What changed in this filing

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Item 9A. Controls and Procedures

2023-10-26 compared with 2022-10-26 · 67 added, 51 removed, 179 unchanged (40% of the section changed)

22 unchanged sentences

In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission in Internal Control—Integrated Framework (2013 Framework).

Management concluded that based on its assessment, our internal controls over financial reporting were not effective as of August 27, 2022.

Management concluded that based on its assessment, our internal control over financial reporting was not effective as of August 26, 2023.

The audited consolidated financial statements of the Company include the results of Clean Uniform, which we acquired in March 2023.

As permitted by the U.S.

Securities and Exchange Commission, we excluded this acquisition from our assessment of the effectiveness of internal control over financial reporting as of August 26, 2023 since it was not practical for management to conduct an assessment of internal control over financial reporting for Clean Uniform between the acquisition date and the date of management’s assessment.

Excluded from our assessment of the effectiveness of internal control over financial reporting as of August 26, 2023 were approximately 2% of total assets and approximately 2% of revenues, attributed to Clean Uniform, for the fiscal year ended August 26, 2023.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

Our management identified a material weakness in internal control over financial reporting related to the revenue and accounts receivable process, primarily due to ineffective information technology general controls (ITGCs) in the area of user access over the CRM system that we are in the process of deploying.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

As disclosed in Part II, Item 9A of our Annual Report on Form 10-K for fiscal 2022, we previously identified a material weakness related to our revenue and accounts receivable process caused principally by ineffective information technology general controls (“ITGCs”) in the area of user access over the CRM system that we are in the process of deploying.

This issue was attributable to numerous role security defects that we experienced in the application and uncertainty that additional role security defects would not arise.

Our business process controls within the revenue and accounts receivable process, both automated and manual, that are dependent on the completeness and accuracy of the information derived from the affected IT system were also deemed ineffective because they could have been adversely impacted.

While we worked during fiscal 2023 to remediate the previously identified material weakness, we were unable to fully remediate the material weakness prior to the end of fiscal 2023.

The material weakness as of the end of fiscal 2023 includes deficiencies in our manage change and manage access processes that were not designed and operating effectively as of date of our assessment.

These deficiencies relate to our CRM system that we are in the process of deploying and affect revenue and receivables as well as a group of legacy applications which affect revenue and receivables, supply inventory and merchandise in service.

Our business process controls within the revenue and accounts receivable process and inventory and merchandise in service process, both automated and manual, that are dependent on the completeness and accuracy of the information derived from the affected IT system were also deemed ineffective because they could have been adversely impacted.

Our independent registered accounting firm, Ernst & Young LLP has issued an adverse audit report on the effectiveness of our internal control over financial reporting as of August 26, 2023, which is included in Item 8 of this Annual Report on Form 10-K.

Following identification of the material weakness and prior to filing this Annual Report on Form 10-K, we completed substantive procedures for the year ended August 27, 2022 over our revenue and accounts receivable balances.

Following identification of the material weakness and prior to filing this Annual Report on Form 10-K, we completed substantive procedures for the year ended August 26, 2023 over our revenue, accounts receivable, supply inventory and merchandise in service.

Based on these procedures, management believes that our Consolidated Financial Statements included in this Annual Report on Form 10-K have been prepared in accordance with U.S.

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Ernst & Young LLP has issued an unqualified opinion on our financial statements, which is included in Item 8 of this Annual Report on Form 10-K.

Management is currently working with the application provider to implement near-term and longer-term security enhancements to the CRM system that will provide improved control over user access.

We believe that these actions as well as other enhancements to our business process controls, both automated and manual, will enable us to remediate the material weakness.

The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

We currently believe that the remediation of the material weakness will be completed by the end of our fiscal 2023.

Our management is committed to maintaining a strong internal control environment.

In response to the material weakness above, management is continuing to take actions to remediate the material weakness in internal control over financial reporting.

The intended remediation actions include:

(i) creating and filling an IT Compliance Oversight function, (ii) remediating the known issues that were identified in the areas of manage change and manage access, (iii) performing a more comprehensive review of current user access and our ITGCs, including the applicable monitoring controls, (iv) developing enhanced procedures and controls related to changes in IT systems, (v) developing and implementing additional training and awareness programs addressing ITGCs and policies, including educating control owners concerning the principles and requirements of each control, with a focus on user access, and (vi) increasing the extent of oversight and verification included in the operation of user access controls and processes.

We believe that these actions, when fully implemented, will remediate the material weakness, however, as we continue to evaluate and improve the applicable controls, management may determine that additional remediation measures are required.

The material weakness will not be considered remediated until applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Management is committed to successfully remediating the material weakness as promptly as possible.

Report of Independent Regist ered Public Accounting Firm

4 unchanged sentences

In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, UniFirst Corporation (and subsidiaries) (the Company) has not maintained effective internal control over financial reporting as of August 26, 2023, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Clean Uniform, which is included in the fiscal 2023 consolidated financial statements of the Company and constituted 2% of total assets as of August 26, 2023 and 2% of revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Clean Uniform.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment.

Management has identified a material weakness in controls related to the Company’s revenue and accounts receivable process.

Management has identified a material weakness in controls related to the Company’s revenue, accounts receivable, and inventory processes.

The material weakness is the result of the aggregate effect of:

(i) ineffective information technology (IT) controls over user access and security related to a new billing system that supports the revenue and accounts receivable process for a material volume of transactions and locations and (ii) design and operating deficiencies for certain transaction level controls within the revenue and accounts receivable process.

As a result of the ineffective IT controls, process level automated controls and manual controls that are dependent on the completeness and accuracy of information derived from the affected IT system were concluded to be ineffective because they could have been adversely impacted.

(i) ineffective information technology (IT) controls over user access and change management related to the IT systems that support the revenue, accounts receivable, and inventory processes and (ii) design and operating deficiencies for certain transaction level controls within the revenue and accounts receivable process.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of UniFirst Corporation as of August 26, 2023 and August 27, 2022, the related consolidated statements of income, comprehensive income, shareholders’

13 unchanged sentences

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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OTHER INFORMATION

On October 24, 2022, our Board of Directors, upon the recommendation of our Nominating and Corporate Governance Committee, appointed Sergio A.

Pupkin to our Board of Directors to serve as a Class III Director.

Pupkin has served since 2021 as Senior Vice President and Chief Growth and Strategy Officer at Sealed Air Corporation (NYSE:

SEE), a leading global provider of packaging solutions integrating high-performance materials, automation, equipment and services.

In that role, Mr.

Pupkin is responsible for global strategy, mergers and acquisitions, strategic marketing, digital business development, research and development and sustainability.

Pupkin was previously named Vice President and Chief Growth & Strategy Officer and appointed an executive officer of Sealed Air Corporation in 2020.

Prior to that, Mr.

Pupkin served as Vice President and Chief Strategy Officer of Sealed Air Corporation from 2019 to 2020 and served as Vice President, Corporate Strategy, Mergers and Acquisitions from 2016 to 2019.

From 2011 to 2016, Mr.

Pupkin held leadership positions in Sealed Air Corporation’s former Diversey Care segment.

Pupkin has been appointed to serve on our Nominating and Corporate Governance Committee and our ESG Committee.

Our Board of Directors has determined that Mr.

Pupkin is independent under the rules of the New York Stock Exchange and the Securities and Exchange Commission.

In connection with his service on our Board of Directors, Mr.

Pupkin will receive the compensation payable under our compensation program for our independent directors.

Pupkin is not a party to any arrangement or understanding with any person pursuant to which he was appointed as a member of our Board of Directors nor is he a party to any transaction required to be disclosed under Item 404(a) of Regulation S-K.

On August 8, 2023 , David A.

DiFillippo , Executive Vice President , Operations of the Company, in his capacity as trustee of a family trust, adopted a trading arrangement for the sale of the Company’s Common Stock (the “Rule 10b5-1 Trading Plan”) held by such trust that is intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c).

The Rule 10b5-1 Trading Plan, which has a term expiring on November 30, 2023, provides for the sale of up to 6,280 shares of Common Stock pursuant to the terms of the plan.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWN ERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table sets forth information concerning our equity compensation plans as of August 26, 2023:

Equity Compensation Plan Information

Plan category

Number of securities

to be issued upon

options, warrants

and rights (1)

Weighted average

exercise price

of outstanding

options, warrants

and rights (2)

Number of securities

remaining available

for future issuance

compensation plans

(excluding securities

referenced in

Equity compensation plans approved by

security holders

Equity compensation plans not approved by

security holders

(1) Includes shares of Common Stock issuable upon vesting of restricted stock units.

(2) Restricted stock units are not included in the weighted-average exercise price calculation because there is no exercise price associated with restricted stock units.

Information required by this Item 12 will be included in our definitive Proxy Statement to be filed with the SEC for our 2024 Annual Meeting of Shareholders and is incorporated by reference into this Item 12.

Information concerning our equity compensation plans contained in the table entitled “Equity Compensation Plan Information”

set forth in Item 5 of this Annual Report on Form 10-K is incorporated by reference into this Item 12.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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UniFirst Corporation and Subsidiaries

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED

AUGUST 27, 2022 (IN THOUSANDS)

Schedule II—Valuation and qualifying accounts and reserves

(In thousands)

or Deductions

Reserves for Accounts Receivable

For the year ended August 27, 2022

For the year ended August 28, 2021

For the year ended August 29, 2020

August 26, 2023

August 27, 2022

August 28, 2021

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.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith)

Inline XBRL Instance Document –

the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

Amendment No.

1 to Second Amended and Restated Credit Agreement, dated March 9, 2023, by and among UniFirst Corporation and certain of its subsidiaries, as Borrowers, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, and the other lenders party thereto (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on March 17, 2023)

The following financial information from UniFirst Corporation Annual Report on Form 10-K for the fiscal year ended August 26, 2023 formatted in Inline XBRL (Extensible Business Reporting Language) includes:

(i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Stockholders’

Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements.

Cover Page Interactive Data File (formatted as Inline XBRL with the applicable taxonomy extension information contained in Exhibits 101.

*) (filed herewith)

Inline XBRL Taxonomy Extension Schema Document (filed herewith)

Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)

Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)

Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith)

Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)

Cover Page Interactive Data File (formatted as Inline XBRL with the applicable taxonomy extension information contained in Exhibits 101.*)) (filed herewith)

* Management contract, compensatory plan or arrangement

22 unchanged sentences

October 25, 2023

/s/ Kathleen Camilli

October 26, 2022

Kathleen Camilli

/s/ Michael Iandoli

4 unchanged sentences

Joseph Nowicki

/s/ Thomas Postek

/s/ Sergio A.

October 25, 2023

/s/ Raymond Zemlin

October 25, 2023

/s/ Raymond C.

Chairman of the Board of Directors

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures