ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Overview
We are one of the leading providers of workplace uniforms and protective clothing in North America. We design, manufacture, personalize, rent, clean, deliver, and sell a wide range of uniforms and protective clothing, including shirts, pants, jackets, coveralls, lab coats, smocks, aprons and specialized protective wear, such as flame resistant and high visibility garments. We also rent and sell industrial wiping products, floor mats, facility service products and other non-garment items, and provides restroom and cleaning supplies and first aid cabinet services and other safety supplies as well as provide certain safety training, to a variety of manufacturers, retailers and service companies. We serve businesses of all sizes across multiple industries and sectors. We provide our products and services to over 300,000 customer locations in the U.S., Canada and Europe.
U.S. GAAP establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in interim financial reports issued to shareholders. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions on how to allocate resources and assess performance. Our chief operating decision-maker is our Chief Executive Officer.
Prior to May 31, 2025, we organized our business into six operating segments: U.S. Rental and Cleaning, Canadian Rental and Cleaning, Manufacturing (“MFG”), Specialty Garments Rental and Cleaning (“Specialty Garments”), First Aid and Corporate. The U.S. Rental and Cleaning and Canadian Rental and Cleaning operating segments were previously combined to form the U.S. and Canadian Rental and Cleaning reporting segment, and as a result, we had five reporting segments. We previously referred to our U.S. and Canadian Rental and Cleaning, MFG, and Corporate segments combined as our “Core Laundry Operations.”
Beginning with the fourth quarter of 2025, we reorganized our business into three reportable operating segments based on the information reviewed by our Chief Executive Officer: Uniform & Facility Service Solutions, First Aid & Safety Solutions and Other. Refer to Item 1, “ Business ” and Note 15, “ Segment Reporting ” to our Consolidated Financial Statements for our disclosure of segment information. We have recast certain prior period segment results to conform with the current presentation.
The Uniform & Facility Service Solutions segment consolidates the former Corporate, MFG and U.S. and Canadian Rental and Cleaning operating segments and includes our cleanroom operations, which was previously part of the Specialty Garments reporting segment. The Uniform & Facility Service Solutions reporting segment designs, manufactures, purchases, rents, cleans, delivers and sells, uniforms and protective clothing and non-garment items in the U.S. and Canada. Certain operations of the Uniform & Facility Service Solutions reporting segment are referred to by the Company as “industrial laundry operations” and we refer to the locations related to this reporting segment as our “industrial laundries”. Additionally, the Uniform & Facility Service Solutions consists of our distribution center, sales and marketing, information systems, engineering, materials management, manufacturing planning, finance, budgeting, human resources, other general and administrative costs and interest expense. The segment, through the Company’s cleanroom operations, also purchases, rents, cleans, delivers and sells specialty garments and non-garment items primarily for cleanroom applications and provides cleanroom cleaning at limited customer locations.
We renamed our First Aid reporting segment as the First Aid & Safety Solutions reporting segment to better reflect the scope of services and products offered. The First Aid & Safety Solutions reporting segment sells first aid cabinet services and other safety supplies, provides certain safety training and maintains wholesale distribution and pill packaging operations for non-prescription medicines.
The Other reporting segment currently consists of our nuclear business, which was previously part of the Specialty Garments reporting segment with our cleanroom operations. The segment purchases, rents, cleans, delivers and sells, specialty garments and non-garment items primarily for nuclear applications.
Approximately 91.2% of our revenues in fiscal 2025 were derived from our Uniform & Facility Service Solutions segment. A key driver of this business is the number of workers employed by our customers. Our revenues are directly impacted by fluctuations in these employment levels. First Aid & Safety Solutions represented approximately 4.7% of our total revenues in fiscal 2025. Revenues from our Other segment, which accounted for approximately 4.1% of our fiscal 2025 revenues, increases during outages and refueling by nuclear power plants, as garment usage increases at these times.
Critical Accounting Policies and Estimates
We believe the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.
Use of Estimates
We prepare our financial statements in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. We utilize key estimates in preparing the financial statements, including casualty and environmental estimates, valuation of intangible assets acquired in connection with a business combination, recoverability of goodwill, intangibles, income taxes and long-lived assets. These estimates are based on historical information, current trends, and information available from other sources. Our results are affected by economic, political, legislative, regulatory and legal actions. Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies, and changes in the prices of raw materials, can have a significant effect on operations. These factors and other events could cause actual results to differ from management’s estimates.
Revenue Recognition and Allowance for Doubtful Accounts
We recognize revenue from rental operations and related services in the period in which the services are provided. Direct sale revenue is recognized in the period in which the services are performed or when the product is shipped. Our judgment and estimates are used in determining the collectability of accounts receivable and evaluating the adequacy of the allowance for doubtful accounts as well as our sales credits reserve. We consider specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances as part of our evaluation in assessing the allowance for doubtful accounts. We consider our historical credit experience in assessing the sales credits reserve. Changes in our estimates are reflected in the period they become known. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Material changes in our estimates may result in significant differences in the amount and timing of bad debt expense recognition for any given period. Our revenues do not include taxes we collect from our customers and remit to governmental authorities.
Inventories and Rental Merchandise in Service
Our inventories are stated at the lower of cost or net realizable value, net of any reserve for excess and obsolete inventory. Work-in-process and finished goods inventories consist of materials, labor and manufacturing overhead. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to our customers or used in our rental operations. We monitor canceled or terminated contracts (and reductions in customer orders) as part of its ongoing assessment of realizability. If such cancellations or reductions indicate that inventory held for those contracts may not be sold or used, additional reserves or write-downs are recorded. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required. We use the first-in, first-out (“FIFO”) method to value our inventories, which primarily consist of finished goods. Rental merchandise in service is being amortized on a straight-line basis over the estimated service lives of the merchandise, which range from six to thirty-six months. In establishing estimated lives for merchandise in service, our management considers historical experience and the intended use of the merchandise. Material differences may result in the amount and timing of operating profit for any period if we make significant changes to our estimates.
Goodwill, Intangibles and Other Long-Lived Assets
In accordance with U.S. GAAP, we do not amortize goodwill. Instead, we test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Our evaluation considers changes in the operating environment, competitive information, market trends, operating performance and cash flow modeling.
We completed our annual goodwill impairment test as of the first day of the fourth quarter in fiscal 2025, fiscal 2024 and fiscal 2023. There have been no impairments of goodwill or other intangible assets in fiscal 2025, 2024 or 2023.
We cannot predict future economic conditions and their impact on us or the future net realizable value of our stock. A decline in our market capitalization and/or deterioration in general economic conditions could negatively and materially impact our assumptions and assessment of the fair value of our business. If general economic conditions or our financial performance
deteriorate, we may be required to record a goodwill impairment charge in the future which could have a material impact on our financial condition and results of operations.
Property, plant and equipment, and definite-lived intangible assets are depreciated or amortized over their useful lives. Useful lives are based on our estimates of the period that the assets will generate economic benefits. Long-lived assets are evaluated for impairment whenever events or circumstances indicate an asset may be impaired. There were no material impairments of long-lived assets in fiscal 2025, 2024 or 2023.
Business Combinations
The Company accounts for business acquisitions using the purchase method of accounting, in accordance with which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair value of the consideration paid, including contingent consideration, is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed.
The Company’s management exercises significant judgments in determining the fair value of assets acquired and liabilities assumed, as well as intangibles and their estimated useful lives. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows, royalty cost savings and appropriate discount rates used in computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to the fair value of assets and liabilities made after the end of the measurement period are recorded within the Company’s operating results.
Insurance
We self-insure for certain obligations related to health and dental, workers’ compensation, vehicles and general liability programs. We also purchase stop-loss insurance policies for workers’ compensation, vehicles and general liability programs to protect ourselves from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for events that have occurred but have not been reported. Our estimates consider historical claim experience and other factors. Our liabilities are based on our estimates, and, while we believe that our accruals are adequate, the ultimate liability may be significantly different from the amounts recorded. In certain cases where partial insurance coverage exists, we must estimate the portion of the liability that will be covered by existing insurance policies to arrive at our net expected liability. Receivables for insurance recoveries are recorded as assets, on an undiscounted basis. Changes in our claim experience, our ability to settle claims or other estimates and judgments we use could have a material impact on the amount and timing of expense for any given period.
Environmental and Other Contingencies
We are subject to legal proceedings and claims arising from the conduct of our business operations, including environmental matters, personal injury, customer contract matters and employment claims. U.S. GAAP requires that a liability for contingencies be recorded when it is probable that a liability has occurred, and the amount of the liability can be reasonably estimated. Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded. We regularly consult with our attorneys and outside consultants, in our consideration of the relevant facts and circumstances, before recording a contingent liability. We record accruals for environmental and other contingencies based on enacted laws, regulatory orders or decrees, our estimates of costs, insurance proceeds, participation by other parties, the timing of payments, and the input of our attorneys and outside consultants.
The estimated liability for environmental contingencies has been discounted as of August 30, 2025 using risk-free interest rates ranging from 4.86% to 4.92% over periods ranging from twenty to thirty years. The estimated current costs, net of legal settlements with insurance carriers, have been adjusted for the estimated impact of inflation at 3.0% per year. Changes in enacted laws, regulatory orders or decrees, our estimates of costs, risk-free interest rates, insurance proceeds, participation by other parties, the timing of payments, the input of our attorneys and outside consultants or other factual circumstances could have a material impact on the amounts recorded for our environmental and other contingent liabilities. Refer to Note 11, “ Commitments and Contingencies ”, of our Consolidated Financial Statements for additional discussion and analysis.
Income Taxes
We compute income tax expense by jurisdiction based on our operations in each jurisdiction. Deferred income taxes are provided for temporary differences between the amounts recognized for income tax and financial reporting purposes at currently enacted tax rates. Deferred tax assets and liabilities are determined by the differences between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities. See Note 4, “ Income Taxes ” of our Consolidated Financial Statements for the types of items that give rise to significant deferred income tax assets and liabilities. Deferred income taxes are classified as assets or liabilities based on the classification of the related asset or liability for financial reporting purposes. We regularly review deferred tax assets for recoverability based upon projected future taxable income and the expected timing of the reversals of existing temporary differences. Although realization is not assured, management believes it is more likely than not that the recorded deferred tax assets will be realized.
We are periodically reviewed by U.S. domestic and foreign tax authorities regarding the amount of taxes due. These reviews typically include inquiries regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with various filing positions, we record estimated reserves . Refer to Note 4, “ Income Taxes ”, of our Consolidated Financial Statements for further discussion regarding our accounting for income taxes and our uncertain tax positions for financial accounting purposes.
Fiscal Year
Our fiscal year ends on the last Saturday in August. For financial reporting purposes, fiscal 2025 and 2024 consisted of 52 weeks and 53 weeks, respectively.
Factors Affecting our Business
In general, we believe that our results of operations are not dependent on moderate changes in the inflation rate. Historically, we have been able to manage the impacts of more significant changes in inflation rates through our customer relationships, customer agreements that generally provide for price increases and continued focus on improvements in operational productivity. However, the inflationary environment in recent years had a negative impact on our margins, including increased energy costs for our vehicles and our plants, and increased wages in the labor markets in which we compete. While inflation has moderated recently, a period of sustained inflation could pressure our margins in future periods. Adverse economic conditions resulting from inflationary pressures, U.S. Federal Reserve actions, including elevated interest rates and/or increases in interest rates, geopolitical issues, U.S. and foreign tariffs or other impositions on imported goods or other causes are difficult to predict and may have a material adverse impact on our business, results of operations and financial condition.
We are also monitoring and evaluating the potential impact of recently announced new or increased tariffs on imported goods. If any such tariffs were to increase our cost or difficulty of obtaining raw materials or products from suppliers and we were unable to mitigate the impacts of any such increased costs or difficulties, it could have a material adverse impact on our business and our results of operations. In addition, any such tariffs or other impositions on imported goods could have a negative adverse impact on economic conditions generally and on the businesses of our customers, including decreases in wearer levels at our customers, which could have a material adverse impact on our business and our results of operations.
Please see Part I, Item 1A. “ Risk Factors ” in this Annual Report on Form 10-K for an additional discussion of risks and potential risks of inflation, elevated interest rates and/or increases in interest rates, geopolitical issues, U.S. and foreign tariffs or other impositions on imported goods and adverse economic conditions on our business, financial condition and results of operations.
Results of Operations
The following table presents certain selected financial data, including the percentage of revenues represented by each item, for fiscal years 2025 and 2024. For discussion of fiscal 2024 results compared to fiscal 2023 results, see the Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report on Form 10-K for the fiscal year ended August 31, 2024, filed with the SEC on November 14, 2024.
(In thousands, except for percentages)
Fiscal 2025
Revenues
Fiscal 2024
Revenues
% Change
Revenues
Operating expenses:
Cost of revenue (1)
Selling and administrative
expenses (1)
Depreciation and amortization
Total operating expenses
Operating income
Other income, net
Income before income taxes
Provision for income taxes
Net income
Exclusive of depreciation on our property, plant and equipment and amortization of our intangible assets.
Revenues and income (loss) from operations by reporting segment for fiscal 2025 and 2024 are presented in the following table:
Fiscal
Fiscal
(In thousands)
Revenues
Uniform & Facility Service Solutions
First Aid & Safety Solutions
Other
Total consolidated revenues
Operating income (loss)
Uniform & Facility Service Solutions
First Aid & Safety Solutions
Other
Total operating income
Note: Our segment results for the fiscal year 2025 presented in this Annual Report on Form 10-K reflect our modified segments. Our prior period segment results presented in this Annual Report on Form 10-K have been recast to conform with the current presentation of our modified segments.
General
We derive our revenues from the services described under “ Business Overview ” above.
Cost of revenues include the amortization of rental merchandise in service and merchandise costs related to direct sales as well as labor and other production, service and delivery costs, and distribution costs associated with operating our Uniform & Facility Service Solutions operations, Other segment facilities, and First Aid & Safety Solutions locations. Selling and administrative costs include costs related to our sales and marketing functions as well as general and administrative costs associated with our corporate offices, non-operating environmental sites and operating locations including information systems, engineering, materials management, manufacturing planning, finance, budgeting, and human resources.
A portion of our sales is derived from international markets, including Canada. Revenues denominated in currencies other than the U.S. dollar represented approximately 7.0% and 6.9% of total consolidated revenues for fiscal 2025 and 2024, respectively. The operating results of our international subsidiaries are translated into U.S. dollars and such results are affected by movements in foreign currencies relative to the U.S. dollar. In addition, a weaker Canadian dollar increases the costs to our Canadian operations of merchandise and other operational inputs that are sourced from outside Canada, which has the effect of reducing the operating margins of our Canadian business if we are unable to recover these additional costs through price adjustments with our Canadian customers. In fiscal 2025 and 2024, foreign currency fluctuations impacted our consolidated revenues negatively by 0.1% and a nominal percentage, respectively. These impacts were primarily driven by fluctuations in the Canadian dollar. Our operating results in future years could be negatively impacted by any further devaluation, as compared to the U.S. dollar, of the Canadian dollar or any of the currencies of the other countries in which we operate.
In fiscal 2018, we initiated a multiyear CRM project to further develop, implement and deploy a third-party software application we licensed. This new solution improves functionality, capability and information flow as well as increases automation for our operations in servicing our customers. We began deployment of our new CRM project during the second half of fiscal 2021 and concluded the deployment to our U.S. locations in the first quarter of fiscal 2024. We are depreciating this system over a 10-year life and recognized $4.1 million and $3.6 million of amortization expense in fiscal 2025 and 2024, respectively.
In fiscal 2022, we initiated a multiyear ERP project that we plan to continue through 2027, with early phases focused on master data management and finance capabilities followed by subsequent phases with a strong focus on supply chain, procurement, automation and technology. We believe that this initiative will become the core of our systems technology footprint and will integrate and complement the capabilities of the CRM system. We expect the ERP system and the new supply chain and procurement capabilities that it will provide to enable lower operating costs and reduce customer churn. Such benefits are expected to be delivered through enhanced inventory utilization and vendor management, improved response times to customer orders and more efficient back-end processes. As of fiscal 2025, we capitalized $45.3 million related to our ERP project. We refer to our CRM and ERP projects together as our “Key Initiatives”.
The following section of this Annual Report on Form 10-K generally discusses fiscal 2025 and fiscal 2024 items and year-to-year comparisons between fiscal 2025 and fiscal 2024. Discussions of fiscal 2023 items and year-to-year comparisons between fiscal 2024 and fiscal 2023 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended August 31, 2024, which was filed with the SEC on November 14, 2024.
Fiscal Year Ended August 30, 2025 Compared with Fiscal Year Ended August 31, 2024
Revenues
(In thousands, except percentages)
Fiscal
Fiscal
Dollar
Change
Percent
Change
Uniform & Facility Service Solutions
First Aid & Safety Solutions
Other
Total consolidated revenues
In fiscal 2025, our consolidated revenues increased by $4.9 million from the comparable period in 2024, or 0.2%. Fiscal 2025 included 52 weeks of operations, while fiscal 2024 included 53 weeks. Excluding the impact of the extra week, consolidated organic growth was 1.8%. The effect of the Canadian dollar exchange rate resulted in changes in our revenues of (0.2)%. The
year-over-year increase was primarily driven by strong organic growth within our Uniform & Facility Service Solutions segment, reflecting solid new account sales and improved customer pricing.
Although Uniform & Facility Service Solutions revenues decreased slightly to $2.219 billion in fiscal 2025 from $2.224 billion in fiscal 2024, or (0.2)%, this decline was entirely attributable to the impact of the extra week in fiscal 2024. On a normalized basis, excluding the effect of the additional week, Uniform & Facility Service Solutions revenues increased $36.4 million, representing organic growth of 1.7%.
First Aid & Safety Solutions revenues for fiscal 2025 increased 7.8% compared to the prior fiscal year. This increase was driven by our continued investment in expanding the first aid van business, which accounted for growth of 10.1%. Excluding the estimated impact of the extra week of operations in fiscal 2024, First Aid & Safety Solutions revenues increased 10.0% compared to fiscal 2024.
Other segment revenues for fiscal 2025 increased 2.1% compared to the prior year due primarily to growth in our European and U.S. nuclear operations.
Cost of revenues
(In thousands, except percentages)
Fiscal 2025
Fiscal 2024
Dollar
Change
Percent
Change
Cost of revenues
% of Revenues
The decrease in consolidated cost of revenues of 2.4% during fiscal 2025 compared to the prior fiscal year was due primarily to the impact of the revenue change discussed above. Also contributing to the decrease were the effects of the one fewer week of operations in fiscal 2025 compared to fiscal 2024, and lower merchandise and production payroll costs as a percentage of revenues.
Selling and administrative expenses
(In thousands, except percentages)
Fiscal 2025
Fiscal 2024
Dollar
Change
Percent
Change
Selling and administrative expenses
% of Revenues
The increase in selling and administrative costs of 8.1% during fiscal 2025 compared to the prior fiscal year was due primarily to continued investments we have made in our sales organization capabilities to support our digital transformation over the last year. The increase also reflects approximately $12.8 million in higher healthcare claims compared to the prior fiscal year and approximately $5.7 million of advisory and legal expenses related to a strategic matter and an employee matter, respectively. We expensed $6.8 million and $11.8 million of non-recurring costs related to our Key Initiatives, primarily relating to our ERP project, in fiscal 2025 and fiscal 2024, respectively.
Depreciation and amortization
(In thousands, except percentages)
Fiscal 2025
Fiscal 2024
Dollar
Change
Percent
Change
Depreciation and amortization
% of Revenues
Depreciation and amortization expense in fiscal 2025 remained relatively consistent compared to the prior fiscal year. Depreciation increased approximately $2.0 million, primarily reflecting continued investment in systems, technology capabilities, and infrastructure to support future growth. Amortization decreased approximately $3.0 million, due primarily to lower amortization related to the acquisition of Clean Uniform in fiscal 2023. On a combined basis, depreciation and amortization decreased $1.0 million, or 0.8%, year over year. The comparison to the prior year is also affected by the additional week of operations included in fiscal 2024, which modestly elevated the prior-year expense.
Operating Income
For fiscal 2025, changes in our revenues and costs as discussed above resulted in the following changes in our operating income and margin:
(In thousands, except percentages)
Fiscal
Fiscal
Dollar
Change
Percent
Change
Uniform & Facility Service Solutions
First Aid & Safety Solutions
Other
Operating income
Operating income margin
Other income, net
(In thousands, except percentages)
Fiscal 2025
Fiscal 2024
Dollar
Change
Percent
Change
Interest income, net
Other expense (income), net
Total other income, net
Total other income, net in fiscal 2025 increased as compared to the prior fiscal year primarily due to $2.8 million in proceeds from the sale of a property. In addition, improved operating cash flows over the past few years have led to increased cash reserves, which in turn have also generated higher interest income.
Provision for income taxes
(In thousands, except percentages)
Fiscal 2025
Fiscal 2024
Dollar
Change
Percent
Change
Provision for income taxes
Effective income tax rate
The increase in the effective tax rate for fiscal 2025 compared to the prior fiscal year was to an increase in taxable permanent differences in fiscal 2025.
Liquidity and Capital Resources
General
Cash and cash equivalents, and short-term investments totaled $209.2 million as of August 30, 2025, an increase of $34.1 million from $175.1 million as of August 31, 2024. The increase in cash and cash equivalents and short-term investments was largely driven by our enhanced cash flows from operating activities. We generated $296.9 million and $295.3 million in cash from operating activities in fiscal 2025 and 2024, respectively. The increase was due primarily to increased profitability and lower working capital needs of the business. During fiscal 2025, we continued to invest in our business with capital expenditures totaling $154.3 million.
On April 8, 2025, our Board of Directors authorized a new share repurchase program to repurchase up to $100.0 million of our outstanding shares of Common Stock, inclusive of the amount which remained available under the existing share repurchase program approved in 2023.
Pursuant to the share repurchase program, we repurchased 402,415 shares of our Common Stock for an aggregate of approximately $70.9 million during fiscal 2025, representing approximately 2.2% of our outstanding shares as of August 30, 2025. As of August 30, 2025, we had $40.6 million remaining to repurchase shares under the share repurchase program.
We believe, although there can be no assurance, that our current cash and cash equivalents balances, our cash generated from future operations and amounts available under our Credit Agreement (as defined below) will be sufficient to meet our current anticipated working capital and capital expenditure requirements for at least the next 12 months and will help us manage the impacts of inflation and address related liquidity needs.
Cash flows provided by operating activities have historically been the primary source of our liquidity. We generally use these cash flows to fund most, if not all, of our operations, capital expenditure and acquisition activities as well as dividends on our Common Stock. We may also use cash flows provided by operating activities, as well as proceeds from long-term debt, to fund growth and acquisition opportunities, as well as other cash requirements.
Sources and uses of cash flows for fiscal 2025 and 2024, respectively, are summarized as follows:
(In thousands, except percentages)
Fiscal 2025
Fiscal 2024
Dollar Change
Percent
Change
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate changes
Net decrease in cash and cash equivalents
Net Cash Provided by Operating Activities
Net cash provided by operating activities in fiscal 2025 increased compared to fiscal 2024, primarily due to improved profitability as well as favorable changes in working capital.
The increase in operating cash flows was driven by a $20.8 million positive impact from inventories, reflecting our continued focus on managing inventory levels and optimizing supply chain processes and a $6.4 million positive impact from accounts payable, largely attributable to the timing of vendor payments.
These favorable impacts were partially offset by a $11.7 million decrease related to prepaid expenses and other current and non-current assets, primarily reflecting higher information technology-related prepaid contracts and increased capitalized commission costs. Operating activities were also negatively impacted by changes in receivables of $7.0 million and accrued liabilities of $5.8 million, driven largely by the timing of customer collections and disbursements, respectively.
Net Cash Used in Investing Activities
Net cash used in investing activities in fiscal 2025 decreased as compared to fiscal 2024 due primarily to reduced net investment in certificates of deposit of $10.9 million and reduced capital expenditures of $6.1 million. O ffsetting these decreases was an increase in cash paid for acquisitions of $11.7 million during fiscal 2025 as compared to the prior year.
Net Cash Used in Financing Activities
Net cash used in financing activities in fiscal 2025 increased as compared to fiscal 2024 due primarily to a $47.1 million increase in the repurchase of Common Stock during the period, an increase in cash dividends of $1.3 million, an increase in taxes withheld and paid related to net-share settlement of equity awards of $1.2 million and an increase in deferred financing costs of $1.2 million.
Long-term Debt and Borrowing Capacity
On August 12, 2025, we entered into an amended and restated $300.0 million unsecured revolving credit agreement (the “Credit Agreement”) with a syndicate of banks, which matures on August 12, 2030. The Credit Agreement amended and restated our prior credit agreement, which was scheduled to mature on March 26, 2026. Under the Credit Agreement, we are able to borrow funds at variable interest rates. As of August 30, 2025, the interest rates applicable to our borrowings under the Credit Agreement would be calculated as SOFR plus 1.00% at the time of the respective borrowing. Provided there is no default or event of default under the Credit Agreement and we are in compliance with our financial covenants on a pro forma basis, we may request an increase in the aggregate commitments under the Credit Agreement (in the form of revolving or term tranches) of up to an additional $100.0 million, for a total aggregate commitment of up to $400.0 million.
Availability of credit requires compliance with certain financial and other covenants, including a maximum consolidated funded debt ratio and minimum consolidated interest coverage ratio as defined in the Credit Agreement. We test our compliance with these financial covenants on a fiscal quarterly basis.
As of August 30, 2025, we had no outstanding borrowings and had outstanding letters of credit amounting to $106.7 million, leaving $193.3 million available for borrowing under the Credit Agreement, with the ability to request up to an additional $100.0 million in commitments pursuant to the accordion feature described above.
As of August 30, 2025, we were in compliance with all covenants under the Credit Agreement.
Derivative Instruments and Hedging Activities
See Item 7A. “ Quantitative and Qualitative Disclosures About Market Risk ” in this Annual Report on Form 10-K for information regarding our derivative instruments and hedging activities.
Environmental and Legal Contingencies
We are involved with environmental investigation, monitoring and remediation activities at certain sites. In addition, from time to time, we are also subject to legal and regulatory proceedings and claims arising from the conduct of our business operations, including but not limited to, personal injury, customer contract, employment claims and environmental and tax matters as described. We maintain insurance coverage providing indemnification against many of such claims, and we do not expect, although there can be no assurance, that we will sustain any material loss as a result thereof. Refer to Note 11, “ Commitments and Contingencies ,” to the Consolidated Financial Statements, as well as Part II, Item 1A. “ Risk Factors ” in this Annual Report on Form 10-K.
In addition, in the fourth quarter of fiscal 2022, the Mexican federal tax authority issued a tax assessment on our subsidiary in Mexico for fiscal 2016 import taxes, value added taxes and custom processing fees of over $17.0 million, plus surcharges, fines and penalties of over $67.7 million for a total assessment of over $84.7 million. We challenged the validity of the tax assessment through an appeal process. In the first quarter of fiscal 2025, the Federal Tax Court in Mexico made a determination partially in our favor. Following the Federal Tax Court’s determination, we filed a constitutional action before the Federal Administrative Court. While we are unable to ascertain the ultimate outcome of this matter, based on the information currently available, we believe that a loss with respect to this matter is neither probable nor remote. Given the uncertainty associated with the ultimate resolution of this matter, we are unable to reasonably assess an estimate or range of estimates of any potential losses.
While it is impossible for us to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits and environmental contingencies, we believe that the aggregate amount of such liabilities, if any, in excess of amounts covered by insurance have been properly accrued in accordance with accounting principles under U.S. GAAP. It is possible, however, that the future financial position and/or results of operations for any particular future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of our control.
Acquisitions
As part of our business, we regularly evaluate opportunities to acquire other garment service companies. In recent years, we have typically paid for acquisitions with cash and may continue to do so in the future. To pay for an acquisition, we may use cash on hand, cash generated from operations or borrowings under our Credit Agreement, or we may pursue other forms of debt financing. Our ability to secure short-term and long-term debt financing in the future will depend on several factors, including our future profitability, our levels of debt and equity, and the overall credit and equity market environments.
Contractual Obligations and Other Commercial Commitments
The following information is presented as of August 30, 2025 (in thousands):
Payments Due by Fiscal Period
Contractual Obligations
Total
Less than
1 year
1 – 3 years
3 – 5 years
More than
5 years
Retirement plan benefit payments
Asset retirement obligations
Operating leases
Forward contracts
Purchase Commitments*
Total contractual cash obligations
*Includes non-cancellable purchase commitments for inventories, software, and services.
As discussed above under “ Long-Term Debt and Borrowing Capacity ”, as of August 30, 2025, we had total borrowing capacity of $300.0 million under our Credit Agreement. The Credit Agreement includes an accordion feature, which is described above, that permits us to request up to an additional $100.0 million in commitments (for aggregate commitments up to $400.0 million) subject to covenant compliance. As of August 30, 2025 had no outstanding borrowings, $106.7 million of letters of credit outstanding and $193.3 million available for borrowing. We were in compliance with all covenants as of that date.
As discussed below under “ Quantitative and Qualitative Disclosures About Market Risk ”, as of August 30, 2025, we had forward contracts with a notional value of approximately 1.8 million CAD outstanding and recorded the fair value of the contracts of $0.1 million in prepaid expenses and other current assets with a corresponding gain of $0.1 million in accumulated other comprehensive loss, which was recorded net of tax. During fiscal 2025, we reclassified $0.1 million from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The gain on these forward contracts that results in a decrease to accumulated other comprehensive loss as of August 30, 2025 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.
Energy Costs
Significant variability in energy costs, specifically with respect to natural gas, gasoline and electricity can materially affect our operating costs. During fiscal 2025, our energy costs, which include fuel, natural gas, and electricity, represented approximately 3.9% of our total revenue.
Recent Accounting Pronouncements
See Note 1, “ Summary of Significant Accounting Policies ” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for more information on recently implemented and issued accounting standards.
ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
We have determined that all of our foreign subsidiaries operate primarily in local currencies that represent the functional currencies of such subsidiaries. All assets and liabilities of our foreign subsidiaries are translated into U.S. dollars using the exchange rate prevailing at the balance sheet date. The effects of exchange rate fluctuations on the translation of assets and liabilities are recorded as a component of shareholders’ equity. Revenues and expenses are translated at the average exchange rates in effect during each month of the fiscal year. As such, our financial condition and operating results are affected by fluctuations in the value of the U.S. dollar as compared to currencies in foreign countries. Revenues denominated in currencies other than the U.S. dollar represented approximately 7.0%, 6.9% and 7.0% of our total consolidated revenues for fiscal 2025, 2024 and 2023, respectively. Total assets denominated in currencies other than the U.S. dollar represented approximately 7.0% and 6.8% of our total consolidated assets as of August 30, 2025 and August 31, 2024, respectively. If exchange rates had increased or decreased by 10% from the actual rates in effect during fiscal 2025, our revenues and assets for the year ended and as of August 30, 2025 would have increased or decreased by approximately $17.1 million and $19.4 million, respectively.
In August 2021, we entered into twenty forward contracts to exchange CAD for U.S. dollars at fixed exchange rates in order to manage our exposure related to certain forecasted CAD denominated sales of one of our subsidiaries. The hedged transactions are specified as the first amount of CAD denominated revenues invoiced by one of our domestic subsidiaries each fiscal quarter, beginning in the first fiscal quarter of 2022 and continuing through the fourth fiscal quarter of 2026. In total, we will sell approximately 14.1 million CAD at an average Canadian-dollar exchange rate of 0.7861 over these quarterly periods. We concluded that the forward contracts met the criteria to qualify as a cash flow hedge under U.S. GAAP.
As of August 30, 2025, we had forward contracts with a notional value of approximately 1.8 million CAD outstanding and recorded the fair value of the contracts of $0.1 million in prepaid expenses and other current assets with a corresponding gain of $0.1 million in accumulated other comprehensive loss, which was recorded net of tax. During fiscal 2025, we reclassified $0.1 million from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The gain on these forward contracts that results in a decrease to accumulated other comprehensive loss as of August 30, 2025 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.
Other than the forward contracts discussed above, we do not operate a hedging program to mitigate the effect of a significant change in the value of the functional currencies of our foreign subsidiaries, which include the Canadian dollar, euro, British pound, Mexican peso and Nicaraguan cordoba, as compared to the U.S. dollar. Any losses or gains resulting from unhedged foreign currency transactions, including exchange rate fluctuations on intercompany accounts are reported as transaction losses (gains) in our other expense, net. The intercompany payables and receivables are denominated in Canadian dollars, euros, British pounds, Mexican pesos and Nicaraguan cordobas. During fiscal 2025, transaction losses included in other expense, net, was $0.6 million. If exchange rates had changed by 10% during fiscal 2025, we would have recognized exchange gains or losses of approximately $0.1 million.
Interest Rate Sensitivity
We are exposed to market risk from changes in interest rates, which may adversely affect our financial position, results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, we manage exposures through our operating and financing activities. We are exposed to interest rate risk primarily through borrowings under our Credit Agreement. During fiscal 2025, we had no outstanding borrowings under the Credit Agreement. Under the Credit Agreement, we borrow funds at variable interest rates based on, at our election, the SOFR rate or a base rate, plus in each case a spread based on our consolidated funded debt ratio. To the extent we have borrowings outstanding under the Credit Agreement, changes in interest rates result in changes in our interest expense.
Please see Item 1A. “ Risk Factors ” in this Annual Report on Form 10-K for an additional discussion of risks and potential risks on our business, financial performance and the market price of our Common Stock.
ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA
Consolidated Stat ements of Income
UniFirst Corporation and Subsidiaries
52 Weeks Ended
53 Weeks Ended
52 Weeks Ended
Year ended
(In thousands, except per share data)
August 30,
August 31,
August 26,
Revenues
Operating expenses:
Cost of revenues (1)
Selling and administrative expenses (1)
Depreciation and amortization
Total operating expenses
Operating income
Other (income) expense:
Interest income, net
Other (income) expense, net
Total other income, net
Income before income taxes
Provision for income taxes
Net income
Income per share—Basic:
Common Stock
Class B Common Stock
Income per share—Diluted:
Common Stock
Income allocated to—Basic:
Common Stock
Class B Common Stock
Income allocated to—Diluted:
Common Stock
Weighted average number of shares outstanding—Basic:
Common Stock
Class B Common Stock
Weighted average number of shares outstanding—Diluted:
Common Stock
Exclusive of depreciation of the Company’s property, plant and equipment and amortization of its intangible assets.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Consolidated Statements of Comprehensive Income
UniFirst Corporation and Subsidiaries
52 Weeks Ended
53 Weeks Ended
52 Weeks Ended
Year ended
(In thousands)
August 30,
August 31,
August 26,
Net income
Other comprehensive income:
Foreign currency translation adjustments
Pension benefit liabilities, net of income taxes
Change in fair value of derivatives, net of income taxes
Other comprehensive income
Comprehensive income
The accompanying notes are an integral part of these Consolidated Financial Statements.
Consolidated B alance Sheets
UniFirst Corporation and Subsidiaries
(In thousands, except share and par value data)
August 30,
August 31,
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Receivables, less reserves of $ 6,802 and $ 7,916
Inventories
Rental merchandise in service
Prepaid taxes
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Customer contracts, net
Other intangible assets, net
Deferred income taxes
Operating lease right-of-use assets, net
Other assets
Total assets
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable
Accrued liabilities
Accrued taxes
Operating lease liabilities, current
Total current liabilities
Accrued liabilities
Accrued and deferred income taxes
Operating lease liabilities
Total liabilities
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred Stock, $ 1.00 par value; 2,000,000 shares authorized; no shares issued and
outstanding
Common Stock, $ 0.10 par value; 30,000,000 shares authorized; 14,679,646 and 15,000,552 shares issued and outstanding in 2025 and 2024, respectively
Class B Common Stock, $ 0.10 par value; 20,000,000 shares authorized; 3,551,265 and 3,590,295 shares issued and outstanding in 2025 and 2024, respectively
Capital surplus
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these Consolidated Financial Statements.
Consolidated Statements of Shareholders’ Equity
UniFirst Corporation and Subsidiaries
(In thousands)
Common
Shares
Class B
Common
Shares
Common
Stock
Class B
Common
Stock
Capital
Surplus
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Equity
Balance, as of August 27, 2022
Net income
Pension benefit liabilities, net (1)
Change in fair value of derivatives (1)
Foreign currency translation
Dividends declared
Share-based compensation, net (2)
Share-based awards exercised,
net (1)
Balance, as of August 26, 2023
Net income
Pension benefit liabilities, net (1)
Change in fair value of derivatives (1)
Foreign currency translation
Dividends declared
Share-based compensation, net (2)
Share-based awards exercised,
net (1)
Repurchase of Common Stock (3)
Balance, as of August 31, 2024
Net income
Pension benefit liabilities, net (1)
Change in fair value of derivatives (1)
Foreign currency translation
Dividends declared
Share-based compensation, net (2)
Share-based awards exercised, net (1)
Repurchase of Common Stock (3)
Shares converted
Balance, as of August 30, 2025
These amounts are shown net of the effect of income taxes.
These amounts are shown net of any shares withheld by the Company to satisfy certain tax withholding obligations in connection with the vesting of certain restricted stock units.
These amounts are shown net of the effect of excise taxes.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Consolidated Stateme nts of Cash Flows
UniFirst Corporation and Subsidiaries
52 Weeks Ended
53 Weeks Ended
52 Weeks Ended
Year ended
(In thousands)
August 30,
August 31,
August 26,
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization (1)
Share-based compensation
Accretion on environmental contingencies
Accretion on asset retirement obligations
Other
Deferred income taxes
(Gain) loss on sale of property and equipment
Changes in assets and liabilities, net of acquisitions:
Receivables, less reserves
Inventories
Rental merchandise in service
Prepaid expenses and other current assets and Other assets
Accounts payable
Accrued liabilities
Prepaid and accrued income taxes
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired
Capital expenditures, including capitalization of software costs
Purchases of investments
Maturities of investments
Proceeds from sale of assets
Net cash used in investing activities
Cash flows from financing activities:
Payment of deferred financing costs
Borrowings under line of credit
Repayments under line of credit
Proceeds from exercise of share-based awards
Taxes withheld and paid related to net share settlement of equity awards
Repurchase of Common Stock
Payment of cash dividends
Net cash used in financing activities
Effect of exchange rate changes
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Non-cash capital expenditures
Interest paid
Income taxes paid, net of refunds received
Depreciation and amortization for the full year of fiscal 2025, 2024 and 2023 included approximately $ 17.0 million , $ 18.8 million and $ 14.7 million , respectively, of non-cash amortization expense recognized for acquisition-related intangible assets.
The accompanying notes are an integral part of these Consolidated Financial Statements.
Notes to Consolidated Financial Statements
UniFirst Corporation and Subsidiaries
1. Summary of Significan t Accounting Policies
Business Description
UniFirst Corporation (the “Company”) is one of the leading providers of workplace uniforms and protective clothing in North America. The Company designs, manufactures, personalizes, rents, cleans, delivers, and sells a wide range of uniforms and protective clothing, including shirts, pants, jackets, coveralls, lab coats, smocks, aprons and specialized protective wear, such as flame resistant and high visibility garments. The Company also rents and sells industrial wiping products, floor mats, facility service products and other non-garment items, and provides restroom and cleaning supplies and first aid cabinet services and other safety supplies as well as provide certain safety training, to a variety of manufacturers, retailers and service companies.
The Company serves businesses of all sizes across multiple industry sectors. Typical customers include automobile service centers and dealers, delivery services, food and general merchandise retailers, manufacturers, maintenance facilities, restaurants and food-related businesses, business service companies, soft and durable goods wholesalers, transportation companies, energy producing operations, healthcare providers and others who require employee clothing on the job for image, identification, protection or utility purposes. The Company also provides its customers with restroom and cleaning supplies, including air fresheners, paper products, gloves, masks, hand soaps and sanitizers.
At certain specialized facilities, like nuclear operations, the Company decontaminates and cleans work clothes and other items that may have been exposed to radioactive materials and services special cleanroom protective wear. Typical customers for these specialized services include government agencies, research and development laboratories, high technology companies and utility providers operating nuclear reactors.
As discussed and described in Note 15, “ Segment Reporting ”, to these Consolidated Financial Statements, the Company has three reporting segments: Uniform & Facility Service Solutions, First Aid & Safety Solutions and Other. Certain operations of the Uniform & Facility Service Solutions reporting segment are referred to by the Company as its “industrial laundry operations” and the locations related to this reporting segment are referred to as “industrial laundries”.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. Intercompany balances and transactions are eliminated in consolidation.
Basis of Presentation
The Consolidated Financial Statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) . There have been no material changes in the accounting policies followed by the Company during the current fiscal year other than the adoption of recent accounting pronouncements as discussed in greater detail in the Recent Accounting Pronouncements sub-section of this Note.
Use of Estimates
The preparation of these Consolidated Financial Statements is in conformity with U.S. GAAP which requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. The Company utilizes key estimates in preparing the financial statements including casualty and environmental estimates, valuation of intangible assets acquired in a business combination, recoverability of goodwill, intangibles, income taxes and long-lived assets. These estimates are based on historical information, current trends, and information available from other sources. The Company’s results are affected by economic, political, legislative, regulatory and legal actions. Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies, and changes in the prices of raw materials, can have a significant effect on operations. These factors and other events could cause actual results to differ from management’s estimates.
Fiscal Year
The Company’s fiscal year ends on the last Saturday in August. For financial reporting purposes, fiscal year ended fiscal year ended August 31, 2024 (“fiscal 2024”) consisted of 53 weeks, and fiscal year ending August 30, 2025 (“fiscal 2025”) and August 26, 2023 (“fiscal 2023 ”) both consisted of 52 weeks. The additional week was included in the fourth quarter of fiscal 2024.
Cash, Cash Equivalents and Short-Term Investments
Cash, cash equivalents and short-term investments include cash in banks, money market securities and bank short-term investments having original maturities of six months or less. As of August 30, 2025 and August 31, 2024, the Company had $ 5.7 million and $ 13.5 million in short-term investments, respectively.
Accounts receivable
Accounts receivable represents amounts due from customers and is presented net of reserves for expected credit losses. The Company utilizes its judgment and estimates are used in determining the collectability of accounts receivable and evaluating the adequacy of the reserve for expected credit losses. The Company considers specific accounts receivable and historical credit loss experience, customer credit worthiness, current economic trends and the age of outstanding balances as part of its evaluation. When an account is considered uncollectible, it is written off against the reserve for expected credit losses.
The following table presents the change in the allowance for credit losses, which is included in Receivables, net of reserves on the Consolidated Balance Sheets as of August 30, 2025 and August 31, 2024 are as follows (in thousands):
(In thousands)
August 30,
August 31,
Beginning balance
Current period provision
Write-offs and other
Ending balance
Financial Instruments
The Company’s financial instruments, which may expose the Company to concentrations of credit risk, include cash and cash equivalents, receivables, accounts payable and foreign exchange forward contracts. Each of these financial instruments is recorded at cost, which approximates its fair value given the short maturity of each financial instrument.
Revenue Recognition
In fiscal 2025, approximately 83.8 % of the Company’s revenues are derived from fees for route servicing of Uniform & Facility Service Solutions and Other segment services performed by the Company’s employees at the customer’s location of business. The Company recognizes these revenues over time using an output method, as customers simultaneously receive and consume the benefits of the services as they are satisfied. The Company’s remaining revenue representing approximately 16.2% of the Company’s total revenue, is recognized when the obligations under the terms of a contract with a customer are satisfied. This generally occurs when the goods are transferred to the customer.
Certain of the Company’s customer contracts, primarily within the Uniform & Facility Service Solutions segment, include pricing terms that provide customers with potential discounts or rebates based on volume or other performance metrics. These components of variable consideration are not material to the Company’s consolidated revenues, and the related estimates are reassessed each reporting period.
The Company maintains an immaterial liability for these amounts within accrued liabilities on the Consolidated Balance Sheets. Any consideration paid to a customer at the beginning of a contract is capitalized and amortized over the life of the contract as a reduction to revenue.
The following table presents the Company’s revenues for fiscal 2025, 2024 and 2023 disaggregated by segment:
Year ended
(In thousands, except percentages)
Revenues
Revenues
Revenues
Revenues
Revenues
Revenues
Uniforms & Facility Service Solutions
First Aid & Safety Solutions
Other
Total revenues
Note: The Company ’s segment results for the fiscal year 2025 presented in these Consolidated Financial Statements reflect its modified segments. The Company ’s prior period segment results presented in these Consolidated Financial Statements have been recast to conform with the current presentation of its modified segments.
See Note 15, “ Segment Reporting ” for additional details of segment definitions.
Costs to Obtain a Contract
The Company defers commission expenses paid to its employee-partners when the commissions are deemed to be incremental for obtaining the route servicing customer contract. The deferred commissions are amortized on a straight-line basis over the expected period of benefit. The Company reviews the deferred commission balances for impairment on an ongoing basis. Deferred commissions are classified as current or non-current based on the timing of when the Company expects to recognize the expense.
The following table presents deferred commissions on the Company’s Consolidated Balance Sheets as of August 30, 2025 and August 31, 2024:
(in thousands)
August 30,
August 31,
Prepaid expenses and other current assets
Other assets
The following table presents the Company’s amortization expense related to deferred commissions on the Consolidated Statements of Income for fiscal 2025, 2024 and 2023, respectively:
(in thousands)
Selling and administrative expenses
Inventories and Rental Merchandise in Service
Inventories are stated at the lower of cost or net realizable value, net of any reserve for excess and obsolete inventory. Work-in-process and finished goods inventories consist of materials, labor and manufacturing overhead. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to customers or used in rental operations. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required. The Company uses the first-in, first-out (“FIFO”) method to value its inventories.
The components of inventory as of August 30, 2025 and August 31, 2024 are as follows (in thousands):
August 30,
August 31,
Raw materials
Work in process
Finished goods
Total inventory
Rental merchandise in service is amortized, primarily on a straight-line basis, over the estimated service lives of the merchandise, which range from six to thirty-six months . The amortization expense is included in the cost of revenues on the
Company’s Consolidated Statements of Income. In establishing estimated lives for merchandise in service, management considers historical experience and the intended use of the merchandise. Material differences may result in the amount and timing of operating profit for any period if management makes significant changes to these estimates.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Expenditures for maintenance and repairs are expensed as incurred, while expenditures for renewals and betterments are capitalized.
The components of property, plant and equipment as of August 30, 2025 and August 31, 2024 are as follows (in thousands):
August 30,
August 31,
Land, buildings and leasehold equipment
Machinery and equipment
Motor vehicles
Total property, plant and equipment, gross
Less: accumulated depreciation
Total property, plant and equipment, net
The Company provides for depreciation on the straight-line method based on the date the asset is placed in service using the following estimated useful lives:
Buildings (in years)
Building components (in years)
Leasehold improvements
Shorter of useful
life or term of lease
Machinery and equipment (in years)
Motor vehicles (in years)
Long-lived assets, including property, plant and equipment, are evaluated for impairment whenever events or circumstances indicate an asset may be impaired. There were no material impairments of long-lived assets in fiscal 2025, 2024 and 2023 .
Goodwill and Other Intangible Assets
In accordance with U.S. GAAP, the Company does not amortize goodwill. Instead, the Company tests goodwill for impairment on an annual basis. Management completes its annual goodwill impairment test on the first day of the fourth quarter of each fiscal year. In addition, U.S. GAAP requires that companies test goodwill if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit to which goodwill is assigned below its carrying amount. The Company used quantitative assessment option for its impairment testing for goodwill in fiscal 2025 and determined that the fair values of the reporting units more likely than not exceeded their carrying values and that there was no evidence of impairment as of June 1, 2025.
The Company cannot predict future economic conditions and their impact on the Company or the future net realizable value of the Company’s stock. A decline in the Company’s market capitalization and/or deterioration in general economic conditions could negatively and materially impact the Company’s assumptions and assessment of the fair value of the Company’s business. If general economic conditions or the Company’s financial performance deteriorate, the Company may be required to record a goodwill impairment charge in the future which could have a material impact on the Company’s financial condition and results of operations.
Definite-lived intangible assets are amortized over their estimated useful lives, which are based on management’s estimates of the period that the assets will generate economic benefits. Definite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable in accordance with U.S. GAAP. There were no impairments of goodwill or indicators of impairment for definite-lived intangible assets in fiscal 2025, 2024 or 2023.
As of August 30, 2025, definite-lived intangible assets have a weighted average useful life of approximately 13.7 years. Customer contracts have a weighted average useful life of approximately 14.6 years and other intangible assets, net, which consist of primarily of restrictive covenants, software and trademarks, have a weighted average useful life of approximately 8.8 years.
Cloud Computing Arrangements
The Company enters into certain cloud-based software hosting arrangements that are accounted for as service contracts. Costs incurred for these arrangements are capitalized for application development activities, if material, and immediately expensed for preliminary project activities and post-implementation activities. The Company amortizes the capitalized development costs straight-line over the fixed, non-cancellable term of the associated hosting arrangement plus any reasonably certain renewal periods. The capitalized costs are included in “Prepaid expenses and other current assets” and “Long-term other assets” on the Company’s Consolidated Balance Sheets. Capitalized costs were $ 45.3 million and $ 18.9 million as of August 30, 2025, and August 31, 2024 , respectively.
Environmental and Other Contingencies
The Company is subject to legal proceedings and claims arising from the conduct of its business operations, including but not limited to, environmental matters, personal injury, customer contract matters and employment claims. U.S. GAAP require that a liability for contingencies be recorded when it is probable that a liability has occurred and the amount of the liability can be reasonably estimated. Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded. The Company regularly consults with attorneys and outside consultants in its consideration of the relevant facts and circumstances before recording a contingent liability. The Company records accruals for environmental and other contingencies based on enacted laws, regulatory orders or decrees, the Company’s estimates of costs, insurance proceeds, participation by other parties, the timing of payments, and the input of outside consultants and attorneys.
The estimated liability for environmental contingencies has been discounted as of August 30, 2025 using risk-free interest rates ranging from 4.86 % to 4.92 % over periods ranging from twenty to thirty years . The estimated current costs, net of legal settlements with insurance carriers, have been adjusted for the estimated impact of inflation at 3 % per year. Changes in enacted laws, regulatory orders or decrees, management’s estimates of costs, risk-free interest rates, insurance proceeds, participation by other parties, the timing of payments, the input of the Company’s attorneys and outside consultants or other factual circumstances could have a material impact on the amounts recorded for environmental and other contingent liabilities. Refer to Note 11, “ Commitments and Contingencies ”, of these Consolidated Financial Statements for additional discussion and analysis.
Asset Retirement Obligations
Under U.S. GAAP, asset retirement obligations generally apply to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. The Company recognizes asset retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset.
The Company has recognized as a liability the present value of the estimated future costs to decommission its nuclear laundry facilities. The Company depreciates, on a straight-line basis, the amount added to property, plant and equipment and recognizes accretion expense in connection with the discounted liability over the various remaining lives which range from approximately one to nineteen years .
The estimated liability has been based on historical experience in decommissioning nuclear laundry facilities, estimated useful lives of the underlying assets, external vendor estimates as to the cost to decommission these assets in the future, and federal and state regulatory requirements. The estimated current costs have been adjusted for the estimated impact of inflation at 3 % per year. The liability has been discounted using credit-adjusted risk-free rates that range from approximately 4.75 % to 7.5 % . Revisions to the liability could occur due to changes in the Company’s estimated useful lives of the underlying assets, estimated dates of decommissioning, changes in decommissioning costs, changes in federal or state regulatory guidance on the decommissioning of such facilities, or other changes in estimates. Changes due to revised estimates are recognized by adjusting the carrying amount of the liability and the related long-lived asset if the assets are still in service, or charged to expense in the period if the assets are no longer in service.
Insurance
The Company is self-insured for certain obligations related to health and dental, workers’ compensation, vehicles and general liability programs. The Company also purchases stop-loss insurance policies for workers’ compensation, vehicles and general liability programs to protect itself from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for events that have occurred, but have not been reported. The Company’s estimates consider historical claims experience and other factors. In certain cases where partial insurance coverage exists, the
Company estimates the portion of the liability that will be covered by existing insurance policies to arrive at its net expected liability. Receivables for insurance recoveries are recorded as assets, on an undiscounted basis. The Company’s liabilities are based on estimates, and, while the Company believes that its accruals are adequate, the ultimate liability may be significantly different from the amounts recorded. Changes in claims experience, the Company’s ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period.
Supplemental Executive Retirement Plan and Other Pension Plans
Pension expense is recognized on an accrual basis over employees’ estimated service periods. Pension expense is generally independent of funding decisions or requirements.
The Company (1) recognizes in its statement of financial position the over-funded or under-funded status of its defined benefit post-retirement plans measured as the difference between the fair value of plan assets and the benefit obligation, (2) recognizes as a component of other comprehensive (loss) income, net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period but are not recognized as components of net periodic benefit cost, (3) measures defined benefit plan assets and defined benefit plan obligations as of the date of its statement of financial position, and (4) discloses additional information in the notes to financial statements about certain effects on net periodic benefit cost in the upcoming fiscal year that arise from delayed recognition of the actuarial gains and and the prior service costs and credits. Refer to Note 7, “ Employee Plans ”, of these Consolidated Financial Statements for further discussion regarding the Company’s pension plans.
The calculation of pension expense and the corresponding liability requires the use of a number of critical assumptions, including the expected long-term rates of return on plan assets, the assumed discount rates, assumed rate of compensation increases and life expectancy of participants. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from these assumptions. Pension expense increases as the expected rate of return on pension plan assets decreases. Future changes in plan asset returns, assumed discount rates and various other factors related to the participants in the Company’s pension plans will impact the Company’s future pension expense and liabilities. The Company cannot predict with certainty what these factors will be in the future.
Non-qualified Deferred Compensation Plan
The Company adopted the UniFirst Corporation Deferred Compensation Plan (the “NQDC Plan”) effective on February 1, 2022. The NQDC Plan is an unfunded, non-qualified deferred compensation plan that allows eligible participants to voluntarily defer receipt of their salary and annual cash bonuses up to approved limits. In its discretion, the Company may credit one or more additional contributions to participant accounts. NQDC Plan participants who are not accruing benefits under the Supplemental Executive Retirement Plan are eligible to have discretionary annual employer contributions credited to their NQDC Plan accounts. All participants are also eligible to have employer supplemental contributions and employer discretionary contributions credited to their NQDC Plan accounts. The amounts of such contributions may differ from year to year and from participant to participant. Refer to Note 7, “ Employee Benefit Plans ”, of these Consolidated Financial Statements for further discussion regarding the Company’s NQDC Plan .
Income Taxes
The Company computes income tax expense by jurisdiction based on its operations in each jurisdiction. Deferred income taxes are provided for temporary differences between the amounts recognized for income tax and financial reporting purposes at currently enacted tax rates. Deferred tax assets and liabilities are determined by the differences between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities. See Note 4, “ Income Taxes ” in these Consolidated Financial Statements for the types of items that give rise to significant deferred income tax assets and liabilities. Deferred income taxes are classified as assets or liabilities based on the classification of the related asset or liability for financial reporting purposes. The Company regularly reviews deferred tax assets for recoverability based upon projected future taxable income and the expected timing of the reversals of existing temporary differences. Although realization is not assured, management believes it is more likely than not that the recorded deferred tax assets will be realized.
The Company is periodically reviewed by U.S. domestic and foreign tax authorities regarding the amount of taxes due. These reviews typically include inquiries regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with various filing positions, the Company records estimated reserves . Refer to Note 4, “ Income Taxes ”, of these Consolidated Financial Statements for further discussion regarding the Company’s accounting for income taxes and its uncertain tax positions for financial accounting purposes.
Advertising Costs
Advertising costs are expensed as incurred and are classified as selling and administrative expenses. The Company incurred advertising costs of $ 7.7 million , $ 5.3 million and $ 9.9 million , for fiscal 2025, 2024 and 2023 , respectively.
Share-Based Compensation
Compensation expense for all stock options, stock appreciation rights, unrestricted stock and restricted stock units (collectively, “Share-Based Awards”) is recognized ratably over the related vesting period, net of actual forfeitures. Certain Share-Based Awards in the form of stock appreciation rights and shares of unrestricted stock were granted during fiscal 2025, 2024 and 2023 to non-employee Directors of the Company, which were fully vested upon grant and, with respect to stock appreciation rights, expire eight years after the grant date. Accordingly, compensation expense related to these Share-Based Awards in fiscal 2025, 2024 and 2023 was recognized on the date of grant.
For performance-based restricted stock unit awards with revenue and profitability performance criteria, we evaluate the probability of meeting the performance criteria at each balance sheet date and, if probable, related compensation cost is amortized over the performance period on a straight-line basis because such awards vest only at the end of the measurement period. Changes to the probability assessment and the estimate of shares expected to vest will result in adjustments to the related share-based compensation expense that will be recorded in the period of the change. If the performance targets are not achieved, no compensation cost is recognized and any previously recognized compensation cost is reversed.
U.S. GAAP requires that share-based compensation cost be measured at the grant date based on the fair value of the award and be recognized as expense over the requisite service period, which is generally the vesting period. Determining the fair value of Share-Based Awards in the form of stock appreciation rights at the grant date requires judgment, including estimating expected dividends and share price volatility. The fair value of each Share-Based Award in the form of stock appreciation rights is estimated on the date of grant using the Black-Scholes option pricing model.
The Company recognizes compensation expense for restricted stock and restricted stock unit grants over the related vesting period. The fair value for each restricted stock, unrestricted stock and restricted stock unit grant is determined by using the closing price of the Company’s stock on the date of the grant. Refer to Note 12, “ Share-Based Compensation ”, of these Consolidated Financial Statements for further discussion regarding the Company’s share-based compensation plans.
Income Per Share
The Company calculates income per share by allocating income to its unvested participating securities as part of its income per share calculations. The following table sets forth the computation of basic income per share using the two-class method for amounts attributable to the Company’s shares of Common Stock and Class B Common Stock (in thousands, except per share data):
Year ended
Net income available to shareholders
Allocation of net income for Basic:
Common Stock
Class B Common Stock
Weighted average number of shares for Basic:
Common Stock
Class B Common Stock
Income per share for Basic:
Common Stock
Class B Common Stock
The Class B Common Stock may be converted at any time on a one -for-one basis into Common Stock at the option of the holder of the Class B Common Stock. Diluted income per share for the Company’s Common Stock assumes the conversion of all of the Company’s Class B Common Stock into Common Stock, full vesting of outstanding restricted stock, and the exercise of Share-Based Awards under the Company’s stock incentive plans.
The Company is required to calculate the diluted income per share for Common Stock using the more dilutive of the following two methods:
The treasury stock method; or
The two-class method assuming a participating security is not exercised or converted.
For fiscal 2025, 2024 and 2023, the Company’s diluted income per share assumes the conversion of all Class B Common Stock into Common Stock and uses the two-class method for its unvested participating shares.
The following table sets forth the computation of diluted income per share of Common Stock for the years ended August 30, 2025, August 31, 2024 and August 26, 2023 (in thousands, except per share data):
Year Ended August 30, 2025
Year Ended August 31, 2024
Year Ended August 26, 2023
Earnings
to Common
shareholders
Common
Shares
Income
Per Share
Earnings
to Common
shareholders
Common
Shares
Income
Per Share
Earnings
to Common
shareholders
Common
Shares
Income
Per Share
As reported—Basic
Add: effect of dilutive potential
common shares
Share-Based Awards
Class B Common Stock
Diluted Income Per Share—
Common Stock
Anti-dilutive stock-based awards excluded from the calculations of diluted income per share were immaterial during the periods presented.
Foreign Currency Translation
The functional currency of our foreign operations is the local country’s currency. Transaction gains and losses, including gains and losses on our intercompany transactions, are included in other expense, net in the accompanying Consolidated Statements of Income. Assets and liabilities of operations outside the U.S. are translated into U.S. dollars using period-end exchange rates. Revenues and expenses are translated at the average exchange rates in effect during each month of the fiscal year. The effects of foreign currency translation adjustments are included in shareholders’ equity as a component of accumulated other comprehensive loss in the accompanying Consolidated Balance Sheets.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update “ASU” 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company adopted ASU 2023-07 on August 30, 2025. Adoption resulted in expanded segment-level disclosures, consistent with the Company’s new three-segment reporting structure, but did not have a material impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which enhances effective tax rate reconciliation disclosure requirements and provides clarity to the disclosures of income taxes paid, income before taxes and provision for income taxes. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis. Retrospective application is permitted. The Company has evaluated the impact of the ASU and concluded it is immaterial to the Company's disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures . The ASU requires a public business entity to provide disaggregated disclosures of certain categories of expenses on an annual and interim basis including purchases of inventory, employee compensation, depreciation, and intangible asset amortization for each income statement line item that contains those expenses. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (S ubtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software . This ASU amends the guidance in ASC 350-40 to modernize the recognition and disclosure framework for internal-use software costs by eliminating the previous “development stage” model and introducing a more principles- and judgment-based approach. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027 and for interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2025-06 on its consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC have not had, or are not believed by management to, have a material impact on the Company’s present or future financial statements.
2. Acquisitions
Whenever the Company acquires a business, consistent with current accounting guidance, the results of operations of the acquisition are included in the Company’s consolidated financial results from the date of the acquisition. The amount assigned to intangible assets acquired is based on their respective fair values determined as of the acquisition date. The excess of the purchase price over the tangible and intangible assets is recorded as goodwill. Goodwill is allocated to the segment to which the acquisition relates and is deductible for tax purposes.
During fiscal 2025, the Company completed ten business acquisitions with an aggregate purchase price of approximately $ 13.9 million, including $ 12.0 million in the First Aid & Safety Solutions segment and $ 1.9 million in the Uniform & Facility Service Solutions segment. The purchase price was primarily allocated to goodwill and intangible assets, with tangible assets consisting mainly of inventory and property, plant and equipment. A portion of the total purchase price is subject to holdback arrangements, which are typically payable within a one-year period following the acquisition date and contingent upon the achievement of specified revenue targets. The operating results of these businesses have been included in the Company’s consolidated financial statements from their respective acquisition dates. As these acquisitions were not material to the Company’s consolidated results, pro forma financial information has not been presented.
During fiscal 2024, the Company did not complete any material business acquisitions.
Aggregate information relating to the acquisition of businesses which were accounted for as purchases is as follows (in thousands):
Year ended
August 30,
Tangible assets acquired
Goodwill
Customer contracts
Other intangibles assets
Total consideration paid for acquisition of businesses
Contingent holdbacks
Acquisition of businesses, net of contingent holdbacks
3. Fair Value Measurements
U.S. GAAP establishes a framework for measuring fair value and establishes disclosure requirements about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company considered non-performance risk when determining fair value of our derivative financial instruments.
The fair value hierarchy prescribed under U.S. GAAP contains three levels as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
All financial assets or liabilities that are measured at fair value on a recurring basis (at least annually) have been segregated into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date. The assets or liabilities measured at fair value on a recurring basis are summarized in the tables below (in thousands):
As of August 30, 2025
As of August 31, 2024
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets:
Short-term investments
Pension plan assets
Non-qualified deferred compensation plan assets
Foreign currency forward contracts
Total assets at fair value
Liabilities:
Non-qualified deferred compensation plan liability
Total liabilities at fair value
The Company’s short-term investments listed above represent certificates of deposit, which maturities range up to six months at purchase. Such securities are classified as held-to-maturity and are carried at amortized cost, which approximates market value. As such, the Company’s short-term investments are included within Level 2 of the fair value hierarchy.
The Company’s pension plan assets listed above represent guaranteed deposit accounts that are maintained and operated by a third-party investment manager. At the beginning of each calendar year, the third-party investment manager notifies the Company of the annual rates of interest which will be applied to the amounts held in the guaranteed deposit account during the next calendar year. In determining the interest rate to be applied, the third-party investment manager considers the investment performance of the underlying assets of the prior year; however, regardless of the investment performance the annual interest rate applied per the contract must be a minimum of 3.25 %. As such, the Company’s pension plan assets are included within Level 2 of the fair value hierarchy. Refer to Note 7, “ Employee Benefit Plans ”, of these Consolidated Financial Statements for further discussion regarding the Company’s pension plan and Supplemental Executive Retirement Plan.
The Company’s non-qualified deferred compensation plan liability listed above is carried at fair value and is composed primarily of mutual funds, municipal bonds and other fixed income securities. As such, the Company’s non-qualified deferred compensation plan assets and liabilities are included within Level 2 of the fair value hierarchy. Refer to Note 7, “ Employee Benefit Plans ”, of these Consolidated Financial Statements for further discussion regarding the Company’s non-qualified deferred compensation plan.
The Company’s foreign currency forward contracts represent contracts the Company has entered into to exchange Canadian dollars for U.S. dollars at fixed exchange rates in order to manage its exposure related to certain forecasted Canadian dollar denominated sales of one of its subsidiaries. These contracts are included in prepaid expenses and other current assets and other long-term assets as of August 30, 2025 and August 31, 2024 . The fair value of the forward contracts is based on similar exchange-traded derivatives and is, therefore, included within Level 2 of the fair value hierarchy.
4. Income Taxes
The provision for income taxes consists of the following (in thousands):
Year ended
Current:
Federal
Foreign
State
Total current
Deferred:
Federal
Foreign
State
Total deferred
Total provision for income taxes
The following table reconciles the provision for income taxes using the statutory federal income tax rate to the actual provision for income taxes:
Year ended
Income taxes at the statutory federal income tax rate
State income taxes
Adjustments to tax reserve
Other
Effective income tax rate
The increase in the effective tax rate for fiscal 2025 compared to the prior fiscal year was to an increase in taxable permanent differences in fiscal 2025.
The components of deferred income taxes included on the Consolidated Balance Sheets are as follows (in thousands):
August 30,
August 31,
Deferred tax assets:
Payroll and benefit related
Insurance related
Environmental
Accrued expenses
Operating lease liabilities
Research and development
Other
Total deferred tax assets
Deferred tax liabilities:
Payroll and benefit related
Property, plant and equipment
Purchased intangible assets
Rental merchandise in service
Operating lease right-of-use assets
Other
Total deferred tax liabilities
Net deferred tax liability
The Company regularly reviews deferred tax assets for recoverability based upon projected future taxable income and the expected timing of the reversals of existing temporary differences. Although realization is not assured, management believes it is more likely than not that the recorded deferred tax assets will be realized.
Foreign tax effect
As of August 30, 2025, unremitted foreign earnings have been retained by the Company’s foreign subsidiaries for indefinite reinvestment. If the Company were to repatriate those earnings, in the form of dividends or otherwise, the Company could be subject to immaterial withholding taxes payable to the various foreign countries.
In October 2021, the Organization for Economic Co-operation and Development (“OECD”) introduced an inclusive framework to address tax challenges arising from the digitalization of the economy through a two-pillar solution. One of the components of the solution is the implementation of a global minimum corporate tax rate of 15 % for large multinational corporations (“Pillar Two”). The OECD continues to release additional guidance on the two-pillar solution with implementation began in 2024 while reporting of the tax applicable will not occur until calendar 2026. Based on currently enacted guidelines, the Company does not expect Pillar Two to have a material impact upon its tax expense, cash taxes, and effective tax rate.
Uncertain tax positions
As of August 30, 2025, and August 31, 2024 , there were $ 3.9 million and $ 4.6 million, respectively, of unrecognized tax benefits, of which $ 3.7 million and $ 4.5 million, respectively, would favorably impact the Company’s effective tax rate, if recognized. The Company recognized interest and penalties related to uncertain tax positions as a component of income tax expense which is consistent with the recognition of these items in prior reporting periods. As of August 30, 2025, and August 31, 2024, the Company had accrued a nominal amount in interest and penalties, in its long-term accrued liabilities. For fiscal 2025, 2024 and 2023, the Company recognized a nominal expense in its Consolidated Statements of Income related to interest and penalties.
A reconciliation of the beginning and ending amount of unrecognized tax benefits are as follows (in thousands):
Balance at August 26, 2023
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reduction for tax positions of prior years
Statute expirations
Balance at August 31, 2024
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reduction for tax positions of prior years
Statute expirations
Balance at August 30, 2025
The Company has a significant portion of its operations in the U.S. and Canada. The Company is required to file federal income tax returns as well as state income tax returns in most of the U.S. states and in several Canadian provinces. At times, the Company is subject to audits in these jurisdictions, which typically are complex and can take several years to resolve. The final resolution of any such tax audits could result in either a reduction in the Company’s accruals or an increase in its income tax provision, both of which could have a material impact on the consolidated results of operations in any given period.
All U.S. and Canadian federal income tax statutes have lapsed for filings up to and including fiscal years 2021 and 2017, respectively. With a few exceptions, the Company is no longer subject to state and local income tax examinations for periods prior to fiscal 2022. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months.
5. Long-Term Debt
On August 12, 2025, the Company entered into an amended and restated $ 300.0 million unsecured revolving credit agreement, (the “Credit Agreement”) with a syndicate of banks, which matures on August 12, 2030 . Under the Credit Agreement, the Company was able to borrow funds at variable interest rates based on, at the Company’s election, the Secured Overnight Financing Rate or a base rate, plus in each case a spread based on the Company’s consolidated funded debt ratio. Provided there is no default or event of default under the Credit Agreement and the Company is in compliance with its financial covenants on a pro forma basis, the Company may request an increase in the aggregate commitments under the Credit Agreement (in the form of revolving or term tranches) of up to an additional $ 100.0 million, for a total aggregate commitment of up to $ 400.0 million.
Availability of credit requires compliance with certain financial and other covenants, including a maximum consolidated funded debt ratio and minimum consolidated interest coverage ratio as defined in the Credit Agreement. The Company evaluates its compliance with these financial covenants on a fiscal quarterly basis. As of August 30, 2025, the interest rates applicable to the Company’s borrowings under the Credit Agreement would be calculated as SOFR plus 1.00 % at the time of the respective borrowing.
As of August 30, 2025 , the Company had no outstanding borrowings and had outstanding letters of credit amounting to $ 106.7 million , leaving $ 193.3 million available for borrowing under the Credit Agreement, with the ability to request up to an additional $ 100.0 million in commitments pursuant to the accordion feature.
As of August 30, 2025, the Company was in compliance with all covenants under the Credit Agreement.
6. Derivative Instruments and Hedging Activities
The Company uses derivative financial instruments to mitigate its exposure to fluctuations in foreign currencies on certain forecasted transactions denominated in foreign currencies. U.S. GAAP requires that all of the Company’s derivative instruments be recorded on the balance sheet at fair value. All subsequent changes in a derivative’s fair value are recognized in income, unless specific hedge accounting criteria are met.
Derivative instruments that qualify for hedge accounting are classified as a hedge of the variability of cash flows to be received or paid related to a recognized asset, liability or forecasted transaction. Changes in the fair value of a derivative that is highly effective and designated as a cash flow hedge are recognized in accumulated other comprehensive (loss) income until the hedged item or forecasted transaction is recognized in earnings. The Company performs an assessment at the inception of the hedge and on a quarterly basis thereafter, to determine whether its derivatives are highly effective in offsetting changes in the value of the hedged items. Any changes in the fair value resulting from hedge ineffectiveness are immediately recognized as income or expense.
In August 2021, the Company entered into twenty forward contracts to exchange CAD for U.S. dollars at fixed exchange rates in order to manage its exposure related to certain forecasted CAD denominated sales of one of its subsidiaries. The hedged transactions are specified as the first amount of CAD denominated revenues invoiced by one of the Company’s domestic subsidiaries each fiscal quarter, beginning in the first fiscal quarter of 2022 and continuing through the fourth fiscal quarter of 2026. In total, the Company will sell approximately 14.1 million CAD at an average Canadian-dollar exchange rate of 0.7861 over these quarterly periods. The Company concluded that the forward contracts met the criteria to qualify as a cash flow hedge under U.S. GAAP.
As of August 30, 2025, the Company had forward contracts with a notional value of approximately 1.8 million CAD outstanding and recorded the fair value of the contracts of $ 0.1 million in prepaid expenses and other current assets with a corresponding gain of $ 0.1 million in accumulated other comprehensive loss, which was recorded net of tax. For the fiscal 2025, the Company reclassified $ 0.1 million from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The gain on these forward contracts that results in a decrease to accumulated other comprehensive loss as of August 30, 2025 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.
7. Employee Benefit Plans
Defined Contribution Retirement Savings Plan
The Company has a defined contribution retirement savings plan with a 401(k) feature for all eligible U.S. and Canadian employees not under collective bargaining agreements. The Company matches a portion of the employee’s contribution and may make an additional contribution at its discretion. Contributions charged to expense under the plan for fiscal 2025, 2024 and 2023 were $ 15.6 million , $ 20.3 million and $ 18.7 million , respectively.
Pension Plan and Supplemental Executive Retirement Plan
The Company accounts for its pension plan and Supplemental Executive Retirement Plan on an accrual basis over employees’ estimated service periods.
The Company maintains an unfunded Supplemental Executive Retirement Plan (“SERP”) for certain eligible employees of the Company. The benefits are based on the employee’s compensation upon retirement. The amount charged to expense related to this plan amounted to approximately $ 1.6 million , $ 1.7 million and $ 1.7 million for fiscal 2025, 2024 and 2023, respectively.
The Company maintains a non-contributory defined benefit pension plan (“UniFirst Plan”) covering employees at one of its locations. The benefits are based on years of service. The UniFirst Plan assets are invested in a Guaranteed Deposit Account (“GDA”) that is maintained and operated by a third-party investment manager. The amount charged to expense related to this plan amounted to approximately $ 0.2 million , $ 0.2 million and $ 0.1 million for fiscal 2025, 2024 and 2023, respectively.
Net periodic benefit cost other than service costs have been recorded in the accompanying Consolidated Statements of Income in other expense, net.
The components of net periodic benefit cost for fiscal 2025, 2024 and 2023 are as follows (in thousands):
UniFirst Plan
SERP
Service cost
Interest cost
Expected return on assets
Amortization of prior service cost
Amortization of actuarial gain
Other events
Net periodic benefit cost
The Company’s obligations and funded status as of August 30, 2025 and August 31, 2024 are as follows (in thousands):
UniFirst Plan
SERP
Change in benefit obligation:
Projected benefit obligation, beginning of year
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Settlements
Projected benefit obligation, end of year
Change in plan assets:
Fair value of plan assets, beginning of year
Actual return on plan assets
Employer Contributions
Benefits paid
Settlements
Fair value of plan assets, end of year
Funded status (net amount recognized)
As of August 30, 2025 and August 31, 2024, the accumulated benefit obligations related to the UniFirst Plan were $ 3.0 million and $ 3.6 million , respectively. As of August 30, 2025 and August 31, 2024, the accumulated benefit obligations related to the SERP were $ 21.7 million and $ 23.4 million , respectively.
The amounts recorded on the Consolidated Balance Sheets as of August 30, 2025 and August 31, 2024 are as follows (in thousands):
Pension Plans
SERP
Deferred tax assets (liabilities)
Accrued liabilities
Accumulated other comprehensive (loss) income
As of August 30, 2025 and August 31, 2024, the amounts recognized in accumulated other comprehensive loss are as follows (in thousands):
UniFirst Plan
SERP
Net actuarial gain
Unrecognized prior service cost
Accumulated other comprehensive (loss) income
The weighted average assumptions used in calculating the Company’s projected benefit obligation as of August 30, 2025 and August 31, 2024 are as follows:
UniFirst Plan
SERP
Discount rate
Rate of compensation increase
The weighted average assumptions used in calculating the Company’s net periodic service cost for fiscal 2025, 2024 and 2023 are as follows:
UniFirst Plan
SERP
Discount rate
Expected return on plan assets
Rate of compensation increase
The benefit payments, which reflect expected future service, are expected to be paid for the five fiscal years subsequent to August 30, 2025 and thereafter are as follows (in thousands):
UniFirst Plan
SERP
Thereafter
Total benefit payments
Non-qualified Deferred Compensation Plan
The Company adopted the NQDC Plan effective on February 1, 2022. The NQDC Plan is an unfunded, non-qualified deferred compensation plan that allows eligible participants to voluntarily defer receipt of their salary and annual cash bonuses up to approved limits. In its discretion, the Company may credit one or more additional contributions to participant accounts. NQDC Plan participants who are not accruing benefits under the Supplemental Executive Retirement Plan are eligible to have discretionary annual employer contributions credited to their NQDC Plan accounts. All participants are also eligible to have employer supplemental contributions and employer discretionary contributions credited to their NQDC Plan accounts. The amounts of such contributions, if any, may differ from year to year and from participant to participant.
The amounts for employee or employer contributions charged to expense related to the NQDC Plan for fiscal 2025, fiscal 2024 and fiscal 2023, were $ 1.0 million , $ 0.8 million and $ 0.3 million , respectively.
The Company, at its discretion, may also elect to transfer funds to a trust account with the intention to fund the future liability. Total NQDC Plan assets were $ 4.7 million and $ 3.3 million as of August 30, 2025 and August 31, 2024, respectively, and are included within other long-term assets in the accompanying Consolidated Balance Sheets. Total NQDC Plan liabilities were $ 2.8 million and $ 1.6 million as of August 30, 2025 and August 31, 2024, respectively, and are included within current accrued liabilities in the accompanying Consolidated Balance Sheets.
Earnings and losses on contributions, based on investment elections, are recorded as a component of compensation expense in the period earned and are included within other (income) expense, net. For fiscal 2025 and fiscal 2024, other income was $ 0.4 million and $ 0.6 million , respectively. No amount was recorded for fiscal 2023.
8. Goodwill and Other Intangible Assets
When the Company acquires a business, the amount assigned to the tangible assets and liabilities and intangible assets acquired is based on their respective fair values determined as of the acquisition date. The excess of the purchase price over the tangible assets and liabilities and intangible assets is recorded as goodwill. The Company does not amortize goodwill, but it is reviewed annually or more frequently if certain indicators arise, for impairment. There were no impairment losses related to goodwill or intangible assets during fiscal 2025, 2024 and 2023.
The changes in the carrying amount of goodwill are as follows (in thousands):
Balance as of August 26, 2023
Purchase price adjustments recorded during the period
Other
Balance as of August 31, 2024
Goodwill recorded during the period
Other
Balance as of August 30, 2025
As of August 30, 2025, the Company has allocated $ 645.8 million , $ 8.7 million and $ 3.2 million of goodwill to its Uniform & Facility Service Solutions, First Aid & Safety Solutions and Other segments, respectively.
Intangible assets, net in the Company’s Consolidated Balance Sheets as of August 30, 2025 and August 31, 2024 are as follows (in thousands):
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
August 30, 2025
Customer contracts
Software
Other intangible assets
August 31, 2024
Customer contracts
Software
Other intangible assets
Estimated amortization expense for the five fiscal years subsequent to August 30, 2025 and thereafter, based on intangible assets, net as of August 30, 2025 are as follows (in thousands):
Thereafter
Total estimated amortization expense
9. Accrued Liabilities
Accrued liabilities in the Consolidated Balance Sheets as of August 30, 2025 and August 31, 2024 consists of the following (in thousands):
August 30,
August 31,
Current liabilities:
Payroll and benefit related
Bonuses
Insurance related
Environmental related
Other
Total current liabilities
Long-term liabilities:
Benefit related
Environmental related
Asset retirement obligations
Insurance related
Total long-term liabilities
Total accrued liabilities
10. Asset Retirement Obligations
Asset retirement obligations generally result from legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. Accordingly, the Company recognizes asset retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company continues to depreciate, on a straight-line basis, the amount added to property, plant and equipment and recognizes accretion expense in connection with the discounted liability over the various remaining lives which range from approximately one to nineteen years .
The Company recognized as a liability the present value of the estimated future costs to decommission its nuclear laundry facilities. The estimated liability is based on historical experience in decommissioning nuclear laundry facilities, estimated useful lives of the underlying assets, external vendor estimates as to the cost to decommission these assets in the future, and federal and state regulatory requirements. The estimated current costs have been adjusted for the estimated impact of inflation at 3 % per year , and the liability has been discounted to present value using a credit-adjusted risk-free rate.
Revisions to the liability could occur due to changes in the Company’s estimated useful lives of the underlying assets, estimated dates of decommissioning, changes in decommissioning costs, changes in federal or state regulatory guidance on the decommissioning of such facilities, or other changes in estimates. Changes due to revised estimates are recognized by adjusting the carrying amount of the liability and the related long-lived asset if the assets are still in service, or charged to expense in the period if the assets are no longer in service.
A reconciliation of the Company’s asset retirement are as follows for fiscal 2025 and 2024 (in thousands):
Year ended
August 30,
August 31,
Beginning balance
Accretion expense
Effect of exchange rate changes
Costs incurred
Change in estimate
Ending balance
The Company’s asset retirement obligations are included in long-term accrued liabilities in the accompanying Consolidated Balance Sheet.
11. Commitments and Contingencies
Lease Commitments
The Company has operating leases for certain operating facilities, vehicles and equipment, which provide the right to use the underlying asset and require lease payments over the term of the lease. Each new contract is evaluated to determine if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. All identified leases are recorded on the Consolidated Balance Sheets with a corresponding operating lease right-of-use asset, net, representing the right to use the underlying asset for the lease term and the operating lease liabilities representing the obligation to make lease payments arising from the lease. Short-term operating leases, which have an initial term of twelve months or less, are not recorded on the Consolidated Balance Sheets.
Operating lease right-of-use assets, net and operating lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily by using the incremental borrowing rate based on the information available as of the lease commencement date. Lease expense for operating leases is recorded on a straight-line basis over the lease term and variable lease costs are recorded as incurred. Both lease expense and variable lease costs are primarily recorded in cost of revenues on the Company’s Consolidated Statements of Income. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table presents the operating lease cost and information related to the operating lease right-of-use assets, net and operating lease liabilities for fiscal 2025, 2024 and 2023:
(In thousands, except lease term and discount rate)
Lease cost:
Operating lease costs including short-term lease expense and variable lease costs, which were immaterial in the period
Operating cash flow impacts:
Cash paid for amounts included in the measurement of operating lease liabilities
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities
Operating lease right-of-use assets acquired in business combination
Weighted average remaining lease term - operating leases
Weighted average discount rate - operating leases
Total rent expense on all leases was $ 22.7 million , $ 21.8 million and $ 18.4 million for fiscal 2025, 2024 and 2023, respectively.
The contractual future minimum lease payments of the Company’s operating lease liabilities by fiscal year as of August 30, 2025 are as follows (in thousands):
Thereafter
Total payments
Less interest
Total present value of lease payments
Environmental and Legal Contingencies
The Company and its operations are subject to various federal, state and local laws and regulations governing, among other things, air emissions, wastewater discharges, and the generation, handling, storage, transportation, treatment and disposal of hazardous wastes and other substances. In particular, industrial laundries currently use and must properly dispose of detergent
wastewater and other residues, and, in the past, used perchloroethylene and other dry-cleaning solvents. The Company is attentive to the environmental concerns surrounding the disposal of these materials and has, through the years, taken measures to avoid their improper disposal. The Company has settled, or contributed to the settlement of, past actions or claims brought against the Company relating to the disposal of hazardous materials at several sites and there can be no assurance that the Company will not have to expend material amounts to remediate the consequences of any such disposal in the future.
U.S. GAAP requires that a liability for contingencies be recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded. The Company regularly consults with attorneys and outside consultants in its consideration of the relevant facts and circumstances before recording a contingent liability. Changes in enacted laws, regulatory orders or decrees, management’s estimates of costs, risk-free interest rates, insurance proceeds, participation by other parties, the timing of payments, the input of the Company’s attorneys and outside consultants or other factual circumstances could have a material impact on the amounts recorded for environmental and other contingent liabilities.
Under environmental laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located on, or in, or emanating from, such property, as well as related costs of investigation and property damage. Such laws often impose liability without regard to whether the owner or lessee knew of, or was responsible for, the presence of such hazardous or toxic substances. There can be no assurances that acquired or leased locations have been operated in compliance with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon the Company under such laws or expose the Company to third-party actions such as tort suits. The Company continues to address environmental conditions under terms of consent orders negotiated with the applicable environmental authorities or otherwise with respect to certain sites.
The Company has accrued certain costs related to ongoing and potential future environmental investigation, monitoring and remediation activities at certain sites, as it has been determined that the costs are probable and can be reasonably estimated.
The Company routinely reviews and evaluates sites that may require remediation and monitoring and determines its estimated costs based on various estimates and assumptions. These estimates are developed using its internal sources or by third party environmental engineers or other service providers. Internally developed estimates are based on:
Management’s judgment and experience in remediating and monitoring the Company’s sites;
Information available from regulatory agencies as to costs of remediation and monitoring;
The number, financial resources and relative degree of responsibility of other potentially responsible parties (“PRPs”) who may be liable for remediation and monitoring of a specific site; and
The typical allocation of costs among PRPs.
There is usually a range of reasonable estimates of the costs associated with each site. In accordance with U.S. GAAP, the Company’s accruals reflect the amount within the range that it believes is the best estimate or the low end of a range of estimates if no point within the range is a better estimate. Where it believes that both the amount of a particular liability and the timing of the payments are reliably determinable, the Company adjusts the cost in current dollars using a rate of 3 % for inflation until the time of expected payment and discounts the cost to present value using current risk-free interest rates. As of August 30, 2025, the risk-free interest rates utilized by the Company ranged from 4.86 % to 4.92 % .
For environmental liabilities that have been discounted, the Company includes interest accretion, based on the effective interest method, in selling and administrative expenses on the accompanying Consolidated Statements of Income.
The changes to the Company’s environmental liabilities for fiscal 2025 and 2024 are as follows (in thousands):
Year ended
August 30,
August 31,
Beginning balance
Costs incurred for which reserves have been provided
Insurance proceeds
Interest accretion
Changes in discount rates
Revisions in estimates
Ending balance
Anticipated payments and insurance proceeds of currently identified environmental remediation liabilities as of August 30, 2025, for the next five fiscal years and thereafter, as measured in current dollars, are reflected below (in thousands):
Fiscal year ended August
Thereafter
Total
Estimated costs—current dollars
Estimated insurance proceeds
Net anticipated costs
Effect of inflation
Effect of discounting
Balance as of August 30, 2025
Estimated insurance proceeds are primarily obtained from an annuity received as part of a legal settlement with an insurance company. Annual proceeds of approximately $ 0.3 million are deposited into an escrow account which funds remediation and monitoring costs for two sites related to former operations. Annual proceeds received but not expended in the current year accumulate in this account and may be used in future years for costs related to this site through the year 2027. As of August 30, 2025, the balance in this escrow account, which is held in a trust and is not recorded in the Company’s accompanying Consolidated Balance Sheets, was approximately $ 5.9 million . Also included in estimated insurance proceeds are amounts the Company is entitled to receive pursuant to legal settlements as reimbursements from three insurance companies for estimated costs at one of its sites.
The Company’s nuclear garment decontamination facilities are licensed by respective state agencies, as delegated authority by the Nuclear Regulatory Commission (the “NRC”) pursuant to the NRC’s Agreement State program and are subject to applicable federal and state radioactive material regulations. In addition, the Company’s international locations (Canada, the United Kingdom and the European Union) are regulated by equivalent respective jurisdictional authorities. There can be no assurance that such regulation will not lead to material disruptions in the Company’s garment decontamination business.
From time to time, the Company is also subject to legal and regulatory proceedings and claims arising from the conduct of its business operations, including personal injury claims, customer contract matters, employment claims and environmental matters as described above.
In addition, in the fourth quarter of fiscal 2022, the Mexican federal tax authority issued a tax assessment on the Company’s subsidiary in Mexico for fiscal 2016 import taxes, value added taxes and custom processing fees of over $ 17.0 million, plus surcharges, fines and penalties of over $ 67.7 million for a total assessment of over $ 84.7 million. The Company challenged the validity of the tax assessment through an appeal process. In the first quarter of fiscal 2025, the Federal Tax Court in Mexico made a determination partially in the Company’s favor. Following the Federal Tax Court’s determination, the Company filed a constitutional action before the Federal Administrative Court. In addition, the federal tax authority appealed the determination of the Federal Tax Court. While the Company is unable to ascertain the ultimate outcome of this matter, based on the information currently available, the Company believes that a loss with respect to this matter is neither probable nor remote. Given the uncertainty associated with the ultimate resolution of this matter, the Company is unable to reasonably assess an estimate or range of estimates of any potential losses. Accordingly, the Company has not recorded a liability related to this matter.
While it is impossible for the Company to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits and environmental contingencies, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts covered by insurance have been properly accrued in accordance with U.S. GAAP. It is possible, however, that the future financial position and/or results of operations for any particular future period could be materially affected by changes in the Company’s assumptions or strategies related to these contingencies or changes out of the Company’s control.
Other Contingent Liabilities
As security for certain agreements with the NRC and various state agencies related to the nuclear operations (see above) and certain insurance programs, the Company had standby irrevocable bank commercial letters of credit of $ 106.7 million and $ 65.1 million outstanding as of August 30, 2025 and August 31, 2024, respectively.
Non-cancellable purchase commitments for inventories, software, and services amounted to $ 132.0 million as of August 30, 2025, of which $ 89.3 million will be paid in less than 1 year, $ 31.8 million will be paid in 1 to 3 years, and the remaining will be paid in 3 to 5 years.
12. Share-based Compensation
The Company adopted an equity incentive plan (the “2023 Plan”) in October 2023 and reserved 375,000 shares of Common Stock for issuance under the 2023 Plan. The 2023 Plan, which was approved by the Company's shareholders in January 2024, replaced the Company’s 2010 stock incentive plan (the “2010 Plan”). Upon approval of the 2023 Plan by the Company’s shareholders, no further awards may be granted under the 2010 Plan. The 2023 Plan permits the award of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and unrestricted stock (collectively referred to as “Share-Based Awards”) as well as dividend equivalent rights and cash-based awards. As of August 30, 2025, the number of remaining shares available for future grants under the 2023 Plan was 352,741 . Share-based compensation expense, which includes expense related to Share-Based Awards, has been recorded in the accompanying Consolidated Statements of Income in selling and administrative expenses.
All Share-Based Awards issued to management were recommended to the Board of Directors by the Compensation Committee and approved by the Board of Directors. All Share-Based Awards issued to the Company’s non-employee members of the Board of Directors (the “Directors”) were recommended to the Board of Directors by the Compensation Committee and approved by the Board of Directors.
In fiscal 2025, 2024 and 2023, the Company granted a total of 1,662 , 1,475 and 1,575 shares of fully vested unrestricted stock, respectively, to its non-employee Directors. Accordingly, compensation expense related to the unrestricted stock granted in each of fiscal 2025, 2024 and 2023 were recognized on the date of grant.
In fiscal 2025, 2024 and 2023, the Company granted a total of 4,938 , 5,004 and 6,864 stock appreciation rights, respectively, to its non-employee Directors. Such stock appreciation rights were fully vested upon grant, expire on the earlier of the eighth anniversary of the grant date or the second anniversary of the date that the Director ceases to be a member of the Board of Directors and must be settled in stock at the time of exercise. Accordingly, compensation expense related to the stock appreciation rights was recognized on the date of grant.
As of August 30, 2025, the total compensation cost not yet recognized related to non-vested Share-Based Awards was approximately $ 16.9 million . The weighted average period over which compensation cost for Share-Based Awards will be recognized is 2.25 years.
All stock appreciation rights issued to employees were granted with an exercise price equal to the fair value of the Company’s Common Stock on the date of grant. Stock appreciation rights generally vest one-third on each anniversary of the grant date over a three-year period and expire ten years after the grant date. Share-Based Awards granted to the Company’s non-employee Directors were fully vested as of the date of grant. Non-employee Director Share-Based Award grants in the form of stock appreciation rights expire on the earlier of the eighth anniversary of the grant date or the second anniversary of the date that the Director ceases to be a member of the Board of Directors.
Time-based restricted stock units granted to employees generally vest one-third on each anniversary of the grant date over a three-year period. Generally, performance-based restricted stock units granted to employees are earned based on whether and the extent to which the Company achieves certai n revenue and operating margin targets.
The fair value of each stock appreciation right is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used:
Year ended
Risk-free interest rate
Expected dividend yield
Expected life (in years)
Expected volatility
The weighted average fair value of Share-Based Awards granted in the form of stock appreciation rights during fiscal years 2025, 2024 and 2023 were $ 64.32 , $ 55.97 and $ 60.38 , respectively.
The following table summarizes the Share-Based Awards activity in the form of stock options and stock appreciation rights for fiscal 2025:
Number of
Shares
Weighted
Average
Exercise Price
Outstanding at August 31, 2024
Granted
Expired
Exercised
Forfeited
Outstanding at August 30, 2025
Exercisable at August 30, 2025
The following table summarizes the Share-Based Awards activity in the form of restricted stock units for fiscal 2025:
Number of
Shares
Weighted
Average
Grant Price
Unvested balance at August 31, 2024
Granted
Vested
Forfeited
Unvested balance at August 30, 2025
13. Shareholders’ Equity
The Company has two classes of common stock: Common Stock and Class B Common Stock. Each share of Common Stock is entitled to one vote, is freely transferable, and is entitled to a cash dividend equal to 125 % of any cash dividend paid on ea ch share of Class B Common Stock. Each share of Class B Common Stock is entitled to ten votes and can be converted to Common Stock on a share-for-share basis. However, until converted to Common Stock, shares of Class B Common Stock are not freely transferable. During fiscal 2025, 39,030 shares of Class B Common Stock were converted to Common Stock. No such conversions occurred during each of fiscal 2024 and 2023.
On October 24, 2023, the Company’s Board of Directors authorized a new share repurchase program to repurchase up to $ 100.0 million of its outstanding shares of Common Stock, inclusive of the amount which remained available under the existing share repurchase program approved on October 18, 2021. On April 8, 2025, the Company’s Board of Directors authorized a new share repurchase program to repurchase up to $ 100.0 million of its outstanding shares of Common Stock, inclusive of the amount which remained available under the existing share repurchase program approved in 2023. Repurchases from time to time under the new program, if any, will be made in either the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will depend on a variety of factors, including economic and market conditions, the Company stock price, corporate liquidity requirements and priorities, applicable legal requirements and other factors. The share repurchase program has been funded to date with the Company’s available cash and will be funded in the future using the Company’s available cash or capacity under its Credit Agreement and may be suspended or discontinued at any time. On April 8, 2025, the Company’s Board of Directors authorized a new
share repurchase program to repurchase up to $ 100.0 million of its outstanding shares of Common Stock, inclusive of the amount which remained available under the existing share repurchase program approved in 2023.
The Company repurchased 402,415 shares for an average price per share of $ 178.81 in fiscal 2025 and 139,556 shares for an average price per share of $ 170.40 in fiscal 2024 , and did no t repurchase any shares in fiscal 2023. As of August 30, 2025, there was $ 40.6 million remaining to repurchase outstanding shares of Common Stock under the existing program.
On October 28, 2025, the Company’s Board of Directors declared increased quarterly cash dividends of $ 0.365 per share of Common Stock and $ 0.292 per share of Class B Common Stock, up from $ 0.350 and $ 0.280 per share, respectively. Both dividends are payable on January 2, 2026 to shareholders of record as of December 5, 2025 . The amount and timing of any future dividend payment is subject to the approval of the Board of Directors each quarter.
14. Accumulated Other Comprehensive Loss
The changes in each component of accumulated other comprehensive loss for fiscal 2025 and 2024 are as follows (in thousands):
Foreign
Currency
Translation
Pension-
related (1)
Derivative
Financial
Instruments (1)
Total
Accumulated
Other
Comprehensive
Loss
Balance as of August 26, 2023
Change during the year
Balance as of August 31, 2024
Change during the year
Balance as of August 30, 2025
Amounts are shown net of tax.
Amounts reclassified from accumulated other comprehensive loss, net of tax, for fiscal 2025 and 2024 are as follows (in thousands):
Year ended
Pension benefit liabilities, net:
Actuarial loss (gain) (a)
Total, net of tax
Derivative financial instruments, net:
Forward contracts loss (gain) (b)
Total, net of tax
Total amounts reclassified, net of tax
Amounts included in selling and administrative expenses in the accompanying Consolidated Statements of Income.
Amounts included in revenues in the accompanying Consolidated Statements of Income.
15. Segment Reporting
Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions on how to allocate resources and assess performance.
Prior to May 31, 2025, the Company organized its business into six operating segments: U.S. Rental and Cleaning, Canadian Rental and Cleaning, Manufacturing (“MFG”), Specialty Garments Rental and Cleaning (“Specialty Garments”), First Aid and Corporate. The U.S. Rental and Cleaning and Canadian Rental and Cleaning operating segments were previously combined to form the U.S. and Canadian Rental and Cleaning reporting segment, and as a result, the Company had five reporting segments. The Company previously referred to its U.S. and Canadian Rental and Cleaning, MFG, and Corporate segments combined as its “Core Laundry Operations.”
Beginning with the fourth quarter of 2025 , the Company reorganized its business into three reportable operating segments:
Uniform & Facility Service Solutions: This reporting segment consolidates the former U.S. and Canadian Rental and Cleaning, MFG and Corporate segments and includes our cleanroom solutions, which was previously part of the Specialty Garments reporting segment. The Uniform & Facility Service Solutions reporting segment designs, manufactures, purchases, rents, cleans, delivers and sells, uniforms and protective clothing and non-garment items in the U.S. and Canada. The segment, through our cleanroom solutions, also purchases, rents, cleans, delivers and sells specialty garments and non-garment items primarily for cleanroom applications and provides cleanroom cleaning at limited customer locations. Additionally, Uniform & Facility Service Solutions consists of our distribution center, sales and marketing, information systems, engineering, materials management, manufacturing planning, finance, budgeting, human resources, other general and administrative costs and interest expense.
First Aid & Safety Solutions: We renamed our First Aid reporting segment as the First Aid & Safety Solutions reporting segment to better reflect the scope of services and products offered. The First Aid & Safety Solutions reporting segment sells first aid cabinet services, non-prescription medicines and safety supplies, and provides certain safety training.
Other: This reporting segment currently consists of our nuclear solutions, which was previously part of the Specialty Garments reporting segment with our cleanroom solutions. The segment purchases, rents, cleans, delivers and sells, specialty garments and non-garment items primarily for nuclear applications.
The Company’s chief operating decision maker (the “CODM”) is the Chief Executive Officer . The modifications to the Company’s reporting segments reflect how the CODM assesses performance and allocates resources. The CODM uses segment revenues and segment operating income to assess performance and allocate resources. The Company has recast prior certain period segment results to conform with the current presentation. Asset information is not utilized by the CODM for purposes of assessing performance or allocating resources, and therefore such information has not been presented.
The following table includes our financial results by reportable segment for the periods indicated (in thousands):
As of and for
the year ended August 30, 2025
Uniform & Facility Service Solutions
First Aid & Safety Solutions
Other
Total
Revenues
Cost of revenues
Selling and administrative expenses
Depreciation and amortization
Operating Income
Capital expenditures
As of and for
the year ended August 31, 2024
Uniform & Facility Service Solutions
First Aid & Safety Solutions
Other
Total
Revenues
Cost of revenues
Selling and administrative expenses
Depreciation and amortization
Operating Income
Capital expenditures
As of and for
the year ended August 26, 2023
Uniform & Facility Service Solutions
First Aid & Safety Solutions
Other
Total
Revenues
Cost of revenues
Selling and administrative expenses
Depreciation and amortization
Operating Income
Capital expenditures
The Company’s long-lived assets as of August 30, 2025 and August 31, 2024 and revenues and income before income taxes for fiscal 2025, 2024 and 2023 were attributed to the following countries (in thousands):
Long-lived assets as of:
August 30,
August 31,
Europe, Canada, Mexico and Nicaragua (1)
Total
Revenues for fiscal years:
Europe and Canada (1)
Total
Income before income taxes for fiscal years:
Europe, Canada, Mexico and Nicaragua (1)
Total
No country other than the U.S. accounts for greater than 10% of total long-lived assets, revenues or income before income taxes.
16. Related Party
During fiscal 2025, 2024 and 2023, the Company reco gnized $ 1.7 million, 1.5 million and $ 1.6 million, respectively, of revenues with a company for which a member of the Company’s Board of Directors served as senior officer for such periods.
During fiscal 2025 , the Company did no t record any material expenses with a related party. During fiscal 2024 and 2023 , the Company recorded $ 2.1 million and $ 3.2 million, respectively, of expense with a company for which one member of the Company’s Board of Directors was an executive officer for a portion of such periods. Such member of the Board of Directors is no longer an executive officer of the company, and as a result, no such expenses were categorized as related party during fiscal 2025.
Report of Independent Regist ered Public Accounting Firm
To the Shareholders and the Board of Directors of UniFirst Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of UniFirst Corporation and subsidiaries (the “Company”) as of August 30, 2025 and August 31, 2024, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended August 30, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 30, 2025 and August 31, 2024, and the results of its operations and its cash flows for each of the three years in the period ended August 30, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 30, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated October 29, 2025 expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Self-Insured Workers’ Compensation, Vehicles and General Liability Insurance-related Accruals
Description of the Matter
As disclosed in Note 9 to the Company’s consolidated financial statements, as of August 30, 2025, the Company had recognized current and long-term insurance related liabilities of $36.1 million and $73.4 million, respectively. As discussed in Note 1 to the Company’s consolidated financial statements, the Company is self-insured for certain obligations related to workers’ compensation, vehicles and general liability programs and judgments and estimates are used by the Company in determining the potential value associated with reported claims and for events that have occurred but have not been reported.
Auditing management’s estimate of the portion of the insurance related liabilities related to workers’ compensation, vehicles and general liability is highly judgmental due to the significant estimation uncertainty in the potential values of reported claims and incurred but not reported claims and the application of management judgment in assessing the methodologies and certain assumptions used in making those estimates. The reserve estimate relies on inputs such as historical claims experience and other factors to estimate the liability for reported claims and to estimate the value of claims that have been incurred but have not been reported.
How We Addressed the Matter in Our Audit
To audit the self-insurance accrual, our procedures included, among others, assessing the methodologies used to estimate the insurance reserve, performing testing of significant inputs including transactional testing over the completeness and accuracy of historical claims data and vouching payments made to third parties. In addition, we compared the Company’s contractual self-insured retentions, deductibles, and coverage limits within the estimation to the Company’s contractual agreements. Furthermore, we involved our actuarial specialists in evaluating the methodologies used by management to determine the estimate of the reserve. We then compared the Company’s estimate of the reserve amount to a range which our actuarial specialist developed based on independently selected actuarial methodologies and assumptions.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2002.
Boston, Massachusetts
October 29, 2025
