Unifirst Corp 10-Q for FY2021 Q1

Unifirst Corp (UNF)

10-Q 2021-01-07 For: 2020-11-28

Added on April 11, 2026

About this 10-Q

Unifirst Corp filed this 10-Q on January 7, 2021, covering the quarter ended November 28, 2020 (FY2021 Q1).

Headline figures

Quarter ended November 28, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $446.85M; down 4.0% from $465.4M a year earlier
Net income: $41.9M; down 13.2% from net income of $48.24M a year earlier
Diluted EPS: $2.20; down 12.7% from $2.52 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →

Massachusetts	04-2103460
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

68 Jonspin Road, Wilmington, MA	01887
(Address of Principal Executive Offices)	(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 par value per share	UNF	New York Stock Exchange

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller Reporting Company	☐

Emerging Growth Company	☐

Part I – FINANCIAL INFORMATION	3

Item 1 – Unaudited Financial Statements	3

Consolidated Statements of Income for the Thirteen Weeks ended November 28, 2020 and November 30, 2019	3

Consolidated Statements of Comprehensive Income for the Thirteen Weeks ended November 28, 2020 and November 30, 2019	4

Consolidated Balance Sheets as of November 28, 2020 and August 29, 2020	5

Consolidated Statements of Shareholders’ Equity for the Thirteen Weeks ended November 28, 2020 and November 30, 2019	6

Consolidated Statements of Cash Flows for the Thirteen Weeks ended November 28, 2020 and November 30, 2019	7

Notes to Consolidated Financial Statements	8

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3 – Quantitative and Qualitative Disclosures About Market Risk	30

Item 4 – Controls and Procedures	30

Part II – OTHER INFORMATION	31

Item 1 – Legal Proceedings	31

Item 1A – Risk Factors	31

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3 – Defaults Upon Senior Securities	31

Item 4 – Mine Safety Disclosures	31

Item 5 – Other Information	31

Item 6 – Exhibits	32

Signatures	33

Certifications
Ex-31.1 Section 302 Certification of CEO
Ex-31.2 Section 302 Certification of CFO
Ex-32.1 Section 906 Certification of CEO
Ex-32.2 Section 906 Certification of CFO

	Thirteen weeks ended
(In thousands, except per share data)	November 28, 2020			November 30, 2019
Revenues	$	446,853		$	465,398
Operating expenses:
Cost of revenues (1)		275,800			289,316
Selling and administrative expenses (1)		88,703			90,528
Depreciation and amortization		26,308			25,459
Total operating expenses		390,811			405,303

Operating income		56,042			60,095
Other (income) expense:
Interest income, net		(568	)		(2,361	)
Other expense, net		749			528
Total other (income) expense, net		181			(1,833	)

Income before income taxes		55,861			61,928
Provision for income taxes		13,965			13,686
Net income	$	41,896		$	48,242
Income per share – Basic:
Common Stock	$	2.31		$	2.65
Class B Common Stock	$	1.85		$	2.12
Income per share – Diluted:
Common Stock	$	2.20		$	2.52
Income allocated to – Basic:
Common Stock	$	35,171		$	40,526
Class B Common Stock	$	6,725		$	7,716
Income allocated to – Diluted:
Common Stock	$	41,896		$	48,242
Weighted average shares outstanding – Basic:
Common Stock		15,247			15,308
Class B Common Stock		3,643			3,643
Weighted average shares outstanding – Diluted:
Common Stock		19,019			19,123


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	Thirteen weeks ended
(In thousands)	November 28, 2020			November 30, 2019
Net income	$	41,896		$	48,242
Other comprehensive income (loss):
Foreign currency translation adjustments		1,310			989
Change in fair value of derivatives, net of income taxes		(10	)		25
Derivative financial instruments reclassified to earnings		(11	)		(30	)
Other comprehensive income		1,289			984
Comprehensive income	$	43,185		$	49,226

(In thousands, except share and par value data)	November 28, 2020			August 29, 2020
Assets
Current assets:
Cash, cash equivalents and short-term investments	$	473,010		$	474,838
Receivables, less reserves of $14,224 and $12,125		209,916			190,916
Inventories		104,525			106,269
Rental merchandise in service		155,100			154,278
Prepaid taxes		3,612			7,115
Prepaid expenses and other current assets		40,661			35,918
Total current assets		986,824			969,334

Property, plant and equipment, net		598,719			582,470
Goodwill		424,881			424,844
Customer contracts, net		54,820			56,946
Other intangible assets, net		30,330			28,590
Deferred income taxes		522			522
Operating lease right-of-use assets, net		42,033			42,710
Other assets		96,031			93,611
Total assets	$	2,234,160		$	2,199,027

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	60,268		$	64,035
Accrued liabilities		138,693			132,965
Accrued taxes		—			527
Operating lease liabilities, current		12,731			12,569
Total current liabilities		211,692			210,096

Accrued liabilities		133,600			132,820
Accrued and deferred income taxes		86,642			85,721
Operating lease liabilities		28,874			29,261

Total liabilities		460,808			457,898
Commitments and contingencies (Note 12)
Shareholders’ equity:
Preferred Stock, $1.00 par value; 2,000,000 shares authorized; no shares issued and outstanding		—			—
Common Stock, $0.10 par value; 30,000,000 shares authorized; 15,220,271 and 15,251,176 shares issued and outstanding as of November 28, 2020 and August 29, 2020, respectively		1,522			1,525
Class B Common Stock, $0.10 par value; 20,000,000 shares authorized; 3,643,009 shares issued and outstanding as of November 28, 2020 and August 29, 2020, respectively		364			364
Capital surplus		87,210			86,645
Retained earnings		1,714,937			1,684,565
Accumulated other comprehensive loss		(30,681	)		(31,970	)

Total shareholders’ equity		1,773,352			1,741,129

Total liabilities and shareholders’ equity	$	2,234,160		$	2,199,027

(In thousands)	Common Shares			Class B Common Shares		Common Stock			Class B Common Stock		Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity
Balance, August 31, 2019		15,333			3,643	$	1,533		$	364	$	84,946		$	1,588,075		$	(33,688	)	$	1,641,230
Net income		—			—		—			—		—			48,242			—			48,242
Change in fair value of derivatives		—			—		—			—		—			—			(5	)		(5	)
Foreign currency translation		—			—		—			—		—			—			989			989
Dividends declared Common Stock ($0.25 per share)		—			—		—			—		—			(3,825	)		—			(3,825	)
Dividends declared Class B Common Stock ($0.20 per share)		—			—		—			—		—			(729	)		—			(729	)
Share-based compensation, net (1)		—			—		—			—		1,575			—			—			1,575
Share-based awards exercised, net (2)		16			—		2			—		(1,498	)		—			—			(1,496	)
Repurchase of Common Stock		(51	)				(5	)				(274	)		(9,694	)					(9,973	)
Balance, November 30, 2019		15,298			3,643		1,530			364		84,749			1,622,069			(32,704	)		1,676,008

Thirteen weeks ended (In thousands)	November 28, 2020			November 30, 2019
Cash flows from operating activities:
Net income	$	41,896		$	48,242
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		26,308			25,459
Amortization of deferred financing costs		28			28
Loss on sale of property, plant & equipment		5			—
Share-based compensation		1,622			1,575
Accretion on environmental contingencies		112			134
Accretion on asset retirement obligations		245			232
Deferred income taxes		242			245
Other		28			5
Changes in assets and liabilities, net of acquisitions:
Receivables, less reserves		(18,875	)		(12,771	)
Inventories		1,783			1,195
Rental merchandise in service		(684	)		1,370
Prepaid expenses and other current assets and Other assets		(2,812	)		(2,074	)
Accounts payable		(3,127	)		(5,031	)
Accrued liabilities		2,876			(2,678	)
Prepaid and accrued income taxes		3,094			(3,497	)
Net cash provided by operating activities		52,741			52,434

Cash flows from investing activities:
Acquisition of businesses, net of cash acquired		(603	)		(39,286	)
Capital expenditures, including capitalization of software costs		(41,836	)		(28,975	)
Proceeds from sale of assets		15			61
Net cash used in investing activities		(42,424	)		(68,200	)

Cash flows from financing activities:
Proceeds from exercise of share-based awards		1			74
Taxes withheld and paid related to net share settlement of equity awards		(834	)		(1,570	)
Repurchase of Common Stock		(7,216	)		(9,973	)
Payment of cash dividends		(4,541	)		(2,056	)
Net cash used in financing activities		(12,590	)		(13,525	)

Effect of exchange rate changes		445			538

Net decrease in cash, cash equivalents and short-term investments		(1,828	)		(28,753	)
Cash, cash equivalents and short-term investments at beginning of period		474,838			385,341
Cash, cash equivalents and short-term investments at end of period	$	473,010		$	356,588

Supplemental disclosure of cash flow information:
Non-cash capital expenditures	$	5,961		$	8,436

	As of November 28, 2020
	Level 1		Level 2		Level 3		Fair Value
Assets:
Cash equivalents	$	196,649	$	—	$	—	$	196,649
Pension plan assets		—		4,097		—		4,097
Foreign currency forward contracts		—		58		—		58
Total assets at fair value	$	196,649	$	4,155	$	—	$	200,804

	As of August 29, 2020
	Level 1		Level 2		Level 3		Fair Value
Assets:
Cash equivalents	$	196,478	$	—	$	—	$	196,478
Pension plan assets		—		4,146		—		4,146
Foreign currency forward contracts		—		87		—		87
Total assets at fair value	$	196,478	$	4,233	$	—	$	200,711

	Thirteen weeks ended November 28, 2020
	Earnings to Common Shareholders		Common Shares		Income Per Share
As reported - Basic	$	35,171		15,247	$	2.31
Add: effect of dilutive potential common shares
Share-Based Awards		—		129
Class B Common Stock		6,725		3,643
As reported – Diluted	$	41,896		19,019	$	2.20

	Thirteen Weeks Ended November 30, 2019
	Earnings to Common Shareholders		Common Shares		Income Per Share
As reported - Basic	$	40,526		15,308	$	2.65
Add: effect of dilutive potential common shares
Share-Based Awards		—		172
Class B Common Stock		7,716		3,643
As reported – Diluted	$	48,242		19,123	$	2.52

	Thirteen Weeks Ended
	November 28, 2020					November 30, 2019
(In thousands, except percentages)	Revenues		% of Revenues			Revenues		% of Revenues
Core Laundry Operations	$	393,190		88.0	%	$	416,298		89.4	%
Specialty Garments		38,134		8.5	%		33,402		7.2	%
First Aid		15,529		3.5	%		15,698		3.4	%
Total Revenues	$	446,853		100.0	%	$	465,398		100.0	%

	November 28, 2020		August 29, 2020
Raw materials	$	18,334	$	20,266
Work in process		1,120		2,730
Finished goods		85,071		83,273
Total inventories	$	104,525	$	106,269

	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
November 28, 2020
Customer contracts	$	234,750	$	179,930	$	54,820
Software		68,924		40,003		28,921
Other intangible assets		35,778		34,369		1,409
	$	339,452	$	254,302	$	85,150
August 29, 2020
Customer contracts	$	234,065	$	177,119	$	56,946
Software		66,014		39,020		26,994
Other intangible assets		35,741		34,145		1,596
	$	335,820	$	250,284	$	85,536

(In thousands)
2021 (remaining nine months)	$	10,319
2022		11,270
2023		8,119
2024		5,667
2025		3,614
Thereafter		4,866
Total payments		43,855
Less interest		(2,250	)
Total present value of lease payments	$	41,605

Balance as of August 29, 2020	$	424,844
Goodwill recorded during the period		-
Other		37
Balance as of November 28, 2020	$	424,881

	November 28, 2020
Beginning balance as of August 29, 2020	$	13,920
Accretion expense		245
Effect of exchange rate changes		14
Balance as of November 28, 2020	$	14,179

(In thousands, except lease term and discount rate)
Lease cost
Operating lease costs including short-term lease expense and variable lease costs, which were immaterial in the period	$	4,811

Operating cash flow impacts
Cash paid for amounts included in the measurement of operating lease liabilities	$	3,357
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	$	2,841
Weighted-average remaining lease term - operating leases	4.5 years
Weighted-average discount rate - operating leases		2.54	%

	November 28, 2020
Beginning balance as of August 29, 2020	$	30,702
Costs incurred for which reserves have been provided		(279	)
Insurance proceeds		35
Interest accretion		112
Changes in discount rates		(137	)
Balance as of November 28, 2020	$	30,433

(In thousands)	2021			2022			2023			2024			2025			Thereafter			Total
Estimated costs – current dollars	$	11,089		$	2,668		$	1,371		$	1,073		$	1,076		$	11,852		$	29,129
Estimated insurance proceeds		(161	)		(159	)		(173	)		(159	)		(173	)		(521	)		(1,346	)
Net anticipated costs	$	10,928		$	2,509		$	1,198		$	914		$	903		$	11,331		$	27,783
Effect of inflation																				7,363
Effect of discounting																				(4,713	)
Balance as of November 28, 2020																			$	30,433

	Thirteen Weeks Ended November 28, 2020
	Foreign Currency Translation			Pension- related (1)			Derivative Financial Instruments (1)			Total Accumulated Other Comprehensive Loss
Beginning balance as of August 29, 2020	$	(22,009	)	$	(10,026	)	$	65		$	(31,970	)
Other comprehensive income (loss) before reclassification		1,310			—			(10	)		1,300
Amounts reclassified from accumulated other comprehensive loss		—			—			(11	)		(11	)
Net current period other comprehensive (loss) income		1,310			—			(21	)		1,289
Ending balance as of November 28, 2020	$	(20,699	)	$	(10,026	)	$	44		$	(30,681	)

Thirteen weeks ended	U.S. and Canadian Rental and Cleaning			MFG		Net Interco MFG Elim			Corporate			Subtotal Core Laundry Operations			Specialty Garments		First Aid		Total
November 28, 2020
Revenues	$	386,158		$	59,082	$	(59,082	)	$	7,032		$	393,190		$	38,134	$	15,529	$	446,853
Operating income (loss)	$	74,840		$	19,810	$	(994	)	$	(44,786	)	$	48,870		$	7,159	$	13	$	56,042
Interest income, net	$	(693	)	$	—	$	—		$	125		$	(568	)	$	—	$	—	$	(568	)
Income (loss) before taxes	$	75,542		$	19,674	$	(994	)	$	(45,383	)	$	48,839		$	7,008	$	14	$	55,861
November 30, 2019
Revenues	$	407,803		$	65,010	$	(65,010	)	$	8,495		$	416,298		$	33,402	$	15,698	$	465,398
Operating income (loss)	$	76,287		$	22,546	$	(2,526	)	$	(42,499	)	$	53,808		$	4,879	$	1,408	$	60,095
Interest income, net	$	(976	)	$	—	$	—		$	(1,385	)	$	(2,361	)	$	—	$	—	$	(2,361	)
Income (loss) before taxes	$	77,257		$	22,403	$	(2,526	)	$	(41,498	)	$	55,636		$	4,884	$	1,408	$	61,928

	(a) Total Number of Shares of Stock Purchased(1)		(b) Average Price Paid per Share(1)		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)		(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs(1)
August 30, 2020 - September 26, 2020			$				$	47,736,951
September 27, 2020 - October 24, 2020		—	$	—		—	$	47,736,951
October 25, 2020 - November 28, 2020		41,000	$	176.01		41,000	$	40,520,525
		41,000	$			41,000

10.1		UniFirst Corporation Executive Employment Plan (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed with the Commission on October 28, 2020)

10.2		Form of Stock Appreciation Right Award for eligible participants under the UniFirst Corporation Executive Employment Plan pursuant to the UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan ((incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed with the Commission on October 28, 2020)

10.3		Form of Restricted Stock Unit Award for eligible participants under the UniFirst Corporation Executive Employment Plan pursuant to the UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed with the Commission on October 28, 2020)

10.4		Form of Restricted Stock Unit Award for eligible participants under the UniFirst Corporation Executive Employment Plan pursuant to the UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan (with respect to performance-based restricted stock unit awards) (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed with the Commission on October 28, 2020)

31.1		Rule 13a-14(a)/15d-14(a) Certification of Steven S. Sintros (filed herewith).

31.2		Rule 13a-14(a)/15d-14(a) Certification of Shane O’Connor (filed herewith).

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.SCH		Inline XBRL Taxonomy Extension Schema Document (filed herewith).

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).

104		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) (filed herewith).


		UniFirst Corporation

January 7, 2021	By:	/s/ Steven S. Sintros
		Steven S. Sintros
		President and Chief Executive Officer

January 7, 2021	By:	/s/ Shane O’Connor
		Shane O’Connor
		Executive Vice President and Chief Financial Officer