Aramark Reports Strong Third Quarter 2014 Results and Raises Full Year EPS Guidance

Company Posts Continued Sales and Profit Growth Momentum

PHILADELPHIA, PA (August 11, 2014) - Aramark (NYSE: ARMK), the $14 billion global provider of award winning services in food, facilities management, and uniforms, today reported third quarter 2014 results with strong sales and profit growth and increased its earnings outlook for fiscal 2014.

KEY HIGHLIGHTS 

  • Sales in the third quarter of $3.6 billion, with organic growth of 4%;
  • Adjusted operating income in the third quarter of $192.4 million up 10%, operating income of $141.3 million;
  • Adjusted earnings per share in the third quarter of $0.32, earnings per share of $0.19;
  • Sales year-to-date of $10.9 billion, with organic growth of 5%;
  • Adjusted operating income year-to-date of $649.7 million up 11%, operating income of $419.3 million;
  • 2014 Adjusted Earnings per Share expectation increased to $1.45-$1.50.

"I am pleased to report another quarter of strong business results achieved within a challenging consumer and economic environment," said Eric J. Foss, President and Chief Executive Officer. "Our performance reflects solid execution against a sound strategy and was broad-based across the segments and geographies of our portfolio. Based upon this strength and our overall business momentum, we are increasing our full-year 2014 earnings outlook."

THIRD QUARTER RESULTS
Sales were $3.6 billion versus $3.5 billion in the third quarter of 2013, with organic growth of 4%. Adjusted operating income was $192.4 million versus $175.5 million in last year's period, an increase of 10%.

Adjusted net income for the quarter was $77.8 million or $0.32 per share, versus adjusted net income of $59.4 million or $0.28 per share in the third quarter of 2013. The diluted share count in the third quarter was 243.7 million shares, up from 208.3 million shares in the same period last year, primarily as a result of the company's initial public offering this past December.

On an as reported basis for the quarter, sales were $3.6 billion, operating income was $141.3 million, net income was $46.9 million and earnings per share were $0.19. Changes in currency rates from the prior year reduced sales and operating income in the quarter. A reconciliation of as reported financial measures to adjusted financial measures, including changes in currency translation rates is presented below. See "Non-GAAP Measures."

THIRD QUARTER SEGMENT RESULTS 

Food and Support Services – North America
Sales in the Food and Support Services – North America segment were $2.5 billion, up 4% on an organic basis (up 3% on a reported basis) and adjusted operating income for the segment was up 10% (operating income up 31%). Sales growth in the Education, Healthcare and Sports, Leisure and Corrections sectors were particularly notable as new business wins continue to come online.

Food and Support Services - International
Sales in the Food and Support Services - International segment were $765.2 million, a 6% increase on an organic basis (up 5% on a reported basis) and adjusted operating income for the segment was up 22% (operating income up 28%). Growth in Europe showed continued improvement from the prior year, and emerging markets continued to grow in the double digits during the third quarter. The company was proud to have served as the food service provider to 3 million fans at 12 different venues during the FIFA World Cup tournament in Brazil this quarter.

Uniform and Career Apparel
Sales in the Uniform and Career Apparel segment were $367.1 million, up 3% on an organic basis (up 3% on a reported basis) and adjusted operating income for the segment was up 8% (operating income up 32%). Profitability improvement in the segment was driven by ongoing sales growth and continuing merchandise and plant productivity initiatives.

Declaration of Dividend
On August 6, 2014, the company's Board of Directors declared a 7.5 cent dividend per share of common stock, payable on September 9, 2014, to shareholders of record at the close of business August 19, 2014.

LIQUIDITY & CAPITAL STRUCTURE
As of June 27, 2014, total debt was $5.7 billion, a reduction of approximately $525 million from the year prior. The company's total debt to adjusted EBITDA ratio has been reduced to 4.6x, from 5.3x in June 2013. Corporate liquidity remains strong, and as of quarter-end the company had $591.4 million of available borrowing capacity on its $770.0 million revolving credit facility.

OUTLOOK
The company has previously provided a multi-year annual framework that contemplates:

  • Organic Sales growth of 3% to 5% annually;
  • Adjusted Operating Income growth in the mid- to upper-single digits on a percentage basis, and;
  • Adjusted EPS growth in the low double digits on a percentage basis.

Based upon third quarter results, the company is raising its expected 53-week adjusted earnings per share range to $1.45-$1.50 for fiscal 2014.

CONFERENCE CALL SCHEDULED
The company has scheduled a conference call at 10 a.m. Eastern Daylight Time today to discuss its earnings. This call can be heard, either live or on a delayed basis, on the company's web site, www.aramark.com on the investor relations page.

 

About Aramark 

Aramark (NYSE: ARMK) is in the customer service business across food, facilities and uniforms, wherever people work, learn, recover and play. United by a passion to serve, our more than 270,000 employees deliver experiences that enrich and nourish the lives of millions of people in 22 countries around the world every day. Aramark is recognized among the Most Admired Companies by FORTUNE and the World’s Most Ethical Companies by the Ethisphere Institute. Learn more at www.aramark.com or connect with us on Facebook and Twitter.

 

Selected Operational and Financial Metrics 

Adjusted Sales (Organic)
Management believes that presentation of sales growth, adjusted to eliminate the effects of acquisitions and divestitures and the impact of currency translation, provides useful information to investors because it enhances comparability between the current year and prior year reporting periods. Elimination of the currency translation effect provides constant currency comparisons without the distortion of currency rate fluctuations.

Adjusted Operating Income
Adjusted operating income represents operating income adjusted to eliminate the change in amortization of acquisition-related customer relationship intangible assets and depreciation of property and equipment resulting from the going-private transaction in 2007 (the "Transaction"); the impact of the change in fair value related to the gasoline and diesel agreements; severance and other charges; share-based compensation; the effects of acquisitions and divestitures and the impact of currency translation and other items impacting comparability.

Adjusted EBITDA
Adjusted EBITDA represents Adjusted Operating Income further adjusted to exclude the impact of all other depreciation and amortization expense.

Adjusted Net Income
djusted Net Income represents net income adjusted to eliminate the impact of discontinued operations; the change in amortization of acquisition-related customer relationship intangible assets and depreciation of property and equipment resulting from the Transaction; the impact of changes in the fair value related to the gasoline and diesel agreements; severance and other charges; share-based compensation; the effects of acquisitions and divestitures and the impact of currency translation and other items impacting comparability, less the tax impact of these adjustments. Management believes that presentation of net income as adjusted is useful information to investors because we use such information when evaluating net income to better evaluate the underlying operating performance of the company.

We use Adjusted Sales, Adjusted Operating Income, Adjusted EBITDA and Adjusted Net Income as supplemental measures of our operating profitability and to operate and control our cash operating costs to evaluate our performance. These financial metrics are not measurements of financial performance under generally accepted accounting principles in the United States, or U.S. GAAP. We believe the presentation of these metrics is appropriate to provide additional information to investors about our operating performance. Our presentation of these metrics has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. You should not consider these measures as alternatives to sales, operating income or net income, determined in accordance with U.S. GAAP. Adjusted Sales, Adjusted Operating Income, Adjusted EBITDA and Adjusted Net Income, as presented by us, may not be comparable to other similarly titled measures of other companies because not all companies use identical calculations.

 

 

ARAMARK AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(Unaudited) 

(In Thousands, Except Per Share Amounts) 

         
         
   

Three Months 

 

Three Months 

   

Ended 

 

Ended 

   

June 27, 2014 

 

June 28, 2013 

         

Sales 

 

$ 3,620,057 

 

$ 3,490,030 

Costs and Expenses: 

       

Cost of services provided 

 

3,275,409 

 

3,178,092 

Depreciation and amortization 

 

124,917 

 

135,808 

Selling and general corporate expenses 

 

78,448 

 

52,534 

   

3,478,774 

 

3,366,434 

Operating income 

 

141,283 

 

123,596 

Interest and other financing costs, net 

 

71,186 

 

80,917 

Income before income taxes  

 

70,097 

 

42,679 

Provision for income taxes 

 

23,181 

 

14,705 

Net income 

 

46,916 

 

27,974 

Less: Net income attributable to noncontrolling interests 

 

43 

 

226 

Net income attributable to Aramark stockholders 

 

$ 46,873 

 

$ 27,748 

         

Earnings per share attributable to Aramark stockholders: 

       

Basic 

 

$0.20 

 

$0.14 

Diluted 

 

$0.19 

 

$0.13 

Weighted Average Shares Outstanding: 

       

Basic 

 

231,854 

 

201,364 

Diluted 

 

243,739 

 

208,326 

 

 

ARAMARK AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(Unaudited) 

(In Thousands, Except Per Share Amounts) 

         
         
   

Nine Months 

 

Nine Months 

   

Ended 

 

Ended 

   

June 27, 2014 

 

June 28, 2013 

         

Sales 

 

$ 10,885,145 

 

$ 10,429,682 

Costs and Expenses: 

       

Cost of services provided 

 

9,790,036 

 

9,481,859 

Depreciation and amortization 

 

387,058 

 

404,512 

Selling and general corporate expenses 

 

288,739 

 

164,181 

   

10,465,833 

 

10,050,552 

Operating income 

 

419,312 

 

379,130 

Interest and other financing costs, net 

 

256,613 

 

341,392 

Income before income taxes  

 

162,699 

 

37,738 

Provision for income taxes 

 

57,750 

 

6,476 

Net income 

 

104,949 

 

31,262 

Less: Net income attributable to noncontrolling interests 

 

398 

 

804 

Net income attributable to Aramark stockholders 

 

$ 104,551 

 

$ 30,458 

         

Earnings per share attributable to Aramark stockholders: 

       

Basic 

 

$0.47 

 

$0.15 

Diluted 

 

$0.45 

 

$0.15 

Weighted Average Shares Outstanding: 

       

Basic 

 

223,143 

 

201,607 

Diluted 

 

234,822 

 

208,703 

 

 

ARAMARK AND SUBSIDIARIES 

CONDENSED CONSOLIDATED BALANCE SHEETS 

(Unaudited) 

(In Thousands) 

         
   

June 27, 2014 

 

September 27, 2013 

Assets 

       
         

Current Assets: 

       

Cash and cash equivalents 

 

$ 122,419 

 

$ 110,998 

Receivables  

 

1,494,709 

 

1,405,843 

Inventories 

 

543,210 

 

541,972 

Prepayments and other current assets 

 

194,862 

 

228,352 

Total current assets 

 

2,355,200 

 

2,287,165 

Property and Equipment, net 

 

988,603 

 

977,323 

Goodwill 

 

4,619,214 

 

4,619,987 

Other Intangible Assets 

 

1,298,407 

 

1,408,764 

Other Assets 

 

1,013,578 

 

973,867 

   

$ 10,275,002 

 

$ 10,267,106 

         

Liabilities and Stockholders' Equity 

       
         

Current Liabilities: 

       

Current maturities of long-term borrowings 

 

$ 104,106 

 

$ 65,841 

Accounts payable 

 

766,450 

 

888,969 

Accrued expenses and other current liabilities 

 

1,129,981 

 

1,434,443 

Total current liabilities 

 

2,000,537 

 

2,389,253 

Long-Term Borrowings 

 

5,585,603 

 

5,758,229 

Other Liabilities 

 

959,135 

 

1,047,002 

Common Stock Subject to Repurchase and Other 

 

10,005 

 

168,915 

Total Stockholders' Equity 

 

1,719,722 

 

903,707 

   

$ 10,275,002 

 

$ 10,267,106 

 

 

ARAMARK AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited) 

(In Thousands) 

         
         
   

Nine Months 

 

Nine Months 

   

Ended 

 

Ended 

   

June 27, 2014 

 

June 28, 2013 

         

Cash flows from operating activities: 

       

Net income 

 

$ 104,949 

 

$ 31,262 

Adjustments to reconcile net income to net cash  

       

(used in) provided by operating activities: 

       

Depreciation and amortization 

 

387,058 

 

404,512 

Income taxes deferred 

 

(46,190) 

 

(46,454) 

Share-based compensation expense 

 

83,017 

 

12,328 

Changes in noncash working capital 

 

(562,432) 

 

(328,085) 

Other operating activities 

 

16,158 

 

62,763 

Net cash (used in) provided by operating activities 

 

(17,440) 

 

136,326 

         

Cash flows from investing activities: 

       

Net purchases of property and equipment, 

       

client contract investments and other 

 

(310,510) 

 

(254,851) 

Acquisitions, divestitures and other investing activities 

 

12,239 

 

2,778 

Net cash used in investing activities 

 

(298,271) 

 

(252,073) 

         

Cash flows from financing activities: 

       

Net proceeds/payments of long-term borrowings 

 

(194,933) 

 

175,086 

Net change in funding under the Receivables Facility 

 

50,000 

 

36,200 

Payments of dividends 

 

(34,696) 

 

- 

Proceeds from initial public offering, net 

 

524,081 

 

- 

Proceeds from issuance of common stock 

 

3,701 

 

4,882 

Distribution in connection with spin-off of Seamless Holdings 

 

- 

 

(47,352) 

Repurchase of common stock 

 

(2,085) 

 

(38,419) 

Other financing activities  

 

(18,936) 

 

(53,577) 

Net cash provided by financing activities 

 

327,132 

 

76,820 

Increase (decrease) in cash and cash equivalents 

 

11,421 

 

(38,927) 

Cash and cash equivalents, beginning of period 

 

110,998 

 

136,748 

Cash and cash equivalents, end of period 

 

$ 122,419 

 

$ 97,821 

 

 

ARAMARK AND SUBSIDIARIES 

RECONCILIATION OF NON-GAAP MEASURES 

ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN 

(Unaudited) 

(In thousands) 

                     
   

Three Months Ended 

   

June 27, 2014  

   

FSS North
America
 

 

FSS
International
 

 

Uniform 

 

Corporate 

 

Aramark and
Subsidiaries
 

Sales (as reported) 

 

$ 2,487,739 

 

$ 765,206 

 

$ 367,112 

     

$ 3,620,057 

                     

Operating Income (as reported) 

 

$ 95,546 

 

$ 36,722 

 

$ 46,857 

 

$ (37,842) 

 

$ 141,283 

                     

Operating Income Margin (as reported) 

 

3.8% 

 

4.8% 

 

12.8% 

     

3.9% 

                     
                     

Sales (as reported) 

 

$ 2,487,739 

 

$ 765,206 

 

$ 367,112 

     

$ 3,620,057 

                     

Effects of Acquisitions and Divestitures 

 

(1,380) 

 

(928) 

 

(548) 

     

(2,856) 

                     

Adjusted Sales (Organic) 

 

$ 2,486,359 

 

$ 764,278 

 

$ 366,564 

     

$ 3,617,201 

                     

Operating Income (as reported) 

 

$ 95,546 

 

$ 36,722 

 

$ 46,857 

 

$ (37,842) 

 

$ 141,283 

Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
 

 

27,847 

 

1,727 

 

(1,048) 

 

- 

 

28,526 

Share-Based Compensation 

 

674 

 

167 

 

348 

 

10,122 

 

11,311 

Severance and Other Charges 

 

(609) 

 

754 

 

- 

 

7,981 

 

8,126 

Effects of Acquisitions and Divestitures 

 

(1) 

 

(139) 

 

18 

 

- 

 

(122) 

Branding 

 

- 

 

- 

 

- 

 

4,634 

 

4,634 

Gains, Losses and Settlements impacting comparability 

 

(1,258) 

 

- 

 

(623) 

 

475 

 

(1,406) 

Adjusted Operating Income 

 

$ 122,199 

 

$ 39,231 

 

$ 45,552 

 

$ (14,630) 

 

$ 192,352 

                     

Adjusted Operating Income Margin 

 

4.9% 

 

5.1% 

 

12.4% 

     

5.3% 

                     
                     
   

Three Months Ended 

   

June 28, 2013  

   

FSS North
America
 

 

FSS
International
 

 

Uniform 

 

Corporate 

 

Aramark and
Subsidiaries
 

Sales (as reported) 

 

$ 2,405,860 

 

$ 727,516 

 

$ 356,654 

     

$ 3,490,030 

                     

Operating Income (as reported) 

 

$ 73,146 

 

$ 28,694 

 

$ 35,388 

 

$ (13,632) 

 

$ 123,596 

                     

Operating Income Margin (as reported) 

 

3.0% 

 

3.9% 

 

9.9% 

     

3.5% 

                     
                     

Sales (as reported) 

 

$ 2,405,860 

 

$ 727,516 

 

$ 356,654 

     

$ 3,490,030 

                     

Effect of Currency Translation 

 

(15,556) 

 

(7,199) 

 

- 

     

(22,755) 

Effects of Acquisitions and Divestitures 

 

(5,100) 

 

- 

 

- 

     

(5,100) 

                     

Adjusted Sales (Organic) 

 

$ 2,385,204 

 

$ 720,317 

 

$ 356,654 

     

$ 3,462,175 

                     

Operating Income (as reported) 

 

$ 73,146 

 

$ 28,694 

 

$ 35,388 

 

$ (13,632) 

 

$ 123,596 

Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
 

 

30,034 

 

1,757 

 

6,907 

 

- 

 

38,698 

Share-Based Compensation 

 

- 

 

- 

 

- 

 

3,507 

 

3,507 

Effect of Currency Translation 

 

(969) 

 

426 

 

- 

 

- 

 

(543) 

Severance and Other Charges 

 

9,875 

 

1,201 

 

- 

 

- 

 

11,076 

Effects of Acquisitions and Divestitures 

 

(1,062) 

 

- 

 

- 

 

- 

 

(1,062) 

Gains, Losses and Settlements impacting comparability 

 

(180) 

 

- 

 

- 

 

373 

 

193 

Adjusted Operating Income 

 

$ 110,844 

 

$ 32,078 

 

$ 42,295 

 

$ (9,752) 

 

$ 175,465 

                     

Adjusted Operating Income Margin 

 

4.6% 

 

4.5% 

 

11.9% 

     

5.1% 

 

 

ARAMARK AND SUBSIDIARIES 

RECONCILIATION OF NON-GAAP MEASURES 

ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN 

(Unaudited) 

(In thousands) 

                     
   

Nine Months Ended 

   

June 27, 2014  

   

FSS North
America
 

 

FSS
International
 

 

Uniform 

 

Corporate 

 

Aramark and 

Subsidiaries 

Sales (as reported) 

 

$ 7,504,970 

 

$ 2,284,944 

 

$ 1,095,231 

     

$ 10,885,145 

                     

Operating Income (as reported) 

 

$ 384,096 

 

$ 76,957 

 

$ 123,716 

 

$ (165,457) 

 

$ 419,312 

                     

Operating Income Margin (as reported) 

 

5.1% 

 

3.4% 

 

11.3% 

     

3.9% 

                     
                     

Sales (as reported) 

 

$ 7,504,970 

 

$ 2,284,944 

 

$ 1,095,231 

     

$ 10,885,145 

                     

Effects of Acquisitions and Divestitures 

 

(7,847) 

 

(1,637) 

 

(548) 

     

(10,032) 

                     

Adjusted Sales (Organic) 

 

$ 7,497,123 

 

$ 2,283,307 

 

$ 1,094,683 

     

$ 10,875,113 

                     

Operating Income (as reported) 

 

$ 384,096 

 

$ 76,957 

 

$ 123,716 

 

$ (165,457) 

 

$ 419,312 

Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
 

 

87,220 

 

4,923 

 

6,721 

 

- 

 

98,864 

Share-Based Compensation 

 

674 

 

167 

 

348 

 

32,255 

 

33,444 

Severance and Other Charges 

 

(11,936) 

 

13,862 

 

- 

 

20,027 

 

21,953 

Effects of Acquisitions and Divestitures 

 

(551) 

 

(192) 

 

18 

 

- 

 

(725) 

Branding 

 

1,189 

 

225 

 

210 

 

17,862 

 

19,486 

Initial Public Offering-Related Expenses, including share-
based compensation
 

 

- 

 

- 

 

- 

 

56,133 

 

56,133 

Gains, Losses and Settlements impacting comparability 

 

2,409 

 

- 

 

(1,546) 

 

394 

 

1,257 

Adjusted Operating Income 

 

$ 463,101 

 

$ 95,942 

 

$ 129,467 

 

$ (38,786) 

 

$ 649,724 

                     

Adjusted Operating Income Margin 

 

6.2% 

 

4.2% 

 

11.8% 

     

6.0% 

                     
                     
   

Nine Months Ended 

   

June 28, 2013  

   

FSS North
America
 

 

FSS
International
 

 

Uniform 

 

Corporate 

 

Aramark and
Subsidiaries
 

Sales (as reported) 

 

$ 7,217,759 

 

$ 2,154,567 

 

$ 1,057,356 

     

$ 10,429,682 

                     

Operating Income (as reported) 

 

$ 298,935 

 

$ 37,877 

 

$ 89,761 

 

$ (47,443) 

 

$ 379,130 

                     

Operating Income Margin (as reported) 

 

4.1% 

 

1.8% 

 

8.5% 

     

3.6% 

                     
                     

Sales (as reported) 

 

$ 7,217,759 

 

$ 2,154,567 

 

$ 1,057,356 

     

$ 10,429,682 

                     

Effect of Currency Translation 

 

(52,639) 

 

(21,522) 

 

- 

     

(74,161) 

Effects of Acquisitions and Divestitures 

 

(13,730) 

 

- 

 

- 

     

(13,730) 

                     

Adjusted Sales (Organic) 

 

$ 7,151,390 

 

$ 2,133,045 

 

$ 1,057,356 

     

$ 10,341,791 

                     

Operating Income (as reported) 

 

$ 298,935 

 

$ 37,877 

 

$ 89,761 

 

$ (47,443) 

 

$ 379,130 

Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
 

 

89,814 

 

6,160 

 

20,425 

 

- 

 

116,399 

Share-Based Compensation 

 

- 

 

- 

 

- 

 

12,328 

 

12,328 

Effect of Currency Translation 

 

(3,904) 

 

(659) 

 

- 

 

- 

 

(4,563) 

Severance and Other Charges 

 

54,843 

 

34,152 

 

3,730 

 

1,021 

 

93,746 

Effects of Acquisitions and Divestitures 

 

(447) 

 

- 

 

- 

 

- 

 

(447) 

Gains, Losses and Settlements impacting comparability 

 

(16,721) 

 

- 

 

2,913 

 

551 

 

(13,257) 

Adjusted Operating Income 

 

$ 422,520 

 

$ 77,530 

 

$ 116,829 

 

$ (33,543) 

 

$ 583,336 

                     

Adjusted Operating Income Margin 

 

5.9% 

 

3.6% 

 

11.0% 

     

5.6% 

 

 

ARAMARK AND SUBSIDIARIES 

RECONCILIATION OF NON-GAAP MEASURES 

ADJUSTED NET INCOME, ADJUSTED OPERATING INCOME, ADJUSTED EBITDA & ADJUSTED EPS 

(Unaudited) 

(In thousands, except per share amounts) 

                     
                     
       

Three Months Ended 

 

Three Months Ended 

 

Nine Months Ended 

 

Nine Months Ended 

       

June 27, 2014  

 

June 28, 2013  

 

June 27, 2014  

 

June 28, 2013  

                     

Net Income (as reported) 

   

$ 46,916 

 

$ 27,974 

 

$ 104,949 

 

$ 31,262 

 

Adjustment: 

                 
 

Amortization of Acquisition-
Related Customer Relationship
Intangible Assets and Depreciation of
Property and Equipment Resulting from
the Transaction
 

   

28,526 

 

38,698 

 

98,864 

 

116,399 

 

Share-Based Compensation 

   

11,311 

 

3,507 

 

33,444 

 

12,328 

 

Effect of Currency Translation 

   

- 

 

(543) 

 

- 

 

(4,563) 

 

Severance and Other Charges 

   

8,126 

 

11,076 

 

21,953 

 

93,746 

 

Effects of Acquisitions and Divestitures 

   

(122) 

 

(1,062) 

 

(725) 

 

(447) 

 

Branding 

   

4,634 

 

- 

 

19,486 

 

- 

 

Initial Public Offering-Related Expenses,
including share-based compensation
 

   

- 

 

- 

 

56,133 

 

- 

 

Gains, Losses and Settlements impacting
comparability
 

   

(1,406) 

 

193 

 

1,257 

 

(13,257) 

 

Effects of Refinancing on Interest
and Other Financing Costs, net
 

   

- 

 

- 

 

25,705 

 

39,830 

 

Tax Impact of Adjustments to Adjusted Net
Income
 

   

(20,172) 

 

(20,488) 

 

(96,161) 

 

(91,774) 

Adjusted Net Income 

   

$ 77,813 

 

$ 59,355 

 

$ 264,905 

 

$ 183,524 

 

Adjustment: 

                 
 

Tax Impact of Adjustments to Adjusted Net
Income and Interest Adjustments
 

   

20,172 

 

20,488 

 

70,456 

 

51,944 

 

Provision for Income Taxes 

   

23,181 

 

14,705 

 

57,750 

 

6,476 

 

Interest and Other Financing Costs, net 

   

71,186 

 

80,917 

 

256,613 

 

341,392 

Adjusted Operating Income 

   

$ 192,352 

 

$ 175,465 

 

$ 649,724 

 

$ 583,336 

 

Adjustment: 

                 
 

Amortization of Acquisition-
Related Customer Relationship
Intangible Assets and Depreciation of
Property and Equipment Resulting from
the Transaction
 

   

(28,526) 

 

(38,698) 

 

(98,864) 

 

(116,399) 

 

Depreciation and Amortization 

   

124,917 

 

135,808 

 

387,058 

 

404,512 

Adjusted EBITDA 

   

$ 288,743 

 

$ 272,575 

 

$ 937,918 

 

$ 871,449 

                     
                     

Adjusted Earnings Per Share 

                 
 

Adjusted Net Income 

   

$ 77,813 

 

$ 59,355 

 

$ 264,905 

 

$ 183,524 

 

Net Income Attributable to Noncontrolling Interests 

   

(43) 

 

(226) 

 

(398) 

 

(804) 

 

Adjusted Net Income Attributable to Aramark
Stockholders
 

   

$ 77,770 

 

$ 59,129 

 

$ 264,507 

 

$ 182,720 

 

Diluted Weighted Average Shares Outstanding 

   

243,739 

 

208,326 

 

234,822 

 

208,703 

       

$ 0.32 

 

$ 0.28 

 

$ 1.13 

 

$ 0.88 

 

 

ARAMARK AND SUBSIDIARIES 

RECONCILIATION OF NON-GAAP MEASURES 

DEBT TO ADJUSTED EBITDA 

(Unaudited) 

(In thousands) 

         
 

Twelve months ended 

 

Twelve months ended 

 
 

June 27, 2014  

 

June 28, 2013  

 

Net Income 

$ 144,053 

 

$ 90,680 

 

Adjustment: 

       

Loss from Discontinued Operations, net of tax 

1,030 

 

- 

 

Amortization of Acquisition-
Related Customer Relationship
Intangible Assets and Depreciation of
Property and Equipment Resulting from
the Transaction
 

137,908 

 

154,743 

 

Share-Based Compensation 

40,533 

 

15,467 

 

Effect of Currency Translation 

- 

 

(4,563) 

 

Severance and Other Charges 

42,639 

 

93,746 

 

Effects of Acquisitions and Divestitures 

(278) 

 

(447) 

 

Branding 

19,486 

 

- 

 

Initial Public Offering-Related Expenses,
including share-based compensation
 

56,133 

 

- 

 

Gains, Losses and Settlements impacting
comparability
 

4,263 

 

(18,910) 

 

Effects of Refinancing on Interest
and Other Financing Costs, net
 

25,705 

 

39,830 

 

Tax Impact of Adjustments to Adjusted Net
Income
 

(123,918) 

 

(105,927) 

 

Adjusted Net Income 

$ 347,554 

 

$ 264,619 

 

Adjustment: 

       

Tax Impact of Adjustments to Adjusted Net
Income and Interest Adjustments
 

98,213 

 

66,097 

 

Provision for Income Taxes 

70,507 

 

12,641 

 

Interest and Other Financing Costs, net 

339,066 

 

441,812 

 

Adjusted Operating Income 

$ 855,340 

 

$ 785,169 

 

Adjustment: 

       

Amortization of Acquisition-
Related Customer Relationship
Intangible Assets and Depreciation of
Property and Equipment Resulting from
the Transaction
 

(137,908) 

 

(154,743) 

 

Depreciation and Amortization 

524,682 

 

537,757 

 

Adjusted EBITDA 

$ 1,242,114 

 

$ 1,168,183 

 
         

Debt to Adjusted EBITDA 

       

Total Long-Term Borrowings 

$ 5,689,709 

 

$ 6,217,056 

 

Adjusted EBITDA 

$ 1,242,114 

 

$ 1,168,183 

 

Debt/Adjusted EBITDA 

4.6 

 

5.3 

 

 

Explanatory Notes to the Non-GAAP Schedules 

Amortization of acquisition related customer relationship intangible assets and depreciation of property and equipment resulting from the Transaction - adjustments to eliminate the change in amortization and depreciation resulting from the purchase accounting applied to the January 26, 2007 going-private transaction executed with investment funds affiliated with GS Capital Partners, CCMP Capital Advisors, LLC and J.P. Morgan Partners, LLC, Thomas H. Lee Partners, L.P. and Warburg Pincus LLC as well as approximately 250 senior management personnel.

Share-based compensation - adjustments to eliminate compensation expense related to the company's issuances of share-based awards and the related employer payroll tax expense incurred by the company when employees exercise in the money stock options or vest in restricted stock awards. This adjustment excludes the expense related to the modification of missed year options in connection with the initial public offering which are included in the Initial public offering and related expenses adjustment noted below. See Note 9 to the Condensed Consolidated Financial Statements contained in the company's Form 10-Q filing.

Effect of currency translation - adjustments to eliminate the impact that fluctuations in currency translation rates had on the comparative results by presenting the periods on a constant currency basis.

Severance and other charges - adjustments to eliminate severance expenses and other costs incurred in the applicable period such as costs incurred to start-up our Business Service Center in Nashville, TN ($6.0 million for the third quarter of 2014 and $18.1 million for the year-to-date 2014), organizational streamlining initiatives ($1.3 million expense reduction for the third quarter of 2014 and $0.5 million for the year-to-date 2014 and $7.7 million for the third quarter of 2013 and $54.6 million for the year-to-date 2013), goodwill impairments and asset write-offs ($0.1 million for the third quarter of 2013 and $23.2 million for the year-to-date 2013) and other transformational initiatives ($3.5 million for the third quarter and year-to-date 2014 and $3.3 million for the third quarter of 2013 and $15.9 million for the year-to-date 2013).

Effects of acquisitions and divestitures - adjustments to eliminate the impact that acquisitions and divestitures had on the comparative periods by only presenting the acquired or divested businesses for the same periods of time in each period of the comparison.

Branding - adjustments to eliminate the expenses incurred in the period for the Aramark rebranding, such as costs related to the logo redesign, painting of trucks, changing signage, advertising, an internal new brand roll-out meeting, including travel and lodging expenses for company employees to attend this meeting.

Initial public offering and related expenses - adjustments to eliminate non-cash compensation expense ($50.9 million for year-to-date 2014) related to the modification of missed year options in connection with the initial public offering, bonuses paid ($4.3 million for year-to-date 2014) to select senior management individuals related to the successful completion of the initial public offering and other costs attributable to the completion of the initial public offering.

Gains, losses and settlements impacting comparability - adjustments to eliminate certain transactions that are not indicative of our ongoing operational performance such as the loss on the McKinley Chalet divestiture ($6.7 million for year-to-date 2014), insurance reserve adjustments due to favorable claims experience ($1.9 million for the third quarter of 2014 and $5.8 million for the year-to-date 2014 and $4.5 million for the year-to-date 2013), multiemployer pension plan withdrawal charges ($2.1 million for the year-to-date 2013), wage and hour settlement ($2.8 million for the year-to-date 2013), other income relating to the recovery of the Company's investment (possessory interest) at one of the National Park Service sites ($14.2 million for the year-to-date 2013), expenses related to a secondary offering of common stock by certain of our stockholders in May of 2014 ($0.9 million for the third quarter and year-to-date 2014) and the impact of the change in fair value related to the gasoline and diesel agreements.

Effects of refinancing on interest and other financing costs, net - adjustments to eliminate expenses associated with refinancing activities undertaken by the Company in the applicable period such as third party costs and non-cash charges for the write-offs of deferring financing costs.

 

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views as to future events and financial performance with respect to, without limitation, conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as "outlook," "aim," "anticipate," "are confident," "estimate," "expect," "will be," "will continue," "will likely result," "project," "intend," "plan," "believe," "see," "look to" and other words and terms of similar meaning or the negative versions of such words.

Forward-looking statements speak only as of the date made. All statements we make relating to our estimated and projected earnings, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include without limitation: unfavorable economic conditions; natural disasters, global calamities, sports strikes and other adverse incidents; the failure to retain current clients, renew existing client contracts and obtain new client contracts; a determination by clients to reduce their outsourcing or use of preferred vendors; competition in our industries; increased operating costs and obstacles to cost recovery due to the pricing and cancellation terms of our food and support services contracts; the inability to achieve cost savings through our cost reduction efforts; our expansion strategy; the failure to maintain food safety throughout our supply chain, food-borne illness concerns and claims of illness or injury; governmental regulations including those relating to food and beverages, the environment, wage and hour and government contracting; liability associated with noncompliance with applicable law or other governmental regulations; changes in, new interpretations of or changes in the enforcement of the government regulatory framework; currency risks and other risks associated with international operations, including Foreign Corrupt Practices Act, U.K. Bribery Act and other anti-corruption law compliance; continued or further unionization of our workforce; liability resulting from our participation in multiemployer defined benefit pension plans; risks associated with suppliers from whom our products are sourced; disruptions to our relationship with, or to the business of, our primary distributor; the inability to hire and retain sufficient qualified personnel or increases in labor costs; healthcare reform legislation; the contract intensive nature of our business, which may lead to client disputes; seasonality; our leverage; the inability to generate sufficient cash to service all of our indebtedness; debt agreements that limit our flexibility in operating our business; potential conflicts of interest between certain of our controlling shareholders and us; and other factors set forth under the headings "Risk Factors," "Business - Legal Proceedings" and "Management Discussion and Analysis of Financial Condition and Results of Operations" sections in our prospectus dated December 11, 2013, filed with the SEC pursuant to Rule 424(b) of the Securities Act on December 12, 2013, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov and which may be obtained by contacting Aramark's investor relations department via its website www.aramark.com. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, us. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, changes in our expectations, or otherwise, except as required by law.

Contacts:
Media Inquiries
Karen Cutler
215-238-4063
cutler-karen@aramark.com

Investor Inquiries
Ian Bailey
215-409-7287
bailey-ian@aramark.com

Did You Know?

ARAMARK maintains over 1 million pieces of clinical equipment in hundreds of U.S. hospitals.