UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 8-K
____________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
August 12, 2015 | |||
Date of Report (Date of earliest event reported) ____________________________ | |||
Aramark | |||
(Exact name of Registrant as Specified in its Charter) ____________________________ | |||
Delaware | 001-36223 | 20-8236097 | |
(State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |
1101 Market Street Philadelphia, Pennsylvania | 19107 | ||
(Address of Principal Executive Offices) | (Zip Code) | ||
(215) 238-3000 | |||
(Registrant's Telephone Number, Including Area Code) | |||
N/A (Former name or former address, if changed since last report.) | |||
___________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. | Results of Operations |
On August 12, 2015, Aramark (the “Company”) issued a press release announcing the results of the Company’s operations for the quarter ended July 3, 2015. The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in this Item 2.02.
The information set forth under this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. | Financial Statements and Exhibits |
(d) | Exhibits | |
Exhibit No. | Description | |
Exhibit 99.1 | Press release of Aramark, dated August 12, 2015, announcing results for the quarter ended July 3, 2015. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Aramark | ||||
Date: | August 12, 2015 | By: | /s/ STEPHEN P. BRAMLAGE, JR. | |
Name: | STEPHEN P. BRAMLAGE, JR. | |||
Title: | Executive Vice President and | |||
Chief Financial Officer | ||||
EXHIBIT INDEX
Exhibit No. | Description | |
Exhibit 99.1 | Press release of Aramark, dated August 12, 2015 announcing results for the quarter ended July 3, 2015. | |
For Immediate Release | Contact: Media Inquiries Karen Cutler (215)238-4063 Cutler-Karen@aramark.com Investor Inquiries Ian Bailey (215)409-7287 Bailey-Ian@aramark.com |
Aramark Reports Third Quarter 2015 Results
***
2015 Full Year Constant-Currency Earnings Outlook Reaffirmed
Landmark Initiative Launched with the American Heart Association
Philadelphia, PA, August 12, 2015 - Aramark (NYSE:ARMK), the $15 billion global provider of award-winning services in food, facilities management, and uniforms, today reported third quarter fiscal 2015 results, reaffirmed its 2015 constant-currency earnings outlook and announced a landmark initiative with the American Heart Association.
Calendar Shift
As previously disclosed, the company’s fiscal calendar timing resulted in a 53 week year in 2014. This has two impacts on 2015 results. First, the fourth quarter of 2015 will be negatively impacted by approximately one week less of both sales and adjusted operating income vs the prior year, or approximately 7% for the quarter and 2% for the year. Second, our businesses will be affected by a later starting point in each quarter vs. the prior year. This has a modest phasing impact on several businesses in North America between quarters, with a full year negative impact of approximately (1%).
Q3 HIGHLIGHTS
• | Sales of $3.5 billion; |
• | Adjusted operating income of $178 million, U.S. GAAP operating income of $117 million; |
• | Adjusted Earnings per Share of $0.29, U.S. GAAP earnings per share of $0.14; |
• | 2015 Full-Year Adjusted EPS expectation unchanged at $1.50 to $1.60. |
“The business performed in line with our expectations in the third quarter as we continued making significant progress against our transformation agenda,” said Eric J. Foss, Chairman, President and Chief Executive Officer. “Our earnings outlook for this year remains unchanged on a constant currency basis, with continued emphasis on capturing additional productivity and margin improvement while driving critical re-investment in the business. We are maintaining focus on our multi-year growth strategy as we move into 2016 and are well positioned to keep delivering sustainable shareholder value.”
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THIRD QUARTER SALES RESULTS
Q3 Sales | As-Reported Growth (GAAP) | Organic Sales Growth1 | Estimated Impact on Organic Growth from Calendar Shift | |
FSS North America | $2.4B | (3)% | (3)% | (3)% |
FSS International | 0.7B | (8)% | 6% | na |
Uniform & Career Apparel | 0.4B | 4% | 4% | na |
Total Company | $3.5B | (4)% | Flat | (2)% |
1 Organic Growth adjusts for currency translation, acquisitions and divestitures, but does not adjust for the estimated calendar shift impact.
The company experienced solid retention rates and base business expansion in the quarter. The North American segment, particularly the Education and Sports, Leisure and Corrections sectors, were the most significantly affected by the calendar shift in the quarter. FSS International organic growth was driven by continued strong European sales growth and ongoing expansion in Emerging Markets, especially China. Sales in the Uniform and Career Apparel segment were strong in the quarter as capacity expansion and automation investments continued to be brought on-line.
During the quarter, the National Park Service announced that it had selected Aramark as the new concessioner for Yosemite National Park. Under the 15-year contract, scheduled to begin on March 1, 2016, Aramark will manage Yosemite’s hospitality programs encompassing lodging, food and beverage, retail, recreational and transportation services.
THIRD QUARTER ADJUSTED OPERATING INCOME (AOI) RESULTS
Q3 AOI | Operating Income Growth (GAAP) | AOI Growth1 | Estimated Impact on AOI Growth from Calendar Shift | |
FSS North America | $108M | (22)% | (10)% | (6)% |
FSS International | 38M | (13)% | 9% | na |
Uniform & Career Apparel | 49M | 6% | 8% | na |
Corporate | (17)M | |||
Total Company | $178M | (17)% | (4)% | (4)% |
1 AOI does not adjust for the estimated calendar shift impact.
During the third quarter, FSS North America had solid productivity gains from food and labor initiatives in its base client locations, which, as was previously disclosed, was offset by the timing of costs associated with certain start-up accounts as well as the phasing of investment spending and an approximate 2% headwind from reductions in Canadian remote oil services. Productivity initiatives and revenue drop-through continued to improve FSS International’s results, with the segment achieving strong profit expansion in the quarter. The Uniform & Career Apparel segment also achieved strong profit expansion as a result of revenue growth, strong cost controls and automation investments.
2
THIRD QUARTER EARNINGS SUMMARY
Adjusted net income was $71 million or $0.29 per share, versus adjusted net income of $73 million or $0.30 per share in the third quarter of 2014. The diluted weighted average share count in the third quarter of fiscal 2015 was 247.2 million shares vs. 243.7 million in the prior year period. The calendar shift is estimated to have reduced earnings per share in the quarter by $0.02.
On a U.S. GAAP basis, sales were $3.5 billion, operating income was $117 million, net income attributable to Aramark stockholders was $34 million and diluted earnings per share were $0.14. This compares to the third quarter of 2014 where on a U.S. GAAP basis, sales were $3.6 billion, operating income was $141 million, net income attributable to Aramark stockholders was $47 million and diluted earnings per share were $0.19. The company’s calculations of organic sales growth, adjusted operating income and adjusted net income adjusts for changes in currency translation rates. The significant strengthening of the U.S. dollar versus the prior year period decreased sales by approximately $126 million, operating income by $7 million and net income by $5 million ($0.02 in earnings per share) in the quarter. A reconciliation of as reported U.S. GAAP financial measures to adjusted financial measures, including changes in currency translation rates is presented below. See “Non-GAAP Measures.”
LANDMARK INITIATIVE WITH THE AMERICAN HEART ASSOCIATION
The company recently announced a landmark initiative with the American Heart Association, aimed at improving Americans’ diets and health by 20 percent by 2020. Healthy for Life® 20 by 20, a five year initiative, introduces industry leading menu commitments by reducing calories, saturated fat and sodium levels 20 percent, and increasing fruits, vegetables and whole grains 20 percent. Changes will impact more than 2 billion meals that Aramark serves annually at thousands of schools and universities, businesses, hospitals, sports and entertainment venues, parks and other destinations, with an expected impact of 10 billion meals by 2020.
LIQUIDITY & CAPITAL STRUCTURE
The company’s liquidity remains strong, with cash on hand plus available secured credit lines totaling $600 million at the end of the third quarter. As of quarter end, total debt was $5.6 billion. The company’s trailing 12-month total debt to adjusted EBITDA ratio was 4.4, an improvement of 30 basis points versus a year ago. This is due to a combination of adjusted EBITDA growth and lower average debt levels. On July 26, 2015, Moody's Investors Service (Moody's) upgraded Aramark Services, Inc.'s corporate family rating (CFR), along with other ratings, to Ba3 from B1.
2015 OUTLOOK & CURRENCY IMPACT
The company’s adjusted earnings per share outlook for the year is unchanged at $1.50 - $1.60. Currency exchange rates are essentially unchanged from the company’s previous disclosures and on a full year basis, at current currency exchange rates, the impact on both sales and adjusted operating income remains a reduction of approximately 3%.
CONFERENCE CALL SCHEDULED
The company has scheduled a conference call at 10 a.m. Eastern Daylight Time today to discuss its earnings and review its outlook for the remainder of the year. This call and related materials can be reviewed, either live or on a delayed basis, on the company's web site, www.aramark.com on the investor relations page.
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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 approximately 270,000 employees deliver experiences that enrich and nourish the lives of millions of people in 21 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.
# # #
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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
Adjusted Net Income represents net income attributable to Aramark stockholders 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 (Organic), Adjusted Operating Income, Adjusted EBITDA and Adjusted Net Income as supplemental measures of our operating profitability and to control our cash operating costs. 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 (Organic), 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.
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ARAMARK AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||
(Unaudited) | ||||||||
(In Thousands, Except Per Share Amounts) | ||||||||
Three Months | Three Months | |||||||
Ended | Ended | |||||||
July 3, 2015 | June 27, 2014 | |||||||
Sales | $ | 3,486,203 | $ | 3,620,057 | ||||
Costs and Expenses: | ||||||||
Cost of services provided | 3,164,700 | 3,275,409 | ||||||
Depreciation and amortization | 125,332 | 124,917 | ||||||
Selling and general corporate expenses | 79,293 | 78,448 | ||||||
3,369,325 | 3,478,774 | |||||||
Operating income | 116,878 | 141,283 | ||||||
Interest and other financing costs, net | 71,225 | 71,186 | ||||||
Income before income taxes | 45,653 | 70,097 | ||||||
Provision for income taxes | 11,615 | 23,181 | ||||||
Net income | 34,038 | 46,916 | ||||||
Less: Net income attributable to noncontrolling interest | 277 | 43 | ||||||
Net income attributable to Aramark stockholders | $ | 33,761 | $ | 46,873 | ||||
Earnings per share attributable to Aramark stockholders: | ||||||||
Basic | $ | 0.14 | $ | 0.20 | ||||
Diluted | $ | 0.14 | $ | 0.19 | ||||
Weighted Average Shares Outstanding: | ||||||||
Basic | 238,718 | 231,854 | ||||||
Diluted | 247,224 | 243,739 | ||||||
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ARAMARK AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||
(Unaudited) | ||||||||
(In Thousands, Except Per Share Amounts) | ||||||||
Nine Months | Nine Months | |||||||
Ended | Ended | |||||||
July 3, 2015 | June 27, 2014 | |||||||
Sales | $ | 10,783,183 | $ | 10,885,145 | ||||
Costs and Expenses: | ||||||||
Cost of services provided | 9,691,195 | 9,790,036 | ||||||
Depreciation and amortization | 375,757 | 387,058 | ||||||
Selling and general corporate expenses | 242,597 | 288,739 | ||||||
10,309,549 | 10,465,833 | |||||||
Operating income | 473,634 | 419,312 | ||||||
Interest and other financing costs, net | 214,354 | 256,613 | ||||||
Income before income taxes | 259,280 | 162,699 | ||||||
Provision for income taxes | 79,517 | 57,750 | ||||||
Net income | 179,763 | 104,949 | ||||||
Less: Net income attributable to noncontrolling interest | 682 | 398 | ||||||
Net income attributable to Aramark stockholders | $ | 179,081 | $ | 104,551 | ||||
Earnings per share attributable to Aramark stockholders: | ||||||||
Basic | $ | 0.76 | $ | 0.47 | ||||
Diluted | $ | 0.73 | $ | 0.45 | ||||
Weighted Average Shares Outstanding: | ||||||||
Basic | 236,933 | 223,143 | ||||||
Diluted | 246,035 | 234,822 | ||||||
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ARAMARK AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
July 3, 2015 | October 3, 2014 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 117,836 | $ | 111,690 | ||||
Receivables | 1,465,896 | 1,582,431 | ||||||
Inventories | 550,922 | 553,815 | ||||||
Prepayments and other current assets | 252,942 | 217,040 | ||||||
Total current assets | 2,387,596 | 2,464,976 | ||||||
Property and Equipment, net | 958,478 | 997,331 | ||||||
Goodwill | 4,563,345 | 4,589,680 | ||||||
Other Intangible Assets | 1,145,604 | 1,252,741 | ||||||
Other Assets | 1,158,342 | 1,150,965 | ||||||
$ | 10,213,365 | $ | 10,455,693 | |||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities: | ||||||||
Current maturities of long-term borrowings | $ | 86,000 | $ | 89,805 | ||||
Accounts payable | 689,260 | 986,240 | ||||||
Accrued expenses and other current liabilities | 1,051,388 | 1,302,828 | ||||||
Total current liabilities | 1,826,648 | 2,378,873 | ||||||
Long-Term Borrowings | 5,531,964 | 5,355,789 | ||||||
Other Liabilities | 978,443 | 993,118 | ||||||
Redeemable Noncontrolling Interest | 9,969 | 9,877 | ||||||
Total Stockholders' Equity | 1,866,341 | 1,718,036 | ||||||
$ | 10,213,365 | $ | 10,455,693 | |||||
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ARAMARK AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Nine Months | Nine Months | |||||||
Ended | Ended | |||||||
July 3, 2015 | June 27, 2014 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 179,763 | $ | 104,949 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 375,757 | 387,058 | ||||||
Income taxes deferred | 11,032 | (46,190 | ) | |||||
Share-based compensation expense | 51,984 | 83,017 | ||||||
Changes in operating assets and liabilities | (479,492 | ) | (562,432 | ) | ||||
Other operating activities | 18,540 | 16,158 | ||||||
Net cash provided by (used in) operating activities | 157,584 | (17,440 | ) | |||||
Cash flows from investing activities: | ||||||||
Net purchases of property and equipment, client contract investments and other | (346,471 | ) | (310,510 | ) | ||||
Acquisition, divestitures and other investing activities | (376 | ) | 12,239 | |||||
Net cash used in investing activities | (346,847 | ) | (298,271 | ) | ||||
Cash flows from financing activities: | ||||||||
Net proceeds/payments of long-term borrowings | 195,003 | (194,933 | ) | |||||
Net change in funding under the Receivables Facility | (7,870 | ) | 50,000 | |||||
Payments of dividends | (61,236 | ) | (34,696 | ) | ||||
Proceeds from initial public offering, net | — | 524,081 | ||||||
Proceeds from issuance of common stock | 24,109 | 3,701 | ||||||
Other financing activities | 45,403 | (21,021 | ) | |||||
Net cash provided by financing activities | 195,409 | 327,132 | ||||||
Increase in cash and cash equivalents | 6,146 | 11,421 | ||||||
Cash and cash equivalents, beginning of period | 111,690 | 110,998 | ||||||
Cash and cash equivalents, end of period | $ | 117,836 | $ | 122,419 | ||||
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ARAMARK AND SUBSIDIARIES | ||||||||||||||||||||
RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||||||
ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
July 3, 2015 | ||||||||||||||||||||
FSS North America | FSS International | Uniform | Corporate | Aramark and Subsidiaries | ||||||||||||||||
Sales (as reported) | $ | 2,382,626 | $ | 721,974 | $ | 381,603 | $ | 3,486,203 | ||||||||||||
Operating Income (as reported) | $ | 73,599 | $ | 32,321 | $ | 49,563 | $ | (38,605 | ) | $ | 116,878 | |||||||||
Operating Income Margin (as reported) | 3.1 | % | 4.5 | % | 13.0 | % | 3.4 | % | ||||||||||||
Sales (as reported) | $ | 2,382,626 | $ | 721,974 | $ | 381,603 | $ | 3,486,203 | ||||||||||||
Effects of Acquisitions and Divestitures | (1,415 | ) | — | (70 | ) | (1,485 | ) | |||||||||||||
Adjusted Sales (Organic) | $ | 2,381,211 | $ | 721,974 | $ | 381,533 | $ | 3,484,718 | ||||||||||||
Operating Income (as reported) | $ | 73,599 | $ | 32,321 | $ | 49,563 | $ | (38,605 | ) | $ | 116,878 | |||||||||
Amortization of Acquisition-Related Customer Relationship Intangible Assets and Depreciation of Property and Equipment Resulting from the Transaction | 27,558 | 120 | (582 | ) | — | 27,096 | ||||||||||||||
Share-Based Compensation | 195 | 15 | 33 | 20,764 | 21,007 | |||||||||||||||
Severance and Other Charges | (900 | ) | 5,122 | — | 3,974 | 8,196 | ||||||||||||||
Effects of Acquisitions and Divestitures | (97 | ) | — | (3 | ) | — | (100 | ) | ||||||||||||
Gains, Losses and Settlements impacting comparability | 7,117 | — | — | (2,645 | ) | 4,472 | ||||||||||||||
Adjusted Operating Income | $ | 107,472 | $ | 37,578 | $ | 49,011 | $ | (16,512 | ) | $ | 177,549 | |||||||||
Adjusted Operating Income Margin | 4.5 | % | 5.2 | % | 12.8 | % | 5.1 | % | ||||||||||||
Three Months Ended | ||||||||||||||||||||
June 27, 2014 | ||||||||||||||||||||
FSS North America | FSS International | Uniform | Corporate | Aramark and Subsidiaries | ||||||||||||||||
Sales (as reported) | $ | 2,468,863 | $ | 784,082 | $ | 367,112 | $ | 3,620,057 | ||||||||||||
Operating Income (as reported) | $ | 94,904 | $ | 37,364 | $ | 46,857 | $ | (37,842 | ) | $ | 141,283 | |||||||||
Operating Income Margin (as reported) | 3.8 | % | 4.8 | % | 12.8 | % | 3.9 | % | ||||||||||||
Sales (as reported) | $ | 2,468,863 | $ | 784,082 | $ | 367,112 | $ | 3,620,057 | ||||||||||||
Effect of Currency Translation | (24,205 | ) | (101,873 | ) | — | (126,078 | ) | |||||||||||||
Effects of Acquisitions and Divestitures | — | (1,797 | ) | — | (1,797 | ) | ||||||||||||||
Adjusted Sales (Organic) | $ | 2,444,658 | $ | 680,412 | $ | 367,112 | $ | 3,492,182 | ||||||||||||
Operating Income (as reported) | $ | 94,904 | $ | 37,364 | $ | 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 | |||||||||||||||
Effect of Currency Translation | (1,750 | ) | (5,792 | ) | — | — | (7,542 | ) | ||||||||||||
Severance and Other Charges | (609 | ) | 754 | — | 7,981 | 8,126 | ||||||||||||||
Effects of Acquisitions and Divestitures | — | 200 | — | — | 200 | |||||||||||||||
Branding | — | — | — | 4,634 | 4,634 | |||||||||||||||
Gains, Losses and Settlements impacting comparability | (1,258 | ) | — | (623 | ) | 475 | (1,406 | ) | ||||||||||||
Adjusted Operating Income | $ | 119,808 | $ | 34,420 | $ | 45,534 | $ | (14,630 | ) | $ | 185,132 | |||||||||
Adjusted Operating Income Margin | 4.9 | % | 5.1 | % | 12.4 | % | 5.3 | % | ||||||||||||
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ARAMARK AND SUBSIDIARIES | ||||||||||||||||||||
RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||||||
ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Nine Months Ended | ||||||||||||||||||||
July 3, 2015 | ||||||||||||||||||||
FSS North America | FSS International | Uniform | Corporate | Aramark and Subsidiaries | ||||||||||||||||
Sales (as reported) | $ | 7,466,119 | $ | 2,180,343 | $ | 1,136,721 | $ | 10,783,183 | ||||||||||||
Operating Income (as reported) | $ | 363,558 | $ | 83,360 | $ | 145,743 | $ | (119,027 | ) | $ | 473,634 | |||||||||
Operating Income Margin (as reported) | 4.9 | % | 3.8 | % | 12.8 | % | 4.4 | % | ||||||||||||
Sales (as reported) | $ | 7,466,119 | $ | 2,180,343 | $ | 1,136,721 | $ | 10,783,183 | ||||||||||||
Effects of Acquisitions and Divestitures | (5,450 | ) | (1,701 | ) | (1,387 | ) | (8,538 | ) | ||||||||||||
Adjusted Sales (Organic) | $ | 7,460,669 | $ | 2,178,642 | $ | 1,135,334 | $ | 10,774,645 | ||||||||||||
Operating Income (as reported) | $ | 363,558 | $ | 83,360 | $ | 145,743 | $ | (119,027 | ) | $ | 473,634 | |||||||||
Amortization of Acquisition-Related Customer Relationship Intangible Assets and Depreciation of Property and Equipment Resulting from the Transaction | 83,060 | 1,767 | (1,903 | ) | — | 82,924 | ||||||||||||||
Share-Based Compensation | 1,737 | 2,639 | 407 | 52,692 | 57,475 | |||||||||||||||
Severance and Other Charges | (1,788 | ) | 6,270 | 158 | 18,360 | 23,000 | ||||||||||||||
Effects of Acquisitions and Divestitures | (314 | ) | (145 | ) | 28 | — | (431 | ) | ||||||||||||
Gains, Losses and Settlements impacting comparability | 969 | 4,825 | (2,132 | ) | 1,630 | 5,292 | ||||||||||||||
Adjusted Operating Income | $ | 447,222 | $ | 98,716 | $ | 142,301 | $ | (46,345 | ) | $ | 641,894 | |||||||||
Adjusted Operating Income Margin | 6.0 | % | 4.5 | % | 12.5 | % | 6.0 | % | ||||||||||||
Nine Months Ended | ||||||||||||||||||||
June 27, 2014 | ||||||||||||||||||||
FSS North America | FSS International | Uniform | Corporate | Aramark and Subsidiaries | ||||||||||||||||
Sales (as reported) | $ | 7,449,761 | $ | 2,340,153 | $ | 1,095,231 | $ | 10,885,145 | ||||||||||||
Operating Income (as reported) | $ | 382,519 | $ | 78,534 | $ | 123,716 | $ | (165,457 | ) | $ | 419,312 | |||||||||
Operating Income Margin (as reported) | 5.1 | % | 3.4 | % | 11.3 | % | 3.9 | % | ||||||||||||
Sales (as reported) | $ | 7,449,761 | $ | 2,340,153 | $ | 1,095,231 | $ | 10,885,145 | ||||||||||||
Effect of Currency Translation | (70,669 | ) | (269,546 | ) | — | (340,215 | ) | |||||||||||||
Effects of Acquisitions and Divestitures | — | (1,797 | ) | — | (1,797 | ) | ||||||||||||||
Adjusted Sales (Organic) | $ | 7,379,092 | $ | 2,068,810 | $ | 1,095,231 | $ | 10,543,133 | ||||||||||||
Operating Income (as reported) | $ | 382,519 | $ | 78,534 | $ | 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 | |||||||||||||||
Effect of Currency Translation | (6,736 | ) | (13,133 | ) | — | — | (19,869 | ) | ||||||||||||
Severance and Other Charges | (11,936 | ) | 13,862 | — | 20,027 | 21,953 | ||||||||||||||
Effects of Acquisitions and Divestitures | — | 200 | — | — | 200 | |||||||||||||||
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 | $ | 455,339 | $ | 84,778 | $ | 129,449 | $ | (38,786 | ) | $ | 630,780 | |||||||||
Adjusted Operating Income Margin | 6.2 | % | 4.1 | % | 11.8 | % | 6.0 | % | ||||||||||||
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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 | Nine Months Ended | ||||||||||||||||
July 3, 2015 | June 27, 2014 | July 3, 2015 | June 27, 2014 | ||||||||||||||
Net Income (as reported) | $ | 34,038 | $ | 46,916 | $ | 179,763 | $ | 104,949 | |||||||||
Adjustment: | |||||||||||||||||
Amortization of Acquisition-Related Customer Relationship Intangible Assets and Depreciation of Property and Equipment Resulting from the Transaction | 27,096 | 28,526 | 82,924 | 98,864 | |||||||||||||
Share-Based Compensation | 21,007 | 11,311 | 57,475 | 33,444 | |||||||||||||
Effect of Currency Translation | — | (7,542 | ) | — | (19,869 | ) | |||||||||||
Severance and Other Charges | 8,196 | 8,126 | 23,000 | 21,953 | |||||||||||||
Effects of Acquisitions and Divestitures | (100 | ) | 200 | (431 | ) | 200 | |||||||||||
Branding | — | 4,634 | — | 19,486 | |||||||||||||
Initial Public Offering-Related Expenses, including share-based compensation | — | — | — | 56,133 | |||||||||||||
Gains, Losses and Settlements impacting comparability | 4,472 | (1,406 | ) | 5,292 | 1,257 | ||||||||||||
Effects of Refinancings on Interest and Other Financing Costs, net | — | — | — | 25,705 | |||||||||||||
Tax Impact of Adjustments to Adjusted Net Income | (23,728 | ) | (17,320 | ) | (70,304 | ) | (88,622 | ) | |||||||||
Adjusted Net Income | $ | 70,981 | $ | 73,445 | $ | 277,719 | $ | 253,500 | |||||||||
Adjustment: | |||||||||||||||||
Tax Impact of Adjustments to Adjusted Net Income and Interest Adjustments | 23,728 | 17,320 | 70,304 | 62,917 | |||||||||||||
Provision for Income Taxes | 11,615 | 23,181 | 79,517 | 57,750 | |||||||||||||
Interest and Other Financing Costs, net | 71,225 | 71,186 | 214,354 | 256,613 | |||||||||||||
Adjusted Operating Income | $ | 177,549 | $ | 185,132 | $ | 641,894 | $ | 630,780 | |||||||||
Adjustment: | |||||||||||||||||
Amortization of Acquisition-Related Customer Relationship Intangible Assets and Depreciation of Property and Equipment Resulting from the Transaction | (27,096 | ) | (28,526 | ) | (82,924 | ) | (98,864 | ) | |||||||||
Depreciation and Amortization | 125,332 | 124,917 | 375,757 | 387,058 | |||||||||||||
Adjusted EBITDA | $ | 275,785 | $ | 281,523 | $ | 934,727 | $ | 918,974 | |||||||||
Adjusted Earnings Per Share | |||||||||||||||||
Adjusted Net Income | $ | 70,981 | $ | 73,445 | $ | 277,719 | $ | 253,500 | |||||||||
Net Income Attributable to Noncontrolling Interest | (277 | ) | (43 | ) | (682 | ) | (398 | ) | |||||||||
Adjusted Net Income Attributable to Aramark Stockholders | $ | 70,704 | $ | 73,402 | $ | 277,037 | $ | 253,102 | |||||||||
Diluted Weighted Average Shares Outstanding | 247,224 | 243,739 | 246,035 | 234,822 | |||||||||||||
$ | 0.29 | $ | 0.30 | $ | 1.13 | $ | 1.08 | ||||||||||
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ARAMARK AND SUBSIDIARIES | |||||||||
RECONCILIATION OF NON-GAAP MEASURES | |||||||||
DEBT TO ADJUSTED EBITDA | |||||||||
(Unaudited) | |||||||||
(In thousands) | |||||||||
Twelve Months Ended | |||||||||
July 3, 2015 | June 27, 2014 | ||||||||
Net Income (as reported) | $ | 224,273 | $ | 144,053 | |||||
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 | 113,565 | 137,908 | |||||||
Share-based compensation | 71,553 | 40,533 | |||||||
Effect of currency translation | — | (19,869 | ) | ||||||
Severance and other charges | 54,601 | 42,639 | |||||||
Effects of acquisitions and divestitures | (431 | ) | 200 | ||||||
Branding | 7,424 | 19,486 | |||||||
Initial public offering related expenses, including share-based compensation | — | 56,133 | |||||||
Gains, Losses and Settlements impacting comparability | 5,946 | 4,263 | |||||||
Effect of Refinancing on Interest and Other Financing Costs, net | — | 25,705 | |||||||
Tax impact of Adjustments to Adjusted Net Income | (111,263 | ) | (116,964 | ) | |||||
Adjusted Net Income | $ | 365,668 | $ | 335,117 | |||||
Adjustment: | |||||||||
Tax Impact of Adjustments to Adjusted Net Income and Interest Adjustments | 111,263 | 91,259 | |||||||
Provision for Income Taxes | 101,985 | 70,507 | |||||||
Interest and Other Financing Costs, net | 292,627 | 339,066 | |||||||
Adjusted Operating Income | $ | 871,543 | $ | 835,949 | |||||
Adjustment: | |||||||||
Amortization of Acquisition-Related Customer Relationship Intangible Assets and Depreciation of Property and Equipment Resulting from the Transaction | (113,565 | ) | (137,908 | ) | |||||
Depreciation and Amortization | 510,280 | 524,682 | |||||||
Adjusted EBITDA | $ | 1,268,258 | $ | 1,222,723 | |||||
Debt to Adjusted EBITDA | |||||||||
Total Long-Term Borrowings | $ | 5,617,964 | $ | 5,689,709 | |||||
Adjusted EBITDA | $ | 1,268,258 | $ | 1,222,723 | |||||
Debt/Adjusted EBITDA | 4.4 | 4.7 | |||||||
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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.
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 ($4.0 million for the third quarter of 2015 and $14.3 million for the year-to-date 2015 and $6.0 million for the third quarter of 2014 and $18.1 million for the year-to-date 2014), organizational streamlining initiatives ($3.8 million net expense for the third quarter of 2015 and $0.9 million net expense for the year-to-date 2015 and $1.3 million net expense reduction for the third quarter of 2014 and $0.5 million for the year-to-date 2014), and other consulting costs related to transformation initiatives ($0.4 million for the third quarter of 2015 and $7.8 million for the year-to-date 2015 and $3.5 million for the third quarter and year-to-date 2014).
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 the 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 the 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 loss on divestitures ($4.3 million for the year-to-date 2015 and $6.7 million for the year-to-date 2014), asset impairments associated with preparing a property for sale ($8.7 million for the third quarter and year-to-date 2015), insurance reserve adjustments due to favorable claims experience ($1.6 million for the third quarter of 2015 and $9.9 million for the year-to-date 2015 and $1.9 million for the third quarter of 2014 and $5.8 million for the year-to-date 2014), expenses related to secondary offerings of common stock by certain of our stockholders ($0.3 million for the third quarter of 2015 and $1.8 million for the year-to-date 2015 and $0.9 million for the third quarter and year-to-date 2014), the impact of the change in fair value related to gasoline and diesel agreements ($2.9 million gain for the third quarter of 2015 and a gain of $0.2 million for the year-to-date 2015 and a gain of $0.5 million for the third quarter of 2014 and a gain of $0.6 million for the year-to-date 2014) and other miscellaneous expenses.
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.
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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,” “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.
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; disruptions to or breaches of our information security systems or compromise of data; failure to maintain effective internal controls; 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 in the “Risk Factors,” Legal Proceedings” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and other sections of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on December 3, 2014, 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 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.
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