Note 14 - Segment Reporting

6 Months Ended

Feb. 28, 2015

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

14. Segment Reporting

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

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

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

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

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

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

	US and
	Canadian											Subtotal
	Rental and					Net Interco						Core Laundry						Specialty
Thirteen weeks ended	Cleaning			MFG		MFG Elim			Corporate			Operations			Garments			First Aid		Total
February 28, 2015
Revenues	$	327,950		$	50,844	$	(50,844	)	$	4,118		$	332,068		$	18,661		$	10,733	$	361,462
Income (loss) from operations	$	51,691		$	17,003	$	(443	)	$	(27,327	)(a)	$	40,924		$	(435	)	$	1,062	$	41,551
Interest (income) expense, net	$	(901	)	$	—	$	—		$	196		$	(705	)	$	—		$	—	$	(705	)
Income (loss) before taxes	$	52,605		$	17,054	$	(443	)	$	(27,654	)	$	41,562		$	(1,248	)	$	1,062	$	41,376
March 1, 2014
Revenues	$	309,342		$	42,101	$	(42,101	)	$	3,839		$	313,181		$	20,406		$	10,380	$	343,967
Income (loss) from operations	$	46,794		$	14,299	$	362		$	(22,012	)	$	39,443		$	312		$	969	$	40,724
Interest (income) expense, net	$	(865	)	$	—	$	—		$	204		$	(661	)	$	—		$	—	$	(661	)
Income (loss) before taxes	$	47,640		$	14,270	$	362		$	(22,266	)	$	40,006		$	249		$	969	$	41,224
Twenty-six weeks ended
February 28, 2015
Revenues	$	658,851		$	102,672	$	(102,672	)	$	9,064		$	667,915		$	41,137		$	22,771	$	731,823
Income (loss) from operations	$	114,990		$	35,234	$	(2,132	)	$	(50,295	)(a)	$	97,797		$	1,833		$	2,510	$	102,140
Interest (income) expense, net	$	(1,671	)	$	—	$	—		$	350		$	(1,321	)	$	—		$	—	$	(1,321	)
Income (loss) before taxes	$	116,689		$	35,326	$	(2,132	)	$	(50,901	)	$	98,982		$	718		$	2,510	$	102,210
March 1, 2014
Revenues	$	617,784		$	86,334	$	(86,334	)	$	7,403		$	625,187		$	44,849		$	20,635	$	690,671
Income (loss) from operations	$	105,153		$	29,873	$	(902	)	$	(42,309	)	$	91,815		$	3,071		$	1,478	$	96,364
Interest (income) expense, net	$	(1,595	)	$	—	$	—		$	377		$	(1,218	)	$	—		$	—	$	(1,218	)
Income (loss) before taxes	$	106,727		$	29,763	$	(902	)	$	(42,735	)	$	92,853		$	3,249		$	1,478	$	97,580

(a) The Company increased its environmental contingency reserves during its second fiscal quarter of 2015 by $3.6 million. This increase was due mainly to additional costs the Company expects to incur associated with the construction of a planned municipal transit station in the area of its Somerville site. To a lesser extent, the Company’s reserves also were increased due to the effect of lower interest rates on the discounting of its environmental liabilities.