<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 27, 1997.
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
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(Exact name of registrant as specified in its charter)
Delaware 44-0529828
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 W. 11th Street, Kansas City, MO 64105
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(Address of principal executive offices) (Zip Code)
(816) 474-7000
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(Registrant's telephone number, including area code)
Not applicable
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(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 27, 1997, the registrant had 9,644,767 shares of
common stock, par value $.01 per share, outstanding.
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TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION Page Number
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ITEM 1. Financial Statements
(1) Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of April 27, 1997
and January 26, 1997. 3
Condensed Consolidated Statements of Earnings for the Three
Months ended April 27, 1997 and April 28, 1996. 4
Condensed Consolidated Statements of Cash Flows for the Three
Months ended April 27, 1997 and April 28, 1996. 5
(2) Notes to Condensed Consolidated Financial Statements. 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 7
PART II. - OTHER INFORMATION
ITEM I. Legal Proceedings 9
ITEM 6. Exhibits and Reports on Form 8-K 9
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 27, 1997 and January 26, 1997
(unaudited)
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<CAPTION>
ASSETS April 27, 1997 January 26, 1997
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,269,539 $ 31,307
Accounts receivable, less allowance
for doubtful receivables of $1,176,000 and
$1,240,000, respectively 28,499,325 28,090,702
Inventories (note 2) 18,201,667 17,525,175
Rental garments in service, net 39,735,870 40,329,880
Prepaid expenses 1,597,919 1,375,210
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Total current assets 89,304,320 87,352,274
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Property, plant and equipment, at cost 166,526,922 161,351,786
Less accumulated depreciation 68,558,706 66,554,486
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Net property, plant and
equipment 97,968,216 94,797,300
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Other assets, net 33,887,537 35,120,442
Excess cost over net assets of
businesses acquired, net 37,698,817 37,294,970
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$258,858,890 $254,564,986
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term
debt $ 2,050,072 $ 2,046,821
Accounts payable 14,166,690 13,820,339
Accrued expenses 11,931,018 11,369,557
Accrued and deferred income taxes
payable 12,383,586 10,880,382
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Total current liabilities 40,531,366 38,117,099
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Long-term debt, less current
installments 102,232,750 103,524,014
Deferred income taxes and other
liabilities 13,959,120 13,819,237
Stockholders' equity:
Common stock of $.01 par value.
Authorized 30,000,000 shares; issued and
outstanding 9,644,767 shares 96,448 96,439
Additional paid-in capital 41,238,827 41,202,740
Retained earnings 60,800,379 57,805,457
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Total stockholders' equity 102,135,654 99,104,636
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$258,858,890 $254,564,986
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended April 27, 1997 and April 28, 1996
(unaudited)
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<CAPTION>
April 27, 1997 April 28, 1996
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<S> <C> <C>
Revenues:
Rental operations $54,031,073 $48,430,562
Direct sales 14,878,908 15,504,301
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Total revenues 68,909,981 63,934,863
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Operating costs and expenses:
Cost of rental operations 43,822,357 39,893,480
Cost of direct sales 12,236,555 12,440,956
Depreciation and amortization 4,158,348 3,650,384
General and adminstrative 2,449,048 2,176,447
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Total costs and expenses 62,666,308 58,161,267
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Operating income 6,243,673 5,773,596
Interest expense 1,455,375 1,343,596
Other expense (income), net (47,974) (23,077)
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Earnings before income taxes 4,836,272 4,453,077
Income taxes 1,837,000 1,692,000
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Net earnings $ 2,999,272 $ 2,761,077
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Net earnings per common share $ .31 $ .29
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Weighted average common and common equivalent
shares outstanding 9,705,987 9,435,093
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Dividends per common share (note 3) $ -- $ --
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended April 27, 1997 and April 28, 1996
(unaudited)
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<CAPTION>
April 27, 1997 April 28, 1996
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,999,272 $ 2,761,077
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 4,158,348 3,650,384
Provision for deferred income taxes 154,000 1,180,000
Disposal of equipment, net of gains and losses 52,852 12,797
Changes in assets and liabilities:
Accounts receivable (408,623) 278,219
Inventories (676,492) (1,471,890)
Rental garments in service 1 ,058,456 481,963
Prepaid Expenses (222,709) (881,550)
Other noncurrent assets 981,886 254,805
Accounts payable 346,351 (1,975,779)
Accrued expenses 486,462 (1,362,943)
Income taxes payable 1,473,204 320,186
Other noncurrent liabilities 15,883 (119,047)
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Net cash provided by operating activities 10,418,890 3,128,222
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Cash flows from investing activities:
Acquisition of rental operations (2,363,600) (17,052,357)
Purchase of property, plant and equipment (5,560,791) (5,302,973)
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Net cash used by investing activities (7,924,391) (22,355,330)
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Cash flows from financing activities:
Proceeds from stock issuance 31,746 847,429
Increases in long-term debt -- 19,283,320
Repayments of long-term debt (1,288,013) --
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Net cash provided by finance activities (1,256,267) 20,130,749
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Net increase (decrease) in cash and cash equivalents 1,238,232 903,641
Cash and cash equivalents at beginning of period 31,307 28,321
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Cash and cash equivalents at end of period $ 1,269,539 $ 931,962
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,647,000 $ 1,438,000
============== ==============
Income taxes $ 208,183 $ 185,000
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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UNITOG COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended April 27, 1997 and April 28, 1996
Note 1
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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 27, 1997, and the results of its operations and its cash flows for the
three months ended April 27, 1997 and April 28, 1996. The results of operations
for the three months ended April 27, 1997 are not necessarily indicative of the
results to be expected for the full year.
Note 2 Inventories
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The following is a summary of inventories at April 27, 1997 and January 26,
1997:
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<CAPTION>
April 27, 1997 January 26, 1997
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<S> <C> <C>
Raw materials $ 3,732,542 $ 3,899,072
Work in progress 2,766,911 1,085,883
Finished goods 15,790,768 16,556,660
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22,290,221 21,541,615
Less LIFO allowance (4,088,554) (4,016,440)
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$18,201,667 $17,525,175
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</TABLE>
Note 3 Cash Dividend
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At its May 22, 1997 Board of Directors meeting the Board declared a $.075 per
share cash dividend payable on June 24, 1997 to stockholders of record on
June 6, 1997. The $.075 per share dividend was a 25% increase over the prior
year.
Note 4 Acquisitions
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During the first quarter of fiscal 1998, the Company acquired certain uniform
rental routes in Detroit, Michigan for approximately $2.2 million in cash and
notes payable. The acquisition was accounted for as a purchase. The operating
results of this acquisition have been included in the consolidated results of
the Company since the acquisition with an insignificant effect on revenues and
net earnings.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Liquidity and Capital Resources
Cash provided by operating activities was $10.4 million for the quarter ended
April 27, 1997, an increase of $7.3 million. The increase was principally due
to higher net earnings and improved cash and working capital management. Cash
and cash equivalents were $1.3 million at April 27, 1997. At April 27, 1997,
the Company had $34 million in borrowings outstanding under its foreign and
domestic bank credit facilities. The amount of borrowings available under the
Company's bank credit facilities was $33 million at April 27, 1997. The
Company's capitalization ratio was 50% at April 27, 1997 compared to 51.1% at
January 26, 1997.
Working capital was $48.8 million at April 27, 1997 compared to $49.2 million at
January 26, 1997. Capital expenditures were $5.6 million through April 27,
1997, $258,000 greater than last year. Capital expenditures for fiscal 1998 are
expected to approximate $28 million.
During the first quarter of fiscal 1998, the Company acquired certain uniform
rental routes in Detroit, Michigan for approximately $2.2 million in cash, and
notes payable. The acquisition was accounted for as a purchase. The operating
results of this acquisitions have been included in the consolidated results of
the Company since acquisition with an insignificant effect on revenues and net
earnings. The acquisition is expected to add approximately $2 million in annual
rental revenues.
On May 22, 1997 the Company declared a $.075 per share cash dividend payable on
June 24, 1997 to stockholders of record on June 6, 1997. The $.075 per share
dividend was 25% 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
facilities will be sufficient to meet its cash requirements for acquisitions and
capital expenditures in the foreseeable future.
Results of Operations
First quarter fiscal 1998 compared to first quarter fiscal 1997
- ---------------------------------------------------------------
Revenues for the first quarter of fiscal 1998 were $68.9 million, an increase of
$5.0 million or 8% over the comparable period last year. Rental revenues for
the quarter were $54.0 million, an increase of $5.6 million or 12% higher than
last year. The increase in rental revenues was due to our fiscal 1997
acquisitions and internal growth within our network of existing locations.
Direct sales for the first quarter of fiscal 1998 were $14.9 million, a decrease
of $625,000 or 4% below the comparable period last year. The decrease in Direct
sales was due to fewer implementations of new image programs with national
accounts.
Depreciation and amortization was $4.2 million, an increase of $508,000 or 14%
over the comparable period last year. Amortization of intangible assets from
rental acquisitions and capital expenditures created the increase over last
year.
7
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Operating income for the first quarter of fiscal 1998 was $6.2 million, an
increase of $470,000 or 8% over the comparable period last year. Higher
operating contribution from Rental operations offset a slight decline in the
profitability of the Direct sales business and increased depreciation and
amortization.
Net earnings for the first quarter of fiscal 1998 were $3.0 million, an increase
of $238,000 or 9% over the comparable period last year. Improved operating
contribution from Rental operations offset decreased Direct sales' profitability
and increased depreciation, amortization and interest costs in comparison to
last year. Net earnings per common share for the first quarter of fiscal 1998
were $.31 per share, an increase of $.02 per share or 7% over the comparable
period last year.
FORWARD LOOKING STATEMENTS
--------------------------
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
certain forward-looking statements. This Form 10-Q contains forward-looking
statements that reflect the Company's current views with respect to future
events and financial performance. These forward-looking statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from historical results or those anticipated. The words "should,"
"believe," "expect," "anticipate," "intend," "estimate," and other expressions
that indicate future events and trends identify forward-looking statements.
Actual future results and trends may differ materially from historical results
or those anticipated depending on a variety of factors, including, but not
limited to, performance of acquisitions; economic and business changes;
fluctuations in the cost of materials; strikes and unemployment levels; demand
and price for the Company's products and services; and the outcome of pending
and future litigation and environmental matters.
8
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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 26,
1997.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
27 Financial Data Schedule for the Quarter ended April 27, 1997.
(b) Reports on Form 8-K.
Unitog Company did not file any reports on Form 8-K during the
quarter ended April 27, 1997.
9
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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 6, 1997 By: /s/ J. Craig Peterson
---------------------
J. Craig Peterson
Executive Vice President
Chief Administrative and Financial Officer
(Duly Authorized Officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-25-1998
<PERIOD-END> APR-26-1997
<CASH> 1,269,539
<SECURITIES> 0
<RECEIVABLES> 28,499,325
<ALLOWANCES> 1,176,000
<INVENTORY> 18,201,667
<CURRENT-ASSETS> 89,304,320
<PP&E> 166,526,922
<DEPRECIATION> 68,558,706
<TOTAL-ASSETS> 258,858,890
<CURRENT-LIABILITIES> 40,531,366
<BONDS> 102,232,750
0
0
<COMMON> 96,448
<OTHER-SE> 102,039,206
<TOTAL-LIABILITY-AND-EQUITY> 258,858,890
<SALES> 14,878,907
<TOTAL-REVENUES> 68,909,980
<CGS> 12,236,555
<TOTAL-COSTS> 60,217,260
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,455,376
<INCOME-PRETAX> 4,836,272
<INCOME-TAX> 1,837,000
<INCOME-CONTINUING> 2,999,272
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,999,272
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
