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UniFirst(UNF) - 2025 Q3 - Quarterly Report

Part I – Financial Information Financial Statements (Unaudited) The unaudited financial statements present the company's performance for the thirteen and thirty-nine weeks ended May 31, 2025, highlighting revenue and net income growth, increased total assets and shareholders' equity, and strong operating cash flow Consolidated Statements of Income For the third quarter of fiscal 2025, revenues increased by 1.2% to $610.8 million, while net income grew by 4.3% to $39.7 million compared to the same period last year, with year-to-date revenues rising 1.7% to $1.82 billion and net income increasing by 6.4% to $107.2 million Financial Performance Summary | Financial Metric | Thirteen Weeks Ended May 31, 2025 | Thirteen Weeks Ended May 25, 2024 | Thirty-Nine Weeks Ended May 31, 2025 | Thirty-Nine Weeks Ended May 25, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $610.8M | $603.3M | $1,817.9M | $1,787.6M | | Operating Income | $48.2M | $48.5M | $134.9M | $129.5M | | Net Income | $39.7M | $38.1M | $107.2M | $100.8M | | Diluted EPS (Common Stock) | $2.13 | $2.03 | $5.76 | $5.38 | Consolidated Balance Sheets As of May 31, 2025, total assets increased to $2.76 billion from $2.70 billion at August 31, 2024, driven by a rise in cash and cash equivalents, while total liabilities remained stable and shareholders' equity grew to $2.17 billion Consolidated Balance Sheet Highlights | Balance Sheet Item | May 31, 2025 | August 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $937.9M | $915.7M | | Total Assets | $2,760.0M | $2,696.4M | | Total Current Liabilities | $266.9M | $281.4M | | Total Liabilities | $585.2M | $587.9M | | Total Shareholders' Equity | $2,174.8M | $2,108.5M | Consolidated Statements of Cash Flows For the thirty-nine weeks ended May 31, 2025, the company generated $196.5 million in cash from operating activities, with cash used in investing activities primarily for capital expenditures and financing activities mainly for share repurchases and dividends, resulting in a net cash increase of $50.3 million Consolidated Cash Flow Summary | Cash Flow Activity (Thirty-Nine Weeks Ended) | May 31, 2025 | May 25, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $196.5M | $193.0M | | Net cash used in investing activities | ($98.5M) | ($124.3M) | | Net cash used in financing activities | ($48.3M) | ($36.1M) | | Net increase in cash and cash equivalents | $50.3M | $32.8M | Notes to Consolidated Financial Statements Key notes detail revenue disaggregation, commitments, debt facilities, and segment performance, highlighting Core Laundry Operations as the largest revenue source, a significant but not probable tax assessment in Mexico, and the company's credit facility and share repurchase program - Core Laundry Operations constituted 87.8% of total revenues for the thirty-nine weeks ended May 31, 2025, followed by Specialty Garments (7.6%) and First Aid (4.6%)35 - The company is challenging a tax assessment from Mexican authorities totaling over $84.7 million, though management believes a loss is neither probable nor remote93 - As of May 31, 2025, the company had no outstanding borrowings under its credit facility and $168.3 million available for borrowing103 - A new share repurchase program of up to $100.0 million was authorized on April 8, 2025, with $86.4 million remained available for repurchases as of May 31, 2025116117 Management's Discussion and Analysis (MD&A) Management attributes the 1.2% quarterly revenue growth primarily to organic growth in Core Laundry Operations, noting a slight decrease in operating margin due to higher healthcare claims and advisory costs, while liquidity remains strong, funding capital expenditures, share repurchases, and dividends Results of Operations For Q3 2025, consolidated revenue grew 1.2% to $610.8 million, driven by increases in Core Laundry Operations and First Aid, with operating income nearly flat, while the 39-week period saw revenue growth of 1.7% to $1.82 billion and operating income increase of 4.2% to $134.9 million Quarterly Revenue by Segment | Revenue by Segment (Q3) | May 31, 2025 | May 25, 2024 | % Change | | :--- | :--- | :--- | :--- | | Core Laundry Operations | $533.2M | $528.5M | 0.9% | | Specialty Garments | $47.8M | $47.6M | 0.5% | | First Aid | $29.8M | $27.3M | 9.1% | | Total | $610.8M | $603.3M | 1.2% | - Cost of revenues as a percentage of revenue decreased from 64.8% to 63.1% in Q3 2025, primarily due to lower merchandise and production payroll costs144 - Selling and administrative expenses increased by 10.5% in Q3 2025, driven by higher healthcare claims and approximately $5.7 million in advisory and legal costs for strategic and employee matters145 Year-to-Date Operating Income by Segment | Operating Income by Segment (YTD) | May 31, 2025 | May 25, 2024 | % Change | | :--- | :--- | :--- | :--- | | Core Laundry Operations | $104.0M | $98.1M | 6.1% | | Specialty Garments | $30.5M | $33.4M | (8.6)% | | First Aid | $0.4M | ($1.9M) | 119.7% | | Total | $134.9M | $129.5M | 4.2% | Liquidity and Capital Resources The company's liquidity remains strong, with cash and equivalents increasing by $50.3 million to $211.9 million during the first thirty-nine weeks of fiscal 2025, driven by $196.5 million in operating cash flow, while major uses of cash included capital expenditures, share repurchases, and dividends Cash Flow Summary (Thirty-Nine Weeks Ended) | Cash Flow Summary (Thirty-Nine Weeks Ended) | May 31, 2025 | May 25, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $196.5M | $193.0M | | Net cash used in investing activities | ($98.5M) | ($124.3M) | | Net cash used in financing activities | ($48.3M) | ($36.1M) | - The increase in operating cash flow was primarily due to improved profitability and positive working capital changes, including better management of inventories and receivables166167 - The increase in cash used for financing activities was driven by a $9.6 million increase in share repurchases compared to the prior year period171 Market Risk Disclosures The company is exposed to foreign currency exchange risk and interest rate risk, with approximately 7.1% of Q3 2025 revenues denominated in foreign currencies, and mitigates some currency risk using forward contracts while interest rate risk exists through potential borrowings under its variable-rate credit facility - Revenues denominated in foreign currencies represented approximately 7.1% of total consolidated revenues for the thirteen weeks ended May 31, 2025186 - The company has forward contracts to sell approximately 14.1 million CAD through fiscal 2026 to manage exposure from a subsidiary's CAD-denominated sales, with 2.3 million CAD notional value outstanding as of May 31, 2025187188 Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of May 31, 2025, solely due to previously identified material weaknesses in IT general controls, with ongoing remediation efforts including redesigning IT processes, enhancing oversight, strengthening policies, and implementing a new Identity and Access Management system - The CEO and CFO concluded that disclosure controls and procedures were not effective as of the end of the period, solely due to material weaknesses in IT general controls identified in the fiscal 2024 Annual Report192 - Ongoing remediation actions include: - Reassessing and redesigning IT 'manage change' and 'manage access' processes - Enhanced oversight from the new Business Processes, Risk and Controls group - Implementing an Identity and Access Management (IAM) system - Oversight from the new Chief Information and Technology Officer hired in Q1 2025196 Part II – Other Information Risk Factors The company highlights a risk related to U.S. and foreign trade policies, where new or increased tariffs on imported goods could materially and adversely impact the business if these costs cannot be mitigated - A key risk is that new or increased tariffs on imported goods by the U.S. and other countries could materially and adversely impact the business if the company is unable to mitigate the increased costs of raw materials or products202 Share Repurchases During the third quarter of fiscal 2025, the company repurchased 75,973 shares of its Common Stock for approximately $13.6 million, and on April 8, 2025, the Board authorized a new $100.0 million share repurchase program, with $86.4 million remaining available as of May 31, 2025 Common Stock Repurchases | Period (2025) | Total Shares Purchased | Average Price Paid per Share | Approx. Value Remaining under Program | | :--- | :--- | :--- | :--- | | Mar 2 - Mar 29 | 0 | $— | $63.7M | | Mar 30 - Apr 26 | 24,000 | $173.65 | $95.8M | | Apr 27 - May 31 | 51,973 | $182.10 | $86.4M | | Total for Q3 | 75,973 | N/A | $86.4M | - On April 8, 2025, the Board of Directors authorized a new share repurchase program for up to $100.0 million of its outstanding Common Stock, inclusive of amounts remaining under the prior program116203