INNOVATING THE
EVERYDAY
2017 ANNUAL REPORT
DEAR FELLOW
SHAREHOLDERS,
Every day at Aramark, we focus on delivering
excellence to the customers, consumers,
and communities we are privileged to serve
around the globe. Our mission to enrich
and nourish lives is carried out daily by our
associates who are committed to dreaming
and doing—never losing sight of the
importance of delighting people wherever
they learn, work, play, and recover. We
seek feedback regularly and are proud of
the significant progress we are making to
continuously increase consumer satisfaction
and client loyalty by constantly raising the bar
on our product offerings and service levels.
I am pleased to report that 2017 was another
successful year for our company. We made
further strides on our transformative journey
while delivering strong results—led by a double-
digit increase in adjusted earnings per share for
the fourth consecutive year. Our performance
was driven by maintaining a clear-eyed focus
on our winning strategy:
• Accelerating growth
• Activating productivity
• Attracting talent
• Achieving portfolio optimization
3
OUR CONSUMER FOCUS
At Aramark, everything begins with the principle
that the consumer sets the table, meaning that we
must understand, anticipate, and meet consumers’
needs centered on:
QUALITY: Providing products featuring
superior ingredients that are sourced and
prepared the right way
HEALTH AND WELLNESS: Developing a variety
of items that are fresh and good for you, led by
our groundbreaking Healthy for Life® partnership
with the American Heart Association®
CONVENIENCE: Capitalizing on technology
to enable speed of service that fits within
today’s busy and fast-paced schedules
PERSONALIZATION: Tailoring and customizing
our offerings to be relevant to individual tastes
and preferences
I am very pleased that our consumer satisfaction
scores continue to improve across the portfolio as we
innovate against these four critical dimensions for
today’s consumer. We are also improving our product
offerings, service, and technology to constantly
elevate the customer experience—expanding variety
through unique seasonal offerings, regular Restaurant
Rotations, limited-time offers, and exciting celebrity
chef partnerships. And we are also enhancing our
brand strategy, with additional segmentation around
premium offerings and a core café concept featuring
a dynamic food hall experience.
OUR GROWING PORTFOLIO
We announced two strategic, financially compelling
transactions that will drive meaningful growth and
enhance our competitive position across our portfolio.
We acquired Avendra, the leading hospitality
procurement service provider in North America,
which manages nearly $5 billion in annual purchasing
spend. We also entered into an agreement to acquire
AmeriPride, one of the largest uniform rental and
linen supply companies in North America. These
transactions meet our objective to enhance scale and
capability in our core business, and represent the next
step in our commitment to creating sustainable value
for our shareholders. We look forward to welcoming
the hard-working team members of Avendra and
AmeriPride to the Aramark family.
OUR CULTURE OF RECOGNITION
We are committed to fostering the right culture to
create a great place to work and ensuring we have
a diverse and inclusive workplace. We were pleased
to once again be recognized by the Human Rights
Campaign as a Best Place to Work for LGBTQ
Equality and to receive the Best Places to Work for
Disability Inclusion Award. In addition, each year,
we bring one of our core values, “Front Line First,”
to life by recognizing the outstanding efforts of our
front-line team members through our annual Ring
of Stars celebration.
OUR COMMITMENT TO
HEALTH AND WELLNESS
Two years into our groundbreaking alliance with
the American Heart Association, I’m pleased to
report that we are well ahead of our targeted goals
in our Healthy for Life 20 By 20 campaign. We’ve
achieved a 13 percent reduction in calories, saturated
fats, and sodium across our menus in higher ed,
healthcare, and business dining—far exceeding our
target of 3 to 5 percent annual improvement. At
the same time, our increased focus on plant-based
choices has resulted in 30 percent of our menus
becoming vegetarian or vegan—contributing to both
the health and wellness of consumers and the well-
being of our environment.
OUR SERVICE STARS
I want to thank all of our team members who
deliver service excellence every day to our customers
around the world. I also want to salute the heroic
efforts of our associates who supported our clients,
consumers, and their broader communities in the face
of several unprecedented natural disasters in 2017
and who will continue to do so through the cleanup
efforts that lie ahead. Finally, I also want to thank
our team members who volunteered their time and
expertise as part of Aramark Building Community,
impacting nearly 500,000 families in communities
where we operate around the globe.
OUR PROMISING FUTURE
Looking forward, I remain exceptionally confident in
the Aramark team and the outlook for our company.
Thank you for your investment in Aramark and your
ongoing interest. Our success is fueled by your
confidence in us, and we count on your support
to enable our future success.
Eric J. Foss
Chairman, President, and Chief Executive Officer
4
WE DREAM
WE DO
The Momentum Continues
Four years ago, with our proud history as an anchor,
Aramark embarked on an exciting journey to transform the
company. We took the company public, established a new
mission and values, redefined our brand, and unveiled a
strategic framework to accelerate growth, activate
productivity, attract the best talent, and
achieve portfolio optimization.
5
This clear and focused strategy has delivered
promising results as 2017 was another
successful year at Aramark. It marks the fourth
consecutive year of double-digit growth in adjusted
earnings per share. The company also generated record free
cash flow. Combined with disciplined financial management,
this allowed us to achieve our long-term target leverage ratio of
3.5x as of the end of fiscal 2017—ahead of our original expectations laid
out at our Investor Day in 2015.
Achieving this milestone underscores the accomplishments we have
made in strengthening the balance sheet since the IPO. This financial
flexibility enabled us to commit to two strategically sound and financially
compelling acquisitions: Avendra, a leading hospitality procurement
services company, and AmeriPride, a leading uniform and linen rental
and supply company. They will drive meaningful growth and enhance
our competitive position across our portfolio. Either one of these deals
alone would have been the largest in the company’s 80-year history.
Together, they create greater scale and capabilities in critical areas
of our business, which will enable us to enhance our service offerings
to our customers, create career opportunities for our employees,
and deliver meaningful, sustainable value for our shareholders.
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7
ELEVATING THE
CONSUMER
EXPERIENCE
As a global leader, we regularly
monitor how we are doing with our
consumers and clients through
our Voice of the Consumer and
Partnership Value Index surveys.
Both surveys feature a strong
representative sample across
businesses and geographies.
Through our research, we have identified four
universal criteria that drive consumer choices
around food consumption: quality, health,
convenience, and personalization. We design
our menus to offer quality, on-trend flavors,
healthy options, and a variety of convenient
choices to increase consumer satisfaction. Our
culinary team and dietitians develop the best
recipes based on flavors, nutritional value, and
cooking techniques. Before rolling out new menu
items, we use tools like panels, focus groups,
and even on-site taste tests to collect consumer
feedback on everything from flavor preferences
to marketing posters. Finally, we review ongoing
feedback through our Voice of the Consumer
program to share with our clients and better
understand how we can continue to elevate
the consumer experience.
In 2017, we drove a strong double-digit percentage
improvement in overall consumer satisfaction,
including a major improvement in the key
categories of quality, convenience, health, and the
overall service experience. Client loyalty scores
continue to rise, led by a notable improvement
in innovation.
8
TASTY AND ON-TREND
We have been laser-focused on improving
quality and expanding variety through unique
seasonal offerings, regular Restaurant Rotations,
limited-time offers, and exciting celebrity chef
partnerships. In 2017, we introduced several on-
trend popup restaurant concepts, including Fresh
Ginger, allowing consumers to personalize their
meals with unique ingredients and flavors from the
Pacific, and Zoca, which celebrates fresh Mexican
fare. We continue to work across our supply chain
to create menus with more vegan, vegetarian,
and plant-based options that are produced locally
and sustainably.
In 2017, we announced a partnership with The
Humane Society of the United States (HSUS) to
conduct a series of plant-based culinary trainings
throughout 2018 that will further enable
Aramark’s 1,000+ chefs, who serve millions of
meals daily in hospitals, schools, and workplaces,
to create meals, menus, and dining concepts that
center on foods, including vegetables, whole
grains, legumes, and nuts. Currently, as part of our
Healthy for Life 20 By 20 commitment with the
American Heart Association, 30 percent
of the main dishes Aramark serves across our
dining operations in healthcare, higher
education, and business dining are vegan or
vegetarian. And 10 percent feature whole grains
as their main ingredient.
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9
CELEBRITY CHEF PARTNERS
Award-winning chef Michael White joined our
celebrity chef lineup, opening his renowned
restaurant Nicoletta at Citi Field, home of the New
York Mets. We also expanded our relationships with
Danny Meyer and Cat Cora. With Meyer, we opened
new Shake Shack locations at M&T Bank Stadium,
the home of the Baltimore Ravens, and Minute Maid
Park, home of the World Champion Houston Astros.
With Cat Cora, we created a new proprietary
INCREASING SPEED OF SERVICE
concept, Wicked Eats, that
follows last year’s successful
introduction of OLILO. Wicked Eats
is inspired by the vibe and energy of
street foods, highlighting fresh, healthy
Mediterranean and Middle Eastern cultures.
To meet increased consumer demand for
convenience and speed of service, we are piloting
automated ordering and checkout across our
portfolio with technology that is generating
positive reviews from our customers and clients.
This includes mobile app and kiosk ordering,
self-checkout, cashless vending, and instant text-
message feedback. We are removing friction from
the ordering process so that our customers can
spend less time in line and more time enjoying
their dining experience, as well as have easy
access to nutritional information. In our sports
business, we launched a new self-ordering
cashless kiosk concept called Zoom Food that
is significantly increasing volume and speed of
service at many venues.
EXPANDING OUR FOOTPRINT
We are also enhancing our brand strategy,
with additional segmentation around premium
offerings and a core café concept, featuring
a dynamic food hall experience called
Simple Spoon planned for debut in 2018. The next
page will give you a glimpse of how it will come
to life in our locations.
10
QUALITY
HEALTH
At Simple Spoon, a customer is
Aramark makes nutrition a key
guaranteed a great-tasting meal
priority in Simple Spoon. We hold
made to order by expert chefs.
ourselves to superior standards of
Aramark holds itself to the highest
excellence by using the freshest
standards in food quality, the
ingredients, sourced from local
outstanding craftsmanship in the
suppliers as often as possible.
cooking and preparation of dishes,
and the top-notch presentation
of its culinary creations. Those
standards are reflected in every
Simple Spoon offering.
Simple Spoon always makes it easy
for customers to find healthier
selections, such as wholesome
foods and fresh fruit, to satisfy
their appetites.
11
11
CONVENIENCE
PERSONALIZATION
Every day is a busy day and
Every meal is uniquely tailored
there’s never time to wait! Kiosk
to the customer’s specific tastes.
ordering cuts down on wait times
Specialized action stations show
and lines, and allows more
off an amazing array of cuisines,
customization to individual orders.
and regional and ethnic styles.
Simple Spoon is equipped with
Never discount the importance
integrated seating, with tables for
of a café’s atmosphere either.
large parties looking for a break
Simple Spoon takes great care
from their desks, and single seating
in fashioning inviting destinations
at action stations for busy associates
where people love to eat.
just looking to eat and go.
12
GROWTH AND
PRODUCTIVVITYV
ACCELERATING GROWTH
In 2017, we won a number of new accounts across our key
sectors: education, sports, leisure, business and industry,
healthcare, and facilities.
IN NORTH AMERICA, we also leveraged our reputation for service
excellence to grow a number of key client relationships , extending
and expanding our contracts with them. A few highlights include winning
dining contracts at the University of South Carolina and Atlanta Public
Schools. In healthcare, we expanded our relationship with Baylor Scott &
White Health and Christus Health in Texas and won the dining contract at
Sunnybrook Health Science Centre, one of Canada’s leading hospitals. In
sports, we were named the official retail merchandise concessionaire for
the National Football League for all special league events in the United
States, including the Super Bowl and the NFL Draft. We were also named
the official retail partner for the U.S. Tennis Association, home of the U.S.
Open tennis championship. Our leisure business was awarded the retail
and e-commerce business contract at Colonial Williamsburg in Virginia,
the world’s most recognized living history museum.
13
15
ACCELERATING GROWTH
IN OUR INTERNATIONAL SEGMENT, we delivered broad-based growth, with wins
across Europe, Asia, and Mexico. We entered into a new business dining contract
with SKODA AUTO, a Volkswagen subsidiary, in the Czech Republic. In South America,
we won a new food and facilities contract with ENAP, a large oil and gas exploration
company. And in Ireland, we expanded our retail footprint, opening the newest and
largest Avoca store in Dunboyne, and began a partnership with Hammerson Dundrum,
a leading owner, manager, and developer of retail destinations in Europe.
IN OUR UNIFORMS SEGMENT, we secured a strategic partnership with JBS USA,
one of the world’s largest meat processing companies. We also expanded
our long-term relationship with McDonald’s and created a digital portal and call
center environment that centralizes uniform ordering and fulfillment for the first
time across the entire McDonald’s organization. This innovation earned Aramark
the first-ever McDonald’s Customer Obsessed Award, given to suppliers that are
always putting the McDonald’s customer first, whether through product innovation,
customer experience, or field support.
IN OUR FACILITIES BUSINESS, it has been a year since we stood up a separate
management team and we are making substantial progress. We have improved
our “right to win” as we leverage best practices across the organization to
ensure we deliver service excellence for our clients each and every day. In 2017,
we expanded our relationship with Eastern Kentucky University and partnered
with several new clients in K–12. We continue to be excited about this important
long-term growth opportunity.
ACTIVATING
PRODUCTIVITY
We continued to drive strong base productivity improvements in 2017 while also
investing in growth, people, and technology. By leveraging the scale of our $14.6
billion worldwide enterprise, we are reducing complexity and driving a more nimble
operation focused on enhancing quality and the overall customer experience.
Our three-fold approach covers food, labor, and SG&A.
We are attacking complexity in the supply chain through strategic sourcing, menu optimization,
and food management and waste reduction initiatives. An enhanced, easier-to-execute menu,
as well as the development of standards and processes, enable our front-line associates
to focus on their most important objective: delivering service excellence at the moment of truth
to our clients and consumers.
We are focused on reducing labor spend by driving headcount productivity through effective
scheduling, proactive management of overtime and agency labor costs, and the ongoing rollout
of our standard labor model. In SG&A, efficient above-unit cost controls give us additional operating
leverage while creating more agility across the company.
17
ATTRACTING THE
BEST TALENT
Aramark is committed to fostering the right
culture to create a great place to work. This
begins with ensuring that we have a diverse
and inclusive workplace where people from all
backgrounds can grow, contribute, and succeed.
We were pleased to once again be recognized
by the Human Rights Campaign as a Best Place
to Work for LGBTQ Equality and to receive
the Best Places to Work for Disability Inclusion
Award. We were also proud to be named
among the Top 50 Companies for Diversity by
DiversityInc and one of FORTUNE magazine’s
Most Admired Companies, an honor that we
have proudly shared with our team members
for almost 20 years. In addition, Chairman,
President, and CEO Eric Foss became
a Catalyst CEO Champion for Change,
joining more than 50 other global business
leaders who pledged to help accelerate more
women—including women of color—into senior
leadership positions.
SERVING ON THE BIG STAGE
In 2017, our Service Stars once again shined
on the world’s biggest and brightest stages,
including the NFL Draft in Philadelphia, the
Houston Rodeo, and Super Bowl LI, where
thousands of our team members served more
than 1 million fans and guests during the
week-long festivities and managed more than
70 exclusive NFL retail locations throughout
Houston. We are looking forward to continuing
our championship service record at Super
Bowl LII on February 4, 2018 at the new U.S.
Bank Stadium, home of the Minnesota Vikings.
18
ARAMARK
BUILDING
COMMUNITY
ENRICHING AND NOURISHING LIVES
IN OUR COMMUNITIES
We serve clients in thousands of communities worldwide, and we invest financial
resources, dedicate the skills of our employees, and develop community and national
partnerships that we know will make a meaningful difference.
Through these strategic partnerships, including Healthy for Life 20 By 20, our
breakthrough initiative with the American Heart Association, we aim to improve
the health of all Americans 20 percent by 2020. As part of our effort to engage millions
of Americans, in 2017 we launched an innovative campaign to help consumers discover
what healthy food can do to feed their potential and live a healthier life. The new Feed
Your Potential 365™ health engagement campaign was launched in more than 1,000
Aramark-managed food service locations.
19
PHILANTHROPY
Through Aramark Building Community, our global
volunteer and philanthropic program, we partner
on the local level with community centers to
address critical issues. Our employees “adopt”
community centers and build strong, sustainable
partnerships, matching skills and passion to the
needs of the neighborhood. Since 2008, more
than 55,000 employees have contributed over
200,000 volunteer hours through Aramark Building
Community, impacting nearly 5 million children,
adults, and families.
During our annual global day of service in 2017,
Aramark Building Community Day, we celebrated
our year-round efforts to enrich and nourish lives
in our communities. More than 12,000 employees
in 12 countries impacted the lives of 500,000 people
on a single day, through more than 400 projects
aimed at helping families lead healthier lives
or gain job skills.
Our corporate giving is also focused on health
and wellness and workforce readiness. Overall,
we contribute approximately $15 million a year
to nonprofit organizations through the Aramark
Charitable Fund, corporate contributions, and
our businesses.
In 2017, our giving expanded to help the thousands
of people who were impacted by natural disasters
during the late summer and early fall. Aramark
donated more than $700,000 to relief agencies
and charities, including the American Red Cross,
Save the Children, AmeriCares, The Salvation Army,
Boys & Girls Clubs of America, and Feeding Texas.
The company also matched all employee donations.
SUSTAINABILITY
MINIMIZING
OUR ENVIRONMENTAL IMPACT
Our goal is to enhance the places where our employees, clients, customers,
and community members work, learn, play, and recover. We create practical
solutions to minimize environmental impacts in our operations and in our
communities. Our enterprise-wide environmental sustainability platform
focuses on responsible sourcing and waste minimization, as well as efficient
operations and transportation management.
RESPONSIBLE SOURCING
In the past few years, we’ve taken important steps—and made significant progress—
in our responsible sourcing practices. Core to our approach is offering clients and
customers fresh, safe, whole foods that are raised, grown, and harvested in a sustainable
manner, while providing a wide spectrum of responsibly sourced food products.
Our responsible sourcing strategy is led by our internal Sustainable Sourcing
Council, which drives our approach, priorities, and objectives. We also seek
expertise and insights from a diverse group of leaders from industry and academia,
as well as animal welfare and environmental organizations as part of a formal
Sustainable Sourcing Advisory Panel.
21
SUSTAINABLE SEAFOOD AND ANIMAL WELFARE
WASTE MINIMIZATION
Our Sustainable Seafood Principles and Policy guide
our global position on responsible sourcing for wild-
caught and farm-raised seafood products, and detail
our purchasing practices, commitment to reporting,
and approach to stakeholder engagement.
Since 2008, we’ve been working toward purchasing
100 percent of our contracted seafood in the U.S.
from sources that meet Monterey Bay Aquarium
Seafood Watch® Best Choice and Good Alternative
recommendations by 2018, and we’re on track
to meet our commitment.
• Of our contracted purchases, more than 90 percent
of our frozen finfish and 100 percent of our canned
tuna meet Seafood Watch recommendations.
• We are transitioning all contracted salmon and
shrimp products to Seafood Watch Best Choice
and Good Alternative, including wild-caught salmon
from Marine Stewardship Council–certified fisheries
and shrimp from eco-certified sources.
We’ve also made significant progress related to our
Animal Welfare Principles and Policy:
• We committed to humane treatment of broiler
chickens, calling on our suppliers to meet our
requirements by 2024.
• We plan to transition to 100 percent group-housed
pork by 2022, and in 2017, we eliminated veal crates
from our supply chain.
• We also committed to serve 100 percent cage-free
eggs by 2020 in the U.S. and 100 percent cage-free
eggs globally by 2025.
Waste minimization is an important aspect of our
environmental sustainability platform and extends to
every stage of our operations—from what we purchase
to what we serve. Environmentally responsible waste
management practices—reducing, reusing, recycling,
and composting—are standard procedure at thousands
of our locations.
Our goal is to eliminate waste before it is generated.
Every one of our locations employs Aramark’s Food
Management Process and consistently tracks food
waste. We implement standards to ensure we order
the right amount of food, prepare it and serve it in
a way that limits waste, and track what’s left at the
end of the day.
Using innovative technology, we have reduced food
waste across 161 sites by 44 percent, and diverted
479 tons of waste from landfills since 2016. We’re
expanding our program to hundreds more sites to
enable real-time food waste tracking and insights
that help drive behavior change.
Reducing food waste goes beyond what happens
in the kitchen. We’ve found some great ways to
engage consumers and reduce our impact even
more. We compost food waste at many locations,
from carrot peels and apple cores to uneaten buffet
items. In partnership with our clients and local
waste haulers, we divert organic waste from
landfills whenever possible.
At times, even with the best practices in place,
there may be instances of overproduction.
Aramark’s Food Donation Program, in partnership
with Food Donation Connection, provides a way
to donate unused, unserved food to qualified
nonprofit organizations. Our food donation process
minimizes waste and feeds those in need, helping the
environment and our communities.
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FINANCIAL HIGHLIGHTS
$1.95
$1.74
$1.57
$1.45
$1.24
6.6%
6.5%
6.2%
5.9%
5.7%
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
ADJUSTED EPS
MARGIN
$952
$962
$852
$881
$781
4.8x
4.3x
4.1x
3.8x
3.5x
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
ADJUSTED OPERATING INCOME
(IN MILLIONS)
NET DEBT TO COVENANT
ADJUSTED EBITDA
See reconciliation of GAAP and non-GAAP information at the end of this Annual Report.
Aramark 2017
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 29, 2017 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
Securities registered pursuant to Section 12(g) of the Act: None
___________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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, a smaller
reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting
company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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 March 31, 2017, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was
approximately $8,850.7 million.
As of October 27, 2017, the number of shares of the registrant's common stock outstanding is 245,038,765.
___________________________________________
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 2018 Annual Meeting of Stockholders, to be held on January 31, 2018, 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 29, 2017.
TABLE OF CONTENTS
Page
PART I
PART II
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
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
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes and Disagreements With Accountants on Accounting and Financial
Disclosure
Item 9A.
Controls and Procedures
PART III
PART IV
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
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
Exhibits, Financial Statement Schedules
Form 10-K Summary
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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, with respect to, without limitation, the benefits, costs and timing of and
ability to consummate the acquisitions of each of Avendra and AmeriPride and related financings, as well as statements regarding these companies’
services and products and statements relating to our business and growth strategy. These statements can be identified by the fact that they do not
relate strictly to historical or current facts. They use words such as "outlook," "aim," "anticipate," "are or remain confident," "have confidence,"
"estimate," "expect," "will be," "will continue," "will likely result," "project," "intend," "plan," "believe," "see," "look to" and other words and
terms of similar meaning or the negative versions of such words.
Forward-looking statements speak only as of the date made. All statements we make relating to our estimated and projected earnings, costs,
expenditures, cash flows, growth rates, financial results and our estimated benefits, costs and timing of and ability to consummate the acquisitions
and related financings are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking
public statements concerning our expected future operations and performance and other developments. These forward-looking statements are
subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected.
We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions.
While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is
impossible for us to anticipate all factors that could affect our actual results. All subsequent written and oral forward-looking statements
attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we
believe could affect our results or the costs, benefits or timing of the proposed acquisitions and related financings 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 achieve and 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; the outcome and timing of regulatory reviews of both the
Avendra and AmeriPride transactions; our ability to complete the transactions in the time expected or at all, our ability to successfully integrate the
businesses of Avendra and AmeriPride and costs and timing related thereto, the risk of unanticipated restructuring costs or assumption of
undisclosed liabilities, the risk that we are unable to achieve the anticipated benefits (including tax benefits) and synergies of the acquisition of
AmeriPride and Avendra including whether the proposed transactions will be accretive and within the expected timeframes, our ability to complete
the anticipated financing of these transactions on our expected terms, the availability of sufficient cash to repay certain indebtedness and our
decision to utilize the cash for that purpose, the disruption of the transactions to each of Avendra and AmeriPride and their respective
managements; the effect of announcement of the transactions on each of Avendra’s and AmeriPride’s ability to retain and hire key personnel and
maintain relationships with customers, suppliers and other third parties, our ability to attract new or maintain existing customer and supplier
relationships at reasonable cost, our ability to retain key personnel and other factors set forth under the headings Item 1A "Risk Factors," Item 3
"Legal Proceedings" and Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and other sections of
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 2017. Internationally, we hold a top 3 position
in food and facilities services based on total sales in fiscal 2017 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 260,500 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"). The following chart shows a breakdown of our sales and operating income by our reportable segments:
Reportable Segments:
FY 2017 Sales(a):
FY 2017 Operating Income(a):
Services:
Sectors:
FSS North America
FSS International
Uniform
$
$
10,231.5
621.9
$
$
2,808.2
137.0
Food, hospitality and facilities
Food, hospitality and facilities
Business & industry, sports,
leisure & corrections, education
and healthcare
Business & industry, sports,
leisure & corrections,
healthcare and education
$
1,564.7
$
182.3
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 $133.1 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 2017, we generated $14.6 billion of sales, $808.1 million of operating income and $374.2 million of net 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. During fiscal 2015, the private equity
fund sponsors of our going-private transaction sold their remaining Aramark shares.
Recent Developments
On October 13, 2017, we entered into definitive agreements to acquire, in separate transactions, Avendra, LLC, a Delaware limited
liability company (“Avendra”), and AmeriPride Services Inc., a Delaware corporation (“AmeriPride”).
Avendra
Avendra is the leading hospitality procurement services provider in North America, managing purchasing spend for over 650
companies at more than 8,500 locations. Avendra was founded in 2001 by five hospitality organizations: Marriott, Hyatt, Fairmont
Hotels, ClubCorp and IHG. While we currently provide procurement services in our FSS segments on a limited basis, the
acquisition of Avendra would significantly expand our capabilities and client reach in this area.
Aramark 2017 Form 10-K 1
The purchase price for Avendra is $1,350.0 million, subject to certain adjustments set forth in the Agreement and Plan of Merger
among Aramark Services, Inc., Avendra and certain other parties (the “Avendra Merger Agreement”). The completion of the
Avendra acquisition is subject to the satisfaction of a number of conditions, including without limitation, the expiration or
termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR"). The Avendra Merger
Agreement contains termination rights for both Aramark and Avendra, including if the acquisition is not consummated on or before
January 13, 2018, which date may be extended by us or Avendra to a date not beyond April 13, 2018 in certain circumstances, or if
consummation of the acquisition is permanently enjoined or prohibited.
We expect to finance the acquisition of Avendra primarily through new debt. We have obtained a commitment from a group of
banks to provide term loan financings in an aggregate principal amount of up to $1,350.0 million to fund the consideration for the
Avendra acquisition.
AmeriPride
AmeriPride is a highly respected uniform and linen rental and supply company headquartered in Minneapolis with 6,000 employees
and serving 150,000 customers in the U.S. and Canada. The acquisition of AmeriPride will add scale and capabilities to our
uniforms business in the U.S. while immediately establishing Aramark as a leading uniform services provider in Canada, where our
existing operations are very limited.
The purchase price for AmeriPride is $1,000.0 million, subject to certain adjustments set forth in the Agreement and Plan of Merger
among the Company, AmeriPride and certain other parties (the “AmeriPride Merger Agreement”). The completion of the
AmeriPride acquisition is subject to a number of conditions, including (i) the expiration or termination of the HSR waiting period
and (ii) the receipt of Canadian antitrust approvals. We are not required to consummate the AmeriPride acquisition if, in connection
with obtaining the required regulatory approvals, the parties are required to divest facilities, products or services of AmeriPride and/
or the Company above a specified revenue threshold. The AmeriPride Merger Agreement contains certain termination rights for
both us and AmeriPride, including if the AmeriPride acquisition is not consummated on or before April 30, 2018 or if
consummation of the AmeriPride acquisition is permanently enjoined or prohibited.
We expect to finance the acquisition of AmeriPride primarily through new debt. We have obtained a commitment from a group of
banks to provide term loan financings in an aggregate principal amount of up to $1,000.0 million to fund the consideration for the
AmeriPride acquisition.
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 2017, our FSS North America segment generated $10,231.5 million in sales, or 70% of our total sales, and our FSS
International segment generated $2,808.2 million in sales, or 19% of our total sales. No individual client represents more than 2% 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 identifiable 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 sectors across 19 countries around the world. Our Food and Support
Services operations focus on serving clients in five principal sectors: Education, Healthcare, Business & Industry, Sports, Leisure &
Corrections and Facilities & Other.
Education. Within the Education sector we serve Higher Education and K-12 clients. We deliver a wide range of food and food-
related services at more than 1,400 colleges, universities, school systems & districts and private schools. We offer our education
clients a single source provider for food-related managed service solutions, including dining, catering, food service management and
convenience-oriented retail operations.
Healthcare. We provide a wide range of non-clinical food and food-related support services, as well as clinical equipment services,
to approximately 600 healthcare clients and more than 1,000 facilities across our global footprint. Our food and food-related
services include patient food and nutrition, retail food and procurement services.
2 Aramark 2017 Form 10-K
Business & Industry. We provide a comprehensive range of business dining services, including on-site restaurants, catering,
convenience stores and executive dining.
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.
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 142
professional (including minor league affiliates) and college sports teams, including 36 teams in Major League Baseball, the National
Basketball Association, the National Football League and the National Hockey League. We also serve 25 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.
Facilities & Other. We provide a variety of support services to approximately 700 facilities clients and more than 1,400 facilities.
These services include the management of housekeeping, plant operations and maintenance, energy management, custodial,
groundskeeping, landscaping, transportation, capital program management and commissioning services and other facility consulting
services relating to building operations. For clients who are looking for a single source provider for all of their managed services,
our Facilities & Other sector works closely with the above food-related sectors.
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 2017, Sysco distributed approximately 51% 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 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.
Aramark 2017 Form 10-K 3
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 with our customers 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 2017, 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 our upside potential and downside risk
are reduced compared to our profit and loss contracts. For fiscal 2017, 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
4 Aramark 2017 Form 10-K
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 2,700 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 2017, our Uniform segment generated $1,564.7 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 locations and
distribution centers across the United States and a service center in Ontario, Canada. None of our clients individually represents 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 84 laundry plants and 153 satellite plants and depots supporting over 2,700
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
Aramark 2017 Form 10-K 5
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 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 29, 2017, we had a total of approximately 260,500 employees, including seasonal employees, consisting of
approximately 169,500 full-time and approximately 91,000 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: 156,000; FSS International: 90,500; 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.
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;
6 Aramark 2017 Form 10-K
•
•
•
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, transportation 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 29, 2017, our subsidiaries held liquor licenses
in 44 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 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
Aramark 2017 Form 10-K 7
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.
As of September 29, 2017, 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.
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.
8 Aramark 2017 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, asset impairments 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. For example, in 2017, our financial
results were particularly impacted by Hurricane Maria in Puerto Rico and Hurricane Harvey and Hurricane Irma in the southern
United States. 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, 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
Aramark 2017 Form 10-K 9
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 or natural disasters. 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 2017 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 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.
10 Aramark 2017 Form 10-K
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 processes required for
these efforts. 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. 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 existing clients or attract new clients, maintain relationships with suppliers and other
contractual parties, or retain and integrate acquired personnel. 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, resulting in additional unanticipated costs. In addition, labor laws in certain countries may require
us to retain more employees than would otherwise be optimal from entities we acquire. Such integration 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, which could have a material adverse effect on our business, financial condition or results of
operations. Similarly, our business depends on effective information technology and financial reporting systems. Delays in or poor
execution of the integration of these systems could disrupt our operations and increase costs, and could also potentially adversely
impact the effectiveness of our disclosure controls and internal controls over financial reporting.
Possible future acquisitions also could result in the incurrence of additional contingent liabilities and amortization expenses related
to intangible assets, which could have a material adverse effect on our business, financial condition or results of operations. In
addition, goodwill and other intangible assets resulting from business combinations represent 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.
On October 13, 2017, we entered into agreements to acquire, in separate transactions, Avendra and AmeriPride. The completion of
these acquisitions are subject to a number of conditions, including the expiration or termination of HSR waiting periods and, with
respect to AmeriPride, the receipt of Canadian regulatory approval. The failure to satisfy the required conditions on a timely basis
could delay the completion of these acquisitions for a period of time or prevent either or both of them from occurring at all. Any
delay in completing these acquisitions, as well as any inability in obtaining the related debt financing on favorable terms, could
cause us not to realize some or all of the benefits that we expect on a timely basis or at all.
The success of these acquisitions will depend, in part, on our ability to successfully integrate these businesses with our current
operations and to realize the anticipated benefits, including synergies, from the acquisitions on a timely basis. It may take longer
than expected to realize these anticipated benefits and they may ultimately be smaller than we expect. There are a number of
challenges and risks involved in our ability to successfully integrate Avendra and AmeriPride with our current businesses and to
realize the anticipated benefits of these acquisitions, including all of the risks identified in the paragraphs above. Any of these
factors could have a material adverse effect on our business, financial condition or results of operations. For example, there are a
number of factors beyond our control that could affect the amount and timing of the transaction and integration expenses that we
expect to incur in connection with these acquisitions. In addition, in the short term these transaction and integration expenses are
anticipated to exceed the cost savings that we expect to achieve from the elimination of duplicative expenses, realization of
economies of scale and integration of the acquired businesses. During such period, these charges could negatively impact our
results of operations.
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,
Aramark 2017 Form 10-K 11
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.
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, transportation 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 or the ability to operate our motor vehicles. 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 14% in fiscal 2017, 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 could result in lower
sales or profits than we have historically achieved, which could have an adverse effect on our results of operations.
12 Aramark 2017 Form 10-K
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 2017, 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 90,500 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.
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.
A number of our locations operate 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
Aramark 2017 Form 10-K 13
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. 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. 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. 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 2017, one distributor distributed approximately 51% 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. At times when the United States or
other geographic regions experience reduced levels of unemployment, there may be 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 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 in this area is expected. 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.
14 Aramark 2017 Form 10-K
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, catastrophic events and implementation delays or difficulties. 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, integration 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.
We are subject to numerous laws and regulations in the U.S. and internationally designed to protect the information of clients,
customers, employees, and other third parties that we collect and maintain, such as the European Union General Data Protection
Regulation (the “GDPR”), which will take effect in May 2018. These laws and regulations are increasing in complexity and number,
change frequently and increasingly conflict among the various countries in which we operate, which has resulted in greater
compliance risk and cost for us. If we fail to comply with these laws or regulations, we could be subject to significant litigation,
monetary damages, regulatory enforcement actions or fines in one or more jurisdictions. For example, a failure to comply with the
GDPR could result in fines up to the greater of €20 million or 4% of annual global revenues.
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 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.
Our business may be materially affected by changes to fiscal and tax policies.
The U.S. Congress has recently introduced tax reform legislation that would make significant changes to the U.S. Internal Revenue
Code. Such changes include a reduction in the corporate tax rate, moving from a worldwide to a territorial system of taxing multi-
national companies and limitations on interest expense and other corporate deductions, among other changes. Although we cannot
predict what changes, if any, will actually be enacted, any such changes could have a material effect on our business, financial
condition, results of operations and cash flows.
Aramark 2017 Form 10-K 15
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 29, 2017, our outstanding indebtedness was $5,268.5 million. We also had additional
availability of $998.5 million under our revolving credit facilities as of that date. In addition, we expect to incur new indebtedness
to finance all of the $2,350.0 million consideration to be paid in the Avendra and AmeriPride acquisitions.
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.
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
16 Aramark 2017 Form 10-K
•
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.
The trading price of our common stock, as reported by the NYSE, could fluctuate due to a number of factors such as those listed in
“—Risks Related to Our Business” and include, but are not limited to, 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.
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.
Aramark 2017 Form 10-K 17
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.
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.
Item 1B.
Unresolved Staff Comments
Not Applicable.
Item 2.
Properties
Our principal executive offices are currently leased at Aramark Tower, 1101 Market Street, Philadelphia, Pennsylvania 19107. We
expect to move our principal executive offices to 2400 Market Street, Philadelphia, PA 19103 during fiscal 2019 and have entered
into a lease agreement for this new location. Our principal real estate is primarily comprised of Uniform facilities. As of
September 29, 2017, we operated 270 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 51% are leased and approximately 49% are
owned. We own seven buildings that we use in our FSS North America segment, including several office/warehouse spaces, and we
lease 121 premises, consisting of offices, office/warehouses and distribution centers. In addition, we own a distribution center, one
office and four other properties and lease 114 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.
18 Aramark 2017 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 as of September 29, 2017.
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.
______________________________________
Aramark 2017 Form 10-K 19
Executive Officers of the Registrant
Our executive officers as of November 22, 2017 are as follows:
Name
Eric J. Foss
Age
59
Position
Chairman, President and Chief Executive Officer
Stephen P. Bramlage, Jr.
Harrald F. Kroeker
Lynn B. McKee
Brian P. Pressler
Stephen R. Reynolds
47
60
62
42
59
Executive Vice President and Chief Financial Officer
Senior Vice President, Integration
Executive Vice President, Human Resources
Senior Vice President, Controller and Chief Accounting Officer
Executive Vice President, General Counsel and Secretary
James J. Tarangelo
44 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, Integration since October 2017. Prior to that he was our Senior Vice
President, Transformation from November 2014 to October 2017 and 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.
20 Aramark 2017 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 27, 2017,
there were approximately 578 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 1, 2016
Quarter ended April 1, 2016
Quarter ended July 1, 2016
Quarter ended September 30, 2016
Quarter ended December 30, 2016
Quarter ended March 31, 2017
Quarter ended June 30, 2017
Quarter ended September 29, 2017
High
$ 33.74
Low
$ 29.24
$ 33.28
$ 29.57
$ 34.16
$ 31.56
$ 38.21
$ 33.12
$ 37.96
$ 33.15
$ 37.51
$ 33.08
$ 41.48
$ 36.11
$ 41.08
$ 38.91
$
$
$
$
$
$
$
$
Cash
Dividend
Declared
Per Share
0.095
0.095
0.095
0.095
0.103
0.103
0.103
0.103
Dividends
The Company declared quarterly cash dividends of $0.103 per share to all common stockholders of record at the close of business
on November 28, 2016, February 15, 2017, May 17, 2017 and August 16, 2017, which were paid on December 8, 2016, March 1,
2017, June 6, 2017 and September 5, 2017, respectively. 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. On November 13,
2017, a $0.105 dividend per share of common stock was declared, payable on December 7, 2017, to shareholders of record on the
close of business on November 27, 2017.
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.
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 Credit Agreement dated as of March 28, 2017 as amended from time
to time and the indentures governing the senior notes. 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.
Aramark 2017 Form 10-K 21
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 29, 2017 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
$100.0
$100.0
$100.0
October 3,
2014
$133.3
October 2,
2015
$152.2
$112.7
$107.8
$114.0
$122.9
September 30,
2016
September 29,
2017
$194.9
$121.3
$125.8
$203.1
$141.9
$140.6
There were no unregistered sales of equity securities during the fiscal year ended September 29, 2017 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 29, 2017.
22 Aramark 2017 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)
2017
2016
2015
2014
2013
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)
$ 14,604.4
508.2
808.1
287.4
374.2
374.2
373.9
$ 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
$1.53
$1.49
$0.41
2.4x
$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
$ 11,006.2
5,190.3
2,459.1
$ 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
(1) Our fiscal year ends on the Friday nearest to September 30th. Fiscal years 2017, 2016, 2015, 2014 and 2013 refer to the fiscal
years ended September 29, 2017, September 30, 2016, October 2, 2015, October 3, 2014 and September 27, 2013,
respectively. Fiscal 2014 was a fifty-three week year. All other periods presented were fifty-two week years.
(2) During fiscal 2017, the Company paid cash dividends totaling $100.8 million ($0.103 per share per quarter). 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).
(3)
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).
(4) During fiscal 2013, the Company completed a refinancing, repurchasing Aramark Services, Inc.’s ("ASI") 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 ASI of 5.75% Senior Notes due 2020 (the "2020 Notes"). During fiscal 2016, ASI issued $900 million of 5.125%
Senior Notes due 2024 and $500 million of 4.75% Senior Notes due 2026 to repay approximately $194.1 million of senior
secured term loan facility, due September 2019 (the"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.
During fiscal 2017, ASI issued $600.0 million of 5.000% Senior Notes due April 1, 2025 (the "5.000% 2025 Notes") and
Aramark International Finance S.à r.l., an indirect wholly owned subsidiary of the Company, issued €325.0 million of 3.125%
Senior Notes due April 1, 2025 (the "3.125% 2025 Notes" and, together with the 5.000% 2025 Notes, the "2025 Notes").
Additionally, ASI and certain of its subsidiaries entered into a credit agreement on March 28, 2017 (supplemented or
otherwise modified from time to time, the "Credit Agreement"), which replaced the existing Amended and Restated Credit
Agreement, originally dated January 26, 2007, and last amended on March 28, 2014 (the "Previous Credit Agreement"). On
September 20, 2017, ASI and certain of its subsidiaries entered into an amendment (the "Incremental Amendment No. 1") to
the Credit Agreement. Among other things, the Credit Agreement provides for a U.S. dollar denominated term loan to ASI in
the amount of $633.8 million, due 2022, and $1.4 billion, due 2024; a Canadian dollar denominated term loan to Aramark
Canada Ltd. in the amount of CAD250.1 million, due 2022 (approximately $200.5 million); a yen denominated term loan to
ASI in the amount of ¥11,051.5 million, due 2022 (approximately $98.2 million); and a euro denominated term loan to
Aramark 2017 Form 10-K 23
Aramark Investments Limited, a U.K. borrower, in an amount of €170.0 million, due 2022 (approximately $200.9 million).
The net proceeds from the 2025 Notes and borrowings from the term loans under the Credit Agreement were used to repay
outstanding term loans, to redeem ASI's 2020 Notes and to pay certain fees and related expenses.
(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.
24 Aramark 2017 Form 10-K
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of Aramark's (the "Company, "we," "our" and "us") financial condition and results of
operations for the fiscal years ended September 29, 2017, September 30, 2016 and October 2, 2015 should be read in conjunction
with Selected Consolidated Financial Data and our audited consolidated financial statements and the notes to those statements.
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 Statements" 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
We are 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 employees, we anchor our business in our partnerships with
thousands of education, healthcare, business, sports, leisure and 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 services 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 the 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 five principal sectors: Business & Industry, Education,
Healthcare, Sports, Leisure & Corrections and Facilities & Other. 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. Administrative expenses not allocated to our three reportable segments are presented
separately as corporate expenses.
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 standards, process
improvements, and consolidation.
As discussed in "Business - Recent Developments", during the first quarter of fiscal 2018, we entered into definitive agreements to
acquire Avendra and AmeriPride in separate transactions. The Avendra acquisition consideration is $1,350.0 million, subject to
certain adjustments and provisions, and the AmeriPride acquisition consideration is $1,000.0 million, subject to certain adjustments
and provisions. We expect to incur new debt to finance these acquisitions and have received commitments from a group of lenders
to provide us with term loans of up to $2,350.0 million for this purpose. We expect our earnings for some period following the
closings to be impacted as a result of the acquisitions, due to, among other factors, transaction and integration costs as well as
depreciation and amortization resulting from purchasing accounting.
Aramark 2017 Form 10-K 25
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 2017, 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
2017, 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 unallocated 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, share-
based award exercise activity 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
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 29, 2017, September 30, 2016 and October 2, 2015 were each fifty-two week periods.
26 Aramark 2017 Form 10-K
Results of Operations
Fiscal 2017 Compared to Fiscal 2016
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 2017 and 2016 (dollars in millions).
Sales
Costs and Expenses:
Cost of services 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 29, 2017
14,604.4
$
September 30, 2016
14,415.8
$
$
$
188.6
%
12,989.0
807.3
13,796.3
808.1
287.4
520.7
146.5
374.2
$
12,890.4
779.1
13,669.5
746.3
315.4
430.9
142.7
288.2
$
$
Fiscal Year Ended
September 29, 2017
10,231.5
$
September 30, 2016
10,122.3
$
2,808.2
1,564.7
2,729.8
1,563.7
$
14,604.4
$
14,415.8
$
Fiscal Year Ended
September 29, 2017
621.9
$
September 30, 2016
546.4
$
137.0
182.3
(133.1)
808.1
$
129.1
195.3
(124.5)
746.3
$
$
$
1 %
1 %
4 %
1 %
8 %
(9)%
21 %
3 %
30 %
1%
3%
—%
1%
14%
6%
(7%)
7%
8%
98.6
28.2
126.8
61.8
(28.0)
89.8
3.8
86.0
109.2
78.4
1.0
188.6
75.5
7.9
(13.0)
(8.6)
61.8
$
$
%
%
(1) As a percentage of total sales, FSS North America represented 70%, FSS International represented 19% and Uniform represented 11% for both fiscal 2017 and fiscal
2016, respectively.
Aramark 2017 Form 10-K 27
Consolidated Overview
Sales increased approximately 1% during fiscal 2017. Sales were primarily impacted by:
•
•
•
•
growth in the Sports, Leisure & Corrections sector partially offset by a decrease in the Healthcare sector in the FSS North
America segment;
growth in Ireland and Germany partially offset by a decrease in the U.K. in the FSS International segment;
the adverse impact of natural disasters (estimated to be $25 million); and
the negative impact of foreign currency translation of approximately $72 million (approximately -1%).
Cost of services provided was $13.0 billion for fiscal 2017 and $12.9 billion for fiscal 2016. Cost of services provided as a
percentage of sales was 89% in both fiscal 2017 and fiscal 2016. Cost of services provided was impacted by most of the items
discussed below for operating income. The following table presents the percentages attributable to the components in cost of
services provided for fiscal 2017 and fiscal 2016.
Cost of services provided components
Food and support service costs
Personnel costs
Other direct costs
Fiscal Year Ended
September 29, 2017
September 30, 2016
26%
47%
27%
100%
27%
47%
26%
100%
Operating income increased approximately 8% during fiscal 2017. The increase in operating income was impacted by:
•
•
•
•
•
•
•
•
profit growth in the FSS North America and FSS International segments;
a decrease in acquisition-related amortization expense ($20.6 million);
the prior year charges related to the sale of one of our buildings (approximately $6.8 million) and asset write-offs, mainly
in the Uniform segment (approximately $7.0 million); and
a gain from a retrospective refund under our casualty insurance program related to favorable loss experience in a prior year
(approximately $6.5 million); which more than offset
the adverse impact of natural disasters (estimated to be $17 million, which includes approximately $6.1 million in asset
write-downs);
a profit decline in the Uniform segment;
an increase in the loss related to the change in fair value of certain gasoline and diesel agreements (approximately $8.7
million); and
an increase in share-based compensation (approximately $8.2 million).
Interest and Other Financing Costs, net, decreased 9% during fiscal 2017. The decrease during fiscal 2017 was primarily due to
lower weighted average interest rates from refinancing activity during fiscal 2017. Fiscal 2017 and fiscal 2016 include charges
related to refinancing activities of approximately $31.5 million and $30.2 million, respectively. Beginning in fiscal 2018, we
anticipate additional Interest and Other Financing Costs, net arising from the new borrowings we expect to incur to acquire Avendra
and AmeriPride.
The effective income tax rate for fiscal 2017 was 28.1% compared to 33.1% in the prior year. The decrease in the effective tax rate
is primarily due to the $23.3 million tax benefit recognized for fiscal 2017 as a result of the adoption of the accounting standards
update related to share-based payment transactions (see Note 1 to the audited consolidated financial statements) and from the impact
of certain permanently reinvested foreign earnings.
Segment Results
FSS North America Segment
The FSS North America reportable segment consists of five operating segments which have similar economic characteristics and are
aggregated into a single operating segment. The five operating segments or sectors of the FSS North America reportable segment
are Business & Industry, Education, Healthcare, Sports, Leisure & Corrections and Facilities & Other.
28 Aramark 2017 Form 10-K
Sales for each of these sectors are summarized as follows (in millions):
Business & Industry
Education
Healthcare
Sports, Leisure & Corrections
Facilities & Other
Fiscal Year Ended
September 29, 2017
1,536.2
$
September 30, 2016 *
$
1,522.0
3,063.5
1,274.1
2,354.6
2,003.1
3,026.4
1,350.1
2,191.1
2,032.7
10,122.3
*Prior year amounts have been restated to reflect current period classification due to an internal reorganization related to Facilities &
Other beginning in fiscal 2017.
10,231.5
$
$
The Healthcare and Education sectors generally have high-single digit operating income margins and the Business & Industry,
Sports, Leisure & Corrections and Facilities & Other sectors generally have mid-single digit operating income margins.
FSS North America segment sales increased 1% during fiscal 2017. Business & Industry sector sales increased approximately 1%
during fiscal 2017 due to net new business and base business growth. Education sector sales increased approximately 1% during
fiscal 2017 due to base business growth. Healthcare sector sales declined approximately 6% during fiscal 2017 due to net lost
business. Sports, Leisure & Corrections sector sales increased approximately 7% during fiscal 2017 due to net new business and
base business growth across the sector. Facilities & Other sector sales declined approximately 1% during fiscal 2017 due to net lost
business.
Cost of services provided was $9.1 billion for both fiscal 2017 and fiscal 2016. Cost of services provided as a percentage of sales
was 89% in fiscal 2017 compared to 90% in fiscal 2016. Cost of services provided was impacted by most of the items discussed
below for operating income.
Operating income increased approximately 14% during fiscal 2017. The increase in operating income was impacted by:
•
•
•
•
•
•
•
•
strategic focus around procurement and labor management initiatives in base business;
a decrease in acquisition-related amortization expense (approximately $21.0 million);
the prior year charges related to the sale of one of our buildings (approximately $6.8 million);
a decrease in severance-related charges (approximately $6.5 million);
prior year multiemployer pension plan charges (approximately $2.3 million); and
a gain from a retrospective refund under our casualty insurance program related to favorable loss experience in a prior year
(approximately $4.0 million); which more than offset
the adverse impact of natural disasters (estimated to be $8 million); and
profit decline in our Healthcare and Facilities & Other sectors.
FSS International Segment
Sales in the FSS International segment increased 3% during fiscal 2017. The increase was impacted by:
•
•
•
sales growth in Ireland, Germany, Spain, China and Korea and acquisitions (approximately 1%); which was partially offset
by
a sales decline in the U.K. and South America; and
the negative impact of foreign currency translation (approximately $77 million or -3%).
Cost of services provided was $2.6 billion for fiscal 2017 compared to $2.5 billion in the prior year. Cost of services provided as a
percentage of sales was 93% in both fiscal 2017 and fiscal 2016. Cost of services provided was impacted by the items discussed
below for operating income.
Aramark 2017 Form 10-K 29
Operating income increased approximately 6% during fiscal 2017. The increase in operating income was impacted by:
•
•
•
profit growth in Germany, China and South America; which was partially offset by
a profit decline in the U.K.; and
the negative impact of foreign currency translation (approximately $1.8 million or -1%).
Fiscal 2017 and fiscal 2016 include severance related charges of approximately $10.7 million and $9.9 million, respectively.
Uniform Segment
Uniform segment sales for fiscal 2017 were comparable to fiscal 2016.
Cost of services provided was $1.2 billion for both fiscal 2017 and fiscal 2016. Cost of services provided as a percentage of sales
was 79% in both fiscal 2017 and fiscal 2016. Cost of services provided was impacted by the items discussed below for operating
income.
Fiscal 2017 operating income decreased approximately 7% compared to fiscal 2016. The decrease in operating income was
impacted by:
•
•
•
the adverse impact of natural disasters, primarily on our operations in Puerto Rico (estimated to be $8 million, including
$6.1 million of asset write-downs); and
installation costs related to the onboarding of new business; which was partially offset by
the prior year charge to write-off impaired assets (approximately $6.0 million).
Operating income in fiscal 2017 and fiscal 2016 includes severance related charges of approximately $1.1 million and $2.5 million,
respectively.
Corporate
Corporate expenses, those administrative expenses not allocated to the business segments, increased approximately 7% during fiscal
2017. The increase is primarily due to the impact of:
•
•
•
an increase in the loss related to the change in fair value related to certain gasoline and diesel agreements (approximately
$8.7 million); and
an increase in share-based compensation expense mainly related to performance stock awards (approximately $8.2
million); which more than offset
a decrease in consulting costs (approximately $9.1 million).
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
Fiscal Year Ended
September 30, 2016
14,415.8
$
October 2, 2015
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
$
10.0
(41.7)
(31.7)
118.4
29.5
88.9
37.7
51.2
1 %
— %
(5)%
— %
19 %
10 %
26 %
36 %
22 %
30 Aramark 2017 Form 10-K
Sales by Segment
FSS North America
FSS International
Uniform
Operating Income by Segment
FSS North America
FSS International
Uniform
Corporate
Consolidated Overview
Fiscal Year Ended
September 30, 2016
10,122.3
$
2,729.8
1,563.7
14,415.8
$
October 2, 2015
9,950.3
$
2,858.2
1,520.6
14,329.1
$
Fiscal Year Ended
September 30, 2016
546.4
$
129.1
195.3
(124.5)
746.3
$
October 2, 2015
494.5
$
95.3
191.8
(153.7)
627.9
$
$
$
$
$
$
%
172.0
(128.4)
43.1
86.7
$
%
51.9
33.8
3.5
29.2
118.4
2 %
(4)%
3 %
1 %
10 %
35 %
2 %
(19)%
19 %
Sales of $14.4 billion for fiscal 2016 represented an increase of approximately 1% over the prior year. This increase is primarily
attributable to growth in the Sports, Leisure & Corrections and Education sectors, growth in Ireland, Spain, China and Mexico, and
growth in our Uniform segment. This increase was 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. Food and support service costs comprised
approximately 27% of Cost of services provided, personnel costs comprised approximately 47% of Cost of services provided, and
other direct costs comprised the remaining approximately 26% of Cost of services provided for both fiscal 2016 and fiscal 2015.
Cost of services provided was impacted by the items discussed below for operating income.
Operating income of $746.3 million for fiscal 2016 represented an increase of approximately 19% from the prior year. The increase
is primarily attributable to 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 from the prior year 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 to 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.
Net income for fiscal 2016 was $288.2 million compared to $237.0 million in the prior year. Net income attributable to
noncontrolling interests 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 five 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; Sports, Leisure & Corrections; and Facilities & Other.
Aramark 2017 Form 10-K 31
Sales for each of these sectors are summarized as follows (in millions):
Business & Industry
Education
Healthcare
Sports, Leisure & Corrections
Facilities & Other
Fiscal Year Ended
September 30, 2016*
1,522.0
$
$
3,026.4
1,350.1
2,191.1
2,032.7
$
10,122.3
$
October 2, 2015*
1,558.4
2,895.2
1,375.7
2,001.1
2,119.9
9,950.3
*Amounts have been restated to reflect current period classification due to an internal reorganization related to Facilities & Other beginning in fiscal
2017.
The Healthcare and Education sectors generally have high-single digit operating income margins and the Business & Industry,
Sports, Leisure & Corrections and Facilities & Other sectors generally have mid-single digit operating income margins.
FSS North America segment sales for fiscal 2016 increased 2% over the prior period, primarily due to growth in our Education and
Sports, Leisure & Corrections sectors, partially offset by a sales decline in our Facilities & Other, Healthcare and Business &
Industry 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% over the prior period, primarily due to a decline in base
business.
The Education sector had a sales increase of approximately 5% over the prior period, primarily due to 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 2% over the prior period, primarily due to growth in base business
within our technologies business, which was more than offset by the impact of lost business.
The Sports, Leisure & Corrections sector had a sales increase of approximately 9% over the prior period, primarily due to 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.
The Facilities & Other sector had a sales decrease of approximately 4% over the prior year period primarily due to 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.
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.
Operating income for fiscal 2016 was $546.4 million compared to $494.5 million in the prior year. This increase is primarily
attributable to 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). This increase was 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.
32 Aramark 2017 Form 10-K
Operating income for fiscal 2016 was $129.1 million compared to $95.3 million in the prior year. This increase is primarily
attributable to 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 fiscal 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.
Operating income for fiscal 2016 was $195.3 million compared to 191.8 million in the prior year. This increase is primarily
attributable to 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 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).
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 29, 2017, we had $238.8 million of cash and cash equivalents and approximately $998.5 million of availability under
our senior secured revolving credit facility. As of September 29, 2017, there was approximately $881.8 million of outstanding
foreign currency borrowings.
We believe that our cash flow from operations, 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. Undistributed earnings of certain
foreign subsidiaries for which no deferred tax liability was recorded amounted to approximately $40 million at September 29, 2017.
Those earnings are considered to be indefinitely reinvested and, accordingly, no deferred income taxes have been provided thereon.
As part of our ongoing liquidity assessments, we routinely monitor our cash flow (including the mix of domestic and international
inflows and outflows) and the condition of the capital markets in order to be prepared to respond to changing conditions. As
discussed above, we have received bank term loan commitments to finance the Avendra and AmeriPride acquisitions.
The table below summarizes our cash activity (in millions):
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Fiscal Year Ended
September 29, 2017
1,053.4
$
(678.5)
(288.7)
September 30, 2016
867.3
$
(679.7)
(157.4)
$
October 2, 2015
802.2
(504.3)
(287.1)
Reference to the audited Consolidated Statements of Cash Flows will facilitate understanding of the discussion that follows. In the
first quarter of fiscal 2017, the Company early adopted the accounting standard update related to share-based payment transactions.
Upon adoption, the Company applied the guidance related to the presentation in the Consolidated Statements of Cash Flows on a
retrospective basis. The excess tax benefits of $23.3 million, $32.0 million and $66.3 million for share-based awards are included in
operating activities, previously classified in financing activities, and approximately $24.7 million, $28.7 million and $52.8 million
of cash paid for employee taxes for withheld shares are included in financing activities, previously classified in operating activities,
for fiscal 2017, fiscal 2016 and fiscal 2015, respectively (see Note 1 to the audited consolidated financial statements).
Aramark 2017 Form 10-K 33
Cash Flows Provided by Operating Activities
During fiscal 2017, there was an increase in the total of net income and non cash charges compared to fiscal 2016 as discussed
above. The change in operating assets and liabilities of approximately $118.8 million compared to fiscal 2016, is primarily due to
the following:
•
Prepayments being a source of cash compared to a use of cash in the prior year due to the timing of prepayments made at
the end of fiscal 2016 related to interest, insurance premiums and income and non-income related tax payments; and
• Accounts payable being a greater source of cash compared to the prior year due to the timing of disbursements, extension
of certain payment terms and new business; partially offset by
• Accounts receivable were a greater use of cash compared to the prior year due to timing of collections and new business;
and
• Accrued expenses were less of a source of cash compared to the prior year due to a decrease in payroll related accruals
offset by timing of client advances and interest payments.
During fiscal 2017, the Company received proceeds of approximately $9.7 million related to our casualty insurance program from
our loss experience being favorable related to a prior year. The "Other operating activities" caption in the Consolidated Statements
of Cash Flows was a greater source of cash compared to fiscal 2016 due to the timing of payments related to our casualty insurance
program. The "Other operating activities" caption for fiscal 2017 and fiscal 2016 also reflects the adjustments to net income in both
periods related to certain financing charges in connection with our refinancing activities (see Note 5 to the audited consolidated
financial statements).
During fiscal 2016, the total of net income and non cash charges increased compared to fiscal 2015, resulting from the higher
operating results. The change in operating assets and liabilities of approximately $3.9 million compared to the prior year period
relates primarily to 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.
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.
Cash Flows Used in Investing Activities
Fiscal 2017 use of cash in investing activities was comparable with fiscal 2016 primarily due to higher levels of capital expenditures
offset by a decrease in the level of spending for acquisitions.
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.
34 Aramark 2017 Form 10-K
Cash Flows Used In Financing Activities
During fiscal 2017, cash used in financing activities was impacted by the following (see Note 5 to the consolidated financial
statements):
•
•
•
•
•
•
•
issuance of $600 million of 5.000% Senior Notes due April 2025;
issuance of €325.0 of 3.125% Senior Notes due April 2025;
issuance of $2.0 billion of new U.S. term loans, CAD250.1 million ($200.5 million) of term loan denominated in Canadian
dollars, ¥11,051.5 million ($98.2 million) of term loans denominated in yen and €170.0 million ($200.9 million of euro
denominated term loan;
repayment of all existing term loan facilities under the Company's existing senior secured credit facilities;
repayment of the 5.750% Senior Notes, due March 2020;
payment of fees and expenses related to the refinancing activities (approximately $44.4 million); and
proceeds from the sale of buildings in our FSS International segment (approximately $30.1 million).
During fiscal 2017, the Board of Directors authorized a new share repurchase program providing for purchases of up to $250
million of Aramark common stock during fiscal 2017 and fiscal 2018. The Company repurchased approximately 2.8 million shares
of its common stock for $100.0 million in fiscal 2017. We may utilize various methods to effect repurchases of our common stock
under the repurchase program, which could include open market repurchases, privately negotiated transactions, block transactions,
accelerated share repurchase or open market solicitations for shares, some of which may be effected through Rule 10b5-1
plans. Repurchases will be made at our discretion, based on ongoing assessments of the capital needs of the business, the market
price of our common stock and general market conditions. The program may be suspended or discontinued at any time. Currently,
we do not expect further share repurchase activity under this program due to the pending acquisitions of Avendra and AmeriPride.
During fiscal 2016, cash used in financing activities was impacted by the issuance of $900 million of 5.125% Senior Notes due
January 2024 and $500 million of 4.750% Senior Notes due June 2026, 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 of financing fees from the debt issuances during fiscal 2016 of approximately $20.2 million; call premium payment of
$22.2 million from repayment of the 2020 Notes and the repayment of a U.S. dollar denominated term loan of a Canadian subsidiary
in the amount of $74.1 million.
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 and payment of approximately $48.5 million for a repurchase of 1.5 million shares of our common stock.
Covenant Compliance
The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability
and the ability of our 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 our capital stock; make
investments, loans or advances; repay or repurchase any subordinated debt, 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 our subordinated debt (or any indebtedness that refinances the
subordinated debt); and fundamentally change our business. The indentures governing our senior notes contain similar provisions.
As of September 29, 2017, we were in compliance with these covenants.
As stated above, the Credit Agreement and the indentures governing our senior notes contain provisions that restrict our ability to
pay dividends and repurchase stock (collectively, "Restricted Payments"). In addition to customary exceptions, the Credit
Agreement and indentures permit Restricted Payments in the aggregate up to an amount that increases quarterly by 50% of our
Consolidated Net Income, as such term is defined in these debt agreements, subject to being in compliance with the interest
coverage ratio described below.
Under the Credit Agreement, we are required to satisfy and maintain specified financial ratios and other financial condition tests and
covenants. The indentures governing our senior notes also require us to comply with certain financial ratios in order to take certain
actions. 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 Adjusted EBITDA." Covenant Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP.
Covenant Adjusted 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, 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
Aramark 2017 Form 10-K 35
operating income determined in accordance with U.S. GAAP. 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 Adjusted EBITDA
is a measure of Aramark Services, Inc. and its restricted subsidiaries only and does 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
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 29, 2017
September 30, 2016
October 2, 2015
$
373.9
$
287.8
$
287.4
146.5
508.2
65.2
—
14.2
—
36.8
315.4
142.7
495.8
56.9
—
14.3
4.1
35.4
235.9
285.9
105.0
504.0
66.4
(3.9)
14.8
—
58.9
$
1,432.2
$
1,352.4
$
1,267.0
(1) Represents share-based compensation expense resulting from the application of accounting for stock options, restricted stock
units, performance stock, performance stock units and deferred stock unit awards (see Note 10 to the audited consolidated
financial statements).
(2)
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.
(3) Represents our estimated share of EBITDA, primarily from our AIM Services Co., Ltd. equity method investment, not
already reflected in our Covenant Adjusted EBITDA. EBITDA for this equity method investee is calculated in a manner
consistent with consolidated Covenant Adjusted EBITDA but does not represent cash distributions received from this
investee.
(4) Represents the annualizing of net EBITDA from acquisitions made during the period.
(5) Other includes organizational streamlining initiatives ($19.4 million for fiscal 2017, $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 ($0.4 million
loss for fiscal 2017, $8.3 million gain for fiscal 2016 and $2.6 million loss for fiscal 2015), expenses related to acquisition
costs ($2.6 million for fiscal 2017, $3.9 million for fiscal 2016 and $0.4 million for fiscal 2015), estimated impact from
natural disasters ($17.0 million, of which $6.1 million relates to asset write-downs, for fiscal 2017), 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 other miscellaneous expenses.
Our covenant requirements and actual ratios for the fiscal year ended September 29, 2017 are as follows:
Consolidated Secured Debt Ratio(1)
Interest Coverage Ratio (Fixed Charge Coverage Ratio)(2)
Covenant
Requirements
Actual
Ratios
5.125x
2.00x
1.87x
5.82x
(1)
The Credit Agreement requires ASI 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 consisting of debt for borrowed money, capital leases, debt in respect
of sale-leaseback transactions, disqualified and preferred stock and advances under the Receivables Facility secured by a lien
reduced by the amount of cash and cash equivalents on the consolidated balance sheet that is free and clear of any lien. Non-
compliance with the maximum Consolidated Secured Debt Ratio could result in the requirement to immediately repay all
amounts outstanding under the Credit Agreement, which, if ASI's lenders under the Credit Agreement (other than the lenders
in respect of ASI’s U.S. Term Loan B, which lenders do not benefit from the maximum Consolidated Secured Debt Ratio
covenant) failed to waive any such default, would also constitute a default under the indentures governing our senior notes.
(2) 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
36 Aramark 2017 Form 10-K
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 incremental capacity 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.
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 29, 2017 (dollars in thousands):
Contractual Obligations as of September 29, 2017
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 29, 2017
Letters of credit
Guarantees
Payments Due by Period
Total
$5,186,427
114,400
1,219,500
623,481
962,902
241,600
$8,348,310
Less than
1 year
$ 55,864
22,293
196,100
213,414
417,211
47,800
$ 952,682
1-3 years
$ 415,027
38,650
376,400
129,096
377,457
19,300
$1,355,930
3-5 years
$ 920,956
24,230
342,400
78,467
71,405
11,300
$1,448,758
More than
5 years
$3,794,580
29,227
304,600
202,504
96,829
163,200
$4,590,940
Amount of Commitment Expiration by Period
Total
Amounts
Committed
33,107
$
—
33,107
$
Less than
1 year
$ 33,107
—
$ 33,107
$
$
1-3 years
3-5 years
More than
5 years
— $
—
— $
— $
—
— $
—
—
—
(1)
(2)
Excludes the $47.2 million reduction to long-term borrowings from debt discounts and deferred financing fees and the
increase of $14.9 million from the unamortized premium on the 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 29, 2017 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 2018 through 2023 is $4,885.9 million, $4,814.8 million, $4,719.9 million, $4,594.4
million, $4,466.4 million and $3,686.1 million, respectively. The weighted average interest rate of our existing debt
obligations for each fiscal year from 2018 through 2023 is 4.01%, 3.94%, 3.96%, 3.87%, 3.68% and 4.18%, 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 in which we operate as well as for purchases of certain vendors' products.
(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 29, 2017, we have gross uncertain tax liabilities of $30.8 million (see Note 8 to the audited consolidated financial
statements). During fiscal 2017, we made contributions totaling $4.3 million into our defined benefit pension plans and benefit
payments and settlements of $14.3 million out of these plans. Estimated contributions to our defined benefit pension plans in fiscal
2018 are $7.5 million and estimated benefit payments out of these plans in fiscal 2018 are $21.0 million (see Note 7 to the audited
consolidated financial statements).
We have an agreement (the "Receivables Facility") with three 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,
Aramark 2017 Form 10-K 37
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 29, 2017, $254.2 million was outstanding under the
Receivables Facility and is included in “Long-Term Borrowings” in the Consolidated Balance 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.
During the first quarter of fiscal 2018, pursuant to a Rule 10b5-1 plan, we repurchased approximately 0.6 million shares of our
common stock for $24.4 million under the share repurchase program previously announced by the Board of Directors authorized
providing for purchases of up to $250.0 million of Aramark common stock during fiscal 2017 and fiscal 2018. Currently, we do not
expect further share repurchase activity under this program due to the pending acquisitions of Avendra and AmeriPride.
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.
Effective in fiscal 2017, the unremitted earnings of the Company's non-Uniform foreign subsidiaries are intended to be permanently
invested in operations outside the U.S. and, therefore, U.S. taxes have not been recorded on those earnings.
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 discounted cash flow calculations of each reporting unit with its estimated net book value. The discounted
cash flow calculations are dependent on several subjective factors including the timing of future cash flows, future growth rates and
the discount rate. If our assumptions or estimates in our fair value calculations change or if future cash flows or future growth rates
vary from what was planned, this may impact our impairment analysis.
We perform the assessment of goodwill at the reporting unit level. Within our FSS International segment, each country is evaluated
separately since they are relatively autonomous and separate goodwill balances have been recorded for each entity. During the
fourth quarter of fiscal 2017, we performed an impairment test for goodwill for each of our reporting units using a quantitative
testing approach. Based on our evaluation performed, 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. A country
in our FSS International segment had a fair value that did not substantially exceed its carrying value based on the result of the fair
value calculations (fair value excess of approximately 9%). This country has a goodwill balance of approximately $150 million.
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:
38 Aramark 2017 Form 10-K
• 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.
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 make assumptions, judgments and
estimates to determine the current income tax provision, deferred tax asset and liabilities and valuation allowance recorded against a
deferred tax asset. The assumptions, judgments and estimates relative to the current income tax provision take into account current
tax laws, their interpretation and possible results of foreign and domestic tax audits. Changes in tax law, their interpretation and
resolution of tax audits could significantly impact the income taxes provided in our consolidated financial statements. Assumptions,
judgments and estimates relative to the amount of deferred income taxes take into account future taxable income. Any of the
assumptions, judgments and estimates mentioned above could cause the actual income tax obligations to differ from our estimates.
*****
Aramark 2017 Form 10-K 39
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.
40 Aramark 2017 Form 10-K
New Accounting Standards Updates
See Note 1 to the audited consolidated financial statements for a full description of recent accounting standards 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 29, 2017 (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 29, 2017. 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
As of September 29, 2017
Debt:
Fixed rate
Average interest rate
Variable rate
Average interest rate
Interest Rate Swaps:
Receive variable/pay fixed
Average pay rate
Average receive rate
2018
2019
2020
2021
2022
Thereafter
Total
Fair Value
$
$
$
$
$
22
5.0%
56
2.7%
$ 600
1.6%
1.2%
20
5.0%
301
2.4%
575
1.9%
1.2%
$
19
5.0%
(a) $ 114
$
15
5.0%
$ 135
$
$
2.7%
2.7%
9
5.0%
786
2.6%
$ 2,413
$ 2,498
4.7%
4.7%
$ 1,411
$ 2,803
3.2%
2.9%
$ 425
$ — $ — $ — $ 1,600
2.2%
1.2%
—%
—%
—%
—%
$
$
$
2,642
2,808
(11)
(a)
Balance includes $254.2 million of borrowings under the Receivables Facility.
As of September 29, 2017, the Company had foreign currency forward exchange contracts outstanding with notional amounts of
€33.0 million, £12.1 million and CAD 67.0 million to mitigate the risk of changes in foreign currency exchange rates on short-term
intercompany loans to certain international subsidiaries. As of September 29, 2017, the fair value of these foreign exchange
contracts is $0.1 million, which is included in "Prepayments and Other Current Assets" 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 29, 2017, the Company has contracts for approximately 16.7 million gallons outstanding for fiscal 2018. As of
September 29, 2017, the fair value of the Company’s gasoline and diesel fuel hedge agreements is $3.6 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.
Aramark 2017 Form 10-K 41
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 and is accumulated and communicated to the Company's management, including its principal executive and principal
financial officers, to allow timely decisions regarding required disclosures. 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 29, 2017. The effectiveness of the Company's internal control over financial reporting as of September 29, 2017 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 2017
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
42 Aramark 2017 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 29, 2017, 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 the accompanying “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 29,
2017, 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 29, 2017 and September 30, 2016, and the related consolidated
statements of income, comprehensive income, cash flows, and stockholders’ equity for each of the fiscal years ended September 29,
2017, September 30, 2016 and October 2, 2015, and our report dated November 22, 2017 expressed an unqualified opinion on those
consolidated financial statements.
/s/ KPMG LLP
Philadelphia, Pennsylvania
November 22, 2017
Aramark 2017 Form 10-K 43
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 2018 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 2018 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 2018 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 2018 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 2018 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 2018 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 2018 Annual Meeting of Stockholders and is incorporated herein by reference.
44 Aramark 2017 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.
Item 16.
Form 10-K Summary
None.
Aramark 2017 Form 10-K 45
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 22, 2017.
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 22, 2017.
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)
Director
Director
Director
Director
Director
Director
Director
Director
Director
/s/ PIERRE-OLIVIER BECKERS-VIEUJANT
Pierre-Olivier Beckers-Vieujant
/s/ LISA G. BISACCIA
Lisa G. Bisaccia
/s/ RICHARD W. DREILING
Richard W. Dreiling
/s/ IRENE M. ESTEVES
Irene M. Esteves
/s/ DANIEL J. HEINRICH
Daniel J. Heinrich
/s/ SANJEEV K. MEHRA
Sanjeev K. Mehra
/s/ PATRICIA B. MORRISON
Patricia B. Morrison
/s/ JOHN A. QUELCH
John A. Quelch
/s/ STEPHEN I. SADOVE
Stephen I. Sadove
46 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of September 29, 2017 and September 30, 2016
Consolidated Statements of Income for the fiscal years ended September 29,
2017, September 30, 2016 and October 2, 2015
Consolidated Statements of Comprehensive Income for the fiscal years ended
September 29, 2017, September 30, 2016 and October 2, 2015
Consolidated Statements of Cash Flows for the fiscal years ended September 29,
2017, September 30, 2016 and October 2, 2015
Consolidated Statements of Stockholders' Equity for the fiscal years ended
September 29, 2017, September 30, 2016 and October 2, 2015
Notes to Consolidated Financial Statements
Schedule II—Valuation and Qualifying Accounts and Reserves for the fiscal
years ended September 29, 2017, September 30, 2016 and October 2, 2015
Page
S-2
S-3
S-4
S-5
S-6
S-7
S-8
S-43
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.
Aramark 2017 Form 10-K S-1
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 29, 2017
and September 30, 2016, and the related consolidated statements of income, comprehensive income, cash flows, and stockholders’
equity for each of the fiscal years ended September 29, 2017, September 30, 2016 and October 2, 2015. 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 29, 2017 and September 30, 2016, and the results of their operations and their cash flows
for each of the fiscal years ended September 29, 2017, September 30, 2016 and October 2, 2015, 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.
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for share-based
payments effective October 1, 2016 due to the adoption of FASB ASU 2016-09, Compensation - Stock Compensation (Topic 718)
Improvements to Employee Share-Based Payment Accounting.
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 29, 2017, 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 22, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial
reporting.
/s/ KPMG LLP
Philadelphia, Pennsylvania
November 22, 2017
S-2 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 29, 2017 AND SEPTEMBER 30, 2016
(in thousands, except share amounts)
Current Assets:
ASSETS
Cash and cash equivalents
Receivables (less allowances: 2017 - $53,416; 2016 - $48,058)
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 29, 2017
September 30, 2016
$
$
$
$
$
$
238,797
1,615,993
610,732
187,617
2,653,139
673,616
2,003,177
2,676,793
(1,634,762)
1,042,031
4,715,511
1,120,824
1,474,724
11,006,229
78,157
955,925
487,573
846,440
2,368,095
5,190,331
978,944
9,798
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
Common stock, par value $.01 (authorized: 600,000,000 shares; issued:
2017—277,111,042 shares and 2016—272,565,923; and
outstanding: 2017—245,593,961 shares and 2016—244,713,580)
Capital surplus
Retained earnings/(accumulated deficit)
Accumulated other comprehensive loss
Treasury stock (shares held in treasury: 2017—31,517,081 shares and
2016—27,852,343)
Total stockholders' equity
2,771
3,014,546
247,050
(123,760)
2,726
2,921,725
(33,778)
(180,783)
(681,546)
2,459,061
11,006,229
$
(548,884)
2,161,006
10,582,072
$
The accompanying notes are an integral part of these consolidated financial statements.
Aramark 2017 Form 10-K S-3
ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED SEPTEMBER 29, 2017, SEPTEMBER 30, 2016 AND OCTOBER 2, 2015
(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 29, 2017
14,604,412
$
September 30, 2016
14,415,829
$
October 2, 2015
$
14,329,135
12,988,973
508,212
299,170
13,796,355
808,057
287,415
520,642
146,455
374,187
264
373,923
1.53
1.49
244,453
251,557
$
$
$
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
The accompanying notes are an integral part of these consolidated financial statements.
S-4 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE FISCAL YEARS ENDED SEPTEMBER 29, 2017, SEPTEMBER 30, 2016 AND OCTOBER 2, 2015
(in thousands)
Net income
Other comprehensive income (loss), net of tax:
Pension plan adjustments
Foreign currency translation adjustments
Cash flow hedges:
Unrealized gains (losses) arising during the period
Reclassification adjustments
Share of equity investee's comprehensive income (loss)
Other comprehensive income (loss), net of tax
Comprehensive income
Less: Net income attributable to noncontrolling interest
Comprehensive income attributable to Aramark stockholders
$
Fiscal Year Ended
September 29, 2017
374,187
$
September 30, 2016
288,232
$
$
October 2, 2015
236,976
19,992
5,903
19,449
10,130
1,549
57,023
431,210
264
430,946
$
(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
The accompanying notes are an integral part of these consolidated financial statements.
Aramark 2017 Form 10-K S-5
ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 29, 2017, SEPTEMBER 30, 2016 AND OCTOBER 2, 2015
(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
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 issuance of common stock
Repurchase of common stock
Other financing activities
Net cash 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 29, 2017
September 30, 2016
October 2, 2015
Fiscal Year Ended
$
374,187
$
288,232
$
236,976
508,212
(37,856)
65,155
(111,423)
(21,147)
95,536
93,965
26,804
31,959
(9,342)
37,337
1,053,387
(552,729)
18,906
8,114
(2,273)
(147,963)
(2,539)
(678,484)
495,765
52,416
56,942
(32,859)
(9,625)
(64,663)
4,486
67,600
(33,711)
(10,189)
52,920
867,314
(512,532)
26,824
10,226
(32,989)
(176,614)
5,340
(679,745)
3,851,417
(3,911,992)
1,399,988
(1,363,534)
(13,800)
(100,813)
28,779
(100,000)
(42,277)
(288,686)
86,217
152,580
(82,000)
(92,074)
35,705
(749)
(54,741)
(157,405)
30,164
122,416
$
238,797
$
152,580
$
504,033
(4,108)
66,416
81,284
(29,587)
9,763
(46,422)
4,474
(52,136)
13,595
17,904
802,192
(524,384)
19,128
(143)
—
(3,234)
4,299
(504,334)
71,926
(209,621)
—
(81,898)
39,946
(50,176)
(57,309)
(287,132)
10,726
111,690
122,416
The accompanying notes are an integral part of these consolidated financial statements.
S-6 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED SEPTEMBER 29, 2017, SEPTEMBER 30, 2016 AND OCTOBER 2, 2015
(in thousands)
Total
Stockholders'
Equity
1,718,036
$
Common
Stock
2,561
$
Capital
Surplus
$2,575,011
Retained
Earnings /
(Accumulated
Deficit)
$
(382,463) $
Accumulated
Other
Comprehensive
Loss
(106,298) $ (370,775)
Treasury
Stock
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
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
$
235,946
(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)
Adoption of new accounting
standard (see Note 1)
Net income attributable to Aramark
stockholders
Other comprehensive income (loss)
Capital contributions from issuance
of common stock
Share-based compensation expense
Repurchases of Common Stock
Payments of dividends
1,129
373,923
57,023
35,724
65,155
(132,662)
(102,237)
(8,013)
9,142
373,923
57,023
45
35,679
65,155
(132,662)
(102,237)
247,050
$
(123,760) $ (681,546)
Balance, September 29, 2017
$
2,459,061
$
2,771
$3,014,546
$
The accompanying notes are an integral part of these consolidated financial statements.
Aramark 2017 Form 10-K S-7
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. 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.
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 29, 2017, September 30, 2016 and October 2, 2015 were each fifty-two week periods.
New Accounting Standards Updates
In September 2017, the Financial Accounting Standards Board ("FASB") issued an accounting standards update ("ASU") which
provides additional implementation guidance with respect to the revenue recognition standard and the leases recognition standard.
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 2017, the FASB issued an ASU to improve the financial reporting of hedging relationships to better portray the economic
results of an entity’s risk management activities in its financial statements and simplify the application of hedge accounting. 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.
In May 2017, the FASB issued an ASU to clarify the determination of the customer of the operation services in a service concession
arrangement. The guidance is effective for the Company in the first quarter of fiscal 2019 and early adoption is permitted. The
Company will adopt this standard in conjunction with the revenue recognition standard, as described below. The Company is
currently evaluating the impact of the pronouncement.
In May 2017, the FASB issued an ASU to clarify when to account for a change to the terms or conditions of a share-based payment
award as a modification. 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 2017, the FASB issued an ASU to improve the presentation of net periodic pension cost and net periodic postretirement
benefit cost. 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 February 2017, the FASB issued an ASU to clarify the accounting guidance for partial sales of nonfinancial assets. 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 January 2017, the FASB issued an ASU to simplify the subsequent measurement of goodwill as part of the impairment test. The
guidance is effective for the Company in the first quarter of fiscal 2021 and early adoption is permitted. The Company is currently
evaluating the impact of the pronouncement.
In January 2017, the FASB issued an ASU to clarify the definition of a business. 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 October 2016, the FASB issued an 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.
S-8 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 June 2016, the FASB issued an ASU to require entities to account for expected credit losses on financial instruments including
trade receivables. The guidance is effective for the Company in the first quarter of fiscal 2021 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. Upon
adoption, the ASU requires that excess tax benefits for share-based payments be recorded as a reduction to the provision for income
taxes and reflected within cash flows from operating activities rather than being recorded within stockholders’ equity and reflected
within cash flows from financing activities. The standard also clarifies that all cash payments made on an employee’s behalf for
withheld shares should be presented as a financing activity on a cash flow statement, and provides an accounting policy election to
account for forfeitures as they occur.
The Company elected to early adopt the guidance as of the beginning of its first quarter of fiscal 2017. The impact to the
Consolidated Statements of Income was $23.3 million of excess tax benefit recorded as a reduction to the provision for income
taxes for fiscal 2017. The adoption impact to the Consolidated Balance Sheets was a cumulative-effect adjustment of approximately
$9.1 million to increase retained earnings for previously unrecognized excess tax benefits. The Company applied the guidance
related to the presentation in the Consolidated Statements of Cash Flows on a retrospective basis. The excess tax benefits of $23.3
million, $32.0 million and $66.3 million for share-based awards are included in operating activities, previously classified in
financing activities, and approximately $24.7 million, $28.7 million and $52.8 million of cash paid for employee taxes for withheld
shares are included in financing activities, previously classified in operating activities, for fiscal 2017, fiscal 2016 and fiscal 2015,
respectively. As a result of the adoption, the excess tax benefits are no longer included in the calculation of diluted shares under the
treasury stock method, which increased the diluted shares outstanding by approximately 1.4 million shares for fiscal 2017. The
Company elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be
recognized in each period.
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 in the process of reviewing its lease
arrangements in order to determine the impact the adoption of this ASU will have on its consolidated financial statements and
related disclosures. Based on the assessment to date, the Company expects adoption of this standard to result in a material increase
in lease-related assets and liabilities in its Consolidated Balance Sheets, but does not expect it to have a significant impact in its
Consolidated Statements of Income or Cash Flows.
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 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 does not believe the adoption of this ASU will have a material impact on the consolidated
financial statements.
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 Company adopted the guidance in the
first quarter of fiscal 2017, which did not have an 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 completed its comprehensive contract review project and has developed an understanding of the potential adoption
impact to the consolidated financial statements on a qualitative basis. Based on this preliminary assessment, the Company does not
believe this ASU will have a material impact on the timing of revenue recognition. The Company has also made significant progress
on evaluating the impact the ASU may have related to the timing and presentation of various financial aspects of our contractual
arrangements, including client contract investments, costs to fulfill and commissions. The Company has not selected the method of
adoption and continues to assess the disclosure requirements, business processes, controls and systems.
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
Aramark 2017 Form 10-K S-9
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 for 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 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 29, 2017
September 30, 2016
October 2, 2015
Net income
Pre-Tax
Amount
Tax
Effect
After-
Tax
Amount
$ 374,187
Pre-Tax
Amount
Tax
Effect
Pension plan adjustments
22,548
(2,556)
19,992
(37,957)
13,287
After-
Tax
Amount
$ 288,232
(24,670)
Pre-Tax
Amount
Tax
Effect
After-
Tax
Amount
$236,976
2,832
690
3,522
Foreign currency
translation adjustments
Cash flow hedges:
Unrealized gains
(losses) arising during
the period
Reclassification
adjustments
Share of equity investee's
comprehensive income
(loss)
Other comprehensive
income (loss)
Comprehensive income
Less: Net income
attributable to
noncontrolling interest
Comprehensive income
attributable to Aramark
stockholders
5,903
—
5,903
18,547
(15,467)
3,080
(50,458)
6,911
(43,547)
31,884
(12,435)
19,449
(23,437)
15,011
(8,426)
(58,143)
23,521
(34,622)
16,606
(6,476)
10,130
34,861
(13,677)
21,184
20,143
(8,462)
11,681
2,383
(834)
1,549
(8,282)
2,899
(5,383)
4,148
(1,452)
2,696
79,324
(22,301)
57,023
(16,268)
2,053
431,210
264
(81,478)
21,208
(14,215)
274,017
426
(60,270)
176,706
1,030
$ 430,946
$ 273,591
$175,676
S-10 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accumulated other comprehensive loss consists of the following (in thousands):
Pension plan adjustments
Foreign currency translation adjustments
Cash flow hedges
Share of equity investee's accumulated
other comprehensive loss
$
$
September 29, 2017
September 30, 2016
(45,275) $
(62,558)
(6,794)
(9,133)
(123,760) $
(65,267)
(68,461)
(36,373)
(10,682)
(180,783)
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 2017, fiscal 2016 and fiscal 2015 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 29, 2017
September 30, 2016
36.9%
60.5%
2.6%
100.0%
35.9%
60.9%
3.2%
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 2017, fiscal 2016 and fiscal 2015 was $237.9 million, $234.8 million, and $226.6
million, respectively.
During fiscal 2017, the Company received proceeds of approximately $30.1 million related to the sale of a building within the FSS
International segment. Subsequently, the Company entered into a capital lease for the building. The proceeds are included in "Other
financing activities" in the Consolidated Statements of Cash Flows. The impact on the Consolidated Statements of Income was not
material.
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.
Aramark 2017 Form 10-K S-11
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 29, 2017
September 30, 2016
$
$
981,300
247,601
72,406
111,005
62,412
1,474,724
$
$
865,004
253,798
72,469
91,760
42,623
1,325,654
(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 $159.6 million, $142.5 million and $128.8 million during fiscal 2017,
fiscal 2016 and fiscal 2015, respectively.
(2) Miscellaneous investments represent investments in 50% or less owned entities, including the Company's 50% ownership
in AIM Services Co., Ltd., a Japanese food and support services company (approximately $173.8 million and $181.4
million at September 29, 2017 and September 30, 2016, respectively).
(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.
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 29, 2017
September 30, 2016
Deferred income
Accrued commissions
Accrued taxes
Accrued insurance and interest
Other
$
$
294,781
$
84,138
75,156
87,143
305,222
846,440
$
262,976
79,048
62,510
66,165
305,317
776,016
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 29, 2017
September 30, 2016
$
$
570,893
229,663
14,164
9,313
154,911
978,944
$
$
608,375
228,231
26,854
34,919
104,634
1,003,013
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 Aramark 2017 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:
Fiscal Year Ended
$
September 29, 2017
201.7
126.3
$
September 30, 2016
275.4
55.6
$
October 2, 2015
267.9
31.5
• During fiscal 2017, fiscal 2016 and fiscal 2015, the Company executed capital lease transactions. The present value of
the future rental obligations was approximately $55.4 million, $36.4 million and $17.9 million for the respective
periods, which is included in property and equipment and long-term borrowings.
• During fiscal 2017, fiscal 2016 and fiscal 2015, cashless settlements of the exercise price and related employee
minimum tax withholding liabilities of share-based payment awards were approximately $32.7 million, $40.1 million
and $89.6 million, respectively.
NOTE 2. ACQUISITIONS AND DIVESTITURES:
Acquisitions
During fiscal 2017, the Company paid cash consideration of approximately $142.1 million for various acquisitions. The sales, net
income, assets and liabilities of the acquisitions did not have a material impact on the Company's consolidated financial statements.
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. 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. 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.
NOTE 3. SEVERANCE AND ASSET WRITE-DOWNS:
During fiscal 2015, the Company initiated a new phase related to streamlining and improving the efficiency and effectiveness of the
Company's selling, general and administrative functions, which resulted in 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.
During fiscal 2017, the Company updated its previously initiated actions on streamlining and improving the efficiencies and
effectiveness of its selling, general and administrative functions. The Company recorded net severance charges of approximately
$18.4 million during fiscal 2017.
Aramark 2017 Form 10-K S-13
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the unpaid obligations for severance and related costs as of September 29, 2017, which are
included in "Accrued payroll and related expenses" in the Consolidated Balance Sheets. These unpaid obligations are expected to be
paid during fiscal 2018.
(in millions)
September 30, 2016
Severance and Related Costs Accrual
$26.1
Net
Charges
18.4
Payments
and Other
(26.7)
September 29, 2017
$17.8
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 completed its annual goodwill impairment test for fiscal 2017,
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
September 30, 2016
3,635,614
$
418,488
$
574,779
$
32,497
25,413
9,640
$
4,628,881
$
67,550
$
(1,070) $
20,630
(480)
19,080
$
September 29, 2017
3,667,041
464,531
583,939
4,715,511
Acquisitions
Translation
and Other
Goodwill related to acquisitions closed during the fiscal 2017 may be revised upon final determination of the purchase price
allocation.
Other intangible assets consist of (in thousands):
Customer relationship assets
Trade names
September 29, 2017
September 30, 2016
Gross
Amount
$ 1,376,812
Accumulated
Amortization
$ (1,063,350) $
Net
Amount
313,462
Gross
Amount
$ 1,793,739
Accumulated
Amortization
$ (1,462,058) $
Net
Amount
331,681
807,362
$ 2,184,174
—
807,362
$ (1,063,350) $ 1,120,824
781,835
$ 2,575,574
(1,633)
780,202
$ (1,463,691) $ 1,111,883
During fiscal 2017, the Company acquired customer relationship assets and trade names with preliminary values of approximately
$67.0 million and $22.9 million, respectively. During fiscal 2016, the Company acquired customer relationship assets and trade
names with values of approximately $64.0 million and $35.6 million, respectively. Customer relationship assets are being amortized
principally on a straight-line basis over the expected period of benefit, 3 to 24 years, with a weighted average life of approximately
13 years. The Aramark and other 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 2017, which did not result in
an impairment charge. Amortization of intangible assets for fiscal 2017, fiscal 2016 and fiscal 2015 was approximately $87.9
million, $98.5 million and $133.2 million, respectively.
Based on the recorded balances at September 29, 2017, total estimated amortization of all acquisition-related intangible assets for
fiscal years 2018 through 2022 follows (in thousands):
$
2018
2019
2020
2021
2022
62,756
53,357
52,815
45,348
24,972
S-14 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. BORROWINGS:
Long-term borrowings, net, are summarized in the following table (in thousands):
Senior secured revolving credit facility, due March 2022
Senior secured term loan facility, due September 2019
Senior secured term loan facility, due February 2021
Senior secured term loan facility, due March 2022
Senior secured term loan facility, due March 2024
5.75% senior notes, due March 2020
5.125% senior notes, due January 2024
4.750% senior notes, due June 2026
5.000% senior notes, due April 2025
3.125% senior notes, due April 2025
Receivables Facility, due May 2019
Capital leases
Other
Less—current portion
September 29, 2017
$
— $
—
—
1,125,858
1,403,429
—
903,654
493,464
589,733
379,429
254,200
114,400
4,321
5,268,488
(78,157)
5,190,331
$
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
$
As of September 29, 2017, there was approximately $881.8 million of outstanding foreign currency borrowings.
Fiscal 2017 Refinancing Transactions
On March 22, 2017, Aramark Services, Inc. ("ASI"), an indirect wholly owned subsidiary of the Company, issued $600.0 million of
5.000% Senior Notes due April 1, 2025 (the "5.000% 2025 Notes"). On March 27, 2017, Aramark International Finance S.à r.l.
("AIFS" and, together with ASI, "the Issuers"), an indirect wholly owned subsidiary of the Company, issued €325.0 million of
3.125% Senior Notes due April 1, 2025 (the "3.125% 2025 Notes" and, together with the 5.000% 2025 Notes, the "2025 Notes").
ASI and certain of its subsidiaries entered into a credit agreement on March 28, 2017 (as supplemented or otherwise modified from
time to time, the "Credit Agreement"), which replaced the existing Amended and Restated Credit Agreement, originally dated
January 26, 2007, and last amended on March 28, 2014 (the "Previous Credit Agreement"). On September 20, 2017, ASI and certain
of its subsidiaries entered into an amendment (the "Incremental Amendment No. 1") to the Credit Agreement. Among other things,
the Credit Agreement provides for the following as of September 29, 2017:
• A U.S. dollar denominated term loan to ASI in the amount of $633.8 million, due 2022, ("U.S. Term Loan A") and $1.4
billion, due 2024 ("U.S. Term Loan B");
• A Canadian dollar denominated term loan to Aramark Canada Ltd. in the amount of CAD250.1 million, due 2022
(approximately $200.5 million) (the "Canadian Term Loan");
• A yen denominated term loan to ASI in the amount of ¥11,051.5 million, due 2022 (approximately $98.2 million) ("Yen
Term Loan");
• A euro denominated term loan to Aramark Investments Limited, a U.K. borrower, in an amount of €170.0 million, due
2022 (approximately $200.9 million) (the "Euro Term Loan"); and
• A revolving credit facility available for loans in U.S. dollars, Canadian dollars, euros and pounds sterling to ASI and
certain foreign borrowers with aggregate commitments under the Credit Agreement of $1.0 billion and a final maturity date
of March 28, 2022.
The net proceeds from the 2025 Notes and borrowings under the senior secured term loan facilities under the Credit Agreement
were used to repay all existing outstanding borrowings under the term loans under the Previous Credit Agreement, to redeem ASI's
5.750% senior notes, due March 2020 (the "2020 Notes"), and to pay certain fees and related expenses. The Company recorded
$28.5 million of charges to "Interest and Other Financing Costs, net" in the Consolidated Statements of Income for the fiscal year
ended September 29, 2017, consisting of $25.2 million of non-cash charges for the write-off of deferred financing costs and original
issue discount and $3.3 million for the call premium on the 2020 Notes. The Company used the borrowings under the Incremental
Amendment No. 1 to pay down a portion of the existing U.S. Term Loan B loans outstanding under the Credit Agreement and to pay
certain related fees and expenses.
For the fiscal year ended September 29, 2017, the Company capitalized third-party costs of approximately $15.1 million directly
attributable to the 2025 Notes and approximately $17.8 million directly attributable to the new senior secured term loan facilities
under the Credit Agreement, which are included in "Long-Term Borrowings" in the Consolidated Balance Sheets. The Company
Aramark 2017 Form 10-K S-15
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
also capitalized third-party costs of approximately $8.2 million during fiscal 2017, directly attributable to the senior secured
revolving credit facility, which are included in "Other Assets" in the Consolidated Balance Sheets.
Senior Secured Credit Agreement
The applicable margin spread for the U.S. Term Loan B is 1.75% to 2.00% (as of September 29, 2017—2.00%) with respect to
eurocurrency (LIBOR) borrowings, subject to a LIBOR floor of 0.00%, and 0.75% to 1.00% (as of September 29, 2017—1.00%)
with respect to base-rate borrowings, subject to a minimum base rate of 0.00%. The applicable margin spread for the U.S. Term
Loan A, Canadian Term Loan and the senior secured revolving credit facility is 1.50% to 2.25% (as of September 29, 2017—1.75%)
with respect to eurocurrency (LIBOR) borrowings, bankers’ acceptance ("BA") rate borrowings and letters of credit fees and 0.50%
to 1.25% (as of September 29, 2017—0.75%) with respect to U.S. and Canadian base rate borrowings. The applicable margin for
the Yen Term Loan is 1.75%. The applicable margin for the Euro Term Loan is 1.50%. In addition to paying interest on outstanding
principal under the senior secured credit facilities, 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 ranges
from 0.25% to 0.40% per annum (as of September 29, 2017—0.30%). The actual spreads within all ranges referred to above are
based on a Consolidated Leverage Ratio, as defined in the Credit Agreement.
The Company's revolving credit facility includes a $250.0 million sublimit for letters of credit.
The Credit Agreement provides that the Company has the right at any time to request one or more incremental term loan facilities or
increases under existing term loan facilities and/or additional revolving credit facilities or increases under the existing revolving
credit facility in an amount up to $1,400.0 million of incremental commitments in the aggregate plus an unlimited amount so long as
the pro forma Consolidated Secured Debt to Covenant Adjusted EBITDA ratio (each as calculated in accordance with the Credit
Agreement (the "Consolidated Secured Debt Ratio")) would not exceed 3.00 to 1.00, plus any amount of loans and commitments
optionally prepaid and terminated under the senior secured credit facilities. 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 customary conditions precedent. The revolving credit facility may be drawn by ASI as well as by
certain foreign subsidiaries of ASI. Each foreign borrower is subject to a sublimit of $150.0 million with respect to borrowings
under the revolving credit facility.
As of September 29, 2017, there was approximately $998.5 million available for borrowing under the revolving credit facility.
Prepayments and Amortization
The Credit Agreement requires us to prepay outstanding term loans, subject to certain exceptions, with:
•
•
•
50% of ASI's annual excess cash flow (as defined in the Credit Agreement) with stepdowns to 25% and 0% upon ASI's
reaching certain Consolidated Secured Debt Ratio thresholds; provided, further, that such prepayment shall only be
required to the extent excess cash flow for the applicable year exceeds $10.0 million;
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; provided, further, that such prepayment shall only be required to the extent
net cash proceeds exceeds $100.0 million; and
100% of the net cash proceeds of any incurrence of debt, but excluding proceeds from certain debt permitted under the
Credit Agreement.
The foregoing mandatory prepayments will be applied to the term loan facilities on a pro rata basis and will reduce the obligations
to make scheduled amortization payments on a dollar for dollar basis as directed by the Company. The Company may voluntarily
repay outstanding loans under the Credit Agreement any time without premium or penalty, other than (i) customary "breakage" costs
with respect to LIBOR loans and (ii) with respect to any voluntary prepayments of the U.S. Term Loan B in connection with any
repricing transaction (as defined in the Credit Agreement) effected prior to September 28, 2017, a 1% prepayment premium. 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 $330.6 million and $160.0 million of outstanding U.S. dollar term loans, during fiscal
2017 and fiscal 2016, respectively.
If a change of control as defined in the Credit Agreement occurs, this will cause an event of default under the Credit Agreement.
Upon an event of default, the new 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 new senior secured
credit facilities under the Credit Agreement.
The Company is required to make quarterly principal repayments on the U.S. Term Loan B and the Yen Term Loan in quarterly
amounts of 1.00% per annum of their funded total principal amount. The Company is required to make quarterly principal
repayments on the U.S. Term Loan A in quarterly amounts of 5.0%, 5.0%, 7.5%, 10.0% and 15.0% per annum of their funded total
principal amount after the anniversary of the first, second, third, fourth and fifth years under the Credit Agreement. The Company is
required to make quarterly principal repayments on the Canadian Term Loan in quarterly amounts of 4.4%, 5.0%, 7.5%, 10.1% and
S-16 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15.1% per annum of their funded total principal amount after the anniversary of the first, second, third, fourth and fifth years under
the Credit Agreement. The Company is required to make quarterly principal repayments on the Euro Term Loan in quarterly
amounts of 5.0%, 6.3%, 8.8%, 12.5% and 15.0% per annum of their funded total principal amount after the anniversary of the first,
second, third, fourth and fifth years under the Credit Agreement.
Guarantees
All obligations under the Credit Agreement are unconditionally guaranteed by Aramark Intermediate HoldCo Corporation and,
subject to certain exceptions, substantially all of ASI's existing and future wholly-owned domestic subsidiaries excluding certain
immaterial subsidiaries, receivables facility subsidiaries, certain other customarily excluded subsidiaries and certain subsidiaries
designated under the Credit Agreement as "unrestricted subsidiaries", referred to, collectively, as the U.S. Guarantors. All
obligations under the Credit Agreement, and the guarantees of those obligations, are secured by (i) a pledge of 100% of the capital
stock of ASI, (ii) pledges of 100% of the capital stock (or 65% of voting stock and 100% of non-voting stock, in the case of the
stock of foreign subsidiaries) held by ASI, 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 Corporation, ASI or any of
the U.S. Guarantors.
Certain Covenants
The Credit Agreement contains certain covenants that, among other things, restrict, subject to certain exceptions, ASI'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 subordinated debt, except as scheduled or at maturity; create restrictions on
the payment of dividends or other transfers to ASI from its restricted subsidiaries; make certain acquisitions; engage in certain
transactions with affiliates; amend material agreements governing ASI's subordinated debt; and fundamentally change ASI's
business. In addition, the Credit Agreement requires ASI to comply with a maximum Consolidated Secured Debt Ratio maintenance
covenant. The Credit Agreement also contains certain customary affirmative covenants, such as financial and other reporting, and
certain events of default. At September 29, 2017, ASI was in compliance with all of these covenants.
The Credit Agreement requires ASI 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 consisting of debt for borrowed money, capital leases, debt in respect of sale-
leaseback transactions, disqualified and preferred stock and advances under the Receivables Facility secured by a lien reduced by
the amount of cash and cash equivalents on the consolidated balance sheet that is free and clear of any lien. Non-compliance with
the maximum Consolidated Secured Debt Ratio could result in the requirement to immediately repay all amounts outstanding under
the Credit Agreement, which, if ASI's lenders under the Credit Agreement (other than the lenders in respect of ASI’s U.S. Term
Loan B which lenders shall not benefit from the maximum Consolidated Secured Debt Ratio) failed to waive any such default,
would also constitute a default under the indentures governing the senior notes. The actual ratio at September 29, 2017 was 1.87x.
The Credit Agreement establishes an incurrence-based minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA to
consolidated interest expense, as a condition for ASI 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 Credit Agreement. If ASI 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 Credit Agreement and pursuant to specified exceptions, and make certain restricted payments, other than pursuant to
certain exceptions. The actual ratio was 5.82x for the fiscal year ended September 29, 2017.
A failure to pay any obligations under the Credit Agreement as they become due or any event causing amounts to become due prior
to their stated maturity could result in a cross-default and potential acceleration of the Company’s other outstanding debt
obligations, including the senior notes.
Senior Notes
5.000% Senior Notes due 2025 and 3.125% Senior Notes due 2025
The 5.000% 2025 Notes were issued pursuant to an indenture, dated as of March 22, 2017 (the "5.000% 2025 Notes Indenture"),
entered into by and among ASI, the Company and certain other Aramark entities, as guarantors, and The Bank of New York Mellon,
as trustee. The 5.000% 2025 Notes were issued at par. The 3.125% 2025 Notes were issued pursuant to an indenture, dated as of
March 27, 2017 (the "3.125% 2025 Notes Indenture"), entered into by and among AIFS, the Company and certain other Aramark
entities, as guarantors, The Bank of New York Mellon, as trustee and registrar, and The Bank of New York Mellon, London Branch,
as paying agent and transfer agent. The 3.125% 2025 Notes were issued at par.
The 2025 Notes are senior unsecured obligations of the respective Issuers. Each series of the 2025 Notes ranks equal in right of
payment to all of the respective Issuer's existing and future senior indebtedness, including the senior secured credit facilities under
the Credit Agreement, and, in the case of the 5.000% 2025 Notes with respect to ASI, ASI's 5.125% Senior Notes due 2024 (the
"2024 Notes") and 4.750% Senior Notes due 2026 (the "2026 Notes") and will rank senior in right of payment to the respective
Issuer's future subordinated indebtedness. The 2025 Notes are guaranteed on a senior, unsecured basis by the Company and
substantially all of the domestic subsidiaries of ASI and the 3.125% 2025 Notes are guaranteed on a senior, unsecured basis by ASI.
Aramark 2017 Form 10-K S-17
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The guarantees of the 2025 Notes rank equal in right of payment to all of the senior obligations of such guarantor, including
guarantees of the senior secured credit facilities, the 2024 Notes, the 2026 Notes and the 5.000% 2025 Notes or 3.125% 2025 Notes,
as applicable, and in the case of the 3.125% 2025 Notes with respect to ASI, ASI’s obligations under the senior secured credit
facilities, the 2024 Notes, the 2026 Notes and the 5.000% 2025 Notes. Each series of the 2025 Notes and the related guarantees
thereof are effectively subordinated to all of the respective Issuers' existing and future secured indebtedness, including obligations
and/or guarantees of the senior secured credit facilities under the Credit Agreement, to the extent of the value of the assets securing
that indebtedness, and structurally subordinated to all of the liabilities of any of ASI's subsidiaries that do not guarantee the 2025
Notes. Interest on the 2025 Notes is payable on April 1 and October 1 of each year, commencing on October 1, 2017.
In the event of certain types of changes of control, the holders of the 2025 Notes may require the applicable Issuer to purchase for
cash all or a portion of their 2025 Notes at a purchase price equal to 101% of the principal amount of such 2025 Notes, plus accrued
and unpaid interest, if any, to, but not including, the purchase date. Beginning April 1, 2020, ASI has the option to redeem all or a
portion of the 5.000% 2025 Notes at any time at the redemption prices set forth in the 5.000% 2025 Notes Indenture, plus accrued
and unpaid interest. Beginning April 1, 2020, AIFS has the option to redeem all or a portion of the 3.125% 2025 Notes at any time at
the redemption prices set forth in the 3.125% 2025 Notes Indenture, plus accrued and unpaid interest.
The 5.000% 2025 Notes Indenture and the 3.125% 2025 Notes Indenture contain covenants limiting ASI'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 ASI; enter into sale and leaseback transactions; merge, consolidate, sell or
otherwise dispose of all or substantially all of ASI's and its restricted subsidiaries assets; and designate ASI's subsidiaries as
unrestricted subsidiaries. The 5.000% 2025 Notes Indenture and the 3.125% 2025 Notes Indenture also provide for events of default
which, if any of them occurs, would permit or require the principal of and accrued interest on the applicable series of 2025 Notes to
become or to be declared due and payable. Further, a failure to pay any obligations under the 5.000% 2025 Notes Indenture or the
3.125% 2025 Notes Indenture as they become due or any event causing amounts to become due prior to their stated maturity could
result in a cross-default and potential acceleration of the Company’s other outstanding debt obligations, including the other senior
notes and obligations under the Credit Agreement.
Fiscal 2016 Refinancing Transactions
On May 31, 2016, ASI issued $1.0 billion principal amount of senior unsecured notes, consisting of $500 million aggregate
principal amount of 2024 Notes and $500 million of aggregate principal amount of 2026 Notes. The additional 2024 Notes were
issued pursuant to an indenture dated as of December 17, 2015, as supplemented by the supplemental indenture, dated as of May 31,
2016, entered into by ASI, certain other Aramark entities, as guarantors of the 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, entered into by ASI, certain other Aramark
entities, as guarantors of the 2026 Notes and The Bank of New York Mellon, as trustee. The additional 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 2024 Notes and the 2026 Notes and premium from the 2024 Notes were used to redeem $194.1 million of
the senior secured term loan facility due September 2019 (the "2019 Term Loans"), repay $771.2 million principal of the 2020
Notes, pay a $22.2 million call premium on the 2020 Notes, pay $11.1 million of accrued interest on the 2020 Notes and fees and
costs associated with the 2024 Notes and 2026 Notes. As a result of the issuance of the 2024 Notes and 2026 Notes, the Company
recorded charges of approximately $30.2 million, to "Interest and Other Financing Costs, net" in the Consolidated Statements of
Income for the fiscal year ended September 30, 2016, 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
Company also paid approximately $14.2 million in debt issuance costs spread evenly between the 2024 Notes and 2026 Notes,
which were recorded as a reduction to "Long-Term Borrowings" in the Consolidated Balance Sheets.
On December 17, 2015, ASI issued $400 million of 2024 Notes, pursuant to an indenture, dated as of December 17, 2015, entered
into by ASI, certain other Aramark entities, as guarantors of the 2024 Notes and the Bank of New York Mellon, as trustee. The 2024
Notes were issued at par. The Company paid approximately $6.0 million in financing fees related to the 2024 Notes.
The 2024 Notes and 2026 Notes are senior unsecured obligations of ASI. The 2024 Notes and 2026 Notes rank equal in right of
payment to all of ASI's existing and future senior debt, including the senior secured credit facilities under the Credit Agreement and
the 2025 Notes and senior in the right of payment to ASI's future debt and other obligations that are expressly subordinated in right
of payment to the 2024 Notes and 2026 Notes. The 2024 Notes and 2026 Notes are guaranteed on a senior, unsecured basis by the
Company and substantially all of the domestic subsidiaries of ASI. The Notes and the guarantees thereof are effectively
subordinated to all existing and future secured debt of ASI and the guarantors including obligations and/or guarantees of the senior
secured credit facilities under the Credit Agreement, to the extent of the value of the assets securing such debt, and structurally
subordinated to all of the liabilities of any of ASI's subsidiaries that do not guarantee the 2024 Notes and 2026 Notes. Interest on the
2024 Notes is payable on January 15 and July 15 of each year.
In the event of certain types of changes of control, the holders of the 2024 Notes or 2026 Notes may require ASI to purchase for
cash all or a portion of their 2024 Notes or 2026 Notes, as applicable, at a purchase price equal to 101% of the principal amount of
S-18 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
such notes, plus accrued and unpaid interest, if any, to, but not including, the purchase date. Beginning January 15, 2019, ASI has
the option to redeem all or a portion of the 2024 Notes at any time at the redemption prices set forth in the 2024 Notes Indenture,
plus accrued and unpaid interest. Beginning June 1, 2021, ASI has the option to redeem all or a portion of the 2026 Notes at any
time at the redemption prices set forth in the 2026 Notes Indenture, plus accrued and unpaid interest.
The 2024 Notes Indenture and 2026 Notes Indenture contain covenants limiting ASI'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 ASI; enter into sale and leaseback transactions; merge, consolidate, sell or otherwise
dispose of all or substantially all of ASI's and it restricted subsidiaries' assets; and designate ASI'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 2024 Notes and 2026 Notes to become or to be declared due and payable.
Future Maturities and Interest and Other Financing Costs, net
At September 29, 2017, annual maturities on long-term borrowings maturing in the next five fiscal years and thereafter (excluding
the $47.2 million reduction to long-term borrowings from debt discounts and deferred financing fees and the increase of $14.9
million from the premium on the 2024 Notes) are as follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
$
78,157
321,416
132,261
149,435
795,751
3,823,807
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 29, 2017
September 30, 2016
October 2, 2015
$
$
285,995
(5,942)
7,362
287,415
$
$
315,166
(5,288)
5,505
315,383
$
$
286,261
(4,932)
4,613
285,942
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.
Aramark 2017 Form 10-K S-19
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash Flow Hedges
The Company has approximately $1.6 billion notional amount of outstanding interest rate swap agreements, fixing the rate on a like
amount of variable rate borrowings, as of September 29, 2017. During fiscal 2017, the Company entered into $200.0 million
notional amount of forward starting interest rate swap agreements to hedge the cash flow risk of variability in interest payments on
variable rate borrowings. In addition, interest rate swaps with a notional amount of $1.0 billion matured during fiscal 2017. As a
result of the Credit Agreement, the Company de-designated the previous interest rate swap agreements as the terms of the interest
rate swaps did not match the terms of the new term loans. Prior to the Credit Agreement, these agreements met the required criteria
to be designated as cash flow hedging instruments. The Company then amended the interest rate swap agreements to match the
terms of the new term loans under the Credit Agreement to meet the criteria to be designated as cash flow hedging instruments. As a
result of the de-designation, the Company recorded charges to "Interest and Other Financing Costs, net" in the Consolidated
Statements of Income during fiscal 2017 of approximately $2.9 million for the changes in market value of the interest rate swaps.
During the first quarter of fiscal 2018, the Company entered into an additional $500.0 million notional amount of forward starting
interest rate swap agreements.
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 29, 2017 and September 30, 2016, approximately ($6.8) million and ($36.4) 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 2017, fiscal 2016 and fiscal 2015 was not material.
During 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 during fiscal 2016. The termination of these agreements resulted in the Company
receiving $5.7 million of proceeds during fiscal 2016.
The following table summarizes the effect of our derivatives designated as cash flow hedging instruments (effective portion) on
Other comprehensive loss (in thousands):
Fiscal Year Ended
Interest rate swap agreements
Cross currency swap agreements
September 29, 2017
31,884
$
—
31,884
$
September 30, 2016
$
(21,321) $
(2,116)
(23,437) $
October 2, 2015
(70,455)
12,312
(58,143)
$
Derivatives not Designated in Hedging Relationships
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 29, 2017, the Company has contracts for approximately 16.7 million gallons outstanding for 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 was not material for fiscal 2017. 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 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 29, 2017, the Company had foreign currency forward exchange contracts outstanding with notional amounts of
€33.0 million, £12.1 million and CAD67.0 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.
S-20 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 29, 2017
September 30, 2016
ASSETS
Not designated as hedging instruments:
Foreign currency forward exchange contracts
Gasoline and diesel fuel agreements
Prepayments and other
current assets
Prepayments and other
current assets
LIABILITIES
Designated as hedging instruments:
Interest rate swap agreements
Interest rate swap agreements
Accrued expenses and other
current liabilities
Other Noncurrent Liabilities
Not designated as hedging instruments:
Foreign currency forward exchange contracts
Accounts Payable
$
$
$
$
$
$
80
$
3,626
3,706
1,196
9,313
10,509
$
$
$
— $
$
10,509
—
3,878
3,878
5,929
34,919
40,848
447
41,295
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):
Income Statement Location
September 29, 2017
Fiscal Year Ended
September 30,
2016
October 2, 2015
Designated as hedging instruments:
Interest rate swap agreements
Cross currency swap agreements
Interest Expense
Interest Expense
Not designated as hedging instruments:
Gasoline and diesel fuel agreements
Costs of services
provided / Selling and
general corporate
expenses
Foreign currency forward exchange
contracts
Interest Expense
$
$
$
$
$
16,606
—
16,606
$
$
32,800
2,061
34,861
$
$
31,367
(11,224)
20,143
(1,277) $
(685) $
8,512
(886)
(2,163) $
$
14,443
(8,847)
(9,532) $
$
25,329
(4,821)
3,691
23,834
The Company has a Japanese yen denominated term loan in the amount of ¥11,051.5 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. Additionally, the Company has a Euro denominated term loan in the amount of €170.0 million. The term loan was
designated as a hedge of the Company's net Euro currency exposure represented by certain holdings in our European affiliates.
At September 29, 2017, 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 $2.3 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 2017, fiscal 2016 and
fiscal 2015 was $27.5 million, $32.4 million and $29.0 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
Aramark 2017 Form 10-K S-21
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Kingdom. The total expense of these international plans for fiscal 2017, fiscal 2016 and fiscal 2015 was $6.9 million, $9.4 million
and $8.5 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 2017, fiscal 2016 and fiscal 2015 (in thousands):
Service cost
Interest cost
Expected return on plan assets
Settlements
Amortization of prior service cost
Recognized net loss
Net periodic pension cost
September 29, 2017
September 30, 2016
October 2, 2015
Fiscal Year Ended
$
$
8,834
8,398
(18,350)
—
122
3,400
2,404
$
$
7,850
11,041
(17,679)
159
107
1,504
2,982
$
$
9,478
12,367
(16,970)
52
165
1,658
6,750
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 29, 2017
339,313
$
13,883
8,834
8,398
2,261
(24,923)
(14,316)
222
333,672
$
September 30, 2016
302,087
$
(18,867)
7,850
11,041
2,233
51,620
(16,106)
(545)
339,313
$
$
$
$
319,985
14,564
4,285
2,261
14,759
(14,316)
—
341,538
7,866
$
$
$
304,376
(17,841)
25,404
2,233
22,464
(16,106)
(545)
319,985
(19,328)
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)
$
23,056
(15,190)
77,717
6,452
(25,780)
100,265
September 29, 2017
September 30, 2016
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 29, 2017
September 30, 2016
2.8%
2.4%
6.1%
3.8%
3.2%
6.2%
S-22 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following weighted average assumptions were used to determine the funded status of the respective fiscal years:
Discount rate
Rate of compensation increase
September 29, 2017
September 30, 2016
2.9%
2.4%
3.3%
3.3%
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 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 29, 2017 was $316.0 million. During fiscal 2017, actuarial losses of
approximately $24.8 million were recognized in other comprehensive income (before taxes) and $3.6 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 29, 2017 expected to be recognized in net periodic pension cost
during fiscal 2018 is approximately $3.4 million (before taxes).
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 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 29, 2017 and September 30, 2016 (in thousands):
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
September 29, 2017
September 30, 2016
$
$
141,401
140,547
126,210
139,088
136,605
113,710
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.
Aramark 2017 Form 10-K S-23
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of plan assets for the Company's defined benefit pension plans as of September 29, 2017 and September 30, 2016 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 29, 2017
741
$
$
Quoted prices in
active markets
Level 1
Significant other
observable inputs
Level 2
Significant
unobservable inputs
Level 3
741
$
— $
—
202,253
128,155
10,389
341,538
$
September 30, 2016
21,009
$
173,704
116,168
9,104
319,985
$
$
$
$
—
—
—
741
$
202,253
128,155
—
330,408
$
—
—
10,389
10,389
Quoted prices in
active markets
Level 1
Significant other
observable inputs
Level 2
Significant
unobservable inputs
Level 3
21,009
$
— $
—
—
—
21,009
$
173,704
116,168
—
289,872
$
—
—
—
9,104
9,104
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 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 33%) and international companies (approximately
67%) that are diversified across industry, country and stock market capitalization. Investments in fixed income securities include
domestic (approximately 4%) and international (approximately 96%) 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 during fiscal 2016. 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 2018
Fiscal 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023 – 2027
21,015
12,973
13,298
13,983
14,443
77,991
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 2018 are approximately $7.5
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.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers.
S-24 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
c.
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.
The Company's participation in these plans for fiscal 2017 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 2017 and 2016 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 2017, fiscal 2016 and fiscal 2015 contributions.
Pension
Fund
National Retirement Fund
EIN/
Pension
Plan
Number
13-6130178
/ 001
Pension Protection
Act Zone Status
2017
Critical
2016
FIP/RP Status
Pending/
Implemented
Contributions by the Company
(in thousands)
2017
2016
2015
Critical
Implemented
$
7,541 $
6,675 $
6,580
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
534
397
448
339
527
300
Central States SE and SW
Areas Pension Plan
36-6044243
/ 001
Critical and
Declining
Critical and
Declining
Implemented
3,836
3,723
3,659
Surcharge
Imposed
No
No
No
No
No
Range of
Expiration
Dates of
CBAs
1/15/2015 -
9/30/2021
6/30/2018 -
9/30/2019
10/31/2017
- 6/30/2019
1/31/2007 -
2/15/2020
1/31/2018 -
6/30/2018
Pension Plan for Hospital &
Health Care Employees
Philadelphia & Vicinity
Local 731 IBT Textile
Maintenance and Laundry
Craft Pension Fund
SEIU National Industry
Pension Fund (3)
Local 171 Pension Plan
PACE Industry Union-
Management Pension Fund
Other funds
Total contributions
23-2627428
/ 001
51-6056180
/ 001
52-6148540
/ 001
37-6155648
/ 001
11-6166763
/ 001
Critical
Critical
Implemented
Critical
Critical
Implemented
Critical
Critical
Implemented
Critical and
Declining
Critical and
Declining
Critical and
Declining
Critical and
Declining
Implemented
Implemented
336
898
429
82
26
216
198
813
768
No
4/29/2019
404
298
83
25
79
30
No
No
No
4/14/2019 -
12/31/2019
7/7/2017
3/30/2018
15,170
14,415
13,964
$
29,249 $
27,141 $
26,403
(1)
(2)
(3)
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.
Over 75% of the Company's participants in this fund are covered by a single CBA that expires on 12/31/2019.
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)
12/31/2016 and 12/31/2015
Service Employees Pension Fund of Upstate New York
12/31/2016 and 12/31/2015
Local 731 IBT Textile Maintenance and Laundry Craft Pension Fund
12/31/2016 and 12/31/2015
Local 171 Pension Plan
12/31/2016 and 12/31/2015
At the date the Company's financial statements were issued, Forms 5500 were not available for the plan years ending in 2017.
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.
Aramark 2017 Form 10-K S-25
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 29, 2017
362,783
157,859
520,642
Fiscal Year Ended
September 30, 2016
284,216
146,715
430,931
$
$
$
$
October 2, 2015
250,069
91,927
341,996
September 29, 2017
September 30, 2016
October 2, 2015
Fiscal Year Ended
111,175
15,455
57,681
184,311
(21,956)
3,165
(19,065)
(37,856)
146,455
$
$
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
$
$
$
$
Current taxes receivable of $9.6 million and $48.5 million at September 29, 2017 and September 30, 2016, respectively, are
included in "Prepayments and other current assets" in the Consolidated Balance Sheets. Current income taxes payable of $30.7
million and $10.3 million at September 29, 2017 and September 30, 2016, 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(1)
Uncertain tax positions
Tax credits & other
Effective income tax rate
September 29, 2017
September 30, 2016
October 2, 2015
Fiscal Year Ended
35.0%
2.3
(4.3)
(3.8)
1.4
(2.5)
28.1%
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%
(1) Includes the reduction of approximately 4% related to the adoption of the ASU related to share-based payment
transactions in fiscal 2017 (see Note 1).
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 29, 2017, certain subsidiaries have recorded deferred tax assets of $21.3 million associated with accumulated
federal, state and foreign net operating loss carryforwards. The Company believes it is more likely than not that the benefit from
certain state net operating loss ("NOL") carryforwards will not be realized. As a result, the Company has recorded a valuation
allowance of approximately $11.5 million on the deferred tax asset related to these state NOL carryforwards.
S-26 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of September 29, 2017, the Company has approximately $24.8 million of foreign tax credit carryforwards, which expire in 2027.
The Company believes there is sufficient taxable income in the carryforward period to utilize these credits; and a valuation
allowance was not provided.
As of September 29, 2017 and September 30, 2016, the components of deferred taxes are as follows (in thousands):
Deferred tax liabilities:
Property and equipment
Investments
Other intangible assets, including goodwill
Inventory
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 29, 2017
September 30, 2016
$
$
92,268
20,317
629,153
97,622
25,992
865,352
—
33,811
209,951
31,026
48,793
323,581
(11,513)
553,284
$
$
87,191
46,125
655,319
97,796
15,897
902,328
1,618
19,276
249,509
21,716
26,707
318,826
(7,352)
590,854
Deferred tax liabilities of approximately $570.9 million and $608.4 million as of September 29, 2017 and September 30, 2016,
respectively, are included in "Deferred Income Taxes and Other Noncurrent Liabilities" in the Consolidated Balance Sheets.
Deferred tax assets of approximately $17.6 million and $17.4 million as of September 29, 2017 and September 30, 2016,
respectively, are included in "Other Assets" in the Consolidated Balance Sheets.
Prior to fiscal 2017, the Company provided deferred taxes on all unremitted earnings of its foreign subsidiaries. Effective for the
first quarter of fiscal 2017, the Company asserted that the prospective unremitted earnings of certain foreign subsidiaries would be
permanently invested. As a result of a foreign restructuring plan completed in the fourth quarter of fiscal 2017, the Company further
asserted all unremitted earnings of certain foreign subsidiaries held as of September 29, 2017, are permanently invested outside the
U.S. Accordingly, the Company recorded a net benefit related to this assertion of approximately $1.9 million to the Consolidated
Statements of Income.
Undistributed earnings of foreign subsidiaries for which no deferred tax liability has been recorded are approximately $40.0 million
at September 29, 2017. Those earnings are considered to be indefinitely reinvested and, accordingly, no deferred income taxes have
been provided. If the unremitted earnings are no longer permanently invested in a subsequent period, the Company will record a
provision for deferred income taxes on these unremitted earnings. The estimated tax cost associated with remitting these earnings is
not expected to have a significant adverse effect on the results of operations.
The Company has approximately $30.8 million of total gross unrecognized tax benefits as of September 29, 2017, 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 for tax positions taken in prior years
Reductions for remeasurements, settlements and payments
Reductions due to statute expiration
Balance, end of year
September 29, 2017
22,752
$
9,323
4,028
(3,972)
(1,319)
30,812
$
September 30, 2016
21,412
$
481
2,141
(185)
(1,097)
22,752
$
The Company has approximately $5.0 million and $6.0 million accrued for interest and penalties as of September 29, 2017 and
September 30, 2016, respectively, and recorded approximately ($1.0) million and $0.4 million in interest and penalties during fiscal
2017 and fiscal 2016, respectively. Interest and penalties related to unrecognized tax benefits are recorded in "Provision for income
taxes" in the Consolidated Statements of Income.
Unrecognized tax benefits are not expected to significantly change within the next 12 months.
Aramark 2017 Form 10-K S-27
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Generally, a number of years may elapse before a tax reporting year is audited and finally resolved. With few exceptions, the
Company is no longer subject to U.S. federal, state or local examinations by tax authorities before 2013. 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 U.S. federal, state or foreign tax audits that would result in a material change to the financial condition or results of
operations. Adequate amounts are established for any adjustments that may result from examinations for tax years after 2013.
However, an unfavorable settlement of a particular issue would require use of the Company's cash.
NOTE 9. STOCKHOLDERS' EQUITY:
During fiscal 2015, the Company completed a repurchase of 1.5 million shares of its common stock for approximately $48.5
million.
During fiscal 2017, the Board of Directors authorized a new share repurchase program providing for purchases of up to $250.0
million of Aramark common stock during fiscal 2017 and fiscal 2018. The Company completed a repurchase of approximately 2.8
million shares of its common stock for $100.0 million in fiscal 2017.
The following table presents the Company's dividend payments to its stockholders (in millions):
Dividend payments
$
100.8
September 29, 2017
September 30, 2016
92.1
$
$
October 2, 2015
81.9
On November 13, 2017, a $0.105 dividend per share of common stock was declared, payable on December 7, 2017, to shareholders
of record on the close of business on November 27, 2017.
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 "Old 2013 Stock Plan"), which became effective on December 1, 2013 and the
amended and restated Old 2013 Stock Plan was approved by the Board on November 9, 2016 and approved by the stockholders of
Aramark on February 1, 2017 (as amended, the "2013 Stock Plan"). 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
RSUs
PSUs
Deferred Stock and Other Units
Taxes related to share-based compensation
Cash Received from Option Exercises
Tax Benefit on Option Exercises (1)
September 29, 2017
$
$
$
$
$
$
20.4
—
20.8
21.6
2.4
65.2
24.2
28.8
23.3
Fiscal Year Ended
September 30, 2016
18.8
—
21.4
13.9
2.8
56.9
22.3
35.7
32.0
$
$
$
October 2, 2015
16.4
10.8
19.5
17.4
2.3
66.4
26.0
39.9
66.3
(1) The tax benefit on option exercises and restricted stock unit deliveries is included in "Accrued expenses" in the Consolidated Statements of Cash
Flows.
S-28 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
No compensation expense was capitalized. Based on historical activity, 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 29, 2017 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)
$
$
27.0
34.8
19.6
81.4
Weighted-Average
Period (Years)
2.46
2.76
1.72
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 29, 2017
25%
1.11% - 1.21%
6.25
2.14% - 2.20%
$8.47
Fiscal Year Ended
September 30, 2016
30%
1.15% - 1.25%
6.25
1.50% - 2.04%
$9.21
October 2, 2015
30%
1.05% - 1.20%
6.25
1.60% - 2.07%
$8.34
Options
Outstanding at September 30, 2016
Granted
Exercised
Forfeited and expired
Outstanding at September 29, 2017
Exercisable at September 29, 2017
Expected to vest at September 29, 2017
Shares
(000s)
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value ($000s)
Weighted-
Average
Remaining
Term (Years)
12,354
2,584
$
$
(1,561) $
(303) $
13,074
7,474
5,113
$
$
$
21.48
34.11
8.21
27.94
24.39
18.71
31.96
$
$
$
206,623
160,536
42,077
6.7
5.5
8.2
Total intrinsic value exercised (in millions)
Total fair value that vested (in millions)
Fiscal Year Ended
$
September 29, 2017
32.2
17.7
September 30, 2016
49.9
$
17.5
$
October 2, 2015
107.8
13.7
Performance-Based Options
During 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
Aramark 2017 Form 10-K S-29
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 September 30, 2016
Granted
Exercised
Forfeited and expired
Outstanding at September 29, 2017
Exercisable at September 29, 2017
Shares
(000s)
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value ($000s)
Weighted-
Average
Remaining
Term (Years)
3,174
$
— $
(992) $
— $
$
$
2,182
2,182
11.54
—
9.92
—
12.28
12.28
$
$
60,908
60,908
3.8
3.8
The total intrinsic value of PBOs exercised during fiscal 2017, fiscal 2016 and fiscal 2015 was $26.6 million, $39.2 million and
$102.9 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 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 September 30, 2016
Granted
Vested
Forfeited
Outstanding at September 29, 2017
Units
(000s)
Weighted Average
Grant Date Fair
Value
1,620
1,376
(911)
(150)
1,935
$
$
$
$
$
25.87
34.09
22.32
31.09
31.44
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 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 fiscal 2016, the Company granted PSUs with cliff vesting subject to the
achievement of adjusted earnings per share 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. During fiscal 2017, the
Company granted PSUs subject to the level of achievement of adjusted earnings per share for the cumulative three year performance
period and the participant's continued employment with the Company.
Performance Stock Units
Outstanding at September 30, 2016
Granted
Vested
Forfeited
Outstanding at September 29, 2017
Units
(000s)
1,298
455
(422)
(61)
1,270
$
$
$
$
$
Weighted
Average Grant
Date Fair Value
30.02
34.12
26.67
31.52
31.82
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
S-30 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 58,376 deferred stock units during fiscal 2017. 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
$
373,923
$
287,806
$
235,946
Fiscal Year Ended
September 29, 2017
September 30, 2016
October 2, 2015
Shares:
Basic weighted-average shares outstanding
Effect of dilutive securities
Diluted weighted-average shares outstanding
Basic Earnings Per Share:
244,453
7,104
251,557
242,286
6,477
248,763
Net income attributable to Aramark stockholders
Diluted Earnings Per Share:
Net income attributable to Aramark stockholders
$
$
1.53
1.49
$
$
1.19
1.16
$
$
237,616
9,000
246,616
0.99
0.96
Share-based awards to purchase 3.9 million, 2.1 million and 2.5 million shares were outstanding at September 29, 2017,
September 30, 2016 and October 2, 2015, 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 1.2 million and 0.6 million were outstanding
at September 29, 2017 and September 30, 2016, respectively, but were not included in the computation of diluted earnings per
common share, as the performance targets were not yet met.
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, which expires in May 2019. 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.
At September 29, 2017 and September 30, 2016, the amount of outstanding borrowings under the Receivables Facility was $254.2
million and $268.0 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 $962.9 million at September 29, 2017, primarily in
connection with commitments for capital projects and client contract investments. At September 29, 2017, the Company also has
letters of credit outstanding in the amount of $33.1 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 $112.7
million at September 29, 2017 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 29, 2017.
Aramark 2017 Form 10-K S-31
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rental expense for all operating leases was $170.0 million, $180.7 million and $181.8 million for fiscal 2017, fiscal 2016 and fiscal
2015, 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 29, 2017 (in thousands):
$
2018
2019
2020
2021
2022
2023-Thereafter
Total minimum rental obligations
$
213,414
65,418
63,678
45,956
32,511
202,504
623,481
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.
NOTE 14. QUARTERLY RESULTS (Unaudited):
The following tables summarize the Company's unaudited quarterly results for fiscal 2017 and fiscal 2016 (in thousands):
Sales
Cost of services provided
Net income
Net income attributable to Aramark
stockholders
Earnings per share:
Basic
Diluted
Dividends declared per common share
Quarter Ended
December 30, 2016
3,735,383
$
March 31, 2017
3,621,628
$
June 30, 2017
$
3,593,277
September 29, 2017
3,654,124
$
3,299,329
125,435
125,339
3,226,196
3,232,366
70,231
70,151
65,364
65,295
$
$
0.51
0.50
0.103
$
0.29
0.28
0.103
$
0.27
0.26
0.103
3,231,082
113,157
113,138
0.46
0.45
0.103
Sales
January 1, 2016
April 1, 2016
July 1, 2016
$
3,710,275
$
3,574,822
$
3,586,908
September 30, 2016
3,543,824
$
Quarter Ended
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
3,152,291
83,441
83,344
0.34
0.33
0.095
S-32 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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). In the Company's food and support services segments, approximately 80% of the global sales is related to
food services and 20% is related to facilities services. Financial information by segment follows (in millions):
FSS North America
FSS International
Uniform
FSS North America
FSS International
Uniform
Corporate
Operating Income
Interest and Other Financing Costs, net
Income Before Income Taxes
FSS North America
FSS International
Uniform
Corporate
FSS North America
FSS International
Uniform
Corporate
* Includes amounts acquired in business combinations
FSS North America
FSS International
Uniform
Corporate
Sales
Fiscal Year Ended
September 29, 2017
10,231.5
$
September 30, 2016
10,122.3
$
$
2,808.2
1,564.7
2,729.8
1,563.7
October 2, 2015
9,950.3
2,858.2
1,520.6
$
14,604.4
$
14,415.8
$
14,329.1
September 29, 2017
621.9
137.0
182.3
941.2
(133.1)
808.1
(287.4)
520.7
$
$
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
494.5
95.3
191.8
781.6
(153.7)
627.9
(285.9)
342.0
Depreciation and Amortization
Fiscal Year Ended
September 29, 2017
380.6
$
September 30, 2016
373.2
$
$
47.4
77.2
3.0
46.3
73.9
2.4
$
508.2
$
495.8
$
October 2, 2015
385.2
47.1
70.2
1.5
504.0
Capital Expenditures and
Client Contract Investments and Other*
Fiscal Year Ended
September 29, 2017
428.0
$
September 30, 2016
378.9
$
$
58.5
67.5
1.0
92.6
70.7
3.3
$
555.0
$
545.5
$
October 2, 2015
395.3
49.1
72.6
7.4
524.4
Identifiable Assets
$
September 29, 2017
7,268.2
1,707.7
September 30, 2016
7,067.5
$
1,521.3
1,828.7
201.6
11,006.2
$
1,786.4
206.9
10,582.1
$
Aramark 2017 Form 10-K S-33
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
United States
Foreign
Sales
Fiscal Year Ended
September 29, 2017
11,098.0
September 30, 2016
11,011.5
$
3,506.4
14,604.4
$
3,404.3
14,415.8
$
$
October 2, 2015
$
$
10,727.8
3,601.3
14,329.1
Property and Equipment, net
September 29, 2017
838.2
203.8
1,042.0
$
$
September 30, 2016
844.3
178.8
1,023.1
$
$
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 29, 2017 and September 30, 2016 was $5,450.1 million and $5,365.6 million,
respectively. The carrying value of the Company's debt at September 29, 2017 and September 30, 2016 was $5,268.5 million and
$5,270.0 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. 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.
The condensed consolidating financial statements are presented for: (i) Aramark (the "Parent"); (ii) Aramark Services, Inc. and
Aramark International Finance S.à.r.l. (the "Issuers"); (iii) the guarantors; (iv) the non guarantors; (v) elimination entries necessary
to consolidate the Parent with the Issuers, the guarantors and non guarantors; and (vi) the Company on a consolidated basis. Each of
the guarantors is wholly-owned, directly or indirectly, by the Company. All other subsidiaries of the Company, either direct or
indirect, are non guarantors and do not guarantee the 2024 Notes, 2025 Notes and 2026 Notes. The guarantors also guarantee certain
other debt. See Note 5 for additional descriptions of these senior notes. 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.
S-34 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEETS
September 29, 2017
(in thousands)
Aramark
(Parent)
Issuers
Guarantors
Non
Guarantors
Eliminations
Consolidated
$ 111,512
$
37,513
$
89,767
$
— $
238,797
303,664
514,267
1,308,608
80,728
3,721
15,737
14,123
145,093
29,869
83,404
938,848
775,362
173,104
4,047,932
90,090
1,569,193
236,800
494,475
567,277
177,141
311,112
2,459,056
5,248,858
—
—
29,683
53,538
90,049
914,000
1,112,076
$ 2,459,061
$ 5,680,145
$ 7,878,267
$ 3,355,998
(8,365,240)
—
(2,002)
1,474,724
$ (8,367,242) $11,006,229
—
—
—
—
—
—
—
88
88
—
1,615,993
610,732
187,617
2,653,139
1,042,031
4,715,511
—
1,120,824
955,925
1,334,013
2,368,095
5,190,331
978,944
—
9,798
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
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
5
—
—
—
5
—
—
—
—
—
$
— $
33,487
$
20,330
$
24,340
$
— $
78,157
167,926
461,192
326,807
200,130
401,543
814,542
1,296,064
— 4,460,730
63,604
—
—
—
425,297
513,797
— 5,224,196
—
9,798
319,253
670,400
665,997
39,850
747,347
—
—
(5,971,543)
—
(2,395,787)
Total Stockholders' Equity
2,459,061
392,575
770,808
1,232,404
$ 2,459,061
$ 5,680,145
$ 7,878,267
$ 3,355,998
2,459,061
$ (8,367,242) $11,006,229
Aramark 2017 Form 10-K S-35
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2016
(in thousands)
Aramark
(Parent)
Aramark
Services,
Inc.
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
$
— $
21,998
$
15,598
$
8,926
$
— $
46,522
—
156,471
415,481
275,636
—
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
—
1,290,635
2,184,745
5,223,514
1,003,013
—
9,794
—
(6,020,230)
—
(2,421,373)
2,161,006
$ (8,443,042) $10,582,072
Total Stockholders' Equity
2,161,006
537,357
1,714,385
169,631
$ 2,161,106
$ 5,872,910
$ 8,175,106
$ 2,815,992
S-36 Aramark 2017 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the year ended September 29, 2017
(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, net of
tax
Comprehensive income attributable
to Aramark stockholders
Aramark
(Parent)
Issuers
$
— $1,041,490
Guarantors
$ 9,708,157
Non
Guarantors
$3,854,765
Eliminations
$
Consolidated
— $ 14,604,412
941,031
8,507,680
3,540,262
— 12,988,973
17,502
416,979
73,731
—
—
—
140,305
273,405
—
— (348,042)
— 1,024,201
17,289
—
138,304
(3,171)
318,199
9,377,991
330,166
20,561
17,181
29,843
3,681,578
173,187
—
—
—
508,212
299,170
287,415
—
—
— 14,083,770
520,642
—
—
373,923
373,923
5,139
—
98,144
43,172
—
—
12,150
232,022
130,015
—
(373,923)
(373,923)
146,455
—
374,187
—
—
264
—
—
264
373,923
12,150
231,758
130,015
(373,923)
373,923
57,023
35,667
431
80,204
(116,302)
57,023
$ 430,946
$
47,817
$ 232,189
$ 210,219
$ (490,225) $
430,946
Aramark 2017 Form 10-K S-37
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)
Aramark
(Parent)
Aramark
Services,
Inc.
$
— $1,025,664
Guarantors
$ 9,670,207
Non
Guarantors
$3,719,958
Eliminations
$
Consolidated
— $14,415,829
—
—
—
134,705
—
293,072
(358,897)
— 1,024,475
—
—
—
287,806
287,806
—
1,189
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
—
—
—
—
495,765
283,342
315,383
—
9,378,918
3,581,505
— 13,984,898
291,289
104,377
—
138,453
37,895
—
186,912
100,558
—
—
(287,806)
(287,806)
430,931
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
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-38 Aramark 2017 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)
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 (Benefit) 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 loss, net of tax
Comprehensive income (loss)
attributable to Aramark
stockholders
Aramark
(Parent)
Aramark
Services,
Inc.
$
— $1,014,783
Guarantors
$ 9,517,309
Non
Guarantors
$3,797,043
Eliminations
$
Consolidated
— $14,329,135
2,177
162,423
—
—
—
(2,177)
—
—
—
235,946
235,946
900,073
8,438,851
3,541,500
— 12,880,424
11,350
415,985
76,698
255,761
(334,778)
994,829
19,954
6,007
—
135,398
(2,404)
306,915
9,294,745
222,564
16,742
32,585
30,040
3,697,565
99,478
70,050
28,963
—
—
13,947
152,514
70,515
—
—
—
504,033
316,740
285,942
—
—
— 13,987,139
341,996
—
—
(235,946)
(235,946)
105,020
—
236,976
—
—
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
Aramark 2017 Form 10-K S-39
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended September 29, 2017
(in thousands)
Net cash provided by operating activities
$
— $ 261,282
$
Aramark
(Parent)
Issuers
Guarantors
779,801
Non
Guarantors
$ 200,579
Eliminations
Consolidated
$ (188,275) $ 1,053,387
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 used in financing activities
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of period
$
—
—
—
—
—
(20,939)
494
(443,262)
14,780
(88,528)
3,632
—
(69,401)
(89,846)
(37,130)
36,946
(428,666)
(104,992)
29,916
(159,972)
—
—
—
—
—
(552,729)
18,906
(142,122)
(2,539)
(678,484)
— 3,451,164
— (3,572,268)
—
(19,851)
400,253
(319,873)
— 3,851,417
— (3,911,992)
—
—
—
—
—
—
—
—
5
5
—
(100,813)
28,779
(100,000)
(69,172)
254,536
—
—
—
(2,973)
(322,142)
(13,800)
—
—
—
29,868
(120,669)
(107,774)
63,662
(344,966)
6,169
(24,221)
16,386
—
—
—
—
—
188,275
188,275
—
(13,800)
(100,813)
28,779
(100,000)
(42,277)
—
(288,686)
86,217
47,850
31,344
73,381
—
152,580
$ 111,512
$
37,513
$
89,767
$
— $
238,797
S-40 Aramark 2017 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)
Aramark
Services,
Inc.
Aramark
(Parent)
$
— $ 160,790
Guarantors
587,572
$
Non
Guarantors
$ 124,191
Eliminations
$
(5,239) $
Consolidated
867,314
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
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)
(51,495)
(197,623)
—
—
—
—
(2,513)
(187,423)
(82,000)
—
—
—
(733)
379,807
—
—
—
—
—
5,239
(82,000)
(92,074)
35,705
(749)
(54,741)
—
(125,814)
(205,354)
168,524
5,239
(157,405)
16,058
(11,467)
25,573
31,792
42,811
47,808
—
—
30,164
122,416
$
47,850
$
31,344
$
73,381
$
— $
152,580
Aramark 2017 Form 10-K S-41
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended October 2, 2015
(in thousands)
Aramark
(Parent)
Aramark
Services,
Inc.
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
(654) $
170,166
$ 318,988
$ 318,647
$
(4,955) $
802,192
—
—
—
—
—
—
—
—
—
—
654
654
—
5
5
(13,871)
454
(444,962)
8,927
(65,551)
9,747
—
(975)
(14,392)
(3,377)
(825)
(440,237)
70,000
(178,919)
(81,898)
39,946
(50,176)
(52,843)
103,624
—
(14,670)
—
—
—
(3,877)
140,968
—
6,099
(49,705)
1,926
(16,032)
—
—
—
(589)
(250,201)
(150,266)
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)
(57,309)
—
(287,132)
10,726
111,690
$
31,792
$
42,811
$
47,808
$
— $
122,416
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
$
S-42 Aramark 2017 Form 10-K
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED SEPTEMBER 29, 2017, SEPTEMBER 30, 2016 AND OCTOBER 2, 2015
ARAMARK AND SUBSIDIARIES
Balance,
Beginning of
Period
Additions
Charged to
Income
Reductions
Deductions
from
Reserves
(1)
Balance,
End of
Period
Description
Fiscal Year 2017
Reserve for doubtful accounts, advances & current notes receivable $
Fiscal Year 2016
Reserve for doubtful accounts, advances & current notes receivable $
Fiscal Year 2015
Reserve for doubtful accounts, advances & current notes receivable $
48,058 $
18,141 $
12,783 $
53,416
39,023 $
21,913 $
12,878 $
48,058
37,381 $
16,220 $
14,578 $
39,023
(1) Amounts determined not to be collectible and charged against the reserve and translation.
Aramark 2017 Form 10-K S-43
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
2.1# Agreement and Plan of Merger, dated October 13, 2017, by and among Avendra LLC, Aramark, Capital Merger
Sub, LLC, and Marriott International, Inc., as Holder Representative (incorporated by reference to Exhibit 2.1 to
Aramark's Current Report on Form 8-K filed with the SEC on October 16, 2017, pursuant to the Exchange Act
(file number 001-36223)).
2.2# Agreement and Plan of Merger, dated October 13, 2017, by and among AmeriPride Services Inc., Aramark,
Timberwolf Acquisition Corporation, and Bruce M. Steiner, as Stockholder Representative (incorporated by
reference to Exhibit 2.2 to Aramark's Current Report on Form 8-K filed with the SEC on October 16, 2017,
pursuant to the Exchange Act (file number 001-36223)).
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 3.3 to Aramark’s Quarterly
Report on Form 10-Q filed with the SEC on August 8, 2017, pursuant to the Exchange Act (file number
001-36223)).
4.1
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)).
4.2 Supplemental Indenture, dated as of May 31, 2016, among Aramark Services, Inc., as issuer, Aramark, as parent
4.3
4.4
4.5
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)).
Indenture dated as of March 22, 2017, 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 March 28, 2017, pursuant to the
Exchange Act (file number 001-36223)).
Indenture dated as of March 27, 2017, among Aramark International Finance S.a. r.l., as issuer, Aramark, as parent
guarantor, Aramark Services, Inc., the other guarantors named therein and The Bank of New York Mellon, as
trustee and registrar, and The Bank of New York Mellon, London Branch, as paying agent and transfer agent
(incorporated by reference to Exhibit 4.2 of Aramark's Current Report on Form 8-K filed with the SEC on March
28, 2017, pursuant to the Exchange Act (file number 001-36223)).
10.1 Credit Agreement, dated as of March 28, 2017, among Aramark Services, Inc., Aramark Intermediate HoldCo
Corporation, ARAMARK Canada Ltd., ARAMARK Investments Limited, ARAMARK Ireland Holdings
Limited, ARAMARK Regional Treasury Europe, Designated Activity Company, ARAMARK Holdings GmbH &
Co. KG, Aramark International Finance S.à r.l., each subsidiary of the U.S. Borrower that from time to time
becomes a party thereto, the financial institutions from time to time party thereto, the issuing banks named
therein, JPMorgan Chase Bank, N.A., as administrative agent for the lenders and collateral agent for the secured
parties thereunder (incorporated by reference to Exhibit 10.1 of Aramark’s Current Report on Form 8-K/A filed
with the SEC on March 29, 2017, pursuant to the Exchange Act (file number 001-36223))
10.2
Incremental Amendment No. 1, dated as of September 20, 2017, among Aramark Services, Inc. (the “Company”)
Aramark Intermediate HoldCo Corporation, ARAMARK Canada Ltd. (“Aramark Canada”), ARAMARK
Investments Limited (“Aramark UK”), and certain wholly-owned subsidiaries of the Company, the financial
institutions party thereto and JPMorgan Chase Bank, N.A. as administrative agent for the Lenders (as defined
below) and collateral agent for the secured parties thereunder to the credit agreement, dated March 28, 2017,
among the Company, Aramark Intermediate HoldCo Corporation, Aramark Canada, Aramark UK, ARAMARK
Ireland Holdings Limited, ARAMARK Regional Treasury Europe, Designated Activity Company, ARAMARK
Holdings GmbH & Co. KG, Aramark International Finance S.à r.l. and certain wholly-owned domestic
subsidiaries of the Company, the financial institutions from time to time party thereto (including the financial
institutions party to the Incremental Amendment, the “Lenders”), the issuing banks named therein and JPMorgan
Chase Bank, N.A., as administrative agent for the Lenders and collateral agent for the secured parties thereunder
(incorporated by reference to Exhibit 10.1 to Aramark's Current Report on Form 8-K filed with the SEC on
September 26, 2017, pursuant to the Exchange Act (file number 001-362223)).
10.3 U.S. Pledge and Security Agreement, dated as of March 28, 2017 by and among Aramark Intermediate HoldCo
Corporation, Aramark Services, Inc., the Subsidiary Parties from time to time party thereto and JPMorgan Chase
Bank, N.A. as collateral agent (incorporated by reference to Exhibit 10.2 to Aramark's Quarterly Report on Form
10-Q filed with the SEC on May 9, 2017, pursuant to the Exchange Act (file number 001-362223)).
S-44 Aramark 2017 Form 10-K
10.4 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)).
10.5† 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)).
10.6† 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)).
10.7† 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)).
10.8† 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)).
10.9† 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)).
10.10† 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)).
10.11† 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)).
10.12† 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)).
10.13† 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)).
10.14† Offer Letter dated October 13, 2014, between Aramark and Harrald Kroeker (incorporated by reference to Exhibit
10.16 to Aramark’s Annual Report on Form 10-K filed with the SEC on November 23, 2016, pursuant to the
Exchange Act (file number 001-36223)).
10.15† Agreement Relating to Employment and Post-Employment Competition dated November 26, 2013 between
Aramark Corporation and Harrald Kroeker (incorporated by reference to Exhibit 10.17 to Aramark’s Annual
Report on Form 10-K filed with the SEC on November 23, 2016, pursuant to the Exchange Act (file number
001-36223)).
10.16† 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 001-16807)).
10.17*† Form of Indemnification Agreement (Directors)
10.18†
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)).
10.19†
10.20†
10.21†
10.22†
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)).
10.23† 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)).
10.24† 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 001-16807)).
Aramark 2017 Form 10-K S-45
10.25† 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)).
10.26† 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)).
10.27† 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)).
10.28† 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)).
10.29† Amended and Restated Aramark Senior Executive Performance Bonus Plan (incorporated by reference to Exhibit
10.2 to Aramark's Quarterly Report on Form 10-Q filed with the SEC on February 7, 2017, pursuant to the
Exchange Act (file number 001-36233)).
10.30† 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)).
10.31† 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)).
10.32† Amended and Restated Aramark Executive Leadership Council Management Incentive Bonus Plan (incorporated
by reference to Exhibit 10.33 to Aramark’s Annual Report on Form 10-K filed with the SEC on November 23,
2016, pursuant to the Exchange Act (file number 001-36223)).
10.33† 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)).
10.34† 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)).
10.35† Aramark's Amended and Restated 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to
Aramark's Quarterly Report on Form 10-Q filed with the SEC on February 7, 2017, pursuant to the Exchange Act
(file number 001-36233)).
10.36† 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 001-16807)).
10.37† Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.1 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)).
10.38† 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)).
10.39† 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 March 1, 2010, 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 June 22, 2011, pursuant to the Exchange Act (file
number 001-04762)).
10.41† 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)).
10.42† 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)).
10.43† 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)).
10.44† 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)).
10.45† 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 001-04762)).
10.46† 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)).
S-46 Aramark 2017 Form 10-K
10.47† 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 8-K filed with the SEC on June 26, 2013, pursuant to the
Exchange Act (file number 001-04762)).
10.48† 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)).
10.49† 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)).
10.50† 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)).
10.51† 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)).
10.52† 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)).
10.53† 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)).
10.54† 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)).
10.55† 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)).
10.56† 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)).
10.57† 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)).
10.58† 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)).
10.59† 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)).
10.60† 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)).
10.61† 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)).
10.62† 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)).
10.63† 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)).
10.64† 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)).
10.65† Form of Schedule I to Performance Stock Unit Award Agreement (incorporated by reference to Exhibit 10.67 to
Aramark’s Annual Report on Form 10-K filed with the SEC on November 23, 2016, pursuant to the Exchange Act
(file number 001-36223)).
10.66† Form of Schedule I to Performance Restricted Stock Award Agreement (incorporated by reference to Exhibit
10.68 to Aramark’s Annual Report on Form 10-K filed with the SEC on November 23, 2016, pursuant to the
Exchange Act (file number 001-36223)).
10.67† Form of Schedule I to Non-Qualified Stock Option Award Agreement (Relative TSR Vesting) (incorporated by
reference to Exhibit 10.69 to Aramark’s Annual Report on Form 10-K filed with the SEC on November 23, 2016,
pursuant to the Exchange Act (file number 001-36223)).
10.68† Form of Schedule I to Restricted Stock Unit Award Agreement (Relative TSR Vesting) (incorporated by reference
to Exhibit 10.70 to Aramark’s Annual Report on Form 10-K filed with the SEC on November 23, 2016, pursuant
to the Exchange Act (file number 001-36223)).
Aramark 2017 Form 10-K S-47
10.69† Form of Schedule I to Performance Restricted Stock Award Agreement (Relative TSR Vesting) (incorporated by
reference to Exhibit 10.71 to Aramark’s Annual Report on Form 10-K filed with the SEC on November 23, 2016,
pursuant to the Exchange Act (file number 001-36223)).
10.70*† Form of Restricted Stock Unit Award (Time Vesting) (Retirement Notice/Full Vest)
10.71*† Form of Performance Stock Unit Award (Retirement Notice/Full Vest)
10.72*† Form of Non-Qualified Stock Option Award (Retirement Notice/Full Vest)
10.73*† Form of Restricted Stock Unit Award (Time Vesting) (Retirement Notice/2Y Vest)
10.74*† Form of Performance Stock Unit Award (Retirement Notice/2Y Vest)
10.75*† Form of Non-Qualified Stock Option Award (Retirement Notice/2Y Vest)
10.76*† Form of Restricted Stock Unit Award (Relative TSR Vesting)
10.77*† Form of Performance Stock Unit Award (Relative TSR Vesting)
10.78*† Form of Non-Qualified Stock Option Award (Relative TSR Vesting)
10.79*† Form of Schedule I to Performance Stock Unit Award
10.80*† Form of Schedule I to Restricted Stock Unit Award (Relative TSR Vesting)
10.81*† Form of Schedule I to Performance Stock Unit Award (Relative TSR Vesting)
10.82*† Form of Schedule I to Non-Qualified Stock Option Award (Relative TSR Vesting)
10.83† 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)).
10.84† 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)).
10.85† 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)).
10.86† 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)).
10.87† 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)).
10.88 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).
10.89 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
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
*
†
#
Filed herewith.
Identifies exhibits that consist of management contract or compensatory arrangement.
These merger agreements are filed as exhibits to this Annual Report on Form 10-K to provide investors and security holders
with information regarding their terms. They are not intended to provide any other factual or financial information about the
Company, Avendra, AmeriPride or their respective subsidiaries and affiliates. The representations, warranties and covenants
S-48 Aramark 2017 Form 10-K
contained in each of the merger agreements were made only for purposes of that agreement and as of the date of such merger
agreement or such other date as is specified in such merger agreement; were solely for the benefit of the parties to such merger
agreement; have been qualified by confidential disclosures made for the purposes of allocating contractual risk between the
parties to such merger agreement instead of establishing these matters as facts; and are subject to materiality qualifications
contained in such merger agreement that may differ from what may be viewed as material by investors. Investors should not
rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts
or condition of the Company, Avendra, AmeriPride or any of their respective subsidiaries or affiliates. Moreover, information
concerning the subject matter of the representations, warranties and covenants may change after the date of the merger
agreements, which subsequent information may or may not be fully reflected in public disclosures by the Company. The merger
agreements should not be read alone but should instead be read in conjunction with the other information that is or will be
included in reports and other filings that the Company files with the Securities and Exchange Commission.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure
other than with respect to the terms of the agreements or other documents themselves, and should not be relied upon for that purpose.
In particular, any representations and warranties made by the Company in these agreements or other documents were made solely
within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they
were made or at any other time.
Aramark 2017 Form 10-K S-49
Selected Operational and Financial Metrics
Adjusted Sales (Organic)
Adjusted Sales (Organic) represents sales growth, adjusted to eliminate the effects of material acquisitions and
divestitures and the impact of currency translation.
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. The
Company also uses Net Debt for its ratio to Covenant Adjusted EBITDA, which is calculated as total long-term
borrowings less cash and cash equivalents.
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 local country tax rate.
Adjusted Net Income (Constant Currency)
Adjusted Net Income (Constant Currency) represents Adjusted Net Income adjusted to eliminate the impact of
currency translation.
Adjusted EPS
Adjusted EPS represents Adjusted Net Income divided by diluted weighted average shares outstanding.
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. Management believes that the presentation of free cash flow
provides useful information to investors because it represents a measure of cash flow available for distribution
among all the security holders of the Company.
We use Adjusted Sales (Organic), Adjusted Operating Income (including on a constant currency basis), Covenant
Adjusted EBITDA, Adjusted Net Income (including on a constant currency basis), Adjusted EPS and Free Cash
Flow as supplemental measures of our operating profitability and to control our cash operating costs. We believe
these financial measures are useful to investors because they enable better comparisons of our historical results
and allow our investors to evaluate our performance based on the same metrics that we use to evaluate our
performance and trends in our results. These financial metrics are not measurements of financial performance
under generally accepted accounting principles, or GAAP. Our presentation of these metrics has limitations as an
analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported
under GAAP. You should not consider these measures as alternatives to sales, operating income, net income, or
earnings per share, determined in accordance with GAAP. Adjusted Sales (Organic), Adjusted Operating Income,
Covenant Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Free Cash Flow as presented by us, may
not be comparable to other similarly titled measures of other companies because not all companies use identical
calculations.
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 organizational streamlining initiatives ($18.4 million net expense for fiscal 2017 and $24.9 million net expense
for fiscal 2016), other consulting costs related to transformation initiatives ($9.9 million for fiscal 2017 and $16.2 million for
fiscal 2016) and asset write-offs, mainly from the exit of certain operations in the FSS International segment ($0.6 million
for fiscal 2016).
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, primarily for income from prior years' loss experience that were favorable
under our casualty insurance program ($6.5 million gain for fiscal 2017), expenses related to acquisition costs ($2.1
million(cid:3)for fiscal 2017 and $3.9 million for fiscal 2016), expenses related to long-term disability payments ( $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),
asset write-offs ($7.0 million for fiscal 2016), multiemployer pension plan withdrawal charges ($2.6 million for fiscal
2016), certain consulting costs ($3.7 million for fiscal 2017) and the impact of the change in fair value related to certain
gasoline and diesel agreements ($0.4 million loss for fiscal 2017 and $8.3 million gain for fiscal 2016).
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.
Effect 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 and non-cash charges
for the write-offs of deferring financing costs and debt discounts.
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 local
country tax rate for adjustments in jurisdictions outside the U.S.
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 financial performance with respect to, without
limitation, conditions in our industry, our operations, our economic performance and financial condition, and including
with respect to, without limitation, the benefits, costs and timing of and ability to consummate the acquisitions of each
of Avendra and AmeriPride and related financings, as well as statements regarding these companies’ services and
products and relating to our business and growth strategy. These statements can be identified by the fact that they
do not relate strictly to historical or current facts. They use words such as "outlook," "aim," "anticipate," "are or remain
confident," "have confidence," "estimate," "expect," "will be," "will continue," "will likely result," "project," "intend,"
"plan," "believe," "see," "look to" and other words and terms of similar meaning or the negative versions of such
words.
Forward-looking statements speak only as of the date made. All statements we make relating to our estimated and
projected earnings, costs, expenditures, cash flows, growth rates, financial results, our estimated benefits, costs and
timing of and ability to consummate the acquisitions and related financings are forward-looking statements. In addition,
we, through our senior management, from time to time make forward-looking public statements concerning our
expected future operations and performance and other developments. These forward-looking statements are subject
to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from
those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts,
which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution
that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all
factors that could affect our actual results. All subsequent written and oral forward-looking statements attributable
to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some
of the factors that we believe could affect our results or the costs, benefits or timing of the proposed acquisitions and
related financings 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 achieve and 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; the outcome and timing of regulatory reviews of
both the Avendra and AmeriPride transactions; our ability to complete the transactions in the time expected or at all,
our ability to successfully integrate the businesses of Avendra and AmeriPride and costs and timing related thereto,
the risk of unanticipated restructuring costs or assumption of undisclosed liabilities, the risk that we are unable to
achieve the anticipated benefits (including tax benefits) and synergies of the acquisition of AmeriPride and Avendra
including whether the proposed transactions will be accretive and within the expected timeframes, our ability to
complete the anticipated financing of these transactions on our expected terms, the availability of sufficient cash to
repay certain indebtedness and our decision to utilize the cash for that purpose, the disruption of the transactions to
each of Avendra and AmeriPride and their respective managements; the effect of announcement of the transactions
on each of Avendra’s and AmeriPride’s ability to retain and hire key personnel and maintain relationships with
customers, suppliers and other third parties, our ability to attract new or maintain existing customer and supplier
relationships at reasonable cost, our ability to retain key personnel and other factors set forth under the headings
Item 1A "Risk Factors," Item 3 "Legal Proceedings" and Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other sections of our Annual Report on Form 10-K included herewith 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 Annual
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.
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN
(Unaudited) (In thousands)
Fiscal 2017
Fiscal 2016
$
$
$
$
$
$
$
$
$
$
$
$
$
$
14,415,829
746,314
5.18%
14,415,829
259,424
(48,155)
14,627,098
746,314
78,174
59,358
41,736
275
13,447
939,304
12,407
951,711
6.51%
Fiscal 2014
14,832,913
564,563
3.81%
14,832,913
(470,565)
(3,774)
14,358,574
(257,963)
14,100,611
564,563
129,505
47,522
(27,955)
53,554
(71)
26,910
56,133
1,911
852,072
5.93%
Sales (as reported)
Operating Income (as reported)
Operating Income Margin (as reported)
Sales (as reported)
Effect of Currency Translation
Effect of Acquisitions and Divestitures
Adjusted Sales (Organic)
Operating Income (as reported)
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
Effect of Acquisitions and Divestitures
Gains, Losses and Settlements impacting comparability
Adjusted Operating Income
Effect of Currency Translation
Adjusted Operating Income (Constant Currency)
Adjusted Operating Income Margin (Constant Currency)
Sales (as reported)
Operating Income (as reported)
Operating Income Margin (as reported)
Sales (as reported)
Effect of Currency Translation
Effect of Acquisitions and Divestitures
Adjusted Sales
Estimated Impact of 53rd Week
Adjusted Sales (Organic)
Operating Income (as reported)
Amortization of Acquisition-Related Customer Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the 2007 LBO
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
Adjusted Operating Income (Constant Currency)
Adjusted Operating Income Margin (Constant Currency)
Sales (as reported)
Operating Income (as reported)
Operating Income Margin (as reported)
Sales (as reported)
Effect of Currency Translation
Effect of Acquisitions and Divestitures
Adjusted Sales
Estimated Impact of 53rd Week
Adjusted Sales (Organic)
Operating Income (as reported)
Amortization of Acquisition-Related Customer Relationship Intangible Assets and Depreciation of
Property and Equipment Resulting from the 2007 LBO
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
Adjusted Operating Income (Constant Currency)
Adjusted Operating Income Margin (Constant Currency)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
14,604,412
808,057
5.53%
14,604,412
71,780
(18,563)
14,657,629
808,057
57,585
67,089
28,328
(1,127)
912
960,844
1,307
962,151
6.56%
Fiscal 2015
14,329,135
627,938
4.38%
14,329,135
—
(9,377)
14,319,758
—
14,319,758
627,938
110,080
72,800
—
66,545
(421)
—
—
3,793
880,735
6.15%
Fiscal 2013
13,945,657
514,474
3.69%
13,945,657
(106,188)
(25,477)
13,813,992
—
13,813,992
514,474
155,443
19,417
(6,063)
113,464
(5,992)
968
—
(10,251)
781,460
5.66%
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 as reported in each respective year)
Adjusted Net Income (Constant Currency)
Diluted Weighted Average Shares Outstanding
Adjusted Earnings Per Share (Constant Currency)
Adjusted Earnings Per Share Growth (Constant Currency)
Fiscal Year Ended
September 29,
2017
September 30,
2016
$
373,923
$
287,806
57,585
67,089
28,328
(1,127)
912
31,491
(69,039)
489,162
989
490,151
373,923
251,557
1.49
28.45%
489,162
251,557
1.94
490,151
251,557
1.95
1.95
14.04%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
78,174
59,358
41,736
275
13,447
31,267
(87,025)
425,038
7,802
432,840
287,806
248,763
1.16
425,038
248,763
1.71
432,840
248,763
1.74
1.71
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:
Fiscal Year Ended
October 2,
2015
October 3,
2014
September 27,
2013
$ 235,946
$ 148,956
$
69,356
Loss from Discontinued Operations, net of tax
—
—
1,030
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
Branding
Initial Public Offering-Related Expenses, including share-based compensation
Gains, Losses and Settlements impacting comparability
Effects of refinancings 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
Adjusted Earnings Per Share
Adjusted Net Income
Diluted Weighted Average Shares Outstanding
Adjusted Earnings Per Share (Constant Currency as reported in each respective year)
Adjusted Net Income (Constant Currency)
Diluted Weighted Average Shares Outstanding
110,080
72,800
66,545
(421)
—
129,505
47,522
53,554
(71)
26,910
—
3,793
—
(102,485)
$ 386,258
—
$ 386,258
56,133
1,911
25,705
(128,442)
$ 361,683
(18,171)
$ 343,512
$ 235,946
$ 148,956
246,616
237,451
$
0.96
$
0.63
$ 386,258
246,616
1.57
$
$ 361,683
237,451
1.52
$
386,258
246,616
1.57
$
343,512
237,451
1.45
$
$
$
$
$
$
$
$
155,443
19,417
113,464
(5,992)
968
—
(10,251)
39,830
(118,694)
264,571
(3,941)
260,630
69,356
209,370
0.33
264,571
209,370
1.26
260,630
209,370
1.24
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
NET DEBT TO COVENANT ADJUSTED EBITDA
(Unaudited)
(In thousands)
September
29, 2017
September
30, 2016
Fiscal Year Ended
October
2, 2015
October
3, 2014
September
27, 2013
Net Income Attributable to Aramark
Stockholders (as reported)
$
373,923
$
287,806
$
235,946
$
148,956
$
69,356
Interest and Other Financing Costs, net
Provision for Income Taxes
Depreciation and Amortization
Share-based compensation expense
Unusual or non-recurring (gains) and losses
Pro forma EBITDA for equity method investees
Pro forma EBITDA for certain transactions
287,415
146,455
508,212
65,155
—
14,198
18
315,383
142,699
495,765
56,942
—
14,277
4,098
285,942
105,020
504,033
66,416
(3,900)
14,804
—
334,886
80,218
521,581
96,332
2,866
18,819
—
423,845
19,233
542,135
19,417
8,634
20,984
—
Other
Covenant Adjusted EBITDA
36,833
$ 1,432,209
35,436
$ 1,352,406
58,858
$ 1,267,119
28,373
$ 1,232,031
74,485
$ 1,178,089
Net Debt to Covenant Adjusted EBITDA
Total Debt(1)
Less: Cash and cash equivalents
Net Debt
Covenant Adjusted EBITDA
Net Debt/Covenant Adjusted EBITDA
$ 5,268,488
$
238,797
$ 5,029,691
$ 1,432,209
3.5
$ 5,270,036
$
152,580
$ 5,117,456
$ 1,352,406
3.8
$ 5,266,024
$
122,416
$ 5,143,608
$ 1,267,119
4.1
$ 5,445,594
$
111,690
$ 5,333,904
$ 1,232,031
4.3
$ 5,824,070
$
110,998
$ 5,713,072
$ 1,178,089
4.8
(1) 2015-2017 Total Debt reflects an adjustment attributable to an accounting rule change related to debt issuance costs
(Accounting Standards Update 2015-03); 2013-2014 Total Debt does not.
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
FREE CASH FLOW
(Unaudited)
(In thousands)
Net Cash provided by operating activities
Fiscal Year Ended
September 29, 2017 September 30, 2016
$
1,053,387
867,314
$
Net purchases of property and equipment, client contract investments and other
(533,823)
(485,708)
Free Cash Flow
Free Cash Flow Increase
$
519,564
$
381,606
36.15%
25
CORPORATE INFORMATION
SENIOR MANAGEMENT
BOARD OF DIRECTORS
TRANSFER AGENT
Eric J. Foss
Chairman, President, and
Chief Executive Officer
Eric J. Foss
Chairman, President, and
Chief Executive Officer, Aramark
Computershare
480 Washington Blvd.
Jersey City, NJ 07310
Stephen P. Bramlage, Jr.
Executive Vice President and
Chief Financial Officer
Harrald Kroeker
Senior Vice President, Integration
Lynn B. McKee
Executive Vice President,
Human Resources
Stephen R. Reynolds
Executive Vice President,
General Counsel and Secretary
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
Sanjeev K. Mehra
Former Advisory Director and
Vice Chairman, Global Private
Equity, Merchant Banking Division,
Goldman, Sachs & Co.,
Lead Director
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
Richard W. Dreiling
Former Chairman and Chief Executive
Officer, Dollar General Corporation
Irene M. Esteves
Former Chief Financial Officer,
Time Warner Cable Inc.
Daniel J. Heinrich
Former Chief Financial Officer,
The Clorox Company
Patricia B. Morrison
Executive Vice President, Customer
Support Services and Chief Information
Officer, Cardinal Health, Inc.
John A. Quelch
Dean and Vice Provost, University
of Miami School of Business
Administration
Stephen I. Sadove
Former Chairman and Chief Executive
Officer, Saks Incorporated
www.aramark.com