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Note 1 - Summary of Significant Accounting Policies | 12 Months Ended
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Aug. 30, 2014
Accounting Policies [Abstract] |
Significant Accounting Policies [Text Block] | 1. Summary of Significant Accounting Policies Business Description UniFirst Corporation (the “Company”) is one of the largest providers of workplace uniforms and protective clothing in the United States. 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, to a variety of manufacturers, retailers and service companies. The Company serves businesses of all sizes in numerous industry categories. Typical customers include automobile service centers and dealers, delivery services, food and general merchandise retailers, food processors and service operations, light manufacturers, maintenance facilities, restaurants, service companies, soft and durable goods wholesalers, transportation companies, and others who require employee clothing for image, identification, protection or utility purposes. The Company also provides its customers with restroom and cleaning supplies, including air fresheners, paper products and hand soaps. At certain specialized facilities, 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 14, “Segment Reporting”, to these Consolidated Financial Statements, the Company has five reporting segments: US and Canadian Rental and Cleaning, Manufacturing (“MFG”), Specialty Garments Rental and Cleaning (“Specialty Garments”), First Aid and Corporate. The operations of the US and Canadian Rental and Cleaning 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”. The Company refers to its US and Canadian Rental and Cleaning, MFG, and Corporate segments combined as its “Core Laundry Operations”. 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. Reclassifications The Company has recorded certain immaterial classification adjustments to its August 31, 2013 balance sheet as well as its August 31, 2013 and August 25, 2012 statement of cash flows. These classification adjustments did not impact current or historical net income, shareholders' equity or net cash provided by operating activities. Use of Estimates The preparation of these Consolidated Financial Statements is in conformity with accounting principles generally accepted in the United States (“US GAAP”) which requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. These estimates are based on historical information, current trends, and information available from other sources. Actual results could differ from these estimates. Fiscal Year The Company’s fiscal year ends on the last Saturday in August. For financial reporting purposes, fiscal 2014 consisted of 52 weeks, fiscal 2013 consisted of 53 weeks and fiscal 2012 consisted of 52 weeks. The additional week was included in the fourth quarter of fiscal 2013. Cash and Cash Equivalents Cash and cash equivalents include cash in banks and bank short-term investments with maturities of less than ninety days. 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, loans payable and long-term debt. Each of these financial instruments is recorded at cost, which approximates its fair value given the short maturity of each financial instrument. Revenue Recognition and Allowance for Doubtful Accounts The Company recognizes revenue from rental operations in the period in which the services are provided. Direct sales revenue is recognized in the period in which the services are performed or when the product is shipped. Management judgments and estimates are used in determining the collectability of accounts receivable and evaluating the adequacy of the allowance for doubtful accounts. The Company considers specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances as part of its evaluation. Changes in estimates are reflected in the period they become known. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Material changes in its estimates may result in significant differences in the amount and timing of bad debt expense recognition for any given period. Revenues do not include taxes we collect from our customers and remit to governmental authorities. Inventories and Rental Merchandise in Service Inventories are stated at the lower of cost or market value, net of any reserve for excess and obsolete inventory. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to 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, 2014 and August 31, 2013 were as follows (in thousands):
|  | August 30, 2014 |  |  | August 31, 2013 |
Raw materials |  | $ | 19,053 |  |  | $ | 16,673 |
Work in process |  |  | 3,759 |  |  |  | 2,366 |
Finished goods |  |  | 56,046 |  |  |  | 55,312 |
Total inventories |  | $ | 78,858 |  |  | $ | 74,351 |
Rental merchandise in service is amortized, primarily on a straight-line basis, over the estimated service lives of the merchandise, which range from 6 to 36 months. 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 Company provides for depreciation on the straight-line method based on the following estimated useful lives:
Buildings (in years) | 30 | - | 40
Building components (in years) | 10 | - | 20
Leasehold improvements | Shorter of useful life or term of lease
Machinery and equipment (in years) | 3 | - | 10
Motor vehicles (in years) | 3 | - | 5
Long-lived assets, including property, plant and equipment, are evaluated for impairment whenever events or circumstances indicate an asset may be impaired. There have been no material impairments of long-lived assets in fiscal 2014, 2013 or 2012. Goodwill and Other Intangible Assets In accordance with US GAAP, the Company does not amortize goodwill. Instead, current accounting guidance requires that companies test goodwill for impairment on an annual basis. Management completes its annual goodwill impairment test in the fourth quarter of each fiscal year. In addition, US 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’s evaluation considers changes in the operating environment, competitive information, market trends, operating performance and cash flow modeling. The Company cannot predict future economic conditions and their impact on the Company or the future market 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 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 US GAAP. There were no impairments of goodwill or indicators of impairment for definite-lived intangible assets in fiscal 2014, 2013 or 2012. As of August 30, 2014, definite-lived intangible assets have a weighted average useful life of approximately 14.6 years. Customer contracts have a weighted average useful life of approximately 14.9 years and other intangible assets, net, which consist of primarily, restrictive covenants, deferred financing costs and trademarks, have a weighted average useful life of approximately 4.5 years. Environmental and Other Contingencies The Company is subject to legal proceedings and claims arising from the conduct of its business operations, including environmental matters, personal injury, customer contract matters and employment claims. Accounting principles generally accepted in the United States 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, 2014 using risk-free interest rates ranging from 2.4 % to 3.1% over periods ranging from ten to thirty years. The estimated current costs, net of legal settlements with insurance carriers, have been adjusted for the estimated impact of inflation at 3% 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 10, “Commitments and Contingencies”, of these Consolidated Financial Statements for additional discussion and analysis. Asset Retirement Obligations Under US 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 seven to thirty 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 7.0 % 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 will be 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, workers’ compensation, vehicles and general liability programs. The Company also purchases stop-loss insurance policies 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. 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 postretirement plan measured as the difference between the fair value of plan assets and the benefit obligation, (2) recognizes as a component of other comprehensive 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 losses and the prior service costs and credits. Refer to Note 6, “Employee Benefit 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. 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. 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. The Company has undistributed earnings from its foreign subsidiaries of approximately $111.8 million as of August 30, 2014. The Company considers these undistributed earnings as indefinitely reinvested and therefore has not provided for U.S. income taxes or foreign withholding taxes. If these earnings were ultimately distributed to the U.S. in the form of dividends or otherwise, or if the shares of its international subsidiaries were sold or transferred, the Company would likely be subject to additional U.S. income taxes, net of the impact of any available foreign tax credits as well as foreign withholding taxes. It is not practicable to estimate the amount of unrecognized deferred U.S. taxes on these undistributed earnings. Advertising Costs Advertising costs are expensed as incurred and are classified as selling and administrative expenses. The Company incurred advertising costs of $1.5 million, $1.2 million and $1.5 million for the fiscal years ended August 30, 2014, August 31, 2013 and August 25, 2012, respectively. Share-Based Compensation The Company adopted a stock incentive plan (the “1996 Plan”) in November 1996 and reserved 1,500,000 shares of Common Stock for issuance under the 1996 Plan. This plan provided for the issuance of stock options and stock appreciation rights (collectively referred to as “Share-Based Awards”). The Company ceased granting new awards under the 1996 Plan as of January 21, 2011, and the 1996 Plan expired in accordance with its terms on January 8, 2012. The Company adopted a stock incentive plan (the “2010 Plan”) in October 2010 and reserved 600,000 shares of Common Stock for issuance under the 2010 Plan. The 2010 Plan replaced the Company’s 1996 Plan. The 2010 Plan permits the award of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance shares, dividend equivalent rights and cash-based awards. No awards may be made under the 2010 Plan after January 11, 2021. On October 27, 2014, the Board of Directors, subject to the approval of the Company’s shareholders at the 2015 annual meeting, approved an amendment to the 2010 Plan to, among other matters, reserve for issuance an additional 750,000 shares and extend the term of the 2010 Plan by 10 years. Share-based compensation, which includes expense related to Share-Based Awards, unrestricted and restricted stock grants, 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 and shares of unrestricted stock issued to the Company’s non-employee members of the Board of Directors under the 2010 Plan were recommended to the Board of Directors by the Compensation Committee and approved by the Board of Directors. Share-Based Awards granted to non-employee directors are granted on the third business day following the annual shareholders’ meeting. All Share-Based Awards issued to employees were granted with an exercise price equal to the fair market value of the Company’s Common Stock on the date of grant and are subject to a five-year cliff-vesting schedule under which the awards become fully vested or exercisable after five years from the date of grant and expire ten years after the grant date. Share-Based Awards and shares of unrestricted stock granted to the Company’s non-employee members of the Board of Directors (the “Directors”) are fully vested as of the date of grant. Prior to fiscal 2009, non-employee Director Share-Based Award grants expired ten years from the grant date. Beginning in fiscal 2009, non-employee director Share-Based Award grants expire eight years after the grant date. US GAAP requires that share-based compensation cost be measured at the grant date based on the 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 at the grant date requires judgment, including estimating expected dividends, share price volatility and the amount of Share-Based Awards that are expected to be forfeited. The fair value of each Share-Based Award is estimated on the date of grant using the Black-Scholes option pricing model. Compensation expense for all Share-Based Awards is recognized ratably over the related vesting period. Certain Share-Based Awards and shares of unrestricted stock were granted during fiscal 2014, 2013 and 2012 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 and shares of unrestricted stock in fiscal 2014, 2013 and 2012 were recognized on the date of grant. The Company recognizes compensation expense for restricted stock grants over the related vesting period. For unrestricted stock grants, compensation expense is recognized on the date of grant. The fair value for each restricted and unrestricted stock grant is determined by using the closing price of the Company’s stock on the date of the grant. Refer to Note 11, “Share-Based Compensation”, of these Consolidated Financial Statements for further discussion regarding the Company’s share-based compensation plans. The fair value of each Share-Based Award is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used:
Fiscal year ended August |  | 2014 |  |  | 2013 |  |  | 2012 |
Risk-free interest rate |  |  | 1.90 | % |  |  | 1.24 | % |  |  | 1.54 | %
Expected dividend yield |  |  | 0.27 | % |  |  | 0.41 | % |  |  | 0.56 | %
Expected life in years |  |  | 7.45 |  |  |  | 7.42 |  |  |  | 7.39 |
Expected volatility |  |  | 32.9 | % |  |  | 33.4 | % |  |  | 33.8 | %
The weighted average fair values of Share-Based Awards granted during fiscal years 2014, 2013 and 2012 were $39.08, $25.09 and $18.28, respectively. Net Income Per Share The Company calculates net income per share in accordance with US GAAP, which requires the Company to allocate income to its unvested participating securities as part of its earnings per share (“EPS”) calculations. 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 earnings 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-based incentive plans. The following table sets forth the computation of basic earnings 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 |  | August 30, 2014 |  |  | August 31, 2013 |  |  | August 25, 2012 |
Net income available to shareholders |  | $ | 119,925 |  |  | $ | 116,685 |  |  | $ | 94,989 |
Allocation of net income for Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  | $ | 94,849 |  |  | $ | 91,916 |  |  | $ | 74,643 |
Class B Common Stock |  |  | 23,705 |  |  |  | 22,913 |  |  |  | 18,630 |
Unvested participating shares |  |  | 1,371 |  |  |  | 1,856 |  |  |  | 1,716 |
|  | $ | 119,925 |  |  | $ | 116,685 |  |  | $ | 94,989 |
Weighted average number of shares for Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  |  | 15,080 |  |  |  | 14,975 |  |  |  | 14,882 |
Class B Common Stock |  |  | 4,711 |  |  |  | 4,666 |  |  |  | 4,643 |
Unvested participating shares |  |  | 249 |  |  |  | 345 |  |  |  | 391 |
|  |  | 20,040 |  |  |  | 19,986 |  |  |  | 19,916 |
Earnings per share for Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  | $ | 6.29 |  |  | $ | 6.14 |  |  | $ | 5.02 |
Class B Common Stock |  | $ | 5.03 |  |  | $ | 4.91 |  |  | $ | 4.01 |
The Company calculates diluted EPS 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 the years ended August 30, 2014, August 31, 2013 and August 25, 2012, the Company’s diluted EPS assumes the conversion of all vested Class B Common Stock into Common Stock and uses the two-class method for its unvested participating shares as follows (in thousands, except per share data):
|  | Year Ended August 30, 2014 |  |  | Year Ended August 31, 2013 |  |  | Year Ended August 25, 2012 |
|  | Earnings |  |  |  |  |  |  |  |  |  |  | Earnings |  |  |  |  |  |  |  |  |  |  | Earnings |  |  |  |  |  |  |  |  |
|  | to Common |  |  | Common |  |  |  |  |  |  | to Common |  |  | Common |  |  |  |  |  |  | to Common |  |  | Common |  |  |  |  |
|  | shareholders |  |  | Shares |  |  | EPS |  |  | shareholders |  |  | Shares |  |  | EPS |  |  | shareholders |  |  | Shares |  |  | EPS |
As reported – Basic |  | $ | 94,849 |  |  |  | 15,080 |  |  | $ | 6.29 |  |  | $ | 91,916 |  |  |  | 14,975 |  |  | $ | 6.14 |  |  | $ | 74,643 |  |  |  | 14,882 |  |  | $ | 5.02 |
Add: effect of dilutive potential common shares |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Share-Based Awards |  |  | — |  |  |  | 148 |  |  |  |  |  |  |  | — |  |  |  | 148 |  |  |  |  |  |  |  | — |  |  |  | 91 |  |  |  |  |
Class B Common Stock |  |  | 23,705 |  |  |  | 4,711 |  |  |  |  |  |  |  | 22,913 |  |  |  | 4,666 |  |  |  |  |  |  |  | 18,630 |  |  |  | 4,643 |  |  |  |  |
Add: Undistributed earnings allocated to unvested participating shares |  |  | 1,339 |  |  |  | — |  |  |  |  |  |  |  | 1,810 |  |  |  | — |  |  |  |  |  |  |  | 1,664 |  |  |  | — |  |  |  |  |
Less: Undistributed earnings reallocated to unvested participating shares |  |  | (1,267 | ) |  |  | — |  |  |  |  |  |  |  | (1,712 | ) |  |  | — |  |  |  |  |  |  |  | (1,579 | ) |  |  | — |  |  |  |  |
Diluted EPS – Common Stock |  | $ | 118,626 |  |  |  | 19,939 |  |  | $ | 5.95 |  |  | $ | 114,927 |  |  |  | 19,789 |  |  | $ | 5.81 |  |  | $ | 93,358 |  |  |  | 19,616 |  |  | $ | 4.76 |
Share-Based Awards that would result in the issuance of 185 shares of Common Stock were excluded from the calculation of diluted earnings per share for the year ended August 30, 2014 because they were anti-dilutive. Share-Based Awards that would result in the issuance of 152 shares of Common Stock were excluded from the calculation of diluted earnings per share for the year ended August 31, 2013 because they were anti-dilutive. There were no shares of common stock that were excluded from the calculation of diluted earnings per share for the year ended August 25, 2012. 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 (income) expense in the accompanying Consolidated Statements of Income. Assets and liabilities of operations outside the United States 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 income in the accompanying Consolidated Balance Sheets. Recent Accounting Pronouncements In February 2013, the Financial Accounting Standards Board (“FASB”) issued updated accounting guidance that improves the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this updated guidance require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under US GAAP to be reclassified in its entirety to net income. For other amounts that are not required under US GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under US GAAP that provide additional detail about those amounts. This guidance was effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2012 and was to be applied prospectively, with early adoption permitted. The Company adopted this guidance on September 1, 2013 and the adoption did not have a material impact on its financial statements. In July 2013, the FASB issued updated accounting guidance on the presentation of unrecognized tax benefits. This update provides that an entity’s unrecognized tax benefits, or a portion of its unrecognized tax benefits, should be presented in its financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with one exception. That exception states that, to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance is effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2013 and is to be applied prospectively, with early adoption permitted. The Company does not expect this guidance to have a material impact on its financial statements. In May 2014, the FASB issued updated accounting guidance on revenue recognition. This update provides a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. This guidance is effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2016 and allows for either full retrospective or modified retrospective application, with early adoption not permitted. Accordingly, the standard is effective for the Company on August 27, 2017. The Company is currently evaluating the adoption method it will apply and the impact that this guidance will have on its financial statements and related disclosures. In August 2014, the FASB issued accounting guidance about an entity’s ability to continue as a going concern. This update defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. This guidance is effective for annual periods ending after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact that this guidance will have on its financial statements and related disclosures.

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