UniFirst Specialty Garments operating profit up
July 02, 2009 - United States Of America
UniFirst Corporation announced results for the third quarter and first nine months of fiscal 2009, which ended on May 30, 2009.
Revenues for the third quarter of fiscal 2009 were $252.1 million, a 1.0% decrease from the previous year’s $254.6 million. Third quarter net income was a record $21.7 million or $1.12 per diluted common share, a 28.0% increase from the third quarter of fiscal 2008, when net income was $16.9 million or $0.87 per diluted common share.
Revenues were approximately $772 million for both the first nine months of fiscal 2009 and fiscal 2008. However, on a comparable work week basis, revenues increased 2.6% during the first nine months of fiscal 2009 compared to the same period a year ago. Net income for the first nine months of fiscal 2009 was $58.8 million or $3.04 per diluted common share, a 20.8% increase from the first nine months of fiscal 2008, when net income was $48.7 million or $2.52 per diluted common share.
“Our top line continues to be impacted by the further decline of wearer levels at our customers as well as increased business closures,” said Ronald D. Croatti, UniFirst President and Chief Executive Officer. “Significantly lower energy prices as well as lower merchandise costs due to a lack of new employees being hired by our customers have helped drive recent profitability higher. In addition, our strong results reflect the proactive steps that we have taken to control our head count and overall cost structure in anticipation of further declines in our revenues.”
The Company’s core laundry revenues declined $2.9 million or 1.3% during the third quarter compared to the same quarter in fiscal 2008; however, income from operations was up 19.2%. The core laundry’s operating margin increased to 14.9% in the third quarter from 12.3% a year earlier as total expenses were down $8.3 million. The decline in expenses was primarily the result of lower energy, payroll and merchandise costs. Gasoline and natural gas costs were significantly below the prior year’s levels.
Payroll costs are down as total headcount in the core laundry operations has been reduced by approximately 8% since the beginning of the calendar year. In addition, other administrative and production costs including travel expenses, are lower than those in last year’s third quarter. The Company continues to focus on reducing its overall expenses. Partially offsetting these cost benefits were higher healthcare and other payroll related costs, depreciation, bad debt expense as well as an increase to our reserve for environmental contingencies.
UniFirst’s Specialty Garments and First Aid segments also contributed to the Company’s overall growth in third quarter profits compared to 2008. Specialty Garments operating profit increased to $3.0 million from $1.8 million a year ago. This growth was driven primarily by improved performances from the segment’s US and Canadian power reactor business as well asits clean room operations.
UniFirst continues to generate strong cash flows and maintain a solid balance sheet. Cash flows from operations for the first nine months of fiscal 2009 were $109.4 million compared to $83.6 million in the first nine months of fiscal 2008. This year the Company has generated significant free cash flows which have been used primarily to reduce outstanding debt by $41.6 million. Total debt as a percentage of capital as of the end of the third quarter was 24.1%, down from 29.7% as of the end of fiscal 2008.
“As the economic environment remains volatile, cost control will continue to be a top priority,” Croatti said. “We anticipate that even when general economic conditions improve, our customers will be hesitant to increase employee levels too quickly and as a result it will take us longer to recover the uniform wearers that we have lost. However, our strong overall financial position allows us to continue investing significant resources selling the value of our services to prospective and existing customers.”