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Mail Stop 0407
February 18, 2005
Via U.S. Mail and Fax
John B. Bartlett
Chief Financial Officer
UniFirst Corporation
68 Jonspin Road
Wilmington, MA 01887
RE: UniFirst Corporation
Form 10-K for the fiscal year ended August 28, 2004
Filed November 12, 2004
File No. 001-08504
Dear Mr. Bartlett:
We have reviewed the above referenced filing and have the
following comments. We have limited our review to only your
financial statements and related disclosures and will make no
further
review of your documents. As such, all persons who are
responsible
for the adequacy and accuracy of the disclosure are urged to be
certain that they have included all information required pursuant
to
the Securities Exchange Act of 1934. Please address the following
comments in future filings. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a future
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the year ending August 28, 2004
Item 6. Selected Financial Data
1. In future filings, please briefly describe your business
combinations that would materially affect the comparability of the
information reflected in selected financial data, or cross-
reference
to the appropriate footnote of the consolidated financials. See
Item
301(b)(2) of Regulation S-K.
Item 7. Management`s Discussion and Analysis
2. We refer you to your "Environmental and Other Contingencies"
disclosures. MD&A disclosures made pursuant to the guidance
provided
by the SEC should be sufficiently specific to enable a reader to
understand the scope of the contingencies affecting the
registrant.
In this regard, in future filings, your discussion of historical
and
anticipated environmental expenditures should, to the extent
material, describe separately (a) recurring costs associated with
managing hazardous substances and pollution in on-going
operations,
(b) capital expenditures to limit or monitor hazardous substances
or
pollutants, (c) mandated expenditures to remediate previously
contaminated sites, and (d) other infrequent or non-recurring
clean-
up expenditures that can be anticipated but which are not required
in
the present circumstances. Disaggregated disclosure that describes
accrued and reasonably likely losses with respect to particular
environmental sites that are individually material may be
necessary
for a full understanding of these contingencies.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
Please add to your qualitative information about market risk
detailed
informa
(i) The registrant`s primary market risk exposures;
(ii) How those exposures are managed. Such descriptions shall
include, but not be limited to, a discussion of the objectives,
general strategies, and instruments, if any, used to manage those
exposures; and
(iii) Changes in either the registrant`s primary market risk
exposures or how those exposures are managed, when compared to
what
was in effect during the most recently completed fiscal year and
what
is known or expected to be in effect in future reporting periods.
3. Chose from among the three disclosure formats provided by Item
305(a) and include more detailed quantitative information about
foreign currency and interest rate market risk in future filings.
Item 8. Financial Statements and Supplementary Data
Consolidated Statements of Operations
4. We note from your revenue descriptions in your general business
section of Item 1 and in your MD&A that approximately 85% of your
revenues in 2004 were generated from rental activity and the
remaining 15% was generated from services and sales of garments.
As
required by Rule 5-03(b)(1) of Regulation S-X, in future filings,
please revise your presentation in future filings to disclose
separately revenues from rentals as compared to those generated
from
service activity and other. Concomitantly, please state
separately
expenses related to rental revenues from those related to services
and other. See Rule 5-03(b)(2) of Regulation S-X. Please revise or
advise.
5. In future filings, please revise the statements to comply with
SAB
Topic 11:B. We note that you exclude depreciation and
amortization
from the line item for "operating costs".
Note 1. Summary of Critical and Significant Accounting Policies
Environmental and Other Contingencies
6. Please tell us the basis of using a credit-adjusted risk-free
rate
of 4.0% for time periods ranging from 10 to 30 years when
discounting
environmental contingencies. For example, in comparison, we note
that
the credit-adjusted risk-free rates for discounting asset
retirement
obligations, which range from 1 to 30 years, range from 3.00% to
7.25%.
7. We note that you recognize environmental liabilities on a
discounted basis. Beside disclosing the discount rate used, in
future
filings please disclose the following:
* The expected payment for each of the five succeeding years and
the
aggregate amount thereafter;
* A reconciliation of the expected aggregate undiscounted amount
to
amounts recognized in the balance sheet;
* An explanation of material changes since the prior balance sheet
date in the expected aggregate amount of the obligations (other
than
those resulting from a pay down of the obligation).
Please refer to SAB Topic 5Y.
Note 2. Acquisitions
8. In connection with the Textilease purchase, describe for us in
more detail, how you came to assign goodwill to one "reportable
segment." For example, explain to us whether there are any
reporting
units as contemplated by paragraph 50 of SFAS 141 in your varied
list
of business operations describing the one reportable segment in
the
fourth paragraph of Note 2 - Acquisitions.
Note 7. Goodwill and Other Intangibles Assets
9. Using the guidance in paragraphs 30-31 of SFAS 142, tell us in
detail how you determined your reporting unit(s) for purposes of
performing you goodwill impairment test.
Note 9. Commitments and Contingencies
10. Staff Accounting Bulletin 5:Y was issued to provide our
interpretation of current accounting literature and disclosure
requirements and serve as guidance for public companies in their
disclosures regarding contingent liabilities. In that SAB, we
clearly
state that we believe that environmental liabilities typically are
of
such significance that detailed disclosures regarding judgments
and
assumptions underlying the recognition and measurement of the
liabilities are necessary to prevent the financial statements from
being unclear and to inform readers fully regarding the range of
reasonably possible outcomes that could have a material effect on
a
registrant`s financial condition, results of operations, or
liquidity.
Among the disclosures called for in the SAB are as follows:
o Circumstances affecting the reliability and precision of loss
estimates;
o The extent to which unasserted claims are reflected in any
accrual
or may affect the magnitude of the contingency;
o Uncertainties with respect to joint and several liability that
may
affect the magnitude of the contingency, including disclosure of
the
aggregate expected cost to remediate particular sites that are
individually material if the likelihood of contribution by the
other
significant parties has not been established;
o Disclosure of the nature and terms of cost-sharing arrangement
with
other parties;
o The extent to which disclosed but unrecognized contingent losses
are expected to be recoverable through insurance, indemnification
arrangements, or other sources, with disclosure of any material
limitations of that recovery;
o Uncertainties regarding the legal sufficiency of insurance
claims
or solvency of insurance carriers;
o The time frame over which the accrued or presently unrecognized
amounts may be paid out; and
o Material components of the accruals and significant assumptions
underlying estimates.
Please advise or revise in future filings.
Note 13. Segment Reporting
11. Using the guidance in paragraph 10 of SFAS 131, tell us how
you
determine your operating segments and how your Chief Operating
Decision Maker reviews this information. Specifically discuss the
measure of profit and loss reviewed by the chief operating
decision
maker. If you have aggregated several operating segments into one
reportable segment, tell us how determined that you met the
criteria
for aggregation in paragraph 17 of SFAS 131, including the
requirement that the segments have similar economic
characteristics.
Schedule II -Valuation and Qualifying Accounts
12. In future filings, please provide all valuation and qualifying
accounts and reserves as is required by, and in accordance with,
Rule
12-09 of Regulation S-X. For example, as you have material amounts
of
inventories and rental merchandise in service, provide the
required
information for reserves for excess and obsolete inventory.
Form 10-Q for the quarters ended November 27, 2004
13. Please comply with all of the above comments in your future
filings as applicable.
* * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please furnish
a
letter that keys your responses to our comments and provides any
requested supplemental information. Please file your response
letter
on EDGAR. You may contact Joe Cascarano, Staff Accountant, at
(202)
824-5357 or Joe Kempf, Senior Staff Accountant, at (202) 942-1979
if
you have questions.
Sincerely,
Larry Spirgel
Assistant Director
John B. Bartlett
UniFirst Corporation
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