YEAR-OVER-YEAR
SUMMARY
- Revenue +19%; Organic Revenue +19%
- Performance driven by net new business, pricing, and base
business growth
- Contributions to growth from every reportable segment
- Operating Income +28%; Adjusted Operating Income (AOI)
+30%1
- Operating Income Margin +27 bps; AOI Margin +40 bps1
- Higher profitability due to operating leverage from increased
revenue, improving supply chain economics, and disciplined
above-unit cost management
- EPS +50% to $0.21; Adjusted EPS +38%1 to $0.28
- Continued Strengthening of Balance Sheet
- Following quarter-end, repaid approximately $530 million in
total debt
- Signed agreement to sell portion of ownership stake in San
Antonio Spurs NBA franchise
Aramark (NYSE: ARMK) today reported second quarter fiscal 2023
results.
"Now halfway through the fiscal year, we continue to make
progress on our strategic priorities, resulting in strong business
performance, additional balance sheet optimization, and positioning
the Uniforms Services spin-off for success," said John Zillmer,
Aramark's Chief Executive Officer. "Everything we do starts with
our people and their commitment to our hospitality culture, and I
see the results of that unwavering focus every day."
Notes:
– Supplemental business review slides available on Aramark's
Investor Relations website
– 1On a constant-currency basis
SECOND QUARTER RESULTS
Consolidated revenue was $4.6 billion in the second quarter, an
increase of 19% year-over-year, driven by net new business,
pricing, and base business growth. A stronger dollar in the period
impacted revenue results by $76 million, largely offset by the $67
million revenue contribution from Union Supply Group, which was
acquired in June 2022.
Organic revenue, which adjusts for the effect of currency
translation and certain acquisitions, grew 19% year-over-year
compared to the prior year period.
Revenue
Q2 '23
Q2 '22
Change (%)
Organic Revenue
Change (%)
FSS United States
$2,843M
$2,338M
22%
19%
FSS International
1,073
871
23%
31%
Uniform & Career
Apparel
686
651
5%
6%
Total Company
$4,602M
$3,861M
19%
19%
Difference between Change (%) and
Organic Revenue Change (%) reflects the effect of certain
acquisitions and the impact of currency translation.
May not total due to
rounding.
Note: Uniform & Career
Apparel also referred to as Uniform Services, or "AUS"
- FSS United States revenue increased primarily as a result of
strong net new business growth and client pricing. In addition,
revenue growth was driven by higher per capita spending in the
Sports & Entertainment business and greater return-to-work
activity in Business & Industry. Education experienced strong
retail and catering in Collegiate Hospitality, slightly offset by
the end of universal government-sponsored programs in Student
Nutrition at the end of June 2022.
- FSS International grew revenue due to contributions from net
new business, client pricing, and ongoing base business growth
across all geographies, particularly within Germany, Canada, and
South America.
- Uniform & Career Apparel increased revenue in both the U.S.
and Canada from solid net new account growth and client pricing.
Adjacency services, although currently a relatively small portion
of the business' revenue mix, reported double-digit growth and
remains a focal point for growth in the Uniform Services
portfolio.
Operating Income was 28% higher year-over-year, growing to $182
million and AOI improved 30%1 to $213 million, reflecting an
operating income margin increase of 27 basis points and an AOI
margin increase of 40 basis points1. Improvement was driven by
operating leverage from higher revenue generated through net new
business, client pricing, and base business growth, in addition to
disciplined above-unit cost management that more than offset the
impact of inflation and start-up costs. The effect of currency
translation impacted results by $3.3 million.
Operating Income
Adjusted Operating Income
(AOI)
Q2 '23
Q2 '22
Change (%)
Q2 '23
Q2 '22
Change (%)
Constant Currency Change
(%)
FSS United States
$156M
$82M
90%
$140M
$99M
42%
43%
FSS International*
7
37
(81)%
39
41
(4)%
3%
Uniform & Career
Apparel
56
56
—%
67
62
7%
7%
Corporate
(37)
(33)
(10)%
(33)
(36)
9%
9%
Total Company
$182M
$142M
28%
$213M
$166M
28%
30%
May not total due to rounding.
*FSS International Operating Income
included $26 million of severance and other charges that was
excluded from AOI. Operating Income and AOI included $21 million
from government reimbursement programs in Q2 '22.
Year-over-year profitability improvement was a result of the
following segment performance:
- FSS United States increased driven by maturity of prior year
new business, improved supply chain economics, and above-unit cost
management across the entire segment, as well as an increase in
return-to-work volume in the Business & Industry sector, and
higher per capita spending in the Sports & Entertainment
business. These profitability gains more than offset higher product
costs and costs associated with opening a record level of new
client accounts. Operating Income also included non-cash income
that was excluded from AOI associated with the reversal of
contingent consideration related to the Next Level Hospitality and
Union Supply Group acquisitions.
- FSS International decreased year-over-year as the second
quarter last year included $21 million of government reimbursement
programs. On a comparable basis, results benefited from new
business contract maturity, leverage of higher base business
volumes across its business & industry clients, improved supply
chain economics, and reduced above-unit costs, somewhat offset by
higher product costs and the end of government reimbursement
programs. Operating Income also included severance charges that
were excluded from AOI related to organizational restructuring
initiatives.
- Uniform & Career Apparel improved driven by operating
leverage from net new business and control of administrative
expenses, which more than offset higher labor and merchandise
costs. Operating Income also included non-cash charges for the
impairment of operating lease right-of-use assets, severance
charges related to organizational restructuring initiatives and
other spin-off related expenses, and a gain from sale of land—all
of which were excluded from AOI.
- Corporate expenses were tightly managed as revenue
increased.
CASH FLOW AND CAPITAL
STRUCTURE The second quarter generated a cash inflow
associated with Aramark's normal seasonal business cadence. Net
cash provided by operating activities during the second quarter was
$314 million and Free Cash Flow was $229 million.
At quarter-end, Aramark had approximately $1.2 billion in cash
availability.
DIVIDEND DECLARATION As
announced on May 3, 2023, the Company's Board of Directors approved
a quarterly dividend of 11 cents per share of common stock. The
dividend will be payable on May 31, 2023, to stockholders of record
at the close of business on May 17, 2023.
BUSINESS UPDATE Through the
first half of the fiscal year, the Company has demonstrated
significant year-over-year growth on both the top- and
bottom-line.
Revenue performance in the second half of the fiscal year is
expected to be driven by continued strength in net new business,
pricing actions, and ongoing base business growth.
Aramark continues to expect its typical "U-shaped" margin
seasonality—with margins higher in the first and fourth quarters
compared to the second and third quarters. The Company also
anticipates improved profitability through:
- Ongoing supply chain normalization and optimization
- Continued profit recovery through pricing—assuming some
moderation of inflation—in all segments, and most notably within
FSS U.S.' Collegiate Hospitality, Student Nutrition, and
Corrections businesses
- Profitability ramp of record new business in FY21 and FY22
through operational maturity and efficiencies
- Benefit of previously completed organizational restructuring
initiatives in FSS International and Uniform Services
- Tight control and leverage of above-unit overhead across higher
revenue
The Company believes that the typical seasonality of the
business will also drive Net Cash provided by Operating activities
and Free Cash Flow that historically delivers a large cash inflow
in the fourth quarter, primarily from Collegiate Hospitality. In
addition, Aramark continues to strategically evaluate its
non-controlling interest portfolio. This includes the divestiture
of its 50% equity stake in AIM Services for total proceeds of $535
million that closed in early April as well as a newly signed
agreement to sell a portion of its ownership stake in the San
Antonio Spurs NBA franchise.
Following quarter-end, Aramark repaid approximately $530 million
in total debt. The Company expects to be opportunistic and
proactive in further strengthening its balance sheet through
additional debt repayment and strategic refinancings.
Aramark has continued to make significant progress with respect
to the spin-off of the Uniforms business. The Company will continue
to monitor macroeconomic and capital market conditions, as well as
the business' momentum, while remaining diligent in completing the
operational, regulatory, and financial logistics in order to be in
a position to be able to complete the separation by the end of the
fiscal year.
OUTLOOK The Company provides
its expectations for organic revenue growth, Adjusted Operating
Income, Free Cash Flow, and Net Debt to Covenant Adjusted EBITDA
("Leverage Ratio") 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 and other charges and the effect of currency
translation. The fiscal 2023 outlook reflects management's current
assumptions regarding numerous evolving factors that are difficult
to accurately predict, including those discussed in the Risk
Factors set forth in the Company's filings with the United States
Securities and Exchange Commission.
As Aramark enters the second half of fiscal 2023, the Company is
providing full year performance expectations that now include its
outlook for Global FSS and Uniform Services:
Organic Revenue Growth
>13%, comprised of...
Global FSS
~15%
Uniform Services
~5.5%
Adjusted Operating Income Growth
~32%, comprised of...
Global FSS
~45%
Uniform Services
~7%
Free Cash Flow ~
$475 million Deferred payroll
taxes related to CARES Act
$64 million
Spin-off and restructuring related costs
$100-$120 million
After these items,
Free Cash Flow ~$300 million
Leverage Ratio less than 4.0x
Note: Global FSS is defined as the sum of
the FSS United States, FSS International, and Corporate reportable
segments. Uniform Services is defined as the Uniform & Career
Apparel reportable segment. Outlook does not reflect any
incremental public company costs associated with the spin
transaction.
"As we move into the second half of the fiscal year, I am
excited about the opportunities ahead for Aramark as we finish the
year and continue our momentum into fiscal 2024," Zillmer added.
"Revenue is strong, AOI performance continues to build, and we
remain committed to our strategic agenda. I feel the incredible
progress across our business and believe deeply in the ability of
our teams around the globe to reach this level of performance and
well beyond."
CONFERENCE CALL SCHEDULED
The Company has scheduled a conference call at 8:30 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 website, www.aramark.com, on the investor
relations page.
About Aramark Aramark (NYSE:
ARMK) proudly serves the world’s leading educational institutions,
Fortune 500 companies, world champion sports teams, prominent
healthcare providers, iconic destinations and cultural attractions
and numerous municipalities in 19 countries around the world with
food, facilities, and uniform services. Because our culture is
rooted in service, our employees strive to do great things for each
other, our partners, our communities, and our planet. Aramark has
been recognized on FORTUNE's list of "World’s Most Admired
Companies," DiversityInc’s “Top 50 Companies for Diversity” and
"Top Companies for Supplier Diversity," Newsweek's list of
"America's Most Responsible Companies 2023," the HRC's "Best Places
to Work for LGBTQ Equality," and scored 100% on the Disability
Equality Index. Learn more at www.aramark.com and connect with us
on Facebook, Twitter and LinkedIn.
Selected Operational
and Financial Metrics
Adjusted Revenue (Organic)
Adjusted Revenue (Organic) represents revenue growth, adjusted to
eliminate the effect of certain material acquisitions and the
impact of currency translation.
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 certain material acquisitions; spin-off
related charges 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; the effect of certain material
acquisitions; spin-off related charges; loss on defined benefit
pension plan termination; and other items impacting comparability,
less the tax impact of these adjustments. The tax effect for
adjusted net income for our United States earnings is calculated
using a blended United States federal and state tax rate. The tax
effect for adjusted net income in jurisdictions outside the United
States 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 for income taxes; depreciation and
amortization and certain other items as defined in our debt
agreements required in calculating covenant ratios and debt
compliance. We also use Net Debt for our ratio to Covenant Adjusted
EBITDA, which is calculated as total long-term borrowings less cash
and cash equivalents and short-term marketable securities.
Free Cash Flow Free Cash
Flow represents net cash (used in) 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 (Organic), Adjusted Operating Income
(including on a constant currency basis), Adjusted Net Income
(including on a constant currency basis), Adjusted EPS (including
on a constant currency basis), Covenant Adjusted EBITDA 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,
earnings per share or net cash (used in) provided by operating
activities, determined in accordance with GAAP. Adjusted Revenue
(Organic), Adjusted Operating Income, Adjusted Net Income, Adjusted
EPS, Covenant Adjusted EBITDA 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 expense resulting from the purchase accounting
applied to the January 26, 2007 going-private transaction and
amortization expense recognized on other acquisition-related
intangible assets.
Severance and Other Charges
- adjustments to eliminate severance expenses in the applicable
period ($34.4 million for both the second quarter and year-to-date
2023).
Effect of Certain
Acquisitions - adjustments to eliminate the operating
results of certain material acquisitions that are not comparable to
the prior year periods.
Spin-off Related Charges -
adjustments to eliminate charges related to the Company's intention
to spin-off the Uniform segment, including salaries and benefits,
recruiting and relocation costs, accounting and legal related
expenses, branding and other costs.
Gains, Losses and Settlements impacting
comparability - adjustments to eliminate certain
transactions that are not indicative of our ongoing operational
performance, primarily for the reversal of contingent consideration
liabilities related to acquisition earn outs, net of expense ($48.2
million for the second quarter of 2023 and $73.9 million for
year-to-date 2023), non-cash charges for the impairment of
operating lease right-of-use assets and property and equipment
($5.9 million for the second quarter of 2023 and $29.3 million for
year-to-date 2023), the gain from the sale of land ($6.8 million
for both the second quarter and year-to-date 2023), non-cash
charges related to information technology assets ($6.1 million for
both the second quarter and year-to-date 2023); non-cash charges
for the impairment of certain assets related to a business
held-for-sale ($5.2 million for year-to-date 2023), pension
withdrawal charges ($4.7 million for both the second quarter and
year-to-date 2023), charges related to hyperinflation in Argentina
($2.8 million for the second quarter of 2023, $3.9 million for
year-to-date 2023 and $1.0 million for both the second quarter and
year-to-date 2022), legal settlement charges ($2.7 million for
year-to-date 2023), charges related to the retirement of the
Company's former Executive Vice President of Human Resources ($2.6
million for year-to-date 2023), cash termination fees and moving
costs related to exiting a real estate property ($1.3 million for
year-to-date 2023), the impact of the change in fair value related
to certain gasoline and diesel agreements ($1.5 million loss for
the second quarter of 2023, $1.1 million loss for year-to-date
2023, $2.9 million gain for the second quarter of 2022 and $0.3
million loss for year-to-date 2022), the gain from insurance
proceeds received related to property damage from a tornado in
Nashville ($3.1 million for year-to-date of 2022) and other
miscellaneous charges.
Loss on Defined Benefit Pension Plan
Termination - adjustment to eliminate the impact of a
non-cash loss in the prior year from the termination of certain
single-employer defined benefit pension plans.
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 United States federal and state tax rate for United States
adjustments and the local country tax rate for adjustments in
jurisdictions outside the United States. Adjustment also reverses
valuation allowances recorded against deferred tax assets in a
foreign subsidiary that were previously deemed to be not realizable
(approximately $3.8 million for both the second quarter and
year-to-date 2023 and $8.5 million for year-to-date 2022).
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.
Forward-Looking Statements This press release contains
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements reflect
our current expectations as to future events based on certain
assumptions and include any statement that does not directly relate
to any historical or current fact. These statements include, but
are not limited to, statements under the heading "Outlook" and
those related to our expectations regarding the performance of our
business, our financial results, our operations, our liquidity and
capital resources, the conditions in our industry and our growth
strategy. In some cases, forward-looking statements can be
identified by words such as "outlook," "aim," "anticipate," "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. These forward-looking
statements are subject to risks and uncertainties that may change
at any time, and actual results or outcomes may differ materially
from those that we expected.
Some of the factors that we believe could affect or continue to
affect our results include without limitation: unfavorable economic
conditions; natural disasters, global calamities, climate change,
pandemics, including the ongoing COVID-19 pandemic, energy
shortages, sports strikes and other adverse incidents; geopolitical
events including, but not limited to, the ongoing conflict between
Russia and Ukraine and its effects on global supply chains,
inflation, volatility and disruption of global financial markets;
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; currency risks
and other risks associated with international operations, including
compliance with a broad range of laws and regulations, including
the United States Foreign Corrupt Practices Act; risks associated
with suppliers from whom our products are sourced; disruptions to
our relationship with our distribution partners; the contract
intensive nature of our business, which may lead to client
disputes; our expansion strategy and our ability to successfully
integrate the businesses we acquire and costs and timing related
thereto; continued or further unionization of our workforce;
liability resulting from our participation in multiemployer defined
benefit pension plans; the inability to hire and retain key or
sufficient qualified personnel or increases in labor costs; laws
and 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; increases or changes in income tax rates or
tax-related laws; potential liabilities, increased costs,
reputational harm, and other adverse effects based on our
commitments and stakeholder expectations relating to environmental,
social and governance considerations; the failure to maintain food
safety throughout our supply chain, food-borne illness concerns and
claims of illness or injury; a cybersecurity incident or other
disruptions in the availability of our computer systems or privacy
breaches; our leverage; variable rate indebtedness that subjects us
to interest rate risk; the inability to generate sufficient cash to
service all of our indebtedness; debt agreements that limit our
flexibility in operating our business; risks associated with the
impact, timing or terms of the proposed spin-off of Aramark Uniform
Services (our Uniform segment) as an independent publicly traded
company to our stockholders (the "proposed spin-off'"); risks
associated with the expected benefits and costs of the proposed
spin-off, including the risk that the expected benefits of the
proposed spin-off will not be realized within the expected time
frame, in full or at all, and the risk that conditions to the
proposed spin-off will not be satisfied and/or that the proposed
spin-off will not be completed within the expected time frame, on
the expected terms or at all; the expected qualification of the
proposed spin-off as a tax-free transaction for United States
federal income tax purposes, including whether or not an Internal
Revenue Service ruling will be sought or obtained; the risk that
any consents or approvals required in connection with the proposed
spin-off will not be received or obtained within the expected time
frame, on the expected terms or at all; risks associated with
expected financing transactions undertaken in connection with the
proposed spin-off and risks associated with indebtedness incurred
in connection with the proposed spin-off; the risk of increased
costs from lost synergies, costs of restructuring transactions and
other costs incurred in connection with the proposed spin-off;
retention of existing management team members as a result of the
proposed spin-off; reaction of customers, our employees and other
parties to the proposed spin-off; and the impact of the proposed
spin-off on our business and the risk that the proposed spin-off
may be more difficult, time-consuming or costly than expected,
including the impact on our resources, systems, procedures and
controls, diversion of management’s attention and the impact on
relationships with customers, suppliers, employees and other
business counterparties; and other factors set forth under the
headings "Part I, Item 1A Risk Factors," "Part I, Item 3 Legal
Proceedings" and "Part II, 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
Securities and Exchange Commission (the "SEC") on November 22, 2022
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 at
www.aramark.com. These factors should not be construed as
exhaustive and should be read in conjunction with the other
cautionary statements that are included herein 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.
Forward-looking statements speak only as of the date made. 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 31, 2023
April 1, 2022
Revenue
$
4,602,085
$
3,860,529
Costs and Expenses:
Cost of services provided (exclusive of
depreciation and amortization)
4,179,411
3,491,238
Depreciation and amortization
136,789
132,285
Selling and general corporate expenses
103,902
95,015
4,420,102
3,718,538
Operating income
181,983
141,991
Interest and Other Financing Costs,
net
114,021
89,685
Income Before Income Taxes
67,962
52,306
Provision for Income Taxes
12,080
16,761
Net income
55,882
35,545
Less: Net loss attributable to
noncontrolling interests
(159)
(203)
Net income attributable to Aramark
stockholders
$
56,041
$
35,748
Earnings per share attributable to Aramark
stockholders:
Basic
$
0.21
$
0.14
Diluted
$
0.21
$
0.14
Weighted Average Shares Outstanding:
Basic
260,673
257,100
Diluted
262,537
258,747
Six Months Ended
March 31, 2023
April 1, 2022
Revenue
$
9,203,083
$
7,808,789
Costs and Expenses:
Cost of services provided (exclusive of
depreciation and amortization)
8,341,495
7,062,283
Depreciation and amortization
273,273
267,803
Selling and general corporate expenses
206,686
196,465
8,821,454
7,526,551
Operating income
381,629
282,238
Interest and Other Financing Costs,
net
215,366
182,702
Income Before Income Taxes
166,263
99,536
Provision for Income Taxes
36,730
21,284
Net income
129,533
78,252
Less: Net loss attributable to
noncontrolling interests
(659)
(107)
Net income attributable to Aramark
stockholders
$
130,192
$
78,359
Earnings per share attributable to Aramark
stockholders:
Basic
$
0.50
$
0.31
Diluted
$
0.50
$
0.30
Weighted Average Shares Outstanding:
Basic
260,063
256,785
Diluted
261,993
258,399
ARAMARK AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In Thousands)
March 31, 2023
September 30, 2022
Assets
Current Assets:
Cash and cash equivalents
$
302,692
$
329,452
Receivables
2,353,580
2,147,957
Inventories
609,589
552,386
Prepayments and other current assets
330,695
262,195
Total current assets
3,596,556
3,291,990
Property and Equipment, net
2,015,037
2,032,045
Goodwill
5,581,989
5,515,124
Other Intangible Assets
2,091,797
2,113,726
Operating Lease Right-of-use Assets
646,485
592,145
Other Assets
1,524,217
1,537,406
$
15,456,081
$
15,082,436
Liabilities and Stockholders'
Equity
Current Liabilities:
Current maturities of long-term
borrowings
$
110,461
$
65,047
Current operating lease liabilities
69,111
68,858
Accounts payable
1,137,912
1,322,936
Accrued expenses and other current
liabilities
1,650,599
1,829,045
Total current liabilities
2,968,083
3,285,886
Long-Term Borrowings
7,906,636
7,345,860
Noncurrent Operating Lease Liabilities
310,006
305,623
Deferred Income Taxes and Other Noncurrent
Liabilities
1,079,979
1,106,587
Commitments and Contingencies
Redeemable Noncontrolling Interests
8,104
8,840
Total Stockholders' Equity
3,183,273
3,029,640
$
15,456,081
$
15,082,436
ARAMARK AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Six Months Ended
March 31, 2023
April 1, 2022
Cash flows from operating activities:
Net income
$
129,533
$
78,252
Adjustments to reconcile net income to net
cash used in operating activities
Depreciation and amortization
273,273
267,803
Asset write-downs
35,479
—
Reduction of contingent consideration
liability
(73,891)
—
Deferred income taxes
20,700
5,350
Share-based compensation expense
45,077
47,913
Changes in operating assets and
liabilities
(653,940)
(510,887)
Payments made to clients on contracts
(85,335)
(14,977)
Other operating activities
16,382
(1,721)
Net cash used in operating activities
(292,722)
(128,267)
Cash flows from investing activities:
Net purchases of property and equipment
and other
(184,288)
(163,032)
Acquisitions, divestitures and other
investing activities
(41,569)
(126,787)
Net cash used in investing activities
(225,857)
(289,819)
Cash flows from financing activities:
Net proceeds/payments of long-term
borrowings
122,851
59,057
Net change in funding under the
Receivables Facility
395,065
300,000
Payments of dividends
(57,225)
(56,464)
Proceeds from issuance of common stock
34,053
23,703
Other financing activities
(17,417)
(8,483)
Net cash provided by financing
activities
477,327
317,813
Effect of foreign exchange rates on cash
and cash equivalents
14,492
(3,012)
Decrease in cash and cash equivalents
(26,760)
(103,285)
Cash and cash equivalents, beginning of
period
329,452
532,591
Cash and cash equivalents, end of
period
$
302,692
$
429,306
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
ADJUSTED CONSOLIDATED
OPERATING INCOME MARGIN
(Unaudited)
(In thousands)
Three Months Ended
March 31, 2023
FSS United States
FSS International
Uniform
Corporate
Aramark and Subsidiaries
Revenue (as reported)
$
2,843,149
$
1,073,007
$
685,929
$
4,602,085
Operating Income (as reported)
$
155,929
$
6,887
$
55,813
$
(36,646)
$
181,983
Operating Income Margin (as reported)
5.48 %
0.64 %
8.14 %
3.95 %
Revenue (as reported)
$
2,843,149
$
1,073,007
$
685,929
$
4,602,085
Effect of Certain Acquisitions
(67,015)
—
—
(67,015)
Effect of Currency Translation
2,198
69,889
4,367
76,454
Adjusted Revenue (Organic)
$
2,778,332
$
1,142,896
$
690,296
$
4,611,524
Revenue Growth (as reported)
21.59 %
23.21 %
5.32 %
19.21 %
Adjusted Revenue Growth (Organic)
18.82 %
31.23 %
5.99 %
19.45 %
Operating Income (as reported)
$
155,929
$
6,887
$
55,813
$
(36,646)
$
181,983
Amortization of Acquisition-Related
Intangible Assets
19,213
3,200
6,502
—
28,915
Severance and Other Charges
2,310
26,090
5,450
552
34,402
Effect of Certain Acquisitions
(3,502)
—
—
—
(3,502)
Spin-off Related Charges
—
—
3,440
1,941
5,381
Gains, Losses and Settlements impacting
comparability
(34,061)
2,768
(4,242)
1,534
(34,001)
Adjusted Operating Income
$
139,889
$
38,945
$
66,963
$
(32,619)
$
213,178
Effect of Currency Translation
554
2,724
65
—
3,343
Adjusted Operating Income (Constant
Currency)
$
140,443
$
41,669
$
67,028
$
(32,619)
$
216,521
Operating Income Growth (as reported)
89.85 %
(81.43) %
(0.24) %
(10.45) %
28.17 %
Adjusted Operating Income Growth
41.98 %
(4.12) %
7.19 %
8.55 %
28.46 %
Adjusted Operating Income Growth (Constant
Currency)
42.54 %
2.59 %
7.29 %
8.55 %
30.48 %
Adjusted Operating Income Margin
5.04 %
3.63 %
9.76 %
4.70 %
Adjusted Operating Income Margin (Constant
Currency)
5.05 %
3.65 %
9.71 %
4.70 %
Three Months Ended
April 1, 2022
FSS United States
FSS International
Uniform
Corporate
Aramark and Subsidiaries
Revenue (as reported)
$
2,338,336
$
870,895
$
651,298
$
3,860,529
Operating Income (as reported)
$
82,132
$
37,092
$
55,945
$
(33,178)
$
141,991
Amortization of Acquisition-Related
Intangible Assets
16,396
2,520
6,527
—
25,443
Gains, Losses and Settlements impacting
comparability
—
1,005
—
(2,491)
(1,486)
Adjusted Operating Income
$
98,528
$
40,617
$
62,472
$
(35,669)
$
165,948
Operating Income Margin (as reported)
3.51 %
4.26 %
8.59 %
3.68 %
Adjusted Operating Income Margin
4.21 %
4.66 %
9.59 %
4.30 %
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
ADJUSTED CONSOLIDATED
OPERATING INCOME MARGIN
(Unaudited)
(In thousands)
Six Months Ended
March 31, 2023
FSS United States
FSS International
Uniform
Corporate
Aramark and Subsidiaries
Revenue (as reported)
$
5,764,186
$
2,065,690
$
1,373,207
$
9,203,083
Operating Income (as reported)
$
319,168
$
33,646
$
102,353
$
(73,538)
$
381,629
Operating Income Margin (as reported)
5.54 %
1.63 %
7.45 %
4.15 %
Revenue (as reported)
$
5,764,186
$
2,065,690
$
1,373,207
$
9,203,083
Effect of Certain Acquisitions
(139,298)
—
—
(139,298)
Effect of Currency Translation
5,068
191,054
9,320
205,442
Adjusted Revenue (Organic)
$
5,629,956
$
2,256,744
$
1,382,527
$
9,269,227
Revenue Growth (as reported)
21.00 %
18.44 %
5.55 %
17.86 %
Adjusted Revenue Growth (Organic)
18.18 %
29.39 %
6.27 %
18.70 %
Operating Income (as reported)
$
319,168
$
33,646
$
102,353
$
(73,538)
$
381,629
Amortization of Acquisition-Related
Intangible Assets
38,334
5,762
13,003
—
57,099
Severance and Other Charges
2,310
26,090
5,450
552
34,402
Effect of Certain Acquisitions
(6,117)
—
—
—
(6,117)
Spin-off Related Charges
—
—
6,956
3,431
10,387
Gains, Losses and Settlements impacting
comparability
(41,458)
12,067
3,560
3,750
(22,081)
Adjusted Operating Income
$
312,237
$
77,565
$
131,322
$
(65,805)
$
455,319
Effect of Currency Translation
1,225
7,939
364
—
9,528
Adjusted Operating Income (Constant
Currency)
$
313,462
$
85,504
$
131,686
$
(65,805)
$
464,847
Operating Income Growth (as reported)
76.15 %
(43.73) %
(10.88) %
0.08 %
35.22 %
Adjusted Operating Income Growth
43.51 %
17.66 %
5.38 %
9.69 %
35.81 %
Adjusted Operating Income Growth (Constant
Currency)
44.07 %
29.70 %
5.68 %
9.69 %
38.66 %
Adjusted Operating Income Margin
5.55 %
3.75 %
9.56 %
5.02 %
Adjusted Operating Income Margin (Constant
Currency)
5.57 %
3.79 %
9.53 %
5.01 %
Six Months Ended
April 1, 2022
FSS United States
FSS International
Uniform
Corporate
Aramark and Subsidiaries
Revenue (as reported)
$
4,763,715
$
1,744,079
$
1,300,995
$
7,808,789
Operating Income (as reported)
$
181,189
$
59,799
$
114,850
$
(73,600)
$
282,238
Amortization of Acquisition-Related
Intangible Assets
36,389
5,119
12,875
—
54,383
Gains, Losses and Settlements impacting
comparability
—
1,005
(3,113)
737
(1,371)
Adjusted Operating Income
$
217,578
$
65,923
$
124,612
$
(72,863)
$
335,250
Operating Income Margin (as reported)
3.80 %
3.43 %
8.83 %
3.61 %
Adjusted Operating Income Margin
4.57 %
3.78 %
9.58 %
4.29 %
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
ADJUSTED NET INCOME &
ADJUSTED EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended
Six Months Ended
March 31, 2023
April 1, 2022
March 31, 2023
April 1, 2022
Net Income Attributable to Aramark
Stockholders (as reported)
$
56,041
$
35,748
$
130,192
$
78,359
Adjustment:
Amortization of Acquisition-Related
Intangible Assets
28,915
25,443
57,099
54,383
Severance and Other Charges
34,402
—
34,402
—
Effect of Certain Acquisitions
(3,502)
—
(6,117)
—
Spin-off Related Charges
5,381
—
10,387
—
Gains, Losses and Settlements impacting
comparability
(34,001)
(1,486)
(22,081)
(1,371)
Loss on Defined Benefit Pension Plan
Termination
—
—
—
3,644
Tax Impact of Adjustments to Adjusted Net
Income
(12,571)
(5,477)
(21,476)
(22,122)
Adjusted Net Income
$
74,665
$
54,228
$
182,406
$
112,893
Effect of Currency Translation, net of
Tax
2,772
—
9,781
—
Adjusted Net Income (Constant
Currency)
$
77,437
$
54,228
$
192,187
$
112,893
Earnings Per Share (as
reported)
Net Income Attributable to Aramark
Stockholders (as reported)
$
56,041
$
35,748
$
130,192
$
78,359
Diluted Weighted Average Shares
Outstanding
262,537
258,747
261,993
258,399
$
0.21
$
0.14
$
0.50
$
0.30
Earnings Per Share Growth (as reported)
$
$
0.07
$
0.20
Earnings Per Share Growth (as reported)
%
50 %
67 %
Adjusted Earnings Per Share
Adjusted Net Income
$
74,665
$
54,228
$
182,406
$
112,893
Diluted Weighted Average Shares
Outstanding
262,537
258,747
261,993
258,399
$
0.28
$
0.21
$
0.70
$
0.44
Adjusted Earnings Per Share Growth $
$
0.07
$
0.26
Adjusted Earnings Per Share Growth %
33 %
59 %
Adjusted Earnings Per Share (Constant
Currency)
Adjusted Net Income (Constant
Currency)
$
77,437
$
54,228
$
192,187
$
112,893
Diluted Weighted Average Shares
Outstanding
262,537
258,747
261,993
258,399
$
0.29
$
0.21
$
0.73
$
0.44
Adjusted Earnings Per Share Growth
(Constant Currency) $
$
0.08
$
0.29
Adjusted Earnings Per Share Growth
(Constant Currency) %
38 %
66 %
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
NET DEBT TO COVENANT ADJUSTED
EBITDA
(Unaudited)
(In thousands)
Twelve Months Ended
March 31, 2023
April 1, 2022
Net Income Attributable to Aramark
Stockholders (as reported)
$
246,317
$
146,345
Interest and Other Financing Costs,
net
405,391
387,381
Provision for Income Taxes
76,907
33,416
Depreciation and Amortization
537,797
542,602
Share-based compensation expense(1)
92,651
84,078
Unusual or non-recurring (gains) and
losses(2)(3)
5,207
(77,070)
Pro forma EBITDA for equity method
investees(4)
6,872
10,488
Pro forma EBITDA for certain
transactions(5)
7,551
5,225
Other(6)(7)
84,957
(9,042)
Covenant Adjusted EBITDA
$
1,463,650
$
1,123,423
Net Debt to Covenant Adjusted
EBITDA
Total Long-Term Borrowings
$
8,017,097
$
7,793,697
Less: Cash and cash equivalents and
short-term marketable securities(8)
411,707
429,306
Net Debt
$
7,605,390
$
7,364,391
Covenant Adjusted EBITDA
$
1,463,650
$
1,123,423
Net Debt/Covenant Adjusted EBITDA
5.2
6.6
(1) Represents share-based compensation
expense resulting from the application of accounting for stock
options, restricted stock units, performance stock units, deferred
stock unit awards and employee stock purchases.
(2) For the twelve months ended March 31,
2023 represents the fiscal 2023 non-cash charge for the impairment
of certain assets related to a business held-for-sale ($5.2
million).
(3) For the twelve months ended April 1,
2022 represents the fiscal 2021 non-cash gain from an observable
price change on an equity investment ($137.9 million) and the
fiscal 2021 non-cash loss from the termination of certain defined
benefit pension plans ($60.9 million).
(4) Represents the Company's estimated
share of EBITDA, primarily from the Company's AIM Services Co.,
Ltd. equity method investment, not already reflected in the
Company's 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.
(5) Represents the annualizing of net
EBITDA from certain acquisitions made during the period.
(6) "Other" for the twelve months ended
March 31, 2023 includes the reversal of contingent consideration
liabilities related to acquisition earn outs, net of expense ($89.0
million), severance charges ($54.0 million), adjustments to remove
the impact attributable to the adoption of certain accounting
standards that are made to the calculation in accordance with the
Credit Agreement and indentures ($38.7 million), non-cash charges
for the impairment of operating lease right-of-use assets and
property and equipment related to certain real estate properties
($29.3 million), non-cash charges for inventory write-downs to net
realizable value and fixed asset write-offs related to personal
protective equipment ($20.5 million), charges related to the
Company's intention to spin-off the Uniform segment ($19.7
million), the loss from the change in fair value related to certain
gasoline and diesel agreements ($7.2 million), the gain from the
sale of land ($6.8 million), the gain from a funding agreement
related to a legal matter ($6.5 million), the impact of
hyperinflation in Argentina ($6.4 million), non-cash charges
related to information technology assets ($6.1 million), pension
withdrawal charges ($4.7 million), the favorable impact related to
a client contract dispute ($4.0 million), legal settlement charges
($2.7 million) and other miscellaneous expenses.
(7) "Other" for the twelve months ended
April 1, 2022 includes United States and non-United States
governmental labor related tax credits resulting from the COVID-19
pandemic, net of labor charges, incremental expenses and other
expenses associated with closed or partially closed client
locations ($57.3 million), adjustments to remove the impact
attributable to the adoption of certain accounting standards that
are made to the calculation in accordance with the Credit Agreement
and indentures ($29.7 million), non-cash charges for inventory
write-downs to net realizable value and for excess inventory
related to personal protective equipment ($24.4 million), expenses
related to merger and integration related charges ($16.1 million),
the gain from a funding agreement related to a legal matter ($10.0
million), reversal of severance charges ($7.9 million), reversal of
charges related to a client contract dispute ($5.7 million), a
favorable settlement of a legal matter ($4.7 million), the gain
from insurance proceeds received related to property damage from a
tornado in Nashville ($3.1 million), due diligence charges related
to acquisitions ($3.1 million), non-cash charges related to
information technology assets ($2.2 million), the impact of
hyperinflation in Argentina ($1.8 million) and other miscellaneous
expenses.
(8) Short-term marketable securities
represent held-to-maturity debt securities with original maturities
greater than three months, which are maturing within one year and
will convert back to cash. Short-term marketable securities are
included in "Prepayments and other current assets" on the Condensed
Consolidated Balance Sheets.
ARAMARK AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
FREE CASH FLOW
(Unaudited)
(In thousands)
Six Months Ended
Three Months Ended
Three Months Ended
March 31, 2023
December 30, 2022
March 31, 2023
Net cash (used in) provided by operating
activities
$
(292,722)
$
(607,205)
$
314,483
Net purchases of property and equipment
and other
(184,288)
(98,493)
(85,795)
Free Cash Flow
$
(477,010)
$
(705,698)
$
228,688
Six Months Ended
Three Months Ended
Three Months Ended
April 1, 2022
December 31, 2021
April 1, 2022
Net cash (used in) provided by operating
activities
$
(128,267)
$
(503,387)
$
375,120
Net purchases of property and equipment
and other
(163,032)
(65,643)
(97,389)
Free Cash Flow
$
(291,299)
$
(569,030)
$
277,731
Six Months Ended
Three Months Ended
Three Months Ended
Change
Change
Change
Net cash used in operating activities
$
(164,455)
$
(103,818)
$
(60,637)
Net purchases of property and equipment
and other
(21,256)
(32,850)
11,594
Free Cash Flow
$
(185,711)
$
(136,668)
$
(49,043)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230508005787/en/
Inquiries: Felise Glantz Kissell (215) 409-7287
Kissell-Felise@aramark.com
Scott Sullivan (215) 238-3953 Sullivan-Scott1@aramark.com
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