SEC Filing | UniFirst Corp

1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------- FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended August 28, 1999 Commission File Number 1-8504 UNIFIRST CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04-2103460 (State of Incorporation) (IRS Employer Identification Number) 68 Jonspin Road Wilmington, Massachusetts 01887 (Address of principal executive offices) Registrant's telephone number, including area code: (978) 658-8888 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of Class which shares are traded Common Stock, $.10 par value per share 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 X No ----- ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The number of outstanding shares of UniFirst Corporation Common Stock and Class B Common Stock at November 8, 1999 were 10,265,634 and 10,255,744, respectively, and the aggregate market value of these shares held by non-affiliates of the Company on said date was $140,911,656 (based upon the closing price of the Company's Common Stock on the New York Stock Exchange on said date and assuming the market value of a share of Class B Common Stock (which is generally non-transferable, but is convertible at any time into one share of Common Stock) is identical to the market value of the Common Stock). DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's 1999 Annual Report to Shareholders and the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders (which will be filed with the Securities and Exchange Commission within 120 days after the close of the 1999 fiscal year) are incorporated by reference into Parts II, III and IV hereof.

2 Page 2 This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference are discussed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" incorporated by reference in this Form 10-K. ITEM 1. BUSINESS GENERAL UniFirst Corporation (the "Company") is one of the largest providers of workplace uniforms and protective clothing in the United States. The Company rents, manufactures and sells a wide range of uniforms and protective clothing, including shirts, pants, jackets, coveralls, jumpsuits, lab coats, smocks and aprons, and also rents industrial wiping products, floormats and other non-garment items, to a variety of manufacturers, retailers and service companies. The Company serves businesses of all sizes in numerous industry categories. Typical customers include automobile service centers and dealers, delivery services, food and general merchandise retailers, food processors and service operations, light manufacturers, maintenance facilities, restaurants, service companies, soft and durable goods wholesalers, transportation companies, and others who require employee clothing for image, identification, protection or utility purposes. At certain specialized facilities, the Company also decontaminates and cleans work clothes that may have been exposed to radioactive materials and services special cleanroom protective wear. Typical customers for these specialized services include government agencies, research and development laboratories, high technology companies and utilities operating nuclear reactors. In fiscal 1999, the Company generated $487.1 million in revenue, of which approximately 65% was from the rental of uniforms and protective clothing, 26% was from the rental of non-garment items, 7% was from garment decontamination services, and 2% was from the direct sale of garments. PRODUCTS AND SERVICES The Company provides its customers with personalized workplace uniforms and protective work clothing in a broad range of styles, colors, sizes and fabrics. The Company's uniform products include shirts, pants, jackets, coveralls, jumpsuits, smocks, aprons and specialized protective wear, such as garments for use in radioactive and clean room environments and fire retardant garments. The Company also offers non-garment items and services, such as industrial wiping products, floormats, mop dust-control service and other textile products. At certain specialized facilities, the Company also decontaminates and cleans clothes which may have been exposed to radioactive materials and services special cleanroom protective wear. The Company offers its customers a range of garment service options, including full-service rental programs in which garments are cleaned and serviced by the Company and lease programs in which garments are cleaned and maintained by individual employees, as well as the opportunity to purchase garments and related items directly. As part of its rental business, the Company picks up a customer's soiled uniforms or other items on a periodic basis (usually weekly) and delivers at the same time cleaned and processed replacement items. The Company's centralized services, specialized equipment and economies of scale generally allow it to be more cost effective in providing garment services than customers could be by themselves, particularly those customers with high employee turnover rates. The Company's uniform program is intended not only to help its customers foster greater company identity, but to enhance their corporate image and improve employee safety, productivity and morale. The Company typically serves its customers pursuant to written service contracts that range in duration from three to five years.

3 Page 3 CUSTOMERS The Company serves businesses of all sizes in numerous industry categories. Typical customers include automobile service centers and dealers, delivery services, food and general merchandise retailers, food processors and service operations, light manufacturers, maintenance facilities, restaurants, service companies, soft and durable goods wholesalers, transportation companies, and others who require employee clothing for image, identification, protection or utility purposes. The Company currently services over 100,000 customer locations in 45 states, Canada and Europe from approximately 140 service locations and distribution centers. For fiscal 1997, 1998 and 1999, the Company's garment rental operations produced approximately 68%, 68% and 65%, respectively, of its revenues, while non-garment rentals accounted for 22%, 22% and 26%, direct sales of garments accounted for 3%, 3% and 2%, and the specialized garment services business accounted for approximately 7% of the Company's revenues during each such period. During the past five years, no single customer accounted for more than 1% of total revenues in any year. MARKETING AND CUSTOMER SERVICE The Company employs more than 400 trained sales representatives whose sole function is to market the Company's services to potential customers and develop new accounts. The Company also utilizes its route salespeople to maximize sales to existing customers, such as by offering garment rental customers the opportunity to purchase non-garment items. Potential customers are contacted by mail, by telephone and in-person. Sales representatives develop their appointments through the use of an extensive, proprietary database of pre-screened and qualified business prospects. This database is built through responses to the Company's promotional initiatives, through contacts via its World Wide Web site and trade shows and through the selective use of purchased lists. The Company also endeavors to elevate its brand identity through certain advertising and promotional initiatives, including the sponsorship of a NASCAR auto racing team. The Company believes that customer service is the most important element in developing and maintaining its market position and that its emphasis on customer service is reflected throughout its business. The Company serves its customers through approximately 1,025 route salespersons, who generally interact on a weekly basis with their accounts, and more than 750 service support people, who are charged with expeditiously handling customer requirements regarding the outfitting of new customer employees, garment repair and replacement, billing inquiries and other matters. The Company's policy is to respond to all customer inquiries and problems within 24 hours. The Company's customer service function is supported by its fully-networked management information systems, which provide Company personnel with access to information on the status of customers' orders, inventory availability and shipping information, as well as information regarding customers' individual

4 Page 4 employees, including names, sizes, uniform styles and colors. The Company has recently established a national account sales group that targets larger customers with nationwide operations for which the Company can serve as the primary supplier of garment services. The Company currently employs twenty persons in its national account sales organization. COMPETITION The uniform rental and sales industry is highly competitive. The Company believes that the top five companies in the uniform rental segment of the industry currently generate over half of the industry's volume. The remainder of the market, however, is divided among more than 600 smaller businesses, many of which serve one or a limited number of markets or geographic service areas and generate annual revenues of less than $1.0 million, and a small group of which have revenues of up to approximately $200 million. Although the Company is one of the larger companies engaged in the uniform rental and sales business, there are other firms in the industry which are larger and have greater financial resources than the Company. The Company's leading competitors include ARAMARK Corporation, Cintas Corporation, G&K Services, Inc. and Unitog Company. In addition to its traditional rental competitors, the Company may increasingly compete in the future with businesses that focus on selling uniforms and other related items. The principal methods of competition in the industry are quality of service and price. The Company also competes with industry competitors for acquisitions, which has the effect of increasing the price for acquisitions and reducing the number of available acquisition candidates. The Company believes that its ability to compete effectively is enhanced by the superior customer service and support that it provides its customers. MANUFACTURING AND SOURCING The Company manufactured approximately 52% of all garments which it placed in service during fiscal 1999. These included work pants manufactured at its plant in Luquillo, Puerto Rico, shirts manufactured at its plant in Cave City, Arkansas, and jackets and certain specialty garments manufactured at its plant in Wilburton, Oklahoma. The balance of the garments used in its programs are purchased from a variety of industry suppliers. While the Company currently acquires the raw materials with which it produces its garments from a limited number of suppliers, the Company believes that such materials are readily available from other sources. To date, the Company has experienced no significant difficulty in obtaining any of its raw materials or supplies. EMPLOYEES At August 28, 1999, the Company employed approximately 7,500 persons, about 6% of whom are represented by unions pursuant to nine separate collective bargaining agreements. The Company considers its employee relations to be good.

5 Page 5 EXECUTIVE OFFICERS The executive officers of the Company are as follows: NAME AGE POSITION ---- --- -------- Aldo Croatti 81 Chairman of the Board Ronald D. Croatti 56 Vice Chairman of the Board, President and Chief Executive Officer Robert L. Croatti 63 Executive Vice President John B. Bartlett 58 Senior Vice President and Chief Financial Officer Cynthia Croatti 44 Treasurer Bruce P. Boynton 51 Vice President, Operations Dennis G. Assad 54 Vice President, Sales and Marketing The principal occupation and positions for the past five years of the executive officers named above are as follows: Aldo Croatti has been Chairman of the Board since the Company's incorporation in 1950 and of certain of its predecessors since 1940. Ronald D. Croatti joined the Company in 1965. Mr. Croatti became Vice Chairman of the Board in 1986 and has served as Chief Executive Officer since 1991 and President since August 31, 1995. Mr. Croatti has overall responsibility for the management of the Company. Robert L. Croatti joined the Company in 1959. Mr. Croatti has served as Executive Vice President since 1986 and has primary responsibility for overseeing the rental operations of the Company. John B. Bartlett joined the Company in 1977. Mr. Bartlett has served as Senior Vice President and Chief Financial Officer since 1986 and has primary responsibility for overseeing the financial functions of the Company, as well as its human resources and information systems departments. Cynthia Croatti joined the Company in 1980. Ms. Croatti has served as Treasurer since 1982 and has primary responsibility for overseeing the purchasing and direct sales functions of the Company. Bruce P. Boynton joined the Company in 1976. Mr. Boynton has served as Vice President, Operations since 1986 and is the chief operating officer for the Company's Canadian operations. Dennis G. Assad joined the Company in 1975. Mr. Assad has served as Vice President, Sales and Marketing since 1995 and has primary responsibility for overseeing the sales and marketing functions of the Company. Prior to that time, Mr. Assad served as a Regional General Manager of the Company. Ronald D. Croatti, Robert L. Croatti and Cynthia Croatti are a son, nephew and daughter, respectively, of Aldo Croatti.

6 Page 6 ENVIRONMENTAL MATTERS The Company and its operations are subject to various federal, state and local laws and regulations governing, among other things, the generation, handling, storage, transportation, treatment and disposal of hazardous wastes and other substances. In particular, industrial laundries use and must dispose of detergent waste water and other residues. 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. In the past, the Company has settled, or contributed to the settlement of, actions or claims brought against the Company relating to the disposal of hazardous materials 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. Further, under environmental laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in or emanating from such property, as well as related costs of investigation and property damage. Such laws often impose liability without regard to whether the owner or lessee knew of or was responsible for the presence of such hazardous or toxic substances. There can be no 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. In addition, the federal Environmental Protection Agency has recently proposed a federal environmental regulatory framework applicable to industrial laundry operations that would replace local regulations. Scheduled to take effect in 1999, these regulations, if implemented as proposed, would require the Company to expend substantial amounts on compliance, thereby increasing the Company's operating costs and capital expenditures. To the extent such costs and expenses could not be offset through price increases, the Company's results of operations could be adversely affected. The Company's nuclear garment decontamination facilities are licensed by the Nuclear Regulatory Commission, or in certain cases by the applicable state agency, and are subject to regulation by federal, state and local authorities. In recent years, there has been increased scrutiny and, in certain cases, regulation of nuclear facilities or related services that have resulted in the suspension of operations at certain nuclear facilities served by the Company or disruptions of the Company's ability to service such facilities. There can be no assurance that such increased scrutiny will not lead to the shut-down of such facilities or otherwise cause material disruptions in the Company's garment decontamination business.

7 Page 7 ITEM 2. PROPERTIES - ------------------- At August 28, 1999, the Company owned or occupied 146 facilities containing an aggregate of approximately 3.9 million square feet located in the United States, Canada, Puerto Rico, Germany and the Netherlands. These facilities include the Company's 320,000 square foot Owensboro, Kentucky distribution center (which the Company believes is one of the largest and most advanced garment distribution facilities in the industry) and its garment manufacturing plants in Luquillo, Puerto Rico, Cave City, Arkansas, and Wilburton, Oklahoma, as well as 11 decontamination facilities located in Massachusetts, New Mexico, California, Washington, Hawaii, Pennsylvania, South Carolina, Virginia, Georgia, Illinois and The Netherlands. The Company owns 86 of these facilities containing approximately 3.3 million square feet. The Company believes that by owning its manufacturing facilities, it can produce custom garment programs for its larger customers, offer a diverse range of designs within its standard line of garments and better control the quality, price and speed at which it produces such garments. The Company also believes that its industrial laundry facilities are among the most modern in the industry.

8 Page 8 The Company owns substantially all of the machinery and equipment used in its operations. In the opinion of the Company, all of its facilities and its production, cleaning and decontamination equipment have been well maintained, are in good condition and are adequate for the Company's present needs. The Company also owns and leases a fleet of approximately 1,925 delivery vans, trucks and other vehicles. The Company believes that these vehicles are in good repair and are adequate for the Company's present needs. ITEM 3. LEGAL PROCEEDINGS - -------------------------- From time to time the Company is subject to legal proceedings and claims arising from the conduct of its business operations, including personal injury, customer contract, employment claims and environmental matters as described in Item 1 above. The Company maintains insurance coverage providing indemnification against the majority of such claims and management does not expect that any material loss to the Company will be sustained as a result thereof. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS - ---------------------------------------------------------- None

9 Page 9 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED - -------------------------------------------------------------- STOCKHOLDER MATTERS ------------------- Incorporated by reference to the information provided as part of the Company's 1999 Annual Report to Shareholders. ITEM 6. SELECTED FINANCIAL DATA - -------------------------------- Incorporated by reference to the information provided under the caption "Eleven Year Financial Summary" which is incorporated herein by reference, as part of the Company's 1999 Annual Report to Shareholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - -------------------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- Incorporated by reference to the information provided under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1999 Annual Report to Shareholders. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Currency Exchange Risk Management has determined that all of the Company's foreign subsidiaries operate primarily in local currencies that represent the functional currencies of the subsidiaries. All assets and liabilities of foreign subsidiaries are translated into U.S. dollars using the exchange rate prevailing at the balance sheet date, while income and expense accounts are translated at average exchange rates during the year. As such, the Company's operating results are affected by fluctuations in the value of the U.S. dollar as compared to currencies in foreign countries, as a result of the Company's transactions in these foreign markets. The Company does not operate a hedging program to mitigate the effect of a significant rapid change in the value of the Dutch Guilder or the Canadian Dollar as compared to the U.S. dollar. If such a change did occur, the Company would have to take into account a currency exchange gain or loss in the amount of the change in the U.S. dollar denominated balance of the amounts outstanding at the time of such change. While the Company does not believe such a gain or loss is likely, and would not likely be material, there can be no assurance that such a loss would not have an adverse material effect on the Company's results of operations or financial condition. Interest Rate Risk The Company is exposed to market risk from changes in interest rates which may adversely affect its financial position, results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposures through its regular operating and financing activities. The Company does not use financial instruments for trading or other speculative purposes and is not party to any leveraged financial instruments. The Company is exposed to interest rate risk primarily through its borrowings under its $120 million unsecured line of credit with three banks. Under the line of credit, the Company may borrow funds at variable interest rates based on the LIBOR rate or the bank's money market rate, as selected by the Company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- The financial statements and the accompanying notes, which are incorporated herein by reference to the Company's 1999 Annual Report to Shareholders, are indexed herein under Items 14(a)(1) and (2) of Part IV. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES - -------------------------------------------------------------- Not applicable

10 Page 10 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY - --------------------------------------------------------- Incorporated by reference to the information provided under the caption "Election of Directors" in the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders. ITEM 11. EXECUTIVE COMPENSATION - -------------------------------- Incorporated by reference to the information provided under the caption "Summary Compensation Table" in the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND - ------------------------------------------------------------- MANAGEMENT ---------- Incorporated by reference to the information provided under the captions "Election of Directors" and "Principal Shareholders" in the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- Incorporated by reference to the information provided under the caption "Certain Relationships and Related Transactions" in the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - ------------------------------------------------------------------------- (a) The financial statements listed below are filed as part of this report: 1. and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES. The financial statements and financial statement schedules listed below are incorporated herein by reference to the Company's 1999 Annual Report to Shareholders. Consolidated balance sheets as of August 28, 1999 and August 29, 1998 Consolidated statements of income for each of the three years in the period ended August 28, 1999 Consolidated statements of shareholders' equity for each of the three years in the period ended August 28, 1999 Consolidated statements of cash flows for each of the three years in the period ended August 28, 1999 Notes to consolidated financial statements Report of independent public accountants

11 Page 11 The following additional schedules are filed herewith: Report of independent public accountants on supplemental schedule to the consolidated financial statements. Schedule II - Valuation and qualifying accounts and reserves for each of the three years in the period ended August 28, 1999. Separate financial statements of the Company have been omitted because the Company is primarily an operating company and all subsidiaries included in the consolidated financial statements are totally held. All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements or the notes thereto. 3. EXHIBITS. The exhibits listed in the accompanying Exhibit Index are filed as part of this report. (b) During the three months ended August 28, 1999 the Company did not file any reports on Form 8-K with the Securities and Exchange Commission.

12 Page 12 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) 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 By: Aldo Croatti ------------------------------- Aldo Croatti Chairman Date: November 24, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. NAME TITLE DATE ---- ----- ---- Aldo Croatti Chairman and Director November 24, 1999 - -------------------------------------------- Aldo Croatti Ronald D. Croatti Principal Executive November 24, 1999 - -------------------------------------------- Officer and Director Ronald D. Croatti John B. Bartlett Principal Financial November 24, 1999 - -------------------------------------------- Officer and Principal John B. Bartlett Accounting Officer Cynthia Croatti Director November 24, 1999 - -------------------------------------------- Cynthia Croatti Donald J. Evans Director November 24, 1999 - -------------------------------------------- Donald J. Evans Reynold L. Hoover Director November 24, 1999 - -------------------------------------------- Reynold L. Hoover Albert Cohen Director November 24, 1999 - -------------------------------------------- Albert Cohen

13 Page 13 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE TO THE CONSOLIDATED FINANCIAL STATEMENTS To UniFirst Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in this Form 10-K, and have issued our report thereon dated November 2, 1999. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplemental schedule to the consolidated financial statements listed as Item 14(a)(2) in the Form 10-K is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein, in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP Boston, Massachusetts November 2, 1999

14 Page 14 UNIFIRST CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 28, 1999 Balance, Charged to Charges for Balance, Beginning Costs and Which Reserves End of Description of Period Expenses Were Created Period - ----------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED AUGUST 28, 1999 Allowance for doubtful accounts $1,529,000 $3,231,000 $(1,781,000) $ 2,979,000 ===================================================================== FOR THE YEAR ENDED AUGUST 29, 1998 Allowance for doubtful accounts $1,299,000 $2,759,000 $(2,529,000) $ 1,529,000 ===================================================================== FOR THE YEAR ENDED AUGUST 30, 1997 Allowance for doubtful accounts $ 843,000 $2,428,000 $(1,972,000) $ 1,299,000 =====================================================================

15 Page 15 EXHIBIT INDEX ------------- DESCRIPTION 3-A Restated Articles of Organization -- incorporated by reference to Exhibit 3-A to the Company's Registration Statement on Form S-1 (No. 2-83051) -- and the Articles of Amendment dated January 12, 1988, a copy of which was filed on an exhibit to the Company's Annual Report on Form 10-K for fiscal year ended August 27, 1988 -- and the Articles of Amendment dated January 21, 1993, a copy of which was filed on an exhibit to the Company's Quarterly Report on Form 10-Q for fiscal quarter ended February 27, 1993. 3-B By-laws -- incorporated by reference to Exhibit 3-B to the Company's Annual Report on Form 10-K for fiscal year ended August 31, 1991. 10-A UniFirst Corporation Profit Sharing Plan -- incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8 (number 33-60781) --and the Amendment dated June 27, 1995, a copy of which was filed on an exhibit to the Company's Annual Report on Form 10-K for fiscal year ended August 31, 1996. 10-D UniFirst Corporation 1996 Stock Incentive Plan, a copy of which was filed on an exhibit to the Company's Annual Report on Form 10-K for fiscal year ended August 31, 1996. 13 The Company's 1999 Annual Report to Shareholders (filed herewith to the extent expressly incorporated by reference herein). 21 List of Subsidiaries 23 Consent of Arthur Andersen LLP 27 Financial Data Schedule

1 1 EXHIBIT 13 Eleven Year Financial Summary UniFirst Corporation and Subsidiaries Fiscal Year Ended August (in thousands, except ratios and per share amounts) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 - ----------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Summary of Operations Revenues $487,100 $448,052 $419,093 $391,794 $355,041 $318,039 $287,728 $268,190 $250,432 $226,682 $212,731 Earnings before interest, taxes, depreciation and amortization(EBITDA) 83,471 80,804 70,387 61,729 53,725 50,369 47,199 42,010 38,562 38,749 35,768 Depreciation and amortization 31,724 26,629 23,386 20,814 19,194 17,912 16,454 15,999 14,229 12,422 12,309 Income from operations 51,747 54,175 47,001 40,915 34,531 32,457 30,745 26,011 24,333 26,327 23,459 Interest expense (income), net 4,841 2,316 2,118 2,398 2,787 2,513 2,669 4,098 4,320 3,513 4,880 Provision for income taxes 22,800 18,669 16,160 13,855 11,110 11,073 10,387 7,570 6,803 8,516 6,968 Net income 24,106 33,190 28,723 24,662 20,634 18,871 17,689 14,343* 13,210 14,298 11,611 - ----------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Financial Position at Year End Total assets $465,627 $376,130 $339,626 $302,378 $272,691 $250,160 $219,064 $212,097 $204,398 $189,411 $172,389 Long-term obligations 113,105 47,149 40,837 39,365 36,376 41,602 32,231 47,641 52,032 53,134 53,735 Shareholders' equity 257,433 246,374 217,192 191,109 168,596 149,472 132,723 117,329 105,888 93,739 80,249 - ----------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Financial Ratios Net income as a % of revenues 4.9% 7.4% 6.9% 6.3% 5.8% 5.9% 6.1% 5.3% 5.3% 6.3% 5.5% Return on average shareholders' equity 9.6% 14.3% 14.1% 13.7% 13.0% 13.4% 14.1% 12.9% 13.2% 16.4% 15.6% - ----------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Weighted average number of shares outstanding 20,438 20,511 20,511 20,511 20,511 20,506 20,453 20,451 20,426 20,431 20,353 - ----------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Per Share Data Revenues $ 23.83 $ 21.84 $ 20.43 $ 19.10 $ 17.31 $ 15.51 $ 14.07 $ 13.11 $ 12.26 $ 11.09 $ 10.45 Earnings before interest, taxes, depreciation and amortization(EBITDA) 4.08 3.94 3.43 3.01 2.62 2.46 2.31 2.05 1.89 1.90 1.76 Net Income Basic 1.18 1.62 1.40 1.20 1.01 0.92 0.86 0.70 0.65 0.70 0.57 Diluted 1.18 1.62 1.40 1.20 1.01 0.92 0.86 0.67 0.63 0.67 0.56 Shareholders' equity 12.60 12.01 10.59 9.32 8.22 7.29 6.49 5.74 5.18 4.59 3.94 Dividends Common stock .14 .12 .12 .11 .10 .10 .10 .06 .06 .06 .05 Class B common stock .11 .10 .10 .09 .08 .08 .04 -- -- -- -- - ----------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Per share amounts for all years have been restated to reflect a two-for-one stock split declared by the Board of Directors on November 18, 1993. * Amount reflects income before extraordinary item and accounting change. Net income was $12,923.

2 2 Consolidated Balance Sheets UniFirst Corporation and Subsidiaries August 28, August 29, 1999 1998 ------------ ------------ Assets Current assets: Cash and cash equivalents $ 2,912,000 $ 5,330,000 Receivables, less reserves of $2,979,000 in 1999 and $1,529,000 in 1998 51,786,000 42,127,000 Inventories 27,194,000 24,152,000 Rental merchandise in service 55,631,000 42,971,000 Prepaid expenses 199,000 188,000 ------------ ------------ Total current assets 137,722,000 114,768,000 ------------ ------------ Property and equipment: Land, buildings and leasehold improvements 174,979,000 150,853,000 Machinery and equipment 190,722,000 165,762,000 Motor vehicles 49,396,000 41,608,000 ------------ ------------ 415,097,000 358,223,000 Less - accumulated depreciation 172,912,000 147,261,000 ------------ ------------ 242,185,000 210,962,000 ------------ ------------ Other assets, net 85,720,000 50,400,000 ------------ ------------ $465,627,000 $376,130,000 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term obligations $ 1,911,000 $ 1,194,000 Notes payable 2,331,000 2,511,000 Accounts payable 17,659,000 14,109,000 Accrued liabilities 46,659,000 45,101,000 Accrued and deferred income taxes 7,754,000 2,540,000 ------------ ------------ Total current liabilities 76,314,000 65,455,000 ------------ ------------ Long-term obligations, net of current maturities 111,194,000 45,955,000 Deferred income taxes 20,686,000 18,346,000 Commitments and Contingencies (Note 8) -- -- ------------ ------------ Shareholders' equity: Preferred stock, $1.00 par value; 2,000,000 shares authorized; none issued -- -- Common stock, $.10 par value; 30,000,000 shares authorized; issued 10,499,634 shares in 1999 and 10,216,864 shares in 1998 1,050,000 1,022,000 Class B common stock, $.10 par value; 20,000,000 shares authorized; issued and outstanding 10,255,744 shares in 1999 and 10,293,744 shares in 1998 1,026,000 1,029,000 Treasury stock, 857,500 shares, at cost (16,583,000) -- Capital surplus 12,438,000 7,078,000 Retained earnings 261,450,000 239,952,000 Accumulated other comprehensive income (1,948,000) (2,707,000) ------------ ------------ Total shareholders' equity 257,433,000 246,374,000 ------------ ------------ $465,627,000 $376,130,000 ============ ============ The accompanying notes are an integral part of these consolidated financial statements.

3 3 Consolidated Statements of Income UniFirst Corporation and Subsidiaries Year Ended August 28, August 29, August 30, 1999 1998 1997 ------------ ------------ ------------ Revenues $487,100,000 $448,052,000 $419,093,000 ------------ ------------ ------------ Cost and expenses: Operating costs 294,517,000 269,660,000 256,896,000 Selling and administrative expenses 109,112,000 97,588,000 91,810,000 Depreciation and amortization 31,724,000 26,629,000 23,386,000 ------------ ------------ ------------ 435,353,000 393,877,000 372,092,000 ------------ ------------ ------------ Income from operations 51,747,000 54,175,000 47,001,000 ------------ ------------ ------------ Interest expense (income): Interest expense 4,990,000 2,613,000 2,351,000 Interest income (149,000) (297,000) (233,000) ------------ ------------ ------------ 4,841,000 2,316,000 2,118,000 ------------ ------------ ------------ Income before income taxes 46,906,000 51,859,000 44,883,000 Provision for income taxes 22,800,000 18,669,000 16,160,000 ------------ ------------ ------------ Net income $ 24,106,000 $ 33,190,000 $ 28,723,000 ============ ============ ============ Weighted average number of shares outstanding 20,438,355 20,510,608 20,510,608 ============ ============ ============ Net income per share - basic & diluted $ 1.18 $ 1.62 $ 1.40 ============ ============ ============ Dividends per share: Common stock $ 0.14 $ 0.12 $ 0.12 Class B common stock 0.11 0.10 0.10 ============ ============ ============ The accompanying notes are an integral part of these consolidated financial statements.

4 4 Consolidated Statements of Shareholders' Equity UniFirst Corporation and Subsidiaries Accumulated Class B Class B Other Common Common Treasury Common Common Treasury Capital Retained Comprehensive Shares Shares Shares Stock Stock Stock Surplus Earnings Income ---------- ---------- -------- ---------- ---------- ----------- ----------- ------------ ----------- Balance, August 31, 1996 7,886,664 12,623,944 -- $ 789,000 $1,262,000 -- $ 7,078,000 $182,384,000 $ (404,000) Net income -- -- -- -- -- -- -- 28,723,000 -- Dividends -- -- -- -- -- -- -- (2,158,000) -- Shares converted 12,200 (12,200) -- 1,000 (1,000) -- -- -- -- Foreign currency translation adjustments -- -- -- -- -- -- -- -- (482,000) ---------- ---------- -------- ---------- ---------- ----------- ----------- ------------ ----------- Balance, August 30, 1997 7,898,864 12,611,744 -- 790,000 1,261,000 -- 7,078,000 208,949,000 (886,000) Net income -- -- -- -- -- -- -- 33,190,000 -- Dividends -- -- -- -- -- -- -- (2,187,000) -- Shares converted 2,318,000 (2,318,000) -- 232,000 (232,000) -- -- -- -- Foreign currency translation adjustments -- -- -- -- -- -- -- -- (1,821,000) ---------- ---------- -------- ---------- ---------- ----------- ----------- ------------ ----------- Balance, August 29, 1998 10,216,864 10,293,744 -- 1,022,000 1,029,000 -- 7,078,000 239,952,000 (2,707,000) Net income -- -- -- -- -- -- -- 24,106,000 -- Dividends -- -- -- -- -- -- -- (2,608,000) -- Shares issued in connection with an acquisition 244,770 -- -- 25,000 -- -- 5,360,000 -- -- Shares converted 38,000 (38,000) -- 3,000 (3,000) -- -- -- -- Shares repurchased -- -- (857,500) -- -- (16,583,000) -- -- -- Foreign currency translation adjustments -- -- -- -- -- -- -- -- 759,000 ----------- ---------- -------- ---------- ---------- ----------- ----------- ------------ ----------- Balance, August 28, 1999 10,499,634 10,255,744 (857,500) $1,050,000 $1,026,000 $(16,583,000) $12,438,000 $261,450,000 $(1,948,000) ========== ========== ======== ========== ========== ============ =========== ============ =========== The accompanying notes are an integral part of these consolidated financial statements.

5 5 Consolidated Statements of Cash Flows UniFirst Corporation and Subsidiaries Year ended August 28, August 29, August 30, 1999 1998 1997 ------------- ------------ ------------ Cash flows from operating activities: Net income $ 24,106,000 $ 33,190,000 $ 28,723,000 Adjustments, net of acquisitions Depreciation 25,923,000 22,074,000 19,512,000 Amortization of intangible assets 5,801,000 4,555,000 3,874,000 Receivables (5,639,000) (2,691,000) (2,455,000) Inventories 3,717,000 (4,684,000) (2,485,000) Rental merchandise in service (7,957,000) (2,627,000) (690,000) Prepaid expenses 41,000 (41,000) (22,000) Accounts payable 2,290,000 1,022,000 1,401,000 Accrued liabilities 1,235,000 (416,000) 8,284,000 Accrued and deferred income taxes 5,134,000 83,000 (1,102,000) Deferred income taxes 2,257,000 1,302,000 715,000 ------------- ------------ ------------ Net cash provided by operating activities 56,908,000 51,767,000 55,755,000 ------------- ------------ ------------ Cash flows from investing activities: Acquisition of businesses, net of cash acquired (53,782,000) (7,470,000) (7,309,000) Capital expenditures (45,083,000) (43,052,000) (47,432,000) Other assets, net (4,928,000) (3,479,000) (112,000) ------------- ------------ ------------ Net cash used in investing activities (103,793,000) (54,001,000) (54,853,000) ------------- ------------ ------------ Cash flows from financing activities: Increase in debt 67,284,000 7,405,000 3,533,000 Reduction of debt (3,626,000) (1,708,000) (1,648,000) Repurchase of common stock (16,583,000) -- -- Cash dividends (2,608,000) (2,187,000) (2,158,000) ------------- ------------ ------------ Net cash provided by (used in) financing activities 44,467,000 3,510,000 (273,000) ------------- ------------ ------------ Net increase (decrease) in cash and cash equivalents (2,418,000) 1,276,000 629,000 Cash and cash equivalents at beginning of year 5,330,000 4,054,000 3,425,000 ------------- ------------ ------------ Cash and cash equivalents at end of year $ 2,912,000 $ 5,330,000 $ 4,054,000 ============= ============ ============ Supplemental disclosure of cash flow information: Interest paid $ 4,355,000 $ 2,613,000 $ 2,327,000 Income taxes paid 15,246,000 17,445,000 16,577,000 ============= ============ ============ The accompanying notes are an integral part of these consolidated financial statements.

6 6 Notes to Consolidated Financial Statements UniFirst Corporation and Subsidiaries 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Description UniFirst Corporation is a leading company in the garment service business. The Company designs, manufactures, personalizes, rents, cleans, delivers and sells a variety of superior quality occupational garments, career apparel and imagewear programs to businesses of all kinds. It also services industrial wiper towels, floor mats and other non-garment items. The Company also decontaminates and cleans, in separate facilities, garments which may have been exposed to radioactive materials. Principles of Consolidation and Other The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. Intercompany balances and transactions are eliminated in consolidation. The Company recognizes revenues when the actual services are provided to customers. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Fiscal Year The Company's fiscal year ends on the last Saturday in August. For financial reporting purposes, fiscal 1999, 1998 and 1997 all had a 52-week year. Inventories Inventories are stated at the lower of cost or market value. The Company uses the last-in, first-out (LIFO) method to value a significant portion of its inventories. Had the Company used the first-in, first-out (FIFO) accounting method, inventories would have been approximately $1,356,000 and $1,173,000 higher at August 28, 1999 and August 29, 1998, respectively. Rental Merchandise in Service Rental merchandise in service, stated at cost less amortization, is being amortized on a straight-line basis over the estimated service lives (primarily 15 months) of the merchandise. In July 1998, the Company changed the estimated service lives and related amortization periods for rental merchandise in service, from primarily 12 months to primarily 15 months, which is more consistent with their respective useful lives (although the Company believes its principal publicly-held competitors amortize their garments over an average of 15 to 18 months). In 1999 and 1998, this resulted in approximately $5.0 million and $2.0 million, or 1.0% and 0.4% of revenues, respectively, less in garment amortization expense than if the amortization period had not been changed.

7 7 Notes to Consolidated Financial Statements UniFirst Corporation and Subsidiaries 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Property and Equipment The Company provides for depreciation on the straight-line method based on the following estimated useful lives: Buildings 30-40 years Leasehold improvements Term of lease Machinery and equipment 3-10 years Motor vehicles 3-5 years Amortization of Intangible Assets Customer contracts are amortized over periods of eight to seventeen years. Restrictive covenants are amortized over the terms of the respective non-competition agreements, which range from five to fifteen years. Goodwill is amortized over periods of thirty to forty years. Income Taxes Deferred income taxes are provided for temporary differences between amounts recognized for income tax and financial reporting purposes at currently enacted tax rates. Net Income Per Common Share Net income per share is calculated using the weighted average number of common and dilutive potential common shares outstanding during the year. There were no dilutive potential common shares outstanding in 1997, 1998 or 1999. Cash and Cash Equivalents Cash and cash equivalents include cash in banks and bank short-term investments with maturities of less than ninety days. 2. ACQUISITIONS Information relating to the acquisitions of industrial laundry businesses which were accounted for as purchases is as follows: Year ended August 28, August 29, August 30, 1999 1998 1997 ----------- ---------- ---------- Fair value of tangible assets acquired $26,927,000 $3,715,000 $2,199,000 Value of intangible assets acquired 35,990,000 3,790,000 5,214,000 Liabilities assumed or created (3,750,000) (35,000) (104,000) Common stock issued (244,770 shares) (5,385,000) -- -- ----------- ---------- ---------- Acquisition of businesses, net of cash acquired $53,782,000 $7,470,000 $7,309,000 =========== ========== ========== The results of operations of these acquisitions have been included on the Company's consolidated financial statements since their respective acquisition dates. None of these acquisitions were significant, individually or in the aggregate, in relation to the Company's consolidated financial statements and therefore pro forma financial information has not been presented.

8 8 Notes to Consolidated Financial Statements UniFirst Corporation and Subsidiaries 3. INCOME TAXES The provision for income taxes consists of the following: Year ended August 28, August 29, August 30, 1999 1998 1997 ----------- ----------- ----------- Current: Federal and Foreign $12,463,000 $18,328,000 $14,259,000 State (102,000) 3,033,000 2,039,000 ----------- ----------- ----------- 12,361,000 21,361,000 16,298,000 ----------- ----------- ----------- Deferred: Federal and Foreign 8,777,000 (1,875,000) (762,000) State 1,662,000 (817,000) 624,000 ----------- ----------- ----------- 10,439,000 (2,692,000) (138,000) ----------- ----------- ----------- $22,800,000 $18,669,000 $16,160,000 =========== =========== =========== The following table reconciles the provision for income taxes using the statutory federal income tax rate to the actual provision for income taxes: Year ended August 28, August 29, August 30, 1999 1998 1997 ----------- ----------- ----------- Income taxes at the statutory federal income tax rate $16,417,000 $18,151,000 $15,709,000 Puerto Rico exempt income (652,000) (1,062,000) (988,000) Corporate-Owned Life Insurance 5,500,000 (850,000) (775,000) State income taxes 798,000 1,434,000 1,450,000 Foreign income taxes 176,000 265,000 567,000 Other 561,000 731,000 197,000 ----------- ----------- ----------- $22,800,000 $18,669,000 $16,160,000 =========== =========== =========== The Company's Puerto Rico subsidiary's income is 90% exempt from Puerto Rico income taxes through 2001. The Company provides for anticipated tollgate taxes on the repatriation of the subsidiary's accumulated earnings. The tax effect of items giving rise to the Company's net deferred tax liabilities are as follows: August 28, August 29, August 30, 1999 1998 1997 ----------- ----------- ----------- Rental merchandise in service $20,234,000 $15,470,000 $14,429,000 Tax in excess of book depreciation 16,662,000 15,713,000 15,533,000 Accruals and other (15,637,000) (13,274,000) (9,324,000) ----------- ----------- ----------- $21,259,000 $17,909,000 $20,638,000 =========== =========== ===========

9 9 Notes to Consolidated Financial Statements UniFirst Corporation and Subsidiaries 4. LONG-TERM OBLIGATIONS Long-term obligations outstanding on the accompanying consolidated balance sheets are as follows: August 28, August 29, 1999 1998 ------------ ----------- Unsecured revolving credit agreement with three banks, interest rates of 5.82% and 6.06%, respectively $105,500,000 $40,275,000 Notes payable, interest from 4.0% - 8.0%, payable in various installments through 2007 4,963,000 4,798,000 Amounts due for restrictive covenants and other, payable in various installments through 2005 2,642,000 2,076,000 ------------ ----------- 113,105,000 47,149,000 ------------ ----------- Less - current maturities 1,911,000 1,194,000 ============ =========== $111,194,000 $45,955,000 ============ =========== Aggregate current maturities of long-term obligations for each of the next five years are $1,911,000, $1,328,000, $106,481,000, $761,000, $716,000 and $1,908,000 thereafter. The Company's unsecured revolving credit agreement runs through December 31, 2001. As of August 28, 1999, the maximum line of credit was $120,000,000. Certain of the long-term obligations contain, among other things, provisions regarding net worth and debt coverage. Under the most restrictive of these provisions, the Company was required to maintain minimum consolidated tangible net worth of $177,053,000 as of August 28, 1999. Certain notes payable are guaranteed or secured by assets of the Company. As of August 28, 1999 and August 29, 1998, the fair market value of the Company's outstanding debt approximates its carrying value.

10 10 Notes to Consolidated Financial Statements UniFirst Corporation and Subsidiaries 5. EMPLOYEE BENEFIT PLANS The Company has a profit sharing plan with a 401(k) feature for all eligible employees not under collective bargaining agreements. The amount of the Company's contribution is determined at the discretion of the Company. Contributions charged to expense under the plan were $4,100,000 in 1999, $5,649,000 in 1998 and $4,882,000 in 1997. Some employees under collective bargaining agreements are covered by union-sponsored multi-employer pension plans. Company contributions, generally based upon hours worked, are in accordance with negotiated labor contracts. Payments to the plans amounted to $404,000 in 1999, $389,000 in 1998 and $279,000 in 1997. Information is not readily available for the Company to determine its share of unfunded vested benefits, if any, under these plans. 6. OTHER ASSETS Other assets on the accompanying consolidated balance sheets are as follows: August 28, August 29, 1999 1998 ----------- ----------- Customer contracts, restrictive covenants and other assets arising from acquisitions, less accumulated amortization of $27,807,000 and $23,272,000, respectively $30,104,000 $24,107,000 Goodwill, less accumulated amortization of $5,496,000 and $4,162,000, respectively 50,246,000 24,208,000 Other 5,370,000 2,085,000 ----------- ----------- $85,720,000 $50,400,000 =========== =========== 7. ACCRUED LIABILITIES Accrued liabilities on the accompanying consolidated balance sheets are as follows: August 28, August 29, 1999 1998 ----------- ----------- Insurance $18,245,000 $17,921,000 Payroll related 15,090,000 15,748,000 Other 13,324,000 11,432,000 ----------- ----------- $46,659,000 $45,101,000 =========== ===========

11 11 8. COMMITMENTS AND CONTINGENCIES Lease Commitments The Company leases certain buildings from independent parties. Total rent expense on all leases was $3,027,000 in 1999, $2,685,000 in 1998 and $2,401,000 in 1997. Annual minimum lease commitments for all years subsequent to August 28, 1999 are $2,304,000 in 2000, $1,967,000 in 2001, $1,331,000 in 2002, $876,000 in 2003, $237,000 in 2004 and $20,000 thereafter. Contingencies The Company and its subsidiaries are subject to legal proceedings and claims arising from the conduct of their business operations, including personal injury, customer contract, employment claims and environmental matters. In the opinion of management, such proceedings and claims are not likely to result in losses which would have a material adverse effect upon the financial position or results of operations of the Company. As security for certain agreements, the Company had standby irrevocable bank commercial letters of credit and mortgages of $16,326,000 and $15,118,000 outstanding as of August 28, 1999 and August 29, 1998, respectively. 9. SHAREHOLDERS' EQUITY The significant attributes of each type of stock are as follows: Common stock -- Each share is entitled to one vote and is freely transferable. Each share of common stock is entitled to a cash dividend equal to 125% of any cash dividend paid on each share of Class B common stock. Class B common stock -- Each share is entitled to ten votes and can be converted to common stock on a share-for-share basis. Until converted to common stock, however, Class B shares are not freely transferable. The Company adopted an incentive stock option plan in November, 1996 and reserved 150,000 shares of common stock for issue under the plan. After fiscal year end, on August 31, 1999, options to purchase 57,000 shares of common stock were granted at an exercise price of $15.125. 10. COMPREHENSIVE INCOME In the first quarter of fiscal 1999, The Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income". SFAS 130 established new rules for the reporting and display of comprehensive income and its components. The adoption of this SFAS 130 had no impact on the Company's net income or shareholders' equity, but it requires the Company's foreign currency translation adjustment, which prior to adoption was reported separately in shareholders' equity, to be included in accumulated other comprehensive income. The components of comprehensive income for the years ended August 28, 1999 and August 29, 1998 were as follows: August 28, August 29, 1999 1998 ----------- ----------- Net income $24,106,000 $33,190,000 Other comprehensive income: Foreign currency translation adjustments 759,000 (1,821,000) ----------- ----------- Comprehensive income $24,865,000 $31,369,000 =========== ===========

12 12 11. SEGMENT REPORTING In fiscal 1999, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS 131 established new rules for public companies relating to the reporting of financial and descriptive information about their operating segments in financial statements. Since the Company operates as a single business segment, that being the design, rental, cleaning and delivery of occupational garments, industrial wiper towels, floor-mats and other non-garment items, which represent more than 90% of consolidated net sales, the disclosure of segment information is reflected in the financial statements contained herein. UniFirst also has activities in Canada, which do not meet the thresholds outlined in SFAS 131. 12. NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement established accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts and for hedging activities) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedging accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. SFAS 133 is effective for fiscal years beginning after June 15, 2000. A company may also implement the Statement as of the beginning of any fiscal quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and thereafter). SFAS 133 cannot be applied retroactively. The Company has not determined the timing of adoption, but does not anticipate the adoption of this new standard to have a material impact on the Company's fiscal position or results of operations.

13 13 Report of Independent Public Accountants To UniFirst Corporation: We have audited the accompanying consolidated balance sheets of UniFirst Corporation (a Massachusetts corporation) and subsidiaries as of August 28, 1999 and August 29, 1998 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended August 28, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of UniFirst Corporation and subsidiaries as of August 28, 1999 and August 29, 1998, and the results of their operations and their cash flows for each of the three years in the period ended August 28, 1999, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Boston, Massachusetts November 2, 1999

14 14 Management's Discussion and Analysis of Financial Condition and Results of Operations UniFirst Corporation and Subsidiaries Fiscal Year Ended August 28, 1999 Compared with Fiscal Year Ended August 29, 1998 Revenues. In 1999 revenues increased 8.7% to $487.1 million as compared with $448.1 million for 1998. This increase can be attributed to growth from existing operations (3.7%), acquisitions (4.0%) and price increases (1.0%). Growth from existing operations was primarily from the conventional uniform rental business (3.4%), and from the nuclear garment services business (0.3%). The increase in revenues from acquisitions resulted from one acquisition made in fiscal 1998 (in Alabama in June 1998) and seven acquisitions made in fiscal 1999 (one in Wisconsin and one in Mississippi, both in October 1998, one in New England and North Carolina in December 1998, one in Nevada in January 1999, another in Wisconsin in April 1999, and one in Massachusetts and one in Missouri, both in July 1999). Operating Costs. Operating costs increased to $294.5 million for 1999 as compared with $269.7 million for 1998 as a result of costs associated with increased revenues. As a percentage of revenues, operating costs increased to 60.5% from 60.2% for these periods. The increase in operating costs as a percentage of revenues was primarily due to increased labor costs and other operating margin pressures, due primarily to acquisitions. These increases were offset somewhat by the benefit resulting from the change in estimated service lives and related amortization periods for rental merchandise in service, as explained in note one and in the 1998 compared to 1997 section below. Selling and Administrative Expenses. The Company's selling and administrative expenses increased to $109.1 million, or 22.4% or revenues, for 1999 as compared with $97.6 million, or 21.8% of revenues for 1998. This increase was due primarily to increased costs for professional sales training, national, catalog and internet sales to support the Company's current and future revenue growth. The Company also incurred increased costs to upgrade its Information Systems. Depreciation and Amortization. The Company's depreciation and amortization expense increased to $31.7 million, or 6.5% of revenues, for 1999 as compared with $26.6 million, or 5.9% of revenues, for 1998. This increase was due primarily to increased capital expenditures for the Company's new distribution center in Owensboro, KY, information systems hardware and software to upgrade certain Company-wide systems and increased amortization costs due to acquisitions. Net Interest Expense. Net interest expense was $4.8 million, or 1.0% of revenues, for 1999 as compared to $2.3 million, or 0.5% of revenues, for 1998. The increase is primarily attributable to higher debt levels in 1999.

15 15 Management's Discussion and Analysis of Financial Condition and Results of Operations UniFirst Corporation and Subsidiaries Income Taxes. The Company's effective income tax rate was 48.6% in 1999 and 36.0% in 1998. The increase is due primarily to a $5.5 million tax reserve provided in the fourth quarter of 1999 due to a decision by a tax court in the case of a national business regarding the deductibility of interest on its leveraged corporate owned life insurance (COLI) program. Although this ruling will be appealed, the Company has a similar program and provided a reserve for this potential liability. Without this $5.5 million reserve, the Company's effective income tax rate would have been 36.9% in 1999. Fiscal Year Ended August 29, 1998 Compared with Fiscal Year Ended August 30, 1997 Revenues. In 1998, revenues increased 6.9% to $448.1 million as compared with $419.1 million for 1997. This increase can be attributed to growth from existing operations (5.0%), acquisitions (0.9%) and price increases (1.0%). Growth from existing operations was primarily from the conventional uniform rental business. The increase in revenues from acquisitions resulted from three acquisitions made in fiscal 1997 (two in Massachusetts in February and August 1997 and one in Vancouver, British Columbia in April 1997) and two acquisitions made in fiscal 1998 (one in California in March 1998, and one in Alabama in June 1998). Operating Costs. Operating costs increased to $269.7 million for 1998 as compared with $256.9 million for 1997 as a result of costs associated with increased revenues, but declined to 60.2% from 61.3% as a percentage of revenues for these periods. The improvement in operating costs as a percentage of revenues was due primarily to the Company's continued focus on controlling costs. In July 1998, the Company changed the estimated service lives and related amortization periods for rental merchandise in service, from primarily 12 months to primarily 15 months. This resulted in approximately $2.0 million, or 0.4% of revenues, less in garment amortization expense than if the amortization period had not been changed. Selling and Administrative Expenses. The Company's selling and administrative expenses increased to $97.6 million for 1998 as compared with $91.8 million for 1997, primarily due to increased sales personnel and other costs to support the Company's increased revenues. The Company's selling and administrative expenses as a percentage of revenues decreased slightly to 21.8% in 1998 from 21.9% in 1997. Depreciation and Amortization. The Company's depreciation and amortization expense increased to $26.6 million, or 5.9% of revenues, for 1998 as compared with $23.4 million, or 5.6% of revenues, for 1997. This increase was due primarily to increased capital expenditures for the Company's new distribution center in Owensboro, KY and information systems hardware and software to upgrade certain Company-wide systems. Net Interest Expense. Net interest expense was $2.3 million for 1998 as compared to $2.1 million in 1997. The increase is attributable primarily to higher debt levels, offset by lower interest rates, during 1998. Net interest expense was 0.5% of revenues for each period. Income Taxes. The Company's effective income tax rate was 36.0% in both 1998 and 1997.

16 16 Management's Discussion and Analysis of Financial Condition and Results of Operations UniFirst Corporation and Subsidiaries Liquidity and Capital Resources Shareholders' equity at August 28, 1999 was $257.4 million, or 69.5% of total capitalization. Net cash provided by operating activities was $56.9 million in fiscal 1999 and totaled $164.4 million for the three years ended August 28, 1999. These cash flows were used primarily to fund $135.6 million in capital expenditures to expand and update Company facilities, including construction of new facilities in 1999 in Chicago, Illinois; Newark, New Jersey; Lethbridge, Alberta and Hyannis, Massachusetts. Additionally, $68.6 million was used for acquisitions during this three year period. The Company had $2.9 million in cash and $14.5 million available on its $120 million unsecured line of credit with three banks as of August 28, 1999. The Company believes its generated cash from operations and its borrowing capacity will adequately cover its foreseeable capital requirements. Seasonality Historically, the Company's revenues and operating results have varied from quarter to quarter and are expected to continue to fluctuate in the future. These fluctuations have been due to a number of factors, including: general economic conditions in the Company's markets; the timing of acquisitions and of commencing start-up operations and related costs; the effectiveness of integrating acquired businesses and start-up operations; the timing of nuclear plant outages; capital expenditures; seasonal rental and purchasing patterns of the Company's customers; and price changes in response to competitive factors. In addition, the Company's operating results historically have been lower during the second and fourth fiscal quarters than during the other quarters of the fiscal year. The operating results for any historical quarter are not necessarily indicative of the results to be expected for an entire fiscal year or any other interim periods. Information Systems; Year 2000 The statements in this section include "Year 2000 readiness disclosures" within the meaning of S2392 RS, Year 2000 Information and Readiness Disclosure Act (September 17, 1998). The Company has made a substantial investment in its information systems and intends to spend significant amounts on its information systems in the future. The Company has evaluated Year 2000 (Y2K) issues concerning the ability of systems to properly recognize date sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause complete system failures. Based on an assessment conducted in early 1998, a Year 2000 project leader was appointed on April 15, 1998. Utilizing internal resources and consultants, the project leader manages the projects and reports weekly to the information systems director and Y2K project team.

17 17 Management's Discussion and Analysis of Financial Condition and Results of Operations UniFirst Corporation and Subsidiaries State of Readiness: The Company regularly reviews the status of its active Year 2000 projects. The Company believes that its account management system, which is used primarily for customer billing, accounts receivable and sales taxes, and the materials management and catalog sales systems which were installed at its Owensboro, KY facility are Y2K compliant. Additionally, testing and review to verify Y2K compliance of these systems has been successful and is nearing completion. In February 1999, the Company installed a new third party payroll and human resources system which has been represented to be Y2K compliant. The Company has grouped the rest of its information systems and technology into 3 categories for its Y2K program: 1. Information Technology (computer hardware and software, including financial systems and electronic data interchange (EDI) interfaces); 2. Physical Plant (production equipment and facilities); 3. Extended Enterprise (suppliers and customers). The Company uses a five-step process to manage its Y2K program: 1. Inventory (identify items to be assessed for Y2K readiness); 2. Assessment (prioritize the inventoried items, assess and document their Y2K readiness and plan corrective actions); 3. Renovation/Upgrade (apply corrective actions); 4. Testing (verify corrective actions); 5. Implementation (implement new system). The Company has, at a minimum, reached the testing step on all projects and has completed the implementation stage on all systems which are critical to its business operations as well as the majority of all other systems. Costs: The Company expects that the total cost of its Y2K program will range from $1.0 to $1.5 million. As of August 28, 1999, the Company had spent approximately $1.25 million. These costs do not include the account management, materials management, catalog sales and new payroll and human resources systems discussed above. Risks of Y2K issues and Contingency Plans: Since the beginning of its Y2K program, the Company has focused its resources on the systems which are critical to its business operations. While the Company believes it is addressing the Y2K risks within its control, there are other risks, such as the effect that the Y2K issue may have on utilities and other suppliers, which are beyond the immediate control of the Company. Based on current information, the Company believes that the Y2K problem will not have a material adverse effect on the results of operations of the Company. There can, however, be no assurances that Y2K remediation by others, including suppliers, will be properly completed, and failure to do so could have a material adverse effect on the results of operations of the Company. To date our Extended Enterprise survey and review of key customers and suppliers has not revealed any significant Y2K risk. Contingency plans for all Y2K projects which are critical to the Company's business operations have been completed. These plans put procedures in place which maintain our key business processes should any failures occur.

18 18 Management's Discussion and Analysis of Financial Condition and Results of Operations UniFirst Corporation and Subsidiaries Effects of Inflation Inflation has had the effect of increasing the reported amounts of the Company's revenues and costs. The Company uses the last-in, first-out (LIFO) method to value a significant portion of inventories. This method tends to reduce the amount of income due to inflation included in the Company's results of operations. The Company believes that, through increases in its prices and productivity improvements, it has been able to recover increases in costs and expenses attributable to inflation. Safe Harbor for Forward Looking Statements Forward looking statements contained in this annual report are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors that could cause actual results to differ materially from those reflected in such forward looking statements. Such factors include those indicated in the section entitled "Risk Factors" in the Company's Prospectus, dated March 18, 1998, as well as the risks and uncertainties relating to the centralization of certain of the Company's operations at its Owensboro, KY distribution facility, the Company's handling of the Year 2000 issue, and the Company's ability to control manufacturing and operating costs. When used in this annual report, the words "intend," "anticipate," "believe," "estimate," and "expect" and similar expressions as they relate to the Company are included to identify such forward looking statements.

19 19 Quarterly Financial Data (Unaudited) UniFirst Corporation and Subsidiaries The following is a summary of the results of operations for each of the quarters within the years ended August 28, 1999 and August 29, 1998. (In thousands, except per share amounts) First Second Third Fourth 1999 Quarter Quarter Quarter Quarter -------- -------- -------- -------- Revenues $116,335 $120,066 $125,661 $125,038 Income before income taxes 14,946 10,887 12,264 8,809 Net income 9,416 6,859 7,726 105 Weighted average shares outstanding 20,511 20,691 20,320 20,098 Net income per share $ 0.46 $ 0.33 $ 0.38 $ 0.01 ======== ======== ======== ======== First Second Third Fourth 1998 Quarter Quarter Quarter Quarter -------- -------- -------- -------- Revenues $112,402 $109,344 $114,066 $112,240 Income before income taxes 13,791 9,779 13,597 14,692 Net income 8,826 6,259 8,702 9,403 Weighted average shares outstanding 20,511 20,511 20,511 20,511 Net income per share $ 0.43 $ 0.31 $ 0.42 $ 0.46 ======== ======== ======== ======== Common Stock Prices and Dividends Per Share For the Years Ended August 28, 1999 and August 29, 1998: Price Per Share Dividends Per Share Class B 1999 High Low Common Stock Common Stock ------- ------- ------------ ------------ First Quarter $28.750 $20.000 $0.024 $0.0300 Second Quarter 26.625 21.188 0.030 0.0375 Third Quarter 22.625 16.563 0.030 0.0375 Fourth Quarter 18.500 15.500 0.030 0.0375 ======= ======= ====== ======= Price Per Share Dividends Per Share Class B 1998 High Low Common Stock Common Stock ------- ------- ------------ ------------ First Quarter $25.813 $22.250 $0.024 $0.030 Second Quarter 28.063 24.563 0.024 0.030 Third Quarter 29.000 25.500 0.024 0.030 Fourth Quarter 29.500 22.000 0.024 0.030 ======= ======= ====== ====== The Company's common shares are traded on the New York Stock Exchange (NYSE Symbol: UNF). The approximate number of shareholders of record of the Company's common stock and Class B common stock as of November 2, 1999 were 161 and 19 respectively.

1 Exhibit 21 List of subsidiaries of the Company: Interstate Nuclear Services Corp. Interstate Uniform Manufacturing of Puerto Rico, Inc. Superior Products & Equipment Co., Inc. UniFirst Canada Ltd. UniFirst Holdings, L.P. UTWO Corporation UR Corporation UONE Corporation Tennessee Uniform and Towel Service, Inc. Euro Nuclear Services B.V. ENS Nuklear Services, GmbH Durawear Manufacturing Corp. Staple Manufacturing Corp. UniFirst S.A. de C.V. Uniformes de Tamaulipas S.A. de C.V. RC Air LLC

1 Page 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated November 2, 1999 incorporated by reference or included in this Form 10-K, into the Company's previously filed Registration Statement File No. 33-60781. /s/ ARTHUR ANDERSEN LLP Boston, Massachusetts November 24, 1999

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF UNIFIRST CORPORATION FOR THE FISCAL YEAR ENDED AUGUST 28, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS YEAR AUG-28-1999 AUG-30-1998 AUG-28-1999 1 2,912 0 54,765 2,979 27,194 137,722 415,097 172,912 465,627 76,314 111,194 1,990 0 0 255,443 465,627 487,100 487,100 435,353 435,353 0 0 4,841 46,906 22,800 24,106 0 0 0 24,106 1.18 0