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UniFirst revenues up 6.6% in Q1 of fiscal 2011
Jan '11
UniFirst Corporation announced results for the first quarter of fiscal 2011, which ended on November 27, 2010.

Revenues for the first quarter were $273.1 million, up 6.6% compared to $256.2 million for the same period in the prior year. First quarter net income was $23.8 million ($1.20 per diluted common share), a slight increase in net income from the first quarter of fiscal 2010 of $23.6 million ($1.21 per diluted common share).

Ronald D. Croatti, UniFirst President and Chief Executive Officer said, "We are pleased with the Company's overall results for the first quarter. All of our operating segments contributed to stronger than anticipated growth and our profits exceeded our expectations as a result."

The Company's core laundry revenues were $238.7 million in the first quarter, up 5.7% from those reported in the same period a year ago. After excluding the positive effect of acquisitions as well as a stronger Canadian dollar, the Company's core laundry revenues increased 4.2% organically. Core laundry operating income declined 2.8% to $34.4 million in the first quarter from $35.4 million for the same period in the prior year. The core laundry's operating margin also fell to 14.4% in the first quarter from 15.7% in the first quarter of fiscal 2010.

The margin decline primarily relates to a higher cost of revenues, including merchandise, energy and payroll. In addition, higher share-based compensation expense also contributed to the margin decline. These items were partially offset by lower costs associated with healthcare and other insurance as well as a $0.8 million accounting benefit related to the effect of discount rate fluctuations on the fair value of our environmental liabilities.

The Company's Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, posted revenues of $25.8 million, up 12.8% compared to the first quarter of 2010. However, operating income for this segment decreased to $4.0 million in the first quarter of fiscal 2011 from $4.6 million in the first quarter of fiscal 2010. The decline in operating income was primarily the result of a larger percentage of higher-margin project and ancillary service revenues in the first quarter of fiscal 2010.

The Company's results for the first quarter benefited from a lower effective income tax rate compared to a year ago. The effective income tax rate for the quarter was 37.0% compared to 39.5% for the first quarter of fiscal 2010. The decrease in rate was primarily the result of the reduction of tax contingency reserves related to the resolution of certain state audits as well as a lower overall provision for state income taxes.

UniFirst continues to generate strong cash flows and maintain a solid balance sheet. Cash produced by operating activities for the first quarter was $27.2 million. Cash and cash equivalents on hand at the end of the quarter was $133.3 million, up from $121.3 million at the end of fiscal 2010. In addition, the quarter ended with total debt as a percentage of capital of 19.7%, down from 20.4% at the end of fiscal 2010.

Mr. Croatti continued, "Although overall unemployment rates remain high, we are encouraged by the modest improvements we are seeing in economic activity and hiring across our customer base. As always, we will continue to remain vigilant in controlling our costs as well as ensuring that we are doing all we can to provide first-class service to our expanding customer base."

UniFirst Corporation

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