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Recent Accounting Pronouncements (Policies) | 3 Months Ended
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Nov. 24, 2018
Accounting Policies [Abstract] |
Recent Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board ("FASB") issued updated accounting guidance for revenue recognition, which it has subsequently modified. This modified 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. The standard includes cost guidance, whereby all direct and incremental costs to obtain or fulfill a contract will be capitalized and amortized over the corresponding period of benefit, determined on a contract by contract basis. This guidance is also intended to improve disclosure requirements and enhance the comparability of revenue recognition practices. Improved disclosures under the amended guidance relate to the nature, amount, timing and uncertainty of revenue that is recognized from contracts with customers. The Company adopted the standard on August 26, 2018 using the modified retrospective adoption method. Upon adoption of this guidance, the Company recorded an adjustment to the opening balance of retained earnings as of August 26, 2018. The adoption of the standard did not have any material impact to the timing or measurement of revenues. The adjustment to retained earnings relates to the capitalization of certain direct and incremental contract costs required by the new guidance, net of the related income tax effect. Capitalized costs are amortized ratably over the anticipated period of benefit. The Company applied the new guidance to all contracts as of August 26, 2018. Results for reporting periods beginning after August 25, 2018 are presented under the new guidance, while comparative prior period amounts have not been restated and continue to be presented under accounting standards in effect in those periods. Capitalization of Contract Costs. The Company has elected to apply the guidance, as a practical expedient, to a portfolio of contracts (or performance obligations) with similar characteristics because the Company reasonably expects that the effects on the Consolidated Financial Statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within the portfolio. The Company also continues to expense certain costs to obtain a contract if those costs do not meet the criteria of the new standard or the amortization period of the asset would have been one year or less. The cumulative effect of applying the new guidance was recorded as an adjustment to retained earnings as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the adjustments set forth in the table below were made to accounts on the consolidated balance sheet as of August 26, 2018:
Consolidated Balance Sheet (In thousands) |  | August 25, 2018 |  | Capitalization of Contract Costs |  | August 26, 2018
Assets |  |  |  |  |  |
Prepaid expenses and other current assets |  | $ | 21,899 |  |  | $ | 10,789 |  |  | $ | 32,688 |
Total current assets |  | 784,800 |  |  | 10,789 |  |  | 795,589 |
Other assets |  | 30,259 |  |  | 42,405 |  |  | 72,664 |
Total assets |  | $ | 1,843,386 |  |  | $ | 53,194 |  |  | $ | 1,896,580 |
Liabilities and shareholders’ equity |  |  |  |  |  |
Accrued and deferred income taxes |  | $ | 74,070 |  |  | $ | 13,761 |  |  | $ | 87,831 |
Total liabilities |  | 378,419 |  |  | 13,761 |  |  | 392,180 |
Retained earnings |  | 1,405,239 |  |  | 39,433 |  |  | 1,444,672 |
Total shareholders' equity |  | 1,464,967 |  |  | 39,433 |  |  | 1,504,400 |
Total liabilities and shareholders’ equity |  | $ | 1,843,386 |  |  | $ | 53,194 |  |  | $ | 1,896,580 |
The impacts of adopting this standard on the first quarter of fiscal 2019 Consolidated Financial Statements are presented in the following tables:
|  | Thirteen weeks ended November 24, 2018
Consolidated Statement of Income (In thousands, except per share data) |  | As Reported |  | Under Historical Guidance |  | Impact of Adopting New Revenue Standard
Operating expenses: |  |  |  |  |  |
Selling and administrative expenses |  | $ | 85,959 |  |  | $ | 86,875 |  |  | $ | (916 | )
Total operating expenses |  | 388,124 |  |  | 389,040 |  |  | (916 | )
Operating income |  | 50,426 |  |  | 49,510 |  |  | 916 |
Income before income taxes |  | 51,959 |  |  | 51,043 |  |  | 916 |
Provision for income taxes |  | 13,639 |  |  | 13,399 |  |  | 240 |
Income from continuing operations |  |  |  |  |  |
Net income |  | $ | 38,320 |  |  | $ | 37,644 |  |  | $ | 676 |
Income per share – Diluted: |  | $ | 1.99 |  |  | $ | 1.95 |  |  | $ | 0.04 |
|  | Balance at November 24, 2018
Consolidated Balance Sheet (In thousands) |  | As Reported |  | Under Historical Guidance |  | Impact of Adopting New Revenue Standard
Assets |  |  |  |  |  |
Prepaid expenses and other current assets |  | $ | 38,854 |  |  | $ | 28,065 |  |  | $ | 10,789 |
Total current assets |  | 809,413 |  |  | 798,624 |  |  | 10,789 |
Other assets |  | 74,048 |  |  | 30,727 |  |  | 43,321 |
Total assets |  | $ | 1,907,158 |  |  | $ | 1,853,048 |  |  | $ | 54,110 |
Liabilities and shareholders’ equity |  |  |  |  |  |  |
Accrued and deferred income taxes |  | $ | 86,837 |  |  | $ | 72,836 |  |  | $ | 14,001 |
Total liabilities |  | 367,660 |  |  | 353,659 |  |  | 14,001 |
Retained earnings |  | 1,480,922 |  |  | 1,440,813 |  |  | 40,109 |
Total shareholders' equity |  | 1,539,498 |  |  | 1,499,389 |  |  | 40,109 |
Total liabilities and shareholders’ equity |  | $ | 1,907,158 |  |  | $ | 1,853,048 |  |  | $ | 54,110 |
The adoption of this standard had no impact on the Company's first quarter of fiscal 2019 operating cash flow, and the only impact of the adoption on its fiscal 2019 consolidated statement of comprehensive income was the impact to net income as presented in the table above. In January 2016, the FASB issued updated guidance for the recognition, measurement, presentation, and disclosure of certain financial assets and liabilities. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. Accordingly, the Company adopted this standard on August 26, 2018. The adoption of this guidance did not have a material impact on the Company's financial statements. In February 2016, the FASB issued updated guidance which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new guidance requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. This new guidance is effective for reporting periods beginning after December 15, 2018, however, early adoption is permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in their financial statements. The Company will adopt the new guidance on September 1, 2019. At August 25, 2018, the Company was contractually obligated to make future payments of $47.1 million under its operating lease obligations in existence as of that date, primarily related to long-term leases. The Company is evaluating the impact that this guidance will have on its financial statements. While the Company is in the early stages of its implementation process of this guidance, and has not yet determined its impact on its consolidated balance sheet or consolidated statement of income, these leases would potentially be required to be presented on the consolidated balance sheet in accordance with the requirements of this guidance. In August 2016, the FASB issued updated guidance that reduces diversity in how certain cash receipts and cash payments are presented and classified in the Consolidated Statements of Cash Flows. This guidance is effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2017 and is required to be applied retrospectively, with early adoption permitted. Accordingly, the Company adopted this standard on August 26, 2018. The adoption of this guidance did not have a material impact on its financial statements. In October 2016, the FASB issued updated guidance to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This guidance is effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2017 and is required to be applied on a modified retrospective basis, with early adoption permitted. Accordingly, the Company adopted this standard on August 26, 2018. The adoption of this guidance did not have a material impact on its financial statements. In March 2017, the FASB issued updated guidance that requires a change in the presentation of net periodic benefit cost on the consolidated statements of operations. Specifically, entities must present the service cost component of net periodic benefit cost in the same financial statement line items as other compensation costs arising from services rendered by the related employees during the period, whereas the non-service components of net periodic benefit cost must be presented separately from the financial statement line items that include service cost and outside of operating income. The Company’s adoption of this guidance on August 26, 2018 did not have a material impact on its financial statements. In August 2017, the FASB issued guidance that expands component and fair value hedging, specifies the presentation of the effects of hedging instruments, and eliminates the separate measurement and presentation of hedge ineffectiveness. The accounting update is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted, and is to be applied on a modified retrospective basis. The Company elected to early adopt this guidance in the first quarter of fiscal 2019. The adoption of this guidance did not have a material impact on its financial statements. In August 2018, the FASB issued updated guidance to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This guidance will be effective for annual reporting periods, and any interim periods within those annual periods, ending after December 15, 2020 and will be required to be applied on a retrospective basis, with early adoption permitted. Accordingly, the standard will be effective for the Company on August 30, 2020. The Company is currently evaluating the impact that this guidance will have on its financial statements and related disclosures.
Revenue Recognition Policy | Approximately 91.0% of the Company's revenues are derived from fees for route servicing of Core Laundry Operations, Specialty Garments, and First Aid performed by the Company’s employees at the customer's location of business. Revenues from the Company's route servicing customer contracts represent a single-performance obligation. The Company recognizes these revenues over time as services are performed based on the nature of services provided and contractual rates (input method). Certain of the Company's customer contracts, primarily within the Company's Core Laundry Operations, include pricing terms and conditions that include components of variable consideration. The variable consideration is typically in the form of consideration due to a customer based on performance metrics specified within the contract. Specifically, some contracts contain discounts or rebates that the customer can earn through the achievement of specified volume levels. Each component of variable consideration is earned based on the Company's actual performance during the measurement period specified within the contract. To determine the transaction price, the Company estimates the variable consideration using the most likely amount method, based on the specific contract provisions and known performance results during the relevant measurement period. When determining if variable consideration should be constrained, the Company considers whether factors outside its control could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal. The Company's performance period generally corresponds with the monthly invoice period. No significant constraints on the Company's revenue recognition were applied during the thirteen weeks ended November 24, 2018. The Company reassesses these estimates during each reporting period. The Company maintains a liability for these discounts and rebates within accrued liabilities on the consolidated balance sheets. Variable consideration also includes consideration paid to a customer at the beginning of a contract. The Company capitalizes this consideration and amortizes it over the life of the contract as a reduction to revenue in accordance with the updated accounting guidance for revenue recognition. These assets are included in other assets on the consolidated balance sheets.
Costs to Obtain a Contract | The Company defers commission expenses paid to its employee-partners when the commissions are deemed to be incremental for obtaining the route servicing customer contract. The deferred commissions are amortized on a straight-line basis over the expected period of benefit. The Company reviews the deferred commission balances for impairment on an ongoing basis. Deferred commissions are classified as current or noncurrent based on the timing of when the Company expects to recognize the expense. The current portion is included in prepaid expenses and other current assets and the non-current portion is included in other assets on the Company's consolidated balance sheets. As of November 24, 2018, the current and non-current assets related to deferred commissions totaled $10.8 million and $43.3 million, respectively. During the thirteen weeks ended November 24, 2018, the Company recorded $2.8 million of amortization expense related to deferred commissions. This expense is classified in selling and administrative expense on the consolidated statements of income.

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