Discontinued Operations

6 Months Ended

Mar. 29, 2024

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS:

On September 30, 2023, the Company completed the previously announced separation and distribution of its Uniform segment into an independent publicly traded company, Vestis. The separation was structured as a tax free spin-off, which occurred by way of a pro rata distribution to Aramark stockholders. Each of the Aramark stockholders received one share of Vestis common stock for every two shares of Aramark common stock held of record as of the close of business on September 20, 2023. Vestis is now an independent public company under the symbol “VSTS” on the New York Stock Exchange.

In connection with the separation and distribution, the Company entered into or adopted several agreements that provide a framework for the relationship between the Company and Vestis, including, but not limited to the following:

Separation and Distribution Agreement - governs the rights and obligations of the parties regarding the distribution following the completion of the separation, including the transfer of assets and assumption of liabilities, and establishes certain rights and obligations between the Company and Vestis following the distribution, including procedures with respect to claims subject to indemnification and related matters.

Transition Services Agreement - governs services between the Company and Vestis and their respective affiliates to provide each other on an interim, transitional basis, various services, including, but not limited to, administrative, information technology and cybersecurity support services and certain finance, treasury, tax and governmental function services. The services will terminate no later than 24 months following the distribution date.

Tax Matters Agreement - governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.

Employee Matters Agreement - governs the allocation of liabilities and responsibilities relating to employment matters, employee compensation and benefits plans and programs and other related matters.

Under these agreements, the Company will continue to provide certain services to Vestis following the separation and distribution. The agreements do not provide the Company with the ability to influence the operating or financial policies of Vestis subsequent to the separation date. During the three and six months ended March 29, 2024, the value of the services provided to Vestis were $3.5 million and $8.1 million, respectively. Current amounts due to Aramark from Vestis as of March 29, 2024 were not material.

The historical results of the Uniform segment have been reflected as discontinued operations in the Company's consolidated financial statements for all periods prior to the separation and distribution on September 30, 2023.

Details of "Income from Discontinued Operations, net of tax" are as follows (in thousands):


	Three Months Ended		Six Months Ended
	March 31, 2023		March 31, 2023
Revenue	$	685,929	$	1,373,207
Costs and Expenses:
Cost of services provided (exclusive of depreciation and amortization)	558,006		1,128,288
Depreciation and amortization	33,620		67,507
Selling and general corporate expenses	37,677		72,825
	629,303		1,268,620
Operating income	56,626		104,587
Interest Expense, net	417		811
Income from Discontinued Operations Before Income Taxes	56,209		103,776
Provision for Income Taxes from Discontinued Operations	14,417		26,331
Income from Discontinued Operations, net of tax	$	41,792	$	77,445

During the three and six months ended March 31, 2023, the Company incurred charges of $5.4 million and $10.4 million, respectively, related to the Company's separation and distribution of its Uniform segment, including salaries and benefits, recruiting and relocation costs, accounting and legal related expenses, branding and other costs, of which $3.5 million and $7.0 million, respectively, were recorded within "Income from Discontinued Operations, net of tax" and $1.9 million and $3.4 million, respectively, were recorded within "Selling and general corporate expenses" on the Condensed Consolidated Statements of Income.

During the six months ended March 29, 2024, the Company incurred $20.0 million of transaction fees related to the separation and distribution of its Uniform segment and $8.8 million of charitable contribution expense for the contribution of Vestis shares to a donor advised fund in order to fund charitable contributions, which were recorded within "Selling and general corporate expenses" on the Condensed Consolidated Statements of Income.

The following table summarizes the Uniform segment assets and liabilities classified as discontinued operations in the Company's Condensed Consolidated Balance Sheets (in thousands):


	September 29, 2023
ASSETS
Cash and cash equivalents	$	36,051
Receivables (less allowance: $25,066)	392,916
Inventories	174,720
Prepayments and other current assets	17,244
Current assets of discontinued operations	620,931
Property and Equipment, net	664,530
Goodwill	963,543
Other Intangible Assets	238,609
Operating Lease Right-of-use Assets	57,890
Other Assets	579,264
Noncurrent Assets of Discontinued Operations	$	2,503,836

LIABILITIES
Current maturities of long-term borrowings	$	53,910
Current operating lease liabilities	19,935
Accounts payable	134,497
Accrued payroll and other related expenses	113,770
Accrued expenses and other current liabilities	73,412
Current liabilities of discontinued operations	395,524
Long-Term Borrowings	1,567,910
Noncurrent Operating Lease Liabilities	46,084
Deferred Income Taxes	199,535
Other Noncurrent Liabilities	48,206
Noncurrent Liabilities of Discontinued Operations	$	1,861,735

In the fourth quarter of fiscal 2023, the Uniform legal entity entered into the Uniform credit agreement. The Uniform credit agreement included a revolving credit facility, a United States dollar denominated term loan in the amount of $800.0 million due September 2025 and a United States dollar denominated term loan in the amount of $700.0 million due September 2028, which are recorded in "Noncurrent Liabilities of Discontinued Operations" on the Condensed Consolidated Balance Sheets as of September 29, 2023. Also in the fourth quarter of fiscal 2023, the Uniform legal entity paid a cash dividend to the Company of $1,456.7 million. On October 2, 2023, the Company used the proceeds from the cash dividend, along with cash on hand, to repay the $1,500.0 million 6.375% Senior Notes due May 1, 2025 (the "6.375% 2025 Notes") (see Note 5).

The Company recorded its distribution of Vestis' net assets as a change in "Retained Earnings". The amount recorded reflected the carrying amounts, as of September 29, 2023, of the net assets distributed offset by the holdback of Vestis shares upon distribution of $8.8 million, net cash received from Vestis post-separation of $6.1 million and other adjustments of $0.6 million. The Company also recorded a net decrease to "Accumulated other comprehensive loss" of $31.4 million to derecognize foreign currency translation adjustments and pension plan adjustments which were attributable to Vestis.