Aramark Reports Third Quarter 2015 Results

2015 Full Year Constant-Currency Earnings Outlook Reaffirmed

Landmark Initiative Launched with the American Heart Association

Aug 12, 2015, 07:19 ET from Aramark

PHILADELPHIA, Aug. 12, 2015 /PRNewswire/ -- 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."

THIRD QUARTER SALES RESULTS

Q3 Sales

As-Reported Growth (GAAP)

Organic Sales Growth 1

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 Growth 1

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

(17M)

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.  

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.

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.

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; the impact of currency translation and other items impacting comparability,  less the tax effect 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.

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

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

 

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

 

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

 

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)

     Acquisitions, 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

 

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%

 

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%

 

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

 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

 

ARAMARK AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

DEBT TO ADJUSTED EBITDA

(Unaudited)

(In thousands)

Twelve months ended

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

Effects of refinancings 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

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.

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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SOURCE Aramark



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