What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-10-27 compared with 2020-10-28 · 98 added, 180 removed, 906 unchanged (23% of the section changed)

90 unchanged sentences

Dividends declared

Shares converted

Share-based compensation, net (2)

1 unchanged sentence

Repurchase of Common Stock

Cumulative effect of change in accounting principle

Balance, August 31, 2019

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Dividends declared

Shares converted

Share-based compensation, net (2)

1 unchanged sentence

Repurchase of Common Stock

Cumulative effect of change in accounting principle

Balance, August 29, 2020

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These amounts are shown net of the effect of income taxes.

These amounts are shown net of any shares withheld by the Company to satisfy certain tax withholdings obligations in connection with the vesting of certain shares of restricted stock.

These amounts are shown net of any shares withheld by the Company to satisfy certain tax withholdings obligations in connection with the vesting of certain restricted stock units.

The accompanying notes are an integral part of these Consolidated Financial Statements.

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Cash flows from financing activities:

Payment of deferred financing costs

Proceeds from exercise of share-based awards

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Effect of exchange rate changes

Net (decrease) increase in cash, cash equivalents and short-term investments

Net increase in cash, cash equivalents and short-term investments

Cash, cash equivalents and short-term investments at beginning of period

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The Company serves businesses of all sizes in numerous industry categories.

Typical customers include automobile service centers and dealers, delivery services, food and general merchandise retailers, food processors and service operations, light manufacturers, maintenance facilities, restaurants, service companies, soft and durable goods wholesalers, transportation companies, healthcare providers, and others who require employee clothing for image, identification, protection or utility purposes.

Typical customers include automobile service centers and dealers, delivery services, food and general merchandise retailers, manufacturers, maintenance facilities, restaurants and food-related businesses, business service companies, soft and durable goods wholesalers, transportation companies, energy producing operations, healthcare providers and others who require employee clothing on the job for image, identification, protection or utility purposes.

The Company also provides its customers with restroom and cleaning supplies, including air fresheners, paper products, gloves, masks, hand soaps and sanitizers.

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and Canadian Rental and Cleaning, MFG, and Corporate segments combined as its “Core Laundry Operations”.

In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China, and has since spread globally.

In March 2020, the World Health Organization characterized COVID-19 as a pandemic.

Through the first two quarters of fiscal 2020, the COVID-19 pandemic did not have a significant impact on the Company’s business.

However, efforts to contain the spread of COVID-19 intensified during the second half of the Company’s fiscal 2020.

Most states and municipalities within the U.S.

enacted temporary closures of businesses, issued quarantine orders and took other restrictive measures in response to the COVID-19 pandemic.

Within the U.S., the Company’s business has been designated an essential business, which allows the Company to continue to serve customers that remain open.

In these consolidated financial statements and related disclosures, the Company has assessed the current impact of COVID-19 on its consolidated financial condition, results of operations, and cash flows, as well as our estimates and accounting policies.

The COVID-19 pandemic had a significant adverse impact on the Company’s revenues in the second half of fiscal 2020 and the first half of fiscal 2021.

The Company has made additional disclosures of these assessments, as necessary.

Given the unprecedented nature of this situation, the Company cannot reasonably estimate the full extent of the impact COVID-19 will have on its consolidated financial condition, results of operations, or cash flows in the foreseeable future.

Given the unprecedented nature of the COVID-19 pandemic, including the emergence of new variants of the virus and delays in the distribution and administration of various vaccines, particularly in certain geographic regions, the Company cannot reasonably estimate the full extent or duration of the impact COVID-19 will have on its consolidated financial condition, results of operations, or cash flows in the foreseeable future.

The ultimate impact of COVID-19 on the Company is highly uncertain and will depend on future developments, and such impacts could exist for an extended period of time, even after the COVID-19 pandemic subsides.

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The Company’s fiscal year ends on the last Saturday in August.

For financial reporting purposes, fiscal year ended August 31, 2019 (“fiscal 2019”) consisted of 53 weeks, and fiscal years ended August 29, 2020 (“fiscal 2020”) and August 25, 2018 (“fiscal 2018”) both consisted of 52 weeks .

For financial reporting purposes, fiscal years ended August 28, 2021 (“fiscal 2021”) and August 29, 2020 (“fiscal 2020”) both consisted of 52 weeks and fiscal year ended August 31, 2019 (“fiscal 2019”) consisted of 53 weeks.

Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents and short-term investments include cash in banks, money market securities, and bank short-term investments having original maturities of twelve months or less.

As of August 29, 2020, the Company had no short-term investments.

As of August 31, 2019, short-term investments consist of certificates of deposits totaling $ 4.9 million having original maturities of six and twelve months.

As of each of August 28, 2021 and August 29, 2020, the Company had no short-term investments.

Accounts receivable

Accounts receivable represents amounts due from customers and is presented net of an allowance for doubtful accounts.

The Company utilizes its judgment and estimates are used in determining the collectability of accounts receivable and evaluating the adequacy of the allowance for doubtful accounts.

The Company considers specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances as part of its evaluation.

When an account is considered uncollectible, it is written off against the allowance for doubtful accounts.

Accounts receivable represents amounts due from customers and is presented net of reserves for expected credit losses.

The Company utilizes its judgment and estimates are used in determining the collectability of accounts receivable and evaluating the adequacy of the reserve for expected credit losses.

The Company considers specific accounts receivable and historical credit loss experience, customer credit worthiness, current economic trends and the age of outstanding balances as part of its evaluation.

When an account is considered uncollectible, it is written off against the reserve for expected credit losses.

In response to the economic disruption created by the COVID-19 pandemic and the resulting impact on our customer base, the Company performed an additional evaluation of amounts due from customers in fiscal 2020 that were deemed to be higher collection risk.

This evaluation resulted in an allowance for doubtful accounts in excess of historical rates.

The judgment applied to increase the allowance for doubtful accounts beyond our historical policy was deemed to be reasonable and supportable based on the data available as of the consolidated balance sheet date.

This evaluation resulted in a reserve for expected credit losses in excess of historical rates.

The judgment applied to increase the reserve for expected credit losses beyond our historical policy was deemed to be reasonable and supportable based on the data available as of the consolidated balance sheet date.

Financial Instruments

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Revenues from the Company’s route servicing customer contracts represent a single-performance obligation.

recognizes these revenues over time as services are performed based on the nature of services provided and contractual rates (input method).

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.

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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.

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.

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Total Revenues

During fiscal 2020, the percentage of revenues recognized over time as the services are performed was 94.7 % of Core Laundry Operations revenues and 79.2 % of Specialty Garments revenues.

During fiscal 2020, 5.3 % of Core Laundry Operations revenues, 20.8 % of Specialty Garments revenues and 100 % of First Aid revenues were recognized at a point in time, which generally occurs when the goods are transferred to the customer.

During fiscal 2021, 2020 and 2019 the percentage of revenues recognized over time as the services are performed was 95.8 %, 94.7 % and 95.8 % of Core Laundry Operations revenues, respectively, and 81.8 %, 79.2 % and 82.7 % of Specialty Garments revenues, respectively.

During fiscal 2021, 2020 and 2019 4.2 %, 5.3 % and 4.2 % of Core Laundry Operations revenues, respectively, 18.2 %, 20.8 % and 17.3 % of Specialty Garments revenues, respectively, and 100 % of First Aid revenues were recognized at a point in time, which generally occurs when the goods are transferred to the customer.

Costs to Obtain a Contract

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GAAP requires that companies test goodwill if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit to which goodwill is assigned below its carrying amount.

Despite the significant excess fair value identified in the Company’s fiscal 2019 impairment assessment, the Company determined that its reduced cash flow projections and the significant decline in its market capitalization as a result of the COVID-19 pandemic indicated that an impairment loss may have been incurred as of the last day of the third quarter of fiscal 2020.

Therefore, the Company qualitatively assessed whether it was more likely than not that the goodwill in each of its

reporting units was impaired as of the last day of the third quarter of fiscal 2020 .

The Company reviewed its previous forecasts and assumptions based on its current projections, which are subject to various risks and uncertainties, including:

(1) forecasted revenues, expenses and cash flows, including the duration and extent of the impact of the COVID-19 pandemic on the Company’s business (2) current discount rates, (3) the reduction in the Company’s market capitalization, (4) observable market transactions, (5) changes to the regulatory environment and (6) the nature and amount of government support that will be provided.

Based on the Company’s interim impairment assessment as of the last day of the third quarter of fiscal 2020, the Company determined that its goodwill was not impaired.

The Company also concluded that its goodwill was not impaired on the first day of the fourth quarter of fiscal 2020, its new annual impairment test date.

However, the Company is unable to predict how long these conditions will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on its business.

The majority of the Company’s goodwill resides within the US Core Laundry Operations reporting unit, for which there continues to exist significant excess fair value over book value.

The Company used the qualitative assessment option for its impairment testing for goodwill in fiscal 2021 and determined that the fair values of the reporting units more likely than not exceeded their carrying values and that there was no evidence of impairment as of May 30, 2021.

The Company cannot predict future economic conditions and their impact on the Company or the future net realizable value of the Company’s stock.

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Definite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable in accordance with U.S.

There were no impairments of goodwill or indicators of impairment for definite-lived intangible assets in fiscal 2020, 2019 and 2018.

There were no impairments of goodwill or indicators of impairment for definite-lived intangible assets in fiscal 2021, 2020 or 2019.

As of August 28, 2021, definite-lived intangible assets have a weighted average useful life of approximately 11.9 years.

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Revisions to the liability could occur due to changes in the Company’s estimated useful lives of the underlying assets, estimated dates of decommissioning, changes in decommissioning costs, changes in federal or state regulatory guidance on the decommissioning of such facilities, or other changes in estimates.

Changes due to revised estimates will be recognized by adjusting the carrying amount of the liability and the related long-lived asset if the assets are still in service, or charged to expense in the period if the assets are no longer in service.

Changes due to revised estimates are recognized by adjusting the carrying amount of the liability and the related long-lived asset if the assets are still in service, or charged to expense in the period if the assets are no longer in service.

The Company is self-insured for certain obligations related to health, workers’ compensation, vehicles and general liability programs.

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Receivables for insurance recoveries are recorded as assets, on an undiscounted basis.

The Company’s liabilities are based on estimates, and, while the Company believes that its accruals are adequate, the ultimate liability may be significantly different from the amounts recorded.

The Company’s liabilities are based on estimates, and, while the Company believes that its accruals are adequate, the ultimate liability may be significantly

different from the amounts recorded.

Changes in claims experience, the Company’s ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period.

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Deferred income taxes are provided for temporary differences between the amounts recognized for income tax and financial reporting purposes at currently enacted tax rates.

The Tax Cuts and Jobs Act of 2017 (the “TCJA”) included a mandatory one-time transition tax on accumulated earnings of foreign subsidiaries and, as a result, previously unremitted earnings for which no U.S.

deferred tax liability had been accrued have now been subject to U.S.

Deferred tax assets and liabilities are determined by the differences between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities.

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Accordingly, compensation expense related to these Share-Based Awards in fiscal 2021, 2020 and 2019 was recognized on the date of grant.

For performance-based restricted stock unit awards with revenue and adjusted operating margin targets, we evaluate the probability of meeting the performance criteria at each balance sheet date and if probable, related compensation cost is amortized over the performance period on a straight-line basis because such awards vest only at the end of the measurement period.

For performance-based restricted stock unit awards with revenue and earnings per share performance criteria , we evaluate the probability of meeting the performance criteria at each balance sheet date and , if probable, related compensation cost is amortized over the performance period on a straight-line basis because such awards vest only at the end of the measurement period.

Changes to the probability assessment and the estimate of shares expected to vest will result in adjustments to the related share-based compensation expense that will be recorded in the period of the change.

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For fiscal 2021, 2020 and 2019, the Company’s diluted income per share assumes the conversion of all Class B Common Stock into Common Stock and uses the two-class method for its unvested participating shares.

The following table sets forth the computation of diluted income per share of Common Stock for the years ended August 29, 2020, August 31, 2019 and August 25, 2018 (in thousands, except per share data):

The following table sets forth

the computation of diluted income per share of Common Stock for the years ended August 28, 2021 , August 29, 2020 and August 31, 2019 (in thousands, except per share data):

Year Ended August 28, 2021

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The functional currency of our foreign operations is the local country’s currency.

Transaction gains and losses, including gains and losses on our intercompany transactions, are included in other (income) expense in the accompanying Consolidated Statements of Income.

Transaction gains and losses, including gains and losses on our intercompany transactions, are included in other expense, net in the accompanying Consolidated Statements of Income.

Assets and liabilities of operations outside the United States are translated into U.S.

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Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued updated guidance which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors).

The new guidance requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.

Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases.

The Company adopted this standard on September 1, 2019 using the modified retrospective adoption method.

The standard provides a number of optional practical expedients in transition and the Company has elected certain of these practical expedients upon adoption of this standard.

Specifically, the Company elected the package of practical expedients permitted under the standard, which allows a lessee to carry forward its population of existing leases, the classification of each lease, as well as the treatment of initial direct lease costs as of the period of adoption.

The Company also elected the practical expedient related to lease and non-lease components, as an accounting policy election which allows a lessee to not separate non-lease from lease components and instead account for consideration paid in a contract as a single lease component.

In addition, the Company elected the short-term lease recognition exemption for all leases with a term of 12 months or less, which means it will not recognize right-of-use assets or lease liabilities for these leases.

The adoption of this standard resulted in the Company recognizing right-of-use assets, net of $ 48.7 million and corresponding lease liabilities of $ 46.2 million and reductions of prepaid expenses and other current assets of $ 1.2 million and $ 1.3 million, respectively.

The adoption of this standard did not have a material impact on the Company's consolidated statement of income or consolidated statement of cash flows.

In June 2016, the FASB issued updated guidance that introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments including trade receivables.

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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.

Accordingly, the guidance will be effective for the Company on August 30, 2020.

The Company expects that adoption of this guidance will not have a material impact on its financial statements and related disclosures.

Accordingly, the guidance was effective for the Company on August 30, 2020.

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, and any interim periods within those annual 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.

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, this standard is effective for the Company on August 29, 2021.

The Company’s adoption of this guidance on August 29, 2021 did not have a material impact on its financial statements or 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.

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The amendments in this update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

Accordingly, the guidance will be effective for the Company on August 30, 2020.

The Company is currently evaluating the impact that this guidance will have on its financial statements and related disclosures.

Accordingly, the guidance was effective for the Company on August 30, 2020.

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.

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The Company is currently evaluating the impact that this guidance will have on its financial statements and related disclosures.

In March 2020, the FASB issued optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

The guidance is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the impact that this guidance will have on its financial statements and related disclosures.

During fiscal 2021, the Company completed eight business acquisitions with an aggregate purchase price of approximately $ 8.7 million.

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These acquisitions were not significant in relation to the Company’s consolidated financial results and, therefore, pro forma financial information has not been presented.

In September 2019, the Company completed an acquisition for approximately $ 38.8 million.

The all-cash transaction was structured as an asset acquisition, with the Company acquiring substantially all of the acquired company’s industrial laundry, industrial uniform rental and industrial direct sales assets.

Aggregate information relating to the acquisition of businesses which were accounted for as purchases is as follows (in thousands, except number of businesses acquired):

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and Canadian Rental and Cleaning segment and is deductible for tax purposes.

In September 2019, the Company completed an acquisition for approximately $ 38.8 million.

Fair Value Measurements

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State income taxes

Deemed Repatriation of Non—U.S.

Earnings, net foreign

tax credits and other (collectively, Transition Tax)

Impact of U.S.

tax reform federal tax rate reduction

The components of deferred income taxes included on the consolidated balance sheets are as follows (in thousands):

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Although realization is not assured, management believes it is more likely than not that the recorded deferred tax assets will be realized.

The TCJA enacted on December 22, 2017, among other matters, reduced the U.S.

federal corporate income tax rate from 35.0 % to 21.0 %, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and created new taxes on certain foreign sourced earnings.

On December 22, 2017, the Securities and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin No.

118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) directing SEC registrants to consider the impact of the U.S.

legislation as “provisional” when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law.

In accordance with SAB 118, during fiscal 2018 the Company recorded its best estimates based on its interpretation of the U.S.

legislation while it continued to accumulate data to finalize the underlying calculations.

This resulted in the Company recording a provisional net income tax benefit of $ 20.1 million for the fiscal year ended August 25, 2018 related to remeasuring its U.S.

net deferred tax liabilities at the lower tax rate and the one-time transition tax.

As a result of the TCJA, U.S.

corporations are subject to lower income tax rates.

For fiscal 2020 and 2019, the statutory tax rate was 21.0 % compared to the applicable blended statutory tax rate of 25.9 % for fiscal 2018.

During the second quarter of fiscal 2019, the Company completed its accounting for the tax effects of enactment of the TCJA as required by SAB 118.

There were no changes from the provisional calculation as recorded through August 25, 2018 to the final calculation.

Effective tax rate

The Company’s effective tax rate for the fiscal year ended August 28, 2021 was 23.2 % as compared to 23.7 % for the corresponding period in the prior year.

The decrease in the effective tax rate was primarily due to higher benefits of $ 2.1 million resulting from the release of certain tax reserves and the tax benefit related to the exercise of stock appreciation rights in fiscal 2020 compared to fiscal 2019.

The decrease in the effective tax rate was primarily due to the tax benefit related to the exercise of stock appreciation rights in fiscal 2021 compared to fiscal 2020.

Foreign tax effect

As of August 28, 2021, unremitted foreign earnings, have been retained by the Company’s foreign subsidiaries for indefinite reinvestment.

Upon repatriation of those earnings, in the form of dividends or otherwise, the Company could be subject to immaterial withholding taxes payable to the various foreign countries.

If the Company were to repatriate those earnings, in the form of dividends or otherwise, the Company could be subject to immaterial withholding taxes payable to the various foreign countries.

Uncertain tax positions

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Additions based on tax positions related to the current year

Additions for tax positions of prior years

Reduction for tax positions of prior years

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As of August 28, 2021 and August 29, 2020, the Company had no outstanding loans payable.

The Company has a $ 250.0 million unsecured revolving credit agreement (the “Credit Agreement”) with a syndicate of banks, which matures on April 11, 2021 .

Under the Credit Agreement, the Company is 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 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 Credit Agreement.

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 (as defined below), which was scheduled to mature on April 11, 2021 .

Under the 2021 Credit Agreement, the Company may 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.

The Company tests its compliance with these financial covenants on a fiscal quarterly basis.

As of August 29, 2020, the interest rates applicable to the Company’s borrowings under the Credit Agreement would be calculated as LIBOR plus 75 basis points at the time of the respective borrowing.

As of August 28, 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 August 28, 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 August 28, 2021, the Company was in compliance with all covenants under the 2021 Credit Agreement.

Prior to March 26, 2021, the Company had a $ 250.0 million unsecured revolving credit agreement (the “Prior Credit Agreement”) with a syndicate of banks, which was scheduled to mature on April 11, 2021 .

Under the Prior 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, each as defined in the Prior Credit Agreement.

Derivative Instruments and Hedging Activities

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The Company concluded that the forward contracts met the criteria to qualify as a cash flow hedge under U.S.

As of August 29, 2020, the Company had forward contracts with a notional value of approximately 5.0 million CAD outstanding and recorded the fair value of the contracts of $ 0.1 million in prepaid expenses and other current assets with a corresponding $ 0.1 million gain in accumulated other comprehensive loss, which was recorded net of tax.

For the fiscal year ended August 29, 2020, the Company reclassified $ 0.2 million from accumulated other comprehensive loss to revenue, related to the derivative financial instruments.

The gain on these forward contracts that results in a decrease to accumulated other comprehensive loss as of August 29, 2020 is expected to be reclassified to revenues prior to its maturity on February 25, 2022.

In August 2021, the Company entered into twenty forward contracts to exchange CAD for U.S.

dollars at fixed exchange rates in order to manage its exposure related to certain forecasted CAD denominated sales of one of its subsidiaries.

The hedged transactions are specified as the first amount of CAD denominated revenues invoiced by one of the Company’s domestic subsidiaries each fiscal quarter, beginning in the first fiscal quarter of 2022 and continuing through the fourth fiscal quarter of 2026.

In total, the Company will sell approximately 14.1 million CAD at an average Canadian-dollar exchange rate of 0.7861 over these quarterly periods.

The Company concluded that the forward contracts met the criteria to qualify as a cash flow hedge under U.S.

As of August 28, 2021, the Company had forward contracts with a notional value of approximately 15.5 million CAD outstanding and recorded the fair value of the contracts of a nominal amount in prepaid expenses and other current assets with a corresponding loss of $ 0.1 million in accumulated other comprehensive loss, which was recorded net of tax.

For the fiscal year ended August 28, 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 results in an increase to accumulated other comprehensive loss as of August 28, 2021 is expected to be reclassified to revenues prior to their maturity on February 25, 2022 and August 29, 2026, respectively.

Employee Benefit Plans

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however, regardless of the investment performance the annual interest rate applied per the contract must be a minimum of 3.25 %.

The amount charged to expense related to this plan amounted to approximately $ 0.2 million, $ 0.3 million and $ 0.3 million for fiscal 2020, 2019 and 2018.

The amount charged to expense related to this plan amounted to approximately $ 0.2 million for fiscal 2021 and 2020, respectively, and $ 0.3 million for fiscal 2019.

In connection with one of the Company’s acquisitions, the Company assumed liabilities related to a frozen pension plan covering many of the acquired Company’s former employees (“Textilease Plan”).

The pension benefits are based on years of service and the employee’s compensation.

The Textilease Plan assets are held in a separate GDA with PRIAC;

however the minimum interest rate per the Textilease Plan contract is 1.5 %.

The amount charged to expense related to this plan amounted to approximately $ 0 , $ 0.5 million and $ 0.2 million, respectively, for fiscal 2020, 2019 and 2018.

The Textilease Plan was terminated in fiscal 2020.

The pension benefits were based on years of service and the employee’s compensation.

The Textilease Plan assets were held in a separate GDA with PRIAC;

however the minimum interest rate per the Textilease Plan contract was 1.5 %.

The amount charged to expense related to this plan amounted to approximately $ 0.5 million for fiscal 2019.

There was no expense incurred related to this plan in either fiscal 2021 or 2020.

The Company refers to its UniFirst Plan and Textilease Plan collectively as its “Pension Plans”.

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Amortization of prior service cost

Amortization of unrecognized loss

Amortization of net loss

Net periodic benefit cost

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Interest cost

Actuarial loss

Actuarial (gain) loss

Benefits paid

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Rate of compensation increase

The following benefit payments, which reflect expected future service, that are expected to be paid for the five fiscal years subsequent to August 29, 2020 and thereafter are as follows (in thousands):

The benefit payments, which reflect expected future service, that are expected to be paid for the five fiscal years subsequent to August 28, 2021 and thereafter are as follows (in thousands):

Pension Plans

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A rollforward of the Company’s asset retirement liability is as follows for fiscal 2021 and 2020 (in thousands):

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Effect of exchange rate changes

Change in estimate

Ending balance

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The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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 fifty-two weeks ended August 29, 2020:

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 fiscal 2021:

(In thousands, except lease term and discount rate)

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Total rent expense on all leases was $ 16.2 million, $ 15.2 million and $ 16.5 million for the fiscal 2021, 2020 and 2019, respectively.

The contractual future minimum lease payments of the Company's operating lease liabilities by fiscal year are as follows as of August 29, 2020:

The contractual future minimum lease payments of the Company's operating lease liabilities by fiscal year as of August 28, 2021 are as follows:

(In thousands)

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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.

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.

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.

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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 has potential exposure related to a parcel of land (the “Central Area”) related to a site in Woburn, Massachusetts.

Currently, the consent decree for the Woburn site does not define or require any remediation work in the Central Area.

The Company, together with multiple other companies, is party to a consent decree related to its property and parcels 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.

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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.

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

This station is part of an ongoing extension of the transit system.

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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 one of its sites.

The Company’s nuclear garment decontamination facilities are licensed by the Nuclear Regulatory Commission (“NRC”), or, in certain cases, by the applicable state agency, and are subject to regulation by federal, state and local authorities.

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.

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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.

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.

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.

Other Contingent Liabilities

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As of August 28, 2021, the number of remaining shares available for future grants under the 2010 Plan was 251,713 .

Share-based compensation, which includes expense related to Share-Based Awards, has been recorded in the accompanying Consolidated Statements of Income in selling and administrative expenses.

Share-based compensation expense, which includes expense related to Share-Based Awards, has been recorded in the accompanying Consolidated Statements of Income in selling and administrative expenses.

All Share-Based Awards issued to management were recommended to the Board of Directors by the Compensation Committee and approved by the Board of Directors.

All Share-Based Awards issued to the Company’s non-employee members of the Board of Directors (the “Directors”) under the 2010 Plan were recommended to the Board of Directors by the Compensation Committee and approved by the Board of Directors.

Share-Based Awards granted to non-employee Directors are granted on the third business day following the annual shareholders’ meeting.

In fiscal 2019 and 2018, a total of 291 and 234 shares of fully vested unrestricted stock, respectively, were granted to certain non-employee Directors of the Company.

No such shares were granted during fiscal 2020.

Accordingly, compensation expense related to the 2019 and 2018 unrestricted stock was recognized on the date of grant.

In fiscal 2019, a total of 291 shares of fully vested unrestricted stock were granted to certain non-employee Directors of the Company.

No such shares were granted during each of fiscal 2021 and 2020.

Accordingly, compensation expense related to the 2019 unrestricted stock was recognized on the date of grant.

In each of fiscal 2021, 2020 and 2019, the Company granted a total of 5,000 stock appreciation rights under the 2010 Plan to the Company’s non-employee Directors.

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Share-Based Awards granted to the Company’s non-employee Directors were fully vested as of the date of grant.

Beginning in fiscal 2009, non-employee Director Share-Based Award grants in the form of stock options and stock appreciation rights expire on the earlier of the eighth anniversary of the grant date or the second anniversary of the date that the Director ceases to be a member of the Board of Directors.

Non-employee Director Share-Based Award grants in the form of stock options and stock appreciation rights expire on the earlier of the eighth anniversary of the grant date or the second anniversary of the date that the Director ceases to be a member of the Board of Directors.

Time-based restricted stock units granted to employees vest either 20 % on each anniversary of the grant date over a five-year period, 33 % on each anniversary of the grant date over a three-year period or on a five-year cliff vesting schedule under which the awards become fully vested after five years from the date of grant.

Beginning in fiscal 2020, certain time-based restricted stock units granted to employees vest 60 % on the third anniversary of the grant date and 20 % on each of the fourth and fifth anniversaries of the grant date.

Generally, performance-based restricted stock units granted to employees are earned based on whether and the extent to which the Company achieves certain consolidated revenues and adjusted operating margins.

Generally, performance-based restricted stock units granted to employees are earned based on whether and the extent to which the Company achieves certain consolidated revenues and earnings per share.

The fair value of each stock appreciation right is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used:

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However, until converted to Common Stock, shares of Class B Common Stock are not freely transferable.

For the year ended August 31, 2019, 67,000 shares of Class B Common Stock were converted to Common Stock.

On March 27, 2018, the Company repurchased 1.105 million shares of Class B Common Stock and 0.073 million shares of Common Stock for a combined $ 146.0 million in a private transaction with the Croatti family at a per share price of $ 124.00 .

This opportunity to repurchase shares from the Croatti family was evaluated by an independent special committee of the Board of Directors (the “Special Committee”).

The sale of shares by the Croatti family was executed to provide liquidity as well as for estate and family financial planning following the passing of former UniFirst Chief Executive Officer, Ronald D.

The Special Committee determined that a repurchase of Croatti family Class B Common Stock at a discount to market was in the best interests of the Company as it is accretive to income per share and addresses uncertainties that may have been created if the Croatti family had pursued other liquidity options.

The Special Committee undertook its evaluation with the assistance of Stifel Financial Corp.

(“Stifel”) and received an opinion from Stifel to the effect that, as of March 27, 2018, the $ 124.00 per share in cash to be paid was fair to the Company, from a financial point of view.

The entire Board of Directors other than Cynthia Croatti, who is affiliated with the selling shareholders and therefore abstained, approved the transaction upon the recommendation of the Special Committee.

On March 28, 2018, the Company announced that it would be raising its quarterly dividend to $ 0.1125 per share for Common Stock and to $ 0.09 per share for Class B Common Stock, up from $ 0.0375 and $ 0.03 per share, respectively.

During fiscal 2019, 67,000 shares of Class B Common Stock were converted to Common Stock.

No such conversions occurred during each of fiscal 2021 and 2020.

On October 23, 2019, the Company announced that it would be raising its quarterly dividend to $ 0.25 per share for Common Stock and to $ 0.20 per share for Class B Common Stock, up from $ 0.1125 and $ 0.09 per share, respectively.

The amount and timing of any future dividend payment is subject to the approval of the Board of Directors each quarter.

On October 20, 2021, the Company announced that it would be raising its quarterly dividend to $ 0.30 per share for Common Stock and to $ 0.24 per share for Class B Common Stock, up from $ 0.25 and $ 0.20 per share, respectively.

The amount and timing of any future dividend 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.

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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 Credit Agreement and may be suspended or discontinued at any time.

During fiscal 2020, the Company repurchased approximately 118,000 shares for an average price per share of $ 184.67 .

The share repurchase program has been funded to date with available cash and may be funded in the future using the Company’s available cash or capacity under its 2021 Credit Agreement and may be suspended or discontinued at any time.

During fiscal 2021, the Company repurchased 60,950 shares for an average price per share of $ 184.13 .

During fiscal 2020, the Company repurchased 117,767 shares for an average price per share of $ 184.67 .

During fiscal 2019, the Company repurchased 197,150 shares for an average price per share of $ 154.78 .

Currently, there is $ 36.5 million remaining to repurchase outstanding shares of Common Stock under this program.

On October 20, 2021, the Company’s Board of Directors approved a new share repurchase program authorizing the Company to repurchase from time to time up to $ 100.0 million of its outstanding shares of Common Stock, inclusive of the amount which remained available under the existing share repurchase program approved on January 2, 2019.

Repurchases made under the new program, if any, will continue to be made in either the open market or in privately negotiated transactions, subject to market conditions, applicable legal requirements, and other relevant factors.

The timing, manner, price and amount of any repurchases will depend on a variety of factors and may be suspended or discontinued at any time.

Accumulated Other Comprehensive Loss

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August 28, 2021

August 29, 2020

Pension benefit liabilities, net:

Actuarial losses (a)

Actuarial loss (gain) (a)

Tax effect reclass

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October 27, 2021

Quarterly Financial Data (Unaudited)

The following is a summary of the results of operations for each of the quarters within the years ended August 29, 2020 and August 31, 2019.

This quarterly financial information was prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission;

however, the Company believes that the information furnished reflects all adjustments (consisting only of normal recurring adjustments) which were, in the opinion of management, necessary for a fair statement of results in the interim periods.

This summary should be read in conjunction with these Consolidated Financial Statements and notes to Consolidated Financial Statements.

(In thousands, except per share data)

For the year ended August 29, 2020

Income before income taxes

Provision for income taxes

Income per share—basic

Class B Common Stock

Income per share—diluted

Income allocated to—basic

Class B Common Stock

Income allocated to—diluted

Weighted average number of shares outstanding—basic

Class B Common Stock

Weighted average number of shares outstanding—diluted

During the first quarter of fiscal 2020, the Company repurchased 50,600 shares for an average price per share of $ 197.11 .

During the second quarter of fiscal 2020, the Company repurchased 20,500 shares for an average price per share of $ 206.34 .

During the third quarter of fiscal 2020, the Company repurchased 46,667 shares for an average price per share of $ 161.65 .

(In thousands, except per share data)

For the year ended August 31, 2019

Income before income taxes

Provision (benefit) for income taxes

Income per share—basic

Class B Common Stock

Income per share—diluted

Income allocated to—basic

Class B Common Stock

Income allocated to—diluted

Weighted average number of shares outstanding—basic

Class B Common Stock

Weighted average number of shares outstanding—diluted

During the second quarter of fiscal 2019, the Company repurchased 45,000 shares for an average price per share of $ 139.57 .

During fiscal 2017, we recorded a pre-tax non-cash impairment charge of $ 55.8 million once it was determined that it was not probable that a CRM system that was being developed would be completed and placed into service.

During fiscal 2020, we entered into a settlement agreement with our lead contractor for the version of the CRM system with respect to which we recorded the impairment charge.

As part of the settlement agreement, we recorded a total gain of $ 21.1 million as a reduction of selling and administrative expenses, which includes our receipt of a one-time cash payment in the amount of $ 13.0 million as well as the forgiveness of amounts previously due the contractor.

We also received hardware and related maintenance service with a fair value of $ 0.8 million as part of the settlement.

This gain, net of tax, benefitted the Company’s diluted income per share by $ 0.81 in fiscal 2020.

During the third quarter of fiscal 2019, the Company repurchased 99,500 shares for an average price per share of $ 147.47 .

During the fourth quarter of fiscal 2019, the Company repurchased 52,650 shares for an average price per share of $ 181.61 .

The Company’s fiscal year ends on the last Saturday in August.

For financial reporting purposes, fiscal 2020 consisted of 52 weeks, and fiscal 2019 consisted of 53 weeks.

Each of the quarterly periods contained 13 weeks except for the fourth quarter of fiscal 2019 which contained 14 weeks.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data