10q10k10q10k.net

What changed in UNIFIRST CORP's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of UNIFIRST CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+257 added−261 removedSource: 10-K (2023-10-26) vs 10-K (2022-10-26)

Top changes in UNIFIRST CORP's 2023 10-K

257 paragraphs added · 261 removed · 199 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

31 edited+0 added−3 removed35 unchanged
Biggest changeWe measure the speed and accuracy of our customer service efforts on a weekly basis and, through our “Customers for Life” program, we continuously survey, record and report satisfaction levels as a means of evaluating current performance and highlighting areas for improvement. 2 COMPETITION The uniform rental and sales industry is highly competitive.
Biggest changeWe measure the speed and accuracy of our customer service efforts weekly and continuously survey, record and report satisfaction levels to evaluate current performance and highlight areas for improvement. 2 COMPETITION The uniform rental and sales industry is highly competitive. The principal methods of competition in the industry are the quality of products, the quality of service and pricing.
Our principal services include providing customers with uniforms and other non-garment items, picking up soiled uniforms or other items on a periodic basis (usually weekly), and delivering, at the same time, cleaned and processed items. We offer uniforms in a wide variety of styles, colors, sizes and fabrics and with personalized emblems selected by the customer.
Our principal services include providing customers with uniforms and other non-garment items, picking up soiled uniforms or other items on a periodic basis (usually weekly), and delivering, at the same time, cleaned and processed items. We offer uniforms in a wide variety of styles, colors, sizes and fabrics, often with personalized emblems selected by the customer.
Among our largest customers of our conventional uniform rental business are divisions, units, regional operations or franchised agencies of major, nationally recognized organizations. With respect to our Specialty Garments segment, typical customers include government agencies, research and development laboratories, high technology companies, cleanroom operators, and utilities operating nuclear reactors.
Among the largest customers of our conventional uniform rental business are divisions, units, regional operations or franchised agencies of major, nationally recognized organizations. With respect to our Specialty Garments segment, typical customers include government agencies, research and development laboratories, high technology companies, cleanroom operators, and utilities operating nuclear reactors.
Because we design and manufacture a majority of our own uniforms and protective clothes, we can produce custom garment programs for our larger customers, offer a diverse range of such designs within our standard line of garments and better control the quality, price and speed at which we produce such garments.
Because we design and manufacture a majority of our own uniforms and protective clothes, we can produce custom garment programs for our larger customers, offer a diverse range of such designs within our standard line of garments and better control the quality, price and speed at which we service such garments.
Our commitment to service excellence is reflected throughout our organization. Our route sales representatives are the first line of continuing customer contact, who are supported by local customer service representatives, local service management staff and local operations management leaders, all of whom are focused on addressing the ongoing needs of customers, constantly delivering high-value service and pursuing total customer satisfaction.
Our commitment to service excellence is reflected throughout our organization. Our route sales representatives are the first line of continuing customer contact. They are supported by local customer service representatives, local service management staff, and local operations management leaders, all of whom are focused on addressing the ongoing needs of customers, constantly delivering high-value service and pursuing total customer satisfaction.
Marketing contact is made through print advertising, direct mail, publicity, trade shows, catalogs, telemarketing, multiple web sites and direct field sales representation.
Marketing contact is made through print advertising, direct mail, digital advertising, publicity, trade shows, catalogs, telemarketing, multiple web sites and direct field sales representation.
To date, we have experienced limited difficulty in obtaining any of our raw materials or supplies although at certain times, we have sourced raw materials or supplies from alternative sources or experienced costs increases for such raw materials and supplies. Currently, we also manufacture approximately 98% of the mats we place in service at our plant in Cave City, Arkansas.
To date, we have experienced limited difficulty in obtaining any of our raw materials or supplies although at certain times, we have sourced raw materials or supplies from alternative sources or experienced costs increases for such raw materials and supplies. Currently, we also manufacture approximately 99% of the mats we place in service at our plant in Cave City, Arkansas.
We believe our centralized services, specialized equipment and economies of scale generally allow us to be more cost effective in providing garment and related services than customers would be themselves, particularly those customers with high employee turnover rates.
We believe our centralized services, specialized equipment and economies of scale generally allow us to be more cost effective in providing garment and related services than customers could be themselves, particularly those customers with high employee turnover rates.
These fluctuations have been due to a number of factors, including: general economic conditions in our markets; the timing of acquisitions and of commencing start-up operations and related costs; our effectiveness in integrating acquired businesses and start-up operations; the timing of nuclear plant outages; capital expenditures; seasonal rental and purchasing patterns of our customers; and price changes in response to competitive factors.
These fluctuations have been due to a number of factors, including: general economic conditions in our markets; the timing of acquisitions and of commencing start-up operations and related costs; our effectiveness in integrating acquired businesses and start-up operations; the timing of nuclear plant outages; volatility in raw material and labor costs; capital expenditures; seasonal rental and purchasing patterns of our customers; and price changes in response to competitive factors.
DiFillippo is an Executive Vice President, Operations and has had primary responsibility for overseeing the operations of certain regions in the United States and Canada since 2002. From 2000 through 2002, Mr. DiFillippo served as Vice President, Central Rental Group and, prior to 2000, he served as a Regional General Manager. David M. Katz joined our Company in 2009. Mr.
DiFillippo is an Executive Vice President, Operations and has had primary responsibility for overseeing the operations of certain regions in the U.S. and Canada since 2002. From 2000 through 2002, Mr. DiFillippo served as Vice President, Central Rental Group and, prior to 2000, he served as a Regional General Manager. David M. Katz joined our Company in 2009. Mr.
Refer also to the risk factors set forth in this Annual Report on Form 10-K for additional information regarding environmental matters. 4 Our nuclear garment decontamination facilities in the United States are licensed by the Nuclear Regulatory Commission, or in certain cases, by the applicable state agency, and are subject to regulation by federal, state and local authorities.
Refer also to the risk factors set forth in this Annual Report on Form 10-K for additional information regarding environmental matters. 4 Our nuclear garment decontamination facilities in the U.S. are licensed by the Nuclear Regulatory Commission, or in certain cases, by the applicable state agency, and are subject to regulation by federal, state and local authorities.
Ross is an Executive Vice President, Operations and has had primary responsibility for overseeing specified regions in the United States since 2016. From 2002 to 2016, Mr. Ross served as Regional Vice President of the Company. Prior to 2002, Mr. Ross held several sales and operations management positions at the Company.
Ross is an Executive Vice President, Operations and has had primary responsibility for overseeing specified regions in the U.S. since 2016. From 2002 to 2016, Mr. Ross served as Regional Vice President of the Company. Prior to 2002, Mr. Ross held several sales and operations management positions at the Company.
ITEM 1. B USINESS GENERAL UniFirst Corporation, a corporation organized under the laws of the Commonwealth of Massachusetts in 1950, together with its subsidiaries, hereunder referred to as “we”, “our”, the “Company”, or “UniFirst”, is one of the largest providers of workplace uniforms and protective work wear clothing in the United States.
ITEM 1. B USINESS GENERAL UniFirst Corporation, a corporation organized under the laws of the Commonwealth of Massachusetts in 1950, together with its subsidiaries, hereunder referred to as “we”, “our”, the “Company”, or “UniFirst”, is one of the leading providers of workplace uniforms and protective work wear clothing in the United States (“U.S.”).
Our uniform program is intended not only to help our customers foster greater company identity, but to enhance their corporate image and improve employee safety, productivity and morale.
Our uniform program is intended not only to help our customers foster a company identity, but also to enhance their corporate image and improve employee safety, productivity and morale.
Croatti is an Executive Vice President, Operations and has had primary responsibility for overseeing specified regions in the United States and the Company’s overall service operations since 2015.
Croatti is an Executive Vice President, Operations and has had primary responsibility for overseeing specified regions in the U.S. and the Company’s overall service operations since 2015.
Our centralized services, specialized equipment and economies of scale generally allow us to be more cost effective in providing garment services than customers could be themselves, particularly those customers with high employee turnover rates. During the fiscal year ended August 27, 2022 (“fiscal 2022”), we manufactured approximately 61% of the garments we placed in service.
Our centralized services, specialized equipment and economies of scale generally allow us to be more cost effective in providing garment services than customers could be themselves, particularly those customers with high employee turnover rates. During the fiscal year ended August 26, 2023 (“fiscal 2023”), we manufactured approximately 60% of the garments we placed in service.
As a result, we strive to recruit, develop and retain talented team partners. We provide training to our team partners along with opportunities to advance. For example, our leadership development program provides leadership education, operational knowledge and hands-on business experience within the industrial laundry and facilities services industry and is designed to develop our future managers.
We provide training to our team partners along with opportunities to advance. For example, our leadership development program provides leadership education, operational knowledge and hands-on business experience within the industrial laundry and facilities services industry and is designed to develop our future managers.
In addition to our traditional rental competitors, we may increasingly compete in the future with businesses that focus on selling uniforms and other related items. MANUFACTURING AND SOURCING We manufactured approximately 61% of all garments we placed in service during fiscal 2022.
In addition to our traditional rental competitors, we may increasingly compete in the future with businesses that focus on selling uniforms, facilities services products and other related items. MANUFACTURING AND SOURCING We manufactured approximately 60% of all garments we placed in service during fiscal 2023.
We currently service over 300,000 customer locations in the United States, Canada and Europe from 260 customer service, distribution and manufacturing facilities. MARKETING, SALES, AND CUSTOMER SERVICE We market our products and services to a diverse customer base and to prospects that range across virtually all industry segments.
We currently service over 300,000 customer locations in the U.S., Canada and Europe from more than 270 customer service, distribution and manufacturing facilities. MARKETING, SALES, AND CUSTOMER SERVICE We market our products and services to a diverse customer base and to prospects that range across virtually all industry segments.
We employ specialist executive-level salespeople in our National Account Organization—some who specialize in rental programs and some who specialize in direct sale programs—to target the very largest national companies with known uniform and/or facility services program needs. We believe that effective customer service is the most important element in developing and maintaining our market position.
We employ specialist executive-level salespeople in our National Accounts organization—with specialists in rental programs and in direct sale programs—to target the very largest national companies with broad uniform and/or facility services program needs. We believe that effective customer service is the most crucial element in developing and maintaining our market position.
He has had primary responsibility for overseeing the financial functions of our Company, as well as our information systems department, since January 2018. Mr. O’Connor previously served as our Corporate Controller from 2009 to 2016.
O’Connor is an Executive Vice President and our Chief Financial Officer. He has had primary responsibility for overseeing the financial functions of our Company, as well as our information systems department, since January 2018. Mr. O’Connor previously served as our Corporate Controller from 2009 to 2016.
These garments were primarily work pants and shirts manufactured at three of our plants located in San Luis Potosi, Mexico, one plant located in Managua, Nicaragua, as well as at subcontracted manufacturers that we utilize to supplement our manufacturing capacity in periods of high demand.
These garments were primarily work pants and shirts manufactured at three of our plants located in San Luis Potosi, Mexico, one plant located in Managua, Nicaragua, as well as at subcontracted manufacturers that we utilize within our sourcing strategy to balance demand and optimize costs.
These were primarily work pants and shirts manufactured at three of our plants located in San Luis Potosi, Mexico, one plant located in Managua, Nicaragua, as well as at subcontract manufacturers that we utilize to supplement our manufacturing capacity in periods of high demand.
These were primarily work pants and shirts manufactured at three of our plants located in San Luis Potosi, Mexico, one plant located in Managua, Nicaragua, as well as at subcontract manufacturers that we utilize within our sourcing strategy to balance demand and optimize costs.
The principal methods of competition in the industry are the quality of products, the quality of service and price. Our principal competitors include Cintas Corporation, Alsco and Aramark’s uniform services business. The remainder of the market is divided among several hundred smaller businesses, mostly serving a single or a limited number of geographic service areas.
Our principal competitors include Cintas Corporation, Alsco and Vestis Corporation (formerly Aramark Uniform Services). The remainder of the market is divided among several hundred smaller businesses, mostly serving a single or a limited number of geographic service areas.
Ross 61 Executive Vice President, Operations The principal occupation and positions for the past five years of our executive officers named above are as follows: Steven S. Sintros joined our Company in 2004. Mr. Sintros is our President and Chief Executive Officer and a Director. He has had overall responsibility for management of our Company since July 2017.
Croatti 54 Executive Vice President, Operations William M. Ross 62 Executive Vice President, Operations The principal occupation and positions for the past five years of our executive officers named above are as follows: Steven S. Sintros joined our Company in 2004. Mr. Sintros is our President and Chief Executive Officer and a Director.
We also provide representatives with detailed on-line profiles of high opportunity markets to educate them to the typical issues, needs and concerns of those markets. This helps establish credibility and aids their ability to deliver value-based solutions.
We also provide representatives with detailed on-line profiles of high opportunity markets to educate them on the typical issues, needs and concerns of those markets. This helps establish credibility and aids their ability to deliver value-based solutions. We employ a large team of trained professional sales representatives to market our services to potential customers and develop new accounts.
HUMAN CAPITAL As of August 27, 2022, we employed approximately 14,000 persons, and less than 1% of our United States employees are represented by a union pursuant to a collective bargaining agreement. We consider our employee relations to be good. Our success depends on our employee team partners.
HUMAN CAPITAL As of August 26, 2023, we employed approximately 16,000 persons, and less than 1% of our U.S. employees are represented by a union pursuant to a collective bargaining agreement. We consider our employee relations to be good. Our success depends on our employee team partners. As a result, we strive to recruit, develop and retain talented team partners.
For example, in select geographic markets we employ teams of dedicated facility services sales representatives who focus exclusively on developing business for our floor care, restroom and related service programs.
While most of our sales representatives present a full range of service solutions, we also have dedicated representatives for select products and services as well as for specific markets. For example, in certain geographic markets we employ teams of dedicated facility services sales representatives who focus exclusively on developing business for our floor care, restroom and related service programs.
We also seek to promote a family culture and a culture of diversity and inclusion. We believe that promoting diversity and inclusion in our workforce is critical to our success and to the service of our customers. In addition, we focus on the safety and well-being of our team partners.
We also seek to promote a family culture and believe that our workforce is critical to our success and to the service of our customers. In addition, we focus on the safety and well-being of our team partners. We provide safety training and personal protective equipment. We also provide our team partners with competitive healthcare, wellness and other benefits.
He previously served as our Chief Financial Officer from January 2009 until January 2018. Mr. Sintros served as a Finance Manager in 2004 and Corporate Controller from 2005 until January 2009. 3 Shane O’Connor joined our Company in 2005. Mr. O’Connor is an Executive Vice President and our Chief Financial Officer.
He has had overall responsibility for management of our Company since July 2017. He previously served as our Chief Financial Officer from January 2009 until January 2018. Mr. Sintros served as a Finance Manager in 2004 and Corporate Controller from 2005 until January 2009. 3 Shane O’Connor joined our Company in 2005. Mr.
Sintros 49 President and Chief Executive Officer Shane O’Connor 48 Executive Vice President and Chief Financial Officer David A. DiFillippo 65 Executive Vice President, Operations David M. Katz 59 Executive Vice President, Sales and Marketing Michael A. Croatti 53 Executive Vice President, Operations William M.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS Our executive officers are as follows: Name Age Position Steven S. Sintros 50 President and Chief Executive Officer Shane O’Connor 49 Executive Vice President and Chief Financial Officer David A. DiFillippo 66 Executive Vice President, Operations David M. Katz 60 Executive Vice President, Sales and Marketing Michael A.
Removed
We employ a large team of trained professional sales representatives whose sole function is to market our services to potential customers and develop new accounts.
Removed
While most of our sales representatives are capable of presenting a full range of service solutions, some are dedicated to developing business for a limited range of products and services or have a specific market focus.
Removed
We provide safety training and personal protective equipment, which has been particularly important during the COVID-19 pandemic. We also provide our team partners with competitive healthcare, wellness and other benefits. INFORMATION ABOUT OUR EXECUTIVE OFFICERS Our executive officers are as follows: NAME AGE POSITION Steven S.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

66 edited+14 added−9 removed96 unchanged
Biggest changeSuch factors include, but are not limited to, uncertainties caused by an economic recession or other adverse economic conditions, including, without limitation, as a result of continued high inflation rates or further increases in inflation or interest rates or extraordinary events or circumstances such as geopolitical conflicts like the conflict between Russia and Ukraine or the COVID-19 pandemic, and their impact on our customers’ businesses and workforce levels, disruptions of our business and operations, including limitations on, or closures of, our facilities, or the business and operations of our customers or suppliers in connection with extraordinary events or circumstances such as the COVID-19 pandemic, uncertainties regarding our ability to consummate and successfully integrate acquired businesses, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, any adverse outcome of pending or future contingencies or claims, our ability to compete successfully without any significant degradation in our margin rates, seasonal and quarterly fluctuations in business levels, our ability to preserve positive labor relationships and avoid becoming the target of corporate labor unionization campaigns that could disrupt our business, the effect of currency fluctuations on our results of operations and financial condition, our dependence on third parties to supply us with raw materials, which such supply could be severely disrupted as a result of extraordinary events or circumstances such as the COVID-19 pandemic or the conflict between Russia and Ukraine, any loss of key management or other personnel, increased costs as a result of any changes in federal, state, international or other laws, rules and regulations or governmental interpretation of such laws, rules and regulations, uncertainties regarding, or adverse impacts from continued high price levels of natural gas, electricity, fuel and labor or increases in such costs, the negative effect on our business from sharply depressed oil and natural gas prices, including, without limitation, as a result of extraordinary events or circumstances such as the COVID-19 pandemic, the continuing increase in domestic healthcare costs, increased workers’ compensation claim costs, increased healthcare claim costs, including as a result of extraordinary events or circumstances such as the COVID-19 pandemic, our ability to retain and grow our customer base, demand and prices for our products and services, fluctuations in our Specialty Garments business, political or other instability, supply chain disruption or infection among our employees in Mexico and Nicaragua where our principal garment manufacturing plants are located, including, without limitation, as a result of extraordinary events or circumstances such as the COVID-19 pandemic, our ability to properly and efficiently design, construct, implement and operate a new customer relationship management (“CRM”) computer system and an enterprise resource planning (“ERP”) system , interruptions or failures of our information technology systems, including as a result of cyber-attacks, additional professional and internal costs necessary for compliance with any changes in or additional SEC, New York Stock Exchange (“NYSE”) and accounting or other rules, including, without limitation, recent rules proposed by the SEC regarding climate-related and cybersecurity-related disclosures, strikes and unemployment levels, our efforts to evaluate and potentially reduce internal costs, economic and other developments associated with the war on terrorism and its impact on the economy, the impact of foreign trade policies and tariffs or other impositions on imported goods on our business, results of operations and financial condition, general economic conditions, including an economic recession, our ability to successfully implement our business strategies and processes, including our capital allocation strategies, our ability to successfully remediate the material weakness in our internal control over financial reporting disclosed in this Annual Report on Form 10-K in an appropriate and timely matter or at all, and the other factors described under “Item 1A.
Biggest changeSuch factors include, but are not limited to, uncertainties caused by an economic recession or other adverse economic conditions, including, without limitation, as a result of continued high inflation rates or further increases in inflation or interest rates or extraordinary events or circumstances such as geopolitical conflicts like the conflict between Russia and Ukraine, disruption in the Middle East or the COVID-19 pandemic, and their impact on our customers’ businesses and workforce levels, disruptions of our business and operations, including limitations on, or closures of, our facilities, or the business and operations of our customers or suppliers in connection with extraordinary events or circumstances such as the COVID-19 pandemic, uncertainties regarding our ability to consummate acquisitions and successfully integrate acquired businesses, including Clean Uniform (“Clean”), and the performance of such businesses, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, any adverse outcome of pending or future contingencies or claims, our ability to compete successfully without any significant degradation in our margin rates, seasonal and quarterly fluctuations in business levels, our ability to preserve positive labor relationships and avoid becoming the target of corporate labor unionization campaigns that could disrupt our business, the effect of currency fluctuations on our results of operations and financial condition, our dependence on third parties to supply us with raw materials, which such supply could be severely disrupted as a result of extraordinary events or circumstances such as the conflict between Russia and Ukraine, any loss of key management or other personnel, increased costs as a result of any changes in federal, state, international or other laws, rules and regulations or governmental interpretation of such laws, rules and regulations, uncertainties regarding, or adverse impacts from continued high price levels of natural gas, electricity, fuel and labor or increases in such costs, the negative effect on our business from sharply depressed oil and natural gas prices, the continuing increase in domestic healthcare costs, increased workers’ compensation claim costs, increased healthcare claim costs, our ability to retain and grow our customer base, demand and prices for our products and services, fluctuations in our Specialty Garments business, political or other instability, supply chain disruption or infection among our employees in Mexico and Nicaragua where our principal garment manufacturing plants are located, our ability to properly and efficiently design, construct, implement and operate a new customer relationship management (“CRM”) computer system and an enterprise resource planning (“ERP”) computer system, interruptions or failures of our information technology systems, including as a result of cyber-attacks, additional professional and internal costs necessary for compliance with any changes in or additional SEC, New York Stock Exchange (the “NYSE”) and accounting or other rules, including, without limitation, recent rules proposed by the SEC regarding climate-related and cybersecurity-related disclosures, strikes and unemployment levels, our efforts to evaluate and potentially reduce internal costs, economic and other developments associated with the war on terrorism and its impact on the economy, the impact of foreign trade policies and tariffs or other impositions on imported goods on our business, results of operations and financial condition, general economic conditions, our ability to successfully implement our business strategies and processes, including our capital allocation strategies, our ability to successfully remediate the material weakness in internal control over financial reporting disclosed in this Annual Report on Form 10-K in an appropriate and timely matter or at all, and the other factors described under “Item 1A.
LEGAL AND REGULATORY RISKS The expenses we incur to comply with environmental regulations, including costs associated with potential environmental remediation, may prove to be significant and could have a material adverse effect on our results of operations and financial condition.
LEGAL AND REGULATORY RISKS The expenses we may incur to comply with environmental regulations, including costs associated with potential environmental remediation, may prove to be significant and could have a material adverse effect on our results of operations and financial condition.
If these third-party vendors, or our suppliers or other vendors, experience service interruptions, security breaches, cyber-attacks, 10 computer viruses, ransomware or other similar events, customer, employee or other proprietary information could be compromised and it could as a result or otherwise, have an adverse effect on our business. Our business may be subject to seasonal and quarterly fluctuations.
If these third-party vendors, or our suppliers or other vendors, experience service interruptions, security breaches, cyber-attacks, computer viruses, ransomware or other similar events, customer, employee or other proprietary information could be compromised and it could as a result or otherwise, have an adverse effect on our business. Our business may be subject to seasonal and quarterly fluctuations.
We also may experience lower than expected sales and potential adverse impacts on our competitive position if there is a decrease in customer spending or a negative reaction to our pricing. A reduction in our revenue would be detrimental to our profitability and financial condition and could also have an adverse impact on our future growth.
We also may experience lower than expected sales and potential adverse impacts on our competitive position if there is a decrease in customer spending or a 7 negative reaction to our pricing. A reduction in our revenue would be detrimental to our profitability and financial condition and could also have an adverse impact on our future growth.
There can be no assurance that acquired or leased locations have been operated in 13 compliance with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon us under such laws or expose us to third-party actions such as tort suits.
There can be no assurance that acquired or leased locations have been operated in compliance with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon us under such laws or expose us to third-party actions such as tort suits.
We have raised, and expect to continue to raise, our wage rates and benefits to reflect these changes, which has the effect of increasing our labor costs, which in turn adversely affects our results of operation and financial condition.
We have raised, and expect to continue to raise, our wage rates and benefits to reflect these changes, which has the effect of increasing our labor costs, which in turn adversely affects our results of operation and financial 8 condition.
Operations in developing nations present several additional risks, including greater fluctuation in currencies relative to the U.S. dollar, economic and governmental instability, civil disturbances, volatility in gross domestic production, Foreign Corrupt Practice Act compliance issues and nationalization and expropriation of private assets, which could have a material adverse effect on our business, results of operations and financial condition.
Operations in developing nations present several additional risks, including greater fluctuation in currencies relative to the U.S. dollar, economic and governmental instability, civil disturbances, volatility in gross domestic production, Foreign Corrupt Practice Act and other legal compliance issues and nationalization and expropriation of private assets, which could have a material adverse effect on our business, results of operations and financial condition.
The United States Environmental Protection Agency (the “EPA”) has provided us and other signatories to the consent decree with comments on the design and implementation of groundwater and soil remedies at the Woburn site and investigation of environmental conditions in the Central Area. The consent decree does not address any remediation work that may be required in the Central Area.
Environmental Protection Agency (the “EPA”) has provided us and other signatories to the consent decree with comments on the design and implementation of groundwater and soil remedies at the Woburn site and investigation of environmental conditions in the Central Area. The consent decree does not address any remediation work that may be required in the Central Area.
Our future success also depends upon our ability to attract and retain key employees. There is competition in the market for the services of such qualified personnel and hourly workers. In addition, we face wage pressure as the result of a low unemployment environment and increased competition in hiring.
Our future success also depends upon our ability to attract and retain key employees. There is competition in the market for the services of such qualified personnel and hourly workers. In addition, as discussed above, we face wage pressure as the result of a low unemployment environment and increased competition in hiring.
We supply uniform services to many industries that have been in the past, and may be in the future, subject to adverse economic and business conditions resulting in shifting employment levels, workforce reductions, changes in worker productivity, uncertainty regarding the impacts of rehiring and shifts to offshore manufacturing.
We supply uniform, workwear and facility services to many industries that have been in the past, and may be in the future, subject to adverse economic and business conditions resulting in shifting employment levels, workforce reductions, changes in worker productivity, uncertainty regarding the impacts of rehiring and shifts to offshore manufacturing.
In addition, we are also subject to tax audits in the United States and other jurisdictions in which we do business, including, but not limited to, various states, as well as Canada and the Canadian provinces of Alberta, British Columbia, Ontario, Saskatchewan, Quebec and New Brunswick, and Mexico. These audits can be complicated and can require several years to resolve.
In addition, we are also subject to tax audits in the U.S. and other jurisdictions in which we do business, including, but not limited to, various states, as well as Canada and the Canadian provinces of Alberta, British Columbia, Ontario, Saskatchewan, Quebec and New Brunswick, and Mexico. These audits can be complicated and can require several years to resolve.
To date, we have experienced no significant difficulty in obtaining any of our raw materials or supplies, although at certain times, we have sourced raw materials or supplies from alternative sources or experienced costs increases for such raw materials and supplies.
To date, we have experienced no significant difficulty in obtaining any of our raw materials or supplies, although at certain times, we have sourced raw materials or supplies from alternative sources or experienced cost increases for such raw materials and supplies.
Refer to Note 11, “Commitments and Contingencies”, of our Consolidated Financial Statements for further discussion, including regarding a tax assessment matter in Mexico. ITEM 1B. UNRESOLVE D STAFF COMMENTS None.
Refer to Note 11, “Commitments and Contingencies”, of our Consolidated Financial Statements for further discussion, including regarding the tax assessment matter in Mexico. ITEM 1B. UNRESOLVE D STAFF COMMENTS None.
Unanticipated issues related to integration may result in additional expense or in disruption to our operations, either of which could negatively impact our ability to achieve anticipated benefits. While we believe we will be able to fully integrate acquired businesses, we can give no assurance that we will be successful in this regard.
Unanticipated issues related to integration may result in additional expense or in disruption to our operations, either of which could negatively impact our ability to achieve anticipated benefits. While we believe we will be able to fully integrate acquired businesses, such as Clean, we can give no assurance that we will be successful in this regard.
GENERAL RISK FACTORS Adverse global financial and economic conditions may result in impairment of our goodwill and intangibles. Our market capitalization, from time to time, has experienced volatility due in part to turbulent economic conditions and disruption in the global equity and credit markets. Under accounting principles generally accepted in the United States (“U.S.
GENERAL RISK FACTORS Adverse global financial and economic conditions may result in impairment of our goodwill and intangibles. Our market capitalization, from time to time, has experienced volatility due in part to turbulent economic conditions and disruption in the global equity and credit markets. Under accounting principles generally accepted in the U.S. (“U.S.
Moreover, it is generally expected that healthcare costs in the United States will increase over the coming years. In addition, we may incur significant healthcare costs if a significant number of our employees experience injury or illness, including in connection with public health emergencies such as the COVID-19 pandemic.
Moreover, it is generally expected that healthcare costs in the U.S. will increase over the coming years. In addition, we may incur significant healthcare costs if a significant number of our employees experience injury or illness, including in connection with public health emergencies such as the COVID-19 pandemic.
While our management believes that our employee relations are good, we cannot assure you that we will not become the target of campaigns similar to those faced by our competitors. The potential for unionization could increase if the United States Congress passes federal “card check” legislation in the future.
While our management believes that our employee relations are good, we cannot assure you that we will not become the target of campaigns similar to those faced by our competitors. The potential for unionization could increase if the U.S. Congress passes federal “card check” legislation in the future.
Our international operations 9 are also subject to other risks, including the requirement to comply with changing and conflicting national and local regulatory requirements; potential difficulties in staffing and labor disputes; managing and obtaining support and distribution for local operations; credit risk or financial condition of local customers; potential imposition of restrictions on investments; potentially adverse tax consequences, including imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries; foreign exchange controls; and local political and social conditions.
Our international operations are also subject to other risks, including the requirement to comply with changing and conflicting national and local regulatory requirements, including, without limitation, with respect to sustainability matters; potential difficulties in staffing and labor disputes; managing and obtaining support and distribution for local operations; credit risk or financial condition of local customers; potential imposition of restrictions on investments; potentially adverse tax consequences, including imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries; foreign exchange controls; and local political and social conditions.
Our failure to properly respond to any such event could also result in exposure to liability. We are subject to numerous laws and regulations in the United States and internationally designed to protect the information of clients, customers, employees, and other third parties that we collect and maintain. These laws and regulations are increasing in complexity and number.
Our failure to properly respond to any such event could also result in exposure to liability. We are subject to numerous laws and regulations in the U.S. and internationally designed to protect the information of clients, customers, employees, and other third parties that we collect and maintain. These laws and regulations are increasing in complexity and number.
As of October 21, 2022, to the Company’s knowledge, the members of the Croatti family and other family members owned, directly or indirectly, in the aggregate approximately 3,590,295 shares of our Class B Common Stock, which represents approximately 19.2% of the aggregate number of outstanding shares of our Common Stock and Class B Common Stock, but approximately 70.4% of the combined voting power of the outstanding shares of our Common Stock and Class B Common Stock.
As of October 20, 2023, to the Company’s knowledge, the members of the Croatti family and other family members owned, directly or indirectly, in the aggregate approximately 3,590,295 shares of our Class B Common Stock, which represents approximately 19.2% of the aggregate number of outstanding shares of our Common Stock and Class B Common Stock, but approximately 70.4% of the combined voting power of the outstanding shares of our Common Stock and Class B Common Stock.
We, together with multiple other companies, are party to a consent decree related to our property and parcels of land (the “ Central Area”) at a site in Woburn, Massachusetts.
We, together with 13 multiple other companies, are party to a consent decree related to our property and parcels of land (the “ Central Area”) at a site in Woburn, Massachusetts. The U.S.
Such volatility may be caused by fluctuations in our operating results, changes in earnings estimated by investment analysts, the number of shares of our Common Stock traded each day, the degree of success we achieve in implementing our business and growth strategies, changes in business or regulatory conditions affecting us, our customers or our competitors and other factors, including the impact of the COVID-19 pandemic.
Such volatility may be caused by fluctuations in our operating results, changes in earnings estimated by investment analysts, the number of shares of our Common Stock traded each day, the degree of success we achieve in implementing our business and growth strategies, changes in business or regulatory conditions affecting us, our customers or our competitors and other factors.
Our failure to properly and efficiently design, construct, implement and operate a new customer relationship management (“CRM”) computer system or an enterprise resource planning (“ERP”) system could materially disrupt our operations, adversely impact the servicing of our customers and have a material adverse effect on our financial performance.
Our failure to properly and efficiently design, construct, implement and operate a new enterprise resource planning (“ERP”) system and to successfully complete the implementation of our customer relationship management (“CRM”) computer system could materially disrupt our operations, adversely impact the servicing of our customers and have a material adverse effect on our financial performance.
Unexpected events, including, without limitation, fires at facilities, natural disasters as a result of climate change or otherwise, such as hurricanes, earthquakes, floods and tornados, public health emergencies, war or terrorist activities, unplanned utility outages, pandemics such as the COVID-19 pandemic, supply disruptions, failure of equipment or information systems, temporary or long-term disruption of our computer systems, or changes in laws and/or regulations impacting our business, could adversely affect our operating results.
Unexpected events, including, without limitation, fires at facilities, natural disasters as a result of climate change or otherwise, such as hurricanes, earthquakes, floods and tornadoes, public health emergencies, war or terrorist activities, including the conflicts in the Middle East or between Russia and Ukraine, unplanned utility outages, pandemics such as the COVID-19 pandemic, supply disruptions, failure of equipment or information systems, temporary or long-term disruption of our computer systems, or changes in laws and/or regulations impacting our business, could adversely affect our operating results.
Our business process controls within the revenue and accounts receivable process, both automated and manual, that are dependent on the completeness and accuracy of the information derived from the affected IT system were also deemed ineffective because they could have been adversely impacted.
Our business process controls within the revenue and accounts receivable process and inventory and merchandise in service process, both automated and manual, that are dependent on the completeness and accuracy of the information derived from the affected IT systems were also deemed ineffective because they could have been adversely impacted.
In addition, the United States Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation. Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks, which may result in economic recession.
Federal Reserve has raised, and may continue to raise, interest rates in response to concerns about inflation. Continued high interest rates or increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks, which may result in economic recession.
Federal, state and municipal governments are mandating increases to minimum wage and other employee benefits. In addition, we face wage pressure as the result of a low unemployment environment and increased competition in hiring.
Federal, state and municipal governments have and may continue to mandate increases to minimum wage and other employee benefits. In addition, we face wage pressure as the result of a low unemployment environment and increased competition in hiring.
Further, state-sponsored cyber-attacks could expand as part of the hostilities in Ukraine, which could adversely affect our or our suppliers’ ability to maintain and enhance key cyber security and data protection measures.
Further, state-sponsored cyber-attacks could expand including as part of the conflict between Russia and Ukraine, which could adversely affect our or our suppliers’ ability to maintain and enhance key cyber security and data protection measures.
Adverse economic conditions have included or resulted, and could continue to include or result, in a significant increase in inflation, which could have a material adverse impact on our business, including our operating margins.
Adverse economic conditions have included or resulted, and could continue to include or result, in a significant increase in inflation, which could have a material adverse impact on our business, including our operating margins. Continued high inflation has had a negative impact on our operating margins in recent periods.
However, if we were to experience difficulty obtaining any of our raw materials from such suppliers and were unable to obtain new materials or supplies from other industry suppliers, or if the cost of obtaining such materials or supplies were to increase, including in any case as a result of the COVID-19 pandemic, Russia’s invasion of Ukraine or other supply chain disruptions, it could adversely affect our results of operations.
However, if we were to experience difficulty obtaining any of our raw materials from such suppliers and were unable to obtain new materials or supplies from other industry suppliers, or if the cost of obtaining such materials or supplies were to increase, including in any case as a result of continued or increasing inflation, high or rising interest rates, the COVID-19 pandemic, the conflict between Russia and Ukraine or other supply chain disruptions, it could adversely affect our results of operations.
If we pay higher prices for businesses we acquire, our returns on investment and profitability may be reduced. Adverse economic and business conditions or geopolitical events, including public health events such as the COVID-19 pandemic, may affect our business and our customer base and have a material adverse impact on our sales and operating results.
If we pay higher prices for businesses we acquire, our returns on investment and profitability may be reduced. Adverse economic and business conditions or geopolitical events may affect our business and our customer base and have a material adverse impact on our sales and operating results.
As of August 27, 2022, we employ approximately 14,000 persons and less than 1% of our United States employees are represented by a union pursuant to a collective bargaining agreement. Competitors within our industry have been the target of corporate unionization campaigns by multiple labor unions.
As of August 26, 2023, we employ approximately 16,000 persons and less than 1% of our U.S. employees are represented by a union pursuant to a collective bargaining agreement. Competitors within our industry have been the target of corporate unionization campaigns by multiple labor unions.
Continued high inflation rates, or further increases in inflation rates, could have a material adverse impact on our revenues and operating margins. In addition, if our costs increase and we are not able to pass along these price increases to our customers, our results of operations would be adversely affected, and the adverse impact may be material.
In addition, if our costs increase and we are not able to pass along these price increases to our customers, our results of operations would be adversely affected, and the adverse impact may be material. Higher inflation rates have had an adverse impact on our operating margins.
Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “could,” “should,” “may,” “will,” “strategy,” “objective,” “assume,” “strive,” or the negative versions thereof, and similar expressions and by the context in which they are used. Such forward-looking statements are based upon our current expectations and speak only as of the date made.
Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “could,” “should,” “may,” “will,” “strategy,” “objective,” “assume,” “strive,” “design,” “assumption,” “vision” or the negative versions thereof, and similar expressions and by the context in which they are used.
The balance of the garments used in our programs are purchased from a variety of industry suppliers. While we currently acquire the raw materials with which we produce our garments from a limited number of suppliers, we believe that such materials are generally readily available from other sources.
The balance of the garments used in our programs are purchased from a variety of industry suppliers. While we currently acquire the raw materials with which we produce our garments from a limited number of suppliers, we believe that such materials are generally readily available from other sources. Furthermore, overseas garment contractors could be subject to supply chain disruptions.
The uniform rental and sales industry is highly competitive. The principal methods of competition in the industry are quality of products, quality of service and price. Our leading competitors include Cintas Corporation, Alsco and Aramark.
The rental and sales industry with respect to uniforms, workwear and facility services is highly competitive. The principal methods of competition in the industry are quality of products, quality of service and price. Our leading competitors include Cintas Corporation, Alsco and Vestis Corporation (formerly Aramark Uniform Services).
Continued high inflation or increases in inflation may result in decreased demand for our products and services, increased operating costs, including our labor costs, reduced liquidity, and limitations on our ability to access credit or otherwise raise debt and equity capital.
Although inflation rates have moderated somewhat recently, continued high inflation or future increases in inflation may result in decreased demand for our products and services, increased operating costs, including our labor costs, reduced liquidity, and limitations on our ability to access credit or otherwise raise debt and equity capital. In addition, the U.S.
Such statements are highly dependent upon a variety of risks, uncertainties and other important factors that could cause actual results to differ materially from those reflected in such forward-looking statements.
Such forward-looking statements are based upon our current expectations and speak only as of the date made. Such statements are highly dependent upon a variety of risks, uncertainties and other important factors that could cause actual results to differ materially from those reflected in such forward-looking statements.
Our failure to renew a significant number of our existing contracts would have an adverse effect on our results of operations and financial condition and failure to obtain new customers could have an adverse effect on our growth and results of operations. Increases in fuel and energy costs could materially adversely affect our operating costs.
Our failure to renew a significant number of our existing contracts would have an adverse effect on our results of operations and financial condition, and failure to obtain new customers could have an adverse effect on our growth and results of operations.
The price of fuel and energy needed to run our vehicles and equipment is unpredictable and fluctuates based on events outside our control, including geopolitical developments, such as Russia's invasion of Ukraine, supply and demand for oil and gas, actions by the Organization of the Petroleum Exporting Countries, or OPEC, and other oil and gas producers, war and unrest in oil producing countries, regional production patterns, limits on refining capacities, natural disasters, environmental concerns, including the impact of legislative and regulatory efforts to limit GHG emissions, and public health emergencies, including pandemics such as the COVID-19 pandemic.
The price of fuel and energy needed to run our vehicles and equipment is unpredictable and fluctuates based on events outside our control, including geopolitical developments, such as the potential for a broadening Middle East conflict, the ongoing conflict between Russia and Ukraine and the resulting governmental sanctions against certain Russian individuals and entities, supply and demand for oil and gas, actions by the Organization of the Petroleum Exporting Countries, or OPEC, and other oil and gas producers, war and unrest in oil producing countries, regional production patterns, limits on refining capacities, natural disasters, environmental concerns, including the impact of legislative and regulatory efforts to limit greenhouse gas emissions, and public health emergencies.
Although we are working on remedial measures, there can be no assurance that such remedial measures will be successful and that we will be able to remediate the material weakness prior to the end of fiscal 2023.
Although we are working on remedial measures, there can be no assurance that such remedial measures will be successful and we will be able to remediate the material weakness in a timely manner.
The failure of these information technology systems to perform as we anticipate could disrupt our business and negatively impact our results of operations. In addition, our information technology systems could be damaged or cease to function properly due to any number of causes, such as catastrophic events, power outages, security breaches, ransomware, computer viruses or cyber-based attacks.
In addition, our information technology systems could be damaged or cease to function properly due to any number of causes, such as catastrophic events, power outages, security breaches, ransomware, computer viruses or cyber-based attacks.
Our operating margins have been, and may continue to be, adversely 8 impacted by the recent surge in energy prices. A continuing surge in fuel and energy costs or any further increases in fuel and energy costs could materially adversely affect our operating costs.
Our operating margins have been, and may continue to be, adversely impacted by the recent volatility in energy prices. Periods of high fuel and energy costs and any increases in fuel and energy costs could materially adversely affect our operating costs.
Impacts of such general economic weakness include, without limitation: falling overall demand for goods and services; reduced credit availability; reduced liquidity; volatility in credit, equity and foreign exchange markets; bankruptcies and rising interest rates.
In recent quarters, we have observed increased economic uncertainty in the U.S. and abroad, including the potential for an economic recession. Impacts of such general economic weakness include, without limitation: falling overall demand for goods and services; reduced credit availability; reduced liquidity; volatility in credit, equity and foreign exchange markets; bankruptcies and rising interest rates.
This voting control by the members of the Croatti family, together with certain provisions of our by-laws and articles of organization, could have the effect of delaying, deferring or preventing a change in control of our Company that would otherwise be beneficial to our public shareholders. 12 We identified a material weakness in our internal control over financial reporting related to our revenue and accounts receivable process, caused principally by ineffective information technology general controls.
This voting control by the members of the Croatti family, together with certain provisions of our by-laws and articles of organization, could have the effect of delaying, deferring or preventing a change in control of our Company that would otherwise be beneficial to our public shareholders.
Revenue denominated in currencies other than the U.S. dollar represented approximately 7.9%, 8.4% and 6.9% of total consolidated revenues for fiscal 2022, the fiscal year ended August 29, 2021 (“fiscal 2021”) and the fiscal year ended August 31, 2020 (“fiscal 2020”), respectively.
A portion of our sales is derived from international markets. Revenue denominated in currencies other than the U.S. dollar represented approximately 7.0%, 7.9% and 8.4% of total consolidated revenues for fiscal 2023, the fiscal year ended August 27, 2022 (“fiscal 2022”) and the fiscal year ended August 28, 2021 (“fiscal 2021”), respectively.
We depend on third parties to supply us with raw materials and our results of operations could be adversely affected if we are unable to obtain adequate raw materials in a timely manner. We manufactured approximately 61% of all garments we placed in service during fiscal 2022.
We depend on third parties to supply us with raw materials and facility services products and our results of operations could be adversely affected if we are unable to obtain adequate raw materials in a timely and economic manner, or at all, or if our supply chain is otherwise disrupted.
The failure to properly, efficiently and economically complete, implement and operate such systems on a timely basis or at all could materially disrupt our operations, adversely impact the servicing of our customers and have a material adverse effect on our financial results.
The failure to properly, efficiently and economically design, implement and operate an ERP system on a timely basis or at all could materially disrupt our operations, including our supply chain, adversely impact the servicing of our customers and have a material adverse effect on our financial results. In addition, we began deployment of our new CRM project during fiscal 2021.
These were primarily work pants and shirts manufactured at three of our plants located in San Luis Potosi, Mexico, one plant located in Managua, Nicaragua, as well as at subcontracted manufacturers that we utilize to supplement our manufacturing capacity in periods of high demand.
We manufactured approximately 60% of all garments we placed in service during fiscal 2023. These were primarily work pants and shirts manufactured at three of our plants located in San Luis Potosi, Mexico, one plant located in Managua, 11 Nicaragua, as well as at subcontracted manufacturers that we utilize within our sourcing strategy to balance demand and optimize costs.
There can be no assurance that we will be able to manage our expanding operations successfully, that any acquired business will perform as we expect, or that we will be able to maintain or accelerate our growth, and any failure to do so could have an adverse effect on our results of operations and financial condition. 7 In order to finance such acquisitions, we may need to obtain additional funds either through public or private financings, including bank and other secured and unsecured borrowings and the issuance of debt or equity securities.
There can be no assurance that we will be able to manage our expanding operations successfully, that any acquired business, including Clean, will perform as we expect, or that we will be able to maintain or accelerate our growth, and any failure to do so could have an adverse effect on our results of operations and financial condition.
As a result, our ability to acquire businesses in the future, and to acquire such businesses on favorable terms, may be limited.
This competition may increase the price for acquisitions and reduce the number of acquisition candidates available to us. As a result, our ability to acquire businesses in the future, and to acquire such businesses on favorable terms, may be limited.
This concentration subjects this business to significant risks and may result in greater volatility in this segment’s results of operations. Fluctuations in our nuclear decontamination business, including the loss of key customers of our Specialty Garments business, or a significant reduction in our business derived from such key customers, could materially adversely affect our results of operations and financial condition.
Fluctuations in our nuclear decontamination business, including the loss of key customers of our Specialty Garments business, or a significant reduction in our business derived from such key customers, could materially adversely affect our results of operations and financial condition. 9 Our international business results are influenced by currency fluctuations and other risks that could have an adverse effect on our results of operations and financial condition.
In addition, the destruction or temporary loss of our distribution facility in Owensboro, Kentucky or our manufacturing facilities in Mexico and Nicaragua would have a material adverse effect on our operations and financial results. 11 The COVID-19 pandemic and resulting material adverse economic conditions had in the past a significant adverse impact on our business and could have a material adverse impact on our business, financial condition and results of operations in the future.
In addition, the destruction or temporary loss of, or other disruptions with respect to, our distribution facility in Owensboro, Kentucky or our manufacturing facilities in Mexico and Nicaragua would have a material adverse effect on our operations and financial results.
We began deployment of our new CRM project during the third quarter of fiscal 2021, and the deployment is ongoing. This new system is intended to improve functionality, capability and information flow as well as increase automation in servicing our customers.
While the deployment of the CRM system is substantially complete in the U.S., we continue to work on the implementation and operation of the system. This new system is intended to improve functionality, capability and information flow as well as increase automation in servicing our customers.
In addition, U.S. and foreign trade policies and tariffs and other impositions on imported goods may have a negative impact on our business. There can be no assurance that the foregoing factors will not have an adverse effect on our international operations or on our consolidated financial condition and results of operations. We own and operate manufacturing facilities in Mexico.
We disagree with such tax assessment and are challenging the validity of the tax assessment through an appeal process. There can be no assurance that the foregoing factors will not have an adverse effect on our international operations or on our consolidated financial condition and results of operations. In addition, we own and operate manufacturing facilities in Mexico.
As a consequence, successful claims against us not covered by our available insurance coverage, or the impact of adverse publicity against us, could have a material adverse effect on our business, financial condition and results of operation.
As a consequence, successful claims against us not covered by our available insurance coverage or the adverse outcome of a legal or regulatory proceeding, or the impact of adverse publicity against us, could have a material adverse effect on our business, financial condition and results of operation. 14 Failure to comply with state, federal and other rules and regulations to which we are subject may result in penalties or costs that could have a material adverse effect on our business.
The price of our Common Stock on the NYSE may experience volatility and declines should future outbreaks and continued spread of the virus occur. We are controlled by our principal shareholders, and our other shareholders may be unable to affect the outcome of shareholder voting.
We are controlled by our principal shareholders, and our other shareholders may be unable to affect the outcome of shareholder voting.
As part of our growth strategy, we intend to continue to actively pursue additional acquisition opportunities. However, as discussed above, we compete with others within our industry for suitable acquisition candidates. This competition may increase the price for acquisitions and reduce the number of acquisition candidates available to us.
Our failure to implement successfully our acquisition strategy and to grow our business could adversely affect our ability to increase our revenues and could negatively impact our profitability. As part of our growth strategy, we intend to continue to actively pursue additional acquisition opportunities. However, as discussed above, we compete with others within our industry for suitable acquisition candidates.
In addition, geopolitical conflicts, calamities or other events, including public health events such as the COVID-19 pandemic, may disrupt domestic and global business and financial markets and conditions. In recent months, we have observed increased economic uncertainty in the United States and abroad, including the potential for an economic recession.
In addition, geopolitical conflicts, calamities or other events, including the conflict between Russian and Ukraine, disruption in the Middle East and public health events such as the COVID-19 pandemic, may disrupt domestic and global business and financial markets and conditions.
Internal control related to the operation of technology systems are critical to maintaining adequate internal control over financial reporting. As disclosed in Part II, Item 9A of this Annual Report on Form 10-K, management identified a material weakness in internal control over financial reporting for our revenue and accounts receivable process.
As disclosed in Part II, Item 9A of our Annual Report on Form 10-K for fiscal 2022, we previously identified a material weakness related to our revenue and accounts receivable process caused principally by ineffective ITGCs in the area of user access over the CRM system that we are in the process of deploying.
Any of these circumstances would have the effect of reducing the number of employees utilizing our uniform services, which could have a material adverse impact on our sales and results of operations. Our failure to implement successfully our acquisition strategy and to grow our business could adversely affect our ability to increase our revenues and could negatively impact our profitability.
Any of these circumstances would have the effect of reducing the number of employees utilizing our uniform, workwear and facility services, which could have a material adverse impact on our sales and results of operations. Continued high inflation rates, or further increases in inflation rates, could have a material adverse impact on our revenues and operating margins.
In addition, claims occasionally result in significant investigation and 14 litigation expenses and, if successful, may result in material losses to us. Certain claims may also result in significant adverse publicity against us.
Certain claims may also result in significant adverse publicity against us.
This material weakness primarily related to ineffective information technology general controls (ITGCs) in the area of user access over the CRM system that we are in the process of deploying. As a result, management concluded that our internal control over financial reporting was not effective as of August 27, 2022.
As a result, management concluded that our internal control over financial reporting was not effective as of August 26, 2023. The material weakness relates to our CRM system that we are in the process of deploying and affects revenue and receivables as well as a group of legacy applications which affect revenue and receivables, supply inventory and merchandise in service.
If our information technology systems suffer interruptions or failures, including as a result of cyber-attacks, our business operations could be disrupted or other material adverse impacts on our business could result. Our information technology systems serve an important role in the efficient operation of our business.
The failure to successfully complete the implementation and operate the CRM system on a timely basis or at all could materially disrupt our operations, adversely impact the servicing of our customers and have a material adverse effect on our financial results. 10 If our information technology systems suffer interruptions or failures, including as a result of cyber-attacks, our business operations could be disrupted or other material adverse impacts on our business could result.
Refer to Note 11, “Commitments and Contingencies”, of our Consolidated Financial Statements for further discussion, including regarding a tax assessment matter in Mexico and claims relating to the FLSA. Certain of the claims to which we are subject are typically not covered by our available insurance.
Refer to Note 11, “Commitments and Contingencies”, of our Consolidated Financial Statements for further discussion.
In addition, we are working on a corporate-wide ERP system with a strong focus on supply chain and procurement automation and technology.
In fiscal 2022, we initiated a multiyear ERP project with a strong focus on supply chain and procurement automation and technology. We believe that this initiative will become the core of the UniFirst technology footprint and will integrate and complement the capabilities of the CRM system that we are currently deploying.
Removed
Inflation rates, particularly in the United States, have increased recently to historic levels and have had an adverse impact on our operating margins.
Added
In order to finance such acquisitions, we may need to obtain additional funds either through public or private financings, including bank and other secured and unsecured borrowings and the issuance of debt or equity securities.
Removed
Our international business results are influenced by currency fluctuations and other risks that could have an adverse effect on our results of operations and financial condition. A portion of our sales is derived from international markets.
Added
Periods of high fuel and energy costs and increases in fuel and energy costs could materially adversely affect our operating costs.
Removed
In the fourth quarter of fiscal 2018, we initiated a multiyear CRM project to further develop, implement and deploy a third-party application we licensed. Our previous CRM systems project, which we terminated in 2018, did not result in the successful implementation of a CRM system.
Added
This concentration subjects this business to significant risks and may result in greater volatility in this segment’s results of operations.
Removed
The COVID-19 pandemic has, at times, resulted in material adverse economic conditions that have impacted, and may again impact, our business and the businesses of our suppliers and customers. For example, at times during the COVID-19 pandemic our revenues have been significantly adversely impacted as a result of many customers closing their business operations or operating at limited capacities.
Added
In addition, U.S. and foreign trade policies and tariffs and other impositions on imported goods may have a negative impact on our business.
Removed
In addition, at times during the pandemic, we have experienced supply chain disruptions with respect to certain products, including hand sanitizer and masks. Although there continues to be supply chain disruption that is impacting our operating results, these adverse impacts and disruptions have declined since the height of the pandemic.
Added
For example, in the fourth quarter of fiscal 2022, the Mexican federal tax authority issued a tax assessment on our subsidiary in Mexico for fiscal 2016 import taxes, value added taxes and custom processing fees of over $17.0 million, plus surcharges, fines and penalties of over $67.7 million for a total assessment of over $84.7 million, which accrues interest and other charges.
Removed
Any future impacts of the COVID-19 pandemic on our business and operations and the business and operations of our customers and suppliers remain uncertain. New variants of the virus could emerge, the virus may continue to spread and there could be future impositions of related public health measures and travel, health-related, business and other restrictions.
Added
We expect this system and the supply chain and procurement capabilities that it will provide will enable lower operating costs and customer churn through enhanced inventory utilization and vendor management, improved response times to customer orders and more efficient back-end processes.
Removed
Such conditions and any related material adverse economic conditions could materially adversely impact our business, financial condition, results of operations and cash flows. The COVID-19 pandemic has also, at times, resulted in severe disruption and volatility in the financial markets, and the market price of our Common Stock on the NYSE has, at times, declined dramatically.
Added
We believe these capabilities will allow us to more effectively respond to and mitigate the types of supply chain challenges we experienced during the COVID-19 pandemic and continue to experience primarily as a result of the current inflationary environment.

… 9 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeITEM 2. PR OPERTIES As of August 27, 2022, we owned or leased approximately 260 facilities containing an aggregate of approximately 7.9 million square feet located in the United States, Canada, Mexico, Europe and Nicaragua. We owned 136 of these facilities, containing approximately 6.1 million square feet.
Biggest changeITEM 2. PR OPERTIES As of August 26, 2023, we owned or leased approximately 281 facilities containing an aggregate of approximately 8.6 million square feet located in the U.S., Canada, Mexico, Europe and Nicaragua. We owned 143 of these facilities, containing approximately 6.4 million square feet.
We believe that our facilities and our production, cleaning and decontamination equipment have been well maintained and are adequate for our present needs. We also own a fleet of approximately 4,300 delivery vans, trucks and other vehicles.
We believe that our facilities and our production, cleaning and decontamination equipment have been well maintained and are adequate for our present needs. We also own a fleet of approximately 4,375 delivery vans, trucks and other vehicles. 16

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed8 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are subject to legal proceedings and claims arising from the current conduct of our business operations, including personal injury, customer contract, employment claims such as claims alleging violations of, and 16 damages under, the FLSA and environmental matters as described in our Consolidated Financial Statements.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are subject to legal proceedings and claims arising from the current conduct of our business operations, including personal injury, customer contract, employment claims such as claims alleging violations of, and damages under, the FLSA and environmental and tax matters as described in our Consolidated Financial Statements.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−4 removed3 unchanged
Biggest changeRepurchases made under the program, if any, will continue to be made in either the open market or in privately negotiated transactions.
Biggest changeWe did not repurchase any shares of our Common Stock during the quarter ended August 26, 2023. As of August 26, 2023, the Company had $63.6 million remaining to repurchase under the share repurchase program. Repurchases made under the program, if any, will continue to be made in either the open market or in privately negotiated transactions.
On October 18, 2021, our Board of Directors approved a new share repurchase program authorizing the Company to repurchase from time to 18 time up to $100.0 million of our outstanding shares of Common Stock, inclusive of the amount which remained available under the existing share repurchase program approved in January 2019, which program has no scheduled expiration date.
Issuer Purchases of Equity Securities On October 18, 2021, our Board of Directors approved a share repurchase program authorizing the Company to repurchase from time to time up to $100.0 million of our outstanding shares of Common Stock, inclusive of the amount which remained available under the existing share repurchase program approved in January 2019, which program has no scheduled expiration date.
The graph assumes an investment of $100 in each of UniFirst Corporation’s Common Stock, the Russell 2000 Index, and the performance through August 31, 2022, assuming the reinvestment of dividends. 20 ITEM 6. RESERVED 21
The graph assumes an investment of $100 in each of UniFirst Corporation’s Common Stock, the Russell 2000 Index, and the performance through August 31, 2023, assuming the reinvestment of dividends. 19 ITEM 6. [ RESERVED] 20
On July 12, 2022, our Board of Directors declared a quarterly cash dividend of $0.30 per share of Common Stock and $0.24 per share of Class B Common Stock. Both dividends were paid on September 28, 2022 to shareholders of record as of September 7, 2022.
On July 11, 2023, our Board of Directors declared a quarterly cash dividend of $0.310 per share of Common Stock and $0.248 per share of Class B Common Stock. Both dividends were paid on September 28, 2023 to shareholders of record as of September 7, 2023.
The amount and timing of any future dividend payment is subject to the approval of the Board of Directors each quarter. The approximate number of shareholders of record of our Common Stock and Class B Common Stock as of October 21, 2022 was 53 and 46, respectively.
The amount and timing of any future dividend payment is subject to the approval of the Board of Directors each quarter. The approximate number of shareholders of record of our Common Stock and Class B Common Stock as of October 20, 2023 was 48 and 43, respectively.
In addition to the shares repurchased under our share repurchase program and reflected in the table, we repurchased 35,714 shares of Class B Common Stock for $168.00 per share in a privately negotiated transaction in July 2022. 19 Stock Performance Graph The graph below compares the cumulative five-year total return on UniFirst Corporation's Common Stock with the Russell 2000 Index and a customized peer group of three companies that includes Aramark, Cintas Corporation and Rollins, Inc.
The share repurchase program has been funded to date using our available cash and may be suspended or discontinued at any time. 18 Stock Performance Graph The graph below compares the cumulative five-year total return on UniFirst Corporation's Common Stock with the Russell 2000 Index and a customized peer group of three companies that includes Aramark, Cintas Corporation and Rollins, Inc.
Removed
Equity Compensation Plan Information The following table sets forth information concerning our equity compensation plans as of August 27, 2022: Equity Compensation Plan Information Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans (excluding securities referenced in column (a)) (a) (b) (c) Equity compensation plans approved by security holders 460,048 $ 141.68 173,581 Equity compensation plans not approved by security holders — N/A — Total 460,048 173,581 (1) Includes shares of Common Stock issuable upon vesting of restricted stock units.
Removed
(2) Restricted stock units are not included in the weighted-average exercise price calculation because there is no exercise price associated with restricted stock units.
Removed
Issuer Purchases of Equity Securities The following table provides information regarding our purchases of equity securities for the periods set forth therein: (a) Total Number of Shares of Stock Purchased(1) (b) Average Price Paid per Share(1) (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs(1) May 29, 2022 - June 25, 2022 28,275 $ 164.22 28,275 $ 66,956,250 June 26, 2022 - July 23, 2022 47,775 $ 166.59 47,775 $ 63,640,769 July 24, 2022 - August 27, 2022 — $ — — $ 63,640,769 76,050 76,050 (1) On January 2, 2019, our Board of Directors approved a share repurchase program authorizing the Company to repurchase from time to time up to $100.0 million of our outstanding shares of Common Stock.
Removed
The share repurchase program has been funded to date using our available cash and may be suspended or discontinued at any time.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

2 edited+0 added−0 removed0 unchanged
Biggest changeFinancial Statements and Supplementary Data 39 Consolidated statements of income for each of the three years in the period ended August 27, 2022 39 Consolidated statements of comprehensive income for each of the three years in the period ended August 27, 202 2 40 Consolidated balance sheets as of August 27, 2022 and August 28, 2021 41 Consolidated statements of shareholders’ equity for each of the three years in the period ended August 27, 2022 42 Consolidated statements of cash flows for each of the three years in the period ended August 27, 2022 43 Notes to Consolidated Financial Statements 44 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm 70
Biggest changeFinancial Statements and Supplementary Data 37 Consolidated Statements of Income for each of the three years in the period ended August 26, 2023 37 Consolidated Statements of Comprehensive Income for each of the three years in the period ended August 26, 2023 38 Consolidated Balance Sheets as of August 26, 2023 and August 27, 2022 39 Consolidated Statements of Shareholders’ Equity for each of the three years in the period ended August 26, 2023 40 Consolidated Statements of Cash Flows for each of the three years in the period ended August 26, 2023 41 Notes to Consolidated Financial Statements 42 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm 69
Item 6. Reserved 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38 Item 8.
Item 6. [ Reserved ] 20 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 36 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

84 edited+41 added−42 removed79 unchanged
Biggest changeThe changes to the amounts of our environmental liabilities for the years ended August 27, 2022 and August 28, 2021 are as follows (in thousands): Year ended August 27, 2022 August 28, 2021 Beginning balance $ 32,859 $ 30,702 Costs incurred for which reserves have been provided $ (2,188 ) (1,593 ) Insurance proceeds $ 135 129 Interest accretion $ 596 448 Changes in discount rates $ (3,235 ) (1,040 ) Revisions in estimates $ 4,024 4,213 Ending balance $ 32,191 $ 32,859 Anticipated payments and insurance proceeds of currently identified environmental remediation liabilities as of August 27, 2022 for the next five fiscal years and thereafter, as measured in current dollars, are reflected below (in thousands).
Biggest changeThe changes to the amounts of our environmental liabilities for fiscal 2023 and 2022 are as follows (in thousands): Year ended August 26, 2023 August 27, 2022 Beginning balance $ 32,191 $ 32,859 Costs incurred for which reserves have been provided (1,936 ) (2,188 ) Insurance proceeds 147 135 Interest accretion 1,036 596 Changes in discount rates (2,446 ) (3,235 ) Revisions in estimates 1,037 4,024 Ending balance $ 30,029 $ 32,191 33 Anticipated payments and insurance proceeds of currently identified environmental remediation liabilities as of August 26, 2023 for the next five fiscal years and thereafter, as measured in current dollars, are reflected below (in thousands): Fiscal year ended August 2024 2025 2026 2027 2028 Thereafter Total Estimated costs—current dollars $ 14,049 $ 2,651 $ 1,442 $ 1,270 $ 972 $ 14,617 $ 35,001 Estimated insurance proceeds (180 ) (195 ) (159 ) (173 ) (9 ) (230 ) (946 ) Net anticipated costs $ 13,869 $ 2,456 $ 1,283 $ 1,097 $ 963 $ 14,387 $ 34,055 Effect of inflation 9,227 Effect of discounting (13,253 ) Balance as of August 26, 2023 $ 30,029 Estimated insurance proceeds are primarily received from an annuity received as part of our legal settlement with an insurance company.
We believe, although there can be no assurance, that our current cash and cash equivalents balances, our cash generated from future operations and amounts available under our 2021 Credit Agreement (as defined below) will be sufficient to meet our current anticipated working capital and capital expenditure requirements for at least the next 12 months and will help us manage the impacts of inflation and address related liquidity needs.
We believe, although there can be no assurance, that our current cash and cash equivalents balances, our cash generated from future operations and amounts available under our Credit Agreement (as defined below) will be sufficient to meet our current anticipated working capital and capital expenditure requirements for at least the next 12 months and will help us manage the impacts of inflation and address related liquidity needs.
Refer to Note 4, “Income Taxes”, of our Consolidated Financial Statements for further discussion regarding our accounting for income taxes and our uncertain tax positions for financial accounting purposes. 25 Effects of Inflation and Current Economic Conditions In general, we believe that our results of operations are not dependent on moderate changes in the inflation rate.
Refer to Note 4, “Income Taxes”, of our Consolidated Financial Statements for further discussion regarding our accounting for income taxes and our uncertain tax positions for financial accounting purposes. Effects of Inflation and Current Economic Conditions In general, we believe that our results of operations are not dependent on moderate changes in the inflation rate.
In addition, a weaker Canadian dollar increases the costs to our Canadian operations of merchandise and other operational inputs that are sourced from outside 27 Canada, which has the effect of reducing the operating margins of our Canadian business if we are unable to recover these additional costs through price adjustments with our Canadian customers.
In addition, a weaker Canadian dollar increases the costs to our Canadian operations of merchandise and other operational inputs that are sourced from outside Canada, which has the effect of reducing the operating margins of our Canadian business if we are unable to recover these additional costs through price adjustments with our Canadian customers.
In recent years, we have typically paid for acquisitions with cash and may continue to do so in the future. To pay for an acquisition, we may use cash on hand, cash generated from operations or borrowings under our 2021 Credit Agreement, or we may pursue other forms of debt financing.
In recent years, we have typically paid for acquisitions with cash and may continue to do so in the future. To pay for an acquisition, we may use cash on hand, cash generated from operations or borrowings under our Credit Agreement, or we may pursue other forms of debt financing.
The Corporate operating segment consists of costs associated with our distribution center, sales and marketing, information systems, engineering, materials management, manufacturing planning, finance, budgeting, human resources, other general and administrative costs and interest expense. The revenues generated from the Corporate operating segment represent certain direct sales made directly from our distribution center.
The Corporate operating segment consists of costs associated with our distribution center, sales and marketing, information systems, engineering, materials management, manufacturing planning, finance, budgeting, human resources, other general and administrative costs and interest expense. The revenues generated from the Corporate operating segment represent 21 certain direct sales made directly from our distribution center.
We depreciate, on a straight-line basis, the amount added to property, plant and equipment and recognize accretion expense in connection with the discounted liability over the various remaining lives which range from approximately one to twenty-two years.
We depreciate, on a straight-line basis, the amount added to property, plant and equipment and recognize accretion expense in connection with the discounted liability over the various remaining lives which range from approximately one to twenty-one years.
In the segment disclosures in Note 15, “Segment Reporting”, of our Consolidated Financial Statements, no assets or capital expenditures are presented for the Corporate operating segment as no assets are allocated to this operating segment in the information reviewed by our chief 22 executive officer.
In the segment disclosures in Note 15, “Segment Reporting”, of our Consolidated Financial Statements, no assets or capital expenditures are presented for the Corporate operating segment as no assets are allocated to this operating segment in the information reviewed by our chief executive officer.
Changes in 24 enacted laws, regulatory orders or decrees, our estimates of costs, risk-free interest rates, insurance proceeds, participation by other parties, the timing of payments, the input of our attorneys and outside consultants or other factual circumstances could have a material impact on the amounts recorded for our environmental and other contingent liabilities.
Changes in enacted laws, regulatory orders or decrees, our estimates of costs, risk-free interest rates, insurance proceeds, participation by other parties, the timing of 32 payments, the input of our attorneys and outside consultants or other factual circumstances could have a material impact on the amounts recorded for our environmental and other contingent liabilities.
Useful lives are based on our estimates of the period that the assets will generate economic benefits. Long-lived assets are evaluated for impairment whenever events or circumstances indicate an asset may be impaired. There were no material impairments of long-lived assets in fiscal 2022, 2021 or 2020.
Useful lives are based on our estimates of the period that the assets will generate economic benefits. Long-lived assets are evaluated for impairment whenever events or circumstances indicate an asset may be impaired. There were no material impairments of long-lived assets in fiscal 2023, 2022 or 2021.
Availability of credit requires compliance with certain financial and other covenants, including a maximum consolidated funded debt ratio and minimum consolidated interest coverage ratio, each as defined in the 2021 Credit Agreement. We test our compliance with these financial covenants on a fiscal quarterly basis.
Availability of credit requires compliance with certain financial and other covenants, including a maximum consolidated funded debt ratio and minimum consolidated interest coverage ratio as defined in the Credit Agreement. We test our compliance with these financial covenants on a fiscal quarterly basis.
Repurchases made under the program, if any, will be made in either the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will depend on a variety of factors, including economic and market conditions, the Company stock price, corporate liquidity requirements and priorities, applicable legal requirements and other factors.
Repurchases made under the new program, if any, will be made in either the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will depend on a variety of factors, including economic and market conditions, our stock price, corporate liquidity requirements and priorities, applicable legal requirements and other factors.
We may also use cash flows provided by operating activities, as well as proceeds from loans payable and long-term debt, to fund growth and acquisition opportunities, as well as other cash requirements.
We may also use cash flows provided by operating activities, as well as proceeds from long-term debt, to fund growth and acquisition opportunities, as well as other cash requirements.
Historically, we have been able to manage the impacts of more significant changes in inflation rates through our customer relationships, customer agreements that generally provide for price increases consistent with the rate of inflation and continued focus on improvements of operational productivity.
Historically, we have been able to manage the impacts of more significant changes in inflation rates through our customer relationships, customer agreements that generally provide for price increases and continued focus on improvements of operational productivity.
The U.S. and Canadian Rental and Cleaning reporting segment purchases, rents, cleans, delivers and sells, uniforms and protective clothing and non-garment items in the United States and Canada.
The U.S. and Canadian Rental and Cleaning reporting segment purchases, rents, cleans, delivers and sells, uniforms and protective clothing and non-garment items in the U.S. and Canada.
Our operating results are also directly impacted by the costs of the gasoline used to fuel our vehicles and the natural gas used to operate our plants. Our operating margins have been, and may continue to be, adversely impacted by the recent surge in energy prices.
Our operating results are also directly impacted by the costs of the gasoline used to fuel our vehicles and the natural gas used to operate our plants. Our operating margins have been, and may continue to be, adversely impacted by volatility in energy prices.
However, the current inflationary environment has had a negative impact on our margins, including as a result of increased energy costs for our vehicles and our plants, as well as increasing wages in the labor markets in which we compete. We expect that inflation will continue to pressure our margins in future periods.
However, the current inflationary environment has had a negative impact on our margins, including as a result of increased energy costs for our vehicles and our plants, as well as increasing wages in the labor markets in which we compete. Inflation could continue to pressure our margins in future periods.
We have accrued $32.2 million in costs related to certain environmental obligations we have to address under terms of consent orders negotiated with the applicable environmental authorities or otherwise. Refer to “Environmental and Legal Contingencies”, above for additional discussion on our environmental obligations.
We have accrued $30.0 million in costs related to certain environmental obligations we have to address under terms of consent orders negotiated with the applicable environmental authorities or otherwise. Refer to “Environmental and Legal Contingencies”, above for additional discussion on our environmental obligations.
In addition, in the fourth quarter of fiscal 2022, the Mexican federal tax authority issued a tax assessment on our subsidiary in Mexico for fiscal 2016 import taxes, value added taxes and custom processing fees of over $17.0 million, plus surcharges, fines and penalties of over $67.7 million for a total assessment of over $84.7 million.
In addition, in the fourth quarter of fiscal 2022, the Mexican federal tax authority issued a tax assessment on our subsidiary in Mexico for fiscal 2016 import taxes, value added taxes and custom processing fees of over $17.0 million, plus surcharges, fines and penalties of over $67.7 million for a total assessment of over $84.7 million, which accrues interest and other charges.
We manufacture our own branded workwear, protective clothing, and floorcare products, as well as offer products from industry leading suppliers; and with 260 service locations, over 300,000 customer locations, and 14,000 employee Team Partners, we outfit more than 2 million workers each business day. U.S.
We manufacture our own branded workwear, protective clothing, and floorcare products, as well as offer products from industry leading suppliers; and with 270 service locations, over 300,000 customer locations, and approximately 16,000 employee Team Partners, we outfit more than 2 million workers each business day. U.S.
The share repurchase program may be funded using available cash or capacity under our 2021 Credit Agreement (as defined below) and may be suspended or discontinued at any time. During fiscal 2022, we repurchased 0.2 million shares of Common Stock for an average price per share of $179.98.
The share repurchase program may be funded using available cash or capacity under our Credit Agreement (as defined below) and may be suspended or discontinued at any time. During fiscal 2023, we did not repurchase any shares. During fiscal 2022, we repurchased 0.2 million shares for an average price per share of $179.98.
On October 18, 2021, our Board of Directors authorized a new share repurchase program to repurchase from time to time up to $100.0 million of our outstanding shares of Common Stock, inclusive of the amount which remained available under the existing share repurchase program approved on January 2, 2019.
On October 24, 2023, our Board of Directors authorized a new share repurchase program to repurchase from time to time up to $100.0 million of our outstanding shares of Common Stock, inclusive of the amount which remained available under the existing share repurchase program approved on October 18, 2021.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Business Overview UniFirst Corporation, together with its subsidiaries, hereunder referred to as “we”, “our”, the “Company”, or “UniFirst”, is one of the largest providers of workplace uniforms and protective work wear clothing in the United States.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Business Overview UniFirst Corporation, together with its subsidiaries, hereunder referred to as “we”, “our”, the “Company”, or “UniFirst”, is one of the leading providers of workplace uniforms and protective work wear clothing in the U.S.
Approximately 88.5% of our revenues in fiscal 2022 were derived from our U.S. and Canadian Rental and Cleaning and Corporate segments. A key driver of this business is the number of workers employed by our customers. Our revenues are directly impacted by fluctuations in these employment levels.
Approximately 87.8% of our revenues in fiscal 2023 were derived from our U.S. and Canadian Rental and Cleaning and Corporate segments. A key driver of this business is the number of workers employed by our customers. Our revenues are directly impacted by fluctuations in these employment levels.
The estimated liability for environmental contingencies has been discounted as of August 27, 2022 using risk-free interest rates ranging from 3.0% to 3.4% over periods ranging from ten to thirty years. The estimated current costs, net of legal settlements with insurance carriers, have been adjusted for the estimated impact of inflation at 3.0% per year.
The estimated liability for environmental contingencies has been discounted as of August 26, 2023 using risk-free interest rates ranging from 4.3% to 4.7% over periods ranging from three to thirty years. The estimated current costs, net of legal settlements with insurance carriers, have been adjusted for the estimated impact of inflation at 3.0% per year.
As discussed above under “Derivative Instruments and Hedging Activities”, as of August 27, 2022, we had forward contracts with a notional value of approximately 7.2 million CAD outstanding and recorded the fair value of the contracts of $0.1 million in prepaid expenses and other current assets with a corresponding $0.1 million gain in accumulated other comprehensive loss, which was recorded net of tax.
As discussed above under “Derivative Instruments and Hedging Activities”, as of August 26, 2023, we had forward contracts with a notional value of approximately 5.4 million CAD outstanding and recorded the fair value of the contracts of $0.2 million in prepaid expenses and other current assets with a corresponding gain of $0.2 million in accumulated other comprehensive loss, which was recorded net of tax.
As of August 27, 2022, the risk-free interest rates we utilized ranged from 3.0% to 3.4%. 34 For environmental liabilities that have been discounted, we include interest accretion, based on the effective interest method, in selling and administrative expenses on the Consolidated Statements of Income.
As of August 26, 2023, the risk-free interest rates we utilized ranged from 4.3% to 4.7%. For environmental liabilities that have been discounted, we include interest accretion, based on the effective interest method, in selling and administrative expenses on the Consolidated Statements of Income.
Revenues denominated in currencies other than the U.S. dollar represented approximately 7.9%, 8.4% and 6.9% of total consolidated revenues for fiscal years 2022, 2021 and 2020, respectively. The operating results of our international subsidiaries are translated into U.S. dollars and such results are affected by movements in foreign currencies relative to the U.S. dollar.
Revenues denominated in currencies other than the U.S. dollar represented approximately 7.0% and 7.9% of total consolidated revenues for fiscal 2023 and 2022, respectively. The operating results of our international subsidiaries are translated into U.S. dollars and such results are affected by movements in foreign currencies relative to the U.S. dollar.
During fiscal 2022, we reclassified $0.1 million from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The loss on these forward contracts that results in an increase to accumulated other comprehensive loss as of August 27, 2022 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.
During fiscal 2023, we reclassified $0.1 million from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The gain on these forward contracts that results in a decrease to accumulated other comprehensive loss as of August 26, 2023 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.
The calculation of pension expense and the corresponding liability requires us to use a number of critical assumptions, including the expected long-term rates of return on plan assets, the assumed discount rate, the assumed rate of compensation increases and life expectancy of participants.
Pension expense is generally independent of funding decisions or requirements. 24 The calculation of pension expense and the corresponding liability requires us to use a number of critical assumptions, including the expected long-term rates of return on plan assets, the assumed discount rate, the assumed rate of compensation increases and life expectancy of participants.
In fiscal years 2022, 2021 and 2020, foreign currency fluctuations impacted our consolidated revenues negatively by 0.1%, 0.5% and 0.1%, respectively. These impacts were primarily driven by fluctuations in the Canadian dollar.
In fiscal 2023 and 2022, foreign currency fluctuations impacted our consolidated revenues negatively by 0.6% and 0.1%, respectively. These impacts were primarily driven by fluctuations in the Canadian dollar.
As of August 27, 2022, we had forward contracts with a notional value of approximately 7.2 million CAD outstanding and recorded the fair value of the contracts of $0.1 million in prepaid expenses and other current assets with a corresponding $0.1 million loss in accumulated other comprehensive loss, which was recorded net of tax.
As of August 26, 2023, we had forward contracts with a notional value of approximately 5.4 million CAD outstanding and recorded the fair value of the contracts of $0.2 million in prepaid expenses and other current assets with a corresponding gain of $0.2 million in accumulated other comprehensive loss, which was recorded net of tax.
In addition, as described above, the current inflationary environment has had a negative impact on our margins, and we expect that it will continue to pressure our margins in future periods.
In addition, as described above, the current inflationary environment has had a negative impact on our margins, and could continue to pressure our margins in future periods.
If actual product demand and market conditions are less favorable than the amount we projected, additional inventory write-downs may be required. We use the first-in, first-out method to value our inventories, which primarily consist of finished goods.
Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than the amount we projected, additional inventory write-downs may be required. We use the first-in, first-out method to value our inventories, which primarily consist of finished goods.
We have uncertain tax positions that are reserved totaling $9.3 million as of August 27, 2022 that are excluded from the above table as we cannot make a reasonably reliable estimate of the period of cash settlement with the respective taxing authority.
We have uncertain tax positions that are fully reserved totaling $7.8 million as of August 26, 2023 that are excluded from the above table as we cannot make a reasonably reliable estimate of the period of cash settlement with the respective taxing authority.
Revenues from Specialty Garments, which accounted for approximately 7.6% of our fiscal 2022 revenues, increase during outages and refueling by nuclear power plants, as garment usage increases at these times. First Aid represented approximately 3.9% of our total revenues in fiscal 2022.
Revenues from Specialty Garments, which accounted for approximately 8.0% of our fiscal 2023 revenues, increase during outages and refueling by nuclear power plants, as garment usage increases at these times. First Aid represented approximately 4.2% of our total revenues in fiscal 2023.
As of August 27, 2022, the balance in this escrow account, which is held in a trust and is not recorded in our Consolidated Balance Sheet, was approximately $4.8 million.
As of August 26, 2023, the balance in this escrow account, which is held in a trust and is not recorded in our Consolidated Balance Sheet, was approximately $5.2 million.
Our results are affected by economic, political, legislative, regulatory and legal actions. Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies, government policies surrounding the containment of COVID-19 and changes in the prices of raw materials, can have a significant effect on operations.
These estimates are based on historical information, current trends, and information available from other sources. Our results are affected by economic, political, legislative, regulatory and legal actions. Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies, and changes in the prices of raw materials, can have a significant effect on operations.
Our evaluation considers changes in the operating environment, competitive information, market trends, operating performance and cash flow modeling. We completed our annual goodwill impairment test as of the first day of the fourth quarter in fiscal 2022 and fiscal 2021 and the last day of the fourth quarter of fiscal 2020.
Our evaluation considers changes in the operating environment, competitive information, market trends, operating performance and cash flow modeling. We completed our annual goodwill impairment test as of the first day of the fourth quarter in fiscal 2023, fiscal 2022 and fiscal 2021. There have been no impairments of goodwill or other intangible assets in fiscal 2023, 2022 or 2021.
On October 20, 2021, we announced that we would be raising our quarterly dividend to $0.30 per share for Common Stock and to $0.24 per share for Class B Common Stock. The amount and timing of any future dividend payment is subject to the approval of the Board of Directors each quarter.
On October 24, 2023, we announced that we would be raising our quarterly dividend to $0.33 per share of Common Stock and to $0.264 per share of Class B Common Stock, up from $0.31 and $0.248 per share, respectively. The amount and timing of any dividend payment is subject to the approval of our Board of Directors each quarter.
While we are unable to ascertain the ultimate outcome of this matter, based on the information currently available, we believe that a loss with respect to this matter is neither probable nor remote.
We disagree with such tax assessment and are challenging the validity of the tax assessment through an appeal process. While we are unable to ascertain the ultimate outcome of this matter, based on the information currently available, we believe that a loss with respect to this matter is neither probable nor remote.
A decline in our market capitalization and/or deterioration in general economic conditions could negatively and materially impact our assumptions and assessment of the fair value of our business.
We cannot predict future economic conditions and their impact on us or the future net realizable value of our stock. A decline in our market capitalization and/or deterioration in general economic conditions could negatively and materially impact our assumptions and assessment of the fair value of our business.
As discussed above under “Long-Term Debt and Borrowing Capacity”, as of August 27, 2022, we had borrowing capacity of $175.0 million under our 2021 Credit Agreement, of which approximately $114.2 million was available for borrowing. Also, as of such date, we had no outstanding borrowings and letters of credit outstanding of $60.8 million.
As discussed above under “Long-Term Debt and Borrowing Capacity”, as of August 26, 2023, we had borrowing capacity of $375.0 million under our Credit Agreement, of which approximately $208.5 million was available for borrowing. Also, as of such date, we had no outstanding borrowings and letters of credit outstanding of $66.5 million.
The current portion is included in prepaid expenses and other current assets and the non-current portion is included in other assets on our consolidated balance sheets. As of August 27, 2022, the current and non-current assets related to deferred commissions totaled $15.2 million and $65.1 million, respectively.
The current portion is included in prepaid expenses and other current 22 assets and the non-current portion is included in other assets on our Consolidated Balance Sheets. As of August 26, 2023, the current and non-current assets related to deferred commissions totaled $16.5 million and $70.4 million, respectively.
Our operating results in future years could be negatively impacted by any further devaluation, as compared to the U.S. dollar, of the Canadian dollar or any of the currencies of the other countries in which we operate.
Our operating results in future years could be negatively impacted by any further devaluation, as compared to the U.S. dollar, of the Canadian dollar or any of the currencies of the other countries in which we operate. In fiscal 2018, we initiated a multiyear CRM project to further develop, implement and deploy a third-party application we licensed.
Supplemental Executive Retirement Plan and other Pension Plans We recognize pension expense on an accrual basis over our employees’ estimated service periods. Pension expense is generally independent of funding decisions or requirements.
Supplemental Executive Retirement Plan and Pension Plan We recognize pension expense on an accrual basis over our employees’ estimated service periods.
Derivative Instruments and Hedging Activities In June 2018, we entered into twelve forward contracts to exchange CAD for U.S. dollars at fixed exchange rates in order to manage our exposure related to certain forecasted CAD denominated sales of one of our subsidiaries.
As of August 26, 2023, we were in compliance with all covenants under the Credit Agreement. Derivative Instruments and Hedging Activities In August 2021, we entered into twenty forward contracts to exchange CAD for U.S. dollars at fixed exchange rates in order to manage our exposure related to certain forecasted CAD denominated sales of one of our subsidiaries.
GAAP, which requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. We utilize key estimates in preparing the financial statements, including casualty and environmental estimates, recoverability of goodwill, intangibles, income taxes and long-lived assets. These estimates are based on historical information, current trends, and information available from other sources.
GAAP, which requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. We utilize key estimates in preparing the financial statements, including casualty and environmental estimates, valuation of intangible assets acquired in connection with a business combination, recoverability of goodwill, intangibles, income taxes and long-lived assets.
Specialty Garments revenues for fiscal 2022 increased compared to the prior fiscal year due primarily to growth in our cleanroom operations. Specialty Garments’ results are often affected by seasonality and the timing and length of its customers’ power reactor outages as well as its project-based activities.
European nuclear operations effect on Specialty Garments revenue growth was minimal as it accounted for growth of 0.2%. Specialty Garments’ results are often affected by seasonality and the timing and length of our customers’ power reactor outages as well as our project-based activities. First Aid revenues for fiscal 2023 increased compared to the prior fiscal year.
Given the uncertainty associated with the ultimate resolution of this matter, we are unable to reasonably assess an estimate or range of estimates of any potential losses. 35 While it is impossible for us to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits and environmental contingencies, we believe that the aggregate amount of such liabilities, if any, in excess of amounts covered by insurance have been properly accrued in accordance with accounting principles generally accepted in the United States.
While it is impossible for us to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits and environmental contingencies, we believe that the aggregate amount of such liabilities, if any, in excess of amounts covered by insurance have been properly accrued in accordance with accounting principles under U.S. GAAP.
During fiscal 2022, our energy costs, which include fuel, natural gas, and electricity, represented approximately 4.7% of our total revenue. 36 Recent Accounting Pronouncements See Note 1, “Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on recently implemented and issued accounting standards 37
Recent Accounting Pronouncements See Note 1, “Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on recently implemented and issued accounting standards. 35
It is possible that dramatic increases in interest rates may ultimately result in an economic recession. Adverse economic conditions resulting from inflationary pressures, U.S. Federal Reserve actions, geopolitical issues or otherwise are difficult to predict and may have a material adverse impact on our business, results of operation and financial condition. Please see Part I, Item 1A.
Federal Reserve actions, including continued high interest rates and/or increases in interest rates, geopolitical issues or otherwise are difficult to predict and may have a material adverse impact on our business, results of operations and financial condition. Please see Part I, Item 1A.
For fiscal 2022, we incurred $19.7 million, $11.7 million and $1.7 million of costs related to our CRM system, UniFirst branding project and ERP system, respectively, for a total of $33.1 million directly attributable to our Key Initiatives. Our fiscal year ends on the last Saturday in August.
In fiscal 2023, we incurred $17.8 million, $4.8 million and $11.0 million of costs related to our CRM system, UniFirst branding project and ERP system, respectively, for a total of $33.6 million directly attributable to our Key Initiatives.
Long-term Debt and Borrowing Capacity On March 26, 2021, we entered into an amended and restated $175.0 million unsecured revolving credit agreement (the “2021 Credit Agreement”) with a syndicate of banks, which matures on March 26, 2026. The 2021 Credit Agreement amended and restated our $250.0 million unsecured revolving credit agreement, which was scheduled to mature on April 11, 2021.
This was partially offset by an increase in dividends paid of $1.3 million. 31 Long-term Debt and Borrowing Capacity On March 26, 2021, we entered into an amended and restated $175.0 million unsecured revolving credit agreement (as subsequently amended, the “Credit Agreement”) with a syndicate of banks, which matures on March 26, 2026.
Judgments and estimates are used in determining the potential value associated with reported claims and for events that have occurred but have not been reported. Our estimates consider historical claim experience and other factors.
We also purchase stop-loss insurance policies for workers’ compensation, vehicles and general liability programs to protect ourselves from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for events that have occurred but have not been reported. Our estimates consider historical claim experience and other factors.
“Risk Factors” in this Annual Report on Form 10-K for an additional discussion of risks and potential risks of inflation and adverse economic conditions on our business, financial condition and results of operations.
“Risk Factors” in this Annual Report on Form 10-K for an additional discussion of risks and potential risks of inflation and adverse economic conditions on our business, financial condition and results of operations. 25 Results of Operations The following table presents certain selected financial data, including the percentage of revenues represented by each item, for fiscal years 2023 and 2022.
We began deployment of our new CRM project during the second half of fiscal 2021 and anticipate this will continue through fiscal 2023. We are depreciating this system over a 10-year life and recognized $3.2 million and $1.4 million of amortization expense in fiscal 2022 and fiscal 2021, respectively.
We are depreciating this system over a 10-year life and recognized $3.3 million and $3.2 million of amortization expense in fiscal 2023 and fiscal 2022, respectively.
Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to our customers or used in our rental operations. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories.
Inventories and Rental Merchandise in Service Our inventories are stated at the lower of cost or net realizable value, net of any reserve for excess and obsolete inventory. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to our customers or used in our rental operations.
As of August 27, 2022, we had no outstanding borrowings and had outstanding letters of credit amounting to $60.8 million, leaving $114.2 million available for borrowing under the 2021 Credit Agreement. As of August 27, 2022, we were in compliance with all covenants under the 2021 Credit Agreement.
All borrowings were repaid as of August 26, 2023 and we had no outstanding amounts under our Credit Agreement as of August 26, 2023. As of August 26, 2023, we had outstanding letters of credit amounting to $66.5 million, leaving $208.5 million available for borrowing under the Credit Agreement.
The loss on these forward contracts that results in an increase to accumulated other comprehensive loss as of August 27, 2022 is expected to be reclassified to revenues prior to their maturity on February 25, 2022 and August 29, 2026, respectively. 33 Environmental and Legal Contingencies We are subject to various federal, state and local laws and regulations governing, among other things, air emissions, wastewater discharges, and the generation, handling, storage, transportation, treatment and disposal of hazardous wastes and other substances.
Environmental and Legal Contingencies We are subject to various federal, state and local laws and regulations governing, among other things, air emissions, wastewater discharges, and the generation, handling, storage, transportation, treatment and disposal of hazardous wastes and other substances.
As of August 27, 2022, the interest rates applicable to our borrowings under the 2021 Credit Agreement would be calculated as LIBOR plus 1.00% at the time of the respective borrowing.
As of August 26, 2023, the interest rates applicable to our borrowings under the Credit Agreement would be calculated as SOFR plus 1.00% at the time of the respective borrowing. During fiscal 2023, we borrowed $80.0 million under our Credit Agreement to finance the acquisition of Clean and fund our day-to-day operations.
As of August 28, 2021, the current and non-current assets related to deferred commissions totaled $14.2 million and $60.6 million, respectively. During fiscal 2022 and 2021, we recorded $15.4 million and $14.4 million, respectively, of amortization expense related to deferred commissions.
As of August 27, 2022, the current and non-current assets related to deferred commissions totaled $15.2 million and $65.1 million, respectively. During fiscal 2023 and 2022, we recorded $16.5 million and $15.4 million, respectively, of amortization expense related to deferred commissions. This expense is classified in selling and administrative expenses on our Consolidated Statements of Income.
Fiscal Fiscal Fiscal (In thousands) 2022 2021 2020 Segment Information Revenues US and Canadian Rental and Cleaning $ 1,733,088 $ 1,580,850 $ 1,552,179 MFG 281,112 264,021 214,683 Net intercompany MFG elimination (281,112 ) (264,021 ) (214,683 ) Corporate 37,414 34,710 49,306 Subtotal: Core Laundry Operations 1,770,502 1,615,560 1,601,485 Specialty Garments 152,885 145,454 133,185 First Aid 77,435 65,202 69,489 Total consolidated revenues $ 2,000,822 $ 1,826,216 $ 1,804,159 Operating income (loss) US and Canadian Rental and Cleaning $ 289,018 $ 290,774 $ 247,392 MFG 64,884 73,579 64,097 Net intercompany MFG elimination 236 (283 ) 10,012 Corporate (243,428 ) (192,353 ) (171,514 ) Subtotal: Core Laundry Operations 110,710 171,717 149,987 Specialty Garments 23,658 24,801 17,845 First Aid (17 ) (693 ) 4,897 Total operating income $ 134,351 $ 195,825 $ 172,729 General We derive our revenues through the design, manufacture, personalization, rental, cleaning, delivering, and selling of a wide range of uniforms and protective clothing, including shirts, pants, jackets, coveralls, lab coats, smocks and aprons and specialized protective wear, such as flame resistant and high visibility garments.
Revenues and income (loss) from operations by reporting segment for fiscal 2023 and 2022 are presented in the following table: Fiscal Fiscal (In thousands) 2023 2022 Segment Information Revenues U.S. and Canadian Rental and Cleaning $ 1,907,765 $ 1,733,088 MFG 297,752 281,112 Net intercompany MFG elimination (297,752 ) (281,112 ) Corporate 53,424 37,414 Subtotal: Core Laundry Operations 1,961,189 1,770,502 Specialty Garments 177,034 152,885 First Aid 94,824 77,435 Total consolidated revenues $ 2,233,047 $ 2,000,822 Operating income (loss) U.S. and Canadian Rental and Cleaning $ 293,171 $ 289,018 MFG 88,292 64,884 Net intercompany MFG elimination (16,717 ) 236 Corporate (266,080 ) (243,428 ) Subtotal: Core Laundry Operations 98,666 110,710 Specialty Garments 37,488 23,658 First Aid (2,551 ) (17 ) Total operating income $ 133,603 $ 134,351 26 General We derive our revenues through the design, manufacture, personalization, rental, cleaning, delivering, and selling of a wide range of uniforms and protective clothing, including shirts, pants, jackets, coveralls, lab coats, smocks and aprons and specialized protective wear, such as flame resistant and high visibility garments.
Energy Costs Significant increases in energy costs, specifically with respect to natural gas and gasoline, can materially affect our operating costs.
Energy Costs Significant variability in energy costs, specifically with respect to natural gas and gasoline, can materially affect our operating costs. During fiscal 2023, our energy costs, which include fuel, natural gas, and electricity, represented approximately 4.3% of our total revenue.
Under the 2021 Credit Agreement, we may borrow funds at variable interest rates based on, at our election, the Eurodollar rate or a base rate, plus in each case a spread based on our consolidated funded debt ratio.
Prior to the amendment discussed below, interest on borrowings was based on, at our election, the Eurodollar rate or a base rate, plus in each case a spread based on our consolidated funded debt ratio. On March 9, 2023, we exercised the accordion feature of the Credit Agreement pursuant to an amendment to the Credit Agreement.
While we are unable to ascertain the ultimate outcome of such actions, based on the information currently available, we believe that a loss with respect to such matters is neither probable nor remote. Given the uncertainty associated with the ultimate resolution of such matters, we are unable to reasonably assess an estimate or range of estimates of any potential losses.
Given the uncertainty associated with the ultimate resolution of this matter, we are unable to reasonably assess an estimate or range of estimates of any potential losses.
This strong organic growth was primarily the result of customer re-openings in fiscal 2021, solid sales performance and improved customer retention in fiscal 2022 as well as efforts to share with our customers the inflationary cost increases that we experienced in our business due to the ongoing inflationary environment.
The Core Laundry Operations strong organic growth rate was primarily the result of pricing efforts over the last year to share with our customers the cost increases that we have incurred due to the ongoing inflationary environment and solid new account sales.
These initiatives are the continued rollout of our new CRM system (discussed above), investments in the UniFirst brand, and a corporate-wide enterprise resource planning (“ERP”) system with a strong focus on supply chain and procurement automation and technology. We refer to these initiatives together as our “Key Initiatives”.
These initiatives are the continued rollout of our new CRM system, implementation of the ERP system (each discussed above) as well as increased investments in the UniFirst brand. Such increased investments in the UniFirst brand concluded in fiscal 2023. We refer to these initiatives together as our “Key Initiatives”.
Fiscal Year Ended August 27, 2022 Compared with Fiscal Year Ended August 28, 2021 Revenues Fiscal 2022 Fiscal 2021 Dollar Change Percent Change (In thousands, except percentages) Core Laundry Operations $ 1,770,502 $ 1,615,560 $ 154,942 9.6 % Specialty Garments 152,885 145,454 7,431 5.1 % First Aid 77,435 65,202 12,233 18.8 % Total consolidated revenues $ 2,000,822 $ 1,826,216 $ 174,606 9.6 % Core Laundry Operations’ revenues for fiscal 2022 increased compared to the prior fiscal year.
Fiscal Year Ended August 26, 2023 Compared with Fiscal Year Ended August 27, 2022 Revenues (In thousands, except percentages) Fiscal 2023 Fiscal 2022 Dollar Change Percent Change Core Laundry Operations $ 1,961,189 $ 1,770,502 $ 190,687 10.8 % Specialty Garments 177,034 152,885 24,149 15.8 % First Aid 94,824 77,435 17,389 22.5 % Total consolidated revenues $ 2,233,047 $ 2,000,822 $ 232,225 11.6 % The increase in consolidated revenues of 11.6% during fiscal 2023 compared to the prior year was due primarily to growth in our Core Laundry Operations of 10.8%.
The improvement in revenues in fiscal 2021 compared to the prior fiscal year was due primarily to growth in our cleanroom operations and our European nuclear operations.
Specialty Garments revenues for fiscal 2023 increased compared to the prior fiscal year due primarily to growth in our North American nuclear operations and our cleanroom operations. North American nuclear operations accounted for growth of 8.5%, due primarily to increased project work in fiscal 2023 and the cleanroom revenue growth accounted for growth of 7.1%.
In fiscal 2018, we initiated a multiyear CRM project to further develop, implement and deploy a third-party application we licensed. This new solution is intended to improve functionality, capability and information flow as well as increase automation in servicing our customers. As of August 27, 2022, we have capitalized $40.9 million related to our new CRM project.
This new solution is intended to improve functionality, capability and information flow as well as increase automation in servicing our customers.
During fiscal 2022, we reclassified $0.1 million from accumulated other comprehensive loss to revenue, related to the derivative financial instruments.
During fiscal 2023, we reclassified $0.1 million from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The gain on these forward contracts that results in a decrease to accumulated other comprehensive loss as of August 26, 2023 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.
Liquidity and Capital Resources General Cash and cash equivalents totaled $376.4 million as of August 27, 2022, a decrease of $136.5 million from $512.9 million as of August 28, 2021. We generated $122.6 million and $212.3 million in cash from operating activities in the fiscal years ended August 27, 2022 and August 28, 2021, respectively.
Liquidity and Capital Resources General Cash and cash equivalents and short-term investments totaled $89.6 million as of August 26, 2023, a decrease of $286.8 million from $376.4 million as of August 27, 2022.
Net Cash Used in Financing Activities The increase in net cash used in financing activities in fiscal 2022 was due primarily to incremental cash used for repurchases of Common Stock and Class B Common Stock of $33.2 million and an increase in dividends paid of $2.6 million.
Net Cash Used in Financing Activities The decrease in net cash used in financing activities in fiscal 2023 was due primarily to no Common Stock repurchases during fiscal 2023 as compared to $44.4 million of repurchases in the prior fiscal period.
Income from operations 29 For fiscal 2022, the changes in revenues in our Core Laundry Operations, Specialty Garments and First Aid segments, as well as the changes in our costs discussed above, resulted in the following changes in our income from operations: Fiscal 2022 Fiscal 2021 Dollar Change Percent Change (In thousands, except percentages) Core Laundry Operations $ 110,710 $ 171,717 $ (61,007 ) (35.5 )% Specialty Garments 23,658 24,801 (1,143 ) (4.6 )% First Aid (17 ) (693 ) 676 (97.5 )% Total consolidated income from operations $ 134,351 $ 195,825 $ (61,474 ) (31.4 )% Percentage of total revenues 6.7 % 10.7 % Other (income) expense, net (In thousands, except percentages) Fiscal 2022 Fiscal 2021 Dollar Change Percent Change Interest income, net $ (2,851 ) $ (2,568 ) $ (283 ) 11.0 % Other expense, net 2,877 1,522 1,355 89.0 % Total other (income) expense, net $ 26 $ (1,046 ) $ 1,072 (102.5 )% The decrease in other (income) expense, net, in fiscal 2022 compared to the prior fiscal year was due primarily to larger foreign exchange losses in fiscal 2022.
Operating Income For fiscal 2023, changes in our revenues and costs as discussed above resulted in the following changes in our operating income and margin: (In thousands, except percentages) Fiscal 2023 Fiscal 2022 Dollar Change Percent Change Core Laundry Operations $ 98,666 $ 110,710 $ (12,044 ) (10.9 )% Specialty Garments 37,488 23,658 13,830 58.5 % First Aid (2,551 ) (17 ) (2,534 ) 14905.9 % Operating income $ 133,603 $ 134,351 $ (748 ) (0.6 )% Operating income margin 6.0 % 6.7 % Other (income) expense, net (In thousands, except percentages) Fiscal 2023 Fiscal 2022 Dollar Change Percent Change Interest income, net $ (6,738 ) $ (2,851 ) $ (3,887 ) 136.3 % Other expense, net 1,504 2,877 (1,373 ) (47.7 )% Total other (income) expense, net $ (5,234 ) $ 26 $ (5,260 ) (20230.8 )% The increase in other (income) expense, net, in fiscal 2023 compared to the prior fiscal year was due primarily to increases in interest income earned on our cash reserves and short-term investments as a result of rising interest rates.
Fiscal 2020 Revenues $ 2,000,822 100.0 % $ 1,826,216 100.0 % $ 1,804,159 100.0 % 9.6 % 1.2 % Costs and expenses: Cost of revenue (1) 1,306,451 65.3 1,141,275 62.5 1,164,932 64.6 14.5 (2.0 ) Selling and administrative expenses (1) 451,243 22.6 383,161 21.0 361,801 20.1 17.8 5.9 Depreciation and amortization 108,777 5.4 105,955 5.8 104,697 5.8 2.7 1.2 1,866,471 93.3 1,630,391 89.3 1,631,430 90.4 14.5 (0.1 ) Operating income 134,351 6.7 195,825 10.7 172,729 9.6 (31.4 ) 13.4 Other (income) expense, net 26 0.0 (1,046 ) (0.1 ) (5,159 ) (0.3 ) (102.5 ) (79.7 ) Income before income taxes 134,325 6.7 196,871 10.8 177,888 9.9 (31.8 ) 10.7 Provision for income taxes 30,921 1.5 45,760 2.5 42,118 2.3 (32.4 ) 8.6 Net income $ 103,404 5.2 % $ 151,111 8.3 % $ 135,770 7.5 % (31.6 )% 11.3 % (1) Exclusive of depreciation on our property, plant and equipment and amortization of our intangible assets. 26 Revenues and income (loss) from operations by reporting segment for fiscal 2022, 2021 and 2020 are presented in the following table.
(In thousands, except for percentages) Fiscal 2023 % of Revenues Fiscal 2022 % of Revenues % Change Revenues $ 2,233,047 100.0 % $ 2,000,822 100.0 % 11.6 % Operating expenses: Cost of revenue (1) 1,481,296 66.3 1,306,451 65.3 13.4 Selling and administrative expenses (1) 496,915 22.3 451,243 22.6 10.1 Depreciation and amortization 121,233 5.4 108,777 5.4 11.5 Total operating expenses 2,099,444 94.0 1,866,471 93.3 12.5 Operating income 133,603 6.0 134,351 6.7 (0.6 ) Other (income) expense, net (5,234 ) (0.2 ) 26 0.0 (20,230.8 ) Income before income taxes 138,837 6.2 134,325 6.7 3.4 Provision for income taxes 35,163 1.6 30,921 1.5 13.7 Net income $ 103,674 4.6 % $ 103,404 5.2 % 0.3 % (1) Exclusive of depreciation on our property, plant and equipment and amortization of our intangible assets.
(In thousands, except percentages) Fiscal 2022 Fiscal 2021 Percent Change Net cash provided by operating activities $ 122,649 $ 212,302 (42.2 )% Net cash used in investing activities (186,507 ) (141,465 ) 31.8 % Net cash used in financing activities (69,438 ) (34,255 ) 102.7 % Effect of exchange rate changes (3,173 ) 1,448 (319.1 )% Net (decrease) increase in cash and cash equivalents $ (136,469 ) $ 38,030 (458.8 )% Net Cash Provided by Operating Activities The net cash provided by operating activities in fiscal 2022 decreased as compared to fiscal 2021 due primarily to lower profitability, which included costs incurred to support our Key Initiatives, a decrease in accrued liabilities and increases in accounts receivable, supply inventory, merchandise in service, and prepaid income taxes.
(In thousands, except percentages) Fiscal 2023 Fiscal 2022 Dollar Change Percent Change Net cash provided by operating activities $ 215,762 $ 122,649 $ 93,113 75.9 % Net cash used in investing activities (487,647 ) (186,507 ) (301,140 ) 161.5 % Net cash used in financing activities (25,839 ) (69,438 ) 43,599 (62.8 )% Effect of exchange rate changes 768 (3,173 ) 3,941 (124.2 )% Net decrease in cash and cash equivalents $ (296,956 ) $ (136,469 ) $ (160,487 ) 117.6 % Net Cash Provided by Operating Activities The net cash provided by operating activities in fiscal 2023 increased as compared to fiscal 2022 due to positive impacts from receivables of $18.9 million, accrued liabilities of $18.8 million, rental merchandise in service of $15.7 million, prepaid and accrued income taxes of $15.6 million, inventories of $12.1 million and accounts payable of $11.0 million.
Cost of revenues (In thousands, except percentages) Fiscal 2022 Fiscal 2021 Dollar Change Percent Change Cost of revenues $ 1,306,451 $ 1,141,275 $ 165,176 14.5 % % of Revenues 65.3 % 62.5 % Core Laundry Operations’ cost of revenues as a percentage of revenues increased in fiscal 2022 as compared to the prior fiscal year.
Cost of revenues (In thousands, except percentages) Fiscal 2023 Fiscal 2022 Dollar Change Percent Change Cost of revenues $ 1,481,296 $ 1,306,451 $ 174,845 13.4 % % of Revenues 66.3 % 65.3 % The increase in consolidated costs of revenues of 13.4% during fiscal 2023 compared to the prior fiscal year was due primarily to the impact of the revenue growth, as mentioned above.
Over the next few years, we intend to focus on three discrete strategic initiatives that are critical in our efforts to transform the company in terms of our overall capabilities and competitive positioning.
These capabilities will allow us to more effectively respond to and mitigate the types of supply chain challenges that we experienced during the COVID-19 pandemic and that we continue to experience primarily as a result of the current inflationary environment. 27 We have been focused on the three discrete strategic initiatives that are critical in our efforts to transform the Company in terms of our overall capabilities and competitive positioning.
Provision for income taxes (In thousands, except percentages) Fiscal 2021 Fiscal 2020 Dollar Change Percent Change Provision for income taxes $ 45,760 $ 42,118 $ 3,642 8.6 % Effective income tax rate 23.2 % 23.7 % The decrease in our effective tax rate was primarily due to an increase in excess tax benefits from share-based compensation in fiscal 2021 compared to fiscal 2020.
Provision for income taxes (In thousands, except percentages) Fiscal 2023 Fiscal 2022 Dollar Change Percent Change Provision for income taxes $ 35,163 $ 30,921 $ 4,242 13.7 % Effective income tax rate 25.3 % 23.0 % The increase in the effective tax rate for fiscal 2023 as compared to the prior fiscal year was due primarily from the release of certain tax reserves during fiscal 2022 which did not recur in fiscal 2023.

… 87 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+3 added−4 removed6 unchanged
Biggest changeAny losses or gains resulting from unhedged foreign currency transactions, including exchange rate fluctuations on intercompany accounts are reported as transaction losses (gains) in our other expense, net. The intercompany payables and receivables are denominated in Canadian dollars, euros, British pounds, Mexican pesos and Nicaraguan cordobas.
Biggest changeAny losses or gains resulting from unhedged foreign currency transactions, including exchange rate fluctuations on intercompany accounts are reported as transaction losses (gains) in our other expense, net. The intercompany payables and receivables are denominated in Canadian dollars, euros, British pounds, Mexican pesos and Nicaraguan cordobas. During fiscal 2023 transaction losses included in other expense, net, was $0.5 million.
As such, our financial condition and operating results are affected by fluctuations in the value of the U.S. dollar as compared to currencies in foreign countries. Revenues denominated in currencies other than the U.S. dollar represented approximately 7.9%, 8.4% and 6.9% of our total consolidated revenues for fiscal 2022, 2021 and 2020, respectively.
As such, our financial condition and operating results are affected by fluctuations in the value of the U.S. dollar as compared to currencies in foreign countries. Revenues denominated in currencies other than the U.S. dollar represented approximately 7.0%, 7.9% and 8.4% of our total consolidated revenues for fiscal 2023, 2022 and 2021, respectively.
During fiscal 2022, we reclassified $0.1 million from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The loss on these forward contracts that results in an increase to accumulated other comprehensive loss as of August 27, 2022 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.
During fiscal 2023, we reclassified $0.1 million from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The gain on these forward contracts that results in a decrease to accumulated other comprehensive loss as of August 26, 2023 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.
Total assets denominated in currencies other than the U.S. dollar represented approximately 6.8% and 7.0% of our total consolidated assets at August 27, 2022 and August 28, 2021, respectively.
Total assets denominated in currencies other than the U.S. dollar represented approximately 6.6% and 6.8% of our total consolidated assets at August 26, 2023 and August 27, 2022, respectively.
As of August 27, 2022, we had forward contracts with a notional value of approximately 7.2 million CAD outstanding and recorded the fair value of the contracts of $0.1 million in prepaid expenses and other current assets with a corresponding $0.1 million loss in accumulated other comprehensive loss, which was recorded net of tax.
As of August 26, 2023, we had forward contracts with a notional value of approximately 5.4 million CAD outstanding and recorded the fair value of the contracts of $0.2 million in prepaid expenses and other current assets with a corresponding gain of $0.2 million in accumulated other comprehensive loss, which was recorded net of tax.
If exchange rates had increased or decreased by 10% from the actual rates in effect during the fiscal year ended August 27, 2022, our revenues and assets for the year ended and as of August 27, 2022 would have increased or decreased by approximately $0.5 million and $16.4 million, respectively.
If exchange rates had increased or decreased by 10% from the actual rates in effect during fiscal 2023, our revenues and assets for the year ended and as of August 26, 2023 would have increased or decreased by approximately $0.2 million and $17.1 million, respectively.
“Risk Factors” in this Annual Report on Form 10-K for an additional discussion of risks and potential risks of the COVID-19 pandemic on our business, financial performance and the market price of our Common Stock. 38
Please see Item 1A. “Risk Factors” in this Annual Report on Form 10-K for an additional discussion of risks and potential risks on our business, financial performance and the market price of our Common Stock. 36
Removed
In June 2018, we entered into twelve forward contracts to exchange CAD for U.S. dollars at fixed exchange rates in order to manage our exposure related to certain forecasted CAD denominated sales of one of our subsidiaries.
Added
If exchange rates had changed by 10% during fiscal 2023, we would have recognized exchange gains or losses of approximately $1.2 million. Interest Rate Sensitivity We are exposed to market risk from changes in interest rates, which may adversely affect our financial position, results of operations and cash flows.
Removed
The hedged transactions are specified as the first amount of CAD denominated revenues invoiced by one of our domestic subsidiaries each fiscal quarter, beginning in the third fiscal quarter of 2019 and continuing through the second fiscal quarter of 2022. In total, we sold approximately 12.1 million CAD at an average Canadian-dollar exchange rate of 0.7814 over these quarterly periods.
Added
In seeking to minimize the risks from interest rate fluctuations, we manage exposures through our operating and financing activities. We are exposed to interest rate risk primarily through borrowings under our Credit Agreement. During fiscal 2023, we borrowed and repaid $80.0 million under the Credit Agreement.
Removed
We concluded that the forward contracts met the criteria to qualify as a cash flow hedge under U.S. GAAP. These forward contracts matured on February 25, 2022.
Added
Under the Credit Agreement, we borrow funds at variable interest rates based on, at our election, the SOFR rate or a base rate, plus in each case a spread based on our consolidated funded debt ratio. To the extent we have borrowings outstanding under the Credit Agreement, changes in interest rates result in changes in our interest expense.
Removed
During the fiscal year ended August 27, 2022, transaction gains included in other expense, net, was $2.2 million. If exchange rates had changed by 10% during fiscal 2022, we would have recognized exchange gains or losses of approximately $0.4 million. Please see Item 1A.

Other UNF 10-K year-over-year comparisons