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What changed in Vestis Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Vestis Corp's 2023 and 2024 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 2024 report.

+255 added−257 removedSource: 10-K (2024-11-22) vs 10-K (2023-12-21)

Top changes in Vestis Corp's 2024 10-K

255 paragraphs added · 257 removed · 182 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur Mexican operations include approximately 189,000 square feet of manufacturing capacity and a 107,000 square foot distribution facility. 8 Table of Contents __________________ Figure C: U.S. and Canada geographic service footprint We are committed to operating sustainably with a focus on working to minimize fuel usage on our routes and to minimize energy and water usage in our laundry plant facilities.
Biggest changeWe are committed to operating sustainably with a focus on working to minimize fuel usage on our routes and to minimize energy and water usage in our laundry plant facilities. Additionally, we repair and reuse garments whenever possible to maximize the life cycle of our uniforms and support the circular economy.
We provide a full range of uniform programs, managed restroom supply services and first-aid and safety products, as well as ancillary items such as floor mats, towels and linens. Additionally, we provide garments and contamination control supplies that help customers maintain controlled, cleanroom environments commonly used in the manufacturing of electronics, pharmaceuticals and medical equipment.
We provide a full range of uniform programs, restroom supply services and first-aid and safety products, as well as ancillary items such as floor mats, towels and linens. Additionally, we provide garments and contamination control supplies that help customers maintain controlled, cleanroom environments commonly used in the manufacturing of electronics, pharmaceuticals and medical equipment.
Under environmental laws, we may be liable for the costs of removal or remediation of certain hazardous materials located on or in or migrating from our owned or leased property or located at sites that we operated in the past or to which we have sent waste for off-site disposal, as well as related costs of investigation and property damage.
Under environmental laws, we may be liable for the costs of removal or remediation of certain hazardous materials located on or in or migrating from our owned or leased property or located at sites that we acquired or operated in the past or to which we have sent waste for off-site disposal, as well as related costs of investigation and property damage.
Our uniform offerings include shirts, pants, outerwear, gowns, scrubs, high visibility garments and flame-resistant garments, along with shoes and accessories. In addition to uniforms, we also provide workplace supplies including managed restroom supply services, first-aid supplies and safety products, floor mats, towels, linens and other workplace supplies.
Our uniform offerings include shirts, pants, outerwear, gowns, scrubs, high visibility garments and flame-resistant garments, along with shoes and accessories. In addition to uniforms, we also provide workplace supplies including restroom supply services, first-aid supplies and safety products, floor mats, towels, linens and other workplace supplies.
Item 1. Business Overview Vestis Corporation (“Vestis”, the “Company”, “our”, “we” or “us”) is a leading provider of uniform rentals and workplace supplies across the United States and Canada. We provide uniforms, mats, towels, linens, restroom supplies, first-aid supplies, safety products and other workplace supplies. In fiscal year 2023, we generated revenue of approximately $2.8 billion.
Item 1. Business Overview Vestis Corporation (“Vestis”, the “Company”, “our”, “we” or “us”) is a leading provider of uniform rentals and workplace supplies across the United States and Canada. We provide uniforms, mats, towels, linens, restroom supplies, first-aid supplies, safety products and other workplace supplies. In fiscal year 2024, we generated revenue of approximately $2.8 billion.
For example, our new telematics technology allows us to proactively reduce fuel usage by limiting idling through real-time, in-cab driver alerts.
For example, our telematics technology allows us to proactively reduce fuel usage by limiting idling through real-time, in-cab driver alerts.
Our revenue is diversified across numerous sectors and customers operating primarily in manufacturing, hospitality, retail, food processing, automotive and healthcare. These are all sectors where we have decades of expertise. Geographically, 91% of our fiscal year 2023 revenue was from sales in the United States, with the remaining 9% from sales in Canada.
Our revenue is diversified across numerous sectors and customers operating primarily in manufacturing, hospitality, retail, food processing, automotive and healthcare. These are all sectors where we have decades of expertise. Geographically, 91% of our fiscal year 2024 revenue was from sales in the United States, with the remaining 9% from sales in Canada.
To support our Corporate Social Compliance Policy, our international private label garment manufacturers annually confirm their commitment to comply with our Vendor Code of Conduct, and the factories used to produce these products are subject to annual third-party social compliance audits. 13 Table of Contents • We have made enhancements to our wash chemistry that allow us to conserve electricity, natural gas and water.
To support our Corporate Social Compliance Policy, our international private label garment manufacturers annually confirm their commitment to comply with our Vendor Code of Conduct, and the factories used to produce these products are subject to annual third-party social compliance audits. • We have made enhancements to our wash chemistry that allow us to conserve electricity, natural gas and water.
Operations and Supply Chain We operate a network of over 350 facilities including laundry plants, satellite plants, distribution centers and manufacturing plants along with a fleet of service vehicles that support over 3,400 pick-up and delivery routes.
Operations and Supply Chain We operate a network of over 350 facilities including laundry plants, satellite plants, distribution centers and manufacturing plants along with a fleet of service vehicles that support over 3,300 pick-up and delivery routes.
We believe there is a significant opportunity to increase our wallet share with our existing customers through cross-selling additional services and products, including compelling adjacent services such as first aid and managed restroom services. This is expected to result in high-margin growth with existing customers by increasing revenue per stop and leveraging our existing delivery costs.
We continue to believe there is a significant opportunity to increase our wallet share with our existing customers through cross-selling additional services and products, including compelling adjacent services such as first aid and restroom supply services. This is expected to result in high-margin growth with existing customers by increasing revenue per stop and leveraging our existing delivery costs.
Value Creation Strategy As an independent company, we are focused on the development, growth and expansion of our business, with increased flexibility to pursue independent strategic and financial plans, adapt quickly to the changing needs of our customers and sector dynamics, effectively allocate capital to invest in growth areas and accelerate decision-making processes.
Value Creation Strategy We are focused on the development, growth and expansion of our business, with increased flexibility to pursue independent strategic and financial plans, adapt quickly to the changing needs of our customers and sector dynamics, effectively allocate capital to invest in growth areas and accelerate decision-making processes.
We believe our customers value our services and products for a variety of reasons: • Our full-service programs typically offer a lower-cost solution for customers than if they were serviced in-house, as evidenced by our historical experience and customer feedback, as we leverage our scale and network to achieve procurement and operating efficiencies. • We enable customers to focus on operating their core businesses as we take care of their needs for clean uniforms, fully stocked restrooms, complete first-aid kits and other workplace supplies. • We help customers establish corporate identity, foster a sense of team and belonging among employees, project a professional image and enhance brand awareness. • Our uniforms are reusable and can be assigned to another employee (rather than being discarded) when employees transition to new opportunities. • We offer a variety of specialty garments that help customers: ◦ adhere to applicable regulatory standards; ◦ safeguard against contamination in the production or service of items such as food, pharmaceuticals and healthcare products; ◦ operate in static-free or low-static environments; 7 Table of Contents ◦ enhance visibility and safety in work environments including construction, utility services, waste management and public safety; and ◦ promote employee safety in workplace environments that involve heavy soils, heat, flame or chemicals in the production process.
In addition to uniforms, we also provide workplace supplies including restroom supply services, first-aid supplies and safety products, floor mats, towels and linens. 6 Table of Contents We believe our customers value our services and products for a variety of reasons: • Our full-service programs typically offer a lower-cost solution for customers than if they were serviced in-house, as evidenced by our historical experience and customer feedback, as we leverage our scale and network to achieve procurement and operating efficiencies. • We enable customers to focus on operating their core businesses as we take care of their needs for clean uniforms, fully stocked restrooms, complete first-aid kits and other workplace supplies. • We help customers establish corporate identity, foster a sense of team and belonging among employees, project a professional image and enhance brand awareness. • Our uniforms are reusable and can be assigned to another employee (rather than being discarded) when employees transition to new opportunities. • We offer a variety of specialty garments that help customers: ◦ adhere to applicable regulatory standards; ◦ safeguard against contamination in the production or service of items such as food, pharmaceuticals and healthcare products; ◦ operate in static-free or low-static environments; ◦ enhance visibility and safety in work environments including construction, utility services, waste management and public safety; and ◦ promote employee safety in workplace environments that involve heavy soils, heat, flame or chemicals in the production process.
We will focus on implementing analytical and geographical prospecting tools that will aid and reward our sales representatives for delivering growth that increases route density and lowers our overall cost to serve per route. Efficient Operations Our operations currently include significant cost inputs in areas such as labor, merchandise in service costs, plant operating costs and service-related costs.
We will focus on implementing analytical and geographical prospecting tools that will aid and reward our sales representatives for delivering growth that increases route density and lowers our overall cost to serve per route. 9 Table of Contents Efficient Operations Our operations currently include significant cost inputs in areas such as labor, merchandise in service costs, plant operating costs and service-related costs.
Our team consists of approximately 20,000 teammates who operate over 350 sites including laundry plants, satellite plants, distribution centers and manufacturing plants. We leverage our broad footprint and our supply chain, delivery fleet and route logistics capabilities to serve customers on a recurring basis, typically weekly, and primarily through multi-year contracts.
Our team consists of approximately 19,600 teammates who operate over 350 sites including laundry plants, satellite plants, distribution centers and manufacturing plants. We leverage our broad footprint and our supply chain, delivery fleet and route logistics capabilities to serve customers on a recurring basis, typically weekly, and primarily through multi-year contracts.
This includes investments in new technology, such as sophisticated, digital customer portals, as well as investments in our customer service process to enhance our route check-in process and predictive analytics that help us better anticipate customer service opportunities.
This includes continued investments in technology, such as our digital customer portals, as well as investments in our customer service process to enhance our route check-in process and predictive analytics that help us better anticipate customer service opportunities.
We are pursuing the following key strategies to drive value creation and grow our business: 10 Table of Contents High-Quality Revenue Growth Going forward, our strategy will continue to focus on retaining customers, with an increased emphasis on increasing revenue per stop through cross-selling, investing in attractive sectors, margin accretive products and service offerings and adding new customers on existing routes to increase our route density.
We are pursuing the following key strategies to drive value creation and grow our business: High-Quality Revenue Growth Our strategy will continue to focus on retaining customers, with an increased emphasis on increasing revenue per stop through cross-selling, investing in attractive sectors, margin accretive products and service offerings and adding new customers on existing routes to increase our route density.
Vestis is led by Kim Scott, President and Chief Executive Officer, Rick Dillon, Executive Vice President and Chief Financial Officer, Angela Kervin, Executive Vice President and Chief Human Resources Officer, Chris Synek, Executive Vice President and Chief Operating Officer and Timothy Donovan, Executive Vice President, Chief Legal Officer and General Counsel. These executives have deep expertise in their respective fields.
Vestis is led by Kim Scott, President and Chief Executive Officer, Rick Dillon, Executive Vice President and Chief Financial Officer, Angela Kervin, Executive Vice President and Chief Human Resources Officer, Bill Seward, Executive Vice President and Chief Operating Officer and Timothy Donovan, Executive Vice President, Chief Legal Officer and General Counsel. These executives have deep expertise in their respective fields.
Our revenue is diversified across our many customers as demonstrated by the revenue generated from our 10 largest customers accounting for less than 10% of total revenue in fiscal year 2023. Our customers represent a diverse array of industries including sectors such as manufacturing, hospitality, retail, government, automotive, healthcare and food processing (illustrated in Figure A).
Our revenue is diversified across our many customers as demonstrated by the revenue generated from our 10 largest customers accounting for less than 15% of total revenue in fiscal year 2024. Our customers represent a diverse array of industries including sectors such as manufacturing, hospitality, retail, government, automotive, healthcare and food processing.
Our Board of Directors will oversee our ESG goals and objectives, and will support the implementation of our ESG priorities and commitments. Available Information We file annual, quarterly and current reports as well as other information with the Securities and Exchange Commission (“SEC”). These filings are available to the public over the internet at the SEC's website at www.sec.gov.
Our Board of Directors oversees our ESG goals and objectives, and supports the implementation of our ESG priorities and commitments. Available Information We file annual, quarterly and current reports as well as other information with the Securities and Exchange Commission (“SEC”). These filings are available to the public over the internet at the SEC's website at www.sec.gov.
Our footprint enables us to serve large, national customers across the United States and Canada. 9 Table of Contents Long-Tenured Customer Relationships : We deliver to over 300,000 customer locations and serve businesses which participate across numerous industries.
Our footprint enables us to serve large, national customers across the United States and Canada. Long-Tenured Customer Relationships : We deliver to over 300,000 customer locations and serve businesses which participate across numerous industries.
Experienced Leadership Team : The Company is led by Kim Scott, President and Chief Executive Officer, Rick Dillon, Executive Vice President and Chief Financial Officer, and Chris Synek, Executive Vice President and Chief Operating Officer. These executives have deep experience in their respective areas.
Experienced Leadership Team : The Company is led by Kim Scott, President and Chief Executive Officer, Rick Dillon, Executive Vice President and Chief Financial Officer, and Bill Seward, Executive Vice President and Chief Operating Officer. These executives have deep experience in their respective areas.
In our collaboration with new function leaders, we have identified key areas of opportunity to reduce our operating costs and expand margins across our business: Network Optimization : A comprehensive analysis of our plant network and customer flows (route movements from plant to customer) has revealed a significant opportunity throughout our network to lower our cost to serve.
We have identified key areas of opportunity to reduce our operating costs and expand margins across our business: Network Optimization : A comprehensive analysis of our plant network and customer flows (route movements from plant to customer) has revealed a significant opportunity throughout our network to lower our cost to serve.
Hiring, developing and retaining teammates is critically important to our operations and we are focused on creating experiences and programs that foster growth, performance and retention.
Hiring, developing and retaining teammates is critically important to our operations and we are focused on creating experiences and programs that foster growth, performance and 10 Table of Contents retention.
We are working to instill a continuous improvement mindset in our teammates by instituting disciplined, financial metrics and reporting, key performance indicator monitoring and strengthening our leadership in key functional areas such as supply chain, logistics and plant operations.
We focus on a continuous improvement mindset in our teammates by instituting disciplined, financial metrics and reporting, key performance indicator monitoring and strengthening our leadership in key functional areas such as supply chain, logistics and plant operations.
As we move forward as an independent, standalone company, we will continue to embrace that legacy and build upon it by developing a community engagement program unique to our business that is aligned with our strategy, teammates, the customers we serve and the communities where we operate. Compensation, Benefits, Safety and Wellness .
W e have a strong culture of community engagement and as we move forward as an independent, standalone company, we will continue to build upon it by developing a community engagement program unique to our business that is aligned with our strategy, teammates, the customers we serve and the communities where we operate. Compensation, Benefits, Safety and Wellness .
While customers are not required to make an up-front investment for their rental uniforms or other rented merchandise, a rental customer typically agrees to pay specified exit costs if it terminates its agreement early without cause. 6 Table of Contents __________________ Figure A: Revenue by Sector for fiscal 2023 Our Services and Products We provide a full-service uniform solution on a contracted and recurring basis.
While customers are not required to make an up-front investment for their rental uniforms or other rented merchandise, a rental customer typically agrees to pay specified exit costs if it terminates its agreement early without cause. Our Services and Products We provide a full-service uniform solution on a contracted and recurring basis.
We sponsor training and education programs for our teammates, from hourly teammates to upper levels of management, designed to enhance leadership and managerial capability, help ensure quality execution of our programs, drive customer satisfaction and increase return on investment. Community Engagement . Through Aramark’s legacy, we have a strong culture of community engagement.
We sponsor training and education programs for our teammates, from hourly teammates to upper levels of management, designed to enhance leadership and managerial capability, help ensure quality execution of our programs, drive customer satisfaction and increase return on investment. Community Engagement .
He joined Aramark in September 2023 to serve as Chief Operating Officer of Aramark Uniform Services. Our executive leaders foster a culture of investing in our people, supporting their growth and development, instilling a sense of higher purpose, winning through teamwork with integrity and creating a safe environment for all.
He joined Vestis in September 2024 to serve as Executive Vice President and Chief Operating Officer. Our executive leaders foster a culture of investing in our people, supporting their growth and development, instilling a sense of higher purpose, winning through teamwork with integrity and creating a safe environment for all.
We work to maintain productive working relationships with these unions. Diversity, Equity and Inclusion . We believe that it is beneficial to align our diversity, equity and inclusion priorities with our business strategy. As of September 29, 2023, 75% of our Board of Directors is from underrepresented groups, including females who represent 63% of our Board of Directors.
We work to maintain productive working relationships with these unions. Diversity, Equity and Inclusion . We believe that it is beneficial to align our diversity, equity and inclusion priorities with our business strategy. As of September 27, 2024, 60% of our Board of Directors is from underrepresented groups, including females who represent 50% of our Board of Directors.
This requires an unwavering commitment to safety, diversity and inclusion, professional growth opportunities and competitive total compensation and benefits that meet the needs of our teammates and their families. We have approximately 20,000 teammates, primarily based in the United States, Canada and Mexico. As of September 29, 2023, approximately 10,500 of our teammates were represented by labor unions.
This requires an unwavering commitment to safety, diversity and inclusion, professional growth opportunities and competitive total compensation and benefits that meet the needs of our teammates and their families. We have approximately 19,600 teammates, primarily based in the United States, Canada and Mexico. As of September 27, 2024, approximately 10,800 of our teammates were represented by labor unions.
Additionally, 80% of our named executive officers are from underrepresented groups including females, who represent 40% of our named executive officers; 67% of our executive officers are from underrepresented groups including females who represent 33% of our executive officers; and 45% of our senior leadership team are from underrepresented groups including females, who represent 32% of our senior leadership team.
Additionally, 60% of our named executive officers are from underrepresented groups including females, who represent 40% of our named executive officers; 67% of our executive officers are from underrepresented groups including females who represent 33% of our executive officers; and 44% of our senior leadership team are from underrepresented groups including females, who represent 33% of our senior leadership team.
We service our customers on a recurring basis, typically weekly, delivering clean uniforms and, in the same visit, picking up worn uniforms for inspection, cleaning and repair or replacement (illustrated in Figure B). In addition, we pick up used and soiled floor mats, towels and linens and replace them with clean products.
We service our customers on a recurring basis, typically weekly, delivering clean uniforms and, in the same visit, picking up worn uniforms for inspection, cleaning and repair or replacement. In addition, we pick up used and soiled floor mats, towels and linens and replace them with clean products. We also restock restroom supplies, first-aid supplies and safety products as needed.
Within the United States and Canada, we are the second largest provider in our industry, based on publicly reported information related to revenue, number of employees and facilities data for each of Cintas, Vestis and Unifirst.
Critical Scale in Growing, Fragmented Industry : We believe the market opportunity for our services is significant and growing. Within the United States and Canada, we are the second largest provider in our industry, based on publicly reported information related to revenue, number of employees and facilities data for each of Cintas, Vestis and Unifirst.
Financial Profile In fiscal year 2023, we generated revenue of approximately $2.8 billion, operating income of $217.9 million, or 7.7% of revenue, and net income of $213.2 million, or 7.5% of revenue. Cash provided from operating activities was $257.0 million. Revenue from our recurring rental business comprised 93% of total revenue, with 7% from direct sales.
Financial Profile In fiscal year 2024, we generated revenue of approximately $2.8 billion, operating income of $158.0 million, or 5.6% of revenue, and net income of $21.0 million, or 0.7% of revenue. Cash provided from operating activities was $471.8 million. Revenue from our recurring rental business comprised 94% of total revenue, with 6% from direct sales.
We anticipate the repositioning of our brand will occur in stages, over time, and we intend to use trade advertising and targeted digital marketing to promote recognition of our brand. Environmental, Social and Governance (ESG) We have been engaged in actively supporting environmental, social and governance (ESG) efforts.
We intend to continue to use trade advertising and targeted digital marketing to promote recognition of the Vestis brand. Environmental, Social and Governance (ESG) We have been engaged in actively supporting environmental, social and governance (ESG) efforts.
We maintain a Corporate Social Compliance Policy and related Vendor Code of Conduct both of which require the international manufacturing of our private label garments to occur under safe, lawful and humane working conditions. To support our Corporate Social Compliance Policy, our international private label garment manufacturers confirm annually their commitment to comply with our Vendor Code of Conduct.
We maintain a Corporate Social Compliance 7 Table of Contents Policy and related Vendor Code of Conduct both of which require the international manufacturing of our private label garments to occur under safe, lawful and humane working conditions.
Our services and products are delivered to customers by route service representatives via delivery routes that originate from one of our laundry plants or satellite sites. Approximately 50% of our uniforms and linens are manufactured in our two manufacturing plants in Mexico.
Our services and products are delivered to customers by route service representatives via delivery routes that originate from one of our laundry plants or satellite sites. Approximately 60% of our uniforms and linens are manufactured in our two manufacturing plants in Mexico. Our Mexican operations include approximately 189,000 square feet of manufacturing capacity and a 107,000 square foot distribution facility.
We are focused on further strengthening our capabilities and enhancing competencies in functional areas that 11 Table of Contents are core to the delivery of our strategy such as sales and marketing, pricing, procurement, logistics, technology, talent acquisition and retention and plant operations.
Performance-Driven Culture Fostering a performance-driven culture is essential to the delivery of high-quality revenue growth and margin expansion. We are focused on further strengthening our capabilities and enhancing competencies in functional areas that are core to the delivery of our strategy such as sales and marketing, pricing, procurement, logistics, technology, talent acquisition and retention and plant operations.
Additionally, we repair and reuse garments whenever possible to maximize the life cycle of our uniforms and support the circular economy. We source raw materials as well as finished goods from a variety of domestic and international suppliers. Certain of our raw materials and products are currently limited to a single supplier.
We source raw materials as well as finished goods from a variety of domestic and international suppliers. Certain of our raw materials and products are currently limited to a single supplier.
We also restock restroom supplies, first-aid supplies and safety products as needed. __________________ Figure B: Illustrative uniform services weekly process For our cleanroom customers who operate highly regulated and/or contamination-free processes in the healthcare, pharmaceutical and technology industries, we provide advanced static dissipative garments, sterile garments, barrier apparel and cleanroom application accessories.
For our cleanroom customers who operate highly regulated and/or contamination-free processes in the healthcare, pharmaceutical and technology industries, we provide advanced static dissipative garments, sterile garments, barrier apparel and cleanroom application accessories.
He joined Aramark in May 2022 to serve as Chief Financial Officer of Aramark Uniform Services and to prepare the Company to be a standalone, independent public company. Mr. Synek has extensive expertise in leadership roles in related recurring revenue model businesses. Previously, Mr.
He joined Aramark in May 2022 to serve as 8 Table of Contents Chief Financial Officer of Aramark Uniform Services and to prepare the Company to be a standalone, independent public company. Mr.
If we fail to comply with applicable laws, we may be subject to investigations, criminal sanctions or civil remedies, including fines, penalties, damages, reimbursement, injunctions, seizures, disgorgements or debarments from government contracts. 12 Table of Contents Our business is subject to various environmental protection laws and regulations, including the United States Federal Clean Water Act, Clean Air Act, Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation, and Liability Act and similar local, provincial, state, federal and international laws and regulations governing the use, treatment, management, transportation, and disposal of wastes and hazardous materials.
Our business is subject to various environmental protection laws and regulations, including the United States Federal Clean Water Act, Clean Air Act, Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation, and Liability Act and similar local, provincial, state, federal and international laws and regulations governing the use, treatment, management, transportation, and disposal of wastes and hazardous materials.
Given our robust capabilities, scale and talent, we are well positioned to partner with customers for their future needs across a range of services, use cases and business strategies.
Our Competitive Advantages We believe we have significant competitive advantages including our full-service uniform solution offering, size and scale, extensive network footprint, long-tenured customer relationships and experienced leadership team. Given our robust capabilities, scale and talent, we are well positioned to partner with customers for their future needs across a range of services, use cases and business strategies.
Our strategy is focused on creating shareholder value through high-quality and profitable revenue growth that is underpinned by efficient operations and a performance-driven culture.
We are focused on long-term opportunities to make deliveries in our service network more effective, which we expect will drive revenue growth and margin expansion. Our strategy is focused on creating shareholder value through high-quality and profitable revenue growth that is underpinned by efficient operations and a performance-driven culture.
We routinely review and evaluate sites that may require remediation and monitoring. Based on these reviews and various estimates and assumptions, we determine our estimated costs. As of September 29, 2023, we do not anticipate any expenditures for environmental remediation that would have a material effect on our financial condition.
As of September 27, 2024, we do not anticipate any expenditures for environmental remediation that would have a material effect on our financial condition.
In connection with the Separation, we will be repositioning our new Vestis brand to better represent our customer value proposition and value creation strategy as an independent, standalone uniform rental and workplace supplies company.
Intellectual Property We have patents, trademarks, trade names and licenses that support the operation of our business. We have positioned our Vestis brand to represent our customer value proposition and value creation strategy as an independent, standalone uniform rental and workplace supplies company.
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In addition to uniforms, we also provide workplace supplies including managed restroom supply services, first-aid supplies and safety products, floor mats, towels and linens.
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To support our Corporate Social Compliance Policy, our international private label garment manufacturers confirm annually their commitment to comply with our Vendor Code of Conduct. Further, the factories used to produce these products are subject to annual third-party social compliance audits.
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Further, the factories used to produce these products are subject to annual third-party social compliance audits. Our Competitive Advantages We believe we have significant competitive advantages including our full-service uniform solution offering, size and scale, extensive network footprint, long-tenured customer relationships and experienced leadership team.
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Seward has extensive expertise in leadership roles and previously served as President at UPS Supply Chain Solutions where he oversaw multiple business units including global logistics, freight forwarding, warehousing and distribution. In addition, Mr. Seward previously served as Executive Vice President and Chief Commercial Officer at Stericycle, in addition to other leadership roles at UPS.
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Critical Scale in Growing, Fragmented Industry : We believe the market opportunity for our services is significant and growing. We estimate our total addressable market to be approximately $48 billion as of March 31, 2023.
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If we fail to comply with applicable laws, we may be subject to investigations, criminal sanctions or civil remedies, including fines, penalties, damages, reimbursement, injunctions, seizures, disgorgements or debarments from government contracts.
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Synek served as Chief Executive Officer of Neovia Logistics, and President, Transportation North America for XPO Logistics, Inc. Additionally, Mr. Synek spent the first 16 years of his career developing uniform, laundry and workplace services experience at Cintas Corporation, eventually moving on to increasing roles of responsibility at Allied Waste Industries and Republic Services and Tervita Corporation.
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We actively manage the sites which we know require remediation and monitoring in conjunction with regulators and relevant partners. Based on these activities and various estimates and assumptions, we determine our 11 Table of Contents estimated costs and liabilities.
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We are focused on long-term opportunities to make deliveries in our service network more effective, which we expect will drive revenue growth and margin expansion. Our new independence will enable sharper focus on our customers, which we believe will also enhance our competitive positioning and performance.
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Performance-Driven Culture Fostering a performance-driven culture is essential to the delivery of high-quality revenue growth and margin expansion.
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Intellectual Property We have patents, trademarks, trade names and licenses that support the operation of our business. Historically, the Aramark brand, including its corporate starperson logo design, and the Aramark word mark have been used to market our business.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

58 edited+16 added−39 removed158 unchanged
Biggest changeThere can be no assurance that the foregoing factors will not have a material adverse effect on our international operations or on our consolidated financial condition and results of operations. Labor-Related Risks Our business may suffer if we are unable to hire and retain sufficient qualified personnel or if labor costs increase.
Biggest changeLabor-Related Risks Our business may suffer if we are unable to hire and retain sufficient qualified personnel or if labor costs increase. We believe much of our future growth and success depends on the continued availability, service and well-being of entry level personnel.
Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock. 29 Table of Contents We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing the Board with more time to assess any acquisition proposal.
Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock. 26 Table of Contents We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing the Board with more time to assess any acquisition proposal.
In addition, we typically incur substantial start-up and operating costs and experiences lower profit margin and operating cash flows in connection with the establishment of new business, and in periods with higher rates of new business, we have experienced and expect to continue to experience negative impact to our profit margin and our cash flows.
In addition, we typically incur substantial start-up and operating costs and experience lower profit margin and operating cash flows in connection with the establishment of new business, and in periods with higher rates of new business, we have experienced and expect to continue to experience negative impact to our profit margin and our cash flows.
Moreover, the impact of inflation on various areas of our business, including labor and product costs, has recently affected our business, financial condition or results of operations, and we may not be able to mitigate any future impacts of inflation by increases in pricing for our goods and services.
Moreover, the impact of inflation on various areas of our business, including labor and product costs, has affected our business, financial condition and results of operations, and we may not be able to mitigate any future impacts of inflation by increases in pricing for our goods and services.
Following the completion of the Separation, our results of operations and cash flows may be more volatile, and we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and may be more costly. • Prior to the Separation, our business was operated by Aramark as part of its broader corporate organization, rather than as an independent company.
Following the completion of the Separation, our results of operations and cash flows 23 Table of Contents may be more volatile, and we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and may be more costly. • Prior to the Separation, our business was operated by Aramark as part of its broader corporate organization, rather than as an independent company.
Accordingly, the historical financial information included in this 10-K does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below: • Generally, our working capital requirements and capital for our general corporate purposes, including capital expenditures and acquisitions, have historically been satisfied as part of the corporate-wide cash management 24 Table of Contents policies of Aramark.
Accordingly, the historical financial information included in this 10-K for these periods does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below: • Generally, our working capital requirements and capital for our general corporate purposes, including capital expenditures and acquisitions, have historically been satisfied as part of the corporate-wide cash management policies of Aramark.
If one of our suppliers were to violate the law, or engage in conduct that results in adverse publicity, our reputation may be harmed simply due to our association with that supplier. Drought, flood, natural disasters and other extreme weather events caused by climate change or other 16 Table of Contents environmental conditions could also result in supply chain disruptions.
If one of our suppliers were to violate the law, or engage in conduct that results in adverse publicity, our reputation may be harmed simply due to our association with that supplier. Drought, flood, natural disasters and other extreme weather events caused by climate change or other environmental conditions could also result in supply chain disruptions.
On a quarterly basis, we assess each of our environmental sites to determine whether the costs of investigation and remediation of environmental conditions are probable and can be reasonably estimated as well as the adequacy of our reserves with respect to such costs.
On a quarterly basis, we review each of our environmental sites to determine whether the costs of investigation and remediation of environmental conditions are probable and can be reasonably estimated as well as the adequacy of our reserves with respect to such costs.
These systems are also vulnerable to an increasing threat of rapidly evolving cyber-based attacks, including malicious software, attempts to deny access to systems or networks, attempts to gain unauthorized access to data, including through phishing emails, attempts to fraudulently induce employees or others to disclose information, the exploitation of software and operating vulnerabilities and physical device tampering/skimming at card reader units.
These systems are also vulnerable to an increasing threat of rapidly evolving cyber-based attacks, including malicious software, attempts to deny access to 19 Table of Contents systems or networks, attempts to gain unauthorized access to data, including through phishing emails, attempts to fraudulently induce employees or others to disclose information, the exploitation of software and operating vulnerabilities and physical device tampering/skimming at card reader units.
Non-compliance with these emerging rules or standards or a failure to address regulator, stakeholder and societal expectations may result in potential cost increases, litigation, fines, penalties, production and sales restrictions, brand or reputational damage, loss of customers, suppliers and commercial partners, failure to retain and attract talent, lower valuation and higher investor activism activities.
Non-compliance with these emerging rules or standards or a failure to address regulator, stakeholder and societal expectations may result in potential cost increases, litigation, fines, penalties, production and sales restrictions, brand or 20 Table of Contents reputational damage, loss of customers, suppliers and commercial partners, failure to retain and attract talent, lower valuation and higher investor activism activities.
These alternative measures may not be 23 Table of Contents successful and may not permit us to meet our scheduled debt service obligations. In addition, if we were required to raise additional capital in the current financial markets, the terms of such financing, if available, could result in higher costs and greater restrictions on our business.
These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In addition, if we were required to raise additional capital in the current financial markets, the terms of such financing, if available, could result in higher costs and greater restrictions on our business.
The prices of fuel and energy to run our vehicles, equipment and facilities are volatile and fluctuate based on factors outside of our control. For example, the ongoing conflict between Russia and Ukraine has disrupted supply chains and caused increases in fuel prices. Our operating margins have been and may continue to be impacted by such increased fuel prices.
The prices of fuel and energy to run our vehicles, equipment and facilities are volatile and fluctuate based on factors outside of our control. For example, the ongoing conflict between Russia and Ukraine disrupted supply chains and caused increased fuel prices. Our operating margins have been and may continue to be impacted by such increased fuel prices.
Furthermore, we are subject to specific restrictions on discontinuing the active conduct of our trade or business, the issuance or sale of stock or other securities (including securities convertible into our stock but excluding certain compensatory arrangements), and sales of assets outside the ordinary course of business. Such restrictions may reduce our strategic and operating flexibility.
Furthermore, we are subject to specific restrictions on discontinuing the active conduct of our trade or business, the issuance or sale of stock or other 24 Table of Contents securities (including securities convertible into our stock but excluding certain compensatory arrangements), and sales of assets outside the ordinary course of business. Such restrictions may reduce our strategic and operating flexibility.
We are subject to various environmental protection laws and regulations, including the United States Federal Clean Water Act, Clean Air Act, Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation, and Liability Act and 19 Table of Contents similar local, provincial, state, federal and international laws and regulations governing the use, treatment, management, transportation, and disposal of wastes and hazardous materials.
We are subject to various environmental protection laws and regulations, including the United States Federal Clean Water Act, Clean Air Act, Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation, and Liability Act and similar local, provincial, state, federal and international laws and regulations governing the use, treatment, management, transportation, and disposal of wastes and hazardous materials.
In addition, 18 Table of Contents any significant increase in the number of work stoppages at any of our operations could adversely affect our business, financial condition or results of operations. We may incur significant liability as a result of our participation in multiemployer-defined benefit pension plans. A number of our locations operate under collective bargaining agreements.
In addition, any significant increase in the number of work stoppages at any of our operations could adversely affect our business, financial condition or results of operations. We may incur significant liability as a result of our participation in multiemployer-defined benefit pension plans. A number of our locations operate under collective bargaining agreements.
The opinion of its outside tax advisors was based upon and relied on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of Aramark and us, including facts, assumptions, representations, statements and undertakings relating to the past and future conduct of the companies’ respective businesses 27 Table of Contents and other matters.
The opinion of its outside tax advisors was based upon and relied on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of Aramark and us, including facts, assumptions, representations, statements and undertakings relating to the past and future conduct of the companies’ respective businesses and other matters.
In addition, financial distress and insolvency experienced by customers, especially larger customers, has in the past made it difficult and in the future could make it difficult for us to collect amounts we are owed and could result in the voiding, termination or modification of 14 Table of Contents existing contracts.
In addition, financial distress and insolvency experienced by customers, especially larger customers, has in the past made it difficult and in the future could make it difficult for us to collect amounts we are owed and could result in the voiding, termination or modification of existing contracts.
In the course of our business, we may be subject to penalties and fines and reputational harm for non-compliance with environmental protection laws and regulations, and we may settle, or contribute to the settlement of, actions or claims relating to the handling and disposal of wastes or hazardous materials.
In the course of our business, we may be subject to penalties and fines and reputational harm for non-compliance with environmental protection laws and regulations, and we may settle, or contribute 18 Table of Contents to the settlement of, actions or claims relating to the handling and disposal of wastes or hazardous materials.
Risks Related to the Separation We have no history of operating as an independent company, and our historical financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.
Risks Related to the Separation We have limited history of operating as an independent company, and our historical financial information prior to the Separation is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.
However, the timing, declaration, amount and payment of any future dividends will continue to be within the discretion of our Board of Directors, and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by our Board of Directors.
The timing, declaration, amount and payment of any future dividends are within the discretion of our Board of Directors, and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by our Board of Directors.
We do not have direct operations in the Middle East but the recent Israel-Hamas War and escalating tensions in the region may disrupt global markets and impact our supply chain.
We do not have direct operations in the Middle East but the recent conflicts in Israel and escalating tensions in the region may disrupt global markets and impact our supply chain.
Pursuant to the separation and distribution agreement and certain other agreements we entered into with Aramark in connection with the Separation, Aramark agrees to indemnify us for certain liabilities, and we agree to indemnify Aramark for certain liabilities. Indemnities that we will be required to provide Aramark could negatively affect our business.
Pursuant to the separation and distribution agreement and certain other agreements we entered into with Aramark in connection with the Separation, Aramark agrees to indemnify us for certain liabilities relating to Aramark’s business, and we agree to indemnify Aramark for certain liabilities relating to our business. Indemnities that we may be required to provide Aramark could negatively affect our business.
These risks may be exacerbated by current economic conditions due to, among other things, increased cost pressure at our customers, tight labor markets and heightened competition in a contracted marketplace.
These risks may be exacerbated by current 13 Table of Contents economic conditions due to, among other things, increased cost pressure at our customers, tight labor markets and heightened competition in a contracted marketplace.
The amount of such debt financing for acquisitions could be significant and the terms of such debt instruments could be more restrictive than our current covenants.
The amount of such debt financing for acquisitions could be significant and the terms of such debt 15 Table of Contents instruments could be more restrictive than our current covenants.
Continued or further unionization of our workforce may increase our costs and work stoppages could damage our business. As of September 29, 2023, approximately 10,500 of our employees were represented by labor unions and covered by over 200 collective bargaining agreements with various terms and dates of expiration.
Continued or further unionization of our workforce may increase our costs and work stoppages could damage our business. As of September 27, 2024, approximately 10,800 of our employees were represented by labor unions and covered by over 200 collective bargaining agreements with various terms and dates of expiration.
Management's Discussion and Analysis of Financial Condition and Results of Operations” for definitions for the Credit Agreement, Term Loan Facilities, Revolving Credit Facility, and Credit Facilities. 22 Table of Contents This significant amount of debt could potentially have important consequences to us and our debt and equity investors, including: • requiring a substantial portion of our cash flow from operations to make interest payments, thereby reducing our ability to use our cash flow to fund operations, capital expenditures and future business opportunities ; • making it more difficult to satisfy debt service and other obligations; • increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; • increasing our vulnerability to general adverse economic and industry conditions; • reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry; • limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and • limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise.
This significant amount of debt could potentially have important consequences to us and our debt and equity investors, including: • requiring a substantial portion of our cash flow from operations to make interest payments, thereby reducing our ability to use our cash flow to fund operations, capital expenditures and future business opportunities ; • making it more difficult to satisfy debt service and other obligations; • increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; • increasing our vulnerability to general adverse economic and industry conditions; • reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry; • limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and • limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly and potentially limit our ability to effectively refinance our indebtedness as it matures. Borrowings under the Credit Facilities bear interest at variable rates and expose us to interest rate risk.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly and potentially limit our ability to effectively refinance our indebtedness as it matures. 21 Table of Contents Borrowings under the Credit Agreement bear interest at variable rates and expose us to interest rate risk.
Although we believe that the sources of capital in place at the time of the separation will permit us to finance our operations for the foreseeable future on acceptable terms and conditions, our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including, but not limited to: (1) our financial performance; (2) our credit ratings or absence of a credit rating; (3) the liquidity of the overall capital markets; and (4) the state of the economy.
Although we believe that the sources of capital in place will permit us to finance our operations for the foreseeable future on acceptable terms and conditions, our access to, and the availability of, financing on acceptable terms and conditions in 25 Table of Contents the future will be impacted by many factors, including, but not limited to: (1) our financial performance; (2) our credit ratings; (3) the liquidity of the overall capital markets; and (4) the state of the economy.
Risks Related to Our Business Operational Risks Unfavorable economic conditions have in the past adversely affected, are currently adversely affecting and in the future could adversely affect our business, financial condition or results of operations.
Any of the following risks and uncertainties could materially adversely affect our business, financial condition or results of operations. 12 Table of Contents Risks Related to Our Business Operational Risks Unfavorable economic conditions have in the past adversely affected, are currently adversely affecting and in the future could adversely affect our business, financial condition or results of operations.
We are subject to legal proceedings that may adversely affect our business, financial condition or results of operations. We are subject to various litigation claims and legal proceedings arising from the ordinary course of our business, including personal injury, customer contract, environmental and employment claims.
We are subject to legal proceedings that may adversely affect our business, financial condition or results of operations. We are subject to various litigation claims and legal proceedings including securities class actions, personal injury, customer contract, environmental and employment claims.
During fiscal 2023, approximately 91% of our revenue was generated in the United States and approximately 9% of our revenue was generated in Canada. In addition, we operate 17 Table of Contents manufacturing plants and a distribution center in Mexico that collectively employ approximately 2,000 personnel as of September 29, 2023.
During fiscal 2024, approximately 91% of our revenue was generated in the United States and approximately 9% of our revenue was generated in Canada. In addition, we operate manufacturing plants and a distribution center in Mexico that collectively employ approximately 2,100 personnel as of September 27, 2024.
In addition, there are regional and local uniform suppliers whom we believe have strong customer loyalty. The primary areas of competition within the industry are price, design, quality of products and quality of services.
We face competition from major national competitors with significant financial resources. In addition, there are regional and local uniform suppliers whom we believe have strong customer loyalty. The primary areas of competition within the industry are price, design, quality of products and quality of services.
Because we accept debit and credit cards for payment from customers, we are also subject to various industry data protection standards and protocols, such as payment network security operating guidelines and the Payment Card Industry Data Security Standard.
Because we accept debit and credit cards for payment from customers, we are also subject to various industry data protection standards and protocols, such as payment network security operating guidelines and the Payment Card Industry Data Security Standard (PCI - DSS). We are members of PCI, and we maintain a PCI certified Internal Security Assessor (ISA).
Our ability to find qualified suppliers who meet our standards and to access raw materials and finished products in a timely and efficient manner can be a challenge, especially with respect to suppliers located and goods sourced outside the United States.
In addition, customer and stakeholder expectations regarding environmental, social and governance consideration for suppliers are evolving. Our ability to find qualified suppliers who meet our standards and to access raw materials and finished products in a timely and efficient manner can be a challenge, especially with respect to suppliers located and goods sourced outside the United States.
The indemnity from Aramark may not be sufficient to protect us against the full amount of such liabilities if, for example, Aramark is not able to fully satisfy its indemnification obligations.
If we are found responsible for a liability relating to Aramark’s business, the indemnity from Aramark may not be sufficient to protect us against the full amount of such liability if, for example, Aramark is not able to fully satisfy its indemnification obligations.
Our ability to meet those financial ratios and tests can be affected by events beyond our control and, in the event of a significant deterioration of our financial performance, there can be no assurance that we will satisfy those ratios and tests. A breach of any of these covenants could result in a default under the Credit Agreement.
Our ability to meet those financial ratios and tests can be affected by events beyond our control and, in the 22 Table of Contents event of a significant deterioration of our financial performance, there can be no assurance that we will satisfy those ratios and tests.
We have historically marketed our products and services using the “Aramark” name and logo, which is a globally recognized brand with a strong reputation for high-quality products and services.
We are repositioning our brand to remove the Aramark name, which could adversely affect our ability to attract and maintain customers. We have historically marketed our products and services using the “Aramark” name and logo, which is a globally recognized brand with a strong reputation for high-quality products and services.
Legal, Regulatory, Safety and Security Risks If we fail to comply with requirements imposed by applicable law or other governmental regulations, we could become subject to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business, financial condition or results of operations.
In addition, any increased funding obligations for underfunded multiemployer-defined benefit pension plans could have an adverse financial impact on us. 17 Table of Contents Legal, Regulatory, Safety and Security Risks If we fail to comply with requirements imposed by applicable law or other governmental regulations, we could become subject to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business, financial condition or results of operations.
Any terrorist attacks or incidents prompted by political unrest also may adversely affect our revenue and operating results. 15 Table of Contents Competition in our industry could adversely affect our business, financial condition or results of operations. The uniform apparel and workplace supply services industry is highly competitive. We face competition from major national competitors with significant financial resources.
Any terrorist attacks or incidents prompted by political unrest also may adversely affect our revenue and operating results. These future developments are outside of our control and are highly uncertain. Competition in our industry could adversely affect our business, financial condition or results of operations. The uniform apparel and workplace supply services industry is highly competitive.
Item 1A. Risk Factors . You should carefully consider the following risks and other information in this Form 10-K in evaluating Vestis and Vestis’s common stock. Any of the following risks and uncertainties could materially adversely affect our business, financial condition or results of operations.
Item 1A. Risk Factors . You should carefully consider the following risks and other information in this Form 10-K in evaluating Vestis and Vestis’s common stock.
In certain circumstances, payment card association rules and obligations make us liable to payment card issuers if information in connection with payment cards and payment card transactions that we hold is compromised, the liabilities for which could be substantial. 21 Table of Contents These laws, regulations and obligations are increasing in complexity and number, change frequently and may be inconsistent across the various jurisdictions in which we operate.
In certain circumstances, payment card association rules and obligations make us liable to payment card issuers if information in connection with payment cards and payment card transactions that we hold is compromised, the liabilities for which could be substantial.
We believe much of our future growth and success depends on the continued availability, service and well-being of entry level personnel. We have had and may continue to have difficulty in hiring and retaining qualified personnel, particularly at the entry level. We will continue to have significant requirements to hire such personnel.
We have had and may continue to have difficulty in hiring and retaining qualified personnel, particularly at the entry level. We will continue to have significant requirements to hire such personnel.
In addition, political unrest and global conflicts like the ongoing conflict between Russia and Ukraine have disrupted, and in the future may further continue to disrupt, global supply chains and heighten volatility and disruption of global financial markets.
In addition, political unrest and global conflicts have disrupted, and in the future may further continue to disrupt, global supply chains and heighten volatility and disruption of global financial markets. While we do not have direct operations within Russia, Ukraine or Israel, conflicts in those regions further disrupted global supply chains and heightened volatility and disruption of global financial markets.
We expect that stakeholder expectations relating to environmental, social and governance (“ESG”) considerations may expose us to liabilities, increased costs, reputational harm and other adverse effects on our business.
The occurrence of some or all of the foregoing could have a material adverse effect on our results of operations, financial condition, business and reputation. We expect that stakeholder expectations relating to environmental, social and governance (“ESG”) considerations may expose us to liabilities, increased costs, reputational harm and other adverse effects on our business.
If we do not satisfactorily perform our obligations under these agreements, we may be held liable for any resulting losses suffered by Aramark, subject to certain limits. Our agreements with Aramark may be on terms that are less beneficial to us than the terms may have otherwise been from unaffiliated third parties.
If we do not satisfactorily perform our obligations under these agreements, we may be held liable for any resulting losses suffered by Aramark, subject to certain limits.
Any increase 20 Table of Contents in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, consolidated results of operations and consolidated financial condition.
Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, consolidated results of operations and consolidated financial condition. Our operations and reputation may be adversely affected by disruptions to or breaches of our information systems or if our data is otherwise compromised.
We may be held liable to Aramark if we fail to perform under our agreements with Aramark which may negatively affect our business, financial condition or results of operations.
We may be held liable to Aramark if we fail to perform under our agreements with Aramark which may negatively affect our business, financial condition or results of operations. In connection with the Separation, the Company and Aramark entered into various agreements, including a separation and distribution agreement, a tax matters agreement, and other transaction agreements.
Anti-takeover provisions could enable our Board of Directors to resist a takeover attempt by a third party and limit the power of our stockholders.
Moreover, there can be no assurance that we will continue to pay such dividends or the amount of such dividends. Anti-takeover provisions could enable our Board of Directors to resist a takeover attempt by a third party and limit the power of our stockholders.
Emerging international operations 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; and nationalization and expropriation of private assets.
Emerging international operations 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; and nationalization and expropriation of private assets. 16 Table of Contents There can be no assurance that the foregoing factors will not have a material adverse effect on our international operations or on our consolidated financial condition and results of operations.
The impact of these global events on our longer-term operational and financial performance will depend on future developments, our response and governmental response to inflation, and the duration and severity of the conflict in Ukraine and the Middle East.
The impact on our longer-term operational and financial performance will depend on future developments, including our response and governmental response to inflation, the duration and severity of the ongoing volatility and disruption of global financial markets and our ability to effectively hire and retain personnel.
Risks associated with our suppliers and service providers could adversely affect our business, financial condition or results of operations. The raw materials we use in our business and the finished products we sell are sourced from a variety of domestic and international suppliers.
The raw materials we use in our business and the finished products we sell are sourced from a variety of domestic and international suppliers. We seek to require our suppliers and service providers to comply with applicable laws and otherwise meet our quality and/or conduct standards.
Additionally, the federal government and some states have adopted, are considering or in the future may adopt similar data protection laws.
Cybersecurity related laws, regulations and obligations are increasing in complexity and number, change frequently and may be inconsistent across the various jurisdictions in which we operate. Additionally, the federal government and some states have adopted, are considering or in the future may adopt similar data protection laws.
The historical information about Vestis in this 10-K refers to Vestis as operated by and integrated with Aramark. The historical financial information of Vestis included in this 10-K is derived from the Combined Financial Statements and accounting records of Aramark.
The historical financial information of Vestis included in this 10-K for the fiscal years ended September 29, 2023 and September 30, 2022 is derived from the Combined Financial Statements and accounting records of Aramark.
We cannot be certain this trend will continue or not be reversed or that customers that have outsourced functions will not decide to perform these functions themselves. Unfavorable developments with respect to either outsourcing or the use of preferred vendors could have a material adverse effect on our business, financial condition and results of operations.
Unfavorable developments with respect to either outsourcing or the use of preferred vendors could have a material adverse effect on our business, financial condition and results of operations. 14 Table of Contents Risks associated with our suppliers and service providers could adversely affect our business, financial condition or results of operations.
Risks Related to Our Indebtedness We have debt obligations that could adversely affect our business and profitability and our ability to meet other obligations. We entered into a Credit Agreement in fiscal 2023 and completed financing transactions and as a result of such transactions we have approximately $1,500 million of indebtedness.
Risks Related to Our Indebtedness We have debt obligations that could adversely affect our business and profitability and our ability to meet other obligations. We have approximately $1,162.5 million of borrowings outstanding as of September 27, 2024 under our senior secured credit agreement (the “Credit Agreement”), and we may incur additional indebtedness in the future.
We intend to maintain a global cybersecurity program governed by an information security management system aligned with ISO27001. We have established and maintain a cross-functional Cyber Governance Committee that will be responsible for prioritizing and managing evolving cyber risks.
We maintain a global cybersecurity program governed by an information security management system aligned with ISO27001 and mapped against NIST-800. The company’s Chief Information Security Officer (CISO) is responsible for developing and managing the company’s cybersecurity program and reporting cybersecurity matters to senior management, the Audit Committee, and the Board.
There can be no assurance, particularly as a new company, that we will have access to the capital markets on terms acceptable to us. As an independent, publicly traded company, we do not enjoy the same benefits that we did as a part of Aramark.
There can be no assurance that we will have access to the capital markets on terms acceptable to us. Risks Related to our Common Stock Your percentage of ownership in Vestis may be diluted in the future.
The occurrence of some or all of the foregoing could have a material adverse effect on our results of operations, financial condition, business and reputation.
While this facility allows us to monetize these accounts receivable and reduce our indebtedness, it exposes us to certain risks that could have a material adverse effect on our financial condition and results of operations.
Removed
While we do not have direct operations within Russia or Ukraine, the conflict involving these nations has heightened the disruption to our supply chain, triggered inflation in our labor costs and may increase our risk of cyberattacks.
Added
The ongoing volatility and disruption of financial markets caused by these global events, as well as other current global economic factors, triggered inflation in labor and energy costs and has driven significant changes in foreign currencies.
Removed
We seek to require our suppliers and service providers to comply with applicable laws and otherwise meet our quality and/or conduct standards. In addition, customer and stakeholder expectations regarding environmental, social and governance consideration for suppliers are evolving.
Added
We cannot be certain this trend will continue or not be reversed or that customers that have outsourced functions will not decide to perform these functions themselves.
Removed
We do not have direct operations in the Middle East but the recent Israel-Hamas War and escalating tensions in the region may disrupt global markets and impact our supply chain.
Added
We have established and maintain a cross-functional Cyber Governance Committee that is responsible for helping the CISO prioritize and manage evolving cyber risks.
Removed
In addition, any increased funding obligations for underfunded multiemployer-defined benefit pension plans could have an adverse financial impact on us.
Added
A breach of any of these covenants could result in a default under the Credit Agreement.
Removed
Our operations and reputation may be adversely affected by disruptions to or breaches of our information systems or if our data is otherwise compromised.
Added
Risks related to accounts receivable securitization facility Our reliance on an accounts receivable securitization facility subjects us to certain risks that could adversely affect our financial condition and results of operations. Certain of our subsidiaries utilize a revolving accounts receivable securitization facility for working capital.
Removed
While we maintain insurance coverage that may cover certain aspects of cyber risks, such insurance coverage may be unavailable or insufficient to cover all losses or all types of claims that may arise. Further, as cybersecurity risks evolve, such insurance may not be available to us on commercially reasonable terms or at all.
Added
Under this facility, certain subsidiaries sell certain accounts receivable to a special purpose entity, which then transfers these receivables to one or more financial institutions party to the facility as investors.
Removed
We entered into senior secured financing with a syndicate of banks, financial institutions and/or other institutional lenders, with JPMorgan Chase Bank, N.A. acting as the administrative agent and the collateral agent, in an aggregate amount of $1,800 million, consisting of the Term Loan Facilities and the Revolving Credit Facility.
Added
Specifically, if there is a deterioration in the credit quality of our customers, a decline in collections, fewer originations of accounts receivable, or a significant increase in delinquent or defaulted accounts receivable, we may not be able to generate sufficient proceeds to maintain the facility.
Removed
The Term Loan Facilities mature no more than five years from the date thereof. Interest on the loans under the Credit Facilities is to be calculated by reference to the Secured Overnight Financing Rate (“SOFR”) or an alternative base rate, plus an applicable margin, which in the case of any SOFR loan will include a customary spread adjustment.
Added
This could require us to seek alternative financing sources at less favorable terms or reduce our operating cash flow, impacting our ability to meet our financial obligations and invest in growth opportunities.
Removed
We may also incur additional indebtedness in the future. Refer to “Item 7.
Added
Additionally, our accounts receivable securitization facility contains restrictive covenants and asset eligibility criteria, including minimum credit quality standards for receivables, which, if violated, could lead to early repayment requiremen ts, increased fees, or even termination of the facility.
Removed
These reporting and other obligations will place significant demands on our management and administrative and operational resources. Moreover, to comply with these requirements, we anticipate that we will need to migrate our systems, including information technology systems, implement additional financial and management controls, reporting systems and procedures, and hire additional accounting, finance, and information technology staff.
Added
Any termination could further strain our liquidity and potentially require us to use other, possibly more costly, financing alternatives, adversely affecting our profitability, indebtedness profile and financial flexibility.
Removed
We expect to incur additional annual expenses related to these steps, and those expenses may be significant.
Added
Lastly, if the securitization market experiences conditions such as increased risk aversion among investors, liquidity contraction or a tightening of available credit, we may face higher costs or limited access to funding, which could reduce our liquidity and ability to meet our financial obligations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties . Our principal executive offices are currently leased at 500 Colonial Center Parkway, Suite 140, Roswell, GA 30076. As of September 29, 2023, we operated 367 sites including laundry plants, satellite plants, distribution centers and manufacturing plants that are located across the United States, Canada, and Mexico. We own 191 buildings, including distribution centers and satellite plants.
Biggest changeItem 2. Properties . Our principal executive offices are currently leased at 1035 Alpharetta Street, Roswell, GA 30075. As of September 27, 2024, we operated 375 sites including laundry plants, satellite plants, distribution centers and manufacturing plants that are located across the United States, Canada, and Mexico. We own 189 buildings, including distribution centers and satellite plants.
No individual parcel of real estate owned or leased is of material significance to our total assets. 30 Table of Contents
No individual parcel of real estate owned or leased is of material significance to our total assets. 28 Table of Contents
We own 162 buildings in the United States and 29 buildings in Canada. We lease 176 premises, consisting of offices, laundry plants, satellite plants, manufacturing plants, and distribution centers. We lease 163 premises in the United States and 13 premises in Canada.
We own 161 buildings in the United States and 28 buildings in Canada. We lease 186 premises, consisting of offices, laundry plants, satellite plants, manufacturing plants, and distribution centers. We lease 173 premises in the United States and 13 premises in Canada.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe cannot predict the outcome of this legal matter, nor can we predict whether any outcome will have a material adverse effect on our combined statements of income and/or combined statements of cash flows. Accordingly, we have made no provisions for this legal matter in our combined financial statements. Item 4. Mine Safety Disclosures.
Biggest changeWe cannot predict the outcome of these legal matters, nor can we predict whether any outcome may be materially adverse to our business, financial condition, results of operations or cash flows. We intend to vigorously defend these matters. 29 Table of Contents Item 4. Mine Safety Disclosures. Not applicable. 30 Table of Contents PART II
Plaintiffs seek damages on behalf of the purported class representing the amount of the allegedly improperly noticed price increases along with attorneys’ fees, interest and costs. The parties continue to engage in discovery. AmeriPride has moved for summary judgment related to Cake Love. We believe we have numerous defenses and intend to continue to vigorously defend the action.
Plaintiffs seek damages on behalf of the purported class representing the amount of the allegedly improperly noticed price increases along with attorneys’ fees, interest and costs. In the current quarter, the parties reached a settlement in principle, subject to court approval. The settlement includes, among other terms, a monetary component of $3.1 million.
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Not applicable. 31 Table of Contents PART II
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The full amount of the proposed settlement has been provided for in the Consolidated and Combined Financial Statements.
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From time to time, Vestis and its subsidiaries are a party to various other legal actions, proceedings and investigations involving claims incidental to the conduct of their business or otherwise related to us, including actions by customers, employees, government entities and third parties, including under federal, state, international, national, provincial and local employment laws, wage and hour laws, discrimination laws, immigration laws, human health and safety laws, import and export controls and customs laws, environmental laws, false claims or whistleblower statutes, tax codes, antitrust and competition laws, customer protection statutes, procurement regulations, intellectual property laws, supply chain laws, the Foreign Corrupt Practices Act and other anti-corruption laws, lobbying laws, motor carrier safety laws, data privacy and security laws, or alleging negligence and/or breaches of contractual and other obligations.
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Based on information currently available, advice of counsel, available insurance coverage, established reserves and other resources, except as set forth below, we do not believe that any such actions are likely to be, individually or in the aggregate, material to our business, financial condition, results of operations or cash flows.
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However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to our business, financial condition, results of operations or cash flows.
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On May 17, 2024, a purported Vestis shareholder commenced a putative class action lawsuit against Vestis and certain of its officers, in the United States District Court for the Northern District of Georgia, captioned Plumbers, Pipefitters and Apprentices Local No. 112 Pension Fund v. Vestis Corporation, et al., Case No. 1: 24-cv-02175-SDG.
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The lawsuit is purportedly brought on behalf of purchasers of Vestis’ common stock between October 2, 2023 and May 1, 2024, inclusive. The complaint alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, based on allegedly false or misleading statements generally related to our business and operations, pricing practices, and financial results and outlook.
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The lawsuit seeks unspecified damages and other relief. On September 23, 2024, the Court appointed co-lead plaintiffs. On October 30, 2024, the Court entered an amended scheduling order. On June 4, 2024, a purported Vestis shareholder commenced a putative class action lawsuit against Vestis, in the Court of Chancery of the State of Delaware, captioned O’Neill v.
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Vestis Corp., Case No. 2024-0600-JTL . The lawsuit is purportedly brought on behalf of Vestis shareholders. The complaint alleges a single claim for declaratory judgment, seeking to invalidate and void Section II.5(d) of Vestis’ Amended and Restated Bylaws, effective September 29, 2023.
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On October 7, 2024, the Court granted a stipulation to consolidate multiple related actions involving similar company defendants, including the Vestis action, solely for purposes of adjudicating an omnibus motion to dismiss the complaints in each of those actions. On October 11, 2024, Vestis and the other consolidated defendants filed an omnibus motion to dismiss.
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On July 10, 2024, a purported Vestis shareholder commenced a derivative action against Vestis’ directors and certain of its officers, in the United States District Court for the Northern District of Georgia, captioned Hollin v. Scott, et al., Case No. 1: 24-cv-03059-SDG.
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The complaint seeks unspecified damages on behalf of Vestis and certain other relief, such as certain reforms to corporate governance and internal procedures.
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The complaint (in which Vestis is named as a nominal defendant) generally alleges, among other things, breaches of fiduciary duties in connection with the oversight of Vestis’ public statements and internal controls, and that Vestis was damaged as a result of the breaches of fiduciary duties.
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The complaint also alleges, among other things, violations of Section 10(b) of the Securities Exchange Act of 1934, aiding and abetting breach of fiduciary duty, unjust enrichment, and waste of corporate assets.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends After the Separation, our Board of Directors declared a quarterly cash dividend of $0.035 per common share payable on January 4, 2024 to shareholders of record at the close of business on December 15, 2023.
Biggest changeDividends We declared and paid a quarterly dividend of $0.035 per share to our shareholders of record for the first, second, and third quarter of fiscal 2024. In the fourth quarter of fiscal 2024, we declared a dividend of $0.035 to be paid in the first quarter of fiscal 2025.
However, the timing, declaration, amount and payment of any future dividends will continue to be within the discretion of our Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by our Board of Directors.
The timing, declaration, amount and payment of any future dividends will continue to be within the discretion of our Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by our Board of Directors.
As of November 30, 2023, there were approximately 798 holders of record of our outstanding common stock. This does not include persons who hold our common stock in nominee or “street name” accounts through brokers or banks.
As of October 25, 2024, there were approximately 770 holders of record of our outstanding common stock. This does not include persons who hold our common stock in nominee or “street name” accounts through brokers or banks.
There can be no assurance that we will continue to pay such dividends or the amount of such dividends. Securities Authorized for Issuance Under Equity Compensation Plans As of September 29, 2023, we did not maintain an equity compensation plan and none of our securities were available for issuance under an equity compensation plan.
There can be no assurance that we will continue to pay such dividends or the amount of such dividends.
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From October 2, 2023 through November 30, 2023, the highest sales price for our common stock on the NYSE was $19.31 per share, and the lowest sales price for our common stock on the NYSE was $13.83 per share.
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Stock Performance Graph The following graph compares the total return on the Company’s common stock for our fiscal 2024 year with the Standard & Poor’s SmallCap 600 Index (“S&P 600”) and a customized peer group of three companies that includes Cintas Corporation, UniFirst Corporation, and Rollins, Inc..
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While the Board of Directors adopted the Vestis Corporation 2023 Long-Term Incentive Plan in connection with the Spin-Off, no awards under it were outstanding as of September 29, 2023. Accordingly, no equity compensation plan information table is provided. Item 6. [ Reserved ].
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The graph assumes $100 was invested in the S&P 600 and peer group companies on the first day of regular-way trading on October 2, 2023 for our common stock, and that all dividends were reinvested.
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The total return for the peer group companies was weighted according to the market capitalization of each company. 31 Table of Contents Item 6. [ Reserved ].

Item 7. Management's Discussion & Analysis

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

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Biggest changeSegment operating income margin improved approximately 190 basis points from 9.9% in fiscal 2022 to approximately 11.8% in fiscal 2023. 37 Table of Contents Results of Operations—Canada Results Fiscal 2023 Compared to Fiscal 2022 The following table presents an overview of our Canada reportable segment results with the amount of and percentage change between periods for the fiscal years 2023 and 2022 (dollars in thousands).
Biggest changeSegment operating income of $264.7 million in fiscal 2024 decreased 12.9% compared to the prior fiscal year, primarily driven by: • the nonrecurrence of the $26.0 million temporary energy fee recorded in fiscal 2023; • incremental production and delivery labor costs of approximately $18.4 million in fiscal 2024; • higher rental merchandise in service costs of $4.2 million in fiscal year 2024; • higher bad debt expense of $11.5 million in fiscal year 2024; and • the decreases were partially offset by: • lower sales wage costs of $9.0 million largely resulting from lower year-over-year headcount; • year-over-year energy savings of $12.9 million primarily driven by lower rates, as well as our route optimization efforts; Segment operating income margin decreased approximately 140 basis points from 11.8% in fiscal 2023 to approximately 10.4% in fiscal 2024. 37 Table of Contents Results of Operations—Canada Results Fiscal 2024 Compared to Fiscal 2023 The following table presents an overview of our Canada reportable segment results with the amount of and percentage change between periods for the fiscal years 2024 and 2023 (dollars in thousands).
Revenue from these contracts represent a single-performance obligation and are recognized over time as services are performed based on the nature of services provided and contractual rates (output method).
Revenue from these contracts represent a single-performance obligation and are recognized over time as services are performed based on the nature of services provided and contractual rates (output method).
Our cash flows within the United States segment are transferred to Aramark regularly as part of Aramark’s centralized cash management program. Our cash flows within the Canada segment are reinvested locally. The cash and cash equivalents held by Aramark at the corporate level are not specifically identifiable to us and therefore were not allocated to any of the periods presented.
Our cash flows within the United States segment were transferred to Aramark regularly as part of Aramark’s centralized cash management program. Our cash flows within the Canada segment were reinvested locally. The cash and cash equivalents held by Aramark at the corporate level were not specifically identifiable to us and therefore were not allocated to any of the periods presented.
Covenant Compliance The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell or dispose of assets; pay dividends, make distributions or repurchase its capital stock; engage in certain transactions with affiliates; make investments, loans or advances; create restrictions on the payment of dividends or other amounts to the Company from its restricted subsidiaries; amend material agreements governing our subordinated debt; repay or repurchase any subordinated debt, except as scheduled or at maturity; make certain acquisitions; change our fiscal year; and fundamentally change our business.
Covenant Compliance The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell or dispose of assets; pay dividends, make distributions or repurchase capital stock; engage in certain transactions with affiliates; make investments, loans or advances; create restrictions on the payment of dividends or other amounts to the Company from its restricted subsidiaries; amend material agreements 40 Table of Contents governing our subordinated debt; repay or repurchase any subordinated debt, except as scheduled or at maturity; make certain acquisitions; change our fiscal year; and fundamentally change our business.
We have two manufacturing facilities in Mexico with approximately 189,000 square feet of manufacturing capacity between both plants that produce approximately 50% of our uniforms and linens products. We source raw materials, finished goods, equipment, and other supplies from a variety of domestic and international suppliers.
We have two manufacturing facilities in Mexico with approximately 189,000 square feet of manufacturing capacity between both plants that produce approximately 60% of our uniforms and linens products. We source raw materials, finished goods, equipment, and other supplies from a variety of domestic and international suppliers.
Sources of Revenue We generate and recognize over 93% of our total revenue from route servicing contracts on both Uniforms, which we generally manufacture, and Workplace Supplies, such as mats, towels, and linens that are procured from third-party suppliers.
Sources of Revenue We generate and recognize over 94% of our total revenue from route servicing contracts on both Uniforms, which we generally manufacture, and Workplace Supplies, such as mats, towels, and linens that are procured from third-party suppliers.
Results of Operations—United States Results Fiscal 2023 Compared to Fiscal 2022 The following table presents an overview of our United States reportable segment results with the amount of and percentage change between periods for the fiscal years 2023 and 2022 (dollars in thousands).
Results of Operations—United States Results Fiscal 2024 Compared to Fiscal 2023 The following table presents an overview of our United States reportable segment results with the amount of and percentage change between periods for the fiscal years 2024 and 2023 (dollars in thousands).
See “Risk Factors—Operational Risks—Unfavorable economic conditions have in the past adversely affected, are currently affecting and in the future could adversely affect our business, financial condition or results of operations.” Results of Operations Fiscal 2023 Compared to Fiscal 2022 The following table presents an overview of our results on a combined basis with the amount of and percentage change between periods for the fiscal years 2023 and 2022 (dollars in thousands).
See “Risk Factors—Operational Risks—Unfavorable economic conditions have in the past adversely affected, are currently affecting and in the future could adversely affect our business, financial condition or results of operations.” 35 Table of Contents Results of Operations Fiscal 2024 Compared to Fiscal 2023 The following table presents an overview of our results on a combined basis with the amount of and percentage change between periods for the fiscal years 2024 and 2023 (dollars in thousands).
In determining legal reserves, we consider, among other issues: • interpretation of contractual rights and obligations; • the status of government regulatory initiatives, interpretations, and investigations; • the status of settlement negotiations; • prior experience with similar types of claims; 42 Table of Contents • whether there is available insurance; and • advice of counsel.
In determining legal reserves, we consider, among other issues: • interpretation of contractual rights and obligations; • the status of government regulatory initiatives, interpretations, and investigations; • the status of settlement negotiations; • prior experience with similar types of claims; • whether there is available insurance; and • advice of counsel.
Only cash amounts specifically attributable to us are reflected in the Combined Balance Sheets. Transfers of cash, both to and from Aramark’s central cash management system, are reflected as a component of “Net parent investment” on the Combined Balance Sheets and in “Net cash used in financing activities” on the accompanying Combined Statements of Cash Flows.
Only cash amounts specifically attributable to us are reflected in the Combined Balance Sheets. Transfers of cash, both to and from Aramark’s central cash management system, are reflected as a 33 Table of Contents component of “Net parent investment” on the Combined Balance Sheets and in “Net cash used in financing activities” on the accompanying Combined Statements of Cash Flows.
These expenses have been allocated to us on the basis of direct usage where identifiable, with the remainder allocated on a pro rata basis of revenues, headcount or other drivers. We consider these allocations to be a reasonable reflection of the 33 Table of Contents utilization of services or the benefit received.
These expenses have been allocated to us on the basis of direct usage where identifiable, with the remainder allocated on a pro rata basis of revenues, headcount or other drivers. We consider these allocations to be a reasonable reflection of the utilization of services or the benefit received.
This arrangement was used to manage liquidity of Aramark and fund the operations of our business as needed. This arrangement is not indicative of how we would have funded our operations had we been a standalone company separate from Aramark during the periods presented.
This arrangement was used to manage liquidity of Aramark and fund the operations of our business as needed. This arrangement is not indicative of how we would have funded our operations had we been a standalone company separate from Aramark during the fiscal 2023 and fiscal 2022 periods presented.
New Accounting Standards Updates See Note 1 to the audited Combined Financial Statements for a full description of recent accounting standards updates, including the expected dates of adoption.
New Accounting Standards Updates See Note 1 to the audited Consolidated and Combined Financial Statements for a full description of recent accounting standards updates, including the expected dates of adoption.
Following the Separation, our recurring cash needs are primarily directed toward working capital requirements to support ongoing business activities, investments in growth initiatives, capital expenditures, acquisitions, interest payments and repayment of borrowings.
Our recurring cash needs are primarily directed toward working capital requirements to support ongoing business activities, investments in growth initiatives, capital expenditures, acquisitions, interest payments and repayment of borrowings.
In addition to our weekly, recurring customer contracts, we offer customized uniforms through direct sales agreements, typically for large, regional, or national companies. In addition to Uniforms, we also provide workplace supplies (“Workplace Supplies”) including managed restroom supply services, first aid supplies and safety products, floor mats, towels, and linens.
In addition to our weekly, recurring customer contracts, we offer customized uniforms through direct sales agreements, typically for large, regional, or national companies. 32 Table of Contents In addition to Uniforms, we also provide workplace supplies (“Workplace Supplies”) including restroom supply services, first aid supplies and safety products, floor mats, towels, and linens.
The fiscal years ended September 29, 2023, September 30, 2022 and October 1, 2021 were each 52-week periods. Key Trends Affecting Our Results of Operations We serve the uniforms, mats, towels, linens, restroom supplies, first-aid supplies and safety products industry within the United States and Canada.
The fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022 were each 52-week periods. Key Trends Affecting Our Results of Operations We serve the uniforms, mats, towels, linens, restroom supplies, first-aid supplies and safety products industry within the United States and Canada.
The following discussion and analysis of Vestis Corporation’s (“Vestis”, the “Company”, “our”, “we” or “us”) financial condition and results of operations for the fiscal years ended September 29, 2023 and September 30, 2022 should be read in conjunction with our audited Combined Financial Statements and the notes to those statements.
The following discussion and analysis of Vestis Corporation’s (“Vestis”, the “Company”, “our”, “we” or “us”) financial condition and results of operations for the fiscal years ended September 27, 2024 and September 29, 2023 should be read in conjunction with our audited Consolidated and Combined Financial Statements and the notes to those statements.
The cost of these investments is depreciated on a straight-line basis over three to 40 years based upon the estimated useful life of the asset. 34 Table of Contents Selling, general and administrative expenses include costs attributable to our sales team and the administrative functions required to support our customers and our team members.
The cost of these investments is depreciated on a straight-line basis over 3 to 40 years based upon the estimated useful life of the asset. Selling, general and administrative expenses include costs attributable to our sales team and the administrative functions required to support our customers and our team members.
The majority of our cash and cash equivalents balance is from our Canadian operations. Third-party debt and the related interest expense of Aramark has not been allocated to us for any of the periods presented because Aramark’s borrowings were not directly attributable to our standalone business.
The majority of our cash and cash equivalents balance, as of September 29, 2023, is from our Canadian operations. Third-party debt and the related interest expense of Aramark was not been allocated to us for any of the periods presented because Aramark’s borrowings were not directly attributable to our standalone business.
Transactions between us and Aramark have been included in these Combined Financial Statements and are considered related party transactions (see Note 5. Related Party Transactions and Parent Company Investments to our Combined Financial Statements).
Transactions between us and Aramark have been included in these Combined Financial Statements and are considered related party transactions (see Note 15. Related Party Transactions and Parent Company Investment to our Combined Financial Statements).
On September 29, 2023, concurrent with consummation of the Separation, we made a cash distribution of approximately $1,457 million to Aramark. As of September 29, 2023, we had approximately $36 million of cash and cash equivalents and $300 million of availability for borrowing under the Revolving Credit Facility.
On September 29, 2023, concurrent with consummation of the Separation, we made a cash distribution of approximately $1,457 million to Aramark. As of September 27, 2024, we had approximately $31 million of cash and cash equivalents and $295 million of availability for borrowing under the Revolving Credit Facility.
With approximately 20,000 employees, we operate a network of over 350 facilities including laundry plants, satellite plants, distribution centers and manufacturing plants along with a fleet of service vehicles that support over 3,400 pick-up and delivery routes.
With approximately 19,600 employees, we operate a network of over 350 facilities including laundry plants, satellite plants, distribution centers and manufacturing plants along with a fleet of service vehicles that support over 3,300 pick-up and delivery routes.
Basis of Presentation The Combined Financial Statements reflect the combined historical results of operations, comprehensive income and cash flows for the years ended September 29, 2023, September 30, 2022 and October 1, 2021 and the financial position as of September 29, 2023 and September 30, 2022 for Vestis.
Combined Financial Statements The Combined Financial Statements reflect the combined historical results of operations, comprehensive income and cash flows for the years ended September 29, 2023 and September 30, 2022 and the financial position as of September 29, 2023 for Vestis.
Cash Flows Provided by Operating Activities Net cash provided by operating activities was $257.0 million during fiscal 2023 and $232.8 million during fiscal 2022, respectively.
Cash Flows Provided by Operating Activities Net cash provided by operating activities was $471.8 million and $257.0 million during fiscal 2024 and fiscal 2023, respectively.
Rental merchandise in service is amortized over its useful life, which ranges from one to four years. The amortization rates are based on industry experience, intended use of the merchandise, our specific experience, and wear tests performed by us.
Rental merchandise in service is valued at cost less amortization, calculated using the straight-line method. Rental merchandise in service is amortized over its useful life, which ranges from one to four years. The amortization rates are based on industry experience, intended use of the merchandise, our specific experience, and wear tests performed by us.
Cash transferred to and from Aramark’s cash management accounts are reflected within net parent investment as a component of Aramark’s equity. The cash and cash equivalents held by Aramark at the corporate level were not specifically identifiable to us and therefore were not allocated to any of the periods presented.
Cash transferred to and from Aramark’s cash management accounts are reflected within net parent investment as a component of Aramark’s equity. The cash and cash equivalents held by Aramark at the corporate level were not specifically identifiable to us and therefore were not allocated to the Combined Balance Sheet as of September 29, 2023.
We believe that we will meet known and likely future cash requirements through the combination of cash flows from operating activities, available cash balances, available borrowings under our financing arrangements and access to capital markets.
The cost and availability of debt financing will be influenced by market conditions and our future credit ratings. We believe that we will meet known and likely future cash requirements through the combination of cash flows from operating activities, available cash balances, available borrowings under our financing arrangements and access to capital markets.
In preparing our Combined Financial Statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts of assets, liabilities, revenue, and expenses.
We apply these accounting policies in a consistent manner. In preparing our Consolidated and Combined Financial Statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts of assets, liabilities, revenue, and expenses.
For additional information on the year ended October 1, 2021 and year-over-year comparisons to September 30, 2022, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-12B/A filed with the Securities and Exchange Commission (“SEC”) on September 6, 2023.
For additional information on the year ended September 30, 2022 and year-over-year comparisons to September 29, 2023, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the fiscal year ended September 29, 2023.
If results of the qualitative assessment indicate a more likely than not determination or if a qualitative assessment is not performed, a quantitative test is performed by comparing the estimated fair value using discounted cash flow calculations of each reporting unit with its estimated net book value. Historically, Vestis has represented one reporting unit under Aramark’s structure.
If results of the qualitative assessment indicate a more likely than not determination or if a qualitative assessment is not performed, a quantitative test is performed by comparing the estimated fair value using a discounted cash flow method or market method for each reporting unit with its estimated net book value.
Our actions to mitigate the effects of inflation in fiscal 2022 and fiscal 2023 included operating cost reductions, reductions in discretionary spending and reductions in our non-operational footprint, 35 Table of Contents along with the implementation of targeted and strategic price increases under the terms of our customer contracts.
These challenges have continued to impact our business during fiscal 2024. Our actions to mitigate the effects of inflation in fiscal 2023 and fiscal 2024 included operating cost reductions, reductions in discretionary spending and reductions in our non-operational footprint, along with the implementation of targeted and strategic price increases under the terms of our customer contracts.
We provide a full range of uniform programs, managed restroom supply services, first aid supplies and safety products, as well as ancillary items such as floor mats, towels, and linens, to more than 300,000 customer locations across the United States and Canada.
We provide a full range of uniform programs, restroom supply services, first aid supplies and safety products, as well as ancillary items such as floor mats, towels, and linens, to more than 300,000 customer locations across the United States and Canada. We compete with national, regional, and local providers who vary in size, scale, capabilities and product and service offering.
The table below summarizes our cash activity (in thousands): Fiscal Year Ended September 29, 2023 September 30, 2022 Net cash provided by operating activities $ 256,977 $ 232,847 Net cash used in investing activities (14,746) (86,133) Net cash used in financing activities (230,269) (162,543) Reference to the audited Combined Statements of Cash Flows will facilitate understanding of the discussion that follows.
The table below summarizes our cash activity (in thousands): Fiscal Year Ended September 27, 2024 September 29, 2023 Net cash provided by operating activities $ 471,788 $ 256,977 Net cash used in investing activities (73,636) (14,746) Net cash used in financing activities (402,975) (230,269) Reference to the audited Consolidated and Combined Statements of Cash Flows will facilitate understanding of the discussion that follows.
Our continued ability to meet those financial ratios, tests and covenants can be affected by events beyond our control, and there can be no assurance that we will meet those ratios, tests and covenants.
Under the Credit Agreement, we are required to satisfy and maintain specified financial ratios and other financial condition tests and covenants. Our continued ability to meet those financial ratios, tests and covenants can be affected by events beyond our control, and there can be no assurance that we will meet those ratios, tests and covenants.
Our effective tax rate differs from the statutory United States income tax rate due to the effect of state and local income taxes, the tax rate in Canada where we have operations, nontaxable gain on the sale of our equity investment in Sanikleen, a Japanese linen supply company, tax credits and certain nondeductible expenses.
Our effective tax rate differs from the statutory United States income tax rate due to the effect of state and local income taxes, the tax rate in Canada where we have operations, change to deferred taxes on foreign investments, tax credits, and certain nondeductible expenses.
The Credit Agreement establishes a minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA divided by consolidated interest expense. The minimum Interest Coverage Ratio is required to be at least 2.00x for the term of the Credit Agreement. Under the Credit Agreement, we are required to satisfy and maintain specified financial ratios and other financial condition tests and covenants.
The Credit Agreement establishes a minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA divided by consolidated interest expense. The minimum Interest Coverage Ratio is required to be at least 2.00x for the term of the Credit Agreement. At September 27, 2024, we were in compliance with all covenants under the Credit Agreement.
If our assumptions or estimates in our fair value calculations change or if future cash flows, margin projections or future growth rates vary from what was expected, this may impact our impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges.
If our assumptions or estimates in our fair value calculations change or if future cash flows, margin projections or future growth rates vary from what was expected, this may impact our impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges. 42 Table of Contents We believe that an accounting estimate relating to goodwill impairment is a critical accounting estimate because the assumptions underlying future cash flow estimates are subject to change from time to time and the recognition of an impairment could have a significant impact on our Consolidated and Combined Statements of Income.
These factors are critical to determining the amount of rental merchandise in service and related cost of services provided that are presented in the Combined Financial Statements. Material differences may result in the amount and timing of operating income if management makes significant changes to these estimates.
These factors are critical to determining the amount of rental merchandise in service and related cost of services provided that are presented in the Consolidated and Combined Financial Statements.
Segment operating income margin decreased approximately 200 basis points from 7.5% in fiscal 2022 to 5.5% in fiscal 2023. Liquidity and Capital Resources Overview Historically, our business generated positive cash flows from operations. Cash flows within our United States operations were transferred to Aramark regularly as part of Aramark’s centralized cash management program.
Liquidity and Capital Resources Overview Historically, our business generated positive cash flows from operations. For the Combined Statement of Cash Flows during the fiscal years ended September 29, 2023 and September 30, 2022, cash flows within our United States operations were transferred to Aramark regularly as part of Aramark’s centralized cash management program.
We have chosen accounting policies that management believes are appropriate to accurately and fairly report our operating results and financial position in conformity with U.S. GAAP. We apply these accounting policies in a consistent manner.
Critical Accounting Policies and Estimates Our significant accounting policies are described in the notes to the audited Consolidated and Combined Financial Statements included in this Annual Report. We have chosen accounting policies that management believes are appropriate to accurately and fairly report our operating results and financial position in conformity with U.S. GAAP.
Critical accounting estimates and the related assumptions are evaluated periodically as conditions warrant, and changes to such estimates are recorded as new information or changed conditions require. 41 Table of Contents Revenue Recognition We generate and recognize over 93% of our total revenue from route servicing contracts on both Uniforms, which we generally manufacture, and Workplace Supplies, such as mats, towels, and linens that are procured from third-party suppliers.
Revenue Recognition We generate and recognize over 94% of our total revenue from route servicing contracts on both Uniforms, which we generally manufacture, and Workplace Supplies, such as mats, towels, and linens that are procured from third-party suppliers.
We continue to remain principally focused on the safety and well-being of our employees, customers, and everyone we serve, while simultaneously taking timely, proactive measures to adapt to the current environment.
We continue to remain principally focused on the safety and well-being of our employees, customers, and everyone we serve, while simultaneously taking timely, proactive measures to adapt to the current environment. We continue to evaluate and react to the effects of a prolonged global disruption, including items such as inflationary pressures on product and energy costs and greater labor challenges.
Following the separation, certain functions that Aramark provided to us prior to the separation will continue to be provided to us by Aramark under a transition services agreement.
Following the separation, certain functions that Aramark provided to us prior to the separation continued to be provided to us by Aramark under a transition services agreement. As of September 27, 2024 these transition services were no longer being provided.
Interest Expense and Other, net, is primarily comprised of interest expense recognized on financing leases, our share of the financial results for equity method investments and interest expense incurred under our Credit Agreement. Provision for Income Taxes The Provision for Income Taxes represents federal, foreign, state, and local income taxes.
Other income, net is primarily comprised of fees incurred for our accounts receivable securitization facility and our share of the financial results for our equity method investment. 34 Table of Contents Provision for Income Taxes The Provision for Income Taxes represents federal, foreign, state, and local income taxes.
The determination of fair value for the Vestis reporting unit includes assumptions, which are considered Level 3 inputs, that are subject to risk and uncertainty. The discounted cash flow calculations are dependent on several subjective factors including the timing of future cash flows, the underlying margin projection assumptions, future growth rates and the discount rate.
The discounted cash flow calculations are dependent on several subjective factors including the timing of future cash flows, the underlying margin projection assumptions, future growth rates and the discount rate. The market method is dependent on several subjective factors including the determination of market multiples and future cash flows.
On September 29, 2023, we entered into a senior secured financing in an aggregate amount of $1,800 million, consisting of the Term Loan Facilities and the Revolving Credit Facility.
On September 29, 2023, the Company and certain of its subsidiaries entered into a senior secured credit agreement in the aggregate amount of $1,800 million (the “Credit Agreement”).
Workplace Supplies revenue for fiscal 2023 of approximately $1,508 million increased roughly $128 million, or 9.3%, relative to fiscal 2022.
Uniforms revenue for fiscal 2024 of approximately $97 million decreased roughly $4 million, or 3.5%, relative to fiscal 2023. Workplace Supplies revenue for fiscal 2024 of approximately $153 million increased roughly $4 million, or 2.3%, relative to fiscal 2023.
Additionally, many businesses 32 Table of Contents perform certain aspects of our product and service offerings in-house rather than outsourcing them and leveraging the benefits of full-service programs.
Primary methods of competition include product quality, service quality and price. Notable competitors of size include Cintas Corporation and UniFirst Corporation, as well as numerous regional and local competitors. Additionally, many businesses perform certain aspects of our product and service offerings in-house rather than outsourcing them and leveraging the benefits of full-service programs.
Payments related to variable debt are based on applicable rates at September 29, 2023 plus the specified margin in the Credit Agreement for each period presented. (3) Represents purchase commitments for inventory. (4) Includes severance. Critical Accounting Policies and Estimates Our significant accounting policies are described in the notes to the audited Combined Financial Statements included in this Annual Report.
(2) Interest payments on long-term debt includes interest due on outstanding debt obligations under our Credit Agreement. Payments related to variable debt are based on applicable rates at September 27, 2024 plus the specified margin in the Credit Agreement for each period presented. (3) Represents purchase commitments for inventory. (4) Includes severance.
Going forward we will primarily rely on cash and recurring cash flow provided by operations to fund our operations. We also have access to our $300 million Revolving Credit Facility and expect to have access to capital markets for additional funding. The cost and availability of debt financing will be influenced by market conditions and our future credit ratings.
Future Liquidity and Contractual Obligations We primarily rely on cash and recurring cash flow provided by operations to fund our operations. As of September 27, 2024, we have access to $295 million of borrowing capacity from our Revolving Credit Facility and expect to have access to capital markets for additional funding.
In addition, the ongoing conflict between Russia and Ukraine and the recent Israel-Hamas War, regions in which we do not have direct operations, further disrupted global supply chains and heightened volatility and disruption of global financial markets.
Global events, including ongoing geopolitical events, have adversely affected global economies, disrupted global supply chains and labor force participation, and created significant volatility and disruption of financial markets. While we do not have direct operations in Russia and Ukraine or in Israel, conflicts in those regions further disrupted global supply chains and heightened volatility and disruption of global financial markets.
Fiscal Year Ended Change Change September 29, 2023 September 30, 2022 $ % Revenue $ 2,575,352 $ 2,447,027 $ 128,325 5.2 % Segment Operating Income 303,762 242,971 60,791 25.0 % Segment Operating Income % 11.8 % 9.9 % United States revenue increased 5.2% in fiscal 2023 compared to the prior fiscal year.
Fiscal Year Ended Change Change September 27, 2024 September 29, 2023 $ % Revenue $ 2,555,922 $ 2,575,352 $ (19,430) (0.8 %) Segment Operating Income 264,709 303,762 (39,053) (12.9 %) Segment Operating Income % 10.4 % 11.8 % United States revenue decreased 0.8% in fiscal 2024 compared to the prior fiscal year.
The Term Loan A-2 includes $8.75M of principal payments each quarter until the maturity date, in which the remaining unpaid principal amount is due.
The Term Loan A-2 includes $8.75M of principal payments each quarter until the maturity date, in which the remaining unpaid principal amount is due. On February 22, 2024, the Company amended the Credit Agreement to refinance its Term Loan A-1 with an $800 million term loan B-1 due 38 Table of Contents February 22, 2031 (“Term Loan B-1”).
Cash Flows Used in Financing Activities During fiscal 2023, cash provided by financing activities was impacted by the following: • cash receipts related to newly issued debt of ($1,500.0 million); • cash transferred to Aramark ($1,688.9 million); • payments related to finance leases ($27.6 million); and • payments related to debt issuance costs ($13.7 million).
Cash Flows Used in Financing Activities During fiscal 2024, cash used in financing activities was primarily impacted by the following: • cash proceeds from long-term debt borrowings ($798.0 million); • principal payments on long-term borrowings ($1,137.5 million) ; • payments related to finance leases ($30.6 million); • payments related to debt issuance costs ($11.1 million); • dividend payments ($13.8 million); and • cash distributions to Aramark ($6.1 million); During fiscal 2023, cash used in financing activities was impacted by the following: • cash proceeds from long-term debt borrowings ($1,500.0 million); • payments related to debt issuance costs ($13.7 million); • payments related to finance leases ($27.6 million); and • cash distributions to Aramark ($1,688.9 million); Accounts Receivable Securitization Facility On August 2, 2024, certain of our subsidiaries entered into a three-year $250 million accounts receivable securitization facility (the “A/R Facility”).
Costs to Obtain a Contract We defer employee sales commissions earned by our sales force that are considered to be incremental and recoverable costs of obtaining a contract. The deferred costs are amortized using the portfolio approach on a straight-line basis over the average period of benefit, approximately nine years, and are assessed for impairment on a periodic basis.
The deferred costs are amortized using the portfolio approach on a straight-line basis over the average period of benefit, approximately nine years , and are assessed for impairment on a periodic basis. Income Taxes Prior to the Separation, our operations were included in Aramark’s U.S. federal and state tax returns for those taxable periods.
Cost of services provided increased 3.2% in fiscal 2023 compared to the prior fiscal year primarily due to approximately $31.1 million of incremental amortization of rental merchandise in service assets and due to roughly $30.8 million of higher labor and energy costs from the continuation of inflationary pressures.
Segment operating income of $8.2 million decreased 40.5% in fiscal 2024 compared to the prior fiscal year primarily driven by: • incremental labor costs of approximately $4.0 million; and • higher rental merchandise in service costs of $2.1 million; partially offset by: • year-over-year energy savings of approximately $0.5 million Segment operating income margin decreased approximately 220 basis points from 5.5% in fiscal 2023 to 3.3% in fiscal 2024.
Fiscal Year Ended Change Change September 29, 2023 September 30, 2022 $ % Revenue $ 2,825,286 $ 2,687,005 $ 138,281 5.1 % Operating Expenses: Cost of services provided (1) 1,970,215 1,909,676 60,539 3.2 % Depreciation and amortization 136,504 134,352 2,152 1.6 % Selling, general and administrative expenses 500,658 450,734 49,924 11.1 % Total Operating Expenses 2,607,377 2,494,762 112,615 4.5 % Operating Income 217,909 192,243 25,666 13.4 % Gain on Sale of Equity Investment, net (51,831) — (51,831) (100.0 %) Interest Expense and Other, net 10 2,284 (2,274) (99.6 %) Income Before Income Taxes 269,730 189,959 79,771 42.0 % Provision for Income Taxes 56,572 48,280 8,292 17.2 % Net Income $ 213,158 $ 141,679 $ 71,479 50.5 % ______________________ (1) Exclusive of depreciation and amortization Consolidated revenue of $2,825.3 million increased 5.1% in fiscal 2023 compared to the prior fiscal year.
Fiscal Year Ended Change Change September 27, 2024 September 29, 2023 $ % Revenue $ 2,805,820 $ 2,825,286 $ (19,466) (0.7 %) Operating Expenses: Cost of services provided (1) 1,989,872 1,970,215 19,657 1.0 % Depreciation and amortization 140,781 136,504 4,277 3.1 % Selling, general and administrative expenses 517,216 500,658 16,558 3.3 % Total Operating Expenses 2,647,869 2,607,377 40,492 1.6 % Operating Income 157,951 217,909 (59,958) (27.5 %) Gain on Sale of Equity Investment, net — (51,831) 51,831 (100.0 %) Interest Expense, net 126,563 2,109 124,454 5901.1 % Other (Income), net (642) (2,099) 1,457 (69.4 %) Income Before Income Taxes 32,030 269,730 (237,700) (88.1 %) Provision for Income Taxes 11,060 56,572 (45,512) (80.4 %) Net Income $ 20,970 $ 213,158 $ (192,188) (90.2 %) ______________________ (1) Exclusive of depreciation and amortization Consolidated revenue of $2,805.8 million decreased $19.5 million or 0.7% in fiscal 2024 compared to the prior fiscal year.
This increase was driven by sales volume growth and pricing actions, partially offset by the approximately $14.5 million negative impact of foreign currency exchange rates between years. Sales volume growth contributed approximately $77.7 million to the increase.
Revenue was driven by sales volume growth and pricing of approximately $20 million, with pricing accounting for 180 basis points of the growth. This growth was offset by $18 million lower revenue from lost customers and $2 million lower revenue from foreign currency exchange rates between years.
Both periods were impacted by base and new business growth and timing of collections; • Increase in operating cash flows during fiscal 2023 compared to fiscal 2022 due to a greater source of cash from accrued expenses of $23.5 million primarily due to growth in business operations, higher severance charges recorded in fiscal 2023 and timing of other payments; partially offset by: 39 Table of Contents • Decrease in operating cash flows during fiscal 2023 compared to fiscal 2022 due to a lower source of cash from accounts payable of $64.3 million primarily due to the timing of disbursements.
Other significant changes in cash from operating assets and liabilities were primarily due to: • Increase in operating cash flows during fiscal 2024 compared to fiscal 2023 due to a greater source of cash from accrued expenses of $88.5 million primarily due to timing of other payments; and • Increase in operating cash flows during fiscal 2024 compared to fiscal 2023 due to a higher source of cash from accounts payable of $54.6 million primarily due to the timing of disbursements. 39 Table of Contents Cash Flows Used in Investing Activities Net cash used in investing activities of $73.6 million during fiscal 2024 was $58.9 million higher during fiscal 2024 relative to fiscal 2023 primarily due to cash proceeds of $51.9 million related to the sale of our Sanikleen equity investment and due to $5.9 million lower proceeds from the disposal of assets in fiscal 2024 compared to fiscal 2023.
During the fourth quarter of fiscal 2023, we performed the annual impairment test for goodwill using a quantitative testing approach. Based on our evaluation performed, we determined that the fair value of the reporting unit significantly exceeded its respective carrying amount, and therefore, we determined that goodwill was not impaired.
Based on our evaluation performed, we determined that the fair value of the reporting units exceeded their respective carrying amount, and therefore, we determined that goodwill was not impaired. The determination of fair value for the Vestis reporting units includes assumptions, which are considered Level 3 inputs, that are subject to risk and uncertainty.
Additionally, the Revolving Credit Facility is available for loans in United States dollars and Canadian dollars with aggregate commitments of $300 million (the “Revolving Credit Facility” and, together with the Term Loan Facilities, the “Credit Facilities”). 38 Table of Contents The Term Loan A-1 will mature on September 29, 2025 (the “Term A-1 Maturity Date”) and the Term Loan A-2 will mature on the earlier of (i) September 29, 2028 and (ii) the date (the “Springing Maturity Date”) that is 4 months prior to the Term A-1 Maturity Date if any portion of the Term Loan A-1 (or indebtedness which extends, renews, refunds or replaces any portion of the Term Loan A-1) remains outstanding as of such date and has, as of such date, a scheduled maturity date prior to September 29, 2028.
The Credit Agreement was initially comprised of an $800 million term loan A-1 due September 29, 2025 (“Term Loan A-1”), a $700 million term loan A-2 due September 29, 2028 (“Term Loan A-2” and, together with the Term Loan A-1, the “Term Loan Facilities”), and a revolving credit facility available for loans in United States dollars and Canadian dollars with aggregate commitments of $300 million and a maturity of September 29, 2028 (the “Revolving Credit Facility”).
The provision for income taxes for fiscal 2023 was recorded at an effective rate of 21.0% compared to an effective rate of 25.4% in fiscal 2022. The lower effective tax rate was primarily due to a nontaxable gain on the sale of our equity investment in Sanikleen in fiscal 2023.
The higher effective tax rate was primarily due to the non-taxable gain on the sale of our equity investment in Sanikleen in fiscal 2023, change in deferred tax on foreign investments in fiscal 2024, and the impact of tax adjustments on the lower year-over-year earnings.
The increase was driven by the sale of our equity investment in Sanikleen, a Japanese linen supply company, for approximately $51.9 million. Interest Expense and Other, net, decreased $2.3 million in fiscal 2023 from the prior fiscal year.
The Company sold its equity investment in Sanikleen, a Japanese linen supply company, in fiscal 2023. Interest Expense, net, increased $124.5 million in fiscal 2024 from the prior fiscal year primarily due to the issuance of our term loan debt on September 29, 2023, and subsequently partially refinanced on February 22, 2024.
Operating income as a percentage of revenue (“operating income margin”) increased from 7.2% in fiscal 2022 to 7.7% in fiscal 2023, an improvement of approximately 50 basis points. 36 Table of Contents Gain on Sale of Equity Investments, net increased $51.8 million in fiscal 2023 from the prior fiscal year.
Operating income of $158.0 million decreased 27.5% in fiscal 2024 compared to the prior fiscal year from the impact of changes in revenue and costs noted above. Gain on Sale of Equity Investments, net, decreased $51.8 million in fiscal 2024 from the prior fiscal year.
The following table summarizes our future obligations for long-term borrowings, estimated interest payments, finance leases, future minimum lease payments under noncancelable operating leases, purchase obligations and other liabilities as of September 29, 2023 (dollars in thousands): Payments Due by Period Contractual Obligations as of September 29, 2023 Total Less than 1 year 1-3 years 3-5 years More than 5 years Long-term borrowings (1) 1,500,000 26,250 878,750 595,000 — Estimated interest payments (2) 362,574 86,568 176,958 99,049 — Finance lease obligations 153,724 33,300 56,522 38,915 24,987 Operating leases 73,525 22,274 28,841 13,260 9,150 Purchase obligations (3) 7,400 7,400 — — — Other liabilities (4) 3,400 3,400 — — — $ 238,049 $ 66,374 $ 85,363 $ 52,175 $ 34,137 ______________________ (1) Excludes the $11.1 million reduction to long-term borrowings from debt issuance costs (2) Interest payments on long-term debt includes interest due on outstanding debt obligations under our Credit Agreement.
The following table summarizes our future obligations for long-term borrowings, estimated interest payments, finance leases, future minimum lease payments under noncancelable operating leases, purchase obligations and other liabilities as of September 27, 2024 (dollars in thousands): Payments Due by Period Contractual Obligations as of September 27, 2024 Total Less than 1 year 1-3 years 3-5 years More than 5 years Long-term borrowings (1) 1,162,500 — — 497,500 665,000 Estimated interest payments (2) 473,844 89,914 176,436 137,780 69,714 Finance lease obligations 167,586 37,246 61,112 42,821 26,407 Operating leases 108,061 23,755 35,984 20,620 27,702 Purchase obligations (3) 5,800 5,800 — — — Other liabilities (4) 2,703 2,703 — — — $ 1,920,494 $ 159,418 $ 273,532 $ 698,721 $ 788,823 ______________________ 41 Table of Contents (1) Excludes the $13.2 and $1.6 million reduction to long-term borrowings from debt issuance costs and debt discount, respectively.
Borrowings under the Credit Facilities will bear interest at rates calculated by reference to the Secured Overnight Financing Rate (“SOFR”) or the Base Rate (as defined in the definitive credit agreement entered into with respect to the Credit Facilities (the “Credit Agreement”)), at the option of the Company, plus a margin, which initially will be 2.25% for SOFR loans and 1.25% for Base Rate loans and thereafter will fluctuate based on the Company’s total net leverage ratio.
The Term Loan A-1 interest rate was, and the Term Loan A-2 interest rate is, the Secured Overnight Financing Rate (“SOFR”), plus a Credit Spread Adjustment of 10 basis points and a margin from 1.50% to 2.50% depending on the Company’s Consolidated Total Net Leverage Ratio, as defined in the Credit Agreement.
Uniforms revenue for fiscal 2023 of approximately $100 million was essentially flat relative to fiscal 2022. Workplace Supplies revenue for fiscal 2023 of approximately $150 million increased roughly $11 million, or 7.6%, relative to fiscal 2022.
A decline in revenue from losing customers is the primary driver of the remaining year over year variance. Uniforms revenue for fiscal 2024 of approximately $1,038 million decreased approximately $30 million, or 2.8%, relative to fiscal 2023. Workplace Supplies revenue for fiscal 2024 of approximately $1,518 million increased roughly $11 million, or 0.7%, relative to fiscal 2023.
Removed
We compete with national, regional, and local providers who vary in size, scale, capabilities and product and service offering. Primary methods of competition include product quality, service quality and price. Notable competitors of size include Cintas Corporation and UniFirst Corporation, as well as numerous regional and local competitors.
Added
Basis of Presentation Consolidated Financial Statements The Consolidated Financial Statements reflect the historical results of operations, comprehensive income and cash flows for the year ended September 27, 2024 and the financial position as of September 27, 2024 for Vestis.
Removed
Recent global events, including the COVID-19 pandemic, have adversely affected global economies, disrupted global supply chains and labor force participation, and created significant volatility and disruption of financial markets. COVID-19 related disruptions negatively impacted our financial and operating results beginning in the second quarter of fiscal 2020 through the first half of fiscal 2021.
Added
Interest Expense is comprised of interest expense incurred under our Credit Agreement and interest expense recognized on financing leases.
Removed
Our financial results started to improve during the second half of fiscal 2021 and continued to improve throughout fiscal 2022 as COVID-19 restrictions were lifted, and operations reopened.
Added
Temporary energy fees of $26.7 million recorded during fiscal 2023 that did not repeat during fiscal 2024 accounted for approximately 100 basis points of the decrease. Sales volume growth and the net effect of pricing actions contributed approximately $220 million and $59 million, respectively, with approximately 680 basis points of the volume growth coming from new customer sales.
Removed
Throughout fiscal 2022, we saw continued improved profitability from customers reopening as COVID-19 restrictions eased as well as from effective management of operating costs and pricing including temporary fees to mitigate the effects of elevated inflation.
Added
The sales growth was partially offset by the impact on revenue from customer losses along with lower year-over-year direct sales. There was a negligible impact to revenue growth from the change in foreign currency rates year-over-year. Customer retention 1 improved from 90.4% in fiscal 2023 to 91.9% in fiscal 2024.
Removed
We continue to evaluate and react to the effects of a prolonged global disruption, including items such as inflationary pressures on product and energy costs and greater labor challenges. These challenges have continued to impact our business during fiscal 2023.
Added
Cost of services provided increased $19.7 million, or 1.0%, in fiscal 2024 compared to the prior fiscal year primarily due to an increase in labor costs of $20.2 million, rental merchandise in service costs of $6.3 million, and vehicle costs of $6.2 million partially offset by $12.2 million of lower energy costs linked primarily to lower energy rates as well as productivity savings from route optimization efforts.
Removed
Pricing accounted for the remainder of the increase, including actions taken to offset the impact of inflationary pressures and increased merchandise amortization on sales growth. This includes the impact of a temporary energy fee implemented late in the second quarter of fiscal 2022, continuing through the second quarter of fiscal 2023.
Added
Selling, general and administrative expenses increased $16.6 million, or 3.3%, in fiscal 2024 compared to the prior fiscal year. The increase was primarily due to approximately $18 million of incremental public company and standalone costs, a prior fiscal year $6.8 million gain on sale of land, $13.0 million of incremental bad debt expense, and $5.1 million of increased insurance costs.
Removed
The revenue from the temporary energy fee was $26 million in both fiscal 2022 and fiscal 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+2 added−1 removed2 unchanged
Biggest changeExcluding the impact of interest rate derivative agreements, each 1% increase in interest rates on the Term Loan Facilities would increase our annual interest expense by approximately $15 million based on the aggregate 43 Table of Contents principal amount outstanding under the Term Loan Facilities as of September 29, 2023.
Biggest changeEach 1% increase in interest rates on the Term Loan Facilities would increase our annual interest expense by approximately $12 million based on the aggregate principal amount outstanding under the Term Loan Facilities as of September 27, 2024. As of September 27, 2024, $1,163 million aggregate principal amount was outstanding under the Term Loan Facilities.
As a result, increases in interest rates could increase the cost of servicing our debt and could materially reduce our profitability and cash flows. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities, as well as through entering into interest rate derivative agreements.
As a result, increases in interest rates could increase the cost of servicing our debt and could materially reduce our profitability and cash flows. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.
Removed
As of September 29, 2023, $1,500 million aggregate principal amount was outstanding under the Term Loan Facilities. 44 Table of Contents
Added
Commodity Price Risk 44 Table of Contents We are exposed to changes in prices of commodities used in our operations, primarily associated with gasoline, diesel and natural gas fuel. We may from time to time seek to manage exposure to adverse commodity price changes through our normal operations as well as through entering into commodity derivative agreements.
Added
As of September 27, 2024 we did not have any outstanding derivative arrangements. 45 Table of Contents

Other VSTS 10-K year-over-year comparisons