Unifirst Corporation
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ITEM 1. BUSINESS
GENERAL
UniFirst Corporation, a corporation organized under the laws of the Commonwealth of Massachusetts in 1950, together with its subsidiaries, hereunder referred to as “we”, “our”, the “Company”, or “UniFirst”, is one of the leading providers in the supply and servicing of uniform and workwear programs, facility management and service products, as well as first aid and safety supplies and services in North America. We design, manufacture, personalize, rent, clean, deliver, and sell a wide range of uniforms and protective clothing. We also rent and sell industrial wiping products, floor mats, facility management and service products and other non-garment items, and provide restroom and cleaning supplies and first aid cabinet services and other safety supplies as well as certain safety training to a variety of manufacturers, retailers and service companies. Our safety offerings also include fire protection services, such as inspection, testing, and maintenance of fire extinguishers and other fire safety equipment. We serve businesses of all sizes across multiple industry sectors.
Our principal services include providing customers with uniforms and other non-garment items, picking up soiled uniforms or other items on a periodic basis (usually weekly), and delivering, at the same time, cleaned and processed items. We offer uniforms in a wide variety of styles, colors, sizes and fabrics, often with personalized emblems selected by the customer. Our centralized services, specialized equipment and economies of scale generally allow us to be more cost effective in providing garment solutions and services than customers could be themselves, including reducing the burden of managing logistics, offsetting costs, and helping with compliance where the garments may serve a role in safe operations. During the fiscal year ended August 29, 2026 (“fiscal 2026”), we manufactured approximately 65% of the garments placed in service. Because we design and manufacture a majority of our own uniforms and protective clothes, we can produce custom garment programs for our larger customers, offer a diverse range of such designs within our standard line of garments and better control the quality, price and speed at which we service such garments.
Our business has three reporting and operating segments: Uniform & Facility Service Solutions, First Aid & Safety Solutions and Other. All financial information presented in this Annual Report on Form 10-K has been recast to reflect this segment structure for all periods presented.
Uniform & Facility Service Solutions: 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 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. Additionally, the Uniform & Facility Service Solutions segment 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: The First Aid & Safety Solutions reporting segment sells first aid cabinet services, non-prescription medicines, safety supplies, fire safety and provides certain safety training to both end users and wholesalers.
Other: This reporting segment consists of our nuclear garment decontamination business. The segment purchases, rents, cleans, delivers and sells specialty garments and non-garment items primarily for nuclear applications.
For a further discussion of our reporting segments, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 14, “Segment Reporting” to our Consolidated Financial Statements in this Annual Report on Form 10-K.
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Merger Agreement
On March 10, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cintas Corporation (“Cintas”), Bruin Merger Sub I, Inc., a wholly owned subsidiary of Cintas (“Merger Sub Inc.”), and Bruin Merger Sub II, LLC, a wholly owned subsidiary of Cintas (“Merger Sub LLC”).
Pursuant to the terms and conditions of the Merger Agreement, at the effective time of the merger of the Company with and into Merger Sub Inc., each share of (i) our common stock, par value $0.10 per share, and (ii) our Class B common stock, par value $0.10 per share, (clauses (i) and (ii), our “Common Stock”) issued and outstanding immediately prior to the effective time of this merger (other than shares of our Common Stock held in our treasury or held directly by a subsidiary of the Company, Cintas, Merger Sub Inc. or Merger Sub LLC) will convert into the right to receive: $155.00 in cash and 0.7720 shares of fully paid and nonassessable Cintas common stock (the “Merger Consideration”). No fractional shares of Cintas common stock will be issued in this merger, and holders of our Common Stock will receive cash in lieu of any fractional shares of Cintas common stock.
For more information, refer to our Current Reports on Form 8-K filed with the SEC on March 11, 2026 and June 12, 2026 and Note 1, “Summary of Significant Accounting Policies.”
PRODUCTS AND SERVICES
We provide our customers with personalized workplace uniforms and protective work clothing in a broad range of styles, colors, sizes and fabrics. Our uniform products include shirts, pants, jackets, coveralls, lab coats, smocks, aprons and specialized protective wear, such as flame resistant and high visibility garments. At certain specialized facilities, like nuclear plants, we also decontaminate and clean clothes and other items which may have been exposed to radioactive materials and service special cleanroom protective wear and facilities. We also offer non-garment items and services, such as industrial wiping products, floor mats, dry and wet mops, restroom and cleaning supplies and other textile products. We also sell first aid cabinet services and other safety supplies, provide certain safety training and maintain wholesale distribution and pill packaging operations for non-prescription medicines.
We offer our customers a range of garment service options, including full-service rental programs in which garments are cleaned and serviced by us, lease programs in which garments are cleaned and maintained by individual employees and purchase programs to buy garments and related items directly. As part of our rental business, we pick up a customer’s soiled uniforms and/or other items on a periodic basis (usually weekly) and deliver back cleaned and processed replacement items. We believe our centralized services, specialized equipment and economies of scale generally allow us to be more cost effective in providing garment and related services than customers could be themselves, particularly those customers with high employee turnover rates. Our uniform program is intended not only to help our customers foster a company identity, but also to enhance their corporate image and improve employee safety, productivity and morale. We primarily serve our customers pursuant to written service contracts that range in duration from three to five years.
Historically, our revenues and operating results have varied from quarter to quarter and are expected to continue to fluctuate in the future. These fluctuations have been due to a number of factors, including: general economic conditions in our served markets; the timing of acquisitions and of commencing start-up operations and related costs; our effectiveness in integrating acquired businesses and start-up operations; the timing of nuclear plant outages; volatility in raw material and labor costs; capital expenditures; seasonal rental and purchasing patterns of our customers; and price changes in response to competitive factors. In addition, our operating results historically have been lower during the second and fourth fiscal quarters than during the other quarters of the fiscal year. The operating results for any historical quarter are not necessarily indicative of the results to be expected for an entire fiscal year or any other interim periods.
Our fiscal year ends on the last Saturday in August and generally consists of 52 weeks; however, approximately every five or six years includes a 53rd week, which can affect year-over-year comparability of revenues and operating results.
CUSTOMERS
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 United States (“U.S.”), Canada and Europe. In the last three years, no individual customer in any of our segments accounted for greater than 10% of our total revenue.
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MARKETING, SALES, AND CUSTOMER SERVICE
We market our products and services to a diverse customer base and to prospects that range across virtually all industry segments. We have built and maintain an extensive, proprietary database of prescreened and qualified business prospects that have been sourced from our various promotional initiatives, including mailers, website contacts, advertising responses, sales calls and lists purchased from third-party providers. These prospect records serve as a primary targeting resource for our professional sales and marketing organization and are constantly updated, expanded and maintained by an in-house team of specialist database qualifiers and managers.
We employ a large team of trained professional sales representatives to market our services to potential customers and develop new accounts. While most of our sales representatives present a full range of service solutions, we also have specialized sales and service teams for specific customer needs.
We believe that effective customer service is the most crucial element in developing and maintaining our market position. Our commitment to service excellence is reflected throughout our organization. Our information systems and our support service center enable us to respond to customer inquiries or issues within 24 hours, and our service personnel are specially trained to handle the daily contact work necessary to effectively manage customer relations. We measure the speed and accuracy of our customer service efforts weekly and continuously survey, record and report satisfaction levels to evaluate current performance and highlight areas for improvement.
COMPETITION
The uniform rental and sales industry is highly competitive. Our principal competitors offering uniform rental programs include Cintas, Alsco, and Vestis Corporation. Outside of these national competitors we also compete with numerous other service providers and uniform sellers with regional and local presence. In addition to our traditional rental competitors, we also compete with businesses that focus on selling uniforms, facility service products, and other related items directly to end customers. The direct sales market is highly fragmented and includes national, regional, and local providers. The level of competition varies by geographic area and product category. The principal sources of differentiation in the industry are the range of products and services, the quality of service, and pricing. Businesses may also elect to perform certain services internally rather than outsource them. Finally, our biggest competition is from the vast number of businesses choosing to buy their uniforms from various on-line and other retailers and choosing to perform certain services internally.
MANUFACTURING AND SOURCING
We manufactured approximately 65% of all garments we placed in service during fiscal 2026. These garments were primarily work pants and shirts manufactured at two of our plants located in San Luis Potosi, Mexico, one plant located in Managua, Nicaragua, as well as at subcontracted manufacturers that we utilize within our sourcing strategy to balance demand and optimize costs. The balance of the garments used in our programs are purchased from a variety of industry suppliers. While we currently acquire the raw materials with which we produce our garments from a limited number of suppliers, we believe that such materials are generally readily available from other sources. To date, we have experienced limited difficulty in obtaining any of our raw materials or supplies, although at certain times, we have sourced raw materials or supplies from alternative sources or experienced cost increases for such raw materials and supplies. Currently, we also manufacture approximately 99% of the mats we place in service at our plant in Cave City, Arkansas.
HUMAN CAPITAL
As of August 29, 2026, we employed approximately 15,100 team partners across our operations. Our people are fundamental to our success, and we strive to recruit, develop, and retain the best talent. We provide continuous training and development opportunities, including our leadership development program, which offers leadership education, operational knowledge, and hands-on business experience within the industrial laundry and facility services industry to develop future managers.
We seek to foster an employee-intimate culture and believe our workforce is critical to our long-term success and to the service of our customers. We focus on the safety and well-being of our team partners by providing regular safety training, personal protective equipment, and a comprehensive suite of healthcare, wellness, and other employee benefits.
Less than 1% of our U.S. employees are represented by a union under a collective bargaining agreement, and we consider our employee relations to be good.
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GOVERNMENT REGULATIONS
We, like our competitors, 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. We are attentive to the environmental concerns surrounding the disposal of these materials and have, through the years, taken measures to avoid their improper disposal. We have settled, or contributed to the settlement of, past actions or claims brought against us relating to the disposal of hazardous materials at several sites and there can be no assurance that we will not have to expend material amounts of resources to remediate the consequences of any such disposal in the future. Further, 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 assurance that our acquired or leased locations have been operated in compliance with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon us under such laws or expose us to third-party actions, such as tort suits. We continue to address environmental conditions under terms of consent orders negotiated with the applicable environmental authorities or otherwise with respect to certain sites. We routinely review and evaluate sites that may require remediation and monitoring and determine our estimated costs based on various estimates and assumptions. For a discussion of our accruals with respect to environmental liabilities and additional discussion regarding environmental matters, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K. Refer also to the risk factors set forth in this Annual Report on Form 10-K for additional information regarding environmental matters.
Our nuclear garment decontamination facilities in the U.S. are licensed by the Nuclear Regulatory Commission, or in certain cases, by the applicable state agency, and are subject to regulation by federal, state and local authorities. We also have nuclear garment decontamination facilities in the United Kingdom and the Netherlands. These facilities are licensed and regulated by the respective country’s applicable federal agency. In the past, scrutiny and regulation of nuclear facilities and related services have resulted in the suspension of operations at certain nuclear facilities served by us or disruptions in our ability to service such facilities. There can be no assurance that such scrutiny and regulation will not lead to the shut-down of such facilities or otherwise cause material disruptions in our garment decontamination business.
Additional information regarding our environmental, health, and safety initiatives is available in UniFirst’s Impact Report, which can be found on our website at www.unifirst.com/sustainability-report. Such report is not deemed to be incorporated into this Annual Report on Form 10-K or the documents incorporated by reference into this Annual Report on Form 10-K.
AVAILABLE INFORMATION
We make available free of charge our Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including exhibits and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). These reports are available on our website at www.unifirst.com. In addition, you may request a copy of our filings, excluding exhibits, by contacting our Investor Relations group at (978) 658-8888 or at UniFirst Corporation, 68 Jonspin Road, Wilmington, MA 01887. Information included on our website is not deemed to be incorporated into this Annual Report on Form 10-K or the documents incorporated by reference into this Annual Report on Form 10-K.
In addition, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, and you may access any materials we file with the SEC through the SEC’s website at www.sec.gov.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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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 and cleaning products, floor mats, facility service products and other non-garment items, and provide 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.
We report our operations through three reportable operating segments, based on the information reviewed by our Chief Executive Officer: Uniform & Facility Service Solutions, First Aid & Safety Solutions and Other. All financial information presented in this Annual Report on Form 10-K has been recast to reflect this segment structure for all periods presented. Refer to Item 1, “Business” and Note 14, “Segment Reporting” to our Consolidated Financial Statements for our disclosure of segment information.
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 segment 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 our 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.
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 consists of our nuclear garment decontamination business. The segment purchases, rents, cleans, delivers and sells specialty garments and non-garment items primarily for nuclear applications.
Approximately 91.0% of our revenues in fiscal 2026 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 5.0% of our total revenues in fiscal 2026. Revenues from our Other segment, which accounted for approximately 4.0% of our fiscal 2026 revenues, increases during outages and refueling by nuclear power plants, as garment usage increases at these times.
Merger Agreement
On March 10, 2026, we entered into the Merger Agreement with Cintas, Merger Sub Inc., and Merger Sub LLC.
Pursuant to the terms and conditions of the Merger Agreement, at the effective time of the merger of the Company with and into Merger Sub Inc., each share of our Common Stock issued and outstanding immediately prior to the effective time of this merger (other than shares of our Common Stock held in our treasury or held directly by a subsidiary of the Company, Cintas, Merger Sub Inc. or Merger Sub LLC) will convert into the right to receive: $155.00 in cash and 0.7720 shares of fully paid and nonassessable Cintas common stock. No fractional shares of Cintas common stock will be issued in this merger, and holders of our Common Stock will receive cash in lieu of any fractional shares of Cintas common stock.
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For more information, refer to our Current Reports on Form 8-K filed with the SEC on March 11, 2026 and June 12, 2026 and Note 1, “Summary of Significant Accounting Policies.”
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 our 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.
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We completed our annual goodwill impairment test as of the first day of the fourth quarter in fiscal 2026, fiscal 2025 and fiscal 2024. For fiscal 2026, we performed a qualitative assessment and concluded that it was not more likely than not that the fair value of our reporting units was less than their respective carrying values. For fiscal 2025 and fiscal 2024, we performed a quantitative assessment and determined that the fair value of each of our reporting units exceeded its respective carrying value. There have been no impairments of goodwill or other intangible assets in fiscal 2026, 2025 or 2024.
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 2026, 2025 or 2024.
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 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. 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 29, 2026 using a risk-free interest rate of approximately 5.22% over expected payment 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 the factors described above, including risk-free interest rates, or other factual circumstances could have a material impact on the amounts recorded for our environmental and other contingent liabilities. Refer to Note 10, “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. Refer to 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
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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 2026 and 2025 each consisted of 52 weeks.
Factors Affecting our Business
In general, we believe that our results of operations are not dependent on reasonable 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.
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 discussion should be read in conjunction with the accompanying consolidated financial statements and related notes. The discussion below highlights the significant factors affecting our results of operations for the fiscal 2026 compared to the corresponding prior year periods. For discussion of fiscal 2025 results compared to fiscal 2024 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 30, 2025, filed with the SEC on October 29, 2025.
General
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 7.4% and 7.0% of total consolidated revenues for fiscal 2026 and 2025, 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 2026 and 2025, foreign currency fluctuations impacted
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our consolidated revenues positively by 0.1% and negatively by 0.1%, 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 2022, we initiated a multi-year ERP project focused on modernizing our enterprise systems. Early phases focused on master data management and finance capabilities, with subsequent phases focused on supply chain and procurement automation and technology. We believe this initiative will become the foundation of our systems technology footprint and will integrate and complement the capabilities of our other core systems. We expect the ERP system, along with its enhanced supply chain and procurement capabilities, to reduce operating costs and contribute to lower 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 2026, we capitalized $65.8 million related to our ERP project. We refer to our ERP project as our “Key Initiative”.
We have incurred costs associated with the proposed merger with Cintas, consisting primarily of legal, advisory and other professional service fees (“Transaction-related Costs”), which have been included within selling and administrative expenses in the Consolidated Statements of Income. During fiscal 2026, we recognized $37.2 million of Transaction-related Costs.
Fiscal Year Ended August 29, 2026 Compared with Fiscal Year Ended August 30, 2025
Revenues
| (In thousands, except percentages) | Fiscal 2026 | Fiscal 2025 | Dollar Change | Percent Change | ||||||||||||||||||
| Uniform & Facility Service Solutions | $ | 2,295,801 | $ | 2,218,562 | $ | 77,239 | 3.5 | % | ||||||||||||||
| First Aid & Safety Solutions | 127,023 | 114,586 | 12,437 | 10.9 | % | |||||||||||||||||
| Other | 100,406 | 99,204 | 1,202 | 1.2 | % | |||||||||||||||||
| Total consolidated revenues | $ | 2,523,230 | $ | 2,432,352 | $ | 90,878 | 3.7 | % | ||||||||||||||
The increase in consolidated revenues of 3.7% during fiscal 2026 compared to the prior fiscal year was due primarily to the growth in our Uniform & Facility Service Solutions segment of 3.5%.
The increase in revenues in our Uniform & Facility Service Solutions segment was primarily due to organic growth of 3.4%, which benefited from solid new account sales and improved customer retention in 2026. The effect of the Canadian dollar exchange rate was nominal on our revenues.
First Aid & Safety Solutions revenues for fiscal 2026 increased 10.9% compared to the prior fiscal year due primarily to double-digit growth on our van business.
Other segment revenues for fiscal 2026 increased 1.2% compared to the prior fiscal year due primarily to growth in our European operations. This growth was partially offset by the wind-down of a large refurbishment project and a lower number of reactor outages due to the cyclical nature of the nuclear industry. Results for the Other segment are often influenced by seasonality, the timing and duration of customer outages, and project-based activities.
Cost of revenues
| (In thousands, except percentages) | Fiscal 2026 | Fiscal 2025 | Dollar Change | Percent Change | ||||||||||||||||||
| Cost of revenues | $ | 1,600,281 | $ | 1,542,400 | $ | 57,881 | 3.8 | % | ||||||||||||||
| % of Revenues | 63.4 | % | 63.4 | % | ||||||||||||||||||
The increase in consolidated cost of revenues of 3.8% during fiscal 2026 compared to the prior fiscal year was primarily attributable to investments in service staffing to drive continued improvement in customer retention, as well as higher production and healthcare claims expenses. These increases were partially offset by lower merchandise costs as a percentage of revenues compared to fiscal 2025.
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Selling and administrative expenses
| (In thousands, except percentages) | Fiscal 2026 | Fiscal 2025 | Dollar Change | Percent Change | ||||||||||||||||||
| Selling and administrative expenses | $ | 644,913 | $ | 565,099 | $ | 79,814 | 14.1 | % | ||||||||||||||
| % of Revenues | 25.6 | % | 23.2 | % | ||||||||||||||||||
The increase in selling and administrative costs of 14.1% during fiscal 2026 compared to the prior fiscal year was due primarily to approximately $37.2 million of Transaction-related Costs and $2.0 million of shareholder engagement and proxy-related costs incurred in connection with our 2026 Annual Meeting of Shareholders. The increase was further driven by higher selling payroll, healthcare claims expenses and investments to accelerate growth and support our digital transformation. Selling and administrative expenses in the current year were also impacted by increased costs associated with our Key Initiative, which totaled $13.3 million during fiscal 2026 compared to $6.8 million in the prior fiscal year.
Depreciation and amortization
| (In thousands, except percentages) | Fiscal 2026 | Fiscal 2025 | Dollar Change | Percent Change | ||||||||||||||||||
| Depreciation and amortization | $ | 141,992 | $ | 140,355 | $ | 1,637 | 1.2 | % | ||||||||||||||
| % of Revenues | 5.6 | % | 5.8 | % | ||||||||||||||||||
Depreciation and amortization expense in fiscal 2026 increased 1.2% as compared to the prior fiscal year. Depreciation increased approximately $2.5 million, primarily reflecting continued investment in systems, technology capabilities, and infrastructure to support future growth. Amortization decreased approximately $0.9 million, due primarily to lower amortization related to the acquisition of Clean Uniform in fiscal 2023.
Operating Income
For fiscal 2026, 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 2026 | Fiscal 2025 | Dollar Change | Percent Change | ||||||||||||||||||
| Uniform & Facility Service Solutions | $ | 126,340 | $ | 168,502 | $ | (42,162) | (25.0) | % | ||||||||||||||
| First Aid & Safety Solutions | (4,589) | 853 | (5,442) | (638.0) | % | |||||||||||||||||
| Other | 14,293 | 15,143 | (850) | (5.6) | % | |||||||||||||||||
| Operating income | $ | 136,044 | $ | 184,498 | $ | (48,454) | (26.3) | % | ||||||||||||||
| Operating income margin | 5.4 | % | 7.6 | % | ||||||||||||||||||
Other income, net
| (In thousands, except percentages) | Fiscal 2026 | Fiscal 2025 | Dollar Change | Percent Change | ||||||||||||||||||
| Interest income, net | $ | (7,234) | $ | (9,770) | $ | 2,536 | (26.0) | % | ||||||||||||||
| Other expense (income), net | 1,205 | (1,107) | 2,312 | (208.9) | % | |||||||||||||||||
| Total other income, net | $ | (6,029) | $ | (10,877) | $ | 4,848 | (44.6) | % | ||||||||||||||
Total other income, net decreased in fiscal 2026 as compared to the prior fiscal year, primarily due to $2.8 million in proceeds from the sale of a property during fiscal 2025. Lower cash reserves and lower interest rates, which reduced interest income, also contributed to the decrease.
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Provision for income taxes
| (In thousands, except percentages) | Fiscal 2026 | Fiscal 2025 | Dollar Change | Percent Change | ||||||||||||||||||
| Provision for income taxes | $ | 32,583 | $ | 47,104 | $ | (14,521) | (30.8) | % | ||||||||||||||
| Effective income tax rate | 22.9 | % | 24.1 | % | ||||||||||||||||||
The decrease in the effective tax rate for fiscal 2026 compared to the prior fiscal year was primarily due to higher federal income tax credits recognized in fiscal 2026.
Liquidity and Capital Resources
General
Cash and cash equivalents totaled $192.1 million as of August 29, 2026, a decrease of $17.1 million from $209.2 million as of August 30, 2025. The decrease in cash and cash equivalents and short-term investments was largely driven by our continued investment in our business with capital expenditures totaling $134.5 million, $32.7 million of share repurchases, $25.2 million of dividend payments and $24.6 million paid for acquisitions. These decreases were partially offset by $205.3 million of cash provided from operating activities during fiscal 2026.
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 194,100 shares of our Common Stock for an aggregate of approximately $31.7 million during fiscal 2026. As of August 29, 2026, we had $8.9 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, 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 enable us to 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 and stock repurchases. 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 2026 and 2025, respectively, are summarized as follows:
| (In thousands, except percentages) | Fiscal 2026 | Fiscal 2025 | Dollar Change | Percent Change | ||||||||||||||||||
| Net cash provided by operating activities | $ | 205,285 | $ | 296,872 | $ | (91,587) | (30.9) | % | ||||||||||||||
| Net cash used in investing activities | (152,537) | (155,047) | 2,510 | (1.6) | % | |||||||||||||||||
| Net cash used in financing activities | (64,730) | (101,153) | 36,423 | (36.0) | % | |||||||||||||||||
| Effect of exchange rate changes | 602 | 1,258 | (656) | (52.1) | % | |||||||||||||||||
Net (decrease) increase in cash and cash equivalents | $ | (11,380) | $ | 41,930 | $ | (53,310) | (127.1) | % | ||||||||||||||
Net Cash Provided by Operating Activities
Net cash provided by operating activities in fiscal 2026 decreased by $91.6 million as compared to fiscal 2025, due primarily to a $38.8 million decrease in net income, a $26.8 million increase in cash used for rental merchandise in service, a $15.2 million increase in change in for prepaid and accrued income taxes, a $14.8 million increase in change in accounts receivable, and a $12.8 million increase in cash used for inventories. Additionally, the decrease in net income included approximately $37.2 million of Transaction-related Costs incurred during fiscal 2026 associated with the proposed merger
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with Cintas. These decreases in cash provided were partially offset by an $8.8 million decrease in cash used for prepaid expenses and other assets.
The increase in cash used for rental merchandise in service was driven primarily by the installation of garments for several large customers during fiscal 2026. The increase in cash used for inventories was driven primarily by the timing of shipments. The increase in change in accounts receivable was driven primarily by higher sales volumes and an increase in aged receivables within our First Aid & Safety Solutions segment. The increase in change in prepaid and accrued income taxes was due primarily to lower cash tax payments, driven by favorable temporary differences and reduced federal and state tax obligations under the One Big Beautiful Bill Act.
Net Cash Used in Investing Activities
Net cash used in investing activities in fiscal 2026 decreased by $2.5 million as compared to fiscal 2025, due primarily to reduced capital expenditures of $19.8 million. This decrease in net cash used was partially offset by a $12.7 million increase in cash paid for acquisitions, which included the settlement of $1.0 million in acquisition-related holdbacks related to recent acquisitions, a $2.5 million decrease in proceeds from the sale of assets, and a $2.2 million decrease in net proceeds from certificate of deposits.
Net Cash Used in Financing Activities
Net cash used in financing activities in fiscal 2026 decreased by $36.4 million as compared to fiscal 2025, due primarily to a $38.2 million decrease in Common Stock repurchases and the non-recurrence of $1.2 million in deferred financing costs paid in fiscal 2025. These decreases were partially offset by $1.7 million in acquisition-related holdbacks settled more than three months after the acquisition date, a $0.7 million increase in taxes withheld and paid related to net-share settlement of equity awards, and a $0.5 million increase in dividend payments.
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. Under the Credit Agreement, we are able to borrow funds at variable interest rates based on, at our election, the Secured Overnight Financing Rate (“SOFR”) or a base rate, plus in each case a spread based on our consolidated funded debt ratio. 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 evaluate our compliance with these financial covenants on a fiscal quarterly basis. As of August 29, 2026, 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 29, 2026, we had no outstanding borrowings and had outstanding letters of credit amounting to $101.3 million, leaving $198.7 million available for borrowing under the Credit Agreement.
As of August 29, 2026, we were in compliance with all covenants under the Credit Agreement.
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 10, “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.
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In addition, in the fourth quarter of fiscal 2022, the Mexican federal tax authority issued a tax assessment on our subsidiary in Mexico for import taxes from the fiscal year ended August 27, 2016, value added taxes and customs processing fees of over $17.0 million, plus surcharges, fines and penalties of $67.7 million, for a total assessment of $84.7 million. We challenged the validity of the tax assessment through administrative and judicial proceedings. In the first quarter of fiscal 2025, the Federal Tax Court in Mexico issued a ruling partially in our favor. Following subsequent judicial proceedings, the judgment became final and binding in fiscal 2026, requiring the Mexican federal tax authority to issue a revised assessment. Consequently, the tax authority issued a new assessment of approximately $4.16 million, which we subsequently challenged through a complaint alleging defective and/or excessive compliance with the judgment. These proceedings remain pending. Based on the information currently available, we determined that a loss of approximately $2.0 million is probable and recorded an accrual for such estimated liability in our Consolidated Financial Statements for the fourth quarter of fiscal 2026. We are unable to ascertain the ultimate outcome of the remaining disputed amount and believe that any additional loss beyond the recorded accrual is neither probable nor remote; accordingly, we are unable to reasonably estimate the amount or range of any such additional loss.
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 29, 2026 (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 | $ | 24,431 | $ | 4,301 | $ | 3,411 | $ | 3,183 | $ | 13,536 | |||||||||||||||||||||
| Asset retirement obligations | 19,492 | — | — | — | 19,492 | ||||||||||||||||||||||||||
| Operating leases | 97,428 | 22,419 | 35,799 | 22,096 | 17,114 | ||||||||||||||||||||||||||
| Purchase commitments* | 101,963 | 73,888 | 25,813 | 2,262 | — | ||||||||||||||||||||||||||
| Total contractual cash obligations | $ | 243,314 | $ | 100,608 | $ | 65,023 | $ | 27,541 | $ | 50,142 | |||||||||||||||||||||
*Includes non-cancellable purchase commitments for inventories, software, and services.
As discussed above under “Long-Term Debt and Borrowing Capacity”, as of August 29, 2026, 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 29, 2026, we had no outstanding borrowings, $101.3 million of letters of credit outstanding and $198.7 million available for borrowing. We were in compliance with all covenants as of that date.
Energy Costs
Significant variability in energy costs, specifically with respect to natural gas, gasoline and electricity can materially affect our operating costs. During fiscal 2026, our energy costs, which include fuel, natural gas, and electricity, represented approximately 4.0% of our total revenue.
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Recent Accounting Pronouncements
Refer to 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.
Next expected filings
- ~2027-01-06 10-Q expected by 2027-01-06 (in 69 days)
- ~2027-04-06 10-Q expected by 2027-04-06 (in 159 days)
- ~2027-07-07 10-Q expected by 2027-07-07 (in 251 days)
- ~2027-10-27 10-K expected by 2027-10-27 (in 363 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-10-28 10-K Annual Report
- 2026-10-21 8-K Earnings Release; Financial Statements and Exhibits
- 2026-09-11 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-08-28 8-K Officer/Director Change
- 2026-07-08 10-Q Quarterly Report
- 2026-07-01 8-K Earnings Release; Financial Statements and Exhibits
- 2026-06-12 8-K Shareholder Vote Results; Regulation FD Disclosure; Other Events; Financial Statements and Exhibits
- 2026-04-07 10-Q Quarterly Report
- 2026-04-07 10-Q/A Quarterly Report (Amended)
- 2026-04-01 8-K Earnings Release; Financial Statements and Exhibits
- 2026-03-11 8-K Material Agreement Entered; Bylaws/Articles Amended; Regulation FD Disclosure; Other Events; Financial Statements and Exhibits
- 2026-01-07 10-Q Quarterly Report
- 2026-01-07 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-29 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-12-18 8-K Shareholder Vote Results; Other Events; Financial Statements and Exhibits