YEAR-OVER-YEAR
SUMMARY
- Revenue +15%; Organic Revenue +14%
- Performance driven by net new business, pricing actions, and
base business growth
- Contributions to growth from each reportable segment
- Operating Income +38%; Adjusted Operating Income (AOI)
+34%1
- Operating Income Margin +70 bps; AOI Margin +75 bps1
- Higher profitability due to operating leverage from increased
revenue, improved supply chain economics, and disciplined
above-unit cost management
- EPS +706% to $1.29; Adjusted EPS +48%1 to $0.36
- Results reflected consistent focus on profitable growth across
the organization
- GAAP EPS included a net gain on sale from non-controlling
equity investments
- Continued Strengthening of Balance Sheet and Financial
Flexibility
- Opportunistically refinanced $1.1 billion term loan, extending
its debt maturity to 2030
- Repaid approximately $630 million of debt; Over $1.0 billion in
cash availability at quarter-end
Aramark (NYSE: ARMK) today reported third quarter fiscal 2023
results.
"Aramark's third quarter results reflect our continued focus on
profitable growth across the organization," said John Zillmer,
Aramark's Chief Executive Officer. "With signs of inflation
moderating, and our pricing actions taking hold, we are
increasingly confident in the ramp in profitability as we finish
the fiscal year. I am extremely proud of our teams across the
globe, which exemplify our performance-driven culture that
contributed to our raised outlook expectations. We believe that we
are well positioned to capitalize on the substantial opportunities
ahead."
Notes:
– Supplemental business review slides available on Aramark's
Investor Relations website – 1On a constant-currency basis
THIRD QUARTER RESULTS
Consolidated revenue was $4.7 billion in the third quarter, an
increase of 15% year-over-year, driven by net new business, pricing
actions, and base business growth. Revenue growth results included
an incremental $47 million contribution from Union Supply Group,
which was acquired in June 2022. A stronger dollar in the period
impacted revenue by $21 million.
Organic revenue, which adjusts for the effect of currency
translation and certain acquisitions, grew 14% year-over-year
compared to the prior year period.
Revenue
Q3 '23
Q3 '22
Change (%)
Organic Revenue Change
(%)
FSS United States
$2,891M
$2,481M
16%
15%
FSS International
1,162
978
19%
20%
Uniform & Career
Apparel
696
668
4%
5%
Total Company
$4,749M
$4,127M
15%
14%
Difference between Change (%) and Organic
Revenue Change (%) reflects the effect of certain acquisitions and
the impact of currency translation.
May not total due to rounding.
- FSS United States revenue growth benefited from net new
business and pricing actions, as well as strong base business
performance led by higher per capita spending in the Sports &
Entertainment business and increased return-to-work volume in the
Business & Industry sector.
- FSS International grew revenue across all geographies,
particularly in the U.K., Germany, and Canada, as a result of net
new business, pricing actions, and ongoing base business
growth.
- Uniform & Career Apparel increased revenue driven primarily
by pricing actions, and growth in adjacency sales, partially offset
by the rollback of an energy surcharge that was implemented in the
third quarter last year.
Operating Income increased 38% year-over-year, growing to $203
million, and AOI grew 34%1 to $240 million, reflecting an operating
income margin increase of 70 basis points and an AOI margin
increase of 75 basis points1. Performance was driven by operating
leverage from increased revenue, improved supply chain economics,
and disciplined above-unit cost management. The effect of currency
translation impacted results by $0.8 million.
Operating Income
Adjusted Operating Income
(AOI)
Q3 '23
Q3 '22
Change (%)
Q3 '23
Q3 '22
Change (%)
Constant Currency Change
(%)
FSS United States
$129M
$89M
44%
$147M
$108M
36%
36%
FSS International*
40
35
14%
46
38
20%
21%
Uniform & Career
Apparel
67
61
10%
77
69
12%
13%
Corporate
(32)
(36)
13%
(30)
(36)
16%
16%
Total Company
$203M
$148M
38%
$240M
$180M
34%
34%
May not total due to rounding.
*FSS International does not include the
contribution from AIM Services subsequent to the sale of the
non-controlling interest at the beginning of April 2023.
Year-over-year profitability improvement was a result of the
following segment performance:
- FSS United States increase was driven by the ongoing maturity
of new business, supply chain purchasing normalization and
initiatives, and disciplined above-unit cost management across the
entire segment.
- FSS International results benefited from scaling new business,
leverage from higher base business volumes, improved supply chain
economics, and reduced above-unit costs from actions taken earlier
in the fiscal year.
- Uniform & Career Apparel improved due to a focus on revenue
mix and base business performance as well as early savings
associated with operating and administrative cost efficiency
initiatives implemented at the end of the second quarter.
- Corporate expenses reflected prudent cost management as revenue
increased, as well as lower share-based compensation expense.
CASH FLOW AND CAPITAL
STRUCTURE
Consistent with the historical seasonality of the business, Net
cash provided by operating activities increased $36 million in the
third quarter to $23 million, and Free Cash Flow was a use of $80
million. The $16 million year-over-year improvement in Free Cash
Flow was driven by higher net income results and favorable working
capital, somewhat offset by increased capital expenditures—while
CapEx was still below historical levels.
Net cash provided by investing activities included approximately
$635 million in combined proceeds from the sale of the Aramark's
50% equity stake in AIM Services and a portion of its ownership
position in the San Antonio Spurs NBA franchise as part of the
Company's evaluation of its non-controlling interest portfolio.
In the third quarter, Aramark proactively refinanced the
Company's 2025 Term Loan B, totaling $1.1 billion, that extended
the debt maturity by more than five years, to June 2030, as
previously disclosed. The refinancing was net leverage neutral and
maintained a comparable fixed-to-floating debt level, which is
typically approximately 80% to 85% fixed for the Company. Aramark
will continue to be opportunistic in its financing strategies.
Additionally, the Company repaid approximately $630 million of
debt in the quarter. Aramark had more than $1.0 billion in cash
availability at quarter-end.
DIVIDEND DECLARATION
The Company's Board of Directors approved a quarterly dividend
of 11 cents per share of common stock, as announced on August 2,
2023. The dividend will be payable on August 29, 2023, to
stockholders of record at the close of business on August 16,
2023.
BUSINESS UPDATE
Aramark remains committed to driving its profitable growth
strategies. The Company has consistently delivered net new business
wins at a higher rate than historical levels and third quarter 2023
organic revenue has now reached over 120% of the comparable period
in fiscal 2019.
The Company anticipates improved profitability in the near- and
longer-term through:
- Ongoing supply chain normalization and optimization and
expected benefits from early trends related to the moderation of
inflation
- Profit improvement through pricing actions, most notably in the
fourth quarter in the Education sector and Corrections
business
- Profitability ramp of new business as a result of operational
maturity and efficiencies
- Benefit from recently completed organizational restructuring
initiatives, particularly in FSS International and Uniform
Services
- Disciplined control and leverage of above-unit overhead across
higher revenue
Aramark expects its typical "U-shaped" margin seasonality to
continue—with margins higher in the first and fourth quarters
compared to the second and third quarters. The seasonality of the
business is also expected to drive Net cash provided by operating
activities and Free Cash Flow, which historically result in a large
cash inflow in the fourth quarter, primarily from Collegiate
Hospitality.
UNIFORM SERVICES
SPIN-OFF
Aramark has made significant progress related to the
operational, regulatory, and financial logistics to complete the
spin-off of the Uniforms segment. Based on the current
macroeconomic and capital market environment, the Company
anticipates the transaction to be completed at the end of its
fiscal year, subject to customary closing conditions. Aramark
Uniform Services plans to host an Analyst Day on September 13,
2023, to review its strategic plan and next phase of value
creation. Additional details to follow.
OUTLOOK
The Company provides its expectations for organic revenue
growth, Adjusted Operating Income, Free Cash Flow, and Net Debt to
Covenant Adjusted EBITDA ("Leverage Ratio") on a non-GAAP basis,
and does not provide a reconciliation of such forward-looking
non-GAAP measures to GAAP due to the inherent difficulty in
forecasting and quantifying certain amounts that are necessary for
such reconciliations, including adjustments that could be made for
the impact of the change in fair value related to certain gasoline
and diesel agreements and other charges and the effect of currency
translation. The fiscal 2023 outlook reflects management's current
assumptions regarding numerous evolving factors that are difficult
to accurately predict, including those discussed in the Risk
Factors set forth in the Company's filings with the United States
Securities and Exchange Commission.
Aramark raised its full-year performance expectations for fiscal
2023 as follows:
Organic Revenue Growth ~15%
(from >13%), comprised of...
Global FSS
~17% (from ~15%)
Uniform Services
~5.5%
Adjusted Operating Income Growth
~33% (from ~32%), comprised of...
Global FSS
~46% (from ~45%)
Uniform Services
~8% (from ~7%)
Free Cash Flow ~$475
million
Deferred payroll taxes related to CARES
Act
$64 million
Spin-off and restructuring related
costs
$100-$120 million
After these items, Free Cash Flow ~$300
million
Leverage Ratio less than 4.0x
Note: Global FSS is defined as the sum of the FSS United States,
FSS International, and Corporate reportable segments. Uniform
Services is defined as the Uniform & Career Apparel reportable
segment. Outlook does not reflect any incremental public company
costs associated with the spin transaction.
"Our significant progress on a number of key initiatives this
year—including record revenue results, accelerating AOI growth, and
reducing our leverage—reflects our focus on execution and
operational excellence, and delivering for our clients and
customers," Zillmer added. "As we enter the fourth quarter, I
remain confident in our ability to close the year in a position of
strength and build upon these results as we move into fiscal
2024."
CONFERENCE CALL
SCHEDULED
The Company has scheduled a conference call at 8:30 a.m. ET
today to discuss its earnings and outlook. This call and related
materials can be heard and reviewed, either live or on a delayed
basis, on the Company's website, www.aramark.com, on the investor relations
page.
About Aramark
Aramark (NYSE: ARMK) proudly serves the world’s leading
educational institutions, Fortune 500 companies, world champion
sports teams, prominent healthcare providers, iconic destinations
and cultural attractions and numerous municipalities in 19
countries around the world with food, facilities, and uniform
services. Because our culture is rooted in service, our employees
strive to do great things for each other, our partners, our
communities, and our planet. Aramark has been recognized on
FORTUNE's list of "World’s Most Admired Companies," DiversityInc’s
“Top 50 Companies for Diversity” and "Top Companies for Supplier
Diversity," Newsweek's list of "America's Most Responsible
Companies 2023," the HRC's "Best Places to Work for LGBTQ
Equality," and scored 100% on the Disability Equality Index. Learn
more at www.aramark.com and connect with us on Facebook, Twitter
and LinkedIn.
Selected Operational
and Financial Metrics
Adjusted Revenue (Organic)
Adjusted Revenue (Organic) represents revenue growth, adjusted to
eliminate the effect of certain material acquisitions and the
impact of currency translation.
Adjusted Operating Income
Adjusted Operating Income represents operating income adjusted to
eliminate the change in amortization of acquisition-related
intangible assets; the impact of the change in fair value related
to certain gasoline and diesel agreements; severance and other
charges; the effect of certain material acquisitions; spin-off
related charges and other items impacting comparability.
Adjusted Operating Income (Constant
Currency) Adjusted Operating Income (Constant Currency)
represents Adjusted Operating Income adjusted to eliminate the
impact of currency translation.
Adjusted Net Income Adjusted
Net Income represents net income attributable to Aramark
stockholders adjusted to eliminate the change in amortization of
acquisition-related intangible assets; the impact of changes in the
fair value related to certain gasoline and diesel agreements;
severance and other charges; the effect of certain material
acquisitions; spin-off related charges; gain on sale of equity
investments, net; loss on defined benefit pension plan termination;
the effect of refinancings on interest and other financing costs,
net, and other items impacting comparability, less the tax impact
of these adjustments. The tax effect for adjusted net income for
our United States earnings is calculated using a blended United
States federal and state tax rate. The tax effect for adjusted net
income in jurisdictions outside the United States is calculated at
the local country tax rate.
Adjusted Net Income (Constant
Currency) Adjusted Net Income (Constant Currency)
represents Adjusted Net Income adjusted to eliminate the impact of
currency translation.
Adjusted EPS Adjusted EPS
represents Adjusted Net Income divided by diluted weighted average
shares outstanding.
Adjusted EPS (Constant
Currency) Adjusted EPS (Constant Currency) represents
Adjusted EPS adjusted to eliminate the impact of currency
translation.
Covenant Adjusted EBITDA
Covenant Adjusted EBITDA represents net income attributable to
Aramark stockholders adjusted for interest and other financing
costs, net; provision for income taxes; depreciation and
amortization and certain other items as defined in our debt
agreements required in calculating covenant ratios and debt
compliance. We also use Net Debt for our ratio to Covenant Adjusted
EBITDA, which is calculated as total long-term borrowings less cash
and cash equivalents and short-term marketable securities.
Free Cash Flow Free Cash
Flow represents net cash (used in) provided by operating activities
less net purchases of property and equipment and other. Management
believes that the presentation of free cash flow provides useful
information to investors because it represents a measure of cash
flow available for distribution among all the security holders of
the Company.
We use Adjusted Revenue (Organic), Adjusted Operating Income
(including on a constant currency basis), Adjusted Net Income
(including on a constant currency basis), Adjusted EPS (including
on a constant currency basis), Covenant Adjusted EBITDA and Free
Cash Flow as supplemental measures of our operating profitability
and to control our cash operating costs. We believe these financial
measures are useful to investors because they enable better
comparisons of our historical results and allow our investors to
evaluate our performance based on the same metrics that we use to
evaluate our performance and trends in our results. These financial
metrics are not measurements of financial performance under
generally accepted accounting principles, or GAAP. 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 GAAP. You should not consider these
measures as alternatives to revenue, operating income, net income,
earnings per share or net cash (used in) provided by operating
activities, determined in accordance with GAAP. Adjusted Revenue
(Organic), Adjusted Operating Income, Adjusted Net Income, Adjusted
EPS, Covenant Adjusted EBITDA and Free Cash Flow as presented by us
may not be comparable to other similarly titled measures of other
companies because not all companies use identical calculations.
Explanatory Notes to the Non-GAAP
Schedules
Amortization of Acquisition-Related
Intangible Assets - adjustments to eliminate the change
in amortization expense resulting from the purchase accounting
applied to the January 26, 2007 going-private transaction and
amortization expense recognized on other acquisition-related
intangible assets.
Severance and Other Charges
- adjustments to eliminate severance expenses in the applicable
period ($0.8 million expense reversal for the third quarter of 2023
and $33.6 million expense for year-to-date 2023).
Effect of Certain
Acquisitions - adjustments to eliminate the operating
results of certain material acquisitions that are not comparable to
the prior year periods.
Spin-off Related Charges -
adjustments to eliminate charges related to the Company's intention
to spin-off the Uniform segment, including salaries and benefits,
recruiting and relocation costs, accounting and legal related
expenses, branding and other costs.
Gains, Losses and Settlements impacting
comparability - adjustments to eliminate certain
transactions that are not indicative of our ongoing operational
performance, primarily for the reversal of contingent consideration
liabilities related to acquisition earn outs, net of expense ($1.6
million expense for the third quarter of 2023, $72.3 million
reversal, net for year-to-date 2023 and $1.4 million expense for
both the third quarter and year-to-date 2022), non-cash charges for
the impairment of operating lease right-of-use assets and property
and equipment ($29.3 million for year-to-date 2023), the gain from
the sale of land ($6.8 million for year-to-date 2023), charges
related to hyperinflation in Argentina ($2.8 million for the third
quarter of 2023, $6.7 million for year-to-date 2023, $1.2 million
for the third quarter of 2022 and $2.2 million for year-to-date
2022), non-cash charges related to information technology assets
($6.1 million for year-to-date 2023), non-cash charges for the
impairment of certain assets related to a business held-for-sale
($5.2 million for year-to-date 2023), multiemployer pension plan
withdrawal charges, net ($0.8 million reversal for the third
quarter of 2023 and $3.9 million expense for year-to-date 2023),
legal settlement charges ($2.7 million for year-to-date 2023),
charges related to the retirement of the Company's former Executive
Vice President of Human Resources ($2.6 million for year-to-date
2023), cash termination fees and moving costs related to exiting a
real estate property ($1.3 million for year-to-date 2023), the gain
from the change in fair value related to certain gasoline and
diesel agreements ($1.9 million for the third quarter of 2023, $0.8
million for year-to-date 2023, $0.7 million for the third quarter
of 2022 and $0.4 million for year-to-date 2022), the gain from
insurance proceeds received related to property damage from a
tornado in Nashville ($3.1 million for year-to-date of 2022) and
other miscellaneous charges.
Gain on Sale of Equity Investments,
net - adjustment to eliminate the impact of the gain
from the sale of our equity method investment in AIM Services, Co.,
Ltd. ($377.1 million) and the loss from the sale of a portion of
our equity investment in the San Antonio Spurs NBA franchise ($1.1
million).
Loss on Defined Benefit Pension Plan
Termination - adjustment to eliminate the impact of a
non-cash loss in the prior year from the termination of certain
single-employer defined benefit pension plans.
Effect of Debt Repayments and
Refinancings 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 non-cash charges for the write-off of unamortized debt issuance
costs related to debt activity, including the repayment of
borrowings ($2.5 million loss for both the third quarter and
year-to-date 2023).
Tax Impact of Adjustments to Adjusted
Net Income - adjustments to eliminate the net tax impact
of the adjustments to adjusted net income calculated based on a
blended United States federal and state tax rate for United States
adjustments and the local country tax rate for adjustments in
jurisdictions outside the United States. Adjustment also reverses
valuation allowances recorded against deferred tax assets in a
foreign subsidiary that were previously deemed to be not realizable
(approximately $3.8 million for year-to-date 2023 and $8.5 million
for year-to-date 2022).
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.
Assumes constant foreign currency exchange rates based on the rates
in effect for the prior year period being used in translation for
the comparable current year period.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements reflect our current expectations as to
future events based on certain assumptions and include any
statement that does not directly relate to any historical or
current fact. These statements include, but are not limited to,
statements under the heading "Outlook" and those related to our
expectations regarding the performance of our business, our
financial results, our operations, our liquidity and capital
resources, the conditions in our industry and our growth strategy.
In some cases, forward-looking statements can be identified by
words such as "outlook," "aim," "anticipate," "have confidence,"
"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. These forward-looking statements are
subject to risks and uncertainties that may change at any time, and
actual results or outcomes may differ materially from those that we
expected.
Some of the factors that we believe could affect or continue to
affect our results include without limitation: unfavorable economic
conditions; natural disasters, global calamities, climate change,
pandemics, including the COVID-19 pandemic, energy shortages,
sports strikes and other adverse incidents; geopolitical events
including, but not limited to, the ongoing conflict between Russia
and Ukraine and its effects on global supply chains, inflation,
volatility and disruption of global financial markets; 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; currency risks and other risks
associated with international operations, including compliance with
a broad range of laws and regulations, including the United States
Foreign Corrupt Practices Act; risks associated with suppliers from
whom our products are sourced; disruptions to our relationship with
our distribution partners; the contract intensive nature of our
business, which may lead to client disputes; our expansion strategy
and our ability to successfully integrate the businesses we acquire
and costs and timing related thereto; continued or further
unionization of our workforce; liability resulting from our
participation in multiemployer defined benefit pension plans; the
inability to hire and retain key or sufficient qualified personnel
or increases in labor costs; laws and 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; new interpretations of or changes in the enforcement
of the government regulatory framework; increases or changes in
income tax rates or tax-related laws; potential liabilities,
increased costs, reputational harm, and other adverse effects based
on our commitments and stakeholder expectations relating to
environmental, social and governance considerations; the failure to
maintain food safety throughout our supply chain, food-borne
illness concerns and claims of illness or injury; a cybersecurity
incident or other disruptions in the availability of our computer
systems or privacy breaches; our leverage; variable rate
indebtedness that subjects us to interest rate risk; the inability
to generate sufficient cash to service all of our indebtedness;
debt agreements that limit our flexibility in operating our
business; risks associated with the impact, timing or terms of the
proposed spin-off of Aramark Uniform Services (our Uniform segment)
as an independent publicly traded company to our stockholders (the
"proposed spin-off'"); risks associated with the expected benefits
and costs of the proposed spin-off, including the risk that the
expected benefits of the proposed spin-off will not be realized
within the expected time frame, in full or at all, and the risk
that conditions to the proposed spin-off will not be satisfied
and/or that the proposed spin-off will not be completed within the
expected time frame, on the expected terms or at all; the expected
qualification of the proposed spin-off as a tax-free transaction
for United States federal income tax purposes, including whether or
not an Internal Revenue Service ruling will be obtained; the risk
that any consents or approvals required in connection with the
proposed spin-off will not be received or obtained within the
expected time frame, on the expected terms or at all; risks
associated with expected financing transactions undertaken in
connection with the proposed spin-off and risks associated with
indebtedness incurred in connection with the proposed spin-off; the
risk of increased costs from lost synergies, costs of restructuring
transactions and other costs incurred in connection with the
proposed spin-off; retention of existing management team members as
a result of the proposed spin-off; reaction of customers, our
employees and other parties to the proposed spin-off; and the
impact of the proposed spin-off on our business and the risk that
the proposed spin-off may be more difficult, time-consuming or
costly than expected, including the impact on our resources,
systems, procedures and controls, diversion of management’s
attention and the impact on relationships with customers,
suppliers, employees and other business counterparties; and other
factors set forth under the headings "Part I, Item 1A Risk
Factors," "Part I, Item 3 Legal Proceedings" and "Part II, Item 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other sections of our Annual Report on
Form 10-K, filed with the Securities and Exchange Commission (the
"SEC") on November 22, 2022 as such factors may be updated from
time to time in our other 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 at www.aramark.com. These factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included herein and in our
other 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.
Forward-looking statements speak only as of the date made. 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.
ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In
Thousands, Except Per Share Amounts)
Three Months Ended
June 30, 2023
July 1, 2022
Revenue
$
4,749,209
$
4,127,378
Costs and Expenses:
Cost of services provided (exclusive of
depreciation and amortization)
4,314,710
3,747,828
Depreciation and amortization
135,522
132,975
Selling and general corporate expenses
95,595
98,689
4,545,827
3,979,492
Operating income
203,382
147,886
Gain on Sale of Equity Investments,
net
(375,972
)
—
Interest and Other Financing Costs,
net
112,747
91,466
Income Before Income Taxes
466,607
56,420
Provision for Income Taxes
128,052
15,939
Net income
338,555
40,481
Less: Net income attributable to
noncontrolling interests
71
152
Net income attributable to Aramark
stockholders
$
338,484
$
40,329
Earnings per share attributable to Aramark
stockholders:
Basic
$
1.30
$
0.16
Diluted
$
1.29
$
0.16
Weighted Average Shares Outstanding:
Basic
260,922
257,564
Diluted
262,747
259,219
Nine Months Ended
June 30, 2023
July 1, 2022
Revenue
$
13,952,292
$
11,936,167
Costs and Expenses:
Cost of services provided (exclusive of
depreciation and amortization)
12,656,205
10,810,111
Depreciation and amortization
408,795
400,778
Selling and general corporate expenses
302,281
295,154
13,367,281
11,506,043
Operating income
585,011
430,124
Gain on Sale of Equity Investments,
net
(375,972
)
—
Interest and Other Financing Costs,
net
328,113
274,168
Income Before Income Taxes
632,870
155,956
Provision for Income Taxes
164,782
37,223
Net income
468,088
118,733
Less: Net (loss) income attributable to
noncontrolling interests
(588
)
45
Net income attributable to Aramark
stockholders
$
468,676
$
118,688
Earnings per share attributable to Aramark
stockholders:
Basic
$
1.80
$
0.46
Diluted
$
1.79
$
0.46
Weighted Average Shares Outstanding:
Basic
260,349
257,044
Diluted
262,267
258,682
ARAMARK AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In Thousands)
June 30, 2023
September 30, 2022
Assets
Current Assets:
Cash and cash equivalents
$
402,414
$
329,452
Receivables
2,405,890
2,147,957
Inventories
593,168
552,386
Prepayments and other current assets
324,405
262,195
Total current assets
3,725,877
3,291,990
Property and Equipment, net
2,037,168
2,032,045
Goodwill
5,594,340
5,515,124
Other Intangible Assets
2,081,966
2,113,726
Operating Lease Right-of-use Assets
645,084
592,145
Other Assets
1,313,065
1,537,406
$
15,397,500
$
15,082,436
Liabilities and Stockholders'
Equity
Current Liabilities:
Current maturities of long-term
borrowings
$
110,602
$
65,047
Current operating lease liabilities
69,995
68,858
Accounts payable
1,048,605
1,322,936
Accrued expenses and other current
liabilities
1,646,756
1,829,045
Total current liabilities
2,875,958
3,285,886
Long-Term Borrowings
7,535,750
7,345,860
Noncurrent Operating Lease Liabilities
304,374
305,623
Deferred Income Taxes and Other Noncurrent
Liabilities
1,121,984
1,106,587
Commitments and Contingencies
Redeemable Noncontrolling Interests
8,165
8,840
Total Stockholders' Equity
3,551,269
3,029,640
$
15,397,500
$
15,082,436
ARAMARK AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Nine Months Ended
June 30, 2023
July 1, 2022
Cash flows from operating activities:
Net income
$
468,088
$
118,733
Adjustments to reconcile net income to net
cash used in operating activities
Depreciation and amortization
408,795
400,778
Asset write-downs
35,479
—
Reduction of contingent consideration
liability
(73,891
)
—
Gain on sale of equity investments,
net
(375,972
)
—
Deferred income taxes
93,092
15,340
Share-based compensation expense
65,621
71,799
Changes in operating assets and
liabilities
(803,392
)
(695,591
)
Payments made to clients on contracts
(103,798
)
(39,043
)
Other operating activities
15,885
(14,009
)
Net cash used in operating activities
(270,093
)
(141,993
)
Cash flows from investing activities:
Net purchases of property and equipment
and other
(287,302
)
(245,647
)
Proceeds from sale of equity
investments
633,179
—
Acquisitions, divestitures and other
investing activities
(63,971
)
(395,797
)
Net cash provided by (used in) investing
activities
281,906
(641,444
)
Cash flows from financing activities:
Net proceeds/payments of long-term
borrowings
(277,569
)
271,403
Net change in funding under the
Receivables Facility
395,065
500,000
Payments of dividends
(85,898
)
(84,770
)
Proceeds from issuance of common stock
43,715
35,275
Other financing activities
(27,432
)
(18,384
)
Net cash provided by financing
activities
47,881
703,524
Effect of foreign exchange rates on cash
and cash equivalents
13,268
(13,810
)
Increase (decrease) in cash and cash
equivalents
72,962
(93,723
)
Cash and cash equivalents, beginning of
period
329,452
532,591
Cash and cash equivalents, end of
period
$
402,414
$
438,868
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
ADJUSTED CONSOLIDATED
OPERATING INCOME MARGIN
(Unaudited)
(In thousands)
Three Months Ended
June 30, 2023
FSS United States
FSS International
Uniform
Corporate
Aramark and Subsidiaries
Revenue (as reported)
$
2,890,639
$
1,162,411
$
696,159
$
4,749,209
Operating Income (as reported)
$
128,564
$
39,607
$
66,822
$
(31,611
)
$
203,382
Operating Income Margin (as reported)
4.45
%
3.41
%
9.60
%
4.28
%
Revenue (as reported)
$
2,890,639
$
1,162,411
$
696,159
$
4,749,209
Effect of Certain Acquisitions
(47,165
)
—
—
(47,165
)
Effect of Currency Translation
2,778
14,626
3,342
20,746
Adjusted Revenue (Organic)
$
2,846,252
$
1,177,037
$
699,501
$
4,722,790
Revenue Growth (as reported)
16.49
%
18.89
%
4.19
%
15.07
%
Adjusted Revenue Growth (Organic)
14.70
%
20.38
%
4.69
%
14.43
%
Operating Income (as reported)
$
128,564
$
39,607
$
66,822
$
(31,611
)
$
203,382
Amortization of Acquisition-Related
Intangible Assets
19,196
3,362
6,502
—
29,060
Severance and Other Charges
—
—
(778
)
—
(778
)
Effect of Certain Acquisitions
(2,514
)
—
—
—
(2,514
)
Spin-off Related Charges
—
—
6,005
3,529
9,534
Gains, Losses and Settlements impacting
comparability
1,579
3,090
(1,150
)
(1,865
)
1,654
Adjusted Operating Income
$
146,825
$
46,059
$
77,401
$
(29,947
)
$
240,338
Effect of Currency Translation
287
368
174
—
829
Adjusted Operating Income (Constant
Currency)
$
147,112
$
46,427
$
77,575
$
(29,947
)
$
241,167
Operating Income Growth (as reported)
44.36
%
13.97
%
10.40
%
13.28
%
37.53
%
Adjusted Operating Income Growth
35.54
%
20.40
%
12.25
%
15.97
%
33.60
%
Adjusted Operating Income Growth (Constant
Currency)
35.81
%
21.36
%
12.50
%
15.97
%
34.06
%
Adjusted Operating Income Margin
5.16
%
3.96
%
11.12
%
5.11
%
Adjusted Operating Income Margin (Constant
Currency)
5.17
%
3.94
%
11.09
%
5.11
%
Three Months Ended
July 1, 2022
FSS United States
FSS International
Uniform
Corporate
Aramark and Subsidiaries
Revenue (as reported)
$
2,481,433
$
977,759
$
668,186
$
4,127,378
Operating Income (as reported)
$
89,059
$
34,752
$
60,528
$
(36,453
)
$
147,886
Amortization of Acquisition-Related
Intangible Assets
17,856
2,312
6,519
—
26,687
Spin-off Related Charges
—
—
1,908
1,530
3,438
Gains, Losses and Settlements impacting
comparability
1,409
1,192
—
(714
)
1,887
Adjusted Operating Income
$
108,324
$
38,256
$
68,955
$
(35,637
)
$
179,898
Operating Income Margin (as reported)
3.59
%
3.55
%
9.06
%
3.58
%
Adjusted Operating Income Margin
4.37
%
3.91
%
10.32
%
4.36
%
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
ADJUSTED CONSOLIDATED
OPERATING INCOME MARGIN
(Unaudited)
(In thousands)
Nine Months Ended
June 30, 2023
FSS United States
FSS International
Uniform
Corporate
Aramark and Subsidiaries
Revenue (as reported)
$
8,654,825
$
3,228,101
$
2,069,366
$
13,952,292
Operating Income (as reported)
$
447,732
$
73,253
$
169,175
$
(105,149
)
$
585,011
Operating Income Margin (as reported)
5.17
%
2.27
%
8.18
%
4.19
%
Revenue (as reported)
$
8,654,825
$
3,228,101
$
2,069,366
$
13,952,292
Effect of Certain Acquisitions
(186,463
)
—
—
(186,463
)
Effect of Currency Translation
7,846
205,680
12,662
226,188
Adjusted Revenue (Organic)
$
8,476,208
$
3,433,781
$
2,082,028
$
13,992,017
Revenue Growth (as reported)
19.46
%
18.60
%
5.09
%
16.89
%
Adjusted Revenue Growth (Organic)
16.99
%
26.16
%
5.73
%
17.22
%
Operating Income (as reported)
$
447,732
$
73,253
$
169,175
$
(105,149
)
$
585,011
Amortization of Acquisition-Related
Intangible Assets
57,530
9,124
19,505
—
86,159
Severance and Other Charges
2,310
26,090
4,672
552
33,624
Effect of Certain Acquisitions
(8,631
)
—
—
—
(8,631
)
Spin-off Related Charges
—
—
12,961
6,960
19,921
Gains, Losses and Settlements impacting
comparability
(39,879
)
15,157
2,410
1,885
(20,427
)
Adjusted Operating Income
$
459,062
$
123,624
$
208,723
$
(95,752
)
$
695,657
Effect of Currency Translation
1,512
8,307
538
—
10,357
Adjusted Operating Income (Constant
Currency)
$
460,574
$
131,931
$
209,261
$
(95,752
)
$
706,014
Operating Income Growth (as reported)
65.67
%
(22.53
)%
(3.54
)%
4.46
%
36.01
%
Adjusted Operating Income Growth
40.86
%
18.66
%
7.83
%
11.75
%
35.04
%
Adjusted Operating Income Growth (Constant
Currency)
41.32
%
26.64
%
8.11
%
11.75
%
37.05
%
Adjusted Operating Income Margin
5.42
%
3.83
%
10.09
%
5.05
%
Adjusted Operating Income Margin (Constant
Currency)
5.43
%
3.84
%
10.05
%
5.05
%
Nine Months Ended
July 1, 2022
FSS United States
FSS International
Uniform
Corporate
Aramark and Subsidiaries
Revenue (as reported)
$
7,245,148
$
2,721,838
$
1,969,181
$
11,936,167
Operating Income (as reported)
$
270,248
$
94,551
$
175,378
$
(110,053
)
$
430,124
Amortization of Acquisition-Related
Intangible Assets
54,245
7,431
19,394
—
81,070
Spin-off Related Charges
—
—
1,908
1,530
3,438
Gains, Losses and Settlements impacting
comparability
1,409
2,197
(3,113
)
23
516
Adjusted Operating Income
$
325,902
$
104,179
$
193,567
$
(108,500
)
$
515,148
Operating Income Margin (as reported)
3.73
%
3.47
%
8.91
%
3.60
%
Adjusted Operating Income Margin
4.50
%
3.83
%
9.83
%
4.32
%
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
ADJUSTED NET INCOME &
ADJUSTED EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended
Nine Months Ended
June 30, 2023
July 1, 2022
June 30, 2023
July 1, 2022
Net Income Attributable to Aramark
Stockholders (as reported)
$
338,484
$
40,329
$
468,676
$
118,688
Adjustment:
Amortization of Acquisition-Related
Intangible Assets
29,060
26,687
86,159
81,070
Severance and Other Charges
(778
)
—
33,624
—
Effect of Certain Acquisitions
(2,514
)
—
(8,631
)
—
Spin-off Related Charges
9,534
3,438
19,921
3,438
Gains, Losses and Settlements impacting
comparability
1,654
1,887
(20,427
)
516
Gain on Sale of Equity Investments,
net
(375,972
)
—
(375,972
)
—
Loss on Defined Benefit Pension Plan
Termination
—
—
—
3,644
Effect of Debt Repayments and Refinancings
on Interest and Other Financing Costs, net
2,522
—
2,522
—
Tax Impact of Adjustments to Adjusted Net
Income
93,301
(7,446
)
71,825
(29,568
)
Adjusted Net Income
$
95,291
$
64,895
$
277,697
$
177,788
Effect of Currency Translation, net of
Tax
1,075
—
10,856
—
Adjusted Net Income (Constant
Currency)
$
96,366
$
64,895
$
288,553
$
177,788
Earnings Per Share (as
reported)
Net Income Attributable to Aramark
Stockholders (as reported)
$
338,484
$
40,329
$
468,676
$
118,688
Diluted Weighted Average Shares
Outstanding
262,747
259,219
262,267
258,682
$
1.29
$
0.16
$
1.79
$
0.46
Earnings Per Share Growth (as reported)
$
$
1.13
$
1.33
Earnings Per Share Growth (as reported)
%
***
289
%
Adjusted Earnings Per Share
Adjusted Net Income
$
95,291
$
64,895
$
277,697
$
177,788
Diluted Weighted Average Shares
Outstanding
262,747
259,219
262,267
258,682
$
0.36
$
0.25
$
1.06
$
0.69
Adjusted Earnings Per Share Growth $
$
0.11
$
0.37
Adjusted Earnings Per Share Growth %
44
%
54
%
Adjusted Earnings Per Share (Constant
Currency)
Adjusted Net Income (Constant
Currency)
$
96,366
$
64,895
$
288,553
$
177,788
Diluted Weighted Average Shares
Outstanding
262,747
259,219
262,267
258,682
$
0.37
$
0.25
$
1.10
$
0.69
Adjusted Earnings Per Share Growth
(Constant Currency) $
$
0.12
$
0.41
Adjusted Earnings Per Share Growth
(Constant Currency) %
48
%
59
%
*** Not meaningful
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
NET DEBT TO COVENANT ADJUSTED
EBITDA
(Unaudited)
(In thousands)
Twelve Months Ended
June 30, 2023
July 1, 2022
Net Income Attributable to Aramark
Stockholders (as reported)
$
544,472
$
154,117
Interest and Other Financing Costs,
net
426,672
367,132
Provision for Income Taxes
189,020
42,316
Depreciation and Amortization
540,344
539,380
Share-based compensation expense(1)
89,309
90,214
Unusual or non-recurring gains(2)
(370,765
)
—
Pro forma EBITDA for certain
transactions(3)
4,166
16,503
Other(4)(5)
101,376
(7,792
)
Covenant Adjusted EBITDA
$
1,524,594
$
1,201,870
Net Debt to Covenant Adjusted
EBITDA
Total Long-Term Borrowings
$
7,646,352
$
8,162,347
Less: Cash and cash equivalents and
short-term marketable securities(6)
512,244
438,868
Net Debt
$
7,134,108
$
7,723,479
Covenant Adjusted EBITDA
$
1,524,594
$
1,201,870
Net Debt/Covenant Adjusted EBITDA
4.7
6.4
(1) Represents share-based compensation
expense resulting from the application of accounting for stock
options, restricted stock units, performance stock units, deferred
stock unit awards and employee stock purchases.
(2) For the twelve months ended June 30,
2023 represents the fiscal 2023 gain from the sale of the Company's
equity method investment in AIM Services, Co., Ltd. ($377.1
million), the fiscal 2023 non-cash charge for the impairment of
certain assets related to a business held-for-sale ($5.2 million)
and the fiscal 2023 loss from the sale of a portion of the
Company's equity investment in the San Antonio Spurs NBA franchise
($1.1 million).
(3) Represents the annualizing of net
EBITDA from certain acquisitions made during the period.
(4) "Other" for the twelve months ended
June 30, 2023 includes the reversal of contingent consideration
liabilities related to acquisition earn outs, net of expense ($88.8
million), net severance charges ($53.2 million), adjustments to
remove the impact attributable to the adoption of certain
accounting standards that are made to the calculation in accordance
with the Credit Agreement and indentures ($43.0 million), non-cash
charges for the impairment of operating lease right-of-use assets
and property and equipment related to certain real estate
properties ($29.3 million), charges related to the Company's
intention to spin-off the Uniform segment ($25.8 million), non-cash
charges for inventory write-downs to net realizable value and fixed
asset write-offs related to personal protective equipment ($20.5
million), the impact of hyperinflation in Argentina ($8.0 million),
the gain from the sale of land ($6.8 million), the gain from a
funding agreement related to a legal matter ($6.5 million),
non-cash charges related to information technology assets ($6.1
million), the loss from the change in fair value related to certain
gasoline and diesel agreements ($6.0 million), labor charges and
other expenses associated with closed or partially closed locations
from adverse weather ($5.4 million), the favorable impact related
to a client contract dispute ($4.0 million), net multiemployer
pension plan withdrawal charges ($3.9 million), legal settlement
charges ($2.7 million) and other miscellaneous expenses.
(5) "Other" for the twelve months ended
July 1, 2022 includes United States and non-United States
governmental labor related tax credits resulting from the COVID-19
pandemic, net of labor charges, incremental expenses and other
expenses associated with closed or partially closed client
locations ($63.0 million), adjustments to remove the impact
attributable to the adoption of certain accounting standards that
are made to the calculation in accordance with the Credit Agreement
and indentures ($32.7 million), non-cash charges for inventory
write-downs to net realizable value and for excess inventory
related to personal protective equipment ($16.4 million), expenses
related to merger and integration related charges ($12.2 million),
the gain from a funding agreement related to a legal matter ($10.0
million), favorable adjustments to remove the impact attributable
to equity investments that are made to the calculation in
accordance with the Credit Agreement and indentures, primarily from
the Company's previous ownership interest in AIM Services Co., Ltd.
($9.4 million), reversal of severance charges ($7.9 million),
reversal of charges related to a client contract dispute ($5.7
million), the gain from the insurance proceeds received related to
property damage from a tornado in Nashville ($4.0 million), charges
related to the Company's intention to spin-off the Uniform segment
($3.4 million), the impact of hyperinflation in Argentina ($3.0
million), due diligence charges related to acquisitions ($2.7
million), non-cash charges related to information technology assets
($2.2 million) and other miscellaneous expenses.
(6) Short-term marketable securities
represent held-to-maturity debt securities with original maturities
greater than three months, which are maturing within one year and
will convert back to cash. Short-term marketable securities are
included in "Prepayments and other current assets" on the Condensed
Consolidated Balance Sheets.
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
FREE CASH FLOW
(Unaudited)
(In thousands)
Nine Months Ended
Six Months Ended
Three Months Ended
June 30, 2023
March 31, 2023
June 30, 2023
Net cash (used in) provided by operating
activities
$
(270,093
)
$
(292,722
)
$
22,629
Net purchases of property and equipment
and other
(287,302
)
(184,288
)
(103,014
)
Free Cash Flow
$
(557,395
)
$
(477,010
)
$
(80,385
)
Nine Months Ended
Six Months Ended
Three Months Ended
July 1, 2022
April 1, 2022
July 1, 2022
Net cash used in operating activities
$
(141,993
)
$
(128,267
)
$
(13,726
)
Net purchases of property and equipment
and other
(245,647
)
(163,032
)
(82,615
)
Free Cash Flow
$
(387,640
)
$
(291,299
)
$
(96,341
)
Nine Months Ended
Six Months Ended
Three Months Ended
Change
Change
Change
Net cash (used in) provided by operating
activities
$
(128,100
)
$
(164,455
)
$
36,355
Net purchases of property and equipment
and other
(41,655
)
(21,256
)
(20,399
)
Free Cash Flow
$
(169,755
)
$
(185,711
)
$
15,956
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
ADJUSTED REVENUE COMPARISON TO
FISCAL 2019
(Unaudited)
(In thousands)
Three Months Ended
June 30, 2023
Revenue (as reported)
$
4,749,209
Effect of Certain Acquisitions
(47,165
)
Effect of Currency Translation*
162,635
Adjusted Revenue (Organic)
$
4,864,679
Revenue as a Percentage of Fiscal 2019
Revenue (as reported)
118.41
%
Adjusted Revenue (Organic) as a Percentage
of Fiscal 2019 Revenue
121.29
%
Three Months Ended
June 28, 2019
Revenue (as reported)
$
4,010,761
* The effect of currency translation
reflects the impact that fluctuations in currency translation rates
had on the comparative results by translating the fiscal 2021 or
fiscal 2022 period balances using the foreign currency exchange
rates in effect for the comparable periods of fiscal 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230807118223/en/
Inquiries: Felise Glantz Kissell (215) 409-7287
Kissell-Felise@aramark.com Scott Sullivan (215) 238-3953
Sullivan-Scott1@aramark.com
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