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u

United States

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 28, 2022

OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-08504

UNIFIRST CORPORATION

(Exact name of Registrant as Specified in Its Charter)

Massachusetts | 04-2103460
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.)
68 Jonspin Road, Wilmington, MA | 01887
(Address of Principal Executive Offices) | (Zip Code)

(978) 658-8888

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Common Stock, $0.10 par value per share | UNF | New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ | Accelerated filer | ☐
Non-accelerated filer | ☐ | Smaller Reporting Company | ☐
Emerging Growth Company | ☐ |  |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of outstanding shares of UniFirst Corporation Common Stock and Class B Common Stock at July 1, 2022 were 15,093,114 and 3,626,009, respectively.

UniFirst Corporation

Quarterly Report on Form 10-Q

For the Quarter ended May 28, 2022

Table of Contents

Part I – FINANCIAL INFORMATION | 3
Item 1 – Financial Statements (unaudited) | 3
Consolidated Statements of Income for the Thirteen and Thirty-nine Weeks ended May 28, 2022 and May 29, 2021 | 3
Consolidated Statements of Comprehensive Income for the Thirteen and Thirty-nine Weeks ended May 28, 2022 and May 29, 2021 | 4
Consolidated Balance Sheets as of May 28, 2022 and August 28, 2021 | 5
Consolidated Statements of Shareholders’ Equity for the Thirteen and Thirty-nine Weeks ended May 28, 2022 and May 29, 2021 | 6
Consolidated Statements of Cash Flows for the Thirty-nine Weeks ended May 28, 2022 and May 29, 2021 | 8
Notes to Consolidated Financial Statements | 9
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22
Item 3 – Quantitative and Qualitative Disclosures About Market Risk | 32
Item 4 – Controls and Procedures | 33
Part II – OTHER INFORMATION | 34
Item 1 – Legal Proceedings | 34
Item 1A – Risk Factors | 34
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds | 34
Item 3 – Defaults Upon Senior Securities | 34
Item 4 – Mine Safety Disclosures | 34
Item 5 – Other Information | 34
Item 6 – Exhibits | 35
Signatures | 36
Certifications |
Ex-31.1 Section 302 Certification of CEO |
Ex-31.2 Section 302 Certification of CFO |
Ex-32.1 Section 906 Certification of CEO |
Ex-32.2 Section 906 Certification of CFO |

2

PART I – FINANCI AL INFORMATION

ITEM 1. FINANCI AL STATEMENTS

Consolidated State ments of Income

UniFirst Corporation and Subsidiaries

(Unaudited)

|  | Thirteen weeks ended |  |  | Thirty-nine weeks ended |
(In thousands, except per share data) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | May 28, 2022 |  |  | May 29, 2021 |
Revenues |  | $ | 511,548 |  |  | $ | 464,323 |  |  | $ | 1,484,408 |  |  | $ | 1,360,940 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues (1) |  |  | 334,633 |  |  |  | 286,605 |  |  |  | 969,579 |  |  |  | 851,860 |
Selling and administrative expenses (1) |  |  | 116,191 |  |  |  | 96,976 |  |  |  | 332,985 |  |  |  | 279,008 |
Depreciation and amortization |  |  | 27,027 |  |  |  | 26,583 |  |  |  | 80,744 |  |  |  | 79,178 |
Total operating expenses |  |  | 477,851 |  |  |  | 410,164 |  |  |  | 1,383,308 |  |  |  | 1,210,046 |
Operating income |  |  | 33,697 |  |  |  | 54,159 |  |  |  | 101,100 |  |  |  | 150,894 |
Other (income) expense: |  |  |  |  |  |  |  |  |  |  |  |
Interest income, net |  |  | (340 | ) |  |  | (671 | ) |  |  | (1,739 | ) |  |  | (2,102 | )
Other expense, net |  |  | 431 |  |  |  | 348 |  |  |  | 1,761 |  |  |  | 513 |
Total other (income) expense, net |  |  | 91 |  |  |  | (323 | ) |  |  | 22 |  |  |  | (1,589 | )
Income before income taxes |  |  | 33,606 |  |  |  | 54,482 |  |  |  | 101,078 |  |  |  | 152,483 |
Provision for income taxes |  |  | 8,539 |  |  |  | 12,466 |  |  |  | 23,855 |  |  |  | 35,986 |
Net income |  | $ | 25,067 |  |  | $ | 42,016 |  |  | $ | 77,223 |  |  | $ | 116,497 |
Income per share – Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  | $ | 1.39 |  |  | $ | 2.31 |  |  | $ | 4.26 |  |  | $ | 6.42 |
Class B Common Stock |  | $ | 1.11 |  |  | $ | 1.85 |  |  | $ | 3.41 |  |  | $ | 5.13 |
Income per share – Diluted: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  | $ | 1.33 |  |  | $ | 2.21 |  |  | $ | 4.07 |  |  | $ | 6.12 |
Income allocated to – Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  | $ | 21,037 |  |  | $ | 35,270 |  |  | $ | 64,835 |  |  | $ | 97,792 |
Class B Common Stock |  | $ | 4,030 |  |  | $ | 6,746 |  |  | $ | 12,388 |  |  | $ | 18,705 |
Income allocated to – Diluted: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  | $ | 25,067 |  |  | $ | 42,016 |  |  | $ | 77,223 |  |  | $ | 116,497 |
Weighted average shares outstanding – Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  |  | 15,170 |  |  |  | 15,238 |  |  |  | 15,211 |  |  |  | 15,238 |
Class B Common Stock |  |  | 3,632 |  |  |  | 3,643 |  |  |  | 3,632 |  |  |  | 3,643 |
Weighted average shares outstanding – Diluted: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  |  | 18,875 |  |  |  | 19,051 |  |  |  | 18,958 |  |  |  | 19,041 |

(1) Exclusive of depreciation on the Company’s property, plant and equipment and amortization on its intangible assets.

The accompanying notes are an integral part of these

Consolidated Financial Statements.

3

Consolidated Statements of Comprehensive Income

UniFirst Corporation and Subsidiaries

(Unaudited)

|  | Thirteen weeks ended |  |  | Thirty-nine weeks ended |
(In thousands) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | May 28, 2022 |  |  | May 29, 2021 |
Net income |  | $ | 25,067 |  |  | $ | 42,016 |  |  | $ | 77,223 |  |  | $ | 116,497 |
Other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation adjustments |  |  | (982 | ) |  |  | 6,099 |  |  |  | (2,631 | ) |  |  | 9,653 |
Change in fair value of derivatives, net of income taxes |  |  | (10 | ) |  |  | (91 | ) |  |  | 35 |  |  |  | (158 | )
Derivative financial instruments reclassified to earnings |  |  | (4 | ) |  |  | 39 |  |  |  | (57 | ) |  |  | 29 |
Other comprehensive income (loss) |  |  | (996 | ) |  |  | 6,047 |  |  |  | (2,653 | ) |  |  | 9,524 |
Comprehensive income |  | $ | 24,071 |  |  | $ | 48,063 |  |  | $ | 74,570 |  |  | $ | 126,021 |

The accompanying notes are an integral part of these

Consolidated Financial Statements.

4

Consolidated B alance Sheets

UniFirst Corporation and Subsidiaries

(Unaudited)

(In thousands, except share and par value data) |  | May 28, 2022 |  |  | August 28, 2021 |
Assets |  |  |  |  |  |
Current assets: |  |  |  |  |  |
Cash, cash equivalents and short-term investments |  | $ | 410,595 |  |  | $ | 512,868 |
Receivables, less reserves of $15,040 and $11,122 |  |  | 241,160 |  |  |  | 208,331 |
Inventories |  |  | 151,741 |  |  |  | 143,591 |
Rental merchandise in service |  |  | 209,055 |  |  |  | 181,531 |
Prepaid taxes |  |  | 11,319 |  |  |  | 16,580 |
Prepaid expenses and other current assets |  |  | 45,012 |  |  |  | 40,891 |
Total current assets |  |  | 1,068,882 |  |  |  | 1,103,792 |
Property, plant and equipment, net |  |  | 640,810 |  |  |  | 617,719 |
Goodwill |  |  | 456,810 |  |  |  | 429,538 |
Customer contracts, net |  |  | 50,919 |  |  |  | 49,129 |
Other intangible assets, net |  |  | 36,710 |  |  |  | 35,509 |
Deferred income taxes |  |  | 535 |  |  |  | 580 |
Operating lease right-of-use assets, net |  |  | 49,408 |  |  |  | 42,115 |
Other assets |  |  | 106,750 |  |  |  | 102,683 |
Total assets |  | $ | 2,410,824 |  |  | $ | 2,381,065 |
Liabilities and shareholders’ equity |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |
Accounts payable |  | $ | 80,341 |  |  | $ | 81,356 |
Accrued liabilities |  |  | 152,381 |  |  |  | 159,578 |
Accrued taxes |  |  | — |  |  |  | 743 |
Operating lease liabilities, current |  |  | 13,999 |  |  |  | 12,993 |
Total current liabilities |  |  | 246,721 |  |  |  | 254,670 |
Accrued liabilities |  |  | 133,195 |  |  |  | 134,085 |
Accrued and deferred income taxes |  |  | 89,888 |  |  |  | 89,177 |
Operating lease liabilities |  |  | 37,009 |  |  |  | 30,181 |
Total liabilities |  |  | 506,813 |  |  |  | 508,113 |
Commitments and contingencies (Note 12) |  |  |  |  |  |
Shareholders’ equity: |  |  |  |  |  |
Preferred Stock, $1.00 par value; 2,000,000 shares authorized; no shares issued and outstanding |  |  | — |  |  |  | — |
Common Stock, $0.10 par value; 30,000,000 shares authorized; 15,121,143 and 15,235,601 shares issued and outstanding as of May 28, 2022 and August 28, 2021, respectively |  |  | 1,512 |  |  |  | 1,524 |
Class B Common Stock, $0.10 par value; 20,000,000 shares authorized; 3,626,009 and 3,643,009 shares issued and outstanding as of May 28, 2022 and August 28, 2021, respectively |  |  | 363 |  |  |  | 364 |
Capital surplus |  |  | 91,571 |  |  |  | 89,257 |
Retained earnings |  |  | 1,838,055 |  |  |  | 1,806,643 |
Accumulated other comprehensive loss |  |  | (27,490 | ) |  |  | (24,836 | )
Total shareholders’ equity |  |  | 1,904,011 |  |  |  | 1,872,952 |
Total liabilities and shareholders’ equity |  | $ | 2,410,824 |  |  | $ | 2,381,065 |

The accompanying notes are an integral part of these

Consolidated Financial Statements

5

Consolidated Statements of Shareholders’ Equity

UniFirst Corporation and Subsidiaries

(Unaudited)

(In thousands) |  | Common Shares |  |  | Class B Common Shares |  |  | Common Stock |  |  | Class B Common Stock |  |  | Capital Surplus |  |  | Retained Earnings |  |  | Accumulated Other Comprehensive Loss |  |  | Total Equity |
Balance, August 29, 2020 |  |  | 15,251 |  |  |  | 3,643 |  |  | $ | 1,525 |  |  | $ | 364 |  |  | $ | 86,645 |  |  | $ | 1,684,565 |  |  | $ | (31,970 | ) |  | $ | 1,741,129 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 41,896 |  |  |  | — |  |  |  | 41,896 |
Change in fair value of derivatives |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (21 | ) |  |  | (21 | )
Foreign currency translation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,310 |  |  |  | 1,310 |
Dividends declared Common Stock ($0.25 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3,806 | ) |  |  | — |  |  |  | (3,806 | )
Dividends declared Class B Common Stock ($0.20 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (729 | ) |  |  | — |  |  |  | (729 | )
Repurchase of Common Stock |  |  | (41 | ) |  |  | — |  |  |  | (4 | ) |  |  | — |  |  |  | (223 | ) |  |  | (6,989 | ) |  |  | — |  |  |  | (7,216 | )
Share-based compensation, net (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 788 |  |  |  | — |  |  |  | — |  |  |  | 788 |
Share-based awards exercised, net (2) |  |  | 11 |  |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |
Balance, November 28, 2020 |  |  | 15,221 |  |  |  | 3,643 |  |  | $ | 1,522 |  |  | $ | 364 |  |  | $ | 87,210 |  |  | $ | 1,714,937 |  |  | $ | (30,681 | ) |  | $ | 1,773,352 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 32,585 |  |  |  | — |  |  | $ | 32,585 |
Change in fair value of derivatives |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (56 | ) |  |  | (56 | )
Foreign currency translation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,244 |  |  |  | 2,244 |
Dividends declared Common Stock ($0.25 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3,806 | ) |  |  | — |  |  |  | (3,806 | )
Dividends declared Class B Common Stock ($0.20 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (728 | ) |  |  | — |  |  |  | (728 | )
Repurchase of Common Stock |  |  | (12 | ) |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | (66 | ) |  |  | (2,251 | ) |  |  | — |  |  |  | (2,318 | )
Share-based compensation, net (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (165 | ) |  |  | — |  |  |  | — |  |  |  | (165 | )
Share-based awards exercised, net (2) |  |  | 21 |  |  |  | — |  |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2 |
Balance, February 27, 2021 |  |  | 15,230 |  |  |  | 3,643 |  |  | $ | 1,523 |  |  | $ | 364 |  |  | $ | 86,979 |  |  | $ | 1,740,737 |  |  | $ | (28,493 | ) |  | $ | 1,801,110 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 42,016 |  |  |  | — |  |  |  | 42,016 |
Change in fair value of derivatives |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (52 | ) |  |  | (52 | )
Foreign currency translation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,099 |  |  |  | 6,099 |
Dividends declared Common Stock ($0.25 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3,812 | ) |  |  | — |  |  |  | (3,812 | )
Dividends declared Class B Common Stock ($0.20 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (729 | ) |  |  | — |  |  |  | (729 | )
Share-based compensation, net (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 566 |  |  |  | — |  |  |  | — |  |  |  | 566 |
Share-based awards exercised, net (2) |  |  | 13 |  |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |
Balance, May 29, 2021 |  |  | 15,243 |  |  |  | 3,643 |  |  | $ | 1,524 |  |  | $ | 364 |  |  | $ | 87,545 |  |  | $ | 1,778,212 |  |  | $ | (22,446 | ) |  | $ | 1,845,199 |

6

(In thousands) |  | Common Shares |  |  | Class B Common Shares |  |  | Common Stock |  |  | Class B Common Stock |  |  | Capital Surplus |  |  | Retained Earnings |  |  | Accumulated Other Comprehensive Loss |  |  | Total Equity |
Balance, August 28, 2021 |  |  | 15,236 |  |  |  | 3,643 |  |  | $ | 1,524 |  |  | $ | 364 |  |  | $ | 89,257 |  |  | $ | 1,806,643 |  |  | $ | (24,836 | ) |  | $ | 1,872,952 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 33,705 |  |  |  | — |  |  |  | 33,705 |
Change in fair value of derivatives |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 47 |  |  |  | 47 |
Foreign currency translation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,799 | ) |  |  | (2,799 | )
Dividends declared Common Stock ($0.30 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4,566 | ) |  |  | — |  |  |  | (4,566 | )
Dividends declared Class B Common Stock ($0.24 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (874 | ) |  |  | — |  |  |  | (874 | )
Repurchase of Common Stock |  |  | (23 | ) |  |  | — |  |  |  | (2 | ) |  |  | — |  |  |  | (124 | ) |  |  | (4,645 | ) |  |  | — |  |  |  | (4,771 | )
Share-based compensation, net (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,207 |  |  |  | — |  |  |  | — |  |  |  | 1,207 |
Share-based awards exercised, net (2) |  |  | 7 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balance, November 27, 2021 |  |  | 15,220 |  |  |  | 3,643 |  |  | $ | 1,522 |  |  | $ | 364 |  |  | $ | 90,340 |  |  | $ | 1,830,263 |  |  | $ | (27,588 | ) |  | $ | 1,894,901 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 18,451 |  |  |  | — |  |  |  | 18,451 |
Change in fair value of derivatives |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (55 | ) |  |  | (55 | )
Foreign currency translation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,149 |  |  |  | 1,149 |
Dividends declared Common Stock ($0.30 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4,561 | ) |  |  | — |  |  |  | (4,561 | )
Dividends declared Class B Common Stock ($0.24 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (870 | ) |  |  | — |  |  |  | (870 | )
Repurchase of Common Stock |  |  | (53 | ) |  |  | — |  |  |  | (5 | ) |  |  | — |  |  |  | (286 | ) |  |  | (9,704 | ) |  |  | — |  |  |  | (9,995 | )
Share-based compensation, net (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (48 | ) |  |  | — |  |  |  | — |  |  |  | (48 | )
Share-based awards exercised, net (2) |  |  | 25 |  |  |  | — |  |  |  | 3 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |
Shares converted |  |  | 17 |  |  |  | (17 | ) |  |  | 1 |  |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balance, February 26, 2022 |  |  | 15,209 |  |  |  | 3,626 |  |  | $ | 1,521 |  |  | $ | 363 |  |  | $ | 90,006 |  |  | $ | 1,833,579 |  |  | $ | (26,494 | ) |  | $ | 1,898,975 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 25,067 |  |  |  | — |  |  |  | 25,067 |
Change in fair value of derivatives |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (14 | ) |  |  | (14 | )
Foreign currency translation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (982 | ) |  |  | (982 | )
Dividends declared Common Stock ($0.30 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4,534 | ) |  |  | — |  |  |  | (4,534 | )
Dividends declared Class B Common Stock ($0.24 per share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (870 | ) |  |  | — |  |  |  | (870 | )
Repurchase of Common Stock |  |  | (90 | ) |  |  | — |  |  |  | (9 | ) |  |  | — |  |  |  | (491 | ) |  |  | (15,187 | ) |  |  | — |  |  |  | (15,687 | )
Share-based compensation, net (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,056 |  |  |  |  |  |  | — |  |  |  | 2,056 |
Share-based awards exercised, net (2) |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balance, May 28, 2022 |  |  | 15,121 |  |  |  | 3,626 |  |  | $ | 1,512 |  |  | $ | 363 |  |  | $ | 91,571 |  |  | $ | 1,838,055 |  |  | $ | (27,490 | ) |  | $ | 1,904,011 |

(1) These amounts are shown net of any shares withheld by the Company to satisfy certain tax withholding obligations in connection with the vesting of certain restricted stock units.

(2) These amounts are shown net of the effect of income taxes.

The accompanying notes are an integral part of these

Consolidated Financial Statements.

7

Consolidated Stateme nts of Cash Flows

UniFirst Corporation and Subsidiaries

(Unaudited)

Thirty-nine weeks ended (In thousands) |  | May 28, 2022 |  |  | May 29, 2021 |
Cash flows from operating activities: |  |  |  |  |  |
Net income |  | $ | 77,223 |  |  | $ | 116,497 |
Adjustments to reconcile net income to cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  |  | 80,744 |  |  |  | 79,178 |
Amortization of deferred financing costs |  |  | 123 |  |  |  | 85 |
Share-based compensation |  |  | 7,114 |  |  |  | 5,193 |
Accretion on environmental contingencies |  |  | 447 |  |  |  | 336 |
Accretion on asset retirement obligations |  |  | 732 |  |  |  | 740 |
Deferred income taxes |  |  | 1,823 |  |  |  | 2,025 |
Other |  |  | (103 | ) |  |  | (199 | )
Changes in assets and liabilities, net of acquisitions: |  |  |  |  |  |
Receivables, less reserves |  |  | (31,998 | ) |  |  | (7,657 | )
Inventories |  |  | (8,258 | ) |  |  | (13,871 | )
Rental merchandise in service |  |  | (25,788 | ) |  |  | (12,169 | )
Prepaid expenses and other current assets and Other assets |  |  | 3,603 |  |  |  | 5,433 |
Accounts payable |  |  | 850 |  |  |  | 4,019 |
Accrued liabilities |  |  | (21,172 | ) |  |  | 11,636 |
Prepaid and accrued income taxes |  |  | 3,498 |  |  |  | (3,723 | )
Net cash provided by operating activities |  |  | 88,838 |  |  |  | 187,523 |
Cash flows from investing activities: |  |  |  |  |  |
Acquisition of businesses, net of cash acquired |  |  | (42,680 | ) |  |  | (7,128 | )
Capital expenditures, including capitalization of software costs |  |  | (97,259 | ) |  |  | (96,645 | )
Proceeds from sale of assets |  |  | 133 |  |  |  | 551 |
Net cash used in investing activities |  |  | (139,806 | ) |  |  | (103,222 | )
Cash flows from financing activities: |  |  |  |  |  |
Payment of deferred financing costs |  |  | — |  |  |  | (822 | )
Proceeds from exercise of share-based awards |  |  | 3 |  |  |  | 3 |
Taxes withheld and paid related to net share settlement of equity awards |  |  | (3,898 | ) |  |  | (4,003 | )
Repurchase of Common Stock |  |  | (30,453 | ) |  |  | (9,534 | )
Payment of cash dividends |  |  | (15,407 | ) |  |  | (13,610 | )
Other |  |  | (5 | ) |  |  | — |
Net cash used in financing activities |  |  | (49,760 | ) |  |  | (27,966 | )
Effect of exchange rate changes |  |  | (1,545 | ) |  |  | 3,832 |
Net increase (decrease) in cash, cash equivalents and short-term investments |  |  | (102,273 | ) |  |  | 60,167 |
Cash, cash equivalents and short-term investments at beginning of period |  |  | 512,868 |  |  |  | 474,838 |
Cash, cash equivalents and short-term investments at end of period |  | $ | 410,595 |  |  | $ | 535,005 |
Supplemental disclosure of cash flow information: |  |  |  |  |  |
Non-cash capital expenditures |  | $ | 4,954 |  |  | $ | 5,907 |

The accompanying notes are an integral part of these

Consolidated Financial Statements.

8

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements

1. Basis of Presentation

These Consolidated Financial Statements of UniFirst Corporation (the “Company”) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the information furnished reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim period.

It is suggested that these Consolidated Financial Statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 28, 2021. There have been no material changes in the accounting policies followed by the Company during the current fiscal year other than the adoption of recent accounting pronouncements discussed in Note 2. Results for an interim period are not indicative of any future interim periods or for an entire fiscal year.

2. Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued updated guidance to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This guidance was effective for annual reporting periods ending after December 15, 2020, and was required to be applied on a retrospective basis with early adoption permitted. Accordingly, the standard was effective for the Company on August 29, 2021. The Company’s adoption of this guidance on August 29, 2021 did no t have a material impact on its financial statements or related disclosures.

In December 2019, the FASB issued updated guidance to simplify accounting for income taxes by removing certain exceptions and improving the consistent application of and simplifying U.S. GAAP in other areas of this topic. This guidance was effective for annual reporting periods, and any interim periods within those annual periods, that began after December 15, 2020, with early adoption permitted. The Company’s adoption of this guidance on August 29, 2021 did no t have a material impact on its financial statements.

In October 2021, the FASB issued updated guidance to improve the accounting for acquired revenue contracts with customers in a business combination. This guidance will be effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2023 and will be required to be applied on a prospective basis with early adoption permitted. Accordingly, the standard will be effective for the Company on September 1, 2024. The Company is currently evaluating the impact that this guidance will have on its financial statements and related disclosures.

In November 2021, the FASB issued updated guidance to increase the transparency of government assistance, including the disclosure of the types of assistance, an entity’s accounting for the assistance and the effect of the assistance on an entity’s financial statements. This guidance will be effective for annual reporting periods that begin after December 15, 2021 and will be required to be applied on a prospective basis with early adoption permitted. Accordingly, the standard will be effective for the Company on August 28, 2022. The Company does not expect this standard to have a material impact on its financial statements.

3. Revenue Recognition

The following table presents the Company’s revenues for the thirteen and thirty-nine weeks ended May 28, 2022 and May 29, 2021, respectively, disaggregated by service type:

|  | Thirteen Weeks Ended |  |  | Thirty-Nine Weeks Ended |
|  | May 28, 2022 |  |  | May 29, 2021 |  |  | May 28, 2022 |  |  | May 29, 2021 |
(In thousands, except percentages) |  | Revenues |  |  | % of Revenues |  |  | Revenues |  |  | % of Revenues |  |  | Revenues |  |  | % of Revenues |  |  | Revenues |  |  | % of Revenues |
Core Laundry Operations |  | $ | 450,039 |  |  |  | 88.0 | % |  | $ | 409,031 |  |  |  | 88.1 | % |  | $ | 1,311,941 |  |  |  | 88.4 | % |  | $ | 1,200,456 |  |  |  | 88.2 | %
Specialty Garments |  |  | 41,198 |  |  |  | 8.1 | % |  |  | 38,236 |  |  |  | 8.2 | % |  |  | 116,220 |  |  |  | 7.8 | % |  |  | 111,592 |  |  |  | 8.2 | %
First Aid |  |  | 20,311 |  |  |  | 4.0 | % |  |  | 17,056 |  |  |  | 3.7 | % |  |  | 56,247 |  |  |  | 3.8 | % |  |  | 48,892 |  |  |  | 3.6 | %
Total Revenues |  | $ | 511,548 |  |  |  | 100.0 | % |  | $ | 464,323 |  |  |  | 100.0 | % |  | $ | 1,484,408 |  |  |  | 100.0 | % |  | $ | 1,360,940 |  |  |  | 100.0 | %

See Note 16 “Segment Reporting” for additional details of segment definitions.

Revenue Recognition Policy

During the thirteen weeks ended May 28, 2022 and May 29, 2021, approximately 91.0% and 90.9%, respectively, of the Company’s revenues were derived from fees for route servicing of Core Laundry Operations, Specialty Garments, and First Aid segments performed by the Company’s employees at the customer’s location of business. During the thirty-nine weeks ended May 28, 2022 and May 29, 2021, approximately 91.2% and 91.0%, respectively, of the Company’s revenues were derived from fees for route servicing of Core Laundry Operations, Specialty Garments, and First Aid segments performed by the Company’s employees at the customer’s

9

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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 customer-based 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 and thirty-nine weeks ended May 28, 2022 and May 29, 2021. 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 non-current 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 May 28, 2022, the current and non-current assets related to deferred commissions totaled $14.9 million and $64.1 million, respectively. As of August 28, 2021, the current and non-current assets related to deferred commissions totaled $14.2 million and $60.6 million, respectively. During the thirteen weeks ended May 28, 2022 and May 29, 2021, the Company recorded $3.9 million and $3.6 million, respectively, of amortization expense related to deferred commissions. During the thirty-nine weeks ended May 28, 2022 and May 29, 2021, the Company recorded $11.5 million and $10.8 million, respectively, of amortization expense related to deferred commissions. This expense is classified in selling and administrative expenses on the consolidated statements of income.

4. Acquisitions

During the thirty-nine weeks ended May 28, 2022, the Company completed ten business acquisitions with an aggregate purchase price of approximately $43.9 million, which was primarily assigned to goodwill and intangible assets. The initial allocations of the purchase prices are incomplete with respect to certain assets acquired. The results of operations of these acquisitions have been included in the Company’s consolidated financial results since their respective acquisition dates. These acquisitions were not significant in relation to the Company’s consolidated financial results and, therefore, pro-forma financial information has not been presented.

5. Fair Value Measurements

The assets measured at fair value on a recurring basis are summarized in the tables below (in thousands):

|  | As of May 28, 2022 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Fair Value |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 197,154 |  |  | $ | — |  |  | $ | — |  |  | $ | 197,154 |
Pension plan assets |  |  | — |  |  |  | 3,432 |  |  |  | — |  |  |  | 3,432 |
Foreign currency forward contracts |  |  | — |  |  |  | 13 |  |  |  | — |  |  |  | 13 |
Total assets at fair value |  | $ | 197,154 |  |  | $ | 3,445 |  |  | $ | — |  |  | $ | 200,599 |

10

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

|  | As of August 28, 2021 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Fair Value |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 197,081 |  |  | $ | — |  |  | $ | — |  |  | $ | 197,081 |
Pension plan assets |  |  | — |  |  |  | 3,795 |  |  |  | — |  |  |  | 3,795 |
Foreign currency forward contracts |  |  | — |  |  |  | 41 |  |  |  | — |  |  |  | 41 |
Total assets at fair value |  | $ | 197,081 |  |  | $ | 3,836 |  |  | $ | — |  |  | $ | 200,917 |

The Company’s cash equivalents listed above represent money market securities and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The Company does not adjust the quoted market price for such financial instruments.

The Company’s pension plan assets listed above represent guaranteed deposit accounts that are maintained and operated by Prudential Retirement Insurance and Annuity Company (“PRIAC”). All assets are merged with the general assets of PRIAC and are invested predominantly in privately placed securities and mortgages. At the beginning of each calendar year, PRIAC notifies the Company of the annual rates of interest which will be applied to the amounts held in the guaranteed deposit account during the next calendar year. In determining the interest rate to be applied, PRIAC considers the investment performance of the underlying assets of the prior year; however, regardless of the investment performance the Company is contractually guaranteed a minimum rate of return. As such, the Company’s pension plan assets are included within Level 2 of the fair value hierarchy.

The Company’s foreign currency forward contracts represent contracts the Company has entered into to exchange Canadian dollars for U.S. dollars at fixed exchange rates in order to manage its exposure related to the certain forecasted Canadian dollar denominated sales of one of its subsidiaries. These contracts are included in prepaid expenses and other current assets and other long-term assets as of May 28, 2022 and August 28, 2021. The fair value of the forward contracts is based on similar exchange traded derivatives and are, therefore, included within Level 2 of the fair value hierarchy.

6. Derivative Instruments and Hedging Activities

As of May 28, 2022, the Company had forward contracts with a notional value of approximately 7.7 million CAD outstanding and recorded the fair value of the contracts of a nominal amount in prepaid expenses and other current assets and other long-term assets with a corresponding nominal gain in accumulated other comprehensive loss, which was recorded net of tax. During the thirteen and thirty-nine weeks ended May 28, 2022, the Company reclassified a nominal amount from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The gain on these forward contracts that resulted in a decrease to accumulated other comprehensive loss as of May 28, 2022 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.

7. Employee Benefit Plans

Defined Contribution Retirement Savings Plan

The Company has a defined contribution retirement savings plan with a 401(k) feature for all eligible U.S. and Canadian employees not under collective bargaining agreements. The Company matches a portion of the employee’s contribution and may make an additional contribution at its discretion. Contributions charged to expense under the plan for the thirteen weeks ended May 28, 2022 and May 29, 2021 were $4.7 million and $5.1 million, respectively. Contributions charged to expense under the plan for the thirty-nine weeks ended May 28, 2022 and May 29, 2021 were $14.2 million and $15.2 million, respectively.

Pension Plans and Supplemental Executive Retirement Plans

The Company maintains an unfunded Supplemental Executive Retirement Plan for certain eligible employees of the Company and one frozen non-contributory defined benefit pension plan. The amounts charged to expense related to these plans for the thirteen weeks ended May 28, 2022 and May 29, 2021 were $0.6 million and $0.8 million, respectively. The amounts charged to expense related to these plans for the thirty-nine weeks ended May 28, 2022 and May 29, 2021 were $1.9 million and $2.3 million, respectively.

Nonqualified Deferred Compensation Plan

The Company adopted the UniFirst Corporation Deferred Compensation Plan (the “NQDC Plan”) effective on February 1, 2022. The NQDC Plan is an unfunded, nonqualified deferred compensation plan that allows eligible participants to voluntarily defer receipt of their salary and annual cash bonuses up to approved limits. In its discretion, the Company may credit one or more additional contributions to participant accounts. NQDC Plan participants who are not accruing benefits under the Supplemental Executive Retirement Plan are eligible to have discretionary annual employer contributions credited to their NQDC Plan accounts. All participants are also eligible to have employer supplemental contributions and employer discretionary contributions credited to their NQDC Plan accounts. The amounts of such contributions may differ from year to year and from participant to participant. There were

11

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

no employee or employer contributions charged to expense related to this plan for the thirteen and thirty-nine weeks ended May 28, 2022.

8. Income Per Share

The Company calculates income per share by allocating income to its unvested participating securities as part of its income per share calculations. The following table sets forth the computation of basic income per share using the two-class method for amounts attributable to the Company’s shares of Common Stock and Class B Common Stock (in thousands, except per share data):

|  | Thirteen Weeks Ended |  |  | Thirty-Nine Weeks Ended |
|  | May 28, 2022 |  |  | May 29, 2021 |  |  | May 28, 2022 |  |  | May 29, 2021 |
Net income available to shareholders |  | $ | 25,067 |  |  | $ | 42,016 |  |  | $ | 77,223 |  |  | $ | 116,497 |
Allocation of net income for Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  | $ | 21,037 |  |  | $ | 35,270 |  |  | $ | 64,835 |  |  | $ | 97,792 |
Class B Common Stock |  |  | 4,030 |  |  |  | 6,746 |  |  |  | 12,388 |  |  |  | 18,705 |
|  | $ | 25,067 |  |  | $ | 42,016 |  |  | $ | 77,223 |  |  | $ | 116,497 |
Weighted average number of shares for Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  |  | 15,170 |  |  |  | 15,238 |  |  |  | 15,211 |  |  |  | 15,238 |
Class B Common Stock |  |  | 3,632 |  |  |  | 3,643 |  |  |  | 3,632 |  |  |  | 3,643 |
|  |  | 18,802 |  |  |  | 18,881 |  |  |  | 18,843 |  |  |  | 18,881 |
Income per share for Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common Stock |  | $ | 1.39 |  |  | $ | 2.31 |  |  | $ | 4.26 |  |  | $ | 6.42 |
Class B Common Stock |  | $ | 1.11 |  |  | $ | 1.85 |  |  | $ | 3.41 |  |  | $ | 5.13 |

The Company is required to calculate diluted income per share for Common Stock using the more dilutive of the following two methods:

•
The treasury stock method; or
•
The two-class method assuming a participating security is not exercised or converted.

For the thirteen and thirty-nine weeks ended May 28, 2022 and May 29, 2021, the Company’s diluted income per share assumes the conversion of all vested Class B Common Stock into Common Stock and uses the two-class method for its unvested participating shares. The following tables set forth the computation of diluted income per share of Common Stock for the thirteen and thirty-nine weeks ended May 28, 2022 and May 29, 2021 (in thousands, except per share data):

|  | Thirteen weeks ended May 28, 2022 |  |  | Thirty-nine weeks ended May 28, 2022 |
|  | Earnings to Common Shareholders |  |  | Common Shares |  |  | Income Per Share |  |  | Earnings to Common Shareholders |  |  | Common Shares |  |  | Income Per Share |
As reported - Basic |  | $ | 21,037 |  |  |  | 15,170 |  |  | $ | 1.39 |  |  | $ | 64,835 |  |  |  | 15,211 |  |  | $ | 4.26 |
Add: effect of dilutive potential common shares |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Share-Based Awards |  |  | — |  |  |  | 73 |  |  |  |  |  |  | — |  |  |  | 115 |  |  |  |
Class B Common Stock |  |  | 4,030 |  |  |  | 3,632 |  |  |  |  |  |  | 12,388 |  |  |  | 3,632 |  |  |  |
As reported – Diluted |  | $ | 25,067 |  |  |  | 18,875 |  |  | $ | 1.33 |  |  | $ | 77,223 |  |  |  | 18,958 |  |  | $ | 4.07 |

|  | Thirteen weeks ended May 29, 2021 |  |  | Thirty-nine weeks ended May 29, 2021 |
|  | Earnings to Common Shareholders |  |  | Common Shares |  |  | Income Per Share |  |  | Earnings to Common Shareholders |  |  | Common Shares |  |  | Income Per Share |
As reported - Basic |  | $ | 35,270 |  |  |  | 15,238 |  |  | $ | 2.31 |  |  | $ | 97,792 |  |  |  | 15,238 |  |  | $ | 6.42 |
Add: effect of dilutive potential common shares |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Share-Based Awards |  |  | — |  |  |  | 170 |  |  |  |  |  |  | — |  |  |  | 160 |  |  |  |
Class B Common Stock |  |  | 6,746 |  |  |  | 3,643 |  |  |  |  |  |  | 18,705 |  |  |  | 3,643 |  |  |  |
As reported – Diluted |  | $ | 42,016 |  |  |  | 19,051 |  |  | $ | 2.21 |  |  | $ | 116,497 |  |  |  | 19,041 |  |  | $ | 6.12 |

12

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Share-based awards that would result in the issuance of 43,246 and 36,373 shares, respectively, of Common Stock were excluded from the calculation of diluted income per share for the thirteen and thirty-nine weeks ended May 28, 2022 because they were anti-dilutive. Share-based awards that would result in the issuance of 2,189 and 1,770 shares, respectively, of Common Stock were excluded from the calculation of diluted income per share for the thirteen and thirty-nine weeks ended May 29, 2021 because they were anti-dilutive.

9. Inventories

Inventories are stated at the lower of cost or net realizable value, net of any reserve for excess and obsolete inventory. Work-in-process and finished goods inventories consist of materials, labor and manufacturing overhead. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to customers or used in rental operations. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required. The Company uses the first-in, first-out (“FIFO”) method to value its inventories.

The components of inventory as of May 28, 2022 and August 28, 2021 were as follows (in thousands):

|  | May 28, 2022 |  |  | August 28, 2021 |
Raw materials |  | $ | 28,036 |  |  | $ | 24,846 |
Work in process |  |  | 3,357 |  |  |  | 4,703 |
Finished goods |  |  | 120,348 |  |  |  | 114,042 |
Total inventories |  | $ | 151,741 |  |  | $ | 143,591 |

10. Goodwill and Other Intangible Assets

When the Company acquires a business, the amount assigned to the tangible assets and liabilities and intangible assets acquired is based on their respective fair values determined as of the acquisition date. The excess of the purchase price over the tangible assets and liabilities and intangible assets is recorded as goodwill.

The changes in the carrying amount of goodwill are as follows (in thousands):

Balance as of August 28, 2021 |  | $ | 429,538 |
Goodwill recorded during the period |  |  | 27,365 |
Other |  |  | (93 | )
Balance as of May 28, 2022 |  | $ | 456,810 |

Intangible assets, net in the Company’s consolidated balance sheets are as follows (in thousands):

|  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Net Carrying Amount |
May 28, 2022 |  |  |  |  |  |  |  |  |
Customer contracts |  | $ | 246,934 |  |  | $ | 196,015 |  |  | $ | 50,919 |
Software |  |  | 78,502 |  |  |  | 43,911 |  |  |  | 34,591 |
Other intangible assets |  |  | 37,564 |  |  |  | 35,445 |  |  |  | 2,119 |
|  | $ | 363,000 |  |  | $ | 275,371 |  |  | $ | 87,629 |
August 28, 2021 |  |  |  |  |  |  |  |  |
Customer contracts |  | $ | 237,384 |  |  | $ | 188,255 |  |  | $ | 49,129 |
Software |  |  | 74,475 |  |  |  | 40,763 |  |  |  | 33,712 |
Other intangible assets |  |  | 36,866 |  |  |  | 35,069 |  |  |  | 1,797 |
|  | $ | 348,725 |  |  | $ | 264,087 |  |  | $ | 84,638 |

11. Asset Retirement Obligations

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

13

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

continues to depreciate, on a straight-line basis, the amount added to property, plant and equipment and recognizes accretion expense in connection with the discounted liability over the various remaining lives which range from approximately 1 to 22 years.

A reconciliation of the Company’s asset retirement liability for the thirty-nine weeks ended May 28, 2022 was as follows (in thousands):

|  | May 28, 2022 |
Beginning balance as of August 28, 2021 |  | $ | 14,887 |
Accretion expense |  |  | 732 |
Effect of exchange rate changes |  |  | (331 | )
Balance as of May 28, 2022 |  | $ | 15,288 |

Asset retirement obligations are included in long-term accrued liabilities in the Company’s consolidated balance sheets.

12. Commitments and Contingencies

Lease Commitments

The Company has operating leases for certain operating facilities, vehicles and equipment, which provide the right to use the underlying asset and require lease payments over the term of the lease. Each new contract is evaluated to determine if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. All identified leases are recorded on the consolidated balance sheet with a corresponding operating lease right-of-use asset, net, representing the right to use the underlying asset for the lease term and the operating lease liabilities representing the obligation to make lease payments arising from the lease. Short-term operating leases, which have an initial term of twelve months or less, are not recorded on the consolidated balance sheet.

Operating lease right-of-use assets, net and operating lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term and include options to extend or terminat e the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available as of the lease commencement date. Lease expense for operating leases is recorded on a straight-line basis over the lease term and variable lease costs are recorded as incurred. Both lease expense and variable lease costs are primarily recorded in cost of revenues on the Company's consolidated statements of income. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table presents the operating lease cost and information related to the operating lease right-of-use assets, net and operating lease liabilities for the thirty-nine weeks ended May 28, 2022:

(In thousands, except lease term and discount rate) |  |  |
Lease cost |  |  |
Operating lease costs including short-term lease expense and variable lease costs, which were immaterial in the period |  | $ | 16,199 |
Operating cash flow impacts |  |  |
Cash paid for amounts included in the measurement of operating lease liabilities |  | $ | 3,444 |
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities |  | $ | 17,565 |
Weighted-average remaining lease term - operating leases |  | 4.13 |
Weighted-average discount rate - operating leases |  |  | 1.94 | %

14

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The contractual future minimum lease payments of the Company's operating lease liabilities by fiscal year are as follows as of May 28, 2022:

(In thousands) |  |  |
2022 (remaining three months) |  | $ | 3,618 |
2023 |  |  | 14,376 |
2024 |  |  | 11,373 |
2025 |  |  | 8,449 |
2026 |  |  | 6,490 |
Thereafter |  |  | 8,128 |
Total payments |  |  | 52,434 |
Less interest |  |  | (1,426 | )
Total present value of lease payments |  | $ | 51,008 |

Environmental and Legal Contingencies

The Company and its operations are subject to various federal, state and local laws and regulations governing, among other things, air emissions, wastewater discharges, and the generation, handling, storage, transportation, treatment and disposal of hazardous wastes and other substances. In particular, industrial laundries currently use and must dispose of detergent wastewater and other residues, and, in the past, used perchloroethylene and other dry-cleaning solvents. The Company is attentive to the environmental concerns surrounding the disposal of these materials and has, through the years, taken measures to avoid their improper disposal. The Company has settled, or contributed to the settlement of, past actions or claims brought against the Company relating to the disposal of hazardous materials at several sites and there can be no assurance that the Company will not have to expend material amounts to remediate the consequences of any such disposal in the future.

U.S. GAAP requires that a liability for contingencies be recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded. The Company regularly consults with attorneys and outside consultants in its consideration of the relevant facts and circumstances before recording a contingent liability. Changes in enacted laws, regulatory orders or decrees, management’s estimates of costs, risk-free interest rates, insurance proceeds, participation by other parties, the timing of payments, the input of the Company’s attorneys and outside consultants or other factual circumstances could have a material impact on the amounts recorded for environmental and other contingent liabilities.

Under environmental laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located on, or in, or emanating from, such property, as well as related costs of investigation and property damage. Such laws often impose liability without regard to whether the owner or lessee knew of, or was responsible for, the presence of such hazardous or toxic substances. There can be no assurances that acquired or leased locations have been operated in compliance with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon the Company under such laws or expose the Company to third-party actions such as tort suits. The Company continues to address environmental conditions under terms of consent orders negotiated with the applicable environmental authorities or otherwise with respect to certain sites.

The Company has accrued certain costs related to certain sites, including but not limited to sites in Woburn and Somerville, Massachusetts, as it has been determined that the costs are probable and can be reasonably estimated. The Company, together with multiple other companies, is party to a consent decree related to its property and parcels of land (the “Central Area”) at a site in Woburn, Massachusetts. The United States Environmental Protection Agency (the “EPA”) has provided the Company and other signatories to the consent decree with comments on the design and implementation of groundwater and soil remedies at the Woburn site and investigation of environmental conditions in the Central Area. The consent decree does not address any remediation work that may be required in the Central Area. The Company, and other signatories, have implemented and proposed to do additional work at the Woburn site but many of the EPA’s comments remain to be resolved. The Company has accrued costs to perform certain work responsive to the EPA’s comments. Additionally, the Company has implemented mitigation measures and continues to monitor environmental conditions at the Somerville, Massachusetts site. The Company has agreed to undertake additional actions responsive to a notice of audit findings from the Massachusetts Department of Environmental Protection concerning a regulatory submittal that the Company made in 2009 for a portion of the site. The Company has received demands from the local transit authority for reimbursement of certain costs associated with its construction of a new municipal transit station in the area of the Somerville site. This station is part of an ongoing extension of the transit system. The Company has reserved for costs in connection with this matter; however, in light of the uncertainties associated with this matter, these costs and the related reserve may change.

15

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The Company routinely reviews and evaluates sites that may require remediation and monitoring and determines its estimated costs based on various estimates and assumptions. These estimates are developed using its internal sources or by third party environmental engineers or other service providers. Internally developed estimates are based on:

•
Management’s judgment and experience in remediating and monitoring the Company’s sites;
•
Information available from regulatory agencies as to costs of remediation and monitoring;
•
The number, financial resources and relative degree of responsibility of other potentially responsible parties (“PRPs”) who may be liable for remediation and monitoring of a specific site; and
•
The typical allocation of costs among PRPs.

There is usually a range of reasonable estimates of the costs associated with each site. In accordance with U.S. GAAP, the Company’s accruals reflect the amount within the range that it believes is the best estimate or the low end of a range of estimates if no point within the range is a better estimate. Where it believes that both the amount of a particular liability and the timing of the payments are reliably determinable, the Company adjusts the cost in current dollars using a rate of 3% for inflation until the time of expected payment and discounts the cost to present value using current risk-free interest rates. As of May 28, 2022, the risk-free interest rates utilized by the Company ranged from 2.64% to 3.16%.

For environmental liabilities that have been discounted, the Company includes interest accretion, based on the effective interest method, in selling and administrative expenses on the Company’s consolidated statements of income. The changes to the Company’s environmental liabilities for the thirty-nine weeks ended May 28, 2022 were as follows (in thousands):

|  | May 28, 2022 |
Balance as of August 28, 2021 |  | $ | 32,859 |
Revisions in estimates |  |  | — |
Costs incurred for which reserves have been provided |  |  | (1,205 | )
Insurance proceeds |  |  | 100 |
Interest accretion |  |  | 447 |
Changes in discount rates |  |  | (2,692 | )
Balance as of May 28, 2022 |  | $ | 29,509 |

Anticipated payments and insurance proceeds of currently identified environmental remediation liabilities as of May 28, 2022, for the next five fiscal years and thereafter, as measured in current dollars, are reflected below.

(In thousands) |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | 2025 |  |  | 2026 |  |  | Thereafter |  |  | Total |
Estimated costs – current dollars |  | $ | 11,285 |  |  | $ | 2,530 |  |  | $ | 2,080 |  |  | $ | 1,366 |  |  | $ | 1,129 |  |  | $ | 12,712 |  |  | $ | 31,102 |
Estimated insurance proceeds |  |  | (110 | ) |  |  | (159 | ) |  |  | (173 | ) |  |  | (159 | ) |  |  | (173 | ) |  |  | (380 | ) |  |  | (1,154 | )
Net anticipated costs |  | $ | 11,175 |  |  | $ | 2,371 |  |  | $ | 1,907 |  |  | $ | 1,207 |  |  | $ | 956 |  |  | $ | 12,332 |  |  | $ | 29,948 |
Effect of inflation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 8,359 |
Effect of discounting |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (8,798 | )
Balance as of May 28, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 29,509 |

Estimated insurance proceeds are primarily received from an annuity received as part of a legal settlement with an insurance company. Annual proceeds of approximately $0.3 million are deposited into an escrow account which funds remediation and monitoring costs for two sites related to former operations in Williamstown, Vermont. Annual proceeds received but not expended in the current year accumulate in this account and may be used in future years for costs related to this site through the year 2027. As of May 28, 2022, the balance in this escrow account, which is held in a trust and is not recorded in the Company’s consolidated balance sheet, was approximately $4.9 million. Also included in estimated insurance proceeds are amounts the Company is entitled to receive pursuant to legal settlements as reimbursements from three insurance companies for estimated costs at the site in Uvalde, Texas.

The Company’s nuclear garment decontamination facilities are licensed by respective state agencies, as delegated authority by the Nuclear Regulatory Commission (the “NRC”) pursuant to the NRC’s Agreement State program and are subject to applicable federal and state radioactive material regulations. In addition, the Company’s international locations (Canada, the United Kingdom and the European Union) are regulated by equivalent respective jurisdictional authorities. There can be no assurance that such regulation will not lead to material disruptions in the Company’s garment decontamination business.

16

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

From time to time, the Company is also subject to legal proceedings and claims arising from the conduct of its business operations, including personal injury claims, customer contract matters, employment claims and environmental matters as described above.

While it is impossible for the Company to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits and environmental contingencies, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts covered by insurance have been properly accrued in accordance with U.S. GAAP. It is possible, however, that the future financial position and/or results of operations for any particular future period could be materially affected by changes in the Company’s assumptions or strategies related to these contingencies or changes out of the Company’s control.

13. Income Taxes

In accordance with ASC 740, Income Taxes (“ASC 740”), each interim period is considered integral to the annual period and tax expense is measured using an estimated annual effective tax rate. An entity is required to record income tax expense each quarter based on its annual effective tax rate estimated for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period.

Effective tax rate

The Company’s effective tax rate for the thirteen weeks ended May 28, 2022 was 25.4% as compared to 22.9% for the corresponding period in the prior year. The Company’s effective tax rate for the thirty-nine weeks ended May 28, 2022 was 23.6% unchanged from the corresponding period in the prior year. The increase in the effective tax rate for the thirteen weeks ended May 28, 2022 as compared to the corresponding period in the prior year was due primarily to the release of certain tax reserves and excess tax benefits related to the vesting of stock appreciation rights in the prior period.

Uncertain tax positions

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense, which is consistent with the recognition of these items in prior reporting periods. During the thirty-nine weeks ended May 28, 2022, there was a net decrease in unrecognized tax position of $0.5 million related to existing reserves.

All U.S. and Canadian federal income tax statutes have lapsed for filings up to and including fiscal years 2015 and 2014, respectively. With a few exceptions, the Company is no longer subject to state and local income tax examinations for periods prior to fiscal 2016. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months.

14. Long-Term Debt

On March 26, 2021, the Company entered into an amended and restated $175.0 million unsecured revolving credit agreement (the “2021 Credit Agreement”) with a syndicate of banks, which matures on March 26, 2026. The 2021 Credit Agreement amended and restated the Company’s prior credit agreement, which was scheduled to mature on April 11, 2021. Under the 2021 Credit Agreement, the Company is able to borrow funds at variable interest rates based on, at the Company’s election, the Eurodollar rate or a base rate, plus in each case a spread based on the Company’s consolidated funded debt ratio. 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 2021 Credit Agreement. The Company tests its compliance with these financial covenants on a fiscal quarterly basis. As of May 28, 2022, the interest rates applicable to the Company’s borrowings under the 2021 Credit Agreement would be calculated as LIBOR plus 1.00% at the time of the respective borrowing. As of May 28, 2022, the Company had no outstanding borrowings and had outstanding letters of credit amounting to $60.6 million, leaving $114.4 million available for borrowing under the 2021 Credit Agreement.

As of May 28, 2022, the Company was in compliance with all covenants under the 2021 Credit Agreement.

17

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

15. Accumulated Other Comprehensive Loss

The changes in each component of accumulated other comprehensive loss, net of tax, for the thirteen and thirty-nine weeks ended May 28, 2022 and May 29, 2021 were as follows (in thousands):

|  | Thirteen weeks ended May 28, 2022 |
|  | Foreign Currency Translation |  |  | Pension- related (1) |  |  | Derivative Financial Instruments (1) |  |  | Total Accumulated Other Comprehensive Loss |
Balance as of February 26, 2022 |  | $ | (19,451 | ) |  | $ | (7,066 | ) |  | $ | 23 |  |  | $ | (26,494 | )
Other comprehensive loss before reclassification |  |  | (982 | ) |  |  | — |  |  |  | (10 | ) |  |  | (992 | )
Amounts reclassified from accumulated other comprehensive loss |  |  | — |  |  |  | — |  |  |  | (4 | ) |  |  | (4 | )
Net current period other comprehensive loss |  |  | (982 | ) |  |  | — |  |  |  | (14 | ) |  |  | (996 | )
Balance as of May 28, 2022 |  | $ | (20,433 | ) |  | $ | (7,066 | ) |  | $ | 9 |  |  | $ | (27,490 | )

|  | Thirty-nine weeks ended May 28, 2022 |
|  | Foreign Currency Translation |  |  | Pension- related (1) |  |  | Derivative Financial Instruments (1) |  |  | Total Accumulated Other Comprehensive Loss |
Balance as of August 28, 2021 |  | $ | (17,801 | ) |  | $ | (7,066 | ) |  | $ | 31 |  |  | $ | (24,836 | )
Other comprehensive income (loss) before reclassification |  |  | (2,632 | ) |  |  | — |  |  |  | 35 |  |  |  | (2,597 | )
Amounts reclassified from accumulated other comprehensive loss |  |  | — |  |  |  | — |  |  |  | (57 | ) |  |  | (57 | )
Net current period other comprehensive loss |  |  | (2,632 | ) |  |  | — |  |  |  | (22 | ) |  |  | (2,654 | )
Balance as of May 28, 2022 |  | $ | (20,433 | ) |  | $ | (7,066 | ) |  | $ | 9 |  |  | $ | (27,490 | )

|  | Thirteen weeks ended May 29, 2021 |
|  | Foreign Currency Translation |  |  | Pension- related (1) |  |  | Derivative Financial Instruments (1) |  |  | Total Accumulated Other Comprehensive Loss |
Balance as of February 27, 2021 |  | $ | (18,455 | ) |  | $ | (10,026 | ) |  | $ | (12 | ) |  | $ | (28,493 | )
Other comprehensive (loss) income before reclassification |  |  | 6,099 |  |  |  | — |  |  |  | (91 | ) |  |  | 6,008 |
Amounts reclassified from accumulated other comprehensive loss |  |  | — |  |  |  | — |  |  |  | 39 |  |  |  | 39 |
Net current period other comprehensive (loss) income |  |  | 6,099 |  |  |  | — |  |  |  | (52 | ) |  |  | 6,047 |
Balance as of May 29, 2021 |  | $ | (12,356 | ) |  | $ | (10,026 | ) |  | $ | (64 | ) |  | $ | (22,446 | )

|  | Thirty-nine weeks ended May 29, 2021 |
|  | Foreign Currency Translation |  |  | Pension- related (1) |  |  | Derivative Financial Instruments (1) |  |  | Total Accumulated Other Comprehensive Loss |
Balance as of August 29, 2020 |  | $ | (22,009 | ) |  | $ | (10,026 | ) |  | $ | 65 |  |  | $ | (31,970 | )
Other comprehensive income (loss) before reclassification |  |  | 9,653 |  |  |  | — |  |  |  | (158 | ) |  |  | 9,495 |
Amounts reclassified from accumulated other comprehensive loss |  |  | — |  |  |  | — |  |  |  | 29 |  |  |  | 29 |
Net current period other comprehensive (loss) income |  |  | 9,653 |  |  |  | — |  |  |  | (129 | ) |  |  | 9,524 |
Balance as of May 29, 2021 |  | $ | (12,356 | ) |  | $ | (10,026 | ) |  | $ | (64 | ) |  | $ | (22,446 | )

18

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(1)
Amounts are shown net of tax

Amounts reclassified from accumulated other comprehensive loss, net of tax, for the thirteen and thirty-nine weeks ended May 28, 2022 and May 29, 2021 were as follows (in thousands):

|  | Thirteen weeks ended |  |  | Thirty-nine weeks ended |
|  | May 28, 2022 |  |  | May 29, 2021 |  |  | May 28, 2022 |  |  | May 29, 2021 |
Derivative financial instruments, net: |  |  |  |  |  |  |  |  |  |  |  |
Forward contracts (a) |  | $ | (4 | ) |  | $ | 39 |  |  | $ | (57 | ) |  | $ | 29 |
Total, net of tax |  |  | (4 | ) |  |  | 39 |  |  |  | (57 | ) |  |  | 29 |
Total amounts reclassified, net of tax |  | $ | (4 | ) |  | $ | 39 |  |  | $ | (57 | ) |  | $ | 29 |

(a)
Amounts included in revenues in the accompanying consolidated statements of income.

16. Segment Reporting

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Company’s chief executive officer. The Company has six operating segments based on the information reviewed by its chief executive officer: U.S. Rental and Cleaning, Canadian Rental and Cleaning, Manufacturing (“MFG”), Corporate, Specialty Garments and First Aid. The U.S. Rental and Cleaning and Canadian Rental and Cleaning operating segments have been combined to form the U.S. and Canadian Rental and Cleaning reporting segment, and as a result, the Company has five reporting segments.

The U.S. and Canadian Rental and Cleaning reporting segment purchases, rents, cleans, delivers and sells uniforms and protective clothing and non-garment items in the United States and Canada. The laundry locations of the U.S. and Canadian Rental and Cleaning reporting segment are referred to by the Company as “industrial laundries” or “industrial laundry locations.”

The MFG operating segment designs and manufactures uniforms and non-garment items primarily for the purpose of providing these goods to the U.S. and Canadian Rental and Cleaning reporting segment. MFG revenues are primarily generated when goods are shipped from the Company’s manufacturing facilities, or its subcontract manufacturers, to other Company locations. These intercompany revenues are recorded at a transfer price which is typically in excess of the actual manufacturing cost. Manufactured products are carried in inventory until placed in service at which time they are amortized at this transfer price. On a consolidated basis, intercompany revenues and income are eliminated and the carrying value of inventories and rental merchandise in service is reduced to the manufacturing cost. Income before income taxes from MFG net of the intercompany MFG elimination offsets the merchandise amortization costs incurred by the U.S. and Canadian Rental and Cleaning reporting segment as the merchandise costs of this reporting segment are amortized and recognized based on inventories purchased from MFG at the transfer price which is above the Company’s manufacturing cost.

The Corporate operating segment consists of costs associated with the Company’s distribution center, sales and marketing, information systems, engineering, procurement, supply chain, accounting and finance, human resources, other general and administrative costs and interest expense. The revenues generated from the Corporate operating segment represent certain direct sales made by the Company directly from its distribution center. The products sold by this operating segment are the same products rented and sold by the U.S. and Canadian Rental and Cleaning reporting segment. No assets or capital expenditures are allocated to this operating segment in the information reviewed by the chief executive officer. However, depreciation and amortization expense related to certain assets are reflected in operating income and income before income taxes for the Corporate operating segment. The assets that give rise to this depreciation and amortization are included in the total assets of the U.S. and Canadian Rental and Cleaning reporting segment as this is how they are tracked and reviewed by the Company. The majority of expenses accounted for within the Corporate segment relate to costs of the U.S. and Canadian Rental and Cleaning segment, with the remainder of the costs relating to the Specialty Garment and First Aid segments.

19

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The Specialty Garments operating segment purchases, rents, cleans, delivers and sells, specialty garments and non-garment items primarily for nuclear and cleanroom applications and provides cleanroom cleaning services at limited customer locations. The First Aid operating segment sells first aid cabinet services and other safety supplies, provides certain safety training, as well as maintains wholesale distribution and pill packaging operations.

The Company refers to the U.S. and Canadian Rental and Cleaning, MFG, and Corporate reporting segments combined as its “Core Laundry Operations,” which is included as a subtotal in the following table (in thousands):

Thirteen weeks ended |  | U.S. and Canadian Rental and Cleaning |  |  | MFG |  |  | Net Interco MFG Elim |  |  | Corporate |  |  | Subtotal Core Laundry Operations |  |  | Specialty Garments |  |  | First Aid |  |  | Total |
May 28, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  | $ | 439,462 |  |  | $ | 58,369 |  |  | $ | (58,369 | ) |  | $ | 10,577 |  |  | $ | 450,039 |  |  | $ | 41,198 |  |  | $ | 20,311 |  |  | $ | 511,548 |
Operating income (loss) |  | $ | 75,660 |  |  | $ | 12,117 |  |  | $ | 4,219 |  |  | $ | (65,565 | ) |  | $ | 26,431 |  |  | $ | 7,161 |  |  | $ | 105 |  |  | $ | 33,697 |
Interest income, net |  | $ | (736 | ) |  | $ | — |  |  | $ | — |  |  | $ | 396 |  |  | $ | (340 | ) |  | $ | — |  |  | $ | — |  |  | $ | (340 | )
Income (loss) before taxes |  | $ | 76,419 |  |  | $ | 12,045 |  |  | $ | 4,219 |  |  | $ | (66,362 | ) |  | $ | 26,321 |  |  | $ | 7,179 |  |  | $ | 106 |  |  | $ | 33,606 |
May 29, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  | $ | 399,500 |  |  | $ | 67,573 |  |  | $ | (67,573 | ) |  | $ | 9,531 |  |  | $ | 409,031 |  |  | $ | 38,236 |  |  | $ | 17,056 |  |  | $ | 464,323 |
Operating income (loss) |  | $ | 75,550 |  |  | $ | 17,219 |  |  | $ | (258 | ) |  | $ | (46,877 | ) |  | $ | 45,634 |  |  | $ | 8,300 |  |  | $ | 225 |  |  | $ | 54,159 |
Interest income, net |  | $ | (675 | ) |  | $ | — |  |  | $ | — |  |  | $ | 4 |  |  | $ | (671 | ) |  | $ | — |  |  | $ | — |  |  | $ | (671 | )
Income (loss) before taxes |  | $ | 76,062 |  |  | $ | 17,103 |  |  | $ | (258 | ) |  | $ | (47,573 | ) |  | $ | 45,334 |  |  | $ | 8,918 |  |  | $ | 230 |  |  | $ | 54,482 |

Thirty-nine weeks ended |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
May 28, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  | $ | 1,284,411 |  |  | $ | 214,712 |  |  | $ | (214,712 | ) |  | $ | 27,530 |  |  | $ | 1,311,941 |  |  | $ | 116,220 |  |  | $ | 56,247 |  |  | $ | 1,484,408 |
Operating income (loss) |  | $ | 209,499 |  |  | $ | 50,968 |  |  | $ | (1,835 | ) |  | $ | (176,949 | ) |  | $ | 81,683 |  |  | $ | 19,640 |  |  | $ | (223 | ) |  | $ | 101,100 |
Interest income, net |  | $ | (2,216 | ) |  | $ | — |  |  | $ | — |  |  | $ | 477 |  |  | $ | (1,739 | ) |  | $ | — |  |  | $ | — |  |  | $ | (1,739 | )
Income (loss) before taxes |  | $ | 211,700 |  |  | $ | 50,722 |  |  | $ | (1,835 | ) |  | $ | (178,419 | ) |  | $ | 82,168 |  |  | $ | 19,133 |  |  | $ | (223 | ) |  | $ | 101,078 |
May 29, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  | $ | 1,174,285 |  |  | $ | 181,204 |  |  | $ | (181,204 | ) |  | $ | 26,171 |  |  | $ | 1,200,456 |  |  | $ | 111,592 |  |  | $ | 48,892 |  |  | $ | 1,360,940 |
Operating income (loss) |  | $ | 209,546 |  |  | $ | 51,803 |  |  | $ | 2,926 |  |  | $ | (134,405 | ) |  | $ | 129,870 |  |  | $ | 20,693 |  |  | $ | 331 |  |  | $ | 150,894 |
Interest income, net |  | $ | (2,146 | ) |  | $ | — |  |  | $ | — |  |  | $ | 44 |  |  | $ | (2,102 | ) |  | $ | - |  |  | $ | - |  |  | $ | (2,102 | )
Income (loss) before taxes |  | $ | 211,449 |  |  | $ | 51,513 |  |  | $ | 2,926 |  |  | $ | (136,273 | ) |  | $ | 129,615 |  |  | $ | 22,529 |  |  | $ | 339 |  |  | $ | 152,483 |

17. Shares Repurchased and Dividends

On October 20, 2021, the Company announced that it would be raising its quarterly dividend to $0.30 per share of Common Stock and to $0.24 per share of Class B Common Stock, up from $0.25 and $0.20 per share, respectively. The amount and timing of any dividend payment is subject to the approval of the Board of Directors each quarter.

On January 2, 2019, the Company’s Board of Directors approved a share repurchase program (the “2019 Share Repurchase Program”) authorizing the Company to repurchase from time to time up to $100.0 million of its outstanding shares of Common Stock. On October 18, 2021, the Company’s Board of Directors authorized a new share repurchase program (the “2021 Share Repurchase Program” and, together with the 2019 Share Repurchase Program, the “Share Repurchase Programs”) to repurchase from time to time 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 on January 2, 2019. Repurchases made under the new program, if any, will be made in either the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will depend on a variety of factors, including economic and market conditions, the Company stock price, corporate liquidity requirements and priorities,

20

UniFirst Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

applicable legal requirements and other factors. The share repurchase program will be funded using the Company’s available cash or capacity under its 2021 Credit Agreement and may be suspended or discontinued at any time. During the thirteen and thirty-nine weeks ended May 28, 2022, the Company repurchased 90,394 and 165,644 shares for an average price per share of $173.55 and $183.85, respectively. The Company did no t repurchase any shares during the thirteen weeks ended May 29, 2021. During the thirty-nine weeks ended May 29, 2021, the Company repurchased 53,200 shares for an average price per share of $179.21. As of May 28, 2022, the Company had $71.6 million remaining to repurchase under the 2021 Share Repurchase Program.

21

ITEM 2. MANAGEMENT’S DISCUS SION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and any documents incorporated by reference may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements contained in this Quarterly Report on Form 10-Q and any documents incorporated by reference are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “could,” “should,” “may,” “will,” “strategy,” “objective,” “assume,” “strive,” or the negative versions thereof, and similar expressions and by the context in which they are used. Such forward-looking statements are based upon our current expectations and speak only as of the date made. Such statements are highly dependent upon a variety of risks, uncertainties and other important factors that could cause actual results to differ materially from those reflected in such forward-looking statements. Such factors include, but are not limited to, uncertainties caused by adverse economic conditions, including, without limitation, as a result of significant increases in inflation or interest rates or extraordinary events or circumstances such as geopolitical conflicts like the conflict between Russia and Ukraine or the COVID-19 pandemic, and their impact on our customers’ businesses and workforce levels, disruptions of our business and operations, including limitations on, or closures of, our facilities, or the business and operations of our customers or suppliers in connection with extraordinary events or circumstances such as the COVID-19 pandemic, uncertainties regarding our ability to consummate and successfully integrate acquired businesses, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, any adverse outcome of pending or future contingencies or claims, our ability to compete successfully without any significant degradation in our margin rates, seasonal and quarterly fluctuations in business levels, our ability to preserve positive labor relationships and avoid becoming the target of corporate labor unionization campaigns that could disrupt our business, the effect of currency fluctuations on our results of operations and financial condition, our dependence on third parties to supply us with raw materials, which such supply could be severely disrupted as a result of extraordinary events or circumstances such as the COVID-19 pandemic, any loss of key management or other personnel, increased costs as a result of any changes in federal or state laws, rules and regulations or governmental interpretation of such laws, rules and regulations, uncertainties regarding, or adverse impacts from increases in, the price levels of natural gas, electricity, fuel and labor, the negative effect on our business from sharply depressed oil and natural gas prices, including, without limitation, as a result of extraordinary events or circumstances such as the COVID-19 pandemic, the continuing increase in domestic healthcare costs, increased workers’ compensation claim costs, increased healthcare claim costs, including as a result of extraordinary events or circumstances such as the COVID-19 pandemic, our ability to retain and grow our customer base, demand and prices for our products and services, fluctuations in our Specialty Garments business, political or other instability, supply chain disruption or infection among our employees in Mexico and Nicaragua where our principal garment manufacturing plants are located, including, without limitation, as a result of extraordinary events or circumstances such as the COVID-19 pandemic, our ability to properly and efficiently design, construct, implement and operate a new customer relationship management (“CRM”) computer system, interruptions or failures of our information technology systems, including as a result of cyber-attacks, additional professional and internal costs necessary for compliance with any changes in or additional Securities and Exchange Commission, New York Stock Exchange and accounting or other rules, including, without limitation, recent rules proposed by the Securities and Exchange Commission regarding climate-related and cybersecurity-related disclosures, strikes and unemployment levels, our efforts to evaluate and potentially reduce internal costs, economic and other developments associated with the war on terrorism and its impact on the economy, the impact of foreign trade policies and tariffs or other impositions on imported goods on our business, results of operations and financial condition, general economic conditions, our ability to successfully implement our business strategies and processes, including our capital allocation strategies and the other factors described under “Part I, Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended August 28, 2021 and in our other filings with the Securities and Exchange Commission, including, without limitation, under Part II, Item 1A. "Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. We undertake no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made.

Business Overview

UniFirst Corporation, together with its subsidiaries, hereunder referred to as “we”, “our”, the “Company”, or “UniFirst”, is one of the largest providers of workplace uniforms and protective work wear clothing in the United States. We design, manufacture, personalize, rent, clean, deliver, and sell a wide range of uniforms and protective clothing, including shirts, pants, jackets, coveralls, lab coats, smocks, aprons and specialized protective wear, such as flame resistant and high visibility garments. We also rent and sell industrial wiping products, floor mats, facility service products and other non-garment items, and 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 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, healthcare providers and others who require employee clothing for image, identification, protection or utility purposes. We also provide our customers with restroom and cleaning supplies, including air fresheners, paper products and hand soaps.

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At certain specialized facilities, we also decontaminate and clean work clothes and other items that may have been exposed to radioactive materials and service special cleanroom protective wear and facilities. Typical customers for these specialized services include government agencies, research and development laboratories, high technology companies and utilities operating nuclear reactors.

We continue to expand into additional geographic markets through acquisitions and organic growth. We currently service over 300,000 customer locations in the United States, Canada and Europe from over 260 customer service, distribution and manufacturing facilities.

As mentioned and described in Note 16 to our Consolidated Financial Statements, we have five reporting segments: U.S. and Canadian Rental and Cleaning, MFG, Corporate, Specialty Garments and First Aid. We refer to the laundry locations of the U.S. and Canadian Rental and Cleaning reporting segment as “industrial laundries” or “industrial laundry locations”, and to the U.S. and Canadian Rental and Cleaning, MFG, and Corporate reporting segments combined as our “Core Laundry Operations.”

Critical Accounting Policies and Estimates

The discussion of our financial condition and results of operations is based upon the Consolidated Financial Statements, which have been prepared in conformity with GAAP. As such, management is required to make certain estimates, judgments and assumptions that are believed to be reasonable based on the information available. These estimates and assumptions affect the reported amount of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties, the most important and pervasive accounting estimates used and areas most sensitive to material changes from external factors. The critical accounting estimates that we believe affect our more significant judgments and estimates used in the preparation of our consolidated financial statements presented in this report are described in Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August 28, 2021. There have been no significant changes in our critical accounting estimates since the year ended August 28, 2021.

COVID-19 Assessment

At times during the global COVID-19 pandemic, our revenues have been significantly adversely impacted as a result of many customers closing their businesses or operating at limited capacities. In addition, at times during the pandemic, we have experienced supply chain disruptions with respect to certain products, including hand sanitizer and masks. Although there continues to be supply chain disruption that is impacting our operating results, these adverse impacts and disruptions have declined since the height of the pandemic.

As the COVID-19 pandemic has continued, instances of new COVID-19 cases have risen periodically with the outbreak of various COVID-19 variants, and new COVID-19 variants could emerge and spread in the future and have an adverse impact on our business.

We remain focused on the safety and well-being of our team partners and on the service of our customers. We will continue to review and assess the ongoing COVID-19 pandemic and its impacts on our team partners, our customers, our suppliers and our business so that we can seek to address the impacts on our business and service our customers.

Please see Part I, Item 1A. "Risk Factors” in our Annual Report on Form 10-K for the year ended August 28, 2021 for an additional discussion of risks and potential risks of the COVID-19 pandemic on our business, financial condition and results of operations.

Effects of Inflation and Current Economic Conditions

In general, we believe that our results of operations are not dependent on moderate changes in the inflation rate. Historically, we have been able to manage the impacts of more significant changes in inflation rates through our customer relationships, customer agreements that generally provide for price increases consistent with the rate of inflation and continued focus on improvements of operational productivity. However, the current inflationary environment has had a negative impact on our margins, including as a result of increased energy costs for our vehicles and our plants, as well as increasing wages in the labor markets in which we compete. We expect that inflation will continue to pressure our margins in future periods. In addition, in response to the concerns over inflation risk in the broader U.S. economy, the U.S. Federal Reserve began to raise interest rates in March 2022 for the first time in over three years and signaled that additional rate increases would continue throughout the year. It is possible that dramatic increases in interest rates may ultimately result in an economic recession, which could have a material adverse impact on our business. Adverse economic conditions resulting from inflationary pressures, U.S. Federal Reserve actions, geopolitical issues or otherwise are difficult to predict. Please see Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended August 28, 2021 for an additional

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discussion of risks and potential risks of inflation and adverse economic conditions on our business, financial condition and results of operations.

Results of Operations

The following table presents certain selected financial data, including the percentage of revenues represented by each item, for the thirteen and thirty-nine weeks ended May 28, 2022 and May 29, 2021.

|  | Thirteen weeks ended |  |  | Thirty-nine weeks ended |
(In thousands, except percentages) |  | May 28, 2022 |  |  | % of Revenues |  |  | May 29, 2021 |  |  | % of Revenues |  |  | % Change |  |  | May 28, 2022 |  |  | % of Revenues |  |  | May 29, 2021 |  |  | % of Revenues |  |  | % Change |
Revenues |  | $ | 511,548 |  |  |  | 100.0 | % |  | $ | 464,323 |  |  |  | 100.0 | % |  |  | 10.2 | % |  | $ | 1,484,408 |  |  |  | 100.0 | % |  | $ | 1,360,940 |  |  |  | 100.0 | % |  |  | 9.1 | %
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues (1) |  |  | 334,633 |  |  |  | 65.4 |  |  |  | 286,605 |  |  |  | 61.7 |  |  |  | 16.8 |  |  |  | 969,579 |  |  |  | 65.3 |  |  |  | 851,860 |  |  |  | 62.6 |  |  |  | 13.8 |
Selling and administrative expenses (1) |  |  | 116,191 |  |  |  | 22.7 |  |  |  | 96,976 |  |  |  | 20.9 |  |  |  | 19.8 |  |  |  | 332,985 |  |  |  | 22.4 |  |  |  | 279,008 |  |  |  | 20.5 |  |  |  | 19.3 |
Depreciation and amortization |  |  | 27,027 |  |  |  | 5.3 |  |  |  | 26,583 |  |  |  | 5.7 |  |  |  | 1.7 |  |  |  | 80,744 |  |  |  | 5.4 |  |  |  | 79,178 |  |  |  | 5.8 |  |  |  | 2.0 |
Total operating expenses |  |  | 477,851 |  |  |  | 93.4 |  |  |  | 410,164 |  |  |  | 88.3 |  |  |  | 16.5 |  |  |  | 1,383,308 |  |  |  | 93.2 |  |  |  | 1,210,046 |  |  |  | 88.9 |  |  |  | 14.3 |
Operating income |  |  | 33,697 |  |  |  | 6.6 |  |  |  | 54,159 |  |  |  | 11.7 |  |  |  | (37.8 | ) |  |  | 101,100 |  |  |  | 6.8 |  |  |  | 150,894 |  |  |  | 11.1 |  |  |  | (33.0 | )
Other (income) expense, net |  |  | 91 |  |  |  | 0.0 |  |  |  | (323 | ) |  |  | (0.1 | ) |  |  | (128.2 | ) |  |  | 22 |  |  |  | 0.0 |  |  |  | (1,589 | ) |  |  | (0.1 | ) |  |  | (101.4 | )
Income before income taxes |  |  | 33,606 |  |  |  | 6.6 |  |  |  | 54,482 |  |  |  | 11.7 |  |  |  | (38.3 | ) |  |  | 101,078 |  |  |  | 6.8 |  |  |  | 152,483 |  |  |  | 11.2 |  |  |  | (33.7 | )
Provision for income taxes |  |  | 8,539 |  |  |  | 1.7 |  |  |  | 12,466 |  |  |  | 2.7 |  |  |  | (31.5 | ) |  |  | 23,855 |  |  |  | 1.6 |  |  |  | 35,986 |  |  |  | 2.6 |  |  |  | (33.7 | )
Net income |  | $ | 25,067 |  |  |  | 4.9 | % |  | $ | 42,016 |  |  |  | 9.0 | % |  |  | (40.3 | )% |  | $ | 77,223 |  |  |  | 5.2 | % |  | $ | 116,497 |  |  |  | 8.6 | % |  |  | (33.7 | )%

(1) Exclusive of depreciation on our property, plant and equipment and amortization on our intangible assets.

General

We derive our revenues through the design, manufacture, personalization, rental, cleaning, delivering, and selling of a wide range of uniforms and protective clothing, including shirts, pants, jackets, coveralls, lab coats, smocks and aprons and specialized protective wear, such as flame resistant and high visibility garments. We also rent industrial wiping products, floor mats, facility service products, other non-garment items, and provide restroom and cleaning supplies and first aid cabinet services and other safety supplies, to a variety of manufacturers, retailers and service companies. We have five reporting segments, U.S. and Canadian Rental and Cleaning, MFG, Specialty Garments, First Aid and Corporate. We refer to the U.S. and Canadian Rental and Cleaning, MFG, and Corporate reporting segments combined as our “Core Laundry Operations.”

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 Core Laundry Operations, Specialty Garments facilities and First Aid 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.

Our operating results are also directly impacted by the costs of the gasoline used to fuel our vehicles and the natural gas used to operate our plants. Our operating margins have been, and may continue to be, adversely impacted by the recent surge in energy prices. In addition, as described above, the current inflationary environment has had a negative impact on our margins, and we expect that it will continue to pressure our margins in future periods.

Our business is subject to various state and federal regulations, including employment laws and regulations, minimum wage requirements, overtime requirements, working condition requirements, citizenship requirements, healthcare insurance mandates and other laws and regulations that impact our labor costs. Labor costs have increased recently as a result of increases in state and local minimum wage levels as well as the overall impact of wage pressure as the result of a low unemployment environment.

In fiscal 2018, we initiated a multiyear CRM project to further develop, implement and deploy a third-party application we licensed. This new solution improves functionality, capability and information flow as well as increased automation in servicing our customers. As of May 28, 2022, we had capitalized $40.0 million related to this CRM project. We began deployment of our new CRM project during the second half of fiscal 2021 and anticipate this will continue through fiscal 2022 and 2023. We are depreciating this system over a 10-year life and recognized $0.8 million and $2.3 million of amortization expense during the thirteen and thirty-nine weeks ended May 28, 2022, respectively.

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Over the next few years, we intend to be focused on three discrete strategic initiatives that are critical in our efforts to transform the company in terms of our overall capabilities and competitive positioning. These initiatives are the continued rollout of our new CRM system (discussed above), investments in the UniFirst brand, and a corporate-wide enterprise resource planning (“ERP”) system with a strong focus on supply chain and procurement automation and technology. We refer to these initiatives together as our “Key Initiatives”. For the thirteen and thirty-nine weeks ended May 28, 2022, we incurred $11.4 million and $24.1 million, respectively, of costs directly attributable to our Key Initiatives.

Thirteen weeks ended May 28, 2022 compared with thirteen weeks ended May 29, 2021

Revenues

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Core Laundry Operations |  | $ | 450,039 |  |  | $ | 409,031 |  |  | $ | 41,008 |  |  |  | 10.0 | %
Specialty Garments |  |  | 41,198 |  |  |  | 38,236 |  |  |  | 2,962 |  |  |  | 7.7 | %
First Aid |  |  | 20,311 |  |  |  | 17,056 |  |  |  | 3,255 |  |  |  | 19.1 | %
Consolidated total |  | $ | 511,548 |  |  | $ | 464,323 |  |  | $ | 47,225 |  |  |  | 10.2 | %

Core Laundry Operations’ revenues during the third quarter of fiscal 2022 increased compared to the prior year comparable period. Core Laundry Operations’ organic growth, which adjusts for the estimated effect of acquisitions as well as fluctuations in the Canadian dollar, was 9.3%. This strong organic growth rate was primarily the result of solid sales performance and improved customer retention as well as efforts to share with our customers the cost increases that we are seeing in our business due to the ongoing inflationary environment.

Specialty Garments revenues in the third quarter of fiscal 2022 increased compared to the prior year comparable period due primarily to growth in our cleanroom operations. Specialty Garments’ results are often affected by seasonality and the timing and length of its customers’ power reactor outages as well as its project-based activities.

First Aid revenues in the third quarter of fiscal 2022 increased compared to the prior year comparable period due primarily to strong revenue growth in the segment's wholesale distribution business.

Cost of Revenues

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Cost of revenues |  | $ | 334,633 |  |  | $ | 286,605 |  |  | $ | 48,028 |  |  |  | 16.8 | %
% of Revenues |  |  | 65.4 | % |  |  | 61.7 | % |  |  |  |  |  |

Core Laundry Operations’ cost of revenues as a percentage of revenues increased in the third quarter of fiscal 2022 as compared to the prior year comparable period. This increase was due primarily to higher merchandise cost, which has increased as a percentage of revenues due to continued normalization of merchandise amortization from depressed levels during the pandemic, ongoing supply chain disruption, the effect of some large national account investments as well as increased activity in our energy-related markets. In addition, we incurred higher energy costs as a percentage of revenues as well as increased input and labor costs due to the inflationary environment and the challenging employment environment.

Specialty Garments cost of revenues as a percentage of revenues increased in the third quarter of fiscal 2022 as compared to the prior year comparable period due primarily to higher merchandise, labor, and energy costs as a percentage of revenues in the third quarter of fiscal 2022.

Selling and Administrative Expenses

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Selling and administrative expenses |  | $ | 116,191 |  |  | $ | 96,976 |  |  | $ | 19,215 |  |  |  | 19.8 | %
% of Revenues |  |  | 22.7 | % |  |  | 20.9 | % |  |  |  |  |  |

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Our selling and administrative costs increased as a percentage of revenues in the third quarter of fiscal 2022 as compared to the prior year comparable period primarily due to Key Initiative costs as well as higher labor costs as a percentage of revenues responding to the challenging employment environment.

Depreciation and Amortization

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Depreciation and amortization |  | $ | 27,027 |  |  | $ | 26,583 |  |  | $ | 444 |  |  |  | 1.7 | %
% of Revenues |  |  | 5.3 | % |  |  | 5.7 | % |  |  |  |  |  |

Depreciation and amortization expense remained relatively consistent with the prior year comparable period.

Operating Income

For the thirteen weeks ended May 28, 2022 and May 29, 2021, changes in our revenues and costs as discussed above resulted in the following changes in our operating income and margin:

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Core Laundry Operations |  | $ | 26,431 |  |  | $ | 45,634 |  |  | $ | (19,203 | ) |  |  | (42.1 | )%
Specialty Garments |  |  | 7,161 |  |  |  | 8,300 |  |  |  | (1,139 | ) |  |  | (13.7 | )%
First Aid |  |  | 105 |  |  |  | 225 |  |  |  | (120 | ) |  |  | (53.3 | )%
Operating income |  | $ | 33,697 |  |  | $ | 54,159 |  |  | $ | (20,462 | ) |  |  | (37.8 | )%
Operating income margin |  |  | 6.6 | % |  |  | 11.7 | % |  |  |  |  |  |

Other (Income) Expense, net

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Interest income, net |  | $ | (340 | ) |  | $ | (671 | ) |  | $ | 331 |  |  |  | (49.3 | )%
Other (income) expense, net |  |  | 431 |  |  |  | 348 |  |  |  | 83 |  |  |  | 23.9 | %
Total other (income) expense, net |  | $ | 91 |  |  | $ | (323 | ) |  | $ | 414 |  |  |  | (128.2 | )%

The increase in other (income) expense, net during the third quarter of fiscal 2022 as compared to the prior year comparable period was due primarily to foreign exchange losses in the current period as compared to foreign exchange gains in the prior year comparable period.

Provision for Income Taxes

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Provision for income taxes |  | $ | 8,539 |  |  | $ | 12,466 |  |  | $ | (3,927 | ) |  |  | (31.5 | )%
Effective income tax rate |  |  | 25.4 | % |  |  | 22.9 | % |  |  |  |  |  |

The increase in our effective tax rate for the third quarter of fiscal 2022 as compared to the prior year comparable period was due primarily to the release of certain tax reserves and excess tax benefits related to the vesting of stock appreciation rights recorded in the prior period.

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Thirty-nine weeks ended May 28, 2022 compared with thirty-nine weeks ended May 29, 2021

Revenues

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Core Laundry Operations |  | $ | 1,311,941 |  |  | $ | 1,200,456 |  |  | $ | 111,485 |  |  |  | 9.3 | %
Specialty Garments |  |  | 116,220 |  |  |  | 111,592 |  |  |  | 4,628 |  |  |  | 4.1 | %
First Aid |  |  | 56,247 |  |  |  | 48,892 |  |  |  | 7,355 |  |  |  | 15.0 | %
Consolidated total |  | $ | 1,484,408 |  |  | $ | 1,360,940 |  |  | $ | 123,468 |  |  |  | 9.1 | %

Consolidated revenues during the thirty-nine weeks ended May 28, 2022 increased compared to the prior year comparable period. Core Laundry Operations’ organic growth, which adjusts for the estimated effect of acquisitions as well as fluctuations in the Canadian dollar, was 8.6%. This strong organic growth was primarily the result of customer re-openings in fiscal 2021, solid sales performance and improved customer retention as well as efforts to share with our customers the cost increases that we are seeing in our business due to the ongoing inflationary environment.

Specialty Garments revenues during the thirty-nine weeks ended May 28, 2022 increased compared to the prior year comparable period due primarily to growth in our cleanroom operations. Specialty Garments’ results are often affected by seasonality and the timing and length of its customers’ power reactor outages as well as its project-based activities.

First Aid revenues during the thirty-nine weeks ended May 28, 2022 increased compared to the prior year comparable period due to increased sales in our van business and growth in our wholesale distribution business.

Cost of Revenues

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Cost of revenues |  | $ | 969,579 |  |  | $ | 851,860 |  |  | $ | 117,719 |  |  |  | 13.8 | %
% of Revenues |  |  | 65.3 | % |  |  | 62.6 | % |  |  |  |  |  |

Core Laundry Operations’ cost of revenues as a percentage of revenues increased as compared to the prior year comparable period. This increase was due primarily to higher merchandise amortization which continues to normalize from depressed levels during the pandemic as well as the effect of some large national account investments which are providing additional merchandise amortization headwinds. In addition, we incurred higher energy costs as a percentage of revenues and elevated labor costs responding to the very challenging employment environment.

Specialty Garments cost of revenues as a percentage of revenues increased during the thirty-nine weeks ended May 28, 2022 as compared to the prior year comparable period due primarily to higher labor and transportation costs as a percentage of revenues partially offset by lower merchandise costs as a percentage of revenue.

Selling and Administrative Expenses

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Selling and administrative expenses |  | $ | 332,985 |  |  | $ | 279,008 |  |  | $ | 53,977 |  |  |  | 19.3 | %
% of Revenues |  |  | 22.4 | % |  |  | 20.5 | % |  |  |  |  |  |

Our selling and administrative costs increased as a percentage of revenues in the thirty-nine weeks ended May 28, 2022 as compared to the prior year comparable period primarily due to Key Initiative costs. In addition, we incurred higher labor costs as a percentage of revenues responding to the challenging employment environment and elevated travel and stock-based compensation costs.

Depreciation and Amortization

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(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Depreciation and amortization |  | $ | 80,744 |  |  | $ | 79,178 |  |  | $ | 1,566 |  |  |  | 2.0 | %
% of Revenues |  |  | 5.4 | % |  |  | 5.8 | % |  |  |  |  |  |

Depreciation and amortization expense increased during the thirty-nine weeks ended May 28, 2022 as compared to the prior year comparable period due primarily to continued investment in our infrastructure as well as our key technology initiatives.

Operating Income

For the thirty-nine weeks ended May 28, 2022 and May 29, 2021, changes in our revenues and costs as discussed above resulted in the following changes in our operating income and operating income margin:

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Core Laundry Operations |  | $ | 81,683 |  |  | $ | 129,870 |  |  | $ | (48,187 | ) |  |  | (37.1 | )%
Specialty Garments |  |  | 19,640 |  |  |  | 20,693 |  |  |  | (1,053 | ) |  |  | (5.1 | )%
First Aid |  |  | (223 | ) |  |  | 331 |  |  |  | (554 | ) |  |  | (167.4 | )%
Operating income |  | $ | 101,100 |  |  | $ | 150,894 |  |  | $ | (49,794 | ) |  |  | (33.0 | )%
Operating income margin |  |  | 6.8 | % |  |  | 11.1 | % |  |  |  |  |  |

Other (Income) Expense, net

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Interest income, net |  | $ | (1,739 | ) |  | $ | (2,102 | ) |  | $ | 363 |  |  |  | (17.3 | )%
Other expense, net |  |  | 1,761 |  |  |  | 513 |  |  |  | 1,248 |  |  |  | 243.3 | %
Total other (income) expense, net |  | $ | 22 |  |  | $ | (1,589 | ) |  | $ | 1,611 |  |  |  | (101.4 | )%

The increase in other (income) expense, net, during the thirty-nine weeks ended May 28, 2022 as compared to the prior year comparable period was due primarily to higher foreign exchange losses in the thirty-nine weeks ended May 28, 2022.

Provision for Income Taxes

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Dollar Change |  |  | Percent Change |
Provision for income taxes |  | $ | 23,855 |  |  | $ | 35,986 |  |  | $ | (12,131 | ) |  |  | (33.7 | )%
Effective income tax rate |  |  | 23.6 | % |  |  | 23.6 | % |  |  |  |  |  |

Our effective tax rate during the thirty-nine weeks ended May 28, 2022 remained consistent with the prior year comparable period.

Liquidity and Capital Resources

General

Cash, cash equivalents and short-term investments totaled $410.6 million as of May 28, 2022, a decrease of $124.4 million from May 29, 2021 when the amount totaled $535.0 million. Our cash balance decreased primarily as a result of ten acquisitions that we completed during the thirty-nine weeks ended May 28, 2022. We generated $88.8 million and $187.5 million in cash from operating activities in the thirty-nine weeks ended May 28, 2022 and May 29, 2021, respectively.

Pursuant to share repurchase programs approved by our Board of Directors on January 2, 2019 and October 28, 2021, we repurchased 165,644 shares of our Common Stock for an aggregate of approximately $30.5 million during the thirty-nine weeks ended May 28, 2022.

We believe, although there can be no assurance, that our current cash, cash equivalents and short-term investments balances, our cash generated from future operations and amounts available under our 2021 Credit Agreement (defined below) will be sufficient to meet our current anticipated working capital and capital expenditure requirements for at least the next 12 months and will help us manage the impacts of the COVID-19 pandemic on our business and address related liquidity needs.

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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 loans payable and long-term debt, to fund growth and acquisition opportunities, as well as other cash requirements.

Sources and uses of cash flows for the thirty-nine weeks ended May 28, 2022 and May 29, 2021, respectively, are summarized as follows:

(In thousands, except percentages) |  | May 28, 2022 |  |  | May 29, 2021 |  |  | Percent Change |
Net cash provided by operating activities |  | $ | 88,838 |  |  | $ | 187,523 |  |  |  | (52.6 | )%
Net cash used in investing activities |  |  | (139,806 | ) |  |  | (103,222 | ) |  |  | 35.4 | %
Net cash used in financing activities |  |  | (49,760 | ) |  |  | (27,966 | ) |  |  | 77.9 | %
Effect of exchange rate changes |  |  | (1,545 | ) |  |  | 3,832 |  |  |  | (140.3 | )%
Net increase (decrease) in cash, cash equivalents and short-term investments |  | $ | (102,273 | ) |  | $ | 60,167 |  |  |  | (270.0 | )%

Net Cash Provided by Operating Activities

The net cash provided by operating activities during the thirty-nine weeks ended May 28, 2022 decreased as compared to the prior year comparable period due primarily to lower profitability, which included costs incurred to support our Key Initiatives, a decrease in accrued liabilities and increases in accounts receivable, supply inventory and merchandise in service. The decrease in accrued liabilities was due primarily to the payment of $12.2 million of United States Social Security and Medicare taxes that we deferred under the Coronavirus Air, Relief, and Economic Security Act (the “CARES Act”) in fiscal years 2020 and 2021. The Company expects to pay the remaining $12.1 million of deferred United State Social Security and Medicare taxes by the end of calendar year 2022. The elevated inventories related to the ongoing supply chain disruption and the increased merchandise in service are attributable to our balance sheet position continuing to normalize coming out of the COVID-19 pandemic impacted period. The increase in accounts receivable was due in part to the increased revenue from the economic recovery from the earlier impacts of the COVID-19 pandemic.

Net Cash Used in Investing Activities

The net increase in cash used in investing activities during the thirty-nine weeks ended May 28, 2022 was due primarily to an increase in acquisition related activity of $35.6 million as compared to the prior year comparable period.

Net Cash Used in Financing Activities

The increase in net cash used in financing activities during the thirty-nine weeks ended May 28, 2022 was due primarily to incremental cash used for repurchases of Common Stock of $20.9 million and an increase in dividends paid of $1.8 million.

Long-Term Debt and Borrowing Capacity

On March 26, 2021, we entered into an amended and restated $175.0 million unsecured revolving credit agreement (the “2021 Credit Agreement”) with a syndicate of banks, which matures on March 26, 2026. The 2021 Credit Agreement amended and restated our prior credit agreement, which was scheduled to mature on April 11, 2021. Under the 2021 Credit Agreement, we are able to borrow funds at variable interest rates based on, at our election, the Eurodollar rate or a base rate, plus in each case a spread based on our consolidated funded debt ratio. 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 2021 Credit Agreement. We test our compliance with these financial covenants on a fiscal quarterly basis. As of May 28, 2022, the interest rates applicable to our borrowings under the 2021 Credit Agreement would be calculated as LIBOR plus 1.00% at the time of the respective borrowing. As of May 28, 2022, we had no outstanding borrowings and had outstanding letters of credit amounting to $60.6 million, leaving $114.4 million available for borrowing under the 2021 Credit Agreement.

As of May 28, 2022, we were in compliance with all covenants under the 2021 Credit Agreement.

Derivative Instruments and Hedging Activities

In June 2018, we entered into twelve forward contracts to exchange Canadian dollars ("CAD") for U.S. dollars at fixed exchange rates in order to manage our exposure related to the certain forecasted CAD denominated sales of one of our subsidiaries. The hedged transactions were specified as the first amount of CAD denominated revenues invoiced by one of our domestic subsidiaries each fiscal

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quarter, beginning in the third fiscal quarter of 2019 and continuing through the second fiscal quarter of 2022. In total, we sold approximately 12.1 million CAD at an average Canadian-dollar exchange rate of 0.7814 over these quarterly periods. We concluded that the forward contracts met the criteria to qualify as a cash flow hedge under U.S. GAAP. These forward contracts matured on February 25, 2022.

In August 2021, we entered into twenty forward contracts to exchange CAD for U.S. dollars at fixed exchange rates in order to manage our exposure related to certain forecasted CAD denominated sales of one of our subsidiaries. The hedged transactions are specified as the first amount of CAD denominated revenues invoiced by one of our domestic subsidiaries each fiscal quarter, beginning in the first fiscal quarter of 2022 and continuing through the fourth fiscal quarter of 2026. In total, we will sell approximately 14.1 million CAD at an average Canadian-dollar exchange rate of 0.7861 over these quarterly periods. We concluded that the forward contracts met the criteria to qualify as a cash flow hedge under U.S. GAAP.

As of May 28, 2022, we had forward contracts with a notional value of approximately 7.7 million CAD outstanding and recorded the fair value of the contracts of a nominal amount in prepaid expenses and other current assets and other long-term assets with a corresponding nominal gain in accumulated other comprehensive loss, which was recorded net of tax. During the thirteen and thirty-nine weeks ended May 28, 2022, we reclassified a nominal amount from accumulated other comprehensive loss to revenue, related to the derivative financial instruments. The gain on these forward contracts that resulted in a decrease to accumulated other comprehensive loss as of May 28, 2022 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.

Commitments and Contingencies

We 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 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 to remediate the consequences of any such disposal in the future.

U.S. GAAP requires that a liability for contingencies be recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded. We regularly consult with attorneys and outside consultants in our consideration of the relevant facts and circumstances before recording a contingent liability. Changes in enacted laws, regulatory orders or decrees, our estimates of costs, risk-free interest rates, insurance proceeds, participation by other parties, the timing of payments, the input of our attorneys and outside consultants or other factual circumstances could have a material impact on the amounts recorded for environmental and other contingent liabilities.

Under environmental laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located on, or in, or emanating from, such property, as well as related costs of investigation and property damage. Such laws often impose liability without regard to whether the owner or lessee knew of, or was responsible for the presence of such hazardous or toxic substances. There can be no assurances that acquired or leased locations have been operated in compliance with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon our Company under such laws or expose our Company 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 have accrued certain costs related to certain sites, including but not limited to sites in Woburn and Somerville, Massachusetts, as it has been determined that the costs are probable and can be reasonably estimated. We, together with multiple other companies, are party to a consent decree related to our property and other parcels of land (the “Central Area”) at a site in Woburn, Massachusetts. The United States Environmental Protection Agency (the “EPA”) has provided us and other signatories to the consent decree with comments on the design and implementation of groundwater and soil remedies at the Woburn site and investigation of environmental conditions in the Central Area. The consent decree does not address any remediation work that may be required in the Central Area. We, and other signatories, have implemented and proposed to do additional work at the Woburn site but many of the EPA’s comments remain to be resolved. We have accrued costs to perform certain work responsive to the EPA’s comments. Additionally, we have implemented mitigation measures and continue to monitor environmental conditions at the Somerville, Massachusetts site. We have agreed to undertake additional actions responsive to a notice of audit findings from the Massachusetts Department of Environmental Protection concerning a regulatory submittal that we made in 2009 for a portion of the site. We have received demands from the local transit authority for reimbursement of certain costs associated with its construction of a new municipal transit station in the area of the Somerville site. This station is part of an ongoing extension of the transit system. We have reserved for costs in connection with this matter; however, in light of the uncertainties associated with this matter, these costs and the related reserve may change.

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We routinely review and evaluate sites that may require remediation and monitoring and determine our estimated costs based on various estimates and assumptions. These estimates are developed using our internal sources or by third party environmental engineers or other service providers. Internally developed estimates are based on:

•
Management’s judgment and experience in remediating and monitoring our sites;
•
Information available from regulatory agencies as to costs of remediation and monitoring;
•
The number, financial resources and relative degree of responsibility of other potentially responsible parties (“PRPs”) who may be liable for remediation and monitoring of a specific site; and
•
The typical allocation of costs among PRPs.

There is usually a range of reasonable estimates of the costs associated with each site. In accordance with U.S. GAAP, our accruals represent the amount within the range that we believe is the best estimate or the low end of a range of estimates if no point within the range is a better estimate. When we believe that both the amount of a particular liability and the timing of the payments are reliably determinable, we adjust the cost in current dollars using a rate of 3% for inflation until the time of expected payment and discount the cost to present value using current risk-free interest rates. As of May 28, 2022, the risk-free interest rates we utilized ranged from 2.64% to 3.16%.

For environmental liabilities that have been discounted, we include interest accretion, based on the effective interest method, in selling and administrative expenses on the Consolidated Statements of Income. The changes to the amounts of our environmental liabilities for the thirty-nine weeks ended May 28, 2022 were as follows (in thousands):

|  | May 28, 2022 |
Balance as of August 28, 2021 |  | $ | 32,859 |
Revisions in estimates |  |  | — |
Costs incurred for which reserves have been provided |  |  | (1,205 | )
Insurance proceeds |  |  | 100 |
Interest accretion |  |  | 447 |
Changes in discount rates |  |  | (2,692 | )
Balance as of May 28, 2022 |  | $ | 29,509 |

Anticipated payments and insurance proceeds relating to currently identified environmental remediation liabilities as of May 28, 2022, for the next five fiscal years and thereafter, as measured in current dollars, are reflected below.

(In thousands) |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | 2025 |  |  | 2026 |  |  | Thereafter |  |  | Total |
Estimated costs – current dollars |  | $ | 11,285 |  |  | $ | 2,530 |  |  | $ | 2,080 |  |  | $ | 1,366 |  |  | $ | 1,129 |  |  | $ | 12,712 |  |  | $ | 31,102 |
Estimated insurance proceeds |  |  | (110 | ) |  |  | (159 | ) |  |  | (173 | ) |  |  | (159 | ) |  |  | (173 | ) |  |  | (380 | ) |  |  | (1,154 | )
Net anticipated costs |  | $ | 11,175 |  |  | $ | 2,371 |  |  | $ | 1,907 |  |  | $ | 1,207 |  |  | $ | 956 |  |  | $ | 12,332 |  |  | $ | 29,948 |
Effect of inflation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 8,359 |
Effect of discounting |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (8,798 | )
Balance as of May 28, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 29,509 |

Estimated insurance proceeds are primarily received from an annuity received as part of our legal settlement with an insurance company. Annual proceeds of approximately $0.3 million are deposited into an escrow account which funds remediation and monitoring costs for two sites related to our former operations in Williamstown, Vermont. Annual proceeds received but not expended in the current year accumulate in this account and may be used in future years for costs related to this site through the year 2027. As of May 28, 2022, the balance in this escrow account, which is held in a trust and is not recorded in our Consolidated Balance Sheet, was approximately $4.9 million. Also included in estimated insurance proceeds are amounts we are entitled to receive pursuant to legal settlements as reimbursements from three insurance companies for estimated costs at the site in Uvalde, Texas.

Our nuclear garment decontamination facilities are licensed by respective state agencies, as delegated authority by the Nuclear Regulatory Commission (the “NRC”) pursuant to the NRC’s Agreement State program and are subject to applicable federal and state radioactive material regulations. In addition, our international locations (Canada, the United Kingdom and the European Union) are regulated by equivalent respective jurisdictional authorities. There can be no assurance that such regulation will not lead to material disruptions in the Company’s garment decontamination business.

From time to time, we are also subject to legal proceedings and claims arising from the conduct of our business operations, including personal injury claims, customer contract matters, employment claims and environmental matters as described above.

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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 generally accepted in the United States. 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.

Contractual Obligations and Other Commercial Commitments

As of May 28, 2022, there were no material changes to our contractual obligations that were disclosed in our Annual Report on Form 10-K for the year ended August 28, 2021. As of May 28, 2022, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Securities and Exchange Commission Regulation S-K.

Recent Accounting Pronouncements

See Note 2, “Recent Accounting Pronouncements” to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for more information on recently implemented and issued accounting standards.

ITEM 3. QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

We have determined that all of our foreign subsidiaries operate primarily in local currencies that represent the functional currencies of such subsidiaries. All assets and liabilities of our foreign subsidiaries are translated into U.S. dollars using the exchange rate prevailing at the balance sheet date. The effects of exchange rate fluctuations on the translation of assets and liabilities are recorded as a component of shareholders’ equity. Revenues and expenses are translated at the average exchange rates in effect during each month of the fiscal year. As such, our financial condition and operating results are affected by fluctuations in the value of the U.S. dollar as compared to currencies in foreign countries. Revenues denominated in currencies other than the U.S. dollar represented approximately 7.5% and 8.1%, respectively, of total consolidated revenues for each of the thirteen and thirty-nine weeks ended May 28, 2022. Total assets denominated in currencies other than the U.S. dollar represented approximately 6.9% and 7.0% of total consolidated assets as of May 28, 2022 and August 28, 2021, respectively. If exchange rates had increased or decreased by 10% from the actual rates in effect during each of the thirteen and thirty-nine weeks ended May 28, 2022, our revenues would have increased or decreased by approximately $0.1 million and $4.6 million, respectively, and total assets as of May 28, 2022 would have increased or decreased by approximately $16.7 million.

In June 2018, we entered into twelve forward contracts to exchange CAD for U.S. dollars at fixed exchange rates in order to manage our exposure related to the certain forecasted CAD denominated sales of one of our subsidiaries. The hedged transactions are specified as the first amount of CAD denominated revenues invoiced by one of our domestic subsidiaries each fiscal quarter, beginning in the third fiscal quarter of 2019 and continuing through the second fiscal quarter of 2022. In total, we sold approximately 12.1 million CAD at an average Canadian-dollar exchange rate of 0.7814 over these quarterly periods. We concluded that the forward contracts met the criteria to qualify as a cash flow hedge under U.S. GAAP. These forward contracts matured on February 25, 2022.

In August 2021, we entered into twenty forward contracts to exchange CAD for U.S. dollars at fixed exchange rates in order to manage its exposure related to certain forecasted CAD denominated sales of one of its subsidiaries. The hedged transactions are specified as the first amount of CAD denominated revenues invoiced by one of the Company’s domestic subsidiaries each fiscal quarter, beginning in the first fiscal quarter of 2022 and continuing through the fourth fiscal quarter of 2026. In total, the Company will sell approximately 14.1 million CAD at an average Canadian-dollar exchange rate of 0.7861 over these quarterly periods. The Company concluded that the forward contracts met the criteria to qualify as a cash flow hedge under U.S. GAAP.

As of May 28, 2022, we had forward contracts with a notional value of approximately 7.7 million CAD outstanding and recorded the fair value of the contracts of a nominal amount in prepaid expenses and other current assets and other long-term assets with a corresponding nominal gain in accumulated other comprehensive loss, which was recorded net of tax. During the thirty-nine weeks ended May 28, 2022, we reclassified a nominal amount from accumulated other comprehensive loss to revenue, related to the

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derivative financial instruments. The gain on these forward contracts that resulted in a decrease to accumulated other comprehensive loss as of May 28, 2022 is expected to be reclassified to revenues prior to their maturity on August 29, 2026.

Other than the forward contracts, discussed above, we do not operate a hedging program to mitigate the effect of a significant change in the value of the functional currencies of our foreign subsidiaries, which include the Canadian dollar, euro, British pound, Mexican peso and Nicaraguan cordoba, as compared to the U.S. dollar. Any losses or gains resulting from unhedged foreign currency transactions, including exchange rate fluctuations on intercompany accounts are reported as transaction losses (gains) in our other income, net. The intercompany payables and receivables are denominated in Canadian dollars, euros, British pounds, Mexican pesos and Nicaraguan cordobas. During the thirteen and thirty-nine weeks ended May 28, 2022, transaction gains of $0.2 million and $1.0 million, respectively, were included in other income. If exchange rates had increased or decreased by 10% during each of the thirteen and thirty-nine weeks ended May 28, 2022, we would have recognized exchange gains or losses of approximately $0.2 million and $0.3 million, respectively.

Please see Item 1A. "Risk Factors” in our Annual Report on Form 10-K for the year ended August 28, 2021 for an additional discussion of risks and potential risks of the COVID-19 pandemic on our business, financial performance and the market price of our Common Stock.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that material information relating to the Company required to be disclosed by the Company in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures. We continue to review our disclosure controls and procedures, and our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the third quarter of fiscal year 2022 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHE R INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are subject to legal proceedings and claims arising from the current conduct of our business operations, including personal injury, customer contract, employment claims and environmental matters as described in our Consolidated Financial Statements. We maintain insurance coverage providing indemnification against many of such claims, and we do not expect that we will sustain any material loss as a result thereof. Refer to Note 12, “Commitments and Contingencies,” to the Consolidated Financial Statements, as well as Part II, Item 1A. "Risk Factors" below, for further discussion.

ITEM 1A. RI SK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended August 28, 2021, which could materially affect our business, financial condition, and future results. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results. Except to the extent previously updated or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended August 28, 2021.

ITEM 2. UNREGISTERED SALES OF EQUIT Y SECURITIES AND USE OF PROCEEDS

The following table provides information about repurchases of our equity securities during the thirteen weeks ended May 28, 2022:

Period |  | (a) Total Number of Shares of Stock Purchased(1) |  |  | (b) Average Price Paid per Share(1) |  |  | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) |  |  | (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs(1) |
February 27, 2022 - March 26, 2022 |  |  | 30,000 |  |  | $ | 178.53 |  |  |  | 30,000 |  |  | $ | 81,931,088 |
March 27, 2022 - April 23, 2022 |  |  | 22,894 |  |  | $ | 178.33 |  |  |  | 22,894 |  |  | $ | 77,859,126 |
April 24, 2022 - May 28, 2022 |  |  | 37,500 |  |  | $ | 166.90 |  |  |  | 37,500 |  |  | $ | 71,599,625 |
Total |  |  | 90,394 |  |  |  |  |  |  | 90,394 |  |  |  |

(1)
On January 2, 2019, our Board of Directors approved a share repurchase program authorizing the Company to repurchase from time to time up to $100.0 million of our outstanding shares of common stock. On October 18, 2021, the Company’s Board of Directors authorized a new share repurchase program to repurchase from time to time 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 on January 2, 2019. Repurchases made under the new program, if any, will be made in either the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchase will depend on a variety of factors, including economic and market conditions, the Company stock price, corporate liquidity requirements and priorities, applicable legal requirements and other factors. The share repurchase program has been funded to date using our available cash and may be suspended or discontinued at any time.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFE TY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. E XHIBITS

31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Steven S. Sintros (filed herewith).
31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Shane O’Connor (filed herewith).
32.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2 |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document (filed herewith).
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) (filed herewith).

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SIGNAT URES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | UniFirst Corporation
July 7, 2022 | By: | /s/ Steven S. Sintros
|  | Steven S. Sintros
|  | President and Chief Executive Officer
July 7, 2022 | By: | /s/ Shane O’Connor
|  | Shane O’Connor
|  | Executive Vice President and Chief Financial Officer

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