SEC Filing | UniFirst Corp

1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended August 26, 2000 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: (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 6, 2000 were 9,327,834 and 10,255,744, respectively, and the aggregate market value of these shares held by non-affiliates of the Company on said date was $104,317,571 (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 2000 Annual Report to Shareholders and the Company's Proxy Statement for its 2001 Annual Meeting of Shareholders (which will be filed with the Securities and Exchange Commission within 120 days after the close of the 2000 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 2000, the Company generated $528.7 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 145 service locations and distribution centers. For fiscal 1998, 1999 and 2000, the Company's garment rental operations produced approximately 68%, 65% and 65%, respectively, of its revenues, while non-garment rentals accounted for 22%, 26% and 26%, direct sales of garments accounted for 3%, 2% 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 300 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. 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 1,075 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 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.

4 Page 4 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 and G&K Services, Inc. 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 55% of all garments which it placed in service during fiscal 2000. 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. In September, 2000 the Company announced its plans to close its plant in Puerto Rico effective December, 2000. In July, 2000 the Company opened its new manufacturing plant in Ebano, San Luis Potosi, Mexico. 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 26, 2000, the Company employed approximately 7,500 persons, about 6% of whom are represented by unions pursuant to six 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 82 Chairman of the Board Ronald D. Croatti 57 President and Chief Executive Officer Robert L. Croatti 64 Executive Vice President John B. Bartlett 59 Senior Vice President and Chief Financial Officer Cynthia Croatti 45 Treasurer Bruce P. Boynton 52 Vice President, Operations Dennis G. Assad 55 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, is the chief operating officer for the Company's Canadian operations and has primary responsibility for overseeing the operations of certain regions in the United States. 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. 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 in 1998 proposed a federal environmental regulatory framework applicable to industrial laundry operations that would replace local regulations. In 1999, however, the Environmental Protection Agency issued a final ruling which declared that the proposed regulatory framework was not required for the industrial laundry industry. 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 26, 2000, the Company owned or occupied 149 facilities containing an aggregate of approximately 4.0 million square feet located in the United States, Canada, Mexico, 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), garment manufacturing plants in Ebano, San Luis Potosi, Mexico, Luquillo, Puerto Rico, Cave City, Arkansas and Wilburton, Oklahoma, and its many customer service locations. The Company owns 92 of these facilities containing approximately 3.4 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. 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

8 Page 8 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 2000 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 2000 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 2000 Annual Report to Shareholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and the accompanying notes, which are incorporated herein by reference to the Company's 2000 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

9 Page 9 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 2001 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 2001 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 "Security Ownership of Management and Principal Shareholders" in the Company's Proxy Statement for its 2001 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 2001 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 2000 Annual Report to Shareholders. Consolidated balance sheets as of August 26, 2000 and August 28, 1999 Consolidated statements of income for each of the three years in the period ended August 26, 2000 Consolidated statements of shareholders' equity for each of the three years in the period ended August 26, 2000 Consolidated statements of cash flows for each of the three years in the period ended August 26, 2000 Notes to consolidated financial statements Report of independent public accountants

10 Page 10 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 26, 2000. 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 26, 2000 the Company did not file any reports on Form 8-K with the Securities and Exchange Commission.

11 Page 11 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: /s/ Aldo Croatti ------------------------------ Aldo Croatti Chairman Date: November 27, 2000 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 - ---- ----- ---- /s/ Aldo Croatti Chairman and Director November 27, 2000 - -------------------- Aldo Croatti /s/ Ronald D. Croatti Principal Executive November 27, 2000 - -------------------- Officer and Director Ronald D. Croatti /s/ John B. Bartlett Principal Financial November 27, 2000 - -------------------- Officer and Principal John B. Bartlett Accounting Officer /s/ Cynthia Croatti Director November 27, 2000 - -------------------- Cynthia Croatti /s/ Donald J. Evans Director November 27, 2000 - -------------------- Donald J. Evans /s/ Reynold L. Hoover Director November 27, 2000 - -------------------- Reynold L. Hoover /s/ Albert Cohen Director November 27, 2000 - -------------------- Albert Cohen

12 Page 12 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE TO THE CONSOLIDATED FINANCIAL STATEMENTS To UniFirst Corporation: We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in this Form 10-K, and have issued our report thereon dated October 31, 2000. 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 October 31, 2000

13 Page 13 UNIFIRST CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED AUGUST 26, 2000 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 26, 2000 Allowance for doubtful accounts $2,979,000 $2,739,000 $(2,608,000) $3,110,000 ========== ========== =========== ========== 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 ========== ========== =========== ==========

14 Page 14 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 2000 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 ELEVEN YEAR FINANCIAL SUMMARY UniFirst Corporation and Subsidiaries FISCAL YEAR ENDED AUGUST (In thousands, except ratios and per share data) 2000 1999 1998 1997 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Revenues $528,726 $487,100 $448,052 $419,093 $391,794 $355,041 $318,039 $287,728 $268,190 Earnings before interest, taxes, depreciation and amortization (EBITDA) 73,954 83,471 80,804 70,387 61,729 53,725 50,369 47,199 42,010 Depreciation and amortization 34,710 31,724 26,629 23,386 20,814 19,194 17,912 16,454 15,999 Income from operations 39,244 51,747 54,175 47,001 40,915 34,531 32,457 30,745 26,011 Interest expense (income), net 7,200 4,841 2,316 2,118 2,398 2,787 2,513 2,669 4,098 Provision for income taxes 12,176 22,800 18,669 16,160 13,855 11,110 11,073 10,387 7,570 Net income 19,868 24,106 33,190 28,723 24,662 20,634 18,871 17,689 14,343* =================================================================================================================================== FINANCIAL POSITION AT YEAR END Total assets $500,150 $465,627 $376,130 $339,626 $302,378 $272,691 $250,160 $219,064 $212,097 Long-term obligations 126,638 113,105 47,149 40,837 39,365 36,376 41,602 32,231 47,641 Shareholders' equity 271,172 257,433 246,374 217,192 191,109 168,596 149,472 132,723 117,329 =================================================================================================================================== FINANCIAL RATIOS Net income as a % of revenues 3.8% 4.9% 7.4% 6.9% 6.3% 5.8% 5.9% 6.1% 5.3% Return on average shareholders' equity 7.5% 9.6% 14.3% 14.1% 13.7% 13.0% 13.4% 14.1% 12.9% =================================================================================================================================== Weighted average number of shares outstanding 19,670 20,438 20,511 20,511 20,511 20,511 20,506 20,453 20,451 =================================================================================================================================== PER SHARE DATA Revenues $ 26.88 $ 23.83 $ 21.84 $ 20.43 $ 19.10 $ 17.31 $ 15.51 $ 14.07 $ 13.11 Earnings before interest, taxes, depreciation and amortization (EBITDA) 3.76 4.08 3.94 3.43 3.01 2.62 2.46 2.31 2.05 Net Income - Diluted 1.01 1.18 1.62 1.40 1.20 1.01 0.92 0.86 0.67 Shareholders' equity 13.79 12.60 12.01 10.59 9.32 8.22 7.29 6.49 5.74 Dividends Common stock .15 .14 .12 .12 .11 .10 .10 .10 .06 Class B common stock .12 .11 .10 .10 .09 .08 .08 .04 -- =================================================================================================================================== 1991 1990 - --------------------------------------------------- SUMMARY OF OPERATIONS Revenues $250,432 $226,682 Earnings before interest, taxes, depreciation and amortization (EBITDA) 38,562 38,749 Depreciation and amortization 14,229 12,422 Income from operations 24,333 26,327 Interest expense (income), net 4,320 3,513 Provision for income taxes 6,803 8,516 Net income 13,210 14,298 =================================================== FINANCIAL POSITION AT YEAR END Total assets $204,398 $189,411 Long-term obligations 52,032 53,134 Shareholders' equity 105,888 93,739 =================================================== FINANCIAL RATIOS Net income as a % of revenues 5.3% 6.3% Return on average shareholders' equity 13.2% 16.4% =================================================== Weighted average number of shares outstanding 20,426 20,431 =================================================== PER SHARE DATA Revenues $ 12.26 $ 11.09 Earnings before interest, taxes, depreciation and amortization (EBITDA) 1.89 1.90 Net Income - Diluted 0.63 0.67 Shareholders' equity 5.18 4.59 Dividends Common stock .06 .06 Class B common stock -- -- =================================================== 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. UniFirst Corporation 2000 Annual Report www.unifirst.com

2 CONSOLIDATED STATEMENTS OF INCOME UniFirst Corporation and Subsidiaries Year Ended August 26, August 28, August 29, (In thousands, except per share data) 2000 1999 1998 - ------------------------------------------------------------------------------------------------- Revenues $ 528,726 $ 487,100 $ 448,052 - ------------------------------------------------------------------------------------------------- Cost and expenses: Operating costs 336,324 294,517 269,660 Selling and administrative expenses 118,448 109,112 97,588 Depreciation and amortization 34,710 31,724 26,629 - ------------------------------------------------------------------------------------------------- 489,482 435,353 393,877 - ------------------------------------------------------------------------------------------------- Income from operations 39,244 51,747 54,175 - ------------------------------------------------------------------------------------------------- Interest expense (income): Interest expense 7,459 4,990 2,613 Interest income (259) (149) (297) - ------------------------------------------------------------------------------------------------- 7,200 4,841 2,316 - ------------------------------------------------------------------------------------------------- Income before income taxes 32,044 46,906 51,859 Provision for income taxes 12,176 22,800 18,669 - ------------------------------------------------------------------------------------------------- Net income $ 19,868 $ 24,106 $ 33,190 ================================================================================================= Weighted average number of shares outstanding - diluted 19,670 20,438 20,511 ================================================================================================= Net income per share - diluted $ 1.01 $ 1.18 $ 1.62 ================================================================================================= Dividends per share: Common stock $ 0.15 $ 0.14 $ 0.12 Class B common stock 0.12 0.11 0.10 ================================================================================================= The accompanying notes are an integral part of these consolidated financial statements. 19

3 CONSOLIDATED BALANCE SHEETS UniFirst Corporation and Subsidiaries August 26, August 28, (In thousands, except per share data) 2000 1999 - ---------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 7,137 $ 2,912 Receivables, less reserves of $3,110 in 2000 and $2,979 in 1999 54,015 51,786 Inventories 27,598 27,194 Rental merchandise in service 59,256 55,631 Prepaid expenses 299 199 - ---------------------------------------------------------------------------------------------------------- Total current assets 148,305 137,722 - ---------------------------------------------------------------------------------------------------------- Property and equipment: Land, buildings and leasehold improvements 194,619 174,979 Machinery and equipment 205,883 190,722 Motor vehicles 53,535 49,396 - ---------------------------------------------------------------------------------------------------------- 454,037 415,097 Less - accumulated depreciation 191,704 172,912 - ---------------------------------------------------------------------------------------------------------- 262,333 242,185 - ---------------------------------------------------------------------------------------------------------- Other assets, net 89,512 85,720 - ---------------------------------------------------------------------------------------------------------- $ 500,150 $ 465,627 ========================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term obligations $ 1,903 $ 1,911 Notes payable 1,118 2,331 Accounts payable 19,718 17,659 Accrued liabilities 47,170 46,659 Accrued and deferred income taxes 12,294 7,754 - ---------------------------------------------------------------------------------------------------------- Total current liabilities 82,203 76,314 - ---------------------------------------------------------------------------------------------------------- Long-term obligations, net of current maturities 124,735 111,194 Deferred income taxes 22,040 20,686 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 2000 and 10,499,634 shares in 1999 1,050 1,050 Class B common stock, $.10 par value; 20,000,000 shares authorized; issued and outstanding 10,255,744 shares in 2000 and 10,255,744 shares in 1999 1,026 1,026 Treasury stock, 1,091,500 shares in 2000 and 857,500 shares in 1999, at cost (20,049) (16,583) Capital surplus 12,438 12,438 Retained earnings 278,676 261,450 Accumulated other comprehensive loss (1,969) (1,948) - ---------------------------------------------------------------------------------------------------------- Total shareholders' equity 271,172 257,433 - ---------------------------------------------------------------------------------------------------------- $ 500,150 $ 465,627 ========================================================================================================== The accompanying notes are an integral part of these consolidated financial statements. UniFirst Corporation 2000 Annual Report www.unifirst.com

4 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY UniFirst Corporation and Subsidiaries Class B Class B Common Common Treasury Common Common Treasury (In thousands) Shares Shares Shares Stock Stock Stock - ------------------------------------------------------------------------------------------------------------------------------- Balance, August 30, 1997 7,899 12,612 -- $ 790 $ 1,261 -- Net income -- -- -- -- -- -- Dividends -- -- -- -- -- -- Shares converted 2,318 (2,318) -- 232 (232) -- Foreign Currency translation adjustments -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------- Balance, August 29, 1998 10,217 10,294 -- 1,022 1,029 -- Net income -- -- -- -- -- -- Dividends -- -- -- -- -- -- Shares issued in connection with an acquisition 245 -- -- 25 -- -- Shares converted 38 (38) -- 3 (3) -- Shares repurchased -- -- (858) -- -- (16,583) Foreign Currency translation adjustments -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------- Balance, August 28, 1999 10,500 10,256 (858) 1,050 1,026 (16,583) Net income -- -- -- -- -- -- Dividends -- -- -- -- -- -- Shares repurchased -- -- (234) -- -- (3,466) Foreign Currency translation adjustments -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------- Balance, August 26, 2000 10,500 10,256 (1,092) $ 1,050 $ 1,026 $ (20,049) =============================================================================================================================== Accumulated Other Capital Retained Comprehensive (In thousands) Surplus Earnings Loss - -------------------------------------------------------------------------------- Balance, August 30, 1997 $ 7,078 $ 208,949 $ (886) Net income -- 33,190 -- Dividends -- (2,187) -- Shares converted -- -- -- Foreign Currency translation adjustments -- -- (1,821) - -------------------------------------------------------------------------------- Balance, August 29, 1998 7,078 239,952 (2,707) Net income -- 24,106 -- Dividends -- (2,608) -- Shares issued in connection with an acquisition 5,360 -- -- Shares converted -- -- -- Shares repurchased -- -- -- Foreign Currency translation adjustments -- -- 759 - -------------------------------------------------------------------------------- Balance, August 28, 1999 12,438 261,450 (1,948) Net income -- 19,868 -- Dividends -- (2,642) -- Shares repurchased -- -- -- Foreign Currency translation adjustments -- -- (21) - -------------------------------------------------------------------------------- Balance, August 26, 2000 $ 12,438 $ 278,676 $ (1,969) ================================================================================ The accompanying notes are an integral part of these consolidated financial statements. 21

5 CONSOLIDATED STATEMENTS OF CASH FLOWS UniFirst Corporation and Subsidiaries Year Ended August 26, August 28, August 29, (In thousands) 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 19,868 $ 24,106 $ 33,190 Adjustments: Depreciation 28,042 25,923 22,074 Amortization of other assets 6,668 5,801 4,555 Changes in assets and liabilities, net of acquisitions: Receivables (2,220) (5,639) (2,691) Inventories 491 3,717 (4,684) Rental merchandise in service (3,492) (7,957) (2,627) Prepaid expenses (100) 41 (41) Accounts payable 1,981 2,290 1,022 Accrued liabilities 509 1,235 (416) Accrued and deferred income taxes 4,537 5,134 83 Deferred income taxes 1,352 2,257 1,302 - -------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 57,636 56,908 51,767 - -------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Acquisition of businesses, net of cash acquired (6,783) (53,782) (7,470) Capital expenditures (46,714) (45,083) (43,052) Increase in other assets (5,032) (4,928) (3,479) - -------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (58,529) (103,793) (54,001) - -------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Increase in debt 15,509 67,284 7,405 Reduction of debt (4,283) (3,626) (1,708) Repurchase of common stock (3,466) (16,583) -- Cash dividends (2,642) (2,608) (2,187) - -------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 5,118 44,467 3,510 - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 4,225 (2,418) 1,276 Cash and cash equivalents at beginning of year 2,912 5,330 4,054 - -------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 7,137 $ 2,912 $ 5,330 ============================================================================================================== Supplemental disclosure of cash flow information: Interest paid $ 7,745 $ 4,355 $ 2,613 Income taxes paid 6,282 15,246 17,445 ============================================================================================================== The accompanying notes are an integral part of these consolidated financial statements. UniFirst Corporation 2000 Annual Report www.unifirst.com

6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UniFirst Corporation and Subsidiaries (Amounts in thousands, except per share data) 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 2000, 1999 and 1998 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 $1,489 and $1,356 higher at August 26, 2000 and August 28, 1999, 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. 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. EARNINGS PER SHARE Basic and diluted earnings per share (EPS) are computed in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". SFAS 128 requires basic EPS, for companies having two classes of common stock with different dividend rights, to be calculated under the "two-class method". The two-class method allocates income to the different classes of stock based on their respective dividend rights and uses the weighted average shares outstanding for each class of common stock to determine basic EPS by class. Basic EPS under the two-class method for Common Stock was $1.13, $1.31 and $1.82 for fiscal years 2000, 1999 and 1998, respectively. Basic EPS under the two-class method for Class B Common Stock was $.90, $1.05 and $1.46 for fiscal years 2000, 1999 and 1998, respectively. Diluted EPS has been calculated under the if-converted method, which assumes Class B Common Stock has been converted to Common Stock. 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 acquisition of businesses which were accounted for as purchases is as follows: Year ended August 26, August 28, August 29, 2000 1999 1998 ------------------------------------------ Fair value of tangible assets acquired $ 2,310 $ 26,927 $ 3,715 Fair value of intangible assets acquired 5,568 35,990 3,790 Liabilities assumed or created (1,095) (3,750) (35) Common stock issued (244,770 shares in 1999) -- (5,385) -- ------------------------------------------ Acquisition of businesses, net of cash acquired $ 6,783 $ 53,782 $ 7,470 ========================================== 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. 23

7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UniFirst Corporation and Subsidiaries 3. INCOME TAXES The provision for income taxes consists of the following: Year ended August 26, August 28, August 29, 2000 1999 1998 ------------------------------------------------------ Current: Federal and Foreign $ 15,402 $ 12,463 $ 18,328 State 2,158 (102) 3,033 ------------------------------------------------------ 17,560 12,361 21,361 ------------------------------------------------------ Deferred: Federal and Foreign (4,798) 8,777 (1,875) State (586) 1,662 (817) ------------------------------------------------------ (5,384) 10,439 (2,692) ------------------------------------------------------ $ 12,176 $ 22,800 $ 18,669 ====================================================== 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 26, August 28, August 29, 2000 1999 1998 ------------------------------------------------------ Income taxes at the statutory federal income tax rate $ 11,215 $ 16,417 $ 18,151 Puerto Rico exempt income (680) (652) (1,062) Corporate-Owned Life Insurance -- 5,500 (850) State income taxes 986 798 1,434 Foreign income taxes 289 176 265 Other 366 561 731 ------------------------------------------------------ $ 12,176 $ 22,800 $ 18,669 ====================================================== 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 26, August 28, August 29, 2000 1999 1998 ------------------------------------------------------ Rental merchandise in service $ 21,599 $ 20,234 $ 15,470 Tax in excess of book depreciation 19,244 16,662 15,713 Accruals and other (17,358) (8,027) (12,753) ------------------------------------------------------ $ 23,485 $ 28,869 $ 18,430 ====================================================== 4. LONG-TERM OBLIGATIONS Long-term obligations outstanding on the accompanying consolidated balance sheets are as follows: August 26, August 28, 2000 1999 ------------------------------ Unsecured revolving credit agreement with a syndicate of banks, interest rates of 8.15% and 5.82%, respectively $119,000 $105,500 Notes payable, interest from 4.0% - 8.0%, payable in various installments through 2007 5,815 4,963 Amounts due for restrictive covenants and other, payable in various installments through 2005 1,823 2,642 ------------------------------ 126,638 113,105 Less - current maturities 1,903 1,911 ------------------------------ $124,735 $111,194 ============================== Aggregate current maturities of long-term obligations for each of the next five years are $1,903, $1,249, $120,033, $2,254, $378 and $821 thereafter. The Company's unsecured revolving credit agreement runs through August 15, 2003. As of August 26, 2000, the maximum line of credit was $170,000. In 2000 the Company entered into an interest rate swap agreement with a bank, notional amount $40,000 maturing October 13, 2004. The Company pays a fixed rate of 6.38% and receives a variable rate tied to the LIBOR rate. As of August 26, 2000 the variable rate was 6.73%. 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 $164,787 as of August 26, 2000. Certain notes payable are guaranteed or secured by assets of the Company. As of August 26, 2000 and August 28, 1999, the fair market values of the Company's outstanding debt and swap agreement approximate their carrying value. 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 Company matches a portion of the employee's contribution and can make an additional contribution at its discretion. Contributions charged to expense under the plan were $4,404 in 2000, $4,100 in 1999 and $5,649 in 1998. 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 $419 in 2000, $404 in 1999 and $389 in 1998. Information is not readily available for the Company to determine its share of unfunded vested benefits, if any, under these plans. UniFirst Corporation 2000 Annual Report www.unifirst.com

8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UniFirst Corporation and Subsidiaries 6. OTHER ASSETS Other assets on the accompanying consolidated balance sheets are as follows: August 26, August 28, 2000 1999 ---------------------- Customer contracts, restrictive covenants and other assets arising from acquisitions, less accumulated amortization of $32,728 and $27,807, respectively $28,075 $30,104 Goodwill, less accumulated amortization of $7,238 and $5,496, respectively 56,007 50,246 Other 5,430 5,370 ---------------------- $89,512 $85,720 ====================== 7. ACCRUED LIABILITIES Accrued liabilities on the accompanying consolidated balance sheets are as follows: August 26, August 28, 2000 1999 ---------------------- Insurance $19,815 $18,245 Payroll related 12,025 15,090 Other 15,330 13,324 ---------------------- $47,170 $46,659 ====================== 8. COMMITMENTS AND CONTINGENCIES LEASE COMMITMENTS The Company leases certain buildings from independent parties. Total rent expense on all leases was $3,542 in 2000, $3,027 in 1999 and $2,685 in 1998. Annual minimum lease commitments for all years subsequent to August 26, 2000 are $2,760 in 2001, $2,101 in 2002, $1,418 in 2003, $848 in 2004, $464 in 2005 and $182 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 $17,203 and $16,326 outstanding as of August 26, 2000 and August 28, 1999, respectively. 9. COMMON STOCK OPTIONS The Company adopted an incentive stock option plan in November, 1996 and reserved 150,000 shares of common stock for issue under the plan. Options granted under the plan are at a price equal to the fair market value of the Company's common stock on the date of grant and expire eight years after the grant date. Each option is subject to a proportional four-year vesting schedule with no options generally being vested or exercisable until one year from date of grant. Options for 57,000 shares at $15.125 per share and 1,000 shares at $11.875 per share were granted in 2000. As of August 26, 2000, none of the options were exercisable and options to purchase 2,200 shares were forfeited. The Company accounts for the stock option plan under Accounting Principles Board No. 25, under which no compensation cost has been recognized related to stock option grants. Had compensation cost for this plan been determined consistent with SFAS No. 123, "Accounting for Stock-Based Compensation", the Company's net income and earnings per share would have been reduced to the following pro forma amounts: NET INCOME: 2000 As reported ....... $ 19,868 Pro forma ......... 19,782 EARNINGS PER SHARE: As reported ....... $ 1.01 Pro forma ......... 1.01 Due to the fact that no options were granted prior to August 28, 1999, there was no impact on the net income and earnings per share for the years ending August 29, 1998 and August 28, 1999. A summary of the status for all outstanding options at August 26, 2000 and changes during the years then ended is presented in the table below: Balance August 28, 1999 0 Granted 58,000 Exercised 0 Forfeited 2,200 - ---------------------------------------------------- Balance August 26, 2000 55,800 ==================================================== Exercisable at August 26, 2000 0 The 55,800 options outstanding at August 26, 2000 have a remaining weighted average contractual life of approximately seven years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2000: weighted average risk-free interest rate of 6.34 percent; weighted average expected lives of seven years; and expected volatility of 10%. 10. 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. 11. 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 26, 2000 and August 28, 1999 were as follows: August 26, August 28, 2000 1999 --------------------------------- Net income $ 19,868 $ 24,106 Other comprehensive income: Foreign currency translation adjustments (21) 759 --------------------------------- Comprehensive income $ 19,847 $ 24,865 ================================= 25

9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. 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. 13. NEW ACCOUNTING STANDARDS In June of 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 as 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. In June 2000, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB No. 133", which defers for one year the effective date of SFAS No. 133. 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 financial position or results of operations. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," ("SAB 101"), which is required to be adopted in the fourth quarter of fiscal years beginning after December 15, 1999. SAB 101 sets forth certain criteria, including the existence of persuasive evidence of an arrangement, which must be met in order that revenue be recognized. The Company anticipates that the adoption of SAB 101 will not have a significant effect on the financial condition or results of operations of the Company. In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation, and Interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of Accounting Principles Board ("APB") Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequences of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 was effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. Since adoption, the application of FIN 44 has not had a significant effect on the financial condition or results of operations of the Company. 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 26, 2000 and August 28, 1999 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended August 26, 2000. 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 auditing standards generally accepted in the United States. 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 26, 2000 and August 28, 1999 and the results of its operations and its cash flows for each of the three years in the period ended August 26, 2000, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Boston, Massachusetts October 31, 2000 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS UniFirst Corporation and Subsidiaries FISCAL YEAR ENDED AUGUST 26, 2000 COMPARED WITH FISCAL YEAR ENDED AUGUST 28, 1999 Revenues. In 2000, revenues increased 8.5% to $528.7 million as compared with $487.1 million for 1999. This increase can be attributed to growth from existing operations (4.2%), acquisitions (3.3%) and price increases (1.0%). Growth from existing operations was primarily from the conventional uniform rental business (3.9%) and from the nuclear garment services business (0.3%). The increase in revenues from acquisitions resulted from seven acquisitions made in fiscal 1999 and two acquisitions made fiscal 2000. Operating Costs. Operating costs increased to $336.3 million for 2000 as compared with $294.5 million for 1999 as a result of costs associated with increased revenues. As a percentage of revenues, operating costs increased to 63.6% from 60.5% for these periods. The primary reason for the increase in operating costs as a percentage of revenues was the negative impact from a comparative year-to-year increase in merchandise expense. Last year the Company realized a benefit compared to this year due to a change made effective July, 1998 in the estimated 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). Other operating cost increases were attributable to integrating last year's acquisitions, primarily Standard Management and higher labor, fuel and energy costs. There was also lower contribution from the nuclear garment services business. UniFirst Corporation 2000 Annual Report www.unifirst.com

10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Selling and Administrative Expenses. The Company's selling and administrative expenses increased to $118.4 million for 2000 as compared with $109.1 million for 1999, primarily due to increased costs to support the Company's current and future revenue growth. Selling and administrative expenses as a percentage of revenue was 22.4% in both periods. Depreciation and Amortization. The Company's depreciation and amortization expense increased to $34.7 million, or 6.6% of revenues, for 2000 as compared with $31.7 million, or 6.5% of revenues, for 1999. This increase was due primarily to increased amortization costs due to acquisitions. Net Interest Expense. Net interest expense was $7.2 million, or 1.4% of revenues, for 2000 as compared to $4.8 million, or 1.0% of revenues, for 1999. The increase is primarily attributable to higher debt levels in 2000. Income Taxes. The Company's effective income tax rate was 38.0% in 2000 and 48.6% in 1999. The decrease is due primarily to the special $5.5 million tax reserve provided in the fourth quarter of 1999, as explained in the 1999 compared to 1998 discussion below. 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 2000 compared to 1999 section above. Selling and Administrative Expenses. The Company's selling and administrative expenses increased to $109.1 million, or 22.4% of 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. Income Taxes. The Company's effective income tax rate was 48.6% in 1999 and 36% 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. LIQUIDITY AND CAPITAL RESOURCES Shareholders' equity at August 26, 2000 was $271.2 million, or 68.2% of total capitalization. Net cash provided by operating activities was $57.6 million in fiscal 2000 and totaled $166.3 million for the three years ended August 26, 2000. These cash flows, along with net additional borrowings of $80.6 million, were used primarily to fund $134.8 million in capital expenditures to expand and update Company facilities, including construction of new facilities in 2000 in Ebano, San Luis Potosi, Mexico; Detroit, Michigan and Seattle, Washington and significant building additions in Nashua, NH; Pittsburgh, PA and Dallas, TX. Additionally, $68.0 million was used for acquisitions during this three year period and $20.0 million was used to repurchase 1.1 million shares of the Company's common stock. The Company had $7.1 million in cash and $34.8 million available on its $170 million unsecured line of credit with a syndicate of banks as of August 26, 2000. 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. 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. 27

11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) 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 uncertainties relating to the centralization of certain of the Company's operations at its Owensboro, KY distribution facility, uncertainties regarding the transfer of the Company's manufacturing facilities to new facilities in Mexico, the Company's ability to consummate and successfully integrate acquired businesses, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, the Company's ability to compete successfully without any significant degradation in its margin rates, seasonal fluctuations in business levels, control of the Company by the Croatti family and general economic conditions. 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. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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 $170 million unsecured line of credit with a syndicate of banks. Under the line of credit, the Company may borrow funds at variable interest rates based on the Eurodollar rate or the bank's money market rate, as selected by the Company. QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the results of operations for each of the quarters within the years ended August 26, 2000 and August 28, 1999. (In thousands, except per share data) First Second Third Fourth 2000 Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------ Revenues $131,790 $130,283 $134,497 $132,156 Income before income taxes 8,807 6,363 8,869 8,005 Net income 5,460 3,945 5,499 4,964 Weighted average shares outstanding 19,690 19,664 19,664 19,664 Net income per share $ 0.28 $ 0.20 $ 0.28 $ 0.25 - ------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------ Common Stock Prices and Dividends Per Share for the Years Ended August 26, 2000 and August 28, 1999: Price Per Share Dividends Per Share Class B Common Common 2000 High Low Stock Stock - ------------------------------------------------------------------------- First Quarter $15.875 $10.188 $ 0.030 $0.0375 Second Quarter 15.313 10.250 0.030 0.0375 Third Quarter 11.750 8.000 0.030 0.0375 Fourth Quarter 11.125 7.438 0.030 0.0375 ========================================================================= 1999 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 ========================================================================= 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 October 31, 2000 were 148 and 21 respectively. UniFirst Corporation 2000 Annual Report www.unifirst.com

1 Exhibit 21 List of subsidiaries of the Company: UniTech Services Group, Inc. 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 Euro Nuclear Services B.V. ENS Nuklear Services, GmbH Durawear Manufacturing Corp. Staple Manufacturing Corp. UniFirst S.A. de C.V. Uniformes de San Luis S.A. de C.V. RC Air, LLC

1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated October 31, 2000 incorporated by reference or included in this Form 10-K, into the Company's previously filed Registration Statements, File Numbers 33-60781 and 333-96097. ARTHUR ANDERSEN LLP Boston, Massachusetts November 22, 2000

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF UNIFIRST CORPORATION FOR THE FISCAL YEAR ENDED AUGUST 26, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS YEAR AUG-26-2000 AUG-29-1999 AUG-26-2000 1 7,137 0 57,125 3,110 27,598 148,305 454,037 191,704 500,150 82,203 124,735 0 0 2,076 269,096 500,150 528,726 528,726 489,482 489,482 0 0 7,200 32,044 12,176 19,868 0 0 0 19,868 1.01 1.01