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No significant maturities until 2023
More than
Ample room under covenants
“First and foremost,
“We recognize that in this fast-moving environment, it is appropriate to be in more frequent communication with our stakeholders, and this communication is a first step in that direction,” Zillmer continued.
We are managing through this unprecedented period with resiliency that includes meeting the increased demand in several businesses and effectively resolving near-term disruptions:
- Education– While impacted by recent closures, a vast majority of accounts continue to operate in some manner (e.g., grab-and-go meals to fulfill the free and reduced program in schools) to provide creative, safe and cost-effective solutions to serve customers. For those clients who may close early, we will accelerate the standard end-of-semester summer wind down of those locations in real time, thereby managing our costs to appropriate levels.
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Sports, Leisure & Corrections –
Sports & Entertainment has been impacted by the suspension of professional sports seasons and postponement of concerts and events. Leisure has seen some impact related to national parks, but many sites remain open. Corrections has not been materially affected. - Business & Industry – Office closures and remote working have reduced catering and overall volumes, but we continue to serve businesses and geographies that still require service, including the manufacturing and pharmaceutical industries.
- Facilities & Other – We are providing more frequent and comprehensive services at some locations that require enhanced sanitization and deep cleaning, enabling a safer environment for existing and returning employees.
- Healthcare – We are working closely with clients to meet their heightened needs in anticipation of a possible surge in demand in the sector.
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International – We operate in diverse verticals across 18 countries, with the largest presence in
Canada ,Chile ,China ,Germany ,Ireland and theUnited Kingdom . There is no exposure toItaly orFrance . The Company’s business inChina , which is primarily weighted towards Healthcare, has recovered and been awarded new contracts in recognition of our increasingly valued service. - Uniforms – This business serves a range of clients where the employees generally must be on-site, but typically do not require close congregation. These employees must wear uniforms to perform their duties in a safe and hygienic manner. The necessity of clean uniforms for our clients’ continued operation somewhat dampens the volatility in demand.
At this stage, it is too early to determine the full impact of COVID-19 on our operational results. In general, the Company believes revenue declines would have a drop through of approximately 15%-20% on operating income due to the flexible cost structure of the business model, geographic mix and diversified client portfolio.
The Company has a strong balance sheet with solid financial flexibility and no significant debt maturities due until 2023. Liquidity remains strong and in order to maintain maximum flexibility, the Company has decided to fully draw down on its revolver, increasing cash availability to
Seasonality and the sensitivity of working capital balances to the day of the pay cycle on which the quarter closes (payroll is a very large component of working capital) can cause Free Cash Flow and leverage levels to fluctuate. Due to these effects and consistent with our normal seasonality, our Free Cash Flow during our first quarter was negative
COVID-19 is creating personal and economic disruption globally. During this challenging time, we are working hard to do our part to help our employees, clients and customers stay safe. Our contribution – delivering meals, laundered uniforms and facility services to a world-class standard of hygiene and safety – is an essential component of making our society less vulnerable to disease, and ensuring that our employees and everyone we serve are safe.
Our Vice Chairman and Mantle Ridge’s CEO
About
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. 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 or remain or continue to be confident,” “have confidence,” “estimate,” “expect,” “will be,” “will continue,” “will likely result,” “project,” “intend,” “plan,” “believe,” “see,” “look to”, “prospects” 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, financial results and our estimated benefits and costs of our acquisitions 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: our ability to successfully implement our management transition; unfavorable economic conditions; natural disasters, global calamities, pandemics including COVID-19, 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; 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,
Covenant Adjusted EBITDA calculation |
||||||
Twelve Months Ended |
Twelve Months Ended |
Twelve Months Ended |
||||
(in millions) |
|
|
|
|||
Net income attributable to |
|
|
|
|||
Interest and other financing costs, net |
331.6 |
360.9 |
298.0 |
|||
Provision for income taxes |
96.8 |
92.8 |
(56.2) |
|||
Depreciation and amortization |
589.8 |
613.1 |
515.5 |
|||
Share-based compensation expense(1) |
50.8 |
90.3 |
65.4 |
|||
Unusual or non-recurring (gains) and losses |
1.0 |
(157.3) |
- |
|||
Pro forma EBITDA for equity method investees(2) |
7.2 |
14.2 |
13.6 |
|||
Pro forma EBITDA for certain transactions(3) |
19.1 |
(18.2) |
82.9 |
|||
Other(4) |
208.5 |
183.9 |
60.5 |
|||
Covenant Adjusted EBITDA |
|
|
|
|||
(1) Represents share-based compensation expense resulting from the application of accounting for stock options, restricted stock units, performance stock units, and deferred stock unit awards. |
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(2) Represents our estimated share of EBITDA, primarily from our |
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(3) Represents the annualizing of net EBITDA from acquisitions made during the period. |
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(4) Other for the twelve months ended |
Twelve Months Ended |
Twelve Months Ended |
Twelve Months Ended |
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Consolidated Secured Debt Ratio |
|
|
|
||
Consolidated Total Indebtedness secured by any Lien |
|
|
|
||
Less: Cash and Cash Equivalents |
264.6 |
249.9 |
185.7 |
||
Net Consolidated Total Indebtedness secured by any Lien |
3,412.3 |
3,646.2 |
4,499.9 |
||
Covenant Adjusted EBITDA |
1,648.4 |
1,706.0 |
1,520.6 |
||
Net Consolidated Total Indebtedness secured by any Lien/Covenant Adjusted EBITDA |
2.07 |
2.14 |
2.96 |
||
Consolidated Total Indebtedness secured by any Lien |
|
||||
Issuance of |
900.0 |
||||
Consolidated Total Indebtedness secured by any Lien, adjusted |
4,576.9 |
||||
Less: Cash and Cash Equivalents |
264.6 |
||||
Net Consolidated Total Indebtedness secured by any Lien, adjusted |
4,312.3 |
||||
Covenant Adjusted EBITDA |
1,648.4 |
||||
Net Consolidated Total Indebtedness secured by any Lien/Covenant Adjusted EBITDA, adjusted |
2.62 |
Consolidated Interest Expense calculation |
||
Twelve Months Ended |
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(in millions) |
|
|
Interest and other financing costs, net (as reported) |
|
|
Amortization of deferred financing fees and debt issuance costs |
(9.9) |
|
Interest income |
20.2 |
|
Other |
(8.4) |
|
Consolidated Interest Expense |
|
|
Interest Coverage Ratio (Fixed Charge Coverage Ratio) |
|
|
Covenant Adjusted EBITDA |
|
|
Consolidated Interest Expense |
333.5 |
|
Interest Coverage Ratio (Fixed Charge Coverage Ratio)(2) |
4.94 |
As of |
Covenant Requirements |
Actual Ratios |
||
Consolidated Secured Debt Ratio (1) |
5.125x |
2.07x |
||
Interest Coverage Ratio (Fixed Charge Coverage Ratio)(2) |
2.000x |
4.94x |
||
(1) The Credit Agreement requires ASI to maintain a maximum Consolidated Secured Debt Ratio, defined as consolidated total indebtedness secured by a lien to Covenant Adjusted EBITDA, of 5.125x. Consolidated total indebtedness secured by a lien is defined in the Credit Agreement as total indebtedness consisting of debt for borrowed money, finance leases, debt in respect of sale-leaseback transactions, disqualified and preferred stock and advances under the Receivables Facility secured by a lien reduced by the amount of cash and cash equivalents on the condensed consolidated balance sheet that is free and clear of any lien. Non-compliance with the maximum Consolidated Secured Debt Ratio could result in the requirement to immediately repay all amounts outstanding under our Credit Agreement, which, if ASI's lenders under our Credit Agreement (other than the lenders in respect of ASI's |
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(2) Our Credit Agreement establishes an incurrence-based minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA to consolidated interest expense, the achievement of which is a condition for us to incur additional indebtedness and to make certain restricted payments. If we do not maintain this minimum Interest Coverage Ratio calculated on a pro forma basis for any such additional indebtedness or restricted payments, we could be prohibited from being able to incur additional indebtedness, other than the incremental capacity provided for under our Credit Agreement and pursuant to specified exceptions, and make certain restricted payments, other than pursuant to certain exceptions. The minimum Interest Coverage Ratio is 2.000x for the term of the Credit Agreement. Consolidated interest expense is defined in our Credit Agreement as consolidated interest expense excluding interest income, adjusted for acquisitions and dispositions, further adjusted for certain non-cash or nonrecurring interest expense and our estimated share of interest expense from one equity method investee. The indentures governing our senior notes include a similar requirement which is referred to as a Fixed Charge Coverage. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200319005317/en/
Media Inquiries
Cutler-Karen@aramark.com
Investor Inquiries
Kissell-Felise@aramark.com
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