Q2
SUMMARY
- Revenue $4 billion, +2%; Legacy
Business Revenue +3.6%1
- Led by growth in FSS International and
Uniforms
- Operating Income -9%; Adjusted
Operating Income (AOI) -0.5%1
- FSS US results impacted by weather
& client-related reinvestment costs
- Strong results in FSS International and
Uniforms
- EPS +9% to $0.12; Adjusted EPS of
$0.45, flat to prior year1
- Leverage improves by 0.6x vs. prior
year to 4.1x
- Net debt reduced by over $600 million
vs. prior year
Aramark (NYSE: ARMK) today reported second quarter fiscal 2019
results.
“We saw strong revenue growth in the quarter, while
simultaneously making deliberate investments to support new and
existing clients,” said Eric J. Foss, Chairman, President and CEO.
“We are making tangible progress on our transformational growth
strategy, as we continue to innovate and strengthen our brand and
product portfolio to create a consistently great customer
experience.”
“In the near term, we are taking strategic portfolio actions to
optimize returns and focus on new opportunities in the marketplace.
As demonstrated by our solid first half performance, we expect 2019
to be another year of growth across revenue, earnings, and cash
flow," Foss added. "We also remain committed to bolstering our
balance sheet, and expect our leverage ratio to reach 3.8x by the
end of the year.”
1 Constant Currency.
SECOND QUARTER RESULTS*
Revenue
Q2 '19 Q2 '18 Change
AdjustedRevenueChange
FSS United States1 $2,417M $2,506M
(4)% 1%
FSS International 942
925 2% 11%
Uniform & Career Apparel
641
508
26% 27%
Total Company $4,000M
$3,939M 2% 7%
Operating
Income Adjusted Operating Income
Q2 '19 Q2 '18 Change
Q2 '19 Q2 '18
Constant-CurrencyChange
FSS United States $69M $138M (50)%
$153M $170M (10)%
FSS
International 42 14 201% 44
44 6%
Uniform &
CareerApparel
38 30 27% 65 53
22%
Corporate
(26)
(47)
(44%)
(25)
(26)
(5%)
Total Company $123M $135M
(9)% $236M $241M (0.5)% 1
Q2 '18 GAAP results include divested Healthcare Technologies
revenue and operating income of $106 million and $9 million,
respectively.
* May not total due to rounding.
Consolidated revenue was $4.0 billion in the quarter, an
increase of 6.7% on an adjusted basis over the prior-year period,
composed of a 0.7% increase related to the AmeriPride acquisition,
2.4% increase related to an accounting rule change, and 3.6% of
growth in the legacy business. The year-over-year decrease from the
divestiture of the Healthcare Technologies business in November
2018 has been excluded from the calculation of legacy business
growth.
The FSS United States segment income was unfavorably impacted
versus the prior year period primarily by reinvestment costs for
new and retained business, as well as adverse winter weather,
including a severe snowstorm at Yosemite that affected our
operations at the park. As expected, the FSS International segment
income returned to growth in the quarter. Uniform income benefited
from the inclusion of AmeriPride synergies and results.
GAAP SUMMARY
On a GAAP basis, revenue was $4.0 billion, operating income was
$123 million, net income attributable to Aramark stockholders was
$29 million, and diluted earnings per share were $0.12. This
compares to the second quarter of 2018 where, on a GAAP basis,
revenue was $3.9 billion, operating income was $135 million, net
income attributable to Aramark stockholders was $28 million and
diluted earnings per share were $0.11. Operating income in the
second quarter of 2019 was unfavorably impacted by $65 million of
one-time employee reinvestments funded by benefits from US tax
reform. Second quarter GAAP diluted earnings per share increased 9%
year-over-year.
CURRENCY
A stronger U.S. dollar decreased revenue by approximately $89
million and had a negative impact of approximately $4 million on
operating income. It also had a one-cent negative impact on
adjusted earnings per share.
CAPITAL STRUCTURE &
LIQUIDITY
Total trailing 12-month net debt to covenant adjusted EBITDA was
4.1x at the end of the quarter, a 60 basis point improvement versus
the end of the second quarter of 2018. At quarter-end the company
had approximately $1.1 billion in cash and availability on its
revolving credit facility.
2019 OUTLOOK
The Company provides its expectations for legacy business
revenue growth, full-year adjusted EPS and full-year free cash flow
on a non-GAAP basis, and does not provide a reconciliation of such
forward-looking non-GAAP measures to GAAP due to the inherent
difficulty in forecasting and quantifying certain amounts that are
necessary for such reconciliations, including adjustments that
could be made for the impact of the change in fair value related to
certain gasoline and diesel agreements, severance and other charges
and the effect of currency translation.
The Company is providing the following performance outlook for
Fiscal 2019:
- Reaffirming legacy business revenue
growth expectations of approximately 3%
- Updating the 2019 adjusted EPS
outlook to $2.20 to $2.30 per share, which reflects the impact
of strategic portfolio actions in our International segment, as
well as adverse weather. It includes four cents of currency
headwinds.
- Reiterating full-year free cash flow
outlook of $500 million. This outlook includes approximately
$50 million in cash outlay related to the divestiture of the
Healthcare Technologies business and approximately $50 million in
spending on the integrations of Avendra and AmeriPride.
- Continuing to expect leverage ratio
of 3.8x by the end of the fiscal year, and nearly $500 million
of debt repayment.
CONFERENCE CALL
SCHEDULED
The Company has scheduled a conference call at 10 a.m. ET today
to discuss its earnings and outlook. This call and related
materials can be heard and reviewed, either live or on a delayed
basis, on the Company's web site, www.aramark.com on the investor relations
page.
About Aramark
Aramark (NYSE: ARMK) proudly serves Fortune 500 companies, world
champion sports teams, state-of-the-art healthcare providers, the
world’s leading educational institutions, iconic destinations and
cultural attractions, and numerous municipalities in 19 countries
around the world. Our 270,000 team members deliver experiences that
enrich and nourish millions of lives every day through innovative
services in food, facilities management and uniforms. We work to
put our sustainability goals into action by focusing on initiatives
that engage our employees, empower healthy living, preserve our
planet and build local communities. Aramark is recognized as one of
the World’s Most Admired Companies by FORTUNE, as well as an
employer of choice by the Human Rights Campaign and DiversityInc.
Learn more at www.aramark.com or
connect with us on Facebook and Twitter.
Selected Operational
and Financial Metrics
Adjusted Revenue
Adjusted Revenue represents revenue growth, adjusted to
eliminate the impact of currency translation and divestitures.
Legacy Business Revenue
Legacy Business Revenue represents Adjusted Revenue, excluding
the revenue of AmeriPride and Avendra that is not comparable to the
prior year periods and the impact of the adoption of Accounting
Standards Codification ("ASC") 606, Revenue from Contracts with
Customers.
Adjusted Operating
Income
Adjusted Operating Income represents operating income adjusted
to eliminate the change in amortization of acquisition-related
intangible assets; the impact of the change in fair value related
to certain gasoline and diesel agreements; severance and other
charges; the effect of divestitures (including the gain on the
sale); merger and integration related charges; tax reform related
employee reinvestments; and other items impacting
comparability.
Adjusted Operating Income (Constant
Currency)
Adjusted Operating Income (Constant Currency) represents
Adjusted Operating Income adjusted to eliminate the impact of
currency translation.
Adjusted Net Income
Adjusted Net Income represents net income attributable to
Aramark stockholders adjusted to eliminate the change in
amortization of acquisition-related intangible assets; the impact
of changes in the fair value related to certain gasoline and diesel
agreements; severance and other charges; merger and integration
related charges; the effect of divestitures (including the gain on
the sale); the effects of refinancings on interest and other
financing costs, net; the impact of tax reform and other items
impacting comparability, less the tax impact of these adjustments.
The tax effect for adjusted net income for our U.S. earnings is
calculated using a blended U.S. federal and state tax rate. The tax
effect for adjusted net income in jurisdictions outside
the U.S. is calculated at the local country tax rate.
Adjusted Net Income (Constant
Currency)
Adjusted Net Income (Constant Currency) represents Adjusted Net
Income adjusted to eliminate the impact of currency
translation.
Adjusted EPS
Adjusted EPS represents Adjusted Net Income divided by diluted
weighted average shares outstanding.
Adjusted EPS (Constant
Currency)
Adjusted EPS (Constant Currency) represents Adjusted EPS
adjusted to eliminate the impact of currency translation.
Covenant Adjusted EBITDA
Covenant Adjusted EBITDA represents net income attributable to
Aramark stockholders adjusted for interest and other financing
costs, net; provision (benefit) for income taxes; depreciation and
amortization; and certain other items as defined in our debt
agreements required in calculating covenant ratios and debt
compliance. The Company also uses Net Debt for its ratio to
Covenant Adjusted EBITDA, which is calculated as total long-term
borrowings less cash and cash equivalents.
Free Cash Flow
Free Cash Flow represents net cash provided by operating
activities less net purchases of property and equipment and other.
Management believes that the presentation of free cash flow
provides useful information to investors because it represents a
measure of cash flow available for distribution among all the
security holders of the Company.
We use Adjusted Revenue, Legacy Business Revenue, Adjusted
Operating Income (including on a constant currency basis), Covenant
Adjusted EBITDA, Adjusted Net Income (including on a constant
currency basis), Adjusted EPS (including on a constant currency
basis) and Free Cash Flow as supplemental measures of our operating
profitability and to control our cash operating costs. We believe
these financial measures are useful to investors because they
enable better comparisons of our historical results and allow our
investors to evaluate our performance based on the same metrics
that we use to evaluate our performance and trends in our results.
These financial metrics are not measurements of financial
performance under generally accepted accounting principles, or
GAAP. Our presentation of these metrics has limitations as an
analytical tool, and should not be considered in isolation or as a
substitute for analysis of our results as reported under GAAP. You
should not consider these measures as alternatives to revenue,
operating income, net income, or earnings per share, determined in
accordance with GAAP. Adjusted Revenue, Legacy Business Revenue,
Adjusted Operating Income, Covenant Adjusted EBITDA, Adjusted Net
Income, Adjusted EPS and Free Cash Flow as presented by us, may not
be comparable to other similarly titled measures of other companies
because not all companies use identical calculations.
Explanatory Notes to the Non-GAAP
Schedules
Amortization of acquisition-related
intangible assets - adjustments to eliminate the change
in amortization 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 ($7.8 million for the second
quarter of 2019, $15.5 million for year-to-date 2019, $8.6 million
for the second quarter of 2018 and $22.3 million for year-to-date
2018) and amortization expense recognized on other
acquisition-related intangible assets ($20.9 million for the second
quarter of 2019, $43.6 million for year-to-date 2019, $18.3 million
for the second quarter of 2018 and $27.2 million for year-to-date
2018).
Severance and other charges
- adjustments to eliminate severance expenses and other costs
incurred in the applicable period related to streamlining
initiatives ($22.0 million for year-to-date 2019, $39.5 million for
the second quarter of 2018 and year-to-date 2018), adjustments to
eliminate consulting costs incurred in the applicable period
related to streamlining and general administrative initiatives
($4.3 million for the second quarter of 2019, $8.5 million for
year-to-date 2019, $6.2 million for the second quarter of 2018 and
$12.0 million for year-to-date 2018), incurring duplicate rent
charges, moving costs, opening costs to build out and ready the
Company's new headquarters while occupying its existing
headquarters and closing costs ($1.8 million for the second quarter
of 2019, $8.4 million for year-to-date 2019 and $2.4 million for
the second quarter of 2018 and year-to-date 2018), incurring
charges related to information technology related initiatives ($2.2
million for the second quarter of 2019 and $3.7 million for
year-to-date 2019) and other charges ($1.9 million for the second
quarter of 2018 and $2.6 million for year-to-date 2018).
Effects of divestitures -
adjustments to eliminate the impact that the Healthcare
Technologies divestitures had on comparative periods.
Merger and Integration Related
Charges - adjustments to eliminate merger and
integration charges primarily related to the Avendra and AmeriPride
acquisitions, including deal costs, costs for transitional
employees and integration related consulting costs ($9.7 million
for the second quarter of 2019, $18.3 million for year-to-date
2019, $35.8 million for the second quarter of 2018 and $55.1
million for year-to-date 2018).
Gain on sale of Healthcare
Technologies - adjustment to eliminate the impact of the
gain on sale of the Healthcare Technologies business.
Tax Reform Related Employee
Reinvestments - adjustments to eliminate certain
one-time reinvestments associated with tax savings created by the
Tax Cuts and Jobs Act of 2017, including employee training
expenses, one-time special recognition awards and one-time
retirement contributions ($65.5 million for the second quarter and
year-to-date 2019).
Gains, losses and settlements impacting
comparability - adjustments to eliminate certain
transactions that are not indicative of our ongoing operational
performance, primarily for income/loss from prior years' loss
experience under our casualty insurance program ($11.3 million gain
for year-to-date 2019, $5.3 million gain for the second quarter
2018 and $18.2 million gain for year-to-date 2018), settlement
charges related to exiting a joint venture arrangement ($4.5
million for the second quarter and year-to-date 2019), pension plan
charges ($1.2 million for year-to-date 2019, $0.5 million for the
second quarter of 2018 and $2.1 million for year-to-date 2018),
banker fees and other charges related to the sale of Healthcare
Technologies ($8.4 million for year-to-date 2019), charges related
to a joint venture liquidation and acquisition ($5.6 million for
the second quarter of 2018 and year-to-date 2018), the impact of
the change in fair value related to certain gasoline and diesel
agreements ($4.6 million gain for the second quarter of 2019, $4.4
million loss for year-to-date 2019, $1.5 million loss for the
second quarter of 2018 and $0.3 million gain for year-to-date 2018)
and other charges.
Effect of currency
translation - adjustments to eliminate the impact that
fluctuations in currency translation rates had on the comparative
results by presenting the periods on a constant currency basis.
Assumes constant foreign currency exchange rates based on the rates
in effect for the prior year period being used in translation for
the comparable current year period.
Effect of refinancing and other 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 and debt discounts and other pension plan
charges.
Effect of tax reform on provision for
income taxes - adjustments to eliminate the impact of
tax reform that is not indicative of our ongoing tax position based
on the new tax policies and certain other adjustments.
Tax Impact of Adjustments to Adjusted
Net Income - adjustments to eliminate the net tax impact
of the adjustments to adjusted net income calculated based on a
blended U.S. federal and state tax rate for U.S. adjustments and
the local country tax rate for adjustments in jurisdictions outside
the U.S.
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 made by our
Chairman, President, and CEO and under the heading "2019
Outlook" and including with respect to, without limitation,
anticipated effects of changes related to accounting changes and
the divestiture of our Healthcare Technologies business, the
expected impact of strategic portfolio actions, the benefits and
costs of our acquisitions of each of Avendra, LLC ("Avendra") and
AmeriPride Services, Inc. ("AmeriPride") and related financings, as
well as statements regarding these companies’ services and products
and 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 or remain or continue to be
confident," "have confidence," "estimate," "expect," "will be,"
"will continue," "will likely result," "project," "intend," "plan,"
"believe," "see," "look to" and other words and terms of similar
meaning or the negative versions of such words.
Forward-looking statements speak only as of the date made. All
statements we make relating to our estimated and projected
earnings, costs, expenditures, cash flows, growth rates, financial
results and our estimated benefits and costs of our acquisitions
are forward-looking statements. In addition, we, through our senior
management, from time to time make forward-looking public
statements concerning our expected future operations and
performance and other developments. These forward-looking
statements are subject to risks and uncertainties that may change
at any time, and, therefore, our actual results may differ
materially from those that we expected. We derive many of our
forward-looking statements from our operating budgets and
forecasts, which are based upon many detailed assumptions. While we
believe that our assumptions are reasonable, we caution that it is
very difficult to predict the impact of known factors, and, of
course, it is impossible for us to anticipate all factors that
could affect our actual results. All subsequent written and oral
forward-looking statements attributable to us, or persons acting on
our behalf, are expressly qualified in their entirety by the
cautionary statements. Some of the factors that we believe could
affect our results or the costs and benefits of the acquisitions
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; 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 in the availability of our computer systems or privacy
breaches; failure to achieve and 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; our ability to successfully
integrate the businesses of Avendra and AmeriPride and costs and
timing related thereto, the risk of unanticipated restructuring
costs or assumption of undisclosed liabilities, the risk that we
are unable to achieve the anticipated benefits (including tax
benefits) and synergies of the acquisition of AmeriPride and
Avendra including whether the proposed transactions will be
accretive and within the expected timeframes, the availability of
sufficient cash to repay certain indebtedness and our decision to
utilize the cash for that purpose, the disruption of the
transactions to each of Avendra and AmeriPride and their respective
managements; the effect of the transactions on each of Avendra's
and AmeriPride's ability to retain and hire key personnel and
maintain relationships with customers, suppliers and other third
parties, our ability to attract new or maintain existing customer
and supplier relationships at reasonable cost, our ability to
retain key personnel and other factors set forth under the headings
Item 1A "Risk Factors," Item 3 "Legal Proceedings" and Item 7
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other sections of our Annual Report on
Form 10-K, filed with the SEC on November 21, 2018 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 press release
and in our other filings with the SEC. As a result of these risks
and uncertainties, readers are cautioned not to place undue
reliance on any forward-looking statements included herein or that
may be made elsewhere from time to time by, or on behalf of, us. We
undertake no obligation to publicly update or review any
forward-looking statement, whether as a result of new information,
future developments, changes in our expectations, or otherwise,
except as required by law.
ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited) (In Thousands, Except Per Share Amounts) Three
Months Ended March 29, 2019 March 30, 2018 Revenue $
3,999,987 $ 3,939,311 Costs and Expenses: Cost of services
provided 3,639,959 3,563,009 Depreciation and amortization 147,908
152,864 Selling and general corporate expenses 88,285 88,444 Gain
on sale of Healthcare Technologies 1,000 — 3,877,152
3,804,317 Operating income 122,835 134,994 Interest and Other
Financing Costs, net 84,178 92,653 Income Before Income
Taxes 38,657 42,341 Provision for Income Taxes 9,347 14,625
Net income 29,310 27,716 Less: Net income (loss) attributable to
noncontrolling interest (43 ) 147 Net income attributable to
Aramark stockholders $ 29,353 $ 27,569 Earnings per
share attributable to Aramark stockholders: Basic $ 0.12 $ 0.11
Diluted $ 0.12 $ 0.11 Weighted Average Shares Outstanding: Basic
246,217 245,648 Diluted 250,347 252,485 Six Months
Ended March 29, 2019 March 30, 2018 Revenue $ 8,265,336
$ 7,904,429 Costs and Expenses: Cost of services
provided 7,434,404 7,085,239 Depreciation and amortization 298,629
286,713 Selling and general corporate expenses 192,415 180,612 Gain
on sale of Healthcare Technologies (156,309 ) — 7,769,139
7,552,564 Operating income 496,197 351,865 Interest
and Other Financing Costs, net 167,155 166,786 Income
Before Income Taxes 329,042 185,079 (Benefit) Provision for Income
Taxes 49,054 (135,077 ) Net income 279,988 320,156 Less: Net
income (loss) attributable to noncontrolling interest (49 ) 303
Net income attributable to Aramark stockholders $ 280,037
$ 319,853 Earnings per share attributable to
Aramark stockholders: Basic $ 1.14 $ 1.30 Diluted $ 1.11 $ 1.27
Weighted Average Shares Outstanding: Basic 246,540 245,366 Diluted
251,355 252,380
ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS* (Unaudited) (In
Thousands) March 29, 2019 September 28, 2018 Assets
Current Assets: Cash and cash equivalents $ 195,387 $
215,025 Receivables 1,878,151 1,790,433 Inventories 400,269 724,802
Prepayments and other current assets 156,796 171,165 Total
current assets 2,630,603 2,901,425 Property and Equipment,
net 2,142,944 1,378,094 Goodwill 5,522,552 5,610,568 Other
Intangible Assets 2,087,641 2,136,844 Other Assets 1,327,074
1,693,171 $ 13,710,814 $ 13,720,102 Liabilities and
Stockholders' Equity Current Liabilities: Current maturities
of long-term borrowings $ 56,339 $ 30,907 Accounts payable 911,785
1,018,920 Accrued expenses and other current liabilities 1,342,981
1,440,332 Total current liabilities 2,311,105
2,490,159 Long-Term Borrowings 7,134,286 7,213,077 Deferred Income
Taxes and Other Noncurrent Liabilities 1,021,749 977,215 Redeemable
Noncontrolling Interest 9,994 10,093 Total Stockholders' Equity
3,233,680 3,029,558 $ 13,710,814 $ 13,720,102
*In connection with the Company's adoption
of ASC 606, Revenue from Contracts with Customers, the
classification of certain balance sheet line items has been
adjusted as of March 29, 2019, including Inventories, Property and
Equipment, net and Other Assets. Further details will be available
in the Quarterly Report on Form 10-Q for the quarterly period ended
March 29, 2019.
ARAMARK AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In
Thousands) Six Months Ended March 29, 2019
March 30, 2018 Cash flows from operating activities: Net
income $ 279,988 $ 320,156 Adjustments to reconcile net income to
net cash provided by operating activities Depreciation and
amortization 298,629 286,713 Deferred income taxes 3,475 (164,069 )
Share-based compensation expense 33,241 33,511 Net gain on sale of
Healthcare Technologies (139,165 ) — Changes in operating assets
and liabilities (361,168 ) (461,032 ) Payments made to clients on
contracts1 (26,551 ) — Other operating activities 534 6,348
Net cash provided by operating activities 88,983
21,627 Cash flows from investing activities: Net
purchases of property and equipment and other (222,846 ) (243,416 )
Acquisitions, divestitures and other investing activities 281,041
(2,232,844 ) Net cash provided by (used in) investing
activities 58,195 (2,476,260 ) Cash flows from
financing activities: Net proceeds/payments of long-term borrowings
(245,387 ) 2,408,675 Net change in funding under the Receivables
Facility 205,000 95,800 Payments of dividends (54,220 ) (51,547 )
Proceeds from issuance of common stock 10,372 10,556 Repurchase of
stock (50,000 ) (24,410 ) Other financing activities (29,120 )
(40,276 ) Net cash provided by (used in) financing activities
(163,355 ) 2,398,798 Effect of foreign exchange rates on
cash and cash equivalents (3,461 ) 2,571 Decrease in cash
and cash equivalents (19,638 ) (53,264 ) Cash and cash equivalents,
beginning of period 215,025 238,797 Cash and cash
equivalents, end of period $ 195,387 $ 185,533
1Prior to the Company's adoption of ASC
606, Revenue from Contracts with Customers, certain client contract
investments were included within "Net purchases of property and
equipment and other" in Net cash provided by (used in) investing
activities. Subsequent to adoption of ASC 606, these costs are now
included within "Payments made to clients on contracts" in Net cash
provided by operating activities.
ARAMARK AND SUBSIDIARIES RECONCILIATION OF
NON-GAAP MEASURES ADJUSTED CONSOLIDATED OPERATING INCOME
MARGIN (Unaudited) (In thousands)
Three Months Ended March 29, 2019 FSS United States FSS
International Uniform Corporate
Aramark andSubsidiaries
Revenue (as reported) $ 2,416,958 $ 942,063 $ 640,966
$ 3,999,987 Operating Income (as reported) $
68,815 $ 41,899 $ 38,198 $ (26,077 ) $ 122,835
Operating Income Margin (as reported) 2.85 % 4.45 % 5.96 %
3.07 % Revenue (as reported) $ 2,416,958 $ 942,063 $ 640,966
$ 3,999,987 Effect of Currency Translation 2,392 84,088
3,010 89,490 Adjusted Revenue $ 2,419,350
$ 1,026,151 $ 643,976 $ 4,089,477
Revenue Growth (as reported) (3.57 )% 1.81 % 26.28 % 1.54 %
Adjusted Revenue Growth 0.79 % 10.90 % 26.88 % 6.69 %
Operating Income (as reported) $ 68,815 $ 41,899 $ 38,198 $ (26,077
) $ 122,835 Amortization of Acquisition-Related Intangible Assets
21,184 1,358 6,115 — 28,657 Severance and Other Charges 3,992 — —
4,418 8,410 Merger and Integration Related Charges 1,186 — 8,477 —
9,663 Gain on sale of Healthcare Technologies 1,000 — — — 1,000 Tax
Reform Related Employee Reinvestments 51,802 352 11,858 1,443
65,455 Gains, Losses and Settlements impacting comparability 4,567
323 — (4,579 ) 311 Adjusted Operating
Income* $ 152,546 $ 43,932 $ 64,648 $ (24,795
) $ 236,331 Effect of Currency Translation 420 3,261
322 — 4,003 Adjusted Operating Income
(Constant Currency) $ 152,966 $ 47,193 $ 64,970
$ (24,795 ) $ 240,334 Operating Income Growth
(as reported) (50.08 )% 201.32 % 27.31 % (44.23 )% (9.01 )%
Adjusted Operating Income Growth (10.16 )% (0.89 )% 21.12 % (4.61
)% (2.14 )% Adjusted Operating Income Growth (Constant Currency)
(9.91 )% 6.47 % 21.72 % (4.61 )% (0.48 )% Adjusted Operating Income
Margin (Constant Currency) 6.32 % 4.60 % 10.09 % 5.88 %
Three Months Ended March 30, 2018 FSS United States FSS
International Uniform Corporate
Aramark andSubsidiaries
Revenue (as reported) $ 2,506,453 $ 925,300 $ 507,558 $ 3,939,311
Effect of Divestitures (106,105 ) — — (106,105 )
Adjusted Revenue $ 2,400,348 $ 925,300 $ 507,558
$ 3,833,206 Operating Income (as reported) $
137,843 $ 13,905 $ 30,003 $ (46,757 ) $ 134,994 Amortization of
Acquisition-Related Intangible Assets 21,412 1,034 4,473 — 26,919
Severance and Other Charges 17,671 23,400 1,571 7,349 49,991 Effect
of Divestitures (9,189 ) — — — (9,189 ) Merger and Integration
Related Charges 6,832 — 17,328 11,600 35,760 Gains, Losses and
Settlements impacting comparability (4,777 ) 5,986 —
1,815 3,024 Adjusted Operating Income* $ 169,792
$ 44,325 $ 53,375 $ (25,993 ) $ 241,499
Operating Income Margin (as reported) 5.50 % 1.50 % 5.91 %
3.43 % Adjusted Operating Income Margin 7.07 % 4.79 % 10.52 % 6.30
% * Beginning in fiscal 2019, the definition of AOI changed. AOI
for the three months ended March 30, 2018 has been calculated based
on this new definition. See page 5 for the new definition of AOI.
ARAMARK AND SUBSIDIARIES RECONCILIATION OF
NON-GAAP MEASURES ADJUSTED CONSOLIDATED OPERATING INCOME
MARGIN (Unaudited) (In thousands)
Six Months Ended
March 29, 2019 FSS United States FSS International Uniform
Corporate
Aramark andSubsidiaries
Revenue (as reported) $ 5,077,315 $ 1,895,183 $
1,292,838 $ 8,265,336 Operating Income (as
reported) $ 432,566 $ 53,355 $ 90,892 $
(80,616 ) $ 496,197 Operating Income Margin (as reported)
8.52 % 2.82 % 7.03 % 6.00 % Revenue (as reported) $
5,077,315 $ 1,895,183 $ 1,292,838 $ 8,265,336 Effect of Currency
Translation 4,215 139,495 5,244 148,954
Adjusted Revenue $ 5,081,530 $ 2,034,678 $ 1,298,082
$ 8,414,290 Revenue Growth (as reported) (1.53 )%
3.10 % 42.04 % 4.57 % Adjusted Revenue Growth 1.81 % 10.68 % 42.62
% 8.71 % Operating Income (as reported) $ 432,566 $ 53,355 $
90,892 $ (80,616 ) $ 496,197 Amortization of Acquisition-Related
Intangible Assets 44,428 2,488 12,134 — 59,050 Severance and Other
Charges 13,947 17,945 493 10,253 42,638 Merger and Integration
Related Charges 3,282 — 14,990 8 18,280 Gain on sale of Healthcare
Technologies (156,309 ) — — — (156,309 ) Tax Reform Related
Employee Reinvestments 51,802 352 11,858 1,443 65,455 Gains, Losses
and Settlements impacting comparability (5,276 ) 2,542 —
10,431 7,697 Adjusted Operating Income* $
384,440 $ 76,682 $ 130,367 $ (58,481 ) $
533,008 Effect of Currency Translation 831 5,251
526 — 6,608 Adjusted Operating Income
(Constant Currency) $ 385,271 $ 81,933 $ 130,893
$ (58,481 ) $ 539,616 Operating Income Growth
(as reported) 36.04 % (7.63 )% 22.04 % (18.02 )% 41.02 % Adjusted
Operating Income Growth 6.80 % (13.99 )% 31.00 % (2.53 )% 9.08 %
Adjusted Operating Income Growth (Constant Currency) 7.03 % (8.10
)% 31.53 % (2.53 )% 10.43 % Adjusted Operating Income Margin
(Constant Currency) 7.58 % 4.03 % 10.08 % 6.41 % Six Months
Ended March 30, 2018 FSS United States FSS International Uniform
Corporate
Aramark andSubsidiaries
Revenue (as reported) $ 5,155,979 $ 1,838,282 $ 910,168 $ 7,904,429
Effect of Divestitures (164,652 ) — — (164,652 )
Adjusted Revenue $ 4,991,327 $ 1,838,282 $ 910,168
$ 7,739,777 Operating Income (as reported) $
317,960 $ 57,761 $ 74,475 $ (98,331 ) $ 351,865 Amortization of
Acquisition-Related Intangible Assets 42,614 2,008 4,930 — 49,552
Severance and Other Charges 18,314 23,400 1,571 13,191 56,476
Effect of Divestitures (14,315 ) — — — (14,315 ) Merger and
Integration Related Charges 9,686 20,286 25,159 55,131 Gains,
Losses and Settlements impacting comparability (14,289 ) 5,986
(1,746 ) (16 ) (10,065 ) Adjusted Operating Income* $
359,970 $ 89,155 $ 99,516 $ (59,997 ) $
488,644 Operating Income Margin (as reported) 6.17 %
3.14 % 8.18 % 4.45 % Adjusted Operating Income Margin 7.21 % 4.85 %
10.93 % 6.31 % * Beginning in fiscal 2019, the
definition of AOI changed. AOI for the six months ended March 30,
2018 has been calculated based on this new definition. See page 5
for the new definition of AOI.
ARAMARK AND
SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES
ADJUSTED NET INCOME & ADJUSTED EPS (Unaudited) (In
thousands, except per share amounts)
Three Months Ended Six
Months Ended March 29, 2019 March 30, 2018 March 29, 2019 March 30,
2018
Net Income Attributable to Aramark Stockholders (as
reported) $ 29,353 $ 27,569 $ 280,037 $ 319,853 Adjustment:
Amortization of Acquisition-Related Intangible Assets 28,657 26,919
59,050 49,552 Severance and Other Charges 8,410 49,991 42,638
56,476 Effect of Divestitures — (9,189 ) — (14,315 ) Merger and
Integration Related Charges 9,663 35,760 18,280 55,131 Gain on sale
of Healthcare Technologies 1,000 — (156,309 ) (10,065 ) Tax Reform
Related Employee Reinvestments 65,455 — 65,455 — Gains, Losses and
Settlements impacting comparability 311 3,024 7,697 — Effects of
Refinancing and Other on Interest and Other Financing Costs, net —
6,404 — 18,843 Effect of Tax Reform on Provision for Income Taxes
(809 ) — (12,126 ) (183,808 ) Tax Impact of Adjustments to Adjusted
Net Income (29,240 ) (23,847 ) (32,383 ) (36,174 )
Adjusted Net
Income $ 112,800 $ 116,631 $ 272,339 $ 255,493 Effect of
Currency Translation, net of Tax 2,596 — 5,095
—
Adjusted Net Income (Constant Currency) $ 115,396
$ 116,631 $ 277,434 $ 255,493
Earnings Per Share (as reported) Net Income Attributable to
Aramark Stockholders (as reported) $ 29,353 $ 27,569 $ 280,037 $
319,853 Diluted Weighted Average Shares Outstanding 250,347
252,485 251,355 252,380 $ 0.12 $ 0.11
$ 1.11 $ 1.27 Earnings Per Share Growth (as
reported) 9.09 % (12.60 )%
Adjusted Earnings Per
Share Adjusted Net Income* $ 112,800 $ 116,631 $ 272,339 $
255,493 Diluted Weighted Average Shares Outstanding 250,347
252,485 251,355 252,380 $ 0.45 $ 0.46
$ 1.08 $ 1.01 Adjusted Earnings Per Share
Growth (2.17 )% 6.93 %
Adjusted Earnings Per Share
(Constant Currency) Adjusted Net Income (Constant Currency) $
115,396 $ 116,631 $ 277,434 $ 255,493 Diluted Weighted Average
Shares Outstanding 250,347 252,485 251,355
252,380 $ 0.46 $ 0.46 $ 1.10 $ 1.01
Adjusted Earnings Per Share Growth (Constant Currency) — %
8.91 % * Beginning in fiscal 2019, the definition of
Adjusted Net Income changed. Adjusted Net Income for the three and
six months ended March 30, 2018 has been calculated based on this
new definition. See page 5 for the new definition of Adjusted Net
Income.
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES NET DEBT TO COVENANT
ADJUSTED EBITDA (Unaudited) (In thousands)
Twelve Months Ended March 29, 2019 March 30, 2018
Net Income Attributable to Aramark Stockholders (as
reported) $ 528,067 $ 498,286 Interest and Other Financing
Costs, net 350,964 294,559 (Benefit) Provision for Income Taxes
87,568 (65,124 ) Depreciation and Amortization 608,098 543,107
Share-based compensation expense(1) 88,007 63,981 Unusual or
non-recurring (gains) and losses(2) (156,309 ) — Pro forma EBITDA
for equity method investees(3) 13,197 15,338 Pro forma EBITDA for
certain transactions(4) (11,055 ) 137,627 Other(5) 185,799
140,979
Covenant Adjusted EBITDA $ 1,694,336 $
1,628,753
Net Debt to Covenant Adjusted EBITDA
Total Long-Term Borrowings $ 7,190,625 $ 7,822,007 Less: Cash and
cash equivalents $ 195,387 $ 185,533 Net Debt $
6,995,238 $ 7,636,474 Covenant Adjusted EBITDA $ 1,694,336 $
1,628,753 Net Debt/Covenant Adjusted EBITDA 4.1 4.7
(1) Represents compensation expense related to
the Company's issuances of share-based awards. (2) Represents the
gain from the divestiture of Healthcare Technologies. (3)
Represents our estimated share of EBITDA primarily from our AIM
Services Co., Ltd. equity method investment, not already reflected
in our net income attributable to Aramark stockholders. EBITDA for
this equity method investee is calculated in a manner consistent
with Covenant Adjusted EBITDA but does not represent cash
distributions received from this investee. (4) Represents the
annualizing of net EBITDA from certain acquisitions and
divestitures made during the period. (5) "Other" for the twelve
months ended March 29, 2019 and March 30, 2018, respectively,
includes organizational streamlining initiatives ($19.0 million
costs and $58.9 million costs), the impact of the change in fair
value related to certain gasoline and diesel agreements ($4.5
million loss and $0.9 million gain), expenses related to merger and
integration related charges ($41.3 million and $57.2 million),
duplicate rent charges, moving costs, opening costs to build out
and ready the Company's new headquarters while occupying its
existing headquarters and closing costs ($13.7 million and $2.4
million) and other miscellaneous expenses. "Other" for the twelve
months ended March 29, 2019 also includes compensation expense for
one-time employee reinvestments related to tax reform ($65.5
million), adjustments to remove the impact attributable to the
adoption of certain new accounting standards, including Accounting
Standards Codification 606, Revenue from Contracts with Customers,
in accordance with the Credit Agreement and indentures ($10.4
million), banker fees and other charges related to the sale of
Healthcare Technologies ($9.9 million), certain environmental
charges ($5.0 million), settlement charges related to exiting a
joint venture arrangement ($4.5 million) and the impact of
hyperinflation in Argentina ($3.8 million). "Other" for the twelve
months ended March 30, 2018 also includes the estimated impact of
natural disasters ($14.4 million, of which $6.1 million related to
asset write-downs) and property and other asset write-downs related
to a joint venture liquidation and acquisition ($5.6 million).
ARAMARK AND SUBSIDIARIES RECONCILIATION OF
NON-GAAP MEASURES LEGACY BUSINESS REVENUE (Unaudited)
(In thousands) Three Months
Ended Six Months Ended March 29, 2019 March 29, 2019 Revenue
(as reported) $ 3,999,987 $ 8,265,336 Effect of Currency
Translation 89,490 148,954 Adjusted Revenue 4,089,477
8,414,290 Effect of AmeriPride and Avendra Acquisitions (26,730 )
(198,384 ) Changes pursuant to ASC 606, Revenue from Contracts with
Customers (91,583 ) (180,090 ) Legacy Business Revenue $ 3,971,164
$ 8,035,816 Three Months Ended Six Months
Ended March 30, 2018 March 30, 2018 Revenue (as reported) $
3,939,311 $ 7,904,429 Effect of Divestitures (106,105 ) (164,652 )
Legacy Business Revenue $ 3,833,206 $ 7,739,777
Revenue Growth (as reported) 1.54 % 4.57 % Legacy Business
Revenue Growth 3.60 % 3.82 %
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version on businesswire.com: https://www.businesswire.com/news/home/20190507005486/en/
Media Inquiries:Karen Cutler(215)
238-4063Cutler-Karen@aramark.com
Investor Inquiries:Felise Kissell(215)
409-7287Kissell-Felise@aramark.com
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