Vestis (VSTS) - 2025 Q3 - Quarterly Report

Cover Page and Filing Information This section provides essential filing details for Vestis Corporation's quarterly report Filing Details Vestis Corporation filed its 10-Q quarterly report for the period ended June 27, 2025, with stock ticker VSTS listed on the NYSE, and had 131,839,915 shares of common stock outstanding as of August 1, 2025 - Vestis Corporation filed its 10-Q quarterly report for the period ended June 27, 2025[2] Filing Details | Indicator | Detail | | :--- | :--- | | Filing Type | 10-Q Quarterly Report | | Quarter End Date | June 27, 2025 | | Commission File Number | 001-41783 | | Registrant Name | Vestis Corporation | | State of Incorporation | Delaware | | Stock Ticker | VSTS | | Registered Exchange | New York Stock Exchange | | Shares Outstanding (as of August 1, 2025) | 131,839,915 shares | | Accelerated Filer Category | Large accelerated filer | | Shell Company | No | TABLE OF CONTENTS This section lists all chapters and items included in the quarterly report for easy navigation Cautionary Note Regarding Forward-Looking Statements This section warns readers about the inherent uncertainties and risks associated with forward-looking statements in the report Forward-Looking Statements This quarterly report contains forward-looking statements regarding the company's expectations, assumptions, or projections for future operations, financial performance, growth strategies, product development, regulatory approvals, competitive position, and expenditures - The report's forward-looking statements cover expectations for future operations, financial performance, growth strategies, product development, regulatory approvals, competitive position, and expenditures[9] - Forward-looking statements are not guarantees of future performance, and actual results may differ materially from expectations due to various risks and uncertainties[9] Risks and Uncertainties The company faces various risks and uncertainties, including adverse macroeconomic conditions, customer attrition, industry competition, debt obligations, rising costs, supply chain disruptions, and legal proceedings - Adverse macroeconomic conditions, including inflationary pressures and higher interest rates[10] - Failure to retain existing customers, renew existing contracts, and obtain new customer contracts, potentially leading to continued stock volatility and future goodwill impairment charges[10] - Industry competition[10] - Ability to comply with certain financial ratios, tests, and covenants in credit agreements, including the net leverage ratio[10] - High debt and debt service capacity, and reliance on accounts receivable securitization facilities[10] - Increased fuel and energy costs and other supply chain challenges and disruptions[10] - Imposition of new or increased tariffs and ongoing changes in U.S. and foreign government trade policies[10] - Increased operating costs and barriers to cost recovery due to pricing and cancellation terms of support service contracts[10] - Customer decisions to reduce outsourcing or use preferred suppliers[10] - Outcomes of legal proceedings the company may face[10] - Risks related to product suppliers[10] - Customer challenges to contracts[10] - Currency risks and other risks associated with international operations, including compliance with extensive laws and regulations[10] - Increased labor costs or inability to hire and retain key or sufficiently qualified personnel[10] - Continued or further unionization of the workforce or any labor strikes[10] - Expansion strategies and the ability to successfully integrate acquired businesses, along with associated costs and time[10] - Natural disasters, global catastrophes, climate change, pandemics, and other adverse events[10] - Liabilities arising from participation in multiemployer defined benefit pension plans[10] - Liabilities related to non-compliance with applicable laws or other governmental regulations[10] - Environmental, wage and hour, and government contract-related laws and government regulations[10] - Unexpected changes in tax laws[10] - New interpretations or enforcement changes of government regulatory frameworks[10] - Cybersecurity incidents or disruptions in computer system availability or privacy breaches[10] - Stakeholder expectations related to environmental, social, and governance (ESG) considerations, which may expose the company to liabilities and other adverse business impacts[10] - Aramark's failure to perform its obligations under various separation agreements related to the spin-off[11] - The IRS determining that the spin-off or certain related transactions are taxable[11] PART I - Financial Information This part presents the unaudited consolidated financial statements and management's discussion and analysis of the company's performance Item 1. Financial Statements (Unaudited) This section presents Vestis Corporation's unaudited consolidated financial statements, including statements of income, comprehensive income, balance sheets, statements of changes in equity, and cash flows, along with detailed notes Consolidated Statements of Income (Loss) For the three and nine months ended June 27, 2025, Vestis Corporation experienced year-over-year declines in both revenue and operating income, resulting in net losses for both periods compared to net income in the prior year Consolidated Statements of Income (Loss) (three months ended) | Indicator (thousand dollars) | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 673,799 | 698,248 | (24,449) | (3.5%) | | Operating Expenses | 648,838 | 660,725 | (11,887) | (1.8%) | | Operating Income (Loss) | 24,961 | 37,523 | (12,562) | (33.5%) | | Interest Expense, Net | 22,495 | 29,857 | (7,362) | (24.7%) | | Other Expense (Income), Net | 3,215 | (471) | 3,686 | (782.6%) | | Income (Loss) Before Income Taxes | (749) | 8,137 | (8,886) | (109.2%) | | Income Tax Provision (Benefit) | (73) | 3,100 | (3,173) | (102.4%) | | Net Income (Loss) | (676) | 5,037 | (5,713) | (113.4%) | | Earnings (Loss) Per Share - Basic | (0.01) | 0.04 | (0.05) | (125.0%) | | Earnings (Loss) Per Share - Diluted | (0.01) | 0.04 | (0.05) | (125.0%) | Consolidated Statements of Income (Loss) (nine months ended) | Indicator (thousand dollars) | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 2,022,828 | 2,121,539 | (98,711) | (4.7%) | | Operating Expenses | 1,976,038 | 1,993,364 | (17,326) | (0.9%) | | Operating Income (Loss) | 46,790 | 128,175 | (81,385) | (63.5%) | | Interest Expense, Net | 67,921 | 96,715 | (28,794) | (29.8%) | | Other Expense (Income), Net | 12,270 | (1,841) | 14,111 | (766.5%) | | Income (Loss) Before Income Taxes | (33,401) | 33,301 | (66,702) | (200.3%) | | Income Tax Provision (Benefit) | (5,727) | 10,033 | (15,760) | (157.1%) | | Net Income (Loss) | (27,674) | 23,268 | (50,942) | (218.9%) | | Earnings (Loss) Per Share - Basic | (0.21) | 0.18 | (0.39) | (216.7%) | | Earnings (Loss) Per Share - Diluted | (0.21) | 0.18 | (0.39) | (216.7%) | Consolidated Statements of Comprehensive Income (Loss) For the three and nine months ended June 27, 2025, the company's comprehensive income (loss) was influenced by net income (loss) and foreign currency translation adjustments, resulting in comprehensive income for the three-month period and a comprehensive loss for the nine-month period Consolidated Statements of Comprehensive Income (Loss) (three months ended) | Indicator (thousand dollars) | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | | :--- | :--- | :--- | | Net Income (Loss) | (676) | 5,037 | | Other Comprehensive Income (Loss), Net of Tax: | | | | Foreign Currency Translation Adjustments | 9,019 | (3,699) | | Other Comprehensive Income (Loss), Net of Tax | 9,019 | (3,699) | | Comprehensive Income (Loss) | 8,343 | 1,338 | Consolidated Statements of Comprehensive Income (Loss) (nine months ended) | Indicator (thousand dollars) | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | | :--- | :--- | :--- | | Net Income (Loss) | (27,674) | 23,268 | | Other Comprehensive Income (Loss), Net of Tax: | | | | Foreign Currency Translation Adjustments | 7,100 | (3,508) | | Other Comprehensive Income (Loss), Net of Tax | 7,100 | (3,508) | | Comprehensive Income (Loss) | (20,574) | 19,760 | Consolidated Balance Sheets As of June 27, 2025, the company's total assets slightly decreased, with cash and cash equivalents declining, while inventories and net rental merchandise increased; total liabilities remained relatively stable, and total equity decreased Consolidated Balance Sheets | Indicator (thousand dollars) | As of June 27, 2025 | As of September 27, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and Cash Equivalents | 23,743 | 31,010 | | Accounts Receivable, Net | 175,789 | 177,271 | | Inventories, Net | 186,992 | 164,913 | | Rental Merchandise, Net | 400,374 | 396,094 | | Total Current Assets | 820,602 | 787,389 | | Property and Equipment, Net | 652,495 | 670,858 | | Goodwill | 963,027 | 963,844 | | Other Intangible Assets, Net | 196,370 | 212,773 | | Operating Lease Right-of-Use Assets | 86,539 | 73,530 | | Other Assets | 189,058 | 223,993 | | Total Assets | 2,908,091 | 2,932,387 | | Liabilities | | | | Total Current Liabilities | 445,866 | 456,102 | | Long-Term Borrowings | 1,156,457 | 1,147,733 | | Non-Current Finance Lease Obligations | 119,014 | 115,325 | | Non-Current Operating Lease Liabilities | 78,239 | 66,111 | | Deferred Income Taxes | 175,069 | 191,465 | | Other Non-Current Liabilities | 51,218 | 52,600 | | Total Liabilities | 2,025,863 | 2,029,336 | | Equity | | | | Common Stock | 1,318 | 1,315 | | Additional Paid-in Capital | 937,051 | 928,082 | | Retained Earnings (Accumulated Deficit) | (34,330) | 2,565 | | Accumulated Other Comprehensive Loss | (21,811) | (28,911) | | Total Equity | 882,228 | 903,051 | | Total Liabilities and Equity | 2,908,091 | 2,932,387 | Consolidated Statements of Changes in Equity As of June 27, 2025, the company's total equity was $882,228 thousand, a decrease from $903,051 thousand as of September 27, 2024, primarily due to net losses and dividend payments, partially offset by other comprehensive income and share-based compensation expenses Consolidated Statements of Changes in Equity | Indicator (thousand dollars) | As of September 27, 2024 | As of June 27, 2025 | | :--- | :--- | :--- | | Total Equity | 903,051 | 882,228 | | Net Income (Loss) | 2,565 (Retained Earnings) | (34,330) (Accumulated Deficit) | | Dividends Paid | (4,610) (as of December 27, 2024) | (4,611) (as of March 28, 2025) | | Other Comprehensive Income (Loss) | (3,157) (as of December 27, 2024) | 9,019 (as of June 27, 2025) | | Share-Based Compensation Expense | 5,180 (as of December 27, 2024) | 7,977 (as of March 28, 2025) | | Common Stock Issued | 2 (as of December 27, 2024) | 1 (as of March 28, 2025) | | Taxes Related to Share-Based Payment Arrangements | (1,708) (as of December 27, 2024) | (90) (as of March 28, 2025) | - As of June 27, 2025, the accumulated deficit was $34,330 thousand, compared to retained earnings of $2,565 thousand as of September 27, 2024, reflecting the impact of net losses during the period[23] - As of June 27, 2025, accumulated other comprehensive loss was $21,811 thousand, an improvement from $28,911 thousand as of September 27, 2024, primarily due to gains from foreign currency translation adjustments[23] Consolidated Statements of Cash Flows For the nine months ended June 27, 2025, cash flow from operating activities significantly decreased, cash outflow from investing activities reduced, and cash outflow from financing activities also substantially decreased, leading to a reduction in cash and cash equivalents at period-end Consolidated Statements of Cash Flows | Cash Flow Category (thousand dollars) | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | 33,302 | 176,200 | (142,898) | (81.1%) | | Net Cash from Investing Activities | (5,521) | (50,787) | 45,266 | (89.1%) | | Net Cash from Financing Activities | (35,117) | (132,309) | 97,192 | (73.5%) | | Effect of Exchange Rate Changes | 69 | (57) | 126 | (221.1%) | | Decrease in Cash and Cash Equivalents | (7,267) | (6,953) | (314) | 4.5% | | Cash and Cash Equivalents at Beginning of Period | 31,010 | 36,051 | (5,041) | (14.0%) | | Cash and Cash Equivalents at End of Period | 23,743 | 29,098 | (5,355) | (18.4%) | Notes to Consolidated Financial Statements This section provides detailed notes to the consolidated financial statements, covering key financial and operational details such as the company's business nature, accounting policies, significant estimates, borrowings, leases, share-based compensation, commitments and contingencies, and segment information NOTE 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION Vestis Corporation is a leading provider of uniforms and workplace supplies in the U.S. and Canada, offering uniform rental, service, and direct sale, as well as workplace supplies rental and management services - Vestis Corporation is a leading provider of uniforms and workplace supplies in the U.S. and Canada, serving various industries including manufacturing, hospitality, retail, government, automotive, healthcare, food processing, and pharmaceuticals[33] - Uniforms Business: Generates revenue through uniform rental, service, and direct sales, encompassing design, sourcing, manufacturing, customization, personalization, delivery, laundering, sanitization, repair, and replacement[34] - Workplace Supplies Business: Generates revenue through rental and management services for restroom supplies, first aid and safety products, floor mats, towels, and linens[34] - The company completed its spin-off from Aramark on September 30, 2023, becoming an independent public company with its common stock listed on the New York Stock Exchange under the ticker "VSTS"[35] Accounts Receivable Allowance and Inventory Reserve | Indicator (thousand dollars) | As of June 27, 2025 | As of September 27, 2024 | | :--- | :--- | :--- | | Allowance for Credit Losses on Accounts Receivable | 30,795 | 19,804 | | Inventory Reserve | 17,000 | 15,700 | - The company sold its equity interest in Aramark Uniform Services Japan Corporation in the first quarter of fiscal year 2025, realizing a gain of $36.8 million and recognizing a loss of $2.2 million[52] NOTE 2. SEVERANCE The company's severance expenses significantly increased during the nine months of fiscal year 2025, primarily due to the departure of certain senior executives, leading to a rise in accrued unpaid severance obligations Severance Expense and Payments | Indicator (thousand dollars) | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | | :--- | :--- | :--- | :--- | :--- | | Severance Expense | 400 | 1,000 | 12,400 | 1,400 | | Severance Payments | 2,600 | 1,100 | 8,700 | 2,900 | - As of June 27, 2025, the company's unpaid severance obligation was approximately $6.4 million, compared to $2.7 million as of September 27, 2024[58] NOTE 3. GOODWILL AND OTHER INTANGIBLE ASSETS During the quarter ended June 27, 2025, the company identified potential triggering events for goodwill impairment, but quantitative tests showed that the fair value of each reporting unit exceeded its carrying value, thus no goodwill impairment was recognized - During the quarter ended June 27, 2025, the company identified potential triggering events for goodwill impairment due to declining financial performance and a sustained decrease in stock price[60] - Quantitative goodwill impairment tests indicated that the estimated fair value of each reporting unit exceeded its carrying value, resulting in no goodwill impairment recognized as of the test date[62] Goodwill Changes (thousand dollars) | Reporting Unit | As of September 27, 2024 | Exchange Rate Impact | As of June 27, 2025 | | :--- | :--- | :--- | :--- | | United States | 896,237 | — | 896,237 | | Canada | 67,607 | (817) | 66,790 | | Total | 963,844 | (817) | 963,027 | Other Intangible Assets (thousand dollars) | Category | As of June 27, 2025 (Net) | As of September 27, 2024 (Net) | | :--- | :--- | :--- | | Customer Relationship Assets | 179,984 | 196,188 | | Trademarks | 16,386 | 16,585 | | Total | 196,370 | 212,773 | - Amortization expense for intangible assets was approximately $6.8 million and $20.0 million for the three and nine months ended June 27, 2025, respectively[63] NOTE 4. BORROWINGS The company's total long-term borrowings slightly increased, primarily comprising senior secured term loans, and on May 1, 2025, the company amended its credit agreement, raising the net leverage ratio cap and restricting dividends and share repurchases Long-Term Borrowings, Net (thousand dollars) | Borrowing Type | As of June 27, 2025 | As of September 27, 2024 | | :--- | :--- | :--- | | Senior Secured Term Loan (due September 2028) | 477,500 | 497,500 | | Senior Secured Term Loan (due February 2031) | 665,000 | 665,000 | | Senior Secured Revolving Credit Facility (due September 2028) | 28,000 | — | | Total Principal Amount of Debt Issued | 1,170,500 | 1,162,500 | | Unamortized Debt Issuance Costs | (12,589) | (13,164) | | Unamortized Discount | (1,454) | (1,603) | | Long-Term Borrowings, Less Current Portion | 1,156,457 | 1,147,733 | - On May 1, 2025, the company amended its credit agreement, increasing the net leverage ratio cap to 5.25x for any fiscal quarter ending before July 3, 2026, and restricting all dividends and share repurchases until specific financial conditions are met[67][70][71] - As of June 27, 2025, the company had $28 million outstanding on its revolving credit facility, with $266.3 million available for borrowing, and was in compliance with all credit agreement terms[73] NOTE 5. DERIVATIVE INSTRUMENTS The company previously used derivative instruments to manage fuel price fluctuation risks, but all derivatives matured by September 27, 2024, and as of June 27, 2025, the company had no outstanding fuel contracts - The company previously used gasoline, diesel, and natural gas fuel agreements to limit exposure to fuel price fluctuations, but all derivative instruments matured by September 27, 2024[74] - As of June 27, 2025, the company had no outstanding fuel contracts, and for the comparable period in 2024, the profit and loss impact of fuel agreements was recorded in service costs[76][77][78] NOTE 6. REVENUE RECOGNITION The company's revenue primarily derives from route service contracts for uniforms and workplace supplies (approximately 94% of total revenue), with the remainder from direct sales of uniforms Revenue by Source (thousand dollars) | Revenue Source | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | | :--- | :--- | :--- | :--- | :--- | | United States | | | | | | Uniforms | 237,678 | 255,401 | 716,601 | 792,459 | | Workplace Supplies | 375,624 | 381,438 | 1,124,491 | 1,139,677 | | Total United States | 613,302 | 636,839 | 1,841,092 | 1,932,136 | | Canada | | | | | | Uniforms | 22,749 | 23,603 | 67,642 | 73,831 | | Workplace Supplies | 37,748 | 37,806 | 114,094 | 115,572 | | Total Canada | 60,497 | 61,409 | 181,736 | 189,403 | | Total Revenue | 673,799 | 698,248 | 2,022,828 | 2,121,539 | - Approximately 94% of the company's total revenue is derived from route service contracts, with the remainder primarily from direct sales of uniforms[80] - As of June 27, 2025, the company's deferred sales commission asset was $106.6 million, compared to $105.8 million as of September 27, 2024[86] NOTE 7. LEASES The company primarily has lease arrangements for real estate, vehicles, and equipment, categorized as operating and finance leases Lease Costs (thousand dollars) | Lease Type | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | | :--- | :--- | :--- | :--- | :--- | | Operating Lease Costs | 11,271 | 11,019 | 33,398 | 31,748 | | Finance Lease Costs | 10,604 | 9,522 | 31,074 | 27,635 | Supplemental Cash Flow Information Related to Leases (thousand dollars) | Cash Flow Category | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | | :--- | :--- | :--- | | Operating Cash Flow for Operating Leases | 18,391 | 18,169 | | Operating Cash Flow for Finance Leases | 5,340 | 4,241 | | Financing Cash Flow for Finance Leases | 25,630 | 22,572 | Weighted-Average Lease Information | Indicator | As of June 27, 2025 | As of September 27, 2024 | | :--- | :--- | :--- | | Weighted-Average Remaining Operating Lease Term (years) | 5.9 | 6.1 | | Weighted-Average Remaining Finance Lease Term (years) | 5.6 | 5.7 | | Weighted-Average Operating Lease Discount Rate | 6.7% | 6.1% | | Weighted-Average Finance Lease Discount Rate | 4.9% | 4.6% | NOTE 8. SHARE-BASED COMPENSATION The company granted share-based compensation to executives and employees, including time-based option awards (TBOs), restricted stock units (RSUs), and performance stock units (PSUs) Share-Based Compensation Expense (thousand dollars) | Incentive Type | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | | :--- | :--- | :--- | :--- | :--- | | TBOs | 615 | 1,015 | 4,464 | 3,201 | | RSUs | 1,274 | 1,704 | 6,083 | 5,216 | | PSUs | (4,037) | 1,137 | 462 | 3,439 | | DSUs | — | — | — | 1,447 | | Total | (2,148) | 3,856 | 11,009 | 13,303 | Shares Granted and Weighted-Average Grant Date Fair Value for the Nine Months Ended June 27, 2025 | Incentive Type | Shares Granted (thousand shares) | Weighted-Average Grant Date Fair Value (dollars per share) | | :--- | :--- | :--- | | TBOs | 982 | 5.49 | | RSUs | 1,139 | 11.32 | | PSUs | 324 | 16.64 | | Total | 2,445 | | - The fair value of TBOs is estimated using the Black-Scholes option pricing model[94] - The fair value of RSUs is based on the fair value of Vestis common stock[96] - The fair value of PSUs is estimated using a Monte Carlo simulation pricing model[98] NOTE 9. COMMITMENTS AND CONTINGENCIES The company faces multiple legal proceedings, environmental investigations and remediation activities, and asset retirement obligations, with environmental liabilities totaling $25.7 million and asset retirement obligations at $12.1 million as of June 27, 2025 - The company is involved in various legal actions, proceedings, and investigations, environmental investigations and remediation activities, and asset retirement obligations[99][100][102] - As of June 27, 2025, environmental liabilities totaled $25.7 million ($7.5 million current and $18.2 million non-current)[103] - As of June 27, 2025, asset retirement obligations were $12.1 million, recorded in other non-current liabilities[105] - The company reached a settlement in the Cake Love Co. class action lawsuit, paying $3.1 million[107] - The company faces multiple shareholder class action and derivative lawsuits alleging false or misleading statements related to its business, operations, pricing practices, financial performance, and outlook, as well as breaches of fiduciary duty; the company will vigorously defend these matters but cannot predict their ultimate outcome[109][110][111] NOTE 10. BUSINESS SEGMENTS The company manages and evaluates business activities based on geographic location, with two reportable segments: U.S. and Canada, both experiencing declines in revenue and operating income for the three and nine months ended June 27, 2025 - The company has two reportable segments: United States and Canada, both offering uniform programs, restroom supplies management services, first aid and safety products, and other ancillary items[112] Revenue by Segment (thousand dollars) | Segment | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | | :--- | :--- | :--- | :--- | :--- | | United States | 613,302 | 636,839 | 1,841,092 | 1,932,136 | | Canada | 60,497 | 61,409 | 181,736 | 189,403 | | Total Revenue | 673,799 | 698,248 | 2,022,828 | 2,121,539 | Operating Income by Segment (thousand dollars) | Segment | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | | :--- | :--- | :--- | :--- | :--- | | United States | 40,684 | 64,520 | 117,270 | 209,796 | | Canada | 2,518 | 1,293 | 6,508 | 6,824 | | Total Segment Operating Income | 43,202 | 65,813 | 123,778 | 216,620 | | Corporate | (18,241) | (28,290) | (76,988) | (88,445) | | Total Operating Income (Loss) | 24,961 | 37,523 | 46,790 | 128,175 | NOTE 11. EARNINGS (LOSS) PER SHARE For the three and nine months ended June 27, 2025, the company reported basic and diluted losses per share of $0.01 and $0.21, respectively, compared to earnings per share of $0.04 and $0.18 in the prior year Earnings (Loss) Per Share Calculation | Indicator | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) (thousand dollars) | (676) | 5,037 | (27,674) | 23,268 | | Basic Weighted-Average Shares Outstanding (thousand shares) | 131,812 | 131,543 | 131,719 | 131,486 | | Diluted Weighted-Average Shares Outstanding (thousand shares) | 131,812 | 131,833 | 131,719 | 131,785 | | Basic Earnings (Loss) Per Share | (0.01) | 0.04 | (0.21) | 0.18 | | Diluted Earnings (Loss) Per Share | (0.01) | 0.04 | (0.21) | 0.18 | - Due to the net loss for the period, share-based compensation awards had no dilutive effect for the three and nine months ended June 27, 2025[116] NOTE 12. INCOME TAXES For the three and nine months ended June 27, 2025, the company's effective tax rates were 9.7% and 17.1%, respectively, both lower than the prior year, primarily influenced by consolidated pre-tax losses, state tax impacts, and permanent book/tax differences Effective Tax Rates | Period | As of June 27, 2025 | As of June 28, 2024 | | :--- | :--- | :--- | | Three Months | 9.7% | 38.1% | | Nine Months | 17.1% | 30.1% | - Effective tax rate differences are primarily attributable to consolidated pre-tax losses, state tax impacts, permanent book/tax differences such as non-deductible executive compensation and meals and entertainment, federal tax credits, and higher income tax rates in international jurisdictions where the company operates[117] - The "One Big Beautiful Bill Act," enacted in the U.S. on July 4, 2025, includes a permanent extension of 100% bonus depreciation and repeal of mandatory capitalization of domestic R&D expenditures, but the company anticipates no significant impact on its 2025 annual effective tax rate[118] NOTE 13. RELATED PARTIES Following its spin-off from Aramark on September 30, 2023, the company entered into several agreements with Aramark, including a separation and distribution agreement, transition services agreement, tax matters agreement, and employee matters agreement - Separation and Distribution Agreement: Governs the rights and obligations of both parties following the spin-off, including asset transfers, liability assumptions, and claims indemnification procedures[119] - Transition Services Agreement: Outlines the provision of administrative, IT, cybersecurity support, financial, tax, and governmental functions between the parties during a transition period, which was completed on September 27, 2024[120] - Tax Matters Agreement: Governs the rights and obligations of both parties regarding tax liabilities, benefits, tax returns, and audit control, and restricts the company from taking actions that could affect the tax-free status of the spin-off[121] - Employee Matters Agreement: Governs the allocation of liabilities and responsibilities related to employment matters, employee compensation, and benefit plans[122] - For the three and nine months ended June 27, 2025, the company made no payments to Aramark and had no outstanding receivables or payables[123] NOTE 14. ACCOUNTS RECEIVABLE SECURITIZATION FACILITY On August 2, 2024, the company established a three-year, $250 million accounts receivable securitization facility (A/R Facility) to obtain cash by selling receivables, used to repay a portion of existing term loans - On August 2, 2024, the company established a three-year, $250 million accounts receivable securitization facility (A/R Facility) to repay a portion of existing term loans by selling receivables[124] Accounts Receivable Securitization Facility Data (thousand dollars) | Indicator | As of June 27, 2025 | As of September 27, 2024 | | :--- | :--- | :--- | | Total Accounts Receivable Sold and Derecognized | 211,900 | 229,000 | | Unsold Accounts Receivable Pledged as Collateral | 159,600 | 157,800 | - For the three and nine months ended June 27, 2025, the company incurred $3.2 million and $9.7 million in fees, respectively, from the A/R Facility, recorded in other expense (income), net[126] NOTE 15. EQUITY As of June 27, 2025, the company's accumulated other comprehensive loss was $21.8 million, an improvement from $28.9 million as of September 27, 2024, primarily due to foreign currency translation adjustments Accumulated Other Comprehensive Loss Changes (thousand dollars) | Period | Foreign Currency Translation | Pension Related | Total | | :--- | :--- | :--- | :--- | | Balance as of September 27, 2024 | (23,812) | (5,099) | (28,911) | | Other Comprehensive Loss | (2,350) | — | (2,350) | | Amounts Reclassified from Accumulated Other Comprehensive Loss | 9,450 | — | 9,450 | | Balance as of June 27, 2025 | (16,712) | (5,099) | (21,811) | Dividend Payments (thousand dollars) | Period | Dividend Payments | | :--- | :--- | | As of June 27, 2025 (9 months) | 13,822 | | As of June 28, 2024 (9 months) | 9,199 | | As of June 27, 2025 (3 months) | 0 | | As of June 28, 2024 (3 months) | 4,600 | | As of December 27, 2024 (3 months) | 4,610 | | As of March 28, 2025 (3 months) | 4,611 | - Pursuant to the May 1, 2025, amendment to the credit agreement, the company agreed to restrict all dividends and share repurchases until specific financial conditions are met (net leverage ratio less than or equal to 4.50x, or in any fiscal quarter ending after October 2, 2026)[132] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses Vestis Corporation's financial condition and results of operations for the three and nine months ended June 27, 2025, highlighting year-over-year declines in revenue and operating income, resulting in a net loss Company Overview Vestis Corporation is a leading provider of uniforms and workplace supplies in the U.S. and Canada, offering comprehensive uniform programs, restroom supplies management, first aid, and safety products - Vestis Corporation is a leading provider of uniforms and workplace supplies in the U.S. and Canada, offering comprehensive uniform programs, restroom supplies management services, first aid and safety products[137] - The company operates through two reportable segments (U.S. and Canada), competing primarily on product quality, service quality, and price[137][140] - Uniforms Business: Includes the design, sourcing, manufacturing, customization, personalization, delivery, laundering, sanitization, repair, and replacement of uniforms, primarily through weekly rental services and direct sale agreements[138] - Workplace Supplies Business: Includes rental and replenishment services for restroom supplies management, first aid and safety products, floor mats, towels, and linens[139] Fiscal Year The company's fiscal year is a 52 or 53-week period ending on the Friday closest to September 30, with fiscal year 2024 being 52 weeks and fiscal year 2025 being 53 weeks - The company's fiscal year is a 52 or 53-week period ending on the Friday closest to September 30; fiscal year 2024 was a 52-week period, and fiscal year 2025 will be a 53-week period[141] Key Trends Affecting Our Results of Operations Company performance is influenced by macroeconomic conditions, employment levels, workplace hygiene and safety standards, and business outsourcing trends, with global events causing supply chain disruptions and cost inflation - Industry demand is primarily influenced by macroeconomic conditions, employment levels, workplace hygiene and safety standards, and business outsourcing trends[142] - Global events, including geopolitical conflicts, have contributed to a damaged global economy, supply chain and labor participation disruptions, and significant financial market volatility, leading to labor and energy cost inflation[143] - On May 1, 2025, the company amended its credit agreement, restricting all dividends and share repurchases until specific financial conditions are met[144] - During the quarter ended June 27, 2025, the company's financial performance and sustained stock price decline triggered a goodwill impairment test, though no impairment was recognized[145][146] Results of Operations - Consolidated For the three and nine months ended June 27, 2025, the company's consolidated revenue and operating income both decreased year-over-year, resulting in a net loss, primarily due to business attrition, reduced existing customer revenue, and national account losses Consolidated Results of Operations Overview (thousand dollars) | Indicator | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 673,799 | 698,248 | (24,449) | (3.5%) | | Operating Income (Loss) | 24,961 | 37,523 | (12,562) | (33.5%) | | Net Income (Loss) | (676) | 5,037 | (5,713) | (113.4%) | - Revenue for the three-month period decreased by 3.5%, primarily due to a $18.6 million decline in uniform revenue and a $5.8 million decline in workplace supplies revenue, along with a negative foreign currency impact of $0.8 million[149] - Rental revenue decreased by $18.0 million, mainly due to business attrition exceeding new business by $14.6 million and a $3.4 million decline in existing customer revenue[150] - Direct sale revenue decreased by $5.6 million, primarily impacted by the loss of national customer accounts totaling $4.3 million[152] - Service costs decreased by 0.8%, mainly due to a $7.1 million reduction in delivery costs and a $4.3 million decrease in direct sale merchandise costs, partially offset by a $4.9 million increase in rental merchandise amortization and a $2.5 million increase in plant operating costs[153] - Selling, general, and administrative (SG&A) expenses decreased by 6.0%, primarily due to a $6.0 million reduction in share-based compensation expense, a $3.6 million decrease in separation-related expenses, and a $2.6 million decrease in other administrative costs, partially offset by a $4.5 million increase in selling costs[154] - Net interest expense decreased by 24.7%, primarily due to a reduction in average outstanding debt resulting from the accounts receivable securitization facility[156] - Other expense, net, increased by $3.7 million, primarily due to a $3.2 million loss on the sale of receivables from the accounts receivable securitization facility[156] - Net loss was $0.7 million, a 113.4% decrease year-over-year[156] Consolidated Results of Operations Overview (nine months ended) | Indicator | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 2,022,828 | 2,121,539 | (98,711) | (4.7%) | | Operating Income (Loss) | 46,790 | 128,175 | (81,385) | (63.5%) | | Net Income (Loss) | (27,674) | 23,268 | (50,942) | (218.9%) | - Revenue for the nine-month period decreased by 4.7%, primarily due to an $82.0 million decline in uniform revenue and a $16.7 million decline in workplace supplies revenue, along with a negative foreign currency impact of $6.2 million[159] - Rental revenue decreased by $71.3 million, mainly due to business attrition exceeding new business by $52.8 million and an $18.5 million decline in existing customer revenue[160] - Direct sale revenue decreased by $21.2 million, primarily impacted by the loss of national customer accounts totaling $15.5 million[162] - Service costs decreased by 1.7%, mainly due to a $16.0 million reduction in delivery costs and a $15.3 million decrease in direct sale merchandise costs, partially offset by a $6.9 million increase in rental merchandise amortization[163] - SG&A expenses increased by 1.6%, primarily due to a $19.5 million increase in bad debt expense (including a $15.0 million adjustment to the allowance for credit losses) and an $11.4 million increase in severance expense, partially offset by an $8.4 million decrease in general and administrative salaries, an $8.4 million decrease in separation-related expenses, a $3.9 million decrease in professional service costs, and a $2.3 million decrease in share-based compensation expense[164] - Net interest expense decreased by 29.8%, primarily due to a reduction in average outstanding debt[166] - Other expense, net, increased by $14.1 million, primarily due to a $9.7 million loss on the sale of receivables from the accounts receivable securitization facility, a $2.2 million loss on the sale of an equity investment, and a $2.0 million decrease in equity investment income[166] - Net loss was $27.7 million, a 218.9% decrease year-over-year[166] Results of Operations—United States Results For the three and nine months ended June 27, 2025, the U.S. segment experienced significant declines in both revenue and operating income, primarily due to reduced uniform and workplace supplies revenue, business attrition, and national account losses United States Segment Results of Operations Overview (thousand dollars) | Indicator | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Segment Revenue | 613,302 | 636,839 | (23,537) | (3.7%) | | Segment Operating Income | 40,684 | 64,520 | (23,836) | (36.9%) | | Segment Operating Margin | 6.6% | 10.1% | (3.5%) | (34.7%) | - Revenue for the three-month period decreased by 3.7%, primarily due to a $17.7 million decline in uniform revenue and a $5.8 million decline in workplace supplies revenue[168] - Rental revenue decreased by $17.8 million, mainly due to business attrition exceeding new business by $14 million and a $3.8 million decline in existing customer revenue[169] - Direct sale revenue decreased by $5.7 million, primarily impacted by the loss of national customer accounts totaling $4.3 million[169] - Segment operating income decreased by 36.9%, with the operating margin declining by 350 basis points to 6.6%[169] United States Segment Results of Operations Overview (thousand dollars) | Indicator | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Segment Revenue | 1,841,092 | 1,932,136 | (91,044) | (4.7%) | | Segment Operating Income | 117,270 | 209,796 | (92,526) | (44.1%) | | Segment Operating Margin | 6.4% | 10.9% | (4.5%) | (41.3%) | - Revenue for the nine-month period decreased by 4.7%, primarily due to a $75.8 million decline in uniform revenue and a $15.2 million decline in workplace supplies revenue[171] - Rental revenue decreased by $71.1 million, mainly due to business attrition exceeding new business by $49.5 million and a $21.6 million decline in existing customer revenue[172] - Direct sale revenue decreased by $19.9 million, primarily impacted by the loss of national customer accounts totaling $15.5 million[172] - Segment operating income decreased by 44.1%, with the operating margin declining by 450 basis points to 6.4%[172] Results of Operations—Canada Results For the three months ended June 27, 2025, the Canada segment's revenue slightly decreased, but operating income significantly grew, improving the operating margin, while the nine-month period saw declines in both revenue and operating income Canada Segment Results of Operations Overview (thousand dollars) | Indicator | As of June 27, 2025 (3 months) | As of June 28, 2024 (3 months) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Segment Revenue | 60,497 | 61,409 | (912) | (1.5%) | | Segment Operating Income | 2,518 | 1,293 | 1,225 | 94.7% | | Segment Operating Margin | 4.2% | 2.1% | 2.1% | 100.0% | - Revenue for the three-month period decreased by 1.5%, primarily due to a $0.8 million decline in uniform revenue and a $0.1 million decline in workplace supplies revenue, along with a negative foreign currency impact of $0.8 million[175] - Segment operating income grew by 94.7%, with the operating margin improving by 210 basis points to 4.2%[176] Canada Segment Results of Operations Overview (thousand dollars) | Indicator | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Segment Revenue | 181,736 | 189,403 | (7,667) | (4.0%) | | Segment Operating Income | 6,508 | 6,824 | (316) | (4.6%) | | Segment Operating Margin | 3.6% | 3.6% | 0.0% | 0.0% | - Revenue for the nine-month period decreased by 4.0%, primarily due to a $6.2 million decline in uniform revenue and a $1.5 million decline in workplace supplies revenue, along with a negative foreign currency impact of $6.2 million[178][179] - Segment operating income decreased by 4.6%, with the operating margin remaining stable at 3.6%[180] Liquidity and Capital Resources As of June 27, 2025, the company had $23.7 million in cash and cash equivalents and $1,170.5 million in total principal debt, with operating cash flow significantly reduced, and both investing and financing cash outflows also decreased - As of June 27, 2025, the company had approximately $23.7 million in cash and cash equivalents and $266.3 million available for borrowing under its revolving credit facility[181] - As of June 27, 2025, total principal debt was $1,170.5 million, an increase from $1,162.5 million as of September 27, 2024[182] - On May 1, 2025, the company amended its credit agreement, raising the net leverage ratio cap and restricting all dividends and share repurchases until specific financial conditions are met[183] - The company established a $250 million accounts receivable securitization facility on August 2, 2024, to repay a portion of existing term loans[184] Cash Activities Overview (thousand dollars) | Cash Flow Category | As of June 27, 2025 (9 months) | As of June 28, 2024 (9 months) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 33,302 | 176,200 | | Net Cash from Investing Activities | (5,521) | (50,787) | | Net Cash from Financing Activities | (35,117) | (132,309) | - Cash flow from operating activities decreased by $142.9 million, primarily due to the net loss and increased investment in inventories[186] - Cash outflow from investing activities decreased by $45.3 million, mainly due to $36.8 million net proceeds from the sale of an equity investment, $5.4 million proceeds from the disposal of property and equipment, and a $7.7 million reduction in property and equipment purchases, partially offset by $4.6 million cash outflow for acquisition activities[187][189] - Cash outflow from financing activities decreased, primarily due to an $8.0 million net increase in long-term borrowings, $25.6 million in finance lease payments, and $13.8 million in dividend payments[192] - As of June 27, 2025, the company was in compliance with all covenants in its credit agreement, including the revised net leverage ratio and interest coverage ratio requirements[200] Critical Accounting Policies and Estimates The company relies on management's estimates and assumptions in preparing financial statements, which significantly impact reported amounts of assets, liabilities, revenue, and expenses - The company relies on management's estimates and assumptions in preparing financial statements, which significantly impact the reported amounts of assets, liabilities, revenue, and expenses[202][203] - For the nine months ended June 27, 2025, no significant changes occurred in the company's disclosed critical accounting policies and estimates[201] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces foreign currency risk, interest rate risk, and commodity price risk, with foreign currency risk from foreign-denominated revenues, interest rate risk from floating-rate debt, and commodity price risk from fuel price fluctuations - Foreign Currency Risk: The company faces market risk from changes in foreign currency exchange rates, primarily from revenues and profits denominated in foreign currencies, and currently does not use financial instruments to manage this risk[205] - Interest Rate Risk: The company faces risk from fluctuations in interest rates on its debt obligations, as its term loan facilities bear floating interest rates, and rising rates could increase debt costs and significantly reduce profitability and cash flows[206] - Commodity Price Risk: The company faces risk from changes in prices of commodities used in its operations, primarily gasoline, diesel, and natural gas fuel, and manages this risk through normal operations and commodity derivative agreements[207] Item 4. Controls and Procedures As of June 27, 2025, the company's CEO and CFO assessed and concluded that its disclosure controls and procedures are effective, with no significant changes in internal control over financial reporting during the quarter - As of June 27, 2025, the company's Chief Executive Officer and Chief Financial Officer assessed and concluded that its disclosure controls and procedures are effective, providing reasonable assurance that information is timely recorded, processed, summarized, and reported[208] - For the fiscal quarter ended June 27, 2025, no significant changes occurred in the company's internal control over financial reporting[209] PART II - Other Information This part provides additional disclosures on legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings The company is involved in multiple legal actions, proceedings, and investigations, including a settled class action lawsuit and several shareholder class action and derivative lawsuits - The company is involved in multiple legal actions, proceedings, and investigations, including a settled class action lawsuit and several shareholder class action and derivative lawsuits[211][212][213] - The company cannot predict the ultimate outcome of these legal matters or whether they will have a material adverse effect on its business, financial condition, results of operations, or cash flows, but it will vigorously defend them[213] Item 1A. Risk Factors No material changes have occurred in the risk factors disclosed since the company's 10-K annual report filed on September 27, 2024, and the 10-Q quarterly report filed on March 28, 2025 - No material changes have occurred in the risk factors disclosed since the company's 10-K annual report filed on September 27, 2024, and the 10-Q quarterly report filed on March 28, 2025[214] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds during the quarter - There were no unregistered sales of equity securities or use of proceeds during the quarter[215] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the quarter - There were no defaults upon senior securities during the quarter[216] Item 4. Mine Safety Disclosures This disclosure is not applicable - This disclosure is not applicable[217] Item 5. Other Information For the three months ended June 27, 2025, no directors or executive officers adopted, terminated, or modified any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements - For the three months ended June 27, 2025, no directors or executive officers adopted, terminated, or modified any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements[218] Item 6. Exhibits This section lists the exhibits filed with the 10-Q report, including employment agreements, credit agreement amendments, equity incentive agreements, separation agreements, deferred compensation plans, director restricted stock unit award agreements, and executive certification documents - Exhibits include employment agreements with Kelly Janzen and Jim Barber, the Second Amendment to the Credit Agreement, the Letter Agreement Amendment with Corvex, Jim Barber's Restricted Stock Unit Award Agreement, Angela J. Kervin's Separation Agreement and Waiver and Release, the Amended and Restated Deferred Compensation Plan, Director Restricted Stock Unit Award Agreements, and Sarbanes-Oxley Act certifications for the CEO and CFO[219] SIGNATURE This report was signed by Kelly Janzen, Executive Vice President and Chief Financial Officer, and John Laveck, Vice President and Chief Accounting Officer of Vestis Corporation, on August 5, 2025 - This report was signed by Kelly Janzen, Executive Vice President and Chief Financial Officer, and John Laveck, Vice President and Chief Accounting Officer of Vestis Corporation, on August 5, 2025[222][223]