WHAT WE
BRING TO
THE TABLE
2016 Annual Report
ARAMARK DELIVERS EXPERIENCES THAT ENRICH AND NOURISH LIVES
THROUGH INNOVATIVE SERVICES IN FOOD, FACILITIES MANAGEMENT, AND
UNIFORMS. WE PROVIDE AWARD-WINNING SERVICES TO HEALTHCARE
INSTITUTIONS, UNIVERSITIES AND SCHOOL DISTRICTS, STADIUMS AND
ARENAS, AND BUSINESSES IN 19 COUNTRIES AROUND THE WORLD.
FOOD SERVICES
Over the past 80 years, we’ve served food to millions of people from all walks of life, in all places, all
around the world. And we’ve used our array of resources and expertise to cultivate amazing dining
experiences that delight our customers, deliver success for our clients, and empower people to lead
healthier lives every single day.
FACILITY SERVICES
While facilities have changed a lot over the past few decades, our ability to adapt to new challenges
only grows stronger. Today, we provide comprehensive facilities services covering nearly one billion
square feet of space in multiple industries all over the world.
UNIFORM SERVICES
As a leading provider of uniforms and workplace supplies to over 300,000 clients across a variety of
industries nationwide, we leverage insights to ensure we deliver products and services that make an
impact on business.
N e w 1 0 y e a r
c o n t r a c t w i t h
C o l o g n e F a i r ,
G e r m a n y
Acquired group
purchasing
organization, HPSI
2016 KEY MILESTONES
Aramark began operations at Yosemite National Park
Ye a r o n e r e s u l t s a h e a d o f t a r g e t s o n
H e a l t h y f o r L i f e ® 2 0 B y 2 0 i n i t i a t i v e
w i t h t h e A m e r i c a n H e a r t A s s o c i a t i o n
N e w
p a r t n e r s h i p
w i t h C a t C o r a
Acquired Avoca,
Ireland’s largest retailer
A Message from the Chairman, President and CEO
Our purpose at Aramark is to enrich and nourish the lives of the customers, consumers and communities
we serve around the world every day. We do that by Dreaming and Doing — by innovating and executing
to deliver service excellence everywhere we operate. Our 270,000 associates take great pride in
providing great experiences wherever people learn, work, play and recover.
DEAR SHAREHOLDERS:
I am pleased to report that 2016 was a year of record
breaking progress on Aramark’s journey — one
marked by unprecedented financial results and total
shareholder return that significantly outpaced the
broader markets.
Our focus over the past several years innovating for
our clients, engaging our employees and improving
our financial performance has helped to build a strong
foundation for our company, one that I like to think
of as:
• Proven — The ability to drive consistent and
sustained results.
• Powerful — A leader in an established & resilient
industry with a blue-chip client base.
• Promising — Executing a clear & focused strategy to
create shareholder value.
This foundation delivered outstanding financial results*
in 2016 including:
• A 21% increase in earnings per share and an 11%
increase in adjusted earnings per share1.
• 80 basis points of operating income margin
expansion to 5.2% and nearly 40 basis points of
constant currency adjusted operating income margin
expansion to 6.5%.
• A 30 basis point reduction in Aramark’s total debt to
covenant adjusted EBITDA ratio to 3.9x.
• An 8% increase in our dividend.
• All of which drove total shareholder return of 25% for
the fiscal year.
Our Three-Year Goal We have been focused on
strengthening our company through the execution
of a three pronged strategy — Accelerating Growth,
Activating Productivity and Attracting and Retaining
the Best Talent. Our focus on Accelerating Growth has
led to an expansion of our sales force and a sharply
honed approach to winning in the marketplace. This
has allowed us to reap strong rewards. Through our
Activating Productivity anchor we are achieving
savings in food, labor and SG&A costs which allow us
to reinvest in the business while expanding margins.
We need the right people to execute this strategy, so
through Attracting and Retaining the Best Talent, we
are making Aramark an even better place to work.
This has not been a small undertaking, and will
continue to require significant investments in the
business, particularly in technology. The great news
is that these investments are working — the food and
labor tools we spent the last few years developing are
delivering meaningful cost reductions. The success
of these pilots has provided us with a good line-of-
sight on our deployment plans, which in turn gives us
confidence in our 3-year earnings targets. In December
2015, we announced a goal of increasing Aramark’s
adjusted operating margins1 by 100 basis points and
adjusted earnings per share1 to $2.20 by the end of
fiscal 2018. With nearly 40 basis points of adjusted
operating income margin expansion delivered in 2016,
we are well on our way to achieving our goal and the
corresponding shareholder value.
Our New Partnerships We executed the largest and
most successful account mobilization in Aramark’s
distinguished history — hiring, training and on-boarding
in record time more than 1,000 associates at Yosemite
National Park. We also welcomed Koelnmesse/Cologne
1 Constant Currency
* Annex A of this Annual Report includes reconciliations of financial measures presented in accordance with
generally accepted accounting principles (“GAAP”) to non-GAAP financial measures included in this Annual Report.
2
Aramark 2016 Annual Report “ Looking forward, I remain exceptionally confident in the worldwide Aramark team and the outlook
for our company. Our Proven, Powerful and Promising foundation enables us to deliver sustainable
long-term shareholder value.”
Fair, the largest client in our German business’ history.
These historic partnerships were just two of many new
client relationships started in 2016.
Our Growing Portfolio We welcomed Avoca into the
Aramark portfolio, one of Ireland’s most successful
retailers, as well as HPSI, a leading GPO that serves
thousands of healthcare providers, educational
institutions and hospitality businesses in the U.S. These
strategic “tuck in” acquisitions enhance our consumer
brand portfolio and ability to compete in the group
purchasing space.
Our Innovation in Action We continued to accelerate
growth through our innovation framework to drive
revenue, consumer satisfaction and loyalty. Another
hallmark is an exciting new strategic partnership with
TV personality, restaurateur and “Iron Chef” Cat Cora
to develop and activate an exclusive Mediterranean
concept in 2017.
Our Commitment to Health & Wellness We are very
proud of the results from our Healthy for Life® 20
By 20 initiative with the American Heart Association
to improve the health of consumers. In year one, we
achieved an 8 percent reduction in calories, sodium
and saturated fats across our menus, well ahead of our
targets, and generated dramatic response from the
underserved communities where we piloted a health
engagement and education program to improve diets
and lifestyles.
Our Culture of Recognition Our 270,000 team
members around the world are the foundation of our
success and we are committed to recognizing our
Service Stars who deliver on our brand promise every
day. In 2016, we proudly welcomed our second annual
Ring of Stars class, which honors our 200 “Best of
the Best” frontline team members. We were also
recognized once again as an employer-of-choice for
our diverse and inclusive work environment.
Our Bright Future Looking forward, I remain
exceptionally confident in the worldwide Aramark team
and the outlook for our company. Our Proven, Powerful
and Promising foundation enables us to deliver
sustainable long-term shareholder value. I also remain
encouraged by the economic resiliency of Aramark’s
business model. Our diversified client base reduces
concentration risk, as no single client comprises more
than 2 percent of annual sales; our variable food and
labor costs allow us to substantially flex with the macro
environment; and roughly half of our sales are derived
from less cyclical industry sectors, resulting in another
level of stability.
I greatly appreciate your ongoing interest and
investment in our company. Your confidence in us has
enabled our success so far, and your continued support
is instrumental to our future success.
Eric J. Foss
Chairman, President and Chief Executive Officer
3
Aramark 2016 Annual Report PROVEN
4
Aramark 2016 Annual Report DRIVING CONSISTENT AND SUSTAINED RESULTS
2016 was a year of championship performances for
Aramark and our client partners. We had the good
fortune of partnering with every major professional
sports champion in the U.S., along with the NCAA
champions in football, basketball, baseball and
lacrosse. We also had the honor to serve several high
profile events throughout the year, including both the
Republican and Democratic national conventions.
It was a strong year across our portfolio, including new
partnerships with the Minnesota Vikings, Fordham
University and The Rock & Roll Hall of Fame, to name
a few. Our International business continued to grow
with notable wins in China, Northern Europe and
Germany, including the largest client in our German
business’ history, Koelnmesse/Cologne Fair, the sixth
largest Trade Fair in the world. Our Uniforms business
benefited from our investments in capacity expansion,
which resulted in organic sales growth and new clients,
including Publix, the largest employee owned grocery
retailer in the U.S.
Innovation and quality are a major focal point for
Aramark across the entire business, particularly in the
important area of Health & Wellness. We continue to
accelerate growth through an innovation framework
centered around new culinary ideas and promotions,
celebrity chef partnerships and proprietary concepts
that is driving revenue, consumer satisfaction and loyalty.
In June, we announced a strategic partnership with TV
personality, restaurateur and “Iron Chef” Cat Cora to
develop an exclusive healthy Mediterranean concept
called OLILO by Cat Cora. In addition, we expanded
our in-unit chef partnerships with celebrity chefs like
Andrew Zimmern, Jimmy Bannos, Jóse Andrés and
Danny Meyer.
All of our success to
innovate around the world
did not go unnoticed. We
were very pleased to be
named to Fortune’s Most
Admired Companies list
in 2016, ranking #1 for
Diversified Outsourcing
based on key criteria
including innovation, global competitiveness and
social responsibility.
EDUCATION
We proudly serve more than 600 million nourishing meals
each year to K-12 and college students.
We are also especially proud of the year one results
from our Healthy for Life® 20 By 20 initiative with the
American Heart Association (AHA), which aims to
improve the health of Americans by the year 2020.
“The American Heart Association
is grateful for Aramark’s continued
commitment to improving the
health of all Americans and we’re
delighted with the progress we
have collectively made in the past year,” said Nancy
Brown, CEO of the American Heart Association. “This
proves that our work is truly advancing the health of
Americans and we look forward to continuing this great
work in the coming years.”
We achieved an 8 percent reduction in calories, sodium
and saturated fats across the menus we serve in
colleges and universities, hospital cafes and workplace
locations. Over 30 percent of main dishes served on
these menus are now vegetarian or vegan, and over
50 percent of the entrees or sandwich items are 500
calories or less. And, in the underserved communities
where we piloted a health engagement and education
program to drive behavior change, fruit and vegetable
consumption was up almost a cup serving per day
among participants.
In year two, Aramark and the AHA will expand and
scale the successful community health engagement
program and launch a consumer health engagement
and awareness campaign.
5
Aramark 2016 Annual Report POWERFUL
6
Aramark 2016 Annual Report A LEADER IN AN ESTABLISHED AND RESILIENT
INDUSTRY WITH A BLUE-CHIP CLIENT BASE
Our mission to deliver experiences that enrich and
nourish lives is fueled every day by our 270,000
team members around the world. We know that our
employees are the foundation of our success and we
continue to accelerate our efforts to attract and retain
the best people.
In 2016, we earned recognition for the diverse and
inclusive environment we proudly nurture. For the
second year in a row, we were named a Best Place to
Work for LGBT Equality, earning a perfect score on the
Human Rights Campaign Corporate Equality Index. We
were also named an employer-of-choice by Diversity
Inc., BLACK ENTERPRISE, LATINO and CAREERS & the
disABLED magazines.
Our recruiting efforts are accelerating with a keen focus
on filling our talent pipeline with high-potential candidates
from our on-campus recruiting initiatives, as well as
from the large pool of deserving military veterans.
Our commitment to build a culture of recognition
continued to flourish in 2016, as we welcomed our
second annual Ring of Stars class, which honors our
200 “Best of the Best” frontline team members. This
program is growing, with thousands of nominees each
year, all of whom serve as inspirational motivators for all
of our employees.
Aramark has pivoted to a more center-led organization,
rolling out a standard and repeatable business model
across our organization that is supported through
technologies that fundamentally change how we work
at all levels of the organization, from the frontline to the
executive leadership.
We appreciate the outstanding efforts of all of our
team members who have made a great deal of progress
activating productivity this past year, establishing
HEALTHCARE
Our patient-centric approach can improve satisfaction and
elevate the entire patient dining experience.
centers of excellence to give us the ability to create
standard processes and key performance measures to
propel the organization forward.
Our investment in technology is providing insights that
are more timely and actionable. Focus areas in food
include menu optimization, strategic sourcing, standard
food production processes and greater discipline
around waste reduction. On the labor side, we are
working to implement wages that work, get a better
handle on headcount, create smart schedules and
address overtime and agency overruns.
Finally, while Aramark operates in 19 countries, our
global headquarters has been located in Philadelphia,
Pennsylvania since 1961. In September, we recommitted
to staying in our hometown, and plan to move in 2018
to a modern riverfront headquarters that will provide
our associates with a dynamic work environment and
exciting amenities, with an emphasis on innovation,
sustainability and green space.
7
Aramark 2016 Annual Report PROMISING
8
Aramark 2016 Annual Report EXECUTING A CLEAR AND FOCUSED STRATEGY
TO CREATE SHAREHOLDER VALUE
Aramark is a leader in a dynamic market with a
$900 billion opportunity, the large majority of which
has yet to be tapped. It is an exciting place to be with
enormous upside for future growth.
Since our IPO in 2013, the company has been on a
steady march to increase margins through balanced
sales growth and simultaneous reinvestment. At
our Investor Day in December 2015, we announced
a three-year goal to increase adjusted operating
margins by 100 basis points by the end of 2018. We
continue to make solid progress, guided by our focused
strategy to build the business through three key areas:
Accelerating Growth, Activating Productivity and
Attracting the Best People.
We are driving incremental margin expansion through
our SG&A, food and labor productivity initiatives, which
netted about 40 basis points of constant currency
margin improvement in fiscal 2016. A portion of our
gross productivity and margin savings continue to be
reinvested in the business to deploy new technology,
optimize our portfolio and explore strategic alliances
and small “tuck-in” acquisitions.
In 2016, we made two strategic acquisitions that are
strengthening our consumer brand portfolio and
helping us compete more effectively. We acquired
Avoca, one of Ireland’s most successful retailers, which
operates 11 destinations including cafes, food halls
and retail stores, as well as a home catering company.
Initial results have been very encouraging, as Avoca
is not only accretive to our business, the brand is also
providing us with consumer insights that are driving
future trends across the company.
We also strengthened our ability to compete in
the group purchasing space by acquiring HPSI, a
privately-held organization founded in 1964 that
serves thousands of healthcare providers, educational
institutions and hospitality businesses in the U.S. We
believe that HPSI will support our margin march by
increasing our purchasing power, scale and technology
strength in the healthcare and education sectors.
SPORTS AND ENTERTAINMENT
We enhance the game day experience for more than 100
million sports fans each year.
As we continue to fine tune our portfolio, we remain
focused on adding capabilities that will help us become
more competitive in businesses with promising margin
potential. In our Facilities business, for example, we
have recently established a dedicated management
team to ensure that we are consistently delivering high-
quality service through a repeatable business model.
We are leveraging a core competency within Aramark,
as we seek to increase vertical sales with our existing
clients. We believe that there is meaningful opportunity
in this business, as the facilities function is currently less
outsourced than the food business and the relatively
higher margins will be accretive to our corporate margins.
Our 270,000 strong Aramark team is rallying behind
our focused strategy, driving increased consumer and
employee satisfaction, which in turn, is accelerating
financial performance and helping to create shareholder
value. One year into this journey we have notched
almost 40 basis points of adjusted operating income
margin improvement toward our goal of 100.
Much of the progress to date has been manual as we
have created the preconditions necessary to deploy
technologies that enable greater productivity. As these
technologies continue to come to market, they are
fundamentally changing how we work and will unlock
even greater opportunity to reach our goal.
9
Aramark 2016 Annual Report CORPORATE
RESPONSIBILITY:
OUR PURPOSE
10
Aramark 2016 Annual Report Our mission is to enrich and nourish lives. It is also our
responsibility. We serve millions of clients, consumers
and communities across the globe and strive to operate
with integrity, respect and in the most responsible
way possible.
We work to develop innovative product and service
solutions that put our social responsibility goals at
the forefront — focusing on initiatives supporting
our diverse workforce, advancing consumer health
and wellness, protecting our environment, and
strengthening our communities.
EMPLOYEE ADVOCACY
We provide competitive wages and benefits, a
safe, open work environment, and development
opportunities so our team members can grow their
careers with us. We are recognized as an employer-of-
choice for our commitment to a diverse and inclusive
work environment.
HEALTH & WELLNESS
Healthy for Life®, our comprehensive wellness platform,
features a range of menu items and education and
awareness initiatives that work together to support
healthy lifestyles. Our groundbreaking partnership
with the American Heart Association is designed to
improve the health of our consumers, team members
and communities by enhancing our menus to reduce
calories, saturated fat and sodium levels while
increasing fruits, vegetables and whole grains.
ENVIRONMENTAL SUSTAINABILITY
We weave environmental sustainability into everything
we do, making constant progress on our commitment
to source responsibly, minimize waste, support efficient
operations with natural resource conservation, and
manage our fleet to minimize the environmental
impact. We measure our impact and hold ourselves
accountable.
COMMUNITY INVOLVEMENT
We invest financial resources in tandem with employee
volunteer skills and expertise, and develop community
partnerships to make a meaningful difference. Through
our global volunteer and philanthropic program,
Aramark Building Community, we partner at the local
level to improve family and community health and
help individuals succeed in the workplace. We also
support national and local organizations and contribute
$15 million annually to nonprofits through the Aramark
Charitable Fund, corporate contributions, and through
our businesses.
11
Aramark 2016 Annual Report CORPORATE
RESPONSIBILITY:
IN ACTION
12
Aramark 2016 Annual Report COMMUNITY
Since 2008, Aramark has invested more than $10 million
in volunteer expertise and financial in-kind resources
and nearly 45,000 employees have contributed more
than 190,000 volunteer hours, impacting 4.5 million
children, adults and families, to strengthen communities
around the world through Aramark Building Community,
our global philanthropic and volunteer program. During
our global day of service in 2016, more than 9,000
employees volunteered in nearly 450 projects.
ENVIRONMENTAL SUSTAINABILITY
This past year we enhanced our Green Thread™
environmental sustainability platform which brings
to life Aramark’s commitments and programs
focused on responsible sourcing, waste minimization,
operational efficiency and transportation management.
Green Thread provides Aramark associates serving
universities, schools, stadiums, hospitals, municipalities,
businesses and other venues with more resources and
tools to consistently advance sustainable practices at
thousands of locations every day by:
• Increasing procurement of local, seasonal and
responsibly sourced products
• Reducing, reusing and recycling food and other waste
• Conserving energy and water and providing healthy
environments
• Reducing fuel consumption and minimizing emissions
In 2016, we made significant progress against our
commitments to responsible sourcing and animal
welfare. Aramark became the first major food service
company to call on its suppliers to implement
additional humane conditions for the treatment of
broiler chickens by 2024, or sooner. This pledge is part
of the company’s industry-leading animal welfare policy,
instituted in 2015, that covers the care and treatment of
farm animals, including rapid growth, confinement and
painful procedures.
We established a new Sustainable Seafood Sourcing
Policy, which reinforces a pledge to purchase
100 percent of our U.S. contracted seafood from
responsible sources that meet Monterey Bay Aquarium
Seafood Watch® program recommendations by 2018.
This new policy includes our recently-completed
transition to 100 percent sustainably sourced canned
skipjack and albacore tuna. We are also working to
avoid the purchase of “at risk species” as defined by
Seafood Watch®, address human rights abuses and
support responsible management practices.
Aramark is proud of our continued progress to
minimize food waste. A new partnership with LeanPath,
a company that uses real-time data to measure and
track food waste, builds upon an initial pilot with
results showing a 36 percent reduction in food waste.
We expect to install LeanPath across our 500 highest
volume locations over the next year, with plans to
expand more broadly.
While reducing food waste at its source is Aramark’s
primary focus, occasional overproduction due to unique
situations, can happen. In these cases, Aramark’s
Food Donation Program, in partnership with the Food
Donation Connection, provides a solution to safely
donate surplus food to local hunger relief agencies,
helping families in need.
Other areas that are woven under Green Thread include
environmentally-friendly building operations, such
as efficient building design, water and energy-saving
efforts, and Aramark’s Blue Cleaning™ program, which
uses electrically activated or ionized tap water to safely
clean without harmful chemicals.
The company’s fleet operations continue to address
efficient fuel usage through advanced maintenance
diagnostics, and state-of-the-art routing software to
map out the most efficient travel routes.
13
Aramark 2016 Annual Report Financial Highlights
Organic Sales ($B)
Adjusted Operating
Income Margin
$14.1
$14.3
$13.9
$14.6
$13.4
6.5%
6.2%
5.9%
5.7%
5.6%
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Adjusted Operating
Income ($M)
Debt to Covenant
Adjusted EBITDA
$852
$881
$952
$746
$781
5.4x
5.0x
4.4x
4.2x
3.9x
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
See Reconciliation of GAAP and Non-GAAP information at the end of this Annual Report.
14
Aramark 2016 Annual Report aramark 2016
financial performance
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
___________________________________________
For the fiscal year ended September 30, 2016
Commission File Number: 001-36223
Aramark
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
Aramark Tower
1101 Market Street
Philadelphia, Pennsylvania
(Address of principal executive offices)
20-8236097
(I.R.S. Employer
Identification Number)
19107
(Zip Code)
(215) 238-3000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.01 per share
Name of Each Exchange on which Registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Securities registered pursuant to Section 12(g) of the Act: None
___________________________________________
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
As of April 1, 2016, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was
approximately $7,985.3 million.
As of October 28, 2016, the number of shares of the registrant's common stock outstanding is 244,754,648.
___________________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A
relating to the registrant's 2017 Annual Meeting of Stockholders, to be held on February 1, 2017, will be incorporated by
reference in this Form 10-K in response to portions of Part III. The definitive proxy statement will be filed with the SEC not
later than 120 days after the registrant's fiscal year ended September 30, 2016.
[THIS PAGE INTENTIONALLY LEFT BLANK]
PART I
PART II
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Consolidated Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes and Disagreements With Accountants on Accounting and Financial
Disclosure
Item 9A.
Controls and Procedures
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 15.
Exhibits, Financial Statement Schedules
PART III
PART IV
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Special Note About Forward-Looking Statements
This report 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 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 confident,” “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 and financial results 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 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; 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; and other factors set forth herein
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 this Annual Report on Form 10-K, 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 report 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.
Item 1.
Business
Overview
PART I
Aramark (the “Company,” “we” or “us”) is a leading global provider of food, facilities and uniform services to education,
healthcare, business & industry, and sports, leisure & corrections clients. Our core market is North America (composed of the
United States and Canada), which is supplemented by an additional 17-country footprint. We hold the #2 position in North
America in food and facilities services as well as uniform services based on total sales in fiscal 2016. Internationally, we hold a
top 3 position in food and facilities services based on total sales in fiscal 2016 in most countries in which we have significant
operations, and are one of only 3 food and facilities competitors with our combination of scale, scope, and global reach.
Through our established brand, broad geographic presence and approximately 266,500 employees, we anchor our business in
our partnerships with thousands of education, healthcare, business and sports, leisure & corrections clients. Through these
partnerships we serve millions of consumers including students, patients, employees, sports fans and guests worldwide.
We operate our business in three reportable segments that share many of the same operating characteristics: Food and Support
Services North America ("FSS North America"), Food and Support Services International ("FSS International") and Uniform
and Career Apparel ("Uniform"). Both FSS North America and Uniform have significant scale and hold the #2 position in
North America, while in our FSS International segment we hold a top 3 position in most countries in which we have significant
operations based on fiscal 2016 total sales. The following chart shows a breakdown of our sales and operating income by our
reportable segments:
Reportable Segments:
FY 2016 Sales(a):
FY 2016 Operating Income(a):
Services:
Sectors:
FSS North America
FSS International
Uniform
$
$
10,122.3
546.4
$
$
2,729.8
129.1
Food, hospitality and facilities
Food, hospitality and facilities
Business & industry, sports,
leisure & corrections, education
and healthcare
Business & industry, sports,
leisure & corrections,
healthcare and education
$
1,563.7
$
195.3
Rental, sale and maintenance of
uniform apparel and other items
Business, public institutions,
manufacturing, transportation
and service industries
(a) Dollars in millions. Operating income excludes $124.5 million related to corporate expenses. For certain other financial
information relating to our segments, see Note 15 to the audited consolidated financial statements.
In fiscal 2016, we generated $14.4 billion of sales, $288.2 million of net income and $746.3 million of operating income.
Our History
Since our founding in 1959, we have broadened our service offerings and expanded our client base through a combination of
organic growth and successful acquisitions, with the goal of further developing our food, facilities and uniform capabilities, as
well as growing our international presence. In 1984, we completed a management buyout, after which our management and
employees increased their Company ownership to approximately 90% of our equity capital leading up to our December 2001
public offering. On January 26, 2007, we delisted from the NYSE in conjunction with a going-private transaction executed with
investment funds affiliated with Goldman Sachs Capital Partners, CCMP Capital Advisors, J.P. Morgan Partners, Thomas H.
Lee Partners, L.P. and Warburg Pincus LLC as well as approximately 250 senior management personnel.
On December 17, 2013, we completed an initial public offering of 41,687,500 shares of our common stock, including
13,687,500 shares of common stock sold by our selling stockholders. We did not receive any of the proceeds from the sale of
the shares sold by the selling stockholders and we used our proceeds from the initial public offering, net of costs, to pay down
debt. Our common stock began trading on the NYSE under the ticker symbol “ARMK” on December 12, 2013.
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Aramark 2016 Form 10-K Food and Support Services
Our Food and Support Services segments manage a number of interrelated services-including food, hospitality and facility
services-for school districts, colleges & universities, healthcare facilities, businesses, sports, entertainment & recreational
venues, conference & convention centers, national & state parks and correctional institutions.
We are the exclusive provider of food and beverage services at most of the locations we serve and are responsible for hiring,
training and supervising the majority of the food service personnel in addition to ordering, receiving, preparing and serving
food and beverage items sold at those facilities. Our facilities services capabilities are broad, and include plant operations and
maintenance, custodial/housekeeping, energy management, clinical equipment maintenance, grounds keeping, and capital
project management. In governmental, business, educational and healthcare facilities (for example, offices and industrial plants,
schools and universities and hospitals), our clients provide us with a captive client base through their on-site employees,
students and patients. At sports, entertainment and recreational facilities, our clients attract patrons to their site, usually for
specific events such as sporting events and conventions.
We manage our FSS business in two geographic reportable segments split between our North America and International
operations. In fiscal 2016, our FSS North America segment generated $10,122.3 million in sales, or 70% of our total sales, and
our FSS International segment generated $2,729.8 million in sales, or 19% of our total sales. No individual client represents
more than 1% of our total sales, other than, collectively, a number of U.S. government agencies. See Note 15 to the audited
consolidated financial statements for information on sales, operating income and total assets for the FSS North America
segment and the FSS International segment.
Clients and Services
Our Food and Support Services segments serve a number of client sectors across 19 countries around the world. Our Food and
Support Services operations focus on serving clients in four principal sectors:
Sector
Types of Clients
Food Services
Education
Colleges and universities
Public school districts and systems
Private schools
Dining services
Catering
Food service management
Retail operations
Healthcare
Hospitals
Nursing homes
Food and nutrition services
Retail operations
Business & Industry
Sports, Leisure &
Corrections
Office parks and buildings
Manufacturing plants
Corporate cafeterias
Mining operations
Oil & gas drilling operations
Professional and collegiate
stadiums and arenas
Concert venues
National and state parks
Convention and civic centers
Correctional facilities
Dining services
On-site restaurants
Catering
Convenience stores
Executive dining rooms
Coffee and vending
Drinking water filtration
Concessions
Banquet and catering
Retail and merchandise sales
Food and nutrition services
Premium and restaurant
Facilities Services
Facilities management
Custodial services
Grounds
Energy management
Construction management
Capital project management
Clinical equipment maintenance
Environmental services
Laundry and linen distribution
Plant operations
Energy management
Strategic and technical services
Supply chain management
Purchasing
Central transportation
Housekeeping management
Plant operations/maintenance
Energy management
Groundskeeping
Landscaping
Transportation
Capital program management
Commissioning services
Building operations consulting
Recreational and lodging services
Commissary services
Laundry and linen management
Property room management
Housekeeping management
Facility management
Education. Within the Education sector we serve Higher Education and K-12 clients. We deliver a wide range of food and
facility services at more than 1,500 colleges, universities, school systems & districts and private schools. We offer our
education clients a single source provider for managed service solutions, including dining, catering, food service management,
convenience-oriented retail operations, grounds & facilities maintenance, custodial, energy management, construction
management, and capital project management.
Healthcare. We provide a wide range of non-clinical support services to approximately 1,200 healthcare clients and more than
2,000 facilities across our global footprint. We offer healthcare organizations a single source provider for managed service
solutions, which include food services such as patient food and nutrition services and retail food services, and facilities services
such as clinical equipment maintenance, environmental services, laundry & linen distribution, plant operations, energy
management, strategic/technical services, supply chain management, purchasing and central transportation.
Business & Industry. We provide a comprehensive range of business dining services, including on-site restaurants, catering,
convenience stores and executive dining.
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Aramark 2016 Form 10-K We also provide beverage and vending services to business & industry clients at thousands of locations. Our service and
product offerings include a full range of coffee offerings, “grab and go” food operations, convenience stores, micromarkets and
a proprietary drinking water filtration system.
We also offer a variety of facility management services to business & industry clients. These services include the management
of housekeeping, plant operations and maintenance, energy management, laundry and linen, groundskeeping, landscaping,
transportation, capital program management and commissioning services and other facility consulting services relating to
building operations.
We also offer remote services which include facility and business support services primarily for mining and oil operations.
Sports, Leisure & Corrections. We administer concessions, banquet and catering services, retail services and merchandise sales,
recreational and lodging services and facility management services at sports, entertainment and recreational facilities. We serve
146 professional (including minor league affiliates) and college sports teams, including 39 teams in Major League Baseball, the
National Basketball Association, the National Football League and the National Hockey League. We also serve 22 convention
and civic centers, 19 national and state parks and other resort operations, plus other popular tourist attractions in the United
States and Canada. Additionally, we provide correctional food services, operate commissaries, laundry facilities and property
rooms and provide food and facilities management services for parks.
Our FSS International segment provides a similar range of services as those provided to our FSS North America segment clients
and operates in all of our sectors. We have operations in 17 countries outside the United States and Canada. Our largest
international operations are in Chile, China, Germany, Ireland and the United Kingdom, and in each of these countries we are
one of the leading food and/or facilities service providers. We also have a strong presence in Japan through our 50% ownership
of AIM Services Co., Ltd., which is a leader in providing outsourced food services in Japan. In addition to the core Business &
Industry sector, our FSS International segment serves many soccer stadiums across Europe, and numerous educational
institutions, correctional institutions and convention centers globally. There are particular risks attendant with our international
operations. Please see Item 1A. “Risk Factors.”
Purchasing
We negotiate the pricing and other terms for the majority of our purchases of food and related products in the United States and
Canada directly with national manufacturers. We purchase these products and other items through Sysco Corporation and other
distributors. We have a master distribution agreement with Sysco that covers a significant amount of our purchases of these
products and items in the United States and another distribution agreement with Sysco that covers our purchases of these
products in Canada. Our distributors are responsible for tracking our orders and delivering products to our specific locations.
Due to our ability to negotiate favorable terms with our suppliers, we earn vendor consideration, including discounts, rebates
and other applicable credits. See “Types of Contracts” below. Our location managers also purchase a number of items,
including bread, dairy products and alcoholic beverages from local suppliers, and we purchase certain items directly from
manufacturers.
Our relationship with Sysco is important to our operations—we have had distribution agreements in place for more than 20
years. In fiscal 2016, Sysco distributed approximately 52% of our food and non-food products in the United States and Canada,
and we believe that we are one of their largest clients. However, we believe that the products acquired through Sysco can, in
significant cases, be purchased through other sources and that termination of our relationship with them or any disruption of
their business would cause only short-term disruptions to our operations.
Our agreements with our distributors are generally for an indefinite term, subject to termination by either party after a notice
period, which is generally 60 to 120 days. The pricing and other financial terms of these agreements are renegotiated
periodically. Our current agreement with Sysco is terminable by either party with 180 days notice.
In our international segment, our approach to purchasing is substantially similar. On a country-by-country basis, we negotiate
pricing and other terms for a majority of our purchases of food and related products with manufacturers operating in the
applicable country, and we purchase these products and other items through distributors in that country. Due to our ability to
negotiate favorable terms with our suppliers, we receive vendor consideration, including rebates, allowances and volume
discounts. See “Types of Contracts” below. As in North America, our location managers also purchase a number of items,
including bread, dairy products and alcoholic beverages from local suppliers, and we purchase certain items directly from
manufacturers. Our agreements with our distributors are subject to termination by either party after a notice period, which is
generally 60 days. The pricing and other financial terms of these agreements are renegotiated periodically.
Our relationship with distributors in the countries outside the United States and Canada is important to our operations, but from
an overall volume standpoint, no distributor outside the United States and Canada distributes a significant volume of products.
We believe that products we acquire from our distributors in countries outside the United States and Canada can, in significant
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Aramark 2016 Form 10-K cases, be purchased from other sources, and that the termination of our relationships with our distributors outside the United
States and Canada, or the disruption of their business operations, would cause only short-term disruption to our operations.
Sales and Marketing
We maintain selling and marketing excellence by focusing on the execution of a common selling process as well as optimal
resource allocation and deployment. Our common selling process ensures that we sell our services to our clients in the same
way, regardless of the sector in which such client is located. We have developed consistent tools and training that are used
across all of our businesses to train our employees on this selling process. Our business development functions are aligned
directly with the sectors and services in which we have leadership positions, and we combine our targeted business
development strategies with our strong client relationships to deliver differentiated and innovative solutions. We target our
business development by aligning our sales efforts directly with the sectors and services in which we operate. We identify
individuals at various levels in our organization to match up with individuals in a variety of roles at both existing and potential
clients. We believe that these connections throughout various levels within the client organization allow us to develop strong
relationships with the client and gain a better understanding of the clients' requirements. Based on the knowledge of the clients'
requirements and the sector, our goal is to develop solutions for the client that are unique and that help to differentiate us from
our competitors.
Types of Contracts
We use contracts that allow us to manage our potential upside and downside risk in connection with our various business
interactions. Our contracts may require that consent be obtained in order to raise prices on the food, beverages and merchandise
we sell within a particular facility. The contracts that we enter into vary in length. Contracts generally are for fixed terms, many
of which are in excess of one year. Contracts for education and sports and leisure services typically require larger capital
investments, but have correspondingly longer and fixed terms, usually from five to fifteen years.
When we enter into new contracts, or extend or renew existing contracts, particularly those for stadiums, arenas, convention
centers, colleges and universities and business dining accounts, we are sometimes contractually required to make some form of
up-front or future capital investment to help finance improvement or renovation, typically to the food and beverage facilities of
the venue from which we operate. Contractually required capital expenditures typically take the form of investment in leasehold
improvements, food service equipment and/or grants to clients. At the end of the contract term or upon its earlier termination,
assets such as equipment and leasehold improvements typically become the property of the client, but generally the client must
reimburse us for any undepreciated or unamortized capital investments.
Food and Support Services contracts are generally obtained and renewed either through a competitive process or on a
negotiated basis, although contracts in the public sector are frequently awarded on a competitive bid basis, as required by
applicable law. Contracts for Food and Support Services with school districts and correctional clients are typically awarded
through a formal bid process. Contracts in the private sector may be entered into without a formal bid process, but we and other
companies will often compete in the process leading up to the award or the completion of contract negotiations. Typically, after
the award, final contract terms are negotiated and agreed upon.
We use two general contract types in our Food and Support Services segments: profit and loss contracts and client interest
contracts. These contracts differ in their provision for the amount of financial risk that we bear and, accordingly, the potential
compensation, profits or fees we may receive. Commission rates and management fees, if any, may vary significantly among
contracts based upon various factors, including the type of facility involved, the term of the contract, the services we provide
and the amount of capital we invest.
Profit and Loss Contracts. Under profit and loss contracts, we receive all of the revenue from, and bear all of the expenses of,
the provision of our services at a client location. Expenses under profit and loss contracts sometimes include commissions paid
to the client, typically calculated as a fixed or variable percentage of various categories of sales, and, in some cases, require
minimum guaranteed commissions. We benefit from greater upside potential with a profit and loss contract, although we do
consequently bear greater downside risk than with a client interest contract. For fiscal 2016, approximately 70% of our Food
and Support Services sales were derived from profit and loss contracts.
Client Interest Contracts. Client interest contracts include management fee contracts, under which our clients reimburse our
operating costs and pay us a management fee, which may be calculated as a fixed dollar amount or a percentage of sales or
operating costs. Some management fee contracts entitle us to receive incentive fees based upon our performance under the
contract, as measured by factors such as sales, operating costs and client satisfaction surveys. Client interest contracts also
include limited profit and loss contracts, under which we receive a percentage of any profits earned from the provision of our
services at the facility and we generally receive no payments if there are losses. As discussed above under “Purchasing,” we
earn vendor consideration, including discounts, rebates and other applicable credits that we typically retain except in those
cases where the contract and/or applicable law requires us to credit these to our clients. For our client interest contracts, both
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Aramark 2016 Form 10-K our upside potential and downside risk are reduced compared to our profit and loss contracts. For fiscal 2016, approximately
30% of our Food and Support Services sales were derived from client interest contracts.
Competition
There is significant competition in the Food and Support Services business from local, regional, national and international
companies, as well as from the businesses, healthcare institutions, colleges and universities, correctional facilities, school
districts and public assembly facilities that decide to provide these services themselves. Institutions may decide to operate their
own services or outsource to one of our competitors following the expiration or termination of contracts with us. Clients do not
necessarily choose the lowest cost provider, and tend to place a premium on the total value proposition offered. In our FSS
North America segment, our external competitors include other multi-regional food and support service providers, such as
Centerplate, Inc., Compass Group plc, Delaware North Companies Inc. and Sodexo SA. Internationally, our external food
service and support service competitors include Compass Group plc, Elior SA, International Service System A/S and Sodexo
SA. We also face competition from many regional and local service providers.
We believe that the following competitive factors are the principal drivers of our success:
•
•
•
•
•
Seasonality
quality and breadth of services and management talent;
innovation;
reputation within the industry;
pricing; and
financial strength and stability.
Our sales and operating results have varied, and we expect them to continue to vary, from quarter to quarter as a result of
different factors. Within our FSS North America segment, historically there has been a lower level of activity during our first
and second fiscal quarters in operations that provide services to sports and leisure clients. This lower level of activity
historically has been partially offset during our first and second fiscal quarters by the increased activity in our educational
operations. Conversely, historically there has been a significant increase in the provision of services to sports and leisure clients
during our third and fourth fiscal quarters, which is partially offset by the effect of summer recess at colleges, universities and
schools.
Uniform
Our Uniform segment provides uniforms and other garments and work clothes and ancillary items such as mats and shop towels
in the United States, Puerto Rico, Canada and through a joint venture in Japan. We hold the #2 position in the North America
uniform services market. We operate over 2,600 routes, giving us a broad reach to service our clients' needs.
Clients use our uniforms to meet a variety of needs, including:
•
•
•
•
establishing corporate identity and brand awareness;
projecting a professional image:
protecting workers—work clothes can help protect workers from difficult environments such as heavy soils, heat,
flame or chemicals; and
protecting products—uniforms can help protect products against contamination in the food, pharmaceutical,
electronics, health care and automotive industries.
We provide a full service employee uniform solution, including design, sourcing and manufacturing, delivery, cleaning and
maintenance. We rent uniforms, work clothing, outerwear, particulate-free garments and non-garment items and related
services, including industrial towels, floor mats, mops, linen products, and paper products to businesses in a wide range of
industries, including manufacturing, food services, automotive, healthcare, construction, utilities, repair and maintenance
services, restaurant and hospitality. In fiscal 2016, our Uniform segment generated $1,563.7 million in sales, or 11% of our total
sales. See Note 15 to the audited consolidated financial statements for information on sales, operating income and total assets
for the Uniform segment.
Clients and Services
We serve businesses of all sizes in many different industries. We have a diverse client base from over 200 service location and
distribution centers across the United States and a service center in Ontario, Canada. None of our clients individually represents
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Aramark 2016 Form 10-K a material portion of our sales. We typically visit our clients' sites weekly, delivering clean, finished uniforms and, at the same
time, removing the soiled uniforms or other items for cleaning, repair or replacement. We also offer products for direct sale.
Our cleanroom service offers advanced static dissipative garments, barrier apparel, sterile garments and cleanroom application
accessories for clients with contamination-free operations in the technology, healthcare and pharmaceutical industries.
We conduct our direct marketing business through three primary brands - WearGuard, Crest and Aramark. We design, source or
manufacture and distribute distinctive image apparel to workers in a wide variety of industries through the internet at
www.shoparamark.com, dedicated sales representatives and telemarketing sales channels. We customize and embroider
personalized uniforms and logos for clients through an extensive computer assisted design center and distribute work clothing,
outerwear, business casual apparel and footwear throughout the United States, Puerto Rico and Canada.
Operations
We operate our uniform rental business as a network of 85 laundry plants and 172 satellite plants and depots supporting over
2,600 pick-up and delivery routes. We operate a fleet of service vehicles that pick up and deliver uniforms for cleaning and
maintenance. We conduct our direct marketing activities principally from our facilities in Salem, Virginia; Norwell and
Rockland, Massachusetts; and Reno, Nevada. We market our own brands of apparel and offer a variety of customized
personalization options such as embroidery and logos. We also source uniforms and other products to our specifications from a
number of domestic and international suppliers and also manufacture a significant portion of our uniform requirements. We
purchase uniform and textile products as well as equipment and supplies from domestic and international suppliers. The loss of
any one supplier would not have a significant impact on us. We also operate two cutting and sewing plants in Mexico, which
satisfy a substantial amount of our standard uniform inventory needs.
Sales and Marketing
Our sales representatives and route sales drivers are responsible for selling our services to current and potential clients and
developing new accounts through the use of an extensive, proprietary database of pre-screened and qualified business
prospects. We build our brand identity through local advertising, promotional initiatives and through our distinctive service
vehicles. Our clients frequently come to us through client referrals, either from our uniform rental business or from our other
service sectors. Our customer service representatives generally interact on a weekly basis with their clients, while our support
personnel are charged with expeditiously handling client requirements regarding the outfitting of new client employees and
other customer service needs.
Types of Contracts
We typically serve our rental clients under written service contracts for an initial term of three to five years. While clients are
not required to make an up-front investment for their uniforms, in the case of nonstandard uniforms and certain specialty
programs, clients typically agree to reimburse us for our costs if they terminate their agreement early. With the exception of
certain governmental bid business, most of our direct marketing business is conducted under invoice arrangement with repeat
clients.
Competition
Although the United States rental industry has experienced some consolidation, there is significant competition in all the areas
that we serve, and such competition varies across geographies. Although many competitors are smaller local and regional firms,
we also face competition from other large national firms such as Cintas Corporation, G&K Services, Inc. and UniFirst
Corporation. We believe that the primary competitive factors that affect our operations are quality, service, design, consistency
of product, and distribution capability, particularly for large multi-location clients, and price. We believe that our ability to
compete effectively is enhanced by the quality and breadth of our product line as well as our nationwide reach.
Employees of Aramark
As of September 30, 2016, we had a total of approximately 266,500 employees, including seasonal employees, consisting of
approximately 168,000 full-time and approximately 98,500 part-time employees in our three business segments. The number of
part-time employees varies significantly from time to time during the year due to seasonal and other operating requirements.
We generally experience our highest level of employment during the fourth fiscal quarter. The approximate number of
employees by segment is as follows: FSS North America: 164,000; FSS International: 88,500; Uniform: 13,500. In addition, the
Aramark corporate staff is approximately 500 employees. Approximately 40,000 employees in the United States are covered by
collective bargaining agreements. We have not experienced any material interruptions of operations due to disputes with our
employees and consider our relations with our employees to be satisfactory.
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Aramark 2016 Form 10-K Governmental Regulation
Our business is subject to various federal, state, local and international laws and regulations, in areas such as environmental,
labor, employment, immigration, health and safety laws and liquor licensing and dram shop matters. In addition, our facilities
and products are subject to periodic inspection by federal, state, local and international authorities. We have established, and
periodically update, various internal controls and procedures designed to maintain compliance with these laws and regulations.
Our compliance programs are subject to legislative changes, or changes in regulatory interpretation, implementation or
enforcement. From time to time both federal and state government agencies have conducted audits of certain of our practices as
part of routine investigations of providers of services under government contracts, or otherwise. Like others in our business, we
receive requests for information from governmental agencies in connection with these audits. If we fail to comply with
applicable laws, we may be subject to investigations, criminal sanctions or civil remedies, including fines, penalties, damages,
reimbursement, injunctions, seizures, disgorgements, debarments from government contracts or loss of liquor licenses.
Our operations are subject to various laws and regulations, including, but not limited to, those governing:
•
•
alcohol licensing and service;
collection of sales and other taxes;
• minimum wage, overtime, classification, wage payment and employment discrimination;
•
•
•
•
•
•
•
•
immigration;
governmentally funded entitlement programs and cost and accounting principles;
false claims, whistleblowers and consumer protection;
environmental protection;
food safety, sanitation, labeling and human health and safety;
customs and import and export controls;
the Foreign Corrupt Practices Act, the U.K. Bribery Act and other anti-corruption laws;
antitrust, competition, procurement and lobbying;
• minority, women and disadvantaged business enterprise statutes;
• motor carrier safety; and
•
privacy and data security.
The laws and regulations relating to each of our food and support services segments are numerous and complex. There are a
variety of laws and regulations at various governmental levels relating to the handling, preparation and serving of food,
including in some cases requirements relating to the temperature of food, the cleanliness of food production facilities, and the
hygiene of food-handling personnel, which are enforced primarily at the local public health department level. While we attempt
to comply with applicable laws and regulations, there can be no assurance that we are in full compliance at all times with all of
the applicable laws and regulations or that we will be able to comply with any future laws and regulations. Furthermore,
legislation and regulatory attention to food safety is very high. Additional or amended regulations in this area may significantly
increase the cost of compliance or expose us to liability.
In addition, various government agencies impose nutritional guidelines and other requirements on us at certain of the
healthcare, education and corrections facilities we serve. We may also be subject to laws and regulations that limit or restrict the
use of trans fats in the food we serve or other requirements relating to ingredient or nutrient labeling. There can be no assurance
that legislation, or changes in regulatory implementation or interpretation of government regulations, would not limit our
activities in the future or significantly increase the cost of regulatory compliance.
Because we serve alcoholic beverages at many sports, entertainment and recreational facilities, including convention centers
and national and state parks, we also hold liquor licenses incidental to our food service operations and are subject to the liquor
license requirements of the jurisdictions in which we hold a liquor license. As of September 30, 2016, our subsidiaries held
liquor licenses in 45 states and the District of Columbia, four Canadian provinces and certain other countries. Typically, liquor
licenses must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control
regulations relate to numerous aspects of our operations, including minimum age of patrons and employees, hours of operation,
advertising, wholesale purchasing, inventory control and handling, and storage, dispensing and service of alcoholic beverages.
We have not encountered any material problems relating to liquor licenses to date. The failure to receive or retain a liquor
license in a particular location could adversely affect our ability to obtain such a license elsewhere. Some of our contracts
require us to pay liquidated damages during any period in which the liquor license for the facility is suspended as a result of our
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Aramark 2016 Form 10-K actions, and most contracts are subject to termination if the liquor license for the facility is lost as a result of our actions. Our
service of alcoholic beverages is also subject to alcoholic beverage service laws, commonly called dram shop statutes. Dram
shop statutes generally prohibit serving alcoholic beverages to certain persons such as minors or visibly intoxicated persons. If
we violate dram shop laws, we may be liable to the patron and/or to third parties for the acts of the visibly intoxicated patron.
We sponsor regular training programs designed to minimize the likelihood of such a situation and to take advantage of certain
safe harbors and affirmative defenses enacted for the benefit of alcoholic beverage service providers. However, we cannot
guarantee that intoxicated or minor patrons will not be served or that liability for their acts will not be imposed on us.
Our uniform rental business and our food and support service business are subject to various environmental protection laws and
regulations, including the U.S. Federal Clean Water Act, Clean Air Act, Resource Conservation and Recovery Act,
Comprehensive Environmental Response, Compensation, and Liability Act and similar local, state, federal and international
laws and regulations governing the use, management, shipping and disposal of chemicals and hazardous materials. In particular,
industrial laundries use certain detergents and cleaning chemicals to launder garments and other merchandise. The residues
from such detergents and chemicals and residues from soiled garments and other merchandise laundered at our facilities may
result in potential discharges to air and to water (through sanitary sewer systems and publicly owned treatment works) and may
be contained in waste generated by our wastewater treatment systems. Our industrial laundries are subject to certain volume and
chemical air and water pollution discharge limits, monitoring, permitting and recordkeeping requirements. We own or operate
aboveground and underground storage tank systems at some locations to store petroleum products for use in our or our clients'
operations. Certain of these storage tank systems also are subject to performance standards, periodic monitoring and
recordkeeping requirements. We also may use and manage chemicals and hazardous materials in our operations from time to
time. We are mindful of the environmental concerns surrounding the use, management, shipping and disposal of these
chemicals and hazardous materials, and have taken and continue to take measures to comply with environmental protection
laws and regulations. Given the regulated nature of some of our operations, we could face penalties and fines for non-
compliance. In the past, we have settled, or contributed to the settlement of, actions or claims relating to the management of
underground storage tanks and the handling and disposal of chemicals or hazardous materials, either on or off-site. We may, in
the future, be required to expend material amounts to rectify the consequences of any such events. Under environmental laws,
we may be liable for the costs of removal or remediation of certain hazardous materials located on or in or migrating from our
owned or leased property or our clients' properties, as well as related costs of investigation and property damage. Such laws
may impose liability without regard to our fault, knowledge or responsibility for the presence of such hazardous substances. We
may not know whether our clients' properties or our acquired or leased properties have been operated in compliance with
environmental laws and regulations or that our future uses or conditions will not result in the imposition of liability upon us
under such laws or expose us to third-party actions such as tort suits.
We do not anticipate any capital expenditures for environmental remediation that would have a material effect on our financial
condition.
Intellectual Property
We have the patents, trademarks, trade names and licenses that are necessary for the operation of our business. Other than the
Aramark brand, which includes our corporate starperson logo design (both old and new) and the Aramark word mark (our
name), we do not consider our patents, trademarks, trade names and licenses to be material to the operation of our business in
any material respect.
Available Information
We file annual, quarterly and current reports and other information with the Securities and Exchange Commission (the “SEC”).
These filings are available to the public over the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference room at 100 F. Street, N.E., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference room.
Our principal Internet address is www.aramark.com. We make available free of charge on www.aramark.com our annual,
quarterly and current reports, and amendments to those reports, as soon as reasonably practicable after we electronically file
such material with, or furnish it to, the SEC.
Our Business Conduct Policy includes a code of ethics for our principal executive officer, our principal financial officer and our
principal accounting officer and applies to all of our employees and non-employee directors. Our Business Conduct Policy is
available on the Investor Relations section of our website at www.aramark.com and is available in print to any person who
requests it by writing or telephoning us at the address or telephone number set forth below.
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Aramark 2016 Form 10-K You may request a copy of our SEC filings (excluding exhibits) and our Business Conduct Policy at no cost by writing or
telephoning us at the following address or telephone number:
Aramark
1101 Market Street
Philadelphia, PA 19107
Attention: Corporate Secretary
Telephone: (215) 238-3000
The references to our web site and the SEC's web site are intended to be inactive textual references only and the contents of
those websites are not incorporated by reference herein.
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Aramark 2016 Form 10-K Item 1A. Risk Factors
Risks related to our business
Unfavorable economic conditions have, and in the future could, adversely affect our results of operations and financial
condition.
In the past, national and international economic downturns have reduced demand for our services and any such downturns in
the future could reduce demand for our services in each of our reportable segments, resulting in the loss of business or
increased pressure to contract for business on less favorable terms than our generally preferred terms. Economic hardship
among our client base can also impact our business. For example, during the most recent period of economic distress, certain of
our businesses were negatively affected by reduced employment levels at our clients’ locations and declining levels of business
and consumer spending. In addition, insolvency experienced by clients, especially larger clients, has in the past made it
difficult, and in the future could, make it difficult, for us to collect amounts we are owed and could result in the voiding of
existing contracts. Similarly, financial distress or insolvency, if experienced by our key vendors and service providers such as
insurance carriers, could significantly increase our costs.
The portion of our food and support services business that provides services in public facilities such as convention centers and
tourist and recreational attractions is particularly sensitive to an economic downturn, as expenditures to take vacations or hold
or attend conventions are funded to a partial or total extent by discretionary income. A decrease in such discretionary income on
the part of potential attendees at our clients' facilities has in the past resulted, and in the future could result, in a reduction in our
sales. Further, because our exposure to the ultimate consumer of what we provide is limited by our dependence on our clients to
attract those consumers to their facilities and events, our ability to respond to such a reduction in attendance, and therefore our
sales, is limited. There are many factors that could reduce the numbers of events in a facility or attendance at an event,
including labor disruptions involving sports leagues, poor performance by the teams playing in a facility, number of playoff
games, inclement weather and adverse economic conditions which would adversely affect sales and profits.
Natural disasters, global calamities, sports strikes and other adverse incidents could adversely affect our sales and operating
results.
Natural disasters, including hurricanes and earthquakes, or global calamities, such as an Ebola outbreak or a flu pandemic,
have, and in the future could, affect our sales and operating results. In the past, we experienced lost and closed client locations,
business disruptions and delays, the loss of inventory and other assets, and the effect of the temporary conversion of a number
of our client locations to provide food and shelter to those left homeless by storms. In addition, any terrorist attacks, particularly
against venues that we serve, and the national and global military, diplomatic and financial response to such attacks or other
threats, also may adversely affect our sales and operating results. Sports strikes, particularly those that are for an extended time
period, can reduce our sales and have an adverse impact on our results of operations. For example, in 2012, the collective
bargaining agreement for the players in the National Hockey League expired. As a result, the 2012/2013 season was
significantly shortened and our sales and profits were negatively impacted. Any decrease in the number of games played would
mean a loss of sales and reduced profits at the venues we service.
Our failure to retain our current clients, renew our existing client contracts on comparable terms and obtain new client
contracts could adversely affect our business.
Our success depends on our ability to retain our current clients, renew our existing client contracts and obtain new business.
Our ability to do so generally depends on a variety of factors, including the quality, price and responsiveness of our services, as
well as our ability to market these services effectively and differentiate ourselves from our competitors. There can be no
assurance that we will be able to obtain new business, renew existing client contracts at the same or higher levels of pricing or
that our current clients will not turn to competitors, cease operations, elect to self-operate or terminate contracts with us. In
addition, consolidation by our clients in the industries we serve could result in our losing business if the combined entity
chooses a different provider. The failure to renew a significant number of our existing contracts would have a material adverse
effect on our business and results of operations and the failure to obtain new business could have an adverse impact on our
growth and financial results.
We may be adversely affected if clients reduce their outsourcing or use of preferred vendors.
Our business and growth strategies depend in large part on the continuation of a current trend toward outsourcing services.
Clients will outsource if they perceive that outsourcing may provide quality services at a lower overall cost and permit them to
focus on their core business activities. We cannot be certain that this trend will continue or not be reversed or that clients that
have outsourced functions will not decide to perform these functions themselves.
In addition, labor unions representing employees of some of our current and prospective clients have occasionally opposed the
outsourcing trend to the extent that they believed that current union jobs for their memberships might be lost. In these cases,
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Aramark 2016 Form 10-K unions typically seek to prevent public sector entities from outsourcing and if that fails, ensure that jobs that are outsourced
continue to be unionized, which can reduce our pricing and operational flexibility with respect to such businesses.
We have also identified a trend among some of our clients toward the retention of a limited number of preferred vendors to
provide all or a large part of their required services. We cannot be certain that this trend will continue or not be reversed or, if it
does continue, that we will be selected and retained as a preferred vendor to provide these services. Unfavorable developments
with respect to either outsourcing or the use of preferred vendors could have a material adverse effect on our business and
results of operations.
Competition in our industries could adversely affect our results of operations.
There is significant competition in the food and support services business from local, regional, national and international
companies, of varying sizes, many of which have substantial financial resources. Our ability to successfully compete depends
on our ability to provide quality services at a reasonable price and to provide value to our clients and consumers. Certain of our
competitors have been and may in the future be willing to underbid us or accept a lower profit margin or expend more capital in
order to obtain or retain business. Also, certain regional and local service providers may be better established than we are within
a specific geographic region. In addition, existing or potential clients may elect to self-operate their food and support services,
eliminating the opportunity for us to serve them or compete for the account. While we have a significant international presence,
certain of our competitors have more extensive portfolios of services and a broader geographic footprint than we do. Therefore,
we may be placed at a competitive disadvantage for clients who require multiservice or multinational bids.
We have a number of major national competitors in the uniform rental industry with significant financial resources. In addition,
there are regional and local uniform suppliers whom we believe have strong client loyalty. While most clients focus primarily
on quality of service, uniform rental also is a price-sensitive service and if existing or future competitors seek to gain clients or
accounts by reducing prices, we may be required to lower prices, which would reduce our sales and profits. The uniform rental
business requires investment capital for growth. Failure to maintain capital investment in this business would put us at a
competitive disadvantage. In addition, due to competition in our uniform rental business, it has become increasingly important
for us to source garments and other products overseas, particularly from Asia. To the extent we are not able to effectively source
such products from Asia and gain the related cost savings, we may be at a further disadvantage in relation to some of our
competitors.
Increased operating costs and obstacles to cost recovery due to the pricing and cancellation terms of our food and support
services contracts may constrain our ability to make a profit.
Our profitability can be adversely affected to the extent we are faced with cost increases for food, wages, other labor related
expenses (including workers' compensation, state unemployment insurance and federal or state mandated health benefits and
other healthcare costs), insurance, fuel, utilities, piece goods, clothing and equipment, especially to the extent we are unable to
recover such increased costs through increases in the prices for our products and services, due to one or more of general
economic conditions, competitive conditions or contractual provisions in our client contracts. For example, when federal, state,
foreign or local minimum wage rates increase, we may have to increase the wages of both minimum wage employees and
employees whose wages are above the minimum wage. We may also face increased operating costs if federal, state or local
laws and regulations regarding the classification of employees and/or their eligibility for overtime changes. Oil and natural gas
prices have fluctuated significantly in the last several years. Substantial increases in the cost of fuel and utilities have
historically resulted in substantial cost increases in our uniform rental business, and to a lesser extent in our food and support
services segments. From time to time we have experienced increases in our food costs. While we believe a portion of these
increases were attributable to fuel prices, we believe the increases also resulted from rising global food demand and the
increased production of biofuels such as ethanol. In addition, food prices can fluctuate as a result of temporary changes in
supply, including as a result of incidences of severe weather such as droughts, heavy rains and late freezes. We have two main
types of contract in our food and facilities business: profit and loss contracts in which we bear all of the expenses of the contract
but gain the benefit of the sales, and client interest contracts in which our clients share some or all of the expenses and gain
some or all of the sales. Approximately 70% of our food and support services sales in fiscal 2016 are from profit and loss
contracts under which we have limited ability to pass on cost increases to our clients. Therefore, in many cases, we will have to
absorb any cost increases, which may adversely impact our operating results.
The amount of risk that we bear and our profit potential vary depending on the type of contract under which we provide food
and support services. We may be unable to fully recover costs on contracts that limit our ability to increase prices. In addition,
we provide many of our services under contracts of indefinite term, which are subject to termination on short notice by either
party without cause. Some of our profit and loss and client interest contracts contain minimum guaranteed remittances to our
client regardless of our sales or profit at the facility. If sales do not exceed costs under a contract that contains minimum
guaranteed commissions, we will bear any losses which are incurred, as well as the guaranteed commission. Generally, our
contracts also limit our ability to raise prices on the food, beverages and merchandise we sell within a particular facility without
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Aramark 2016 Form 10-K the client's consent. In addition, some of our contracts exclude certain events or products from the scope of the contract, or give
the client the right to modify the terms under which we may operate at certain events. The payment of guaranteed commissions
or other guaranteed amounts to a client under a profit and loss contract that is not profitable, the refusal by individual clients to
permit the sale of some products at their venues, the imposition by clients of limits on prices which are not economically
feasible for us, or decisions by clients to curtail their use of the services we provide could adversely affect our sales and results
of operations. For example, during the most recent economic downturn, certain of our business & industry clients curtailed their
employees' use of catering, which had a negative effect on our sales and profits.
Our inability to achieve cost savings through our cost reduction efforts could impact our results of operations.
The achievement of the goals we set in our plans and our future financial performance is dependent, in part, on our efforts to
reduce our cost structure through various cost reduction initiatives. Successful execution of our cost reduction initiatives is not
assured and there are several obstacles to success, including our ability to enable the information technology and business
process required for these efforts, as well as the timing of the transition to our business services center. In addition, there can be
no assurance that our efforts, if properly executed, will result in our desired outcome of improved financial performance.
Our expansion strategy involves risks.
We may seek to acquire companies or interests in companies or enter into joint ventures that complement our business, and our
inability to complete acquisitions, integrate acquired companies successfully or enter into joint ventures may render us less
competitive. At any given time, we may be evaluating one or more acquisitions or engaging in acquisition negotiations. We
cannot be sure that we will be able to continue to identify acquisition candidates or joint venture partners on commercially
reasonable terms or at all. If we make acquisitions, we also cannot be sure that any benefits anticipated from the acquisitions
will actually be realized. Likewise, we cannot be sure that we will be able to obtain necessary financing for acquisitions. Such
financing could be restricted by the terms of our debt agreements or it could be more expensive than our current debt. The
amount of such debt financing for acquisitions could be significant and the terms of such debt instruments could be more
restrictive than our current covenants. In addition, our ability to control the planning and operations of our joint ventures and
other less than majority-owned affiliates may be subject to numerous restrictions imposed by the joint venture agreements and
majority stockholders. Our joint venture partners may also have interests which differ from ours.
The process of integrating acquired operations into our existing operations may result in operating, contract and supply chain
difficulties, such as the failure to retain clients or management personnel and problems coordinating technology and supply
chain arrangements. Also, in connection with any acquisition, we could fail to discover liabilities of the acquired company for
which we may be responsible as a successor owner or operator in spite of any investigation we make prior to the acquisition. In
addition, labor laws in certain countries may require us to retain more employees than would otherwise be optimal from entities
we acquire. Such difficulties may divert significant financial, operational and managerial resources from our existing
operations, and make it more difficult to achieve our operating and strategic objectives. The diversion of management attention,
particularly in a difficult operating environment, may affect our sales. Similarly, our business depends on effective information
technology systems and implementation delays or poor execution of the integration of different information technology systems
could disrupt our operations and increase costs. Possible future acquisitions could result in the incurrence of additional debt and
related interest expense or contingent liabilities and amortization expenses related to intangible assets, which could have a
material adverse effect on our financial condition, operating results and/or cash flow. In addition, goodwill and other intangible
assets resulting from business combinations represents a significant portion of our assets. If the goodwill or other intangible
assets were deemed to be impaired, we would need to take a charge to earnings to write down these assets to its fair value.
A failure to maintain food safety throughout our supply chain and food-borne illness concerns may result in reputational
harm and claims of illness or injury that could adversely affect us.
Food safety is a top priority for us and we dedicate substantial resources to ensuring that our consumers enjoy safe, quality food
products. Claims of illness or injury relating to food quality or food handling are common in the food service industry, and a
number of these claims may exist at any given time. Because food safety issues could be experienced at the source or by food
suppliers or distributors, food safety could, in part, be out of our control. Regardless of the source or cause, any report of food-
borne illness or other food safety issues such as food tampering or contamination at one of our locations could adversely impact
our reputation, hindering our ability to renew contracts on favorable terms or to obtain new business, and have a negative
impact on our sales. Even instances of food-borne illness, food tampering or contamination at a location served by one of our
competitors could result in negative publicity regarding the food service industry generally and could negatively impact our
sales. Future food safety issues may also from time to time disrupt our business. In addition, product recalls or health concerns
associated with food contamination may also increase our raw materials costs.
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Aramark 2016 Form 10-K Laws and governmental regulations relating to food and beverages may subject us to significant liability.
The laws and regulations relating to each of our food and support services segments are numerous and complex. A variety of
laws and regulations at various governmental levels relating to the handling, preparation and serving of food (including, in
some cases, requirements relating to the temperature of food), and the cleanliness of food production facilities and the hygiene
of food-handling personnel are enforced primarily at the local public health department level. There can be no assurance that we
are in full compliance with all applicable laws and regulations at all times or that we will be able to comply with any future
laws and regulations. Furthermore, legislation and regulatory attention to food safety is very high. Additional or amended laws
or regulations in this area may significantly increase the cost of compliance or expose us to liabilities.
We serve alcoholic beverages at many facilities, and must comply with applicable licensing laws, as well as state and local
service laws, commonly called dram shop statutes. Dram shop statutes generally prohibit serving alcoholic beverages to certain
persons, such as an individual who is visibly intoxicated or a minor. If we violate dram shop laws, we may be liable to the
patron and/or third parties for the acts of the patron. Although we sponsor regular training programs designed to minimize the
likelihood of such a situation and to take advantage of certain safe harbors and affirmative defenses established for the benefit
of alcoholic beverages service providers, we cannot guarantee that visibly intoxicated or minor patrons will not be served or
that liability for their acts will not be imposed on us. There can be no assurance that additional laws or regulations in this area
would not limit our activities in the future or significantly increase the cost of regulatory compliance. We must also obtain and
comply with the terms of licenses in order to sell alcoholic beverages in the states in which we serve alcoholic beverages. Some
of our contracts require us to pay liquidated damages during any period in which the liquor license for the facility is suspended
as a result of our actions, and most contracts are subject to termination if the liquor license for the facility is lost as a result of
our actions.
If we fail to comply with requirements imposed by applicable law or other governmental regulations, we could become
subject to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and
adversely affect our business.
We are subject to governmental regulation at the federal, state, international, national, provincial and local levels in many areas
of our business, such as employment laws, wage and hour laws, discrimination laws, immigration laws, human health and
safety laws, import and export controls and customs laws, environmental laws, false claims or whistleblower statutes, minority,
women and disadvantaged business enterprise statutes, tax codes, antitrust and competition laws, consumer protection statutes,
procurement regulations, intellectual property laws, food safety, labeling and sanitation laws, governmentally funded
entitlement programs and cost and accounting principles, the Foreign Corrupt Practices Act, the U.K. Bribery Act, other anti-
corruption laws, lobbying laws, motor carrier safety laws, data privacy and security laws and alcohol licensing and service
laws.
From time to time, governmental agencies have conducted reviews and audits of certain of our practices as part of routine
investigations of providers of services under government contracts, or otherwise. Like others in our business, we also receive
requests for information from government agencies in connection with these reviews and audits. While we attempt to comply
with all applicable laws and regulations, there can be no assurance that we are in full compliance with all applicable laws and
regulations or interpretations of these laws and regulations at all times or that we will be able to comply with any future laws,
regulations or interpretations of these laws and regulations.
If we fail to comply with applicable laws and regulations, including those referred to above, we may be subject to
investigations, criminal sanctions or civil remedies, including fines, penalties, damages, reimbursement, injunctions, seizures,
disgorgements or debarments from government contracts or the loss of liquor licenses. The cost of compliance or the
consequences of non-compliance, including debarments, could have a material adverse effect on our business and results of
operations. In addition, government agencies may make changes in the regulatory frameworks within which we operate that
may require either the corporation as a whole or individual businesses to incur substantial increases in costs in order to comply
with such laws and regulations.
Changes in, new interpretations of or changes in the enforcement of the governmental regulatory framework may affect our
contracts and contract terms and may reduce our sales or profits.
A portion of our sales, estimated to be approximately 15% in fiscal 2016, is derived from business with U.S. federal, state and
local governments and agencies. Changes or new interpretations in, or changes in the enforcement of, the statutory or regulatory
framework applicable to services provided under government contracts or bidding procedures, including an adverse change in
government spending policies or appropriations, budget priorities or revenue levels, particularly by our food and support
services businesses, could result in fewer new contracts or contract renewals, modifications to the methods we apply to price
government contracts, or in contract terms of shorter duration than we have historically experienced. Any of these changes
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Aramark 2016 Form 10-K could result in lower sales or profits than we have historically achieved, which could have an adverse effect on our results of
operations.
Environmental regulations may subject us to significant liability and limit our ability to grow.
We are subject to various environmental protection laws and regulations, including the U.S. Federal Clean Water Act, Clean Air
Act, Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation, and Liability Act and
similar federal, state and local statutes and regulations governing the use, management, and disposal of chemicals and
hazardous materials. In particular, industrial laundries in our uniform rental business use certain detergents and cleaning
chemicals to launder garments and other merchandise. The residues from such detergents and chemicals and residues from
soiled garments and other merchandise laundered at our facilities may result in potential discharges to air and to water (through
sanitary sewer systems and publicly owned treatment works) and may be contained in waste generated by our wastewater
treatment systems.
Our industrial laundries are subject to certain volume and chemical air and water pollution discharge limits, monitoring,
permitting and recordkeeping requirements.
We own or operate aboveground and underground storage tank systems at some locations to store petroleum products for use in
our or our clients' operations. Certain of these storage tank systems also are subject to performance standards, periodic
monitoring, and recordkeeping requirements. We also may use and manage chemicals and hazardous materials in our operations
from time to time. In the course of our business, we may be subject to penalties and fines for non-compliance with
environmental protection laws and regulations and we may settle, or contribute to the settlement of, actions or claims relating to
the management of underground storage tanks and the handling and disposal of chemicals or hazardous materials. We may, in
the future, be required to expend material amounts to rectify the consequences of any such events.
In addition, changes to environmental laws may subject us to additional costs or cause us to change aspects of our business.
Under U.S. federal and state environmental protection laws, as an owner or operator of real estate we may be liable for the costs
of removal or remediation of certain hazardous materials located on or in or migrating from our owned or leased property or our
client's properties, as well as related costs of investigation and property damage, without regard to our fault, knowledge, or
responsibility for the presence of such hazardous materials. There can be no assurance that locations that we own, lease or
otherwise operate, either for ourselves or for our clients, or that we may acquire in the future, have been operated in compliance
with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon us
under such laws or expose us to third-party actions such as tort suits. In addition, such regulations may limit our ability to
identify suitable sites for new or expanded facilities. In connection with our present or past operations and the present or past
operations of our predecessors or companies that we have acquired, hazardous substances may migrate from properties on
which we operate or which were operated by our predecessors or companies we acquired to other properties. We may be subject
to significant liabilities to the extent that human health is adversely affected or the value of such properties is diminished by
such migration.
Our international business faces risks different from those we face in the United States that could have an effect on our
results of operations and financial condition.
A significant portion of our sales is derived from international business. During fiscal 2016, approximately 19% of our sales
were generated outside of North America. We currently have a presence in 17 countries outside of the United States and Canada
with approximately 88,500 personnel. Our international operations are subject to risks that are different from those we face in
the United States, including the requirement to comply with changing, conflicting and unclear national and local regulatory
requirements; Foreign Corrupt Practices Act, U.K. Bribery Act and other anti-corruption law compliance matters; potential
difficulties in staffing and labor disputes; differing local labor laws; managing and obtaining support and distribution for local
operations; credit risk or financial condition of local clients; potential imposition of restrictions on investments; potentially
adverse tax consequences, including imposition or increase of withholding, VAT and other taxes on remittances and other
payments by subsidiaries; foreign exchange controls; and local political and social conditions. In addition, the operating results
of our non-U.S. subsidiaries are translated into U.S. dollars and those results are affected by movements in foreign currencies
relative to the U.S. dollar.
We intend to continue to develop our business in emerging countries over the long term. Emerging international operations
present several additional risks, including greater fluctuation in currencies relative to the U.S. dollar; economic and
governmental instability; civil disturbances; volatility in gross domestic production; and nationalization and expropriation of
private assets.
There can be no assurance that the foregoing factors will not have a material adverse effect on our international operations or on
our consolidated financial condition and results of operations.
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Aramark 2016 Form 10-K Continued or further unionization of our workforce may increase our costs and work stoppages could damage our business.
Approximately 40,000 employees in our North America operations are represented by unions and covered by collective
bargaining agreements. The continued or further unionization of a significantly greater portion of our workforce could increase
our overall costs at the affected locations and adversely affect our flexibility to run our business in the most efficient manner to
remain competitive or acquire new business. In addition, any significant increase in the number of work stoppages at our
various operations could adversely affect our business, financial condition or results of operations.
We may incur significant liability as a result of our participation in multiemployer defined benefit pension plans.
We operate at several locations under collective bargaining agreements. Under some of these agreements, we are obligated to
contribute to multiemployer defined benefit pension plans. As a contributing employer to such plans, should we trigger either a
“complete” or a “partial withdrawal,” we would be subject to withdrawal liability (or partial withdrawal liability) for our
proportionate share of any unfunded vested benefits. In addition, if a multiemployer defined benefit pension plan fails to satisfy
the minimum funding standards, we could be liable to increase our contributions to meet minimum funding standards. Also, if a
participating employer withdraws from the plan or experiences financial difficulty, including bankruptcy, our obligation could
increase. The financial status of certain of the plans to which we contribute has deteriorated in the recent past and continues to
deteriorate. In addition, any increased funding obligations for underfunded multiemployer defined benefit pension plans could
have an adverse financial impact on us.
Risks associated with the suppliers from whom our products are sourced could adversely affect our results of operations.
The raw materials we use in our business and the finished products we sell are sourced from a wide variety of domestic and
international suppliers. We seek to require our suppliers to comply with applicable laws and otherwise be certified as meeting
our supplier standards of conduct. Our ability to find qualified suppliers who meet our standards, and to access raw materials
and finished products in a timely and efficient manner is a challenge, especially with respect to suppliers located and goods
sourced outside the United States. In addition, insolvency experienced by suppliers could make it difficult for us to source the
items we need to run our business. Political and economic stability in the countries in which foreign suppliers are located, the
financial stability of suppliers, suppliers' failure to meet our supplier standards, labor problems experienced by our suppliers,
the availability of raw materials to suppliers, currency exchange rates, transport availability and cost, inflation and other factors
relating to the suppliers and the countries in which they are located are beyond our control. In addition, United States foreign
trade policies, tariffs and other impositions on imported goods, trade sanctions imposed on certain countries, the limitation on
the importation of certain types of goods or of goods containing certain materials from other countries and other factors relating
to foreign trade are beyond our control. In addition, if one of our suppliers were to violate the law, our reputation may be
harmed simply due to our association with that supplier. These and other factors affecting our suppliers and our access to raw
materials and finished products could adversely affect our results of operations.
In fiscal 2016, one distributor distributed approximately 52% of our food and non-food products in the United States and
Canada, and if our relationship or their business were to be disrupted, we could experience disruptions to our operations
and cost structure.
Although we negotiate the pricing and other terms for the majority of our purchases of food and related products in the U.S. and
Canada directly with national manufacturers, we purchase these products and other items through Sysco Corporation and other
distributors. Sysco, the main U.S. and Canadian distributor of our food and non-food products, and other distributors are
responsible for tracking our orders and delivering products to our specific locations. If our relationship with, or the business of,
Sysco were to be disrupted, we would have to arrange alternative distributors and our operations and cost structure could be
adversely affected in the short term. Similarly, a sudden termination of the relationship with a significant provider in other
geographic areas could in the short term adversely affect our ability to provide services and disrupt our client relationships in
such areas.
Our business may suffer if we are unable to hire and retain sufficient qualified personnel or if labor costs increase.
From time to time, we have had difficulty in hiring and retaining qualified management personnel, particularly at the entry
management level. We will continue to have significant requirements to hire such personnel. In the past, at times when the
United States or other geographic regions have periodically experienced reduced levels of unemployment, there has been a
shortage of qualified workers at all levels. Given that our workforce requires large numbers of entry level and skilled workers
and managers, low levels of unemployment when such conditions exist or mismatches between the labor markets and our skill
requirements can compromise our ability in certain areas of our businesses to continue to provide quality service or compete for
new business. We also regularly hire a large number of part-time and seasonal workers, particularly in our food and support
services segments. Any difficulty we may encounter in hiring such workers could result in significant increases in labor costs,
which could have a material adverse effect on our business, financial condition and results of operations. Competition for labor
has at times resulted in wage increases in the past and future competition could substantially increase our labor costs. Due to the
15
15
Aramark 2016 Form 10-K labor intensive nature of our businesses and the fact that 70% of our food and support services segments' sales are from profit
and loss contracts under which we have limited ability to pass along cost increases, a shortage of labor or increases in wage
levels in excess of normal levels could have a material adverse effect on our results of operations.
Healthcare reform legislation could have an impact on our business.
During 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010
were signed into law in the United States. Certain of the provisions that have increased our healthcare costs include the removal
of annual plan limits, the mandate that health plans provide 100% coverage on expanded preventative care and new eligibility
rules, which cover more variable hour employees than we have done in the past. A number of the provisions of the legislation
have been delayed and/or phased in over time, such as the excise tax on high cost coverage. Further regulatory action is
expected as a result of the outcome of the recent presidential election. Such action could result in changes to healthcare
eligibility, design and cost structure that could have an adverse impact on our business and operating costs.
Our business is contract intensive and may lead to client disputes.
Our business is contract intensive and we are parties to many contracts with clients all over the world. Our client interest
contracts provide that client billings, and for some contracts the sharing of profits and losses, are based on our determinations of
costs of service. Contract terms under which we base these determinations and, for certain government contracts, regulations
governing our cost determinations, may be subject to differing interpretations which could result in disputes with our clients
from time to time. Clients generally have the right to audit our contracts, and we periodically review our compliance with
contract terms and provisions. If clients were to dispute our contract determinations, the resolution of such disputes in a manner
adverse to our interests could negatively affect sales and operating results. While we do not believe any reviews, audits or other
such matters should result in material adjustments, if a large number of our client arrangements were modified in response to
any such matter, the effect could be materially adverse to our business or results of operations.
Our operations are seasonal and quarter to quarter comparisons may not be a good indicator of our performance.
In our first and second fiscal quarters, within the FSS North America segment, there historically has been a lower level of sales
to sports and leisure clients, which is partly offset by increased activity in educational operations. In our third and fourth fiscal
quarters, there historically has been a significant increase in sales to sports and leisure clients, which is partially offset by the
effect of summer recess in educational operations. For these reasons, a quarter to quarter comparison is not a good indication of
our performance or how we will perform in the future.
Our operations and reputation may be adversely affected by disruptions to or breaches of our information security systems
or if our data is otherwise compromised.
We are increasingly utilizing information technology systems to enhance the efficiency of our business. We maintain
confidential, proprietary and personal information about, or on behalf of, our potential, current and former clients, customers,
employees and other third parties in these systems or engage third parties in connection with storage and processing of this
information. Our systems and the systems of our vendors are subject to damage or interruption from power outages, computer
or telecommunication failures, computer viruses and catastrophic events. These systems are also vulnerable to an increasing
threat of rapidly evolving cyber-based attacks, including malicious software, attempts to gain unauthorized access to data and
other electronic security breaches. The development and maintenance of these systems is costly and requires ongoing
monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite
our efforts and the efforts of our vendors, the possibility of risks described above, particularly cyber-based attacks, cannot be
eliminated entirely, and each of these risks remain. In addition, we provide confidential, proprietary and personal information to
third parties when it is necessary to pursue business objectives. While we obtain assurances that these third parties will protect
this information, there is a risk the confidentiality of data held by third parties may be compromised. In addition, data and
security breaches can also occur as the result of non-technical issues, including intentional or inadvertent breach by our
employees or others with whom we have a relationship. Any damage to, or compromise or breach of our systems or the systems
of our vendors could impair our ability to conduct our business, and result in a violation of applicable privacy and other laws,
significant legal and financial exposure, including litigation and other potential liability, and a loss of confidence in our security
measures, which could have an adverse effect on our results of operations and our reputation as a brand, business partner or an
employer.
Failure to maintain effective internal controls could adversely affect our business and stock price.
Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal
control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting in
accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal
control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of
our financial statements or fraud. Any failure to maintain an effective system of internal control over financial reporting could
16
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Aramark 2016 Form 10-K limit our ability to report our financial results accurately and timely or to detect and prevent fraud. A significant financial
reporting failure or material weakness in internal control over financial reporting could cause a loss of investor confidence and
decline in the market price of our common stock.
Risks Related to Our Indebtedness
Our leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to
changes in the economy or our industries, expose us to interest rate risk to the extent of our variable rate debt and prevent
us from meeting our obligations.
We are highly leveraged. As of September 30, 2016, our outstanding indebtedness was $5,270.0 million. We also had additional
availability of $713.5 million under our revolving credit facilities as of that date.
This degree of leverage could have important consequences, including:
•
exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our
senior secured credit facilities and our receivables facility, are at variable rates of interest;
• making it more difficult for us to make payments on our indebtedness;
•
•
•
•
•
increasing our vulnerability to general economic and industry conditions;
requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and
interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital
expenditures and future business opportunities;
restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
limiting our ability to obtain additional financing for working capital, capital expenditures, debt service
requirements, acquisitions and general corporate or other purposes; and
limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage
compared to our competitors who are less highly leveraged.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future, subject to the restrictions
contained in our senior secured credit facilities and the indentures governing our senior notes. If new indebtedness is added to
our current debt levels, the related risks that we now face could increase.
If our financial performance were to deteriorate, we may not be able to generate sufficient cash to service all of our
indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be
successful.
Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and
operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business
and other factors beyond our control. While we believe that we currently have adequate cash flows to service our indebtedness,
if our financial performance were to deteriorate significantly, we might be unable to maintain a level of cash flows from
operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
If, due to such a deterioration in our financial performance, our cash flows and capital resources were to be insufficient to fund
our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek
additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not
permit us to meet our scheduled debt service obligations. In addition, if we were required to raise additional capital in the
current financial markets, the terms of such financing, if available, could result in higher costs and greater restrictions on our
business. In addition, although none of our long-term borrowings mature prior to 2019, if we were to need to refinance our
existing indebtedness, the conditions in the financial markets at that time could make it difficult to refinance our existing
indebtedness on acceptable terms or at all. If such alternative measures proved unsuccessful, we could face substantial liquidity
problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Our
senior secured credit agreement and the indentures governing our senior notes restrict our ability to dispose of assets and use
the proceeds from any disposition of assets and to refinance our indebtedness. We may not be able to consummate those
dispositions or to obtain the proceeds that we could realize from them and these proceeds may not be adequate to meet any debt
service obligations then due.
17
17
Aramark 2016 Form 10-K Our debt agreements contain restrictions that limit our flexibility in operating our business.
Our senior secured credit agreement and the indentures governing our senior notes contain various covenants that limit our
ability to engage in specified types of transactions. These covenants limit our and our restricted subsidiaries' ability to, among
other things:
•
•
incur additional indebtedness, refinance or restructure indebtedness or issue certain preferred shares;
pay dividends on, repurchase or make distributions in respect of our capital stock, make unscheduled payments on
our notes, repurchase or redeem our senior notes or make other restricted payments;
• make certain investments;
•
•
•
•
sell certain assets;
create liens;
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
enter into certain transactions with our affiliates.
In addition, our senior secured revolving credit facility requires us to satisfy and maintain specified financial ratios and other
financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and in
the event of a significant deterioration of our financial performance, there can be no assurance that we will satisfy those ratios
and tests. A breach of any of these covenants could result in a default under the senior secured credit agreement. Upon our
failure to maintain compliance with these covenants that is not waived by the lenders under the revolving credit facility, the
lenders under the senior secured credit facilities could elect to declare all amounts outstanding under the senior secured credit
facilities to be immediately due and payable and terminate all commitments to extend further credit under such facilities. If we
were unable to repay those amounts, the lenders under the senior secured credit facilities could proceed against the collateral
granted to them to secure that indebtedness. We have pledged a significant portion of our assets as collateral under the senior
secured credit agreement. If the lenders under the senior secured credit facilities accelerate the repayment of borrowings, there
can be no assurance that we will have sufficient assets to repay those borrowings, as well as our unsecured indebtedness. If our
senior secured indebtedness was accelerated by the lenders as a result of a default, our senior notes may become due and
payable as well. Any such acceleration may also constitute an amortization event under our receivables facility, which could
result in the amount outstanding under that facility becoming due and payable.
Risks Related to Ownership of Our Common Stock
Our share price may change significantly, and you may not be able to resell shares of our common stock at or above the
price you paid or at all, and you could lose all or part of your investment as a result.
We completed our initial public offering on December 17, 2013. Since our initial public offering, the trading price of our
common stock, as reported by the NYSE, has been and is likely to continue to be volatile and could fluctuate due to a number
of factors such as those listed in “—Risks Related to Our Business” and the following, some of which are beyond our control:
•
•
•
•
•
•
•
•
•
quarterly variations in our results of operations;
results of operations that vary from the expectations of securities analysts and investors;
results of operations that vary from those of our competitors;
changes in expectations as to our future financial performance, including financial estimates by securities analysts
and investors;
announcements by us, our competitors or our vendors of significant contracts, acquisitions, joint marketing
relationships, joint ventures or capital commitments;
announcements by third parties of significant claims or proceedings against us;
future sales of our common stock;
general domestic and international economic conditions; and
unexpected and sudden changes in senior management.
Furthermore, the stock market has experienced extreme volatility that, in some cases, has been unrelated or disproportionate to
the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the
market price of our common stock, regardless of our actual operating performance.
18
18
Aramark 2016 Form 10-K In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were
involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management
from our business regardless of the outcome of such litigation.
There can be no assurance that we will continue to pay dividends on our common stock, and our indebtedness could limit
our ability to pay dividends on our common stock.
Payment of cash dividends on our common stock is subject to our compliance with applicable law and depends on, among other
things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions,
business prospects and other factors that our board of directors may deem relevant. Our senior secured credit facilities and the
indentures governing our senior notes contain, and the terms of any future indebtedness we or our subsidiaries incur may
contain, limitations on our ability to pay dividends. For more information, see Item 5. "Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividends." Although we have paid cash dividends in
the past, there can be no assurance that we will continue to pay any dividend in the future.
Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have an anti-
takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control
transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over
the market price for the shares held by our stockholders.
These provisions provide for, among other things:
•
•
•
•
•
the ability of our board of directors to issue one or more series of preferred stock;
advance notice for nominations of directors by stockholders and for stockholders to include matters to be
considered at our annual meetings;
certain limitations on convening special stockholder meetings;
the removal of directors only upon the affirmative vote of the holders of at least 75% in voting power of all the
then-outstanding common stock of the company entitled to vote thereon, voting together as a single class; and
that certain provisions may be amended only by the affirmative vote of the holders of at least 75% in voting power
of all the then-outstanding common stock of the company entitled to vote thereon, voting together as a single
class.
These anti-takeover provisions could make it more difficult for a third-party to acquire us, even if the third-party's offer may be
considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a
premium for their shares.
19
19
Aramark 2016 Form 10-K Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole
and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit
our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other
employees.
Our amended and restated certificate of incorporation provides that, with certain limited exceptions, unless we consent in
writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive
forum for any stockholder (including any beneficial owner) to bring (i) any derivative action or proceeding brought on our
behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any director or officer of the Company owed to us
or our stockholders, creditors or other constituents, (iii) any action asserting a claim against us or any director or officer of the
Company arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate
of incorporation or our amended and restated bylaws, or (iv) any action asserting a claim against the Company or any director
or officer of the Company governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any
interest in shares of our capital stock is deemed to have received notice of and consented to the foregoing provisions. This
choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for
disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors,
officers and employees. Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in
respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving
such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
If securities or industry research analysts do not publish or cease publishing research or reports about our business or if
they issue unfavorable commentary or downgrade our common stock, our share price and trading volume could decline.
The trading market for our common stock relies in part on the research and reports that securities and industry research analysts
publish about us, our industry, our competitors and our business. We do not have any control over these analysts. Our share
price and trading volumes could decline if one or more securities or industry analysts downgrade our common stock, issue
unfavorable commentary about us, our industry or our business, cease to cover our company or fail to regularly publish reports
about us, our industry or our business.
Item 1B.
Unresolved Staff Comments
Not Applicable.
Item 2.
Properties
Our principal executive offices are leased at Aramark Tower, 1101 Market Street, Philadelphia, Pennsylvania 19107. Our
principal real estate is primarily comprised of Uniform facilities. As of September 30, 2016, we operated 283 service facilities
in our Uniform segment, consisting of industrial laundries, cleanroom laundries, warehouses, distribution centers, satellites,
depots, stand alone garages, shared service centers and administrative offices that are located in 40 states, Mexico, Canada and
Puerto Rico. Of these, approximately 53% are leased and approximately 47% are owned. We own eight buildings that we use in
our FSS North America segment, including several office/warehouse spaces, and we lease 107 premises, consisting of offices,
office/warehouses and distribution centers. In addition, we own a distribution center, two offices and five other properties and
lease 118 facilities throughout the world that we use in our FSS International segment. We also maintain other real estate and
leasehold improvements, which we use in the Uniform and FSS segments. No individual parcel of real estate owned or leased is
of material significance to our total assets.
20
20
Aramark 2016 Form 10-K Item 3.
Legal Proceedings
Our business is subject to various federal, state and local laws and regulations governing, among other things, the generation,
handling, storage, transportation, treatment and disposal of water wastes and other substances. We engage in informal
settlement discussions with federal, state, local and foreign authorities regarding allegations of violations of environmental laws
in connection with our operations or businesses conducted by our predecessors or companies that we have acquired, the
aggregate amount of which and related remediation costs we do not believe should have a material adverse effect on our
financial condition or results of operations.
From time to time, the Company and its subsidiaries are party to various legal actions, proceedings and investigations involving
claims incidental to the conduct of their business, including those brought by clients, consumers, employees, government
entities and third parties under, among others, federal, state, international, national, provincial and local employment laws,
wage and hour laws, discrimination laws, immigration laws, human health and safety laws, import and export controls and
customs laws, environmental laws, false claims or whistleblower statutes, minority, women and disadvantaged business
enterprise statutes, tax codes, antitrust and competition laws, consumer protection statutes, procurement regulations, intellectual
property laws, food safety and sanitation laws, cost and accounting principles, the Foreign Corrupt Practices Act, the U.K.
Bribery Act, other anti-corruption laws, lobbying laws, motor carrier safety laws, data privacy and security laws and alcohol
licensing and service laws, or alleging negligence and/or breaches of contractual and other obligations. Based on information
currently available, advice of counsel, available insurance coverage, established reserves and other resources, the Company
does not believe that any such actions, proceedings or investigations are likely to be, individually or in the aggregate, material
to its business, financial condition, results of operations or cash flows. However, in the event of unexpected further
developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be
materially adverse to the Company's business, financial condition, results of operations or cash flows.
Item 4.
Mine Safety Disclosures
Not Applicable.
______________________________________
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21
Aramark 2016 Form 10-K Executive Officers of the Registrant
Our executive officers as of November 23, 2016 are as follows:
Name
Eric J. Foss
Stephen P. Bramlage, Jr.
Harrald F. Kroeker
Lynn B. McKee
Brian P. Pressler
Stephen R. Reynolds
Age
Position
58
46
59
61
41
58
Chairman, President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Senior Vice President, Transformation
Executive Vice President, Human Resources
Senior Vice President, Controller and Chief Accounting Officer
Executive Vice President, General Counsel and Secretary
James J. Tarangelo
43 Vice President and Treasurer
With
Aramark
Since
2012
2015
2013
1980
2002
2012
2003
Eric J. Foss has been our Chairman of the Board since February 2015 and our President and Chief Executive Officer since
May 2012. Before joining us, Mr. Foss served as Chief Executive Officer of Pepsi Beverages Company from February 2010
until December 2011. Prior to that Mr. Foss served as Chairman and Chief Executive Officer of The Pepsi Bottling Group from
2008 until 2010; President and Chief Executive Officer from 2006 until 2007; and Chief Operating Officer from 2005 until
2006. Mr. Foss serves on the board of CIGNA Corporation and previously served on the board of UDR, Inc.
Stephen P. Bramlage, Jr. was appointed Executive Vice President and Chief Financial Officer in April 2015. Prior to joining
us, Mr. Bramlage served as Senior Vice President and Chief Financial Officer of Owens-Illinois, Inc. from June 2012 to March
2015. Prior to that, he served as President of Owens-Illinois Asia Pacific from August 2011 to June 2012; General Manager of
Owens-Illinois New Zealand from August 2010 to July 2011; Vice President of Finance of Owens-Illinois, Inc. from March
2008 to July 2010; Vice President and Chief Financial Officer of Owens-Illinois Europe in 2008; and Vice President and
Treasurer of Owens-Illinois, Inc. from 2006 to 2008.
Harrald F. Kroeker has been the Senior Vice President, Transformation since December 2014. Prior to that he was our Chief
Operating Officer - Europe from November 2013 to November 2014. Before joining us, Mr. Kroeker was an executive with
Dean Foods Company serving as its Senior Vice President and Chief Operating Officer, Dairy Group from November 2006 to
January 2007 and as President, Fresh Daily Direct, from January 2007 to October 2011.
Lynn B. McKee was appointed Executive Vice President, Human Resources in May 2004. From August 2012 to August 2013,
Ms. McKee served as Executive Vice President, Human Resources and Communications. From January 2004 to May 2004, Ms.
McKee served as our Senior Vice President of Human Resources and from September 2001 to December 2003, she served as
Senior Vice President of Human Resources for our Food and Support Services Group. From August 1998 to August 2001, she
served as our Staff Vice President, Executive Development and Compensation. Ms. McKee serves on the board of directors of
Bryn Mawr Bank Co.
Brian P. Pressler was appointed Senior Vice President, Controller and Chief Accounting Officer in June 2016. From January
2014 to May 2016, he served as our Vice President, Finance, Education and from January 2013 to January 2014 as our Vice
President, Finance, International. Mr. Pressler served as our Vice President, Finance, Educational Services, K-12 from
February 2011 to January 2013 and as Associate Vice President, Finance, Educational Services, K-12 from September 2008 to
February 2011.
Stephen R. Reynolds was appointed Executive Vice President, General Counsel and Secretary in September 2012. Before
joining us, Mr. Reynolds was an executive with Alcatel-Lucent for seven years, having most recently served as Senior Vice
President and General Counsel from January 2006 to August 2012.
James J. Tarangelo was appointed Vice President and Treasurer in November 2016. He has been with Aramark since 2003 and
has held positions of progressive responsibility in operations finance, financial planning and international finance. Mr.
Tarangelo served as our Vice President, Finance, International from January 2014 to November 2016. He served as Associate
Vice President, Planning & Operations Finance from 2013 to 2014 and Associate Vice President, Finance, International from
2008 to 2013.
22
22
Aramark 2016 Form 10-K PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Shares of our common stock began trading on December 12, 2013 and are quoted on the New York Stock Exchange (“NYSE”)
under the ticker symbol “ARMK.” Prior to that date, there was no public market for our common stock. As of October 28,
2016, there were approximately 325 holders of record of our outstanding common stock. This does not include persons who
hold our common stock in nominee or “street name” accounts through brokers or banks. The following table sets forth the high
and low closing sales prices per share of our common stock during the periods indicated and the amount of cash dividends
declared per share:
Fiscal Period
Quarter ended January 2, 2015
Quarter ended April 3, 2015
Quarter ended July 3, 2015
Quarter ended October 2, 2015
Quarter ended January 1, 2016
Quarter ended April 1, 2016
Quarter ended July 1, 2016
Quarter ended September 30, 2016
High
Low
$ 31.43
$ 25.03
$ 32.70
$ 29.63
$ 32.35
$ 30.26
$ 33.78
$ 28.09
$ 33.74
$ 29.24
$ 33.28
$ 29.57
$ 34.16
$ 31.56
$ 38.21
$ 33.12
$
$
$
$
$
$
$
$
Cash
Dividend
Declared
Per Share
0.08625
0.08625
0.08625
0.08625
0.09500
0.09500
0.09500
0.09500
Dividends
The Company declared quarterly cash dividends of $0.095 per share to all common stockholders of record at the close of
business on November 17, 2015, February 16, 2016, May 18, 2016 and August 16, 2016, which were paid on December 9,
2015, March 7, 2016, June 7, 2016 and September 6, 2016, respectively. The Company declared quarterly cash dividends of
$0.08625 per share to all common stockholders of record at the close of business on November 25, 2014, February 17, 2015,
May 20, 2015 and August 18, 2015, which were paid on December 16, 2014, March 9, 2015, June 9, 2015 and September 8,
2015, respectively. On November 9, 2016, a $0.103 dividend per share of common stock was declared, payable on December 8,
2016, to shareholders of record on the close of business on November 28, 2016.
We intend to continue to pay cash dividends on our common stock, subject to our compliance with applicable law, and
depending on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements,
contractual restrictions, restrictions in our debt agreements, business prospects and other factors that our Board of Directors
may deem relevant. However, the payment of any future dividends will be at the discretion of our Board of Directors and our
Board of Directors may, at any time, determine not to continue to declare quarterly dividends.
Our ability to pay dividends depends on our receipt of cash dividends from our main operating subsidiary, Aramark Services,
Inc., formerly known as ARAMARK Corporation, which may further restrict our ability to pay dividends as a result of
covenants under any existing and future outstanding indebtedness of Aramark Services, Inc. In particular, the ability of Aramark
Services, Inc. to distribute cash to the Company to pay dividends is limited by covenants in Aramark Services, Inc.’s Amended
and Restated Credit Agreement dated as of February 24, 2014, as amended from time to time, the indentures governing
Aramark Services, Inc.'s 5.75% Senior Notes due 2020, 5.125% Senior Notes due 2024 and 4.75% Senior Notes due 2026. See
Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a description of the
restrictions on our ability to pay dividends and Note 5 to the audited consolidated financial statements included elsewhere in
this Annual Report on Form 10-K.
Stock Price Performance
This performance graph and related information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or
incorporated by reference into any filing of Aramark under the Securities Act or the Exchange Act, except as shall be expressly
set forth by specific reference in such filing.
23
23
Aramark 2016 Form 10-K The following graph shows a comparison from December 12, 2013 (the date our common stock commenced trading on the
New York Stock Exchange) through September 30, 2016 of the cumulative total return for our common stock, The Standard &
Poor’s (“S&P”) 500 Stock Index and The Dow Jones Consumer Non-Cyclical Index. The graph assumes that $100 was invested
in the Company’s common stock and in each index at the market close on December 12, 2013 and assumes that all dividends
were reinvested. The stock price performance of the following graph is not necessarily indicative of future stock price
performance.
Aramark
S&P 500
Dow Jones Consumer Non-Cyclical Index
Unregistered Sales of Equity Securities
December 12, 2013
October 3, 2014
October 2, 2015
September 30, 2016
$100.0
$100.0
$100.0
$133.3
$112.7
$107.8
$152.2
$114.0
$122.9
$194.9
$121.3
$125.8
There were no unregistered sales of equity securities during the fiscal year ended September 30, 2016 which have not been
previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K.
Purchases of Equity Securities by the Issuer
There were no repurchases of equity securities by the Company in the fourth fiscal quarter ended September 30, 2016.
24
24
Aramark 2016 Form 10-K Item 6.
Selected Consolidated Financial Data
The following table presents selected consolidated financial data. This information should be read in conjunction with the
audited consolidated financial statements and the related notes thereto, Management’s Discussion and Analysis of Financial
Condition and Results of Operations, and Risk Factors sections, each included elsewhere in this Annual Report on Form 10-K.
(dollars in millions, except per share
amounts)
Fiscal Year Ended on or near
September 30
(1)
2016
2015
2014
2013
2012
Income Statement Data:
Sales
Depreciation and amortization
Operating income
Interest and other financing costs, net
Income from continuing operations
Net income
Net income attributable to Aramark stockholders
Basic earnings per share attributable to Aramark
stockholders
Diluted earnings per share attributable to
Aramark stockholders
Cash dividends declared per common share(2)
Ratio of earnings to fixed charges(3)
Balance Sheet Data (at period end):
Total assets
Long-term borrowings(4)(5)
Stockholders' Equity(2)(5)
$ 14,415.8
495.8
746.3
315.4
288.2
288.2
287.8
$ 14,329.1
504.0
627.9
285.9
237.0
237.0
235.9
$ 14,832.9
521.6
564.6
334.9
149.5
149.5
149.0
$ 13,945.7
542.1
514.4
423.8
71.4
70.4
69.4
$ 13,505.4
529.2
581.8
456.8
106.9
107.2
103.6
$1.19
$1.16
$0.39
2.1x
$0.99
$0.96
$0.35
1.9x
$0.66
$0.63
$0.23
1.5x
$0.34
$0.33
$—
1.2x
$0.51
$0.49
$—
1.2x
$ 10,582.1
5,223.5
2,161.0
$ 10,196.4
5,184.6
1,883.4
$ 10,455.7
5,355.8
1,718.0
$ 10,267.1
5,758.2
903.7
$ 10,487.4
5,971.3
966.9
(1)
(2)
(3)
(4)
Our fiscal year ends on the Friday nearest to September 30th. Fiscal years 2016, 2015, 2014, 2013 and 2012 refer to the
fiscal years ended September 30, 2016, October 2, 2015, October 3, 2014, September 27, 2013 and September 28, 2012,
respectively. Fiscal 2014 was a fifty-three week year. All other periods presented were fifty-two week years.
During fiscal 2016, the Company paid cash dividends totaling $92.1 million ($0.095 per share per quarter). During fiscal
2015, the Company paid cash dividends totaling $81.9 million ($0.08625 per share per quarter). During fiscal 2014, the
Company paid cash dividends totaling $52.2 million ($0.075 per share during the second, third and fourth quarters of
fiscal 2014).
For the purpose of determining the ratio of earnings to fixed charges, earnings include pre-tax income from continuing
operations plus fixed charges (excluding capitalized interest). Fixed charges consist of interest on all indebtedness
(including capitalized interest) plus that portion of operating lease rentals representative of the interest factor (deemed to
be one-third of operating lease rentals).
During fiscal 2013, the Company completed a refinancing, repurchasing Aramark Services, Inc.’s outstanding 8.50%
Senior Notes due 2015 and Senior Floating Rate Notes due 2015 and the Company's 8.625% / 9.375% Senior Notes due
2016. The Company refinanced that debt with new term loan borrowings under its senior secured credit facilities and the
issuance by Aramark Services, Inc. of 5.75% Senior Notes due 2020 (the "2020 Notes"). During fiscal 2016, Aramark
Services, Inc. issued $400 million of 5.125% Senior Notes due 2024, $500 million of additional 5.125% Senior Notes
due 2024 (the "New 2024 Notes") and $500 million of 4.75% Senior Notes due 2026 to repay approximately $194.1
million of 2019 Term Loans and redeem approximately $771.2 million aggregate principal amount of the 2020 Notes.
The Company also made optional prepayments in fiscal 2016 of approximately $160.0 million of outstanding U.S. dollar
term loans and repaid a U.S. dollar denominated term loan of a Canadian subsidiary, due July 2016, that had been
borrowed under the Company's senior secured credit agreement in the amount of $74.1 million,
(5)
On December 17, 2013, the Company completed its initial public offering ("IPO") of 28,000,000 shares of its common
stock at a price of $20.00 per share, raising approximately $524.1 million, net of costs directly related to the IPO. The
Company used the net proceeds to repay borrowings of approximately $154.1 million on the senior secured revolving
credit facility and $370.0 million of outstanding loans under our senior secured term loan facility.
25
25
Aramark 2016 Form 10-K Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations for the fiscal years ended
September 30, 2016, October 2, 2015 and October 3, 2014 should be read in conjunction with Selected Consolidated Financial
Data and our audited consolidated financial statements and the notes to those statements.
On December 17, 2013, Aramark (the "Company", "we", "our" and "us") completed its initial public offering ("IPO") of
28,000,000 shares of its common stock at a price of $20.00 per share. The Company's common stock trades on the New York
Stock Exchange under the symbol "ARMK".
Our discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such
as our plans, objectives, opinions, expectations, anticipations, intentions and beliefs. Actual results and the timing of events
could differ materially from those anticipated in those forward-looking statements as a result of a number of factors, including
those set forth under "Risk Factors," "Special Note About Forward-looking Information" and "Business" sections and
elsewhere in this Annual Report on Form 10-K ("Annual Report"). In the following discussion and analysis of financial
condition and results of operations, certain financial measures may be considered “non-GAAP financial measures” under
Securities and Exchange Commission (“SEC”) rules. These rules require supplemental explanation and reconciliation, which is
provided elsewhere in this Annual Report on Form 10-K.
Overview
Aramark is a leading global provider of food, facilities and uniform services to education, healthcare, business & industry and
sports, leisure & corrections clients. Our core market is North America, which is supplemented by an additional 17-country
footprint. Through our established brand, broad geographic presence and approximately 266,500 employees, we anchor our
business in our partnerships with thousands of education, healthcare, business, sports, leisure & corrections clients. Through
these partnerships we serve millions of consumers including students, patients, employees, sports fans and guests worldwide.
We operate our business in three reportable segments:
•
•
•
Food and Support Services North America ("FSS North America") - Food, refreshment, specialized dietary and
support services, including facility maintenance and housekeeping, provided to business, educational and
healthcare institutions and in sports, leisure and other facilities serving the general public in the United States and
Canada.
Food and Support Services International ("FSS International") - Food, refreshment, specialized dietary and
support services, including facility maintenance and housekeeping, provided to business, educational and
healthcare institutions and in sports, leisure and other facilities serving the general public. We have operations in
17 countries outside FSS North America. Our largest international operations are in the Chile, China, Germany,
Ireland and the United Kingdom, and in each of these countries we are one of the leading food and/or facility
service providers. We also have operations in Japan through our 50% ownership of AIM Services Co., Ltd., which
is a leader in providing outsourced food services in Japan.
Uniform and Career Apparel ("Uniform") - Rental, sale, cleaning, maintenance and delivery of personalized
uniforms and other textile items on a contract basis and direct marketing of personalized uniforms and accessories
to clients in a wide range of industries in the United States, Puerto Rico, Japan and Canada, including
manufacturing, transportation, construction, restaurants and hotels, healthcare and pharmaceutical industries. We
supply garments, other textile and paper products and other accessories through rental and direct purchase
programs to businesses, public institutions and individuals.
Our Food and Support Services operations focus on serving clients in four principal sectors: Business & Industry, Education,
Healthcare and Sports, Leisure & Corrections. Our FSS International reportable segment provides a similar range of services as
those provided to our FSS North America clients and operates in the same sectors although it is more heavily weighted towards
Business & Industry. In fiscal 2016, our FSS North America segment generated $10.1 billion in sales, or 70% of our total sales,
our FSS International segment generated $2.7 billion in sales, or 19% of our total sales and our Uniform segment generated
$1.6 billion in sales, or 11% of total sales. Administrative expenses not allocated to our three reportable segments are presented
separately as corporate expenses and are not included in our segment results.
Our operating results are affected by the economic conditions being experienced in the countries in which we operate. Across
all of our businesses, we continue to plan and execute both growth and productivity initiatives and continue to focus on
streamlining and improving the efficiency and effectiveness of our general and administrative functions through increased
26
26
Aramark 2016 Form 10-K standards, process improvements, and consolidation. As a result, we recorded certain costs related to these initiatives during
fiscal 2016 (see Note 3 to our audited consolidated financial statements for more information).
Seasonality
Our sales and operating results have varied from quarter to quarter, as a result of different factors. Historically, within our FSS
North America segment, there has been a lower level of activity during our first and second fiscal quarters in operations that
provide services to sports and leisure clients. This lower level of activity, historically, has been partially offset during our first
and second fiscal quarters by the increased activity levels in our educational operations. Conversely, historically there has been
a significant increase in the provision of services to sports and leisure clients during our third and fourth fiscal quarters, which
is partially offset by the effect of summer recess at colleges, universities and schools in our educational operations.
Sources of Sales
Our clients engage us, generally through written contracts, to provide our services at their locations. Depending on the type of
client and service, we are paid either by our client or directly by the consumer to whom we have been provided access by our
client. We typically use either profit and loss contracts or client interest contracts in our FSS North America and FSS
International segments. These contracts differ in their provision for the amount of financial risk we bear and, accordingly, the
potential compensation, profits or fees we may receive. Under profit and loss contracts, we receive all of the revenue from, and
bear all of the expenses of, the provision of our services at a client location. For fiscal 2016, approximately 70% of our FSS
North America and FSS International sales were derived from profit and loss contracts. Client interest contracts include
management fee contracts, under which our clients reimburse our operating costs and pay us a management fee, which may be
calculated as a fixed dollar amount or a percentage of sales or operating costs. Some management fee contracts entitle us to
receive incentive fees based upon our performance under the contract, as measured by factors such as sales, operating costs and
customer satisfaction surveys. For fiscal 2016, approximately 30% of our FSS North America and FSS International sales were
derived from client interest contracts.
For our Uniform segment, we typically serve our rental clients under written service contracts for an initial term of three to five
years. As the majority of our clients purchase on a recurring basis, our backlog of orders at any given time consists principally
of orders in the process of being filled. With the exception of certain governmental bid business, most of our direct marketing
business is conducted under invoice arrangement with repeat clients. To a large degree, our direct marketing business is
relationship-driven. While we have long-term relationships with our larger clients, we generally do not have contracts with
these clients.
Costs and Expenses
Our costs and expenses are comprised of cost of services provided, depreciation and amortization and selling and general
corporate expenses. Cost of services provided consists of direct expenses associated with our operations, which includes food
costs, wages, other labor-related expenses (including workers' compensation, state unemployment insurance and federal or state
mandated health benefits and other healthcare costs), insurance, fuel, utilities, piece goods and clothing and equipment.
Depreciation and amortization expenses mainly relate to assets used in generating sales. Selling and general corporate expenses
include sales commissions, marketing, share-based compensation and other costs related to administrative functions including
finance, legal, human resources and information technology.
Interest and Other Financing Costs, net
Interest and other financing costs, net, relates primarily to interest expense on long-term borrowings. Interest and other
financing costs, net also includes third-party costs associated with long-term borrowings that were capitalized and are being
amortized over the term of the borrowing.
Provision for Income Taxes
The provision for income taxes represents federal, foreign, state and local income taxes. Our effective tax rate differs from the
statutory U.S. income tax rate due to the effect of state and local income taxes, tax rates in foreign jurisdictions, tax credits and
certain nondeductible expenses. Our effective tax rate will change from quarter to quarter based on recurring and nonrecurring
factors including, but not limited to, the geographical mix of earnings, state and local income taxes, tax audit settlements and
enacted tax legislation, including certain business tax credits. Changes in judgment due to the evaluation of new information
resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized
separately in the quarter of the change.
Foreign Currency Fluctuations
The impact from foreign currency translation assumes constant foreign currency exchange rates based on the rates in effect for
the current year period being used in translation for the comparable prior year period. We believe that providing the impact of
27
27
Aramark 2016 Form 10-K fluctuations in foreign currency rates on certain financial results can facilitate analysis of period-to-period comparisons of
business performance.
Fiscal Year
Our fiscal year is the fifty-two or fifty-three week period which ends on the Friday nearest to September 30th. The fiscal years
ended September 30, 2016 and October 2, 2015 were each fifty-two week periods and the fiscal year ended October 3, 2014
was a fifty-three week period.
Results of Operations
Fiscal 2016 Compared to Fiscal 2015
The following tables present an overview of our results on a consolidated and segment basis with the amount of and percentage
change between periods for the fiscal years 2016 and 2015 (dollars in millions).
Sales
Cost and Expenses:
Cost of service provided
Other operating expenses
Operating income
Interest and Other Financing Costs, net
Income Before Income Taxes
Provision for Income Taxes
Net income
Sales by Segment(1)
FSS North America
FSS International
Uniform
Operating Income by Segment
FSS North America
FSS International
Uniform
Corporate
Fiscal Year Ended
September 30, 2016
October 2, 2015
$
%
$
14,415.8
$
14,329.1
$
86.7
12,890.4
779.1
13,669.5
746.3
315.4
430.9
142.7
12,880.4
820.8
13,701.2
627.9
285.9
342.0
105.0
288.2
$
237.0
$
Fiscal Year Ended
10.0
(41.7)
(31.7)
118.4
29.5
88.9
37.7
51.2
September 30, 2016
October 2, 2015
$
%
10,122.3
$
9,950.3
$
2,729.8
1,563.7
2,858.2
1,520.6
14,415.8
$
14,329.1
$
172.0
(128.4)
43.1
86.7
Fiscal Year Ended
September 30, 2016
October 2, 2015
$
%
546.4
$
494.5
$
129.1
195.3
(124.5)
746.3
$
95.3
191.8
(153.7)
627.9
51.9
33.8
3.5
29.2
$
118.4
$
$
$
$
$
1 %
— %
(5)%
— %
19 %
10 %
26 %
36 %
22 %
2%
(4%)
3%
1%
10%
35%
2%
(19%)
19%
(1) As a percentage of total sales, FSS North America represented 70% and 69%, FSS International represented 19% and 20% and Uniform represented 11% in
both periods during fiscal 2016 and fiscal 2015, respectively.
28
28
Aramark 2016 Form 10-K Consolidated Overview
Sales of $14.4 billion for fiscal 2016 represented an increase of approximately 1% over the prior year period. The increase in
sales for fiscal 2016 is attributable to:
•
•
•
•
•
•
growth in the Sports, Leisure & Corrections and Education sectors;
growth in Ireland, Spain, China and Mexico; and
growth in our Uniform segment; partially offset by
the decision to exit certain operations within the FSS International segment;
a sales decline in the Business & Industry and Healthcare sectors and the U.K.; and
the negative impact of foreign currency translation of approximately $259 million (approximately -2%).
Cost of services provided was $12.9 billion for fiscal 2016, and was consistent compared with prior year. Cost of services
provided as a percentage of sales was 89% in fiscal 2016 compared to 90% in fiscal 2015. Cost of services provided was
impacted by the items discussed below for operating income. The following table presents the percentages attributable to the
components in cost of services provided for fiscal 2016 and fiscal 2015.
Cost of services provided components
September 30, 2016
October 2, 2015
Fiscal Year Ended
Food and support service costs
Personnel costs
Other direct costs
27%
47%
26%
100%
27%
47%
26%
100%
Operating income of $746.3 million for fiscal 2016 represented an increase of approximately 19% from the prior year. The
increase in operating income was impacted by:
•
•
•
•
•
•
•
•
•
•
profit growth in our Education and Sports, Leisure & Corrections sectors in the FSS North America segment;
profit growth in South America, China and our 50% ownership of AIM Services Co., Ltd. in Japan;
cost reductions from streamlining our general and administrative functions;
a decrease in acquisition-related amortization expense (approximately $31.9 million);
the prior year charges associated with asset write-downs in the FSS North America and FSS International segments
(approximately $16.2 million);
an increase from the gain related to the change in the fair value related to certain gasoline and diesel agreement
(approximately $10.9 million); and
a decrease in share-based compensation expense mainly from the prior year vesting of outstanding performance-based
options from a return-based event (approximately $9.5 million); which more than offset
assets write-offs, mainly in the Uniform segment (approximately $7.0 million);
a profit decline in the Healthcare sector; and
the negative impact of foreign currency translation of approximately $12 million (approximately -2%).
Interest and Other Financing Costs, net, for fiscal 2016 increased approximately $29.5 million compared to the prior year. The
increase during fiscal 2016 was primarily due to the partial paydown of the senior secured term loans, due September 2019 (the
"2019 Term Loans") and the 5.75% Senior Notes due March 2020 (the "2020 Notes"), which resulted in charges of
approximately $30.2 million, consisting of $22.2 million for the call premium on the 2020 Notes and $8.0 million of non-cash
charges for the write-off of debt issuance costs and debt discount on the 2020 Notes and 2019 Term Loans.
The effective income tax rate for fiscal 2016 was 33.1% compared to 30.7% in the prior year. The increase in the effective tax
rate is primarily due the prior year benefits of $6 million in connection with the sale of the India subsidiary due to the tax basis
exceeding the book basis of the subsidiary and $2.6 million from cash distributions received from the company’s 50%
ownership interest in AIM Services Co., Ltd. from the recovery of Japanese taxes paid in excess of the U.S. tax rate.
29
29
Aramark 2016 Form 10-K Net income for fiscal 2016 was $288.2 million compared to $237.0 million in the prior year. Net income attributable to
noncontrolling interest for fiscal 2016 was $0.4 million compared to $1.0 million in the prior year.
Segment Results
FSS North America Segment
The FSS North America reportable segment consists of four operating segments which have similar economic characteristics
and are aggregated into a single operating segment. The four operating segments or sectors of the FSS North America
reportable segment are Business & Industry, Education, Healthcare and Sports, Leisure & Corrections.
Sales for each of these sectors are summarized as follows (in millions):
Business & Industry
Education
Healthcare
Sports, Leisure & Corrections
Fiscal Year Ended
September 30, 2016
October 2, 2015 *
$
$
1,975.9
$
3,956.3
1,909.3
2,280.8
10,122.3
$
2,018.6
3,816.0
1,997.0
2,118.7
9,950.3
*Certain prior year amounts have been restated to reflect the current period classification. The effect of which was not material.
The Healthcare and Education sectors generally have high-single digit operating income margins and the Business & Industry
and Sports, Leisure & Corrections sectors generally have mid-single digit operating income margins.
FSS North America segment sales for fiscal 2016 increased 2% over the prior period. The increase in sales was impacted by:
•
•
•
growth in our Education and Sports, Leisure & Corrections sectors; partially offset by
a sales decline in our Business & Industry and Healthcare sectors; and
the negative impact of foreign currency translation of approximately $55 million (approximately -1%).
The Business & Industry sector had a sales decrease of approximately 2% for fiscal 2016 which was impacted by:
•
a decline in our remote services business in Canada due to camp shut downs and reduced employee headcount at our
clients resulting from the economic downturn in the oil and gas industry.
The Education sector had a sales increase of approximately 4% for fiscal 2016 which was impacted by:
•
•
growth in base business within our higher education business; and
net new business within our higher education and K-12 businesses.
The Healthcare sector had a sales decrease of approximately 4% for fiscal 2016 which was impacted by:
•
•
growth in base business within our technologies business; which was more than offset by
the impact of net lost business.
The Sports, Leisure & Corrections sector had a sales increase of approximately 8% for fiscal 2016 which was impacted by:
•
•
•
•
new business within our leisure business; and
base business growth in the stadiums and arenas we serve; which more than offset
an account we exited in the corrections business; and
net lost business in the stadiums and arenas we serve.
Cost of services provided was $9.1 billion for fiscal 2016 compared to $9.0 billion for the prior year. Cost of services provided
as a percentage of sales was 90% in both fiscal 2016 and fiscal 2015. Cost of services provided was impacted by the items
discussed below for operating income.
30
30
Aramark 2016 Form 10-K Operating income for fiscal 2016 was $546.4 million compared to $494.5 million in the prior year. The increase in operating
income was impacted by:
•
•
•
•
•
•
•
•
profit growth in our Education and Sports, Leisure & Corrections sectors;
cost reductions from streamlining our general and administrative functions;
a decrease in acquisition-related amortization expense (approximately $30.7 million);
a decrease in consulting costs (approximately $2.7 million); and
the prior year charge to write-off idle service equipment ($6.0 million); partially offset by
profit decline in our Healthcare sector;
an increase in severance related costs (approximately $8.9 million);
expenses associated with acquisition costs (approximately $3.5 million);
• multiemployer pension plan withdrawal charges (approximately $2.3 million);
•
•
•
the prior year gain on a sale of a property (approximately $3.1 million);
the negative impact of foreign currency translation of approximately $6 million (approximately -1%); and
prior year income from favorable insurance adjustments related to claims experience (approximately $7.1 million).
During fiscal 2016, we sold one of our buildings for cash proceeds of approximately $9.5 million. A loss was recorded of
approximately $6.8 million during fiscal 2016 related to the sale and other asset write-offs. During fiscal 2015, we recorded an
impairment charge of approximately $8.7 million to write down the book value of the building to its estimated fair value at the
time.
FSS International Segment
Sales in the FSS International segment for fiscal 2016 decreased 4% compared to the prior year, as the negative impact of
foreign currency translation (approximately $204 million or -7%) and the sales decline in the U.K., primarily from the
economic downturn in the oil and gas industry, more than offset growth in China, Ireland, Spain, Mexico and the positive
impact of the Avoca Handweavers Limited ("Avoca") acquisition (approximately 2%).
Cost of services provided was $2.5 billion for fiscal 2016 compared to $2.7 billion in the prior year. Cost of services provided
as a percentage of sales was 93% in fiscal 2016 compared to 94% in fiscal 2015. Cost of services provided was impacted by the
items discussed below for operating income.
Operating income for fiscal 2016 was $129.1 million compared to $95.3 million in the prior year. The increase in operating
income was impacted by:
•
•
•
•
•
profit growth in South America, Germany, the U.K., China and our 50% ownership of AIM Services Co., Ltd. in
Japan;
the decrease in severance and related costs (other than the prior year severance charges incurred related to exiting
certain operations) (approximately $6.9 million);
the prior year impact of charges associated with severance, asset write-downs and certain other exit costs related to
exiting certain operations (approximately $14.6 million); and
the prior year impact of the loss associated with the divestiture of India (approximately $4.3 million); which more than
offset
the negative impact of foreign currency translation of approximately $7 million (approximately -7%).
Uniform Segment
Uniform segment sales increased 3% for fiscal 2016 compared to the prior year, resulting primarily from growth in our uniform
rental base business.
Cost of services provided was $1.2 billion in both fiscal 2016 and 2015. Cost of services provided as a percentage of sales was
79% in fiscal 2016 compared to 78% in fiscal 2015. Cost of services provided was impacted by the items discussed below for
operating income.
31
31
Aramark 2016 Form 10-K Operating income for fiscal 2016 was $195.3 million compared to $191.8 million in the prior year. The increase in operating
income was impacted by:
•
growth in the uniform rental business; and
• merchandise and plant productivity initiatives, capacity expansion and increased automation; which was partially
offset by
•
a charge to write-off impaired assets (approximately $6.0 million).
Operating income in fiscal 2016 and fiscal 2015 includes $2.5 million and $2.3 million of severance and related costs,
respectively. Operating income for fiscal 2015 includes a favorable insurance adjustment related to claims experience of
approximately $2.7 million.
Corporate
Corporate expenses, those administrative expenses not allocated to the business segments, were $124.5 million in fiscal 2016,
compared to $153.7 million for the prior year. The decrease is primarily due to the impact of:
•
•
•
•
a decrease in our stock based compensation expense mainly from the prior year vesting of outstanding performance-
based options from a return-based event (approximately $9.5 million);
an increase from the gain related to the change in the fair value related to certain gasoline and diesel agreement
(approximately $10.9 million);
a decrease in consulting costs (approximately $3.2 million); and
cost reductions from streamlining our general and administrative functions (approximately $3.8 million).
Fiscal 2015 Compared to Fiscal 2014
The following tables present an overview of our results on a consolidated and segment basis with the amount of and percentage
change between periods for the fiscal years 2015 and 2014 (dollars in millions).
Sales
Cost and Expenses:
Cost of service provided
Other operating expenses
Operating income
Interest and Other Financing Costs, net
Income Before Income Taxes
Provision for Income Taxes
Net income
Sales by Segment
FSS North America
FSS International
Uniform
Fiscal Year Ended
October 2, 2015
October 3, 2014
$
%
$
14,329.1
$
14,832.9
$
(503.8)
(3)%
12,880.4
820.8
13,701.2
627.9
285.9
342.0
105.0
13,363.9
904.4
14,268.3
564.6
334.9
229.7
80.2
$
237.0
$
149.5
$
Fiscal Year Ended
October 2, 2015
9,950.3
2,858.2
1,520.6
14,329.1
$
$
October 3, 2014
10,232.8
$
3,111.2
1,488.9
14,832.9
$
$
$
(483.5)
(83.6)
(567.1)
63.3
(49.0)
112.3
24.8
87.5
$
%
(282.5)
(253.0)
31.7
(503.8)
(4)%
(9)%
(4)%
11 %
(15)%
49 %
31 %
59 %
(3)%
(8)%
2 %
(3)%
32
32
Aramark 2016 Form 10-K Operating Income by Segment
FSS North America
FSS International
Uniform
Corporate
Consolidated Overview
Fiscal Year Ended
October 2, 2015
494.5
95.3
191.8
(153.7)
627.9
$
$
October 3, 2014
501.3
$
106.2
172.1
(215.0)
564.6
$
$
$
$
%
(6.8)
(10.9)
19.7
61.3
63.3
(1)%
(10)%
11 %
(29)%
11 %
Sales of $14.3 billion for fiscal 2015 represented a decrease of approximately 3% over the prior year. This decrease is primarily
attributable to the estimated impact of the 53rd week in fiscal 2014 (approximately -2%), the negative impact of foreign
currency translation of approximately $474 million (approximately -3%) and a sales decline in the Business & Industry and
Sports, Leisure & Corrections sectors. This decrease was partially offset by growth in the Education sector, growth in Germany,
South America and China in our FSS International segment, and growth in our Uniform segment.
Cost of services provided was $12.9 billion for fiscal 2015 compared to $13.4 billion for the prior year period. Cost of services
provided as a percentage of sales was 90% in both periods. Food and support service costs comprised approximately 27% of
Cost of services provided for fiscal 2015 compared to 28% for fiscal 2014, personnel costs comprised approximately 47% of
Cost of services provided for fiscal 2015 compared to 46% for fiscal 2014, and other direct costs comprised the remaining
approximately 26% of Cost of services provided in both periods. Cost of services provided was impacted by the items discussed
below for operating income.
Operating income of $627.9 million for fiscal 2015 represented an increase of approximately 11% from the prior year. The
increase is primarily attributable to increased sales and cost control efficiencies within our Uniform segment, profit growth in
our Education and Sports, Leisure & Corrections sectors, a decrease in acquisition-related amortization expense (approximately
$19.4 million), a decrease in share-based compensation expense due to the fiscal 2014 modification of performance-based
options, which more than offset the increase in expense from the share-based awards granted in fiscal 2015 (approximately
$29.9 million), a decrease in charges related to branding (approximately $26.9 million) and the fiscal 2014 loss on the sale of
the McKinley Chalet hotel (the "Chalet") of approximately $6.7 million within our Sports, Leisure & Corrections sector, which
more than offset the profit decline in our Business & Industry sector, the increase in severance and related costs (approximately
$4.2 million), the estimated impact of the 53rd week in fiscal 2014 (approximately -3%), and the negative impact of foreign
currency translation of approximately $25 million (approximately -5%). Fiscal 2015 includes charges of approximately $16.2
million associated with asset write-downs within the FSS North America and FSS International segments, an impairment charge
of approximately $8.7 million related to one of our buildings in the FSS North America segment and the loss of approximately
$4.3 million associated with the divestiture of Aramark India Private Limited ("India").
Interest and Other Financing Costs, net, for fiscal 2015 decreased approximately $48.9 million from the prior year primarily
due to the impact of the 53rd week in fiscal 2014 (approximately $5.0 million), favorable interest rates (approximately $9.3
million) and debt refinancing costs related to the debt refinancing in fiscal 2014 (approximately $25.7 million).
The effective income tax rate for fiscal 2015 was 30.7% compared to 34.9% in the prior year. The effective tax rate for fiscal
2015 includes a $6.0 million benefit in connection with the sale of the India subsidiary due to the tax basis exceeding the book
basis of the subsidiary, a $2.2 million incremental benefit related to the retroactive extension of wage tax credits under the Tax
Increase Prevention Act of 2014 and a $2.6 million benefit from cash distributions received from the company’s 50% ownership
interest in AIM Services Co., Ltd. from the recovery of Japanese taxes paid in excess of the U.S. tax rate. Our fiscal 2015
effective tax rate also includes a benefit from additional tax credits received from prior year distributions received from AIM
Services, Co., Ltd. The fiscal 2014 effective tax rate includes the reduction of goodwill in connection with the sale of the Chalet
that was not tax deductible.
Net income for fiscal 2015 was $237.0 million compared to $149.5 million in the prior year. Net income attributable to
noncontrolling interests for fiscal 2015 was $1.0 million compared to $0.5 million in the prior year.
Segment Results
FSS North America Segment
The FSS North America reportable segment consists of four operating segments which have similar economic characteristics
and are aggregated into a single operating segment. The four operating segments or sectors of the FSS North America
reportable segment are Business & Industry; Education; Healthcare; and Sports, Leisure & Corrections.
33
33
Aramark 2016 Form 10-K Sales for each of these sectors are summarized as follows (in millions):
Business & Industry
Education
Healthcare
Sports, Leisure & Corrections
Fiscal Year Ended
October 2, 2015
October 3, 2014
$
$
2,054.8
$
3,816.0
1,997.0
2,082.5
9,950.3
$
2,264.4
3,744.6
2,011.1
2,212.7
10,232.8
The Healthcare and Education sectors generally have high-single digit operating income margins and the Business & Industry
and Sports, Leisure & Corrections sectors generally have mid-single digit operating income margins.
FSS North America segment sales for fiscal 2015 decreased 3% over the prior period, primarily due to the estimated impact of
the 53rd week in fiscal 2014 (approximately -2%), the negative impact of foreign currency translation of approximately $108
million (approximately -1%), a sales decline in our Business & Industry and Sports, Leisure & Corrections sectors, partially
offset by growth in our Education sector.
The Business & Industry sector had a high-single digit sales decrease for fiscal 2015 primarily due to the estimated impact of
the 53rd week in fiscal 2014 (approximately -2%), the impact of lost business including a one-time facility project during fiscal
2014 (approximately $70 million) and a decline in our remote services business in Canada due to camp shut downs and reduced
employee headcount at our clients resulting from the economic downturn in the oil and gas indstury.
The Education sector had a low single-digit sales increase for fiscal 2015 primarily due to growth in our base business within
our Higher Education food business, net new business in our Higher Education and K-12 businesses, partially offset by the
estimated impact of the 53rd week in fiscal 2014 (approximately -3%).
The Healthcare sector had a low-single digit sales decrease for fiscal 2015 primarily due to the estimated impact of the 53rd
week in fiscal 2014 (approximately -2%), the impact of lost business within our healthcare technologies business from client
consolidations, partially offset by growth in our base and new business within our hospitality business.
The Sports, Leisure & Corrections sector had a mid single-digit sales decrease for fiscal 2015 primarily due to the estimated
impact of the 53rd week in fiscal 2014 (approximately -2%), lost business within our entertainment venues and arenas business,
which more than offset base business growth in our stadiums and new business within our Corrections business.
Cost of services provided was $9.0 billion for fiscal 2015 compared to $9.3 billion for the prior year . Cost of services provided
as a percentage of sales was 90% in fiscal 2015 compared to 91% in fiscal 2014. Cost of services provided was impacted by the
items discussed below for operating income.
Operating income for fiscal 2015 was $494.5 million compared to $501.3 million in the prior year. This decrease is primarily
attributable to the estimated impact of the 53rd week in fiscal 2014 (approximately -2%), the negative impact of foreign
currency translation of approximately $10 million (approximately -2%), an impairment charge related to one of our buildings
(approximately $8.7 million), an increase in severance expense as part of the next phase related to streamlining and improving
the efficiency and effectiveness of our selling, general and administrative functions (approximately $7.9 million), profit decline
in our Business & Industry sector, primarily driven by a decline in our Canadian remote services business, including a charge to
write-off idle service equipment (approximately $6.0 million), and the impact of start-up costs at new client locations and
amortization of client investments. These factors more than offset profit growth in our Education and Sports, Leisure &
Corrections sectors, a decrease in acquisition-related amortization expense (approximately $6.6 million), the gain on a sale of a
property (approximately $3.1 million), and the prior year loss on the sale of the Chalet (approximately $6.7 million). Operating
income in both periods also includes favorable risk insurance adjustments related to favorable claims experience.
FSS International Segment
Sales in the FSS International segment for fiscal 2015 decreased 8% compared to the prior year period, as the negative impact
of foreign currency translation (approximately $367 million or -12%) more than offset growth in Germany, Ireland, Spain,
China, and South America.
Cost of services provided was $2.7 billion for fiscal 2015 compared to $2.9 billion in the prior year. Cost of services provided
as a percentage of sales was 94% in both fiscal 2015 and fiscal 2014. Cost of services provided was impacted by the items
discussed below for operating income.
34
34
Aramark 2016 Form 10-K Operating income for fiscal 2015 was $95.3 million compared to $106.2 million in the prior year. This decrease is primarily
attributable to the negative impact of foreign currency translation of approximately $15 million (approximately -15%), the
charges associated with severance, asset write-downs and certain other exit costs related to exiting certain operations
(approximately $14.6 million), and the loss associated with the divestiture of India (approximately $4.3 million), which more
than offset profit growth in Ireland, Germany and China, the decrease in acquisition-related amortization expense
(approximately $4.8 million), and the decrease in severance and related costs (exclusive of the severance charges incurred
related to exiting certain operations) (approximately $6.7 million).
Uniform Segment
Uniform segment sales increased 2% for fiscal 2015 compared to the prior year, resulting primarily from growth in our uniform
rental base business offset by the estimated impact of the 53rd week in fiscal 2014 (approximately -2%).
Cost of services provided was $1.2 billion in both fiscal 2015 and fiscal 2014. Cost of services provided as a percentage of sales
was 78% for both fiscal 2015 and fiscal 2014. Cost of services provided was impacted by the items discussed below for
operating income.
Operating income for fiscal 2015 was $191.8 million, an increase of approximately 11% when compared to the prior year due
to growth in the uniform rental business, merchandise and plant productivity initiatives, and the decrease in acquisition-related
amortization expense compared to the prior period (approximately $8.0 million), partially offset by the estimated impact of the
53rd week in fiscal 2014 (approximately -2%). Operating income in fiscal 2015 and fiscal 2014 includes $2.3 million and $2.2
million of severance and related costs, respectively. Both periods also include favorable risk insurance adjustments related to
favorable claims experience.
Corporate
Corporate expenses, those administrative expenses not allocated to the business segments, were $153.7 million in fiscal 2015,
compared to $215.0 million for the prior year. The decrease is primarily due to the decrease in share-based compensation
expense related to a fiscal 2014 modification of the vesting provisions for outstanding performance-based options that did not
meet the applicable performance thresholds in prior years (approximately $50.9 million), a decrease in charges related to
branding (approximately $24.0 million), and cash bonuses and other expenses from the completion of the IPO in fiscal 2014
(approximately $5.0 million), which more than offset the increase in share-based compensation expense mainly from
performance-based options, restricted stock unit and performance stock unit awards (approximately $21.0 million).
Liquidity and Capital Resources
Overview
Our principal sources of liquidity are cash generated from operating activities, funds from borrowings and existing cash on
hand. As of September 30, 2016, we had $152.6 million of cash and cash equivalents and approximately $713.5 million of
availability under our senior secured revolving credit facility. As of September 30, 2016, there was approximately $379.0
million of outstanding foreign currency borrowings.
We believe that our cash and cash equivalents and the unused portion of our committed credit availability under the senior
secured revolving credit facility will be adequate to meet anticipated cash requirements to fund working capital, capital
spending, debt service obligations, refinancings, dividends and other cash needs. We will continue to seek to invest strategically
but prudently in certain sectors and geographies. We routinely monitor our cash flow and the condition of the capital markets in
order to be prepared to respond to changing conditions.
The table below summarizes our cash activity (in millions):
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Fiscal Year Ended
September 30, 2016
October 2, 2015
October 3, 2014
$
$
806.6
(679.7)
(96.7)
$
683.0
(504.3)
(168.0)
398.2
(505.2)
107.8
Reference to the audited Consolidated Statements of Cash Flows will facilitate understanding of the discussion that follows.
35
35
Aramark 2016 Form 10-K Cash Flows Provided by Operating Activities
During fiscal 2016, the total of net income and non cash charges increased compared to fiscal 2015, resulting from the higher
operating results discussed above. The change in operating assets and liabilities of approximately $3.9 million compared to the
prior year period relates primarily to the following:
•
•
•
•
Accrued Expenses being a source of cash compared to a use of cash in the prior year primarily due to a decrease in
commission payments mainly from a prior year lost client in the Sports, Leisure & Corrections sector, timing of
deferred income payments, timing of interest payments and timing of other accrued expenses; and
Accounts Payable being less of a use of cash compared to the prior year due to the timing of disbursements and less
employee taxes paid from exercises of share-based awards compared to the prior year; partially offset by
Accounts Receivable were a use of cash due to timing of collections, mainly from the fiscal 2015 cash receipts related
to a one-time facility project in the Business & Industry sector; and
Prepayments were a use of cash primarily due to prepayments of income and non-income related taxes, interest on the
U.S. dollar denominated term loan and insurance premiums.
During fiscal 2016, we made voluntary contributions to our defined benefit pension plans of approximately $19.8 million. The
"Other operating activities" caption in the Consolidated Statement of Cash Flows primarily reflects adjustments to net income
in the current year for charges related to the repayment of the 2019 Term Loans and redemption of the 2020 Notes (see Note 5
to the audited consolidated financial statements).
During fiscal 2015, the total of net income and non cash charges was consistent compared to fiscal 2014. The increase in cash
provided by operating activities compared to fiscal 2014 relates primarily to accounts receivable being a source of cash due to
timing of collections (approximately $308.0 million), mainly from a one-time facility project in the Business & Industry sector,
accrued expenses being a source of cash due to the impact of prior year medical insurance payments by switching from being
self-insured to fully-insured (approximately $42.8 million), the timing of interest payments primarily from the 53rd week in
fiscal 2014 (approximately $45.9 million); partially offset by lower accruals for commissions, mainly from a lost client in the
Sports, Leisure and Corrections sector ($25.9 million) and prepayments being a source of cash primarily due to changes in the
timing of income taxes (approximately $64.4 million), partially offset by accounts payable being a use of cash due to the timing
of disbursements (approximately $108.9 million).
During fiscal 2015, we received proceeds of approximately $9.2 million from a retrospective refund under our casualty
insurance program related to prior year favorable loss experience and cash distributions of approximately $22.2 million from
AIM Services Co., Ltd. In addition, during fiscal 2015, we made voluntary contributions to our defined benefit pension plans of
approximately $45.0 million.
During fiscal 2014, the increase in the total of net income and noncash charges compared to fiscal 2013 results mainly from the
overall growth of the business, improved operating results of our segments and the estimated impact of the 53rd week, as
discussed above. The change in working capital requirements relates to changes in Accrued Expenses (approximately $274.6
million), related to payments for severance and related costs from the series of actions undertaken during fiscal 2013, the timing
of payments for interest, commissions and payroll due to the 53rd week and medical insurance payments due to switching from
being self-insured to a private exchange, Accounts Receivable (approximately $118.2 million), primarily due to business
growth, mainly from the one-time facility project in the Business & Industry sector, and an increase in days sales outstanding,
Accounts Payable (approximately $64.8 million) due to timing of disbursements and the increase in employee payroll tax
withholding payments from exercises of share-based awards and Prepayments and other current assets (approximately $28.4
million) due to a change in tax method that impacts the timing of deductions. The "Other operating activities" caption reflects
adjustments to net income in the current year and prior year periods related to nonoperating gains and losses, including
goodwill write-offs and impairments and other financing related charges.
Cash Flows Used in Investing Activities
Fiscal 2016 use of cash in investing activities increased approximately 35% compared with fiscal 2015 primarily due to the
acquisitions of Avoca in the FSS International segment for approximately $65.8 million and HPSI, a group purchasing
organization, in the FSS North America segment for $140.0 million, partially offset by lower net capital expenditures, which
includes the proceeds from the sale of a building in our FSS North America segment of approximately $9.5 million.
Fiscal 2015 use of cash in investing activities was relatively stable compared with fiscal 2014 as the decline in fiscal 2015 of
purchases of property and equipment, client contract investments and other and business acquisitions was offset by lower
proceeds in fiscal 2015 from the disposal of property and equipment and divestitures.
36
36
Aramark 2016 Form 10-K During fiscal 2014, the increase compared to fiscal 2013 in purchases of property and equipment, client contract investments
and other mainly related to an increase in client contract investments resulting from new business wins and contract extensions,
mainly within the Education sector. We also received proceeds of $24.0 million as a result of the sale of the Chalet in our
Sports, Leisure & Corrections sector.
Cash Flows Provided by (Used In) Financing Activities
During fiscal 2016, cash used in financing activities was impacted by the following (see Note 5 to the audited consolidated
financial statements);
•
•
•
•
•
•
issuance of $400 million of 5.125% Senior Notes due January 2024 during the first quarter of fiscal 2016;
issuance of $500 million of additional 5.125% Senior Notes due January 2024 and $500 million of 4.750% Senior
Notes due June 2026 during the third quarter of fiscal 2016;
repayment of approximately $771.2 million aggregate principal amount of the 2020 Notes; optional prepayments of
outstanding 2019 Term Loans of approximately $354.1 million; payment of financing fees from the debt issuances
during fiscal 2016 of approximately $20.2 million;
repayment of approximately $82.0 million under the Receivables Facility;
repayment of a U.S. dollar denominated term loan of a Canadian subsidiary in the amount of $74.1 million; and
payment of approximately $92.1 million of dividends.
The "Other financing activities" in the Consolidated Statement of Cash Flows reflects a source of cash during fiscal 2016 from
the excess tax benefit recorded on exercises of share-based awards which more than offset the call premium of $22.2 million
paid on the 2020 Notes. The source of cash during fiscal 2015 is mainly from the excess tax benefit recorded on exercises of
share-based awards.
During fiscal 2015, cash used in financing activities was impacted by the repayment of approximately $209.6 million on the
senior secured term loan facility, payment of approximately $81.9 million of dividends and payment of approximately $48.5
million for a repurchase of 1.5 million shares of our common stock. This was partially offset by proceeds received of
approximately $39.9 million related to stock option exercises, and other financing activities, which mainly reflects the excess
tax benefit recorded on exercises of stock options of approximately $66.3 million.
During fiscal 2014, on December 17, 2013, the Company completed an IPO of 28.0 million shares of its common stock at a
price of $20.00 per share raising approximately $524.1 million, net of costs directly related to the IPO. The Company used the
net proceeds from the IPO to repay borrowings of approximately $154.1 million on the senior secured revolving credit facility
and $370.0 million on the senior secured term loan facility. During fiscal 2014, we paid dividends of approximately $52.2
million to our stockholders. The "Other financing activities" caption reflects financing related fees, distributions to
noncontrolling interests and the excess tax benefit recorded on exercises of share-based awards.
On February 24, 2014, Aramark Services, Inc. entered into an Amendment Agreement (the “2014 Amendment Agreement”) to
the Amended and Restated Credit Agreement dated as of March 26, 2010 (as amended, supplemented or otherwise modified
from time to time, the “Credit Agreement”). The 2014 Amendment Agreement amended and restated the Credit Agreement
effective as of February 24, 2014. Among other things, the 2014 Amendment Agreement provided for approximately $3,982.0
million in the aggregate of new term loans, $2,582.0 million of which have a maturity date of February 24, 2021, with an
acceleration to December 13, 2019 if the 5.75% Senior Notes due March 15, 2020 remain outstanding on December 13, 2019,
and $1,400.0 million of which have a maturity date of September 7, 2019. The new term loans were borrowed on February 24,
2014 and the proceeds were used to refinance Aramark Services, Inc.'s existing term loans due 2016 and 2019 (with the
exception of term loans due 2016 borrowed by Aramark Services, Inc.’s Canadian subsidiary in the amount of approximately
$75.0 million). During fiscal 2014, approximately $22.9 million of lender fees and third-party costs directly attributable to the
term loans of the 2014 Amendment Agreement were capitalized. The Company also recorded charges to "Interest and Other
Financing Costs, net” during fiscal 2014 consisting of $13.1 million of third party costs and $12.6 million of non-cash charges
for the write-off of deferred financing costs and original issue discount.
The 2014 Amendment Agreement also provided for the extension, from January 26, 2017 to February 24, 2019, of the maturity
of $565.0 million in revolving lender commitments of the existing $605.0 million revolving credit facility under the Credit
Agreement. The 2014 Amendment Agreement also increased the revolving lender commitments by $165.0 million. During
fiscal 2014, approximately $4.8 million of third-party costs directly attributable to the revolving credit facility of the 2014
Amendment Agreement were capitalized.
37
37
Aramark 2016 Form 10-K Covenant Compliance
The Credit Agreement contains a number of covenants that, among other things, restrict our ability to: incur additional
indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell
assets; pay dividends, make distributions or repurchase our capital stock; make investments, loans or advances; repay or
repurchase any notes, except as scheduled or at maturity; create restrictions on the payment of dividends or other amounts to us
from our restricted subsidiaries; make certain acquisitions; engage in certain transactions with affiliates; amend material
agreements governing the notes (or any indebtedness that refinances the notes); and fundamentally change our business. The
indentures governing our senior notes contains similar provisions. As of September 30, 2016, we were in compliance with these
covenants.
Under the Credit Agreement and the indentures governing our senior notes, we are required to satisfy and maintain specified
financial ratios and other financial condition tests and covenants. Our continued ability to meet those financial ratios, tests and
covenants can be affected by events beyond our control, and there can be no assurance that we will meet those ratios, tests and
covenants.
These financial ratios, tests and covenants involve the calculation of certain measures that we refer to in this discussion as
“Covenant EBITDA” and “Covenant Adjusted EBITDA.” Covenant EBITDA and Covenant Adjusted EBITDA are not
measurements of financial performance under U.S. GAAP. Covenant EBITDA is defined as net income (loss) of Aramark
Services, Inc. and its restricted subsidiaries plus interest and other financing costs, net, provision (benefit) for income taxes, and
depreciation and amortization. Covenant Adjusted EBITDA is defined as Covenant EBITDA, further adjusted to give effect to
adjustments required in calculating covenant ratios and compliance under our Credit Agreement and the indentures governing
our senior notes.
Our presentation of these measures 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 net
income or operating income determined in accordance with U.S. GAAP. Covenant EBITDA and Covenant Adjusted EBITDA,
as presented by us, may not be comparable to other similarly titled measures of other companies because not all companies use
identical calculations.
The following is a reconciliation of net income attributable to Aramark Services, Inc. stockholder, which is a U.S. GAAP
measure of Aramark Services, Inc.’s operating results, to Covenant Adjusted EBITDA as defined in our debt agreements. The
terms and related calculations are defined in the Credit Agreement and the indentures governing our senior notes. Covenant
EBITDA and Covenant Adjusted EBITDA are measures of Aramark Services, Inc. and its restricted subsidiaries only and do
not include the results of Aramark.
(in millions)
Net income attributable to Aramark Services, Inc. stockholder
Interest and other financing costs, net
Provision for income taxes
Depreciation and amortization
Covenant EBITDA
Share-based compensation expense(1)
Unusual or non-recurring (gains)/losses(2)
Pro forma EBITDA for equity method investees(3)
Pro forma EBITDA for certain transactions(4)
Other(5)
Covenant Adjusted EBITDA
Fiscal Year Ended
September 30, 2016
October 2, 2015
October 3, 2014
$
287.8
$
236.0
$
315.4
142.7
495.8
285.9
105.0
504.0
149.0
334.9
80.2
521.6
1,241.7
1,130.9
1,085.7
56.9
—
14.3
4.1
35.4
66.4
(3.9)
14.8
—
58.9
96.3
2.9
18.8
—
28.3
$
1,352.4
$
1,267.1
$
1,232.0
Represents share-based compensation expense resulting from the application of accounting for stock options, restricted
stock units, performance stock units and deferred stock unit awards (see Note 10 to the audited consolidated financial
statements).
Fiscal 2015 includes other income of approximately $2.0 million related to our investment (possessory interest) at one of
our National Parks Service ("NPS") client sites in our Sports, Leisure & Corrections sector and a net of tax gain of
approximately $1.9 million related to the sale of a building in our Healthcare sector. Fiscal 2014 includes a loss of
38
(1)
(2)
38
Aramark 2016 Form 10-K (3)
(4)
(5)
approximately $6.7 million related to the sale of the Chalet, a gain from proceeds from the impact of Hurricane Sandy
and other income related to our investment (possessory interest) at one of our NPS client sites.
Represents our estimated share of EBITDA, primarily from our AIM Services Co., Ltd. equity method investment not
already reflected in our Covenant EBITDA. EBITDA for this equity method investee is calculated in a manner consistent
with consolidated Covenant EBITDA but does not represent cash distributions received from this investee.
Represents the annualizing of net EBITDA from acquisitions made during the period.
Other includes organizational streamlining initiatives ($24.9 million for fiscal 2016, $27.5 million for fiscal 2015 and
$21.3 million for fiscal 2014), the impact of the change in fair value related to certain gasoline and diesel agreements
($8.3 million gain for fiscal 2016, $2.6 million loss for fiscal 2015 and $1.8 million loss for fiscal 2014), expenses
related to acquisition costs ($3.9 million for fiscal 2016 and $0.4 million for fiscal 2015), property and other asset write-
downs associated with the sale of a building ($6.8 million for fiscal 2016 and $8.7 million for fiscal 2015), other asset
write-offs ($5.0 million for fiscal 2016 and $16.2 million for fiscal 2015), expenses related to secondary offerings of
common stock by certain of our stockholders ($2.2 million for fiscal 2015 and $0.9 million for fiscal 2014) and other
miscellaneous expenses.
Our covenant requirements and actual ratios for the fiscal year ended September 30, 2016 are as follows:
Consolidated Secured Debt Ratio(1)
Interest Coverage Ratio (Fixed Charge Coverage Ratio)(2)
Covenant
Requirements
Actual
Ratios
5.125x
2.00x
2.64x
4.51x
(1)
(2)
Our Credit Agreement requires us to maintain a maximum Consolidated Secured Debt Ratio, defined as consolidated
total indebtedness secured by a lien to Covenant Adjusted EBITDA, of 5.125x. Consolidated total indebtedness secured
by a lien is defined in the Credit Agreement as total indebtedness outstanding under the Credit Agreement, capital leases,
advances under the Receivables Facility and any other indebtedness secured by a lien reduced by the lesser of the
amount of cash and cash equivalents on our balance sheet that is free and clear of any lien and $75 million. Non-
compliance with the maximum Consolidated Secured Debt Ratio could result in the requirement to immediately repay all
amounts outstanding under our Credit Agreement, which, if our revolving credit facility lenders failed to waive any such
default, would also constitute a default under the indentures governing our senior notes.
Our Credit Agreement establishes an incurrence-based minimum Interest Coverage Ratio, defined as Covenant Adjusted
EBITDA to consolidated interest expense, the achievement of which is a condition for us to incur additional indebtedness
and to make certain restricted payments. If we do not maintain this minimum Interest Coverage Ratio calculated on a pro
forma basis for any such additional indebtedness or restricted payments, we could be prohibited from being able to incur
additional indebtedness, other than the additional funding provided for under the Credit Agreement and pursuant to
specified exceptions, and make certain restricted payments, other than pursuant to certain exceptions. The minimum
Interest Coverage Ratio is 2.00x for the term of the Credit Agreement. Consolidated interest expense is defined in the
Credit Agreement as consolidated interest expense excluding interest income, adjusted for acquisitions and dispositions,
further adjusted for certain non-cash or nonrecurring interest expense and our estimated share of interest expense from
one equity method investee. The indentures governing our senior notes includes a similar requirement which is referred
to as a Fixed Charge Coverage Ratio.
The Company and its subsidiaries and affiliates may from time to time, in their sole discretion, purchase, repay, redeem or retire
any of our outstanding debt securities (including any publicly issued debt securities), in privately negotiated or open market
transactions, by tender offer or otherwise, or extend or refinance any of our outstanding indebtedness.
39
39
Aramark 2016 Form 10-K The following table summarizes our future obligations for debt repayments, capital leases, estimated interest payments, future
minimum rental and similar commitments under noncancelable operating leases as well as contingent obligations related to
outstanding letters of credit and guarantees as of September 30, 2016 (dollars in thousands):
Contractual Obligations as of September 30, 2016
Long-term borrowings(1)
Capital lease obligations
Estimated interest payments(2)
Operating leases and other noncancelable commitments
Purchase obligations(3)
Other liabilities(4)
Other Commercial Commitments as of September 30, 2016
Letters of credit
Guarantees
Payments Due by Period
Total
$5,219,980
78,615
1,114,400
713,129
565,109
248,500
$7,939,733
Less than
1 year
$ 30,800
15,722
220,300
238,462
248,369
56,100
$ 809,753
1-3 years
$1,159,759
34,752
411,400
149,019
171,223
18,700
$1,944,853
3-5 years
$2,628,689
20,692
265,600
96,439
39,739
9,700
$3,060,859
More than
5 years
$1,400,732
7,449
217,100
229,209
105,778
164,000
$2,124,268
Amount of Commitment Expiration by Period
Total
Amounts
Committed
53,783
$
—
53,783
$
Less than
1 year
$ 53,783
—
$ 53,783
$
$
1-3 years
3-5 years
More than
5 years
— $
—
— $
— $
—
— $
—
—
—
(1)
(2)
Excludes the $46.3 million reduction to long-term borrowings from debt discounts and deferred financing fees and the
increase of $17.8 million from the unamortized premium on the New 2024 Notes.
These amounts represent future interest payments related to our existing debt obligations based on fixed and variable
interest rates specified in the associated debt agreements. Payments related to variable debt are based on applicable rates
at September 30, 2016 plus the specified margin in the associated debt agreements for each period presented. The
amounts provided relate only to existing debt obligations and do not assume the refinancing or replacement of such debt.
The average debt balance for each fiscal year from 2017 through 2022 is $4,976.0 million, $4,950.3 million, $4,882.2
million, $3,930.6 million, $2,355.2 million and $1,400.0 million, respectively. The average interest rate (after giving
effect to interest rate swaps) for each fiscal year from 2017 through 2022 is 3.02%, 3.46%, 3.73%, 3.93%, 4.35% and
4.99%, respectively (See Note 5 to the audited consolidated financial statements for the terms and maturities of existing
debt obligations).
(3)
Represents commitments for capital projects and client contract investments to help finance improvements or
renovations at the facilities from which we operate.
(4)
Includes certain unfunded employee retirement and severance related obligations.
We have excluded from the table above uncertain tax liabilities due to the uncertainty of the amount and period of payment. As
of September 30, 2016, we have gross uncertain tax liabilities of $22.8 million (see Note 8 to the audited consolidated financial
statements). During fiscal 2016, we made contributions totaling $25.4 million into our defined benefit pension plans and benefit
payments and settlements of $16.7 million out of these plans. Estimated contributions to our defined benefit pension plans in
fiscal 2017 are $5.9 million and estimated benefit payments out of these plans in fiscal 2017 are $12.3 million (see Note 7 to the
audited consolidated financial statements).
We have an agreement (the "Receivables Facility") with 3 financial institutions where we sell on a continuous basis an
undivided interest in all eligible accounts receivable, as defined in the Receivables Facility. Pursuant to the Receivables Facility,
we formed ARAMARK Receivables, LLC, a wholly-owned, consolidated, bankruptcy-remote subsidiary. ARAMARK
Receivables, LLC was formed for the sole purpose of transferring receivables generated by certain of our subsidiaries. Under
the Receivables Facility, we and certain of our subsidiaries transfer without recourse all of their accounts receivable to
ARAMARK Receivables, LLC. As collections reduce previously transferred interests, interests in new, eligible receivables are
transferred to ARAMARK Receivables, LLC, subject to meeting certain conditions. The maximum amount available under the
Receivables Facility is $350.0 million, which expires in May 2019. In addition, the Receivables Facility includes a seasonal
tranche which will increase the capacity by $50.0 million at certain times of the year. As of September 30, 2016, $268.0 million
was outstanding under the Receivables Facility and is included in “Long-Term Borrowings” in the Consolidated Balance
40
40
Aramark 2016 Form 10-K Sheets. Amounts borrowed under the Receivables Facility fluctuate monthly based on our funding requirements and the level of
qualified receivables available to collateralize the Receivables Facility.
Our business activities do not include the use of unconsolidated special purpose entities, and there are no significant business
transactions that have not been reflected in the accompanying financial statements. We are self-insured for a limited portion of
the risk retained under our general liability and workers’ compensation arrangements. Self-insurance reserves are recorded
based on actuarial analyses.
In the fourth quarter of fiscal 2016, as part of an initiative to simplify our corporate governance and organization, we
reorganized our foreign affiliates into a holding company structure. It is anticipated this will create administrative and
managerial benefits and better align with intergroup and regional operations.
Critical Accounting Policies and Estimates
Our significant accounting policies are described in the notes to the audited consolidated financial statements included in this
Annual Report. As described in such notes, we recognize sales in the period in which services are provided pursuant to the
terms of our contractual relationships with our clients. Sales from direct marketing activities are recognized upon shipment.
In preparing our financial statements, management is required to make estimates and assumptions that, among other things,
affect the reported amounts of assets, liabilities, sales and expenses. These estimates and assumptions are most significant
where they involve levels of subjectivity and judgment necessary to account for highly uncertain matters or matters susceptible
to change, and where they can have a material impact on our financial condition and operating performance. If actual results
were to differ materially from the estimates made, the reported results could be materially affected.
Asset Impairment Determinations
Goodwill, the Aramark trade name and other trade names are indefinite lived intangible assets that are not amortizable and are
subject to an impairment test that we conduct annually or more frequently if a change in circumstances or the occurrence of
events indicates that potential impairment exists. The impairment test may first consider qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Examples of qualitative
factors include, macroeconomic conditions, industry and market considerations, cost factors, overall financial performance,
entity-specific events, events affecting reporting units and sustained changes in our stock price. If results of the qualitative
assessment indicate a more likely than not determination or if a qualitative assessment is not performed, a quantitative test is
performed by comparing the estimated fair value using a discounted cash flow approach of each reporting unit with its
estimated net book value.
We perform the assessment of goodwill at the reporting unit level. Within our FSS International segment, each country is
evaluated separately since these operating units are relatively autonomous and separate goodwill balances have been recorded
for each entity. Based on our evaluation performed in the fourth quarter of fiscal 2016, we determined that it was more likely
than not that the fair value of each of the reporting units exceeded its respective carrying amount, and therefore, we determined
that goodwill was not impaired.
With respect to our other long-lived assets, we are required to test for asset impairment whenever events or circumstances
indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, we compare the sum
of the future expected cash flows from the asset, undiscounted and without interest charges, to the asset’s carrying value. If the
sum of the future expected cash flows from the asset is less than the carrying value, an impairment would be recognized for the
difference between the estimated fair value and the carrying value of the asset.
In making future cash flow analyses of various assets, we make assumptions relating to the following:
•
•
•
•
•
The intended use of assets and the expected future cash flows resulting directly from such use;
Comparable market valuations of businesses similar to Aramark's business segments;
Industry specific economic conditions;
Competitor activities and regulatory initiatives; and
Client and customer preferences and behavior patterns.
We believe that an accounting estimate relating to asset impairment is a critical accounting estimate because the assumptions
underlying future cash flow estimates are subject to change from time to time and the recognition of an impairment could have
a significant impact on our consolidated statement of income.
41
41
Aramark 2016 Form 10-K Environmental Loss Contingencies
Accruals for environmental loss contingencies (i.e., environmental reserves) are recorded when it is probable that a liability has
been incurred and the amount can reasonably be estimated. We view the measurement of environmental reserves as a critical
accounting estimate because of the considerable uncertainty surrounding estimation, including the need to forecast well into the
future. We are involved in legal proceedings under federal, state, local and foreign environmental laws in connection with our
operations or businesses conducted by our predecessors or companies that we have acquired. The calculation of environmental
reserves is based on the evaluation of currently available information, prior experience in the remediation of contaminated sites
and assumptions with respect to government regulations and enforcement activity, changes in remediation technology and
practices, and financial obligations and creditworthiness of other responsible parties and insurers.
Litigation and Claims
From time to time, the Company and its subsidiaries are party to various legal actions, proceedings and investigations involving
claims incidental to the conduct of our businesses, including those brought by clients, consumers, employees, government
entities and third parties under, among others, federal, state, international, national, provincial and local employment laws,
wage and hour laws, discrimination laws, immigration laws, human health and safety laws, import and export controls and
customs laws, environmental laws, false claims or whistleblower statutes, procurement regulations, intellectual property laws,
food safety and sanitation laws, cost and accounting principles, the Foreign Corrupt Practices Act, the U.K. Bribery Act, other
anti-corruption laws, lobbying laws, motor carrier safety laws, data privacy and security laws and alcohol licensing and service
laws, or alleging negligence and/or breach of contractual and other obligations. We consider the measurement of litigation
reserves as a critical accounting estimate because of the significant uncertainty in some cases relating to the outcome of
potential claims or litigation and the difficulty of predicting the likelihood and range of potential liability involved, coupled
with the material impact on our results of operations that could result from litigation or other claims. In determining legal
reserves, we consider, among other issues:
•
•
•
•
•
•
interpretation of contractual rights and obligations;
the status of government regulatory initiatives, interpretations and investigations;
the status of settlement negotiations;
prior experience with similar types of claims;
whether there is available insurance; and
advice of counsel.
Allowance for Doubtful Accounts
We encounter risks associated with sales and the collection of the associated accounts receivable. We record a provision for
accounts receivable that are considered to be uncollectible. In order to calculate the appropriate provision, we analyze the
creditworthiness of specific customers, aging of customer balances, general and specific industry economic conditions, industry
concentrations, such as exposure to small and medium-sized businesses, the non-profit healthcare sector and the automotive,
airline and financial services industries, and contractual rights and obligations. The accounting estimate related to the allowance
for doubtful accounts is a critical accounting estimate because the underlying assumptions used for the allowance can change
from time to time and uncollectible accounts could potentially have a material impact on our results of operations.
Inventory Obsolescence
We record an inventory obsolescence reserve for obsolete, excess and slow-moving inventory, principally in the Uniform
segment. In calculating our inventory obsolescence reserve, we analyze historical and projected data regarding customer
demand within specific product categories and make assumptions regarding economic conditions within customer specific
industries, as well as style and product changes. Our accounting estimate related to inventory obsolescence is a critical
accounting estimate because customer demand in certain of our businesses can be variable and changes in our reserve for
inventory obsolescence could materially affect our results of operations.
Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for
the amount of taxes payable or refundable for the current year and for deferred tax liabilities and assets for the future tax
consequences of events that have been recognized in our consolidated financial statements or tax returns. We must make
assumptions, judgments and estimates to determine our current provision for income taxes and also our deferred tax assets and
liabilities and any valuation allowance to be recorded against a deferred tax asset. Our assumptions, judgments and estimates
relative to the current provision for income taxes take into account current tax laws, our interpretation of current tax laws and
possible outcomes of current and future audits conducted by foreign and domestic tax authorities. Changes in tax law or our
42
42
Aramark 2016 Form 10-K interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for
income taxes in our consolidated financial statements. Our assumptions, judgments and estimates relative to the amount of
deferred income taxes take into account estimates of the amount of future taxable income, and actual operating results in future
years could render our current assumptions, judgments and estimates inaccurate. Any of the assumptions, judgments and
estimates mentioned above could cause our actual income tax obligations to differ from our estimates.
Critical accounting estimates and the related assumptions are evaluated periodically as conditions warrant, and changes to such
estimates are recorded as new information or changed conditions require.
*****
43
43
Aramark 2016 Form 10-K New Accounting Standard Updates
See Note 1 to the audited consolidated financial statements for a full description of recent accounting standard updates,
including the expected dates of adoption.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
We are exposed to the impact of interest rate changes and manage this exposure through the use of variable-rate and fixed-rate
debt and by utilizing interest rate swaps. We do not enter into contracts for trading purposes and do not use leveraged
instruments. The information below summarizes our market risks associated with debt obligations and other significant
financial instruments as of September 30, 2016 (see Notes 5 and 6 to the audited consolidated financial statements). Fair values
were computed using market quotes, if available, or based on discounted cash flows using market interest rates as of the end of
the respective periods. For debt obligations, the table presents principal cash flows and related interest rates by contractual
fiscal year of maturity. Variable interest rates disclosed represent the weighted-average rates of the portfolio at September 30,
2016. For interest rate swaps, the table presents the notional amounts and related weighted-average interest rates by fiscal year
of maturity. The variable rates presented are the average forward rates for the term of each contract.
(US$ equivalent in millions)
Expected Fiscal Year of Maturity
2017
2018
2019
2020
2021
Thereafter
Total
Fair Value
$
$
$
$
$
16
5.0%
31
3.1%
$1,000
1.6%
0.8%
19
5.0%
26
3.4%
600
1.7%
0.8%
$ 241
$
$
15
5.0%
$1,134
(a) $
2.9%
5.7%
32
3.4%
9
5.0%
$ 1,407
$ 1,707
5.0%
5.1%
$ 2,369
$ — $ 3,592
3.4%
—%
3.2%
$ 575
$ 225
$ — $ — $ 2,400
2.0%
0.8%
2.9%
0.8%
—%
—%
$
$
$
1,756
3,610
(41)
As of September 30, 2016
Debt:
Fixed rate
Average interest rate
Variable rate
Average interest rate
Interest Rate Swaps:
Receive variable/pay fixed
Average pay rate
Average receive rate
(a)
Balance includes $268 million of borrowings under the Receivables Facility.
As of September 30, 2016, the Company had foreign currency forward exchange contracts outstanding with notional amounts
of €59.5 million, £72.3 million and CAD 132.5 million to mitigate the risk of changes in foreign currency exchange rates on
short-term intercompany loans to certain international subsidiaries. As of September 30, 2016, the fair value of these foreign
exchange contracts is $0.4 million, which is included in "Accounts Payable" in our Consolidated Balance Sheets.
The Company entered into a series of pay fixed/receive floating gasoline and diesel fuel agreements based on the Department of
Energy weekly retail on-highway index in order to limit its exposure to price fluctuations for gasoline and diesel fuel. As of
September 30, 2016, the Company has contracts for approximately 32.6 million gallons outstanding for fiscal 2017 and fiscal
2018. As of September 30, 2016, the fair value of the Company’s gasoline and diesel fuel hedge agreements is $3.9 million,
which is included in "Prepayments and Other Current Assets" in our Consolidated Balance Sheets.
Item 8.
Financial Statements and Supplementary Data
See Financial Statements and Schedule beginning on page S-1.
Item 9.
Changes and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
44
44
Aramark 2016 Form 10-K Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the Company’s disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on
that evaluation, management, with the participation of the Chief Executive Officer and Chief Financial Officer, concluded that
the Company’s disclosure controls and procedures, as of the end of the period covered by this report, are functioning effectively
to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms. A controls system, no matter how well designed and operated, cannot provide absolute assurance that
the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within a company have been detected.
(b) Management’s Annual Report on Internal Control Over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of the
Company's management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an
evaluation of the effectiveness of the Company's internal control over financial reporting based upon criteria established in
Internal Control – Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on that evaluation, the Company's management concluded that the Company's internal control over financial reporting
was effective as of September 30, 2016. The effectiveness of the Company's internal control over financial reporting as of
September 30, 2016 has been audited by KPMG LLP, the Company's independent registered public accounting firm, as stated
in their report that is included herein on the following page.
(c) Change in Internal Control over Financial Reporting
No change in the Company’s internal control over financial reporting occurred during the Company’s fourth quarter of fiscal
2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial
reporting.
45
45
Aramark 2016 Form 10-K Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Aramark:
We have audited Aramark and subsidiaries’ (the Company) internal control over financial reporting as of September 30, 2016,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
“Management’s Annual Report on Internal Control Over Financial Reporting,” appearing in item 9A, Controls and Procedures.
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
September 30, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Aramark and subsidiaries as of September 30, 2016 and October 2, 2015, and the related consolidated
statements of income, comprehensive income, cash flows and stockholders’ equity for each of the fiscal years ended September 30,
2016, October 2, 2015 and October 3, 2014, and our report dated November 23, 2016 expressed an unqualified opinion on those
consolidated financial statements.
/s/ KPMG LLP
Philadelphia, Pennsylvania
November 23, 2016
46
46
Aramark 2016 Form 10-K PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Information about our directors and persons nominated to become directors required by Item 10 will be included under the
caption "Proposal No. 1 - Election of Directors" in the Company's Proxy Statement for the 2017 Annual Meeting of
Stockholders and is incorporated herein by reference. Information about our executive officers is included under the caption
“Executive Officers of the Registrant” in Part I of this report and incorporated herein.
Information on beneficial ownership reporting required by Item 10 will be included under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Proxy Statement for the 2017 Annual Meeting of Stockholders and is
incorporated herein by reference.
We have a Business Conduct Policy that applies to all of our directors, officers and employees, including our principal
executive officer, principal financial officer and principal accounting officer, which is available on the Investor Relations
section of our website at www.aramark.com. A copy of our Business Conduct Policy may be obtained free of charge by writing
to Investor Relations, Aramark, 1101 Market Street, Philadelphia, PA 19107. Our Business Conduct Policy contains a "code of
ethics," as defined in Item 406(b) of Regulation S-K. Please note that our website address is provided as an inactive textual
reference only. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code
of ethics on our website.
The remaining information required by Item 10 will be included under the caption "Board Committees and Meetings" in the
Company's Proxy Statement for the 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 11.
Executive Compensation
Information required by Item 11 will be included under the caption "Compensation Matters" in the Company's Proxy Statement
for the 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by Item 12 will be included under the captions "Security Ownership of Certain Beneficial Owners and
Management" and "Equity Compensation Plan Information" in the Company's Proxy Statement for the 2017 Annual Meeting of
Stockholders and is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Information required by Item 13 will be included under the captions "Certain Relationships and Related Transactions" and
"Director Independence and Independence Determinations" in the Company's Proxy Statement for the 2017 Annual Meeting of
Stockholders and is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services
Information required by Item 14 will be included under the caption "Fees to Independent Registered Public Accounting Firm"
in the Company's Proxy Statement for the 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
47
47
Aramark 2016 Form 10-K PART IV
Item 15.
Exhibits and Financial Statement Schedules
(a) Financial Statements
See Index to Financial Statements and Schedule at page S-1 and the Exhibit Index.
(b) Exhibits Required by Item 601 of Regulation S-K
See the Exhibit Index which is incorporated herein by reference.
(c) Financial Statement Schedules
See Index to Financial Statements and Schedule at page S-1.
48
48
Aramark 2016 Form 10-K Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly
caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized on November 23, 2016.
SIGNATURES
Aramark
By:
Name:
Title:
/s/ STEPHEN P. BRAMLAGE, JR.
Stephen P. Bramlage, Jr.
Executive Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on November 23, 2016.
Name
/s/ ERIC J. FOSS
Eric J. Foss
Capacity
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
/s/ STEPHEN P. BRAMLAGE, JR.
Stephen P. Bramlage, Jr.
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ BRIAN P. PRESSLER
Brian P. Pressler
Senior Vice President, Controller and Chief Accounting Officer
(Principal Accounting Officer)
/s/ TODD M. ABBRECHT
Todd M. Abbrecht
/s/ LAWRENCE T. BABBIO, JR.
Lawrence T. Babbio, Jr.
/s/ PIERRE-OLIVIER BECKERS-VIEUJANT
Pierre-Olivier Beckers-Vieujant
/s/ LISA G. BISACCIA
Lisa G. Bisaccia
/s/ LEONARD S. COLEMAN, JR.
Leonard S. Coleman, Jr.
/s/ RICHARD DREILING
Richard Dreiling
/s/ IRENE M. ESTEVES
Irene M. Esteves
/s/ DANIEL J. HEINRICH
Daniel J. Heinrich
/s/ SANJEEV MEHRA
Sanjeev Mehra
/s/ JOHN A. QUELCH
John A. Quelch
/s/ STEPHEN SADOVE
Stephen Sadove
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
49
49
Aramark 2016 Form 10-K [THIS PAGE INTENTIONALLY LEFT BLANK]
ARAMARK AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of September 30, 2016 and October 2, 2015
Consolidated Statements of Income for the fiscal years ended September 30,
2016, October 2, 2015 and October 3, 2014
Consolidated Statements of Comprehensive Income for the fiscal years ended
September 30, 2016, October 2, 2015 and October 3, 2014
Consolidated Statements of Cash Flows for the fiscal years ended September
30, 2016, October 2, 2015 and October 3, 2014
Consolidated Statements of Stockholders' Equity for the fiscal years ended
September 30, 2016, October 2, 2015 and October 3, 2014
Notes to Consolidated Financial Statements
Schedule II—Valuation and Qualifying Accounts and Reserves for the fiscal
years ended September 30, 2016, October 2, 2015 and October 3, 2014
Page
S-2
S-3
S-4
S-5
S-6
S-7
S-8
S-45
All other schedules are omitted because they are not applicable, not required, or the information required to be set forth therein
is included in the consolidated financial statements or in the notes thereto.
S-1
S-1
Aramark 2016 Form 10-K Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Aramark:
We have audited the accompanying consolidated balance sheets of Aramark and subsidiaries (the Company) as of September 30,
2016 and October 2, 2015, and the related consolidated statements of income, comprehensive income, cash flows, and stockholders’
equity for each of the fiscal years ended September 30, 2016, October 2, 2015 and October 3, 2014. In connection with our audits
of the consolidated financial statements, we also have audited the financial statement schedule. These consolidated financial
statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Aramark and subsidiaries as of September 30, 2016 and October 2, 2015, and the results of their operations and their cash flows
for each of the fiscal years ended September 30, 2016, October 2, 2015 and October 3, 2014, in conformity with U.S. generally
accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Company’s internal control over financial reporting as of September 30, 2016, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report
dated November 23, 2016 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial
reporting.
/s/ KPMG LLP
Philadelphia, Pennsylvania
November 23, 2016
S-2
S-2
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2016 AND OCTOBER 2, 2015
(in thousands, except share amounts)
Current Assets:
ASSETS
Cash and cash equivalents
Receivables (less allowances: 2016 - $48,058; 2015 - $39,023)
Inventories
Prepayments and other current assets
Total current assets
Property and Equipment, at cost:
Land, buildings and improvements
Service equipment and fixtures
Less - Accumulated depreciation
Goodwill
Other Intangible Assets
Other Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term borrowings
Accounts payable
Accrued payroll and related expenses
Accrued expenses and other current liabilities
Total current liabilities
Long-Term Borrowings
Deferred Income Taxes and Other Noncurrent Liabilities
Redeemable Noncontrolling Interest
Stockholders' Equity:
September 30, 2016
October 2, 2015
$
$
$
$
$
$
152,580
1,476,349
587,155
276,487
2,492,571
643,347
1,890,301
2,533,648
(1,510,565)
1,023,083
4,628,881
1,111,883
1,325,654
10,582,072
46,522
847,588
514,619
776,016
2,184,745
5,223,514
1,003,013
9,794
122,416
1,444,574
575,263
236,870
2,379,123
639,148
1,745,545
2,384,693
(1,425,348)
959,345
4,558,968
1,111,980
1,186,941
10,196,357
81,427
850,040
522,687
726,834
2,180,988
5,184,597
937,311
10,102
Common stock, par value $.01 (authorized: 600,000,000 shares; issued:
2016—272,565,923 shares and 2015—266,564,567; and
outstanding: 2016—244,713,580 shares and 2015—239,917,320)
Capital surplus
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock (shares held in treasury: 2016—27,852,343 shares and
2015—26,647,247)
Total stockholders' equity
2,726
2,921,725
(33,778)
(180,783)
2,666
2,784,730
(228,641)
(166,568)
(548,884)
2,161,006
10,582,072
$
(508,828)
1,883,359
10,196,357
$
The accompanying notes are an integral part of these consolidated financial statements.
S-3
S-3
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2016, OCTOBER 2, 2015 AND OCTOBER 3, 2014
(in thousands, except per share data)
Sales
Costs and Expenses:
Cost of services provided
Depreciation and amortization
Selling and general corporate expenses
Operating income
Interest and Other Financing Costs, net
Income Before Income Taxes
Provision for Income Taxes
Net income
Less: Net income attributable to noncontrolling interest
Net income attributable to Aramark stockholders
Earnings per share attributable to Aramark stockholders:
Basic
Diluted
Weighted Average Shares Outstanding:
Basic
Diluted
$
$
$
Fiscal Year Ended
September 30, 2016
14,415,829
$
October 2, 2015
October 3, 2014
$
14,329,135
$
14,832,913
12,890,408
495,765
283,342
13,669,515
746,314
315,383
430,931
142,699
288,232
426
287,806
1.19
1.16
242,286
248,763
$
$
$
12,880,424
504,033
316,740
13,701,197
627,938
285,942
341,996
105,020
236,976
1,030
235,946
0.99
0.96
237,616
246,616
$
$
$
13,363,918
521,581
382,851
14,268,350
564,563
334,886
229,677
80,218
149,459
503
148,956
0.66
0.63
225,866
237,451
The accompanying notes are an integral part of these consolidated financial statements.
S-4
S-4
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2016, OCTOBER 2, 2015 AND OCTOBER 3, 2014
(in thousands)
Net income
Other comprehensive loss, net of tax:
Pension plan adjustments
Foreign currency translation adjustments
Cash flow hedges:
Unrealized losses arising during the period
Reclassification adjustments
Share of equity investee's comprehensive income (loss)
Other comprehensive loss, net of tax
Comprehensive income
Less: Net income attributable to noncontrolling interest
Comprehensive income attributable to Aramark stockholders
$
Fiscal Year Ended
September 30, 2016
288,232
$
$
October 2, 2015
October 3, 2014
236,976
$
149,459
(24,670)
3,080
(8,426)
21,184
(5,383)
(14,215)
274,017
426
273,591
$
3,522
(43,547)
(34,622)
11,681
2,696
(60,270)
176,706
1,030
175,676
$
(13,596)
(31,281)
(17,626)
15,430
—
(47,073)
102,386
503
101,883
The accompanying notes are an integral part of these consolidated financial statements.
S-5
S-5
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2016, OCTOBER 2, 2015 AND OCTOBER 3, 2014
(in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Income taxes deferred
Share-based compensation expense
Changes in operating assets and liabilities:
Receivables
Inventories
Prepayments
Accounts payable
Accrued expenses
Changes in other noncurrent liabilities
Changes in other assets
Other operating activities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment, client contract investments
and other
Disposals of property and equipment
Proceeds from divestitures
Acquisition of certain businesses:
Working capital other than cash acquired
Property and equipment
Additions to goodwill, other intangible assets and other
assets, net
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term borrowings
Payments of long-term borrowings
Net change in funding under the Receivables Facility
Payments of dividends
Proceeds from initial public offering, net
Proceeds from issuance of common stock
Repurchase of common stock
Other financing activities
Net cash provided by (used in) financing activities
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
September 30, 2016
October 2, 2015
October 3, 2014
Fiscal Year Ended
$
288,232
$
236,976
$
149,459
495,765
52,416
56,942
(32,859)
(9,625)
(64,663)
(24,231)
35,643
(33,711)
(10,189)
52,920
806,640
504,033
(4,108)
66,416
81,284
(29,587)
9,763
(99,265)
(61,839)
(52,136)
13,595
17,904
683,036
(512,532)
(524,384)
26,824
—
10,226
(32,989)
(176,614)
5,340
(679,745)
1,399,988
(1,363,534)
(82,000)
(92,074)
—
35,705
(749)
5,933
(96,731)
30,164
122,416
19,128
—
(143)
—
(3,234)
4,299
(504,334)
71,926
(209,621)
—
(81,898)
—
39,946
(50,176)
61,847
(167,976)
10,726
111,690
$
152,580
$
122,416
$
521,581
37,372
96,332
(226,756)
(19,810)
(77,609)
9,657
(113,193)
(9,034)
10,123
20,037
398,159
(545,194)
28,494
24,000
(540)
(6,681)
(14,235)
8,934
(505,222)
1,570,818
(1,978,606)
50,000
(52,186)
524,081
4,408
(4,730)
(6,030)
107,755
692
110,998
111,690
The accompanying notes are an integral part of these consolidated financial statements.
S-6
S-6
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2016, OCTOBER 2, 2015 AND OCTOBER 3, 2014
(in thousands)
Balance, September 27, 2013
$
903,707
$
2,194
$1,693,663
$
(479,233) $
(59,225) $ (253,692)
Total
Stockholders'
Equity
Common
Stock
Capital
Surplus
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Net income attributable to Aramark
stockholders
Other comprehensive income (loss)
Capital contributions from issuance
of common stock
Capital contributions from initial
public offering
Share-based compensation expense
Tax benefits related to stock
incentive plans
Change due to termination of
provision in Stockholders'
Agreement
Repurchases of Common Stock
Payments of dividends
Balance, October 3, 2014
Net income attributable to Aramark
stockholders
Other comprehensive income (loss)
Capital contributions from issuance
of common stock
Share-based compensation expense
Tax benefits related to stock
incentive plans
Repurchases of Common Stock
Payments of dividends
Balance, October 2, 2015
Net income attributable to Aramark
stockholders
Other comprehensive income (loss)
Capital contributions from issuance
of common stock
Share-based compensation expense
Tax benefits related to stock
incentive plans
Repurchases of Common Stock
Payments of dividends
148,956
(47,073)
62,087
524,081
96,332
40,507
158,708
(117,083)
(52,186)
87
280
62,000
523,801
96,332
40,507
158,708
$
1,718,036
$
2,561
$2,575,011
$
235,946
(60,270)
77,095
66,416
66,313
(138,053)
(82,124)
105
76,990
66,416
66,313
$
1,883,359
$
2,666
$2,784,730
$
287,806
(14,215)
48,156
56,942
31,957
(40,056)
(92,943)
60
48,096
56,942
31,957
Balance, September 30, 2016
$
2,161,006
$
2,726
$2,921,725
$
148,956
(47,073)
(52,186)
(382,463) $
235,946
(117,083)
(106,298) $ (370,775)
(60,270)
(82,124)
(228,641) $
287,806
(138,053)
(166,568) $ (508,828)
(14,215)
(40,056)
(92,943)
(33,778) $
(180,783) $ (548,884)
The accompanying notes are an integral part of these consolidated financial statements.
S-7
S-7
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Aramark (the "Company") is a leading global provider of food, facilities and uniform services to education, healthcare, business
& industry, and sports, leisure & corrections clients. The Company's core market is North America (composed of the United
States and Canada), which is supplemented by an additional 17-country footprint serving many of the fastest growing global
geographies. The Company operates its business in three reportable segments that share many of the same operating
characteristics:
•
•
•
Food and Support Services North America ("FSS North America") - Food, refreshment, specialized dietary and
supports services, including facility maintenance and housekeeping, provided to business, educational and
healthcare institutions and in sports, leisure and other facilities.
Food and Support Services International ("FSS International") - Food, refreshment, specialized dietary and
support services, including facility maintenance and housekeeping, provided to business, educational and
healthcare institutions and in sports, leisure and other facilities.
Uniform and Career Apparel ("Uniform") - Rental, sale, cleaning, maintenance and delivery of personalized
uniforms and other textile items on a contract basis and direct marketing of personalized uniforms and accessories
to clients in a wide range of industries, including manufacturing, transportation, construction, restaurants and
hotels, healthcare and pharmaceutical industries. We supply garments, other textile and paper products and other
accessories through rental and direct purchase programs to businesses, public institutions and individuals.
On December 12, 2013, Aramark's common stock began trading on the New York Stock Exchange under the symbol "ARMK"
after its initial public offering ("IPO") of 28,000,000 shares of its common stock at a price of $20.00 per share (see Note 9).
The consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling
financial interest is maintained in accordance with generally accepted accounting principles in the United States ("U.S.
GAAP"). All significant intercompany transactions and accounts have been eliminated.
Fiscal Year
The Company's fiscal year is the fifty-two or fifty-three week period which ends on the Friday nearest September 30th. The
fiscal years ended September 30, 2016 and October 2, 2015 were each fifty-two week periods and the fiscal year ended
October 3, 2014 was a fifty-three week period.
New Accounting Standard Updates
In October 2016, the Financial Accounting Standards Board ("FASB") issued an accounting standard update ("ASU") to require
entities to recognize the income tax consequences of certain intercompany assets transfers at the transaction date. The guidance
is effective for the Company in the first quarter of fiscal 2019 and early adoption is permitted. The Company is currently
evaluating the impact of the pronouncement.
In August 2016, the FASB issued an ASU to address the classification of certain cash receipts and cash payments in the
Statement of Cash Flows. The guidance is effective for the Company in the first quarter of fiscal 2019 and early adoption is
permitted. The Company is currently evaluating the impact of the pronouncement.
In March 2016, the FASB issued an ASU to update several aspects of the accounting for share-based payment transactions,
including the income tax consequences and classification of awards. The guidance is effective for the Company in the first
quarter of fiscal 2018 and early adoption is permitted. The Company expects to adopt the provisions of this ASU beginning in
its first quarter of fiscal 2017. As required under the update, the Company will prospectively adopt the provisions of this
guidance related to the recognition of the excess tax benefits or deficiencies in the Consolidated Statement of Income. The
Company will retrospectively adopt the provisions related to the changes to the Consolidated Statement of Cash Flows for all
periods presented. The Company does not expect the provisions to have a material impact on its consolidated financial
statements except for the income tax impact, which will be dependent on the volume of future option exercise and award
vesting activity.
In February 2016, the FASB issued an ASU requiring lessees to recognize most leases on their balance sheets as lease liabilities
with corresponding right-of-use assets and to disclose key information about lease arrangements. The guidance is effective for
the Company in the first quarter of fiscal 2020 and early adoption is permitted. The Company is currently evaluating the impact
of the pronouncement.
S-8
S-8
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In January 2016, the FASB issued an ASU to address certain aspects of recognition, measurement, presentation and disclosure
of financial instruments. The guidance is effective for the Company in the first quarter of fiscal 2019 and early adoption is
permitted. The Company is currently evaluating the impact of the pronouncement.
In November 2015, the FASB issued an ASU to simplify the presentation of deferred income taxes to require all deferred tax
liabilities and assets to be classified as noncurrent in a classified statement of financial position. The Company early adopted
the guidance in the second quarter of fiscal 2016 on a prospective basis, resulting in a reclassification of approximately $18.1
million from "Accrued expenses and other current liabilities" to "Deferred Income Taxes and Other Noncurrent Liabilities" in
the Consolidated Balance Sheet.
In July 2015, the FASB issued an ASU which changes the measurement principle for inventory from the lower of cost or
market to the lower of cost and net realizable value. The guidance is effective for the Company in the first quarter of fiscal 2018
and early adoption is permitted. The Company is currently evaluating the impact of the pronouncement.
In April 2015, the FASB issued an ASU on debt issuance costs which requires presentation on the balance sheet as a direct
deduction from the debt liability, similar to the presentation of debt discounts, and will no longer be recorded as a separate
asset. The Company early adopted the retrospective guidance in the first quarter of fiscal 2016 and approximately $27.7 million
of debt issuance costs were reclassified from "Other Assets" to "Long-Term Borrowings" in the Consolidated Balance Sheet as
of October 2, 2015.
In June 2014, the FASB issued an ASU on stock compensation which requires that a performance target affecting vesting and
that could be achieved after the requisite service period be treated as a performance condition. The guidance is effective for the
Company beginning in the first quarter of fiscal 2017. The Company does not expect the pronouncement to have a material
impact on the consolidated financial statements.
In May 2014, the FASB issued an ASU on revenue from contracts with customers which outlines a single comprehensive model
to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition
guidance. In July 2015, the FASB voted to defer the effective date of the new revenue standard by one year, but to permit
entities to adopt one year earlier if they choose (i.e., the original effective date). The guidance is effective for the Company
beginning in the first quarter of fiscal 2019. As the new standard will supersede most existing revenue guidance affecting the
Company, it could impact revenue and cost recognition on contracts across all reportable segments. The Company has been
closely monitoring the FASB activity related to the new standard and begun work to conclude on specific interpretative issues.
The Company has also made progress on a comprehensive contract review project in order to develop a full understanding of
the adoption impact on the consolidated financial statements.
In January 2014, the FASB issued an ASU which states that companies should not account for certain service concession
arrangements with public-sector entities as leases and should not recognize the related infrastructure as property, plant and
equipment. The Company adopted the guidance in the first quarter of fiscal 2016 which did not have a material impact on the
consolidated financial statements.
Revenue Recognition
The Company recognizes sales when persuasive evidence of an arrangement exists, delivery has occurred or services have been
rendered, the fee is fixed and determinable and collectability is reasonably assured. In each of the Company's operating
segments, sales are recognized in the period in which services are provided pursuant to the terms of the Company's contractual
relationships with its clients. The Company generally records sales on food and support services contracts (both profit and loss
contracts and client interest contracts) on a gross basis as the Company is the primary obligor and service provider.
Certain profit and loss contracts include commissions paid to the client, typically calculated as a fixed or variable percentage of
various categories of sales. In some cases these contracts require minimum guaranteed commissions. Commissions paid to
clients are recorded in "Cost of services provided."
Sales from client interest contracts are generally comprised of amounts billed to clients for food, labor and other costs that the
Company incurs, controls and pays for. Sales from client interest contracts also include any associated management fees, client
subsidies or incentive fees based upon the Company's performance under the contract. Sales from direct marketing activities are
recognized upon shipment. All sales related taxes are presented on a net basis.
Vendor Consideration
Consideration received from vendors includes rebates, allowances and volume discounts and are accounted for as an adjustment
to the cost of the vendors' products or services and are reported as a reduction of "Cost of services provided," "Inventory," or
"Property and Equipment." Income from rebates, allowances and volume discounts is recognized based on actual purchases in
the fiscal period relative to total actual or forecasted purchases to be made over the contractual rebate period agreed to with the
vendor. Rebates, allowances and volume discounts related to Inventory held at the balance sheet date are deducted from the
S-9
S-9
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
carrying value of these inventories. Rebates, allowances and volume discounts related to "Property and Equipment" are
deducted from the costs capitalized.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could
materially differ from those estimates.
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 (loss), changes in foreign currency
translation adjustments (net of tax), pension plan 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 (net of tax).
The summary of the components of comprehensive income (loss) is as follows (in thousands):
Fiscal Year Ended
September 30, 2016
October 2, 2015
October 3, 2014
Net income
Pre-Tax
Amount
Tax
Effect
After-
Tax
Amount
$ 288,232
Pre-Tax
Amount
Tax
Effect
After-
Tax
Amount
$ 236,976
Pre-Tax
Amount
Tax
Effect
Pension plan adjustments
(37,957)
13,287
(24,670)
2,832
690
3,522
(17,640)
4,044
After-
Tax
Amount
$149,459
(13,596)
Foreign currency
translation adjustments
Cash flow hedges:
Unrealized losses
arising during the
period
Reclassification
adjustments
18,547
(15,467)
3,080
(50,458)
6,911
(43,547)
(37,246)
5,965
(31,281)
(23,437)
15,011
(8,426)
(58,143)
23,521
(34,622)
(29,201)
11,575
(17,626)
34,861
(13,677)
21,184
20,143
(8,462)
11,681
25,921
(10,491)
15,430
Share of equity investee's
comprehensive income
(loss)
(8,282)
Other comprehensive loss
(16,268)
Comprehensive income
Less: Net income
attributable to
noncontrolling interest
Comprehensive income
attributable to Aramark
stockholders
2,899
2,053
(5,383)
(14,215)
274,017
4,148
(81,478)
(1,452)
21,208
426
—
(58,166)
—
11,093
2,696
(60,270)
176,706
1,030
—
(47,073)
102,386
503
$ 273,591
$ 175,676
$101,883
Accumulated other comprehensive loss consists of the following (in thousands):
September 30, 2016
October 2, 2015
Pension plan adjustments
Foreign currency translation adjustments
Cash flow hedges
Share of equity investee's accumulated
other comprehensive loss
$
$
(65,267) $
(68,461)
(36,373)
(10,682)
(180,783) $
(40,597)
(71,541)
(49,131)
(5,299)
(166,568)
S-10
S-10
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Currency Translation
Gains and losses resulting from the translation of financial statements of non-U.S. subsidiaries are reflected as a component of
accumulated other comprehensive income (loss) in stockholders' equity. Transaction gains and losses included in operating
results for fiscal 2016, fiscal 2015 and fiscal 2014 were not material.
Current Assets
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Inventories are valued at the lower of cost (principally the first-in, first-out method) or market. Personalized work apparel,
linens and other rental items in service 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 components of inventories are as follows:
Food
Career apparel and linens
Parts, supplies and novelties
September 30, 2016
October 2, 2015
35.9%
60.9%
3.2%
100.0%
37.2%
60.3%
2.5%
100.0%
Property and Equipment
Property and equipment are stated at cost and are depreciated over their estimated useful lives on a straight-line basis. Gains
and losses on dispositions are included in operating results. Maintenance and repairs are charged to current operations, and
replacements and significant improvements that extend the useful life of the asset are capitalized. The estimated useful lives for
the major categories of property and equipment are 10 to 40 years for buildings and improvements and 3 to 10 years for service
equipment and fixtures. Depreciation expense during fiscal 2016, fiscal 2015 and fiscal 2014 was $234.8 million, $226.6
million, and $239.9 million, respectively.
During fiscal 2016, the Company received proceeds of approximately $9.5 million related to the sale of a building within the
FSS North America segment, resulting in a loss of approximately $5.1 million, which is included in "Cost of services provided"
in the Consolidated Statement of Income. During fiscal 2015, the Company recorded an impairment charge of
approximately $8.7 million, which is included in "Cost of services provided" in the Consolidated Statement of Income, to write
down the book value of this building to its estimated fair value at the time. Also during fiscal 2015, the Company received
proceeds of approximately $9.8 million related to the sale of another of its buildings within the FSS North America segment,
resulting in a gain of approximately $3.1 million. Also during fiscal 2016, the Company recorded an impairment charge of
approximately $6.0 million, which is included in "Cost of services provided" in the Consolidated Statements of Income, to
write off certain idle service equipment in the Uniform segment.
Other Assets
The following table presents details of "Other Assets" as presented in the Consolidated Balance Sheets (in thousands):
Client contract investments(1)
Miscellaneous investments(2)
Long-term receivables
Computer software costs, net(3)
Other(4)
September 30, 2016
October 2, 2015
$
$
865,004
253,798
72,469
91,760
42,623
1,325,654
$
$
782,670
214,292
84,477
77,319
28,183
1,186,941
(1)
Client contract investments generally represent a cash payment provided by the Company to help finance improvement
or renovation at the facility from which the Company operates. These amounts are amortized over the contract period. If
a contract is terminated prior to its maturity date, the Company is reimbursed for the unamortized client contract
investment amount. Amortization expense was $142.5 million, $128.8 million and $106.2 million during fiscal 2016,
fiscal 2015 and fiscal 2014, respectively.
(2) Miscellaneous investments represent investments in 50% or less owned entities.
(3)
(4)
Computer software costs represent capitalized costs incurred to purchase or develop software for internal use, and are
amortized over the estimated useful life of the software, generally a period of three to seven years.
Other consists of noncurrent deferred tax assets, pension assets and deferred financing costs on certain revolving credit
facilities.
S-11
S-11
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's principal equity method investment is its 50% ownership interest in AIM Services Co., Ltd., a Japanese food
and support services company (approximately $181.4 million and $152.5 million at September 30, 2016 and October 2, 2015,
respectively, which is included in "Other Assets" in the Consolidated Balance Sheets). Summarized financial information for
AIM Services Co., Ltd. follows (in thousands):
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
$
September 30, 2016
362,961
153,866
290,814
53,998
October 2, 2015
$
279,244
127,158
234,305
32,625
Sales
Gross profit
Net income
$
September 30, 2016
1,511,938
176,303
35,820
Fiscal Year Ended
October 2, 2015
$
1,377,043
152,539
25,747
October 3, 2014
$
1,552,250
174,194
26,869
Equity in undistributed earnings
Cash distributions
15,621
7,296
10,700
22,200
10,500
6,500
The period to period comparisons of the summarized financial information for AIM Services Co., Ltd., presented in U.S. dollars
above, is impacted by currency translation. The Company's equity in undistributed earnings of AIM Services Co., Ltd. is
recorded as a reduction of "Cost of services provided" in the Consolidated Statements of Income.
Other Accrued Expenses and Liabilities
The following table presents details of "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets (in
thousands):
September 30, 2016
October 2, 2015
Deferred income
Accrued commissions
Accrued taxes
Accrued insurance and interest
Other
$
$
262,976
$
79,048
62,510
66,165
305,317
776,016
$
248,124
75,460
81,787
58,719
262,744
726,834
Deferred Income Taxes and Other Noncurrent Liabilities
The following table presents details of "Deferred Income Taxes and Other Noncurrent Liabilities" as presented in the
Consolidated Balance Sheets (in thousands):
Deferred income tax payable
Deferred compensation
Pension-related liabilities
Interest rate swap agreements
Other noncurrent liabilities
September 30, 2016
October 2, 2015
$
$
608,375
228,231
26,854
34,919
104,634
1,003,013
$
$
535,442
232,653
9,565
51,762
107,889
937,311
Share-Based Compensation
The Company recognizes compensation cost related to share-based payment transactions in the consolidated financial
statements. The cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as an
expense over the employee's requisite service period (generally the vesting period of the equity award). See Note 10 for
additional information on share-based compensation.
S-12
S-12
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supplemental Cash Flow Information
(dollars in millions)
Interest paid
Income taxes paid
Significant noncash activities follow:
$
September 30, 2016
275.4
55.6
$
Fiscal Year Ended
October 2, 2015
October 3, 2014
$
267.9
31.5
348.5
55.8
•
•
•
During fiscal 2016, fiscal 2015 and fiscal 2014, the Company executed capital lease transactions. The present
value of the future rental obligations was approximately $36.4 million, $17.9 million and $16.6 million for the
respective periods, which is included in property and equipment and long-term borrowings.
During fiscal 2016, fiscal 2015 and fiscal 2014, cashless settlements of the exercise price and related employee
minimum tax withholding liabilities of share-based payment awards were approximately $40.1 million, $89.6
million and $116.3 million, respectively.
During fiscal 2014, obligations related to client contract investments of approximately $57.2 million were unpaid
at October 3, 2014 and included in other assets and accounts payable.
NOTE 2. ACQUISITIONS AND DIVESTITURES:
Acquisitions
HPSI
During the fourth quarter of fiscal 2016, the Company acquired the assets of HPSI, a group purchasing organization, in its FSS
North America segment for cash consideration of $140.0 million. The sales, net income, assets and liabilities of HPSI did not
have a material impact on the Company's consolidated financial statements.
Avoca Handweavers Limited
During the second quarter of fiscal 2016, the Company completed the purchase of Avoca Handweavers Limited ("Avoca"), an
Irish retail and cafe business, for cash consideration of approximately $65.8 million (approximately $59.2 million, net of cash
acquired). The sales, net income, assets and liabilities of Avoca did not have a material impact on the Company's consolidated
financial statements.
Divestitures
During the fourth quarter of fiscal 2015, the Company announced it had made the decision to exit certain operations within the
FSS International segment. The Company expects to exit these operations in the first half of fiscal 2017. As a result of this
action, the Company incurred charges of approximately $0.6 million and $14.6 million during fiscal 2016 and fiscal 2015,
respectively. For fiscal 2015, these charges consisted of severance charges (approximately $4.4 million), asset write-downs
(approximately $8.0 million) and certain other exit costs (approximately $2.2 million). The Company recorded these charges in
"Cost of services provided" in the Consolidated Statements of Income.
Aramark India Private Limited
During the second quarter of fiscal 2015, the Company completed the sale of Aramark India Private Limited ("India"), resulting
in a pretax loss of approximately $4.3 million (after tax gain of approximately $1.8 million due to the tax basis exceeding the
book basis of the subsidiary), which is included in "Cost of services provided" in the Consolidated Statements of Income for
fiscal 2015. The Company did not receive any proceeds from the sale of its India subsidiary. The results of operations and cash
flows associated with the India subsidiary divestiture were not material to the Company's Consolidated Statements of Income
and Cash Flows.
McKinley Chalet Hotel
During the first quarter of fiscal 2014, the Company completed the sale of its McKinley Chalet Hotel (the "Chalet") located
adjacent to Denali National Park for approximately $24.0 million in cash. The transaction resulted in a pretax loss of
approximately $6.7 million (net of tax loss of approximately $9.1 million), which is included in "Cost of services provided" in
the Consolidated Statements of Income for fiscal 2014. The pretax loss includes a write-off of an allocation of goodwill of
approximately $12.8 million. The results of operations and cash flows associated with the Chalet divestiture were not material
to the Company's Consolidated Statements of Income and Cash Flows.
S-13
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SEVERANCE AND ASSET WRITE-DOWNS:
During fiscal 2014, as a result of additional cost saving and refinements and the continuation of productivity initiatives to the
Company's original plans developed in fiscal 2013 for consolidation and centralization initiatives and actual attrition of the
workforce, the Company recorded net severance charges of approximately $21.3 million.
During fiscal 2015, as part of the next phase related to streamlining and improving the efficiency and effectiveness of the
Company's selling, general and administrative functions, the Company incurred net severance charges of approximately $23.1
million (exclusive of the severance charges incurred related to the exit of certain operations within the FSS International
segment- see Note 2). In addition, during fiscal 2015, the Company recorded charges of approximately $6.0 million to write-off
service equipment from the decline in its Canadian remote services business within its FSS North America segment, which is
included in "Cost of services provided" in the Consolidated Statements of Income.
During fiscal 2016, the Company continued and refined its focus on streamlining and improving the efficiency and
effectiveness of its selling, general and administrative functions. As a result, the Company recorded net severance charges of
approximately $24.9 million during fiscal 2016.
The following table summarizes the unpaid obligations for severance and related costs as of September 30, 2016, which are
included in "Accrued payroll and related expenses" in the Consolidated Balance Sheets. The unpaid obligations are expected to
be paid during fiscal 2017.
(in millions)
October 2, 2015
Net
Charges
Payments
and Other
September 30, 2016
Severance and Related Costs Accrual
$26.0
24.9
(24.8)
$26.1
NOTE 4. GOODWILL AND OTHER INTANGIBLE ASSETS:
Goodwill represents the excess of the fair value of consideration paid for an acquired entity over the fair value of assets
acquired and liabilities assumed in a business combination. Goodwill is not amortized and is subject to an impairment test that
the Company conducts annually, or more frequently if a change in circumstances or the occurrence of events indicates that
potential impairment exists, using discounted cash flows. The Company performs its assessment of goodwill at the reporting
unit level. Within the FSS International segment, each country is evaluated separately since such operating units are relatively
autonomous and separate goodwill balances have been recorded for each entity. The Company has completed its annual
goodwill impairment test for fiscal 2016, which determined goodwill was not impaired. The Company performs its annual
impairment test as of the end of the fiscal month of August.
Goodwill, allocated by segment, is as follows (in thousands):
Segment
FSS North America
FSS International
Uniform
October 2, 2015
3,583,365
$
400,824
$
574,779
Acquisitions
$
52,245
40,432
—
$
4,558,968
$
92,677
$
Other intangible assets consist of (in thousands):
Translation
4
(22,768)
—
(22,764) $
September 30, 2016
3,635,614
$
418,488
574,779
4,628,881
September 30, 2016
Gross
Amount
Accumulated
Amortization
Net
Amount
Gross
Amount
October 2, 2015
Accumulated
Amortization
Net
Amount
Customer relationship assets
$ 1,793,739
$ (1,462,058) $
331,681
$ 1,859,689
$ (1,494,885) $
364,804
Trade names
781,835
$ 2,575,574
(1,633)
780,202
$ (1,463,691) $ 1,111,883
748,809
$ 2,608,498
(1,633)
747,176
$ (1,496,518) $ 1,111,980
During the second quarter of fiscal 2016, as part of the Avoca acquisition, the Company acquired a trade name with a value of
approximately $14.5 million. During the fourth quarter of fiscal 2016, as part of the HPSI acquisition, the Company acquired,
with preliminary values, a trade name of approximately $21.1 million and customer relationship assets of approximately $64.0
million. Acquisition-related intangible assets consist of customer relationship assets and the Aramark, Avoca, HPSI and other
trade names. Customer relationship assets are being amortized principally on a straight-line basis over the expected period of
S-14
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
benefit, 3 to 24 years, with a weighted average life of approximately 13 years. The Aramark, Avoca and HPSI trade names are
indefinite lived intangible assets and are not amortizable but are evaluated for impairment at least annually. The Company
completed its annual trade name impairment test for fiscal 2016, which did not result in an impairment charge. Amortization of
intangible assets for fiscal 2016, fiscal 2015 and fiscal 2014 was approximately $99 million, $133 million and $158 million,
respectively.
Based on the recorded balances at September 30, 2016, total estimated amortization of all acquisition-related intangible assets
for fiscal years 2017 through 2021 follows (in thousands):
$
2017
2018
2019
2020
2021
83,493
60,205
49,469
47,754
39,212
NOTE 5. BORROWINGS:
Long-term borrowings, net, are summarized in the following table (in thousands):
Senior secured revolving credit facility, due February 2019
Senior secured term loan facility, due July 2016
Senior secured term loan facility, due September 2019
Senior secured term loan facility, due February 2021
5.75% senior notes, due March 2020
5.125% senior notes, due January 2024
4.75% senior notes, due June 2026
Receivables Facility, due May 2019
Capital leases
Other
Less—current portion
September 30, 2016
$
— $
—
840,305
2,450,749
227,032
905,095
492,886
268,000
78,615
7,354
5,270,036
(46,522)
5,223,514
$
October 2, 2015
70,000
74,130
1,189,371
2,489,235
990,540
—
—
350,000
57,660
45,088
5,266,024
(81,427)
5,184,597
$
As of September 30, 2016, there was approximately $379.0 million of outstanding foreign currency borrowings.
Senior Secured Credit Agreement
Senior Secured Term Loan Facilities
The senior secured term loan facilities consist of the following subfacilities as of September 30, 2016:
•
•
•
•
•
A U.S. dollar denominated term loan to Aramark Services, Inc. in the amount of $840.3 million (due 2019) and
$2,079.1 million (due 2021);
A yen denominated term loan to Aramark Services, Inc. in the amount of ¥4,916.3 million (approximately $48.5
million due 2021);
A Canadian dollar denominated term loan to a Canadian subsidiary in the amount of CAD33.0 million (approximately
$25.2 million due 2021);
A euro denominated term loan to an Irish subsidiary in an amount of €136.1 million (approximately $152.9 million
due 2021); and
A sterling denominated term loan to a U.K. subsidiary in an amount of £111.8 million (approximately $145.0 million
due 2021).
The primary borrower under the senior secured credit facilities is Aramark Services, Inc. (the "Issuer"). In addition, certain
subsidiaries of the Issuer are borrowers under certain subfacilities of the term loan facilities and/or the revolving credit facility.
The Company is not a guarantor under the senior secured credit facilities and is not subject to the covenants or obligations
under the senior secured credit agreement.
S-15
S-15
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Senior Secured Revolving Credit Facility
The senior secured revolving credit facility consists of the following subfacilities as of September 30, 2016:
•
•
A revolving credit facility available for loans in U.S. dollars to the Issuer with aggregate commitments of $680.0
million (due February 24, 2019); and
A revolving credit facility available for loans in Canadian dollars or U.S. dollars to the Issuer or a Canadian subsidiary
with aggregate commitments of $50.0 million (due February 24, 2019).
Senior Secured Credit Agreement, as Amended
All U.S. dollar denominated term loans have an applicable margin of 2.50% for eurocurrency (LIBOR) borrowings, subject to a
LIBOR floor of 0.75%, and an applicable margin of 1.50% for base-rate borrowings, subject to a minimum base rate of 1.75%.
The yen denominated and euro denominated term loans have an applicable margin of 2.75%, subject to a LIBOR floor of
0.75%, and the sterling denominated terms loans have an applicable margin of 3.25%, subject to a LIBOR floor of 0.75%. The
applicable margin spread for the U.S. dollar borrowings under the $680.0 million of extended revolving credit commitments is
2.50% with respect to LIBOR borrowings and 1.50% with respect to base rate borrowings. The applicable margin spread for
Canadian dollar borrowings under the revolving credit facility are for BA (bankers' acceptance) rate borrowings and 1.50% for
base rate borrowings. U.S. and Canadian swingline loans must be base rate borrowings. The term loans due on February 24,
2021 were borrowed with an original issue discount of 0.50%. The term loans due on September 7, 2019 were borrowed with
an original issue discount of 0.25%.
In addition to paying interest on outstanding principal, the Company is required to pay a commitment fee to the lenders under
the revolving credit facility in respect of the unutilized commitments thereunder. The commitment fee rate is 0.50% per annum.
The Company's revolving credit facility includes a $250.0 million sublimit for letters of credit and includes borrowing capacity
available for short-term borrowings referred to as swingline loans subject to a sublimit.
The senior secured credit facilities provide that the Company has the right at any time to request up to $555.0 million of
incremental commitments in the aggregate under one or more incremental term loan facilities and/or synthetic letter of credit
facilities and/or revolving credit facilities and/or by increasing commitments under the revolving credit facility. The lenders
under these facilities are not under any obligation to provide any such incremental facilities or commitments, and any such
addition of or increase in facilities or commitments will be subject to pro forma compliance with an incurrence-based financial
covenant and customary conditions precedent. Our ability to obtain extensions of credit under these incremental facilities or
commitments is subject to the same conditions as extensions of credit under the existing credit facilities.
The Company recorded charges to "Interest and Other Financing Costs, net" in the Consolidated Statements of Income during
fiscal 2014 consisting of $13.1 million of third-party costs and $12.6 million of non-cash charges for the write-off of deferred
financing costs and original issue discount related to senior secured credit agreement refinancing activity during fiscal 2014.
As of September 30, 2016, there was approximately $713.5 million available for borrowing under the revolving credit facility.
Prepayments and Amortization
The senior secured credit agreement requires us to prepay outstanding term loans, subject to certain exceptions, with:
•
•
•
50% of the Issuer's annual excess cash flow (as defined in the senior secured credit agreement) with stepdowns to 25%
and 0% upon the Issuer's reaching certain consolidated leverage ratio thresholds;
100% of the net cash proceeds of all nonordinary course asset sales or other dispositions of property subject to certain
exceptions and customary reinvestment rights; and
100% of the net cash proceeds of any incurrence of debt, including debt incurred by any business securitization
subsidiary in respect of any business securitization facility, but excluding proceeds from the receivables facilities and
other debt permitted under the senior secured credit agreement.
The foregoing mandatory prepayments will be applied to the term loan facilities as directed by us. The Company may
voluntarily repay outstanding loans under the senior secured credit facilities at any time without premium or penalty, other than
customary "breakage" costs with respect to LIBOR loans. Prepaid term loans may not be reborrowed.
During the first quarter of fiscal 2016, the Company repaid a U.S. dollar denominated term loan of a Canadian subsidiary, due
July 2016, that had been borrowed under the Company's senior secured credit agreement in the amount of $74.1 million. The
Company made optional prepayments of approximately $160.0 million and $157.0 million of outstanding U.S. dollar term
loans, during fiscal 2016 and fiscal 2015, respectively.
S-16
S-16
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
If a change of control as defined in the senior secured credit agreement occurs, this will cause an event of default under the
credit agreement. Upon an event of default, the senior secured credit facilities may be accelerated, in which case the Company
would be required to repay all outstanding loans plus accrued and unpaid interest and all other amounts outstanding under the
senior secured credit facilities.
The Company is required to repay installments on the loans under the term loan facilities in quarterly principal amounts of
1.00% per annum of their funded total principal amount. This requirement does not apply to the 2019 Term Loans due to the
principal prepayments made by the Company.
Guarantees and Certain Covenants
All obligations under the senior secured credit agreement are unconditionally guaranteed by Aramark Intermediate HoldCo
Corporation and, subject to certain exceptions, substantially all of the Issuer's existing and future domestic subsidiaries
(excluding certain immaterial and dormant subsidiaries, receivables facility subsidiaries, business securitization subsidiaries
and certain subsidiaries designated under our senior secured credit agreement as "unrestricted subsidiaries"), referred to,
collectively, as U.S. Guarantors. All obligations of each foreign borrower under the senior secured credit facilities are
unconditionally guaranteed by the Issuer, the U.S. guarantors and, subject to certain exceptions and qualifications, the
respective other foreign borrowers. All obligations under the senior secured credit facilities, and the guarantees of those
obligations, are secured by (i) a pledge of 100% of the capital stock of the Issuer, (ii) pledges of 100% of the capital stock held
by the Issuer, Aramark Intermediate HoldCo Corporation or any of the U.S. Guarantors and (iii) a security interest in, and
mortgages on, substantially all tangible assets of Aramark Intermediate HoldCo Coporation, the Issuer or any of the U.S.
Guarantors.
The senior secured credit agreement contains a number of covenants that, among other things, restrict, subject to certain
exceptions, the Issuer's ability and the ability of its restricted subsidiaries to: incur additional indebtedness; issue preferred stock
or provide guarantees; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends, make distributions
or repurchase its capital stock; make investments, loans or advances; repay or repurchase any notes, except as scheduled or at
maturity; create restrictions on the payment of dividends or other transfers to the Issuer from its restricted subsidiaries; make
certain acquisitions; engage in certain transactions with affiliates; amend material agreements governing the Issuer's
outstanding notes (or any indebtedness that refinances the notes); and fundamentally change the Issuer's business. In addition,
the senior secured revolving credit facility requires the Issuer to maintain a maximum senior secured leverage ratio and imposes
limitations on capital expenditures. The senior secured credit agreement also contains certain customary affirmative covenants,
such as financial and other reporting, and certain events of default. At September 30, 2016, the Issuer was in compliance with
all of these covenants.
The senior secured credit agreement requires the Issuer to maintain a maximum Consolidated Secured Debt Ratio, defined as
consolidated total indebtedness secured by a lien to Covenant Adjusted EBITDA, of 5.125x. Consolidated total indebtedness
secured by a lien is defined in the senior secured credit agreement as total indebtedness outstanding under the senior secured
credit agreement, capital leases, advances under the Receivables Facility and any other indebtedness secured by a lien reduced
by the lesser of the amount of cash and cash equivalents on the consolidated balance sheet that is free and clear of any lien and
$75 million. Non-compliance with the maximum Consolidated Secured Debt Ratio could result in the requirement to
immediately repay all amounts outstanding under the senior secured credit agreement, which, if the Issuer's revolving credit
facility lenders failed to waive any such default, would also constitute a default under the indentures governing the senior notes.
The actual ratio at September 30, 2016 was 2.64x.
The senior secured credit agreement establishes an incurrence-based minimum Interest Coverage Ratio, defined as Covenant
Adjusted EBITDA to consolidated interest expense, as a condition for the Issuer and its restricted subsidiaries to incur
additional indebtedness and to make certain restricted payments. The minimum Interest Coverage Ratio is 2.00x for the term of
the senior secured credit agreement. If the Issuer does not maintain this minimum Interest Coverage Ratio calculated on a pro
forma basis for any such additional indebtedness or restricted payments, it could be prohibited from being able to incur
additional indebtedness, other than the additional funding provided for under the senior secured credit agreement and pursuant
to specified exceptions, and make certain restricted payments, other than pursuant to certain exceptions. Consolidated interest
expense is defined in the senior secured credit agreement as consolidated interest expense excluding interest income, adjusted
for acquisitions and dispositions, further adjusted for certain non-cash or nonrecurring interest expense and the Issuer's
estimated share of interest expense from one equity method investee. The actual ratio was 4.51x for the fiscal year ended
September 30, 2016.
S-17
S-17
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Senior Notes
5.75% Senior Notes due 2020
On March 7, 2013, the Issuer issued $1,000 million of 5.75% Senior Notes due March 15, 2020 (the "2020 Notes") pursuant to
an indenture, dated as of March 7, 2013 (the "2020 Notes Indenture"), entered into by the Issuer, the Company and certain other
Aramark entities, as guarantors of the 2020 Notes, and The Bank of New York Mellon, as trustee. The 2020 Notes were issued
at par. The 2020 Notes are unsecured obligations of the Issuer. The 2020 Notes rank equal in right of payment to all of the
Issuer's existing and future senior debt and senior in right of payment to all of the Issuer's existing and future debt that is
expressly subordinated in right of payment to the 2020 Notes. The 2020 Notes are guaranteed on a senior, unsecured basis by
substantially all of the domestic subsidiaries of the Issuer. Interest on the 2020 Notes is payable on March 15 and September 15
of each year. The 2020 Notes and the guarantees thereof are effectively subordinated to the Issuer's existing and future secured
debt and that of the existing guarantors to the 2020 Notes, including all indebtedness under our senior secured credit facilities,
to the extent of the value of the assets securing that indebtedness. The 2020 Notes and the guarantees thereof are structurally
subordinated to all of the liabilities of any of the Issuer's subsidiaries that do not guarantee the 2020 Notes. The Company is a
guarantor of the Issuer's obligations with respect to the 2020 Notes.
In the event of certain types of changes of control, the holders of the 2020 Notes may require the Issuer to purchase for cash all
or a portion of their 2020 Notes at a purchase price equal to 101% of the principal amount of such 2020 Notes, plus accrued and
unpaid interest, if any, to the date of repurchase. Beginning March 15, 2015, the Issuer has the option to redeem all or a portion
of the 2020 Notes at any time at the redemption prices set forth in the Indenture.
The 2020 Notes Indenture contains covenants limiting the Issuer's ability and the ability of its restricted subsidiaries to: incur
additional indebtedness or issue certain preferred shares; pay dividends and make certain distributions, investments and other
restricted payments; create certain liens; sell assets; enter into transactions with affiliates; limit the ability of restricted
subsidiaries to make payments to the Issuer; enter into sale and leaseback transactions; merge, consolidate, sell or otherwise
dispose of all or substantially all of the Issuer's assets; and designate the Issuer's subsidiaries as unrestricted subsidiaries. The
2020 Notes Indenture also provides for events of default which, if any of them occurs, would permit or require the principal of
and accrued interest on the 2020 Notes to become or to be declared due and payable.
5.125% Senior Notes due 2024 and 4.75% Senior Notes due 2026
On December 17, 2015, the Issuer issued $400 million of 5.125% Senior Notes due January 15, 2024 (the "Original 2024
Notes"), pursuant to an indenture, dated as of December 17, 2015 (the "Base Indenture"), entered into by the Issuer, the
Company and certain other Aramark entities, as guarantors of the Original 2024 Notes, and The Bank of New York Mellon, as
trustee. The Original 2024 Notes were issued at par and the net proceeds were used for general corporate purposes and to
reduce the outstanding balance under the Company's revolving credit facility. The Company paid approximately $6.0 million in
financing fees related to the offering of the Original 2024 Notes.
On May 31, 2016, the Issuer issued $1,000 million aggregate principal amount of senior unsecured notes, consisting of $500
million of additional 5.125% Senior Notes due January 15, 2024 (the "New 2024 Notes") and $500 million of 4.75% Senior
Notes due June 1, 2026 (the "2026 Notes" and, together with the New 2024 Notes, the "Issued Notes"). The New 2024 Notes
constitute a further issuance of the Original 2024 Notes (together with the New 2024 Notes, the "2024 Notes" and, together
with the 2026 Notes, the "Notes"). The New 2024 Notes were issued pursuant to the Base Indenture, as supplemented by the
supplemental indenture, dated as of May 31, 2016 (the "Supplemental Indenture" and together with the Base Indenture, the
"2024 Notes Indenture"), entered into by the Issuer, the Company and certain other Aramark entities, as guarantors of the New
2024 Notes, and The Bank of New York Mellon, as trustee. The 2026 Notes were issued pursuant to the indenture, dated as of
May 31, 2016 (the "2026 Notes Indenture"), entered into by the Issuer, the Company and certain other Aramark entities, as
guarantors of the 2026 Notes and The Bank of New York Mellon, as trustee. The New 2024 Notes were issued at a premium of
$18.8 million, which created an effective yield of 4.6%. The premium was recorded to "Long-Term Borrowings" in the
Consolidated Balance Sheets and will be amortized to "Interest and Other Financing Costs, net" in the Consolidated Statements
of Income until maturity in 2024.
The 2026 Notes were issued at par. The net proceeds from the Issued Notes and premium from the New 2024 Notes were used
to repay $194.1 million of 2019 Term Loans, redeem $771.2 million principal of the 2020 Notes, pay a $22.2 million call
premium on the 2020 Notes that were redeemed during fiscal 2016, pay $11.1 million of accrued interest on the 2020 Notes and
fees and costs associated with the offering of the Issued Notes. As a result of the issuance of the Issued Notes, the Company
recorded charges in fiscal 2016 of approximately $30.2 million, to "Interest and Other Financing Costs, net" in the Consolidated
Statements of Income, consisting of $22.2 million for the call premium on the 2020 Notes that were redeemed during fiscal
2016 and $8.0 million of non-cash charges for the write-off of debt issuance costs and debt discount on the 2020 Notes and
2019 Term Loans. The Company also paid approximately $14.2 million in debt issuance costs spread evenly between the Issued
Notes, which were recorded as a reduction to "Long-Term Borrowings" in the Consolidated Balance Sheets.
S-18
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Notes are senior unsecured obligations of the Issuer. The Notes rank equal in right of payment to all of the Issuer's existing
and future senior debt and senior in the right of payment to the Issuer's future debt and other obligations that are expressly
subordinated in right of payment to the Notes. The Notes are guaranteed on a senior, unsecured basis by the Company and
substantially all of the domestic subsidiaries of the Issuer. The Notes and the guarantees thereof are effectively subordinated to
all existing and future secured debt of the Issuer and the guarantors, to the extent of the value of the assets securing such debt,
and structurally subordinated to all of the liabilities of any of the Issuer's subsidiaries that do not guarantee the Notes. Interest
on the 2024 Notes is payable on January 15 and July 15 of each year. Interest on the 2026 Notes is payable on June 1 and
December 1 of each year.
The 2024 Notes Indenture and 2026 Notes Indenture contain covenants limiting the Issuer's ability and the ability of its
restricted subsidiaries to: incur additional indebtedness or issue certain preferred shares; pay dividends and make certain
distributions, investments and other restricted payments; create certain liens; sell assets; enter into transactions with affiliates;
limit the ability of restricted subsidiaries to make payments to the Issuer; enter into sale and leaseback transactions; merge,
consolidate, sell or otherwise dispose of all or substantially all of the Issuer's assets; and designate the Issuer's subsidiaries as
unrestricted subsidiaries. They also provide for events of default which, if any of them occurs, would permit or require the
principal of and accrued interest on the Notes to become or to be declared due and payable.
Registration Rights Agreement
On May 31, 2016, the Issuer, the Company and the other guarantors entered into a registration rights agreement (the "New 2024
Notes Registration Rights Agreement") with Wells Fargo Securities, LLC, as representative of the several initial purchasers,
with respect to the New 2024 Notes and a registration rights agreement (the "2026 Notes Registration Rights Agreement" and
together with the New 2024 Notes Registration Agreement, the "Registration Rights Agreements") with Wells Fargo Securities,
LLC, as representative of several initial purchasers, with respect to the 2026 Notes. In each of the Registration Rights
Agreements, the Issuer agreed to use commercially reasonable efforts to (1) file an exchange offer registration statement
pursuant to which the Issuer will offer exchange notes with terms identical in all material respects to, and evidencing the same
indebtedness as, the applicable series of Issued Notes, in exchange for such series of Issued Notes (but which exchange notes
will not contain terms with respect to transfer restrictions, registration rights or provide for the additional interest described
below); and (2) cause the exchange offer registration statement to be declared effective under the Securities Act of 1933, as
amended. The Issuer has agreed to use commercially reasonable efforts to cause the exchange offers to be consummated or, if
required, to have one or more shelf registration statements declared effective, within 270 days after the issue date of the Issued
Notes.
If the Company fails to satisfy this obligation (a "registration default"), the annual interest rate on the New 2024 Notes or the
2026 Notes, as applicable, will increase by 0.25%. The annual interest rate on the New 2024 Notes or the 2026 Notes, as
applicable, will increase by an additional 0.25% for each subsequent 90-day period during which the registration default
continues, up to a maximum additional interest rate of 1.00% per year over the applicable interest rate in the 2024 Notes
Indenture or 2026 Notes Indenture, as applicable. If the registration default is corrected, the applicable interest rate on the New
2024 Notes or the 2026 Notes, as applicable, will revert to the original level.
Future Maturities and Interest and Other Financing Costs, net
At September 30, 2016, annual maturities on long-term borrowings maturing in the next five fiscal years and thereafter
(excluding the $46.3 million reduction to long-term borrowings from debt discounts and deferred financing fees and the
increase of $17.8 million from the premium on the New 2024 Notes) are as follows (in thousands):
2017
2018
2019
2020
2021
Thereafter
$
46,522
45,074
1,149,437
272,674
2,376,707
1,408,181
S-19
S-19
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of interest and other financing costs, net, are summarized as follows (in thousands):
Interest expense
Interest income
Other financing costs
Total
Fiscal Year Ended
September 30, 2016
October 2, 2015
October 3, 2014
$
$
315,166
(5,288)
5,505
315,383
$
$
286,261
(4,932)
4,613
285,942
$
$
334,442
(4,338)
4,782
334,886
NOTE 6. DERIVATIVE INSTRUMENTS:
The Company enters into contractual derivative arrangements to manage changes in market conditions related to interest on
debt obligations, foreign currency exposures and exposure to fluctuating gasoline and diesel fuel prices. Derivative instruments
utilized during the period include interest rate swap agreements, foreign currency forward exchange contracts, and gasoline and
diesel fuel agreements. All derivative instruments are recognized as either assets or liabilities on the balance sheet at fair value
at the end of each quarter. The counterparties to the Company's contractual derivative agreements are all major international
financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The
Company continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance
by the counterparties. For designated hedging relationships, the Company formally documents the hedging relationship and its
risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item, the nature of the
risk being hedged, how the hedging instrument's effectiveness in offsetting the hedged risk will be assessed prospectively and
retrospectively, and a description of the method of measuring ineffectiveness. The Company also formally assesses, both at the
hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in
offsetting cash flows of hedged items.
Cash Flow Hedges
The Company has $2.4 billion notional amount of outstanding interest rate swap agreements, fixing the rate on a like amount of
variable rate borrowings. During fiscal 2016, $0.5 billion of interest rate swap agreements matured.
Changes in the fair value of a derivative that is designated as and meets all the required criteria for a cash flow hedge are
recorded in accumulated other comprehensive income (loss) and reclassified into earnings as the underlying hedged item affects
earnings. As of September 30, 2016 and October 2, 2015, approximately ($36.4) million and ($43.3) million of unrealized net
of tax losses related to the interest rate swaps were included in "Accumulated other comprehensive loss," respectively. The
hedge ineffectiveness for these cash flow hedging instruments during fiscal 2016, fiscal 2015 and fiscal 2014 was not material.
During the first quarter of fiscal 2016, the Company repaid a U.S. dollar denominated term loan of a Canadian subsidiary in the
amount of $74.1 million. As a result of this repayment, the Company terminated its $74.1 million of outstanding amortizing
cross currency swap agreements, which resulted in a pre-tax charge of approximately $1.1 million recorded to "Interest and
Other Financing Costs, net" in the Consolidated Statements of Income. The termination of these agreements resulted in the
Company receiving $5.7 million of proceeds.
The following table summarizes the effect of our derivatives designated as cash flow hedging instruments (effective portion) on
Other comprehensive loss (in thousands):
Interest rate swap agreements
Cross currency swap agreements
Derivatives not Designated in Hedging Relationships
$
September 30, 2016
$
(21,321) $
(2,116)
(23,437) $
Fiscal Year Ended
October 2, 2015
October 3, 2014
(70,455) $
12,312
(58,143) $
(30,099)
898
(29,201)
The Company entered into a series of pay fixed/receive floating gasoline and diesel fuel agreements based on the Department of
Energy weekly retail on-highway index in order to limit its exposure to price fluctuations for gasoline and diesel fuel. During
fiscal 2016, the Company entered into contracts for approximately 34.7 million gallons. As of September 30, 2016, the
Company has contracts for approximately 32.6 million gallons outstanding for fiscal 2017 and fiscal 2018. The Company does
not record its gasoline and diesel fuel agreements as hedges for accounting purposes. The impact on earnings related to the
change in fair value of these unsettled contracts was a gain of approximately $8.1 million and a loss of approximately ($2.6)
million for fiscal 2016 and fiscal 2015, respectively. The impact on earnings related to the change in fair value of these
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
contracts for fiscal 2014 was not material. The change in fair value for unsettled contracts is included in "Selling and general
corporate expenses" in the Consolidated Statements of Income. When the contracts settle, the gain or loss is recorded to "Costs
of services provided" in the Consolidated Statements of Income.
As of September 30, 2016, the Company had foreign currency forward exchange contracts outstanding with notional amounts
of €59.5 million, £72.3 million and CAD132.5 million to mitigate the risk of changes in foreign currency exchange rates on
short-term intercompany loans to certain international subsidiaries. Gains and losses on these foreign currency exchange
contracts are recognized in income as the contracts were not designated as hedging instruments, substantially offsetting
currency transaction gains and losses on the short-term intercompany loans.
The following table summarizes the location and fair value, using Level 2 inputs (see Note 16 for a description of the fair value
levels), of the Company's derivatives designated and not designated as hedging instruments in the Consolidated Balance Sheets
(in thousands):
Balance Sheet Location
September 30, 2016
October 2, 2015
ASSETS
Designated as hedging instruments:
Cross currency swap agreements
Not designated as hedging instruments:
Gasoline and diesel fuel agreements
LIABILITIES
Designated as hedging instruments:
Interest rate swap agreements
Interest rate swap agreements
Prepayments and other
current assets
Prepayments and other
current assets
Accrued Expenses
Other Noncurrent Liabilities
Not designated as hedging instruments:
Foreign currency forward exchange contracts
Gasoline and diesel fuel agreements
Accounts Payable
Accounts Payable
$
$
$
$
$
$
— $
7,523
3,878
3,878
5,929
34,919
40,848
447
—
41,295
$
$
$
$
$
—
7,523
6,086
51,762
57,848
922
4,419
63,189
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the location of (gain) loss reclassified from "Accumulated other comprehensive loss" into
earnings for derivatives designated as hedging instruments and the location of (gain) loss for our derivatives not designated as
hedging instruments in the Consolidated Statements of Income (in thousands):
Designated as hedging instruments:
Interest rate swap agreements
Cross currency swap agreements
Not designated as hedging instruments:
Cross currency swap agreements
Gasoline and diesel fuel agreements
Foreign currency forward exchange
contracts
Income
Statement Location
Interest Expense
Interest Expense
Interest Expense
Cost of services
provided
Interest Expense
Fiscal Year Ended
September 30, 2016
October 2, 2015
October 3, 2014
$
$
$
$
$
32,800
2,061
34,861
$
$
31,367
(11,224)
20,143
$
$
31,511
(5,590)
25,921
— $
— $
(5,111)
(685)
8,512
(8,847)
(9,532) $
$
25,329
(4,821)
3,691
23,834
$
$
1,696
3,644
229
26,150
The Company has a Japanese yen denominated term loan in the amount of ¥4,916.3 million. The term loan was designated as a
hedge of the Company's net Japanese currency exposure represented by the equity investment in our Japanese affiliate, AIM
Services Co., Ltd.
At September 30, 2016, the net of tax loss expected to be reclassified from "Accumulated other comprehensive loss" into
earnings over the next twelve months based on current market rates is approximately $12.5 million.
NOTE 7. EMPLOYEE PENSION AND PROFIT SHARING PLANS:
In the United States, the Company maintains qualified contributory and non-contributory defined contribution retirement plans
for eligible employees, with Company contributions to the plans based on earnings performance or salary level. The Company
also has a non-qualified retirement savings plan for certain employees. The total expense of the above plans for fiscal 2016,
fiscal 2015 and fiscal 2014 was $32.4 million, $29.0 million and $27.7 million, respectively. The Company also maintains
similar contributory and non-contributory defined contribution retirement plans at several of its international operations,
primarily in Canada and the United Kingdom. The total expense of these international plans for fiscal 2016, fiscal 2015 and
fiscal 2014 was $9.4 million, $8.5 million and $9.6 million, respectively.
The following table sets forth the components of net periodic pension cost for the Company's single-employer defined benefit
pension plans for fiscal 2016, fiscal 2015 and fiscal 2014 (in thousands):
September 30, 2016
October 2, 2015
October 3, 2014
Fiscal Year Ended
7,850
11,041
(17,679)
159
107
1,504
2,982
$
$
9,478
12,367
(16,970)
52
165
1,658
6,750
$
$
9,550
13,571
(16,544)
527
52
1,131
8,287
Service cost
Interest cost
Expected return on plan assets
Settlements
Amortization of prior service cost
Recognized net loss
Net periodic pension cost
S-22
$
$
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table set forth changes in the projected benefit obligation and the fair value of plan assets for these plans (in
thousands):
Change in benefit obligation:
Benefit obligation, beginning
Foreign currency translation
Service cost
Interest cost
Employee contributions
Actuarial loss (gain)
Benefits paid
Settlements and curtailments
Benefit obligation, ending
Change in plan assets:
Fair value of plan assets, beginning
Foreign currency translation
Employer contributions
Employee contributions
Actual return on plan assets
Benefits paid
Settlements
Fair value of plan assets, end
Funded Status at end of year
September 30, 2016
302,087
$
(18,867)
7,850
11,041
2,233
51,620
(16,106)
(545)
339,313
$
$
$
$
$
$
$
304,376
(17,841)
25,404
2,233
22,464
(16,106)
(545)
319,985
$
(19,328) $
October 2, 2015
326,729
(34,384)
9,478
12,367
2,597
(252)
(14,256)
(192)
302,087
276,934
(31,144)
59,155
2,597
11,321
(14,256)
(231)
304,376
2,289
Amounts recognized in the Consolidated Balance Sheets consist of the following (in thousands):
Noncurrent benefit asset (included in Other Assets)
$
Noncurrent benefit liability (included in Other Noncurrent Liabilities)
Net actuarial loss (included in Accumulated other comprehensive
(income) loss before taxes)
Prior service cost (included in Accumulated other comprehensive
(income) loss before taxes)
$
6,452
(25,780)
100,265
21
5,548
(3,259)
62,308
26
September 30, 2016
October 2, 2015
The following weighted average assumptions were used to determine pension expense of the respective fiscal years:
Discount rate
Rate of compensation increase
Long-term rate of return on assets
September 30, 2016
October 2, 2015
3.8%
3.2%
6.2%
4.0%
3.3%
6.6%
The following weighted average assumptions were used to determine the funded status of the respective fiscal years:
Discount rate
Rate of compensation increase
September 30, 2016
October 2, 2015
3.3%
3.3%
3.9%
3.2%
Assumptions, including discount rate, expected return on assets, compensation increases and health care trends, are adjusted
annually, as necessary, based on prevailing market conditions and actual experience. The Company has elected to use a spot-
rate approach for the discount rate used in the calculation of pension interest and service cost for fiscal 2017 and beyond. The
spot-rate approach applies separate discount rates for each projected benefit payment in the calculation. Historically, the
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company used a weighted-average approach to determine the appropriate discount rate. The impact of the change is not
material to the consolidated financial statements.
The accumulated benefit obligation as of September 30, 2016 was $316.5 million. During fiscal 2016, actuarial losses of
approximately $39.6 million were recognized in other comprehensive loss (before taxes) and $1.6 million of amortization of
actuarial losses was recognized as net periodic pension cost during such period. The estimated portion of net actuarial loss
included in accumulated other comprehensive income (loss) as of September 30, 2016 expected to be recognized in net periodic
pension cost during fiscal 2017 is approximately $4.3 million (before taxes).
The accumulated benefit obligation as of October 2, 2015 was $279.6 million. During fiscal 2015, actuarial losses of
approximately $5.0 million were recognized in other comprehensive (loss) (before taxes) and $1.6 million of amortization of
actuarial losses was recognized as net periodic pension cost during such period.
The following table sets forth information for the Company's single-employer pension plans with an accumulated benefit
obligation in excess of plan assets as of September 30, 2016 and October 2, 2015 (in thousands):
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
September 30, 2016
October 2, 2015
$
$
139,088
136,605
113,710
23,475
21,871
8,717
The significant change for the accumulated benefit obligation in excess of plan assets between years relates to the U.K. plan.
Assets of the plans are invested with the goal of principal preservation and enhancement over the long-term. The primary goal
is total return, consistent with prudent investment management. The Company's investment policies also require an appropriate
level of diversification across the asset categories. The current overall capital structure and targeted ranges for asset classes are
50-70% invested in equity securities, 25-50% invested in debt securities and 0-5% in real estate investments. Performance of
the plans is monitored on a regular basis and adjustments of the asset allocations are made when deemed necessary.
The weighted-average long-term rate of return on assets has been determined based on an estimated weighted-average of long-
term returns of major asset classes, taking into account historical performance of plan assets, the current interest rate
environment, plan demographics, acceptable risk levels and the estimated value of active asset management.
The fair value of plan assets for the Company's defined benefit pension plans as of September 30, 2016 and October 2, 2015 is
as follows (see Note 16 for a description of the fair value levels) (in thousands):
Cash and cash equivalents and other
Investment funds:
Equity funds
Fixed income funds
Real estate
Total
Cash and cash equivalents and other
Investment funds:
Equity funds
Fixed income funds
Real estate
Total
$
$
$
September 30, 2016
21,009
$
$
Quoted prices in
active markets
Level 1
Significant other
observable inputs
Level 2
Significant
unobservable inputs
Level 3
21,009
$
— $
173,704
116,168
9,104
319,985
$
—
—
—
21,009
$
173,704
116,168
—
289,872
$
—
—
—
9,104
9,104
October 2, 2015
Quoted prices in
active markets
Level 1
Significant other
observable inputs
Level 2
Significant
unobservable inputs
Level 3
44,318
$
44,318
$
— $
154,112
96,998
8,948
304,376
$
—
—
—
44,318
$
154,112
96,998
—
251,110
$
—
—
—
8,948
8,948
The fair value of the investment funds is based on the value of the underlying assets, as reported to the Plan by the trustees.
They are comprised of a portfolio of underlying securities that can be valued based on trading information on active markets.
Fair value is calculated by applying the Plan's percentage ownership in the fund to the total market value of the account's
S-24
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
underlying securities, and is therefore categorized as Level 2 as the Plan does not directly own shares in these underlying
investments. Investments in equity securities include publicly-traded domestic companies (approximately 30%) and
international companies (approximately 70%) that are diversified across industry, country and stock market capitalization.
Investments in fixed income securities include domestic (approximately 5%) and international (approximately 95%) corporate
bonds and government securities. Substantially all of the real estate investments are in international markets. Cash and cash
equivalents include direct cash holdings, which are valued based on cost, and short-term deposits and investments in money
market funds for which fair value measurements are all based on quoted prices for similar assets or liabilities in markets that are
active.
It is the Company's policy to fund at least the minimum required contributions as outlined in the required statutory actuarial
valuation for each plan. The Company made voluntary pension contributions above the minimum required of approximately
$19.8 million and $45.0 million during fiscal 2016 and fiscal 2015, respectively. The following table sets forth the benefits
expected to be paid in the next five fiscal years and in aggregate for the five fiscal years thereafter by the Company's defined
benefit pension plans (in thousands):
$
Fiscal 2017
Fiscal 2018
Fiscal 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022 – 2026
12,269
12,745
12,969
13,436
14,081
75,199
The estimated benefit payments above are based on assumptions about future events. Actual benefit payments may vary
significantly from these estimates.
The expected contributions to be paid to the Company's defined benefit pension plans during fiscal 2017 are approximately
$5.9 million.
Multiemployer Defined Benefit Pension Plans
The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining
agreements ("CBA") that cover its union-represented employees. The risks of participating in these multiemployer plans are
different from single-employer plans in the following respects:
a. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of
other participating employers.
b.
c.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by
the remaining participating employers.
If the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to
pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
S-25
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's participation in these plans for fiscal 2016 is outlined in the table below. The "EIN/Pension Plan Number"
column provides the Employee Identification Number (EIN) and the three-digit plan number, if applicable. Unless otherwise
noted, the most recent Pension Protection Act (PPA) zone status available in 2016 and 2015 is for the plans' two most recent
fiscal year-ends. The zone status is based on information that the Company received from the plan and is certified by the plan's
actuary. Among other factors, plans in the critical and declining zone are generally less than 65% funded and projected to
become insolvent in the next 15 or 20 years depending on the ratio of active to inactive participants, plans in the critical zone
are generally less than 65% funded, plans in the endangered zone are less than 80% funded, and plans in the green zone are at
least 80% funded. The "FIP/RP Status Pending/Implemented" column indicates plans for which a financial improvement plan
(FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date(s) of the
CBA(s) to which the plans are subject. There have been no significant changes that affect the comparability of fiscal 2016,
fiscal 2015 and fiscal 2014 contributions.
Pension
Fund
National Retirement Fund
EIN/
Pension
Plan
Number
13-6130178
/ 001
Pension Protection
Act Zone Status
2016
Critical
2015
FIP/RP Status
Pending/
Implemented
Contributions by the Company
(in thousands)
2016
2015
2014
Critical
Implemented
$
6,675 $
6,580 $
6,304
Service Employees Pension
Fund of Upstate New York (1)
Local 1102 Retirement Trust (2) 13-1847329
16-0908576
/ 001
/ 001
Critical
Critical
Implemented
Critical
Critical
Implemented
448
339
527
300
440
334
Central States SE and SW
Areas Pension Plan
36-6044243
/ 001
Critical and
Declining
Critical and
Declining
Implemented
3,723
3,659
3,549
Range of
Expiration
Dates of
CBAs
1/15/2015 -
2/29/2020
9/30/2016 -
6/30/2018
10/31/2017
- 6/30/2019
1/31/2007 -
11/29/2018
1/31/2018
Surcharge
Imposed
No
No
No
No
No
23-2627428
/ 001
51-6056180
/ 001
52-6148540
/ 001
Critical
Endangered
Implemented
Critical
Critical
Implemented
Critical
Critical
Implemented
37-6155648
/ 001
Critical and
Declining
Critical
Implemented
216
813
404
83
198
156
768
668
No
4/29/2016
298
79
47
62
No
No
4/14/2016 -
12/31/2016
7/7/2017
Pension Plan for Hospital &
Health Care Employees
Philadelphia & Vicinity
Local 731 IBT Textile
Maintenance and Laundry
Craft Pension Fund
SEIU National Industry
Pension Fund
Local 171 Pension Plan
Other funds
Total contributions
14,440
13,994
13,563
$
27,141 $
26,403 $
25,123
(1)
(2)
Over 60% of the Company's participants in this fund are covered by a single CBA that expires on 6/30/2018.
Over 90% of the Company's participants in this fund are covered by a single CBA that expires on 6/30/2019.
The Company provided more than 5 percent of the total contributions for the following plans and plan years:
Pension
Fund
Local 1102 Retirement Trust
Contributions to the plan
exceeded more than 5%
of total contributions (as
of the plan's year-end)
12/31/2015 and 12/31/2014
Service Employees Pension Fund of Upstate New York
12/31/2015 and 12/31/2014
Local 731 IBT Textile Maintenance and Laundry Craft Pension Fund
12/31/2015 and 12/31/2014
Local 171 Pension Plan
12/31/2015 and 12/31/2014
At the date the Company's financial statements were issued, Forms 5500 were not available for the plan years ending in 2016.
NOTE 8. INCOME TAXES:
The Company accounts for income taxes using the asset and liability method. Under this method, the provision for income
taxes represents income taxes payable or refundable for the current year plus the change in deferred taxes during the year.
Deferred taxes result from differences between the financial and tax bases in assets and liabilities and are adjusted for changes
in tax rates and enacted tax legislation. Valuation allowances are recorded to reduce deferred tax assets when it is more likely
than not that a tax benefit will not be realized.
S-26
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of income before income taxes by source of income are as follows (in thousands):
United States
Non-U.S.
The provision for income taxes consists of (in thousands):
Current:
Federal
State and local
Non-U.S.
Deferred:
Federal
State and local
Non-U.S.
September 30, 2016
October 2, 2015
October 3, 2014
Fiscal Year Ended
284,216
146,715
430,931
$
$
250,069
91,927
341,996
$
$
110,936
118,741
229,677
September 30, 2016
October 2, 2015
October 3, 2014
Fiscal Year Ended
39,510
15,750
35,023
90,283
47,323
(740)
5,833
52,416
142,699
$
$
64,221
15,223
29,684
109,128
(585)
(208)
(3,315)
(4,108)
105,020
$
$
6,692
5,308
30,846
42,846
32,843
2,515
2,014
37,372
80,218
$
$
$
$
Current taxes receivable of $48.5 million and $72.3 million at September 30, 2016 and October 2, 2015, respectively, are
included in "Prepayments and other current assets" in the Consolidated Balance Sheets. Current income taxes payable of $10.3
million and $0 at September 30, 2016 and October 2, 2015, respectively, are included in "Accrued expenses and other current
liabilities" in the Consolidated Balance Sheets.
The provision for income taxes varies from the amount determined by applying the United States Federal statutory rate to
pretax income as a result of the following (all percentages are as a percentage of income before income taxes):
United States statutory income tax rate
Increase (decrease) in taxes, resulting from:
State income taxes, net of Federal tax benefit
Foreign taxes
Permanent book/tax differences
Uncertain tax positions
Tax credits & other
Effective income tax rate
September 30, 2016
October 2, 2015
October 3, 2014
Fiscal Year Ended
35.0%
2.3
(1.4)
0.3
0.1
(3.2)
33.1%
35.0%
2.9
(3.7)
0.3
(0.5)
(3.3)
30.7%
35.0%
2.2
(2.3)
2.7
(0.4)
(2.3)
34.9%
The effective tax rate is based on expected income, statutory tax rates and tax planning opportunities available to the Company
in the various jurisdictions in which it operates. Judgment is required in determining the effective tax rate and in evaluating the
tax return positions. Reserves are established when positions are "more likely than not" to be challenged and not sustained.
Reserves are adjusted at each financial statement date to reflect the impact of audit settlements, expiration of statutes of
limitation, developments in tax law and ongoing discussions with tax authorities. Accrued interest and penalties associated with
uncertain tax positions are recognized as part of the income tax provision.
As of September 30, 2016, certain subsidiaries have recorded deferred tax assets of $18.6 million associated with accumulated
federal, state and foreign net operating loss carryforwards. The Company has a valuation allowance of approximately $7.4
million as of September 30, 2016 against these carryforwards due to the uncertainty of their realization. Based on the
Company's historical earnings, forecasted taxable income and the reversal of taxable temporary differences, it is "more likely
than not" the deferred tax asset will be realized and no additional valuation allowance was recorded in fiscal 2016.
S-27
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table of deferred tax assets shown below does not include certain deferred tax assets at September 30, 2016 and October 2,
2015 that arose directly from tax deductions related to equity compensation in excess of compensation recognized for book
purposes. The unrecognized tax benefits, as of September 30, 2016 and October 2, 2015, attributable to these net operating
losses was approximately $4.4 million and $4.2 million, respectively. The tax law ordering approach is used to determine the
sequence in which NOL carryforwards are utilized. Federal, state and foreign net operating loss carryforwards will expire from
2017 through 2026.
As of September 30, 2016, the Company has approximately $1.2 million of foreign tax credit carryforwards, which expire in
2026. It is "more likely than not" that there is sufficient taxable income in the carryforward period to utilize these credits;
therefore, a valuation allowance is not needed. The Company does not maintain significant or excessive cash balances at any of
its foreign operations and does not consider any of its unremitted earnings to be permanently reinvested. Therefore, a deferred
tax liability is recorded for the incremental U.S. taxes on all unremitted earnings.
As of September 30, 2016 and October 2, 2015, the components of deferred taxes are as follows (in thousands):
Deferred tax liabilities:
Property and equipment
Investments
Other intangible assets, including goodwill
Inventory and Other
Gross deferred tax liability
Deferred tax assets:
Derivatives
Insurance
Employee compensation and benefits
Accruals and allowances
Net operating loss/credit carryforwards and other
Gross deferred tax asset, before valuation allowances
Valuation allowances
Net deferred tax liability
September 30, 2016
October 2, 2015
$
$
87,191
46,125
655,319
113,693
902,328
1,618
19,276
249,509
21,716
26,707
318,826
(7,352)
590,854
$
$
54,218
29,526
654,568
110,869
849,181
5,282
21,737
219,645
20,836
32,884
300,384
(8,630)
557,427
Deferred tax liabilities of approximately $608.4 million and $535.4 million as of September 30, 2016 and October 2, 2015,
respectively, are included in "Deferred Income Taxes and Other Noncurrent Liabilities" in the Consolidated Balance Sheets.
Deferred tax assets of approximately $17.4 million and $0 as of September 30, 2016 and October 2, 2015, respectively, are
included in "Other Assets" in the Consolidated Balance Sheets.
The Company had approximately $22.8 million of total gross unrecognized tax benefits as of September 30, 2016, all of which,
if recognized, would impact the effective tax rate. A reconciliation of the beginning and ending amount of gross unrecognized
tax benefits follows (in thousands):
Balance, beginning of year
Additions based on tax positions taken in the current year
Additions/Reductions for tax positions taken in prior years
Reductions for remeasurements, settlements and payments
Reductions due to statute expiration
Balance, end of year
September 30, 2016
21,412
$
481
2,141
(185)
(1,097)
22,752
$
$
$
October 2, 2015
26,217
270
1,715
(6,004)
(786)
21,412
The effective tax rate in fiscal year 2015 included a benefit of approximately $4.8 million resulting from the reversal of reserves
for uncertain tax positions related to audit settlements and the expiration of statutes. The fiscal 2015 benefit was offset by a
write-off of a current income tax receivable of approximately $3.5 million related to Work Opportunity Tax Credits.
The Company has approximately $6.0 million and $5.6 million accrued for interest and penalties as of September 30, 2016 and
October 2, 2015, respectively, and recorded approximately $0.4 million and ($0.2) million in interest and penalties during fiscal
2016 and fiscal 2015, respectively.
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unrecognized tax benefits are not expected to significantly change within the next 12 months.
All United States federal income tax matters are substantially concluded through 2013. Adequate amounts are established for
any adjustments that may result from examinations for tax years after 2013.
Generally, a number of years may elapse before a tax reporting year is audited and finally resolved. There are open statutes in
various tax jurisdictions ranging from 1 to 10 years. While it is often difficult to predict the final outcome or the timing of or
resolution of a particular tax matter, the Company does not anticipate any adjustments resulting from state or foreign tax audits
that would result in a material change to the financial condition or results of operations. However, an unfavorable settlement of
a particular issue would require use of the Company's cash.
NOTE 9. STOCKHOLDERS' EQUITY:
During the first quarter of fiscal 2014, the Company completed an IPO of 28.0 million shares of its common stock at a price of
$20.00 per share, raising approximately $524.1 million, net of costs directly related to the IPO. The Company used the net
proceeds to repay borrowings on the senior secured revolving credit facility and a portion of the principal on the senior secured
term loan facility. In addition, the Company paid cash bonuses and certain other expenses of approximately $5.0 million related
to the IPO which were included in the Consolidated Statements of Income for fiscal 2014.
During the fourth quarter of fiscal 2015, the Company completed a repurchase of 1.5 million shares of its common stock for
approximately $48.5 million.
The following table presents the Company's dividend payments to its stockholders (in millions):
Dividend payments
$
92.1
$
81.9
$
52.2
September 30, 2016
October 2, 2015
October 3, 2014
On November 9, 2016, a $0.103 dividend per share of common stock was declared, payable on December 8, 2016, to
shareholders of record on the close of business on November 28, 2016.
NOTE 10. SHARE-BASED COMPENSATION:
On November 12, 2013, the Board of Directors (the "Board") approved, and the stockholders of Aramark adopted by written
consent, the Aramark 2013 Stock Incentive Plan (the "2013 Stock Plan"), which became effective on December 1, 2013. The
2013 Stock Plan provides that the total number of shares of common stock that may be issued under the 2013 Stock Plan is
25,500,000.
The following table summarizes the share-based compensation expense and related information for Time-Based Options
("TBOs"), Performance-Based Options ("PBOs"), Time-Based Restricted Stock Units ("RSUs"), Performance Stock Units and
Performance Restricted Stock ("PSUs"), and Deferred Stock and Other Units classified as "Selling and general corporate
expenses" in the Consolidated Statements of Income (in millions).
TBOs
PBOs(1)
RSUs
PSUs
Deferred Stock and Other Units
Taxes related to share-based compensation
Cash Received from Option Exercises
Tax Benefit on Option Exercises (2)
September 30, 2016
October 2, 2015
October 3, 2014
Fiscal Year Ended
$
$
$
$
$
$
18.8
—
21.4
13.9
2.8
56.9
22.3
35.7
32.0
$
$
$
16.4
10.8
19.5
17.4
2.3
66.4
26.0
39.9
66.3
12.9
58.5
14.2
7.2
3.5
96.3
37.6
4.4
40.5
(1) Fiscal 2014 compensation expense for PBOs includes approximately $50.9 million related to the missed year options that were modified.
(2) The tax benefit on option exercises and restricted stock unit deliveries is included in "Other financing activities" in the Consolidated Statements of
Cash Flows.
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
No compensation expense was capitalized. The Company has applied a forfeiture assumption of 8.7% per annum in the
calculation of such expenses.
The below table summarizes the unrecognized compensation expense as of September 30, 2016 related to nonvested awards
and the weighted-average period they are expected to be recognized:
TBOs
RSUs
PSUs
Total
Stock Options
Time-Based Options
Unrecognized
Compensation Expense
(in millions)
$
$
28.6
22.5
14.5
65.6
Weighted-Average
Period (Years)
2.38
2.28
1.89
TBOs vest solely based upon continued employment over a four year time period. All TBOs remain exercisable for ten years
from the date of grant. The fair value of the TBOs granted was estimated using the Black-Scholes option pricing model. The
expected volatility is based on a blended average of the historical volatility of the Company's and competitors' stocks over the
expected term of the stock options. The expected life represents the period of time that options granted are expected to be
outstanding and is calculated using the simplified method as permitted under Securities and Exchange Commission ("SEC")
rules and regulations due to the lack of history of our equity incentive plan. The simplified method uses the midpoint between
an option's vesting date and contractual term. The risk-free rate is based on the United States Treasury security with terms equal
to the expected life of the option as of the grant date. Compensation expense for TBOs is recognized on a straight-line basis
over the vesting period during which employees perform related services.
The table below presents the weighted average assumptions and related valuations for TBOs.
Expected volatility
Expected dividend yield
Expected life (in years)
Risk-free interest rate
Weighted-average grant-date fair value
A summary of TBO activity is presented below:
September 30, 2016
30%
1.15% - 1.25%
6.25
1.50% - 2.04%
$9.21
Fiscal Year Ended
October 2, 2015
30%
1.05% - 1.20%
6.25
1.60% - 2.07%
$8.34
October 3, 2014
30%
1.5%
6.25
2.06% - 2.33%
$6.72
Options
Outstanding at October 2, 2015
Granted
Exercised
Forfeited and expired
Outstanding at September 30, 2016
Exercisable at September 30, 2016
Expected to vest at September 30, 2016
Shares
(000s)
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value ($000s)
Weighted-
Average
Remaining
Term (Years)
13,266
2,308
$
$
(2,429) $
(791) $
12,354
6,569
6,633
$
$
$
18.24
32.55
13.42
24.35
21.48
16.29
26.37
$
$
$
204,412
142,824
27,715
6.9
5.8
8.0
Total intrinsic value exercised (in millions)
Total fair value that vested (in millions)
Fiscal Year Ended
$
September 30, 2016
49.9
17.5
$
October 2, 2015
October 3, 2014
$
107.8
13.7
79.9
13.2
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance-Based Options
During the first quarter of fiscal 2014, the Compensation Committee approved an amendment to all outstanding 2007
Management Stock Incentive Plan (the "2007 MSIP") Option Agreements (the "Performance Option Amendment") modifying
the vesting provisions relating to outstanding performance-based options granted under the 2007 MSIP. The Performance
Option Amendment provided that in the event of an initial public offering of Aramark, subject to continued employment on
such date, 50% of any then-unvested performance-based options that did not meet applicable performance thresholds in prior
years (the "Missed Year Options") would become vested if the initial public offering price for the common stock of Aramark
equals or exceeds $20.00 per share. In addition, during the 18 month period following the initial public offering, if the closing
trading price for common stock of Aramark equals or exceeds $25.00 per share over any consecutive twenty day trading period,
100% of the Missed Year Options will become vested. There were a total of approximately 5.0 million Missed Year Options
which fully vested by the second quarter of fiscal 2014 as all performance targets were met.
During the third quarter of fiscal 2015, all unvested performance-based options granted under the 2007 Management Stock
Incentive Plan vested due to the sponsors of the Company's 2007 going-private transaction achieving the required rate of return
on their sales of the Company's stock to constitute a return-based event under the original terms of such options related to
approximately 0.7 million shares. The Company no longer grants PBOs under the 2013 Stock Plan. All PBOs remain
exercisable for ten years from the date of grant.
A summary of PBO activity is presented below:
Options
Outstanding at October 2, 2015
Granted
Exercised
Forfeited and expired
Outstanding at September 30, 2016
Exercisable at September 30, 2016
Shares
(000s)
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value ($000s)
Weighted-
Average
Remaining
Term (Years)
4,785
$
— $
(1,602) $
(9) $
$
$
3,174
3,174
10.74
—
9.15
11.79
11.54
11.54
$
$
84,054
84,054
4.2
4.2
The total intrinsic value of PBOs exercised during fiscal 2016, fiscal 2015 and fiscal 2014 was $39.2 million, $102.9 million
and $74.6 million, respectively.
Time-Based Restricted Stock Units
The RSU Agreement provides for grants of RSUs, 25% of which will vest and be settled in shares on each of the first four
anniversaries of the date of grant, subject to the participant's continued employment with the Company through each such
anniversary. The RSU grant in connection with the IPO and certain other grants vest and settle in shares generally on each of
the first three anniversaries of the date of grant, subject to the participant's continued employment with the Company through
each such anniversary. The grant-date fair value of RSUs is based on the fair value of the Company's common stock.
Participants holding RSUs will receive the benefit of any dividends paid on shares in the form of additional RSUs. The
unvested units are subject to forfeiture if employment is terminated other than due to death, disability or retirement, and the
units are nontransferable while subject to forfeiture.
Restricted Stock Units
Outstanding at October 2, 2015
Granted
Vested
Forfeited
Outstanding at September 30, 2016
Units
(000s)
Weighted Average
Grant Date Fair
Value
2,282
575
(1,004)
(233)
1,620
$
$
$
$
$
21.61
32.65
20.61
21.04
25.87
Performance Stock Units
Under the 2013 Stock Plan, the Company is authorized to grant PSUs to its employees. A participant is eligible to become
vested in a number of PSUs equal to a percentage, higher or lower, of the target number of PSUs granted based on the level of
the Company's achievement of the performance condition. Prior to fiscal 2016, the Company granted three year PSUs with the
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
first 33% of the award vesting on the first anniversary of the grant date, if and to the extent the Company achieves these
performance conditions, while the remaining 67% will generally vest ratably over the next two anniversaries of the date of
grant, subject to the achievement of an adjusted earnings per share-based performance condition in the first year of grant and
the participant's continued employment with the Company through each such anniversary. During the first quarter of fiscal
2016, the Company granted PSUs with cliff vesting subject to the achievement of a performance condition in the third fiscal
year of grant and the participant's continued employment with the Company. The grant-date fair value of the PSUs is based on
the fair value of the Company's common stock.
Performance Stock Units
Outstanding at October 2, 2015
Granted
Vested
Forfeited
Outstanding at September 30, 2016
Units
(000s)
Weighted
Average Grant
Date Fair Value
1,270
669
(516)
(125)
1,298
$
$
$
$
$
27.20
32.64
26.70
29.21
30.02
Deferred Stock Units
Deferred Stock Units are issued only to non-employee members of the Board of Directors of the Company and represent the
right to receive shares of the Company's common stock in the future. Each deferred stock unit will be converted to one share of
the Company's common stock on the first day of the seventh month after which such director ceases to serve as a member of the
Board of Directors. The grant-date fair value of deferred stock units is based on the fair value of the Company's common stock.
The deferred stock units vest on the day prior to the next annual meeting of stockholders (which is generally one year after
grant). The Company granted 61,802 deferred stock units during fiscal 2016. In addition, directors may elect to defer their cash
retainer into Deferred Stock Units which are fully vested upon issuance.
NOTE 11. EARNINGS PER SHARE:
Basic earnings per share is computed using the weighted average number of common shares outstanding during the periods
presented. Diluted earnings per share is computed using the weighted average number of common shares outstanding adjusted
to include the potentially dilutive effect of stock awards.
The following table sets forth the computation of basic and diluted earnings per share attributable to the Company's
stockholders (in thousands, except per share data):
Earnings:
Net income attributable to Aramark stockholders
$
287,806
$
235,946
$
148,956
Fiscal Year Ended
September 30, 2016
October 2, 2015
October 3, 2014
Shares:
Basic weighted-average shares outstanding
Effect of dilutive securities
Diluted weighted-average shares outstanding
Basic Earnings Per Share:
242,286
6,477
248,763
237,616
9,000
246,616
Net income attributable to Aramark stockholders
Diluted Earnings Per Share:
Net income attributable to Aramark stockholders
$
$
1.19
1.16
$
$
0.99
0.96
$
$
225,866
11,585
237,451
0.66
0.63
Share-based awards to purchase 2.1 million, 2.5 million and 1.5 million shares were outstanding at September 30, 2016,
October 2, 2015 and October 3, 2014, respectively, but were not included in the computation of diluted earnings per common
share, as their effect would have been antidilutive. In addition, PSUs of approximately 0.6 million and PSUs and PBOs of
approximately 0.8 million were outstanding at September 30, 2016 and October 3, 2014, respectively, but were not included in
the computation of diluted earnings per common share, as the performance targets were not yet met.
S-32
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. ACCOUNTS RECEIVABLE SECURITIZATION:
The Company has an agreement (the "Receivables Facility") with three financial institutions where we sell on a continuous
basis an undivided interest in all eligible trade accounts receivable, as defined in the Receivables Facility. The maximum
amount available under the Receivables Facility is $350.0 million. In addition, the Receivables Facility includes a seasonal
tranche which increases the capacity of the Receivables Facility and increases the maximum amount available by $50.0 million.
Pursuant to the Receivables Facility, the Company formed ARAMARK Receivables, LLC, a wholly-owned, consolidated,
bankruptcy-remote subsidiary. ARAMARK Receivables, LLC was formed for the sole purpose of buying and selling
receivables generated by certain subsidiaries of the Company. Under the Receivables Facility, the Company and certain of its
subsidiaries transfer without recourse all of their accounts receivable to ARAMARK Receivables, LLC. As collections reduce
previously transferred interests, interests in new, eligible receivables are transferred to ARAMARK Receivables, LLC, subject
to meeting certain conditions.
During the third quarter of fiscal 2016, the Company extended the term of the Receivables Facility from May 2017 to May
2019. In addition, the Company modified the terms of the additional seasonal capacity of the Receivables Facility to increase it
from $25.0 million to $50.0 million for the period from September to March and May to June. At September 30, 2016 and
October 2, 2015, the amount of outstanding borrowings under the Receivables Facility was $268.0 million and $350.0 million,
respectively, and is included in "Long-Term Borrowings" in the Consolidated Balance Sheets.
NOTE 13. COMMITMENTS AND CONTINGENCIES:
The Company has capital and other purchase commitments of approximately $565.1 million at September 30, 2016, primarily
in connection with commitments for capital projects and client contract investments. At September 30, 2016, the Company also
has letters of credit outstanding in the amount of $53.8 million.
Certain of the Company's lease arrangements, primarily vehicle leases, with terms of one to eight years, contain provisions
related to residual value guarantees. The maximum potential liability to the Company under such arrangements was
approximately $127.8 million at September 30, 2016 if the terminal fair value of vehicles coming off lease was zero. Consistent
with past experience, management does not expect any significant payments will be required pursuant to these arrangements.
No amounts have been accrued for guarantee arrangements at September 30, 2016.
Rental expense for all operating leases was $180.7 million, $181.8 million and $188.0 million for fiscal 2016, fiscal 2015 and
fiscal 2014, respectively. Following is a schedule of the future minimum rental and similar commitments under all
noncancelable operating leases and certain residual value guarantees as of September 30, 2016 (in thousands):
$
2017
2018
2019
2020
2021
2022-Thereafter
Total minimum rental obligations
$
238,462
92,589
56,430
56,835
39,604
229,209
713,129
From time to time, the Company and its subsidiaries are a party to various legal actions, proceedings and investigations
involving claims incidental to the conduct of their business, including actions by clients, consumers, employees, government
entities and third parties, including under federal, state, international, national, provincial and local employment laws, wage and
hour laws, discrimination laws, immigration laws, human health and safety laws, import and export controls and customs laws,
environmental laws, false claims or whistleblower statutes, minority, women and disadvantaged business enterprise statutes, tax
codes, antitrust and competition laws, consumer protection statutes, procurement regulations, intellectual property laws, food
safety and sanitation laws, cost and accounting principles, the Foreign Corrupt Practices Act, the U.K. Bribery Act, other anti-
corruption laws, lobbying laws, motor carrier safety laws, data privacy and security laws and alcohol licensing and service
laws, or alleging negligence and/or breaches of contractual and other obligations. Based on information currently available,
advice of counsel, available insurance coverage, established reserves and other resources, the Company does not believe that
any such actions are likely to be, individually or in the aggregate, material to its business, financial condition, results of
operations or cash flows. However, in the event of unexpected further developments, it is possible that the ultimate resolution of
these matters, or other similar matters, if unfavorable, may be materially adverse to the Company's business, financial
condition, results of operations or cash flows.
S-33
S-33
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. QUARTERLY RESULTS (Unaudited):
The following tables summarize the Company's unaudited quarterly results for fiscal 2016 and fiscal 2015 (in thousands):
January 1, 2016
April 1, 2016
July 1, 2016
September 30, 2016
Quarter Ended
Sales
$
3,710,275
$
3,574,822
$
3,586,908
$
Cost of services provided
3,294,523
3,209,710
3,233,884
Net income
Net income attributable to Aramark
stockholders
Earnings per share:
Basic
Diluted
Dividends declared per common share
93,436
93,343
66,497
66,354
44,858
44,765
$
$
0.39
0.38
0.095
$
0.27
0.27
0.095
$
0.18
0.18
0.095
3,543,824
3,152,291
83,441
83,344
0.34
0.33
0.095
January 2, 2015
April 3, 2015
July 3, 2015
October 2, 2015
Quarter Ended
Sales
$
3,702,353
$
3,594,627
$
3,486,203
$
Cost of services provided
3,287,281
3,239,214
3,164,700
Net income
Net income attributable to Aramark
stockholders
Earnings per share:
85,620
85,497
60,105
59,823
34,038
33,761
3,545,952
3,189,230
57,213
56,865
Basic
Diluted
$
$
0.36
0.35
$
0.25
0.24
$
0.14
0.14
0.24
0.23
Dividends declared per common share
0.08625
0.08625
0.08625
0.08625
NOTE 15. BUSINESS SEGMENTS:
The Company reports its operating results in three reportable segments: FSS North America, FSS International and Uniform.
Corporate includes general expenses and assets not specifically allocated to an individual segment and share-based
compensation expense (see Note 10). Financial information by segment follows (in millions):
Sales
Fiscal Year Ended
FSS North America
FSS International
Uniform
September 30, 2016
10,122.3
$
$
2,729.8
1,563.7
October 2, 2015
October 3, 2014
9,950.3
$
2,858.2
1,520.6
10,232.8
3,111.2
1,488.9
14,832.9
$
14,415.8
$
14,329.1
$
S-34
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FSS North America
FSS International
Uniform
Corporate
Operating Income
Interest and Other Financing Costs, net
Income Before Income Taxes
Operating Income
Fiscal Year Ended
September 30, 2016
546.4
129.1
195.3
870.8
(124.5)
746.3
(315.4)
430.9
$
$
$
$
October 2, 2015
October 3, 2014
494.5
95.3
191.8
781.6
(153.7)
627.9
(285.9)
342.0
$
$
501.3
106.2
172.1
779.6
(215.0)
564.6
(334.9)
229.7
Depreciation and Amortization
Fiscal Year Ended
October 2, 2015
October 3, 2014
FSS North America
FSS International
Uniform
Corporate
FSS North America
FSS International
Uniform
Corporate
September 30, 2016
373.2
$
$
46.3
73.9
2.4
September 30, 2016
378.9
$
$
92.6
70.7
3.3
385.2
$
47.1
70.2
1.5
395.3
$
49.1
72.6
7.4
$
495.8
$
504.0
$
Capital Expenditures and
Client Contract Investments and Other*
Fiscal Year Ended
October 2, 2015
October 3, 2014
381.0
59.2
79.6
1.8
521.6
431.3
48.4
53.8
18.4
551.9
* Includes amounts acquired in business combinations
$
545.5
$
524.4
$
FSS North America
FSS International
Uniform
Corporate
Identifiable Assets
September 30, 2016
7,067.5
$
$
1,521.3
1,786.4
206.9
October 2, 2015
6,955.9
1,369.9
1,751.7
118.9
$
10,582.1
$
10,196.4
The following geographic data include sales generated by subsidiaries within that geographic area and net property &
equipment based on physical location (in millions):
United States
Foreign
Sales
Fiscal Year Ended
September 30, 2016
11,011.5
3,404.3
14,415.8
$
$
$
$
October 2, 2015
October 3, 2014
10,727.8
3,601.3
14,329.1
$
$
10,798.5
4,034.4
14,832.9
S-35
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Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
United States
Foreign
Property and Equipment, net
September 30, 2016
October 2, 2015
$
$
844.3
178.8
1,023.1
$
$
817.0
142.3
959.3
NOTE 16. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES:
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Assets and liabilities recorded at fair value are classified based upon the
level of judgment associated with the inputs used to measure their fair value. The hierarchical levels related to the subjectivity
of the valuation inputs are defined as follows:
•
•
•
Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in
active markets
Level 2—inputs to the valuation methodology include quoted prices for similar assets and liabilities in active
markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the
full term of the financial instrument
Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement
Recurring Fair Value Measurements
The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable,
borrowings and derivatives. Management believes that the carrying value of cash and cash equivalents, accounts receivable and
accounts payable are representative of their respective fair values. In conjunction with the fair value measurement of the
derivative instruments, the Company made an accounting policy election to measure the credit risk of its derivative instruments
that are subject to master netting agreements on a net basis by counterparty portfolio, the gross values would not be materially
different. The fair value of the Company's debt at September 30, 2016 and October 2, 2015 was $5,365.6 million and $5,341.3
million, respectively. The carrying value of the Company's debt at September 30, 2016 and October 2, 2015 was $5,270.0
million and $5,266.0 million, respectively. The fair values were computed using market quotes, if available, or based on
discounted cash flows using market interest rates as of the end of the respective periods. The inputs utilized in estimating the
fair value of the Company's debt has been classified as level 2 in the fair value hierarchy levels.
NOTE 17. RELATED PARTY TRANSACTIONS:
In August 2015, GS Capital Partners and J.P. Morgan Partners sold their remaining shares of Aramark common stock and are no
longer viewed as related parties. Net payments in fiscal 2015 and fiscal 2014 to entities affiliated with GS Capital Partners
pursuant to interest rate swap transactions were approximately $6.1 million and $7.9 million, respectively. The net payments in
fiscal 2015 and fiscal 2014 to entities affiliated with J.P. Morgan Partners pursuant to interest rate swap transactions were
approximately $4.0 million and $6.9 million, respectively.
NOTE 18. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF ARAMARK AND SUBSIDIARIES:
The following condensed consolidating financial statements of the Company have been prepared pursuant to Rule 3-10 of
Regulation S-X.
These condensed consolidating financial statements have been prepared from the Company's financial information on the same
basis of accounting as the consolidated financial statements. Interest expense and certain other costs are partially allocated to all
of the subsidiaries of the Company. Goodwill and other intangible assets have been allocated to the subsidiaries based on
management's estimates. The 2020 Notes, 2024 Notes and 2026 Notes are obligations of the Company's wholly-owned
subsidiary, Aramark Services, Inc., and are each jointly and severally guaranteed on a senior unsecured basis by the Company
and substantially all of the Company's existing and future domestic subsidiaries (excluding the Receivables Facility subsidiary)
("Guarantors"). Each of the Guarantors is wholly-owned, directly or indirectly, by the Company. All other subsidiaries of the
Company, either direct or indirect, do not guarantee the 2020 Notes, 2024 Notes or 2026 Notes ("Non-Guarantors"). The
Guarantors also guarantee certain other debt.
S-36
S-36
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2016
(in thousands)
Aramark
Services,
Inc.
(Issuer)
Aramark
(Parent)
Guarantors
Non
Guarantors
Eliminations
Consolidated
ASSETS
Current Assets:
Cash and cash equivalents
$
Receivables
Inventories
Prepayments and other current
assets
Total current assets
Property and Equipment, net
Goodwill
Investment in and Advances to
Subsidiaries
Other Intangible Assets
Other Assets
5
—
—
—
5
—
—
$
47,850
$
31,344
$
73,381
$
— $
152,580
265,124
492,855
1,211,058
79,016
167
15,284
69,033
132,334
30,201
98,779
888,102
782,347
173,104
3,982,737
108,675
1,472,130
210,535
473,040
230,488
187,880
241,919
2,161,101
5,450,692
—
—
29,729
56,850
598,759
894,274
1,028,887
$ 2,161,106
$ 5,872,910
$ 8,175,106
$ 2,815,992
—
—
—
—
—
—
1,476,349
587,155
276,487
2,492,571
1,023,083
4,628,881
—
1,111,883
(8,441,040)
—
(2,002)
1,325,654
$ (8,443,042) $10,582,072
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term
borrowings
Accounts payable
Accrued expenses and other
liabilities
Total current liabilities
Long-term Borrowings
Deferred Income Taxes and Other
Noncurrent Liabilities
Intercompany Payable
Redeemable Noncontrolling Interest
Total Stockholders' Equity
$
— $
21,998
$
15,598
$
8,926
$
—
156,471
415,481
275,636
— $
46,522
—
847,588
100
100
145,314
323,783
827,213
1,258,292
— 4,570,931
62,892
319,447
604,009
589,691
(1,439)
(1,439)
—
—
—
—
440,839
510,254
51,920
— 4,619,489
1,400,741
—
9,794
—
2,161,006
537,357
1,714,385
169,631
$ 2,161,106
$ 5,872,910
$ 8,175,106
$ 2,815,992
—
(6,020,230)
—
(2,421,373)
2,161,006
$ (8,443,042) $10,582,072
1,290,635
2,184,745
5,223,514
1,003,013
—
9,794
S-37
S-37
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEETS
October 2, 2015
(in thousands)
Aramark
(Parent)
Aramark
Services,
Inc.
(Issuer)
Guarantors
Non
Guarantors
Eliminations
Consolidated
ASSETS
Current Assets:
Cash and cash equivalents
$
Receivables
Inventories
Prepayments and other current
assets
Total current assets
Property and Equipment, net
Goodwill
Investment in and Advances to
Subsidiaries
Other Intangible Assets
Other Assets
5
—
—
—
5
—
—
3,721
15,981
59,706
111,200
20,713
173,104
1,883,454
5,586,010
—
—
29,729
40,128
$
31,792
$
42,811
$
47,808
$
— $
122,416
295,618
487,551
1,145,235
71,731
74,395
102,769
900,375
1,367,543
785,274
3,982,737
479,517
985,449
919,811
153,358
403,127
16,121
96,802
229,004
—
—
—
—
—
—
1,444,574
575,263
236,870
2,379,123
959,345
4,558,968
—
1,111,980
(7,965,102)
—
(2,002)
1,186,941
$ (7,967,104) $10,196,357
$ 1,883,459
$ 5,960,884
$ 8,053,163
$ 2,265,955
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term
borrowings
Accounts payable
Accrued expenses and other
liabilities
Total current liabilities
Long-term Borrowings
Deferred Income Taxes and Other
Noncurrent Liabilities
Intercompany Payable
Redeemable Noncontrolling Interest
Total Stockholders' Equity
$
— $
21,921
$
13,013
$
46,493
$
— $
81,427
—
152,844
419,188
278,008
100
100
135,540
310,305
818,610
1,250,811
— 4,366,341
44,464
295,183
619,684
773,792
—
88
88
—
—
—
—
415,284
500,632
21,395
— 5,096,806
1,075,836
—
10,102
1,883,359
868,954
1,150,348
$ 1,883,459
$ 5,960,884
$ 8,053,163
1,883,359
$ (7,967,104) $10,196,357
—
(224,752)
$ 2,265,955
—
(6,172,642)
—
(1,794,550)
850,040
1,249,521
2,180,988
5,184,597
937,311
—
10,102
S-38
S-38
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the year ended September 30, 2016
(in thousands)
Sales
Costs and Expenses:
Cost of services provided
Depreciation and amortization
Selling and general corporate
expenses
Interest and other financing costs, net
Expense allocations
Income before Income Taxes
Provision for Income Taxes
Equity in Net Income of Subsidiaries
Net income
Less: Net income attributable to
noncontrolling interest
Net income attributable to Aramark
stockholders
Other comprehensive income (loss),
net of tax
Comprehensive income (loss)
attributable to Aramark
stockholders
Aramark
(Parent)
Aramark
Services,
Inc.
(Issuer)
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
— $1,025,664
$ 9,670,207
$3,719,958
$
— $ 14,415,829
—
—
—
134,705
—
293,072
— (358,897)
— 1,024,475
1,189
—
—
287,806
287,806
—
427
—
762
—
939,925
8,536,196
3,414,287
— 12,890,408
15,670
406,154
73,941
130,153
(2,513)
308,928
18,484
24,824
49,969
9,378,918
291,289
3,581,505
138,453
—
—
—
—
495,765
283,342
315,383
—
— 13,984,898
430,931
—
104,377
—
186,912
37,895
—
100,558
—
(287,806)
(287,806)
142,699
—
288,232
426
—
—
426
287,806
762
186,486
100,558
(287,806)
287,806
(14,215)
(16,093)
(7,284)
1,176
22,201
(14,215)
$ 273,591
$ (15,331) $ 179,202
$ 101,734
$ (265,605) $
273,591
S-39
S-39
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the year ended October 2, 2015
(in thousands)
Aramark
Services,
Inc.
(Issuer)
Aramark
(Parent)
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
— $1,014,783
$ 9,517,309
$3,797,043
$
— $14,329,135
900,073
8,438,851
3,541,500
— 12,880,424
11,350
415,985
76,698
—
—
—
(2,177)
—
—
—
235,946
235,946
2,177
162,423
255,761
(334,778)
994,829
19,954
6,007
—
135,398
(2,404)
306,915
16,742
32,585
30,040
222,564
70,050
—
99,478
28,963
—
13,947
152,514
70,515
—
—
—
—
504,033
316,740
285,942
—
—
—
(235,946)
(235,946)
341,996
105,020
—
236,976
9,294,745
3,697,565
— 13,987,139
—
—
1,030
—
—
1,030
235,946
13,947
151,484
70,515
(235,946)
235,946
(60,270)
(12,872)
(2,958)
(78,946)
94,776
(60,270)
$175,676
$
1,075
$
148,526
$
(8,431) $ (141,170) $
175,676
Sales
Costs and Expenses:
Cost of services provided
Depreciation and amortization
Selling and general corporate
expenses
Interest and other financing costs, net
Expense allocations
Income Before Income Taxes
Provision for Income Taxes
Equity in Net Income of Subsidiaries
Net income
Less: Net income attributable to
noncontrolling interest
Net income attributable to Aramark
stockholders
Other comprehensive income (loss),
net of tax
Comprehensive income (loss)
attributable to Aramark
stockholders
S-40
S-40
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the year ended October 3, 2014
(in thousands)
Sales
Costs and Expenses:
Cost of services provided
Depreciation and amortization
Selling and general corporate
expenses
Interest and other financing costs, net
Expense allocations
Income (Loss) Before Income Taxes
Provision (Benefit) for Income Taxes
Equity in Net Income of Subsidiaries
Net income (loss)
Less: Net income attributable to
noncontrolling interest
Net income (loss) attributable to
Aramark stockholders
Other comprehensive income (loss),
net of tax
Comprehensive income (loss)
attributable to Aramark
stockholders
Aramark
Services,
Inc.
(Issuer)
Aramark
(Parent)
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
— $1,047,371
$ 9,544,705
$4,240,837
$
— $14,832,913
—
—
929,087
8,506,445
3,928,386
— 13,363,918
13,683
412,075
95,823
139,221
(1,216)
342,270
19,238
33,218
42,361
9,398,795
145,910
4,119,026
121,811
7,836
216,556
(7,836)
—
302,884
(376,795)
— 1,085,415
(38,044)
—
(15,578)
—
(22,466)
—
148,956
148,956
62,936
32,860
—
—
82,974
88,951
—
(148,956)
(148,956)
80,218
—
149,459
—
—
—
—
521,581
382,851
334,886
—
— 14,603,236
229,677
—
—
—
503
—
—
503
148,956
(22,466)
82,471
88,951
(148,956)
148,956
(47,073)
12,123
(638)
(82,604)
71,119
(47,073)
$101,883
$ (10,343) $
81,833
$
6,347
$
(77,837) $
101,883
S-41
S-41
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended September 30, 2016
(in thousands)
Net cash provided by operating activities
$
— $ 100,116
$
587,572
$ 124,191
$
(5,239) $
806,640
Aramark
Services,
Inc.
(Issuer)
Aramark
(Parent)
Guarantors
Non
Guarantors
Eliminations
Consolidated
Cash flows from investing activities:
Purchases of property and
equipment, client contract
investments and other
Disposals of property and equipment
Acquisitions of businesses, net of
cash acquired
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term borrowings
Payments of long-term borrowings
Net change in funding under the
Receivables Facility
Payments of dividends
Proceeds from issuance of common
stock
Repurchase of common stock
Other financing activities
Change in intercompany, net
Net cash provided by (used in) financing
activities
Increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of period
$
—
—
—
—
—
(22,326)
1,832
(419,009)
20,353
(71,197)
4,639
—
1,576
(18,918)
(231)
5,202
(393,685)
(199,146)
(1,438)
(267,142)
—
—
—
—
—
(512,532)
26,824
(199,377)
5,340
(679,745)
— 1,397,714
— (1,217,292)
—
(15,418)
2,274
(130,824)
— 1,399,988
— (1,363,534)
—
—
—
—
—
—
—
—
5
5
—
(92,074)
35,705
(749)
9,179
(197,623)
—
—
—
—
(2,513)
(187,423)
(82,000)
—
—
—
(733)
379,807
—
—
—
—
—
5,239
(82,000)
(92,074)
35,705
(749)
5,933
—
(65,140)
(205,354)
168,524
5,239
(96,731)
16,058
(11,467)
25,573
31,792
42,811
47,808
—
—
30,164
122,416
$
47,850
$
31,344
$
73,381
$
— $
152,580
S-42
S-42
Aramark 2016 Form 10-K Net cash provided by (used in) operating
activities
Cash flows from investing activities:
Purchases of property and
equipment, client contract
investments and other
Disposals of property and equipment
Acquisitions of businesses, net of
cash acquired
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term borrowings
Payments of long-term borrowings
Payments of dividends
Proceeds from issuance of common
stock
Repurchase of common stock
Other financing activities
Change in intercompany, net
Net cash provided by (used in) financing
activities
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of period
$
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended October 2, 2015
(in thousands)
Aramark
Services,
Inc.
(Issuer)
Aramark
(Parent)
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
(654) $
51,010
$
318,988
$ 318,647
$
(4,955) $
683,036
—
—
—
—
—
—
—
—
—
—
—
654
654
—
5
5
(13,871)
454
(444,962)
8,927
—
(975)
(14,392)
(3,377)
(825)
(440,237)
70,000
(178,919)
(81,898)
39,946
(50,176)
66,313
103,624
—
(14,670)
—
—
—
(3,877)
140,968
(65,551)
9,747
—
6,099
(49,705)
1,926
(16,032)
—
—
—
(589)
(250,201)
(31,110)
5,508
122,421
1,172
(264,896)
4,046
26,284
41,639
43,762
—
—
—
—
—
—
—
—
—
—
—
4,955
4,955
—
—
(524,384)
19,128
(3,377)
4,299
(504,334)
71,926
(209,621)
(81,898)
39,946
(50,176)
61,847
—
(167,976)
10,726
111,690
$
31,792
$
42,811
$
47,808
$
— $
122,416
S-43
S-43
Aramark 2016 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended October 3, 2014
(in thousands)
Net cash provided by (used in) operating
activities
Cash flows from investing activities:
Purchases of property and
equipment, client contract
investments and other
Disposals of property and equipment
Proceeds from divestitures
Acquisitions of businesses, net of
cash acquired
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term borrowings
Payments of long-term borrowings
Net change in funding under the
Receivables Facility
Payments of dividends
Proceeds from initial public offering,
net
Proceeds from issuance of common
stock
Repurchase of common stock
Other financing activities
Aramark
Services,
Inc.
(Issuer)
Aramark
(Parent)
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
450
$
65,605
$ 470,472
$ (105,412) $
(32,956) $
398,159
—
—
—
—
—
—
(20,219)
8,446
(456,671)
6,219
—
24,000
—
265
(11,508)
(13,261)
14,058
(425,655)
(68,304)
13,829
—
(8,195)
(5,389)
(68,059)
(545,194)
28,494
24,000
(21,456)
8,934
(505,222)
—
—
—
—
—
—
—
— 1,293,745
(1,877,379)
—
(14,558)
277,073
(86,669)
— 1,570,818
— (1,978,606)
—
—
—
(52,186)
524,081
—
—
—
—
4,408
(4,730)
4,377
—
—
—
—
50,000
—
—
—
—
(6,382)
(22,725)
—
(4,025)
(66,683)
—
—
—
—
—
—
32,956
50,000
(52,186)
524,081
4,408
(4,730)
(6,030)
—
Change in intercompany, net
(524,531)
580,983
Net cash provided by (used in) financing
activities
Increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of period
$
(450)
(50,782)
(43,665)
169,696
32,956
107,755
—
5
5
3,315
1,152
(3,775)
22,969
40,487
47,537
—
—
692
110,998
$
26,284
$
41,639
$
43,762
$
— $
111,690
S-44
S-44
Aramark 2016 Form 10-K SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2016, OCTOBER 2, 2015 AND OCTOBER 3, 2014
ARAMARK AND SUBSIDIARIES
Balance,
Beginning of
Period
Additions
Charged to
Income
Reductions
Deductions
from
Reserves
(1)
Balance,
End of
Period
Description
Fiscal Year 2016
Reserve for doubtful accounts, advances & current notes receivable $
Fiscal Year 2015
Reserve for doubtful accounts, advances & current notes receivable $
Fiscal Year 2014
Reserve for doubtful accounts, advances & current notes receivable $
39,023 $
21,913 $
12,878 $
48,058
37,381 $
16,220 $
14,578 $
39,023
34,676 $
15,037 $
12,332 $
37,381
(1) Amounts determined not to be collectible and charged against the reserve and translation.
S-45
S-45
Aramark 2016 Form 10-K Copies of any of the following exhibits are available to Stockholders for the cost of reproduction upon written request to the
Secretary, Aramark, 1101 Market Street, Philadelphia, PA 19107.
EXHIBIT INDEX
Exhibit No.
Description
3.1 Amended and Restated Certificate of Incorporation of Aramark (incorporated by reference to Exhibit 3.1 to
Aramark’s Current Report on Form 8-K filed with the SEC on December 16, 2013, pursuant to the Exchange Act
(file number 001-36223)).
3.2 Certificate of Ownership and Merger (incorporated by reference to Exhibit 3.1 to Aramark’s Current Report on
Form 8-K filed with the SEC on May 15, 2014, pursuant to the Exchange Act (file number 001-36223)).
3.3 Amended and Restated By-laws of Aramark (incorporated by reference to Exhibit 3.2 to Aramark’s Current
Report on Form 8-K filed with the SEC on May 15, 2014, pursuant to the Exchange Act
(file number 001-36223)).
4.1
Indenture, dated as of March 7, 2013, among Aramark Services, Inc., the guarantors named therein and The Bank
of New York Mellon, as trustee (incorporated by reference to Exhibit 4.1 to Aramark Services, Inc.’s Current
Report on Form 8-K filed with the SEC on March 7, 2013 pursuant to the Exchange Act
(file number 001-04762)).
4.2 First Supplemental Indenture, dated as of December 17, 2013, among ARAMARK Holdings Corporation and The
Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.3 to Aramark’s Form S-4 filed with
the SEC on December 17, 2013 (file number 333-192907)).
4.3 Second Supplemental Indenture, dated as of December 17, 2013, among the entities listed in Schedule I thereto
and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.4 to Aramark’s Form S-4
filed with the SEC on December 17, 2013 (file number 333-192907)).
Indenture, dated as of December 17, 2015, among Aramark Services, Inc., as issuer, Aramark, as parent guarantor,
the subsidiary guarantors named therein and The Bank of New York Mellon, as trustee (incorporated by reference
to Exhibit 4.1 of Aramark’s Current Report on Form 8-K filed with the SEC on December 17, 2015, pursuant to
the Exchange Act (file number 001-36223)).
4.4
4.5 Supplemental Indenture, dated as of May 31, 2016, among Aramark Services, Inc., as issuer, Aramark, as parent
4.6
guarantor, the subsidiary guarantors named therein and The Bank of New York Mellon, as trustee (incorporated by
reference to Exhibit 4.2 of Aramark’s Current Report on Form 8-K filed with the SEC on June 6, 2016, pursuant
to the Exchange Act (file number 001-36223)).
Indenture, dated as of May 31, 2016, among Aramark Services, Inc., as issuer, Aramark, as parent guarantor, the
subsidiary guarantors named therein and The Bank of New York Mellon, as trustee (incorporated by reference to
Exhibit 4.3 of Aramark’s Current Report on Form 8-K filed with the SEC on June 6, 2016, pursuant to the
Exchange Act (file number 001-36223)).
4.7 Registration Rights Agreement, dated as of May 31, 2016, among Aramark Services, Inc., Aramark, the subsidiary
guarantors named therein and Wells Fargo Securities, LLC, as representative of the several initial purchasers
(certain 5.125% Senior Notes due 2024 of Aramark Service, Inc.) (incorporated by reference to Exhibit 4.4 of
Aramark’s Current Report on Form 8-K filed with the SEC on June 6, 2016, pursuant to the Exchange Act (file
number 001-36223)).
4.8 Registration Rights Agreement, dated as of May 31, 2016, among Aramark Services, Inc., Aramark, the subsidiary
guarantors named therein and Wells Fargo Securities, LLC, as representative of the several initial purchasers
(4.75% Senior Notes due 2016 of Aramark Services, Inc.) (incorporated by reference to Exhibit 4.5 of Aramark’s
Current Report on Form 8-K filed with the SEC on June 6, 2016, pursuant to the Exchange Act (file number
001-36223)).
10.1 Amendment Agreement, dated as of February 24, 2014 (the “2014 Amendment Agreement”), to the Credit
Agreement, dated as of January 26, 2007, as amended and restated as of March 26, 2010, as further amended and
supplemented prior to the date of the Amendment Agreement by and among Aramark Services, Inc., ARAMARK
Canada Ltd., ARAMARK Investments Limited, ARAMARK Ireland Holdings Limited, ARAMARK Holdings
GMBH & Co. KG, ARAMARK GMBH, ARAMARK Intermediate Holdco Corporation, the Guarantors (as
defined therein) party thereto, the Lenders (as defined therein) and JPMorgan Chase Bank, N.A., as administrative
agent, collateral agent, issuing bank and as LC facility issuing bank and the other parties thereto from time to time
(incorporated by reference to Exhibit 10.67 to Aramark’s Form S-1/A filed with the SEC on February 26, 2014
(file number 333-194077)) .
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Aramark 2016 Form 10-K 10.2 Amendment Agreement No. 1, dated as of March 28, 2014, to the Amendment Agreement, dated as of
February 24, 2014, to the Credit Agreement, dated as of January 26, 2007, as amended and restated as of
March 26, 2010, as further amended and supplemented prior to the date of the Amendment Agreement by and
among Aramark Services, Inc., ARAMARK Canada Ltd., ARAMARK Investments Limited, ARAMARK Ireland
Holdings Limited, ARAMARK Holdings GMBH & Co. KG, ARAMARK GMBH, ARAMARK Intermediate
Holdco Corporation, the Guarantors (as defined therein) party thereto, the Lenders (as defined therein) and
JPMorgan Chase Bank, N.A., as administrative agent, collateral agent, issuing bank and as LC facility issuing
bank and the other parties thereto from time to time (incorporated by reference to Exhibit 10.1 to Aramark’s
Quarterly Report on Form 10-Q filed with the SEC on May 8, 2014, pursuant to the Exchange Act
(file number 001-36223))
10.3 Assumption Agreement, dated as of March 30, 2007, relating to the Credit Agreement dated as of January 26,
2007 among Aramark Services, Inc., the other Borrowers and Loan Guarantors party thereto, the Lenders party
thereto, Citibank, N.A., as administrative agent and collateral agent for the Lenders, and the other parties thereto
from time to time (incorporated by reference to Exhibit 99.2 to Aramark Services, Inc.’s Current Report on Form
8-K filed with the SEC on April 5, 2007, pursuant to the Exchange Act (file number 001-04762)).
10.4
Joinder Agreement, dated as of December 17, 2013, between each New Subsidiary listed on Schedule I thereto
and JPMorgan Chase Bank, N.A., as agent (incorporated by reference to Exhibit 10.64 to Aramark’s Form S-4
filed with the SEC on December 17, 2013 (file number 333-192907)).
10.5 U.S. Pledge and Security Agreement, dated as of January 26, 2007, among ARAMARK Intermediate Holdco
Corporation, RMK Acquisition Corporation, Aramark Services, Inc., the Subsidiary Parties from time to time
party thereto and Citibank, N.A., as collateral agent (incorporated by reference to Exhibit 10.2 to Aramark
Services, Inc.’s Current Report on Form 8-K filed with the SEC on February 1, 2007, pursuant to the Exchange
Act (file number 001-04762)).
10.6 Amended and Restated Registration Rights and Coordination Committee Agreement, dated as of December 10,
2013, among Aramark and the other parties thereto (incorporated by reference to Exhibit 10.2 to Aramark’s
Current Report on Form 8-K filed with the SEC on December 16, 2013, pursuant to the Exchange Act
(file number 001-36223)).
10.7† Letter Agreement dated May 7, 2012 between Aramark Services, Inc. and Eric Foss (incorporated by reference to
Exhibit 10.4 to Aramark Services, Inc.’s Quarterly Report on Form 10-Q filed with the SEC on May 9, 2012,
pursuant to the Exchange Act (file number 001-04762)).
10.8† Agreement Relating to Employment and Post-Employment Competition dated May 7, 2012 between Aramark
Services, Inc. and Eric Foss (incorporated by reference to Exhibit 10.5 to Aramark Services, Inc.’s Quarterly
Report on Form 10-Q filed with the SEC on May 9, 2012, pursuant to the Exchange Act
(file number 001-04762)).
10.9† Amendment, effective as of June 25, 2013, to the Letter Agreement dated May 7, 2012 between Aramark
Services, Inc. and Eric Foss (incorporated by reference to Exhibit 10.6 to Aramark Services, Inc.’s Current Report
on Form 8-K filed with the SEC on June 26, 2013, pursuant to the Exchange Act (file number 001-04762)).
10.10† Form of Agreement Relating to Employment and Post-Employment Competition and Schedule 1 listing each
Executive Officer who is a party to such Agreement (incorporated by reference to Exhibit 10.1 to Aramark
Services, Inc.’s Current Report on Form 8-K filed with the SEC on July 19, 2007, pursuant to the Exchange Act
(file number 001-04762)).
10.11† Form of Amendment to Agreement Relating to Employment and Post-Employment Competition (incorporated by
reference to Exhibit 10.8 to Aramark Services, Inc.’s Annual Report on Form 10-K filed with the SEC on
December 15, 2008, pursuant to the Exchange Act (file number 001-04762)).
10.12† Offer Letter dated July 20, 2012 between Aramark Services, Inc. and Stephen R. Reynolds (incorporated by
reference to Exhibit 10.12 to Aramark Services, Inc.’s Annual Report on Form 10-K filed with the SEC on
December 20, 2012, pursuant to the Exchange Act (file number 001-04762)).
10.13† Agreement Relating to Employment and Post-Employment Competition dated December 6, 2012 between
Aramark Services, Inc. and Stephen R. Reynolds (incorporated by reference to Exhibit 10.13 to Aramark
Services, Inc.’s Annual Report on Form 10-K filed with the SEC on December 20, 2012, pursuant to the
Exchange Act (file number 001-04762)).
10.14† Offer Letter dated March 12, 2015, between Aramark and Stephen P. Bramlage, Jr. (incorporated by reference to
Exhibit 10.1 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on May 13, 2015, pursuant to the
Exchange Act (file number 001-36223)).
10.15† Agreement Relating to Employment and Post-Employment Competition dated March 12, 2015 between Aramark
and Stephen P. Bramlage, Jr. (incorporated by reference to Exhibit 10.2 to Aramark’s Quarterly Report on Form
10-Q filed with the SEC on May 13, 2015, pursuant to the Exchange Act (file number 001-36223)).
10.16*† Offer Letter dated October 13, 2014, between Aramark and Harrald Kroeker
10.17*† Agreement Relating to Employment and Post-Employment Competition dated November 26, 2013 between
Aramark Corporation and Harrald Kroeker
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Aramark 2016 Form 10-K 10.18† Form of Indemnification Agreement and attached schedule (incorporated by reference to Exhibit 10.4 to Aramark
Services, Inc.’s Current Report on Form 8-K filed with the SEC on August 10, 2005, pursuant to the Exchange
Act (file number 001-04762)).
10.19†
10.20†
10.21†
10.22†
10.23†
Indemnification Agreement dated May 7, 2012 between Eric Foss and Aramark Services, Inc. (incorporated by
reference to Exhibit 10.6 to Aramark Services, Inc.’s Quarterly Report on Form 10-Q filed with the SEC on
May 9, 2012, pursuant to the Exchange Act (file number 001-04762)).
Indemnification Agreement dated December 12, 2012 between Stephen R. Reynolds and Aramark Services, Inc.
(incorporated by reference to Exhibit 10.22 to Aramark Services, Inc.’s Annual Report on Form 10-K filed with
the SEC on December 20, 2012, pursuant to the Exchange Act (file number 001-04762)).
Indemnification Agreement dated February 4, 2014 between Daniel J. Heinrich and Aramark (incorporated by
reference to Exhibit 10.1 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on February 5, 2014,
pursuant to the Exchange Act (file number 001-36223)).
Indemnification Agreement dated February 4, 2014 between Stephen Sadove and Aramark (incorporated by
reference to Exhibit 10.2 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on February 5, 2014,
pursuant to the Exchange Act (file number 001-36223)).
Indemnification Agreement dated April 6, 2015, between Stephen P. Bramlage, Jr. and Aramark (incorporated by
reference to Exhibit 10.3 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on May 13, 2015,
pursuant to the Exchange Act (file number 001-36223)).
10.24† Aramark 2001 Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to Aramark Services,
Inc.’s Registration Statement on Form S-8 filed with the SEC on May 24, 2002 (file number 333-89120)).
10.25† Amended and Restated Aramark 2001 Stock Unit Retirement Plan (incorporated by reference to Exhibit 10.22 to
Aramark Services, Inc.’s Annual Report on Form 10-K filed with the SEC on December 19, 2003, pursuant to the
Exchange Act (file number 001-04762)).
10.26† Second Amended and Restated Aramark Savings Incentive Retirement Plan (incorporated by reference to Exhibit
10.45 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013, (file number 333-191057)).
10.27† Amended Survivor Income Protection Plan (incorporated by reference to Exhibit 10.5 to Aramark Services, Inc.’s
Quarterly Report on Form 10-Q filed with the SEC on August 8, 2007, pursuant to the Exchange Act
(file number 001-04762)).
10.28† Second Amended and Restated Aramark 2005 Deferred Compensation Plan (incorporated by reference to Exhibit
10.48 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.29† Third Amended and Restated 2005 Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to
Aramark’s Quarterly Report on Form 10-Q filed with the SEC on February 10, 2016, pursuant to the Exchange
Act (file number 001-36233)).
10.30† Amended and Restated Aramark Senior Executive Performance Bonus Plan (incorporated by reference to Exhibit
10.49 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.31† Amended and Restated Executive Leadership Council Management Incentive Bonus Plan (2014) (incorporated by
reference to Exhibit 10.50 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013
(file number 333-191057)).
10.32† Amended and Restated Aramark Executive Leadership Council Management Incentive Bonus Plan (2016)
(incorporated by reference to Exhibit 10.1 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on
February 10, 2016, pursuant to the Exchange Act (file number 001-36233)).
10.33*† Amended and Restated Aramark Executive Leadership Council Management Incentive Bonus Plan.
10.34† Aramark 2005 Deferred Compensation Plan for Directors (incorporated by reference to Exhibit 10.67 to
Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.35† Fifth Amended and Restated Aramark 2007 Management Stock Incentive Plan (incorporated by reference to
Exhibit 10.22 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.36† Aramark 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.70 to Aramark’s Form S-1/A filed
with the SEC on November 19, 2013 (file number 333-191057)).
10.37† Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.5 to Aramark Services,
Inc.’s Current Report on Form 8-K filed with the SEC on February 1, 2007, pursuant to the Exchange Act
(file number 001-04762)).
10.38† Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to Aramark Services,
Inc.’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2007, pursuant to the Exchange Act
(file number 001-04762)).
10.39† Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.3 to Aramark Services,
Inc.’s Current Report on Form 8-K filed with the SEC on November 16, 2007, pursuant to the Exchange Act
(file number 001-04762)).
10.40† Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.3 to Aramark Services,
Inc.’s Current Report on Form 8-K filed with the SEC on March 1, 2010, pursuant to the Exchange Act
(file number 001-04762)).
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10.41† Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.3 to Aramark Services,
Inc.’s Current Report on Form 8-K filed with the SEC on June 22, 2011, pursuant to the Exchange Act
(file number 001-04762)).
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10.42† Amendment to Outstanding Non-Qualified Stock Option Agreements dated March 1, 2010 (incorporated by
reference to Exhibit 10.1 to Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on March 1,
2010, pursuant to the Exchange Act (file number 001-04762)).
10.43† Form of Amendment to Outstanding Non-Qualified Stock Option Agreements (incorporated by reference to
Exhibit 10.4 to Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on June 22, 2011,
pursuant to the Exchange Act (file number 001-04762)).
10.44† Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to Aramark Services,
Inc.’s Quarterly Report on Form 10-Q filed with the SEC on May 9, 2012, pursuant to the Exchange Act
10.45† Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.2 to Aramark
Services, Inc.’s Current Report on Form 8-K filed with the SEC on June 26, 2013, pursuant to the Exchange Act
(file number 001-04762)).
(file number 001-04762)).
10.46† Form of Time-Based Restricted Stock Unit Award Agreement with Aramark (incorporated by reference to Exhibit
10.3 to Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on June 26, 2013, pursuant to the
Exchange Act (file number 00104762)).
10.47† Form of Restricted Stock Award Agreement with Aramark (incorporated by reference to Exhibit 10.4 to Aramark
Services, Inc.’s Current Report on Form 8-K filed with the SEC on June 26, 2013, pursuant to the Exchange Act
(file number 001-04762)).
10.48† Form of Replacement Stock Option Award Agreement with Aramark (incorporated by reference to Exhibit 10.5 to
Aramark Services, Inc.’s Current Report on Form 8K filed with the SEC on June 26, 2013, pursuant to the
Exchange Act (file number 001-04762)).
10.49† Schedule 1s to Outstanding Non-Qualified Stock Option Agreements (incorporated by reference to Exhibit 10.18
to Aramark Services, Inc.’s Annual Report on Form 10-K filed with the SEC on December 15, 2009, pursuant to
the Exchange Act (file number 001-04762)).
10.50† Schedules 1 to Outstanding Non-Qualified Stock Option Agreements (incorporated by reference to Exhibit 10.2 to
Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on March 1, 2010, pursuant to the
Exchange Act (file number 001-04762)).
10.51† New Schedule 1 to Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to
Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on November 18, 2011, pursuant to the
Exchange Act (file number 001-04762)).
10.52† Revised Schedule 1s to outstanding Non-Qualified Stock Option Agreements (incorporated by reference to
Exhibit 10.3 to Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on November 18, 2011,
pursuant to the Exchange Act (file number 001-04762)).
10.53† New Schedule 1 to Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.1 to
Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on November 19, 2012, pursuant to the
Exchange Act (file number 001-04762)).
10.54† Revised Schedule 1s to outstanding Non-Qualified Stock Option Agreements (incorporated by reference to
Exhibit 10.2 to Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on November 19, 2012,
pursuant to the Exchange Act (file number 001-04762)).
10.55† Revised Schedule 1s to Outstanding Non-Qualified Stock Option Agreements (incorporated by reference to
Exhibit 10.68 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.56† Form of Amendment to Outstanding Non-Qualified Stock Option Agreement (incorporated by reference to
Exhibit 10.69 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.57† Form of Non-Qualified Stock Option Award under the Aramark 2013 Stock Incentive Plan (incorporated by
reference to Exhibit 10.71 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number
333-191057)).
10.58† Form of Restricted Stock Unit Award under the Aramark 2013 Stock Incentive Plan (incorporated by reference to
Exhibit 10.72 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.59† Form of Performance Stock Unit Award Agreement (incorporated by reference to Exhibit 10.4 to Aramark’s
Quarterly Report on Form 10-Q filed with the SEC on February 5, 2014, pursuant to the Exchange Act
(file number 001-36223)).
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Aramark 2016 Form 10-K 10.40† Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.3 to Aramark Services,
Inc.’s Current Report on Form 8-K filed with the SEC on March 1, 2010, pursuant to the Exchange Act
(file number 001-04762)).
10.41† Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.3 to Aramark Services,
Inc.’s Current Report on Form 8-K filed with the SEC on June 22, 2011, pursuant to the Exchange Act
(file number 001-04762)).
10.42† Amendment to Outstanding Non-Qualified Stock Option Agreements dated March 1, 2010 (incorporated by
reference to Exhibit 10.1 to Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on March 1,
2010, pursuant to the Exchange Act (file number 001-04762)).
10.43† Form of Amendment to Outstanding Non-Qualified Stock Option Agreements (incorporated by reference to
Exhibit 10.4 to Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on June 22, 2011,
pursuant to the Exchange Act (file number 001-04762)).
10.44† Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to Aramark Services,
Inc.’s Quarterly Report on Form 10-Q filed with the SEC on May 9, 2012, pursuant to the Exchange Act
(file number 001-04762)).
10.45† Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.2 to Aramark
Services, Inc.’s Current Report on Form 8-K filed with the SEC on June 26, 2013, pursuant to the Exchange Act
(file number 001-04762)).
10.46† Form of Time-Based Restricted Stock Unit Award Agreement with Aramark (incorporated by reference to Exhibit
10.3 to Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on June 26, 2013, pursuant to the
Exchange Act (file number 00104762)).
10.47† Form of Restricted Stock Award Agreement with Aramark (incorporated by reference to Exhibit 10.4 to Aramark
Services, Inc.’s Current Report on Form 8-K filed with the SEC on June 26, 2013, pursuant to the Exchange Act
(file number 001-04762)).
10.48† Form of Replacement Stock Option Award Agreement with Aramark (incorporated by reference to Exhibit 10.5 to
Aramark Services, Inc.’s Current Report on Form 8K filed with the SEC on June 26, 2013, pursuant to the
Exchange Act (file number 001-04762)).
10.49† Schedule 1s to Outstanding Non-Qualified Stock Option Agreements (incorporated by reference to Exhibit 10.18
to Aramark Services, Inc.’s Annual Report on Form 10-K filed with the SEC on December 15, 2009, pursuant to
the Exchange Act (file number 001-04762)).
10.50† Schedules 1 to Outstanding Non-Qualified Stock Option Agreements (incorporated by reference to Exhibit 10.2 to
Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on March 1, 2010, pursuant to the
Exchange Act (file number 001-04762)).
10.51† New Schedule 1 to Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to
Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on November 18, 2011, pursuant to the
Exchange Act (file number 001-04762)).
10.52† Revised Schedule 1s to outstanding Non-Qualified Stock Option Agreements (incorporated by reference to
Exhibit 10.3 to Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on November 18, 2011,
pursuant to the Exchange Act (file number 001-04762)).
10.53† New Schedule 1 to Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.1 to
Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on November 19, 2012, pursuant to the
Exchange Act (file number 001-04762)).
10.54† Revised Schedule 1s to outstanding Non-Qualified Stock Option Agreements (incorporated by reference to
Exhibit 10.2 to Aramark Services, Inc.’s Current Report on Form 8-K filed with the SEC on November 19, 2012,
pursuant to the Exchange Act (file number 001-04762)).
10.55† Revised Schedule 1s to Outstanding Non-Qualified Stock Option Agreements (incorporated by reference to
Exhibit 10.68 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.56† Form of Amendment to Outstanding Non-Qualified Stock Option Agreement (incorporated by reference to
Exhibit 10.69 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.57† Form of Non-Qualified Stock Option Award under the Aramark 2013 Stock Incentive Plan (incorporated by
reference to Exhibit 10.71 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number
333-191057)).
10.58† Form of Restricted Stock Unit Award under the Aramark 2013 Stock Incentive Plan (incorporated by reference to
Exhibit 10.72 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.59† Form of Performance Stock Unit Award Agreement (incorporated by reference to Exhibit 10.4 to Aramark’s
Quarterly Report on Form 10-Q filed with the SEC on February 5, 2014, pursuant to the Exchange Act
(file number 001-36223)).
10.60† Form of Performance Stock Unit Award Agreement (Revised) (incorporated by reference to Exhibit 10.26 to
Aramark’s Annual Report on Form 10-K filed with the SEC on December 3, 2014, pursuant to the Exchange Act
(file number 001-36223)).
10.61† Form of Performance Stock Unit Award Agreement (Revised) (incorporated by reference to Exhibit 10.2 to
Aramark’s Quarterly Report on Form 10-Q filed with the SEC on August 12, 2015, pursuant to the Exchange Act
(file number 001-36223)).
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10.62† Form of Performance Restricted Stock Award (incorporated by reference to Exhibit 10.61 to Aramark’s Annual
Report on Form 10-K filed with the SEC on December 1, 2015, pursuant to the Exchange Act (file number
001-36223)).
10.63† Form of Non-Qualified Stock Option Award Agreement (Relative TSR Vesting) (incorporated by reference to
Exhibit 10.62 to Aramark’s Annual Report on Form 10-K filed with the SEC on December 1, 2015, pursuant to
the Exchange Act (file number 001-36223)).
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10.64† Form of Restricted Stock Unit Award Agreement (Relative TSR Vesting) (incorporated by reference to Exhibit
10.63 to Aramark’s Annual Report on Form 10-K filed with the SEC on December 1, 2015, pursuant to the
Exchange Act (file number 001-36223)).
10.65† Form of Performance Restricted Stock Award Agreement (Relative TSR Vesting) (incorporated by reference to
Exhibit 10.64 to Aramark’s Annual Report on Form 10-K filed with the SEC on December 1, 2015, pursuant to
the Exchange Act (file number 001-36223)).
10.66† Form of Deferred Stock Unit Award Agreement under the Fifth Amended and Restated Aramark 2007
Management Stock Incentive Plan (incorporated by reference to Exhibit 10.46 to Aramark’s Form S-1/A filed
with the SEC on November 19, 2013 (file number 333-191057)).
10.67*† Form of Schedule I to Performance Stock Unit Award Agreement
10.68*† Form of Schedule I to Performance Restricted Stock Award Agreement
10.69*† Form of Schedule I to Non-Qualified Stock Option Award Agreement (Relative TSR Vesting)
10.70*† Form of Schedule I to Restricted Stock Unit Award Agreement (Relative TSR Vesting)
10.71*† Form of Schedule I to Performance Restricted Stock Award Agreement (Relative TSR Vesting)
10.72† Form of Deferred Stock Unit Award under the Aramark 2013 Stock Incentive Plan (incorporated by reference to
Exhibit 10.73 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.73† Form of Deferred Stock Unit Award Agreement under the Aramark 2013 Stock Incentive Plan (Revised)
(incorporated by reference to Exhibit 10.77 to Aramark’s Annual Report on Form 10-K filed with the SEC on
December 3, 2014, pursuant to the Exchange Act (file number 001-36223)).
10.74† Form of Deferred Stock Unit Agreement under the Aramark 2013 Stock Incentive Plan (incorporated by reference
to Exhibit 10.4 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on May 13, 2015, pursuant to the
Exchange Act (file number 001-36223)).
10.75† Form of Aircraft Timesharing Agreement (incorporated by reference to Exhibit 10.69 to Aramark’s Annual Report
on Form 10-K filed with the SEC on December 1, 2015, pursuant to the Exchange Act (file number 001-36223)).
10.76 Amended and Restated Master Distribution Agreement effective as of March 5, 2011 between SYSCO
Corporation and ARAMARK Food and Support Services Group, Inc. (incorporated by reference to Exhibit 10.1
to Aramark Services, Inc.’s Quarterly Report on Form 10-Q filed with the SEC on May 12, 2011, pursuant to the
Exchange Act (file number 001-04762)) (portions omitted pursuant to a grant of confidential treatment).
10.77 Amendment Agreement, dated February 26, 2014, to the Master Distribution Agreement dated as of November
25, 2006, between SYSCO Corporation and ARAMARK Food and Support Services Group, Inc., as amended and
restated effective as of March 5, 2011 (incorporated by reference to Exhibit 10.71 to Aramark’s Form S-1/A filed
with the SEC on February 26, 2014 (file number 333-194077)) (portions omitted pursuant to a grant of
confidential treatment).
12.1* Ratio of Earnings to Fixed Charges.
21.1* List of subsidiaries of Aramark.
23.1* Consent of Independent Registered Public Accounting Firm-KPMG LLP.
31.1* Certification of Eric Foss, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Stephen P. Bramlage, Jr., Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.1* Certification of Eric Foss, Chief Executive Officer, and Stephen P. Bramlage, Jr., Chief Financial Officer,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
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Aramark 2016 Form 10-K 10.60† Form of Performance Stock Unit Award Agreement (Revised) (incorporated by reference to Exhibit 10.26 to
Aramark’s Annual Report on Form 10-K filed with the SEC on December 3, 2014, pursuant to the Exchange Act
(file number 001-36223)).
10.61† Form of Performance Stock Unit Award Agreement (Revised) (incorporated by reference to Exhibit 10.2 to
Aramark’s Quarterly Report on Form 10-Q filed with the SEC on August 12, 2015, pursuant to the Exchange Act
(file number 001-36223)).
10.62† Form of Performance Restricted Stock Award (incorporated by reference to Exhibit 10.61 to Aramark’s Annual
Report on Form 10-K filed with the SEC on December 1, 2015, pursuant to the Exchange Act (file number
001-36223)).
10.63† Form of Non-Qualified Stock Option Award Agreement (Relative TSR Vesting) (incorporated by reference to
Exhibit 10.62 to Aramark’s Annual Report on Form 10-K filed with the SEC on December 1, 2015, pursuant to
the Exchange Act (file number 001-36223)).
10.64† Form of Restricted Stock Unit Award Agreement (Relative TSR Vesting) (incorporated by reference to Exhibit
10.63 to Aramark’s Annual Report on Form 10-K filed with the SEC on December 1, 2015, pursuant to the
Exchange Act (file number 001-36223)).
10.65† Form of Performance Restricted Stock Award Agreement (Relative TSR Vesting) (incorporated by reference to
Exhibit 10.64 to Aramark’s Annual Report on Form 10-K filed with the SEC on December 1, 2015, pursuant to
the Exchange Act (file number 001-36223)).
10.66† Form of Deferred Stock Unit Award Agreement under the Fifth Amended and Restated Aramark 2007
Management Stock Incentive Plan (incorporated by reference to Exhibit 10.46 to Aramark’s Form S-1/A filed
with the SEC on November 19, 2013 (file number 333-191057)).
10.67*† Form of Schedule I to Performance Stock Unit Award Agreement
10.68*† Form of Schedule I to Performance Restricted Stock Award Agreement
10.69*† Form of Schedule I to Non-Qualified Stock Option Award Agreement (Relative TSR Vesting)
10.70*† Form of Schedule I to Restricted Stock Unit Award Agreement (Relative TSR Vesting)
10.71*† Form of Schedule I to Performance Restricted Stock Award Agreement (Relative TSR Vesting)
10.72† Form of Deferred Stock Unit Award under the Aramark 2013 Stock Incentive Plan (incorporated by reference to
Exhibit 10.73 to Aramark’s Form S-1/A filed with the SEC on November 19, 2013 (file number 333-191057)).
10.73† Form of Deferred Stock Unit Award Agreement under the Aramark 2013 Stock Incentive Plan (Revised)
(incorporated by reference to Exhibit 10.77 to Aramark’s Annual Report on Form 10-K filed with the SEC on
December 3, 2014, pursuant to the Exchange Act (file number 001-36223)).
10.74† Form of Deferred Stock Unit Agreement under the Aramark 2013 Stock Incentive Plan (incorporated by reference
to Exhibit 10.4 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on May 13, 2015, pursuant to the
Exchange Act (file number 001-36223)).
10.75† Form of Aircraft Timesharing Agreement (incorporated by reference to Exhibit 10.69 to Aramark’s Annual Report
on Form 10-K filed with the SEC on December 1, 2015, pursuant to the Exchange Act (file number 001-36223)).
10.76 Amended and Restated Master Distribution Agreement effective as of March 5, 2011 between SYSCO
Corporation and ARAMARK Food and Support Services Group, Inc. (incorporated by reference to Exhibit 10.1
to Aramark Services, Inc.’s Quarterly Report on Form 10-Q filed with the SEC on May 12, 2011, pursuant to the
Exchange Act (file number 001-04762)) (portions omitted pursuant to a grant of confidential treatment).
10.77 Amendment Agreement, dated February 26, 2014, to the Master Distribution Agreement dated as of November
25, 2006, between SYSCO Corporation and ARAMARK Food and Support Services Group, Inc., as amended and
restated effective as of March 5, 2011 (incorporated by reference to Exhibit 10.71 to Aramark’s Form S-1/A filed
with the SEC on February 26, 2014 (file number 333-194077)) (portions omitted pursuant to a grant of
confidential treatment).
12.1* Ratio of Earnings to Fixed Charges.
21.1* List of subsidiaries of Aramark.
23.1* Consent of Independent Registered Public Accounting Firm-KPMG LLP.
31.1* Certification of Eric Foss, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Stephen P. Bramlage, Jr., Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.1* Certification of Eric Foss, Chief Executive Officer, and Stephen P. Bramlage, Jr., Chief Financial Officer,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
S-50
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
*
†
Filed herewith.
Identifies exhibits that consist of management contract or compensatory arrangement.
S-50
S-51
Aramark 2016 Form 10-K Selected Operational and Financial Metrics
Adjusted Sales (Organic)
Management believes that presentation of sales growth, adjusted to eliminate the effects of material 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.
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 "2007 LBO"); the impact of the change in fair value related to certain
gasoline and diesel agreements; severance and other charges; share-based compensation; the effects of material
acquisitions and divestitures 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.
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.
Adjusted Net Income
Adjusted Net Income represents net income attributable to Aramark stockholders adjusted to eliminate the change in
amortization of acquisition-related customer relationship intangible assets and depreciation of property and equipment
resulting from the 2007 LBO; the impact of changes in the fair value related to certain gasoline and diesel agreements;
severance and other charges; share-based compensation; the effects of material acquisitions and divestitures 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 U.S. federal tax rate. Management believes that the
presentation of adjusted net income is useful information to investors because we use such information when
evaluating net income to better evaluate the underlying operating performance of the Company.
Adjusted Net Income (Constant Currency)
Adjusted Net Income (Constant Currency) represents Adjusted Net Income adjusted to eliminate the impact of
currency translation.
We use Adjusted Sales (Organic), Adjusted Operating Income (including on a constant currency basis), Covenant
Adjusted EBITDA and Adjusted Net Income (including on a constant currency basis) 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 sales, operating income or net income, determined in accordance with GAAP. Adjusted Sales
(Organic), Adjusted Operating Income, Covenant 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
Page 1
calculations.
Free Cash Flow
Free Cash Flow represents net cash provided by operating activities less net purchases of property and equipment,
client contract investments and other.
Page 2
Explanatory Notes to the Non-GAAP Schedules
Amortization of acquisition-related customer relationship intangible assets and depreciation of property and
equipment resulting from the 2007 Leveraged Buy-out - adjustments to eliminate the change in amortization and
depreciation resulting from the purchase accounting applied to the January 26, 2007 going-private transaction
executed with investment funds affiliated with GS Capital Partners, CCMP Capital Advisors, LLC and J.P. Morgan
Partners, LLC, Thomas H. Lee Partners, L.P. and Warburg Pincus LLC as well as approximately 250 senior
management personnel.
Share-based compensation - adjustments to eliminate compensation expense related to the Company's issuances
of share-based awards and the related employer payroll tax expense incurred by the Company when employees
exercise in the money stock options or vest in restricted stock awards.
Severance and other charges - adjustments to eliminate severance expenses and other costs incurred in the
applicable period such as costs incurred to start-up our Business Service Center in Nashville, TN ($0.7 million for the
fourth quarter of 2015 and $15.0 million for fiscal 2015), organizational streamlining initiatives ($15.9 million net
expense for the fourth quarter of 2016 and $24.9 million net expense for fiscal 2016 and $26.5 million net expense
for the fourth quarter of 2015 and $27.5 million net expense for the fiscal 2015), other consulting costs related to
transformation initiatives ($4.8 million for the fourth quarter of 2016 and $16.2 million for fiscal 2016 and $0.1 million
for the fourth quarter of 2015 and $7.9 million for fiscal 2015) and asset write-offs, mainly from the exit of certain
operations in the FSS International segment ($0.6 million for the fourth quarter and fiscal 2016 and $16.2 million for
the fourth quarter and fiscal 2015).
Effects of acquisitions and divestitures - adjustments to eliminate the impact that material acquisitions and
divestitures had on the comparative periods.
Gains, losses and settlements impacting comparability - adjustments to eliminate certain transactions that are
not indicative of our ongoing operational performance such as expenses related to acquisition costs ($2.4 million for
the fourth quarter of 2016 and $3.9 million for fiscal 2016 and $0.4 million for the fourth quarter of 2015 and $0.9
million for fiscal 2015), expenses related to long-term disability obligations (approximately $2.3 million for fiscal 2016),
property and other asset write-downs associated with the sale of a building ($6.8 million for fiscal 2016 and $8.7
million for fiscal 2015), asset write-offs ($7.0 million for the fourth quarter and fiscal 2016), multiemployer pension
plan withdrawal charges ($2.6 million for the fourth quarter and fiscal 2016 and $0.8 million for fiscal 2015), the impact
of the change in fair value related to certain gasoline and diesel agreements (no impact for the fourth quarter of fiscal
2016 and $8.3 million gain for fiscal 2016 and a $2.8 million loss for the fourth quarter of 2015 and a loss of $2.6
million for fiscal 2015), insurance reserve adjustments due to favorable claims experience ($0.3 million for the fourth
quarter of 2015 and $10.2 million for fiscal 2015), loss on divestitures ($4.3 million for fiscal 2015), a gain on sale of
a building ($3.1 million for the fourth quarter and fiscal 2015), other income relating to the recovery of the Company's
investment (possessory interest) at our National Park Service sites ($2.0 million for fourth quarter and fiscal 2015),
expenses related to a secondary offering of common stock by certain of our stockholders ($0.4 million for the fourth
quarter of 2015 and $2.2 million for fiscal 2015) and other miscellaneous expenses.
Effect of currency translation - adjustments to eliminate the impact that fluctuations in currency translation rates
had on the comparative results by presenting the periods on a constant currency basis. Assumes constant foreign
currency exchange rates based on the rates in effect for the prior year period being used in translation for the
comparable current year period.
Effects of refinancing on interest and other financing costs, net - adjustments to eliminate expenses associated
with refinancing activities undertaken by the Company in the applicable period such as third party costs, debt
settlement call premiums and non-cash charges for the write-offs of deferring financing costs and debt issuance costs.
Page 3
Tax Impact of Adjustments to Adjusted Net Income - adjustments to eliminate the net tax impact of the adjustments
to adjusted net income calculated based on a blended U.S. federal and state tax rate for U.S. adjustments and the
U.S. federal tax rate for adjustments in jurisdictions outside the U.S.
Page 4
ARAMARK AND SUBSIDIARIES
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
RECONCILIATION OF NON-GAAP MEASURES
ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN
ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN
(Unaudited)
(Unaudited)
(In thousands)
(In thousands)
Fiscal 2016
Fiscal 2015
Sales (as reported)
Operating Income (as reported)
Sales (as reported)
Operating Income Margin (as reported)
Operating Income (as reported)
$
14,415,829
Fiscal 2016
$
14,329,135
$
746,314
$
14,415,829
$
627,938
Fiscal 2015
$
14,329,135
5.2%
$
746,314
4.4%
$
627,938
Operating Income Margin (as reported)
Sales (as reported)
$
14,415,829
$
5.2%
14,329,135
4.4%
Effect of Currency Translation
Sales (as reported)
Effect of Acquisitions and Divestitures
Adjusted Sales (Organic)
Effect of Currency Translation
Effect of Acquisitions and Divestitures
Operating Income (as reported)
Adjusted Sales (Organic)
Operating Income (as reported)
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Share-Based Compensation
Severance and Other Charges
Effect of Acquisitions and Divestitures
Gains, Losses and Settlements impacting comparability
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Share-Based Compensation
Severance and Other Charges
Effect of Acquisitions and Divestitures
Gains, Losses and Settlements impacting comparability
Effect of Currency Translation
Adjusted Operating Income (Constant Currency)
Adjusted Operating Income
Adjusted Operating Income Margin (Constant Currency)
Adjusted Operating Income
Effect of Currency Translation
Adjusted Operating Income (Constant Currency)
259,424
(48,155)
$
14,415,829
-
(9,377)
$
14,329,135
$
14,627,098
$
14,319,758
259,424
(48,155)
$
746,314
$
$
14,627,098
627,938
$
746,314
-
(9,377)
$
14,319,758
$
627,938
78,174
59,358
41,736
275
13,447
939,304
12,407
951,711
$
$
110,080
72,800
66,545
(421)
3,793
880,735
-
880,735
78,174
59,358
$
41,736
275
$
13,447
939,304
12,407
951,711
Fiscal 2013
6.51%
$
6.15%
$
$
$
Fiscal 2014
Sales (as reported)
Adjusted Operating Income Margin (Constant Currency)
Operating Income (as reported)
$
14,832,913
$
564,563
$
13,945,657
6.51%
$
514,474
Operating Income Margin (as reported)
3.8%
3.7%
110,080
72,800
66,545
(421)
3,793
880,735
-
880,735
6.15%
Fiscal 2013
$
13,945,657
$
514,474
3.7%
$
13,945,657
(106,188)
(25,477)
-
$
13,813,992
$
514,474
155,443
19,417
(6,063)
113,464
(5,992)
968
-
(10,251)
781,460
$
$
14,358,574
$
13,813,992
$
14,832,913
Fiscal 2014
$
13,945,657
(470,565)
(3,774)
$
14,832,913
$
564,563
(106,188)
(25,477)
$
14,358,574
$
13,813,992
3.8%
(257,963)
-
$
14,100,611
$
$
14,832,913
13,813,992
$
564,563
$
(470,565)
(3,774)
514,474
155,443
19,417
(6,063)
113,464
(5,992)
968
-
(10,251)
781,460
5.66%
(257,963)
14,100,611
$
129,505
47,522
(27,955)
53,554
(71)
$
26,910
564,563
56,133
1,911
852,072
$
5.93%
Fiscal 2012
$
13,505,426
$
581,775
4.3%
129,505
$
47,522
(27,955)
53,554
(71)
26,910
56,133
1,911
852,072
$
13,505,426
$
(1,262)
(133,242)
$
13,370,922
5.93%
5.66%
Fiscal 2012
$
581,775
$
13,505,426
$
581,775
152,751
15,678
5,360
(9,477)
746,087
$
$
13,505,426
4.3%
(1,262)
(133,242)
5.58%
$
13,370,922
Sales (as reported)
Sales (as reported)
Effect of Currency Translation
Effect of Acquisitions and Divestitures
Operating Income (as reported)
Adjusted Sales
Operating Income Margin (as reported)
Estimated Impact of 53rd Week
Adjusted Sales (Organic)
Sales (as reported)
Operating Income (as reported)
Effect of Currency Translation
Effect of Acquisitions and Divestitures
Adjusted Sales
Adjusted Sales (Organic)
Operating Income (as reported)
Estimated Impact of 53rd Week
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Share-Based Compensation
Effect of Currency Translation
Severance and Other Charges
Effect of Acquisitions and Divestitures
Branding
Initial Public Offering-Related Expenses, including share-
based compensation
Gains, Losses and Settlements impacting comparability
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Share-Based Compensation
Effect of Currency Translation
Severance and Other Charges
Effect of Acquisitions and Divestitures
Branding
Sales (as reported)
Initial Public Offering-Related Expenses, including share-
based compensation
Gains, Losses and Settlements impacting comparability
Operating Income Margin (as reported)
Adjusted Operating Income Margin
Operating Income (as reported)
Adjusted Operating Income
Adjusted Operating Income
Sales (as reported)
Effect of Currency Translation
Effect of Acquisitions and Divestitures
Adjusted Operating Income Margin
Adjusted Sales (Organic)
Operating Income (as reported)
Sales (as reported)
Amortization of Acquisition-Related Customer
Operating Income (as reported)
Relationship Intangible Assets and Depreciation of
Operating Income Margin (as reported)
Property and Equipment Resulting from the Transaction
Share-Based Compensation
Severance and Other Charges
Sales (as reported)
Gains, Losses and Settlements impacting comparability
Adjusted Operating Income
Effect of Currency Translation
Effect of Acquisitions and Divestitures
Adjusted Operating Income Margin
Adjusted Sales (Organic)
Operating Income (as reported)
$
581,775
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Share-Based Compensation
Severance and Other Charges
Gains, Losses and Settlements impacting comparability
Adjusted Operating Income
$
746,087
Adjusted Operating Income Margin
152,751
15,678
5,360
(9,477)
5.58%
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
ADJUSTED NET INCOME & ADJUSTED EPS
(Unaudited)
(In thousands, except per share amounts)
Net Income Attributable to Aramark Stockholders
(as reported)
Adjustment:
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the 2007
LBO
Share-Based Compensation
Severance and Other Charges
Effects of Acquisitions and Divestitures
Gains, Losses and Settlements impacting
comparability
Effects of Refinancing on Interest and Other
Financing Costs, net
Tax Impact of Adjustments to Adjusted Net Income
Adjusted Net Income
Effect of Currency Translation, net of Tax
Adjusted Net Income (Constant Currency)
Earnings Per Share (as reported)
Net Income Attributable to Aramark Stockholders (as
reported)
Diluted Weighted Average Shares Outstanding
Earnings Per Share Growth (as reported)
Adjusted Earnings Per Share
Adjusted Net Income
Diluted Weighted Average Shares Outstanding
Adjusted Earnings Per Share (Constant Currency)
Adjusted Net Income (Constant Currency)
Diluted Weighted Average Shares Outstanding
Adjusted Earnings Per Share Growth
Three Months
Ended
Three Months
Ended
September 30,
2016
October 2,
2015
Fiscal Year
Ended
September
30, 2016
Fiscal Year
Ended
October 2,
2015
$
83,344
$
56,865
$
287,806
$
235,946
16,710
13,997
21,321
(1,012 )
27,156
15,325
43,545
—
78,174
59,358
41,736
275
110,080
72,800
66,545
—
12,022
(1,499 )
13,447
3,793
—
—
31,267
(24,090 )
122,292 $
(246 )
122,046 $
(32,181 )
109,211 $
—
109,211 $
$
83,344
250,135
0.33 $
$
56,865
247,498
0.23 $
(87,025 )
425,038
7,802
432,840
$
$
$
287,806
248,763
1.16
20.83 %
$
—
(102,485 )
386,679
—
386,679
235,946
246,616
0.96
122,292 $
250,135
0.49 $
109,211 $
247,498
0.44 $
425,038
248,763
1.71
$
$
386,679
246,616
1.57
122,046 $
250,135
0.49 $
109,211 $
247,498
0.44 $
$
432,840
248,763
1.74
10.83 %
$
386,679
246,616
1.57
$
$
$
$
$
$
$
$
Page 7
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
ADJUSTED NET INCOME, ADJUSTED OPERATING INCOME, ADJUSTED EBITDA & ADJUSTED EPS
(Unaudited)
(In thousands, except per share amounts)
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
ADJUSTED NET INCOME, ADJUSTED OPERATING INCOME, ADJUSTED EBITDA & ADJUSTED EPS
(Unaudited)
(In thousands, except per share amounts)
Net Income (as reported)
Adjustment:
Loss from Discontinued Operations, net of tax
Net Income (as reported)
Adjustment:
Amortization of Acquisition-Related Customer
Loss from Discontinued Operations, net of tax
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Share-Based Compensation
Amortization of Acquisition-Related Customer
Effect of Currency Translation
Severance and Other Charges
Relationship Intangible Assets and Depreciation of
Effects of Acquisitions and Divestitures
Branding
Property and Equipment Resulting from the Transaction
Initial Public Offering-Related Expenses,
Share-Based Compensation
including share-based compensation
Gains, Losses and Settlements impacting
Effect of Currency Translation
comparability
Severance and Other Charges
Effects of Refinancings on Interest and Other Financing
Costs, net
Effects of Acquisitions and Divestitures
Tax Impact of Adjustments to Adjusted Net
Branding
Income
Initial Public Offering-Related Expenses,
including share-based compensation
Tax Impact of Adjustments to Adjusted Net
Income and Interest Adjustments
Gains, Losses and Settlements impacting
Provision for Income Taxes
comparability
Interest and Other Financing Costs, net
Effects of Refinancings on Interest and Other Financing
Costs, net
Tax Impact of Adjustments to Adjusted Net
Income
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Depreciation and Amortization
Adjusted Net Income
Adjustment:
Adjusted Operating Income
Adjustment:
Adjusted EBITDA
Adjusted Net Income
Adjustment:
Adjusted Earnings Per Share
Adjusted Net Income
Net Income Attributable to Noncontrolling Interest
Adjusted Net Income Attributable to Aramark
Stockholders
Diluted Weighted Average Shares Outstanding
Tax Impact of Adjustments to Adjusted Net
Income and Interest Adjustments
Provision for Income Taxes
Interest and Other Financing Costs, net
Adjusted Operating Income
Adjustment:
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Depreciation and Amortization
Adjusted EBITDA
Adjusted Earnings Per Share
Adjusted Net Income
Net Income Attributable to Noncontrolling Interest
Adjusted Net Income Attributable to Aramark
Stockholders
Diluted Weighted Average Shares Outstanding
Twelve Months Ended
September 28, 2012
155,443
19,417
(6,063)
113,464
(5,992)
968
-
(10,251)
39,830
(116,572)
261,640
76,742
19,233
423,845
(155,443)
542,136
152,751
15,678
5,360
(9,477)
-
-
-
-
-
64,903
18,066
456,807
(152,751)
529,213
$
206,311
(64,903)
Twelve Months Ended
October 2, 2015
Twelve Months Ended
October 2, 2015
236,976
Twelve Months Ended
October 3, 2014
$
149,459
$
Twelve Months Ended
Twelve Months Ended
September 27, 2013
October 3, 2014
70,366
$
Twelve Months Ended
September 28, 2012
Twelve Months Ended
September 27, 2013
107,199
$
$
-
236,976
-
$
1,030
149,459
$
(297)
70,366
$
107,199
-
-
1,030
(297)
110,080
72,800
-
66,545
(421)
-
-
3,793
-
$
(102,485)
387,288
129,505
47,522
(27,955)
53,554
(71)
26,910
56,133
1,911
25,705
(118,658)
344,015
110,080
72,800
-
66,545
(421)
-
155,443
19,417
(6,063)
113,464
(5,992)
968
-
129,505
47,522
(27,955)
53,554
(71)
26,910
(10,251)
39,830
(116,572)
261,640
$
$
$
102,485
105,020
285,942
880,735
$
-
3,793
$
92,953
80,218
334,886
852,072
76,742
19,233
423,845
781,460
$
56,133
1,911
$
-
25,705
(110,080)
504,033
1,274,688
(102,485)
$
387,288
(129,505)
521,581
1,244,148
(155,443)
542,136
$
1,168,153
$
(118,658)
344,015
$
$
$
$
$
387,288
(1,030)
$
386,258
246,616
1.57
$
$
$
$
102,485
105,020
$
285,942
880,735
344,015
(503)
343,512
237,451
1.45
$
$
261,640
(1,010)
$
260,630
209,370
$
1.24
$
92,953
80,218
334,886
852,072
$
$
152,751
15,678
-
5,360
-
-
-
(9,477)
-
(64,903)
206,311
64,903
18,066
456,807
746,087
(152,751)
529,213
1,122,549
206,311
(3,648)
202,663
209,707
0.97
$
781,460
$
746,087
(110,080)
504,033
1,274,688
$
(129,505)
521,581
1,244,148
$
$
1,168,153
$
1,122,549
$
387,288
(1,030)
$
344,015
(503)
$
261,640
$
206,311
(1,010)
(3,648)
$
$
$
$
386,258
246,616
1.57
343,512
237,451
1.45
$
260,630
$
202,663
209,370
209,707
$
1.24
$
0.97
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
DEBT TO COVENANT ADJUSTED EBITDA
(Unaudited)
(In thousands)
Fiscal Year Ended
September 30, 2016
October 2, 2015
Net income attributable to Aramark stockholders (as reported)
$
287,806 $
Interest and other financing costs, net
Provision for income taxes
Depreciation and amortization
Share-based compensation expense(1)
Unusual or non-recurring (gains) and losses(2)
Pro forma EBITDA for equity method investees(3)
Pro forma EBITDA for certain transactions(4)
Other(5)
Covenant Adjusted EBITDA
Debt to Covenant Adjusted EBITDA
Total Long-Term Borrowings
Adjusted EBITDA
Debt/Adjusted EBITDA
315,383
142,699
495,765
56,942
—
14,277
4,098
35,436
235,946
285,942
105,020
504,033
66,416
(3,900)
14,804
—
58,858
$
$
$
1,352,406 $
1,267,119
5,270,036 $
1,352,406 $
3.9
5,266,024
1,267,119
4.2
(1) Represents compensation expense related to the Company's issuances of share-based awards but does not include the
related employer payroll tax expense incurred by the Company when employees exercise in the money stock options or
vest in restricted stock awards.
(2) Fiscal 2015 includes other income of approximately $2.0 million related to our investment (possessory interest) at one of
our National Park Service client sites and a net of tax gain of approximately $1.9 million related to the sale of building in
our Healthcare sector.
(3) Represents our estimated share of EBITDA from our AIM Services Co., Ltd. equity method investment not already
reflected in our EBITDA. EBITDA for this equity method investee is calculated in a manner consistent with consolidated
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 includes organizational streamlining initiatives ($24.9 million for fiscal 2016 and $27.5 million for fiscal 2015), the
impact of the change in fair value related to certain gasoline and diesel agreements ($8.3 million gain for fiscal 2016 and
$2.6 million loss for fiscal 2015), expenses related to acquisition costs ($3.9 million for fiscal 2016 and $0.9 million for
fiscal 2015), property and other asset write-downs associated with the sale of a building ($6.8 million for fiscal 2016 and
$8.7 million for fiscal 2015), asset write-offs ($5.0 million for fiscal 2016 and $16.2 million for fiscal 2015), expenses
related to secondary offerings of common stock by certain of our stockholders ($2.2 million for fiscal 2015) and other
miscellaneous expenses.
Page 8
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
DEBT TO ADJUSTED EBITDA
(Unaudited)
(In thousands)
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
DEBT TO ADJUSTED EBITDA
(Unaudited)
(In thousands)
Twelve Months Ended
October 2, 2015
Twelve Months Ended
October 2, 2015
$
236,976
Twelve Months Ended
October 3, 2014
236,976
$
Twelve Months Ended
Twelve Months Ended
October 3, 2014
September 27, 2013
$
$
149,459
70,366
149,459
$
Twelve Months Ended
September 27, 2013
107,199
Twelve Months Ended
September 28, 2012
$
$
70,366
-
-
-
129,505
47,522
(27,955)
53,554
(71)
26,910
56,133
1,911
25,705
1,030
-
155,443
19,417
129,505
(6,063)
113,464
47,522
(5,992)
(27,955)
968
53,554
-
(71)
26,910
(10,251)
39,830
56,133
(297)
1,030
152,751
15,678
-
5,360
-
-
-
(9,477)
-
155,443
19,417
(6,063)
113,464
(5,992)
968
-
110,080
72,800
-
66,545
(421)
-
-
3,793
-
110,080
72,800
-
66,545
(421)
-
-
102,485
105,020
285,942
880,735
$
$
-
92,953
80,218
334,886
852,072
(102,485)
$
387,288
$
$
25,705
76,742
19,233
423,845
(118,658)
781,460
344,015
64,903
18,066
456,807
746,087
$
$
39,830
(116,572)
261,640
(110,080)
504,033
1,274,688
$
(129,505)
521,581
1,244,148
$
$
$
$
5,293,717
1,274,688
4.15
$
$
$
5,445,594
1,244,148
4.38
102,485
$
105,020
285,942
$
880,735
$
(155,443)
542,136
92,953
1,168,153
80,218
334,886
5,824,070
852,072
1,168,153
4.99
(152,751)
529,213
1,122,549
$
$
$
6,008,767
$
1,122,549
5.35
76,742
19,233
423,845
781,460
Net Income (as reported)
Net Income (as reported)
Adjustment:
Adjustment:
Loss from Discontinued Operations, net of tax
Loss from Discontinued Operations, net of tax
Amortization of Acquisition-Related Customer
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Relationship Intangible Assets and Depreciation of
Share-Based Compensation
Property and Equipment Resulting from the Transaction
Effect of Currency Translation
Severance and Other Charges
Share-Based Compensation
Effects of Acquisitions and Divestitures
Effect of Currency Translation
Branding
Severance and Other Charges
Initial Public Offering-Related Expenses,
including share-based compensation
Effects of Acquisitions and Divestitures
Gains, Losses and Settlements impacting
Branding
comparability
Initial Public Offering-Related Expenses,
Effects of refinancings on Interest and Other Financing
Costs, net
including share-based compensation
Tax Impact of Adjustments to Adjusted Net
Gains, Losses and Settlements impacting
Income
comparability
Effects of refinancings on Interest and Other Financing
Tax Impact of Adjustments to Adjusted Net
Costs, net
Income and Interest Adjustments
Provision for Income Taxes
Tax Impact of Adjustments to Adjusted Net
Interest and Other Financing Costs, net
Income
Adjusted Net Income
Adjustment:
Adjusted Operating Income
Adjustment:
Adjusted Net Income
Adjustment:
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Depreciation and Amortization
Tax Impact of Adjustments to Adjusted Net
Income and Interest Adjustments
Provision for Income Taxes
Interest and Other Financing Costs, net
Total Long-Term Borrowings
Adjusted EBITDA
Debt/Adjusted EBITDA
Debt to Adjusted EBITDA
Adjusted Operating Income
Adjustment:
Adjusted EBITDA
$
(102,485)
387,288
$
3,793
(118,658)
344,015
$
(116,572)
261,640
1,911
$
(64,903)
206,311
(10,251)
(9,477)
Twelve Months Ended
September 28, 2012
$
107,199
(297)
152,751
15,678
5,360
-
-
-
-
-
(64,903)
$
206,311
64,903
18,066
456,807
$
746,087
Amortization of Acquisition-Related Customer
Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the Transaction
Depreciation and Amortization
Adjusted EBITDA
Debt to Adjusted EBITDA
Total Long-Term Borrowings
Adjusted EBITDA
Debt/Adjusted EBITDA
(110,080)
504,033
1,274,688
(129,505)
521,581
1,244,148
$
$
(155,443)
542,136
1,168,153
$
(152,751)
529,213
$
1,122,549
$
$
5,293,717
1,274,688
4.15
$
$
5,445,594
1,244,148
4.38
$
$
5,824,070
1,168,153
4.99
$
6,008,767
$
1,122,549
5.35
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
FREE CASH FLOW
(Unaudited)
(In thousands)
Net Cash provided by operating activities
Fiscal Year Ended
September 30, 2016
806,640
$
October 2, 2015
683,036
$
Net purchases of property and equipment, client contract investments and other
(485,708 )
(505,256 )
Free Cash Flow
$
320,932
$
177,780
80.52 %
Special Note About Forward-Looking Statements
This Annual Report 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 our financial performance including,
without limitation, statements relating to improvements in our operating performance. These statements can be
identified by the fact that they do not relate strictly to historical or current facts. They use words such as “out-
look,” “goal,” “aim,” “anticipate,” “are confident,” “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 neg-
ative 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 and financial
results are forward-looking statements. 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. These risks and uncertainties include, but are not limited to, those described
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
included herewith. These factors should not be construed as exhaustive and should be read in conjunction with
Page 9
the other cautionary statements that are included in this Annual Report and in our filings with the SEC. As a result
of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking state-
ments 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.
Corporate Information
TRANSFER AGENT
Computershare
480 Washington Blvd.
Jersey City, NJ 07310
CORPORATE
HEADQUARTERS
1101 Market Street
Philadelphia, PA 19107
215-238-3000
WEBSITE
www.aramark.com
INVESTOR RELATIONS
DEPARTMENT
215-409-7287
investorrelations@aramark.com
AUDITOR
KPMG LLP
Philadelphia, PA
SENIOR MANAGEMENT
BOARD OF DIRECTORS
Eric J. Foss
Chairman, President and
Chief Executive Officer
Stephen P. Bramlage, Jr.
Executive Vice President and
Chief Financial Officer
Harrald Kroeker
Senior Vice President,
Transformation
Lynn B. McKee
Executive Vice President,
Human Resources
Stephen R. Reynolds
Executive Vice President,
General Counsel and
Secretary
Eric J. Foss
Chairman, President and
Chief Executive Officer,
Aramark
Sanjeev Mehra
Advisory Director,
Goldman, Sachs & Co.
Lead Director
Todd M. Abbrecht
Managing Director,
Thomas H. Lee Partners, L.P.
Lawrence T. Babbio
Former Vice Chairman and President,
Verizon Communications, Inc.
Pierre-Olivier Beckers-Vieujant
Honorary President and
Chief Executive Officer,
Delhaize Group
Lisa G. Bisaccia
Executive Vice President and
Chief Human Resources Officer,
CVS Health Corporation
Leonard S. Coleman, Jr.
Former President,
National League,
Major League Baseball
Richard W. Dreiling
Former Chairman and
Chief Executive Officer,
Dollar General Corporation
Irene Esteves
Former Chief Financial Officer,
Time Warner Cable Inc.
Daniel J. Heinrich
Former Executive Vice President
and Chief Financial Officer,
The Clorox Company
John A. Quelch
Charles Edward Wilson Professor
of Business Administration,
Harvard Business School; Professor
in Health Policy and Management,
Harvard School of Public Health
Stephen I. Sadove
Former Chairman and
Chief Executive Officer,
Saks Incorporated
www.aramark.com