Aramark Reports Third-Quarter 2015 Results

PRESS RELEASE

PHILADELPHIA, PA -- Aug. 12 --Aramark (NYSE: ARMK), the $15 billion global provider of award-winning services in food, facilities management, and uniforms, today reported third quarter fiscal 2015 results, reaffirmed its 2015 constant-currency earnings outlook and announced a landmark initiative with the American Heart Association.

As previously disclosed, the company's fiscal calendar timing resulted in a 53-week year in 2014. This has two impacts on 2015 results. First, the fourth quarter of 2015 will be negatively impacted by approximately one week less of both sales and adjusted operating income vs the prior year, or approximately 7% for the quarter and 2% for the year. Second, our businesses will be affected by a later starting point in each quarter vs. the prior year. This has a modest phasing impact on several businesses in North America between quarters, with a full year negative impact of approximately (1%).

Q3 Highlights

Sales of $3.5 billion;

Adjusted operating income of $178 million, U.S. GAAP operating income of $117 million;

Adjusted earnings per share of $0.29, U.S. GAAP earnings per share of $0.14;

2015 full-year adjusted EPS expectation unchanged at $1.50 to $1.60.

"The business performed in line with our expectations in the third quarter as we continued making significant progress against our transformation agenda," said Eric J. Foss, chairman, president and chief executive officer. "Our earnings outlook for this year remains unchanged on a constant currency basis, with continued emphasis on capturing additional productivity and margin improvement while driving critical re-investment in the business. We are maintaining focus on our multi-year growth strategy as we move into 2016 and are well positioned to keep delivering sustainable shareholder value."

The company experienced solid retention rates and base business expansion in the quarter. The North American segment, particularly the Education and Sports, Leisure and Corrections sectors, were the most significantly affected by the calendar shift in the quarter. FSS International organic growth was driven by continued strong European sales growth and ongoing expansion in Emerging Markets, especially China. Sales in the Uniform and Career Apparel segment were strong in the quarter as capacity expansion and automation investments continued to be brought on-line.

During the quarter, the National Park Service announced that it had selected Aramark as the new concessioner for Yosemite National Park. Under the 15-year contract, scheduled to begin on March 1, 2016, Aramark will manage Yosemite's hospitality programs encompassing lodging, food and beverage, retail, recreational and transportation services.

During the third quarter, FSS North America had solid productivity gains from food and labor initiatives in its base client locations, which, as was previously disclosed, was offset by the timing of costs associated with certain start-up accounts as well as the phasing of investment spending and an approximate 2% headwind from reductions in Canadian remote oil services. Productivity initiatives and revenue drop-through continued to improve FSS International's results, with the segment achieving strong profit expansion in the quarter. The Uniform & Career Apparel segment also achieved strong profit expansion as a result of revenue growth, strong cost controls and automation investments.

Third Quarter Earnings Summary

Adjusted net income was $71 million or $0.29 per share, versus adjusted net income of $73 million or $0.30 per share in the third quarter of 2014. The diluted weighted average share count in the third quarter of fiscal 2015 was 247.2 million shares vs. 243.7 million in the prior year period. The calendar shift is estimated to have reduced earnings per share in the quarter by $0.02.

On a U.S. GAAP basis, sales were $3.5 billion, operating income was $117 million, net income attributable to Aramark stockholders was $34 million and diluted earnings per share were $0.14. This compares to the third quarter of 2014 where on a U.S. GAAP basis, sales were $3.6 billion, operating income was $141 million, net income attributable to Aramark stockholders was $47 million and diluted earnings per share were $0.19. The company's calculations of organic sales growth, adjusted operating income and adjusted net income adjusts for changes in currency translation rates. The significant strengthening of the U.S. dollar versus the prior year period decreased sales by approximately $126 million, operating income by $7 million and net income by $5 million ($0.02 in earnings per share) in the quarter. A reconciliation of as reported U.S. GAAP financial measures to adjusted financial measures, including changes in currency translation rates is presented below. See "Non-GAAP Measures."

Landmark Initiative With The American Heart Association

The company recently announced a landmark initiative with the American Heart Association, aimed at improving Americans' diets and health by 20 percent by 2020. Healthy for Life® 20 by 20, a five year initiative, introduces industry leading menu commitments by reducing calories, saturated fat and sodium levels 20 percent, and increasing fruits, vegetables and whole grains 20 percent. Changes will impact more than 2 billion meals that Aramark serves annually at thousands of schools and universities, businesses, hospitals, sports and entertainment venues, parks and other destinations, with an expected impact of 10 billion meals by 2020.

Liquidity & Capital Structure

The company's liquidity remains strong, with cash on hand plus available secured credit lines totaling $600 million at the end of the third quarter. As of quarter end, total debt was $5.6 billion. The company's trailing 12-month total debt to adjusted EBITDA ratio was 4.4, an improvement of 30 basis points versus a year ago. This is due to a combination of adjusted EBITDA growth and lower average debt levels. On July 26, 2015, Moody's Investors Service (Moody's) upgraded Aramark Services, Inc.'s corporate family rating (CFR), along with other ratings, to Ba3 from B1.

2015 Outlook & Currency Impact

The company's adjusted earnings per share outlook for the year is unchanged at $1.50 - $1.60. Currency exchange rates are essentially unchanged from the company's previous disclosures and on a full year basis, at current currency exchange rates, the impact on both sales and adjusted operating income remains a reduction of approximately 3%.

Selected Operational and Financial Metrics

Adjusted Sales (Organic)

Management believes that presentation of sales growth, adjusted to eliminate the effects of acquisitions and divestitures and the impact of currency translation, provides useful information to investors because it enhances comparability between the current year and prior year reporting periods. Elimination of the currency translation effect provides constant currency comparisons without the distortion of currency rate fluctuations.

Adjusted Operating Income

Adjusted operating income represents operating income adjusted to eliminate the change in amortization of acquisition-related customer relationship intangible assets and depreciation of property and equipment resulting from the going-private transaction in 2007 (the "Transaction"); the impact of the change in fair value related to the gasoline and diesel agreements; severance and other charges; share-based compensation; the effects of acquisitions and divestitures and the impact of currency translation and other items impacting comparability.

Adjusted EBITDA

Adjusted EBITDA represents Adjusted Operating Income further adjusted to exclude the impact of all other depreciation and amortization expense.

Adjusted Net Income

Adjusted Net Income represents net income attributable to Aramark stockholders adjusted to eliminate the impact of discontinued operations; the change in amortization of acquisition-related customer relationship intangible assets and depreciation of property and equipment resulting from the Transaction; the impact of changes in the fair value related to the gasoline and diesel agreements; severance and other charges; share-based compensation; the effects of acquisitions and divestitures; the impact of currency translation and other items impacting comparability, less the tax effect of these adjustments. Management believes that presentation of net income as adjusted is useful information to investors because we use such information when evaluating net income to better evaluate the underlying operating performance of the company.

We use Adjusted Sales (Organic), Adjusted Operating Income, Adjusted EBITDA and Adjusted Net Income as supplemental measures of our operating profitability and to control our cash operating costs. These financial metrics are not measurements of financial performance under generally accepted accounting principles in the United States, or U.S. GAAP. We believe the presentation of these metrics is appropriate to provide additional information to investors about our operating performance. 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 U.S. GAAP. You should not consider these measures as alternatives to sales, operating income or net income, determined in accordance with U.S. GAAP. Adjusted Sales (Organic), Adjusted Operating Income, Adjusted EBITDA and Adjusted Net Income, as presented by us, may not be comparable to other similarly titled measures of other companies because not all companies use identical calculations.

About Aramark

Aramark (NYSE: ARMK) is in the customer service business across food, facilities and uniforms, wherever people work, learn, recover, and play. United by a passion to serve, our approximately 270,000 employees deliver experiences that enrich and nourish the lives of millions of people in 21 countries around the world every day. Aramark is recognized among the Most Admired Companies by FORTUNE and the World's Most Ethical Companies by the Ethisphere Institute. Learn more at www.aramark.com or connect with us on Facebook and Twitter.

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