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UniFirst Announces Financial Results for the First Quarter of Fiscal 2019 and Board of Directors Authorizes $100.0 Million Share Repurchase Program

January 3, 2019

WILMINGTON, Mass., Jan. 03, 2019 (GLOBE NEWSWIRE) -- UniFirst Corporation (NYSE: UNF) today announced results for its first quarter which ended November 24, 2018. Revenues for the quarter were $438.6 million, up 5.5% from $415.8 million in the comparable prior year period. Operating income in the first quarter of fiscal 2019 was $50.4 million compared to $51.9 million in the prior year. Net income in the quarter increased to $38.3 million ($1.99 per diluted share) from $34.2 million ($1.67 per diluted share) in the first quarter of fiscal 2018.

The Company’s operating income and net income in the quarter benefited from a $3.0 million pre-tax gain ($0.11 per diluted share) from the settlement of environmental litigation. In addition, the Company’s net income also benefited from a tax rate in the first quarter of fiscal 2019 of 26.2% compared to 35.5% in the prior year period primarily due to the positive impact of the recent U.S. tax reform.

Steven Sintros, UniFirst President and Chief Executive Officer, said, “As anticipated, our overall margin in the quarter was challenged primarily by the impact of higher payroll costs partially driven by the low unemployment environment, as well as higher merchandise and related costs. We want to thank our thousands of employee Team Partners across North America, Central America and Europe as they continue to work through these challenges and produce solid results for our Company all while striving to provide high quality service to our customers.”

Core Laundry revenues in the quarter were $390.5 million, up 4.5% from the first quarter of the prior year. Organic revenue growth, which excludes the estimated effect of acquisitions as well as fluctuations in the Canadian dollar, was 4.1%. The Core Laundry operating margin was 11.5% compared to 12.4% in the first quarter of the prior year. The segment’s operating margin was impacted by continuing wage pressures in its production and service payroll as well as higher merchandise amortization, energy and depreciation expense as a percentage of revenues. These items were partially offset by the $3.0 million gain from the settlement of environmental litigation, lower healthcare claims as well as the capitalization of sales commission costs due to the adoption of new revenue accounting guidance in the first quarter of fiscal 2019.

Revenues from our Specialty Garments segment, which consists of nuclear decontamination and cleanroom operations, were $34.4 million in the quarter, an increase of 21.2% compared to the same period a year ago. This segment’s results can vary significantly due to seasonality and the timing of reactor outages and projects. This segment’s top-line benefited from acquisitions in fiscal 2018 that increased quarterly revenues by 11.3%, increased outage and project-based activity at the segment’s Canadian customers and solid growth from its cleanroom division. Specialty Garments’ operating margin decreased from 15.7% in the prior year to 13.0% in the first quarter of fiscal 2019 primarily due to higher costs related to its 2018 acquisitions as well as higher production payroll, merchandise amortization and casualty claims expense as a percentage of revenues.

UniFirst continues to maintain a strong balance sheet with no long-term debt and significant cash balances. At the end of the Company’s first quarter of fiscal 2019, cash, cash equivalents and short-term investments totaled $276.5 million.

Share Repurchase Program

On January 2, 2019, the Company’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $100.0 million of its outstanding shares of common stock. Repurchases made under the program, if any, will be made in either the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will depend on a variety of factors and may be suspended or discontinued at any time.

CRM-Related Settlement Agreement

During fiscal 2017, UniFirst recorded a pre-tax non-cash impairment charge of $55.8 million when it was determined that it was not probable the version of the Customer Relationship Management (“CRM”) system that was being developed would be completed and placed into service. On December 28, 2018, the Company entered into a settlement agreement with its lead contractor for the version of the CRM system with respect to which the Company recorded the impairment charge. As part of the settlement agreement, the Company will record a gain of $20.3 million in its second fiscal quarter of 2019, which includes the Company’s receipt of a one-time cash payment in the amount of $13.0 million as well as the forgiveness of amounts previously due the contractor.

Outlook

Mr. Sintros continued, “At this time, we continue to expect our fiscal 2019 revenues to be between $1.765 billion and $1.785 billion, however, due to the increases that we are experiencing primarily in our payroll costs and merchandise amortization we now expect full year diluted earnings per share to be between $6.65 and $6.90. This guidance excludes the impact of the CRM-related settlement agreement and as a reminder, our guidance for fiscal 2019 includes one extra week of operations compared to fiscal 2018 due to the timing of our fiscal calendar.”

Conference Call Information

UniFirst will hold a conference call today at 9:00 a.m. (ET) to discuss its quarterly financial results, business highlights and outlook. A simultaneous live webcast of the call will be available over the Internet and can be accessed at www.unifirst.com.

About UniFirst Corporation

Headquartered in Wilmington, Mass., UniFirst Corporation (NYSE: UNF) is a North American leader in the supply and servicing of uniform and workwear programs, as well as the delivery of facility service programs. Together with its subsidiaries, the company also provides first aid and safety products, and manages specialized garment programs for the cleanroom and nuclear industries. UniFirst manufactures its own branded workwear, protective clothing, and floorcare products, and with more than 250 service locations, over 300,000 customer locations, and 14,000-plus employee Team Partners, the company outfits nearly 2 million workers each business day. UniFirst is a publicly held company traded on the New York Stock Exchange under the symbol UNF and is a component of the Standard & Poor’s 600 Small Cap Index. For more information, contact UniFirst at 800.455.7654 or visit www.unifirst.com.

Forward Looking Statements

This public announcement contains forward looking statements that reflect the Company’s current views with respect to future events and financial performance, including projected revenues and earnings per share. Forward looking statements contained in this public announcement are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “could,” “should,” “may,” “will,” “strategy,” “objective,” “assume,” 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, the performance and success of our Chief Executive Officer, uncertainties caused by adverse economic conditions and their impact on our customers’ businesses and workforce levels, 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, any adverse outcome of pending or future contingencies or claims, our ability to compete successfully without any significant degradation in our margin rates, seasonal and quarterly fluctuations in business levels, our ability to preserve positive labor relationships and avoid becoming the target of corporate labor unionization campaigns that could disrupt our business, the effect of currency fluctuations on our results of operations and financial condition, our dependence on third parties to supply us with raw materials, any loss of key management or other personnel, increased costs as a result of any changes in federal or state laws, rules and regulations or governmental interpretation of such laws, rules and regulations, uncertainties regarding the impact of the recently passed U.S. tax reform on our business, results of operations and financial condition, uncertainties regarding the price levels of natural gas, electricity, fuel and labor, the negative effect on our business from sharply depressed oil and natural gas prices, the continuing increase in domestic healthcare costs, including the impact of the Affordable Care Act, our ability to retain and grow our customer base, demand and prices for our products and services, fluctuations in our Specialty Garments business, instability in Mexico and Nicaragua where our principal garment manufacturing plants are located, our ability to properly and efficiently design, construct, implement and operate a new customer relationship management (CRM) computer system, interruptions or failures of our information technology systems, including as a result of cyber-attacks, additional professional and internal costs necessary for compliance with any changes in Securities and Exchange Commission, 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, general economic conditions, our ability to successfully implement our business strategies and processes, including our capital allocation strategies, and other factors described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended August 25, 2018 and in our other filings with the Securities and Exchange Commission. We undertake no obligation to update any forward looking statements to reflect events or circumstances arising after the date on which they are made.

UniFirst Corporation and SubsidiariesConsolidated Statements of Income(Unaudited)

Thirteen Thirteen weeks ended weeks ended (In thousands, except per share data) November November 24, 25, 2018 2017 -------------------------------------------------------- ----------- ----------- Revenues $ 438,550 $ 415,778 Operating expenses: Cost of revenues (1) 277,049 253,650 Selling and administrative expenses (1) 85,959 87,510 Depreciation and amortization 25,116 22,707 --------- - --------- - Total operating expenses 388,124 363,867 --------- - --------- - Operating income 50,426 51,911 --------- - --------- - Other (income) expense: Interest income, net (1,705 ) (1,276 ) Other expense, net 172 154 --------- - --------- - Total other income, net (1,533 ) (1,122 ) --------- - --------- - Income before income taxes 51,959 53,033 Provision for income taxes 13,639 18,827 --------- - --------- - Net income $ 38,320 $ 34,206 - ------- - - ------- - Income per share – Basic: Common Stock $ 2.08 $ 1.77 Class B Common Stock $ 1.67 $ 1.42 Income per share – Diluted: Common Stock $ 1.99 $ 1.67 Income allocated to – Basic: Common Stock $ 32,137 $ 27,384 Class B Common Stock $ 6,183 $ 6,822 Income allocated to – Diluted: Common Stock $ 38,320 $ 34,206 Weighted average number of shares outstanding – Basic: Common Stock 15,432 15,462 Class B Common Stock 3,710 4,816 Weighted average number of shares outstanding – Diluted: Common Stock 19,302 20,434

(1) Exclusive of depreciation on the Company’s property, plant and equipment and amortization on its intangible assets.

UniFirst Corporation and SubsidiariesCondensed Consolidated Balance Sheets(Unaudited)

(In thousands) November 24, August 25, 2018 2018 --------------------------------------------------- ------------- ------------- Assets Current assets: Cash, cash equivalents and short-term investments $ 276,536 $ 270,512 Receivables, net 212,655 200,797 Inventories 91,154 90,176 Rental merchandise in service 178,636 174,392 Prepaid taxes 11,578 27,024 Prepaid expenses and other current assets 38,854 21,899 ----------- - ----------- - Total current assets 809,413 784,800 ----------- - ----------- - Property, plant and equipment, net 558,442 559,576 Goodwill 397,296 397,422 Customer contracts and other intangible assets, net 67,536 70,904 Deferred income taxes 423 425 Other assets 74,048 30,259 ----------- - ----------- - $ 1,907,158 $ 1,843,386 - --------- - - --------- - Liabilities and shareholders’ equity Current liabilities: Accounts payable $ 71,987 $ 73,500 Accrued liabilities 104,712 124,225 Accrued taxes — 736 ----------- - ----------- - Total current liabilities 176,699 198,461 ----------- - ----------- - Long-term liabilities: Accrued liabilities 104,124 105,888 Accrued and deferred income taxes 86,837 74,070 ----------- - ----------- - Total long-term liabilities 190,961 179,958 ----------- - ----------- - Shareholders’ equity: Common Stock 1,543 1,543 Class B Common Stock 371 371 Capital surplus 84,015 82,973 Retained earnings 1,480,922 1,405,239 Accumulated other comprehensive loss (27,353 ) (25,159 ) ----------- - ----------- - Total shareholders’ equity 1,539,498 1,464,967 ----------- - ----------- - $ 1,907,158 $ 1,843,386 - --------- - - --------- -

UniFirst Corporation and SubsidiariesDetail of Operating Results(Unaudited)

Revenues

Thirteen Thirteen (In thousands, except percentages) weeks ended weeks ended Dollar Percent November 24, November 25, Change Change 2018 2017 ---------------------------------- ------------ ------------ --------- ------ Core Laundry Operations $ 390,477 $ 373,796 $ 16,681 4.5 % Specialty Garments 34,448 28,427 6,021 21.2 % First Aid 13,625 13,555 70 0.5 % Consolidated total $ 438,550 $ 415,778 $ 22,772 5.5 % - ------- -- - ------- -- - ------

Operating Income

Thirteen Thirteen (In thousands, except percentages) weeks ended weeks ended Dollar Percent November 24, November 25, Change Change 2018 2017 ---------------------------------- ------------ ------------ ---------- ------- Core Laundry Operations $ 44,782 $ 46,358 $ (1,576 ) (3.4 )% Specialty Garments 4,470 4,477 (7 ) (0.2 )% First Aid 1,174 1,076 98 9.1 % Consolidated total $ 50,426 $ 51,911 $ (1,485 ) (2.9 )% - ------ --- - ------ --- - ------ -

UniFirst Corporation and SubsidiariesConsolidated Statements of Cash Flows(Unaudited)

Thirteen Thirteen weeks ended weeks ended November November (In thousands) 24, 25, 2018 2017 ----------------------------------------------------------------------------- ----------- ----------- Cash flows from operating activities: Net income $ 38,320 $ 34,206 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 21,795 19,540 Amortization of intangible assets 3,321 3,167 Amortization of deferred financing costs 28 28 Gain on sale of assets (19 ) — Share-based compensation 1,182 1,114 Accretion on environmental contingencies 189 173 Accretion on asset retirement obligations 220 240 Deferred income taxes (497 ) 2,031 Changes in assets and liabilities, net of acquisitions: Receivables, less reserves (12,165 ) (12,879 ) Inventories (1,061 ) (2,882 ) Rental merchandise in service (4,513 ) (82 ) Prepaid expenses and other current assets and Other assets (6,884 ) (4,901 ) Accounts payable (1,264 ) (1,092 ) Accrued liabilities (19,651 ) (7,456 ) Prepaid and accrued income taxes 13,256 16,420 --------- - --------- - Net cash provided by operating activities 32,257 47,627 --------- - --------- - Cash flows from investing activities: Acquisition of businesses, net of cash acquired — (2,671 ) Capital expenditures (23,285 ) (19,033 ) Proceeds from sale of assets 90 — Other 33 318 --------- - --------- - Net cash used in investing activities (23,162 ) (21,386 ) --------- - --------- - Cash flows from financing activities: Proceeds from exercise of share-based awards — 267 Taxes withheld and paid related to net share settlement of equity awards (140 ) (522 ) Payment of cash dividends (2,070 ) (726 ) Net cash used in financing activities (2,210 ) (981 ) --------- - --------- - Effect of exchange rate changes (861 ) (976 ) --------- - --------- - Net increase in cash, cash equivalents and short-term investments 6,024 24,284 Cash, cash equivalents and short-term investments at beginning of period 270,512 349,752 --------- - --------- - Cash, cash equivalents and short-term investments at end of period $ 276,536 $ 374,036 - ------- - - ------- -

CONTACT: Shane O’Connor Chief Financial Officer 978-658-8888 Shane_OConnor@unifirst.com

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