<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 30, 1997
Commission File Number 1-8504
UNIFIRST CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2103460
(State of Incorporation) (IRS Employer Identification Number)
68 Jonspin Road
Wilmington, Massachusetts 01887
(Address of principal executive offices)
Registrant's telephone number, including area code: (978) 658-8888
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Class which shares are traded
Common Stock,
$.10 par value per share New York Stock Exchange
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 definintive proxy or information incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[X]
The number of outstanding shares of UniFirst Corporation Common Stock and
Class B Common Stock at November 10, 1997 were 7,903,864 and 12,606,744,
respectively, and the aggregate market value of these shares held by
non-affiliates of the Company on said date was $237,980,769 (based upon the
closing price of the Company's Common Stock on the New York Stock Exchange on
said date and assuming the market value of a share of Class B Common Stock
(which is generally non-transferable, but is convertible at any time into one
share of Common Stock) is identical to the market value of the Common Stock).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 1997 Annual Report to Shareholders and the
Company's Proxy Statement for its 1998 Annual Meeting of Shareholders (which
will be filed with the Securities and Exchange Commission within 120 days after
the close of the 1997 fiscal year) are incorporated by reference into Parts II,
III and IV hereof.
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ITEM 1. BUSINESS
UniFirst is a leading company in the garment services business. The
Company's services consist principally of manufacturing, renting, cleaning, and
delivering a variety of industrial employment garments on a periodic basis,
usually weekly. The Company manufactures most of the garments used in its
customer service operations. The Company also decontaminates and cleans, in
separate facilities, garments which may have been exposed to radioactive
materials. Customer billings are rendered and recorded as revenues when services
are performed.
The Company's principal business, since its inception, has been the rental
and servicing of industrial employment uniforms and protective clothing (such as
shirts, pants, jackets, coveralls, jumpsuits, lab coats, smocks and aprons) as
well as industrial wiper towels, floor mats and other non-garment items. The
Company services its customers by picking up the soiled items on a periodic
basis, usually weekly, and delivering at the same time cleaned and processed
items.
Through the Company's services, customers are provided with uniforms and
protective work clothing for their employees without the necessity of investing
working capital, which is particularly advantageous to customers whose worker
turnover is high. The Company's centralized services, specialized equipment and
economies of scale generally allow it to be more cost effective in providing
garment services than the customers could be by themselves. In order to better
service its customers, the Company maintains a relatively higher level of
inventory of garments in stock than it believes customary in the industry.
Customers are given a broad selection of styles, colors, sizes, fabrics and
personalized emblems from which to choose. The Company's uniform program is
intended not only to upgrade the image of the customers, but also to improve the
effectiveness, morale, safety and satisfaction of their employees.
The Company services a wide variety of manufacturers, retailers and service
companies, including automobile dealers and service stations, bakeries,
transportation companies and agricultural processors. Substantially all of the
Company's rental services are provided pursuant to written contracts, primarily
for a term of five years. The Company services well over 100,000 customer
locations in 45 states, Canada and Europe from 114 service locations and
distribution centers. For fiscal 1995, 1996 and 1997, the Company's garment
rental operations produced approximately 67%, 67% and 68%, respectively, of its
revenues, and non-garment rental items accounted for another 25%, 26% and 25% of
its revenues in each of those years, with no single customer accounting for more
than 1% of total revenues in any year.
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The Company manufactures work pants, shirts and other items, primarily
jackets, for its garment rental operations in its plants in Luquillo, PR, Cave
City, AR and Wilburton, OK, respectively. These plants produced approximately
55% of all employment garments which the Company placed in service during fiscal
1997. In 1996, the Company's production level was approximately 53%.
The Company is also in the specialized business of decontaminating and
cleaning work clothes which may have been exposed to radioactive materials. The
Company's customers in this market include government agencies, research and
development laboratories and utilities operating nuclear reactors. The Company
operates 11 decontamination facilities, located in Massachusetts, New Mexico,
California, Washington, Hawaii, Pennsylvania, South Carolina, Virginia, Georgia,
Illinois and the Netherlands. For fiscal 1995, 1996 and 1997, the Company's
nuclear garment services business produced approximately 8%, 7% and 7%,
respectively, of its revenues.
MARKETING
The Company markets its services to potential customers through
approximately 300 trained sales representatives whose sole function is to
develop new sales by adding new accounts and who have no direct responsibility
for servicing customer accounts. Potential customers are contacted by mail, by
telephone and in-person. Sales representatives develop their appointments
through the use of an extensive proprietary database of pre-screened and
qualified business prospects.
The Company believes that customer service is the most important element in
developing and maintaining its market position. As of August 30, 1997, existing
accounts were serviced by approximately 925 route salespersons and 510 service
support people who together are responsible for providing prompt delivery
service and ensuring expeditious handling of customer requirements regarding
billings, adjustments, garment repairs and other matters. The Company's policy
is to resolve all customer inquiries and problems within 24 hours.
The Company believes that its distinction between sales and service
personnel, which allows the route salespersons to monitor and maximize existing
customer satisfaction while others promote an ongoing new business effort, is an
important part of its competitive strategy.
Customer service is enhanced by the Company's management information
systems, which provide instantaneous access to information on the customer
employees serviced by the Company. Available data includes the status of
customer orders, inventory availability, shipping information and personal data
regarding individual customer employees, including names, sizes, uniform styles
and colors.
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The Company's emphasis on customer service is reflected throughout its
business. The Company believes that ownership of its manufacturing facilities
increases its ability to control the quality of its garments. The Company
believes its industrial cleaning facilities are among the most modern in the
industry.
Expansion by the Company into new market areas is achieved through an
acquisition program and internal growth. Internal expansion normally results
from extending sales routes into new market areas and then servicing the new
accounts from one of the Company's existing facilities. Since internal expansion
is thus limited to contiguous areas, the Company also has an acquisition program
to permit it to expand more widely into new market areas. The Company believes
that acquisitions are an effective manner of expanding its customer base and
foresees this avenue as an important source of growth.
COMPETITION
The markets serviced by the Company are highly competitive. Although the
Company is one of the larger companies engaged in the business of renting and
cleaning employment garments, there are other firms in the industry which are
larger and have greater financial resources than the Company. The principal
methods of competition in the industry are quality of service and price. The
Company believes that its ability to compete effectively is due primarily to the
superior service and support systems which it provides to its customers.
RAW MATERIALS
The Company obtained through its manufacturing operations approximately 55%
of all garments which it placed in service during fiscal 1997, with other items
and the balance of garments being purchased from a variety of suppliers. The
Company has experienced no significant difficulty in obtaining any of its raw
materials or supplies.
EMPLOYEES
The Company employs approximately 7,000 persons, about 5% of whom are
represented by unions pursuant to 6 separate collective bargaining agreements.
The Company considers its employee relations to be satisfactory.
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EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Aldo Croatti 79 Chairman of the Board
Ronald D. Croatti 54 Vice Chairman of the Board,
President and Chief Executive
Officer
Robert L. Croatti 61 Executive Vice President
John B. Bartlett 56 Senior Vice President and
Chief Financial Officer
Cynthia Croatti 42 Treasurer
Bruce P. Boynton 49 Vice President,
Canadian Operations
Dennis G. Assad 52 Vice President,
Sales and Marketing
</TABLE>
Aldo Croatti has been Chairman of the Board since the Company's incorporation in
1950 and of certain of its predecessors since 1940.
Ronald D. Croatti has been Vice Chairman of the Board and Chief Executive
Officer for more than the past five years and President since August 31, 1995.
Robert L. Croatti has been Executive Vice President for more than the past five
years.
John B. Bartlett has been Senior Vice President and Chief Financial Officer for
more than the past five years.
Cynthia Croatti has been Treasurer for more than the past five years.
Bruce P. Boynton has been Vice President, Canadian Operations for more than the
past five years.
Dennis G. Assad has been Vice President, Sales and Marketing since August 31,
1995. Prior to that he was a Regional General Manager of the Company for more
than five years.
Ronald D. Croatti, Robert L. Croatti and Cynthia Croatti are a son, nephew and
daughter, respectively, of Aldo Croatti.
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ENVIRONMENTAL MATTERS
All industrial laundries use and have to dispose of detergent waste water
and other residues. The Company is aware of the environmental concerns
surrounding the disposal of these materials and has taken steps to avoid their
improper disposal. Although from time to time the Company is subject to
administrative and judicial proceedings involving environmental matters, the
Company does not foresee a material effect on its earnings or competitive
position in connection with such proceedings or its compliance with federal,
state and local provisions regulating the environment. The Company's nuclear
garment decontamination facilities are licensed by the Nuclear Regulatory
Commission or, in certain instances, by the applicable state agency.
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ITEM 2. PROPERTIES
At August 30, 1997 the Company owned or occupied 128 facilities containing
an aggregate of approximately 3.3 million square feet located in the United
States, Canada, Puerto Rico and the Netherlands. The Company owns 74 of these
facilities containing approximately 2.5 million square feet.
The following chart summarizes certain information with respect to the
principal properties currently owned or leased by the Company.
<TABLE>
<CAPTION>
LOCATION APPROXIMATE SQUARE FEET
-------- -----------------------
<S> <C>
Executive Office & Distribution Center
Wilmington, MA 132,000
Rental Garment Servicing Facilities
Pittsburgh, PA 96,000
Ontario, CA 90,000
Springfield, MA 68,000
Philadelphia, PA 62,000
Washington, DC 57,000
Dallas, TX 55,000
Nashua, NH 54,000
Stratford, CT 54,000
Miami, FL 50,000
Richmond, VA 50,000
Boston, MA 48,000
Houston, TX 48,000
Corpus Christi, TX 46,000
Tampa, FL 46,000
Columbus, OH 45,000
Odessa, TX 45,000
Portland, ME 44,000
Harlingen, TX 42,000
Toronto, Ontario, Canada 41,000
Buffalo, NY 40,000
Lubbock, TX 40,000
Portland, OR 40,000
Tulsa, OK 40,000
Norfolk, VA 38,000
Ocala, FL 38,000
Los Angeles, CA 37,000
Lebanon, NH 36,000
Uvalde, TX 36,000
Vancouver, British Columbia, Canada 35,000
Charlotte, NC 34,000
San Antonio, TX 34,000
Albuquerque, NM 33,000
Amarillo, TX 33,000
Cincinnati, OH 32,000
McAllen, TX 32,000
Fort Worth, TX 31,000
Baltimore, MD 30,000
Bangor, ME 30,000
Titusville, FL 30,000
</TABLE>
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<TABLE>
<S> <C>
Garment Manufacturing Facilities
Cave City, AR 62,000
Luquillo, PR 44,000
Distribution Center
Macon, GA 39,000
Nuclear Garment Decontamination Facilities
Royersford, PA 39,000
Richland, WA 37,000
</TABLE>
The Company owns all the machinery and equipment used in its operations. In
the opinion of the Company, all of its facilities and its production, cleaning
and decontamination equipment have been well maintained, are in good condition
and are adequate for the Company's present needs.
The Company owns and leases a fleet of approximately 1,700 delivery vans,
trucks and other vehicles. The Company believes that these vehicles are in good
repair and are adequate for the Company's present needs.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company is subject to legal proceedings and claims
arising from the conduct of its business operations, including personal injury,
customer contract, employment claims and environmental matters as described in
Item 1 above. The Company maintains insurance coverage providing indemnification
against the majority of such claims and management does not expect that any
material loss to the Company will be sustained as a result thereof.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
See the section entitled "Common Stock Prices and Dividends Per Share"
which is incorporated herein by reference, as part of the Company's 1997 Annual
Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
See the section entitled "Eleven Year Financial Summary" which is
incorporated herein by reference, as part of the Company's 1997 Annual Report to
Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" which is incorporated herein by reference,
as part of the Company's 1997 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and the accompanying notes, which are incorporated
herein by reference to the Company's 1997 Annual Report to Shareholders, are
indexed herein under Items 14(a)(1) and (2) of Part IV.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Incorporated by reference to the information provided under the caption
"Election of Directors" in the Company's Proxy Statement for its 1998 Annual
Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the information provided under the caption
"Summary Compensation Table" in the Company's Proxy Statement for its 1998
Annual Meeting of Shareholders.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the information provided under the captions
"Election of Directors" and "Security Ownership of Management and Principal
Shareholders" in the Company's Proxy Statement for its 1998 Annual Meeting of
Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the information provided under the caption
"Certain Relationships and Related Transactions" in the Company's Proxy
Statement for its 1998 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The financial statements listed below are filed as part of this
report:
1. and 2. FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES.
The financial statements and financial statement schedules listed below are
incorporated herein by reference to the Company's 1997 Annual Report to
Shareholders.
Consolidated balance sheets as of August 30, 1997 and August 31, 1996
Consolidated statements of income for each of the three years in the period
ended August 30, 1997
Consolidated statements of shareholders' equity for each of the three years in
the period ended August 30, 1997
Consolidated statements of cash flows for each of the three years in the period
ended August 30, 1997
Notes to consolidated financial statements
Report of independent public accountants
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The following additional schedules are filed herewith:
Report of independent public accountants on supplemental schedule to the
consolidated financial statements.
Schedule II -
Valuation and qualifying accounts and reserves for each of the three years
in the period ended August 30, 1997.
Separate financial statements of the Company have been omitted because the
Company is primarily an operating company and all subsidiaries included in the
consolidated financial statements are totally held.
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
3. EXHIBITS. The exhibits listed in the accompanying Exhibit Index are
filed as part of this report.
(b) During the three months ended August 30, 1997 the Company did not file
any reports on Form 8-K with the Securities and Exchange Commission.
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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.
UniFirst Corporation
By: /s/ Aldo A. Croatti
-----------------------------
Aldo A. Croatti
Chairman
Date: November 26, 1997
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.
NAME TITLE DATE
/s/ Aldo A. Croatti Chairman and Director November 26, 1997
- --------------------------
Aldo A. Croatti
Principal Executive
/s/ Ronald D. Croatti Officer and Director November 26, 1997
- --------------------------
Ronald D. Croatti
Principal Financial
Officer and Principal
/s/ John B. Bartlett Accounting Officer November 26, 1997
- --------------------------
John B. Bartlett
/s/ Cynthia Croatti Director November 26, 1997
- --------------------------
Cynthia Croatti
/s/ Donald J. Evans Director November 26, 1997
- --------------------------
Donald J. Evans
/s/ Reynold L. Hoover Director November 26, 1997
- --------------------------
Reynold L. Hoover
Director November 26, 1997
- --------------------------
Albert Cohen
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL
SCHEDULE TO THE CONSOLIDATED FINANCIAL STATEMENTS
To the Board of Directors and Shareholders of UniFirst Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in this Form 10-K, and have
issued our report thereon dated November 5, 1997. Our audit was made for the
purpose of forming an opinion on the basic consolidated financial statements
taken as a whole. The supplemental schedule to the consolidated financial
statements listed as Item 14(a)(2) in the Form 10-K is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This supplemental schedule has been subjected
to the auditing procedures applied in the audit of the basic consolidated
financial statements and, in our opinion, fairly states, in all material
respects, the financial data required to be set forth therein, in relation to
the basic consolidated financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 5, 1997
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UNIFIRST CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR EACH
OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 30, 1997
<TABLE>
<CAPTION>
Balance, Charged to Charges for Balance,
Beginning Costs and Which Reserves End of
Description of Period Expenses Were Created Period
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the year ended August 30, 1997
- ----------------------------------
Allowance for
doubtful accounts $843,000 $2,428,000 $(1,972,000) $1,299,000
========================================================================
For the year ended August 31, 1996
- ----------------------------------
Allowance for
doubtful accounts $734,000 $1,850,000 $(1,741,000) $ 843,000
========================================================================
For the year ended August 26, 1995
- ----------------------------------
Allowance for
doubtful accounts $582,000 $1,335,000 $(1,183,000) $ 734,000
========================================================================
</TABLE>
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EXHIBIT INDEX
DESCRIPTION
3-A Restated Articles of Organization -- incorporated by reference to Exhibit
3-A to the Company's Registration Statement on Form S-1 (No. 2-83051) --
and the Articles of Amendment dated January 12, 1988, a copy of which was
filed on an exhibit to the Company's Annual Report on Form 10-K for fiscal
year ended August 27, 1988 -- and the Articles of Amendment dated January
21, 1993, a copy of which was filed on an exhibit to the Company's
Quarterly Report on Form 10-Q for fiscal quarter ended February 27, 1993.
3-B By-laws -- incorporated by reference to Exhibit 3-B to the Company's Annual
Report on Form 10-K for fiscal year ended August 31, 1991.
10-A UniFirst Corporation Profit Sharing Plan -- incorporated by reference to
Exhibit 4.3 to the Company's Registration Statement on Form S-8 (number
33-60781) -- and the Amendment dated June 27, 1995, a copy of which was
filed on an exhibit to the Company's Annual Report on Form 10-K for fiscal
year ended August 31, 1996.
10-D UniFirst Corporation 1996 Stock Incentive Plan, a copy of which was filed
on an exhibit to the Company's Annual Report on Form 10-K for fiscal year
ended August 31, 1996.
13 The Company's 1997 Annual Report to Shareholders (filed herewith to the
extent expressly incorporated by reference herein).
21 List of Subsidiaries
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
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EXHIBIT 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations
UniFirst Corporation and Subsidiaries
Fiscal 1997 Compared with Fiscal 1996
In 1997 revenues increased $27.3 million or 7.0% over 1996. This increase can be
attributed to acquisitions (2.4%), price increases (1.0%) and growth from
existing operations (5.5%) offset by one week less of revenue in fiscal 1997
(1.9%).
Income from operations increased to $47.0 million in 1997 from $40.9 million in
1996. As a percent of revenues, income from operations increased to 11.2% in
1997 from 10.4% in 1996. The main reason for the increase is improved profit
margins in the Company's conventional uniform rental business, principally
attributable to increased operating efficiencies.
During 1997, net interest expense (interest expense less interest income) was
$2.1 million as compared to $2.4 million in 1996. The decrease is attributable
to lower interest rates in fiscal 1997.
The Company's effective income tax rate was 36.0% in both 1997 and 1996.
Fiscal 1996 Compared with Fiscal 1995
In 1996 revenues increased $36.8 million or 10.4% over 1995. This increase can
be attributed to an extra week of revenue (1.9%), acquisitions (1.7%), price
increases (1.0%) and growth from existing operations (5.8%).
Income from operations increased to $40.9 million in 1996 from $34.5 million in
1995. As a percent of revenues, income from operations increased to 10.4% in
1996 from 9.7% in 1995. The main reason for the increase is improved profit
margins in the Company's conventional uniform rental business, principally
attributable to lower uniform merchandise costs. The Company also achieved
comparative improvements from a restructuring of its service management and
teleresources operations and contribution from its Canadian operations improved.
Offsetting these advances were lower contributions from the Company's nuclear
garment services business.
During 1996, net interest expense (interest expense less interest income) was
$2.4 million as compared to $2.8 million in 1995. The decrease is attributable
to lower average debt levels and lower interest rates during fiscal 1996.
The Company's effective income tax rate was 36.0% in 1996 and 35.0% in 1995. The
increase is due primarily to reduced benefits from corporate-owned life
insurance and higher state income taxes.
1
<PAGE> 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
UniFirst Corporation and Subsidiaries
Liquidity and Capital Resources
Shareholders' equity at August 30, 1997 was $217.2 million, 84.2% of total
capitalization, indicating the overall strength of the Company's balance sheet.
Net cash provided by operating activities was $55.8 million in 1997 and totaled
$139.8 million for the three years ended August 30, 1997. These cash flows were
used primarily to fund $99.0 million in capital expenditures to expand and
update Company facilities. Additionally, $32.8 million was used for acquisitions
during this three year period.
The Company had $4.1 million in cash and cash equivalents as well as a line of
credit to borrow an additional $26.7 million as of August 30, 1997. The Company
believes its ability to generate cash from operations will adequately cover its
foreseeable capital requirements.
Effects of Inflation
Inflation has had the effect of increasing the reported amounts of the Company's
revenues and costs. The Company uses the last-in, first-out (LIFO) method to
value a significant portion of inventories. This method tends to reduce the
amount of income due to inflation included in the Company's results of
operations. The Company believes that, through increases in its prices and
productivity improvements, it has been able to recover increases in costs and
expenses attributable to inflation.
2
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Eleven Year Financial Summary
UniFirst Corporation and Subsidiaries
<TABLE>
<CAPTION>
Fiscal Year Ended August
(in thousands, except ratios
and per share amounts) 1997 1996 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Revenues $419,093 $391,794 $355,041 $318,039 $287,728 $268,190 $250,432 $226,682
Income from
operations, before
depreciation and
amortization 70,387 61,729 53,725 50,369 47,199 42,010 38,562 38,749
Depreciation and
amortization 23,386 20,814 19,194 17,912 16,454 15,999 14,229 12,422
Income from
operations 47,001 40,915 34,531 32,457 30,745 26,011 24,333 26,327
Interest expense
(income), net 2,118 2,398 2,787 2,513 2,669 4,098 4,320 3,513
Other income -- -- -- -- -- -- -- --
Provision for
income taxes 16,160 13,855 11,110 11,073 10,387 7,570 6,803 8,516
Net income 28,723 24,662 20,634 18,871 17,689 14,343 * 13,210 14,298
- -----------------------------------------------------------------------------------------------------------------------
Financial Position at Year End
Total assets $339,626 $302,378 $272,691 $250,160 $219,064 $212,097 $204,398 $189,411
Long-term obligations 40,837 39,365 36,376 41,602 32,231 47,641 52,032 53,134
Shareholders' equity 217,192 191,109 168,596 149,472 132,723 117,329 105,888 93,739
- -----------------------------------------------------------------------------------------------------------------------
Financial Ratios
Net income
as a % of revenues 6.9% 6.3% 5.8% 5.9% 6.1% 5.3% 5.3% 6.3%
Return on average
shareholders' equity 14.1% 13.7% 13.0% 13.4% 14.1% 12.9% 13.2% 16.4%
- -----------------------------------------------------------------------------------------------------------------------
Weighted average number
of shares outstanding 20,511 20,511 20,511 20,506 20,453 20,451 20,426 20,431
- -----------------------------------------------------------------------------------------------------------------------
Per Share Data
Revenues $ 20.43 $ 19.10 $ 17.31 $ 15.51 $ 14.07 $ 13.11 $ 12.26 $ 11.09
Income from
operations, before
depreciation and
amortization 3.43 3.01 2.62 2.46 2.31 2.05 1.89 1.90
Net Income
Primary 1.40 1.20 1.01 0.92 0.86 0.70 0.65 0.70
Fully diluted 1.40 1.20 1.01 0.92 0.86 0.67 0.63 0.67
Shareholders' equity 10.59 9.32 8.22 7.29 6.49 5.74 5.18 4.59
Dividends
Common stock .12 .11 .10 .10 .10 .06 .06 .06
Class B common stock .10 .09 .08 .08 .04 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Per share amounts for all years have been restated to reflect a two-for-one
stock split declared by the Board of Directors on November 18, 1993.
* Amount reflects income before extraordinary item and accounting change. Net
income was $12,923.
3
<PAGE> 4
Eleven Year Financial Summary (continued)
UniFirst Corporation and Subsidiaries
<TABLE>
<CAPTION>
Fiscal Year Ended August
(in thousands, except ratios
and per share amounts) 1989 1988 1987
- -----------------------------------------------------------------
<S> <C> <C> <C>
Summary of Operations
Revenues $212,731 $196,296 $159,900
Income from
operations, before
depreciation and
amortization 35,768 32,207 28,161
Depreciation and
amortization 12,309 12,298 10,494
Income from
operations 23,459 19,909 17,667
Interest expense
(income), net 4,880 5,965 4,622
Other income -- -- 1,300
Provision for
income taxes 6,968 5,289 6,530
Net income 11,611 8,655 7,815
- -----------------------------------------------------------------
Financial Position at Year End
Total assets $172,389 $171,010 $166,304
Long-term obligations 53,735 66,476 69,505
Shareholders' equity 80,249 69,127 60,681
- -----------------------------------------------------------------
Financial Ratios
Net income
as a % of revenues 5.5% 4.4% 4.9%
Return on average
shareholders' equity 15.6% 13.3% 13.7%
- -----------------------------------------------------------------
Weighted average number
of shares outstanding 20,353 20,168 20,158
- -----------------------------------------------------------------
Per Share Data
Revenues $ 10.45 $ 9.73 $ 7.93
Income from
operations, before
depreciation and
amortization 1.76 1.60 1.40
Net Income
Primary 0.57 0.43 0.39
Fully diluted 0.56 0.43 0.39
Shareholders' equity 3.94 3.43 3.01
Dividends
Common stock .05 .05 .05
Class B common stock -- -- --
- -----------------------------------------------------------------
</TABLE>
Per share amounts for all years have been restated to reflect a two-for-one
stock split declared by the Board of Directors on November 18, 1993.
4
<PAGE> 5
Consolidated Balance Sheets
UniFirst Corporation and Subsidiaries
<TABLE>
<CAPTION>
August 30, August 31,
1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,054,000 $ 3,425,000
Receivables, less reserves of $1,299,000 in 1997
and $843,000 in 1996 39,431,000 36,634,000
Inventories 19,497,000 17,053,000
Rental merchandise in service 40,013,000 37,973,000
Prepaid expenses 149,000 127,000
- --------------------------------------------------------------------------------------------------
Total current assets 103,144,000 95,212,000
- --------------------------------------------------------------------------------------------------
Property and equipment:
Land, buildings and leasehold improvements 137,281,000 119,346,000
Machinery and equipment 142,242,000 120,671,000
Motor vehicles 37,276,000 33,278,000
- --------------------------------------------------------------------------------------------------
316,799,000 273,295,000
Less - accumulated depreciation 128,532,000 113,191,000
- --------------------------------------------------------------------------------------------------
188,267,000 160,104,000
- --------------------------------------------------------------------------------------------------
Other assets 48,215,000 47,062,000
- --------------------------------------------------------------------------------------------------
$ 339,626,000 $ 302,378,000
==================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term obligations $ 1,040,000 $ 1,058,000
Notes payable 3,213,000 2,757,000
Accounts payable 13,085,000 11,697,000
Accrued liabilities 45,637,000 37,371,000
Accrued and deferred income taxes 2,555,000 3,679,000
- --------------------------------------------------------------------------------------------------
Total current liabilities 65,530,000 56,562,000
- --------------------------------------------------------------------------------------------------
Long-term obligations, net of current maturities 39,797,000 38,307,000
Deferred income taxes 17,107,000 16,400,000
- --------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock, $1.00 par value; 2,000,000 shares
authorized; none issued -- --
Common stock, $.10 par value; 30,000,000 shares
authorized; issued and outstanding 7,898,864
shares in 1997 and 7,886,664 shares in 1996 790,000 789,000
Class B Common stock, $.10 par value; 20,000,000
shares authorized; issued and outstanding 12,611,744
shares in 1997 and 12,623,944 shares in 1996 1,261,000 1,262,000
Capital surplus 7,078,000 7,078,000
Retained earnings 208,949,000 182,384,000
Cumulative translation adjustment (886,000) (404,000)
- --------------------------------------------------------------------------------------------------
Total shareholders' equity 217,192,000 191,109,000
- --------------------------------------------------------------------------------------------------
$ 339,626,000 $ 302,378,000
==================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
Consolidated Statements of Income
UniFirst Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year Ended August 30, August 31, August 26,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 419,093,000 $ 391,794,000 $ 355,041,000
- -----------------------------------------------------------------------------------------------------------------
Cost and expenses:
Operating costs 256,896,000 240,672,000 222,205,000
Selling and administrative expenses 91,810,000 89,393,000 79,111,000
Depreciation and amortization 23,386,000 20,814,000 19,194,000
- -----------------------------------------------------------------------------------------------------------------
372,092,000 350,879,000 320,510,000
- -----------------------------------------------------------------------------------------------------------------
Income from operations 47,001,000 40,915,000 34,531,000
- -----------------------------------------------------------------------------------------------------------------
Interest expense (income):
Interest expense 2,351,000 2,659,000 2,963,000
Interest income (233,000) (261,000) (176,000)
- -----------------------------------------------------------------------------------------------------------------
2,118,000 2,398,000 2,787,000
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 44,883,000 38,517,000 31,744,000
Provision for income taxes 16,160,000 13,855,000 11,110,000
- -----------------------------------------------------------------------------------------------------------------
Net income $ 28,723,000 $ 24,662,000 $ 20,634,000
=================================================================================================================
Weighted average number of shares outstanding 20,510,608 20,510,608 20,510,608
=================================================================================================================
Net income per share $ 1.40 $ 1.20 $ 1.01
=================================================================================================================
Dividends per share:
Common stock $ 0.12 $ 0.11 $ 0.10
Class B common stock $ 0.10 $ 0.09 $ 0.08
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
Consolidated Statements of Shareholders' Equity
UniFirst Corporation and Subsidiaries
<TABLE>
<CAPTION>
Class B Class B Cumulative
Common Common Common Common Capital Retained Translation
Shares Shares Stock Stock Surplus Earnings Adjustment
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, August 27, 1994 7,884,644 12,625,964 $788,000 $ 1,263,000 $7,042,000 $ 140,866,000 $(487,000)
Net income -- -- -- -- -- 20,634,000 --
Dividends -- -- -- -- -- (1,799,000) --
Other -- -- -- -- 36,000 -- --
Shares converted 2,000 (2,000) 1,000 (1,000) -- -- --
Translation adjustment -- -- -- -- -- -- 253,000
- ------------------------------------------------------------------------------------------------------------------------------
Balance, August 26, 1995 7,886,644 12,623,964 789,000 1,262,000 7,078,000 159,701,000 (234,000)
Net income -- -- -- -- -- 24,662,000 --
Dividends -- -- -- -- -- (1,979,000) --
Shares converted 20 (20) -- -- -- -- --
Translation adjustment -- -- -- -- -- -- (170,000)
- ------------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1996 7,886,664 12,623,944 789,000 1,262,000 7,078,000 182,384,000 (404,000)
Net income -- -- -- -- -- 28,723,000 --
Dividends -- -- -- -- -- (2,158,000) --
Shares converted 12,200 (12,200) 1,000 (1,000) -- -- --
Translation adjustment -- -- -- -- -- -- (482,000)
- ------------------------------------------------------------------------------------------------------------------------------
Balance, August 30, 1997 7,898,864 12,611,744 $790,000 $ 1,261,000 $7,078,000 $ 208,949,000 $(886,000)
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE> 8
Consolidated Statements of Cash Flows
UniFirst Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year ended August 30, August 31, August 26,
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 28,723,000 $ 24,662,000 $ 20,634,000
Adjustments:
Depreciation 19,512,000 17,339,000 15,960,000
Amortization of other assets 3,874,000 3,475,000 3,234,000
Receivables (2,455,000) (2,272,000) (2,935,000)
Inventories (2,485,000) (370,000) (938,000)
Rental merchandise in service (690,000) (3,523,000) (1,198,000)
Prepaid expenses (22,000) (9,000) 15,000
Accounts payable 1,401,000 (1,331,000) 476,000
Accrued liabilities 8,284,000 1,906,000 7,967,000
Accrued and deferred income taxes (1,102,000) (191,000) (1,572,000)
Deferred income taxes 715,000 1,812,000 899,000
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 55,755,000 41,498,000 42,542,000
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (7,309,000) (18,245,000) (7,226,000)
Capital expenditures (47,432,000) (27,182,000) (24,409,000)
Other assets, net (112,000) (1,432,000) (1,575,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (54,853,000) (46,859,000) (33,210,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in debt 3,533,000 12,762,000 4,079,000
Reduction of debt (1,648,000) (7,886,000) (9,879,000)
Cash dividends paid or payable (2,158,000) (1,979,000) (1,799,000)
Other -- -- 36,000
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (273,000) 2,897,000 (7,563,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 629,000 (2,464,000) 1,769,000
Cash and cash equivalents at beginning of year 3,425,000 5,889,000 4,120,000
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 4,054,000 $ 3,425,000 $ 5,889,000
=================================================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 2,327,000 $ 2,691,000 $ 3,010,000
Income taxes paid $ 16,577,000 $ 12,439,000 $ 11,712,000
=================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE> 9
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description
UniFirst Corporation is a leading company in the garment services business. The
Company designs, manufactures, personalizes, rents, cleans, delivers and sells a
variety of superior quality occupational garments, career apparel and imagewear
programs to businesses of all kinds. The Company also decontaminates and cleans,
in separate facilities, garments which may have been exposed to radioactive
materials.
Principles of Consolidation and Other
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. Intercompany balances and
transactions are eliminated in consolidation. The Company recognizes revenues
when the actual services are provided to customers.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Fiscal Year
The Company's fiscal year ends on the last Saturday in August. For financial
reporting purposes, fiscal 1997 was a 52 week year, while fiscal 1996 had 53
weeks and 1995 had 52 weeks.
Inventories
Inventories are stated at the lower of cost or market value. The Company uses
the last-in, first-out (LIFO) method to value a significant portion of its
inventories. Had the Company used the first-in, first-out (FIFO) accounting
method, inventories would have been approximately $1,240,000 and $1,195,000
higher at August 30, 1997 and August 31, 1996, respectively.
Rental Merchandise in Service
Rental merchandise in service, stated at cost less amortization, is being
amortized on a straight-line basis over the estimated service lives (primarily
12 months) of the merchandise.
Property and Equipment
The Company provides for depreciation on the straight-line method based on the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings 30-40 years
Leasehold improvements Term of lease
Machinery and equipment 3-10 years
Motor vehicles 3-5 years
</TABLE>
9
<PAGE> 10
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Other Assets
Customer contracts are amortized over periods of up to seventeen years.
Restrictive covenants are amortized over the terms of the respective
non-competition agreements, which range from five to fifteen years. Goodwill is
amortized over periods of up to forty years.
Income Taxes
Deferred income taxes are provided for temporary differences between amounts
recognized for income tax and financial reporting purposes at currently enacted
tax rates.
Net Income Per Share
Net income per share is calculated using the weighted average number of common
shares outstanding during the year. There were no common equivalent shares
outstanding in 1995, 1996 or 1997.
Cash Flow Disclosures
Cash and cash equivalents include cash in banks and bank short-term investments
with maturities of less than ninety days.
2. ACQUISITIONS
Information relating to the acquisitions of industrial laundry businesses
which were accounted for as purchases is as follows:
<TABLE>
<CAPTION>
Year ended August 30, August 31, August 26,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fair market value of assets acquired $7,413,000 $18,360,000 $8,688,000
Liabilities assumed or created 104,000 115,000 1,462,000
---------------------------------------------------
Acquisition of businesses, net of cash acquired $7,309,000 $18,245,000 $7,226,000
===================================================
</TABLE>
The results of operations of these acquisitions have been included on the
Company's consolidated financial statements since their respective acquisition
dates. None of these acquisitions were significant in relation to the Company's
consolidated financial statements and therefore pro forma financial information
has not been presented.
10
<PAGE> 11
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
3. INCOME TAXES
<TABLE>
The provision for income taxes consists of the following:
<CAPTION>
Year ended August 30, August 31, August 26,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal and Foreign $ 14,259,000 $ 8,615,000 $ 10,597,000
State 2,039,000 2,584,000 1,818,000
- -----------------------------------------------------------------------------------------------------------------------------
16,298,000 11,199,000 12,415,000
- -----------------------------------------------------------------------------------------------------------------------------
Deferred:
Federal and Foreign (762,000) 2,295,000 (1,516,000)
State 624,000 361,000 211,000
- -----------------------------------------------------------------------------------------------------------------------------
(138,000) 2,656,000 (1,305,000)
- -----------------------------------------------------------------------------------------------------------------------------
$ 16,160,000 $ 13,855,000 $ 11,110,000
=============================================================================================================================
</TABLE>
The following table reconciles the provision for income taxes using the
statutory federal income tax rate to the actual provision for income taxes:
<TABLE>
<CAPTION>
Year ended August 30, August 31, August 26,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at the statutory federal
income tax rate $ 15,709,000 $ 13,481,000 $ 11,110,000
Puerto Rico exempt income (988,000) (877,000) (678,000)
Corporate-Owned Life Insurance (775,000) (770,000) (825,000)
State income taxes 1,450,000 1,222,000 1,170,000
Foreign income taxes 567,000 262,000 99,000
Other 197,000 537,000 234,000
- ----------------------------------------------------------------------------------------------------------------------------
$ 16,160,000 $ 13,855,000 $ 11,110,000
=============================================================================================================================
</TABLE>
The Company's Puerto Rico subsidiary's income is 90% exempt from Puerto Rico
income taxes through 2001. The Company provides for anticipated tollgate taxes
on the repatriation of the subsidiary's accumulated earnings.
<TABLE>
The tax effect of items giving rise to the Company's net deferred tax liabilities are as follows:
<CAPTION>
August 30, August 31, August 26,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental merchandise in service $ 14,429,000 $ 13,814,000 $ 12,626,000
Tax in excess of book depreciation 15,533,000 14,836,000 12,906,000
Accruals and other (9,324,000) (7,819,000) (7,248,000)
- -----------------------------------------------------------------------------------------------------------------------------
$ 20,638,000 $ 20,831,000 $ 18,284,000
=============================================================================================================================
</TABLE>
11
<PAGE> 12
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
4. LONG-TERM OBLIGATIONS
<TABLE>
Long-term obligations outstanding on the accompanying consolidated balance
sheets are as follows:
<CAPTION>
August 30, August 31,
1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unsecured revolving credit agreement with two banks,
interest rates of 6.19% and 5.75%, respectively $ 33,279,000 $ 30,525,000
Notes payable, interest from 5.2% - 8.5%, payable
in various installments through 2005 4,782,000 5,252,000
Amounts due for restrictive covenants and other,
payable in various installments through 2005 2,776,000 3,588,000
- ----------------------------------------------------------------------------------------------------
40,837,000 39,365,000
- ----------------------------------------------------------------------------------------------------
Less - current maturities 1,040,000 1,058,000
- ----------------------------------------------------------------------------------------------------
$ 39,797,000 $ 38,307,000
====================================================================================================
</TABLE>
Aggregate current maturities of long-term obligations for each of the next five
years are $1,040,000, $1,038,000, $34,044,000, $862,000, $891,000 and $2,962,000
thereafter.
The Company's unsecured revolving credit agreement runs through December 31,
1999. As of August 30, 1997, the maximum line of credit was $60,000,000.
In 1996 the Company entered into an interest rate swap agreement with a bank,
notional amount $15,000,000, maturing December 12, 1998. The Company pays a
fixed rate of 5.53% and receives a variable rate tied to the LIBOR rate. As of
August 30, 1997 the variable rate was 5.72%.
Certain of the long-term obligations contain among other things, provisions
regarding net worth and debt coverage. Under the most restrictive of these
provisions, the Company was required to maintain minimum consolidated tangible
net worth of $133,357,000 as of August 30, 1997. Certain notes payable are
guaranteed or secured by assets of the Company.
As of August 30, 1997 and August 31, 1996, the fair market values of the
Company's outstanding debt and swap agreement approximate their carrying value.
12
<PAGE> 13
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
5. EMPLOYEE BENEFIT PLANS
The Company has a profit sharing plan with a 401(k) feature for all eligible
employees not under collective bargaining agreements. The amount of the
Company's contribution is determined at the discretion of the Company.
Contributions charged to expense under the plan were $4,882,000 in 1997,
$4,184,000 in 1996 and $3,508,000 in 1995.
Some employees under collective bargaining agreements are covered by
union-sponsored multi-employer pension plans. Company contributions, generally
based upon hours worked, are in accordance with negotiated labor contracts.
Payments to the plans amounted to $279,000 in 1997, $221,000 in 1996 and
$156,000 in 1995. Information is not readily available for the Company to
determine its share of unfunded vested benefits, if any, under these plans.
6. OTHER ASSETS
<TABLE>
Other assets on the accompanying consolidated balance sheets are as follows:
<CAPTION>
August 30, August 31,
1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Customer contracts, restrictive covenants and other assets arising from
acquisitions, less accumulated amortization
of $19,433,000 and $18,884,000, respectively $24,804,000 $22,697,000
Goodwill, less accumulated amortization
of $3,455,000 and $2,876,000, respectively 21,389,000 21,250,000
Other 2,022,000 3,115,000
- -----------------------------------------------------------------------------------------------------------------
$48,215,000 $47,062,000
=================================================================================================================
</TABLE>
7. ACCRUED LIABILITIES
<TABLE>
Accrued liabilities on the accompanying consolidated balance sheets are as
follows:
<CAPTION>
August 30, August 31,
1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance $17,735,000 $16,100,000
Payroll related 13,818,000 13,254,000
Other 14,084,000 8,017,000
- ---------------------------------------------------------------------------------------------------------------
$45,637,000 $37,371,000
===============================================================================================================
</TABLE>
13
<PAGE> 14
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
8. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases certain buildings from independent parties. Total rent
expense on all leases was $2,401,000 in 1997, $2,108,000 in 1996 and $1,867,000
in 1995.
Annual minimum lease commitments for all years subsequent to August 30, 1997 are
$2,193,000 in 1998, $1,434,000 in 1999, $772,000 in 2000, $471,000 in 2001,
$222,000 in 2002 and $55,000 thereafter.
Contingencies
The Company and its subsidiaries are subject to legal proceedings and claims
arising from the conduct of their business operations, including personal
injury, customer contract, employment claims and environmental matters. In the
opinion of management, such proceedings and claims are not likely to result in
losses which would have a material adverse effect upon the financial position or
results of operations of the Company.
As security for certain agreements, the Company had standby irrevocable bank
commercial letters of credit and mortgages of $18,182,000 and $16,332,000
outstanding as of August 30, 1997 and August 31, 1996, respectively.
9. SHAREHOLDERS' EQUITY
The significant attributes of each type of stock are as follows:
Common stock -- Each share is entitled to one vote and is freely transferable.
Each share of common stock is entitled to a cash dividend equal to 125% of any
cash dividend paid on each share of Class B common stock.
Class B common stock -- Each share is entitled to ten votes and can be converted
to common stock on a share-for-share basis. Until converted to common stock,
however, Class B shares are not freely transferable.
The Company adopted an incentive stock option plan in November, 1996 and
reserved 150,000 shares of common stock for issue under the plan. As of August
30, 1997 no options had been granted under the plan.
14
<PAGE> 15
Report of Independent Public Accountants
To the Board of Directors and Shareholders of UniFirst Corporation:
We have audited the accompanying consolidated balance sheets of UniFirst
Corporation (a Massachusetts corporation) and subsidiaries as of August 30, 1997
and August 31, 1996 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended August 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly, in
all material respects, the financial position of UniFirst Corporation and
subsidiaries as of August 30, 1997 and August 31, 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
August 30, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 5, 1997
15
<PAGE> 16
Quarterly Financial Data (Unaudited)
UniFirst Corporation and Subsidiaries
<TABLE>
The following is a summary of the results of operations for each of the
quarters within the years ended August 30, 1997 and August 31, 1996.
(In thousands, except per share amounts)
<CAPTION>
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $103,976 $102,064 $107,124 $105,929
Income before income taxes 12,274 8,638 11,535 12,436
Net income 7,855 5,529 7,382 7,957
Weighted average shares outstanding 20,511 20,511 20,511 20,511
Net income per share $0.38 $0.27 $0.36 $0.39
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $95,413 $100,825 $98,554 $97,002
Income before income taxes 10,578 7,712 10,313 9,914
Net income 6,770 4,936 6,600 6,356
Weighted average shares outstanding 20,511 20,511 20,511 20,511
Net income per share $0.33 $0.24 $0.32 $0.31
=================================================================================================================================
</TABLE>
<TABLE>
Common Stock Prices and Dividends Per Share
For the Years Ended August 30, 1997 and August 31, 1996:
<CAPTION>
Price Per Share Dividends Per Share
Class B
1997 High Low Common Stock Common Stock
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $21 3/4 $18 1/4 $0.024 $0.030
Second Quarter 23 20 1/8 0.024 0.030
Third Quarter 21 1/8 18 3/4 0.024 0.030
Fourth Quarter 25 1/2 18 7/8 0.024 0.030
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Price Per Share Dividends Per Share
Class B
1996 High Low Common Stock Common Stock
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $15 5/8 $13 1/2 $0.020 $0.025
Second Quarter 19 1/2 15 1/8 0.020 0.025
Third Quarter 25 1/4 17 7/8 0.024 0.030
Fourth Quarter 23 19 1/4 0.024 0.030
===================================================================================================================================
</TABLE>
The Company's common shares are traded on the New York Stock Exchange (NYSE
Symbol: UNF).
The approximate number of shareholders of record of the Company's common stock
and Class B common stock as of November 5, 1997 were 165 and 19 respectively.
16
<PAGE> 1
Exhibit 21
List of subsidiaries of the Company:
Interstate Nuclear Services Corp.
Interstate Uniform Manufacturing of Puerto Rico, Inc.
Superior Products & Equipment Co., Inc.
UniFirst Canada Ltd.
Texas Industrial Services, Inc.
U Two Corporation
UR Corporation
Tennessee Uniform and Towel Service, Inc.
Euro Nuclear Services B.V.
<PAGE> 1
Page 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated November 5, 1997 incorporated by reference or included in this
Form 10-K, into the Company's previously filed Registration Statement File No.
33-60781.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNIFIRST CORPORATION FOR THE FISCAL YEAR ENDED AUGUST
30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-30-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-30-1997
<EXCHANGE-RATE> 1
<CASH> 4,054
<SECURITIES> 0
<RECEIVABLES> 40,730
<ALLOWANCES> 1,299
<INVENTORY> 19,497
<CURRENT-ASSETS> 103,144
<PP&E> 316,799
<DEPRECIATION> 128,532
<TOTAL-ASSETS> 339,626
<CURRENT-LIABILITIES> 65,530
<BONDS> 39,797
0
0
<COMMON> 2,051
<OTHER-SE> 215,141
<TOTAL-LIABILITY-AND-EQUITY> 339,626
<SALES> 419,093
<TOTAL-REVENUES> 419,093
<CGS> 372,092
<TOTAL-COSTS> 372,092
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,118
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</TABLE>
