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UNF > SEC Filings for UNF > Form 10-Q on 9-Apr-2009All Recent SEC Filings

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Form 10-Q for UNIFIRST CORP


9-Apr-2009

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SAFE HARBOR FOR FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and any documents incorporated by reference contain forward looking statements within the meaning of the federal securities laws. Forward looking statements contained in this Quarterly Report on Form 10-Q and any documents incorporated by reference are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Forward looking statements may be identified by words such as "estimates," "anticipates," "projects," "plans," "expects," "intends," "believes," "seeks," "could," "should," "may," "will," or the negative versions thereof, and similar expressions and by the context in which they are used. Such forward looking statements are based upon our current expectations and speak only as of the date made. Such statements are highly dependent upon a variety of risks, uncertainties and other important factors that could cause actual results to differ materially from those reflected in such forward looking statements. Such factors include, but are not limited to, uncertainties regarding our ability to consummate and successfully integrate acquired businesses, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, our ability to compete successfully without any significant degradation in our margin rates, seasonal fluctuations in business levels, uncertainties regarding the price levels of natural gas, electricity, fuel and labor, the impact of negative economic conditions on our customers and such customers' workforce, the continuing increase in domestic healthcare costs, demand and prices for our products and services, additional professional and internal costs necessary for compliance with recent and proposed future changes in Securities and Exchange Commission (including the Sarbanes-Oxley Act of 2002), New York Stock Exchange and accounting rules, strikes and unemployment levels, our efforts to evaluate and potentially reduce internal costs, economic and other developments associated with the war on terrorism and its impact on the economy and general economic conditions. We undertake no obligation to update any forward looking statements to reflect events or circumstances arising after the date on which such statements are made.

Business Overview

UniFirst Corporation, together with its subsidiaries, hereunder referred to as "we", "our", the "Company", or "UniFirst", is one of the largest providers of workplace uniforms and protective clothing in the United States. We design, manufacture, personalize, rent, clean, deliver, and sell a wide range of uniforms and protective clothing, including shirts, pants, jackets, coveralls, lab coats, smocks, aprons and specialized protective wear, such as flame resistant and high visibility garments. We also rent industrial wiping products, floor mats, facility service products and other non-garment items, and provide first aid cabinet services and other safety supplies, to a variety of manufacturers, retailers and service companies.

We serve businesses of all sizes in numerous industry categories. Typical customers include automobile service centers and dealers, delivery services, food and general merchandise retailers, food processors and service operations, light manufacturers, maintenance facilities, restaurants, service companies, soft and durable goods wholesalers, transportation companies, and others who require employee clothing for image, identification, protection or utility purposes. We also provide our customers with restroom supplies, including air fresheners, paper products and hand soaps.

At certain specialized facilities, we also decontaminate and clean work clothes that may have been exposed to radioactive materials and service special clean room protective wear. Typical customers for these specialized services include government agencies, research and development laboratories, high technology companies and utilities operating nuclear reactors.

We continue to expand into additional geographic markets through acquisitions and organic growth. We currently service over 200,000 customer locations in the United States, Canada and Europe from approximately 201 customer service, distribution and manufacturing facilities.

As discussed and described in Note 11 to the Consolidated Financial Statements, we have five reporting segments: US and Canadian Rental and Cleaning, Manufacturing ("MFG"), Corporate, Specialty Garments Rental and Cleaning ("Specialty Garments") and First Aid. We refer to the laundry locations of the US and Canadian Rental and Cleaning reporting segment as "industrial laundries" or "industrial laundry locations", and to the US and Canadian Rental and Cleaning, MFG, and Corporate reporting segments combined as our "core laundry operations."

Results of Operations

The amounts of revenues and certain expense items for the thirteen and twenty-six weeks ended February 28, 2009 and the fourteen and twenty-seven weeks ended March 1, 2008, and the percentage changes in revenues and certain expense items as a percentage of total revenues between these periods, are presented in the following table. Operating costs presented in the table below include merchandise costs related to the amortization of rental merchandise in service and direct sales as well as labor and other production, service and delivery costs associated with operating our industrial laundries, Specialty Garments facilities, First Aid locations and our distribution center. Selling and administrative costs include costs related to our sales and marketing functions, as well as general and administrative costs associated with our corporate offices and operating locations including information systems, engineering, materials management, manufacturing planning, finance, budgeting, and human resources.

                                 Thirteen               Fourteen                         Twenty-six            Twenty-seven
                               weeks ended            weeks ended                       weeks ended            weeks ended
(in thousands, except      February 28,   % of      March 1,   % of      %          February 28,   % of      March 1,   % of      %
percentages)                   2009       Rev.        2008     Rev.    Change           2009       Rev.        2008     Rev.    Change

Revenues                 $      257,285   100.0 % $  270,288   100.0 %   -4.8 %   $      519,839   100.0 % $  517,548   100.0 %    0.4 %

Costs and expenses:
Operating costs (1)             158,972    61.8      172,481    63.8     -7.8            316,035    60.8      323,628    62.5     -2.3
Selling and
administrative expenses
(1)                              50,113    19.5       56,024    20.7    -10.6            107,600    20.7      110,043    21.3     -2.2
Depreciation and                                                                                                                   4.2
amortization                     14,339     5.6       14,115     5.2      1.6             28,042     5.4       26,902     5.2
                                223,424    86.8      242,620    89.8     -7.9            451,677    86.9      460,573    89.0     -1.9

Income from operations           33,861    13.2       27,668    10.2     22.4             68,162    13.1       56,975    11.0     19.6

Other expense (income)            1,972     0.8        2,821     1.0    -30.1              4,993     1.0        5,341     1.0     -6.5

Income before income                                                                                                              22.3
taxes                            31,889    12.4       24,847     9.2     28.3             63,169    12.2       51,634    10.0
Provision for income                                                                                                              30.9
taxes                            13,609     5.3        9,566     3.5     42.3             26,027     5.0       19,879     3.8

Net income               $       18,280     7.1 % $   15,281     5.7 %   19.6 %   $       37,142     7.1 % $   31,755     6.1 %   17.0 %

(1) Exclusive of depreciation on our property and equipment and amortization of our intangible assets.

The current worldwide economic weakness may negatively impact our revenues for the balance of fiscal 2009 and perhaps into fiscal 2010 due to the impact on spending plans and employment levels of our customers and sales prospects. Since the beginning of the fiscal 2009 year, U.S. unemployment rates have continued to increase, which is impacting our broad customer base. Lost accounts have increased, and may continue to increase, as we are seeing a larger number of accounts going out of business or in financial distress.

General

We derive our revenues through the design, manufacture, personalization, rental, cleaning, delivering, and selling of a wide range of uniforms and protective clothing, including shirts, pants, jackets, coveralls, lab coats, smocks, aprons and specialized protective wear, such as flame resistant and high visibility garments. We also rent industrial wiping products, floor mats, facility service products, other non-garment items, and provide first aid cabinet services and other safety supplies, to a variety of manufacturers, retailers and service companies.

Thirteen weeks ended February 28, 2009 compared with fourteen weeks ended March 1, 2008

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