<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 28, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 (I.R.S. Employer
incorporation or organization) Identification No.)
101 W. 11th Street, Kansas City, MO 64105
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(816) 474-7000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 12, 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
As of April 28, 1996, the registrant had 9,572,724 shares of
common stock, par value $.01 per share, outstanding.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
<S> <C>
ITEM 1. Financial Statements
(1) Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of April 28, 1996
and January 28, 1996. 3
Condensed Consolidated Statements of Earnings for the Three
Months ended April 28, 1996 and April 30, 1995. 4
Condensed Consolidated Statements of Cash Flows for the Three
Months ended April 28, 1996 and April 30, 1995. 5
(2) Notes to Condensed Consolidated Financial Statements. 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 8
PART II. - OTHER INFORMATION
ITEM I. Legal Proceedings 10
ITEM 6. Exhibits and Reports on Form 8-K 10
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 28, 1996 AND JANUARY 28, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
April 28, January 28,
ASSETS 1996 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 931,962 $ 28,321
Accounts receivable, less allowance for
doubtful receivables of $863,000 and
$760,000, respectively 25,716,782 25,012,073
Inventories (note 2) 16,805,871 15,333,981
Rental garments in service, net 39,201,335 36,774,298
Prepaid expenses 2,115,498 1,233,948
------------ ------------
Total current assets 84,771,448 78,382,621
------------ ------------
Property, plant and equipment, at cost 147,735,203 140,834,624
Less accumulated depreciation 61,308,166 58,542,615
------------ ------------
Net property, plant and equipment 86,427,037 82,292,009
------------ ------------
Other assets, net 39,063,758 30,848,817
Excess cost over net assets of businesses
acquired, net 36,316,795 32,045,645
------------ ------------
$246,579,038 $223,569,092
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 484,056 $ 481,087
Accounts payable 13,324,820 15,300,599
Accrued expenses 12,996,479 13,399,851
Income taxes payable 819,046 498,860
Deferred income taxes 11,908,000 10,788,000
------------ ------------
Total current liabilities 39,532,401 40,468,397
------------ ------------
Long-term debt, less current installments 104,127,582 83,731,099
Other liabilities, noncurrent 1,081,831 1,200,878
Deferred income taxes, noncurrent 12,104,011 12,044,011
Stockholders' equity:
Common stock of $.01 par value. Authorized
30,000,000 shares; issued and outstanding
9,572,724 shares 95,727 92,793
Additional paid-in capital 40,045,170 39,200,675
Retained earnings 49,592,316 46,831,239
------------ ------------
Total stockholders' equity 89,733,213 86,124,707
------------ ------------
$246,579,038 $223,569,092
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED APRIL 28, 1996 AND APRIL 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
April 28, April 30,
1996 1995
-------------- --------------
<S> <C> <C>
Revenues:
Rental operations $48,430,562 $35,970,814
Direct sales 15,504,301 14,622,146
----------- -----------
Total revenues 63,934,863 50,592,960
----------- -----------
Operating costs and expenses:
Cost of rental operations 39,893,480 29,170,113
Cost of direct sales 12,440,956 11,918,033
Depreciation and amortization 3,650,384 2,524,691
General and administrative 2,176,447 2,023,361
----------- -----------
Total costs and expenses 58,161,267 45,636,198
----------- -----------
Operating income 5,773,596 4,956,762
Interest expense 1,343,596 630,563
Other expense (income), net (23,077) 4,560
----------- -----------
Earnings before income taxes 4,453,077 4,321,639
Income taxes 1,692,000 1,685,000
----------- -----------
Net earnings $ 2,761,077 $ 2,636,639
=========== ===========
Net earnings per common share $ .29 $ .28
=========== ===========
Weighted average common and common equivalent
shares outstanding 9,435,093 9,336,026
=========== ===========
Dividends per common share (note 3) $ -- $ --
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED APRIL 28, 1996 AND APRIL 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
April 28, April 30,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,761,077 $ 2,636,639
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 3,650,383 2,524,691
Provision for deferred income taxes 1,180,000 970,000
Disposal of equipment, net of gains and losses 12,798 14,128
Changes in assets and liabilities:
Accounts receivable 278,219 (225,514)
Inventories (1,471,890) (550,689)
Rental garments in service 481,963 (729,968)
Prepaid expenses (881,550) (227,342)
Other noncurrent assets 254,805 (12,142)
Accounts payable (1,975,779) 2,243,173
Accrued expenses (1,362,943) 870,945
Income taxes payable 320,186 639,657
Other noncurrent liabilities (119,047) 229,634
------------ ------------
Net cash provided by operating activities 3,128,222 8,383,212
------------ ------------
Cash flows from investing activities:
Acquisition of rental operations (17,052,357) (9,789,141)
Purchase of property, plant and equipment (5,302,973) (3,586,758)
------------ ------------
Net cash used by investing activities (22,355,330) (13,375,899)
------------ ------------
Cash flows from financing activities:
Proceeds from stock issuance 847,429 --
Increases in long-term debt 19,283,320 900,000
Repayments of long-term debt -- (24,413)
------------ ------------
Net cash provided by financing activities 20,130,749 875,587
------------ ------------
Net increase (decrease) in cash and cash
equivalents 903,641 (4,117,100)
Cash and cash equivalents at beginning of period 28,321 7,717,999
------------ ------------
Cash and cash equivalents at end of period $ 931,962 $ 3,600,899
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,438,000 $ 711,000
============ ============
Income taxes $ 185,000 $ 75,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
UNITOG COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED APRIL 28, 1996 AND APRIL 30, 1995
Note 1
- ------
In the opinion of the Company, the accompanying unaudited condensed consolidated
financial statements reflect adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position of the Company as
of April 28, 1996, and the results of its operations and its cash flows for the
three months ended April 28, 1996 and April 30, 1995. The results of operations
for the three months ended April 28, 1996 are not necessarily indicative of the
results to be expected for the full year.
Note 2 Inventories
- ------------------
The following is a summary of inventories at April 28, 1996 and January 28,
1996:
<TABLE>
<CAPTION>
April 28, 1996 January 28, 1996
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<S> <C> <C>
Raw materials $ 4,092,678 $ 4,135,131
Work in progress 2,867,655 2,503,558
Finished goods 13,726,978 12,501,732
----------- -----------
20,687,311 19,140,421
Less LIFO allowance (3,881,440) (3,806,440)
----------- -----------
$16,805,871 $15,333,981
=========== ===========
</TABLE>
Note 3 Cash Dividend
- --------------------
At its May 23, 1996 Board of Directors meeting the Board declared a $.06 per
share cash dividend payable on June 24, 1996 to stockholders of record on
June 7, 1996. The $.06 per share dividend was a 20% increase over the prior
year.
6
<PAGE>
Note 4 Acquisitions:
- --------------------
During the first quarter of fiscal 1997 the Company acquired a portion of the
assets of Central Quality Services Corporation headquartered in Farmington
Hills, Michigan for approximately $17 million in cash. The assets acquired were
primarily industrial uniform routes and production facilities in central and
northern Michigan and eastern Illinois. The acquisition was accounted for as a
purchase.
During the first quarter of fiscal 1997 the Company also acquired American Dust
Control Co., Inc. in Philadelphia, Pennsylvania in exchange for Unitog common
stock. The acquisition was accounted for as a pooling-of-interests. Prior
period financial statements were not restated due to immateriality.
The operating results of these acquisitions have been included in the
consolidated results of the Company since their acquisition with an
insignificant effect on revenues and net earnings.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $3.1 million for the quarter ended
April 28, 1996, a decrease of $5.3 million or 62% below last year. The decrease
was principally due to an increase in inventories and reductions in trade
accounts payable and accrued expenses resulting from the timing of certain
acquisition related liabilities and vendor payments. Cash and cash equivalents
were $932,000 at April 28, 1996. At April 28, 1996, the Company had $32.5
million in borrowings outstanding under its bank credit facility. The amount of
borrowings available under the Company's bank credit facility was $17 million at
April 28, 1996. The Company's capitalization ratio was 54% at April 28, 1996
compared to 49% at January 28, 1996.
Working capital was $45.2 million at April 28, 1996 compared to $37.9 million at
January 28, 1996. Purchased working capital from rental acquisitions coupled
with reduced acquisition related liabilities and trade payables created the
increase in working capital. Capital expenditures were $5.3 million through
April 28, 1996, 48% greater than last year. Capital expenditures for fiscal
1996 are expected to approximate $20 million.
During the first quarter of fiscal 1997, the Company issued $4.5 million in
variable rate tax-exempt Industrial Revenue Bonds which mature in 2020. The
bonds bear interest at floating rates based upon market conditions for tax-
exempt issues. The bond proceeds were used to repay bank debt which had been
incurred to finance facility construction.
During the first quarter of fiscal 1997 the Company acquired a portion of the
assets of Central Quality Services Corporation headquartered in Farmington
Hills, Michigan for approximately $17 million in cash. The assets acquired were
primarily industrial uniform routes and production facilities in central and
northern Michigan and eastern Illinois. The acquisition was accounted for as a
purchase and the operating results of this acquisition have been included in the
consolidated results of the Company since its purchase with an insignificant
effect on revenues and net earnings. The acquisition will add approximately $15
million in annual rental revenues.
During the first quarter of fiscal 1997 the Company acquired American Dust
Control Co., Inc. in Philadelphia, Pennsylvania in exchange for Unitog common
stock. The acquisition was accounted for as a pooling-of-interests. The
operating results of this acquisition have been included in the consolidated
results of the Company since its purchase with an insignificant effect on
revenues and net earnings. The acquisition will add approximately $3 million in
annual rental revenues. Prior period financial statements were not restated due
to immateriality.
On May 23, 1995 the Company declared a $.06 per share cash dividend payable on
June 24, 1996 to stockholders of record on June 7, 1996. The $.06 per share
dividend is 20% greater than the semi-annual dividend paid in the second quarter
of last year.
Management believes that cash generated from operations, and its bank credit
facility will be sufficient to meet its cash requirements for acquisitions and
capital expenditures in the foreseeable future.
8
<PAGE>
RESULTS OF OPERATIONS
First quarter fiscal 1997 compared to first quarter fiscal 1996
- ---------------------------------------------------------------
Revenues for the first quarter of fiscal 1997 were $63.9 million, an increase of
$13.3 million or 26% over the comparable period last year. Rental revenues for
the quarter were $48.4 million, an increase of $12.5 million or 35% higher than
last year. The increase in rental revenues was due to our fiscal 1996 and fiscal
1997 acquisitions and internal growth within our network of existing locations.
Direct sales for the first quarter of fiscal 1997 were $15.5 million, an
increase of $882,000 or 6% over the comparable period last year. The increase in
Direct sales was due to new image programs with new and existing customers.
Operating income for the first quarter of fiscal 1997 was $5.8 million, an
increase of $817,000 or 16% over the comparable period last year. Higher
operating contribution from both the Rental and Direct sales businesses created
the improvement over last year.
Depreciation and amortization was $3.7 million, and increase of $1.1 million or
45% over the comparable period last year. Additional depreciation from our
acquired rental operations combined with increased amortization of acquisition
related intangible assets created the increase.
Interest expense for the first quarter of fiscal 1997 was $1.3 million, an
increase of $713,000 over the comparable period last year. Higher debt levels
related to our fiscal 1996 and fiscal 1997 rental acquisitions created the
increase in interest expense.
Net earnings for the first quarter of fiscal 1997 were $2.8 million, an increase
of $124,000 or 5% over the comparable period last year. Higher revenues and
improved operating contribution from both the Rental and Direct sales business
segments offset increased depreciation, amortization and interest costs in
comparison to last year. Net earnings per common share for the first quarter of
fiscal 1997 were $.29 per share, an increase of $.01 per share or 4% over the
comparable period last year.
FORWARD LOOKING STATEMENTS
--------------------------
Forward-looking statements appear in this quarterly report, including in
Management's Discussion and Analysis. These statements reflect Management's
current expectations for future revenues and expenditures. Actual results may
differ materially from those expectations. Factors that could cause results to
differ materially include labor-related events, and particularly strikes, labor
disputes or increased costs of labor; and changes in the general economy,
including unemployment levels.
9
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
See the discussion of certain environmental matters in Part I, Item 1 of the
Company's Annual Report on Form 10-K for the fiscal year ended January 28,
1996.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
27 Financial Data Schedule for the Quarter ended April 28, 1996.
(b) Reports on Form 8-K.
Unitog Company has not filed any reports on Form 8-K during the
quarter ended April 28, 1996.
10
<PAGE>
SIGNATURES
Pursuant to the requirements 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
Dated: June 3, 1996 By: /s/ J. Craig Peterson
----------------------------
J. Craig Peterson
Senior Vice-President of
Finance and Administration,
Chief Financial Officer
(Duly Authorized Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-26-1997
<PERIOD-END> APR-28-1996
<CASH> 931,962
<SECURITIES> 0
<RECEIVABLES> 25,716,782
<ALLOWANCES> 863,000
<INVENTORY> 16,805,871
<CURRENT-ASSETS> 84,771,448
<PP&E> 147,735,203
<DEPRECIATION> 61,308,166
<TOTAL-ASSETS> 246,579,038
<CURRENT-LIABILITIES> 39,532,401
<BONDS> 104,127,582
<COMMON> 95,727
0
0
<OTHER-SE> 89,637,486
<TOTAL-LIABILITY-AND-EQUITY> 246,579,038
<SALES> 15,504,301
<TOTAL-REVENUES> 63,934,863
<CGS> 12,440,956
<TOTAL-COSTS> 55,984,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,343,596
<INCOME-PRETAX> 4,453,077
<INCOME-TAX> 1,692,000
<INCOME-CONTINUING> 2,761,077
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,761,077
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
