UNIFIRST CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that material information relating to the Company required to be disclosed by the Company in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures. We continue to review our disclosure controls and procedures, and our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended August 29, 2020 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. Management’s Responsibility for Financial Statements Our management is responsible for the preparation, integrity and objectivity of our Consolidated Financial Statements and other financial information contained in our Annual Report on Form 10-K. Those Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States. In preparing those Consolidated Financial Statements, management was required to make certain estimates and judgments, which are based upon currently available information and management’s view of current conditions and circumstances. The Audit Committee of our Board of Directors, which consists solely of independent directors, oversees our process of reporting financial information and the audit of our Consolidated Financial Statements. The Audit Committee stays informed of our financial condition and regularly reviews management’s financial policies and procedures, the independence of our independent auditors, our internal control and the objectivity of our financial reporting. Our independent registered public accounting firm has full access to the Audit Committee and meets with the Audit Committee periodically, both with and without management present. We have retained Ernst & Young LLP, an independent registered public accounting firm, to audit our Consolidated Financial Statements found in this Annual Report on Form 10-K for the year ended August 29, 2020. We have made available to Ernst & Young LLP all of our financial records and related data in connection with their audit of our Consolidated Financial Statements. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has assessed the effectiveness of our internal control over financial reporting as of August 29, 2020. 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 control over financial reporting was effective as of August 29, 2020. The effectiveness of our internal control over financial reporting as of August 29, 2020 has been audited by Ernst & Young LLP, and a copy of its attestation report is included below. 75 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of UniFirst Corporation Opinion on Internal Control over Financial Reporting We have audited UniFirst Corporation and subsidiaries’ internal control over financial reporting as of August 29, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, UniFirst Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of August 29, 2020, based on the COSO criteria. 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 29, 2020 and August 31, 2019, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended August 29, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a) of the Company and our report dated October 28, 2020 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. 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 company; 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Boston, Massachusetts October 28, 2020 76 ITEM 9B. OTHER INFORMATION On October 26, 2020, our board of directors and the compensation committee of our board of directors adopted an Executive Employment Plan (the “Plan”). Senior Vice Presidents and above (each, a “Covered Executive”) are eligible to participate in the Plan, subject to certain requirements, including their execution of a participation agreement that includes, among other matters, certain noncompetition and non-solicitation obligations. The Plan provides that upon a termination of a Covered Executive’s employment (a “Qualified Termination”) (1) by us for any reason other than “cause” (as defined in the Plan), death, disability or retirement or (2) by a Covered Executive for “good reason” (as defined in the Plan), the Covered Executive will be entitled to receive certain cash payments determined pursuant to the Plan. The amount of any payments under the Plan in some cases will depend on whether the Qualified Termination is in connection with a “change in control” (as defined in the Plan). In addition, our board of directors and the compensation committee of our board of directors approved revised award forms for equity awards to Covered Executives. The revised award forms provide for accelerated vesting under certain circumstances, including upon a Qualified Termination in connection with a change in control. Any such payments and benefits under the Plan and the award forms are subject to the Covered Executive’s execution of a separation agreement that includes a release of claims in favor of the Company and the other terms and conditions of the Plan and the awards. The foregoing descriptions of the Plan and the award forms are qualified in their entirety by the provisions of the Plan and the award forms, copies of which are filed herewith as Exhibits 10.19, 10.20, 10.21 and 10.22. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE We have adopted a Statement of Corporate Policy and Code of Business Conduct and Ethics, which applies to our directors and all of our employees, including our principal executive officer, principal financial officer, principal accounting officer and corporate controller. Our Statement of Corporate Policy and Code of Business Conduct and Ethics is available, free of charge, on our website at www.unifirst.com. Information contained on our website is not part of this Annual Report on Form 10-K or the documents incorporated by reference into this Annual Report on Form 10-K. We intend to disclose any amendment to or waiver of a provision of the Statement of Corporate Policy and Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller by posting such information on our website at www.unifirst.com. Information regarding our directors and executive officers required by this Item 10 will be included in our definitive Proxy Statement to be filed with the Securities and Exchange Commission for our 2021 Annual Meeting of Shareholders and is incorporated by reference into this Item 10. Certain information required by this Item 10 is set forth in Item 1 of this Annual Report on Form 10-K under the heading “Executive Officers”. ITEM 11. EXECUTIVE COMPENSATION Information required by this Item 11 will be included in our definitive Proxy Statement to be filed with the Securities and Exchange Commission for our 2021 Annual Meeting of Shareholders and is incorporated by reference into this Item 11. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information required by this Item 12 will be included in our definitive Proxy Statement to be filed with the Securities and Exchange Commission for our 2021 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. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information required by this Item 13 will be included in our definitive Proxy Statement to be filed with the Securities and Exchange Commission for our 2021 Annual Meeting of Shareholders and is incorporated by reference into this Item 13. 77 ITEM 14. PRINCIPAL ACCOUN TING FEES AND SERVICES Information required by this Item 14 will be included in our definitive Proxy Statement to be filed with the Securities and Exchange Commission for our 2021 Annual Meeting of Shareholders and is incorporated by reference into this Item 14. 78 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (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 listed below are included under Item 8 of this Annual Report on Form 10-K: Consolidated statements of income for each of the three years in the period ended August 29, 2020 Consolidated statements of comprehensive income for each of the three years in the period ended August 29, 2020 Consolidated balance sheets as of August 29, 2020 and August 31, 2019 Consolidated statements of shareholders’ equity for each of the three years in the period ended August 29, 2020 Consolidated statements of cash flows for each of the three years in the period ended August 29, 2020 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Registered Public Accounting Firm The items listed below are included under Item 9a of this Annual Report on Form 10-K Management’s Report on Internal Control Over Financial Reporting Report of Ernst & Young LLP, Independent Registered Public Accounting Firm The following additional schedule is filed herewith: Schedule II—Valuation and qualifying accounts and reserves for each of the three years in the period ended August 29, 2020 UNIFIRST CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 29, 2020 (IN THOUSANDS) Description Balance, Beginning of Period Charged to Costs and Expenses Charges for Which Reserves Were Created or Deductions Balance, End of Period Reserves for Accounts Receivable For the year ended August 29, 2020 $ 9,935 $ 6,027 $ ( 3,837 ) $ 12,125 For the year ended August 31, 2019 $ 9,237 $ 5,996 $ ( 5,298 ) $ 9,935 For the year ended August 25, 2018 $ 8,719 $ 5,882 $ ( 5,364 ) $ 9,237 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. 79 ( 3 ) EXHIBITS. The list of exhibits filed as part of this Annual Report on Form 10-K is set forth below. DESCRIPTION 3.1 Restated Articles of Organization (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 5, 2006) 3.2 Articles of Amendment dated January 13, 1988 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Commission on July 5, 2006) 3.3 Articles of Amendment dated January 21, 1993 (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed with the Commission on July 5, 2006) 3.4 By-laws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 10, 2008) 4.1 Specimen Stock Certificate for Shares of Common Stock (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 5, 2006) 4.2 Description of securities (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed with the Commission on October 30, 2019) *10.1 UniFirst Corporation Unfunded Supplemental Executive Retirement Plan as restated January 11, 2017 to incorporate and consolidate all previous amendments thereto (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on April 4, 2017) *10.2 Employment Agreement, dated December 14, 2017, by and between UniFirst Corporation and Steven S. Sintros (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 20, 2017) *10.3 Restricted Stock Unit Award Agreement, dated December 14, 2017, by and between UniFirst Corporation and Steven S. Sintros (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on December 20, 2017) *10.4 UniFirst Corporation 2010 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 14, 2011) *10.5 Form of Stock Appreciation Right Award Agreement for Company Employees under the UniFirst Corporation 2010 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on January 14, 2011) *10.6 Form of Stock Appreciation Right Agreement for Non-Employee Directors under the UniFirst Corporation 2010 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on January 14, 2011) *10.7 Form of Non-Qualified Stock Option Agreement for Company Employees under the UniFirst Corporation 2010 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on January 14, 2011) *10.8 Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the UniFirst Corporation 2010 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on January 14, 2011) 10.9 Amended and Restated Credit Agreement, dated as of April 11, 2016, 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, JPMorgan Chase Bank, N.A., as an L/C Issuer and Syndication Agent, the other lenders a party thereto, Merrill Lynch, Pierce Fenner & Smith Incorporated and JPMorgan Chase Bank, N.A., as Joint Lead Arrangers and Book Managers, and Santander Bank, N.A. and Wells Fargo Bank, N.A., as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 13, 2016) * 10.10 UniFirst Corporation CEO Cash Incentive Bonus Plan, as amended (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement filed with the Commission on December 3, 2013) *10.11 UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement filed with the Commission on December 2, 2014). *10.12 Restricted Stock Unit Award Agreement, dated December 14, 2017, between the Company and Steven S. Sintros (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on December 20, 2017) 80 *10.13 Stock Appreciation Right Award Agreement, dated December 14, 2017, between the Company and Steven S. Sintros (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on December 20, 2017) *10.14 Form of Restricted Stock Unit Award Agreement under the UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on December 20, 2017) *10.15 Form of Restricted Stock Unit Award Agreement under the UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan (with respect to performance-based restricted stock unit awards) (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on January 3, 2019) *10.16 UniFirst Corporation Amendment No. 1 to Amended and Restated 2010 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on April 4, 2018) *10.17 Form of Stock Appreciation Right Award for Company Employees under the UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on January 9, 2020) *10.18 Form of Restricted Stock Unit Award for Company Employees under the UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on January 9, 2020) *10.19 UniFirst Corporation Executive Employment Plan (filed herewith) *10.20 Form of Stock Appreciation Right Award for eligible participants under the UniFirst Corporation Executive Employment Plan pursuant to the UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan (filed herewith) *10.21 Form of Restricted Stock Unit Award for eligible participants under the UniFirst Corporation Executive Employment Plan pursuant to the UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan (filed herewith) *10.22 Form of Restricted Stock Unit Award for eligible participants under the UniFirst Corporation Executive Employment Plan pursuant to the UniFirst Corporation Amended and Restated 2010 Stock Option and Incentive Plan (with respect to performance-based restricted stock unit awards) (filed herewith) 21 List of Subsidiaries (filed herewith) 23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm (filed herewith) 31.1 Rule 13a-14(a)/15d-14(a) Certification of Steven S. Sintros (filed herewith) 31.2 Rule 13a-14(a)/15d-14(a) Certification of Shane O’Connor (filed herewith) 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith) 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (furnished herewith) 101.INS 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. (filed herewith) 101.SCH Inline XBRL Taxonomy Extension Schema Document (filed herewith) 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith) 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith) 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) (filed herewith) * Management contract, compensatory plan or arrangement 81 ITEM 16. FORM 10-K SUMMARY Not Applicable. 82 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: /s/ Steven S. Sintros Steven S. Sintros President and Chief Executive Officer October 28, 2020 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 /s/ Steven S. Sintros President and Chief Executive Officer (Principal Executive Officer) October 28, 2020 Steven S. Sintros /s/ Shane O’Connor Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) October 28, 2020 Shane O’Connor /s/ Cynthia Croatti Director October 28, 2020 Cynthia Croatti /s/ Phillip L. Cohen Director October 28, 2020 Phillip L. Cohen /s/ Kathleen Camilli Director October 28, 2020 Kathleen Camilli /s/ Michael Iandoli Director October 28, 2020 Michael Iandoli /s/ Thomas Postek Director October 28, 2020 Thomas S. Postek /s/ Raymond Zemlin Chairman of the Board of Directors October 28, 2020 Raymond C. Zemlin 83