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Basis of Presentation and Summary of Significant Accounting Policies | 6 Months Ended
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Mar. 29, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Basis of Presentation and Summary of Significant Accounting Policies | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Aramark (the "Company") is a leading global provider of food and facilities services to education, healthcare, business & industry and sports, leisure & corrections clients. The Company's core market is the United States, which is supplemented by an additional 14-country footprint. The Company also provides services on a more limited basis in several additional countries and in offshore locations. The Company operates its business in two reportable segments that share many of the same operating characteristics: Food and Support Services United States ("FSS United States") and Food and Support Services International ("FSS International"). On September 30, 2023, the Company completed the previously announced separation and distribution of its Aramark Uniform and Career Apparel ("Uniform") segment into an independent publicly traded company, Vestis Corporation ("Vestis"), and the historical results of the Uniform segment have been reflected as discontinued operations in the Company's condensed consolidated financial statements for all periods prior to the separation and distribution. Assets and liabilities associated with the Uniform segment are classified as assets and liabilities of discontinued operations in the Company's Condensed Consolidated Balance Sheet as of September 29, 2023. Additional disclosures regarding the separation and distribution are provided in Note 2. The condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and should be read in conjunction with the audited consolidated financial statements, and the notes to those statements, included in the Company's Form 10-K filed with the SEC on November 21, 2023. The Condensed Consolidated Balance Sheet as of September 29, 2023 was derived from audited financial statements which have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. In the opinion of the Company, the statements include all adjustments, which are of a normal, recurring nature, required for a fair presentation for the periods presented. The results of operations for interim periods are not necessarily indicative of the results for a full year, due to the seasonality of some of the Company's business activities and the possibility of changes in general economic conditions. The condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling financial interest is maintained. All intercompany transactions and accounts have been eliminated. New Accounting Standards Updates Adopted Standards (from most to least recent date of issuance) In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2022-04 Liabilities - Supplier Finance Programs (Subtopic 405-50) to enhance the transparency of supplier finance programs, which may be referred to as reverse factoring, payables finance or structured payables arrangements. The guidance requires that a buyer in a supplier finance program disclose the program's nature, activity and potential magnitude. The guidance was effective for the Company in the first quarter of fiscal 2024. The Company reviewed existing supplier finance agreements and enhanced disclosures with qualitative and quantitative information about its supplier finance program, but the adoption of this guidance did not have a material impact on the condensed consolidated financial statements. In October 2021, the FASB issued ASU 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers which required that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606") as if it had originated the contracts. The guidance was effective for the Company in the first quarter of fiscal 2024. The adoption of this guidance did not have a material impact on the condensed consolidated financial statements. Standards Not Yet Adopted (from most to least recent date of issuance) In March 2024, the SEC adopted final climate-related disclosure rules under SEC Release Nos. 33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors. The rules require disclosure of governance, risk management and strategy related to material climate-related risks as well as disclosure of material greenhouse gas emissions in registration statements and annual reports. In addition, the rules require presentation of certain material climate-related disclosures in the annual consolidated financial statements. On April 4, 2024, the SEC voluntarily stayed the effective date of the final rules pending completion of judicial review following legal challenges. The disclosure requirements will apply to the Company's fiscal year reporting beginning October 4, 2025, pending resolution of the stay. The Company is currently evaluating the impact of the rules on the Company’s disclosures. In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. The guidance will require improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance is effective for the Company's annual disclosures for fiscal 2026 and early adoption is permitted. The Company is currently evaluating the impact of this standard. In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to enhance the reportable segment disclosures. The guidance will require additional disclosures about significant segment expenses. The guidance is effective for the Company's annual disclosures for fiscal 2025 and early adoption is permitted. The Company is currently evaluating the impact of this standard. Other new accounting pronouncements recently issued or newly effective were not applicable to the Company, did not have a material impact on the condensed consolidated financial statements or are not expected to have a material impact on the condensed consolidated financial statements. Comprehensive Income Comprehensive income includes all changes to stockholders' equity during a period, except those resulting from investments by and distributions to stockholders. Components of comprehensive income include net income, changes in foreign currency translation adjustments (net of tax), changes in the fair value of cash flow hedges (net of tax) and changes to the share of any equity investees' comprehensive income (loss) (net of tax). The summary of the components of comprehensive income is as follows (in thousands):
| Three Months Ended
| March 29, 2024 |  | March 31, 2023
| Pre-Tax Amount | Tax Effect | After-Tax Amount |  | Pre-Tax Amount | Tax Effect | After-Tax Amount
Net income |  |  | $ | 53,002 |  |  |  |  | $ | 55,882 |
Foreign currency translation adjustments | (20,595) |  | — |  | (20,595) |  |  | 10,658 |  | (502) |  | 10,156 |
Fair value of cash flow hedges | 12,639 |  | (3,286) |  | 9,353 |  |  | (30,230) |  | 7,860 |  | (22,370) |
Share of equity investee's comprehensive income | — |  | — |  | — |  |  | 82 |  | — |  | 82 |
Other comprehensive loss | (7,956) |  | (3,286) |  | (11,242) |  |  | (19,490) |  | 7,358 |  | (12,132) |
Comprehensive income |  |  | 41,760 |  |  |  |  | 43,750 |
Less: Net loss attributable to noncontrolling interests |  |  | (447) |  |  |  |  | (159) |
Comprehensive income attributable to Aramark stockholders |  |  | $ | 42,207 |  |  |  |  | $ | 43,909 |
| Six Months Ended
| March 29, 2024 |  | March 31, 2023
| Pre-Tax Amount | Tax Effect | After-Tax Amount |  | Pre-Tax Amount | Tax Effect | After-Tax Amount
Net income |  |  | $ | 81,519 |  |  |  |  | $ | 129,533 |
Foreign currency translation adjustments | (5,246) |  | — |  | (5,246) |  |  | 47,727 |  | (2,734) |  | 44,993 |
Fair value of cash flow hedges | (38,080) |  | 9,901 |  | (28,179) |  |  | (38,561) |  | 10,026 |  | (28,535) |
Share of equity investee's comprehensive loss | — |  | — |  | — |  |  | (510) |  | — |  | (510) |
Other comprehensive (loss) income | (43,326) |  | 9,901 |  | (33,425) |  |  | 8,656 |  | 7,292 |  | 15,948 |
Comprehensive income |  |  | 48,094 |  |  |  |  | 145,481 |
Less: Net loss attributable to noncontrolling interests |  |  | (466) |  |  |  |  | (659) |
Comprehensive income attributable to Aramark stockholders |  |  | $ | 48,560 |  |  |  |  | $ | 146,140 |
The amounts in the table above exclude the impact of a $5.1 million pension plan adjustment and $26.3 million currency translation adjustment during the six months ended March 29, 2024 related to the separation and distribution of the Uniform segment (see Note 2). Accumulated other comprehensive loss consists of the following (in thousands):
| March 29, 2024 |  | September 29, 2023
Pension plan adjustments | $ | (9,165) |  |  | $ | (14,241) |
Foreign currency translation adjustments | (172,028) |  |  | (193,115) |
Cash flow hedges | 80,940 |  |  | 109,119 |
| $ | (100,253) |  |  | $ | (98,237) |
Currency Translation Gains and losses resulting from the translation of financial statements of non-United States subsidiaries are reflected as a component of accumulated other comprehensive loss in stockholder's equity. Beginning in fiscal 2018, Argentina was determined to have a highly inflationary economy. As a result, the Company remeasures the financial statements of Argentina's operations in accordance with the accounting guidance for highly inflationary economies. The impact of the Argentina remeasurement was a foreign currency transaction loss of $0.9 million and $4.8 million during the three and six month periods ended March 29, 2024. The impact of the Argentina remeasurement was a foreign currency transaction loss of $2.8 million and $3.9 million during the three and six month periods ended March 31, 2023. The impact of foreign currency transaction gains and losses exclusive of Argentina's operations included in the Company's operating results during the three and six month periods of both fiscal 2024 and 2023 were immaterial to the condensed consolidated financial statements. Current Assets The Company insures portions of its risk in general liability, automobile liability, workers’ compensation liability claims as well as certain property damage risks through a wholly owned captive insurance subsidiary (the "Captive") as part of its approach to risk finance. The Captive is subject to regulations within its domicile of Bermuda, including regulations established by the Bermuda Monetary Authority (the "BMA") relating to levels of liquidity and solvency as such concepts are defined by the BMA. The Captive was in compliance with these regulations as of March 29, 2024. These regulations may have the effect of limiting the Company's ability to access certain cash and cash equivalents held by the Captive for uses other than for the payment of its general liability, automobile liability, workers' compensation liability, certain property damage and related Captive costs. As of March 29, 2024 and September 29, 2023, cash and cash equivalents at the Captive were $13.2 million and $32.8 million, respectively. The Captive also invests in United States Treasury securities where the amount as of March 29, 2024 and September 29, 2023 was $112.8 million and $110.7 million, respectively, and is recorded in "Prepayments and other current assets" on the Condensed Consolidated Balance Sheets. Within the FSS International segment, the Company receives certain cash on behalf of the Company's clients, which is contractually restricted from withdrawal and usage. This restricted cash is recorded in "Prepayments and other current assets" on the Condensed Consolidated Balance Sheets. Property and Equipment and Operating Lease Right-of-use Assets During fiscal 2023, the Company completed a strategic review of certain administrative locations, taking into account facility capacity and current utilization, among other factors. Based on this review, the Company vacated or otherwise reduced its usage at certain of these locations, resulting in an analysis of the recoverability of the assets associated with the locations. As a result, for the three and six months ended March 31, 2023, the Company recorded an impairment charge of $0.7 million and $19.0 million within its FSS United States segment, which is included in "Cost of services provided (exclusive of depreciation and amortization)" on the Condensed Consolidated Statements of Income. For the three and six months ended March 31, 2023, the non-cash impairment charges within the FSS United States segment consisted of operating lease right-of-use assets of $0.7 million and $8.6 million, respectively, and property and equipment of zero and $10.4 million, respectively. Other Assets Other assets consist primarily of costs to obtain or fulfill contracts (including employee sales commissions), long-term receivables, investments in 50% or less owned entities and computer software costs. For investments in 50% or less owned entities accounted for under the equity method of accounting, the carrying amount as of March 29, 2024 and September 29, 2023 was $71.6 million and $73.5 million, respectively. For investments in 50% or less owned entities, other than those accounted for under the equity method of accounting, the Company measures these investments at cost, less any impairment and adjusted for changes in fair value resulting from observable price changes for an identical or a similar investment of the same issuer due to the lack of readily available fair values related to those investments. The carrying amount of equity investments without readily determinable fair values as of both March 29, 2024 and September 29, 2023 was $83.6 million. Supply Chain Finance Program The Company has agreements with third-party administrators that allow participating vendors to voluntarily elect to sell payment obligations from the Company to financial institutions as part of a Supply Chain Finance Program ("SCF Program"). The Company's payment terms to the financial institutions, including the timing and amount of payments, are based on the original supplier invoices. When participating vendors elect to sell one or more of the Company's payment obligations, the Company's rights and obligations to settle the payable on their contractual due date are not impacted. The Company has no economic or commercial interest in a vendor's decision to sell the Company's payment obligations. The Company agrees on commercial terms with vendors for the goods and services procured, which are consistent with payment terms observed at other peer companies in the industry, and the terms are not impacted by the SCF Program. For the SCF Program, the Company does not provide asset pledges, or other forms of guarantees, as security for the committed payment to the financial institutions. As of March 29, 2024 and September 29, 2023, the Company had $2.2 million and $2.8 million, respectively, of outstanding payment obligations to the financial institutions as part of the SCF Program recorded in "Accounts payable" on the Condensed Consolidated Balance Sheets. Other Current and Noncurrent Liabilities The Company is self-insured for certain obligations related to its employee health care benefit programs as well as for certain risks retained under its general liability, automobile liability, workers' compensation liability and certain property damage programs. Reserves for these programs are estimated through actuarial methods, with the assistance of third-party actuaries using loss development assumptions based on the Company's claims history. Impact of COVID-19 The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") provided for deferred payment of the employer portion of social security taxes through the end of calendar 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% of the amount due December 31, 2022. Approximately $47.6 million of deferred social security taxes were paid in fiscal 2023.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//235/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 275 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//275/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//810/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205/tableOfContent + Details
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