File Number: 0-6643
UNITOG COMPANY
(Exact name of registrant as specified in its charter)
Delaware 44-0529828
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
101 West 11th Street, Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 474-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $ .01 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of voting stock held by non-affiliates of
the registrant was $133,553,491 as of March 1, 1995.
As of April 14, 1995, Unitog Company had 9,272,094 shares of common
stock outstanding.
Part I and Part II incorporate information by reference from the
registrant's Annual Report to Stockholders for the fiscal year ended January
29, 1995. Part III incorporates information by reference from the registrant's
definitive proxy statement, dated April 24, 1995.
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PART I
ITEM 1. BUSINESS.
Unitog Company, the registrant, together with its subsidiaries is referred
to herein as the "Company". The Company was first incorporated in Missouri in
1948 and was reincorporated under the laws of Delaware in 1969. The Company's
executive offices are located at 101 West 11th Street, Kansas City, Missouri
64105, and its telephone number is (816) 474-7000.
A. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Information incorporated herein by reference from the Company's Annual
Report to Stockholders for the fiscal year ended January 29, 1995, page 23.
B. NARRATIVE DESCRIPTION OF BUSINESS.
GENERAL
The Company is a leading provider of high quality uniform rental services
to a variety of industries and sells custom-designed uniforms primarily to
national companies in connection with their corporate image programs. The
Company manufactures substantially all the uniforms it rents or sells. The
Company provides national uniform programs for many of the largest companies in
the United States on both a rental and direct sale basis. In addition, the
Company believes it is one of the largest suppliers of uniforms to employees of
the United States Postal Service. Rental operations accounted for 70.6%, 70.3%
and 67.9% of the Company's total revenues in fiscal 1995, 1994 and 1993,
respectively. Uniform Direct sales accounted for the remaining revenues.
RENTAL OPERATIONS
The Company rents uniforms and other industrial items, such as dust mops,
wiping towels and entrance mats, and, to a lesser extent, linen items, such as
sheets, pillowcases, tablecloths and napkins, to customers who prefer a rental
laundry service instead of purchasing and maintaining such items themselves.
Uniform Rentals. The Company's rental services are designed to address
customers' requirements for managing employee uniform programs. The services
provided by Unitog include assistance in selecting fabrics, styles and colors
appropriate for a customer's needs; maintaining necessary inventory to match
the customer's changing employment levels; replacing worn items and providing
pick-up, cleaning, maintenance and delivery services on a regularly scheduled
basis.
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The Company provides rental services in 44 markets to customers in 26
states. Rental services are provided through industrial laundry facilities at
which the cleaning and processing of garments is performed. In addition, the
Company operates sales and service branches which serve as sales offices and
warehouse and distribution sites, allowing the Company to provide rental
services to customers in geographic areas adjacent to the immediate area of an
industrial laundry facility.
Generally, the Company's uniform rental service contracts cover a
multi-year term and provide compensation to Unitog in the event a customer
terminates the contract before the end of the term. In addition, if a rental
item is lost, stolen or destroyed, Unitog receives a specified replacement
value.
Linen Rentals. The Company rents linens, such as sheets, pillowcases,
tablecloths and napkins, primarily to customers in the hotel and food service
industries. Unitog has historically retained linen volume if the linen volume
does not adversely impact the operating efficiency of the rental plant. In
those instances where operating efficiency was affected, the Company has sold
linen volume.
DIRECT SALES
The Company has over 60 years of experience in supplying custom-designed
uniforms to national customers in connection with corporate image programs. A
majority of the Company's direct sales are to companies in diverse industries,
including automotive services, petroleum, brewing, soft drink bottling and
transportation industries. The Company believes that it has remained a leader
in uniform sales by consistently offering superior program management, prompt
order fulfillment and high quality uniforms in a variety of styles, colors and
fabrics.
Unitog provides a total uniform management program to its customers. The
Company assists its customers in designing attractive, readily recognizable
uniforms to complement the customer's overall corporate identity. The
Company's product line consists of shirts, trousers, jackets, coveralls,
rainwear, selected women's apparel and related accessories. In many cases, a
national customer selects a particular style of uniform and designates approved
suppliers to sell the uniforms to the customer's independent distributors,
franchisees or employees throughout the customer's distribution system. Unitog
specializes in assisting these national customers by promoting the benefits of
approved uniform programs through the use of professionally designed brochures,
promotional programs and direct sales contacts.
The Company has sold uniforms to employees of the United States Postal
Service under the Brookfield label for over 25 years. The Postal Service
provides an annual allotment ranging from $50 to
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$310 to each postal employee for uniform purchases. The individual employee is
then free to select uniforms from any supplier approved by the Postal Service.
Payment is made by the Postal Service directly to the Company to the extent of
the employee's allotment and any excess is paid directly by the employee.
SALES AND MARKETING
The Company considers its target market to be national and regional
customers seeking improved image and employee recognition as well as higher
levels of product quality and customer service.
The selling efforts of the Rental and Direct sales forces are combined
under common regional sales managers, creating a company-wide marketing
approach to maximize cross-selling opportunities by identifying customers'
needs, whether rental or direct sale. Unitog believes the program has resulted
in a more professional sales team, upgraded sales training and improved
salesperson productivity.
Uniform programs on the national level are handled by the national account
marketing department, whose members call directly on existing and prospective
rental and direct sale national accounts. The Company's Rental sales force is
comprised of salespersons based at the rental locations who call on customers
within the geographic service area of the rental location. In addition to the
Rental sales force, the Company's route salespersons have responsibility for
increasing sales to customers on their routes. The Company maintains a Direct
sales force that covers the continental United States, with each member being
assigned a specific sales territory. Sales of Postal Service uniforms are made
through direct sales calls on postal employees by commissioned representatives.
MANUFACTURING AND DISTRIBUTION
The Company manufactures garments and emblems for both the Rental and
Direct sales operations at four plants located in Missouri, one plant located
in Arkansas and one plant located in Honduras. The Company performs
manufacturing operations, consisting mainly of cutting, sewing and finishing
garments, for substantially all its product line. From time to time Unitog
contracts with independent garment manufacturers for a portion of its
requirements. Certain uniform accessories sold or rented by the Company, such
as shoes, ties and belts, are purchased from other manufacturers.
The Company maintains distribution centers in Ontario, California,
Atlanta, Georgia and Kansas City and Warrensburg, Missouri where its uniforms
are stored pending shipment to customers. The Company believes that its
experience and efficiency
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in the manufacturing and distribution processes enable the Company to provide
quick delivery of customized products.
SOURCES OF RAW MATERIALS
Substantially all of the fabrics used by Unitog in its manufacturing
process are acquired from textile mills located in the United States.
Alternative sources of these materials are generally available.
SEASONALITY
Rental operations are not generally subject to seasonality. Subject to
the effects of the introduction of new programs with national accounts, Direct
sales have historically been higher in the third and fourth quarters due to the
sale of fall and winter garments. As a result, operating income can be higher
in such quarters.
CUSTOMERS
No material part of the business of the Company is dependent upon a single
customer or a small number of customers.
COMPETITION
The business in which Unitog is engaged is highly competitive, and the
Company competes in both the sale and rental of uniforms with a large number of
other firms. The Company believes that the primary competitive factors that
affect its operations are design, quality, service and price. The Company
believes it maintains prices comparable to those of its major competitors and
endeavors to offer prompt and high quality service to its customers and
superior products as the principal methods of distinguishing itself from its
competition. Unitog's Rental operation competes with a number of national,
regional and local companies in the geographic areas it serves. The Company's
Direct sales operation also competes on a national basis with other suppliers
and uniform manufacturers. Some of these competitors are larger and have
greater financial resources than the Company.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws governing the use
and disposal of various wastes, including wastewater from its washing
processes. The Company has a continuing program to upgrade wastewater
treatment processes, where necessary, to avoid improper disposal. Although the
Company is subject to administrative and judicial proceedings from time to time
involving environmental matters, the Company does not believe that costs
incurred in connection with environmental compliance
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will have a material adverse effect on the consolidated financial statements of
the Company.
The Company is subject to various federal, state and local laws which
require the investigation and, in some cases, remediation of environmental
contamination. The Company is currently engaged in soil and groundwater
investigations at its Phoenix, Minneapolis and Los Angeles rental plants. The
Phoenix and Los Angeles plants are located in federal superfund sites several
square miles in size. The Company, along with certain unaffiliated parties,
has been designated by the U.S. EPA as a potentially responsible party under
the Comprehensive Environmental Response, Compensation and Liability Act with
respect to the Phoenix site. The Company entered into a consent order with EPA
requiring a soil and groundwater investigation at the Phoenix site. The cost
of the investigation will be borne by two other parties pursuant to a
settlement agreement with the Company. Test results at the Phoenix site
indicate that volatile organic compound contamination is present in the soil,
necessitating soil remediation. Groundwater tests have not detected on-site
contamination, although additional periodic groundwater testing is expected.
Test results at the Minneapolis and Los Angeles plants indicate that volatile
organic compound contamination is present in the soil and groundwater at those
plants. The Company believes that it will be required to remediate the soil at
the Minneapolis plant and has begun soil remediation at Los Angeles.
Additional testing is being conducted to determine if groundwater remediation
will be required at those facilities. The Company's estimate of the expense
related to all three of these sites has been accrued and charged to operating
expense. Based on information currently available, the Company does not
believe that additional costs of investigation and remediation at these sites
are individually or in the aggregate material to the consolidated financial
statements of the Company.
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EXECUTIVE OFFICERS OF THE COMPANY
Certain information about the executive officers of the Company is set
forth below.
PRINCIPAL OCCUPATION FOR
NAME AGE LAST FIVE YEARS
- ---- --- ------------------------
Randolph K. Rolf 53 Mr. Rolf has served as Chairman of the Board since
May 1991 and as a Director of the Company since 1986.
He has served as its President and Chief Executive
Officer since May 1988.
John W. Hall 64 Mr. Hall has served as the Company's Senior Vice
President - Human Resources and Industrial Relations
since 1984.
J. Craig Peterson 42 Mr. Peterson has served as the Company's Senior Vice
President - Finance and Administration and Chief
Financial Officer since July 1991. Prior to that
time he was a partner at KPMG Peat Marwick.
J. Keith Schreiman 53 Mr. Schreiman has served as the Company's Senior Vice
President - Sales and Marketing since May 1993.
From May 1988 to May 1993 he was the Company's
Senior Vice President - Direct Sales.
Terence C. Shoreman 40 Mr. Shoreman has served as the Company's Senior Vice
President - Rental Operations since May 1993. From
December 1989 to May 1993 he was a Vice President of
the Company's rental subsidiary.
G. Jay Arrowsmith 47 Mr. Arrowsmith has served as the Company's Vice
President - Manufacturing since August 1994. From
March 1994 to August 1994 he was a Vice President -
Manufacturing for Fruit of the Loom. Prior to that
time he was Sewing Operations Manager for Jostens
Sportswear.
Robert M. Barnes 37 Mr. Barnes has served as Vice President, General
Counsel and Secretary of the Company since May 1994.
From January 1990 until May 1994, he was General
Counsel and Secretary of the Company.
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PRINCIPAL OCCUPATION FOR
NAME AGE LAST FIVE YEARS
Ronald J. Harden 52 Mr. Harden has served as the Company's Controller
since 1981.
EMPLOYEES
The Company had approximately 3,225 full-time employees as of January 29,
1995.
ITEM 2. PROPERTIES.
The Company's rental processing plants have the necessary equipment to
clean and process uniforms and non-uniform items and also contain
administrative, sales and service personnel for the market serviced by the
plant. The Company owns substantially all of the machinery and equipment used
in its operations and owns and leases a fleet of vehicles.
The Company believes its facilities are generally of adequate size and
productive capacity to meet its current needs. The following chart provides
information concerning the Company's principal facilities.
Location Type of Facility
Birmingham, Alabama**.................. Processing Plant
Decatur, Alabama*...................... Processing Plant
Gadsden, Alabama*...................... Sales and Service Branch
Tempe, Arizona**....................... Processing Plant
Fort Smith, Arkansas**................. Manufacturing Facility
Long Beach, California**............... Processing Plant
Long Beach, California**............... Processing Plant
Ontario, California.................... Sales and Service Branch
and Distribution Center
San Diego, California.................. Processing Plant
San Fernando, California*.............. Sales and Service Branch
Union City, California*................ Processing Plant
Whittier, California**................. Processing Plant
Denver, Colorado*...................... Sales and Service Branch
Greeley, Colorado...................... Processing Plant
Atlanta, Georgia*...................... Processing Plant
Atlanta, Georgia*...................... Distribution Center
Freeport, Illinois*.................... Sales and Service Branch
Villa Park, Illinois**................. Processing Plant
Ft. Wayne, Indiana..................... Sales and Service Branch
Goshen, Indiana*....................... Processing Plant
Indianapolis, Indiana*................. Sales and Service Branch
Muncie, Indiana........................ Processing Plant
Cedar Rapids, Iowa*.................... Sales and Service Branch
Charles City, Iowa*.................... Processing Plant
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Location Type of Facility
Des Moines, Iowa*...................... Sales and Service Branch
Glenwood, Iowa**....................... Processing Plant
Duluth, Minnesota**.................... Processing Plant
Eagan, Minnesota....................... Processing Plant
Minneapolis, Minnesota**............... Processing Plant
Concordia, Missouri*................... Manufacturing Facility
Kansas City, Missouri*................. Corporate Offices
Kansas City, Missouri**................ Processing Plant and
Distribution Center
St. Charles, Missouri**................ Manufacturing Facility
University City, Missouri**............ Processing Plant
Warrensburg, Missouri**............... Manufacturing Facility and
Distribution Center
Warsaw, Missouri**..................... Manufacturing Facility
Las Vegas, Nevada*..................... Sales and Service Branch
Charlotte, North Carolina*............. Sales and Service Branch
Cleveland, Ohio*....................... Sales and Service Branch
Lima, Ohio*............................ Sales and Service Branch
Toledo, Ohio*(1)....................... Processing Plant
Xenia, Ohio*........................... Sales and Service Branch
Bloomsburg, Pennsylvania*.............. Processing Plant
Bristol, Pennsylvania**................ Processing Plant
Nashville, Tennessee**................. Sales and Service Branch
Dallas, Texas*......................... Processing Plant
Houston, Texas*........................ Processing Plant
La Ceiba, Honduras*.................... Manufacturing Facility
- ---------------
* Leased for various terms expiring from fiscal 1996 to fiscal 2004. The
Company expects that it will be able to renew or replace its leases on
satisfactory terms. Except as otherwise noted, all other properties are
owned.
** Pledged to secure certain long-term indebtedness.
(1) Includes an option to purchase in 2000 upon payment of a nominal amount.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to litigation incidental to its business, primarily
involving claims for personal injury, employment claims and environmental
matters as described in Item 1 above. Based on information currently
available, the Company does not believe its costs with respect to pending legal
matters will have a material adverse effect on the consolidated financial
statements of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information incorporated herein by reference from the information provided
under the caption "Common Stock Information" and "Price Range" in the Company's
Annual Report to Stockholders for the fiscal year ended January 29, 1995, page
26.
Dividends on the outstanding common stock totaled $.08 and $.07 per share
in fiscal 1995 and 1994, respectively, and are paid semi-annually. The
Company's principal credit agreements contain certain restrictions on
dividends. At January 29, 1995, the Company had $16.5 million in unrestricted
stockholders' equity available to pay future dividends.
ITEM 6. SELECTED FINANCIAL DATA.
Information incorporated herein by reference from the Company's Annual
Report to Stockholders for the fiscal year ended January 29, 1995, page 25.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information incorporated herein by reference from the Company's Annual
Report to Stockholders for the fiscal year ended January 29, 1995, pages 8 -
11.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information incorporated herein by reference from the Company's Annual
Report to Stockholders for the fiscal year ended January 29, 1995, pages 12 -
24.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information incorporated herein by reference from the Company's definitive
proxy statement for its 1995 Annual Meeting of Stockholders under the captions
"Nominees for Three-Year Terms", "Continuing Directors" and "Stock Ownership
and Trading Reports", pages 5 - 7, and from Item 1, "Executive Officers of
the Company", in Part I hereof.
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ITEM 11. EXECUTIVE COMPENSATION.
Information incorporated herein by reference from the Company's definitive
proxy statement for its 1995 Annual Meeting of Stockholders under the captions
"Compensation of Directors" and "Executive Compensation and Other Information",
page 6 and pages 8 - 13, except information under the captions "Board
Compensation Committee Report on Executive Compensation" and "Total Market
Return" are not incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information incorporated herein by reference from the Company's definitive
proxy statement for its 1995 Annual Meeting of Stockholders under the caption
"Stock Ownership of Certain Beneficial Owners and Management", pages 3 and
4.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information incorporated herein by reference from the Company's definitive
proxy statement for its 1995 Annual Meeting of Stockholders under the caption
"Related Party Transaction", page 7.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of the report:
1. Financial Statements (incorporated by reference from pages 12
- 24 of the Company's Annual Report to Stockholders for the fiscal year
ended January 29, 1995).
- - Independent Auditors' Report.
- - Consolidated Balance Sheets--January 29, 1995 and January 30, 1994.
- - Consolidated Statements of Earnings--Years ended January 29,
1995, January 30, 1994 and January 31, 1993.
- - Consolidated Statements of Stockholders' Equity--Years ended January 29,
1995, January 30, 1994 and January 31, 1993.
- - Consolidated Statements of Cash Flows--Years ended January 29, 1995,
January 30, 1994 and January 31, 1993.
- - Notes to Consolidated Financial Statements.
2. Exhibits.
3(a) Second Restated Certificate of Incorporation and amendment
thereto (incorporated by reference to Exhibit
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3(a) to Amendment No. 2 to Registration Statement on Form S-1
(SEC No. 33-27969)).
3(b) Third Amended and Restated Bylaws and amendment thereto
(incorporated by reference to Exhibit 3(b) to registrant's Annual
Report on Form 10-K for the fiscal year ended January 28, 1990).
4(a) Specimen common stock certificate (incorporated by reference to
Exhibit 4(a) to Registration Statement on Form S-3 (SEC No. 33-
59628)).
4(b) Reference is made to the Fourth Article of the Second Restated
Certificate of Incorporation (Exhibit 3(a) hereto), and Sections
9, 47, 48, 49 and 50 of the Third Amended and Restated Bylaws, as
amended (Exhibit 3(b) hereto).
4(c) Loan and Letter of Credit Reimbursement Agreement, dated
September 10, 1993, among Unitog Company, Unitog Rental Services,
Inc., United Missouri Bank, N.A., Harris Trust and Savings Bank
and NBD Bank, N.A., including promissory notes issued thereunder
(incorporated by reference to Exhibit 4(a) of Quarterly Report on
Form 10-Q for the quarterly period ended August 1, 1993).
4(d) Amendment No. 1 to Loan and Letter of Credit Reimbursement
Agreement, dated December 29, 1994, among Unitog Company, Unitog
Rental Services, Inc., United Missouri Bank, N.A., Harris Trust
and Savings Bank and NBD Bank, N.A.
4(e) Trust Indenture, dated as of December 7, 1988, between Unitog
Company, Unitog Rental Services, Inc., jointly and severally, and
Peoples Bank and Trust Company, including specimen copy of note
(incorporated by reference to Exhibit 4(h) to Registration
Statement on Form S-1 (SEC No. 33-27969)).
4(f) Amendment No. 1 to Trust Indenture, dated as of September 10,
1993, between Unitog Company, Unitog Rental Services, Inc. and
Peoples Bank and Trust Company (incorporated by reference to
Exhibit 4(c) of Quarterly Report on Form 10-Q for the quarterly
period ended August 1, 1993).
4(g) Amendment No. 2 to Trust Indenture, dated December 29, 1994,
between Unitog Company, Unitog Rental Services, Inc. and Peoples
Bank and Trust Company.
4(h) Note Agreement, dated as of December 1, 1993, among Unitog
Company, Unitog Rental Services, Inc. and Metropolitan Life
Insurance Company, and the Note issued
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thereunder (incorporated by reference to Exhibit 4(a) to
Quarterly Report on Form 10-Q for the quarterly period ended
October 31, 1993).
10(a)* Employment Agreement, dated July 1, 1991, between the registrant
and J. Craig Peterson (incorporated by reference to Exhibit 10(c)
to registrant's Annual Report on Form 10-K for the fiscal year
ended January 26, 1992).
10(b)* Unitog Company 1992 Stock Option Plan (incorporated by reference
to Exhibit 10(d) to registrant's Annual Report on Form 10-K for
the fiscal year ended January 26, 1992).
10(c)* Amendment No. 1 to Unitog Company 1992 Stock Option Plan
(incorporated by reference to Exhibit 10(d) to registrant's
Annual Report on Form 10-K for fiscal year ended January 30,
1994).
10(d)* Description of Management Incentive Plan (incorporated by
reference to Exhibit 10(e) to registrant's Annual Report on Form
10-K for fiscal year ended January 30, 1994).
10(e)* Unitog Company Outside Director Fee/Stock Program (incorporated
by reference to Exhibit B to registrant's definitive proxy
statement for its 1995 Annual Meeting of Stockholders).
13 Information incorporated by reference from the Annual Report to
Stockholders for the fiscal year ended January 29, 1995.
21 Subsidiaries of the registrant (incorporated by reference to
Exhibit 22 of the registrant's Annual Report on Form 10-K for the
fiscal year ended January 28, 1990).
23 Consent of independent public accountant.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit by Item 601 of Regulation S-K.
(b) There were no reports on Form 8-K filed during the fourth quarter of
fiscal 1995.
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UNITOG COMPANY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEX
<TABLE>
<CAPTION>
Page Reference
Annual Report
to
Stockholders
-------------
<S> <C>
Independent Auditors' Report 12
Financial Statements:
Consolidated Balance Sheets--January
29, 1995 and January 30, 1994 13
Consolidated Statements of Earnings--
Years Ended January 29, 1995, January
30, 1994 and January 31, 1993 14
Consolidated Statements of Stockholders'
Equity--Years Ended January 29, 1995,
January 30, 1994 and January 31, 1993 14
Consolidated Statements of Cash Flows--
Years Ended January 29, 1995, January
30, 1994 and January 31, 1993 15
Notes to Consolidated Financial Statements 16 - 24
</TABLE>
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
UNITOG COMPANY
By: /s/ Randolph K. Rolf
-------------------------
Randolph K. Rolf
Chairman, President and
Chief Executive Officer
April 25, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ------------- -----------
/s/ Randolph K. Rolf Chairman, President April 25, 1995
- ------------------------- and Chief Executive
Randolph K. Rolf Officer
/s/ J. Craig Peterson Senior Vice President April 25, 1995
- ------------------------- Finance and Adminis-
J. Craig Peterson tration and Chief
Financial Officer
/s/ Ronald J. Harden Controller April 25, 1995
- -------------------------
Ronald J. Harden
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SIGNATURE TITLE DATE
- --------- ---------- ---------
/s/ G. Kenneth Baum Director April 25, 1995
- --------------------------
G. Kenneth Baum
- -------------------------- Director April , 1995
John W. Caffry
/s/ D. Patrick Curran Director April 25, 1995
- --------------------------
D. Patrick Curran
/s/ Robert F. Hagans Director April 25, 1995
- --------------------------
Robert F. Hagans
- -------------------------- Director April , 1995
David B. Sharrock
/s/ William D. Thomas Director April 25, 1995
- --------------------------
William D. Thomas
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INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
3(a) Second Restated Certificate of Incorpora-
tion and amendment thereto (incorporated
by reference to Exhibit 3(a) to Amendment
No. 2 to Registration Statement on Form
S-1 (SEC No. 33-27969)).
3(b) Third Amended and Restated Bylaws and
amendment thereto (incorporated by refer-
ence to Exhibit 3(b) to registrant's Annual
Report on Form 10-K for the fiscal
year ended January 28, 1990).
4(a) Specimen common stock certificate
(incorporated by reference to Exhibit
4(a) to Registration Statement on Form S-3
(SEC No. 33-59628)).
4(b) Reference is made to the Fourth Article of
the Second Restated Certificate of Incorp-
oration (Exhibit 3(a) hereto), and Sec-
tions 9, 47, 48, 49 and 50 of the Third
Amended and Restated Bylaws, as amended
(Exhibit 3(b) hereto).
4(c) Loan and Letter of Credit Reimbursement Agree-
ment, dated September 10, 1993, among Unitog
Company, Unitog Rental Services, Inc., United
Missouri Bank, N.A., Harris Trust and Savings
Bank and NBD Bank, N.A., including promissory
notes issued thereunder (incorporated by refer-
ence to Exhibit 4(a) of Quarterly Report on Form
10-Q for the quarterly period ended August 1, 1993).
4(d) Amendment No. 1 to Loan and Letter of Credit
Reimbursement Agreement, dated December 29, 1994,
among Unitog Company, Unitog Rental Services, Inc.,
United Missouri Bank, N.A., Harris Trust and Savings
Bank and NBD Bank, N.A.
4(e) Trust Indenture, dated as of December 7,
1988, between Unitog Company, Unitog Rental
Services, Inc., jointly and severally, and
Peoples Bank and Trust Company, including
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SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
specimen copy of note (incorporated by
reference to Exhibit 4(h) to Registration
Statement on Form S-1 (SEC No. 33-27969)).
4(f) Amendment No. 1 to Trust Indenture, dated
as of September 10, 1993, between Unitog
Company, Unitog Rental Services, Inc. and
Peoples Bank and Trust Company (incorporated
by reference to Exhibit 4(c) of Quarterly
Report on Form 10-Q for the quarterly pe-
riod ended August 1, 1993.
4(g) Amendment No. 2 to Trust Indenture, dated
December 29, 1994, between Unitog Company,
Unitog Rental Services, Inc. and Peoples Bank
and Trust Company.
4(h) Note Agreement, dated as of December 1, 1993,
among Unitog Company, Unitog Rental Services,
Inc. and Metropolitan Life Insurance Company,
and the Note issued thereunder (incorporated by
reference to Exhibit 4(a) to Quarterly Report on
Form 10-Q for the quarterly period ended October 31,
1993).
Long-term debt instruments authorizing debt which
does not exceed 10% of the total consolidated assets
of the Company are not filed herewith but will be
furnished on request of the Commission.
10(a) Employment Agreement, dated July 1, 1991,
between the registrant and J. Craig
Peterson (incorporated by reference to Ex-
hibit 10(c) to registrant's Annual Report
on Form 10-K for the fiscal year ended January
26, 1992).
10(b) Unitog Company 1992 Stock Option Plan
(incorporated by reference to Exhibit 10(d)
to registrant's Annual Report on Form 10-K
for the fiscal year ended January 26, 1992).
10(c) Amendment No. 1 to Unitog Company 1992 Stock
Option Plan (incorporated by reference to Exhibit
10(d) to registrant's Annual Report on Form 10-K
for the fiscal year ended January 30, 1994)
18
<PAGE> 19
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
10(d) Description of Management Incentive Plan (incor-
porated by reference to Exhibit 10(e) to regis-
trant's Annual Report on Form 10-K for the fiscal
year ended January 30, 1994).
10(e) Unitog Company Outside Director Fee/Stock
Program (incorporated by reference to
Exhibit B to registrant's definitive proxy
statement for its 1995 Annual Meeting of
Stockholders).
13 Information incorporated by reference from
the Annual Report to Stockholders for the
fiscal year ended January 29, 1995.
21 Subsidiaries of the registrant (incorporated
by reference to Exhibit 22 of the regis-
trant's Annual Report on Form 10-K for
the fiscal year ended January 28, 1990).
23 Consent of independent public accountant.
19
<PAGE> 1
EXHIBIT 4(d)
AMENDMENT NO. 1
TO LOAN AND LETTER OF CREDIT
REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 1 is made as of the 29th day of December, 1994
among UNITOG COMPANY, a Delaware corporation (the "Company"), UNITOG RENTAL
SERVICES, INC., a California corporation ("Rental") (Company and Rental being
sometimes collectively referred to herein as the "Borrowers" or individually as
a "Borrower"), UMB BANK, N. A., Kansas City, Missouri, a national banking
association ("UMB"), HARRIS TRUST AND SAVINGS BANK, Chicago, Illinois, an
Illinois banking corporation ("Harris"), NBD BANK, N.A., Detroit, Michigan, a
national banking association ("NBD") (UMB, Harris and NBD being sometimes
collectively referred to herein as the "Banks" or individually as a "Bank") and
UMB BANK, N.A., Kansas City, Missouri, a national banking association, as agent
for the Banks herein (in such capacity, the "Agent").
RECITALS
WHEREAS, as of September 10, 1993, the Borrowers, the Banks and the
Agent entered into a Loan and Letter of Credit Reimbursement Agreement (the
"LOAN AGREEMENT"), pursuant to which the Banks provided to the Borrowers
revolving loans of up to Thirty-Five Million Dollars ($35,000,000) and issued
the Letter of Credit and provided certain other accommodations.
WHEREAS, the Letter of Credit was issued to Peoples Bank & Trust
Company as trustee (the "TRUSTEE") under a Trust Indenture (the "INDENTURE")
dated as of December 1, 1988, for the purpose of securing certain notes (the
"Notes") issued by the Borrowers pursuant to the Indenture.
WHEREAS, the Trustee and the holders of the Notes have agreed to waive
the requirement that the Notes be secured by the Letter of Credit, as
specifically set forth in Amendment No. 2 to Trust Indenture, dated December
29, 1994.
WHEREAS, the parties desire to amend the Loan Agreement to reflect the
elimination of the Letter of Credit and to reflect certain other changes.
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the parties mutually agree as follows:
1. Consent to the Amendment to Trust Indenture. Each of the
Banks consents to the execution by the Borrowers of Amendment No. 2 to Trust
Indenture, dated as of December 29, 1994, among the Borrowers and the Trustee.
2. Amendment to Section 3 of the Loan Agreement. Section 3 of
the Loan Agreement is deleted in its entirety and replaced with the following:
<PAGE> 2
"Section 3
Cancellation of the Letter of Credit; Installment Loan
3.1 Cancellation of the Letter of Credit. Each of the Banks consents to
the cancellation and return of the Letter of Credit and agrees that all
obligations of the Borrowers with respect to the Letter of Credit are
terminated including, without limitation, the obligation of the Borrowers to
pay any commission in connection with the issuance or maintenance of the Letter
of Credit.
3.2 Installment Loan. If the Borrowers are in full and complete
compliance with the terms of this Agreement, upon the written election of the
Borrowers to the Agent, the Banks agree to loan to the Borrowers an amount
equal to the then outstanding principal balance of the Credit Enhanced Notes,
plus accrued interest thereon to the date of redemption, which loan shall be
used by the Borrowers for the sole purpose of redeeming the Credit Enhanced
Notes in full. Such loan shall be an installment loan obligation payable over
a term of four (4) years in equal quarterly payments of principal calculated
on a seven (7) year amortization of such principal amount and a final principal
payment in the amount of the remaining outstanding principal loan amount. Such
installment loan shall bear interest payable quarterly in arrears on the same
date as each principal payment is due and at a rate per annum equal to the
3-month LIBOR rate, as reported in the Wall Street Journal, plus the Applicable
Margin for LIBOR Advances plus 25 basis points, adjusted each ninety (90) days.
Upon receipt by the Agent of notice of any such election by the Borrowers, the
Agent shall immediately notify the Banks of such election. Three (3) Banking
Days after receipt of such notification, Harris and NBD shall each transfer to
the Agent by wire transfer or deposit to any correspondent account which Agent
may maintain with such Bank an amount equal to thirty percent (30%) of the
principal amount of the loan as provided above in this Section 3.2 and UMB
shall immediately transfer forty percent (40%) of such amount to the Agent.
Upon receipt by the Agent of notes executed by the Borrowers in the form of
Exhibit E attached hereto payable to each of the Banks in each Bank's Pro Rata
Share of such loan, the Agent shall disburse the amount of the loan to the
Borrowers by depositing the same in the Company's account at UMB, and the
Borrowers hereby authorize the disbursement of the loan in such manner. The
Agent shall handle the notes in the form of Exhibit E attached hereto and all
collections thereon in the same manner as provided in this Agreement for
collections on Revolving Credit Loans as respects the Banks."
3. References to Installment Loan. Each reference in the Loan Agreement
to the installment loan provided for in Section 3.8 shall be amended to mean
and refer to the installment loan provided for in Section 3.2 of the Loan
Agreement.
4. Amendment to Section 9.2.1. Section 9.2.1 of the Loan Agreement is
amended by deleting therefrom the phrase "may cause NBD to cause the Trustee to
accelerate payment of the Credit Enhanced Notes and to draw on the Letter of
Credit."
5. Amendment to Exhibit E. Exhibit E to the Loan Agreement is deleted in
its entirety and replaced by Exhibit E, attached hereto and incorporated herein
by reference.
2
<PAGE> 3
6. Representations and Warranties. The Borrowers hereby represent and
warrant that:
(a) The representations and warranties contained in the Loan
Agreement and in each certificate or document furnished by the Borrowers and
delivered therewith are true and correct in all material respects on and as of
the date hereof as though made on and as of the date hereof;
(b) No Event of Default, and to the Borrower's knowledge no event
which with the passage of time or the giving of notice or both could become an
Event of Default, exist on the date hereof, and no offsets or defenses exist
against their obligations under the Loan Agreement or the documents delivered
in connection therewith;
(c) This Amendment has been duly authorized, executed and delivered
so as to constitute the legal, valid and binding obligation of the Borrowers,
enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy insolvency, reorganization, moratorium or other similar
laws affecting creditor's rights generally and general principles of equity;
(d) The execution, delivery and performance of this Amendment will
not violate any applicable provision of law or judgment, order or regulation of
any court or of any public or governmental agency or authority nor conflict
with or constitute a breach of or a default under any instrument to which the
Borrowers are a party or by which the Borrowers or the Borrower's properties is
bound nor result in the creation of any lien, charge or encumbrance upon any
assets of the Borrowers.
7. Miscellaneous.
(a) The laws of the State of Missouri shall govern this Amendment.
(b) This Amendment shall be binding on the parties hereto and their
respective successors and assigns, and shall inure to the benefit of the
parties hereto.
(c) This Amendment may be executed in any number of counterparts, all
of which when taken together shall constitute but one agreement and any of the
parties hereto may execute this Amendment by signing any such counterpart.
(d) Section captions used in this Amendment are for convenience only
and shall not affect the construction of this Amendment.
(e) Capitalized terms used herein and not specifically herein defined
shall have the meanings ascribed in the Loan Agreement.
3
<PAGE> 4
IN WITNESS WHEREOF, the Borrowers, the Banks and the Agent have caused
this Amendment No. 1 to be executed by their respective officers duly
authorized as of the date first above written.
UNITOG COMPANY
By:/s/ J. Craig Peterson
------------------------------------------
J. Craig Peterson, Senior Vice President
Finance & Administration & Chief
Financial Officer
UNITOG RENTAL SERVICES, INC.
By:/s/ J. Craig Peterson
------------------------------------------
J. Craig Peterson, Senior Vice President
Finance & Administration & Chief
Financial Officer
UMB BANK, N.A.
Individually and as Agent
By:/s/ David A. Proffitt
----------------------------
Senior Vice President
NBD BANK, N.A.
By:/s/ Thomas A. Levasseur
--------------------------------
Vice President
HARRIS TRUST & SAVINGS BANK
By:/s/ Len E. Meyer
--------------------------------
Vice President
4
<PAGE> 5
EXHIBIT E
$_______________ Kansas City, Missouri
and Interest ___________, 199__
FOR VALUE RECEIVED, the undersigned each (the "undersigned" means each
maker and each jointly and severally agrees to all the provisions hereunder)
promise(s) to pay to the order of __________________________ (hereinafter
called "Bank"), at its main office, the principal sum of
_______________________________ Dollars in quarterly installments of principal
payable as follows:
$______________ on the _____________ day of _________________________,
19___ and $_____________ on the _______________ day of each succeeding quarter
thereafter until _________________, on which date all unpaid principal and
accrued interest shall be due and payable in full. Interest on the unpaid
principal balance shall accrue from the date hereof at the rate as provided in
that certain Loan and Letter of Credit Reimbursement Agreement ("Agreement")
between undersigned, the Bank and others dated September 10, 1993, the
provisions of which are incorporated herein by reference. Accrued interest
shall be due and payable on each date a principal payment is due. If any of
said principal installments or accrued interest thereon is not paid when due,
then all remaining installments plus accrued interest thereon shall, subject to
the terms of the Agreement, immediately become due and payable. Unless
provided in the Agreement to the contrary, each payment shall be applied first
to payment of accrued interest, and then to reduction of the principal sum.
This note shall bear interest after maturity at an annual rate two percent (2%)
above the rate otherwise then in affect until paid in full or cured. This note
may be prepaid in whole or in part at any time without premium or penalty.
Upon the occurrence of any of the events of default defined in Section 8
of the Agreement, then this note and all other obligations of each of the
undersigned to the holder shall, subject to the provisions of Section 9 of the
Agreement, immediately become due and payable in full in accordance with the
terms of said Agreement.
To the extent (if any) permitted by applicable law, the undersigned agrees
to pay all expenses of the holder in collecting this note, including reasonable
attorney's fees. the interpretation of this instrument and the rights and
remedies of the parties hereto shall be governed by the law of Missouri. The
undersigned warrant(s) and represent(s) that all loan proceeds of the
indebtedness evidenced hereby are to be used exclusively for business purposes
of the undersigned.
Demand for payment, notice of nonpayment, protest, notice of dishonor,
diligence and suit are hereby waived by all parties liable hereon.
5
<PAGE> 6
Any failure by the holder hereof to exercise any right hereunder shall not
be construed as a waiver of the right to exercise the same or any other right
at any other time and from time to time thereafter.
UNITOG COMPANY
By:________________________________
Title:_______________________________
UNITOG RENTAL SERVICES, INC.
By:________________________________
Title:_______________________________
6
<PAGE> 1
EXHIBIT 4(g)
AMENDMENT NO. 2
TO TRUST INDENTURE
This Amendment is entered into this 29th day of December, 1994 between
UNITOG COMPANY and UNITOG RENTAL SERVICES, INC. (the "Companies") and PEOPLES
BANK & TRUST COMPANY (the "Trustee").
RECITALS
WHEREAS, the Companies and the Trustee entered into a Trust Indenture,
dated as of December 1, 1988, governing the Companies' 9.68% Fixed Rate Credit
Enhanced Notes due December 1, 1998 (the "Original Notes"), which Indenture was
subsequently amended as of September 10, 1993 (as amended, the "Indenture").
WHEREAS, the Original Notes are secured by, among other things, a Letter
of Credit, dated as of September 10, 1993, issued by NBD Bank, N.A. (the
"Letter of Credit").
WHEREAS, the Original Notes are held by the Lincoln National Life
Insurance Company (the "Noteholder") and the Noteholder has agreed to waive the
requirement that the Original Notes and the Replacement Notes (as hereinafter
defined) be secured by the Letter of Credit, in exchange for certain changes to
the Indenture and in exchange for the issuance by the Companies of notes that
will replace the Original Notes and that have a higher interest rate than the
Original Notes.
WHEREAS, the parties desire to amend the Indenture as set forth herein to
reflect the elimination of the Letter of Credit and certain other changes.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Elimination of Letter of Credit. Effective as of the date hereof, the
requirement that the Original Notes (and any replacements thereof, including,
without limitation, the Replacement Notes) be secured by a letter of credit is
eliminated and the Indenture is amended to reflect the elimination of the
requirement to provide a letter of credit. The Trustee shall immediately
return the Letter of Credit to NBD Bank, N.A. for cancellation.
2. Replacement Notes: No Effect on Redemption.
(a) On the date hereof, the Companies shall issue to the Noteholder
the Companies' 10.055% Fixed Rate Notes due December 1, 1998 (the "Replacement
Notes"), which Replacement Notes shall be in the form attached hereto as
Exhibit A, in exchange for and as a replacement to the Original Notes.
Simultaneously with the issuance of the Replacement Notes, the Original Notes
shall be cancelled and the Noteholder shall immediately return the originals
thereof to the Trustee for cancellation and the Trustee following cancellation
shall immediately
<PAGE> 2
return the originals thereof to the Companies. All references in the
Indenture and in this Amendment No. 2 to the Notes shall from and after the
date hereof mean the Replacement Notes.
(b) The Trustee and the Noteholder (by signing the consent in the
form attached hereto) acknowledge that the agreement by the Companies to enter
into this Amendment No. 2 and the issuance by the Companies of the Replacement
Notes is predicated in part, on the absolute right of the Companies to redeem
the Replacement Notes in whole or in part, at a redemption price equal to one
hundred percent (100%) of the principal amount thereof plus accrued interest
thereon to the date of such redemption, on and after December 1, 1995.
Accordingly, the Trustee and the Noteholder (by signing the consent in the form
attached hereto) acknowledge and agree that nothing in the Indenture, this
Amendment No. 2 or otherwise shall impair, restrict or otherwise adversely
affect the Companies' absolute right to redeem the Replacement Notes, as stated
above on or after December 1, 1995.
3. Payments Under the Indenture. Commencing on the date hereof, all
amounts required to be paid by the Companies under the Replacement Notes
(including interest, optional and mandatory redemptions) shall be paid by the
Companies to the Trustee on the due dates thereof by wire transfer of
immediately available funds. Attached hereto as Exhibit B are the wire
instructions for payments to the Trustee.
4. Amendment to Second Paragraph. The second paragraph of the Indenture
is amended by deleting therefrom the words "and the Credit Bank."
5. Amendment to Section 2.10. Section 2.10 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 2.10. Security. The Notes are secured by the Mortgages and,
may after the date hereof, be secured from time to time by Additional
Collateral (as hereinafter defined). The Trustee shall consent to, and shall
have no right to disapprove, any release of collateral covered by the Mortgages
or Additional Collateral and shall promptly execute all documentation necessary
to effect the release (the "Release") upon the delivery by the Companies to the
Trustee of a certificate stating that the principal amount of the Notes
outstanding at the time of a request for a Release (the "Outstanding Amount")
will not, after giving effect to any such Release, exceed (x) ninety percent
(90%) for the period from and including the date hereof through and including
March 31, 1990, and (y) eighty-five percent (85%) for periods thereafter (the
"Applicable Percentage"), of (A) the fair market value of the collateral then
subject to Mortgages as determined by an independent appraisal, satisfactory to
the Trustee in its sole and absolute discretion, dated as of a date not earlier
than eighteen (18) months prior to the date of any such proposed Release plus
(B) the amount of Additional Collateral (together referred to herein as the
"Collateral Value"), it being the intent of the parties hereto and the
Noteholders that upon the presentation of such certificate, the Trustee shall
be absolutely required to execute such documentation as may be necessary to
effect the Release, without any requirement of obtaining the consent of the
Noteholders. If the Companies seek to obtain a Release and if the Outstanding
Amount exceeds the Applicable Percentage of the Collateral Value, or would
exceed the Applicable Percentage of the Collateral Value after giving effect to
the Release, the Companies
2
<PAGE> 3
acknowledge and agree that the collateral sought to be released may not be
released without the prior written consent of the Trustee and Initial Holders;
provided, however, that if the Companies elect to deposit with the Trustee, to
be held as additional collateral securing the obligations of the Companies
under this Indenture, cash or its equivalent equal to the amount by which the
Outstanding Amount exceeds the Applicable Percentage of the Collateral Value of
the collateral after giving effect to the proposed Release ("Additional
Collateral), then the Trustee shall be required to execute promptly
documentation necessary to effect the Release as above provided upon delivery
of the required certificate above described. The Trustee shall hold such
Additional Collateral in a separate account pledged for the benefit of the
Trustee to secure its obligations under the Indenture. The Trustee shall be
permitted to invest such Additional Collateral in Investment Securities and, so
long as there is no Event of Default by the Companies hereunder, interest or
other income derived from such Investment Securities shall inure solely to the
benefit of the Companies and the Trustee shall not have a security interest in
such interest. Notwithstanding anything in the Indenture to the contrary
whatsoever, the Applicable Percentage may not be waived or otherwise amended
without the prior written consent of the Initial Holders, so long as they own
any of the Notes.
The Trustee shall be required to accept such additional real estate
collateral hereunder to be included in the Mortgages for all purposes under
this Indenture as the Companies shall elect to deliver to the Trustee provided
that the Trustee shall receive customary opinions of counsel, title insurance
and representations and warranties with respect to the validity, binding nature
and enforceability of any such Mortgage.
The Companies hereby agree to grant on or before March 31, 1989 to the
Trustee a Mortgage on that certain real property of Unitog Rental Services,
Inc. located in Duluth, Minnesota and the Companies shall promptly notify the
Trustee of the recording of such Mortgage."
6. Amendment to Section 3.01(a). Section 3.01(a) of the Indenture is
deleted in its entirety and replaced with the following:
"(a) Redemption at Option of Companies. On and after December 1,
1995 (but not prior to December 1, 1995), all Notes or a portion of the
principal amount thereof are subject to redemption on any Interest Payment Date
at a redemption price equal to one hundred percent (100 %) of the principal
amount thereof plus accrued interest thereon to the date of such redemption."
7. Amendment to Section 3.02. Section 3.02 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 3.02. Notices to Trustee. If the Companies desire to redeem
Notes pursuant to Section 3.01(a), they shall notify the Trustee of the
redemption date and the principal amount of notes to be redeemed not later
than forty-five (45) days prior to the date fixed for such redemption."
3
<PAGE> 4
8. Deletion of Sections 3.03(a) and (b). Sections 3.03(a) and (b) of the
Indenture are each deleted in its entirety.
9. Deletion of Section 3.06. Section 3.06 of the Indenture is deleted in
its entirety.
10. Deletion of Section 4.02. Section 4.02 of the Indenture is deleted in
its entirety.
11. Amendment to Section 5.01. Section 5.01 of the Indenture is amended
by deleting all portions of Section 5.01 after the first sentence thereof.
12. Amendment to Section 5.03. Section 5.03 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 5.03. Deposits into the Note Fund. The Trustee shall
deposit into the Note Fund from time to time the following:
(a) In the Interest Account (i) all moneys received by the Trustee
under and pursuant to the provisions of this Indenture, required by any
provision of this Indenture to be deposited in the Interest Account or
accompanied by directions from the person depositing such moneys that such
moneys are to be paid into the Interest Account, and (ii) any other moneys
received by the Trustee accompanied by directions from the person depositing
such moneys that such moneys are to be paid into the Interest Account.
(b) In the Principal Account all moneys received by the Trustee under
and pursuant to the provisions of this Indenture required by any provision of
this Indenture to be deposited in the Principal Account or accompanied by
directions from the person depositing such moneys that such moneys are to be
paid into the Principal Account.
(c) In the Optional Redemption Account all moneys received by the
Trustee under and pursuant to the provisions of this Indenture required by any
provision of this Indenture to be deposited in the Optional Redemption Account
or accompanied by directions from the person depositing such moneys that such
moneys are to be paid into the Optional Redemption Account."
13. Amendment to Section 5.04.
(a) The preamble to Section 5.04 of the Indenture is deleted in its
entirety and replaced with the following: "Except as provided in Section 7.06,
moneys in the Note Fund shall be used solely for the payment of the principal
of and interest on the Notes as follows:"
(b) Section 5.04(c) of the Indenture is deleted in its entirety and
replaced with the following:
"(c) Anything in this Section 5.04 to the contrary
notwithstanding, the Trustee shall pay to the Companies any funds remaining in
the Interest Account, Principal
4
<PAGE> 5
Account or Optional Redemption Account after the application of funds in
accordance with this Section 5.04."
(c) The last paragraph of Section 5.04 is deleted in its entirety.
14. Deletion of Section 5.05. Section 5.05 of the Indenture is deleted
in its entirety.
15. Amendment to Section 6.01.
(a) Section 6.01(6) of the Indenture is deleted in its entirety and
replaced with the following:
"(6) An "Event of Default" shall occur under the terms of
that certain Note Agreement, dated as of December 1, 1993, between the
Companies and the Metropolitan Life Insurance Company."
(b) Section 6.01(7) of the Indenture is deleted in its entirety and
replaced with the following:
"(7) An "Event of Default" shall occur under the terms of
that certain Loan and Letter of Credit Reimbursement, dated September 10, 1993,
between the Companies and UMB Bank, n.a., Harris Trust and Savings Bank and NBD
Bank, N.A."
(c) Sections 6.01(8) and (9) of the Indenture are deleted in their
entirety.
16. Amendment to Section 6.02. Section 6.02 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 6.02. Acceleration.
(1) If an Event of Default occurs, the Trustee shall notify the
Companies and the Noteholders and shall declare the principal of and accrued
interest on all of the Notes to be due and payable; whereupon such principal
and accrued interest shall be due and payable on the earlier of (i) the next
succeeding Interest Payment Date or (ii) the 5th day after such declaration
(the "Payment Date").
(2) The Trustee shall, upon the written consent of the Holders of a
majority of a principal amount of the Notes acting singly, rescind an
acceleration and its consequences provided (A) the rescission would not
conflict with any judgment or decree and (B) all existing Events of Default
have been cured or waived except nonpayment of the principal and/or interest
that has become due solely because of the acceleration. In the case of any
such rescission, the Companies, the Trustee and the Noteholders shall be
restored to their former positions and rights under this Indenture."
5
<PAGE> 6
17. Amendment to Section 6.03. Section 6.03 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 6.03. Election of Remedies. The Trustee may maintain a
proceeding even if it does not possess any of the Notes or does not produce any
of them in the proceeding. A delay or omission by the Trustee or any
Noteholder in exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver of or acquiescence
in the Event of Default. All remedies are cumulative to the extent permitted
by law."
18. Amendment to Section 6.04. Section 6.04 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Notes, by notice to the Trustee, may waive an existing
Default or Event of Default and its consequences except a default in the
payment of the principal of or interest on any Note."
19. Amendment to Section 6.06. Section 6.06 of the Indenture is amended
by deleting from the preamble the phrase "Subject to Section 6.02(2) and (3),"
20. Amendment to Section 6.10. Section 6.10 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 6.10. Priorities. If the Trustee collects any money
pursuant to this Article it shall pay out the money in the following order:
First: To the Trustee for amounts due under Section 7.06;
Second: To the Noteholders for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal and interest, respectively; and
Third: To the Company."
21. Amendment to Section 6.13. Section 6.13 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 6.13. Release of Collateral. If the principal of and
interest on the Notes have been paid in full, then, upon such payment and
provision in full:
(i) All of the Trustee's rights, title and interests in and to the
Mortgages, the Additional Collateral and all of the liens and security
interests thereunder and on and to any other collateral for the Notes held by
the Trustee shall, without any further action on the part of the Trustee, the
Noteholders, the Companies or the Credit Bank be terminated, cancelled and
released
6
<PAGE> 7
and the Trustee shall execute and deliver such documents and instruments as may
be necessary or appropriate to effect such termination, cancellation and
release, it being the intention of this Section 6.13 that if the Notes are paid
in full, then the Companies shall succeed to all of the Trustee's right, title
and interest in and to the collateral for the Notes and the Trustee and the
Credit Bank shall have no interest therein by subrogation or otherwise; and
(ii) Any excess moneys in the Note Fund otherwise being held by
the Trustee under the Indenture, and any policies of insurance, including title
insurance, shall be, without any further action on the part of the Trustee, the
Noteholders, the Companies or the Credit Bank, be assigned to the Companies,
and the Trustee shall execute and deliver such documents or instruments as may
be necessary or appropriate to effect such assignment."
22. Amendment to Section 7.05. Section 7.05 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 7.05. Notice of Defaults; Other Notices. If an Event of
Default occurs and is continuing and if it is known to the Trustee, the Trustee
shall mail a notice of the Event of Default to the Noteholders immediately
after it has occurred. The Trustee shall mail copies to the Initial Holders of
any document or report which it receives from the Companies pursuant to this
Indenture promptly upon receipt by the Trustee."
23. Amendment to Section 7.07. Section 7.07 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 7.07. Replacement of Trustee. A resignation or removal of
the Trustee and appointment of a successor Trustee shall become effective only
upon (i) receipt by the Trustee and successor Trustee of written consent by the
Noteholders to such resignation or removal and appointment and (ii) the
successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Companies and the Holders.
The Holders of a majority in principal amount of the Notes may remove the
Trustee by so notifying the Trustee and the Companies. The Companies may
remove the Trustee if :
(1) The Trustee is adjudged a bankrupt or an insolvent;
(2) A receiver or public officer takes charge of the Trustee or its
property; or
(3) The Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Companies shall promptly appoint a
successor Trustee and notify the Holders of the same. Within one year after
the successor Trustee takes office, the Holders of a majority in principal
amount of the Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Companies.
7
<PAGE> 8
If after accepting appointment, a successor Trustee does not take
office within 60 days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Companies or the Holders of at least ten percent (10%) in
principal amount of the Notes may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and the Companies. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Noteholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.06."
24. Amendment to Section 8.01.
(a) Section 8.01(a)(ii) of the Indenture is amended in its entirety
to read as follows:
"(ii) the Trustee shall have received funds sufficient to
cover the Defeasance Amount (as hereafter defined) and shall hold such funds in
trust in an amount, or apply such funds for the purchase in trust of U.S.
Government Obligations maturing as to principal and interest at such times and
in such amounts as shall be, sufficient without further reinvestments to pay
principal and interest on the Notes to maturity or redemption, as the case may
be (the "Defeasance Amount");"
(b) Subparagraph (iii) of the third full paragraph of Section 8.01 of
the Indenture is deleted in its entirety.
25. Amendment to Section 9.01. Section 9.01 is deleted in its entirety
and replaced with the following:
"Section 9.01. Without Consent of Holders. The Companies and the
Trustee may amend this Indenture or the Notes without the consent of any
Noteholder to cure any ambiguity, defect or inconsistency; provided, however,
that no amendments may be made to the Indenture or the Notes without the
consent of the Noteholders so long as the Initial Holders own at least fifty
percent (50%) of the outstanding principal amount of the Notes."
26. Amendment to Section 9.02. Section 9.02 of the Indenture is deleted
in its entirety and replaced with the following:
"Section 9.02. With Consent of Holders. Except as otherwise provided
in Section 9.01, the Companies and the Trustee may amend this Indenture or the
Notes only with the written consent of the Holders of a majority in principal
amount of the Notes. However, without the consent of each Noteholder affected,
an amendment under this Section may not:
(1) Reduce the amount of Notes whose Holders must consent to an
amendment;
8
<PAGE> 9
(2) Reduce the rate of or change the time for payment of interest on
any Note;
(3) Reduce the principal of or change the fixed maturity or mandatory
redemption date of any Note;
(4) Make any Note payable in money other than that stated in the
Note; or
(5) Make any change in Section 6.04, 6.07 or this second sentence of
Section 9.02.
After an amendment under this Section becomes effective, the Trustee
shall mail to Noteholders a notice briefly describing the amendment."
27. Amendment to Section 10.01. Section 10.01 of the Indenture is amended
by deleting the fourth paragraph therefrom.
28. Amendment to Section 11.01. Section 11.01 of the Indenture is amended
by deleting all references therein to the Credit Bank.
29. Miscellaneous.
(a) The laws of the State of Indiana shall govern this Amendment.
(b) This Amendment shall be binding on the parties hereto and their
respective successors and assigns, and shall inure to the benefit of the
parties hereto.
(c) This Amendment may be executed in any number of counterparts, all
of which when taken together shall constitute but one agreement and any of the
parties hereto may execute this Amendment by signing any such counterpart.
(d) Section captions used in this agreement are for convenience only
and shall not affect the construction of this Amendment.
9
<PAGE> 10
IN WITNESS WHEREOF, the Companies and the Trustee have caused this
Amendment No. 2 to be executed by their respective officers duly authorized as
of the date first above written.
"COMPANIES"
UNITOG COMPANY
By:/s/ J. Craig Peterson
--------------------------------
J. Craig Peterson, Senior Vice
President Finance & Administration &
Chief Financial Officer
UNITOG RENTAL SERVICES, INC.
By:/s/ J. Craig Peterson
--------------------------------
J. Craig Peterson, Senior Vice
President Finance & Administration &
Chief Financial Officer
"TRUSTEE"
PEOPLES BANK & TRUST COMPANY,
individually and as Agent
By:/s/ Christopher White
--------------------------------
Christopher White, Vice President
ATTEST:
___________________________
___________________________
___________________________
10
<PAGE> 11
EXHIBIT A
(Face of Note)
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE. THIS NOTE MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN VIOLATION OF APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
No. A-________ $__________
UNITOG COMPANY
UNITOG RENTAL SERVICES, INC.
(JOINTLY AND SEVERALLY)
10.055% Fixed Rate Credit Enhanced Note
Due December 1, 1998
Interest Payment Dates: Monthly
Record Dates: Fifteenth day of month preceding next
Interest Payment Date
Dated: December ____, 1994
UNITOG COMPANY, a Delaware corporation with its principal place of
business at 101 West 11th Street, Kansas City, Missouri 64105, and UNITOG
RENTAL SERVICES, INC., a California corporation with its principal place of
business at 101 West 11th Street, Kansas City, Missouri 64105, jointly and
severally, promise to pay to __________________________, or registered assigns,
the principal sum of $_________________ on the due date set forth above,
subject to mandatory and optional redemption as provided in the Indenture, as
hereinafter defined.
11
<PAGE> 12
The Note is issued in exchange for and as a replacement to that certain
Note of the Companies dated December 1, 1988, No. R-___________.
UNITOG COMPANY
A Delaware corporation
By:________________________________
J. Craig Peterson, Senior Vice
President Finance &
Administration & Chief
Financial Officer
UNITOG RENTAL SERVICES, INC.
A California corporation
By:________________________________
J. Craig Peterson, Senior Vice
President Finance &
Administration & Chief
Financial Officer
Authenticated:
PEOPLES BANK & TRUST COMPANY, as Trustee
By:__________________________________
Christopher White, Vice President
12
<PAGE> 13
(Back of Note)
UNITOG COMPANY
UNITOG RENTAL SERVICES, INC.
(JOINTLY AND SEVERALLY)
10.055% Fixed Rate Credit Enhanced Note
Due December 1, 1998
1. Interest. UNITOG COMPANY, a Delaware corporation, and UNITOG RENTAL
SERVICES, INC., a California corporation (individually, a "Company" and
collectively, the "Companies"), jointly and severally, promise to pay interest
on the principal amount of this Note at the rate per annum shown above. The
Companies will pay interest monthly on the first day of each calendar month
("Interest Payment Date") of each year, commencing January 1, 1995. Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of original issuance of
the Notes. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
2. Method of Payment. The Companies will pay interest on the Notes
(except defaulted interest) to the persons who are registered holders of Notes
at the close of business on the Record Date shown above for the next Interest
Payment Date, even though Notes are cancelled after the Record Date and on or
before the Interest Payment Date, and otherwise as provided in Section 2.11 of
the Indenture.
3. Paying Agent, Registrar. Initially, Peoples Bank & Trust Company,
Indianapolis, Indiana ("Trustee"), will act as Paying Agent and Registrar.
4. Indenture. The Companies issued the Notes under a Trust Indenture
dated as of December 1, 1988, as amended by Amendment No. 1, dated September
10, 1993 and Amendment No. 2, dated December _____, 1994, between the Companies
and the Trustee (as amended, the "Indenture"). The terms of the Notes include
those stated in the Indenture. The Notes are subject to all such terms, and
Noteholders are referred to the Indenture for a statement of such terms. The
Notes are secured by the Mortgages (as defined in the Indenture) granted by
the Companies to the Trustee. The Notes are limited to $14,625,000 in
aggregate principal amount.
5. Prepayment. This Note and the other Notes outstanding under the
Indenture may be declared due prior to their expressed maturity dates,
voluntary prepayments may be made thereon by the Companies and certain
prepayments are required to be made thereon, all in the events, on the terms
and in the manner and amounts as provided in Article 3 of the Indenture.
13
<PAGE> 14
6. Restriction on Transfer. This Note has not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities law. The holder of this Note, by the acceptance hereof, represents
and warrants that it is acquiring this Note for investment purposes and not for
the purpose of distribution thereof. No transfer of this Note or any interest
herein shall be made unless such transfer is made pursuant to an effective
registration statement under the Securities Act or is made in a transaction
that does not require such registration. Until such time as this Note shall be
registered pursuant to a registration statement filed under the Securities Act,
this Note and any Note issued upon the transfer or replacement hereof shall
bear a legend to the effect set forth in the preceding sentence. In the event
that registration of a transfer is to be made in reliance upon an exemption of
the transfer from the Securities Act, the Companies or the Trustee may require,
in order to assure compliance with the Securities Act, the prospective
transferor and transferee to certify to the Companies and the Trustee in
writing the facts surrounding such proposed transfer. In the event that such
certificate of facts does not, in the reasonable judgment of the Companies or
the Trustee, on its face establish the availability of an exemption under the
Securities Act, the Companies or the Trustee may require an Opinion of Counsel
reasonably satisfactory to the Companies or the Trustee, as the case may be,
that such transfer may be made pursuant to an exemption from the Securities
Act. In lieu of the certification of facts surrounding a proposed transfer,
the prospective transferor or transferee may provide the Opinion of Counsel
referred to in the immediately preceding sentence. Any such Opinion of Counsel
shall be obtained at the expense of the prospective transferee and not at the
expense of the Companies or the Trustee, and shall be delivered to the
Companies and Trustee prior to or contemporaneously with any such transfer.
Neither the Companies nor the Trustee is obligated to register the Notes under
the Securities Act or to take any other action not otherwise required under
this Agreement to permit the transfer of Notes without registration.
7. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of either Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture of for any claim
based on, in respect of or by reason of such obligations or their creation.
Each Noteholder by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the
Notes.
8. Joint and Several Liability. The Companies' obligations hereunder and
under the Indenture are both joint and several and each Company expressly binds
itself, both jointly with the other company and individually to the Trustee for
the full payment and performance of such obligations, and acknowledges and
agrees that both may be sued together for the enforcement of such obligations
or that the Trustee may select either Company alone as the object of such suit.
The obligations of the Companies hereunder and under the Indenture are absolute
and unconditional, shall be without relief from valuation or appraisement laws
and shall remain in full force and effect until all such obligations have been
fully paid or performed, and such obligations shall not be affected, modified
or impaired upon the happening from time to time of any event or matter that
might be raised in avoidance of, or in defense against, an action to enforce
such obligations.
14
<PAGE> 15
9. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
The Companies will furnish to any Noteholder upon written request and
without charge a copy of the Indenture. Requests may be made to: Secretary,
Unitog Company, 101 West 11th Street, Kansas City, Missouri 64105.
15
<PAGE> 16
FORM OF ASSIGNMENT
____________________________________________
Social Security or Other Identifying Number
of Assignee
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto
(Please print or typewrite name and address, including postal zip code of
assignee.)
this Note and all rights hereunder, and hereby irrevocably constitute(s) and
appoint(s) __________________________ attorney to transfer this Note on the
Books of the Companies, with full power of substitution in the premises.
Dated:_____________________________
______________________________
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of this Note in
every particular, without
alteration or enlargement or
any change whatever.
16
<PAGE> 17
EXHIBIT B
WIRE INSTRUCTIONS FOR CASH
Peoples Bank & Trust Company
Indianapolis, Indiana 46204
ABA # 074000146
Attn: Trust Department
Ref: Unitog Note Issue
17
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
Revenues for fiscal 1995 were $189.1 million, an increase of $11.2 million, or
6% over fiscal 1994.
Rental revenues were $133.5 million for fiscal 1995, an increase of $8.5
million, or 7% over last year. Internal growth from our existing locations was
4% for fiscal 1995. Revenue increases for industrial rentals were stronger
than last year. A decline in our linen rental business together with little
development in the Southern California region during fiscal 1995 combined to
offset the industrial rental gain. Southern California continued to experience
difficult economic conditions which resulted in slim, if any, job growth within
our customer base in this region.
Direct sales were $55.7 million for fiscal 1995, an increase of $2.7 million,
or 5% over last year. Direct sales were impacted by a 12% increase in sales of
U.S. Postal Service uniforms and increased demand for industrial garments.
Several new national industrial uniform customer programs were developed in
fiscal 1995 which will start shipping in fiscal 1996.
Rental operating contribution was $26.4 million for fiscal 1995, an increase of
$3.5 million, or 15% over last year. Rental operating contribution was 19.8%
of rental revenue compared to 18.3% in fiscal 1994. This improvement was
brought about by lower garment costs and better plant processing and handling
efficiencies.
Direct sales operating contribution for fiscal 1995 was $10.7 million,
an increase of $750,000, or 8% over fiscal 1994. Direct sales
operating contribution was 19.2% of sales compared to 18.7% last year.
Increased sales and cost controls created the gain over fiscal 1994.
General and administrative costs for fiscal 1995 were $8.2 million, a 17%
increase over fiscal 1994. Increased spending on technology enhancement
projects and other general expenses contributed to the higher costs in fiscal
1995.
Interest expense for fiscal 1995 of $2.6 million was $700,000 or 21% less than
the prior year. Debt repayments from our April 1993 public stock offering and
the replacement of higher cost bank debt with $20 million of 5.8% privately
placed notes in fiscal 1994 produced the interest expense savings during fiscal
1995.
<PAGE> 2
Net earnings were $10 million for fiscal 1995, an increase of $2.2 million, or
28% over fiscal 1994. The gain was caused by improved operating contributions
from both the Rental and Direct sales business segments and reduced interest
expense which offset higher general and administrative costs. Net earnings per
share were $1.07 per share in fiscal 1995 compared to $.87 per share last year,
a 23% gain. The 28% increase in net earnings was offset slightly by 4% more
average shares outstanding due to our public offering in April 1993.
FISCAL 1994 COMPARED TO FISCAL 1993
Revenues for fiscal 1994 were $177.9 million, an increase of $7.8 million or 5%
over fiscal 1993. Rental revenues increased 8% over fiscal 1993 to $125
million. Direct sales declined 3% from the prior year to $52.9 million.
Internal rental revenue growth for fiscal 1994 was 5% with all our service
regions showing improvement over fiscal 1993, exclusive of Southern California.
The decline in Direct sales was expected due to the typical reduction in orders
during the second year of several image programs introduced in fiscal 1993 with
national customers. Fiscal 1993 included an additional week of revenue
compared to fiscal 1994.
Rental operating contribution for fiscal 1994 was $22.9 million, an increase of
$2.1 million or 10% over fiscal 1993. Rental operating contribution was 18.3%
of rental revenue in fiscal 1994 compared to 18.0% in fiscal 1993. The
improved rental operating contribution was due to reductions in garment costs,
plant production costs and lower general operating expenses.
Direct sales operating contribution for fiscal 1994 was $9.9 million, an
increase of $850,000, or 9% over fiscal 1993. Direct sales operating
contribution was 18.7% of sales in fiscal 1994 compared to 16.6% in the prior
year. Improved distribution efficiencies and continued expense control created
the increase over fiscal 1993, despite a slight sales decrease.
Interest expense for fiscal 1994 was $3.3 million, a decrease of $1.5 million
or 31% from the prior year. Debt repayments from our April 1993 public stock
offering and cash provided from operating activities combined with our bank
debt refinancing activities to create the decrease.
The Company's fiscal 1994 income tax rate was 39% compared to 37% in fiscal
1993. During the third quarter of fiscal 1994, the Company adjusted its
deferred income tax assets and liabilities as a result of the August 1993
increase in federal corporate income tax rates. The amount of the adjustment
was $165,000 or $.02 per share.
<PAGE> 3
Net earnings for fiscal 1994 were $7.8 million or $.87 per share compared to
$5.9 million or $.78 per share in fiscal 1993. Net earnings increased 32% over
the prior year due to profitability improvements from the operations of both
the Rental and Direct sales businesses and reduced interest costs. Net
earnings per share in fiscal 1994 increased $.09 per share or 12% over the
prior year. The 32% improvement in net earnings in fiscal 1994 was offset by
18% more average shares outstanding due to our public stock offering in April
1993.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at January 29, 1995 were $7.7 million, an increase of
$4.3 million over last year. At January 29, 1995 the Company's capitalization
ratio was 32% compared to 35% one year ago. The Company's long-term debt is
at a blended fixed rate of 7.6%. There were no borrowings outstanding under
the Company's $35 million long-term bank credit facility at year end. On or
after December 1, 1995 the Company may prepay at par value all or a portion of
$14.6 million of 10% long-term notes due in 1998.
Cash provided by operating activities for fiscal 1995 was $20 million, about
the same as last year. Working capital was $40.3 million at January 29, 1995
compared to $34.4 million at January 30, 1994. The increase in working capital
was due to higher levels of garments in service and increases in cash and cash
equivalents. The Company raised its semi-annual dividend by 20% in fiscal 1995
to $.04 per share. Capital expenditures were $9.2 million for fiscal 1995.
Planned capital expenditures for fiscal 1996 are $15 million.
During fiscal 1995, the Company completed four acquisitions which will add $5.5
million in annual rental revenues. These purchases expanded our market
presence in Los Angeles, Toledo and Dallas.
Management believes that cash provided by operations and its bank credit
facility will be sufficient to meet its cash requirements for rental
acquisitions and capital expenditures in the foreseeable future.
<PAGE> 4
ENVIRONMENTAL AND OTHER
The Company is subject to various federal, state and local laws relating to
environmental matters, including laws which require the investigation and, in
some cases, remediation of environmental contamination. The Company is
currently engaged in soil and groundwater investigations at its Phoenix,
Minneapolis, and Los Angeles rental plants. The Phoenix and Los Angeles plants
are located in federal superfund sites several square miles in size. The
Company, along with certain unaffiliated parties, has been designated by the
U.S. EPA as a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act with respect to the
Phoenix site. The Company entered into a consent order with EPA requiring a
soil and groundwater investigation at the Phoenix site. The cost of the
investigation will be borne by two other parties pursuant to a settlement
agreement with the Company. Test results at the Phoenix site indicate that
volatile organic compound contamination is present in the soil, necessitating
soil remediation. Groundwater tests have not detected on-site contamination,
although additional periodic groundwater testing is expected. Test results
at the Minneapolis and Los Angeles plants indicate that volatile organic
compound contamination is present in the soil and groundwater at those plants.
The Company believes that it will be required to remediate the soil at the
Minneapolis plant and has begun soil remediation at Los Angeles. Additional
testing is being conducted to determine if ground-water remediation will be
required at those facilities. The Company's estimate of the expense related
to all three of these sites has been accrued and charged to operating expense.
Based on information currently available, the Company does not believe that
additional costs of investigation and remediation at these sites are
individually or in the aggregate material to the consolidated financial
statements of the Company.
Inflation has not significantly affected the Company in recent years. Labor
and raw materials are the Company's primary operating costs. Inventories are
valued on the LIFO (last-in first-out) method, which management believes more
accurately matches current costs with current revenues.
<PAGE> 5
Unitog Company and Subsidiaries
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Unitog Company:
We have audited the accompanying consolidated balance sheets of Unitog Company
and subsidiaries as of January 29, 1995 and January 30, 1994, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended January 29, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Unitog Company and
subsidiaries at January 29, 1995 and January 30, 1994 and the results of their
operations and their cash flows for each of the years in the three-year period
ended January 29, 1995 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Kansas City, Missouri
March 3, 1995
<PAGE> 6
UNITOG COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 29, 1995 AND JANUARY 30, 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,717,999 $ 3,416,988
Accounts receivable, less allowance for doubtful
receivables of $425,000 in 1995 and
$452,100 in 1994 18,079,047 16,832,049
Inventories (note 3) 13,630,072 14,099,379
Rental garments in service, net 24,478,470 21,634,340
Prepaid expenses 991,674 949,815
------------- --------------
Total current assets 64,897,262 56,932,571
------------- --------------
Property, plant and equipment, at cost (note 5):
Land 5,161,539 5,161,279
Buildings and improvements 36,015,657 33,816,749
Machinery and equipment 66,313,390 61,309,719
------------- --------------
107,490,586 100,287,747
Less accumulated depreciation 47,974,078 42,938,716
------------- --------------
Net property, plant and equipment 59,516,508 57,349,031
------------- --------------
Other assets, net 16,529,871 16,377,229
Excess cost over net assets of businesses
acquired, net 2,504,370 2,131,447
------------- --------------
$143,448,011 $132,790,278
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 5) $ 827,214 $ 1,232,633
Accounts payable 6,691,845 6,492,290
Accrued expenses 5,292,387 4,132,915
Accrued payroll expenses 4,192,817 3,394,628
Income taxes payable 419,969 835,426
Deferred income taxes (note 6) 7,142,000 6,425,000
------------- --------------
Total current liabilities 24,566,232 22,512,892
------------- --------------
Long-term debt, less current installments (note 5) 34,837,880 35,665,094
Other liabilities 986,217 1,125,972
Deferred income taxes (note 6) 7,625,011 7,325,011
Stockholders' equity (notes 4, 5 and 7):
Common stock of $.01 par value. Authorized
15,000,000 shares; issued and outstanding
9,272,094 shares in 1995 and 9,272,118
shares in 1994 92,721 92,721
Additional paid-in capital 39,070,262 39,070,262
Retained earnings 36,269,688 26,998,326
------------- --------------
Total stockholders' equity 75,432,671 66,161,309
------------- --------------
Commitments and contingencies (notes 5, 7 and 8) $143,448,011 $132,790,278
============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
UNITOG COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JANUARY 29, 1995, JANUARY 30, 1994 AND JANUARY 31, 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental operations $133,488,069 $125,006,214 $115,495,702
Direct sales 55,655,727 52,908,968 54,652,828
------------- ------------- -------------
Total revenues 189,143,796 177,915,182 170,148,530
------------- ------------- -------------
Operating costs and expenses:
Cost of rental operations 107,091,152 102,108,762 94,651,895
Cost of direct sales 44,990,968 42,997,820 45,593,892
Depreciation and amortization 9,659,338 9,530,036 8,835,990
General and administrative 8,229,984 7,011,861 6,742,184
------------- ------------- -------------
Total costs and expenses 169,971,442 161,648,479 155,823,961
------------- ------------- -------------
Operating income 19,172,354 16,266,703 14,324,569
Interest expense, net 2,627,655 3,333,755 4,857,134
Other expenses, net 129,569 91,840 66,895
------------- ------------- -------------
Earnings before income taxes 16,415,130 12,841,108 9,400,540
Income taxes (note 6) 6,402,000 5,045,000 3,501,000
------------- ------------- -------------
Net earnings $ 10,013,130 $ 7,796,108 $ 5,899,540
============= ============= =============
Net earnings per common share (note 4) $1.07 $ .87 $ .78
===== ====== ======
Weighted average common and common
equivalent shares outstanding (note 4) 9,334,781 8,952,911 7,560,132
============= ============= =============
Dividends per common share (note 4) $ .08 $ .07 $ -
====== ====== =====
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 29, 1995, JANUARY 30, 1994 AND JANUARY 31, 1993
<TABLE>
<CAPTION>
Additional Total
Common paid-in Retained stockholders'
stock capital earnings equity
--------- ------------ -------- -------------
<S> <C> <C> <C> <C>
Balance at January 26, 1992 (note 4) $ 81,201 $17,352,858 $13,920,794 $31,354,853
Net earnings - - 5,899,540 5,899,540
------------- ------------ ------------ ------------
Balance at January 31, 1993 81,201 17,352,858 19,820,334 37,254,393
Issuance of 1,725,000 common shares
in public offering (note 4) 11,500 21,679,000 - 21,690,500
Employee stock options (note 7) 20 38,404 - 38,424
Net earnings - - 7,796,108 7,796,108
Dividends paid - - (618,116) (618,116)
------------- ------------ ------------- -------------
Balance at January 30, 1994 92,721 39,070,262 26,998,326 66,161,309
Net earnings - - 10,013,130 10,013,130
Dividends paid - - (741,768) (741,768)
------------ ------------ ------------- -------------
Balance at January 29, 1995 $ 92,721 $39,070,262 $36,269,688 $75,432,671
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
UNITOG COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 29, 1995, JANUARY 30, 1994, AND JANUARY 31, 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $10,013,130 $ 7,796,108 $ 5,899,540
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 9,659,338 9,530,036 8,835,990
Provision (benefit) for deferred income taxes 1,017,000 (34,000) 1,724,000
Disposal of equipment, net of gains and losses 456,355 440,483 406,911
Changes in assets and liabilities:
Accounts receivable (1,005,943) (557,624) (120,997)
Inventories 469,307 469,653 (693,294)
Rental garments in service (2,093,823) 1,763,987 (2,018,931)
Prepaid expenses (41,859) 310,305 205,156
Other noncurrent assets (36,526) 298,341 360,473
Accounts payable 199,555 935,278 (337,767)
Accrued expenses 1,884,043 (79,414) 319,277
Income taxes payable (415,457) 210,532 113,582
Other noncurrent liabilities (139,755) 16,249 1,109,723
------------ ----------- -----------
Net cash provided by operating activities 19,965,365 21,099,934 15,803,663
----------- ----------- -----------
Cash flows from investing activities:
Acquisition of rental operations (4,443,868) (5,174,996) (32,157,392)
Purchase of property, plant and equipment (9,246,085) (9,775,326) (6,894,079)
------------ ------------ ------------
Net cash used by investing activities (13,689,953) (14,950,322) (39,051,471)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock - 21,728,924 -
Dividends paid (741,768) (618,116) -
Increases in long-term debt - 24,957,860 32,589,963
Repayments of long-term debt (1,232,633) (48,883,270) (9,427,938)
------------ ------------ -----------
Net cash provided (used) by financing activities (1,974,401) (2,814,602) 23,162,025
------------ ------------ -----------
Net increase (decrease) in cash and cash equivalents 4,301,011 3,335,010 (85,783)
Cash and cash equivalents at beginning of year 3,416,988 81,978 167,761
----------- ----------- -----------
Cash and cash equivalents at end of year $ 7,717,999 $ 3,416,988 $ 81,978
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 2,901,000 $ 3,501,000 $ 4,699,000
=========== =========== ===========
Income taxes $ 5,800,000 $ 4,864,000 $ 1,943,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
UNITOG COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 29, 1995, JANUARY 30, 1994 AND JANUARY 31, 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND REVENUE RECOGNITION
The consolidated financial statements include the accounts of the Company, its
wholly-owned domestic subsidiaries and its wholly-owned foreign subsidiary.
All significant intercompany balances and transactions have been eliminated.
The Company recognizes Rental revenues when the services are delivered to
customers. The Company records Direct sales upon shipment to the customer.
FISCAL YEAR
The Company uses a fifty-two/fifty-three week period ending on the last Sunday
in January. Fifty-two week periods were included in the years ended January
29, 1995 and January 30, 1994. A fifty-three week period was included in the
year ended January 31, 1993.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash, money market deposits, and investments
in highly-liquid tax-exempt municipal bond funds. For purposes of reporting
cash flows, the Company considers investments with original maturities of three
months or less to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost or market with costs applied on the
last-in, first-out (LIFO) method.
RENTAL GARMENTS IN SERVICE
Rental garments in service are stated at cost less accumulated amortization.
Amortization is provided using the straight-line method over the estimated
useful lives of the garments, generally twelve to eighteen months. Accumulated
amortization of rental garments in service was $18,102,000 and $17,721,000 at
January 29, 1995 and January 30, 1994, respectively.
PROPERTY, PLANT AND EQUIPMENT
Expenditures for additions and improvements are capitalized to the appropriate
asset accounts. Maintenance and repairs are charged to earnings as incurred.
On sale or retirement of assets, the cost and related accumulated depreciation
applicable to such assets are removed from the accounts and any resulting gain
or loss is reflected in earnings. Losses on the disposal of plant and
equipment were $165,000, $67,000 and $234,000 for fiscal 1995, 1994 and 1993,
respectively.
<PAGE> 10
Depreciation is provided using the straight-line method over the estimated
useful lives of the various assets. Useful lives range from ten to thirty-five
years for buildings and improvements and from three to ten years for machinery
and equipment.
OTHER NONCURRENT ASSETS
Debt origination and placement fees and acquisition related expenditures
associated with noncompetition agreements, customer contracts and other
acquired intangible assets are stated at cost less accumulated amortization.
Amortization is provided using the straight-line method over the term of the
underlying agreements and estimated useful lives.
At January 29, 1995 and January 30, 1994 the cost and related accumulated
amortization pertaining to noncompetition agreements was $10,246,000 and
($4,175,000) and $9,498,000 and ($3,113,000), respectively. The contractual
term for noncompetition agreements is generally three to eight years. At
January 29, 1995 and January 30, 1994 the cost and related accumulated
amortization pertaining to acquired customer contracts was $15,302,000 and
($5,219,000) and $13,325,000 and ($3,756,000), respectively. The estimated
useful lives of the customer contracts is generally eight to twelve years.
EXCESS COST OVER NET ASSETS OF BUSINESSES ACQUIRED
The Company's acquisitions of rental operations were accounted for by using the
purchase method. The purchase method allocates the amounts paid to the net
assets acquired based on their respective fair values. The amounts paid in
excess of the fair value of the acquired net assets is amortized on a
straight-line basis over twenty years.
OTHER LIABILITIES
The Company, under certain insurance programs, retains portions of expected
losses. The Company, upon consultation with its insurance carriers and
advisors, records the estimated aggregate liabilities for claims incurred and
projects their future settlement dates. The Company provides letters of credit
and funded trust arrangements for certain of these insurance programs.
INCOME TAXES
Provisions are made for deferred income taxes for temporary differences between
amounts recognized for income tax and financial reporting purposes.
NET EARNINGS PER COMMON SHARE
Net earnings per common share are computed based upon the weighted average
number of common shares and common equivalent shares outstanding. For fiscal
1995, 1994 and 1993, employee stock options were the Company's only common
stock equivalents; there were no other potentially dilutive securities.
<PAGE> 11
(2) ACQUISITIONS OF RENTAL OPERATIONS
During fiscal 1995 and 1994, the Company acquired rental routes and equipment
for approximately $4.4 million and $5.2 million, respectively, in cash
and notes payable. The operating results of these rental acquisitions have
been included in the consolidated results of the Company since their purchase
with an insignificant effect on revenues and net earnings.
On March 27, 1992 the Company acquired substantially all of the assets of Mid
West Services, Inc., and Hertz and Hertz, L.P., (Mid West) for approximately
$30 million in cash. The operating results of Mid West have been included in
the consolidated results of the Company since the date of acquisition. During
fiscal 1993, the Company also acquired certain uniform rental routes and
equipment for approximately $2.2 million in cash and notes payable. The
operating results of these rental acquisitions have been included in the
consolidated results of the Company since their acquisition.
(3) INVENTORIES
Components of inventories at January 29, 1995 and January 30, 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials $ 3,570,498 $ 3,176,089
Work in progress 2,351,766 2,084,027
Finished goods 11,255,800 12,155,287
------------ ------------
17,178,064 17,415,403
Less LIFO allowance (3,547,992) (3,316,024)
------------- ------------
$13,630,072 $14,099,379
============ ============
</TABLE>
The use of the LIFO method reduced net earnings by approximately $142,000 ($.02
per share), $43,000 ($.01 per share) and $124,000 ($.02 per share) for fiscal
1995, 1994 and 1993, respectively.
(4) COMMON STOCK
On August 26, 1994 the Board of Directors approved a 3-for-2 stock split. The
split was in the form of a stock dividend paid on September 23, 1994 to
stockholders of record on September 9, 1994. The outstanding common shares,
weighted average common and common equivalent shares outstanding, net earnings
per share and other related per share data have been restated for all prior
periods to reflect the stock split.
In April 1993, the Company completed the sale of 1,725,000 shares of its common
stock. The public offering price was $13.50 per share. The net proceeds of
approximately $21.7 million were used to reduce long-term indebtedness.
<PAGE> 12
(5) LONG-TERM DEBT
A summary of long-term debt at January 29, 1995 and January 30, 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
5.79% Senior Notes $20,000,000 $20,000,000
Fixed Rate Notes 14,625,000 15,125,000
Other 1,040,094 1,772,727
------------ -----------
Total long-term debt 35,665,094 36,897,727
Less current installments (827,214) (1,232,633)
------------- ------------
Long-term debt, less
current installments $34,837,880 $35,665,094
============ ===========
</TABLE>
In December 1993, the Company issued $20 million of 5.79% Senior Notes (the
"Senior Notes") to an insurance company. The Senior Notes have an average life
of seven years and mature in 2003. The proceeds were used to repay long-term
bank debt.
In September 1993, the Company refinanced its long-term bank debt by entering
into a three-year Bank Credit Agreement (the "Bank Agreement"). The Bank
Agreement provides for borrowings on a revolving basis of up to $35 million at
an interest rate based upon LIBOR or prime. At January 29, 1995 the Company
had no outstanding borrowings under the Bank Agreement.
Both the Senior Notes and the Bank Agreement require the Company, among other
things, to maintain certain minimum levels of stockholders' equity and fixed
charge coverage and they set a minimum current ratio and a maximum
capitalization ratio. The agreements also contain certain restrictions on
dividends and stock redemptions. At January 29, 1995 the Company had $16.5
million in unrestricted stockholders' equity.
The Fixed Rate Notes mature serially in annual installments ranging from
$525,000 to $650,000 through 1997 with the balance due in 1998. The Fixed Rate
Notes bear interest at 10.06% and are secured by certain real estate of the
Company. The Company may prepay at par value all or a portion of the unpaid
balance of the Fixed Rate Notes on or after December 1, 1995.
The approximate aggregate principal installments of long-term debt for the next
five fiscal years are: 1996 - $827,000; 1997 - $821,000; 1998 - $2,422,000;
1999 - $16,010,000; 2000 - $3,109,000 and for all years thereafter -
$12,476,000. The principal installments for fiscal 1996 do not include any
optional prepayments of the Fixed Rate Notes.
<PAGE> 13
(6) INCOME TAXES
The components of income tax expense (benefit) for the years ended January 29,
1995, January 30, 1994 and January 31, 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $4,482,000 $4,200,000 $1,420,000
State and local 903,000 879,000 357,000
----------- ----------- ----------
5,385,000 5,079,000 1,777,000
Deferred 1,017,000 (34,000) 1,724,000
----------- ----------- ----------
Total income tax expense $6,402,000 $5,045,000 $3,501,000
=========== =========== ==========
</TABLE>
For the years ended January 29, 1995, January 30, 1994 and January 31, 1993,
income taxes provided differed from the expected federal statutory rates of
35%, 35% and 34%, respectively, as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Computed expected tax at statutory rate $5,745,000 $4,494,000 $3,196,000
State and local taxes, net of federal benefit 587,000 548,000 394,000
Adjustment to deferred tax assets and
liabilities for enacted changes in tax rates - 165,000 -
Other 70,000 (162,000) (89,000)
----------- ------------ -----------
$6,402,000 $5,045,000 $3,501,000
=========== =========== ==========
Effective tax rate 39.0% 39.3% 37.2%
===== ===== =====
</TABLE>
The tax effects of temporary differences that gave rise to deferred tax assets
and (liabilities) at January 29, 1995 and January 30, 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Depreciation $ (7,910,011) $ (7,576,011)
Rental garments in service (8,207,000) (7,072,000)
Accrued expenses 1,698,000 1,405,000
Other (348,000) (507,000)
------------- ----------------
Net deferred tax liability $(14,767,011) $(13,750,011)
============= ================
</TABLE>
Total deferred tax assets and liabilities at January 29, 1995 and January 30,
1994 were $2,112,000 and ($16,879,011) and $1,683,000 and ($15,433,011),
respectively. No valuation allowances for deferred tax assets have been
provided.
<PAGE> 14
(7) EMPLOYEE BENEFIT PLANS
The Company has contributory thrift plans covering substantially all of its
salaried and clerical employees and certain employees subject to collective
bargaining agreements. Under the provisions of these plans, employees are
permitted to contribute a maximum of 6% of their earnings and the Company makes
matching contributions of 25% to 50%. Employees may make additional unmatched
contributions to the plans of up to 9% of their earnings. The Company's
contributions were $814,000, $645,000 and $618,000 for the fiscal years ended
January 29, 1995, January 30, 1994 and January 31, 1993, respectively.
The Company has an employee stock option plan which provides for the
discretionary granting of options for up to 450,000 shares of the Company's
common stock to employees selected by the Compensation Committee of the Board
of Directors. The exercise price of the options may not be less than fair
market value at the date of grant. The Company granted a nonqualified stock
option for 60,000 shares of common stock to an officer which expires in 2001.
The options granted to date were nonqualified stock options which vest ratably
over four years and expire ten years after the date of grant. At January 29,
1995, 125,250 options were available for grant under the plan and 125,625
shares under option were exercisable.
Stock option activity for the three fiscal years ended January 29, 1995 was as
follows:
<TABLE>
<CAPTION>
Number Option
of Shares Price Range
--------- -------------
<S> <C> <C>
Outstanding at January 26, 1992 60,000 $ 7.00
Granted 160,500 11.17
Terminated (10,500) 11.17
---------
Outstanding at January 31, 1993 210,000 7.00 - 11.17
Granted 40,500 12.83 - 13.50
Terminated (3,750) 11.17
Exercised (3,000) 11.17
---------
Outstanding at January 30, 1994 243,750 7.00 - 13.50
Granted 143,250 17.00
Terminated (5,250) 11.17 - 17.00
---------
Outstanding at January 29, 1995 381,750 7.00 - 17.00
=========
</TABLE>
<PAGE> 15
(8) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company rents its general office building and certain facilities and
equipment under various operating leases. Rent charged to operations
(including month-to-month rentals on certain equipment) was $4.5 million in
fiscal 1995, $4.0 million in fiscal 1994 and $3.5 million in fiscal 1993.
A summary of noncancelable long-term lease commitments follows:
<TABLE>
<CAPTION>
Years Ending
January
------------
<S> <C>
1996 $1,396,000
1997 1,037,000
1998 420,000
1999 364,000
2000 279,000
Thereafter 599,000
------------
$4,095,000
============
</TABLE>
Certain real estate taxes on leased property are obligations of the Company. It
is anticipated that leases that expire will be renewed or replaced, and future
lease commitments are not expected to aggregate less than the amount shown for
fiscal 1996.
ENVIRONMENTAL MATTERS AND LITIGATION
The Company is subject to various federal, state and local regulations relating
to environmental matters, including laws which require the investigation and,
in some cases, remediation of environmental contamination. The Company's
policy is to accrue and charge to operations environmental investigation and
remediation expenses when it is probable that a liability has been incurred and
an amount is reasonably estimable.
The Company is also subject to legal proceedings and claims arising from the
conduct of its business, including personal injury and employment claims.
Based on information currently available, management does not believe the
liability, if any, arising from settlement of these matters will have a
material adverse effect on the consolidated financial statements of the
Company.
<PAGE> 16
(9) BUSINESS SEGMENT INFORMATION
The Company rents uniforms and other items to customers through arrangements by
which the Company provides pick-up, cleaning, maintenance and delivery of its
rental products. The Company is also engaged in the manufacture and sale of
uniforms used by industrial personnel and other individuals who are in contact
with the public. Operating contribution has been determined by deducting from
segment revenues all costs and expenses directly related to the operations of
the segments, excluding depreciation and amortization, general and
administrative expense, other expense and interest expense. Identifiable
assets are those used directly in the segments' operations. Other corporate
assets consist primarily of cash and cash equivalents, prepaid expenses and
other noncurrent assets. Information with respect to these operations for the
years ended January 29, 1995, January 30, 1994 and January 31, 1993 was as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NET SALES TO UNAFFILIATED CUSTOMERS:
Rental operations $ 133,488,069 $ 125,006,214 $ 115,495,702
Direct sales 55,655,727 52,908,968 54,652,828
------------- -------------- -------------
$ 189,143,796 $ 177,915,182 $ 170,148,530
============= ============== =============
INTERSEGMENT TRANSFERS TO RENTAL OPERATIONS (AT COST) $ 16,193,862 $ 13,969,694 $ 13,590,948
============= ============== =============
OPERATING CONTRIBUTION:
Rental operations $ 26,396,917 $ 22,897,452 $ 20,843,807
Direct sales 10,664,759 9,911,148 9,058,936
------------- -------------- -------------
Total operating contribution 37,061,676 32,808,600 29,902,743
Depreciation and amortization 9,659,338 9,530,036 8,835,990
General and administrative expense 8,229,984 7,011,861 6,742,184
Interest expense, net 2,627,655 3,333,755 4,857,134
Other expense, net 129,569 91,840 66,895
------------- -------------- -------------
Earnings before income taxes $ 16,415,130 $ 12,841,108 $ 9,400,540
============= ============== =============
IDENTIFIABLE ASSETS:
Rental operations $ 103,578,360 $ 96,407,350 $ 95,940,752
Direct sales 31,676,700 32,378,353 29,319,970
Corporate 8,192,951 4,004,575 1,426,905
------------- -------------- -------------
$ 143,448,011 $ 132,790,278 $ 126,687,627
============= ============== =============
CAPITAL EXPENDITURES:
Rental operations $ 7,223,374 $ 5,404,097 $ 4,015,190
Direct sales 809,520 4,235,597 2,641,451
Corporate 1,213,191 135,632 237,438
------------- -------------- -------------
$ 9,246,085 $ 9,775,326 $ 6,894,079
============= ============== =============
DEPRECIATION AND AMORTIZATION EXPENSE:
Rental operations $ 7,857,700 $ 7,694,349 $ 7,103,178
Direct sales 1,281,881 1,369,111 1,270,078
Corporate 519,757 466,576 462,734
------------- -------------- -------------
$ 9,659,338 $ 9,530,036 $ 8,835,990
============= ============== =============
</TABLE>
<PAGE> 17
(10) UNAUDITED QUARTERLY FINANCIAL DATA
Unaudited quarterly financial data was as follows:
<TABLE>
<CAPTION>
FISCAL QUARTERS ENDED
------------------------------------------------------------------------
1995 APRIL JULY OCTOBER JANUARY TOTAL
- ---- ----- ---- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Rental operations $32,212,937 $32,707,302 $34,031,367 $34,536,463 $133,488,069
Direct sales 13,859,864 12,810,335 14,284,680 14,700,848 55,655,727
----------- ----------- ----------- ----------- ------------
Total revenues $46,072,801 $45,517,637 $48,316,047 $49,237,311 $189,143,796
=========== =========== =========== =========== ============
Operating income $ 4,255,351 $ 4,216,583 $ 5,247,210 $ 5,453,210 $ 19,172,354
=========== =========== =========== =========== ============
Net earnings $ 2,130,799 $ 2,172,326 $ 2,810,703 $ 2,899,302 $ 10,013,130
=========== =========== =========== =========== ============
Net earnings per common share $.23* $.23* $.30 $.31 $1.07
===== ===== ==== ==== =====
Weighted average common
and common equivalent
shares outstanding 9,326,580* 9,332,703* 9,339,408 9,340,432 9,334,781
=========== =========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
1994 APRIL JULY OCTOBER JANUARY TOTAL
- ---- ----- ---- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Rental operations $30,398,354 $30,896,548 $31,837,256 $31,874,056 $125,006,214
Direct sales 12,885,584 12,152,301 14,337,641 13,533,442 52,908,968
----------- ----------- ----------- ----------- ------------
Total revenues $43,283,938 $43,048,849 $46,174,897 $45,407,498 $177,915,182
=========== =========== =========== =========== ============
Operating income $ 3,418,378 $ 3,668,733 $ 4,643,365 $ 4,536,227 $ 16,266,703
=========== =========== =========== =========== ============
Net earnings $ 1,418,258 $ 1,789,725 $ 2,181,683 $ 2,406,442 $ 7,796,108
=========== =========== =========== =========== ============
Net earnings per common share* $.18 $.19 $.23 $.26 $.87
==== ==== ==== ==== ====
Weighted average common
and common equivalent
shares outstanding* 7,866,029 9,313,584 9,310,017 9,322,010 8,952,911
=========== =========== =========== =========== =============
</TABLE>
* Restated for 3-for-2 stock split in the form of a stock dividend on September
23, 1994.
<PAGE> 18
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental operations $133,488 $125,006 $115,496 $ 93,331 $ 88,118
Direct sales 55,656 52,909 54,653 49,503 48,973
-------- -------- -------- --------- ---------
Total $189,144 $177,915 $170,149 $ 142,834 $ 137,091
======== ======== ======== ========= =========
OPERATING PROFIT CONTRIBUTION:
Rental operations $ 26,397 $ 22,897 $ 20,844 $ 16,378(a) $ 13,688
Direct sales 10,664 9,912 9,059 7,571 6,249
-------- -------- -------- --------- ---------
Total operating contribution 37,061 32,809 29,903 23,949 19,937
Depreciation and amortization (9,659) (9,530) (8,836) (6,541) (6,480)
General and administrative (8,230) (7,012) (6,742) (6,455) (6,553)
Restructuring charge - - - - (1,700)
-------- --------- -------- --------- ---------
OPERATING INCOME $ 19,172 $ 16,267 $ 14,325 $ 10,953 $ 5,204(b)
======== ======== ======== ========= ============
NET EARNINGS $ 10,013 $ 7,796 $ 5,900 $ 4,337 $ 313
NET EARNINGS PER COMMON SHARE (C) $ 1.07 $ .87 $ .78 $ .57 $ .04
DIVIDENDS PER COMMON SHARE (C) $ .08 $ .07 $ - $ - $ -
FINANCIAL POSITION:
Current assets $ 64,897 $ 56,933 $ 54,368 $ 46,045 $ 47,319
Net property, plant and
equipment 59,517 57,349 54,775 41,553 41,160
Total assets 143,448 132,790 126,688 93,748 95,157
Working capital 40,331 34,420 27,431 24,688 25,186
Current ratio 2.6:1 2.5:1 2.0:1 2.2:1 2.1:1
FINANCIAL STRUCTURE:
Long-term debt, less current
installments $ 34,838 $ 35,665 $ 54,600 $ 34,915 $ 39,933
Stockholders' equity 75,433 66,161 37,254 31,354 27,017
Book value per share (c) 8.14 7.14 4.94 4.15 3.58
Capitalization ratio 31.6% 35.0% 59.4% 52.7% 59.6%
CASH FLOWS:
Operating activities $ 19,965 $ 21,100 $ 15,804 $ 10,926 $ 7,898
Investing activities (13,690) (14,950) (39,052) (5,696) (15,885)
Financing activities (1,974) (2,815) 23,162 (5,211) 7,911
--------- --------- -------- ---------- ---------
Net increase (decrease)
in cash and cash
equivalents $ 4,301 $ 3,335 $ (86) $ 19 $ (76)
======== ======== ========= ========= ==========
GENERAL STATISTICS:
Common shares outstanding
at year end (c) 9,272 9,272 7,544 7,544 7,544
Capital expenditures $ 9,246 $ 9,775 $ 6,894 $ 5,717 $ 8,152
</TABLE>
(a) Includes $814,000 pretax gain on sale of certain linen routes.
(b) Includes $3.3 million pretax charge for estimated workers' compensation
insurance expense in excess of amounts previously provided and
restructuring costs.
(c) Restated for 3-for-2 stock split in the form of a stock dividend on
September 23, 1994.
<PAGE> 19
COMMON STOCK INFORMATION
The Common Stock is listed on the Nasdaq Stock Market under the symbol UTOG.
At January 29, 1995 there were 395 stockholders of record and the Company
estimates that there were 1,500 stockholders as of that date.
PRICE RANGE
<TABLE>
<CAPTION>
FISCAL 1995 Fiscal 1994*
QUARTER ENDED HIGH LOW Quarter Ended High Low
- ------------- ------ ----- ------------- ------ ------
<S> <C> <C> <C> <C> <C>
April 1994* $ 17 7/8 $ 15 5/8 April 1993 $ 14 1/2 $ 12 3/4
July 1994* $ 19 $ 16 1/2 July 1993 $ 15 7/8 $ 13 1/8
October 1994 $ 18 3/4 $ 16 1/2 October 1993 $ 16 1/8 $ 12 5/8
January 1995 $ 18 3/4 $ 17 1/2 January 1994 $ 16 7/8 $ 14 5/8
</TABLE>
* Restated for 3-for-2 stock split in the form of a stock dividend on September
23, 1994.
<PAGE> 1
Exhibit 23
The Board of Directors
Unitog Company:
We consent to incorporation by reference in the registration statements on Form
S-8 of Unitog Company (filing No. 33 - 48632 and No. 33 - 48633) of our report
dated March 3, 1995, relating to the consolidated balance sheets of Unitog
Company and subsidiaries as of January 29, 1995 and January 30, 1994 and the
related consolidated statements of earnings, retained earnings, and cash flows
for each of the years in the three-year period ended January 29, 1995, which
report appears in the January 29, 1995 annual report on Form 10-K of Unitog
Company.
Kansas City, Missouri KPMG PEAT MARWICK LLP
April 25, 1995
KPMG PEAT MARWICK LLP
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
UNITOG COMPANY
Data for Financial Data Schedule for Form 10-K
As of January 29, 1995 and for the year then ended
This schedule contains summary financial information extracted from the
financial statements of Unitog Company, dated as of and for the year
ended January 29, 1995 and is qualified in its entirety by reference to such
financial statements.
<CAPTION>
Ref Description Value
--- ----------- -----
<S> <C> <C>
5- 02 (1) cash and cash items 7,717,999
5- 02 (2) marketable securities 0
5- 02 (3)(a)(1) notes and accounts receivable-trade 18,079,047
5- 02 (4) allowances for doubtful accounts 425,000
5- 02 (6) inventory 13,630,072
5- 02 (9) total current assets 64,897,262
5- 02 (13) property, plant and equipment 107,490,586
5- 02 (14) accumulated depreciation 47,974,078
5 -02 (18) total assets 143,448,011
5- 02 (21) total current liabilities 24,566,232
5- 02 (22) bonds, mortgages and similar debt 34,837,880
5- 02 (28) preferred stock-mandatory redemption 0
5- 02 (29) prefered stock-no mandatory redemption 0
5- 02 (3) common stock 92,721
5- 02 (31) other stockholders' equity 75,339,950
5- 02 (32) total liabilities and stockholders' equity 143,448,011
5- 03 (b)1(a) net sales of tangible products 55,655,727
5- 03 (b)1 total revenue 189,143,796
5- 03 (b)2(a) cost of tangible goods sold 44,990,968
5- 03 (b)2 total costs and expenses applicable to sales and revenues 161,741,458
5- 03 (b)3 other costs and expenses 0
5- 03 (b)5 provision for doubtful accounts and notes 0
5- 03 (b)(8) interest and amortization of debt discount 2,627,655
5- 03 (b)(10) income before taxes and other items 16,415,130
5- 03 (b)(11) income tax expense 6,402,000
5- 03 (b)(14) income/loss continuing operations 10,013,130
5- 03 (b)(15) discontinued operations 0
5- 03 (b)(17) extraordinary items 0
5- 03 (b)(18) cumulative effect-changes in accounting principles 0
5- 03 (b)(19) net income or loss 10,013,130
5- 03 (b)(20) earnings per share-primary 1.07
5- 03 (b)(20) earnings per share-fully diluted 1.07
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