REVENUE RECOGNITION:

The Company generates revenue through sales of food, facility and uniform services to customers based on written contracts at the locations we serve. Within our FSS United States and FSS International segments, we provide food and beverage services, including catering and retail services, or facilities services, including plant operations and maintenance, custodial, housekeeping, landscaping and other services. Within our Uniform segment, the Company provides a full service uniform solution, including delivery, cleaning and maintenance. In accordance with Accounting Standards Codification 606 ("ASC 606"), the Company accounts for a customer contract when both parties have approved the arrangement and are committed to perform their respective obligations, each party's rights can be identified, payment terms can be identified, the contract has commercial substance and it is probable the Company will collect substantially all of the consideration to which it is entitled. Revenue is recognized upon the transfer of control of the promised product or service to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods and services.

Performance Obligations

The Company recognizes revenue when its performance obligation is satisfied. Each contract generally has one performance obligation, which is satisfied over time. The Company primarily accounts for its performance obligations under the series guidance, using the as-invoiced practical expedient when applicable. The Company applies the right to invoice practical expedient to record revenue as the services are provided, given the nature of the services provided and the frequency of billing under the customer contracts. Under this practical expedient, the Company recognizes revenue in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date and for which the Company has the right to invoice the customer. Certain arrangements include performance obligations which include variable consideration (primarily per transaction fees). For these arrangements, the Company does not need to estimate the variable consideration for the contract and allocate to the entire performance obligation; therefore, the variable fees are recognized in the period they are earned.

Impact of New Revenue Recognition Standard

As a result of the adoption of ASC 606, the following changes occurred with respect to financial statement line item classification in the Company's condensed consolidated financial statements:

Transition Adjustment:


•	costs to obtain contracts related to employee sales commissions, previously expensed to “Cost of services provided” at contract inception, are now capitalized in “Other Assets” ($97.2 million and $103.8 million as of September 29, 2018 and March 29, 2019, respectively);

Other Reclassifications and Changes in Presentation:


•	certain fees within the Uniform segment, $95.8 million and $191.1 million for the three and six month periods of fiscal 2019, previously recognized as a reduction to “Cost of services provided,” are now recognized in “Revenue;”

•

client contract investments, previously capitalized within “Other Assets” and amortized to “Depreciation and amortization” will continue to be expensed over the contract life as either a leasehold improvement in “Property and equipment, net” ($795.1 million as of March 29, 2019) or as long-term prepaid rent or costs to fulfill in “Other Assets” ($186.4 million and $112.9 million as of March 29, 2019, respectively) and primarily classified in “Depreciation and amortization” or “Cost of services provided;”


•	costs to fulfill contracts related to personalized work apparel, linens and other rental items in service, previously capitalized within "Inventories" are now capitalized within "Other Assets" ($345.0 million as of March 29, 2019); and


•	certain client contract investments, previously included within "Purchases of property and equipment and other" in Net cash provided by (used in) investing activities on the Condensed Consolidated Statements of Cash Flows, are now included within "Payments made to clients on contracts" in Net cash provided by operating activities.

The following table compares the reported Condensed Consolidated Balance Sheet as of March 29, 2019, to the balances had the previous revenue accounting guidance remained in effect (in thousands):



	March 29, 2019
	As Reported			Adoption adjustments of ASC 606			Balances without adoption of ASC 606
ASSETS
Current Assets:
Cash and cash equivalents	$	195,387		$	—		$	195,387
Receivables, net	1,878,151			—			1,878,151
Inventories	400,269			344,953			745,222
Prepayments and other current assets	156,796			—			156,796
Total current assets	2,630,603			344,953			2,975,556
Property and Equipment, net	2,142,944			(795,096		)	1,347,848
Goodwill	5,522,552			—			5,522,552
Other Intangible Assets	2,087,641			—			2,087,641
Other Assets	1,327,074			339,781			1,666,855
	$	13,710,814		$	(110,362	)	$	13,600,452
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term borrowings	$	56,339		$	—		$	56,339
Accounts payable	911,785			—			911,785
Accrued expenses and other current liabilities	1,342,981			(23,526		)	1,319,455
Total current liabilities	2,311,105			(23,526		)	2,287,579
Long-Term Borrowings	7,134,286			—			7,134,286
Deferred Income Taxes and Other Noncurrent Liabilities	1,021,749			(23,544		)	998,205
Redeemable Noncontrolling Interest	9,994			—			9,994
Stockholders' Equity:
Common stock	2,812			—			2,812
Capital surplus	3,180,943			—			3,180,943
Retained earnings	992,736			(63,292		)	929,444
Accumulated other comprehensive loss	(141,651		)	—			(141,651		)
Treasury stock	(801,160		)	—			(801,160		)
Total stockholders' equity	3,233,680			(63,292		)	3,170,388
	$	13,710,814		$	(110,362	)	$	13,600,452

The following table compares the reported Condensed Consolidated Statements of Income for the three and six month period ended March 29, 2019, to the balances had the previous revenue accounting guidance remained in effect (in thousands):



	Three Months Ended March 29, 2019
	As Reported			Adoption adjustments of ASC 606			Balances without adoption of ASC 606

Revenue	$	3,999,987		$	(91,583	)	$	3,908,404
Costs and Expenses:
Cost of services provided	3,639,959			(94,490		)	3,545,469
Depreciation and amortization	147,908			4,893			152,801
Selling and general corporate expenses	88,285			—			88,285
Gain on sale of Healthcare Technologies	1,000			—			1,000
	3,877,152			(89,597		)	3,787,555
Operating income	122,835			(1,986		)	120,849
Interest and Other Financing Costs, net	84,178			—			84,178
Income Before Income Taxes	38,657			(1,986		)	36,671
Provision for Income Taxes	9,347			(514		)	8,833
Net income	29,310			(1,472		)	27,838
Less: Net income (loss) attributable to noncontrolling interest	(43		)	—			(43		)
Net income attributable to Aramark stockholders	$	29,353		$	(1,472	)	$	27,881



	Six Months Ended March 29, 2019
	As Reported			Adoption adjustments of ASC 606			Balances without adoption of ASC 606

Revenue	$	8,265,336		$	(180,090	)	$	8,085,246
Costs and Expenses:
Cost of services provided	7,434,404			(183,197		)	7,251,207
Depreciation and amortization	298,629			7,899			306,528
Selling and general corporate expenses	192,415			—			192,415
Gain on sale of Healthcare Technologies	(156,309		)	—			(156,309		)
	7,769,139			(175,298		)	7,593,841
Operating income	496,197			(4,792		)	491,405
Interest and Other Financing Costs, net	167,155			—			167,155
Income Before Income Taxes	329,042			(4,792		)	324,250
Provision for Income Taxes	49,054			(1,241		)	47,813
Net income	279,988			(3,551		)	276,437
Less: Net income (loss) attributable to noncontrolling interest	(49		)	—			(49		)
Net income attributable to Aramark stockholders	$	280,037		$	(3,551	)	$	276,486

Disaggregation of Revenue

The following table presents revenue disaggregated by revenue source (in millions):



	Three Months Ended		Six Months Ended
	March 29, 2019		March 29, 2019
FSS United States:
Business & Industry	$	394.8	$	794.7
Education	901.6		1,917.9
Healthcare	221.4		484.7
Sports, Leisure & Corrections	504.7		1,099.0
Facilities & Other	394.5		781.0
Total FSS United States	$	2,417.0	$	5,077.3

FSS International:
Europe	512.0		1,032.2
Rest of World	430.0		863.0
Total FSS International	$	942.0	$	1,895.2

Uniform	$	641.0	$	1,292.8

Total Revenue	$	4,000.0	$	8,265.3

Contract Balances

The Company defers sales commissions earned by our sales force that are considered to be incremental and recoverable costs of obtaining a contract tied to its food, facilities and uniform services. The deferred costs are amortized using the portfolio approach on a straight line basis over the average period of benefit and are assessed for impairment on a periodic basis. Determination of the amortization period and the subsequent assessment for impairment of the contract cost asset requires judgment. During the three and six months ended March 29, 2019, the Company expensed approximately $3.6 million and $7.2 million of these costs to “Cost of services provided” in the Condensed Consolidated Statements of Income.

Costs to fulfill contracts includes payments made by the Company to enhance the service resources used by the Company to satisfy its performance obligation. These amounts are amortized over the contract period. If a contract is terminated prior to its maturity date, the Company is typically reimbursed for the unamortized amount. During the three and six months ended March 29, 2019, the Company expensed approximately $4.8 million and $9.9 million of these costs to "Depreciation and amortization" in the Condensed Consolidated Statements of Income.

Other costs to fulfill contracts represent personalized work apparel, linens and other rental items in service. The amounts are recorded at cost and are amortized over their estimated useful lives, which primarily range from one to four years. The amortization rates used are based on the Company's specific experience. The Company recorded expense of approximately $78.4 million and $157.5 million during the three and six months ended March 29, 2019 related to these costs, which was recorded in "Costs of services provided" in the Condensed Consolidated Statements of Income.

Deferred income is recognized in "Accrued expenses and other current liabilities" in the Condensed Consolidated Balance Sheets when the Company has received consideration, or has the right to receive consideration, in advance of the transfer of the performance obligation of the contract to the customer, primarily prepaid meal plans. The consideration received remains a liability until the goods or services have been provided to the customer. The Company classifies deferred income as current as the arrangement is short term in nature.

During the six months ended March 29, 2019, deferred income increased related to customer prepayments and decreased related to income recognized during the period as a result of satisfying the performance obligation. Below is a summary of the changes (in millions):



	Balance, September 28, 2018		Add: Net increase in current period deferred income	Less: Recognition of deferred income		Balance, March 29, 2019
Deferred income	$	281.5	628.5	(676.4	)	$	233.6