1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------- FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 For the fiscal year ended August 31, 1996 Commission File Number 1-8504 UNIFIRST CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04-2103460 (State of Incorporation) (IRS Employer Identification Number) 68 Jonspin Road Wilmington, Massachusetts 01887 (Address of principal executive offices) Registrant's telephone number, including area code: (508) 658-8888 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of Class which shares are traded Common Stock, $.10 par value per share New York Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definintive proxy or information incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The number of outstanding shares of UniFirst Corporation Common Stock and Class B Common Stock at November 18, 1996 were 7,888,864 and 12,621,744, respectively, and the aggregate market value of these shares held by non-affiliates of the Company on said date was $204,104,708 (based upon the closing price of the Company's Common Stock on the New York Stock Exchange on said date and assuming the market value of a share of Class B Common Stock (which is generally non-transferable, but is convertible at any time into one share of Common Stock) is identical to the market value of the Common Stock). DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's 1996 Annual Report to Shareholders and the Company's Proxy Statement for its 1997 Annual Meeting of Shareholders (which will be filed with the Securities and Exchange Commission within 120 days after the close of the 1996 fiscal year) are incorporated by reference into Parts II, III and IV hereof.
2 Page 2 ITEM 1. BUSINESS - ----------------- UniFirst is a leading company in the garment rental industry. The Company's services consist principally of manufacturing, renting, cleaning, and delivering a variety of industrial employment garments on a periodic basis, usually weekly. The Company also decontaminates and cleans, in separate facilities, 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 as 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 personalized 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 five years. The Company services over 100,000 customer locations in 44 states and Canada from 109 service locations and distribution centers. For fiscal 1994, 1995 and 1996, the Company's garment rental operations produced approximately 66%, 67% and 67%, respectively, of its revenues, and non-garment rental items and sales accounted for another 25%, 25% and 26% of its revenues in each of those years, with no single customer accounting for more than 1% of total revenues in any year.
3 Page 3 The Company manufactures work pants and shirts for its garment rental operations in its plants in Luquillo, Puerto Rico and Cave City, Arkansas, respectively. In 1996 the Company began manufacturing other items, primarily jackets, at a third plant in Wilburton, Oklahoma. These plants produced approximately 53% of all employment garments which the Company placed in service during fiscal 1996. In 1995, the Company's manufacturing level was approximately 49%. 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 government agencies, research and development laboratories and utilities operating nuclear reactors. The Company operates 11 decontamination facilities, located in Massachusetts, New Mexico, California, Washington, Hawaii, Pennsylvania, South Carolina, Virginia, Georgia, Illinois and the Netherlands. For fiscal 1994, 1995 and 1996, the Company's nuclear garment services business produced approximately 9%, 8% and 7%, respectively, of its revenues. MARKETING The Company markets its services to potential customers through approximately 265 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 mail, by telephone and in-person. Sales representatives develop their own appointments through the use of an extensive proprietary database of pre-screened and qualified business prospects. The Company believes that customer service is the most important element in developing and maintaining its market position. As of August 31, 1996, existing accounts were serviced by approximately 850 route salespersons and 470 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.
4 Page 4 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 53% of all garments which it placed in service during fiscal 1996, 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 6,600 persons, about 6% of whom are represented by unions pursuant to 6 separate collective bargaining agreements. The Company considers its employee relations to be satisfactory.
5 Page 5 EXECUTIVE OFFICERS The executive officers of the Company are as follows: NAME AGE POSITION ---- --- -------- Aldo A. Croatti 78 Chairman of the Board Ronald D. Croatti 53 Vice Chairman of the Board, President and Chief Executive Officer Robert L. Croatti 60 Executive Vice President John B. Bartlett 55 Senior Vice President and Chief Financial Officer Cynthia Croatti 41 Treasurer Bruce P. Boynton 48 Vice President, Canadian Operations Dennis G. Assad 51 Vice President, Sales and Marketing 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 and Chief Executive Officer for more than the past five years and President since August 31, 1995. 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 has been Treasurer for more than the past five years. Bruce P. Boynton has been Vice President, Canadian Operations for more than the past five years. Dennis G. Assad has been Vice President, Sales and Marketing since August 31, 1995. Prior to that he was a Regional General Manager of the Company for more than five years. Ronald D. Croatti, Robert L. Croatti and Cynthia Croatti are a son, nephew and daughter, respectively, of Aldo A. Croatti.
6 Page 6 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 or results of operations as a result thereof.
7 Page 7 ITEM 2. PROPERTIES - ------------------- At August 31, 1996 the Company owned or occupied 123 facilities containing an aggregate of approximately 3.1 million square feet located in the United States, Canada, Puerto Rico and the Netherlands. The Company owns 71 of these facilities containing approximately 2.4 million square feet. The following chart summarizes certain information with respect to the principal properties currently owned or leased by the Company. LOCATION APPROXIMATE SQUARE FEET -------- ----------------------- Executive Office & Distribution Center Wilmington, MA 132,000 Rental Garment Servicing Facilities Pittsburgh, PA 96,000 Ontario, CA 90,000 Springfield, MA 68,000 Washington, DC 57,000 Dallas, TX 55,000 Nashua, NH 54,000 Stratford, CT 54,000 Miami, FL 50,000 Boston, MA 48,000 Houston, TX 48,000 Corpus Christi, TX 46,000 Tampa, FL 46,000 Columbus, OH 45,000 Odessa, TX 45,000 Richmond, VA 45,000 Portland, ME 44,000 Harlingen, TX 42,000 Toronto, Ontario, Canada 41,000 Buffalo, NY 40,000 Lubbock, TX 40,000 Portland, OR 40,000 Tulsa, OK 40,000 Ocala, FL 38,000 Los Angeles, CA 37,000 Lebanon, NH 36,000 Uvalde, TX 36,000 Vancouver, British Columbia, Canada 35,000 Charlotte, NC 34,000 Philadelphia, PA 34,000 San Antonio, TX 34,000 Albuquerque, NM 33,000 Amarillo, TX 33,000 Norfolk, VA 33,000 Cincinnati, OH 32,000 McAllen, TX 32,000 Baltimore, MD 30,000 Bangor, ME 30,000
8 Page 8 Garment Manufacturing Facilities Cave City, AR 62,000 Luquillo, PR 44,000 Distribution Center Macon, GA 39,000 Nuclear Garment Decontamination Facilities Royersford, PA 39,000 Richland, WA 37,000 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 1,500 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. 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. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS - ---------------------------------------------------------- None
9 Page 9 PART II ------- 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 1996 Annual Report to Shareholders. ITEM 6. SELECTED FINANCIAL DATA - -------------------------------- See the section entitled "Eleven Year Financial Summary" which is incorporated herein by reference, as part of the Company's 1996 Annual Report to Shareholders. 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 1996 Annual Report to Shareholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- The financial statements and the accompanying notes, which are incorporated herein by reference to the Company's 1996 Annual Report to Shareholders, are indexed herein under Items 14(a)(1) and (2) of Part IV. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES - -------------------------------------------------------------- Not applicable PART III -------- 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 1997 Annual Meeting of Shareholders. 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 1997 Annual Meeting of Shareholders.
10 Page 10 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 1997 Annual Meeting of Shareholders. 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 1997 Annual Meeting of Shareholders. PART IV ------- 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 1996 Annual Report to Shareholders. Consolidated balance sheets as of August 31, 1996 and August 26, 1995 Consolidated statements of income for each of the three years in the period ended August 31, 1996 Consolidated statements of shareholders' equity for each of the three years in the period ended August 31, 1996 Consolidated statements of cash flows for each of the three years in the period ended August 31, 1996 Notes to consolidated financial statements Report of independent public accountants
11 Page 11 The following additional schedules are filed herewith: Report of independent public accountants on supplemental schedule to the consolidated financial statements. Schedule II - Valuation and qualifying accounts and reserves for each of the three years in the period ended August 31, 1996. 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 in the accompanying Exhibit Index are filed as part of this report. (b) During the three months ended August 31, 1996 the Company did not file any reports on Form 8-K with the Securities and Exchange Commission.
12 Page 12 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 27, 1996 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. NAME TITLE DATE ---- ----- ---- Aldo A. Croatti Chairman and Director November 27, 1996 - ----------------------- Aldo A. Croatti Principal Executive Ronald D. Croatti Officer and Director November 27, 1996 - ----------------------- Ronald D. Croatti Principal Financial Officer and Principal John B. Bartlett Accounting Officer November 27, 1996 - ----------------------- John B. Bartlett Cynthia Croatti Director November 27, 1996 - ----------------------- Cynthia Croatti Donald J. Evans Director November 27, 1996 - ----------------------- Donald J. Evans Reynold L. Hoover Director November 27, 1996 - ----------------------- Reynold L. Hoover Albert Cohen Director November 27, 1996 - ----------------------- Albert Cohen
13 Page 13 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE TO THE CONSOLIDATED FINANCIAL STATEMENTS To the Board of Directors and Shareholders of 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 4, 1996. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplemental schedule to the consolidated financial statements listed as Item 14(a)(2) in this Form 10-K is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states, 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 4, 1996
14 Page 14 UNIFIRST CORPORATION AND SUBSIDIARIES - ------------------------------------- <TABLE> SCHEDULE II - ----------- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR EACH - ------------------------------------------------------- OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 31, 1996 - ------------------------------------------------------ <CAPTION> Balance, Charged to Charges for Balance, Beginning Costs and Which Reserves End of Description of Period Expenses Were Created Period - -------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> For the year ended August 31, 1996 - ---------------------------------- Allowance for doubtful accounts $734,000 $1,850,000 $(1,741,000) $843,000 ========================================================= For the year ended August 26, 1995 - ---------------------------------- Allowance for doubtful accounts $582,000 $1,335,000 $(1,183,000) $734,000 ========================================================= For the year ended August 27, 1994 - ---------------------------------- Allowance for doubtful accounts $440,000 $1,179,000 $(1,037,000) $582,000 ========================================================= </TABLE>
15 Page 15 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 4.3 to the Company's Registration Statement on Form S-8 (number 33-60781) -- and the Amendment dated June 27, 1995 filed herewith. 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. 10-D UniFirst Corporation 1996 Stock Incentive Plan filed herewith. 13 The Company's 1996 Annual Report to Shareholders (filed herewith to the extent expressly incorporated by reference herein). 22 List of Subsidiaries 23 Consent of Arthur Andersen LLP 27 Financial Data Schedule