UniFirst Corporation

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UniFirst Corporation

68 Jonspin Road
Wilmington, Massachusetts 01887-1086
U.S.A.
(978) 658-8888
Fax: (978) 657-5663
Web site: http://www.unifirst.com

Public Company
Incorporated: 1950 as the National Overall Drycleaning Company
Employees: 6,600
Sales: $391.8 million (1996)
Stock Exchanges: New York
SICs: 2326 Men’s/Boys’; Work Clothing; 2337 Women’s/Misses’ Suits & Coats; 7211 Power Laundries-Family & Commercial; 7299 Miscellaneous Personal Services, Not Elsewhere Classified

UniFirst Corporation is a national leader in the fast-growing industrial and commercial garment industry. Its chief service is the rental of uniforms and protective clothing, which it cleans and repairs as well. UniFirst also leases and sells related items such as towels and floor mats. Among its 100,000 customers in 44 states, Canada, and Europe are many small companies such as automobile dealers, service stations, and bakeries. UniFirst also is licensed by the U.S. Nuclear Regulatory Commission to decontaminate radioactive garments. In the mid-1990s it constructed a “nuclear laundry” in the Netherlands, where it will provide a similar service for the numerous nuclear plants throughout Europe.

Origins as a Family Business

Although not incorporated until 1950, the ambitiously-named National Overall Drycleaning Company opened its doors near Boston in 1935. Initially the business catered to factory workers and other laborers whose work clothing needed to be cleaned frequently. Since most workers bought their own work clothing and could not afford to have several sets, they had to have their clothing returned quickly. The “national” company was housed in a horse barn that had been converted into a garage, and its equipment consisted of a single washing machine and a delivery truck. After three years, the company also had started to rent work clothing for a weekly fee, for those workers who could not afford to buy clothing outright.

The turning point for the young company came in 1940 when Aldo Croatti became general manager, just after his father-in-law, who had held this position, died. He was perhaps even more ambitious than the founders, and within a year he had become president and controlled the majority of the company. Soon a loan allowed expansion of the garage, and branch offices were set up. The post-World War II economy flourished, and with it came greater success for Croatti’s company. He came up with an idea that proved to be one of the company’s great successes: a shirt and pants set that could be rented for a weekly fee, which also included cleaning and repairs.

Through the early years of the company, Aldo Croatti both managed the company and retained ownership of the majority of its stock. His son Ronald and daughter Cynthia later took on key executive roles as well, and over the years several other relatives also joined the company in management positions. As Cynthia Croatti said in the Boston Business Journal about her father’s handling of a company that employed so many relatives, “He didn’t ever let anybody be in a place where they could be unsuccessful.” The company became public in 1983, first changing its name briefly to Interstate Uniform Services, and then to its current name in 1984.

Even after the change to public status, the majority of company stock remained in family hands, as did many top executive positions. As of 1997, Aldo Croatti remained chairman, after nearly 60 years with the company. His son Ronald Croatti was vice-chairman, CEO, and president; daughter Cynthia Croatti was treasurer; and nephew Robert Croatti was executive vice-president.

Products and Services

From its modest beginnings as a family-owned laundry with one heavy-duty washing machine, UniFirst, although still family-owned, became a large international corporation, with 106 customer service centers, 11 nuclear decontamination facilities, three distribution centers, and three manufacturing plants operating in 1996.

UniFirst’s major services consisted of manufacturing, renting, cleaning, and delivering industrial garments to its commercial and industrial customers. The company also maintained facilities in the United States and in the Netherlands, at which it decontaminated and cleaned garments that may have been exposed to radioactive materials in nuclear plants or research facilities.

UniFirst traditionally focused on renting and servicing of industrial and commercial uniforms and protective clothing. Its annual report and web site listed a wide range of available clothing items: shirts, pants, jackets, coveralls, jumpsuits, lab coats, smocks, and aprons. The company also provided other items such as industrial towels and floor mats. UniFirst collected items in need of cleaning or repairs from its customers’ facilities and then returned them to the customers after servicing them, usually on a weekly basis. To provide this delivery service, UniFirst owned or leased about 1,500 vehicles in 1996.

Many garments were specially designed for individual customers in a variety of colors and styles, with company logos often placed on them. UniFirst manufactured about half of the employment garments that it provided for customers, and purchased the other half. Its manufacturing plants were located in Arkansas, Oklahoma, and Puerto Rico. In the mid-1990s UniFirst’s garment rental operations accounted for approximately 67 percent of its total revenues; sales of garments and rental and sales of other items accounted for approximately 25 percent of total revenues.

UniFirst’s specialized nuclear decontamination operations were carried out from 11 facilities in California, Georgia, Hawaii, Illinois, Massachusetts, New Mexico, Pennsylvania, South Carolina, Virginia, Washington, and the Netherlands. In the mid-1990s the nuclear garment services business accounted for an average of eight percent of UniFirst’s revenues. Although the domestic business declined, the facility in the Netherlands in 1996 opened up a new and potentially large market for UniFirst among the 131 nuclear reactors located in Europe. UniFirst was the first American company to break into the European decontamination market.

Management Strategy

UniFirst believed that the shift in the U.S. workplace to a service economy would remain a boon to its business. It estimated that almost one-third of the nation’s workers already wore a uniform at work in the mid-1990s, and that this amount was likely to increase. Management believed that rentals of uniforms would grow and sales would decrease. It set out four strategies for the future in its 1996 report: retaining current customers through superior service practices; increasing “service penetration” of its current customer base; increasing its market share by securing new accounts; and growing in new markets through geographic expansion and targeted acquisitions.

UniFirst placed a premium on customer service. Of its 6,600 employees in 1996, 850 were route salespeople and another 470 were service support workers. UniFirst had a policy of investigating and resolving customer complaints and questions within a day. In addition to being a family-controlled business since its founding, UniFirst also believed in controlling as much as possible of the company’s assets and products. This philosophy was reflected in the high percentage of garments that were manufactured by the company itself.

Two routes were followed to expansion: internal growth, by extending sales routes into adjoining areas that were then serviced by existing facilities; and acquisitions, which would allow it to move into new geographic areas. Between 1985 and 1993 alone, UniFirst acquired 12 smaller competitors. In the mid-1990s UniFirst opened or began construction on several major new facilities, including a manufacturing plant, a distribution plant, and a nuclear decontamination facility in the Netherlands.

The Superfund Lawsuit

In 1985 UniFirst found itself in the midst of a potential public relations nightmare. It was one of several companies in the metropolitan Boston area charged with long-term disposal of toxic wastes into local drinking water wells. It faced both a civil action brought by individuals and a government lawsuit under the federal “Superfund” law (officially known as the Comprehensive Environmental Response, Compensation and Liability Act of 1980).

Local residents had become concerned after several very young children who lived in one neighborhood of the city of Woburn became ill and died of leukemia. The rate of childhood leukemia in Woburn was as much as four times above the national average for a city of its size. Contamination of the wells was finally confirmed in 1979 when the state environmental office tested the water and found that it contained very high levels of chemicals found in cleaning solvents, as well as other cancer-causing compounds. The wells in Woburn were shut down immediately after the test results were announced.

To its credit, UniFirst did not take the approach of other companies involved in the case, who bitterly fought for several years against taking any responsibility for the pollution. Instead, it reached a settlement agreement of the individuals’ civil action in 1985, under which it would pay $1.5 million to a group of local residents whose children had contracted leukemia. It also began testing technology to remove the contamination, including ultraviolet radiation, carbon filtration systems, and hydrogen peroxide additives.

Company Perspectives:

UniFirst’s strong customer service commitment and our continued willingness to apply the latest technology to achieve it has enabled us to maintain our steady heading into the future.

In 1991, UniFirst and three other companies—W.R. Grace & Company, Beatrice Foods, and New England Plastics—decided not to challenge the federal Superfund action any further, and agreed to pay a total of $69 million toward cleanup of the site. This marked the largest settlement under Superfund in New England up to that time. Experts predicted that it would take several years to cleanse or haul away the soil that had been contaminated, and as long as 50 years to purify the ground-water.

An account of the history of this case, A Civil Action, was written by an attorney representing the Woburn families, and became a best seller shortly after it was published in 1995. It dealt largely with the actions of the two largest companies involved, W.R. Grace & Company and Beatrice Foods. In 1997 the Walt Disney Company announced plans to produce a feature-length film based on the struggles of the families.

At least partially because of the negative publicity surrounding the Woburn pollution case, UniFirst hired a public relations firm in 1992. Visitors to the company’s web site in 1997 could see a discussion of the environmentally friendly aspects of renting and commercially laundering uniforms, as well as information on UniFirst’s participation in energy efficient lighting programs.

1990s Performance/Outlook

During the early part of the 1990s, UniFirst managed to weather the recession that caused its stock value to slump. It was aided by the multi-year contracts it had with many customers, as well as its widespread customer base. UniFirst’s customers ranged from large oil-drilling businesses in Texas to small New England bakeries. The company also had wisely marketed itself to the service sector market, which began to grow as heavy industry declined nationwide. However, it was weighed down in terms of its market value by the tight control held by Aldo Croatti, who refused to issue more stock shares that could have been used to finance acquisitions or other projects.

In 1992 Aldo Croatti yielded the position of CEO to his son Ronald, who soon allowed a public stock offering. He also hired a public relations firm to market UniFirst to potential investors (and probably to offset the negative publicity arising from the recent Superfund lawsuit). As a result of these strategies, through the mid-1990s UniFirst was able to achieve revenues that increased an average of 13 percent yearly. Its revenues rose from $114 million in 1986 to almost $392 million in 1996.

In 1996, UniFirst had facilities in the United States, Canada, and the Netherlands. It maintained 106 customer service centers, 11 nuclear decontamination facilities, three distribution centers, and three manufacturing plants. In that year UniFirst processed over 150 million rental garments in addition to sales of hundreds of thousands of garments and related items (towels, mats, etc.). UniFirst noted in its annual report that, in the United States and Canada alone, it had over 100,000 customers, many of them for 25 years or more. UniFirst had become the third largest company in the United States uniform services industry (behind ARA Services and Cintas). There were approximately 800 companies operating, but the top companies controlled over half of the industry, and smaller companies were closing or being absorbed. UniFirst also claimed to be the leader in uniform services for the nuclear industry.

UniFirst’s sales in fiscal 1996 rose to a record $392 million, an increase of 10.4 percent over fiscal 1995’s $355 million. Net income rose 19.5 percent, from $20.6 million in 1995 to $24.7 million in 1996. This marked the company’s 28th consecutive year of profits and fifth consecutive year of record earnings. The domestic nuclear garments business performed poorly, because of the lack of new nuclear facility construction and increased competition for business in this country. But UniFirst began to reap the benefits of its new nuclear laundry in Coevorden, the Netherlands, which opened in May 1996. This subsidiary facility, Euro Nuclear Services (ENS), was operated by another UniFirst subsidiary, Interstate Nuclear Services Corporation (INS), which had already provided nuclear laundering services and protective wear for 35 years.

In the same year UniFirst began construction of a new central distribution facility in Owensboro, Kentucky, and started up a new garment manufacturing plant in Wilburton, Oklahoma. On the lighter side, the company also sponsored a NASCAR stock car racing team that travelled nationally, with a car that bore the green UniFirst logo (visible during numerous televised races). UniFirst was named by the Boston Globe as number 72 among the top 100 Massachusetts businesses in terms of market value in May 1997.

Principal Subsidiaries

Interstate Nuclear Services Corp.; Interstate Uniform Manufacturing of Puerto Rico, Inc.; Superior Products & Equipment Co., Inc.; Tennessee Uniform and Towel Service, Inc.; Texas Industrial Services, Inc.; UR Corporation; U Two Corporation; Euro Nuclear Services B.V. (Netherlands); UniFirst Canada Ltd. (Canada).