Vestis Corp 10-K

Item 8. Financial Statements and Supplementary Data. INDEX TO THE FINANCIAL STATEMENTS Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm (PCAOB ID 34 ) 47 Consolidated and Combined Balance Sheets as of September 27, 2024 and September 29, 2023 50 Consolidated and Combined Statements of Income for the fiscal years ended September 27, 2024 , September 29, 2023, and September 30, 2022 51 Consolidated and Combined Statements of Comprehensive Income for the fiscal years ended September 27, 2024 , September 29, 2023, and September 30, 2022 52 Consolidated and Combined Statements of Cash Flows for the fiscal years ended September 27, 2024 , September 29, 2023, and September 30, 2022 53 Consolidated and Combined Statements of Changes in Equity for the fiscal years ended September 27, 2024 , September 29, 2023, and September 30, 2022 54 Notes to Consolidated and Combined Financial Statements 55 Note 1. Nature of Business, Basis of Presentation and Summary of Significant Accounting Policies 55 Note 2. Severance 63 Note 3. Goodwill and Other Intangible Assets 64 Note 4. Borrowings 65 Note 5 . Derivative Instruments 68 Note 6 . Revenue Recognition 69 Note 7 . Leases 69 Note 8 . Employee Pension and Profit Sharing Plans 72 Note 9 . Commitments and Contingencies 73 Note 1 0 . Business Segments 75 Note 1 1 . Income Taxes 76 Note 1 2 . Share-Based Compensation 79 Note 13. Earnings Per Share 82 Note 14. E quity 83 Note 1 5. Related Party Transactions and Parent Company Investment 84 Note 16. Accounts Receivable Securitization Facility 85 Note 1 7 . Subsequent Events 86 46 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Vestis Corporation Opinion on the Financial Statements We have audited the accompanying consolidated and combined balance sheets of Vestis Corporation and subsidiaries (the "Company") as of September 27, 2024 and September 29, 2023, respectively, the related consolidated and combined statements of income, comprehensive income, cash flows and changes in equity, for each of the three years in the period ended September 27, 2024, September 29, 2023 and September 30, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 27, 2024 and September 29, 2023, and the results of its operations and its cash flows for each of the three years in the period ended September 27, 2024, September 29, 2023 and September 30, 2022, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 27, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 22, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accounts Receivable Securitization – Refer to Note 1 and Note 16 to the financial statements Critical Audit Matter Description The Company entered into an accounts receivable securitization facility (the “A/R Facility”) to sell certain trade receivables arising from revenue transactions of the Company’s U.S. subsidiaries on a revolving basis. The A/R Facility is scheduled to terminate on August 2, 2027, unless terminated earlier pursuant to its terms. As of September 27, 2024, the total value of accounts receivable sold under the A/R Facility and derecognized from the Company’s consolidated balance sheet was $229.0 million. We identified the accounting for the A/R Facility as a critical audit matter because of the complexity involved in determining whether the receivables have been appropriately isolated from the Company and whether the Company has transferred control of the receivables such that the transfers should be accounted for as a sale of financial assets. This 47 Table of Contents required a high degree of auditor judgment and an increased extent of effort, including the need to involve subject matter experts. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to accounts receivable securitization facility included the following, among others: • We tested the design and operating effectiveness of management’s controls over the transfer of financial assets, including management’s controls over the evaluation of the accounting conclusion and the terms of the A/R Facility documents and other accompanying agreements. • We evaluated the Company’s determination of sales of financial assets by evaluating, among other factors, if the transferred receivables have been isolated from the Company and the Company has transferred control of the receivables. Specifically, we performed the following procedures: • Obtained and evaluated opinions from outside legal counsel and evaluated whether the receivables have been appropriately isolated from the Company. • Obtained the executed A/R Facility agreements and evaluated whether the Company: • Assigned its rights, titles, interests, claims, and demands to the third-party assignee • Retained any rights with respect to the payments assigned to the third-party assignee • Obtained and inspected the cash proceeds support from the transfer and compared the cash received to the selling price. /s/ Deloitte & Touche LLP Atlanta, Georgia November 22, 2024 We have served as the Company’s auditor since 2023. 48 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Vestis Corporation Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Vestis Corporation and subsidiaries (the “Company”) as of September 27, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 27, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 27, 2024, of the Company and our report dated November 22, 2024, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Atlanta, Georgia November 22, 2024 49 Table of Contents VESTIS CORPORATION CONSOLIDATED AND COMBINED BALANCE SHEETS SEPTEMBER 27, 2024 AND SEPTEMBER 29, 2023 (in thousands, except per share amounts) September 27, 2024 September 29, 2023 ASSETS Current Assets: Cash and cash equivalents $ 31,010 $ 36,051 Receivables (net of allowances: $ 19,804 ; $ 25,066 ) 177,271 392,916 Inventories, net 164,913 174,719 Rental merchandise in service, net 396,094 399,035 Other current assets 18,101 17,244 Total current assets 787,389 1,019,965 Property and Equipment, at cost: Land, buildings and improvements 590,972 585,797 Equipment 1,168,142 1,110,812 1,759,114 1,696,609 Less - Accumulated depreciation ( 1,088,256 ) ( 1,032,078 ) Total property and equipment, net 670,858 664,531 Goodwill 963,844 963,543 Other Intangible Assets, net 212,773 238,608 Operating Lease Right-of-use Assets 73,530 57,890 Other Assets 223,993 212,587 Total Assets $ 2,932,387 $ 3,157,124 LIABILITIES AND EQUITY Current Liabilities: Current maturities of long-term borrowings $ — $ 26,250 Current maturities of financing lease obligations 31,347 27,659 Current operating lease liabilities 19,886 19,935 Accounts payable 163,054 134,498 Accrued payroll and related expenses 96,768 113,771 Accrued expenses and other current liabilities 145,047 73,412 Total current liabilities 456,102 395,525 Long-Term Borrowings 1,147,733 1,462,693 Noncurrent Financing Lease Obligations 115,325 105,217 Noncurrent Operating Lease Liabilities 66,111 46,084 Deferred Income Taxes 191,465 217,647 Other Noncurrent Liabilities 52,600 52,598 Total Liabilities 2,029,336 2,279,764 Commitments and Contingencies (see Note 9) Equity: Common stock, par value $ 0.01 per share, 350,000,000 shares authorized, 131,481,967 shares issued and outstanding as of September 27, 2024 1,315 — Additional paid-in capital 928,082 — Retained earnings 2,565 — Net parent investment — 908,533 Accumulated other comprehensive loss ( 28,911 ) ( 31,173 ) Total Equity 903,051 877,360 Total Liabilities and Equity $ 2,932,387 $ 3,157,124 Th e accompanying notes are an integral part of these Consolidated and Combined Financial Statements. 50 Table of Contents VESTIS CORPORATION CONSOLIDATED AND COMBINED STATEMENTS OF INCOME FOR THE FISCAL YEARS ENDED SEPTEMBER 27, 2024, SEPTEMBER 29, 2023 AND SEPTEMBER 30, 2022 (in thousands, except per share amounts) Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 Revenue $ 2,805,820 $ 2,825,286 $ 2,687,005 Operating Expenses: Cost of services provided (exclusive of depreciation and amortization) 1,989,872 1,970,215 1,909,676 Depreciation and amortization 140,781 136,504 134,352 Selling, general and administrative expenses 517,216 500,658 450,734 Total Operating Expenses 2,647,869 2,607,377 2,494,762 Operating Income 157,951 217,909 192,243 Gain on Sale of Equity Investment, net — ( 51,831 ) — Interest Expense, net 126,563 2,109 4,548 Other (Income), net ( 642 ) ( 2,099 ) ( 2,264 ) Income Before Income Taxes 32,030 269,730 189,959 Provision for Income Taxes 11,060 56,572 48,280 Net Income $ 20,970 $ 213,158 $ 141,679 Earnings per share: Basic $ 0.16 $ 1.63 $ 1.08 Diluted $ 0.16 $ 1.63 $ 1.08 Weighted Average Shares Outstanding: Basic 131,506 130,725 130,725 Diluted 131,787 130,725 130,725 The accompanying notes are an integral part of these Consolidated and Combined Financial Statements. 51 Table of Contents VESTIS CORPORATION CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME FOR THE FISCAL YEARS ENDED SEPTEMBER 27, 2024, SEPTEMBER 29, 2023 AND SEPTEMBER 30, 2022 (in thousands) Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 Net Income $ 20,970 $ 213,158 $ 141,679 Other Comprehensive Income (Loss), net of tax: Pension plan adjustments ( 30 ) ( 655 ) 1,697 Foreign currency translation adjustments 2,292 1,162 ( 21,771 ) Other Comprehensive Income (Loss), net of tax 2,262 507 ( 20,074 ) Comprehensive Income $ 23,232 $ 213,665 $ 121,605 The accompanying notes are an integral part of these Consolidated and Combined Financial Statements. 52 Table of Contents VESTIS CORPORATION CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED SEPTEMBER 27, 2024, SEPTEMBER 29, 2023 AND SEPTEMBER 30, 2022 (in thousands) Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 Cash flows from operating activities: Net Income $ 20,970 $ 213,158 $ 141,679 Adjustments to reconcile Net Income to Net cash provided by operating activities: Depreciation and amortization 140,781 136,504 134,352 Gain on sale of equity investment, net — ( 51,831 ) — Deferred income taxes ( 19,576 ) 14,370 20,603 Share-based compensation expense 16,336 14,467 17,398 Asset write-downs 980 7,698 — Loss on disposals of property and equipment 1,042 — — Amortization of debt issuance costs 4,683 — — Loss on extinguishment of debt 3,883 — — Personal protective equipment charges — — 26,183 Changes in operating assets and liabilities: Receivables, net 215,814 ( 23,612 ) ( 53,860 ) Inventories, net 9,868 8,929 ( 631 ) Rental merchandise in service, net 3,126 ( 5,334 ) ( 42,226 ) Other current assets ( 836 ) 1,050 ( 2,586 ) Accounts payable 21,665 ( 32,888 ) 31,398 Accrued expenses 80,561 ( 7,928 ) ( 31,456 ) Changes in other noncurrent liabilities ( 16,212 ) ( 944 ) ( 2,183 ) Changes in other assets ( 11,330 ) ( 8,813 ) ( 4,140 ) Other operating activities 33 ( 7,849 ) ( 1,684 ) Net cash provided by operating activities 471,788 256,977 232,847 Cash flows from investing activities: Purchases of property and equipment and other ( 78,905 ) ( 77,870 ) ( 76,449 ) Proceeds from disposals of property and equipment 5,269 11,180 7,316 Acquisition of certain businesses, net of cash acquired — — ( 17,200 ) Proceeds from sale of equity investment — 51,869 — Other investing activities — 75 200 Net cash used in investing activities ( 73,636 ) ( 14,746 ) ( 86,133 ) Cash flows from financing activities: Proceeds from long-term borrowings 798,000 1,500,000 — Payments of long-term borrowings ( 1,137,500 ) — — Payments of financing lease obligations ( 30,608 ) ( 27,601 ) ( 28,041 ) Dividend payments ( 13,801 ) — — Debt issuance costs ( 11,134 ) ( 13,749 ) — Other financing activities ( 1,881 ) — — Net cash distributions to Parent ( 6,051 ) ( 1,688,919 ) ( 134,502 ) Net cash used in financing activities ( 402,975 ) ( 230,269 ) ( 162,543 ) Effect of foreign exchange rates on cash and cash equivalents ( 218 ) 353 ( 1,541 ) Increase (Decrease) in cash and cash equivalents ( 5,041 ) 12,315 ( 17,370 ) Cash and cash equivalents, beginning of period 36,051 23,736 41,106 Cash and cash equivalents, end of period $ 31,010 $ 36,051 $ 23,736 The accompanying notes are an integral part of these Consolidated and Combined Financial Statements. 53 Table of Contents VESTIS CORPORATION CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN EQUITY FOR THE FISCAL YEARS ENDED SEPTEMBER 27, 2024, SEPTEMBER 29, 2023 AND SEPTEMBER 30, 2022 (in thousands) Common Stock Shares Outstanding Par Value Additional Paid-In Capital Retained Earnings Net Parent Investment Accumulated Other Comprehensive Loss Total Parent’s Equity Balance, October 01, 2021 — $ — $ — $ — $ 2,343,591 $ ( 11,606 ) $ 2,331,985 Net Income — — — — 141,679 — 141,679 Net Transfers to Parent — — — — ( 117,778 ) — ( 117,778 ) Other Comprehensive Loss — — — — — ( 20,074 ) ( 20,074 ) Balance, September 30, 2022 — $ — $ — $ — $ 2,367,492 $ ( 31,680 ) $ 2,335,812 Net Income — $ — $ — $ — $ 213,158 $ — $ 213,158 Net Transfers to Parent — — — — ( 1,672,117 ) — ( 1,672,117 ) Other Comprehensive Loss — — — — — 507 507 Balance, September 29, 2023 — $ — $ — $ — $ 908,533 $ ( 31,173 ) $ 877,360 Separation-related adjustments — $ — $ — $ — $ 6,406 $ — $ 6,406 Issuance of common stock in connection with the Separation and reclassification of net parent investment (1) 131,225 1,312 913,627 — ( 914,939 ) — — Net Income — — — 20,970 — — 20,970 Dividends Declared ($ 0.035 per common share) — — — ( 18,405 ) — — ( 18,405 ) Other Comprehensive Income — — — — — 2,262 2,262 Share-based compensation expense — — 16,336 — — — 16,336 Issuance of common stock upon exercise of stock options or awards of restricted stock units 257 3 155 — — — 158 Tax payments related to shares withheld for share based compensation plans — — ( 2,036 ) — — — ( 2,036 ) Balance, September 27, 2024 131,482 $ 1,315 $ 928,082 $ 2,565 $ — $ ( 28,911 ) $ 903,051 __________________ (1) The issuance of common stock in connection with the Separation consists of 130.7 million shares of common stock distributed and 0.5 million shares contributed to an Aramark donor advised fund for charitable contributions. The accompanying notes are an integral part of these Consolidated and Combined Financial Statements. 54 Table of Contents VESTIS CORPORATION NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS NOTE 1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Vestis Corporation ("Vestis", the "Company", “we” or “us”) is a leading provider of uniforms and workplace supplies across the United States and Canada. The Company provides uniforms, mats, towels, linens, restroom supplies, first-aid supplies and safety products. The Company’s customer base participates in a wide variety of industries, including manufacturing, hospitality, retail, government, automotive, healthcare, food processing and pharmaceuticals. The Company serves customers ranging from small, family-owned operations with a single location to large corporations and national franchises with multiple locations. The Company’s customers value the uniforms and workplace supplies it delivers as its services and products can help them reduce operating costs, enhance their brand image, maintain a safe and clean workplace and focus on their core business. The Company leverages its broad footprint and its supply chain, delivery fleet and route logistics capabilities to serve customers on a recurring basis, typically weekly, and primarily through multi-year contracts. In addition, the Company offers customized uniforms through direct sales agreements, typically for large, regional or national companies. The Company manages and evaluates its business activities based on geography and, as a result, determined that its United States and Canada businesses are its operating segments. The Company’s operating segments are also its reportable segments. The United States and Canada reportable segments both provide a range of uniforms and workplace supplies programs. The Company’s uniforms business (“Uniforms”) generates revenue from the rental, servicing and direct sale of uniforms to customers, including the design, sourcing, manufacturing, customization, personalization, delivery, laundering, sanitization, repair and replacement of uniforms. The uniform options include shirts, pants, outerwear, gowns, scrubs, high visibility garments, particulate-free garments and flame-resistant garments, along with shoes and accessories. The Company’s workplace supplies business (“Workplace Supplies”) generates revenue from the rental and servicing of workplace supplies, including restroom supply services, first-aid supplies and safety products, floor mats, towels and linens. On September 30, 2023 (the "Distribution Date"), Aramark completed the previously announced spin-off of Vestis (the “Separation”). The Separation was completed through a distribution of the Company's common stock to holders of record of Aramark’s common stock as of the close of business on September 20, 2023 (the “Distribution”), which resulted in the issuance of approximately 131.2 million shares of common stock, which includes 0.5 million shares contributed to an Aramark donor advised fund for charitable contributions. Aramark stockholders of record received one share of Vestis common stock for every two shares of common stock, par value $ 0.01 , of Aramark. As a result of the Separation, the Company became an independent public company. Our common stock is listed under the symbol “VSTS” on the NYSE. In connection with the Separation, the Company entered into or adopted several agreements that provide a framework for the relationship between the Company and Aramark. See Note 15. " Related Party Transactions and Parent Company Investment " for more information on these agreements. During the fiscal year ended September 27, 2024 , certain Separation-related adjustments were recorded which included a net increase in total equity of $ 6.4 million. These adjustments primarily consisted of: (a) cash transfers paid to Aramark of $ 6.1 million to settle transactions related to the Separation, and (b) adjustments to the Company's deferred income tax liabilities totaling a $ 12.7 million net increase. Basis of Presentation The Consolidated and Combined Financial Statements (the "Financial Statements") were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The Financial Statements reflect the historical results of operations, comprehensive income and cash flows for the years ended September 27, 2024, September 29, 2023 and September 30, 2022 and the financial position as of September 27, 2024 and September 29, 2023 for the Company and are denominated in United States (“U.S.”) dollars. Prior to the Separation, the Company’s business functioned together with other Aramark businesses. The assets, liabilities, revenue and expenses of the Company prior to the Separation have been reflected as Combined Financial Statements on a historical cost basis, as included in the consolidated financial statements of Aramark, using the historical accounting policies applied by Aramark. Prior to the Separation, separate financial statements had not been prepared for the Company, and it had not operated as a standalone business from Aramark. The historical results of operations, financial 55 Table of Contents position and cash flows of the Company prior to the Separation presented in these Combined Financial Statements may not be indicative of what they would have been had the Company actually been an independent standalone public company. Transactions between the Company and Aramark for the years ended September 29, 2023 and September 30, 2022 have been included in the Combined Financial Statements and are considered related party transact ions (see Note 15. " Related Party Transactions and Parent Company Investment "). All intercompany transactions and balances within the Company have been eliminated. Transactions between the Company and Aramark have been included in these Combined Financial Statements and are considered related party transactions (see Note 15. “Related Party Transactions and Parent Company Investment”). The “Provision for Income Taxes” in the Combined Statements of Income for the years ended September 29, 2023 and September 30, 2022 has been calculated as if the Company filed a separate tax return and was operating as a standalone company. Therefore, income tax expense, cash tax payments and items of current and deferred income taxes may not be reflective of the Company’s actual tax balances prior to or subsequent to the distribution. After the Separation, Vestis became a standalone public company and the Consolidated Financial Statements were prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the SEC. These Consolidated and Combined Financial Statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented. All intercompany transactions and balances within the Company have been eliminated. Fiscal Year The Company’s fiscal year is the 52- or 53-week period which ends on the Friday nearest to September 30th. The fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022 were each 52-week periods. New Accounting Standards Updates Adopted Standards (from most to least recent date of issuance) In September 2022, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") to enhance the transparency of supplier finance programs, which may be referred to as reverse factoring, payables finance or structured payables arrangements. The guidance requires that a buyer in a supplier finance program disclose the program’s nature, activity and potential magnitude. The guidance was effective for the Company in the first quarter of fiscal 2024. The Company adopted the ASU prospectively and adoption of this guidance did not have an impact on the Consolidated Financial Statements. In October 2021, the FASB issued an ASU which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers as if it had originated the contracts. The guidance was effective for the Company in the first quarter of fiscal 2024. The Company adopted the ASU prospectively and adoption of this guidance did not have an impact on the Consolidated Financial Statements. Standards Not Yet Adopted (from most to least recent date of issuance) In November 2024, the FASB issued an ASU which requires additional disclosure about certain expenses in the notes to financial statements. The amendments are effective for the Company's annual periods beginning October 2, 2027, and interim periods beginning January 1, 2028, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures. In December 2023, the FASB issued an ASU which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning October 4, 2025, with early 56 Table of Contents adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures. In November 2023, the FASB issued an ASU which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The amendments will require public entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker and included within segment profit and loss. The amendments are effective for the Company's annual periods beginning September 28, 2024, and interim periods beginning October 4, 2025, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures. Other new accounting pronouncements recently issued or newly effective were not applicable to the Company, did not have a material impact on the Consolidated and Combined Financial Statements or are not expected to have a material impact on the Consolidated and Combined Financial Statements. Revenue Recognition The Company generates and recognizes over 94 % of its total revenue from route servicing contracts on both Uniforms, which the Company generally manufactures, and Workplace Supplies, such as mats, towels, and linens that are procured from third-party suppliers. Revenue from these contracts represent a single-performance obligation and are recognized over time as services are performed based on the nature of services provided and contractual rates (output method). The Company generates its remaining revenue primarily from the direct sale of uniforms to customers, with such revenue being recognized when the Company’s performance obligation is satisfied, typically upon the transfer of control of the promised product to the customer. Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for the services or products described above and is presented net of sales and other taxes we collect on behalf of governmental authorities. Certain customer route servicing contracts include terms and conditions that include components of variable consideration, which are typically in the form of consideration paid to a customer based on performance metrics specified within the contract. Some contracts provide for customer discounts or rebates that can be earned 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 assessing if variable consideration should be limited, the Company evaluates the likelihood of whether uncontrollable circumstances could result in a significant reversal of revenue. The Company’s performance period generally corresponds with the monthly invoice period. No significant constraints on the Company’s revenue recognition were applied during fiscal 2024, fiscal 2023 or fiscal 2022. The Company reassesses these estimates during each reporting period. The Company maintains a liability for these discounts and rebates within “Accrued expenses and other current liabilities” on the Consolidated and Combined Balance Sheets. Variable consideration can also include consideration paid to a customer at the beginning of a contract. This type of variable consideration is capitalized as an asset (in “Other Assets” on the Consolidated and Combined Balance Sheets) and is amortized over the life of the contract as a reduction to revenue in accordance with the accounting guidance for revenue recognition. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the Consolidated and Combined Financial Statements and accompanying notes. The Company utilizes key estimates in preparing the financial statements including environmental estimates, goodwill, intangibles, insurance reserves, income taxes and long-lived assets. These estimates are based on historical information, current trends and information available from other sources. Actual results could materially differ from those estimates. Fair Value of Financial Assets and Financial Liabilities Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are classified 57 Table of Contents based upon the level of judgment associated with the inputs used to measure their fair value. The hierarchical levels related to the subjectivity of the valuation inputs are defined as follows: • Level 1 —inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets • Level 2 —inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument • Level 3 —inputs to the valuation methodology are unobservable and significant to the fair value measurement Recurring Fair Value Measurements The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, financing leases and borrowings. Management believes that the carrying value of cash and cash equivalents, accounts receivable, accounts payable, financing leases and borrowings are representative of their respective fair values. All derivatives are recognized as either assets or liabilities on the balance sheet at fair value at the end of each quarter (refer to Note 5. "Derivative Instruments" for additional information). Nonrecurring Fair Value Measurements The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets, indefinite-lived intangible assets and goodwill. The Company reviews the carrying amounts of such assets at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurement of the assets are considered to be Level 3 measurements. Acquisitions The Company had no business acquisitions during fiscal 2024 and 2023. The Company completed business acquisitions with aggregate purchase price of approximately $ 17.2 million during fiscal 2022. The results of operations of these acquisitions have been included in the Company’s consolidated and combined financial results since their respective acquisition dates. These acquisitions were not significant in relation to the Company’s combined financial results and, therefore, pro forma financial information has not been presented. Comprehensive Income Comprehensive income includes all changes to equity during a period, except those resulting from investments by and distributions to stockholders and except those related to the net parent investment. Components of comprehensive income include net income, pension plan adjustments (net of tax) and changes in foreign currency translation adjustments (net of tax). 58 Table of Contents The summary of the components of comprehensive income is as follows (in thousands): Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 Pre-Tax Amount Tax Effect After-Tax Amount Pre-Tax Amount Tax Effect After-Tax Amount Pre-Tax Amount Tax Effect After-Tax Amount Net Income $ 20,970 $ 213,158 $ 141,679 Pension plan adjustments ( 39 ) 9 ( 30 ) ( 884 ) 229 ( 655 ) 2,621 ( 924 ) 1,697 Foreign currency translation adjustments 2,292 — 2,292 2,251 ( 1,089 ) 1,162 ( 22,893 ) 1,122 ( 21,771 ) Other Comprehensive Income (Loss) 2,253 9 2,262 1,367 ( 860 ) 507 ( 20,272 ) 198 ( 20,074 ) Comprehensive Income $ 23,232 $ 213,665 $ 121,605 Accumulated other comprehensive loss consists of the following (in thousands): September 27, 2024 September 29, 2023 Pension plan adjustments $ ( 5,099 ) $ ( 5,069 ) Foreign currency translation adjustments ( 23,812 ) ( 26,104 ) $ ( 28,911 ) $ ( 31,173 ) Currency Translation The Company’s Canadian subsidiary’s functional currency is the local currency of operations, and the net assets of its Canadian operations are translated into U.S. dollars using current exchange rates. The U.S. dollar results that arise from such translation are included as a component of accumulated other comprehensive loss in equity. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Receivables Receivables represents amounts due from customers and is presented net of allowance for credit losses. Judgment and estimates are used in determining the collectability of receivables and evaluating the adequacy of the allowance for credit losses. The Company estimates and reserves for its credit loss exposure based on historical experience, current general and specific industry economic conditions and reasonable and supportable forecasts that affect the collectability of the reported amount in estimating credit losses. Credit loss expense is classified within “Cost of services provided (exclusive of depreciation and amortization)” in the Consolidated and Combined Statements of Income. When an account is considered uncollectible, it is written off against the allowance for credit losses. The amounts recognized in fiscal years 2024 and 2023 relating to allowance for credit losses, which are netted against “Receivables” in the Consolidated and Combined Balance Sheets, are as follows (in thousands): Fiscal Year Ended September 27, 2024 September 29, 2023 Balance, beginning of year $ 25,066 $ 29,100 Additions: Charged to Income 33,705 20,500 Reductions: Deductions from Reserves (1) ( 38,967 ) ( 24,534 ) Balance, end of year $ 19,804 $ 25,066 59 Table of Contents __________________ (1) Amounts determined not to be collectible and charged against the reserve and translation. Transfer of Financial Assets The Company accounts for transfers of its financial assets in accordance with Accounting Standards Codification ("ASC") Topic No. 860, Transfers and Servicing. When a transfer meets all the requirements for a sale of a financial asset, the Company derecognizes the financial asset. Inventories Inventories are valued at the lower of cost (principally the first-in, first-out method) or net realizable value. The Company records valuation adjustments to its inventories if the cost of inventory on hand exceeds the amount it expects to realize from the ultimate sale or disposal of the inventory. These estimates are based on management’s judgment regarding future demand and market conditions and analysis of historical experience. As of September 27, 2024 and September 29, 2023, the Company’s reserve for inventory was approximately $ 15.7 million and $ 18.7 million, respectively. The inventory reserve is determined based on history and projected customer consumption and specific identification. During fiscal 2022, the Company decided to no longer sell certain personal protective equipment (“PPE”), which required inventory charges to reduce the carrying value of PPE to a zero net realizable value. The Company recorded $ 26.2 million in inventory charges within “Cost of services provided (exclusive of depreciation and amortization)” in the Combined Statement of Income during fiscal 2022 to reflect the net realizable value of certain PPE inventory. No charges were recorded in fiscal 2023 or 2024 related to PPE. The components of net inventories are as follows (in thousands): September 27, 2024 September 29, 2023 Raw Materials $ 35,210 $ 35,332 Work in Process 959 1,104 Finished Goods 128,744 138,284 $ 164,913 $ 174,719 Rental merchandise in service Rental merchandise in service represents personalized work apparel, linens and other rental items in service. Rental merchandise in service is valued at cost less amortization, calculated using the straight-line method. Rental merchandise in service is amortized over its useful life, which primarily range from one to four years . The amortization rates are based on the Company’s specific experience and wear tests performed by the Company. These factors are critical to determining the amount of rental merchandise in service and related Cost of services provided (exclusive of depreciation and amortization) that are presented in the Consolidated and Combined Financial Statements. Material differences may result in the amount and timing of operating income if management makes significant changes to these estimates. During the fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022, the Company record ed $ 323.9 million, $ 344.5 million and $ 313.4 million, respectively, of amortization related to rental merchandise in service within “Cost of services provided (exclusive of depreciation and amortization)” on the Consolidated and Combined Statements of Income. Other current assets “Other current assets” as presented in the Consolidated and Combined Balance Sheets is primarily comprised of prepaid insurance and prepaid taxes and licenses. 60 Table of Contents Property and Equipment and Operating Lease Right-of-use Assets Property and equipment are stated at cost and are depreciated over their estimated useful lives on a straight-line basis. When a decision has been made to dispose of property and equipment prior to the end of the previously estimated useful life, depreciation estimates are revised to reflect the use of the asset over the shortened estimated useful life. Gains and losses on dispositions are included in operating results. Maintenance and repairs are charged to current operations and replacements, and significant improvements that extend the useful life of the asset are capitalized. The estimated useful lives for the major categories of property and equipment are 10 to 40 years for buildings and improvements and 3 to 10 years for equipment. Depreciation expense during fiscal 2024, fiscal 2023 and fiscal 2022 w as $ 106.3 million, $ 103.8 million and $ 103.3 million, respectively. The Company had $ 10.2 million , $ 7.6 million, and $ 7.1 million, respectively, of capital expenditures recorded within “Accounts payable” and “Accrued expenses and other current liabilities” in the Consolidated and Combined Balance Sheets a s of September 27, 2024, September 29, 2023, and September 30, 2022. During fiscal 2024, the Company completed the sale of a property for a net selling price of $ 5.3 million. As a result, the Company recorded a loss on disposal of $ 0.2 million within the United States segment, which is included in “Selling, general and administrative expenses” in the Consolidated Statement of Income for fiscal 2024. During fiscal 2023, the Company completed the sale of a property for cash proceeds of $ 9.6 million. As a result, the Company recorded a gain on disposal of $ 6.8 million within the United States segment, which is included in “Selling, general and administrative expenses” in the Combined Statement of Income for fiscal 2023. During fiscal 2023, the Company completed a strategic review of certain administrative locations, taking into account facility capacity and current utilization, among other factors. Based on this review, the Company vacated or otherwise reduced its usage at certain of these locations, resulting in an analysis of the recoverability of the assets associated with the locations. As a result, the Company recorded an impairment charge of $ 7.7 million within its United States segment, which was included in “Selling, general and administrative expenses” in the Combined Statement of Income for fiscal 2023. The non-cash impairment charge consisted of operating lease right-of-use assets ($ 7.1 million) and other costs ($ 0.6 million). Other Assets “Other assets” as presented in the Consolidated and Combined Balance Sheets is primarily comprised of employee sales commissions, computer software cos ts, equity method investment, consid eration payable to a customer at the beginning of the contract, noncurrent pension assets, preparation costs and long-term receivables. Employee sales commissions represent commission payments made to employees related to new or retained business contracts (see Note 6. “Revenue Recognition”). Computer software costs represent capitalized costs incurred to purchase or develop software for internal use, and are amortized over the estimated useful life of the software, generally a period of three to 10 years. The Company accounts for investments in unconsolidated entities where it exercises significant influence, but does not have control, using the equity method. Under the equity method of accounting, the Company recognizes its share of the investee’s net income or loss. Equity method investments represent the 39 % ownership interest in Aramark Uniform Services Japan Corporation. The investment was sold in October 2024 (see Note 17. “Subsequent Events”). On September 22, 2023, the Company sold its 25 % interest in Sanikleen, a Japanese linen supply company for $ 51.9 million in cash resulting in a pre-tax gain on sale of this equity investment of $ 51.8 million for fiscal 2023. The pre-tax gain is included in “Gain on Sale of Equity Investment, net” on the Combined Statement of Income for fiscal 2023. Accrued Expenses and Other Current Liabilities “Accrued Expenses and Other Current Liabilities” as presented in the Consolidated and Combined Balance Sheets is primarily comprised of current deferred income, taxes, insurance, environmental reserves (see Note 9. Commitments and Contingencies) and rebates. 61 Table of Contents Other Noncurrent Liabilities “Other Noncurrent Liabilities” as presented in the Consolidated and Combined Balance Sheets is primarily comprised of environmental reserves (see Note 9. Commitments and Contingencies), asset retirement obligations (see Note 9. Commitments and Contingencies) and noncurrent deferred income. Insurance Prior to the Separation, Aramark insured portions of its risk in general liability, automobile liability, workers’ compensation liability and property liability through a wholly owned captive insurance subsidiary (the “Captive”), to enhance its risk financing strategies. The Captive was subject to regulations within its domicile of Bermuda, including regulations established by the Bermuda Monetary Authority (the “BMA”) relating to levels of liquidity and solvency as such concepts are defined by the BMA. The Captive was in compliance with these regulations as of September 29, 2023. Prior to the Separation, Aramark allocated certain costs associated to the Captive to the Company. The Company did not recognize liabilities related to claims from general liability, automobile liability and workers’ compensation liability on the Combined Balance Sheet as of September 29, 2023 as Aramark’s Captive subsidiary was the primary responsible party related to these obligations. Aramark’s Captive insurance subsidiary had estimated reserves of approximately $ 68.4 million at September 29, 2023 related to claims arising from the Company’s operations. Aramark’s reserves for retained costs associated with Aramark’s casualty program were estimated through actuarial methods, with the assistance of third-party actuaries, using loss development assumptions based on claims history. The Company entered into an independent general liability, automobile liability, workers’ compensation liability insurance policy effec tive September 29, 2023. During the fiscal year ended September 27, 2024, the Company recorded $ 11.4 million, $ 16.5 million, and $ 22.8 million of g eneral liability, automobile liability, and workers’ compensation liability expenses, respectively, within “Cost of services provided (exclusive of depreciation and amortization)” and “Selling, general and administrative expenses” on the Consolidated Statement of Income. The Company entered into an independent property insurance policy and was no longer under Aramark’s property insurance policy effective June 1, 2023. During the fiscal year ended September 27, 2024, the Company recorded $ 4.5 million of property insurance expenses within “Cost of services provided (exclusive of depreciation and amortization)” and “Selling, general and administrative expenses” on the Consolidated Statement of Income. Environmental Matters Capital expenditures for ongoing environmental remediation and compliance measures were recorded in Property and Equipment and related expenses were included in the normal operating expenses of conducting business. The Company accrued for environmental-related activities for which commitments or clean-up plans have been developed and when such costs could be reasonably estimated based on industry standards and professional judgment. Accrued amounts were primarily recorded on an undiscounted basis (see Note 9. Commitments and Contingencies). Income Taxes The Company’s operations were included in Aramark’s U.S. federal and state tax returns for taxable periods through the Company’s Separation from Aramark on September 30, 2023. With respect to such taxable periods, income taxes on the Company’s financial statements were calculated on a separate tax return basis. Beginning after the Separation, the Company is filing tax returns separate from Aramark, and its deferred taxes and effective tax rates may differ from those of the historical periods. The Company and its subsidiaries file a federal consolidated income tax return in the United States, and separate legal entities file in various state, local and foreign jurisdictions. The Company uses the asset and liability approach to determine its provision for income taxes based on its operations in each jurisdiction. Deferred tax assets and liabilities are determined by the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which the deferred tax assets or liabilities are expected to be realized or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. 62 Table of Contents The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than fifty percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company accounts for deferred income taxes related to executive compensation deductions that are limited by IRC 162(m) by first allocating available tax deductions to stock-based compensation and then cash compensation. The Company elects to treat global intangible low-taxed income (GILTI) inclusions as a current-period expense when incurred. Therefore, the Company has not recorded deferred taxes for basis differences expected to reverse in future periods. Refer to Note 11, “Income Taxes”, of these Consolidated Financial Statements for further details on income taxes. Net Parent Investment “Net parent investment” in the Combined Balance Sheet for fiscal 2023 is presented in lieu of stockholders’ equity and represents Aramark’s historic investment in the Company, the accumulated net earnings after taxes of the Company and the net effect of the transactions with the allocations from Aramark. All transactions reflected in “Net parent investment” in the accompanying Combined Balance Sheet for fiscal 2023 have been considered as financing activities for purposes of the Combined Statements of Cash Flows for fiscal 2022 and 2023. For additional information, see Basis of Presentation above and Note 15. Related Party Transactions and Parent Company Investment. Interest Expense, net “Interest Expense, net” as presented in the Consolidated and Combined Statements of Income is primarily comprised of interest expense on borrowings (see Note 4. Borrowings) and interest expense recognized on financing leases (see Note 7. Leases) . Other (Income), net “Other (Income), net ” as presented in the Consolidated and Combined Statements of Income is primarily comprised of fees incurred for the Company’s accounts receivable securitization facility (see Note 16. Accounts Receivable Securitization Facility) and the Company’s share of the financial results for its equity method investment. Impact of COVID-19 COVID-19 adversely affected global economies, disrupted global supply chains and labor force participation and created significant volatility and disruption of financial markets. COVID-19 related disruptions negatively impacted the Company’s financial and operating results beginning in the second quarter of fiscal 2020 through the first half of fiscal 2021. The Company’s financial results started to improve during the second half of fiscal 2021 and continued to improve throughout fiscal 2022 as COVID-19 restrictions were lifted and operations re-opened. The CARES Act provided for deferred payment of the employer portion of social security taxes through the end of calendar 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. Deferred social security taxes of $ 16.6 million were paid during both fiscal 2022 and fiscal 2023. NOTE 2. SEVERANCE: During fiscal 2024, the Company approved headcount reductions to streamline and improve the efficiency and effectiveness of operational and administrative functions. As a result of these actions, severance charges of $ 5.2 million were recorded within “Selling, general and administrative expenses” on the Consolidated Statement of Income for the fiscal year ended September 27, 2024. As of September 27, 2024, the Company had an accrual of approximately $ 2.7 million related to unpaid severance obligations. During fiscal 2023, the Company approved action plans to streamline and improve the efficiency and 63 Table of Contents effectiveness of operational and administrative functions. As a result of these actions, severance charges of $ 7.6 million were recorded within “Selling, general and administrative expenses” and “Cost of services provided (exclusive of depreciation and amortization)” on the Combined Statement of Income for the fiscal year ended September 29, 2023. The following table summarizes the unpaid obligations for severance and related costs as of September 27, 2024, which are included in “Accrued payroll and related expenses” on the Consolidated Balance Sheet. (dollars in thousands) September 29, 2023 Charges Payments and Other September 27, 2024 Fiscal 2024 Severance $ — $ 5,240 $ ( 2,679 ) $ 2,561 Fiscal 2023 Severance $ 3,414 $ — $ ( 3,272 ) $ 142 Total $ 3,414 $ 5,240 $ ( 5,951 ) $ 2,703 The following table summarizes the unpaid obligations for severance and related costs as of September 29, 2023, which are included in “Accrued payroll and related expenses” on the Combined Balance Sheet. (dollars in thousands) September 30, 2022 Charges Payments and Other September 29, 2023 Fiscal 2023 Severance $ — $ 7,588 $ ( 4,174 ) $ 3,414 Fiscal 2021 Severance 3,448 — ( 3,448 ) — Total $ 3,448 $ 7,588 $ ( 7,622 ) $ 3,414 NOTE 3. GOODWILL AND OTHER INTANGIBLE ASSETS: Goodwill represents the excess of the fair value of consideration paid for an acquired entity over the fair value of assets acquired and liabilities assumed in a business combination. Goodwill is not amortized and is subject to an impairment test that is conducted annually or more frequently if a change in circumstances or the occurrence of events indicates that potential impairment exists. Based on Aramark’s historical structure, goodwill for the Company was retained within one reporting unit for the fiscal years ended September 29, 2023 and September 30, 2022. For the fiscal year ended September 27, 2024, Vestis had two reporting units, United States and Canada. The annual impairment test is performed as of the end of the fiscal month of August. If results of the qualitative assessment indicate a more likely than not determination or if a qualitative assessment is not performed, a quantitative test is performed by comparing the estimated fair value using a discounted cash flow method or market method for each reporting unit with its estimated net book value. During the fourth quarter of fiscal 2024 the annual impairment test for goodwill was performed using a quantitative testing approach and no impairment was identified. During fiscal 2023, the annual impairment test for goodwill was performed by Aramark using a quantitative testing approach and no impairment was identified. The determination of fair value for the reporting unit includes assumptions, which are considered Level 3 inputs, that are subject to risk and uncertainty. The discounted cash flow calculations are dependent on several subjective factors, including the timing of future cash flows, the underlying margin projection assumptions, future growth rates and the discount rate. The market method is dependent on several factors including the determination of market multiples and future cash flows. If assumptions or estimates in the fair value calculations change or if future cash flows, margin projections or future growth rates vary from what was expected, this may impact the impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges. Changes in total goodwill during fiscal 2024 are as follows (in thousands): September 29, 2023 Acquisitions Translation September 27, 2024 United States $ 896,237 $ — $ — $ 896,237 Canada 67,306 — 301 67,607 Total $ 963,543 $ — $ 301 $ 963,844 64 Table of Contents Changes in total goodwill during fiscal 2023 are as follows (in thousands): September 30, 2022 Acquisitions Translation September 29, 2023 United States $ 896,237 $ — $ — $ 896,237 Canada 67,138 — 168 67,306 $ 963,375 $ — $ 168 $ 963,543 Other intangible assets consist of (in thousands): September 27, 2024 September 29, 2023 Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount Customer relationship assets $ 383,887 $ ( 187,699 ) $ 196,188 $ 383,869 $ ( 161,773 ) $ 222,096 Trade names 16,585 — 16,585 16,512 — 16,512 $ 400,472 $ ( 187,699 ) $ 212,773 $ 400,381 $ ( 161,773 ) $ 238,608 Customer relationship assets are being amortized principally on a straight-line basis over the expected period of benefit with a weighted average life of approximately 14 years. The Canadian Linen trade name, which is our sole trade name, is an indefinite lived intangible asset and is not amortized, but is evaluated for impairment at least annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The Company utilized the “relief-from-royalty” method, which considers the discounted estimated royalty payments that are expected to be avoided as a result of the trade name being owned. The Company’s annual trade name impairment test did not result in an impairment charge for fiscal 2024. The Company’s annual trade name impairment test was completed by Aramark for fiscal 2023 which did not result in an impairment charge. Amortization of other intangible assets for fiscal 2024, fiscal 2023 and fiscal 2022 was approximately $ 25.9 million, $ 26.0 million and $ 25.9 million, respectively. Based on the recorded balances at September 27, 2024, total estimated amortization of all acquisition-related intangible assets for fiscal years 2025 through 2029 are as follows (in thousands): 2025 $ 26,331 2026 25,925 2027 25,664 2028 24,261 2029 23,747 NOTE 4. BORROWINGS: Long-term borrowings, net, are summarized in the following table (in thousands): September 27, 2024 September 29, 2023 Senior secured term loan facility, due September 2025 $ — $ 800,000 Senior secured term loan facility, due September 2028 497,500 700,000 Senior secured term loan facility, due February 2031 665,000 — Total principal debt issued 1,162,500 1,500,000 Unamortized debt issuance costs ( 13,164 ) ( 11,057 ) Discounts ( 1,603 ) — Less - current portion — ( 26,250 ) Long-term borrowings, net of current portion $ 1,147,733 $ 1,462,693 65 Table of Contents Credit Agreement On September 29, 2023, the Company and certain of its subsidiaries entered into a credit agreement (the “Credit Agreement”). The Credit Agreement was initially comprised of an $ 800 million term loan A-1 due September 29, 2025 (“Term Loan A-1”), a $ 700 million term loan A-2 due September 29, 2028 (“Term Loan A-2”), and a revolving credit facility available for loans in United States dollars and Canadian dollars with aggregate commitments of $ 300 million and a maturity of September 29, 2028 (the “Revolving Credit Facility”). The Company used approximately $ 1,457 million of the proceeds from the senior secured term loans to transfer cash to Aramark in connection with the separation and distribution. The Company recorded approximately $ 11.1 million and $ 2.6 million of debt issuance costs associated with the term loans and the Revolving Credit Facility, respectively. The term loan debt issuance costs are reflected as a reduction to debt in the Consolidated and Combined Balance Sheets and are amortized as a component of interest expense over the term of the related debt using the effective interest method. The Revolving Credit Facility debt issuance costs are reflected within “Other Assets” in the Consolidated and Combined Balance Sheets and are amortized straight-line as a component of interest expense over the term of the facility. The Revolving Credit Facility will mature on the earliest of (i) September 29, 2028, and (ii) the date of termination of all of the commitments under the revolving credit facility or the date on which the loans under the revolving credit facility become due and payable or the commitments under the revolving credit facility are terminated. The Company's revolving credit facility includes a $ 50 million sublimit for swingline loans. The Company's revolving credit facility includes a $ 30 million sublimit for letters of credit. The revolving credit facility may be drawn by the Company as well as by certain foreign subsidiaries. Each foreign borrower is subject to a sublimit of $ 100 million with respect to borrowings under the revolving credit facility. In addition to paying interest on outstanding principal under the senior secured credit facilities, the Company is required to pay a commitment fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. The revolving credit facility is subject to a commitment fee ranging from a rate of 0.20 % to 0.30 % per annum. The actual rate within the range is based on a Consolidated Total Net Leverage Ratio, as defined in the Credit Agreement. As of September 27, 2024, there was $ 5.3 million of letters of credit outstanding leaving $ 294.7 million available for borrowing under the revolving credit facility. On February 22, 2024, the Company amended the Credit Agreement to refinance its Term Loan A-1 with an $ 800 million term loan B-1 due February 22, 2031 (“Term Loan B-1”). The Term Loan B-1 requires $ 2.0 million of principal payments each quarter until the maturity date, at which the remaining unpaid principal amount is due. The Company recorded approximately $ 11.1 million and $ 2.0 million of Term Loan B-1 debt issuance costs and original issue discount, respectively, which are reflected as a reduction to debt in the Consolidated Balance Sheet and are being amortized as a component of interest expense over the term of the related debt using the effective interest method. As a result of the repayment of Term Loan A-1 using the proceeds from Term Loan B-1, the Company also recorded a $ 3.9 million non-cash expense during fiscal 2024 for the write-off of Term Loan A-1 unamortized debt issuance costs to “Interest Expense, net” on the Consolidated Statements of Income. During fiscal 2024, the Company paid principal amounts of $ 202.5 million and $ 135.0 million on its Term Loan A-2 and Term Loan B-1. As a result of these payments, the Company has met its quarterly principal payment obligations through the maturity of both term loans. The Term Loan A-1 interest rate was, and Term Loan A-2 interest rate is, the Secured Overnight Financing Rate (“SOFR”), plus a Credit Spread Adjustment of 10 basis points and a margin from 1.50 % to 2.50 % depending on the Company’s Consolidated Total Net Leverage Ratio, as defined in the Credit Agreement. The applicable margin on these term loans was 2.25 % during fiscal 2024. The Term Loan B-1 interest rate is SOFR plus a margin from 2.0 % to 2.25 % depending on the Company’s Consolidated Total Net Leverage Ratio, as defined in the Credit Agreement. The applicable margin on the Term Loan B-1 was 2.25 % during fiscal 2024. The weighted-average interest rate for the Company’s senior secured term loans was 7.65 % for fiscal 2024. During the fiscal year ended September 27, 2024, the Company paid $ 96.8 million of interest on its outstanding principal debt. The Company did no t have interest payments during the fiscal year ended September 29, 2023. 66 Table of Contents The Company carries debt at historical cost and discloses fair value. As of September 27, 2024, the carrying amounts of the Company’s senior secured term loans approximated their fair value as the interest rates are variable and reflective of market rates. Prepayments The Credit Agreement may be prepaid at any time. The Credit Agreement requires the Company to prepay outstanding term loans, subject to certain exceptions, with: • 100 % of the net cash proceeds of all non-ordinary course asset sales or other dispositions of collateral subject to certain exceptions and customary reinvestment rights; provided, further, that such prepayment shall only be required to the extent net cash proceeds during the applicable fiscal year exceeds the greater of (a) $ 30,000,000 and (b) 7.5 % of Covenant Adjusted EBITDA; • 100 % of the net cash proceeds of all casualty events with respect to any equipment, fixed assets, or real property constituting collateral; provided, that such prepayment shall only be required to the extent proceeds related to the event exceed $ 10 million and are not reinvested within the reinvestment period; and • 100 % of the net cash proceeds of any incurrence of debt, but excluding proceeds from certain debt permitted under the Credit Agreement. In addition, the Term Loan B-1 is subject to mandatory prepayments using 50 % of the Company’s excess cash flow, with reductions to 25 % and 0% based upon achievement and maintenance of a secured net leverage ratio of 3.75 :1.00 and 3.25 :1.00, respectively. Guarantees All obligations under the Credit Agreement are unconditionally guaranteed by the Company and, subject to certain exceptions, substantially all of the Company’s existing and future wholly-owned domestic material subsidiaries. All obligations under the Credit Agreement, and the guarantees of those obligations, are secured, subject to customary exceptions, by (i) pledges of 100 % of the capital stock of the Company’s and guarantors’ direct domestic subsidiaries, (ii) pledges of 65 % of the capital stock of the Company’s and guarantors’ direct foreign subsidiaries, and (iii) a security interest in, and mortgages on, substantially all tangible assets of the Company or any of the Guarantors. Covenants The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability and the ability of its restricted subsidiaries to: incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell or dispose of assets; pay dividends, make distributions or repurchase its capital stock; engage in certain transactions with affiliates; make investments, loans or advances; create restrictions on the payment of dividends or other amounts to the Company from its restricted subsidiaries; amend material agreements governing the Company’s or guarantors’ subordinated debt; repay or repurchase any subordinated debt, except as scheduled or at maturity; make certain acquisitions; change the Company’s or its restricted subsidiaries’ fiscal year; and fundamentally change the Company’s or its restricted subsidiaries’ business. The Credit Agreement also contains certain customary affirmative covenants, such as financial and other reporting, and certain events of default. The Credit Agreement requires the Company to maintain a maximum Consolidated Total Net Leverage Ratio, defined as consolidated total indebtedness over unrestricted cash divided by Covenant Adjusted EBITDA, not to exceed 5.25 x for any fiscal quarter ending prior to March 31, 2025, and not to exceed 4.50 x for any fiscal quarter ending on or after March 31, 2025, subject to certain exceptions. Consolidated total indebtedness is defined in the Credit Agreement as total indebtedness consisting of debt for borrowed money, finance leases, disqualified and preferred stock and advances under any Receivables Facility. Covenant Adjusted EBITDA is defined in the Credit Agreement as consolidated net income increased by interest expense, taxes, depreciation and amortization expense, initial public company costs, restructuring charges, write-offs and noncash charges, non-controlling interest expense, net cost savings in connection with any acquisition, disposition, or other permitted investment under the Credit Agreement, share-based compensation expense, non-recurring or unusual gains and losses, reimbursable insurance costs, cash expenses related to earn outs, and insured losses. 67 Table of Contents The Credit Agreement establishes a minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA divided by consolidated interest expense. The minimum Interest Coverage Ratio is required to be at least 2.00 x for the term of the Credit Agreement. At September 27, 2024, the Company was in compliance with all covenants under the Credit Agreement. Debt Maturities At September 27, 2024, annual maturities on long-term borrowings maturing in the next five fiscal years and thereafter are as follows (in thousands): 2025 $ — 2026 — 2027 — 2028 497,500 2029 — Thereafter 665,000 Total $ 1,162,500 NOTE 5. DERIVATIVE INSTRUMENTS: Prior to the Separation, Aramark entered into contractual derivative arrangements to manage changes in market conditions related to exposure to fluctuating gasoline, diesel and natural gas fuel prices at the Company. These derivative arrangements transferred in-kind to the Company upon the execution of the Separation and Distribution Agreement between the Company and Aramark, which was effective upon the Separation on September 30, 2023. Derivative instruments utilized during the period include pay fixed/receive floating gasoline and diesel fuel agreements based on the Department of Energy weekly retail on-highway index, and pay fixed/receive floating natural gas fuel agreements based on the Henry Hub New York Mercantile Exchange index in order to limit the Company's exposure to price fluctuations for gasoline, diesel, and natural gas fuel mainly for the Company’s operations. The counterparties to the contractual derivative agreements are all major international financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. The Company did not enter into any new derivative arrangements for the fiscal year ended September 27, 2024. As of September 27, 2024, all derivative arrangements had reached maturity and thus, no derivative instruments were recognized as either assets or liabilities on the Consolidated Balance Sheet. The corresponding impact on earnings related to the contractual derivative arrangements have been recorded within the Consolidated Statement of Income for the fiscal year ended September 27, 2024. Additionally, prior to the Separation the impact on earnings related to the contractual derivative arrangements were allocated to the Company and recorded within the Combined Statements of Income for the fiscal years ended September 29, 2023 and September 30, 2022. Derivatives not Designated in Hedging Relationships The Company does not record its gasoline, diesel and natural gas fuel agreements as hedges for accounting purposes. As of September 27, 2024, the Company did not have fuel contracts outstanding. The impact on earnings related to the change in fair value of these contracts related to the Company was a gain of $ 0.1 million for fiscal 2024. The impact 68 Table of Contents on earnings related to the change in fair value of these unsettled contracts related to the Company was a gain of $ 1.6 million for fiscal 2023 and a loss of $ 4.6 million for fiscal 2022. The following table summarizes the location of realized and unrealized loss (gain) for the Company’s derivatives not designated as hedging instruments in the Consolidated and Combined Statements of Income (in thousands): Fiscal Year Ended Income Statement Location September 27, 2024 September 29, 2023 September 30, 2022 Gasoline, diesel and natural gas fuel agreements Cost of services provided (exclusive of depreciation and amortization) $ 2,580 $ 3,488 $ ( 3,212 ) NOTE 6. REVENUE RECOGNITION: Disaggregation of Revenue The following table presents revenue disaggregated by revenue source (in thousands): Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 United States: Uniforms $ 1,037,608 $ 1,067,825 $ 1,067,815 Workplace Supplies 1,518,314 1,507,527 1,379,212 Total United States 2,555,922 2,575,352 2,447,027 Canada: Uniforms $ 96,864 $ 100,403 $ 100,787 Workplace Supplies 153,034 149,531 139,191 Total Canada 249,898 249,934 239,978 Total Revenue $ 2,805,820 $ 2,825,286 $ 2,687,005 Contract Balances The Company defers sales commissions earned by its sales force that are considered to be incremental and recoverable costs of obtaining a contract. The deferred costs are amortized using the portfolio approach on a straight-line basis over the average period of benefit, approximately nine years , and are assessed for impairment on a periodic basis. Determination of the amortization period and the subsequent assessment for impairment of the contract cost asset requires judgment. The Company expenses sales commissions as incurred if the amortization period is one year or less. As of September 27, 2024 and September 29, 2023, the Company has $ 105.8 million and $ 104.4 million, respectively, of employee sales commissions recorded as assets within “Other Assets” on the Company’s Consolidated and Combined Balance Sheets. During the fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022, the Company recorded $ 21.1 million, $ 20.1 million and $ 19.2 million, respectively, of expense related to employee sales commissions within “Selling, general and administrative expenses” on the Consolidated and Combined Statements of Income. NOTE 7. LEASES: The Company has lease arrangements primarily related to real estate, vehicles and equipment, which generally have terms of one to 20 years. Finance leases primarily relate to vehicles. The Company assesses whether an arrangement is a lease, or contains a lease, upon inception of the related contract. A right-of-use asset and corresponding lease liability are not recorded for leases with an initial term of 12 months or less (“short-term leases”). The Company recognizes operating lease liabilities and operating lease right-of-use assets on its Consolidated and Combined Balance Sheets. Operating lease right-of-use assets represent the Company’s right to use the underlying assets for the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from 69 Table of Contents the lease. Operating lease liabilities and operating lease right-of-use assets are recognized at the lease commencement date based on the estimated present value of the lease payments over the lease term. Deferred rent, tenant improvement allowances and prepaid rent are included in the operating lease right-of-use asset balances. Lease expense is recognized on a straight-line basis over the expected lease term. The Company has lease agreements with lease and non-lease components. Non-lease components are combined with the related lease components and accounted for as lease components for all classes of underlying assets. Variable lease payments, which primarily consist of real estate taxes, common area maintenance charges, insurance costs and other operating expenses, are not included in the operating lease right-of-use asset or operating lease liability balances and are recognized in the period in which the expenses are incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain they will be exercised or not, respectively. Options to extend lease terms that are reasonably certain of exercise are recognized as part of the operating lease right-of-use asset and operating lease liability balances. The Company is required to discount its future minimum lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate. As the Company’s leases typically do not provide an implicit rate, the present value of our lease liability is determined using an incremental borrowing rate based on the information available as of the lease commencement date. The following table summarizes the location of the operating and finance leases in the Company’s Consolidated and Combined Balance Sheets (in thousands), as well as the weighted average remaining lease term and weighted average discount rate: Leases Balance Sheet Location September 27, 2024 September 29, 2023 Assets: Operating Operating Lease Right-of-use Assets $ 73,530 $ 57,890 Finance Property and Equipment, net 131,041 121,930 Total lease assets $ 204,571 $ 179,820 Liabilities: Current Operating Current operating lease liabilities $ 19,886 $ 19,935 Finance Current maturities of financing lease obligations 31,347 27,659 Noncurrent Operating Noncurrent Operating Lease Liabilities 66,111 46,084 Finance Noncurrent Financing Lease Obligations 115,325 105,217 Total lease liabilities $ 232,669 $ 198,895 Weighted average remaining lease term (in years) Operating leases 6.1 4.7 Finance leases 5.7 5.7 Weighted average discount rate Operating leases 6.1 % 4.4 % Finance leases 4.6 % 4.3 % The following table summarizes the location of lease related costs in the Consolidated and Combined Statements of Income (in thousands): 70 Table of Contents Fiscal Year Ended Lease Cost Income Statement Location September 27, 2024 September 29, 2023 September 30, 2022 Operating lease cost : Fixed lease costs Cost of services provided (exclusive of depreciation and amortization) / Selling, general and administrative expenses $ 23,359 $ 23,119 $ 25,376 Variable lease costs Cost of services provided (exclusive of depreciation and amortization) / Selling, general and administrative expenses 10,447 9,888 9,114 Short-term lease costs Cost of services provided (exclusive of depreciation and amortization) / Selling, general and administrative expenses 8,698 8,175 6,371 Finance lease cost (1): Amortization of right-of-use-assets Depreciation and amortization 31,647 30,360 29,135 Interest on lease liabilities Interest Expense, net 5,784 4,174 3,205 Net lease cost $ 79,935 $ 75,716 $ 73,201 __________________ (1) Excludes variable lease costs, which are immaterial. Supplemental cash flow information related to leases for the period reported is as follows (in thousands): Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases (1) $ 19,871 $ 24,208 $ 25,189 Operating cash flows from finance leases 5,784 4,174 3,205 Financing cash flows from finance leases 30,608 27,601 28,041 Lease assets obtained in exchange for lease obligations: Operating leases 35,997 12,640 20,416 Finance leases $ 44,916 $ 42,581 $ 28,895 __________________ (1) For fiscal 2024, excludes cash paid for variable and short-term lease costs of $ 10.4 million and $ 8.7 million, respectively, that are not included within the measurement of lease liabilities. For fiscal 2023, excludes cash paid for variable and short-term lease costs of $ 9.9 million and $ 8.2 million, respectively, that are not included within the measurement of lease liabilities. For fiscal 2022, excludes cash paid for variable and short-term lease costs of $ 9.1 million and $ 6.4 million, respectively, that are not included within the measurement of lease liabilities. Additionally, for fiscal 2024, includes $ 4.5 million of cash received for reimbursements of tenant improvement allowances. 71 Table of Contents Future minimum lease payments under non-cancelable leases as of September 27, 2024 are as follows (in thousands): Operating leases Finance leases Total 2025 $ 23,755 $ 37,246 $ 61,001 2026 19,774 32,814 52,588 2027 16,210 28,298 44,508 2028 12,492 23,756 36,248 2029 8,128 19,065 27,193 Thereafter 27,702 26,407 54,109 Total future minimum lease payments $ 108,061 $ 167,586 $ 275,647 Less: Interest ( 22,064 ) ( 20,914 ) ( 42,978 ) Present value of lease liabilities $ 85,997 $ 146,672 $ 232,669 NOTE 8. EMPLOYEE PENSION AND PROFIT SHARING PLANS: Defined Contribution Retirement Plans In the United States and Canada, the Company maintains qualified contributory defined contribution retirement plans for all Company employees meeting certain eligibility requirements, with Company contributions to the plans based on earnings performance or salary level. The total expense of the above plans for Company employees for fiscal 2024, fiscal 2023 and fiscal 2022 was $ 9.0 million, $ 9.1 million and $ 8.7 million, respectively, which were recorded in “Cost of services provided (exclusive of depreciation and amortization)” and “Selling, general and administrative expenses” on the Consolidated and Combined Statements of Income. Multiemployer Defined Benefit Pension Plans The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements (“CBAs”) that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following respects: 1. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. 2. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. 3. If the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The Company’s participation in these plans for fiscal 2024 is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employee Identification Number (EIN) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available in 2024 and 2023 is for the plans’ two most recent fiscal year-ends. The zone status is based on information that the Company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the critical and declining zone are generally less than 65% funded and projected to become insolvent in the next 15 or 20 years depending on the ratio of active to inactive participants, plans in the critical zone are generally less than 65% funded, and plans in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The contributions columns represent the recurring, required contributions made by the Company, which are typically based upon the number of employees participating within the plan. The last column lists the expiration date(s) of the CBA(s) to which the plans are subject. There have been no significant changes that affect the comparability of fiscal 2024, fiscal 2023 and fiscal 2022 contributions. The 72 Table of Contents contributions by the Company were recorded in “Cost of services provided (exclusive of depreciation and amortization)” and “Selling, general and administrative expenses” on the Consolidated and Combined Statements of Income. Pension Protection Act Zone Status Contributions by the Company (in thousands) Pension Fund EIN/Pension Plan Number 2024 2023 FIP/RP Status Pending/ Implemented 2024 2023 2022 Surcharge Imposed Range of Expiration Dates of CBAs National Retirement Fund 13-6130178/ 001 Critical Critical Implemented $ 3,219 $ 2,994 $ 2,400 No 10/30/2022 - 4/7/2028 Central States SE and SW Areas Pension Plan 36-6044243/ 001 Critical Critical Implemented 4,440 4,213 3,971 No 7/19/2024 - 9/22/2028 Retail, Wholesale and Department Store International Union and Industry Pension Fund (1) 63-0708442/ 001 Critical and Declining Critical and Declining Implemented 404 413 408 No 4/18/2025 - 5/22/2026 Local No. 731, I.B. of T. Pension Fund 36-6513567/ 001 Green Green N/A 1,166 1,129 997 No 5/1/2026 Other funds 9,406 9,009 8,369 Total contributions $ 18,635 $ 17,758 $ 16,145 __________________ (1) Over 60 % of the Company’s participants in this fund are covered by a single CBA that expires on 5/22/2026. The Company provided more than 5% of the total contributions for the following plans and plan years: Pension Funds Contributions to the plan exceeded more than 5% of total contributions (as of the plan’s year-end) National Retirement Fund 12/31/2023, 12/31/2022, and 12/31/2021 Retail, Wholesale and Department Store International Union and Industry Pension Fund 12/31/2022 NOTE 9. COMMITMENTS AND CONTINGENCIES: The Company has capital and other purchase commitments of approximately $ 5.8 million at September 27, 2024, primarily in connection with commitments for the purchase of raw materials from vendors. From time to time, the Company and its subsidiaries are a party to various legal actions, proceedings and investigations involving claims incidental to the conduct of their business or otherwise related to the Company, including actions by customers, employees, government entities and third parties, including under federal, state, international, national, provincial and local employment laws, wage and hour laws, discrimination laws, immigration laws, human health and safety laws, import and export controls and customs laws, environmental laws, false claims or whistleblower statutes, tax codes, antitrust and competition laws, customer protection statutes, procurement regulations, intellectual property laws, supply chain laws, the Foreign Corrupt Practices Act and other anti-corruption laws, lobbying laws, motor carrier safety laws, data privacy and security laws, or alleging negligence and/or breaches of contractual and other obligations. Based on information currently available, advice of counsel, available insurance coverage, established reserves and other resources, except as set forth below with respect to the shareholder class action lawsuits and shareholder derivative action lawsuit, the Company does not believe that any such actions are likely to be, individually or in the aggregate, material to its business, financial condition, results of operations or cash flows. However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to the Company’s business, financial condition, results of operations or cash flows. The Company is involved with environmental investigation and remediation activities at certain sites that it currently or formerly owned or operated or to which it sent waste for disposal (including sites which were previously owned and/or operated by businesses acquired by the Company or sites to which such businesses sent waste for disposal). The Company initially provides for estimated costs of environmental-related activities relating to its past operations and third-party sites for which commitments or clean-up plans have been developed and when such costs can be reasonably estimated based on industry standards and professional judgment. These estimated costs, which are mostly undiscounted, 73 Table of Contents are determined based on currently available facts regarding each site. If the reasonably estimable costs can only be identified as a range and no specific amount within that range can be determined more likely, the minimum of the range is used. The Company continuously assesses its potential liability for investigation and remediation-related activities and adjusts its environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated. As of September 27, 2024 and September 29, 2023, the Company has $ 6.6 million and $ 6.8 million, respectively, recorded as liabilities within “ Accrued expenses and other current liabilities ” and $ 19.0 million and $ 17.3 million, respectively, recorded as liabilities within “ Other Noncurrent Liabilities ” on the Company’s Consolidated and Combined Balance Sheets. The Company records the fair value of a liability for an asset retirement obligation both as an asset and a liability when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. The Company has identified certain conditional asset retirement obligations at various current and closed facilities. These obligations relate primarily to asbestos abatement, underground storage tank closures and restoration of leased properties to the original condition. Using investigative, remediation and disposal methods that are currently available to the Company, the estimated costs of these obligations were accrued. As of September 27, 2024 and September 29, 2023, the Company has $ 11.8 million and $ 12.3 million, respectively, recorded as liabilities within “Other Noncurrent Liabilities” on the Company’s Consolidated and Combined Balance Sheets. On May 13, 2022, Cake Love Co. (“Cake Love”) commenced a putative class action lawsuit against AmeriPride Services, LLC (“AmeriPride”), a subsidiary of Vestis, in the United States District Court for the District of Minnesota. The lawsuit was subsequently updated to add an additional named plaintiff, Q-Mark Manufacturing, Inc. (“Q-Mark” and, together with Cake Love, the “Plaintiffs”). Plaintiffs allege that the defendants increased certain pricing charged to members of the purported class without the proper notice required by service agreements between AmeriPride and members of the purported class and that AmeriPride breached the duty of good faith and fair dealing. Plaintiffs seek damages on behalf of the purported class representing the amount of the allegedly improperly noticed price increases along with attorneys’ fees, interest and costs. In the third quarter of fiscal 2024, the parties reached a settlement in principle, subject to court approval. The settlement includes, among other terms, a monetary component of $ 3.1 million. The full amount of the proposed settlement has been provided for in the Consolidated Financial Statements. With respect to the below matters, the Company cannot predict the outcome of these legal matters, nor can it predict whether any outcome may be materially adverse to its business, financial condition, results of operations or cash flows. The Company intends to vigorously defend these matters. On May 17, 2024, a purported Vestis shareholder commenced a putative class action lawsuit against Vestis and certain of its officers, in the United States District Court for the Northern District of Georgia, captioned Plumbers, Pipefitters and Apprentices Local No. 112 Pension Fund v. Vestis Corporation, et al., Case No. 1: 24-cv-02175-SDG. The lawsuit is purportedly brought on behalf of purchasers of Vestis’ common stock between October 2, 2023 and May 1, 2024, inclusive. The complaint alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, based on allegedly false or misleading statements generally related to the Company’s business and operations, pricing practices, and financial results and outlook. The lawsuit seeks unspecified damages and other relief. On September 23, 2024, the Court appointed co-lead plaintiffs. On October 30, 2024, the Court entered an amended scheduling order. On June 4, 2024, a purported Vestis shareholder commenced a putative class action lawsuit against Vestis, in the Court of Chancery of the State of Delaware, captioned O’Neill v. Vestis Corp., Case No. 2024-0600-JTL . The lawsuit is purportedly brought on behalf of Vestis shareholders. The complaint alleges a single claim for declaratory judgment, seeking to invalidate and void Section II.5(d) of Vestis’ Amended and Restated Bylaws, effective September 29, 2023. On October 7, 2024, the Court granted a stipulation to consolidate multiple related actions involving similar company defendants, including the Vestis action, solely for purposes of adjudicating an omnibus motion to dismiss the complaints in each of those actions. On October 11, 2024, Vestis and the other consolidated defendants filed an omnibus motion to dismiss. On July 10, 2024, a purported Vestis shareholder commenced a derivative action against Vestis’ directors and certain of its officers, in the United States District Court for the Northern District of Georgia, captioned Hollin v. Scott, et al., Case No. 1: 24-cv-03059-SDG. The complaint seeks unspecified damages on behalf of Vestis and certain other relief, such as certain reforms to corporate governance and internal procedures. The complaint (in which Vestis is named as a nominal defendant) generally alleges, among other things, breaches of fiduciary duties in connection with the oversight of Vestis’ public statements and internal controls, and that Vestis was damaged as a result of the breaches of fiduciary duties. The complaint also alleges, among other things, violations of Section 10(b) of the Securities Exchange Act of 1934, aiding and abetting breach of fiduciary duty, unjust enrichment, and waste of corporate assets. 74 Table of Contents NOTE 10. BUSINESS SEGMENTS: The Company manages and evaluates its business activities based on geography and, as a result, determined that its United States and Canada businesses are its operating segments. The United States and Canada operating segments both provide a full range of uniform programs, restroom supply services and first-aid and safety products, as well as ancillary items such as floor mats, towels and linens. The Company’s operating segments are also its reportable segments. Corporate includes administrative expenses not specifically allocated to an individual segment. The Company evaluates the performance of each operating segment based on several factors of which the primary financial measure is operating income. The accounting policies of the operating segments are the same as those described in Note 1 "Nature of Business, Basis of Presentation and Summary of Significant Accounting Policies". Financial information by segment is as follows (in thousands): Fiscal Year Ended Revenue September 27, 2024 September 29, 2023 September 30, 2022 United States $ 2,555,922 $ 2,575,352 $ 2,447,027 Canada 249,898 249,934 239,978 $ 2,805,820 $ 2,825,286 $ 2,687,005 Fiscal Year Ended Operating Income (Loss) September 27, 2024 September 29, 2023 September 30, 2022 United States $ 264,709 $ 303,762 $ 242,971 Canada 8,162 13,707 18,008 Total Segment Operating Income 272,871 317,469 260,979 Corporate ( 114,920 ) ( 99,560 ) ( 68,736 ) Total Operating Income $ 157,951 $ 217,909 $ 192,243 Fiscal Year Ended Reconciliation to Income Before Income Taxes September 27, 2024 September 29, 2023 September 30, 2022 Total Operating Income $ 157,951 $ 217,909 $ 192,243 Gain on Sale of Equity Investment, net — ( 51,831 ) — Interest Expense, net 126,563 2,109 4,548 Other (Income) Expense, net ( 642 ) ( 2,099 ) ( 2,264 ) Income Before Income Taxes $ 32,030 $ 269,730 $ 189,959 Fiscal Year Ended Depreciation and Amortization September 27, 2024 September 29, 2023 September 30, 2022 United States $ 129,201 $ 125,167 $ 122,347 Canada 11,331 10,819 11,484 Corporate 249 518 521 $ 140,781 $ 136,504 $ 134,352 Fiscal Year Ended Capital Expenditures September 27, 2024 September 29, 2023 September 30, 2022 United States $ 75,112 $ 72,353 $ 72,197 Canada 3,793 5,517 4,252 $ 78,905 $ 77,870 $ 76,449 75 Table of Contents Property and Equipment, net September 27, 2024 September 29, 2023 United States $ 580,060 $ 578,997 Canada 68,138 72,907 Corporate 22,660 12,627 $ 670,858 $ 664,531 Total Assets September 27, 2024 September 29, 2023 United States $ 2,629,457 $ 2,863,616 Canada 268,800 266,804 Corporate 34,130 26,704 $ 2,932,387 $ 3,157,124 NOTE 11. INCOME TAXES: The components of Income Before Income Taxes by source of income are as follows (in thousands): Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 United States $ 24,683 $ 254,027 $ 172,948 Non-United States 7,347 15,703 17,011 $ 32,030 $ 269,730 $ 189,959 The Provision for Income Taxes consists of (in thousands): Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 Current: Federal $ 22,949 $ 29,704 $ 19,663 State and local 3,283 10,126 6,958 Foreign 4,404 2,372 1,056 30,636 42,202 27,677 Deferred: Federal ( 14,899 ) 10,350 13,070 State and local ( 3,019 ) 2,860 3,322 Foreign ( 1,658 ) 1,160 4,211 ( 19,576 ) 14,370 20,603 $ 11,060 $ 56,572 $ 48,280 76 Table of Contents The Provision for Income Taxes varies from the amount determined by applying the United States Federal statutory rate to Income Before Income Taxes as a result of the following (all percentages are as a percentage of Income Before Income Taxes): Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 United States statutory income tax rate 21.0 % 21.0 % 21.0 % Increase (decrease) in taxes, resulting from: State income taxes, net of Federal tax benefit 5.0 3.8 4.2 Foreign taxes 2.6 ( 0.1 ) 0.9 Separation related adjustments ( 2.9 ) — — Permanent book/tax differences 3.8 0.3 — Nontaxable gain on foreign subsidiary disposition — ( 4.0 ) — Uncertain tax positions 0.7 0.5 0.1 Deferred tax on foreign investments 4.3 — — Share-based compensation 3.5 — — Tax credits & other ( 3.5 ) ( 0.5 ) ( 0.8 ) Effective income tax rate 34.5 % 21.0 % 25.4 % As of September 27, 2024 and September 29, 2023, the components of Deferred Income Taxes are as follows (in thousands): September 27, 2024 September 29, 2023 Deferred tax assets: Accruals and allowances 22,777 16,939 Employee compensation 18,485 14,401 Operating lease right-of-use liability 19,924 16,086 Business interest expense carryforward 16,795 — Research and development expenses 5,622 2,881 NOL/credit carryforward and other 7,290 3,704 Deferred tax asset 90,893 54,011 Valuation allowances $ ( 4,662 ) $ — Deferred tax asset (net of valuation allowance) 86,231 54,011 Deferred tax liabilities: Property and equipment 59,461 62,295 Other intangible assets including goodwill 83,247 77,603 Rental merchandise in service 78,542 80,579 Operating lease asset 16,746 14,025 Capitalized contract costs 24,541 24,506 Internally developed software 7,846 8,399 Other $ 5,752 $ 4,251 Deferred tax liability 276,135 271,658 Net deferred tax liability $ 189,904 $ 217,647 Deferred tax assets of $ 1.6 million and $ 0 million as of September 27, 2024 and September 29, 2023, respectively, are included in "Other Assets" on the Consolidated and Combined Balance Sheets. Deferred tax liabilities of $ 191.5 million and $ 217.6 million as of September 27, 2024 and September 29, 2023, respectively, are included in "Deferred Income Taxes" on the Consolidated and Combined Balance Sheets. In connection with the Separation, the 77 Table of Contents Company's net deferred tax liabilities decreased by $ 8.5 million, primarily related to shared-based compensation, inventoriable costs and tax attributes that were not part of the Company while consolidated with Aramark. As of each reporting date, the Company considers existing evidence, both positive and negative, that could impact the need for valuation allowances against deferred tax assets. As of September 27, 2024, the Company has $ 4.7 million of United States foreign tax credit carryforwards from periods prior to the Separation. However, the Company maintains a full valuation allowance against these credit carryforwards. The Company assessed the remaining deferred tax assets and believes it is more-likely-than-not that they are realizable. As of September 27, 2024, the Company had $ 2 million of tax-effected state net operating loss carryforwards. The earliest expiration of the state net operating loss carryforwards is fiscal 2029 and the Company believes all carryforwards will be utilized prior to expiration. A reconciliation of the beginning and ending amount of valuation allowances follows (in thousands): September 27, 2024 September 29, 2023 September 30, 2022 Balance, beginning of year $ — $ — $ — Separation related adjustments 4,662 — — Balance, end of year $ 4,662 $ — $ — Under the Tax Matters Agreement, the Company is responsible for income taxes on prior period returns filed on a separate company basis in state, local, and foreign jurisdictions. Prior to the Separation, the Company was included on Aramark’s United States federal and various state consolidated and combined tax returns that remain the responsibility of Aramark. Adjustments to Aramark’s consolidated and combined federal and state tax returns could affect the tax attributes allocated to the Company under the Tax Matters Agreement. While it is often difficult to predict the timing or resolution of a particular tax matter, the Company does not anticipate any adjustments resulting from United States federal, state or foreign tax audits that would result in a material change to the financial condition or results of operations. Currently, none of the Company’s income tax returns are under examination by a taxing authority. With few exceptions, the Company is no longer subject to foreign or state and local tax examinations by tax authorities for fiscal years before 2020. Undistributed earnings and profits ("E&P") of our foreign subsidiaries amounted to $ 21.7 million as of September 27, 2024. Currently, $ 21.7 million of the undistributed E&P of our foreign subsidiaries is considered to be indefinitely reinvested and, accordingly, no deferred income taxes have been provided thereon. Upon distribution of those earnings to the U.S. in the form of dividends or otherwise, the Company could be subject to U.S. state and local taxes and withholding taxes payable in various jurisdictions, which may be partially offset by a U.S. foreign tax credit. The unrecorded withholding tax on undistributed E&P is not significant to the Consolidated and Combined Financial Statements. The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate, was approximately $ 0.4 million, $ 4.4 million, and $ 3.0 million as of September 27, 2024, September 29, 2023 and September 30, 2022, respectively. In connection with the Separation, our unrecognized benefits with respect to our uncertain tax positions decreased by $ 4.2 million as these remained the obligation of Aramark under the Tax Matters Agreement. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits follows (in thousands): September 27, 2024 September 29, 2023 September 30, 2022 Balance, beginning of year $ 4,392 $ 2,963 $ 2,854 Additions based on tax positions taken in the current year 195 554 109 Additions for tax positions taken in prior years — 875 — Separation related adjustments ( 4,175 ) — — Balance, end of year $ 412 $ 4,392 $ 2,963 78 Table of Contents The Company has $ 0.1 million, $ 1.1 million and $ 0.2 million accrued for interest and penalties as of September 27, 2024, September 29, 2023 and September 30, 2022, respectively, in the Consolidated and Combined Balance Sheets. Interest and penalties related to unrecognized tax benefits are recorded in "Provision for Income Taxes" on the Consolidated and Combined Statements of Income. It is reasonably possible that the amount of unrecognized benefits with respect to certain of our unrecognized tax positions will change within the next 12 months. At this time, the Company does not anticipate the amount of gross unrecognized tax positions to decrease within the next 12 months. During the fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022 , the Company paid cash for inco me taxes, net of refunds received, of $ 19.1 million, $ 0.2 million, and $ 3.5 million, respectively. NOTE 12. SHARE-BASED COMPENSATION: On September 30, 2023, Aramark completed the previously announced spin-off of Vestis through a distribution of the Company's common stock to holders of record of Aramark’s common stock as of the close of business on September 20, 2023, which resulted in previous Aramark equity awards being converted to Vestis equity awards. Additionally, the Company adopted the Vestis Corporation 2023 Long-Term Incentive Plan (“LTIP”) effective as of September 30, 2023. The Compensation and Human Resources Committee of the Board of Directors approves grants under the LTIP. Under the LTIP, we are authorized to issue up to 15.0 million shares for future Vestis equity awards and issued approximately 1.7 million shares related to the conversion of Aramark equity awards outstanding as of September 30, 2023 into Vestis equity awards upon the Separation from Aramark. Prior to the Separation, the Company had no share-based compensation plans. Certain employees of the Company historically participated in Aramark’s Stock Incentive Plan (“Aramark Stock Plan”) prior to the Separation. All awards granted under Aramark Stock Plan were approved by Aramark’s Compensation Committee of the Board of Directors or another committee authorized by Aramark’s Board of Directors. The following disclosure for the fiscal years ended September 29, 2023 and September 30, 2022 represents share-based compensation attributable to the Company based on the awards and terms previously granted to Company employees under Aramark’s share-based payment plans and is representative of only those employees who are dedicated to the Company. Share-based compensation expense allocated to the Company for Aramark corporate employees who were not dedicated to the Company are included as a component of General Corporate Expenses. The allocation of share-based compensation expense for Aramark corporate employees was $ 3.9 million and $ 4.2 million, respectively in fiscal 2023 and 2022. The following table summarizes the share-based compensation expense (reversal) and related information for Time-Based Options (“TBOs”), Time-Based Restricted Stock Units (“RSUs”), Performance Stock Units (“PSUs”), Deferred Stock Units (“DSUs”) and Employee Stock Purchase Plan (“ESPP”) classified as “Selling, general and administrative expenses” on the Consolidated and Combined Statements of Income (in thousands). Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 TBOs (1) $ 3,960 $ 1,125 $ 1,064 RSUs (2) 6,654 8,013 8,992 PSUs (3) 4,264 866 451 DSUs (4) 1,458 — — ESPP (5) — 597 2,609 $ 16,336 $ 10,601 $ 13,116 Income tax benefit related to share-based compensation $ 3,180 $ 2,568 $ 2,729 __________________ (1) Share-based compensation expense for TBOs increased during fiscal 2024 compared to fiscal 2023 due to an increase in annual grants issued in fiscal 2024 compared to fiscal 2023. (2) Share-based compensation expense for RSUs decreased during fiscal 2024 compared to fiscal 2023 due to a decrease in annual grants in fiscal 2024 compared to prior years. (3) Share-based compensation expense for PSUs increased during fiscal 2024 compared to fiscal 2023 due to an increase in annual grants issued in fiscal 2024 compared to fiscal 2023. (4) Share-based compensation expense related to DSUs increased during fiscal 2024 compared to fiscal 2023 due to the issuance of new DSU grants in fiscal 2024. No DSUs were granted in fiscal 2023 or fiscal 2022. (5) Share-based compensation expense related to the ESPP decreased during fiscal 2024 compared to fiscal 2023 as the Company does not have an ESPP. 79 Table of Contents No compensation expense was capitalized. The Company records forfeitures as they occur. The below table summarizes the unrecognized compensation expense as of September 27, 2024 related to non-vested awards and the weighted-average period they are expected to be recognized: Unrecognized Compensation Expense (in thousands) Weighted-Average Period (Years) TBOs $ 7,290 2.1 RSUs 8,896 2.0 PSUs 7,472 2.0 Total $ 23,658 Stock Options Time-Based Options The Company granted TBOs to the Company's executives and directors on October 2, 2023. Additionally, the Company’s annual TBO grants for fiscal 2024 were awarded in December 2023. Aramark’s annual TBO grants for fiscal 2023 were awarded in November 2022, while Aramark’s annual TBO grants for fiscal 2022 were awarded in November 2021. The fiscal 2024 and 2022 TBO grants vest solely based upon continued employment over a three-year time period. The fiscal 2023 TBO grants vest solely based upon continued employment over a four-year time period. All TBOs remain exercisable for 10 years from the date of grant. The fair value of the TBOs granted was estimated using the Black-Scholes option pricing model. For fiscal 2024 TBO grants, the expected volatility was derived from a peer group’s historical volatility as Vestis did not have sufficient historical volatility based on the expected term of the underlying options. For fiscal 2023 and 2022 TBO grants, the expected volatility is based on the historic volatility of Aramark’s stock price over the expected term of the stock options. For fiscal 2024 TBO grants, the expected dividend yield was 0.0% for the October 2, 2023 grants as the Company had not declared a dividend prior to the grant date, and was 0.8 % for the December 6, 2023 grants based on the dividend announced by the Company on November 29, 2023. The expected life represents the period of time that options granted are expected to be outstanding and is calculated using the simplified method, as permitted under SEC rules and regulations, due to the method providing a reasonable estimate in comparison to actual experience. The simplified method uses the midpoint between an option’s vesting date and contractual term. The risk-free rate is based on the United States Treasury security with terms equal to the expected life of the option as of the grant date. Compensation expense for TBOs is recognized on a straight-line basis over the vesting period during which employees perform related services. The unvested TBOs are subject to forfeiture if employment is terminated other than due to death, disability or retirement, and the TBOs are nontransferable while subject to forfeiture. Cash received from TBOs exercised for the fiscal year ended September 27, 2024 was $ 0.1 million. The table below presents the weighted average assumptions and related valuations for TBOs. Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 Expected volatility 32.3 % - 33.5 % 42 % 41 % Expected dividend yield 0.0 % - 0.8 % 1.00 % - 1.19 % 1.18 % - 1.29 % Expected life (in years) 6.0 - 6.5 6.25 6.00 Risk-free interest rate 4.1 % - 4.7 % 3.65 % - 4.21 % 1.35 % - 2.96 % Weighted-average grant-date fair value $ 6.5 $ 16.9 $ 13.4 80 Table of Contents A summary of TBO activity is presented below: Options Shares (000s) Weighted-Average Exercise Price Aggregate Intrinsic Value ($000s) Weighted-Average Remaining Term (Years) Outstanding at October 2, 2023 (1) 523 $ 18.59 Granted 1,768 $ 19.42 Exercised ( 10 ) $ 13.88 Forfeited and expired ( 353 ) $ 19.57 Outstanding at September 27, 2024 1,928 $ 19.20 $ 44 8.4 Exercisable at September 27, 2024 273 $ 18.24 $ 44 4.8 Expected to vest at September 27, 2024 1,655 $ 19.35 $ — 9.0 __________________ (1) On October 2, 2023 our common stock began regular-way trading on the New York Stock Exchange (“NYSE”). The shares outstanding as of October 2, 2023 pertain to Aramark equity awards issued by Aramark in prior periods to employees of the Company that were converted to Vestis equity awards as part of the Separation. Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 Total intrinsic value exercised (in thousands) $ 63 $ 2,040 $ 3,054 Total fair value that vested (in thousands) 774 1,106 1,681 Time-Based Restricted Stock Units The Company granted RSUs to the Company's executives and directors on October 2, 2023. Additionally, the Company’s annual RSU grants for fiscal 2024 were awarded in December 2023. Aramark’s annual RSU grants for fiscal 2023 were awarded in November 2022, while Aramark’s annual RSU grants for fiscal 2022 were awarded in November 2021. For RSU grants awarded during fiscal 2024 and fiscal 2022, the RSU agreement provides that 33 % of each grant will vest and be settled in shares on each of the first three anniversaries of the date of grant, subject to the participant’s continued employment through each such anniversary. For RSU grants awarded in fiscal 2023, the RSU agreement provides that 25 % of each grant will vest and be settled in shares on each of the first four anniversaries of the grant date, subject to the participant’s continued employment through each such anniversary. The grant-date fair value of RSUs granted in fiscal 2024 is based on the fair value of the Company’s common stock. The grant-date fair value of RSUs granted in fiscal 2023 and 2022 is based on the fair value of Aramark’s common stock. Participants holding RSUs will receive the benefit of any dividends paid on shares in the form of additional RSUs. The unvested RSUs are subject to forfeiture if employment is terminated other than due to death, disability or retirement, and the RSUs are nontransferable while subject to forfeiture. Restricted Stock Units Units (000s) Weighted Average Grant-Date Fair Value Outstanding at October 2, 2023 (1) 850 $ 18.90 Granted 492 $ 17.71 Vested ( 369 ) $ 18.81 Forfeited ( 135 ) $ 19.08 Outstanding at September 27, 2024 838 $ 18.22 __________________ (1) On October 2, 2023 our common stock began regular-way trading on the New York Stock Exchange (“NYSE”). The shares outstanding as of October 2, 2023 pertain to Aramark equity awards issued by Aramark in prior periods to employees of the Company that were converted to Vestis equity awards as part of the Separation. 81 Table of Contents Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 Total fair value that vested (in thousands) $ 6,950 $ 9,396 $ 7,084 Performance Stock Units Under the LTIP, Vestis is authorized to grant PSUs to its employees. A participant is eligible to become vested in a number of PSUs equal to a percentage, higher or lower, of the target number of PSUs granted based on the level of Vestis’ achievement of the performance condition. During fiscal 2024, Vestis granted PSUs on October 2, 2023 subject to the level of achievement of adjusted EBITDA margin percentage and revenue growth (measured as compound annual growth rate) over three years with no additional market conditions. Additionally, on October 2, 2023 and December 6, 2023 Vestis granted PSUs subject to the level of achievement of cumulative adjusted EBITDA, cumulative adjusted free cash flow conversion rate and a total shareholder return modifier for the cumulative performance period of three years and the participant’s continued employment with Vestis. Vestis is accounting for the October 2, 2023 grants that do not include a market condition as performance-based awards, with grant date fair value based on the fair value of Vestis' common stock. Vestis is accounting for the October 2, 2023 and December 6, 2023 grants that include a market condition as performance-based awards, with a market condition, valued utilizing the Monte Carlo Simulation pricing model, which calculates multiple potential outcomes for an award and establishes fair value based on the most likely outcome. The unvested PSUs are subject to forfeiture if employment is terminated other than due to death, disability or retirement, and the PSUs are nontransferable while subject to forfeiture. Performance Stock Units Units (000s) Weighted Average Grant-Date Fair Value Outstanding at October 2, 2023 (1) 177 $ 21.87 Granted 663 $ 17.86 Vested — $ — Forfeited ( 142 ) $ 18.63 Outstanding at September 27, 2024 698 $ 18.76 __________________ (1) On October 2, 2023 our common stock began regular-way trading on the New York Stock Exchange (“NYSE”). The shares outstanding as of October 2, 2023 pertain to Aramark equity awards issued by Aramark in prior periods to employees of the Company that were converted to Vestis equity awards as part of the Separation. Deferred Stock Units DSUs are issued only to non-employee members of the Board of Directors and represent the right to receive shares of the Company's common stock in the future. Each DSU will be converted to one share of the Company's common stock on the first day of the seventh month after which such director ceases to serve as a member of the Board of Directors. The grant-date fair value of DSUs is based on the fair value of the Company's common stock. On October 2, 2023 the Company granted 65,850 DSUs which vested immediately and 19,208 DSUs which vested January 31, 2024. In addition, directors may elect to defer their cash retainer payable in the next calendar year into a fixed income fund which will be paid in cash no less than three years after the cash retainer is deferred or payable upon the first day of the seven th month after which such director ceases to serve as a member of the Board of Directors. NOTE 13. EARNINGS PER SHARE: Basic earnings per share is computed using the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of stock awards. On September 30, 2023, the Company separated from Aramark. As referenced in Note 1. "Nature of Business, Basis of Presentation and Summary of Significant Accounting Policies", the Separation resulted in the initial issuance of approximately 131.2 million shares of Vestis common stock. For purposes of computing basic and diluted earnings per common share for the fiscal years ended September 29, 2023 and September 30, 2022, the number of Vestis common shares issued upon completion of the Separation were used to reflect the outstanding shares. 82 Table of Contents The following table sets forth the computation of basic and diluted earnings per share attributable to the Company's stockholders (in thousands, except per share data): Fiscal Year Ended September 27, 2024 September 29, 2023 September 30, 2022 Earnings: Net Income $ 20,970 $ 213,158 $ 141,679 Shares: Basic weighted-average shares outstanding 131,506 130,725 130,725 Effect of dilutive securities 281 — — Diluted weighted-average shares outstanding 131,787 130,725 130,725 Basic Earnings Per Share $ 0.16 $ 1.63 $ 1.08 Diluted Earnings Per Share $ 0.16 $ 1.63 $ 1.08 Antidilutive securities (1) 2,337 — — __________________ (1) Diluted earnings per share excludes certain shares issuable under share-based compensation plans because the effect would have been antidilutive . NOTE 14. EQUITY: Accumulated Other Comprehensive Loss The changes in each component of accumulated other comprehensive loss, net of tax, for the fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022 were as follows (in thousands): Fiscal Year Ended September 29, 2024 Foreign Currency Translation Pension-related Total Accumulated Other Comprehensive Loss Balance as of September 29, 2023 $ ( 26,104 ) $ ( 5,069 ) $ ( 31,173 ) Other comprehensive income (loss) 2,292 ( 30 ) 2,262 Balance as of September 27, 2024 $ ( 23,812 ) $ ( 5,099 ) $ ( 28,911 ) Fiscal Year Ended September 29, 2023 Foreign Currency Translation Pension-related Total Accumulated Other Comprehensive Loss Balance as of September 30, 2022 $ ( 27,266 ) $ ( 4,414 ) $ ( 31,680 ) Other comprehensive income (loss) 1,162 ( 655 ) 507 Balance as of September 29, 2023 $ ( 26,104 ) $ ( 5,069 ) $ ( 31,173 ) 83 Table of Contents Fiscal Year Ended September 30, 2022 Foreign Currency Translation Pension-related Total Accumulated Other Comprehensive Loss Balance as of October 01, 2021 $ ( 5,495 ) $ ( 6,111 ) $ ( 11,606 ) Other comprehensive loss before reclassification ( 21,771 ) ( 1,311 ) ( 23,082 ) Amounts reclassified from accumulated other comprehensive loss — 3,008 3,008 Net current period other comprehensive (loss) income ( 21,771 ) 1,697 ( 20,074 ) Balance as of September 30, 2022 $ ( 27,266 ) $ ( 4,414 ) $ ( 31,680 ) For the fiscal year ended September 30, 2022 $ 3.0 million was reclassified from Accumulated other comprehensive loss” in the Combined Balance Sheet and into “Interest expense, net” within the Combined Statement of Income for the wind-up of one of the Company’s defined benefit pension plans. Dividends The Company declared and paid a quarterly cash dividend of $ 0.035 per common share to its shareholders of record for the first, second, and third quarters of fiscal 2024 of $ 4.6 million each quarter. On August 19, 2024 , the Company announced that its Board of Directors declared a quarterly cash dividend of $ 0.035 per common share payable on October 3, 2024 to shareholders of record at the close of business on September 13, 2024. The dividend payable of $ 4.6 million was recorded within "Accrued expenses and other current liabilities" on the Consolidated Balance Sheet as of September 27, 2024. The amount and timing of any future dividend payment is subject to the approval of the Company's Board of Directors. The Company’s Board of Directors declared a quarterly cash dividend of $ 0.035 per common share payable on January 6, 2025 to shareholders of record at the close of business on December 13, 2024. NOTE 15. RELATED PARTY TRANSACTIONS AND PARENT COMPANY INVESTMENT Prior to Separation Corporate Allocations The Company’s Combined Financial Statements for the fiscal years ended September 29, 2023 and September 30, 2022 include general corporate expenses of Aramark, which were not historically allocated to the Company for certain support functions that are provided on a centralized basis by Aramark and are not recorded at the Company level, such as expenses related to finance, supply chain, human resources, information technology, share-based compensation, insurance and legal, among others (collectively, “General Corporate Expenses”). For purposes of these Combined Financial Statements, General Corporate Expenses have been allocated to the Company. General Corporate Expenses are included in the Combined Statements of Income in “Selling, general and administrative expenses” with the impact related to Aramark’s gasoline, diesel and natural gas derivative agreements included in “Cost of services provided”. These expenses have been allocated to the Company on the basis of direct usage where identifiable, with the remainder allocated on a pro rata basis of revenues, headcount or other drivers. Management believes the assumptions underlying the Combined Financial Statements, including the assumptions regarding allocating General Corporate Expenses from Aramark, are reasonable. Nevertheless, the Combined Financial Statements may not include all of the actual expenses that would have been incurred and may not reflect the Company’s combined results of operations, financial position and cash flows had it been a standalone public company during the periods presented. Actual costs that would have been incurred if the Company had been a standalone public company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. During the years ended September 29, 2023 and September 30, 2022, General Corporate Expenses allocated to the Company were $ 24.4 million and $ 37.5 million, respectively. 84 Table of Contents Transactions with the Parent In the ordinary course of business, the Company provided uniforms to certain food and support services contracts of Aramark in the United States and Canada, the terms of which were at fair market value. During the years ended September 29, 2023 and September 30, 2022, these related party revenues were $ 54.6 million and $ 47.6 million, respectively, with related costs of $ 49.7 million and $ 43.3 million, respectively. Amounts receivable from Aramark for such revenues as of September 29, 2023 were $ 1.2 million. Parent Company Investment All significant intercompany transactions between the Company and Aramark have been included in the Combined Financial Statements for the fiscal years ended September 29, 2023 and September 30, 2022. The total net effect of these intercompany transactions is reflected in the Combined Statements of Cash Flows as a financing activity and in the Combined Balance Sheets as “Net parent investment.” After Separation On September 30, 2023, the Separation was completed through the Distribution of the Company’s common stock to Aramark shareholders who held shares of Aramark common stock as of the close of business on September 20, 2023, the record date for the Distribution, which resulted in the issuance of approximately 131.2 million shares of common stock. As a result of the Distribution, Aramark shareholders received one share of the Company’s common stock for every two shares of common stock, par value $ 0.01 , of Aramark. On October 2, 2023, the Company began trading as an independent, publicly traded company under the stock symbol “VSTS” on the NYSE. In connection with the Separation, the Company entered into or adopted several agreements that provide a framework for the relationship between the Company and Aramark, including, but not limited to the following: Separation and Distribution Agreement - governs the rights and obligations of the parties regarding the distribution following the completion of the separation, including the transfer of assets and assumption of liabilities, and establishes certain rights and obligations between the Company and Aramark following the distribution, including procedures with respect to claims subject to indemnification and related matters. Transition Services Agreement - governs services between the Company and Aramark and their respective affiliates to provide each other on an interim, transitional basis, various services, including, but not limited to, administrative, information technology and cybersecurity support services and certain finance, treasury, tax and governmental function services. The services commenced on the distribution date and terminate no later than 24 months following the distribution date. As of September 27, 2024, the services under the Transition Services Agreement were completed. Tax Matters Agreement - governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. In addition, the Company is restricted from taking certain actions that could prevent the distribution and certain related transactions from being tax-free for U.S. federal income tax purposes, including specific restrictions on its ability to pursue or enter into acquisition, merger, sale and redemption transactions with respect to the Company’s stock. Employee Matters Agreement - governs the allocation of liabilities and responsibilities relating to employment matters, employee compensation and benefits plans and programs and other related matters. For the fiscal year ended September 27, 2024 , the Company paid $ 10.7 million, respectively, to Aramark under the various agreements described above. As of September 27, 2024, current amounts due from and to Aramark were not material . NOTE 16. ACCOUNTS RECEIVABLE SECURITIZATION FACILITY: On August 2, 2024, Vestis Services, LLC (“Vestis Services”) and certain other subsidiaries (together with Vestis Services, the “Originators”) entered into a three-year $ 250 million accounts receivable securitization facility (the “A/R Facility”). Under the A/R Facility, the Originators transfer accounts receivable and certain related assets (collectively, the “Receivables”) to VS Financing, LLC, a bankruptcy remote special purpose entity (“SPE”) formed as a wholly-owned subsidiary of Vestis Services, who in turn, may sell Receivables to one or more financial institutions party to the facility 85 Table of Contents (“Purchasers”). Transfers of the Receivables from the SPE to the Purchasers are accounted for as a sale of financial assets, and those accounts receivable are derecognized from the consolidated financial statements. Other than collection and administrative responsibilities, Originators have no continuing involvement in the transferred Receivables. The Receivables, once sold to the SPE, are no longer available to satisfy creditors of any Originator in the event of its bankruptcy. These sales are priced at the face value of the relevant accounts receivable less a fair market value discount. The A/R Facility is structured on a revolving basis under which cash collections from Receivables are used to fund additional purchases of Receivables. The future outstanding balance of Receivables that will be sold is expected to vary based on the level of originations and other factors. The Purchasers benefit from the SPE’s guarantee of repayment on Receivables transferred as well as its pledge of additional Receivables as collateral. The Company has agreed to guarantee the performance of the Originators’ respective obligations under the A/R Facility. Neither the Company (except for the SPE referenced above) nor the Originators guarantees the collectability of the Receivables under the A/R Facility. The Company controls and therefore consolidates the SPE in its consolidated financial statements. The A/R Facility is scheduled to terminate on August 2, 2027 , unless terminated earlier pursuant to its terms. As of September 27, 2024, the total value of accounts receivable sold from SPE to the Purchaser under the A/R Facility and derecognized from the Company's Consolidated Balance Sheet was $ 229.0 million , Additionally, during the year ended September 27, 2024, the Company transferred accounts receivable of $ 585.5 million to the SPE and the Company collected $ 198.7 million of accounts receivable transferre d to the SPE under the A/R Facility. The Company continuously transfers receivables to the SPE and the SPE transfers ownership and control of certain receivables that meet certain qualifying conditions which are sold to the Purchasers in exchange for cash. Unsold accounts receivable of $ 157.8 million were pledged by the SPE as collateral to the Purchasers as of September 27, 2024. The Company incurred fees for the A/R Facility of $ 1.7 million for the year ended September 27, 2024, which were reflected within “Other (Income), net ” in the Consolidated Statement of Income. The fees are due to the Purchaser and relate to the monthly utilization of the A/R Facility. Additionally, the Company incurred approximately $ 1.4 million of costs in connection with the A/R Facility which are reco rded within “Other Assets” in the Consolidated Balance Sheet and are amortized straight-line to “ Other (Income), net ” over the term of the related A/R Facility. Cash activity related to the facility is reflected in “Net cash provided by operating activities” in the Consolidated Statement of Cash Flows. NOTE 17. SUBSEQUENT EVENTS: On October 4, 2024, the Company sold its equity stake in Aramark Uniform Services Japan Corporation for approximately $ 36.8 million. The Company will use the net proceeds from the transaction towards debt repayment. 86 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . None.