UNIFIRST CORP 10-Q

ITEM 1. FINANCIAL STATEMENTS Consolidated Statements of Income UniFirst Corporation and Subsidiaries (Unaudited) Thirteen weeks ended Thirty-nine weeks ended (In thousands, except per share data) May 29, 2021 May 30, 2020 May 29, 2021 May 30, 2020 Revenues $ 464,323 $ 445,518 $ 1,360,940 $ 1,375,516 Operating expenses: Cost of revenues (1) 286,605 303,223 851,860 893,961 Selling and administrative expenses (1) 96,976 88,405 279,008 272,013 Depreciation and amortization 26,583 26,182 79,178 77,612 Total operating expenses 410,164 417,810 1,210,046 1,243,586 Operating income 54,159 27,708 150,894 131,930 Other (income) expense: Interest income, net ( 671 ) ( 1,054 ) ( 2,102 ) ( 5,590 ) Other expense, net 348 1,556 513 2,623 Total other (income) expense, net ( 323 ) 502 ( 1,589 ) ( 2,967 ) Income before income taxes 54,482 27,206 152,483 134,897 Provision for income taxes 12,466 5,921 35,986 30,690 Net income $ 42,016 $ 21,285 $ 116,497 $ 104,207 Income per share – Basic: Common Stock $ 2.31 $ 1.17 $ 6.42 $ 5.73 Class B Common Stock $ 1.85 $ 0.94 $ 5.13 $ 4.58 Income per share – Diluted: Common Stock $ 2.21 $ 1.12 $ 6.12 $ 5.46 Income allocated to – Basic: Common Stock $ 35,270 $ 17,871 $ 97,792 $ 87,519 Class B Common Stock $ 6,746 $ 3,414 $ 18,705 $ 16,688 Income allocated to – Diluted: Common Stock $ 42,016 $ 21,285 $ 116,497 $ 104,207 Weighted average shares outstanding – Basic: Common Stock 15,238 15,255 15,238 15,285 Class B Common Stock 3,643 3,643 3,643 3,643 Weighted average shares outstanding – Diluted: Common Stock 19,051 18,995 19,041 19,074 (1) Exclusive of depreciation on the Company’s property, plant and equipment and amortization on its intangible assets. The accompanying notes are an integral part of these Consolidated Financial Statements. 3 Consolidated Statements of Comprehensive Income UniFirst Corporation and Subsidiaries (Unaudited) Thirteen weeks ended Thirty-nine weeks ended (In thousands) May 29, 2021 May 30, 2020 May 29, 2021 May 30, 2020 Net income $ 42,016 $ 21,285 $ 116,497 $ 104,207 Other comprehensive income (loss): Foreign currency translation adjustments 6,099 ( 3,835 ) 9,653 ( 3,615 ) Pension benefit liabilities — — — 350 Change in fair value of derivatives, net of income taxes ( 91 ) 79 ( 158 ) 156 Derivative financial instruments reclassified to earnings 39 ( 47 ) 29 ( 107 ) Other comprehensive income (loss) 6,047 ( 3,803 ) 9,524 ( 3,216 ) Comprehensive income $ 48,063 $ 17,482 $ 126,021 $ 100,991 The accompanying notes are an integral part of these Consolidated Financial Statements. 4 Consolidated Balance Sheets UniFirst Corporation and Subsidiaries (Unaudited) (In thousands, except share and par value data) May 29, 2021 August 29, 2020 Assets Current assets: Cash, cash equivalents and short-term investments $ 535,005 $ 474,838 Receivables, less reserves of $ 14,177 and $ 12,125 200,136 190,916 Inventories 120,337 106,269 Rental merchandise in service 168,234 154,278 Prepaid taxes 9,264 7,115 Prepaid expenses and other current assets 37,171 35,918 Total current assets 1,070,147 969,334 Property, plant and equipment, net 606,663 582,470 Goodwill 429,762 424,844 Customer contracts, net 50,734 56,946 Other intangible assets, net 35,176 28,590 Deferred income taxes 553 522 Operating lease right-of-use assets, net 40,423 42,710 Other assets 102,463 93,611 Total assets $ 2,335,921 $ 2,199,027 Liabilities and shareholders’ equity Current liabilities: Accounts payable $ 69,553 $ 64,035 Accrued liabilities 155,729 132,965 Accrued taxes — 527 Operating lease liabilities, current 13,002 12,569 Total current liabilities 238,284 210,096 Accrued liabilities 133,417 132,820 Accrued and deferred income taxes 91,066 85,721 Operating lease liabilities 27,955 29,261 Total liabilities 490,722 457,898 Commitments and contingencies (Note 12) Shareholders’ equity: Preferred Stock, $ 1.00 par value; 2,000,000 shares authorized; no shares issued and outstanding — — Common Stock, $ 0.10 par value; 30,000,000 shares authorized; 15,242,690 and 15,251,176 shares issued and outstanding as of May 29, 2021 and August 29, 2020, respectively 1,524 1,525 Class B Common Stock, $ 0.10 par value; 20,000,000 shares authorized; 3,643,009 shares issued and outstanding as of May 29, 2021 and August 29, 2020, respectively 364 364 Capital surplus 87,545 86,645 Retained earnings 1,778,212 1,684,565 Accumulated other comprehensive loss ( 22,446 ) ( 31,970 ) Total shareholders’ equity 1,845,199 1,741,129 Total liabilities and shareholders’ equity $ 2,335,921 $ 2,199,027 The accompanying notes are an integral part of these Consolidated Financial Statements 5 Consolidated Statements of Shareholders’ Equity UniFirst Corporation and Subsidiaries (Unaudited) (In thousands) Common Shares Class B Common Shares Common Stock Class B Common Stock Capital Surplus Retained Earnings Accumulated Other Comprehensive Loss Total Equity Balance, August 31, 2019 15,333 3,643 $ 1,533 $ 364 $ 84,946 $ 1,588,075 $ ( 33,688 ) $ 1,641,230 Net income — — — — — 48,242 — 48,242 Change in fair value of derivatives — — — — — — ( 5 ) ( 5 ) Foreign currency translation — — — — — — 989 989 Dividends declared Common Stock ($ 0.25 per share) — — — — — ( 3,825 ) — ( 3,825 ) Dividends declared Class B Common Stock ($ 0.20 per share) — — — — — ( 729 ) — ( 729 ) Repurchase of Common Stock ( 51 ) — ( 5 ) — ( 274 ) ( 9,694 ) — ( 9,973 ) Share-based compensation, net (1) — — — — 77 — — 77 Share-based awards exercised, net (2) 16 — 2 — — — — 2 Balance, November 30, 2019 15,298 3,643 1,530 364 84,749 1,622,069 ( 32,704 ) 1,676,008 Net income — — — — — 34,680 — $ 34,680 Change in fair value of derivatives — — — — — — 22 22 Foreign currency translation — — — — — — ( 769 ) ( 769 ) Pension benefit liabilities, net — — — — — — 350 350 Dividends declared Common Stock ($ 0.25 per share) — — — — — ( 3,835 ) — ( 3,835 ) Dividends declared Class B Common Stock ($ 0.20 per share) — — — — — ( 729 ) — ( 729 ) Repurchase of Common Stock ( 21 ) — ( 2 ) — ( 112 ) ( 4,116 ) — ( 4,230 ) Share-based compensation, net (1) — — — — ( 60 ) — — ( 60 ) Share-based awards exercised, net (2) 16 — 1 — — — — 1 Balance, February 29, 2020 15,293 3,643 1,529 364 84,577 1,648,069 ( 33,101 ) 1,701,438 Net income — — — — — 21,285 — 21,285 Change in fair value of derivatives — — — — — — 32 32 Foreign currency translation — — — — — — ( 3,835 ) ( 3,835 ) Dividends declared Common Stock ($ 0.25 per share) — — — — — ( 3,797 ) — ( 3,797 ) Dividends declared Class B Common Stock ($ 0.20 per share) — — — — — ( 729 ) — ( 729 ) Share-based compensation, net (1) — — — — 1,390 — — 1,390 Share-based awards exercised, net (2) — — — — ( 142 ) — — ( 142 ) Repurchase of Common Stock ( 46 ) — ( 4 ) — ( 253 ) ( 7,285 ) — ( 7,542 ) Balance, May 30, 2020 15,247 3,643 $ 1,525 $ 364 $ 85,572 $ 1,657,543 $ ( 36,904 ) $ 1,708,100 6 (In thousands) Common Shares Class B Common Shares Common Stock Class B Common Stock Capital Surplus Retained Earnings Accumulated Other Comprehensive Loss Total Equity Balance, August 29, 2020 15,251 3,643 $ 1,525 $ 364 $ 86,645 $ 1,684,565 $ ( 31,970 ) $ 1,741,129 Net income — — — — — 41,896 — 41,896 Change in fair value of derivatives — — — — — — ( 21 ) ( 21 ) Foreign currency translation — — — — — — 1,310 1,310 Dividends declared Common Stock ($ 0.25 per share) — — — — — ( 3,806 ) — ( 3,806 ) Dividends declared Class B Common Stock ($ 0.20 per share) — — — — — ( 729 ) — ( 729 ) Repurchase of Common Stock ( 41 ) — ( 4 ) — ( 223 ) ( 6,989 ) — ( 7,216 ) Share-based compensation, net (1) — — — — 788 — — 788 Share-based awards exercised, net (2) 11 — 1 — — — — 1 Balance, November 28, 2020 15,221 3,643 1,522 364 87,210 1,714,937 ( 30,681 ) 1,773,352 Net income — — — — — 32,585 — 32,585 Change in fair value of derivatives — — — — — — ( 56 ) ( 56 ) Foreign currency translation — — — — — — 2,244 2,244 Dividends declared Common Stock ($ 0.25 per share) — — — — — ( 3,806 ) — ( 3,806 ) Dividends declared Class B Common Stock ($ 0.20 per share) — — — — — ( 728 ) — ( 728 ) Repurchase of Common Stock ( 12 ) — ( 1 ) — ( 66 ) ( 2,251 ) — ( 2,318 ) Share-based compensation, net (1) — — — — ( 165 ) — — ( 165 ) Share-based awards exercised, net (2) 21 — 2 — — — — 2 Balance, February 27, 2021 15,230 3,643 1,523 364 86,979 1,740,737 ( 28,493 ) 1,801,110 Net income — — — — — 42,016 — 42,016 Change in fair value of derivatives — — — — — — ( 52 ) ( 52 ) Foreign currency translation — — — — — — 6,099 6,099 Dividends declared Common Stock ($ 0.25 per share) — — — — — ( 3,812 ) — ( 3,812 ) Dividends declared Class B Common Stock ($ 0.20 per share) — — — — — ( 729 ) — ( 729 ) Share-based compensation, net (1) — — — — 566 — — 566 Share-based awards exercised, net (2) 13 — 1 — — — — 1 Balance, May 29, 2021 15,243 3,643 $ 1,524 $ 364 $ 87,545 $ 1,778,212 $ ( 22,446 ) $ 1,845,199 (1) These amounts are shown net of any shares withheld by the Company to satisfy certain tax withholding obligations in connection with the vesting of certain restricted stock units. (2) These amounts are shown net of the effect of income taxes. The accompanying notes are an integral part of these Consolidated Financial Statements. 7 Consolidated Statements of Cash Flows UniFirst Corporation and Subsidiaries (Unaudited) Thirty-nine weeks ended (In thousands) May 29, 2021 May 30, 2020 Cash flows from operating activities: Net income $ 116,497 $ 104,207 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 79,178 77,612 Amortization of deferred financing costs 85 84 Share-based compensation 5,193 4,617 Accretion on environmental contingencies 336 403 Accretion on asset retirement obligations 740 694 Deferred income taxes 2,025 81 Other ( 199 ) 36 Changes in assets and liabilities, net of acquisitions: Receivables, less reserves ( 7,657 ) 4,517 Inventories ( 13,871 ) ( 3,570 ) Rental merchandise in service ( 12,169 ) 23,900 Prepaid expenses and other current assets and Other assets 5,433 3,669 Accounts payable 4,019 ( 17,846 ) Accrued liabilities 11,636 5,246 Prepaid and accrued income taxes ( 3,723 ) 1,782 Net cash provided by operating activities 187,523 205,432 Cash flows from investing activities: Acquisition of businesses, net of cash acquired ( 7,128 ) ( 41,098 ) Capital expenditures, including capitalization of software costs ( 96,645 ) ( 91,155 ) Proceeds from sale of assets 551 261 Net cash used in investing activities ( 103,222 ) ( 131,992 ) Cash flows from financing activities: Payment of deferred financing costs ( 822 ) — Proceeds from exercise of share-based awards 3 75 Taxes withheld and paid related to net share settlement of equity awards ( 4,003 ) ( 3,423 ) Repurchase of Common Stock ( 9,534 ) ( 21,745 ) Payment of cash dividends ( 13,610 ) ( 11,159 ) Net cash used in financing activities ( 27,966 ) ( 36,252 ) Effect of exchange rate changes 3,832 ( 1,276 ) Net increase in cash, cash equivalents and short-term investments 60,167 35,912 Cash, cash equivalents and short-term investments at beginning of period 474,838 385,341 Cash, cash equivalents and short-term investments at end of period $ 535,005 $ 421,253 Supplemental disclosure of cash flow information: Non-cash capital expenditures $ 5,907 $ 7,672 The accompanying notes are an integral part of these Consolidated Financial Statements. 8 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements 1. Basis of Presentation These Consolidated Financial Statements of UniFirst Corporation (the “Company”) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the information furnished reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim period. It is suggested that these Consolidated Financial Statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 29, 2020. There have been no material changes in the accounting policies followed by the Company during the current fiscal year other than the adoption of recent accounting pronouncements discussed in Note 2. Results for an interim period are not indicative of any future interim periods or for an entire fiscal year. 2. Recent Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (the “FASB”) issued an accounting standard update that introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments including trade receivables. The estimate of expected credit losses requires entities to incorporate historical information, current information and reasonable and supportable forecasts. This guidance also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This guidance is effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2019 with early adoption permitted. The Company’s adoption of this guidance on August 30, 2020 did not have a material impact on its financial statements . In August 2018, the FASB issued updated guidance to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This guidance will be effective for annual reporting periods ending after December 15, 2020 and will be required to be applied on a retrospective basis with early adoption permitted. Accordingly, the standard will be effective for the Company on August 29, 2021. The Company is currently evaluating the impact that this guidance will have on its financial statements and related disclosures. In August 2018, the FASB issued guidance that addresses customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance is effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2019 with early adoption permitted. The amendments in this update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company’s adoption of this guidance on August 30, 2020 did not have a material impact on its financial statements. In December 2019, the FASB issued updated guidance to simplify accounting for income taxes by removing certain exceptions and improving the consistent application of and simplifying U.S. GAAP in other areas of this topic. This guidance is effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2020 with early adoption permitted. Accordingly, the guidance will be effective for the Company on August 29, 2021. The Company is currently evaluating the impact that this guidance will have on its financial statements and related disclosures. 3. Revenue Recognition The following table presents the Company’s revenues for the thirteen and thirty-nine weeks ended May 29, 2021 and May 30, 2020, respectively, disaggregated by service type: Thirteen Weeks Ended Thirty-Nine Weeks Ended May 29, 2021 May 30, 2020 May 29, 2021 May 30, 2020 (In thousands, except percentages) Revenues % of Revenues Revenues % of Revenues Revenues % of Revenues Revenues % of Revenues Core Laundry Operations $ 409,031 88.1 % $ 388,411 87.2 % $ 1,200,456 88.2 % $ 1,216,901 88.5 % Specialty Garments 38,236 8.2 % 36,163 8.1 % 111,592 8.2 % 105,545 7.7 % First Aid 17,056 3.7 % 20,944 4.7 % 48,892 3.6 % 53,070 3.9 % Total Revenues $ 464,323 100.0 % $ 445,518 100.0 % $ 1,360,940 100.0 % $ 1,375,516 100.0 % See Note 16 “Segment Reporting” for additional details of segment definitions. 9 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) Revenue Recognition Policy During the thirteen weeks ended May 29, 2021 and May 30, 2020, approximately 90.9 % and 85.7 %, respectively, of the Company’s revenues were derived from fees for route servicing of Core Laundry Operations, Specialty Garments, and First Aid performed by the Company’s employees at the customer’s location of business. During the thirty-nine weeks ended May 29, 2021 and May 30, 2020, approximately 91.0 % and 89.2 %, respectively, of the Company’s revenues were derived from fees for route servicing of Core Laundry Operations, Specialty Garments, and First Aid performed by the Company’s employees at the customer’s location of business. Revenues from the Company’s route servicing customer contracts represent a single performance obligation. The Company recognizes these revenues over time as services are performed based on the nature of services provided and contractual rates (input method). Certain of the Company’s customer contracts, primarily within the Company’s Core Laundry Operations, include pricing terms and conditions that include components of variable consideration. The variable consideration is typically in the form of consideration due to customer-based performance metrics specified within the contract. Specifically, some contracts contain discounts or rebates that the customer can earn through the achievement of specified volume levels. Each component of variable consideration is earned based on the Company’s actual performance during the measurement period specified within the contract. To determine the transaction price, the Company estimates the variable consideration using the most likely amount method, based on the specific contract provisions and known performance results during the relevant measurement period. When determining if variable consideration should be constrained, the Company considers whether factors outside its control could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal. The Company’s performance period generally corresponds with the monthly invoice period. No significant constraints on the Company’s revenue recognition were applied during the thirteen and thirty-nine weeks ended May 29, 2021 and May 30, 2020. The Company reassesses these estimates during each reporting period. The Company maintains a liability for these discounts and rebates within accrued liabilities on the consolidated balance sheets. Variable consideration also includes consideration paid to a customer at the beginning of a contract. The Company capitalizes this consideration and amortizes it over the life of the contract as a reduction to revenue in accordance with the updated accounting guidance for revenue recognition. These assets are included in other assets on the consolidated balance sheets. Costs to Obtain a Contract The Company defers commission expenses paid to its employee-partners when the commissions are deemed to be incremental for obtaining the route servicing customer contract. The deferred commissions are amortized on a straight-line basis over the expected period of benefit. The Company reviews the deferred commission balances for impairment on an ongoing basis. Deferred commissions are classified as current or noncurrent based on the timing of when the Company expects to recognize the expense. The current portion is included in prepaid expenses and other current assets and the non-current portion is included in other assets on the Company’s consolidated balance sheets. As of May 29, 2021, the current and non-current assets related to deferred commissions totaled $ 13.9 million and $ 59.1 million, respectively. As of August 29, 2020, the current and non-current assets related to deferred commissions totaled $ 13.3 million and $ 55.6 million, respectively. During the thirteen weeks ended May 29, 2021 and May 30, 2020, the Company recorded $ 3.6 million and $ 3.4 million, respectively, of amortization expense related to deferred commissions. During the thirty-nine weeks ended May 29, 2021 and May 30, 2020, the Company recorded $ 10.8 million and $ 10.2 million, respectively, of amortization expense related to deferred commissions. This expense is classified in selling and administrative expenses on the consolidated statements of income. 4. Acquisitions During the thirty-nine weeks ended May 29, 2021, the Company completed four business acquisitions with an aggregate purchase price of approximately $ 7.5 million, which was primarily assigned to goodwill and intangible assets. The results of operations of these acquisitions have been included in the Company’s consolidated financial results since their respective acquisition dates. These acquisitions were not significant in relation to the Company’s consolidated financial results and, therefore, pro-forma financial information has not been presented. 10 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) 5. Fair Value Measurements The assets or liabilities measured at fair value on a recurring basis are summarized in the tables below (in thousands): As of May 29, 2021 Level 1 Level 2 Level 3 Fair Value Assets (Liabilities): Cash equivalents $ 197,458 $ — $ — $ 197,458 Pension plan assets — 3,927 — 3,927 Foreign currency forward contracts — ( 86 ) — ( 86 ) Total assets at fair value $ 197,458 $ 3,841 $ — $ 201,299 As of August 29, 2020 Level 1 Level 2 Level 3 Fair Value Assets: Cash equivalents $ 196,478 $ — $ — $ 196,478 Pension plan assets — 4,146 — 4,146 Foreign currency forward contracts — 87 — 87 Total assets at fair value $ 196,478 $ 4,233 $ — $ 200,711 The Company’s cash equivalents listed above represent money market securities and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The Company does not adjust the quoted market price for such financial instruments. The Company’s pension plan assets listed above represent guaranteed deposit accounts that are maintained and operated by Prudential Retirement Insurance and Annuity Company (“PRIAC”). All assets are merged with the general assets of PRIAC and are invested predominantly in privately placed securities and mortgages. At the beginning of each calendar year, PRIAC notifies the Company of the annual rates of interest which will be applied to the amounts held in the guaranteed deposit account during the next calendar year. In determining the interest rate to be applied, PRIAC considers the investment performance of the underlying assets of the prior year; however, regardless of the investment performance the Company is contractually guaranteed a minimum rate of return. As such, the Company’s pension plan assets are included within Level 2 of the fair value hierarchy. The Company’s foreign currency forward contracts represent contracts the Company has entered into to exchange Canadian dollars for U.S. dollars at fixed exchange rates in order to manage its exposure related to the certain forecasted Canadian dollar denominated sales of one of its subsidiaries. These contracts are included in accrued liabilities as of May 29, 2021 and prepaid expenses and other current assets and other long-term assets as of August 29, 2020. The fair value of the forward contracts is based on similar exchange traded derivatives and are, therefore, included within Level 2 of the fair value hierarchy. 6. Derivative Instruments and Hedging Activities As of May 29, 2021, the Company had forward contracts with a notional value of approximately $ 2.2 million CAD outstanding and recorded the fair value of the contracts of $ 0.1 million in accrued liabilities with a corresponding nominal loss in accumulated other comprehensive loss, which was recorded net of tax. During the thirteen and thirty-nine weeks ended May 29, 2021, the Company reclassified a nominal amount from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The loss on these forward contracts that resulted in an increase to accumulated other comprehensive loss as of May 29, 2021 is expected to be reclassified to revenues prior to its maturity on February 25, 2022. 7. Employee Benefit Plans Defined Contribution Retirement Savings Plan The Company has a defined contribution retirement savings plan with a 401(k) feature for all eligible U.S. and Canadian employees not under collective bargaining agreements. The Company matches a portion of the employee’s contribution and may make an additional contribution at its discretion. Contributions charged to expense under the plan for the thirteen weeks ended May 29, 2021 and May 30, 2020 were $ 5.1 million and $ 1.9 million, respectively. Contributions charged to expense under the plan for the thirty-nine weeks ended May 29, 2021 and May 30, 2020 were $ 15.2 million and $ 12.4 million, respectively. 11 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) Pension Plans and Supplemental Executive Retirement Plans The Company maintains an unfunded Supplemental Executive Retirement Plan for certain eligible employees of the Company and one frozen non-contributory defined benefit pension plan. The amounts charged to expense related to these plans for the thirteen weeks ended May 29, 2021 and May 30, 2020 were $ 0.8 million and $ 0.7 million, respectively. The amounts charged to expense related to these plans for the thirty-nine weeks ended May 29, 2021 and May 30, 2020 were $ 2.3 million and $ 1.2 million, respectively. 8. Income Per Share The Company calculates income per share by allocating income to its unvested participating securities as part of its income per share calculations. The following table sets forth the computation of basic income per share using the two-class method for amounts attributable to the Company’s shares of Common Stock and Class B Common Stock (in thousands, except per share data): Thirteen Weeks Ended Thirty-Nine Weeks Ended May 29, 2021 May 30, 2020 May 29, 2021 May 30, 2020 Net income available to shareholders $ 42,016 $ 21,285 $ 116,497 $ 104,207 Allocation of net income for Basic: Common Stock $ 35,270 $ 17,871 $ 97,792 $ 87,519 Class B Common Stock 6,746 3,414 18,705 16,688 $ 42,016 $ 21,285 $ 116,497 $ 104,207 Weighted average number of shares for Basic: Common Stock 15,238 15,255 15,238 15,285 Class B Common Stock 3,643 3,643 3,643 3,643 18,881 18,898 18,881 18,928 Income per share for Basic: Common Stock $ 2.31 $ 1.17 $ 6.42 $ 5.73 Class B Common Stock $ 1.85 $ 0.94 $ 5.13 $ 4.58 The Company is required to calculate diluted income per share for Common Stock using the more dilutive of the following two methods: • The treasury stock method; or • The two-class method assuming a participating security is not exercised or converted. For the thirteen and thirty-nine weeks ended May 29, 2021 and May 30, 2020, the Company’s diluted income per share assumes the conversion of all vested Class B Common Stock into Common Stock and uses the two-class method for its unvested participating shares. The following tables set forth the computation of diluted income per share of Common Stock for the thirteen and thirty-nine weeks ended May 29, 2021 and May 30, 2020 (in thousands, except per share data): Thirteen weeks ended May 29, 2021 Thirty-nine weeks ended May 29, 2021 Earnings to Common Shareholders Common Shares Income Per Share Earnings to Common Shareholders Common Shares Income Per Share As reported - Basic $ 35,270 15,238 $ 2.31 $ 97,792 15,238 $ 6.42 Add: effect of dilutive potential common shares Share-Based Awards — 170 — 160 Class B Common Stock 6,746 3,643 18,705 3,643 As reported – Diluted $ 42,016 19,051 $ 2.21 $ 116,497 19,041 $ 6.12 12 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) Thirteen weeks ended May 30, 2020 Thirty-nine weeks ended May 30, 2020 Earnings to Common Shareholders Common Shares Income Per Share Earnings to Common Shareholders Common Shares Income Per Share As reported - Basic $ 17,871 15,255 $ 1.17 $ 87,519 15,285 $ 5.73 Add: effect of dilutive potential common shares Share-Based Awards — 97 — 146 Class B Common Stock 3,414 3,643 16,688 3,643 As reported – Diluted $ 21,285 18,995 $ 1.12 $ 104,207 19,074 $ 5.46 Share-based awards that would result in the issuance of 2,189 and 1,770 shares, respectively, of Common Stock were excluded from the calculation of diluted income per share for the thirteen and thirty-nine weeks ended May 29, 2021 because they were anti-dilutive. Share-based awards that would result in the issuance of 7,328 and 2,724 shares, respectively, of Common Stock were excluded from the calculation of diluted income per share for the thirteen and thirty-nine weeks ended May 30, 2020 because they were anti-dilutive. 9. Inventories Inventories are stated at the lower of cost or net realizable value, net of any reserve for excess and obsolete inventory. Work-in-process and finished goods inventories consist of materials, labor and manufacturing overhead. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to customers or used in rental operations. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required. The Company uses the first-in, first-out (“FIFO”) method to value its inventories. The components of inventory as of May 29, 2021 and August 29, 2020 were as follows (in thousands): May 29, 2021 August 29, 2020 Raw materials $ 22,055 $ 20,266 Work in process 3,730 2,730 Finished goods 94,552 83,273 Total inventories $ 120,337 $ 106,269 10. Goodwill and Other Intangible Assets When the Company acquires a business, the amount assigned to the tangible assets and liabilities and intangible assets acquired is based on their respective fair values determined as of the acquisition date. The excess of the purchase price over the tangible assets and liabilities and intangible assets is recorded as goodwill. The changes in the carrying amount of goodwill are as follows (in thousands): Balance as of August 29, 2020 $ 424,844 Goodwill recorded during the period 4,533 Other 385 Balance as of May 29, 2021 $ 429,762 13 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) Intangible assets, net in the Company’s accompanying Consolidated Balance Sheets are as follows (in thousands): Gross Carrying Amount Accumulated Amortization Net Carrying Amount May 29, 2021 Customer contracts $ 236,390 $ 185,656 $ 50,734 Software 75,214 42,023 33,191 Other intangible assets 36,997 35,012 1,985 $ 348,601 $ 262,691 $ 85,910 August 29, 2020 Customer contracts $ 234,065 $ 177,119 $ 56,946 Software 66,014 39,020 26,994 Other intangible assets 35,741 34,145 1,596 $ 335,820 $ 250,284 $ 85,536 11. Asset Retirement Obligations The Company recognizes asset retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company continues to depreciate, on a straight-line basis, the amount added to property, plant and equipment and recognizes accretion expense in connection with the discounted liability over the various remaining lives which range from approximately 1 to 23 years . A reconciliation of the Company’s asset retirement liability for the thirty-nine weeks ended May 29, 2021 was as follows (in thousands): May 29, 2021 Beginning balance as of August 29, 2020 $ 13,920 Accretion expense 740 Effect of exchange rate changes 102 Balance as of May 29, 2021 $ 14,762 Asset retirement obligations are included in long-term accrued liabilities in the accompanying Consolidated Balance Sheets. 12. Commitments and Contingencies Lease Commitments The Company has operating leases for certain operating facilities, vehicles and equipment, which provide the right to use the underlying asset and require lease payments over the term of the lease. Each new contract is evaluated to determine if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. All identified leases are recorded on the consolidated balance sheet with a corresponding operating lease right-of-use asset, net, representing the right to use the underlying asset for the lease term and the operating lease liabilities representing the obligation to make lease payments arising from the lease. Short-term operating leases, which have an initial term of twelve months or less, are not recorded on the consolidated balance sheet. Operating lease right-of-use assets, net and operating lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available as of the lease commencement date. Lease expense for operating leases is recorded on a straight-line basis over the lease term and variable lease costs are recorded as incurred. Both lease expense and variable lease costs are primarily recorded in cost of revenues on the Company's consolidated statements of income. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. 14 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) The following table presents the operating lease cost and information related to the operating lease right-of-use assets, net and operating lease liabilities for the thirty-nine weeks ended May 29, 2021: (In thousands, except lease term and discount rate) Lease cost Operating lease costs including short-term lease expense and variable lease costs, which were immaterial in the period $ 14,328 Operating cash flow impacts Cash paid for amounts included in the measurement of operating lease liabilities $ 10,207 Operating lease right-of-use assets obtained in exchange for new operating lease liabilities $ 8,324 Weighted-average remaining lease term - operating leases 4.26 Weighted-average discount rate - operating leases 2.35 % The contractual future minimum lease payments of the Company's operating lease liabilities by fiscal year are as follows as of May 29, 2021: (In thousands) 2021 (remaining three months) $ 3,577 2022 13,004 2023 9,435 2024 6,737 2025 4,428 Thereafter 5,663 Total payments 42,844 Less interest ( 1,887 ) Total present value of lease payments $ 40,957 Environmental and Legal Contingencies The Company and its operations are subject to various federal, state and local laws and regulations governing, among other things, air emissions, wastewater discharges, and the generation, handling, storage, transportation, treatment and disposal of hazardous wastes and other substances. In particular, industrial laundries currently use and must dispose of detergent wastewater and other residues, and, in the past, used perchloroethylene and other dry-cleaning solvents. The Company is attentive to the environmental concerns surrounding the disposal of these materials and has, through the years, taken measures to avoid their improper disposal. The Company has settled, or contributed to the settlement of, past actions or claims brought against the Company relating to the disposal of hazardous materials at several sites and there can be no assurance that the Company will not have to expend material amounts to remediate the consequences of any such disposal in the future. U.S. GAAP requires that a liability for contingencies be recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded. The Company regularly consults with attorneys and outside consultants in its consideration of the relevant facts and circumstances before recording a contingent liability. Changes in enacted laws, regulatory orders or decrees, management’s estimates of costs, risk-free interest rates, insurance proceeds, participation by other parties, the timing of payments, the input of the Company’s attorneys and outside consultants or other factual circumstances could have a material impact on the amounts recorded for environmental and other contingent liabilities. Under environmental laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located on, or in, or emanating from, such property, as well as related costs of investigation and property damage. Such laws often impose liability without regard to whether the owner or lessee knew of, or was responsible for the presence of such hazardous or toxic substances. There can be no assurances that acquired or leased locations have been operated in compliance with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon the Company under such laws or expose the Company to third-party actions such as tort suits. The Company continues to address environmental conditions under terms of consent orders negotiated with the applicable environmental authorities or otherwise with respect to certain sites. 15 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) The Company has accrued certain costs related to certain sites, including but not limited to sites in Woburn and Somerville, Massachusetts, as it has been determined that the costs are probable and can be reasonably estimated. The Company , together with multiple other companies, is party to a consent decree related to its property and parcel s of land (the “Central Area”) at a site in Woburn, Massachusetts. The United States Environmental Protection Agency (the “EPA”) has provided the Company and other signatories to the consent decree with comments on the design and implementation of groundwater and soil remedies at the Woburn site and investigation of environmental conditions in the Central Area. The consent decree does not address any remediation work that may be required in the Central Area. The Company, and other signatories, have implemented and proposed to do additional work at the Woburn site but many of the EPA’s comments remain to be resolved. The Company has accrued costs to perform certain work responsive to the EPA’s comments. Additionally, the Company has implemented mitigation measures and continues to monitor environmental conditions at the Somerville, Massachusetts site. The Company has received, responded, and agreed to undertake additional response actions pertaining to a notice of audit findings from the Massachusetts Department of Environmental Protection concerning a regulatory submittal that the Company made in 2009 for a portion of the site. The Company has received demands from the local transit authority for reimbursement of certain costs associated with its construction of a new municipal transit station in the area of the Somerville site. This station is part of an ongoing extension of the transit system. The Company has reserved for costs in connection with this matter; however, in light of the uncertainties associated with this matter, these costs and the related reserve may change. The Company routinely reviews and evaluates sites that may require remediation and monitoring and determines its estimated costs based on various estimates and assumptions. These estimates are developed using its internal sources or by third party environmental engineers or other service providers. Internally developed estimates are based on: • Management’s judgment and experience in remediating and monitoring the Company’s sites; • Information available from regulatory agencies as to costs of remediation and monitoring; • The number, financial resources and relative degree of responsibility of other potentially responsible parties (“PRPs”) who may be liable for remediation and monitoring of a specific site; and • The typical allocation of costs among PRPs. There is usually a range of reasonable estimates of the costs associated with each site. In accordance with U.S. GAAP, the Company’s accruals reflect the amount within the range that it believes is the best estimate or the low end of a range of estimates if no point within the range is a better estimate. Where it believes that both the amount of a particular liability and the timing of the payments are reliably determinable, the Company adjusts the cost in current dollars using a rate of 3 % for inflation until the time of expected payment and discounts the cost to present value using current risk-free interest rates. As of May 29, 2021, the risk-free interest rates utilized by the Company ranged from 1.58 % to 2.26 %. For environmental liabilities that have been discounted, the Company includes interest accretion, based on the effective interest method, in selling and administrative expenses on the accompanying Consolidated Statements of Income. The changes to the Company’s environmental liabilities for the thirty-nine weeks ended May 29, 2021 were as follows (in thousands): May 29, 2021 Balance as of August 29, 2020 $ 30,702 Revisions in estimates ( 174 ) Costs incurred for which reserves have been provided ( 1,016 ) Insurance proceeds 111 Interest accretion 336 Changes in discount rates ( 1,865 ) Balance as of May 29, 2021 $ 28,094 16 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) Anticipated payments and insurance proceeds of currently identified environmental remediation liabilities as of May 29, 2021, for the next five fiscal years and thereafter, as measured in current dollars, are reflected below. (In thousands) 2021 2022 2023 2024 2025 Thereafter Total Estimated costs – current dollars $ 10,178 $ 2,668 $ 1,371 $ 1,073 $ 1,076 $ 11,852 $ 28,218 Estimated insurance proceeds ( 86 ) ( 159 ) ( 173 ) ( 159 ) ( 173 ) ( 521 ) ( 1,271 ) Net anticipated costs $ 10,092 $ 2,509 $ 1,198 $ 914 $ 903 $ 11,331 $ 26,947 Effect of inflation 7,587 Effect of discounting ( 6,440 ) Balance as of May 29, 2021 $ 28,094 Estimated insurance proceeds are primarily received from an annuity received as part of a legal settlement with an insurance company. Annual proceeds of approximately $ 0.3 million are deposited into an escrow account which funds remediation and monitoring costs for two sites related to former operations in Williamstown, Vermont. Annual proceeds received but not expended in the current year accumulate in this account and may be used in future years for costs related to this site through the year 2027. As of May 29, 2021, the balance in this escrow account, which is held in a trust and is not recorded in the Company’s accompanying Consolidated Balance Sheet, was approximately $ 4.8 million. Also included in estimated insurance proceeds are amounts the Company is entitled to receive pursuant to legal settlements as reimbursements from three insurance companies for estimated costs at the site in Uvalde, Texas. The Company’s nuclear garment decontamination facilities are licensed by respective state agencies, as delegated authority by the Nuclear Regulatory Commission (the “NRC”) pursuant to the NRC’s Agreement State program and are subject to applicable federal and state radioactive material regulations. In addition, the Company’s international locations (Canada, the United Kingdom and the European Union) are regulated by equivalent respective jurisdictional authorities. There can be no assurance that such regulation will not lead to material disruptions in the Company’s garment decontamination business. From time to time, the Company is also subject to legal proceedings and claims arising from the conduct of its business operations, including personal injury claims, customer contract matters, employment claims and environmental matters as described above. While it is impossible for the Company to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits and environmental contingencies, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts covered by insurance have been properly accrued in accordance with U.S. GAAP. It is possible, however, that the future financial position and/or results of operations for any particular future period could be materially affected by changes in the Company’s assumptions or strategies related to these contingencies or changes out of the Company’s control. 13. Income Taxes In accordance with ASC 740, Income Taxes (“ASC 740”), each interim period is considered integral to the annual period and tax expense is measured using an estimated annual effective tax rate. An entity is required to record income tax expense each quarter based on its annual effective tax rate estimated for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period. Effective tax rate The Company’s effective tax rate for the thirteen weeks ended May 29, 2021 was 22.9 % as compared to 21.8 % for the corresponding period in the prior year. The increase in the effective tax rate for the thirteen weeks ended May 29, 2021 as compared to the corresponding period in the prior year was due primarily to the impact of discrete tax benefits on lower income before taxes in the corresponding period in the prior year. The Company’s effective tax rate for the thirty-nine weeks ended May 29, 2021 was 23.6 % as compared to 22.8 % for the corresponding period in the prior year. The increase in the effective tax rate in the thirty-nine weeks ended May 29, 2021 as compared to the corresponding period in the prior year was due to the release of certain tax reserves. Uncertain tax positions The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense, which is consistent with the recognition of these items in prior reporting periods. During the thirty-nine weeks ended May 29, 2021, there was a net increase in unrecognized tax position of $ 2.7 million. The increase was comprised of a $ 3.5 million increase for new tax reserves offset by an $ 0.8 million decrease for the release of certain existing reserves due to the expiration of the statute of limitations. 17 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) All U.S. and Canadian federal income tax statutes have lapsed for filings up to and including fiscal years 2015 and 2013, respectively. With a few exceptions, the Company is no longer subject to state and local income tax examinations for periods prior to fiscal 2016. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months. 14. Long-Term Debt On March 26, 2021, the Company entered into an amended and restated $ 175.0 million unsecured revolving credit agreement (the “2021 Credit Agreement”) with a syndicate of banks, which matures on March 26, 2026 . The 2021 Credit Agreement amended and restated the Company’s prior Credit Agreement (defined below), which was scheduled to mature on April 11, 2021 . Under the 2021 Credit Agreement, the Company is able to borrow funds at variable interest rates based on, at the Company’s election, the Eurodollar rate or a base rate, plus in each case a spread based on the Company’s consolidated funded debt ratio. Availability of credit requires compliance with certain financial and other covenants, including a maximum consolidated funded debt ratio and minimum consolidated interest coverage ratio as defined in the 2021 Credit Agreement. The Company tests its compliance with these financial covenants on a fiscal quarterly basis. As of May 29, 2021, the interest rates applicable to the Company’s borrowings under the 2021 Credit Agreement would be calculated as LIBOR plus 1.00 % at the time of the respective borrowing. As of May 29, 2021, the Company had no outstanding borrowings and had outstanding letters of credit amounting to $ 67.5 million, leaving $ 107.5 million available for borrowing under the 2021 Credit Agreement. As of May 29, 2021, the Company was in compliance with all covenants under the 2021 Credit Agreement. Prior to March 26, 2021, the Company had a $ 250 million unsecured revolving credit agreement (the “Credit Agreement”) with a syndicate of banks, which was scheduled to mature on April 11, 2021 . Under the Credit Agreement, the Company was able to borrow funds at variable interest rates based on, at its election, the Eurodollar rate or a base rate, plus in each case a spread based on the Company’s consolidated funded debt ratio. Availability of credit required compliance with certain financial and other covenants, including a maximum consolidated funded debt ratio and minimum consolidated interest coverage ratio as defined in the Credit Agreement. 15. Accumulated Other Comprehensive Loss The changes in each component of accumulated other comprehensive loss, net of tax, for the thirteen and thirty-nine weeks ended May 29, 2021 and May 30, 2020 were as follows (in thousands): Thirteen weeks ended May 29, 2021 Foreign Currency Translation Pension- related (1) Derivative Financial Instruments (1) Total Accumulated Other Comprehensive Loss Balance as of February 27, 2021 $ ( 18,455 ) $ ( 10,026 ) $ ( 12 ) $ ( 28,493 ) Other comprehensive income (loss) before reclassification 6,099 — ( 91 ) 6,008 Amounts reclassified from accumulated other comprehensive loss — — 39 39 Net current period other comprehensive (loss) income 6,099 — ( 52 ) 6,047 Balance as of May 29, 2021 $ ( 12,356 ) $ ( 10,026 ) $ ( 64 ) $ ( 22,446 ) 18 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) Thirty-nine weeks ended May 29, 2021 Foreign Currency Translation Pension- related (1) Derivative Financial Instruments (1) Total Accumulated Other Comprehensive Loss Balance as of August 29, 2020 $ ( 22,009 ) $ ( 10,026 ) $ 65 $ ( 31,970 ) Other comprehensive income (loss) before reclassification 9,653 — ( 158 ) 9,495 Amounts reclassified from accumulated other comprehensive loss — — 29 29 Net current period other comprehensive (loss) income 9,653 — ( 129 ) 9,524 Balance as of May 29, 2021 $ ( 12,356 ) $ ( 10,026 ) $ ( 64 ) $ ( 22,446 ) Thirteen weeks ended May 30, 2020 Foreign Currency Translation Pension- related (1) Derivative Financial Instruments (1) Total Accumulated Other Comprehensive Loss Balance as of February 29, 2020 $ ( 24,420 ) $ ( 8,889 ) $ 208 $ ( 33,101 ) Other comprehensive (loss) income before reclassification ( 3,835 ) — 79 ( 3,756 ) Amounts reclassified from accumulated other comprehensive loss — — ( 47 ) ( 47 ) Net current period other comprehensive (loss) income ( 3,835 ) — 32 ( 3,803 ) Balance as of May 30, 2020 $ ( 28,255 ) $ ( 8,889 ) $ 240 $ ( 36,904 ) Thirty-nine weeks ended May 30, 2020 Foreign Currency Translation Pension- related (1) Derivative Financial Instruments (1) Total Accumulated Other Comprehensive Loss Balance as of August 31, 2019 $ ( 24,640 ) $ ( 9,239 ) $ 191 $ ( 33,688 ) Other comprehensive income (loss) before reclassification ( 3,615 ) — 156 ( 3,459 ) Amounts reclassified from accumulated other comprehensive loss — 350 ( 107 ) 243 Net current period other comprehensive (loss) income ( 3,615 ) 350 49 ( 3,216 ) Balance as of May 30, 2020 $ ( 28,255 ) $ ( 8,889 ) $ 240 $ ( 36,904 ) (1) Amounts are shown net of tax Amounts reclassified from accumulated other comprehensive loss, net of tax, for the thirteen and thirty-nine weeks ended May 29, 2021 and May 30, 2020 were as follows (in thousands): Thirteen weeks ended Thirty-nine weeks ended May 29, 2021 May 30, 2020 May 29, 2021 May 30, 2020 Pension benefit liabilities (net): Reclassification to income statement (a) $ — $ — $ — $ 350 Total, net of tax — — — 350 Derivative financial instruments, net: Forward contracts (b) 39 ( 47 ) 29 ( 107 ) Total, net of tax 39 ( 47 ) 29 ( 107 ) Total amounts reclassified, net of tax $ 39 $ ( 47 ) $ 29 $ 243 19 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) (a) Amounts included in selling and administrative expenses in the accompanying Consolidated Statements of Income. (b) Amounts included in revenues in the accompanying Consolidated Statements of Income. 16. Segment Reporting Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Company’s chief executive officer. The Company has six operating segments based on the information reviewed by its chief executive officer: U.S. Rental and Cleaning, Canadian Rental and Cleaning, Manufacturing (“MFG”), Corporate, Specialty Garments and First Aid. The U.S. Rental and Cleaning and Canadian Rental and Cleaning operating segments have been combined to form the U.S. and Canadian Rental and Cleaning reporting segment, and as a result, the Company has five reporting segments. The U.S. and Canadian Rental and Cleaning reporting segment purchases, rents, cleans, delivers and sells uniforms and protective clothing and non-garment items in the United States and Canada. The laundry locations of the U.S. and Canadian Rental and Cleaning reporting segment are referred to by the Company as “industrial laundries” or “industrial laundry locations.” The MFG operating segment designs and manufactures uniforms and non-garment items primarily for the purpose of providing these goods to the U.S. and Canadian Rental and Cleaning reporting segment. MFG revenues are primarily generated when goods are shipped from the Company’s manufacturing facilities, or its subcontract manufacturers, to other Company locations. These intercompany revenues are recorded at a transfer price which is typically in excess of the actual manufacturing cost. Manufactured products are carried in inventory until placed in service at which time they are amortized at this transfer price. On a consolidated basis, intercompany revenues and income are eliminated and the carrying value of inventories and rental merchandise in service is reduced to the manufacturing cost. Income before income taxes from MFG net of the intercompany MFG elimination offsets the merchandise amortization costs incurred by the U.S. and Canadian Rental and Cleaning reporting segment as the merchandise costs of this reporting segment are amortized and recognized based on inventories purchased from MFG at the transfer price which is above the Company’s manufacturing cost. The Corporate operating segment consists of costs associated with the Company’s distribution center, sales and marketing, information systems, engineering, procurement, supply chain, accounting and finance, human resources, other general and administrative costs and interest expense. The revenues generated from the Corporate operating segment represent certain direct sales made by the Company directly from its distribution center. The products sold by this operating segment are the same products rented and sold by the U.S. and Canadian Rental and Cleaning reporting segment. In the table below, no assets or capital expenditures are presented for the Corporate operating segment because no assets are allocated to this operating segment in the information reviewed by the chief executive officer. However, depreciation and amortization expense related to certain assets are reflected in operating income and income before income taxes for the Corporate operating segment. The assets that give rise to this depreciation and amortization are included in the total assets of the U.S. and Canadian Rental and Cleaning reporting segment as this is how they are tracked and reviewed by the Company. The majority of expenses accounted for within the Corporate segment relate to costs of the U.S. and Canadian Rental and Cleaning segment, with the remainder of the costs relating to the Specialty Garment and First Aid segments. 20 UniFirst Corporation and Subsidiaries Notes to Consolidated Financial Statements (Continued) The Specialty Garments operating segment purchases, rents, cleans, delivers and sells, specialty garments and non-garment items primarily for nuclear and cleanroom applications and provides cleanroom cleaning services at limited customer locations. The First Aid operating segment sells first aid cabinet services and other safety supplies , provides certain safety training , as well as maintains wholesale distribution and pill packaging operations. The Company refers to the U.S. and Canadian Rental and Cleaning, MFG, and Corporate reporting segments combined as its “Core Laundry Operations,” which is included as a subtotal in the following table (in thousands): Thirteen weeks ended U.S. and Canadian Rental and Cleaning MFG Net Interco MFG Elim Corporate Subtotal Core Laundry Operations Specialty Garments First Aid Total May 29, 2021 Revenues $ 399,500 $ 67,573 $ ( 67,573 ) $ 9,531 $ 409,031 $ 38,236 $ 17,056 $ 464,323 Operating income (loss) $ 75,550 $ 17,219 $ ( 258 ) $ ( 46,877 ) $ 45,634 $ 8,300 $ 225 $ 54,159 Interest income, net $ ( 675 ) $ — $ — $ 4 $ ( 671 ) $ — $ — $ ( 671 ) Income (loss) before taxes $ 76,062 $ 17,103 $ ( 258 ) $ ( 47,573 ) $ 45,334 $ 8,918 $ 230 $ 54,482 May 30, 2020 Revenues $ 362,288 $ 44,949 $ ( 44,949 ) $ 26,123 $ 388,411 $ 36,163 $ 20,944 $ 445,518 Operating income (loss) $ 42,994 $ 13,226 $ 5,398 $ ( 41,927 ) $ 19,691 $ 6,380 $ 1,637 $ 27,708 Interest income, net $ ( 865 ) $ — $ — $ ( 189 ) $ ( 1,054 ) $ — $ — $ ( 1,054 ) Income (loss) before taxes $ 43,856 $ 13,344 $ 5,398 $ ( 42,543 ) $ 20,055 $ 5,514 $ 1,637 $ 27,206 Thirty-nine weeks ended May 29, 2021 Revenues $ 1,174,285 $ 181,204 $ ( 181,204 ) $ 26,171 $ 1,200,456 $ 111,592 $ 48,892 $ 1,360,940 Operating income (loss) $ 209,546 $ 51,803 $ 2,926 $ ( 134,405 ) $ 129,870 $ 20,693 $ 331 $ 150,894 Interest income, net $ ( 2,146 ) $ — $ — $ 44 $ ( 2,102 ) $ — $ — $ ( 2,102 ) Income (loss) before taxes $ 211,449 $ 51,513 $ 2,926 $ ( 136,273 ) $ 129,615 $ 22,529 $ 339 $ 152,483 May 30, 2020 Revenues $ 1,173,252 $ 163,620 $ ( 163,620 ) $ 43,649 $ 1,216,901 $ 105,545 $ 53,070 $ 1,375,516 Operating income (loss) $ 178,289 $ 52,486 $ 5,965 $ ( 124,884 ) $ 111,856 $ 15,886 $ 4,188 $ 131,930 Interest income, net $ ( 2,965 ) $ — $ — $ ( 2,625 ) $ ( 5,590 ) $ — $ — $ ( 5,590 ) Income (loss) before taxes $ 181,232 $ 52,393 $ 5,965 $ ( 123,852 ) $ 115,738 $ 14,971 $ 4,188 $ 134,897 17. Shares Repurchased and Dividends On October 23, 2019, the Company announced that it would be raising its quarterly dividend to $ 0.25 per share of Common Stock and to $ 0.20 per share of Class B Common Stock, up from $ 0.1125 and $ 0.09 per share, respectively. The amount and timing of any dividend payment is subject to the approval of the Board of Directors each quarter. On January 2, 2019, the Company’s Board of Directors approved a share repurchase program authorizing the Company to repurchase from time to time 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, including economic and market conditions, the Company stock price, corporate liquidity requirements and priorities, applicable legal requirements and other factors. The share repurchase program will be funded using the Company’s available cash or capacity under its 2021 Credit Agreement and may be suspended or discontinued at any time. As of May 29, 2021, the Company had repurchased a total of 368,117 shares for an average price per share of $ 167.87 under the share repurchase program using cash on hand. The Company did no t repurchase any shares during the thirteen weeks ended May 29, 2021. During the thirty-nine weeks ended May 29, 2021, the Company repurchased 53,200 shares for an average price per share of $ 179.21 . During the thirteen and thirty-nine weeks ended May 30, 2020, the Company repurchased 46,667 and 117,767 shares for an average price per share of $ 161.65 and $ 184.67 , respectively. 21