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

Company Posts Continued Sales and Profit Growth Momentum

Aug 11, 2014, 07:18 ET from Aramark

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

KEY HIGHLIGHTS

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

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

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

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

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

THIRD QUARTER SEGMENT RESULTS

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

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

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

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

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

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

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

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

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

About Aramark

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

Selected Operational and Financial Metrics

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

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

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

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

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

Contact:

Media Inquiries Karen Cutler (215)238-4063 Cutler-Karen@aramark.com

Investor Inquiries Ian Bailey  (215)409-7287 Bailey-Ian@aramark.com

 

 

ARAMARK AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In Thousands, Except Per Share Amounts)

Three Months

Three Months

Ended

Ended

June 27, 2014

June 28, 2013

Sales

$            3,620,057

$            3,490,030

Costs and Expenses:

     Cost of services provided

3,275,409

3,178,092

     Depreciation and amortization

124,917

135,808

     Selling and general corporate expenses

78,448

52,534

3,478,774

3,366,434

Operating income

141,283

123,596

Interest and other financing costs, net

71,186

80,917

     Income before income taxes 

70,097

42,679

Provision for income taxes

23,181

14,705

     Net income

46,916

27,974

     Less: Net income attributable to noncontrolling interests

43

226

     Net income attributable to Aramark stockholders

$                 46,873

$                 27,748

Earnings per share attributable to Aramark stockholders:

Basic

$0.20

$0.14

Diluted

$0.19

$0.13

Weighted Average Shares Outstanding:

Basic

231,854

201,364

Diluted

243,739

208,326

 

 

ARAMARK AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In Thousands, Except Per Share Amounts)

Nine Months

Nine Months

Ended

Ended

June 27, 2014

June 28, 2013

Sales

$          10,885,145

$          10,429,682

Costs and Expenses:

     Cost of services provided

9,790,036

9,481,859

     Depreciation and amortization

387,058

404,512

     Selling and general corporate expenses

288,739

164,181

10,465,833

10,050,552

Operating income

419,312

379,130

Interest and other financing costs, net

256,613

341,392

     Income before income taxes 

162,699

37,738

Provision for income taxes

57,750

6,476

     Net income

104,949

31,262

     Less: Net income attributable to noncontrolling interests

398

804

     Net income attributable to Aramark stockholders

$               104,551

$                 30,458

Earnings per share attributable to Aramark stockholders:

Basic

$0.47

$0.15

Diluted

$0.45

$0.15

Weighted Average Shares Outstanding:

Basic

223,143

201,607

Diluted

234,822

208,703

 

 

ARAMARK AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands)

June 27, 2014

September 27, 2013

Assets

Current Assets:

Cash and cash equivalents

$               122,419

$               110,998

Receivables 

1,494,709

1,405,843

Inventories

543,210

541,972

Prepayments and other current assets

194,862

228,352

Total current assets

2,355,200

2,287,165

Property and Equipment, net

988,603

977,323

Goodwill

4,619,214

4,619,987

Other Intangible Assets

1,298,407

1,408,764

Other Assets

1,013,578

973,867

$          10,275,002

$          10,267,106

Liabilities and Stockholders' Equity

Current Liabilities:

Current maturities of long-term borrowings

$               104,106

$                 65,841

Accounts payable

766,450

888,969

Accrued expenses and other current liabilities

1,129,981

1,434,443

Total current liabilities

2,000,537

2,389,253

Long-Term Borrowings

5,585,603

5,758,229

Other Liabilities

959,135

1,047,002

Common Stock Subject to Repurchase and Other

10,005

168,915

Total Stockholders' Equity

1,719,722

903,707

$          10,275,002

$          10,267,106

 

 

ARAMARK AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)

Nine Months

Nine Months

Ended

Ended

June 27, 2014

June 28, 2013

Cash flows from operating activities:

     Net income

$               104,949

$                 31,262

     Adjustments to reconcile net income to net cash 

       (used in) provided by operating activities:

          Depreciation and amortization

387,058

404,512

          Income taxes deferred

(46,190)

(46,454)

          Share-based compensation expense

83,017

12,328

     Changes in noncash working capital

(562,432)

(328,085)

     Other operating activities

16,158

62,763

Net cash (used in) provided by operating activities

(17,440)

136,326

Cash flows from investing activities:

     Net purchases of property and equipment,

       client contract investments and other

(310,510)

(254,851)

     Acquisitions, divestitures and other investing activities

12,239

2,778

Net cash used in investing activities

(298,271)

(252,073)

Cash flows from financing activities:

     Net proceeds/payments of long-term borrowings

(194,933)

175,086

     Net change in funding under the Receivables Facility

50,000

36,200

     Payments of dividends

(34,696)

-

     Proceeds from initial public offering, net

524,081

-

     Proceeds from issuance of common stock

3,701

4,882

     Distribution in connection with spin-off of Seamless Holdings

-

(47,352)

     Repurchase of common stock

(2,085)

(38,419)

     Other financing activities 

(18,936)

(53,577)

Net cash provided by financing activities

327,132

76,820

Increase (decrease) in cash and cash equivalents

11,421

(38,927)

Cash and cash equivalents, beginning of period

110,998

136,748

Cash and cash equivalents, end of period

$               122,419

$                 97,821

 

 

ARAMARK AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN

(Unaudited)

(In thousands)

Three Months Ended

 June 27, 2014

FSS North America

FSS International

Uniform

Corporate

Aramark and Subsidiaries

Sales (as reported)

$      2,487,739

$         765,206

$         367,112

$      3,620,057

Operating Income (as reported)

$           95,546

$           36,722

$           46,857

$          (37,842)

$         141,283

Operating Income Margin (as reported)

3.8%

4.8%

12.8%

3.9%

Sales (as reported)

$      2,487,739

$         765,206

$         367,112

$      3,620,057

Effects of Acquisitions and Divestitures

(1,380)

(928)

(548)

(2,856)

Adjusted Sales (Organic)

$      2,486,359

$         764,278

$         366,564

$      3,617,201

Operating Income (as reported)

$           95,546

$           36,722

$           46,857

$          (37,842)

$         141,283

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

27,847

1,727

(1,048)

-

28,526

Share-Based Compensation

674

167

348

10,122

11,311

Severance and Other Charges

(609)

754

-

7,981

8,126

Effects of Acquisitions and Divestitures

(1)

(139)

18

-

(122)

Branding

-

-

-

4,634

4,634

Gains, Losses and Settlements impacting comparability

(1,258)

-

(623)

475

(1,406)

Adjusted Operating Income

$         122,199

$           39,231

$           45,552

$          (14,630)

$         192,352

Adjusted Operating Income Margin

4.9%

5.1%

12.4%

5.3%

Three Months Ended

 June 28, 2013

FSS North America

FSS International

Uniform

Corporate

Aramark and Subsidiaries

Sales (as reported)

$      2,405,860

$         727,516

$         356,654

$      3,490,030

Operating Income (as reported)

$           73,146

$           28,694

$           35,388

$          (13,632)

$         123,596

Operating Income Margin (as reported)

3.0%

3.9%

9.9%

3.5%

Sales (as reported)

$      2,405,860

$         727,516

$         356,654

$      3,490,030

Effect of Currency Translation

(15,556)

(7,199)

-

(22,755)

Effects of Acquisitions and Divestitures

(5,100)

-

-

(5,100)

Adjusted Sales (Organic)

$      2,385,204

$         720,317

$         356,654

$      3,462,175

Operating Income (as reported)

$           73,146

$           28,694

$           35,388

$          (13,632)

$         123,596

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

30,034

1,757

6,907

-

38,698

Share-Based Compensation

-

-

-

3,507

3,507

Effect of Currency Translation

(969)

426

-

-

(543)

Severance and Other Charges

9,875

1,201

-

-

11,076

Effects of Acquisitions and Divestitures

(1,062)

-

-

-

(1,062)

Gains, Losses and Settlements impacting comparability

(180)

-

-

373

193

Adjusted Operating Income

$         110,844

$           32,078

$           42,295

$            (9,752)

$         175,465

Adjusted Operating Income Margin

4.6%

4.5%

11.9%

5.1%

 

 

ARAMARK AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN

(Unaudited)

(In thousands)

Nine Months Ended

 June 27, 2014

FSS North America

FSS International

Uniform

Corporate

Aramark and

Subsidiaries

Sales (as reported)

$      7,504,970

$      2,284,944

$      1,095,231

$    10,885,145

Operating Income (as reported)

$         384,096

$           76,957

$         123,716

$        (165,457)

$         419,312

Operating Income Margin (as reported)

5.1%

3.4%

11.3%

3.9%

Sales (as reported)

$      7,504,970

$      2,284,944

$      1,095,231

$    10,885,145

Effects of Acquisitions and Divestitures

(7,847)

(1,637)

(548)

(10,032)

Adjusted Sales (Organic)

$      7,497,123

$      2,283,307

$      1,094,683

$    10,875,113

Operating Income (as reported)

$         384,096

$           76,957

$         123,716

$        (165,457)

$         419,312

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

87,220

4,923

6,721

-

98,864

Share-Based Compensation

674

167

348

32,255

33,444

Severance and Other Charges

(11,936)

13,862

-

20,027

21,953

Effects of Acquisitions and Divestitures

(551)

(192)

18

-

(725)

Branding

1,189

225

210

17,862

19,486

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

-

-

-

56,133

56,133

Gains, Losses and Settlements impacting comparability

2,409

-

(1,546)

394

1,257

Adjusted Operating Income

$         463,101

$           95,942

$         129,467

$          (38,786)

$         649,724

Adjusted Operating Income Margin

6.2%

4.2%

11.8%

6.0%

Nine Months Ended

 June 28, 2013

FSS North America

FSS International

Uniform

Corporate

Aramark and Subsidiaries

Sales (as reported)

$      7,217,759

$      2,154,567

$      1,057,356

$    10,429,682

Operating Income (as reported)

$         298,935

$           37,877

$           89,761

$          (47,443)

$         379,130

Operating Income Margin (as reported)

4.1%

1.8%

8.5%

3.6%

Sales (as reported)

$      7,217,759

$      2,154,567

$      1,057,356

$    10,429,682

Effect of Currency Translation

(52,639)

(21,522)

-

(74,161)

Effects of Acquisitions and Divestitures

(13,730)

-

-

(13,730)

Adjusted Sales (Organic)

$      7,151,390

$      2,133,045

$      1,057,356

$    10,341,791

Operating Income (as reported)

$         298,935

$           37,877

$           89,761

$          (47,443)

$         379,130

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

89,814

6,160

20,425

-

116,399

Share-Based Compensation

-

-

-

12,328

12,328

Effect of Currency Translation

(3,904)

(659)

-

-

(4,563)

Severance and Other Charges

54,843

34,152

3,730

1,021

93,746

Effects of Acquisitions and Divestitures

(447)

-

-

-

(447)

Gains, Losses and Settlements impacting comparability

(16,721)

-

2,913

551

(13,257)

Adjusted Operating Income

$         422,520

$           77,530

$         116,829

$          (33,543)

$         583,336

Adjusted Operating Income Margin

5.9%

3.6%

11.0%

5.6%

 

 

ARAMARK AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

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

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Three Months Ended

Nine Months Ended

Nine Months Ended

 June 27, 2014 

 June 28, 2013 

 June 27, 2014 

 June 28, 2013 

Net Income (as reported)

$                    46,916

$                    27,974

$                  104,949

$                    31,262

Adjustment:

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

28,526

38,698

98,864

116,399

Share-Based Compensation

11,311

3,507

33,444

12,328

Effect of Currency Translation

-

(543)

-

(4,563)

Severance and Other Charges

8,126

11,076

21,953

93,746

Effects of Acquisitions and Divestitures

(122)

(1,062)

(725)

(447)

Branding

4,634

-

19,486

-

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

-

-

56,133

-

Gains, Losses and Settlements impacting    comparability

(1,406)

193

1,257

(13,257)

Effects of Refinancing on Interest    and Other Financing Costs, net

-

-

25,705

39,830

Tax Impact of Adjustments to Adjusted Net    Income

(20,172)

(20,488)

(96,161)

(91,774)

Adjusted Net Income

$                    77,813

$                    59,355

$                  264,905

$                  183,524

Adjustment:

Tax Impact of Adjustments to Adjusted Net    Income and Interest Adjustments

20,172

20,488

70,456

51,944

Provision for Income Taxes

23,181

14,705

57,750

6,476

Interest and Other Financing Costs, net

71,186

80,917

256,613

341,392

Adjusted Operating Income

$                  192,352

$                  175,465

$                  649,724

$                  583,336

Adjustment:

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

(28,526)

(38,698)

(98,864)

(116,399)

Depreciation and Amortization

124,917

135,808

387,058

404,512

Adjusted EBITDA

$                  288,743

$                  272,575

$                  937,918

$                  871,449

Adjusted Earnings Per Share

Adjusted Net Income

$                    77,813

$                    59,355

$                  264,905

$                  183,524

Net Income Attributable to Noncontrolling Interests

(43)

(226)

(398)

(804)

Adjusted Net Income Attributable to Aramark    Stockholders

$                    77,770

$                    59,129

$                  264,507

$                  182,720

Diluted Weighted Average Shares Outstanding

243,739

208,326

234,822

208,703

$                        0.32

$                        0.28

$                        1.13

$                        0.88

 

 

ARAMARK AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

DEBT TO ADJUSTED EBITDA

(Unaudited)

(In thousands)

Twelve months ended

Twelve months ended

 June 27, 2014 

 June 28, 2013 

Net Income

$                144,053

$                  90,680

Adjustment:

Loss from Discontinued Operations, net of tax

1,030

-

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

137,908

154,743

Share-Based Compensation

40,533

15,467

Effect of Currency Translation

-

(4,563)

Severance and Other Charges

42,639

93,746

Effects of Acquisitions and Divestitures

(278)

(447)

Branding

19,486

-

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

56,133

-

Gains, Losses and Settlements impacting    comparability

4,263

(18,910)

Effects of Refinancing on Interest    and Other Financing Costs, net

25,705

39,830

Tax Impact of Adjustments to Adjusted Net    Income

(123,918)

(105,927)

Adjusted Net Income

$                347,554

$                264,619

Adjustment:

Tax Impact of Adjustments to Adjusted Net    Income and Interest Adjustments

98,213

66,097

Provision for Income Taxes

70,507

12,641

Interest and Other Financing Costs, net

339,066

441,812

Adjusted Operating Income

$                855,340

$                785,169

Adjustment:

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

(137,908)

(154,743)

Depreciation and Amortization

524,682

537,757

Adjusted EBITDA

$             1,242,114

$             1,168,183

Debt to Adjusted EBITDA

Total Long-Term Borrowings

$             5,689,709

$             6,217,056

Adjusted EBITDA

$             1,242,114

$             1,168,183

Debt/Adjusted EBITDA

4.6

5.3

 

Explanatory Notes to the Non-GAAP Schedules

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

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

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

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

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

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

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

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

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

Forward-Looking Statements

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

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

 

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SOURCE Aramark



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