ITEM 1. BUSINESS - - -----------------
UniFirst is a leading company in the garment rental industry. The Company's services consist principally of renting, cleaning, and delivering a variety of industrial employment garments on a periodic basis, usually weekly. The Company also decontaminates and cleans 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 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 three years. The Company services over 100,000 customer locations in 44 states and Canada from 99 service locations and distribution centers. For fiscal 1992, 1993 and 1994, the Company's garment rental operations produced approximately 64%, 65% and 66%, respectively, of its revenues, and non-garment rental items accounted for another 27%, 25% and 25%, respectively, of its revenues, with no single customer accounting for more than 1% of total revenues in any year.
The Company manufactures work pants and shirts for its garment rental operations in its plants in Luquillo, Puerto Rico, and Cave City, Arkansas, respectively. These plants produced approximately 43% of all employment garments which the Company placed in service during both fiscal 1994 and 1993.
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 the federal government, research and development laboratories and utilities operating nuclear reactors. The Company maintains decontamination facilities at the site of a conventional cleaning plant in Massachusetts and has specialized facilities exclusively for its nuclear decontamination operations in Mississippi, New Mexico, California, Washington, Hawaii, Pennsylvania, South Carolina, Virginia, Georgia, Illinois and Iowa.
MARKETING
The Company markets its services to potential customers through approximately 230 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 telephone and also through sales appointments. The Company has a separately-staffed telemarketing program of approximately 30 people, designed to provide broader and more efficient coverage by screening prospects for the sales representatives.
The Company believes that customer service is the most important element in developing and maintaining its market position. As of August 27, 1994, existing accounts were serviced by approximately 685 route salespersons and 410 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.
The Company's emphasis on customer service is reflected throughout the Company's business. The Company believes that ownership of its own 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 43% of all garments which it placed in service during fiscal 1994, 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 5,500 persons, about 6% of whom are represented by unions pursuant to 7 separate collective bargaining agreements. The Company considers its employee relations to be satisfactory.
Aldo A. 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 for more than the past five years and Chief Executive Officer since September 1, 1991. Prior to becoming CEO he was Chief Operating Officer for more than five years.
Anthony F. DiFillippo has been President for more than the past five years.
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 Inello has been Treasurer for more than the past five years.
Robert T. Citrano has been Vice President, Support Services for more than the past five years.
Bruce P. Boynton has been Vice President, Canadian Operations for more than the past five years.
Ronald D. Croatti, Anthony F. DiFillippo, Robert L. Croatti and Cynthia Croatti Inello are a son, brother-in-law, nephew and daughter, respectively, of Aldo A. Croatti.
ENVIRONMENTAL MATTERS
All industrial laundries use and have to dispose of detergent waste water and/or dry cleaning 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.
The Company and several other unaffiliated parties have been identified by the United States Environmental Protection Agency ("EPA") as having contributed to the presence of hazardous substances in the ground water in Woburn, Massachusetts. The Company has not incurred, and does not currently anticipate incurring, expenses in connection therewith which would have a material adverse effect on its financial position as a result thereof.
ITEM 2.
ITEM 2. PROPERTIES - - -------------------
At August 27, 1994 the Company owned or occupied 115 facilities containing an aggregate of approximately 2.8 million square feet located in the United States, Canada and Puerto Rico. The Company owns 70 of these facilities containing approximately 2.3 million square feet.
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 1,300 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.
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.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS - - ----------------------------------------------------------
None
PART II -------
ITEM 5.
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 1994 Annual Report to Shareholders.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA - - --------------------------------
See the section entitled "Ten Year Financial Summary" which is incorporated herein by reference, as part of the Company's 1994 Annual Report to Shareholders.
ITEM 7.
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 1994 Annual Report to Shareholders.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - - ----------------------------------------------------
The financial statements and the accompanying notes, which are incorporated herein by reference to the Company's 1994 Annual Report to Shareholders, are indexed herein under Items 14(a)(1) and (2) of Part IV.
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES - - --------------------------------------------------------------
Not applicable
PART III --------
ITEM 10.
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 1995 Annual Meeting of Shareholders.
ITEM 11.
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 1995 Annual Meeting of Shareholders.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - - ------------------------------------------------------------------------
Incorporated by reference to the information provided under the captions "Election of Directors" and "Principal Shareholders" in the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - - --------------------------------------------------------
Incorporated by reference to the information provided under the caption "Certain Transactions" in the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders.
PART IV -------
ITEM 14.
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 1994 Annual Report to Shareholders.
Consolidated balance sheets as of August 27, 1994 and August 28, 1993
Consolidated statements of income for each of the three years in the period ended August 27, 1994
Consolidated statements of shareholders' equity for each of the three years in the period ended August 27, 1994
Consolidated statements of cash flows for each of the three years in the period ended August 27, 1994
Notes to consolidated financial statements
Report of independent public accountants
The following additional schedules are filed herewith:
Report of independent public accountants on supplemental schedules to the consolidated financial statements.
Schedule II -
Note receivable from related party.
Schedule V -
Property, plant and equipment for each of the three years in the period ended August 27, 1994.
Schedule VI -
Accumulated depreciation and amortization for each of the three years in the period ended August 27, 1994.
Schedule VIII -
Valuation and qualifying accounts and reserves for each of the three years in the period ended August 27, 1994.
Schedule X -
Supplementary income statement information for each of the three years in the period ended August 27, 1994.
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 the accompanying Exhibit Index are filed as part of this report.
(b) During the three months ended August 27, 1994 the Company did not file any reports on Form 8-K with the Securities and Exchange Commission.
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: Aldo A. Croatti ---------------------------------- Aldo A. Croatti Chairman
Date: November 23, 1994
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.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULES TO THE CONSOLIDATED FINANCIAL STATEMENTS
To 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 1, 1994. Our report on the consolidated financial statements includes an explanatory paragraph with respect to the change in the method of accounting for income taxes, effective September 1, 1991, as discussed in Note 3 to the consolidated financial statements. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplemental schedules to the consolidated financial statements listed as Item 14(a)(2) in the Form 10-K are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state, 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.
ARTHUR ANDERSEN LLP
Boston, Massachusetts November 1, 1994
UNIFIRST CORPORATION AND SUBSIDIARIES - - ------------------------------------- SCHEDULE II - - ----------- NOTE RECEIVABLE FROM RELATED PARTY - - ----------------------------------
There was no activity for the year ended August 29, 1992
UNIFIRST CORPORATION AND SUBSIDIARIES - - ------------------------------------- SCHEDULE V - - ---------- PROPERTY, PLANT AND EQUIPMENT FOR EACH OF THE - - --------------------------------------------- THREE YEARS IN THE PERIOD ENDED AUGUST 27, 1994 - - -----------------------------------------------
UNIFIRST CORPORATION AND SUBSIDIARIES - - ------------------------------------- SCHEDULE VI - - ----------- ACCUMULATED DEPRECIATION AND AMORTIZATION FOR EACH OF - - ----------------------------------------------------- THE THREE YEARS IN THE PERIOD ENDED AUGUST 27, 1994 - - ---------------------------------------------------
UNIFIRST CORPORATION AND SUBSIDIARIES - - ------------------------------------- SCHEDULE VIII - - ------------- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR EACH - - ------------------------------------------------------- OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 27, 1994 - - ------------------------------------------------------
UNIFIRST CORPORATION AND SUBSIDIARIES - - ------------------------------------- SCHEDULE X - - ---------- SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR EACH - - --------------------------------------------------- OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 27, 1994 - - ------------------------------------------------------
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 10-A to the Company's Annual Report on Form 10-K for fiscal year ended August 26, 1989.
10-C Metropolitan Life Insurance Company Loan Agreement covering issuance of $15,000,000 9-1/4% Senior Notes -- incorporated by reference to Exhibit 10-F to the Company's Annual Report on Form 10-K for fiscal year ended August 29, 1987.
13 The Company's 1994 Annual Report to Shareholders (filed herewith to the extent expressly incorporated by reference herein).
22 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 UniFirst Express, Inc. Modern Coverall - Uniform Supply, Inc.
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule