For Immediate Release | Contact: |
Media Inquiries: Karen Cutler (215) 238-4063 Cutler-Karen@aramark.com | |
Investor Inquiries: Felise Kissell (215) 409-7287 Kissell-Felise@aramark.com | |
• | Revenue +1.0%; Legacy Business Revenue +3.0% |
◦ | Legacy growth across all segments |
• | Operating Income (26)%; Adjusted Operating Income (2)%1 |
◦ | Increased incentive-based compensation; Solid operational performance |
• | Revenue +2.8%; Legacy Business Revenue +3.6% |
• | Operating Income +9%; Adjusted Operating Income +5%1 |
• | EPS of $1.78, (21)%; Adjusted EPS of $2.24, +8%1 |
• | Net Cash from Operating Activities of $984 million; Free Cash Flow of $499 million |
◦ | Net debt reduced by $593 million; Leverage ratio improved to 3.86x |
• | FSS United States increased 1.9% led by continued strong performance in stadiums and arenas as well as growth in national parks and healthcare, partially offset by education. |
• | FSS International grew 6.3% with continued strong performance in South America and China, as well as Europe despite the strategic exit of non-core custodial accounts in the region that occurred in the previous quarter. |
• | Uniform & Career Apparel increased 2.7% from pricing and volume as the business focuses on expanding adjacency products and services. |
Revenue | |||||
Q4 '19 | Q4 '18 | Change | Adjusted Revenue Change | Legacy Revenue Change | |
FSS United States1 | $2,408M | $2,481M | (2.9)% | 1.1% | 1.9% |
FSS International | 898 | 888 | 1.2% | 6.5% | 6.3% |
Uniform & Career Apparel | 646 | 545 | 18.4% | 18.5% | 2.7% |
Total Company | $3,951M | $3,914M | 1.0% | 4.9% | 3.0% |
• | FSS United States exhibited overall operational efficiencies from greater purchasing scale and business productivity improvement, despite lower volume in education. |
• | FSS International demonstrated broad-based growth with particular strength in Emerging Markets; the financial profile of the business in Europe has strengthened following the strategic exit of non-core custodial accounts. |
• | Uniform & Career Apparel captured synergies related to the AmeriPride acquisition and additional efficiencies from operational performance. |
Operating Income | Adjusted Operating Income | ||||||
Q4 '19 | Q4 '18 | Change | Q4 '19 | Q4 '18 | Constant-Currency Change | ||
FSS United States2 | $156M | $229M | (32)% | $205M | $249M | (18)% | |
FSS International | 49 | 41 | 21% | 56 | 44 | 31% | |
Uniform & Career Apparel | 47 | 50 | (7)% | 71 | 71 | —% | |
Corporate | (46) | (40) | (15%) | (13) | (35) | 64% | |
Total Company | $206M | $280M | (26)% | $320M | $330M | (2)% | |
• | Organic Revenue Growth of approximately 3% that is expected to consistently improve as the year progresses. |
• | Adjusted EPS growth led by further synergy capture from the Avendra and AmeriPride integration; business operating improvements; and reduced interest expense, while considering select investment opportunities. |
• | Free Cash Flow generation of at least $600M. |
• | Net debt to covenant adjusted EBITDA approximately 3.5x to 3.6x by the end of the fiscal year. |
Selected Operational and Financial Metrics |
Adjusted Revenue Adjusted Revenue represents revenue growth, adjusted to eliminate the impact of currency translation and divestitures. Adjusted Revenue (Organic) Adjusted Revenue (Organic) represents revenue growth, adjusted to eliminate the effects of material acquisitions and divestitures and the impact of currency translation. Legacy Business Revenue Legacy Business Revenue represents Adjusted Revenue, adjusted to exclude 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; advisory fees related to shareholder matters; 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; advisory fees related to shareholder matters 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. |
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 CEO and under the heading "2020 Outlook" and including with respect to, without limitation, anticipated effects of our adoption of new accounting standards, 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"), 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; 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 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; 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 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 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 presentation 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. |
Three Months Ended | ||||||||
September 27, 2019 | September 28, 2018 | |||||||
Revenue | $ | 3,951,244 | $ | 3,913,598 | ||||
Costs and Expenses: | ||||||||
Cost of services provided | 3,503,280 | 3,386,380 | ||||||
Depreciation and amortization | 145,165 | 152,536 | ||||||
Selling and general corporate expenses | 96,656 | 94,801 | ||||||
3,745,101 | 3,633,717 | |||||||
Operating income | 206,143 | 279,881 | ||||||
Interest and Other Financing Costs, net | 85,612 | 89,972 | ||||||
Income Before Income Taxes | 120,531 | 189,909 | ||||||
Provision for Income Taxes | 35,117 | 14,341 | ||||||
Net income | 85,414 | 175,568 | ||||||
Less: Net income attributable to noncontrolling interest | (143 | ) | 113 | |||||
Net income attributable to Aramark stockholders | $ | 85,557 | $ | 175,455 | ||||
Earnings per share attributable to Aramark stockholders: | ||||||||
Basic | $ | 0.35 | $ | 0.71 | ||||
Diluted | $ | 0.34 | $ | 0.69 | ||||
Weighted Average Shares Outstanding: | ||||||||
Basic | 247,431 | 246,321 | ||||||
Diluted | 253,404 | 253,724 | ||||||
Fiscal Year Ended | ||||||||
September 27, 2019 | September 28, 2018 | |||||||
Revenue | $ | 16,227,341 | $ | 15,789,633 | ||||
Costs and Expenses: | ||||||||
Cost of services provided | 14,532,662 | 13,997,911 | ||||||
Depreciation and amortization | 592,573 | 596,182 | ||||||
Selling and general corporate expenses | 367,256 | 377,129 | ||||||
Gain on sale of Healthcare Technologies | (156,309 | ) | — | |||||
15,336,182 | 14,971,222 | |||||||
Operating income | 891,159 | 818,411 | ||||||
Interest and Other Financing Costs, net | 334,987 | 346,535 | ||||||
Income Before Income Taxes | 556,172 | 471,876 | ||||||
Provision (Benefit) for Income Taxes | 107,706 | (96,564 | ) | |||||
Net income | 448,466 | 568,440 | ||||||
Less: Net income (loss) attributable to noncontrolling interest | (83 | ) | 555 | |||||
Net income attributable to Aramark stockholders | $ | 448,549 | $ | 567,885 | ||||
Earnings per share attributable to Aramark stockholders: | ||||||||
Basic | $ | 1.82 | $ | 2.31 | ||||
Diluted | $ | 1.78 | $ | 2.24 | ||||
Weighted Average Shares Outstanding: | ||||||||
Basic | 246,854 | 245,771 | ||||||
Diluted | 252,010 | 253,352 | ||||||
ARAMARK AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS* | ||||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
September 27, 2019 | September 28, 2018 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 246,643 | $ | 215,025 | ||||
Receivables | 1,806,964 | 1,790,433 | ||||||
Inventories | 411,319 | 724,802 | ||||||
Prepayments and other current assets | 193,461 | 171,165 | ||||||
Total current assets | 2,658,387 | 2,901,425 | ||||||
Property and Equipment, net | 2,181,762 | 1,378,094 | ||||||
Goodwill | 5,518,800 | 5,610,568 | ||||||
Other Intangible Assets | 2,033,566 | 2,136,844 | ||||||
Other Assets | 1,343,806 | 1,693,171 | ||||||
$ | 13,736,321 | $ | 13,720,102 | |||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities: | ||||||||
Current maturities of long-term borrowings | $ | 69,928 | $ | 30,907 | ||||
Accounts payable | 999,517 | 1,018,920 | ||||||
Accrued expenses and other current liabilities | 1,635,853 | 1,440,332 | ||||||
Total current liabilities | 2,705,298 | 2,490,159 | ||||||
Long-Term Borrowings | 6,612,239 | 7,213,077 | ||||||
Deferred Income Taxes and Other Noncurrent Liabilities | 1,088,822 | 977,215 | ||||||
Redeemable Noncontrolling Interest | 9,915 | 10,093 | ||||||
Total Stockholders' Equity | 3,320,047 | 3,029,558 | ||||||
$ | 13,736,321 | $ | 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 September 27, 2019, including Inventories, Property and Equipment, net and Other Assets. Further details will be available in the Annual Report on Form 10-K for the fiscal year ended September 27, 2019. | ||||||||
ARAMARK AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
(In Thousands) | ||||||||
Fiscal Year Ended | ||||||||
September 27, 2019 | September 28, 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 448,466 | $ | 568,440 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 592,573 | 596,182 | ||||||
Deferred income taxes | 40,503 | (104,289 | ) | |||||
Share-based compensation expense | 55,280 | 88,276 | ||||||
Net gain on sale of Healthcare Technologies | (139,165 | ) | — | |||||
Changes in operating assets and liabilities | 44,855 | (128,356 | ) | |||||
Payments made to clients on contracts1 | (40,073 | ) | — | |||||
Other operating activities | (18,212 | ) | 31,622 | |||||
Net cash provided by operating activities | 984,227 | 1,051,875 | ||||||
Cash flows from investing activities: | ||||||||
Net purchases of property and equipment and other | (485,219 | ) | (618,113 | ) | ||||
Acquisitions, divestitures and other investing activities2 | 275,698 | (2,247,163 | ) | |||||
Net cash used in investing activities | (209,521 | ) | (2,865,276 | ) | ||||
Cash flows from financing activities: | ||||||||
Net proceeds/payments of long-term borrowings | (576,930 | ) | 2,203,624 | |||||
Net change in funding under the Receivables Facility | — | (254,200 | ) | |||||
Payments of dividends | (108,439 | ) | (103,115 | ) | ||||
Proceeds from issuance of common stock | 39,087 | 21,507 | ||||||
Repurchase of stock | (50,000 | ) | (24,410 | ) | ||||
Other financing activities | (38,610 | ) | (49,253 | ) | ||||
Net cash provided by (used in) financing activities | (734,892 | ) | 1,794,153 | |||||
Effect of foreign exchange rates on cash and cash equivalents | (8,196 | ) | (4,524 | ) | ||||
Increase (decrease) in cash and cash equivalents | 31,618 | (23,772 | ) | |||||
Cash and cash equivalents, beginning of period | 215,025 | 238,797 | ||||||
Cash and cash equivalents, end of period | $ | 246,643 | $ | 215,025 | ||||
1 Prior 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 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. | ||||||||
2 Includes proceeds from the sale of Healthcare Technologies and $23.0 million of proceeds from governmental agencies related to property and equipment. | ||||||||
ARAMARK AND SUBSIDIARIES | ||||||||||||||||||||
RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||||||
ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
September 27, 2019 | ||||||||||||||||||||
FSS United States | FSS International | Uniform | Corporate | Aramark and Subsidiaries | ||||||||||||||||
Revenue (as reported) | $ | 2,407,750 | $ | 897,894 | $ | 645,600 | $ | 3,951,244 | ||||||||||||
Operating Income (as reported) | $ | 156,290 | $ | 49,209 | $ | 46,843 | $ | (46,199 | ) | $ | 206,143 | |||||||||
Operating Income Margin (as reported) | 6.49 | % | 5.48 | % | 7.26 | % | 5.22 | % | ||||||||||||
Revenue (as reported) | $ | 2,407,750 | $ | 897,894 | $ | 645,600 | $ | 3,951,244 | ||||||||||||
Effect of Currency Translation | 458 | 47,869 | 576 | 48,903 | ||||||||||||||||
Adjusted Revenue | $ | 2,408,208 | $ | 945,763 | $ | 646,176 | $ | 4,000,147 | ||||||||||||
Revenue Growth (as reported) | (2.95 | )% | 1.15 | % | 18.44 | % | 0.96 | % | ||||||||||||
Adjusted Revenue Growth | 1.13 | % | 6.55 | % | 18.54 | % | 4.88 | % | ||||||||||||
Operating Income (as reported) | $ | 156,290 | $ | 49,209 | $ | 46,843 | $ | (46,199 | ) | $ | 206,143 | |||||||||
Amortization of Acquisition-Related Intangible Assets | 21,209 | 1,952 | 6,148 | — | 29,309 | |||||||||||||||
Severance and Other Charges | (1,393 | ) | (888 | ) | (300 | ) | 13,540 | 10,959 | ||||||||||||
Merger and Integration Related Charges | 1,014 | — | 8,738 | — | 9,752 | |||||||||||||||
Tax Reform Related Employee Reinvestments | 3,228 | — | 1,144 | — | 4,372 | |||||||||||||||
Advisory Fees related to Shareholder Matters | — | — | — | 7,661 | 7,661 | |||||||||||||||
Gains, Losses and Settlements impacting comparability | 24,591 | 5,664 | 8,859 | 12,498 | 51,612 | |||||||||||||||
Adjusted Operating Income* | $ | 204,939 | $ | 55,937 | $ | 71,432 | $ | (12,500 | ) | $ | 319,808 | |||||||||
Effect of Currency Translation | 88 | 1,912 | (48 | ) | — | 1,952 | ||||||||||||||
Adjusted Operating Income (Constant Currency) | $ | 205,027 | $ | 57,849 | $ | 71,384 | $ | (12,500 | ) | $ | 321,760 | |||||||||
Operating Income Growth (as reported) | (31.75 | )% | 20.66 | % | (6.75 | )% | (15.08 | )% | (26.35 | )% | ||||||||||
Adjusted Operating Income Growth | (17.71 | )% | 26.31 | % | 0.54 | % | 63.87 | % | (3.02 | )% | ||||||||||
Adjusted Operating Income Growth (Constant Currency) | (17.67 | )% | 30.63 | % | 0.47 | % | 63.87 | % | (2.43 | )% | ||||||||||
Adjusted Operating Income Margin (Constant Currency) | 8.51 | % | 6.12 | % | 11.05 | % | 8.04 | % | ||||||||||||
Three Months Ended | ||||||||||||||||||||
September 28, 2018 | ||||||||||||||||||||
FSS United States | FSS International | Uniform | Corporate | Aramark and Subsidiaries | ||||||||||||||||
Revenue (as reported) | $ | 2,480,846 | $ | 887,646 | $ | 545,106 | $ | 3,913,598 | ||||||||||||
Effect of Divestitures | (99,598 | ) | — | — | (99,598 | ) | ||||||||||||||
Adjusted Revenue | $ | 2,381,248 | $ | 887,646 | $ | 545,106 | $ | 3,814,000 | ||||||||||||
Operating Income (as reported) | $ | 229,012 | $ | 40,783 | $ | 50,232 | $ | (40,146 | ) | $ | 279,881 | |||||||||
Amortization of Acquisition-Related Intangible Assets | 21,748 | 1,042 | 6,016 | — | 28,806 | |||||||||||||||
Severance and Other Charges | 374 | (2,216 | ) | — | 3,886 | 2,044 | ||||||||||||||
Effect of Divestitures | (8,092 | ) | — | — | — | (8,092 | ) | |||||||||||||
Merger and Integration Related Charges | 2,742 | — | 10,398 | 630 | 13,770 | |||||||||||||||
Gains, Losses and Settlements impacting comparability | 3,251 | 4,676 | 4,401 | 1,030 | 13,358 | |||||||||||||||
Adjusted Operating Income* | $ | 249,035 | $ | 44,285 | $ | 71,047 | $ | (34,600 | ) | $ | 329,767 | |||||||||
Operating Income Margin (as reported) | 9.23 | % | 4.59 | % | 9.22 | % | 7.15 | % | ||||||||||||
Adjusted Operating Income Margin | 10.46 | % | 4.99 | % | 13.03 | % | 8.65 | % | ||||||||||||
* Beginning in fiscal 2019, the definition of AOI changed. AOI for the three months ended September 28, 2018 has been calculated based on this new definition. See page 6 for the new definition of AOI. | ||||||||||||||||||||
ARAMARK AND SUBSIDIARIES | ||||||||||||||||||||
RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||||||
ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Fiscal Year Ended | ||||||||||||||||||||
September 27, 2019 | ||||||||||||||||||||
FSS United States | FSS International | Uniform | Corporate | Aramark and Subsidiaries | ||||||||||||||||
Revenue (as reported) | $ | 9,898,568 | $ | 3,742,939 | $ | 2,585,834 | $ | 16,227,341 | ||||||||||||
Operating Income (as reported) | $ | 716,729 | $ | 142,721 | $ | 191,344 | $ | (159,635 | ) | $ | 891,159 | |||||||||
Operating Income Margin (as reported) | 7.24 | % | 3.81 | % | 7.40 | % | 5.49 | % | ||||||||||||
Revenue (as reported) | $ | 9,898,568 | $ | 3,742,939 | $ | 2,585,834 | $ | 16,227,341 | ||||||||||||
Effect of Currency Translation | 6,498 | 260,695 | 7,850 | 275,043 | ||||||||||||||||
Adjusted Revenue | $ | 9,905,066 | $ | 4,003,634 | $ | 2,593,684 | $ | 16,502,384 | ||||||||||||
Revenue Growth (as reported) | (2.36 | )% | 2.38 | % | 29.55 | % | 2.77 | % | ||||||||||||
Adjusted Revenue Growth | 1.42 | % | 9.51 | % | 29.94 | % | 7.03 | % | ||||||||||||
Operating Income (as reported) | $ | 716,729 | $ | 142,721 | $ | 191,344 | $ | (159,635 | ) | $ | 891,159 | |||||||||
Amortization of Acquisition-Related Intangible Assets | 86,696 | 5,927 | 24,421 | — | 117,044 | |||||||||||||||
Severance and Other Charges | 13,196 | 17,057 | 193 | 28,001 | 58,447 | |||||||||||||||
Merger and Integration Related Charges | 6,534 | — | 29,526 | 8 | 36,068 | |||||||||||||||
Gain on sale of Healthcare Technologies | (156,309 | ) | — | — | — | (156,309 | ) | |||||||||||||
Tax Reform Related Employee Reinvestments | 58,657 | 352 | 14,442 | 1,443 | 74,894 | |||||||||||||||
Advisory Fees related to Shareholder Matters | — | — | — | 7,661 | 7,661 | |||||||||||||||
Gains, Losses and Settlements impacting comparability | 19,930 | 9,171 | 8,859 | 22,504 | 60,464 | |||||||||||||||
Adjusted Operating Income* | $ | 745,433 | $ | 175,228 | $ | 268,785 | $ | (100,018 | ) | $ | 1,089,428 | |||||||||
Effect of Currency Translation | 1,332 | 10,094 | 602 | — | 12,028 | |||||||||||||||
Adjusted Operating Income (Constant Currency) | $ | 746,765 | $ | 185,322 | $ | 269,387 | $ | (100,018 | ) | $ | 1,101,456 | |||||||||
Operating Income Growth (as reported) | 4.99 | % | 0.35 | % | 5.45 | % | 15.05 | % | 8.89 | % | ||||||||||
Adjusted Operating Income Growth | (2.49 | )% | (3.06 | )% | 11.78 | % | 26.86 | % | 3.86 | % | ||||||||||
Adjusted Operating Income Growth (Constant Currency) | (2.32 | )% | 2.52 | % | 12.03 | % | 26.86 | % | 5.00 | % | ||||||||||
Adjusted Operating Income Margin (Constant Currency) | 7.54 | % | 4.63 | % | 10.39 | % | 6.67 | % | ||||||||||||
Fiscal Year Ended | ||||||||||||||||||||
September 28, 2018 | ||||||||||||||||||||
FSS United States | FSS International | Uniform | Corporate | Aramark and Subsidiaries | ||||||||||||||||
Revenue (as reported) | $ | 10,137,825 | $ | 3,655,803 | $ | 1,996,005 | $ | 15,789,633 | ||||||||||||
Effect of Divestitures | (371,712 | ) | — | — | (371,712 | ) | ||||||||||||||
Adjusted Revenue | $ | 9,766,113 | $ | 3,655,803 | $ | 1,996,005 | $ | 15,417,921 | ||||||||||||
Operating Income (as reported) | $ | 682,655 | $ | 142,228 | $ | 181,452 | $ | (187,924 | ) | $ | 818,411 | |||||||||
Amortization of Acquisition-Related Intangible Assets | 85,931 | 4,614 | 17,256 | — | 107,801 | |||||||||||||||
Severance and Other Charges | 22,283 | 21,333 | 1,571 | 22,390 | 67,577 | |||||||||||||||
Effect of Divestitures | (30,157 | ) | — | — | — | (30,157 | ) | |||||||||||||
Merger and Integration Related Charges | 14,398 | — | 37,535 | 27,975 | 79,908 | |||||||||||||||
Gains, Losses and Settlements impacting comparability | (10,628 | ) | 12,588 | 2,655 | 809 | 5,424 | ||||||||||||||
Adjusted Operating Income* | $ | 764,482 | $ | 180,763 | $ | 240,469 | $ | (136,750 | ) | $ | 1,048,964 | |||||||||
Operating Income Margin (as reported) | 6.73 | % | 3.89 | % | 9.09 | % | 5.18 | % | ||||||||||||
Adjusted Operating Income Margin | 7.83 | % | 4.94 | % | 12.05 | % | 6.80 | % | ||||||||||||
* Beginning in fiscal 2019, the definition of AOI changed. AOI for the fiscal year ended September 28, 2018 has been calculated based on this new definition. See page 6 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 | Fiscal Year Ended | ||||||||||||||||
September 27, 2019 | September 28, 2018 | September 27, 2019 | September 28, 2018 | ||||||||||||||
Net Income Attributable to Aramark Stockholders (as reported) | $ | 85,557 | $ | 175,455 | $ | 448,549 | $ | 567,885 | |||||||||
Adjustment: | |||||||||||||||||
Amortization of Acquisition-Related Intangible Assets | 29,309 | 28,806 | 117,044 | 107,801 | |||||||||||||
Severance and Other Charges | 10,959 | 2,044 | 58,447 | 67,577 | |||||||||||||
Effect of Divestitures | — | (8,092 | ) | — | (30,157 | ) | |||||||||||
Merger and Integration Related Charges | 9,752 | 13,770 | 36,068 | 79,908 | |||||||||||||
Gain on sale of Healthcare Technologies | — | — | (156,309 | ) | — | ||||||||||||
Tax Reform Related Employee Reinvestments | 4,372 | — | 74,894 | — | |||||||||||||
Advisory Fees related to Shareholder Matters | 7,661 | — | 7,661 | — | |||||||||||||
Gains, Losses and Settlements impacting comparability | 51,612 | 13,358 | 60,464 | 5,424 | |||||||||||||
Effects of Refinancing and Other on Interest and Other Financing Costs, net | 2,219 | — | 2,219 | 19,925 | |||||||||||||
Effect of Tax Reform on Provision for Income Taxes | — | (38,190 | ) | (12,126 | ) | (221,998 | ) | ||||||||||
Tax Impact of Adjustments to Adjusted Net Income | (28,858 | ) | (13,758 | ) | (73,156 | ) | (62,639 | ) | |||||||||
Adjusted Net Income | $ | 172,583 | $ | 173,393 | $ | 563,755 | $ | 533,726 | |||||||||
Effect of Currency Translation, net of Tax | 1,358 | — | 8,846 | — | |||||||||||||
Adjusted Net Income (Constant Currency) | $ | 173,941 | $ | 173,393 | $ | 572,601 | $ | 533,726 | |||||||||
Earnings Per Share (as reported) | |||||||||||||||||
Net Income Attributable to Aramark Stockholders (as reported) | $ | 85,557 | $ | 175,455 | $ | 448,549 | $ | 567,885 | |||||||||
Diluted Weighted Average Shares Outstanding | 253,404 | 253,724 | 252,010 | 253,352 | |||||||||||||
$ | 0.34 | $ | 0.69 | $ | 1.78 | $ | 2.24 | ||||||||||
Earnings Per Share Growth (as reported) | (50.72 | )% | (20.54 | )% | |||||||||||||
Adjusted Earnings Per Share | |||||||||||||||||
Adjusted Net Income* | $ | 172,583 | $ | 173,393 | $ | 563,755 | $ | 533,726 | |||||||||
Diluted Weighted Average Shares Outstanding | 253,404 | 253,724 | 252,010 | 253,352 | |||||||||||||
$ | 0.68 | $ | 0.68 | $ | 2.24 | $ | 2.11 | ||||||||||
Adjusted Earnings Per Share Growth | — | % | 6.16 | % | |||||||||||||
Adjusted Earnings Per Share (Constant Currency) | |||||||||||||||||
Adjusted Net Income (Constant Currency) | $ | 173,941 | $ | 173,393 | $ | 572,601 | $ | 533,726 | |||||||||
Diluted Weighted Average Shares Outstanding | 253,404 | 253,724 | 252,010 | 253,352 | |||||||||||||
$ | 0.69 | $ | 0.68 | $ | 2.27 | $ | 2.11 | ||||||||||
Adjusted Earnings Per Share Growth (Constant Currency) | 1.47 | % | 7.58 | % | |||||||||||||
* Beginning in fiscal 2019, the definition of Adjusted Net Income changed. Adjusted Net Income for the three months and fiscal year ended September 27, 2019 has been calculated based on this new definition. See page 6 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 | |||||||||
September 27, 2019 | September 28, 2018 | ||||||||
Net Income Attributable to Aramark Stockholders (as reported) | $ | 448,549 | $ | 567,885 | |||||
Interest and Other Financing Costs, net | 334,987 | 346,535 | |||||||
Provision (Benefit) for Income Taxes | 107,706 | (96,564 | ) | ||||||
Depreciation and Amortization | 592,573 | 596,182 | |||||||
Share-based compensation expense(1) | 55,280 | 88,276 | |||||||
Unusual or non-recurring (gains) and losses(2) | (156,309 | ) | — | ||||||
Pro forma EBITDA for equity method investees(3) | 8,077 | 15,214 | |||||||
Pro forma EBITDA for certain transactions(4) | 21,527 | 58,600 | |||||||
Other(5) | 253,480 | 151,636 | |||||||
Covenant Adjusted EBITDA | $ | 1,665,870 | $ | 1,727,764 | |||||
Net Debt to Covenant Adjusted EBITDA | |||||||||
Total Long-Term Borrowings | $ | 6,682,167 | $ | 7,243,984 | |||||
Less: Cash and cash equivalents | $ | 246,643 | $ | 215,025 | |||||
Net Debt | $ | 6,435,524 | $ | 7,028,959 | |||||
Covenant Adjusted EBITDA | $ | 1,665,870 | $ | 1,727,764 | |||||
Net Debt/Covenant Adjusted EBITDA | 3.86 | 4.07 | |||||||
(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 September 27, 2019 and September 28, 2018, respectively, includes expenses related to merger and integration related charges ($36.1 million and $78.1 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 ($23.7 million and $7.7 million), organizational streamlining initiatives ($18.7 million and $36.6 million), duplicate rent charges, moving costs, opening costs to build out and ready the Company's new headquarters while occupying its then existing headquarters and closing costs ($8.2 million and $7.7 million), the impact of hyperinflation in Argentina ($4.9 million and $3.8 million), the impact of the change in fair value related to certain gasoline and diesel agreements ($4.7 million loss and $0.2 million gain) and other miscellaneous expenses. "Other" for the twelve months ended September 27, 2019 also includes compensation expense for employee reinvestments funded by benefits from U.S. tax reform ($74.9 million), costs related to legal settlements ($27.9 million), asset impairment charges ($14.8 million), costs associated with the retirement of the Company's former chief executive officer ($10.4 million), closing costs mainly related to customer contracts ($8.5 million), advisory fees related to shareholder matters ($7.7 million), banker fees and other charges related to the sale of Healthcare Technologies ($7.7 million) and settlement charges related to exiting a joint venture arrangement ($4.5 million). "Other" for the twelve months ended September 28, 2018 also includes property and other asset write-downs related to a joint venture liquidation and acquisition ($7.5 million), and certain environmental charges ($5.0 million). | |||||||||
ARAMARK AND SUBSIDIARIES | ||||||||||||||||
RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||
LEGACY BUSINESS REVENUE | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
September 27, 2019 | ||||||||||||||||
FSS United States | FSS International | Uniform | Aramark and Subsidiaries | |||||||||||||
Revenue (as reported) | $ | 2,407,750 | $ | 897,894 | $ | 645,600 | $ | 3,951,244 | ||||||||
Effect of Currency Translation | 458 | 47,869 | 576 | 48,903 | ||||||||||||
Adjusted Revenue | $ | 2,408,208 | $ | 945,763 | $ | 646,176 | $ | 4,000,147 | ||||||||
Changes pursuant to ASC 606, Revenue from Contracts with Customers | 17,588 | (2,023 | ) | (86,563 | ) | (70,998 | ) | |||||||||
Legacy Business Revenue | $ | 2,425,796 | $ | 943,740 | $ | 559,613 | $ | 3,929,149 | ||||||||
Three Months Ended | ||||||||||||||||
September 28, 2018 | ||||||||||||||||
FSS United States | FSS International | Uniform | Aramark and Subsidiaries | |||||||||||||
Revenue (as reported) | $ | 2,480,846 | $ | 887,646 | $ | 545,106 | $ | 3,913,598 | ||||||||
Effect of Divestitures | (99,598 | ) | — | — | (99,598 | ) | ||||||||||
Legacy Business Revenue | $ | 2,381,248 | $ | 887,646 | $ | 545,106 | $ | 3,814,000 | ||||||||
Revenue Growth (as reported) | (2.95 | )% | 1.15 | % | 18.44 | % | 0.96 | % | ||||||||
Legacy Business Revenue Growth | 1.87 | % | 6.32 | % | 2.66 | % | 3.02 | % | ||||||||
Fiscal Year Ended | ||||||||||||||||
September 27, 2019 | ||||||||||||||||
FSS United States | FSS International | Uniform | Aramark and Subsidiaries | |||||||||||||
Revenue (as reported) | $ | 9,898,568 | $ | 3,742,939 | $ | 2,585,834 | $ | 16,227,341 | ||||||||
Effect of Currency Translation | 6,498 | 260,695 | 7,850 | 275,043 | ||||||||||||
Adjusted Revenue | $ | 9,905,066 | $ | 4,003,634 | $ | 2,593,684 | $ | 16,502,384 | ||||||||
Effect of AmeriPride and Avendra Acquisitions | (30,768 | ) | — | (167,616 | ) | (198,384 | ) | |||||||||
Changes pursuant to ASC 606, Revenue from Contracts with Customers | 46,057 | (8,090 | ) | (369,398 | ) | (331,431 | ) | |||||||||
Legacy Business Revenue | $ | 9,920,355 | $ | 3,995,544 | $ | 2,056,670 | $ | 15,972,569 | ||||||||
Fiscal Year Ended | ||||||||||||||||
September 28, 2018 | ||||||||||||||||
FSS United States | FSS International | Uniform | Aramark and Subsidiaries | |||||||||||||
Revenue (as reported) | $ | 10,137,825 | $ | 3,655,803 | $ | 1,996,005 | $ | 15,789,633 | ||||||||
Effect of Divestitures | (371,712 | ) | — | — | (371,712 | ) | ||||||||||
Legacy Business Revenue | $ | 9,766,113 | $ | 3,655,803 | $ | 1,996,005 | $ | 15,417,921 | ||||||||
Revenue Growth (as reported) | (2.36 | )% | 2.38 | % | 29.55 | % | 2.77 | % | ||||||||
Legacy Business Revenue Growth | 1.58 | % | 9.29 | % | 3.04 | % | 3.60 | % | ||||||||
ARAMARK AND SUBSIDIARIES | |||||||||
RECONCILIATION OF NON-GAAP MEASURES | |||||||||
FREE CASH FLOW | |||||||||
(Unaudited) | |||||||||
(In thousands) | |||||||||
Fiscal Year Ended | |||||||||
September 27, 2019 | September 28, 2018 | ||||||||
Net Cash provided by operating activities | $ | 984,227 | $ | 1,051,875 | |||||
Net purchases of property and equipment and other1 | (485,219 | ) | (618,113 | ) | |||||
Free Cash Flow | $ | 499,008 | $ | 433,762 | |||||
1 Does not include $23.0 million of proceeds from governmental agencies related to property and equipment. | |||||||||