A
R
A
M
A
R
K
2
0
1
8
A
N
N
U
A
L
R
E
P
O
R
T
EXPERIENCES
THAT MATTER
www.aramark.com
2018 | Annual Report
©2018 Aramark
5910_CVR_C1.indd 1
5910_CVR_C1.indd 1
12/19/18 9:54 PM
12/19/18 9:54 PM
DEAR FELLOW
SHAREHOLDERS
I AM PLEASED TO REPORT THAT 2018
WAS ANOTHER RECORD YEAR FOR OUR
COMPANY ACROSS KEY FINANCIAL
METRICS, INCLUDING REVENUE, MARGIN,
PROFIT, AND EARNINGS.
We also strengthened our bal ance sheet and smoothly
integrated the two largest acquisitions in Aramark’s history.
As the capstone of our achievements, 2018 marked our
fifth straight year of double-digit adjusted EPS growth—
a feat matched by exceptionally few companies—as we
continue our transformation journey to ensure consistently
profitable growth. Our winning results are detailed in this
report, and I appl aud the entire Aramark team for this
year’s success. Let me share the 2018 highlights with you.
Eric J. Foss,
Chairman, President, and
Chief Executive Officer
CORPOR ATE INFORMA TION
SENIOR MANAGEMENT
BOARD OF DIRECTORS
TRANSFER AGENT
Eric J. Foss
Chairman, President, and
Chief Executive Officer
Stephen P. Bramlage, Jr.
Executive Vice President and
Chief Financial Officer
Harrald Kroeker*
Senior Vice President, Integration
Lynn B. McKee
Executive Vice President,
Human Resources
Stephen R. Reynolds
Executive Vice President,
General Counsel and Secretary
*Retiring effective December 31, 2018
Eric J. Foss
Chairman, President, and
Chief Executive Officer, Aramark
Computershare
480 Washington Blvd.
Jersey City, NJ 07310
CORPORATE HEADQUARTERS
2400 Market Street
Philadelphia, PA 19103
215-238-3000
WEBSITE
www.aramark.com
INVESTOR RELATIONS
DEPARTMENT
215-409-7287
investorrelations@aramark.com
AUDITOR
KPMG LLP
Philadelphia, PA
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
Calvin Darden
Former Senior Vice President,
U.S. Operations, United Parcel
Service, Inc.
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
Former Executive Vice President,
Customer Support Services &
Chief Information Officer,
Cardinal Health, Inc.
John A. Quelch
Dean, Miami Business School, and
Vice Provost, University of Miami
Stephen I. Sadove
Former Chairman and Chief
Executive Officer, Saks
Incorporated
5910_CVR_C1.indd 2
5910_CVR_C1.indd 2
12/19/18 9:54 PM
12/19/18 9:54 PM
OUR PERFORMANCE
Our success starts by listening closely to our consumers and
clients and keeping a steady focus on quality, innovation, health
and wellness, and brand building. We elevated the experiences
Aramark creates by upping our service levels and enhancing
our offerings, while introducing new technology behind
each. This included launching new premium and core brands,
partnering with fresh, exciting, and innovative concepts,
and deploying integrated technologies to provide seamless
consumer interactions. These initiatives are driving dramatic
improvements in consumer satisfaction and solidifying
client loyalty.
We achieved those advances while simultaneously
strengthening our competitive position by relentlessly
championing productivity throughout our operations. We
successfully navigated tight labor markets, carefully managed
our largest cost centers of food and labor, and relentlessly
attacked complexity across the supply chain and every aspect
of our business. These efforts yielded steady margin growth
in 2018, and enabled us to deliver on our promised three-year
margin target right on schedule.
Last year’s performance was capped by strategically
repositioning the company’s portfolio. We initiated the
exit of a non-core business and completed the integration
of Avendra and AmeriPride—each of which would have
represented Aramark’s largest acquisition as a stand-alone
addition. Avendra substantially increases our purchasing
scale and power. Since 2015, we have grown the company’s
annual procurement spend from $5 billion to $12 billion today.
AmeriPride also greatly expands our scale and broadens
our geographic scope in the highly attractive and growing
Uniforms industry. These strategic, synergistic, and accretive
deals further optimize our portfolio while bolstering our
competitiveness.
OUR PURPOSE
High performance like we achieved is impossible unless team
members are united in a shared purpose. At Aramark, our
purpose revolves around our mission to “Enrich and Nourish
Lives,” which brings together 270,000 committed team
members in a collective effort to be successful by doing
well. Our approach is to drive sustainable growth and create
long-term stakeholder value by concentrating on our People,
Products, Planet, and Community.
OUR PEOPLE
Aramark’s potential is tied to diversity that influences our
thinking and actions. Our commitment to building a high-
performance culture through Diversity and Inclusion
extends from Aramark’s front line to the boardroom. We
grew our diverse representation of the board to nearly half
of our directors last year, and continued growing diversity
of our workforce. We consistently earn accolades for our
progress, including recognition as a FORTUNE Most Admired
Company and being cited as an employer of choice by Black
Enterprise and Latino magazines, DiversityInc, the Human
Rights Campaign for LGBTQ equality, and the Disability
Equality Index.
OUR PRODUCTS
Health and wellness is at the heart of every individual and
family we serve and we take that priority to heart. For example,
our groundbreaking partnership with the American Heart
Association (Healthy for Life® 20 By 20) has us on track to
fundamentally improve the health of consumers 20 percent by
2020 by enhancing our menu offerings. Last year we added to
our progress and reduced calories, saturated fats, and sodium
another 15 percent; and increased fruits, vegetables, and whole
grains an additional 9 percent.
OUR PLANET
We are helping to protect and preserve the environment
by operating efficiently, minimizing waste, and sourcing
responsibly. Significant progress was achieved in 2018 as
we diverted nearly 700 tons of food waste from landfills
on our way to cutting waste 50 percent by 2030; reduced
single-use plastics; and lowered carbon emissions from our
14,000 delivery vehicles to meet our 8 percent reduction goal
next year.
OUR COMMUNITY
Aramark Building Community, our global charitable program,
saw employee volunteers help nearly 500,000 families
in communities around the globe, while our philanthropic
fund donated $15 million to improve community health and
wellness and enabled millions of people to succeed through
education and employment opportunities. The fund also
supported global relief agencies to assist communities
recovering from natural disasters.
OUR PROMISE
I am pleased with our performance and purpose-driven culture.
However, I am even more excited about our promising future—
a future that we’re not just imagining, but shaping with a
confidence rooted in compelling and inescapable facts:
• We operate in a large, growing market with long-term
favorable outsourcing trends.
• We have a proven, resilient business model that works in
all economic cycles—favorable and unfavorable.
• We have a demonstrated record of broad-based business
results and momentum.
• We have significant productivity and margin
opportunities ahead of us.
• We have recently completed acquisitions that boost our
competitive position.
• We have a strong and flexible balance sheet.
In closing, I firmly believe that Aramark’s best days are ahead.
Thank you for your continued investment and support.
Eric J. Foss
Chairman, President, and Chief Executive Officer
5910_TXT_C1.indd 3
5910_TXT_C1.indd 3
12/19/18 10:52 PM
12/19/18 10:52 PM
PERFORMANCE
Driving the
company’s growth
is the pursuit of
a consumer-centric
product portfolio
that aims to exceed
consumer expectations.
ARAMARK CONTINUES TO DELIVER
STRONG FINANCIAL RESULTS.
We are investing in the business and optimizing our
portfolio to meet consumer demands. The business
is guided by a clear and focused strategy based on
four objectives:
> Accelerating Growth
> Activating Productivity
> Attracting the Best Talent
> Achieving Portfolio Optimization
4
5910_TXT_C1.indd 4
5910_TXT_C1.indd 4
12/19/18 10:52 PM
12/19/18 10:52 PM
ACCELERATE GROWTH
From an Accelerating Growth perspective, the company
Driving the company’s growth is the pursuit of a consumer-
has achieved five straight years of double-digit adjusted
centric product portfolio that aims to exceed consumer
earnings per share expansion. This past year, the business
expectations across four critical dimensions: quality, health,
grew across a broad base of sectors and geographies. Our
convenience, and personalization. Aramark believes that
2018 operational highlights include hosting the Super Bowl
at U.S. Bank Stadium and the World Series at Fenway Park;
adding Auburn University to the Higher Education portfolio;
brands matter and we’re implementing a strategy that
includes Building, Borrowing, and Buying brand assets to
enhance the consumer experience. Across our Core and
and BHP Billiton in Chile. The Leisure business expanded
Premium offerings, the company is focused on building
its National Park Service relationship with a new contract
brands from the ground up to satisfy a customer need. Our
at Crater Lake National Park in Oregon. The company also
proprietary brands such as Simple Spoon Food Company,
performed solidly across the International sector, with
Harvest Table Culinary Group, and LifeWorks are built to
growth across Europe, Canada, Asia, and South America.
meet those needs.
Additionally, Aramark’s Uniform business experienced
solid growth as the legacy business was augmented by
the addition of AmeriPride.
5910_TXT_C1.indd 5
5910_TXT_C1.indd 5
12/19/18 10:52 PM
12/19/18 10:52 PM
5
The strategy borrows brands through relationships with well-
known consumer favorites including Oath Pizza, a Northeastern
brand of signature pizzas featuring ethically sourced ingredients;
a partnership across our northern European operations with the
Jamie Oliver Restaurant Group; and our ongoing partnerships
with national brands such as Chick-fil-A and Starbucks. In 2018,
the company also invested in robust development of p lant-
forward menu options that are offered throughout the businesses.
The final component of the strategy involves buying brands that
offer up something new and engaging for customers, like Avoca
and the recent addition of Western First Aid through our Uniform
Services business.
Additionally, the company added a number of consumer-facing
technologies to create a frictionless experience. These include
ordering kiosks and mobile technologies like Apple’s Business
Chat, which allows fans to order from their seats and receive
delivery on the spot. To drive transparency and access to locally
and sustainably sourced products, we expanded our partnership
with FarmLogix to roll out a technology that enables domestic
operators to source local and sustainable products within their
geographies.
ACTIVATE PRODUCTIVITY
In terms of Activating Productivity, Aramark has made excellent
progress driving margin improvement, achieving our three-
year target set in 2015. Leading this positive momentum are
the full integration of processes to manage labor costs, such
as a centralized hiring model and company-wide adaptation of
technology which is helping front-line managers standardize
employee scheduling based on client demand. Aramark has also
improved food productivity and management with technologies
which enable the company to leverage our scale for more efficient
purchasing. Route service representatives in the Uniform Services
business now use iPhone technology to manage their accounts
from an inventory and order fulfillment perspective. All of this
technology has enabled a reduction in SG&A expenses and
has positioned Aramark as a stronger and more agile enterprise
going forward.
BRANDS
MATTER
F O O D C O M PA N Y
F OOD C OMP ANY
ARAMARKFLEXFIT™
6
5910_TXT_C1.indd 6
5910_TXT_C1.indd 6
12/19/18 10:52 PM
12/19/18 10:52 PM
5910_TXT_C1.indd 7
5910_TXT_C1.indd 7
12/19/18 10:52 PM
12/19/18 10:52 PM
7
79%
WORKFORCE
DIVERSITY
ATTRACT THE BEST TALENT
The company continues to strengthen our ability to attract
the best talent by creating a workplace culture that values and
leverages our differences and drives innovation through inclusion.
In 2018, Aramark was once again recognized as one of FORTUNE’s
Most Admired Companies; DiversityInc’s Top 50 Companies for
Diversity; a Best Place to Work for LGBTQ Equality with a perfect
score on the Human Rights Campaign Foundation’s Corporate
Equality Index; a Best Place to Work for Disability Inclusion by the
Disability Equality Index with a 100 percent top score; and a Top
40 Best Company for Diversity by Black Enterprise.
ACHIEVE PORTFOLIO OPTIMIZATION
Aramark continues our strategic journey to achieve portfolio
optimization. The highly accretive acquisitions of Avendra, a
purchasing organization, and AmeriPride, a uniforms services
company, significantly bolstered the company’s competitive
advantage. Avendra was quickly combined into the Aramark
procurement organization and the company has been able to
leverage purchasing capabilities across all businesses. AmeriPride
is on track to achieve targets for integration into Aramark’s legacy
uniforms business. The company also divested our Healthcare
Technologies business, adjusting our portfolio to better focus on
our core food, facility, and uniforms offerings. The majority of the
proceeds were used to pay down debt.
8
5910_TXT_C1.indd 8
5910_TXT_C1.indd 8
12/19/18 10:52 PM
12/19/18 10:52 PM
5910_TXT_C1.indd 9
5910_TXT_C1.indd 9
12/19/18 10:52 PM
12/19/18 10:52 PM
9
PURPOSE
At Aramark,
our purpose revolves
around our mission
to “Enrich and
Nourish Lives.”
WHILE PERFORMANCE IS CRITICAL
IN ANY COMPANY, PERFORMANCE
WITH PURPOSE FUELS A HIGHER
LEVEL OF SUCCESS THAT IS MORE
MEANINGFUL TO ALL STAKEHOLDERS.
Aramark is committed to fostering a culture
of purpose that makes a positive impact on society
and the planet. Our approach is to drive sustainable
growth and create long-term stakeholder value by
concentrating on our People, Products, Planet, and
Community. This means focusing on every dimension
of how the company operates—ethical, economic,
and environmental—through initiatives that engage
employees, empower healthy living, preserve the
planet, and build local communities.
10
5910_TXT_C1.indd 10
5910_TXT_C1.indd 10
12/19/18 10:52 PM
12/19/18 10:52 PM
ENGAGING EMPLOYEES
It all starts with people. Aramark’s associates are the
At Aramark, we celebrate performance, collaboration, and
lifeblood of the company. They are the foundation of our
recognition. Our efforts go beyond wages and benefits,
mission to deliver experiences that enrich and nourish lives.
and include training and development opportunities, a
To ensure Aramark attracts and retains only the best and
brightest employees, we focus on three key areas: creating
a diverse and inclusive work environment, providing an
robust diverse supplier network, a culture of recognition,
and an infrastructure that enables and encourages work/
life balance.
attractive employee value proposition, and enabling deep
Each year, 200 of Aramark’s outstanding team members
and meaningful employee wellness.
Our company is creating a workplace environment
that values differences and drives innovation through
inclusion. Diversity and Inclusion at Aramark spans from
the boardroom to the front line; more than 45 percent of
our Board of Directors is diverse, as is 79 percent of our
total workforce, and 65 percent of our new talent pipeline.
Aramark has active programs to hire thousands of
veterans each year—from deployment to employment—
as well as those who face challenges with physical and
intellectual abilities.
from around the world are named to the company’s Ring
of Stars, and are recognized during a special celebration.
The 2018 Aramark Ring of Stars class comprised front-line
employees who proudly serve our company’s customers
and clients as chefs, cashiers, stadium hawkers, servers,
route drivers, custodians, and in many other roles. They
work diligently where people learn, work, play, and
recover—including schools and universities, hospitals,
sports venues, on delivery routes, and in businesses of
all kinds.
11
5910_TXT_C1.indd 11
5910_TXT_C1.indd 11
12/19/18 10:52 PM
12/19/18 10:52 PM
IMPACTED
MILLIONS OF
FAMILIES THROUGH
FEED YOUR
POTENTIAL 365
PUBLIC HEALTH
CAMPAIGN
12
5910_TXT_C1.indd 12
5910_TXT_C1.indd 12
12/19/18 10:53 PM
12/19/18 10:53 PM
EMPOWERING HEALTHY LIVING
As a global leader in the food business, Aramark has a responsibility
to help create a healthier world. The company recognizes that
health and well-being is at the heart of the lives of every person
and family touched on any given day.
Over the last three years, Aramark has activated a pioneering
initiative with the American Heart Association, called Healthy for
Life® 20 By 20, designed to improve the health of all Americans
20 percent by 2020.
The initiative has increased fruits, vegetables, and whole grains
by 9 percent and reduced calories, saturated fats, and sodium by
15 percent across Aramark’s menus served in business, healthcare,
and college dining. Aramark has trained hundreds of chefs in
vegan cooking and introduced 200 new plant-based recipes to
our menu database, expanding vegan and vegetarian menu items
to 30 percent.
Consumer communications have been broadened to include
an icon to help consumers identify plant-forward menu items
and educate guests through digital screens, posters, and social
media content. Aramark also launched a consumer engagement
campaign to improve th e diets and life styles of o ur own
associates as well as millions of consumers with our Feed Your
Potential campaign.
30%
INCREASE
VEGAN OR VEGETARIAN
MAIN MEAL OPTIONS
15%
DECREASE
SATURATED FAT, SODIUM,
AND CALORIES
9%
INCREASE
IN FRUITS, VEGETABLES,
AND WHOLE GRAINS
13
5910_TXT_C1.indd 13
5910_TXT_C1.indd 13
12/19/18 10:53 PM
12/19/18 10:53 PM
100%
OF LOCATIONS
TRACK
FOOD WASTE
14
5910_TXT_C1.indd 14
5910_TXT_C1.indd 14
12/19/18 10:53 PM
12/19/18 10:53 PM
PRESERVING OUR PLANET
Aramark has an ongoing commitment to reduce our environmental
impact through programs and practices that enrich and support
the natural environment. The company works to make progress every
day on our pledge to source responsibly, operate efficiently, and
minimize waste.
Everyday operations drive the effort. Environmental practices
are integrated with the business strategy and driven through
operational requirements and consumer marketing efforts.
Most recently, Aramark has achieved significant progress to meet
our 2008 commitment to purchase 100 percent of contracted
seafood in the U.S. from sources that meet Monterey Bay
Aquarium Seafood Watch® Best Choice and Good Alternative
recommendations by the end of 2018. We’ve broadened our
humanely raised sourcing practices by taking the lead in food
service and committing to the humane treatment of broiler
chickens by calling on suppliers to address breed selection, space,
enrichments, and slaughtering practices by 2024.
Additionally, we’ve advanced our use of green and blue cleaning
across facilities operations and implemented practices in our
kitchens leading to a reduction in food waste between 2017 and
2018, equivalent to almost 700 tons diverted from landfill.
We made a bold and industry-leading commitment to significantly
reduce single-use plastics—a major contributor to ocean
pollution—by finding new ways to reduce packaging, including a
goal to reduce 60 percent of plastic straws and stirrers by 2020;
expanded efforts to reduce carbon emissions across our portfolio
from the foods we serve to the vehicles we drive; added new
plant-forward menu options to help decrease greenhouse gas
emissions and minimize demand for water and land resources; and
lowered fuel consumption and carbon emissions across Aramark’s
fleet of 14,000 vehicles, targeting an 8 percent reduction in fuel
(approximately 10,000 metric tons of CO2 emissions) for Fiscal
Year 2019.
100%
OF SEAFOOD
PURCHASES WILL MEET
SEAFOOD WATCH
RECOMMENDATIONS
CO2
REDUCTION
ACROSS FLEET OF
14,000 VEHICLES
60%
REDUCTION
IN PLASTIC STRAW
USAGE ANNUALLY
~700
TONS OF WASTE
DIVERTED FROM
LANDFILL SINCE 2017
5910_TXT_C1.indd 15
5910_TXT_C1.indd 15
12/19/18 10:53 PM
12/19/18 10:53 PM
15
BUILDING LOCAL COMMUNITIES
Aramark Building Community is the company’s philanthropic
employee volunteer program. It is committed to improving
community health and wellness and helping people succeed in
education and employment in partnership with local communities.
On the local level, employee volunteers partner with local
community centers to build strong, sustainable relationships,
matching skills and passion to the needs of the neighborhood.
Over the last decade, Aramark has invested volunteer expertise,
financial, and in-kind resources to strengthen the capacity
of hundreds of local communities impacting more than five
million people.
Anchoring this commitment is the company’s global day of
service, Aramark Building Community (ABC) Day. On ABC Day,
thousands of employees volunteer locally, leading cooking and
nutrition demonstrations; organizing food, clothing, and health
and wellness supply kit drives; facilitating workforce readiness
workshops; and building community gardens that positively
impact families, children, and adults.
Aramark’s philanthropic fund donates $15 million each year to
improve community health and wellness and enable millions
of people to succeed through education and employment
opportunities. The fund also supports global relief agencies
to assist communities recovering from natural disasters.
All contributions of employees are matched.
Through Aramark
Building Community,
we have helped millions of
underserved families and
individuals across 19 countries.
16
5910_TXT_C1.indd 16
5910_TXT_C1.indd 16
12/19/18 10:53 PM
12/19/18 10:53 PM
$15M
DONATED
TO IMPROVE
COMMUNITIES
AROUND
THE WORLD
5910_TXT_C1.indd 17
5910_TXT_C1.indd 17
12/19/18 10:53 PM
12/19/18 10:53 PM
17
PROMISE
With a clear and
established
“right to win,”
spanning all industries,
Aramark continues to
perform on our
differentiated
brand strategy.
TOGETHER, PURPOSE AND
PERFORMANCE LEAD STRAIGHT
TO A PROMISING FUTURE.
Aramark’s transformation journey has been
designed to make the company bigger,
stronger, and more agile. Strong broad-based
business momentum has delivered five
straight years of double-digit adjusted
EPS growth, a distinction that very few
FORTUNE 500 companies have achieved.
18
5910_TXT_C2.indd 18
5910_TXT_C2.indd 18
12/20/18 11:26 AM
12/20/18 11:26 AM
A BRIGHT AND PROMISING FUTURE
Aramark operates in a l arge and growing industry
We are positioned to respond to new trends and elevate
with a b right outlook, based on favorable long-term
the customer experience with disciplined oper ations
outsourcing trends and great, longstanding blue-chip client
grounded in consum er ins ights that dri ve innovative
relationships. Our global business portfolio underscores a
products, services, and technologies.
leading position in food, facilities, and uniform services.
The company’s proven and resilient business model is
diversified across industry verticals to provide stability
through both good and challenging economic times,
including times of low or no inflation, as well as times of
higher inflation.
Looking ahead, Aramark is working to create an unmatched
market position. Going into 2019 and beyond, the business
is following a disciplined and flexible financial model
focused on maintaining a strong cash flow position while
delivering margin expansion; pursuin g smart strategic
acquisitions that augment the business and improve
The company maintains a strong balance sheet and has
earnings per share; and aggressively paying down debt
posted solid performance across key financial indicators
including revenue, profit, margin, earnings per share, and
cash flow. With a cl ear and established “right to win,”
spanning all industries, Aramark continues to perform on
our differentiated brand strategy.
and delivering shareholder value.
5910_TXT_C1.indd 19
5910_TXT_C1.indd 19
12/19/18 10:53 PM
12/19/18 10:53 PM
19
FINANCIAL
HIGHLIGHTS
$2.25
$1.95
7.1%
6.6%
6.5%
$1.74
$1.57
$1.45
$1.24
6.2%
5.9%
5.7%
2013
2014
2015
2016
2017
2018
2013
2014
2015
2016
2017
2018
ADJUSTED EPS
ADJUSTED OPERATING
INCOME MARGIN
$1,108
$962
$939
$852
$881
$781
2013
2014
2015
2016
2017
2018
ADJUSTED OPERATING INCOME
(IN MILLIONS)
See reconciliation of GAAP and non-GAAP information at the end of this Annual Report.
20
5910_TXT_C1.indd 20
5910_TXT_C1.indd 20
12/19/18 10:53 PM
12/19/18 10:53 PM
FINANCIAL
PERFORMANCE
2018 | Annual Report
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 28, 2018
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 every Interactive Data File required to be submitted 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 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
III
Aramark 2018 Form 10-K As of March 30, 2018, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was
approximately $9,603.0 million.
As of October 26, 2018, the number of shares of the registrant's common stock outstanding is 246,731,970.
___________________________________________
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 2019 Annual Meeting of Stockholders, to be held on January 30, 2019, 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 28, 2018.
IV
Aramark 2018 Form 10-K 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.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Consolidated Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
PART III
PART IV
Financial Statements and Supplementary Data
Changes and Disagreements With Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
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 Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
1
1
9
19
20
21
21
23
23
24
25
43
43
43
44
46
47
47
47
47
47
47
48
48
48
V
Aramark 2018 Form 10-K 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 and costs of our
acquisitions of each of Avendra, LLC ("Avendra") and AmeriPride Services, Inc. ("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 and costs of our acquisitions 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 and benefits of the acquisitions 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; 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; 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 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.
VI
Aramark 2018 Form 10-K 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 the United States, which is
supplemented by an additional 18-country footprint. We hold the #2 position in North America in food and facilities services
and the #2 position in North America in uniform services based on total sales in fiscal 2018. Internationally, we hold a top 3
position in food and facilities services based on total sales in fiscal 2018 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 274,400 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 United States ("FSS United States"), 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 2018 Sales(a):
FY 2018 Operating Income(a):
Services:
Sectors:
FSS United States
FSS International
Uniform
$
$
10,137.8
680.5
$
$
3,655.8
150.9
Food, hospitality and facilities
Food, hospitality and facilities
Business & industry, sports,
leisure & corrections, education
and healthcare
Business & industry, sports,
leisure & corrections,
healthcare and education
$
1,996.0
$
182.6
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 $187.9 million related to corporate expenses.
In fiscal 2018, we generated $15.8 billion of sales, $826.1 million of operating income and $568.4 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.
1
1
Aramark 2018 Form 10-K Recent Acquisitions
Avendra, LLC ("Avendra")
On December 11, 2017, we completed the acquisition of Avendra, a leading hospitality procurement services provider in North
America that manages 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. The acquisition of Avendra significantly
expanded our capabilities and client reach in the procurement services area.
The total consideration paid for Avendra was $1,386.4 million, partially offset by $87.3 million of cash and restricted
investments acquired. In order to finance the Avendra acquisition, we entered into a long-term financing agreement. Avendra's
financial results since acquisition are included within the FSS United States reporting segment.
AmeriPride Services, Inc. ("AmeriPride")
On January 19, 2018, we completed the acquisition of AmeriPride, 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 added 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 were very limited.
The total consideration paid for AmeriPride was $995.4 million, partially offset by $84.9 million of cash acquired. In order to
finance the AmeriPride acquisition, we entered into a long-term financing agreement. AmeriPride's financial results since
acquisition are included within the Uniform segment.
Food and Support Services
Our Food and Support Services segments manage a number of interrelated services-including food, hospitality, procurement
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 United States and International
operations. In fiscal 2018, our FSS United States segment generated $10,137.8 million in sales, or 64% of our total sales, and
our FSS International segment generated $3,655.8 million in sales, or 23% 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.
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, as well as procurement 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 1,100 facilities across our global footprint. Our food and food-
related services include patient food and nutrition, retail food and procurement services.
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
144 professional (including minor league affiliates) and college sports teams, including 31 teams in Major League Baseball, the
National Basketball Association, the National Football League and the National Hockey League. We also serve convention and
civic centers, national and state parks and other resort operations, plus other popular tourist attractions in the United States.
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 payment services, and other facility
consulting services relating to building operations. We also provide procurement services for a number of clients in a variety of
industries. 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 United States segment clients
and operates in all of our sectors. We have operations in 18 countries outside the United States. Our largest international
operations are in Canada, 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 sports 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 2018, Sysco distributed approximately 49% 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 the rest of 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 the United States and Canada, 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.
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
2
3
2
Aramark 2018 Form 10-K Recent Acquisitions
Avendra, LLC ("Avendra")
On December 11, 2017, we completed the acquisition of Avendra, a leading hospitality procurement services provider in North
America that manages 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. The acquisition of Avendra significantly
expanded our capabilities and client reach in the procurement services area.
The total consideration paid for Avendra was $1,386.4 million, partially offset by $87.3 million of cash and restricted
investments acquired. In order to finance the Avendra acquisition, we entered into a long-term financing agreement. Avendra's
financial results since acquisition are included within the FSS United States reporting segment.
AmeriPride Services, Inc. ("AmeriPride")
On January 19, 2018, we completed the acquisition of AmeriPride, 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 added 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 were very limited.
The total consideration paid for AmeriPride was $995.4 million, partially offset by $84.9 million of cash acquired. In order to
finance the AmeriPride acquisition, we entered into a long-term financing agreement. AmeriPride's financial results since
acquisition are included within the Uniform segment.
Food and Support Services
Our Food and Support Services segments manage a number of interrelated services-including food, hospitality, procurement
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 United States and International
operations. In fiscal 2018, our FSS United States segment generated $10,137.8 million in sales, or 64% of our total sales, and
our FSS International segment generated $3,655.8 million in sales, or 23% 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.
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, as well as procurement 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 1,100 facilities across our global footprint. Our food and food-
related services include patient food and nutrition, retail food and procurement services.
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.
144 professional (including minor league affiliates) and college sports teams, including 31 teams in Major League Baseball, the
National Basketball Association, the National Football League and the National Hockey League. We also serve convention and
civic centers, national and state parks and other resort operations, plus other popular tourist attractions in the United States.
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 payment services, and other facility
consulting services relating to building operations. We also provide procurement services for a number of clients in a variety of
industries. 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 United States segment clients
and operates in all of our sectors. We have operations in 18 countries outside the United States. Our largest international
operations are in Canada, 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 sports 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 2018, Sysco distributed approximately 49% 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 the rest of 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 the United States and Canada, 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.
Sales and Marketing
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
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
2
3
3
Aramark 2018 Form 10-K 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. Payments made to clients 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 payments made to
the client, typically calculated as a fixed or variable percentage of various categories of sales, and, in some cases, require
minimum guaranteed payments. 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 2018, approximately two-thirds 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 2018, approximately
one-third of our Food and Support Services sales were derived from client interest contracts.
Competition
There is significant competition in the Food and Support Services business from local, regional, national and international
companies, as well as from the businesses, healthcare institutions, colleges and universities, correctional facilities, school
•
•
•
•
•
•
•
•
•
districts and public assembly facilities that decide to provide these services themselves. Institutions may decide to operate their
own services or outsource to one of our competitors following the expiration or termination of contracts with us. Clients do not
necessarily choose the lowest cost provider, and tend to place a premium on the total value proposition offered. In our FSS
United States segment, our external competitors include other multi-regional food and support service providers, such as
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:
quality and breadth of services and management talent;
innovation;
pricing; and
reputation within the industry;
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 United States 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.
Seasonality
Uniform
Our Uniform segment provides a full service employee uniform solution, including design, sourcing and manufacturing,
delivery, cleaning and maintenance on a contract basis. We directly market personalized uniforms and accessories, provide
managed restroom services and rent uniforms, work clothing, outerwear, particulate-free garments and non-garment items and
related services, including mats, shop towels and first aid supplies, to clients in a wide range of industries in the United States,
Puerto Rico, Canada and through a joint venture in Japan, including the manufacturing, transportation, construction, restaurants
and hotels, healthcare and pharmaceutical industries.We hold the #2 position in the North America uniform services market. We
operate approximately 3,900 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.
In fiscal 2018, our Uniform segment generated $1,996.0 million in sales, or 13% of our total sales.
Clients and Services
We serve businesses of all sizes in many different industries. We have a diverse client base from approximately 358 service
locations and distribution centers across North America. 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.
4
5
4
Aramark 2018 Form 10-K 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. Payments made to clients 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 payments made to
the client, typically calculated as a fixed or variable percentage of various categories of sales, and, in some cases, require
minimum guaranteed payments. 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 2018, approximately two-thirds 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 2018, approximately
one-third of our Food and Support Services sales were derived from client interest contracts.
Competition
There is significant competition in the Food and Support Services business from local, regional, national and international
companies, as well as from the businesses, healthcare institutions, colleges and universities, correctional facilities, school
districts and public assembly facilities that decide to provide these services themselves. Institutions may decide to operate their
own services or outsource to one of our competitors following the expiration or termination of contracts with us. Clients do not
necessarily choose the lowest cost provider, and tend to place a premium on the total value proposition offered. In our FSS
United States segment, our external competitors include other multi-regional food and support service providers, such as
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 United States 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 a full service employee uniform solution, including design, sourcing and manufacturing,
delivery, cleaning and maintenance on a contract basis. We directly market personalized uniforms and accessories, provide
managed restroom services and rent uniforms, work clothing, outerwear, particulate-free garments and non-garment items and
related services, including mats, shop towels and first aid supplies, to clients in a wide range of industries in the United States,
Puerto Rico, Canada and through a joint venture in Japan, including the manufacturing, transportation, construction, restaurants
and hotels, healthcare and pharmaceutical industries.We hold the #2 position in the North America uniform services market. We
operate approximately 3,900 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.
In fiscal 2018, our Uniform segment generated $1,996.0 million in sales, or 13% of our total sales.
Clients and Services
We serve businesses of all sizes in many different industries. We have a diverse client base from approximately 358 service
locations and distribution centers across North America. 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.
4
5
5
Aramark 2018 Form 10-K Operations
Our operations are subject to various laws and regulations, including, but not limited to, those governing:
We operate our uniform rental business as a network of 131 laundry plants and 227 satellite plants and depots supporting
approximately 3,900 pick-up and delivery routes. We operate a fleet of service vehicles that pick up and deliver uniforms for
cleaning and maintenance. We conduct our direct marketing activities principally from our facilities in Salem, Virginia; Norwell
and Rockland, Massachusetts; and Reno, Nevada. We market our own brands of apparel and offer a variety of customized
personalization options such as embroidery and logos. We also source uniforms and other products to our specifications from a
number of domestic and international suppliers and also manufacture a significant portion of our uniform requirements. We
purchase uniform and textile products as well as equipment and supplies from domestic and international suppliers. The loss of
any one supplier would not have a significant impact on us. We also operate a cutting and sewing plant in Mexico, which
satisfies 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 28, 2018, we had a total of approximately 274,400 employees, including seasonal employees, consisting of
approximately 180,000 full-time and approximately 94,400 part-time employees. 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 United States: 146,700; FSS International: 109,800; Uniform: 17,300. In addition, the Aramark corporate staff is
approximately 600 employees. Approximately 44,000 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, international, national, provincial and local laws and regulations, in areas such
as environmental, labor, employment, immigration, privacy and data security, tax codes, 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.
alcohol licensing and service;
collection of sales and other taxes;
immigration;
• minimum wage, overtime, classification, wage payment and employment discrimination;
governmentally funded entitlement programs and cost and accounting principles;
false claims, whistleblowers and consumer protection;
environmental protection;
food safety, sanitation, labeling and human health and safety;
customs and import and export controls;
the Foreign Corrupt Practices Act, the U.K. Bribery Act and other anti-corruption laws;
antitrust, competition, procurement and lobbying;
• minority, women and disadvantaged business enterprise statutes;
• motor carrier safety; and
privacy and data security.
•
•
•
•
•
•
•
•
•
•
•
The laws and regulations relating to each of our food and support services segments are numerous and complex. There are a
variety of laws and regulations at various governmental levels relating to the handling, preparation, 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 28, 2018, our subsidiaries held
liquor licenses in 42 states and the District of Columbia, 5 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,
6
7
6
Aramark 2018 Form 10-K Operations
Our operations are subject to various laws and regulations, including, but not limited to, those governing:
We operate our uniform rental business as a network of 131 laundry plants and 227 satellite plants and depots supporting
approximately 3,900 pick-up and delivery routes. We operate a fleet of service vehicles that pick up and deliver uniforms for
cleaning and maintenance. We conduct our direct marketing activities principally from our facilities in Salem, Virginia; Norwell
and Rockland, Massachusetts; and Reno, Nevada. We market our own brands of apparel and offer a variety of customized
personalization options such as embroidery and logos. We also source uniforms and other products to our specifications from a
number of domestic and international suppliers and also manufacture a significant portion of our uniform requirements. We
purchase uniform and textile products as well as equipment and supplies from domestic and international suppliers. The loss of
any one supplier would not have a significant impact on us. We also operate a cutting and sewing plant in Mexico, which
satisfies 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
clients.
Competition
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
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 28, 2018, we had a total of approximately 274,400 employees, including seasonal employees, consisting of
approximately 180,000 full-time and approximately 94,400 part-time employees. 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 United States: 146,700; FSS International: 109,800; Uniform: 17,300. In addition, the Aramark corporate staff is
approximately 600 employees. Approximately 44,000 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, international, national, provincial and local laws and regulations, in areas such
as environmental, labor, employment, immigration, privacy and data security, tax codes, 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.
•
•
alcohol licensing and service;
collection of sales and other taxes;
• minimum wage, overtime, classification, wage payment and employment discrimination;
•
•
•
•
•
•
•
•
immigration;
governmentally funded entitlement programs and cost and accounting principles;
false claims, whistleblowers and consumer protection;
environmental protection;
food safety, sanitation, labeling and human health and safety;
customs and import and export controls;
the Foreign Corrupt Practices Act, the U.K. Bribery Act and other anti-corruption laws;
antitrust, competition, procurement and lobbying;
• minority, women and disadvantaged business enterprise statutes;
• motor carrier safety; and
•
privacy and data security.
The laws and regulations relating to each of our food and support services segments are numerous and complex. There are a
variety of laws and regulations at various governmental levels relating to the handling, preparation, 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 28, 2018, our subsidiaries held
liquor licenses in 42 states and the District of Columbia, 5 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,
6
7
7
Aramark 2018 Form 10-K industrial laundries use certain detergents and cleaning chemicals to launder garments and other merchandise. The residues
from such detergents and chemicals and residues from soiled garments and other merchandise laundered at our facilities may
result in potential discharges to air and to water (through sanitary sewer systems and publicly owned treatment works) and may
be contained in waste generated by our wastewater treatment systems. Our industrial laundries are subject to certain volume and
chemical air and water pollution discharge limits, monitoring, permitting and recordkeeping requirements. We own or operate
aboveground and underground storage tank systems at some locations to store petroleum products for use in our or our clients'
operations. Certain of these storage tank systems also are subject to performance standards, periodic monitoring and
recordkeeping requirements. We also may use and manage chemicals and hazardous materials in our operations from time to
time. We are mindful of the environmental concerns surrounding the use, management, shipping and disposal of these
chemicals and hazardous materials, and have taken and continue to take measures to comply with environmental protection
laws and regulations. Given the regulated nature of some of our operations, we could face penalties and fines for non-
compliance. In the past, we have settled, or contributed to the settlement of, actions or claims relating to the management of
underground storage tanks and the handling and disposal of chemicals or hazardous materials, either on or off-site. We may, in
the future, be required to expend material amounts to rectify the consequences of any such events. Under environmental laws,
we may be liable for the costs of removal or remediation of certain hazardous materials located on or in or migrating from our
owned or leased property or our clients' properties, as well as related costs of investigation and property damage. Such laws
may impose liability without regard to our fault, knowledge or responsibility for the presence of such hazardous substances. We
may not know whether our clients' properties or our acquired or leased properties have been operated in compliance with
environmental laws and regulations or that our future uses or conditions will not result in the imposition of liability upon us
under such laws or expose us to third-party actions such as tort suits.
As of September 28, 2018, 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 and the Aramark word mark (our name) and the Avendra
brand, 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.
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.
Item 1A. Risk Factors
Risks related to our business
condition.
Unfavorable economic conditions have, and in the future could, adversely affect our results of operations and financial
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 period of economic distress following the financial
crisis of 2008, 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, our
financial results were particularly impacted in 2018 by wildfires in and around Yosemite National Park and in 2017 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 persist for an extended time period, can reduce our sales and have an adverse impact on our results of operations. 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 on
commercially-favorable terms. 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,
8
9
8
Aramark 2018 Form 10-K industrial laundries use certain detergents and cleaning chemicals to launder garments and other merchandise. The residues
from such detergents and chemicals and residues from soiled garments and other merchandise laundered at our facilities may
result in potential discharges to air and to water (through sanitary sewer systems and publicly owned treatment works) and may
be contained in waste generated by our wastewater treatment systems. Our industrial laundries are subject to certain volume and
chemical air and water pollution discharge limits, monitoring, permitting and recordkeeping requirements. We own or operate
aboveground and underground storage tank systems at some locations to store petroleum products for use in our or our clients'
operations. Certain of these storage tank systems also are subject to performance standards, periodic monitoring and
recordkeeping requirements. We also may use and manage chemicals and hazardous materials in our operations from time to
time. We are mindful of the environmental concerns surrounding the use, management, shipping and disposal of these
chemicals and hazardous materials, and have taken and continue to take measures to comply with environmental protection
laws and regulations. Given the regulated nature of some of our operations, we could face penalties and fines for non-
compliance. In the past, we have settled, or contributed to the settlement of, actions or claims relating to the management of
underground storage tanks and the handling and disposal of chemicals or hazardous materials, either on or off-site. We may, in
the future, be required to expend material amounts to rectify the consequences of any such events. Under environmental laws,
we may be liable for the costs of removal or remediation of certain hazardous materials located on or in or migrating from our
owned or leased property or our clients' properties, as well as related costs of investigation and property damage. Such laws
may impose liability without regard to our fault, knowledge or responsibility for the presence of such hazardous substances. We
may not know whether our clients' properties or our acquired or leased properties have been operated in compliance with
environmental laws and regulations or that our future uses or conditions will not result in the imposition of liability upon us
under such laws or expose us to third-party actions such as tort suits.
As of September 28, 2018, we do not anticipate any capital expenditures for environmental remediation that would have a
material effect on our financial condition.
Intellectual Property
any material respect.
Available Information
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 and the Aramark word mark (our name) and the Avendra
brand, we do not consider our patents, trademarks, trade names and licenses to be material to the operation of our business in
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.
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.
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 period of economic distress following the financial
crisis of 2008, 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, our
financial results were particularly impacted in 2018 by wildfires in and around Yosemite National Park and in 2017 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 persist for an extended time period, can reduce our sales and have an adverse impact on our results of operations. 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 on
commercially-favorable terms. 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,
8
9
9
Aramark 2018 Form 10-K unions typically seek to prevent public sector entities from outsourcing and if that fails, ensure that jobs that are outsourced
continue to be unionized, which can reduce our pricing and operational flexibility with respect to such businesses.
We have also identified a trend among some of our clients toward the retention of a limited number of preferred vendors to
provide all or a large part of their required services. We cannot be certain that this trend will continue or not be reversed or, if it
does continue, that we will be selected and retained as a preferred vendor to provide these services. Unfavorable developments
with respect to either outsourcing or the use of preferred vendors could have a material adverse effect on our business and
results of operations.
Competition in our industries could adversely affect our results of operations.
There is significant competition in the food and support services business from local, regional, national and international
companies, of varying sizes, many of which have substantial financial resources. Our ability to successfully compete depends
on our ability to provide quality services at a reasonable price and to provide value to our clients and consumers. Certain of our
competitors have been and may in the future be willing to underbid us or accept a lower profit margin or expend more capital in
order to obtain or retain business. Also, certain regional and local service providers may be better established than we are within
a specific geographic region. In addition, existing or potential clients may elect to self-operate their food and support services,
eliminating the opportunity for us to serve them or compete for the account. We also may face increased competition from
offsite food delivery at our clients as online restaurant aggregators and similar businesses have been successful at applying
technology developments to local food service. 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 resulting from changes in
federal, state or local laws and regulations relating to employment matters, including those relating to the classification of
employees, employee eligibility for overtime and secure scheduling requirements, which often incorporate a premium pay
mandate for scheduling deviations. 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. Food prices can fluctuate as a result of permanent or 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 two-thirds of our food and support services sales in fiscal 2018 are from profit and loss contracts under which
we have limited ability to pass on cost increases to our clients. Therefore, absent our ability to negotiate contractual changes,
including pricing, we may have to absorb 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, typically contingent on certain future events. If sales do not exceed costs
under a contract that contains minimum guaranteed payments, we will bear any losses which are incurred, as well as the
guaranteed payment. 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.
Guaranteed payments or other guaranteed amounts to a client under a profit and loss contract that is not profitable, the refusal
by individual clients to permit the sale of some products at their venues, the imposition by clients of limits on prices which are
not economically feasible for us, or decisions by clients to curtail their use of the services we provide could adversely affect our
sales and results of operations. For example, during the most recent economic downturn, certain of our business & industry
clients curtailed their employees' use of catering, which had a negative effect on our sales and profits.
Our inability to achieve cost savings through our cost reduction efforts could impact our results of operations.
The achievement of the goals we set in our plans and our future financial performance is dependent, in part, on our efforts to
reduce our cost structure through various cost reduction initiatives. Successful execution of our cost reduction initiatives is not
assured and there are several obstacles to success, including our ability to enable the information technology and business
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. For example, in connection with the Avendra and AmeriPride acquisitions,
we recorded aggregate goodwill of $895.1 million.
We acquired Avendra on December 11, 2017 and AmeriPride on January 19, 2018. The success of these acquisitions depends,
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 integration expenses that we expect to incur in connection with these
acquisitions. In addition, in the short term these integration expenses are anticipated to exceed the cost savings that we expect to
10
11
10
Aramark 2018 Form 10-K unions typically seek to prevent public sector entities from outsourcing and if that fails, ensure that jobs that are outsourced
continue to be unionized, which can reduce our pricing and operational flexibility with respect to such businesses.
We have also identified a trend among some of our clients toward the retention of a limited number of preferred vendors to
provide all or a large part of their required services. We cannot be certain that this trend will continue or not be reversed or, if it
does continue, that we will be selected and retained as a preferred vendor to provide these services. Unfavorable developments
with respect to either outsourcing or the use of preferred vendors could have a material adverse effect on our business and
results of operations.
Competition in our industries could adversely affect our results of operations.
There is significant competition in the food and support services business from local, regional, national and international
companies, of varying sizes, many of which have substantial financial resources. Our ability to successfully compete depends
on our ability to provide quality services at a reasonable price and to provide value to our clients and consumers. Certain of our
competitors have been and may in the future be willing to underbid us or accept a lower profit margin or expend more capital in
order to obtain or retain business. Also, certain regional and local service providers may be better established than we are within
a specific geographic region. In addition, existing or potential clients may elect to self-operate their food and support services,
eliminating the opportunity for us to serve them or compete for the account. We also may face increased competition from
offsite food delivery at our clients as online restaurant aggregators and similar businesses have been successful at applying
technology developments to local food service. 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 resulting from changes in
federal, state or local laws and regulations relating to employment matters, including those relating to the classification of
employees, employee eligibility for overtime and secure scheduling requirements, which often incorporate a premium pay
mandate for scheduling deviations. 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. Food prices can fluctuate as a result of permanent or 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 two-thirds of our food and support services sales in fiscal 2018 are from profit and loss contracts under which
we have limited ability to pass on cost increases to our clients. Therefore, absent our ability to negotiate contractual changes,
including pricing, we may have to absorb 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, typically contingent on certain future events. If sales do not exceed costs
under a contract that contains minimum guaranteed payments, we will bear any losses which are incurred, as well as the
guaranteed payment. 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.
Guaranteed payments or other guaranteed amounts to a client under a profit and loss contract that is not profitable, the refusal
by individual clients to permit the sale of some products at their venues, the imposition by clients of limits on prices which are
not economically feasible for us, or decisions by clients to curtail their use of the services we provide could adversely affect our
sales and results of operations. For example, during the most recent economic downturn, certain of our business & industry
clients curtailed their employees' use of catering, which had a negative effect on our sales and profits.
Our inability to achieve cost savings through our cost reduction efforts could impact our results of operations.
The achievement of the goals we set in our plans and our future financial performance is dependent, in part, on our efforts to
reduce our cost structure through various cost reduction initiatives. Successful execution of our cost reduction initiatives is not
assured and there are several obstacles to success, including our ability to enable the information technology and business
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. For example, in connection with the Avendra and AmeriPride acquisitions,
we recorded aggregate goodwill of $895.1 million.
We acquired Avendra on December 11, 2017 and AmeriPride on January 19, 2018. The success of these acquisitions depends,
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 integration expenses that we expect to incur in connection with these
acquisitions. In addition, in the short term these integration expenses are anticipated to exceed the cost savings that we expect to
10
11
11
Aramark 2018 Form 10-K 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, 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, such as the European Union General
Data Protection Regulation, 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 2018, 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.
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 2018, approximately 23% of our sales
were generated outside of the United States. We currently have a presence in 18 countries outside of the United States with
approximately 109,800 personnel. We also provide our services on a more limited basis in several additional countries. 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,
12
13
12
Aramark 2018 Form 10-K 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, 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.
adversely affect our business.
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
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, such as the European Union General
Data Protection Regulation, 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 2018, 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.
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 2018, approximately 23% of our sales
were generated outside of the United States. We currently have a presence in 18 countries outside of the United States with
approximately 109,800 personnel. We also provide our services on a more limited basis in several additional countries. 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,
12
13
13
Aramark 2018 Form 10-K 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. For example, in June 2016, the United Kingdom voted to leave the
European Union ("Brexit"). Aramark has operated in the United Kingdom since 1972 and employs approximately 10,000
employees there today. While our operations in the United Kingdom do not represent a significant portion of our sales, the
United Kingdom's departure from the European Union could have a negative effect on our business there if Brexit results in a
slow down of the local economy or employment environment. 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 44,000 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
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 2018, one distributor distributed approximately 49% 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 two-thirds 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. 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 United States 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 systems or if our
data is otherwise compromised.
We are increasingly utilizing information technology systems, including with respect to administrative functions, financial and
operational data, ordering, point-of-sale processing and payment and the management of our supply chain, to enhance the
efficiency of our business and to improve the overall experience of our customers. 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. Such information
includes large volumes of employee, client and third party data, including credit card numbers, social security numbers,
healthcare information and other personal information. Our systems and the systems of our vendors and other third parties are
subject to damage or interruption from power outages, computer or telecommunication failures, computer viruses, catastrophic
14
15
14
Aramark 2018 Form 10-K 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. For example, in June 2016, the United Kingdom voted to leave the
European Union ("Brexit"). Aramark has operated in the United Kingdom since 1972 and employs approximately 10,000
employees there today. While our operations in the United Kingdom do not represent a significant portion of our sales, the
United Kingdom's departure from the European Union could have a negative effect on our business there if Brexit results in a
slow down of the local economy or employment environment. 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 44,000 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
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 2018, one distributor distributed approximately 49% 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
14
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 two-thirds 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. 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 United States 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 systems or if our
data is otherwise compromised.
We are increasingly utilizing information technology systems, including with respect to administrative functions, financial and
operational data, ordering, point-of-sale processing and payment and the management of our supply chain, to enhance the
efficiency of our business and to improve the overall experience of our customers. 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. Such information
includes large volumes of employee, client and third party data, including credit card numbers, social security numbers,
healthcare information and other personal information. Our systems and the systems of our vendors and other third parties are
subject to damage or interruption from power outages, computer or telecommunication failures, computer viruses, catastrophic
15
15
Aramark 2018 Form 10-K events and implementation delays or difficulties, as well as usage errors by our employees or third party service providers.
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, including through phishing emails, attempts to fraudulently induce employees or
others to disclose information, the exploitation of software and operating vulnerabilities, and physical device tampering/
skimming at card reader units. The techniques used to obtain unauthorized access, disable or degrade service or sabotage
systems change frequently, may be difficult to detect for a long time and often are not recognized until after an attack is
launched or occurs. As a result, we and such third parties may be unable to anticipate these techniques or to implement adequate
preventative measures. In addition, we or such third parties may decide to upgrade existing information technology systems
from time to time to support the needs of our business and growth strategy and the risk of system disruption is increased when
significant system changes are undertaken. During the normal course of business, we have experienced and expect to continue
to experience attempts to compromise our information systems, although none, to our knowledge, has had a material adverse
effect on our business, financial condition or results of operations. Any damage to, or compromise or breach of our systems or
the systems of our vendors could impair our ability to conduct our business, result in transaction errors, result in corruption or
loss of accounting or other data, which could cause delays in our financial reporting, and result in a violation of applicable
privacy and other laws, significant legal and financial exposure, reputational damage, adverse publicity, and a loss of
confidence in our security measures. Any such event could cause us to incur substantial costs, including costs associated with
systems remediation, client protection, litigation, lost revenues or the failure to retain or attract clients following an attack. The
failure to properly respond to any such event could also result in similar exposure to liability. While we maintain insurance
coverage that may cover certain aspects of cyber risks, such insurance coverage may be unavailable or insufficient to cover all
losses or all types of claims that may arise. Further, as cybersecurity risks evolve, such insurance may not be available to us on
commercially reasonable terms, or at all. The occurrence of some or all of the foregoing could have a material adverse effect on
our results of operations, financial condition, business, and reputation.
We are subject to numerous laws and regulations in the U.S. and internationally as well as contractual obligations and other
security standards, each 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 took effect in May
2018. A failure to comply with the GDPR could result in fines of up to 4% of annual global revenues. Because we accept debit
and credit cards for payment from clients and customers, we are also subject to various industry data protection standards and
protocols, such as payment network security operating guidelines and the Payment Card Industry Data Security Standard. In
certain circumstances, payment card association rules and obligations make us liable to payment card issuers if information in
connection with payment cards and payment card transactions that we hold is compromised, which liabilities could be
substantial. These laws, regulations and obligations are increasing in complexity and number, change frequently and
increasingly conflict among the various countries in which we operate. Other jurisdictions, including states in the U.S., have
enacted or are enacting similar data protection laws, and/or are considering data localization laws that require data to stay
within their borders. Our systems and the systems maintained or used by third parties and service providers may not be able to
satisfy these changing legal and regulatory requirements, or may require significant additional investments or time to do so. 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 and we could experience a material adverse effect on our results of
operations, financial condition and business.
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.
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 28, 2018, our outstanding indebtedness was $7,244.0 million. We had additional
availability of $902.8 million under our revolving credit facilities as of that date.
This degree of leverage could have important consequences, including:
exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our
senior secured credit facilities and our receivables facility, are at variable rates of interest;
• making it more difficult for us to make payments on our indebtedness;
increasing our vulnerability to general economic and industry conditions;
requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and
interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital
expenditures and future business opportunities;
restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
limiting our ability to obtain additional financing for working capital, capital expenditures, debt service
requirements, acquisitions and general corporate or other purposes;
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; and
limiting our ability to benefit from tax deductions for such payments under certain interest expense limitation
rules included in the Tax Cuts and Jobs Act of 2017.
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 2021, 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;
•
•
•
•
•
•
•
•
•
•
•
16
17
16
Aramark 2018 Form 10-K events and implementation delays or difficulties, as well as usage errors by our employees or third party service providers.
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, including through phishing emails, attempts to fraudulently induce employees or
others to disclose information, the exploitation of software and operating vulnerabilities, and physical device tampering/
skimming at card reader units. The techniques used to obtain unauthorized access, disable or degrade service or sabotage
systems change frequently, may be difficult to detect for a long time and often are not recognized until after an attack is
launched or occurs. As a result, we and such third parties may be unable to anticipate these techniques or to implement adequate
preventative measures. In addition, we or such third parties may decide to upgrade existing information technology systems
from time to time to support the needs of our business and growth strategy and the risk of system disruption is increased when
significant system changes are undertaken. During the normal course of business, we have experienced and expect to continue
to experience attempts to compromise our information systems, although none, to our knowledge, has had a material adverse
effect on our business, financial condition or results of operations. Any damage to, or compromise or breach of our systems or
the systems of our vendors could impair our ability to conduct our business, result in transaction errors, result in corruption or
loss of accounting or other data, which could cause delays in our financial reporting, and result in a violation of applicable
privacy and other laws, significant legal and financial exposure, reputational damage, adverse publicity, and a loss of
confidence in our security measures. Any such event could cause us to incur substantial costs, including costs associated with
systems remediation, client protection, litigation, lost revenues or the failure to retain or attract clients following an attack. The
failure to properly respond to any such event could also result in similar exposure to liability. While we maintain insurance
coverage that may cover certain aspects of cyber risks, such insurance coverage may be unavailable or insufficient to cover all
losses or all types of claims that may arise. Further, as cybersecurity risks evolve, such insurance may not be available to us on
commercially reasonable terms, or at all. The occurrence of some or all of the foregoing could have a material adverse effect on
our results of operations, financial condition, business, and reputation.
We are subject to numerous laws and regulations in the U.S. and internationally as well as contractual obligations and other
security standards, each 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 took effect in May
2018. A failure to comply with the GDPR could result in fines of up to 4% of annual global revenues. Because we accept debit
and credit cards for payment from clients and customers, we are also subject to various industry data protection standards and
protocols, such as payment network security operating guidelines and the Payment Card Industry Data Security Standard. In
certain circumstances, payment card association rules and obligations make us liable to payment card issuers if information in
connection with payment cards and payment card transactions that we hold is compromised, which liabilities could be
substantial. These laws, regulations and obligations are increasing in complexity and number, change frequently and
increasingly conflict among the various countries in which we operate. Other jurisdictions, including states in the U.S., have
enacted or are enacting similar data protection laws, and/or are considering data localization laws that require data to stay
within their borders. Our systems and the systems maintained or used by third parties and service providers may not be able to
satisfy these changing legal and regulatory requirements, or may require significant additional investments or time to do so. 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 and we could experience a material adverse effect on our results of
operations, financial condition and business.
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.
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 28, 2018, our outstanding indebtedness was $7,244.0 million. We had additional
availability of $902.8 million under our revolving credit facilities as of that date.
This degree of leverage could have important consequences, including:
•
exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our
senior secured credit facilities and our receivables facility, are at variable rates of interest;
• making it more difficult for us to make payments on our indebtedness;
•
•
•
•
•
•
increasing our vulnerability to general economic and industry conditions;
requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and
interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital
expenditures and future business opportunities;
restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
limiting our ability to obtain additional financing for working capital, capital expenditures, debt service
requirements, acquisitions and general corporate or other purposes;
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; and
limiting our ability to benefit from tax deductions for such payments under certain interest expense limitation
rules included in the Tax Cuts and Jobs Act of 2017.
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 2021, 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;
16
17
17
Aramark 2018 Form 10-K •
•
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
There can be no assurance that we will continue to pay dividends on our common stock, and our indebtedness could limit
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.
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 7. "Management's Discussion and Analysis
of Financial Condition and Results of Operations." Although we have paid cash dividends in the past, there can be no assurance
that we will continue to pay any dividend in the future.
Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have an anti-
takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control
transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over
the market price for the shares held by our stockholders.
These provisions provide for, among other things:
•
•
•
•
•
the ability of our board of directors to issue one or more series of preferred stock;
advance notice for nominations of directors by stockholders and for stockholders to include matters to be
considered at our annual meetings;
certain limitations on convening special stockholder meetings;
the removal of directors only upon the affirmative vote of the holders of at least 75% in voting power of all the
then-outstanding common stock of the company entitled to vote thereon, voting together as a single class; and
that certain provisions may be amended only by the affirmative vote of the holders of at least 75% in voting power
of all the then-outstanding common stock of the company entitled to vote thereon, voting together as a single
class.
premium for their shares.
employees.
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
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
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.
18
19
18
Aramark 2018 Form 10-K •
•
•
•
•
•
•
•
•
•
•
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
enter into certain transactions with our affiliates.
In addition, our senior secured revolving credit facility requires us to satisfy and maintain specified financial ratios and other
financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and in
the event of a significant deterioration of our financial performance, there can be no assurance that we will satisfy those ratios
and tests. A breach of any of these covenants could result in a default under the senior secured credit agreement. Upon our
failure to maintain compliance with these covenants that is not waived by the lenders under the revolving credit facility, the
lenders under the senior secured credit facilities could elect to declare all amounts outstanding under the senior secured credit
facilities to be immediately due and payable and terminate all commitments to extend further credit under such facilities. If we
were unable to repay those amounts, the lenders under the senior secured credit facilities could proceed against the collateral
granted to them to secure that indebtedness. We have pledged a significant portion of our assets as collateral under the senior
secured credit agreement. If the lenders under the senior secured credit facilities accelerate the repayment of borrowings, there
can be no assurance that we will have sufficient assets to repay those borrowings, as well as our unsecured indebtedness. If our
senior secured indebtedness was accelerated by the lenders as a result of a default, our senior notes may become due and
payable as well. Any such acceleration may also constitute an amortization event under our receivables facility, which could
result in the amount outstanding under that facility becoming due and payable.
Risks Related to Ownership of Our Common Stock
Our share price may change significantly, and you may not be able to resell shares of our common stock at or above the
price you paid or at all, and you could lose all or part of your investment as a result.
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 7. "Management's Discussion and Analysis
of Financial Condition and Results of Operations." Although we have paid cash dividends in the past, there can be no assurance
that we will continue to pay any dividend in the future.
Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have an anti-
takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control
transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over
the market price for the shares held by our stockholders.
These provisions provide for, among other things:
•
•
•
•
•
the ability of our board of directors to issue one or more series of preferred stock;
advance notice for nominations of directors by stockholders and for stockholders to include matters to be
considered at our annual meetings;
certain limitations on convening special stockholder meetings;
the removal of directors only upon the affirmative vote of the holders of at least 75% in voting power of all the
then-outstanding common stock of the company entitled to vote thereon, voting together as a single class; and
that certain provisions may be amended only by the affirmative vote of the holders of at least 75% in voting power
of all the then-outstanding common stock of the company entitled to vote thereon, voting together as a single
class.
These anti-takeover provisions could make it more difficult for a third-party to acquire us, even if the third-party's offer may be
considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a
premium for their shares.
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.
18
19
19
Aramark 2018 Form 10-K Item 2.
Properties
Item 3.
Legal Proceedings
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 28, 2018, we operated 389 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 43 states, Mexico, Canada and Puerto Rico. Of these, approximately 54% are leased and
approximately 46% are owned. We own six buildings that we use in our FSS United States segment, including several office/
warehouse spaces, and we lease 115 premises, consisting of offices, office/warehouses and distribution centers. In addition, we
own a distribution center, one office and seven other properties and lease 140 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.
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 28, 2018.
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.
______________________________________
20
21
20
Aramark 2018 Form 10-K Item 2.
Properties
Item 3.
Legal Proceedings
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 28, 2018, we operated 389 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 43 states, Mexico, Canada and Puerto Rico. Of these, approximately 54% are leased and
approximately 46% are owned. We own six buildings that we use in our FSS United States segment, including several office/
warehouse spaces, and we lease 115 premises, consisting of offices, office/warehouses and distribution centers. In addition, we
own a distribution center, one office and seven other properties and lease 140 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.
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 28, 2018.
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.
______________________________________
20
21
21
Aramark 2018 Form 10-K Executive Officers of the Registrant
Our executive officers as of November 21, 2018 are as follows:
Name
Eric J. Foss
Stephen P. Bramlage, Jr.
Harrald F. Kroeker
Lynn B. McKee
Brian P. Pressler
Stephen R. Reynolds
Age
Position
60
48
61
63
43
60
Chairman, President and Chief Executive Officer
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
With
Aramark
Since
2012
2015
2013
1980
2002
2012
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 2010 until 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 2012 to March 2015.
Prior to that, he served as President of Owens-Illinois Asia Pacific from 2011 to 2012; General Manager of Owens-Illinois New
Zealand from 2010 to 2011; Vice President of Finance of Owens-Illinois, Inc. from 2008 to 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 2014 to October 2017 and our Chief Operating Officer - Europe from 2013 to 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 2006 to 2007 and as President, Fresh Daily Direct, from 2007 to 2011. Mr. Kroeker has given the
Company notice that he will be retire from the Company effective December 31, 2018.
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 2001 to 2003, she served as Senior Vice President of
Human Resources for our Food and Support Services Group. From 1998 to 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 2014 to
May 2016, he served as our Vice President, Finance, Education and from 2013 to 2014 as our Vice President, Finance,
International. Mr. Pressler served as our Vice President, Finance, Educational Services, K-12 from 2011 to 2013 and as
Associate Vice President, Finance, Educational Services, K-12 from 2008 to 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 2006 to 2012.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Stock Price Performance
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 26,
2018, there were approximately 1,104 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.
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.
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 28, 2018 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,
October 3,
October 2,
September 30,
September 29,
September 28,
2013
$100.0
$100.0
$100.0
2014
$133.3
$112.7
$107.8
2015
$152.2
$114.0
$122.9
2016
2017
2018
$194.9
$121.3
$125.8
$203.1
$141.9
$140.6
$215.1
$164.1
$181.2
There were no unregistered sales of equity securities during the fiscal year ended September 28, 2018 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 28, 2018.
22
23
22
Aramark 2018 Form 10-K Executive Officers of the Registrant
Our executive officers as of November 21, 2018 are as follows:
With
Aramark
Since
2012
2015
2013
1980
2002
2012
Age
Position
Chairman, President and Chief Executive Officer
Stephen P. Bramlage, Jr.
Executive Vice President and Chief Financial Officer
Name
Eric J. Foss
Harrald F. Kroeker
Lynn B. McKee
Brian P. Pressler
60
48
61
63
43
60
Senior Vice President, Integration
Executive Vice President, Human Resources
Senior Vice President, Controller and Chief Accounting Officer
Stephen R. Reynolds
Executive Vice President, General Counsel and Secretary
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 2010 until 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 2012 to March 2015.
Prior to that, he served as President of Owens-Illinois Asia Pacific from 2011 to 2012; General Manager of Owens-Illinois New
Zealand from 2010 to 2011; Vice President of Finance of Owens-Illinois, Inc. from 2008 to 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 2014 to October 2017 and our Chief Operating Officer - Europe from 2013 to 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 2006 to 2007 and as President, Fresh Daily Direct, from 2007 to 2011. Mr. Kroeker has given the
Company notice that he will be retire from the Company effective December 31, 2018.
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 2001 to 2003, she served as Senior Vice President of
Human Resources for our Food and Support Services Group. From 1998 to 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 2014 to
May 2016, he served as our Vice President, Finance, Education and from 2013 to 2014 as our Vice President, Finance,
International. Mr. Pressler served as our Vice President, Finance, Educational Services, K-12 from 2011 to 2013 and as
Associate Vice President, Finance, Educational Services, K-12 from 2008 to 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 2006 to 2012.
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 26,
2018, there were approximately 1,104 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.
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.
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 28, 2018 of the cumulative total return for our common stock, The Standard &
Poor’s (“S&P”) 500 Stock Index and The Dow Jones Consumer Non-Cyclical Index. The graph assumes that $100 was invested
in the Company’s common stock and in each index at the market close on December 12, 2013 and assumes that all dividends
were reinvested. The stock price performance of the following graph is not necessarily indicative of future stock price
performance.
Aramark
S&P 500
Dow Jones Consumer Non-Cyclical Index
Unregistered Sales of Equity Securities
December 12,
2013
October 3,
2014
October 2,
2015
September 30,
2016
September 29,
2017
September 28,
2018
$100.0
$100.0
$100.0
$133.3
$112.7
$107.8
$152.2
$114.0
$122.9
$194.9
$121.3
$125.8
$203.1
$141.9
$140.6
$215.1
$164.1
$181.2
There were no unregistered sales of equity securities during the fiscal year ended September 28, 2018 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 28, 2018.
22
23
23
Aramark 2018 Form 10-K Item 6.
Selected Consolidated Financial Data
Item 7.
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)
Income Statement Data:
Sales
Depreciation and amortization
Operating income
Interest and other financing costs, net
Net income(3)
Net income attributable to Aramark stockholders(3)
Basic earnings per share attributable to Aramark
stockholders(3)
Diluted earnings per share attributable to Aramark
stockholders(3)
Cash dividends declared per common share
Balance Sheet Data (at period end):
Total assets
Long-term borrowings
Stockholders' Equity
2018(2)
Fiscal Year Ended on or near
September 30(1)
2016
2017
2015
2014
those statements.
$ 15,789.6
596.2
826.1
354.3
568.4
567.9
$ 14,604.4
508.2
808.1
287.4
374.2
373.9
$ 14,415.8
495.8
746.3
315.4
288.2
287.8
$ 14,329.1
504.0
627.9
285.9
237.0
235.9
$ 14,832.9
521.6
564.6
334.9
149.5
149.0
$2.31
$2.24
$0.43
$1.53
$1.49
$0.41
$1.19
$1.16
$0.39
$0.99
$0.96
$0.35
$0.66
$0.63
$0.23
$ 13,720.1
7,213.1
3,029.6
$ 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
(1)
(2)
(3)
Our fiscal year ends on the Friday nearest to September 30th. Fiscal years 2018, 2017, 2016, 2015 and 2014 refer to the
fiscal years ended September 28, 2018, September 29, 2017, September 30, 2016, October 2, 2015 and October 3, 2014,
respectively. Fiscal 2014 was a fifty-three week year. All other periods presented were fifty-two week years.
Includes impact of the acquisitions of Avendra and AmeriPride. To finance these acquisitions, we entered into a U.S.
dollar denominated term loan due 2025 and 5.000% Senior Notes due 2028.
In fiscal 2018, the federal statutory income tax rate decreased from 35.0% to 21.0% through the passage of the "Tax Cuts
and Jobs Act." This resulted in a tax benefit of approximately $237.8 million recorded to the provision (benefit) for
income taxes on the Consolidated Statements of Income.
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 28, 2018, September 29, 2017 and September 30, 2016 should be read in
conjunction with Selected Consolidated Financial Data and our audited consolidated financial statements and the notes to
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 the United States, which is supplemented by an additional 18-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.
Prior to fiscal 2018, we reported our operating results in three reportable segments: FSS North America, FSS International and
Uniform. Beginning in fiscal 2018, the segment reporting structure was modified to align more closely with our management
and internal reporting structure, which was changed on September 30, 2017. Specifically, a majority of the Canadian
operations, previously in the FSS North America segment, were combined with the FSS International reportable segment. The
FSS North America reportable segment was then renamed the FSS United States reportable segment. All prior period segment
information has been restated to reflect the new reportable segment structure. We believe this new presentation enhances the
utility of the segment information, as it reflects our current management structure and operating organization. The financial
statement effect of this segment realignment was not material.We currently operate our business in three reportable segments:
•
•
Food and Support Services United States ("FSS United States") - 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.
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
18 countries outside the United States. Our largest international operations are in Canada, 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") - Provides a full service employee uniform solution, including design,
sourcing and manufacturing, delivery, cleaning and maintenance on a contract basis. We directly market
personalized uniforms and accessories, provide managed restroom services and rent uniforms, work clothing,
outerwear, particulate-free garments and non-garment items and related services, including mats, shop towels and
first aid supplies, to clients in a wide range of industries in the United States, Puerto Rico, Canada and through a
joint venture in Japan, including the manufacturing, transportation, construction, restaurants and hotels, healthcare
and pharmaceutical industries.
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 United States clients and operates in the same sectors. Administrative expenses
not allocated to our three reportable segments are presented separately as corporate expenses.
During the first quarter of fiscal 2018, we acquired Avendra, LLC ("Avendra") and during the second quarter of fiscal 2018, we
acquired AmeriPride Services, Inc. ("AmeriPride") in separate transactions (see Note 2 to the audited consolidated financial
24
25
24
Aramark 2018 Form 10-K Item 6.
Selected Consolidated Financial Data
Item 7.
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)
Income Statement Data:
Sales
Depreciation and amortization
Operating income
Interest and other financing costs, net
Net income(3)
Net income attributable to Aramark stockholders(3)
Basic earnings per share attributable to Aramark
Diluted earnings per share attributable to Aramark
stockholders(3)
stockholders(3)
Cash dividends declared per common share
Balance Sheet Data (at period end):
Fiscal Year Ended on or near
September 30(1)
2018(2)
2017
2016
2015
2014
$ 15,789.6
$ 14,604.4
$ 14,415.8
$ 14,329.1
$ 14,832.9
596.2
826.1
354.3
568.4
567.9
$2.31
$2.24
$0.43
508.2
808.1
287.4
374.2
373.9
$1.53
$1.49
$0.41
495.8
746.3
315.4
288.2
287.8
$1.19
$1.16
$0.39
504.0
627.9
285.9
237.0
235.9
$0.99
$0.96
$0.35
521.6
564.6
334.9
149.5
149.0
$0.66
$0.63
$0.23
Total assets
Long-term borrowings
Stockholders' Equity
$ 13,720.1
$ 11,006.2
$ 10,582.1
$ 10,196.4
$ 10,455.7
7,213.1
3,029.6
5,190.3
2,459.1
5,223.5
2,161.0
5,184.6
1,883.4
5,355.8
1,718.0
(1)
Our fiscal year ends on the Friday nearest to September 30th. Fiscal years 2018, 2017, 2016, 2015 and 2014 refer to the
fiscal years ended September 28, 2018, September 29, 2017, September 30, 2016, October 2, 2015 and October 3, 2014,
respectively. Fiscal 2014 was a fifty-three week year. All other periods presented were fifty-two week years.
(2)
Includes impact of the acquisitions of Avendra and AmeriPride. To finance these acquisitions, we entered into a U.S.
dollar denominated term loan due 2025 and 5.000% Senior Notes due 2028.
(3)
In fiscal 2018, the federal statutory income tax rate decreased from 35.0% to 21.0% through the passage of the "Tax Cuts
and Jobs Act." This resulted in a tax benefit of approximately $237.8 million recorded to the provision (benefit) for
income taxes on the Consolidated Statements of Income.
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 28, 2018, September 29, 2017 and September 30, 2016 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 the United States, which is supplemented by an additional 18-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.
Prior to fiscal 2018, we reported our operating results in three reportable segments: FSS North America, FSS International and
Uniform. Beginning in fiscal 2018, the segment reporting structure was modified to align more closely with our management
and internal reporting structure, which was changed on September 30, 2017. Specifically, a majority of the Canadian
operations, previously in the FSS North America segment, were combined with the FSS International reportable segment. The
FSS North America reportable segment was then renamed the FSS United States reportable segment. All prior period segment
information has been restated to reflect the new reportable segment structure. We believe this new presentation enhances the
utility of the segment information, as it reflects our current management structure and operating organization. The financial
statement effect of this segment realignment was not material.We currently operate our business in three reportable segments:
•
•
•
Food and Support Services United States ("FSS United States") - 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.
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
18 countries outside the United States. Our largest international operations are in Canada, 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") - Provides a full service employee uniform solution, including design,
sourcing and manufacturing, delivery, cleaning and maintenance on a contract basis. We directly market
personalized uniforms and accessories, provide managed restroom services and rent uniforms, work clothing,
outerwear, particulate-free garments and non-garment items and related services, including mats, shop towels and
first aid supplies, to clients in a wide range of industries in the United States, Puerto Rico, Canada and through a
joint venture in Japan, including the manufacturing, transportation, construction, restaurants and hotels, healthcare
and pharmaceutical industries.
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 United States clients and operates in the same sectors. Administrative expenses
not allocated to our three reportable segments are presented separately as corporate expenses.
During the first quarter of fiscal 2018, we acquired Avendra, LLC ("Avendra") and during the second quarter of fiscal 2018, we
acquired AmeriPride Services, Inc. ("AmeriPride") in separate transactions (see Note 2 to the audited consolidated financial
24
25
25
Aramark 2018 Form 10-K 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
Interest and Other Financing Costs, net
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. The fiscal 2018 income tax
provision was impacted by U.S. tax reform enacted in the "Tax Cuts and Jobs Act" (see Note 8 to the audited consolidated
financial statements). 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.
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
Foreign Currency Fluctuations
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 28, 2018, September 29, 2017 and September 30, 2016 were each fifty-two week periods.
statements). The Avendra acquisition consideration was $1,386.4 million, partially offset by $87.3 million of cash and restricted
investments acquired. The AmeriPride acquisition consideration was $995.4 million, partially offset by $84.9 million of cash
acquired. We incurred new debt to finance both the Avendra and AmeriPride acquisitions (see Note 5 to the audited
consolidated financial statements). We expect our earnings for some period following the closings to be impacted as a result of
these acquisitions, due to, among other factors, merger and integration costs as well as depreciation and amortization resulting
from purchase accounting and higher interest expense as a result of the new debt to finance the transactions. As a part of the
integration of Avendra and AmeriPride, we expect to incur an approximate $50 million of additional charges over the next two
years, subject to additional accounting appraisals.
In the second quarter of fiscal 2018, the Company launched the next phase of its program related to food, labor and selling and
general administrative initiatives to generate additional cost savings. These initiatives include a reduction in headcount through
reorganization and integration, the relocation of our headquarter facility and certain other costs. Efforts related to this next
phase of streamlining are already underway, and have resulted in fiscal 2018 charges of approximately $63 million. The
Company currently expects to incur additional charges of approximately $40 million related to this phase within fiscal 2019.
Divestiture
During the fourth quarter of fiscal 2018, we announced that we signed an agreement to sell our Healthcare Technologies
("HCT") business for $300.0 million. The sale closed during the first quarter of fiscal 2019. We intend to use the majority of the
proceeds to repay debt. We also plan to repurchase $50 million of our common stock.
Seasonality
Our sales and operating results have varied from quarter to quarter as a result of different factors. Historically, within our FSS
United States 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 United States 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 2018, approximately two-thirds of our
FSS United States 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 2018, approximately one-third of our FSS United States 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.
26
27
26
Aramark 2018 Form 10-K 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. The fiscal 2018 income tax
provision was impacted by U.S. tax reform enacted in the "Tax Cuts and Jobs Act" (see Note 8 to the audited consolidated
financial statements). 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 28, 2018, September 29, 2017 and September 30, 2016 were each fifty-two week periods.
Divestiture
Seasonality
Sources of Sales
statements). The Avendra acquisition consideration was $1,386.4 million, partially offset by $87.3 million of cash and restricted
investments acquired. The AmeriPride acquisition consideration was $995.4 million, partially offset by $84.9 million of cash
acquired. We incurred new debt to finance both the Avendra and AmeriPride acquisitions (see Note 5 to the audited
consolidated financial statements). We expect our earnings for some period following the closings to be impacted as a result of
these acquisitions, due to, among other factors, merger and integration costs as well as depreciation and amortization resulting
from purchase accounting and higher interest expense as a result of the new debt to finance the transactions. As a part of the
integration of Avendra and AmeriPride, we expect to incur an approximate $50 million of additional charges over the next two
years, subject to additional accounting appraisals.
In the second quarter of fiscal 2018, the Company launched the next phase of its program related to food, labor and selling and
general administrative initiatives to generate additional cost savings. These initiatives include a reduction in headcount through
reorganization and integration, the relocation of our headquarter facility and certain other costs. Efforts related to this next
phase of streamlining are already underway, and have resulted in fiscal 2018 charges of approximately $63 million. The
Company currently expects to incur additional charges of approximately $40 million related to this phase within fiscal 2019.
During the fourth quarter of fiscal 2018, we announced that we signed an agreement to sell our Healthcare Technologies
("HCT") business for $300.0 million. The sale closed during the first quarter of fiscal 2019. We intend to use the majority of the
proceeds to repay debt. We also plan to repurchase $50 million of our common stock.
Our sales and operating results have varied from quarter to quarter as a result of different factors. Historically, within our FSS
United States 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.
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 United States 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 2018, approximately two-thirds of our
FSS United States 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 2018, approximately one-third of our FSS United States 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.
26
27
27
Aramark 2018 Form 10-K $
15,789.6
$
14,604.4
$
1,185.2
8 %
8 %
21 %
8 %
2 %
23 %
(9)%
(166)%
52 %
Sales
Costs and Expenses:
Cost of services provided
Other operating expenses
Operating income
Interest and Other Financing Costs, net
Income Before Income Taxes
(Benefit) Provision for Income Taxes
Net income
$
13,990.2
973.3
14,963.5
826.1
354.3
471.8
(96.6)
568.4
12,989.0
807.3
13,796.3
808.1
287.4
520.7
146.5
$
374.2
$
1,001.2
166.0
1,167.2
18.0
66.9
(48.9)
(243.1)
194.2
Results of Operations
Fiscal 2018 Compared to Fiscal 2017
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 2018 and 2017 (dollars in millions). A majority of our Canadian operations were
reclassified into the FSS International reportable segment beginning in fiscal 2018. Fiscal 2017 was restated to conform to the
current period presentation. The effect was not material.
Fiscal Year Ended
September 28, 2018
September 29, 2017
$
%
The following table presents the cost of services provided by segment and as a percent of sales for the fiscal years ended
September 28, 2018 and September 29, 2017.
Fiscal Year Ended
September 28, 2018
September 29, 2017
Cost of services provided
$
% of Sales
$
% of Sales
FSS United States
$
FSS International
Uniform
8,959.4
3,420.1
1,611.0
88% $
94%
81%
8,692.5
3,053.7
1,242.8
$
13,990.5
89% $
12,989.0
89%
93%
79%
89%
The following table presents the percentages attributable to the components in cost of services provided for fiscal 2018 and
fiscal 2017.
Cost of services provided components
September 28, 2018
September 29, 2017
Food and support service costs
Personnel costs
Other direct costs
Fiscal Year Ended
26%
47%
27%
100%
26%
47%
27%
100%
•
$75.8 million increase primarily driven by our FSS United States business segment, which was primarily from a
reduction in personnel costs, including employee incentive expenses, and profit from the Avendra acquisition; offset
by a decline in operating income in our FSS International business segment, the results of the AmeriPride acquisition
(mainly due to the impact of merger and integration costs) and increased corporate expenses;
($22.4) million increase in share-based compensation expense primarily related to the increase in the performance
stock unit ("PSU") attainment percentage and a reduction in the forfeiture rate; and
($35.4) million increase in severance and consulting costs related to streamlining initiatives.
•
•
Interest and Other Financing Costs, net, increased 23% during fiscal 2018 compared to the prior year period. The increase for
fiscal 2018 was primarily due to new borrowings in the current year to finance the Avendra and AmeriPride acquisitions. This
increase was partially offset by a reduction in charges related to refinancing activities for which $31.5 million was incurred
during fiscal 2017 for the write-off of deferred financing costs, original issue discount and call premium compared to $17.7
million incurred during fiscal 2018 for the write-off of debt issuance costs and financing commitment fees related to the
Avendra and AmeriPride acquisitions.
The effective income tax rate for fiscal 2018 was (20.5)% compared to 28.1% in the prior year. The decrease in the effective tax
rate during fiscal 2018 is driven by a reduction in the U.S. federal statutory rate from 35% to 21% and the re-measurement of
the Company’s deferred tax assets and liabilities as a result of the “Tax Cuts and Jobs Act." A benefit of approximately $237.8
million was recorded to the (benefit) provision for income taxes for fiscal 2018 in the Consolidated Statements of Income as a
result of U.S. tax reform. The effective income tax rate was also impacted by a $13.1 million valuation allowance recorded
against the Company's foreign tax credit carryforward during fiscal 2018 (see Note 8 to the audited consolidated financial
statements).
Segment Results
FSS United States Segment
The FSS United States reportable segment consists of five operating sectors which have similar economic characteristics and
are aggregated into a single operating segment. The five operating sectors of the FSS United States reportable segment are
Business & Industry, Education, Healthcare, Sports, Leisure & Corrections and Facilities & Other.
Fiscal Year Ended
in operating income was attributable to:
Operating income increased by approximately $18.0 million during fiscal 2018 compared to the prior year period. The increase
Sales by Segment(1)
FSS United States
FSS International
Uniform
September 28, 2018
September 29, 2017
$
%
$
$
10,137.8
$
9,748.0
$
3,655.8
1,996.0
3,291.7
1,564.7
389.8
364.1
431.3
15,789.6
$
14,604.4
$
1,185.2
Fiscal Year Ended
Operating Income by Segment
September 28, 2018
September 29, 2017
$
%
FSS United States
FSS International
Uniform
Corporate
$
$
680.5
$
596.8
$
150.9
182.6
(187.9)
826.1
$
162.1
182.3
(133.1)
808.1
$
83.7
(11.2)
0.3
(54.8)
18.0
4%
11%
28%
8%
14%
(7%)
—%
41%
2%
(1) As a percentage of total sales, FSS United States represented 64% and 67%, FSS International represented 23% and 22% and Uniform represented 13% and
11% for fiscal 2018 and fiscal 2017, respectively.
Consolidated Overview
Sales increased by approximately 8% during fiscal 2018 compared to the prior year period. The increase was attributable to:
•
•
•
growth in all of our segments, excluding acquisitions;
growth due to the Avendra and AmeriPride acquisitions (approximately 4%); and
the positive impact of foreign currency translation (approximately 1%).
28
29
28
Aramark 2018 Form 10-K Results of Operations
Fiscal 2018 Compared to Fiscal 2017
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 2018 and 2017 (dollars in millions). A majority of our Canadian operations were
reclassified into the FSS International reportable segment beginning in fiscal 2018. Fiscal 2017 was restated to conform to the
current period presentation. The effect was not material.
Sales
Costs and Expenses:
Cost of services provided
Other operating expenses
Operating income
Interest and Other Financing Costs, net
Income Before Income Taxes
(Benefit) Provision for Income Taxes
Net income
Sales by Segment(1)
FSS United States
FSS International
Uniform
FSS United States
FSS International
Uniform
Corporate
Fiscal Year Ended
September 28, 2018
September 29, 2017
$
%
$
15,789.6
$
14,604.4
$
1,185.2
September 28, 2018
September 29, 2017
$
%
13,990.2
973.3
14,963.5
826.1
354.3
471.8
(96.6)
12,989.0
807.3
13,796.3
808.1
287.4
520.7
146.5
568.4
$
374.2
$
Fiscal Year Ended
1,001.2
166.0
1,167.2
18.0
66.9
(48.9)
(243.1)
194.2
10,137.8
$
9,748.0
$
3,655.8
1,996.0
3,291.7
1,564.7
389.8
364.1
431.3
15,789.6
$
14,604.4
$
1,185.2
Fiscal Year Ended
680.5
$
596.8
$
150.9
182.6
(187.9)
162.1
182.3
(133.1)
826.1
$
808.1
$
83.7
(11.2)
0.3
(54.8)
18.0
$
$
$
$
$
8 %
8 %
21 %
8 %
2 %
23 %
(9)%
(166)%
52 %
4%
11%
28%
8%
14%
(7%)
—%
41%
2%
Operating Income by Segment
September 28, 2018
September 29, 2017
$
%
(1) As a percentage of total sales, FSS United States represented 64% and 67%, FSS International represented 23% and 22% and Uniform represented 13% and
11% for fiscal 2018 and fiscal 2017, respectively.
Consolidated Overview
Sales increased by approximately 8% during fiscal 2018 compared to the prior year period. The increase was attributable to:
•
•
•
growth in all of our segments, excluding acquisitions;
growth due to the Avendra and AmeriPride acquisitions (approximately 4%); and
the positive impact of foreign currency translation (approximately 1%).
The following table presents the cost of services provided by segment and as a percent of sales for the fiscal years ended
September 28, 2018 and September 29, 2017.
Fiscal Year Ended
September 28, 2018
September 29, 2017
Cost of services provided
$
% of Sales
$
% of Sales
FSS United States
$
FSS International
Uniform
8,959.4
3,420.1
1,611.0
88% $
94%
81%
8,692.5
3,053.7
1,242.8
$
13,990.5
89% $
12,989.0
89%
93%
79%
89%
The following table presents the percentages attributable to the components in cost of services provided for fiscal 2018 and
fiscal 2017.
Cost of services provided components
September 28, 2018
September 29, 2017
Fiscal Year Ended
Food and support service costs
Personnel costs
Other direct costs
26%
47%
27%
100%
26%
47%
27%
100%
Operating income increased by approximately $18.0 million during fiscal 2018 compared to the prior year period. The increase
in operating income was attributable to:
•
•
•
$75.8 million increase primarily driven by our FSS United States business segment, which was primarily from a
reduction in personnel costs, including employee incentive expenses, and profit from the Avendra acquisition; offset
by a decline in operating income in our FSS International business segment, the results of the AmeriPride acquisition
(mainly due to the impact of merger and integration costs) and increased corporate expenses;
($22.4) million increase in share-based compensation expense primarily related to the increase in the performance
stock unit ("PSU") attainment percentage and a reduction in the forfeiture rate; and
($35.4) million increase in severance and consulting costs related to streamlining initiatives.
Interest and Other Financing Costs, net, increased 23% during fiscal 2018 compared to the prior year period. The increase for
fiscal 2018 was primarily due to new borrowings in the current year to finance the Avendra and AmeriPride acquisitions. This
increase was partially offset by a reduction in charges related to refinancing activities for which $31.5 million was incurred
during fiscal 2017 for the write-off of deferred financing costs, original issue discount and call premium compared to $17.7
million incurred during fiscal 2018 for the write-off of debt issuance costs and financing commitment fees related to the
Avendra and AmeriPride acquisitions.
The effective income tax rate for fiscal 2018 was (20.5)% compared to 28.1% in the prior year. The decrease in the effective tax
rate during fiscal 2018 is driven by a reduction in the U.S. federal statutory rate from 35% to 21% and the re-measurement of
the Company’s deferred tax assets and liabilities as a result of the “Tax Cuts and Jobs Act." A benefit of approximately $237.8
million was recorded to the (benefit) provision for income taxes for fiscal 2018 in the Consolidated Statements of Income as a
result of U.S. tax reform. The effective income tax rate was also impacted by a $13.1 million valuation allowance recorded
against the Company's foreign tax credit carryforward during fiscal 2018 (see Note 8 to the audited consolidated financial
statements).
Segment Results
FSS United States Segment
The FSS United States reportable segment consists of five operating sectors which have similar economic characteristics and
are aggregated into a single operating segment. The five operating sectors of the FSS United States reportable segment are
Business & Industry, Education, Healthcare, Sports, Leisure & Corrections and Facilities & Other.
28
29
29
Aramark 2018 Form 10-K decline in profit in Northern Europe.
Uniform Segment
primarily attributable to the acquisition of AmeriPride.
in operating income was attributable to:
operations in Puerto Rico;
Operating income increased by approximately $0.3 million during fiscal 2018 compared to the prior year period. The increase
$6.1 million related to a prior year asset write-down from the adverse impact of natural disasters, primarily on our
($0.8) million of profit decline from the AmeriPride acquisition, mainly due to the impact of merger and integration
costs and depreciation and amortization expense on its results, offset by an increase in profit within our legacy uniform
($5.0) million of an increase to the environmental reserve related to a reassessment of the monitoring period of
rental business; and
respective sites.
Corporate
Corporate expenses, those administrative expenses not allocated to the business segments, increased by approximately $54.8
million during fiscal 2018 compared to the prior year period. The increase was attributable to:
($26.0) million of acquisition related costs, mainly banker fees, from the Avendra and AmeriPride acquisitions;
($22.7) million increase in share-based compensation expense, primarily related to the increase in the PSU attainment
percentage;
($17.9) million increase in severance and consulting costs for streamlining initiatives; and
$11.8 million reduction in personnel costs, including employee incentive expenses.
•
•
•
•
•
•
•
Sales for each of these sectors are summarized as follows (in millions):
•
$3.0 million of profit growth related to productivity initiatives and lower employee incentive expenses, offset by a
Fiscal Year Ended
September 28, 2018
September 29, 2017
Uniform segment sales increased by approximately 28% during fiscal 2018 compared to the prior year period. The increase was
Business & Industry
Education
Healthcare
Sports, Leisure & Corrections
Facilities & Other
$
$
1,550.6
$
3,239.6
1,292.1
2,445.1
1,610.4
10,137.8
$
1,536.2
3,158.9
1,270.1
2,354.6
1,428.2
9,748.0
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 United States segment sales increased by approximately 4% during fiscal 2018 compared to the prior year period. The
increase was attributable to:
•
•
•
•
•
an increase in Business & Industry sector sales resulting from base business growth (approximately 1%);
an increase in Education sector sales resulting from net new business and base business growth (approximately 3%);
an increase in Healthcare sector sales resulting from base business growth (approximately 2%);
an increase in Sports, Leisure & Corrections sector sales resulting from net new business and base business growth
(approximately 4%); and
an increase in Facilities & Other sector sales resulting from net new business, an acquisition and base business growth
(approximately 13%).
Operating income increased by approximately $83.7 million during fiscal 2018 compared to the prior year period. The increase
in operating income was attributable to:
•
•
•
•
$92.1 million of profit growth within our businesses, due primarily from a reduction in personnel costs, including
employee incentive expenses, and profit from the Avendra acquisition;
$7.5 million increase from proceeds received related to our casualty insurance program from prior years' loss
experience that were favorable;
($7.7) million of duplicate rent charges to build out and ready our new headquarters while occupying our existing
headquarters; and
($8.3) million increase in severance charges related to streamlining initiatives.
Sales and operating income were both negatively impacted during fiscal 2018 by natural disasters, specifically the wildfires at
Yosemite National Park. The impact to the FSS United States segment was an approximate $28 million decline in revenue and
an approximate $9 million decline in operating income, which includes $5 million of recoveries under our insurance program.
FSS International Segment
FSS International segment sales increased by approximately 11% during fiscal 2018 compared to the prior year period. The
increase was attributable to:
•
•
sales growth across all regions, including growth due to the consolidation of a joint venture (approximately 2%); and
the positive impact of foreign currency translation (approximately 5%).
Operating income decreased by approximately $11.2 million during fiscal 2018 compared to the prior year period. The decrease
in operating income was attributable to:
•
•
•
($8.7) million increase in severance costs related to streamlining initiatives;
($7.5) million of charges related to a joint venture partner liquidation and related acquisition;
$2.0 million from the positive impact of foreign currency translation ($5.8 million), net of a $3.8 million charge as a
result of hyperinflation in Argentina; and
30
31
30
Aramark 2018 Form 10-K •
$3.0 million of profit growth related to productivity initiatives and lower employee incentive expenses, offset by a
decline in profit in Northern Europe.
Uniform Segment
Uniform segment sales increased by approximately 28% during fiscal 2018 compared to the prior year period. The increase was
primarily attributable to the acquisition of AmeriPride.
Operating income increased by approximately $0.3 million during fiscal 2018 compared to the prior year period. The increase
in operating income was attributable to:
•
•
•
$6.1 million related to a prior year asset write-down from the adverse impact of natural disasters, primarily on our
operations in Puerto Rico;
($0.8) million of profit decline from the AmeriPride acquisition, mainly due to the impact of merger and integration
costs and depreciation and amortization expense on its results, offset by an increase in profit within our legacy uniform
rental business; and
($5.0) million of an increase to the environmental reserve related to a reassessment of the monitoring period of
respective sites.
Corporate
Corporate expenses, those administrative expenses not allocated to the business segments, increased by approximately $54.8
million during fiscal 2018 compared to the prior year period. The increase was attributable to:
•
•
•
•
($26.0) million of acquisition related costs, mainly banker fees, from the Avendra and AmeriPride acquisitions;
($22.7) million increase in share-based compensation expense, primarily related to the increase in the PSU attainment
percentage;
($17.9) million increase in severance and consulting costs for streamlining initiatives; and
$11.8 million reduction in personnel costs, including employee incentive expenses.
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 28, 2018
September 29, 2017
$
$
1,550.6
$
3,239.6
1,292.1
2,445.1
1,610.4
10,137.8
$
1,536.2
3,158.9
1,270.1
2,354.6
1,428.2
9,748.0
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 United States segment sales increased by approximately 4% during fiscal 2018 compared to the prior year period. The
increase was attributable to:
an increase in Business & Industry sector sales resulting from base business growth (approximately 1%);
an increase in Education sector sales resulting from net new business and base business growth (approximately 3%);
an increase in Healthcare sector sales resulting from base business growth (approximately 2%);
an increase in Sports, Leisure & Corrections sector sales resulting from net new business and base business growth
(approximately 4%); and
(approximately 13%).
an increase in Facilities & Other sector sales resulting from net new business, an acquisition and base business growth
Operating income increased by approximately $83.7 million during fiscal 2018 compared to the prior year period. The increase
in operating income was attributable to:
$92.1 million of profit growth within our businesses, due primarily from a reduction in personnel costs, including
employee incentive expenses, and profit from the Avendra acquisition;
$7.5 million increase from proceeds received related to our casualty insurance program from prior years' loss
experience that were favorable;
headquarters; and
($7.7) million of duplicate rent charges to build out and ready our new headquarters while occupying our existing
($8.3) million increase in severance charges related to streamlining initiatives.
Sales and operating income were both negatively impacted during fiscal 2018 by natural disasters, specifically the wildfires at
Yosemite National Park. The impact to the FSS United States segment was an approximate $28 million decline in revenue and
an approximate $9 million decline in operating income, which includes $5 million of recoveries under our insurance program.
FSS International Segment
increase was attributable to:
FSS International segment sales increased by approximately 11% during fiscal 2018 compared to the prior year period. The
sales growth across all regions, including growth due to the consolidation of a joint venture (approximately 2%); and
the positive impact of foreign currency translation (approximately 5%).
Operating income decreased by approximately $11.2 million during fiscal 2018 compared to the prior year period. The decrease
in operating income was attributable to:
($8.7) million increase in severance costs related to streamlining initiatives;
($7.5) million of charges related to a joint venture partner liquidation and related acquisition;
$2.0 million from the positive impact of foreign currency translation ($5.8 million), net of a $3.8 million charge as a
result of hyperinflation in Argentina; and
•
•
•
•
•
•
•
•
•
•
•
•
•
•
30
31
31
Aramark 2018 Form 10-K 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). A majority of our Canadian operations were
reclassified into the FSS International reportable segment beginning in fiscal 2018. Fiscal 2017 and fiscal 2016 were restated to
conform to the current period presentation. The effect was not material.
Sales
Cost and Expenses:
Cost of service provided
Other operating expenses
Operating income
Interest and Other Financing Costs, net
Income Before Income Taxes
Provision for Income Taxes
Net income
Sales by Segment(1)
FSS United States
FSS International
Uniform
Operating Income by Segment
FSS United States
FSS International
Uniform
Corporate
Fiscal Year Ended
September 29, 2017
September 30, 2016
$
%
$
14,604.4
$
14,415.8
$
188.6
12,989.0
807.3
13,796.3
808.1
287.4
520.7
146.5
12,890.4
779.1
13,669.5
746.3
315.4
430.9
142.7
$
374.2
$
288.2
$
Fiscal Year Ended
September 29, 2017
9,748.0
$
3,291.7
1,564.7
14,604.4
$
September 30, 2016
9,582.6
$
3,269.5
1,563.7
14,415.8
$
Fiscal Year Ended
September 29, 2017
596.8
$
162.1
182.3
(133.1)
808.1
$
September 30, 2016
490.2
$
185.3
195.3
(124.5)
746.3
$
$
$
$
$
1 %
1 %
4 %
1 %
8 %
(9)%
21 %
3 %
30 %
2%
1%
—%
1%
98.6
28.2
126.8
61.8
(28.0)
89.8
3.8
86.0
$
%
165.4
22.2
1.0
188.6
$
%
106.6
(23.2)
(13.0)
(8.6)
61.8
22 %
(13)%
(7)%
7 %
8 %
(1) As a percentage of total sales, FSS United States represented 67% and 66%, FSS International represented 22% and 23% and Uniform represented 11% and
11% for fiscal 2017 and fiscal 2016, respectively.
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
United States 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 -1%.
32
33
32
The following table presents the cost of services provided by segment and as a percent of sales for the fiscal years ended
September 29, 2017 and September 30, 2016.
Fiscal Year Ended
September 29, 2017
September 30, 2016
Cost of services provided
$
% of Sales
$
% of Sales
FSS United States
$
FSS International
Uniform
8,692.5
3,053.7
1,242.8
89% $
93%
79%
8,652.1
3,007.5
1,230.8
$
12,989.0
89% $
12,890.4
90%
92%
79%
89%
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
September 29, 2017
September 30, 2016
Food and support service costs
Personnel costs
Other direct costs
Fiscal Year Ended
26%
47%
27%
100%
27%
47%
26%
100%
Operating income increased approximately $61.8 million during fiscal 2017. The increase in operating income was impacted
by:
•
•
•
•
•
•
•
•
profit growth in the FSS United States 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.
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 United States Segment
The FSS United States reportable segment consists of five operating sectors which have similar economic characteristics and
are aggregated into a single operating segment. The five operating sectors of the FSS United States reportable segment are
Business & Industry, Education, Healthcare, Sports, Leisure & Corrections and Facilities & Other.
Aramark 2018 Form 10-K 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). A majority of our Canadian operations were
reclassified into the FSS International reportable segment beginning in fiscal 2018. Fiscal 2017 and fiscal 2016 were restated to
conform to the current period presentation. The effect was not material.
Sales
Cost and Expenses:
Cost of service provided
Other operating expenses
Operating income
Interest and Other Financing Costs, net
Income Before Income Taxes
Provision for Income Taxes
Net income
Sales by Segment(1)
FSS United States
FSS International
Uniform
FSS United States
FSS International
Uniform
Corporate
Fiscal Year Ended
September 29, 2017
September 30, 2016
$
%
$
14,604.4
$
14,415.8
$
188.6
September 29, 2017
September 30, 2016
$
%
12,989.0
807.3
13,796.3
808.1
287.4
520.7
146.5
12,890.4
779.1
13,669.5
746.3
315.4
430.9
142.7
374.2
$
288.2
$
Fiscal Year Ended
9,748.0
$
9,582.6
$
3,291.7
1,564.7
3,269.5
1,563.7
14,604.4
$
14,415.8
$
Fiscal Year Ended
$
596.8
162.1
182.3
(133.1)
808.1
$
$
490.2
185.3
195.3
(124.5)
746.3
$
98.6
28.2
126.8
61.8
(28.0)
89.8
3.8
86.0
165.4
22.2
1.0
188.6
106.6
(23.2)
(13.0)
(8.6)
61.8
$
$
$
$
$
1 %
1 %
4 %
1 %
8 %
(9)%
21 %
3 %
30 %
2%
1%
—%
1%
22 %
(13)%
(7)%
7 %
8 %
Operating Income by Segment
September 29, 2017
September 30, 2016
$
%
(1) As a percentage of total sales, FSS United States represented 67% and 66%, FSS International represented 22% and 23% and Uniform represented 11% and
11% for fiscal 2017 and fiscal 2016, respectively.
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
United States 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 -1%.
•
•
•
•
The following table presents the cost of services provided by segment and as a percent of sales for the fiscal years ended
September 29, 2017 and September 30, 2016.
Fiscal Year Ended
September 29, 2017
September 30, 2016
Cost of services provided
$
% of Sales
$
% of Sales
FSS United States
$
FSS International
Uniform
8,692.5
3,053.7
1,242.8
89% $
93%
79%
8,652.1
3,007.5
1,230.8
$
12,989.0
89% $
12,890.4
90%
92%
79%
89%
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
September 29, 2017
September 30, 2016
Fiscal Year Ended
Food and support service costs
Personnel costs
Other direct costs
26%
47%
27%
100%
27%
47%
26%
100%
Operating income increased approximately $61.8 million during fiscal 2017. The increase in operating income was impacted
by:
•
•
•
•
•
•
•
•
profit growth in the FSS United States 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.
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 United States Segment
The FSS United States reportable segment consists of five operating sectors which have similar economic characteristics and
are aggregated into a single operating segment. The five operating sectors of the FSS United States reportable segment are
Business & Industry, Education, Healthcare, Sports, Leisure & Corrections and Facilities & Other.
32
33
33
Aramark 2018 Form 10-K Sales for each of these sectors are summarized as follows (in millions):
Uniform Segment
Fiscal Year Ended
Uniform segment sales for fiscal 2017 were comparable to fiscal 2016.
Fiscal 2017 operating income decreased approximately $13.0 million compared to fiscal 2016. The decrease in operating
September 29, 2017
September 30, 2016
income was impacted by:
Business & Industry
Education
Healthcare
Sports, Leisure & Corrections
Facilities & Other
$
$
1,536.2
$
3,158.9
1,270.1
2,354.6
1,428.2
9,748.0
$
1,522.0
3,291.4
1,350.1
2,191.1
1,228.0
9,582.6
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 United States segment sales increased 2% during fiscal 2017 primarily due to:
during fiscal 2017. The increase is primarily due to the impact of:
•
•
•
•
•
an increase in Business & Industry sector sales resulting from net new business and base business growth
(approximately 1%);
an increase in Sports, Leisure & Corrections sector sales resulting from net new business and base business growth
(approximately 7%);
an increase in Facilities & Other sector sales resulting from net new business (approximately 16%);
a decrease in consulting costs (approximately $9.1 million).
lower Education sector sales resulting from net lost business (approximately 4%); and
lower Healthcare sector sales resulting from net lost business (approximately 6%).
Operating income increased approximately $106.6 million 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 $5.2 million);
prior year multiemployer pension plan charges (approximately $2.3 million);
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 1% 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., Canada and South America; and
the negative impact of foreign currency translation (approximately -2%).
Operating income decreased approximately $23.2 million during fiscal 2017. The decrease in operating income was impacted
by:
•
•
•
a profit decline in the U.K.; and
the negative impact of foreign currency translation (approximately -1%): which was partially offset by
profit growth in Germany, China and South America.
Fiscal 2017 and fiscal 2016 include severance related charges of approximately $13.4 million and $14.0 million, respectively.
34
35
34
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
Corporate expenses, those administrative expenses not allocated to the business segments, increased approximately $8.6 million
an increase in the loss related to the change in the fair value related to certain gasoline and diesel agreements
an increase in share-based compensation expense mainly related to performance stock awards (approximately $8.2
•
•
•
•
•
•
million, respectively.
Corporate
(approximately $8.7 million); and
million); which more than offset
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 28, 2018, we had $215.0 million of cash and cash equivalents and approximately $902.8 million of
availability under our senior secured revolving credit facility. A significant portion of our cash and cash equivalents is held in
mature, liquid markets where we have operations. As of September 28, 2018, there was approximately $913.8 million of
outstanding foreign currency borrowings.
We believe that our cash generated 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. 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.
The table below summarizes our cash activity (in millions):
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
$
1,047.4
$
1,053.4
$
(2,865.3)
1,794.2
(678.5)
(288.7)
867.3
(679.7)
(157.4)
Reference to the audited Consolidated Statements of Cash Flows will facilitate understanding of the discussion that follows.
Aramark 2018 Form 10-K Sales for each of these sectors are summarized as follows (in millions):
Uniform Segment
Business & Industry
Education
Healthcare
Sports, Leisure & Corrections
Facilities & Other
Fiscal Year Ended
September 29, 2017
September 30, 2016
$
$
1,536.2
$
3,158.9
1,270.1
2,354.6
1,428.2
9,748.0
$
1,522.0
3,291.4
1,350.1
2,191.1
1,228.0
9,582.6
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 United States segment sales increased 2% during fiscal 2017 primarily due to:
an increase in Business & Industry sector sales resulting from net new business and base business growth
(approximately 1%);
(approximately 7%);
an increase in Sports, Leisure & Corrections sector sales resulting from net new business and base business growth
an increase in Facilities & Other sector sales resulting from net new business (approximately 16%);
lower Education sector sales resulting from net lost business (approximately 4%); and
lower Healthcare sector sales resulting from net lost business (approximately 6%).
Operating income increased approximately $106.6 million 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 $5.2 million);
prior year multiemployer pension plan charges (approximately $2.3 million);
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 1% 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., Canada and South America; and
the negative impact of foreign currency translation (approximately -2%).
Operating income decreased approximately $23.2 million during fiscal 2017. The decrease in operating income was impacted
by:
a profit decline in the U.K.; and
the negative impact of foreign currency translation (approximately -1%): which was partially offset by
profit growth in Germany, China and South America.
Fiscal 2017 and fiscal 2016 include severance related charges of approximately $13.4 million and $14.0 million, respectively.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Uniform segment sales for fiscal 2017 were comparable to fiscal 2016.
Fiscal 2017 operating income decreased approximately $13.0 million 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 $8.6 million
during fiscal 2017. The increase is primarily due to the impact of:
•
•
•
an increase in the loss related to the change in the 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).
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 28, 2018, we had $215.0 million of cash and cash equivalents and approximately $902.8 million of
availability under our senior secured revolving credit facility. A significant portion of our cash and cash equivalents is held in
mature, liquid markets where we have operations. As of September 28, 2018, there was approximately $913.8 million of
outstanding foreign currency borrowings.
We believe that our cash generated 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. 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.
The table below summarizes our cash activity (in millions):
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
$
$
1,047.4
(2,865.3)
1,794.2
$
1,053.4
(678.5)
(288.7)
867.3
(679.7)
(157.4)
Reference to the audited Consolidated Statements of Cash Flows will facilitate understanding of the discussion that follows.
34
35
35
Aramark 2018 Form 10-K Cash Flows Provided by Operating Activities
Cash Flows Used in Investing Activities
During fiscal 2018, there was an increase in net income and non-cash charges that resulted from higher operating income
discussed above. The decrease in cash flows provided by operating activities was primarily attributable to the change in
operating assets and liabilities ($212.1 million). The change in operating assets and liabilities compared to the prior year period
was primarily due to the following:
•
•
•
•
Accrued expenses were a greater use of cash primarily due to the timing of one-time payments for certain liabilities
assumed related to the Avendra and AmeriPride acquisitions and lower accrued payroll and related expenses offset by
lower tax payments;
Prepayments were less of a source of cash due to the timing of prepayments made related to interest, insurance
premiums and taxes;
Accounts payable were less of a source of cash due to the timing of disbursements; and
Cash Flows Provided by (Used In) Financing Activities
Accounts receivable were less of a use of cash due to the timing of collections.
During fiscal 2018, cash provided by financing activities was impacted by the following (see Note 5 to the audited consolidated
During fiscal 2018, we received gross proceeds of approximately $18.9 million related to our casualty insurance program from
our loss experience being favorable related to a prior year. During fiscal 2018, we incurred approximately $58.2 million of
acquisition related costs. The "Changes in other noncurrent liabilities" caption in the Consolidated Statement of Cash Flows
was less of a source of cash compared to fiscal 2017 due to the timing of payments related to our casualty insurance program.
The "Changes in other assets" caption in the Consolidated Statement of Cash Flows was less of a use of cash during fiscal 2018
mainly from the increase in cash distributions received from our 50% ownership interest in AIM Services Co., Ltd. of
approximately $30.3 million, offset by certain client payments. The "Other operating activities" caption mainly reflects the
adjustments to net income in the prior year period related to certain financing related charges in connection with our refinancing
activity.
During fiscal 2017, there was an increase in the total of net income and non cash charges compared to fiscal 2016. 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
financial statements):
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 "Changes in other noncurrent liabilities" 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.
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.
36
37
36
The increase in net cash flows used in investing activities in fiscal 2018 compared to fiscal 2017 relates primarily to a higher
level of spending for acquisitions, mainly AmeriPride and Avendra (see Note 2 to the audited consolidated financial
statements), and higher spending on capital expenditures mainly for leasehold improvements at our new headquarters.
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 United States 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 United States segment of approximately $9.5 million.
financial statements):
issuance of a new $1.785 billion U.S. Term Loan B due 2025;
•
•
•
•
•
•
•
•
•
•
•
•
•
issuance of $1.150 billion aggregate principal amount of 5.000% senior unsecured notes due 2028;
repayment of the U.S. dollar denominated term loan to Aramark Services, Inc. ("ASI") due 2022 ($633.8 million of
principal);
repayment of borrowings on term loans ($302.6 million, which includes $260.4 million of optional prepayments);
decline in funding under the Receivables Facility ($254.2 million); and
payment of fees primarily related to the U.S. Term Loan B due 2025 and the 5.000% senior unsecured notes due 2028
(approximately $24.7 million).
During fiscal 2017, cash used in financing activities was impacted by the following (see Note 5 to the audited consolidated
issuance of $600.0 million of 5.000% senior unsecured notes due April 2025;
issuance of €325.0 million of 3.125% senior unsecured notes due April 2025;
issuance of $2.0 billion of new U.S. term loans, a CAD250.1 million term loan denominated in Canadian dollars and a
¥11,051.5 million term loan denominated in yen and a €170.0 million term loan denominated in euros;
repayment of all existing term loan facilities under the Company's then existing senior secured credit facilities;
repayment of $228.8 million of the 5.750% senior unsecured notes due 2020;
payment of fees and expenses related to the refinancings (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 through February 1, 2019. During fiscal 2018, we completed a repurchase of 0.6 million
shares of our common stock for $24.4 million. 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.
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 5.75% Senior Notes due 2020 (the "2020 Notes"); optional prepayments of an outstanding U.S. dollar
denominated term loan due 2019 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.
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
Aramark 2018 Form 10-K •
•
•
•
•
•
•
•
During fiscal 2018, there was an increase in net income and non-cash charges that resulted from higher operating income
discussed above. The decrease in cash flows provided by operating activities was primarily attributable to the change in
operating assets and liabilities ($212.1 million). The change in operating assets and liabilities compared to the prior year period
was primarily due to the following:
Accrued expenses were a greater use of cash primarily due to the timing of one-time payments for certain liabilities
assumed related to the Avendra and AmeriPride acquisitions and lower accrued payroll and related expenses offset by
lower tax payments;
premiums and taxes;
Prepayments were less of a source of cash due to the timing of prepayments made related to interest, insurance
Accounts receivable were less of a use of cash due to the timing of collections.
During fiscal 2018, we received gross proceeds of approximately $18.9 million related to our casualty insurance program from
our loss experience being favorable related to a prior year. During fiscal 2018, we incurred approximately $58.2 million of
acquisition related costs. The "Changes in other noncurrent liabilities" caption in the Consolidated Statement of Cash Flows
was less of a source of cash compared to fiscal 2017 due to the timing of payments related to our casualty insurance program.
The "Changes in other assets" caption in the Consolidated Statement of Cash Flows was less of a use of cash during fiscal 2018
mainly from the increase in cash distributions received from our 50% ownership interest in AIM Services Co., Ltd. of
approximately $30.3 million, offset by certain client payments. The "Other operating activities" caption mainly reflects the
adjustments to net income in the prior year period related to certain financing related charges in connection with our refinancing
activity.
During fiscal 2017, there was an increase in the total of net income and non cash charges compared to fiscal 2016. 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 "Changes in other noncurrent liabilities" 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.
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.
Cash Flows Provided by Operating Activities
Cash Flows Used in Investing Activities
Accounts payable were less of a source of cash due to the timing of disbursements; and
Cash Flows Provided by (Used In) Financing Activities
The increase in net cash flows used in investing activities in fiscal 2018 compared to fiscal 2017 relates primarily to a higher
level of spending for acquisitions, mainly AmeriPride and Avendra (see Note 2 to the audited consolidated financial
statements), and higher spending on capital expenditures mainly for leasehold improvements at our new headquarters.
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 United States 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 United States segment of approximately $9.5 million.
During fiscal 2018, cash provided by financing activities was impacted by the following (see Note 5 to the audited consolidated
financial statements):
•
•
•
•
•
•
issuance of a new $1.785 billion U.S. Term Loan B due 2025;
issuance of $1.150 billion aggregate principal amount of 5.000% senior unsecured notes due 2028;
repayment of the U.S. dollar denominated term loan to Aramark Services, Inc. ("ASI") due 2022 ($633.8 million of
principal);
repayment of borrowings on term loans ($302.6 million, which includes $260.4 million of optional prepayments);
decline in funding under the Receivables Facility ($254.2 million); and
payment of fees primarily related to the U.S. Term Loan B due 2025 and the 5.000% senior unsecured notes due 2028
(approximately $24.7 million).
During fiscal 2017, cash used in financing activities was impacted by the following (see Note 5 to the audited consolidated
financial statements):
•
•
•
•
•
•
•
issuance of $600.0 million of 5.000% senior unsecured notes due April 2025;
issuance of €325.0 million of 3.125% senior unsecured notes due April 2025;
issuance of $2.0 billion of new U.S. term loans, a CAD250.1 million term loan denominated in Canadian dollars and a
¥11,051.5 million term loan denominated in yen and a €170.0 million term loan denominated in euros;
repayment of all existing term loan facilities under the Company's then existing senior secured credit facilities;
repayment of $228.8 million of the 5.750% senior unsecured notes due 2020;
payment of fees and expenses related to the refinancings (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 through February 1, 2019. During fiscal 2018, we completed a repurchase of 0.6 million
shares of our common stock for $24.4 million. 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.
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 5.75% Senior Notes due 2020 (the "2020 Notes"); optional prepayments of an outstanding U.S. dollar
denominated term loan due 2019 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.
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
36
37
37
Aramark 2018 Form 10-K 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.
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 28, 2018, 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 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. ("ASI") 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 ASI stockholder
Interest and other financing costs, net
(Benefit) Provision for income taxes
Depreciation and amortization
Share-based compensation expense(1)
Pro forma EBITDA for equity method investees(2)
Pro forma EBITDA for certain transactions(3)
Other(4)
Covenant Adjusted EBITDA
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
$
567.9
$
373.9
$
354.3
(96.6)
596.2
88.3
15.2
58.6
143.9
287.4
146.5
508.2
65.2
14.2
—
36.8
287.8
315.4
142.7
495.8
56.9
14.3
4.1
35.4
$
1,727.8
$
1,432.2
$
1,352.4
(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).
(3)
(4)
(2)
Represents our estimated share of EBITDA, primarily from our AIM Services Co., Ltd. equity method investment, not
already reflected in our Net income attributable to ASI stockholder. 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.
Represents the annualizing of net EBITDA from acquisitions made during the period.
Other includes organizational streamlining initiatives ($36.6 million for fiscal 2018, $19.4 million for fiscal 2017 and
$24.9 million for fiscal 2016), the impact of the change in fair value related to certain gasoline and diesel agreements
($0.2 million gain for fiscal 2018, $0.4 million loss for fiscal 2017 and $8.3 million gain for fiscal 2016), expenses
related to merger and integration related charges ($78.1 million for fiscal 2018, $2.6 million for fiscal 2017 and $3.9
million for fiscal 2016), estimated impact of natural disasters, net of insurance proceeds ($17.0 million, of which $6.1
million relates to asset write-downs, for fiscal 2017), property and other asset write-downs related to a joint venture
liquidation and acquisition ($7.5 million for fiscal 2018), duplicate rent charges to build out and ready our new
headquarters while occupying our existing headquarters ($7.7 million for fiscal 2018), certain environmental charges
($5.0 million for fiscal 2018), the impact of hyperinflation in Argentina ($3.8 million for fiscal 2018), pension plan
charges ($0.9 million for fiscal 2018), property and other asset write-downs associated with the sale of a building ($6.8
million for fiscal 2016), other asset write-offs ($5.0 million for fiscal 2016) and other miscellaneous expenses.
Our covenant requirements and actual ratios for the fiscal year ended September 28, 2018 are as follows:
Consolidated Secured Debt Ratio(1)
Interest Coverage Ratio (Fixed Charge Coverage Ratio)(2)
Covenant
Requirements
Actual
Ratios
5.125x
2.000x
2.05x
4.80x
(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 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 2.000x 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.
38
39
38
Aramark 2018 Form 10-K
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.
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 28, 2018, 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 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. ("ASI") 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 ASI stockholder
Interest and other financing costs, net
(Benefit) Provision for income taxes
Depreciation and amortization
Share-based compensation expense(1)
Pro forma EBITDA for equity method investees(2)
Pro forma EBITDA for certain transactions(3)
Other(4)
Covenant Adjusted EBITDA
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
$
567.9
$
373.9
$
354.3
(96.6)
596.2
88.3
15.2
58.6
143.9
287.4
146.5
508.2
65.2
14.2
—
36.8
287.8
315.4
142.7
495.8
56.9
14.3
4.1
35.4
$
1,727.8
$
1,432.2
$
1,352.4
(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)
(3)
(4)
Represents our estimated share of EBITDA, primarily from our AIM Services Co., Ltd. equity method investment, not
already reflected in our Net income attributable to ASI stockholder. 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.
Represents the annualizing of net EBITDA from acquisitions made during the period.
Other includes organizational streamlining initiatives ($36.6 million for fiscal 2018, $19.4 million for fiscal 2017 and
$24.9 million for fiscal 2016), the impact of the change in fair value related to certain gasoline and diesel agreements
($0.2 million gain for fiscal 2018, $0.4 million loss for fiscal 2017 and $8.3 million gain for fiscal 2016), expenses
related to merger and integration related charges ($78.1 million for fiscal 2018, $2.6 million for fiscal 2017 and $3.9
million for fiscal 2016), estimated impact of natural disasters, net of insurance proceeds ($17.0 million, of which $6.1
million relates to asset write-downs, for fiscal 2017), property and other asset write-downs related to a joint venture
liquidation and acquisition ($7.5 million for fiscal 2018), duplicate rent charges to build out and ready our new
headquarters while occupying our existing headquarters ($7.7 million for fiscal 2018), certain environmental charges
($5.0 million for fiscal 2018), the impact of hyperinflation in Argentina ($3.8 million for fiscal 2018), pension plan
charges ($0.9 million for fiscal 2018), property and other asset write-downs associated with the sale of a building ($6.8
million for fiscal 2016), other asset write-offs ($5.0 million for fiscal 2016) and other miscellaneous expenses.
Our covenant requirements and actual ratios for the fiscal year ended September 28, 2018 are as follows:
Consolidated Secured Debt Ratio(1)
Interest Coverage Ratio (Fixed Charge Coverage Ratio)(2)
Covenant
Requirements
Actual
Ratios
5.125x
2.000x
2.05x
4.80x
(1)
(2)
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.
Our Credit Agreement establishes an incurrence-based minimum Interest Coverage Ratio, defined as Covenant Adjusted
EBITDA to consolidated interest expense, the achievement of which is a condition for us to incur additional indebtedness
and to make certain restricted payments. If we do not maintain this minimum Interest Coverage Ratio calculated on a pro
forma basis for any such additional indebtedness or restricted payments, we could be prohibited from being able to incur
additional indebtedness, other than the 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 2.000x 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.
38
39
39
Aramark 2018 Form 10-K
The following table summarizes our future obligations for debt repayments, capital leases, estimated interest payments, future
minimum rental and similar commitments under noncancelable operating leases as well as contingent obligations related to
outstanding letters of credit and guarantees as of September 28, 2018 (dollars in thousands):
Contractual Obligations as of September 28, 2018
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 28, 2018
Letters of credit
Guarantees
Payments Due by Period
Total
$ 7,146,755
143,388
2,110,600
898,370
675,379
Less than
1 year
$
2,290
28,617
304,600
213,439
325,924
$
1-3 years
70,093
51,598
625,500
190,257
226,636
249,600
$ 11,224,092
34,700
$ 909,570
22,400
$1,186,484
3-5 years
$ 548,033
27,335
648,800
136,372
36,656
13,300
$1,410,496
More than
5 years
$6,526,339
35,838
531,700
358,302
86,163
179,200
$7,717,542
Amount of Commitment Expiration by Period
Total
Amounts
Committed
$
$
60,166
—
60,166
Less than
1 year
$ 60,166
—
$ 60,166
$
$
1-3 years
3-5 years
More than
5 years
— $
—
— $
— $
—
— $
—
—
—
(1)
(2)
Excludes the $58.5 million reduction to long-term borrowings from debt issuance costs and the increase of $12.4 million
from the premium on the 5.125% Senior Notes due 2024.
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 and reflect any current hedging arrangements. Payments related
to variable debt are based on applicable rates at September 28, 2018 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 2019 through 2024 is
$7,065.2 million, $7,059.5 million, $7,024.9 million, $6,807.9 million, $6,572.4 million and $5,226.0 million,
respectively. The weighted average interest rate of our existing debt obligations for each fiscal year from 2019 through
2024 is 4.31%, 4.50%, 4.38%, 4.91%, 4.79% and 4.73%, 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.
(4)
Includes certain unfunded employee retirement and severance related obligations.
During the first quarter of 2019, the Company extended the maturity dates of the Revolving Credit Facility, Yen Term Loan due
2022, Canadian Term Loan due 2022, Canadian Term Loan due 2023 and Euro Term Loan due 2022 to October 1, 2023 (see
Note 5 to the audited consolidated financial statements).
We have excluded from the table above uncertain tax liabilities due to the uncertainty of the amount and period of payment. As
of September 28, 2018, we have gross uncertain tax liabilities of $29.1 million (see Note 8 to the audited consolidated financial
statements). During fiscal 2018, we made contributions totaling $14.0 million into our defined benefit pension plans and benefit
payments and settlements of $27.7 million out of these plans. Estimated contributions to our defined benefit pension plans in
fiscal 2019 are $3.7 million and estimated benefit payments out of these plans in fiscal 2019 are $15.4 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, 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 $400.0 million, which expires in May 2021. In addition, the Receivables Facility includes a seasonal
tranche which will increase the capacity by $100.0 million at certain times of the year. As of September 28, 2018, there were no
borrowings outstanding under the Receivables Facility. 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.
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. See
Note 1 to our audited consolidated financial statements for our revenue recognition policy.
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 primarily 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 or
region is evaluated separately since they are relatively autonomous and separate goodwill balances have been recorded for each
entity. During the fourth quarter of fiscal 2018, we performed an impairment test for goodwill for each of our reporting units
using a qualitative testing approach, except for one reporting unit which was tested using the quantitative 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. The fair value of the
reporting unit in our FSS International segment for which goodwill was tested using the quantitative approach has a goodwill
balance of $278.7 million and a fair value that exceeded its carrying value by approximately 27%.
With respect to our other long-lived assets, we are required to test for asset impairment whenever events or circumstances
indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, we compare the sum
of the future expected cash flows from the asset, undiscounted and without interest charges, to the asset’s carrying value. If the
sum of the future expected cash flows from the asset is less than the carrying value, an impairment would be recognized for the
difference between the estimated fair value and the carrying value of the asset.
In making future cash flow analyses of various assets, we make assumptions relating to the following:
The intended use of assets and the expected future cash flows resulting directly from such use;
Comparable market valuations of businesses similar to Aramark's business segments;
•
•
•
•
•
Industry specific economic conditions;
Competitor activities and regulatory initiatives; and
Client and customer preferences and behavior patterns.
40
41
40
Aramark 2018 Form 10-K The following table summarizes our future obligations for debt repayments, capital leases, estimated interest payments, future
minimum rental and similar commitments under noncancelable operating leases as well as contingent obligations related to
outstanding letters of credit and guarantees as of September 28, 2018 (dollars in thousands):
Contractual Obligations as of September 28, 2018
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 28, 2018
Letters of credit
Guarantees
Payments Due by Period
Total
Less than
1 year
1-3 years
3-5 years
More than
5 years
$ 7,146,755
$
2,290
$
70,093
$ 548,033
$6,526,339
143,388
2,110,600
898,370
675,379
249,600
28,617
304,600
213,439
325,924
34,700
51,598
625,500
190,257
226,636
22,400
27,335
648,800
136,372
36,656
13,300
35,838
531,700
358,302
86,163
179,200
$ 11,224,092
$ 909,570
$1,186,484
$1,410,496
$7,717,542
Amount of Commitment Expiration by Period
Total
Amounts
Committed
Less than
1 year
$
$
60,166
$ 60,166
—
—
60,166
$ 60,166
$
$
1-3 years
3-5 years
More than
5 years
— $
—
— $
— $
—
— $
—
—
—
(1)
Excludes the $58.5 million reduction to long-term borrowings from debt issuance costs and the increase of $12.4 million
from the premium on the 5.125% Senior Notes due 2024.
(2)
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 and reflect any current hedging arrangements. Payments related
to variable debt are based on applicable rates at September 28, 2018 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 2019 through 2024 is
$7,065.2 million, $7,059.5 million, $7,024.9 million, $6,807.9 million, $6,572.4 million and $5,226.0 million,
respectively. The weighted average interest rate of our existing debt obligations for each fiscal year from 2019 through
2024 is 4.31%, 4.50%, 4.38%, 4.91%, 4.79% and 4.73%, 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.
(4)
Includes certain unfunded employee retirement and severance related obligations.
During the first quarter of 2019, the Company extended the maturity dates of the Revolving Credit Facility, Yen Term Loan due
2022, Canadian Term Loan due 2022, Canadian Term Loan due 2023 and Euro Term Loan due 2022 to October 1, 2023 (see
Note 5 to the audited consolidated financial statements).
We have excluded from the table above uncertain tax liabilities due to the uncertainty of the amount and period of payment. As
of September 28, 2018, we have gross uncertain tax liabilities of $29.1 million (see Note 8 to the audited consolidated financial
statements). During fiscal 2018, we made contributions totaling $14.0 million into our defined benefit pension plans and benefit
payments and settlements of $27.7 million out of these plans. Estimated contributions to our defined benefit pension plans in
fiscal 2019 are $3.7 million and estimated benefit payments out of these plans in fiscal 2019 are $15.4 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, 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 $400.0 million, which expires in May 2021. In addition, the Receivables Facility includes a seasonal
tranche which will increase the capacity by $100.0 million at certain times of the year. As of September 28, 2018, there were no
borrowings outstanding under the Receivables Facility. 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.
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. See
Note 1 to our audited consolidated financial statements for our revenue recognition policy.
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 primarily 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 or
region is evaluated separately since they are relatively autonomous and separate goodwill balances have been recorded for each
entity. During the fourth quarter of fiscal 2018, we performed an impairment test for goodwill for each of our reporting units
using a qualitative testing approach, except for one reporting unit which was tested using the quantitative 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. The fair value of the
reporting unit in our FSS International segment for which goodwill was tested using the quantitative approach has a goodwill
balance of $278.7 million and a fair value that exceeded its carrying value by approximately 27%.
With respect to our other long-lived assets, we are required to test for asset impairment whenever events or circumstances
indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, we compare the sum
of the future expected cash flows from the asset, undiscounted and without interest charges, to the asset’s carrying value. If the
sum of the future expected cash flows from the asset is less than the carrying value, an impairment would be recognized for the
difference between the estimated fair value and the carrying value of the asset.
In making future cash flow analyses of various assets, we make assumptions relating to the following:
•
•
•
•
•
The intended use of assets and the expected future cash flows resulting directly from such use;
Comparable market valuations of businesses similar to Aramark's business segments;
Industry specific economic conditions;
Competitor activities and regulatory initiatives; and
Client and customer preferences and behavior patterns.
40
41
41
Aramark 2018 Form 10-K 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.
New Accounting Standards Updates
including the expected dates of adoption.
See Note 1 to the audited consolidated financial statements for a full description of recent accounting standards updates,
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.
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.
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 28, 2018 (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 28,
2018. 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 28, 2018
2019
2020
2021
2022
2023
Thereafter
Total
Fair Value
Debt:
Fixed rate
Average interest rate
Variable rate
Average interest rate
Interest Rate Swaps:
$
$
29
5.0%
2
16.3%
$
$
$
$
5.0%
31
12
3.1%
5.0%
21
58
2.9%
$
14
(a) $ 453
5.0%
3.0%
$
$
5.0%
13
95
3.4%
$ 3,564
$ 3,672
3,676
4.8%
4.8%
$ 2,998
$ 3,618
3,627
4.1%
3.9%
$
$
$
Receive variable/pay fixed
$ 575
$ 425
$ —
$ — $ 1,550
$ — $ 2,550
56
Average pay rate
Average receive rate
1.9%
2.2%
2.2%
2.2%
—%
—%
—%
—%
2.1%
2.2%
(a)
As of September 28, 2018, there were no borrowings outstanding under the Receivables Facility due 2021.
As of September 28, 2018, the Company had foreign currency forward exchange contracts outstanding with notional amounts
of €59.0 million, £4.5 million and CAD 20.0 million to mitigate the risk of changes in foreign currency exchange rates on short-
term intercompany loans to certain international subsidiaries. As of September 28, 2018, the fair value of these foreign
exchange contracts is $0.2 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 28, 2018, the Company has contracts for approximately 15.4 million gallons outstanding through fiscal 2019. As of
September 28, 2018, 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.
42
43
42
Aramark 2018 Form 10-K 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.
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.
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 28, 2018 (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 28,
2018. 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 28, 2018
Debt:
Fixed rate
Average interest rate
Variable rate
Average interest rate
Interest Rate Swaps:
Receive variable/pay fixed
Average pay rate
Average receive rate
2019
2020
2021
2022
2023
Thereafter
Total
Fair Value
$
$
29
5.0%
2
16.3%
$
$
31
5.0%
12
3.1%
$
$
21
5.0%
58
2.9%
$
14
5.0%
(a) $ 453
$
$
3.0%
13
5.0%
95
3.4%
$ 3,564
$ 3,672
4.8%
4.8%
$ 2,998
$ 3,618
4.1%
3.9%
$ 575
$ 425
$ —
$ — $ 1,550
$ — $ 2,550
1.9%
2.2%
2.2%
2.2%
—%
—%
—%
—%
2.1%
2.2%
$
$
$
3,676
3,627
56
(a)
As of September 28, 2018, there were no borrowings outstanding under the Receivables Facility due 2021.
As of September 28, 2018, the Company had foreign currency forward exchange contracts outstanding with notional amounts
of €59.0 million, £4.5 million and CAD 20.0 million to mitigate the risk of changes in foreign currency exchange rates on short-
term intercompany loans to certain international subsidiaries. As of September 28, 2018, the fair value of these foreign
exchange contracts is $0.2 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 28, 2018, the Company has contracts for approximately 15.4 million gallons outstanding through fiscal 2019. As of
September 28, 2018, 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.
42
43
43
Aramark 2018 Form 10-K Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the Company’s disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on
that evaluation, management, with the participation of the Chief Executive Officer and Chief Financial Officer, concluded that
the Company’s disclosure controls and procedures, as of the end of the period covered by this report, are functioning effectively
to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms 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. As discussed in Note 2 to the audited
consolidated financial statements included in this Annual Report, we completed our acquisitions of Avendra and AmeriPride on
December 11, 2017 and January 19, 2018, respectively. As part of our post-closing integration activities, we are engaged in the
process of assessing the internal controls of Avendra and AmeriPride. As permitted by interpretive guidance for newly acquired
businesses issued by the staff of the Securities and Exchange Commission, management has excluded the internal control over
financial reporting of Avendra and AmeriPride from the evaluation of the Company’s effectiveness of its disclosure controls and
procedures as of September 28, 2018. As set forth in more detail in Note 2 to the audited consolidated financial statements
included in this Annual Report, total assets of Avendra and AmeriPride as of September 28, 2018, excluding the identified
intangible assets and goodwill, were $93.4 million and $396.2 million, respectively. 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.
As permitted by interpretive guidance for newly acquired businesses issued by the staff of the Securities and Exchange
Commission, management has excluded the internal control over financial reporting of Avendra and AmeriPride from the
evaluation of the Company’s effectiveness of its internal control over financial reporting as of September 28, 2018. Based on
that evaluation, the Company's management concluded that the Company's internal control over financial reporting was
effective as of September 28, 2018. The effectiveness of the Company's internal control over financial reporting as of
September 28, 2018 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
Other than the acquisitions of Avendra and AmeriPride, no change in the Company’s internal control over financial reporting
occurred during the Company’s fourth quarter of fiscal 2018 that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Aramark:
Opinion on Internal Control Over Financial Reporting
We have audited Aramark and subsidiaries (the Company) internal control over financial reporting as of September 28, 2018,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of September 28, 2018, 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)
(PCAOB), the consolidated balance sheets of the Company as of September 28, 2018 and September 29, 2017, the related
consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity for each of the fiscal years ended
September 28, 2018, September 29, 2017 and September 30, 2016 and the related notes and financial statement schedule II
(collectively, the consolidated financial statements), and our report dated November 21, 2018 expressed an unqualified opinion
on those consolidated financial statements.
The Company acquired Avendra LLC during December 2017 and AmeriPride Services Inc. during January 2018, and management
excluded from its assessment of the effectiveness of the Company's internal control over financial reporting as of September 28,
2018, Avendra LLC's internal control over financial reporting associated with total assets of $93.4 million and total revenues of
$121.0 million and AmeriPride Services Inc.'s internal control over financial reporting associated with total assets of $396.2 million
and total revenues of $401.2 million included in the consolidated financial statements of the Company as of and for the year ended
September 28, 2018. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the
internal control over financial reporting of Avendra LLC and AmeriPride Services Inc.
Basis for Opinion
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 Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ KPMG LLP
Philadelphia, Pennsylvania
November 21, 2018
44
45
44
Aramark 2018 Form 10-K Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the Company’s disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on
that evaluation, management, with the participation of the Chief Executive Officer and Chief Financial Officer, concluded that
the Company’s disclosure controls and procedures, as of the end of the period covered by this report, are functioning effectively
to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms 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. As discussed in Note 2 to the audited
consolidated financial statements included in this Annual Report, we completed our acquisitions of Avendra and AmeriPride on
December 11, 2017 and January 19, 2018, respectively. As part of our post-closing integration activities, we are engaged in the
process of assessing the internal controls of Avendra and AmeriPride. As permitted by interpretive guidance for newly acquired
businesses issued by the staff of the Securities and Exchange Commission, management has excluded the internal control over
financial reporting of Avendra and AmeriPride from the evaluation of the Company’s effectiveness of its disclosure controls and
procedures as of September 28, 2018. As set forth in more detail in Note 2 to the audited consolidated financial statements
included in this Annual Report, total assets of Avendra and AmeriPride as of September 28, 2018, excluding the identified
intangible assets and goodwill, were $93.4 million and $396.2 million, respectively. 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.
As permitted by interpretive guidance for newly acquired businesses issued by the staff of the Securities and Exchange
Commission, management has excluded the internal control over financial reporting of Avendra and AmeriPride from the
evaluation of the Company’s effectiveness of its internal control over financial reporting as of September 28, 2018. Based on
that evaluation, the Company's management concluded that the Company's internal control over financial reporting was
effective as of September 28, 2018. The effectiveness of the Company's internal control over financial reporting as of
September 28, 2018 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
Other than the acquisitions of Avendra and AmeriPride, no change in the Company’s internal control over financial reporting
occurred during the Company’s fourth quarter of fiscal 2018 that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Aramark:
Opinion on Internal Control Over Financial Reporting
We have audited Aramark and subsidiaries (the Company) internal control over financial reporting as of September 28, 2018,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of September 28, 2018, 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)
(PCAOB), the consolidated balance sheets of the Company as of September 28, 2018 and September 29, 2017, the related
consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity for each of the fiscal years ended
September 28, 2018, September 29, 2017 and September 30, 2016 and the related notes and financial statement schedule II
(collectively, the consolidated financial statements), and our report dated November 21, 2018 expressed an unqualified opinion
on those consolidated financial statements.
The Company acquired Avendra LLC during December 2017 and AmeriPride Services Inc. during January 2018, and management
excluded from its assessment of the effectiveness of the Company's internal control over financial reporting as of September 28,
2018, Avendra LLC's internal control over financial reporting associated with total assets of $93.4 million and total revenues of
$121.0 million and AmeriPride Services Inc.'s internal control over financial reporting associated with total assets of $396.2 million
and total revenues of $401.2 million included in the consolidated financial statements of the Company as of and for the year ended
September 28, 2018. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the
internal control over financial reporting of Avendra LLC and AmeriPride Services Inc.
Basis for Opinion
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 Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ KPMG LLP
Philadelphia, Pennsylvania
November 21, 2018
44
45
45
Aramark 2018 Form 10-K Item 9B. Other Information
Not applicable.
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 2019 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 2019 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 2019 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 2019 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 2019 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 2019 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 2019 Annual Meeting of Stockholders and is incorporated herein by reference.
46
46
47
Aramark 2018 Form 10-K PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Information about our directors and persons nominated to become directors required by Item 10 will be included under the
caption "Proposal No. 1 - Election of Directors" in the Company's Proxy Statement for the 2019 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 2019 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 2019 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 2019 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 2019 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 2019 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 2019 Annual Meeting of Stockholders and is incorporated herein by reference.
47
47
Aramark 2018 Form 10-K PART IV
SIGNATURES
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.
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 21, 2018.
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 21, 2018.
Name
/s/ ERIC J. FOSS
Eric J. Foss
Capacity
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
/s/ STEPHEN P. BRAMLAGE, JR.
Executive Vice President and Chief Financial Officer
Stephen P. Bramlage, Jr.
(Principal Financial Officer)
/s/ BRIAN P. PRESSLER
Senior Vice President, Controller and Chief Accounting Officer
Brian P. Pressler
(Principal Accounting Officer)
/s/ PIERRE-OLIVIER BECKERS-VIEUJANT
Pierre-Olivier Beckers-Vieujant
/s/ LISA G. BISACCIA
Lisa G. Bisaccia
/s/ CALVIN DARDEN
Calvin Darden
/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
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
48
49
48
Aramark 2018 Form 10-K 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.
PART IV
SIGNATURES
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 21, 2018.
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 21, 2018.
Name
/s/ ERIC J. FOSS
Eric J. Foss
Capacity
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
/s/ STEPHEN P. BRAMLAGE, JR.
Stephen P. Bramlage, Jr.
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ BRIAN P. PRESSLER
Brian P. Pressler
Senior Vice President, Controller and Chief Accounting Officer
(Principal Accounting Officer)
/s/ PIERRE-OLIVIER BECKERS-VIEUJANT
Pierre-Olivier Beckers-Vieujant
/s/ LISA G. BISACCIA
Lisa G. Bisaccia
/s/ CALVIN DARDEN
Calvin Darden
/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
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
48
49
49
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Registered Public Accounting Firm
Page
Aramark:
To the Stockholders and Board of Directors
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of September 28, 2018 and September 29, 2017
Consolidated Statements of Income for the fiscal years ended September 28,
2018, September 29, 2017 and September 30, 2016
Consolidated Statements of Comprehensive Income for the fiscal years ended
September 28, 2018, September 29, 2017 and September 30, 2016
Consolidated Statements of Cash Flows for the fiscal years ended September 28,
2018, September 29, 2017 and September 30, 2016
Consolidated Statements of Stockholders' Equity for the fiscal years ended
September 28, 2018, September 29, 2017 and September 30, 2016
Notes to Consolidated Financial Statements
Schedule II—Valuation and Qualifying Accounts and Reserves for the fiscal
years ended September 28, 2018, September 29, 2017 and September 30, 2016
S-2
S-3
S-4
S-5
S-6
S-7
S-8
S-54
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.
internal control over financial reporting.
Basis for Opinion
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Aramark and subsidiaries (the Company) as of September 28,
2018 and September 29, 2017, the related consolidated statements of income, comprehensive income, cash flows, and stockholders’
equity for each of the fiscal years ended September 28, 2018, September 29, 2017 and September 30, 2016 and the related notes
and the financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of September 28, 2018 and September 29,
2017, and the results of its operations and its cash flows for each of the fiscal years ended September 28, 2018, September 29,
2017 and September 30, 2016, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of September 28, 2018, 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 21, 2018, expressed an unqualified opinion on the effectiveness of the Company’s
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company's auditor since 2002.
Philadelphia, Pennsylvania
November 21, 2018
S-1
S-2
S-1
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Registered Public Accounting Firm
Page
Aramark:
To the Stockholders and Board of Directors
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of September 28, 2018 and September 29, 2017
Consolidated Statements of Income for the fiscal years ended September 28,
2018, September 29, 2017 and September 30, 2016
Consolidated Statements of Comprehensive Income for the fiscal years ended
September 28, 2018, September 29, 2017 and September 30, 2016
Consolidated Statements of Cash Flows for the fiscal years ended September 28,
2018, September 29, 2017 and September 30, 2016
Consolidated Statements of Stockholders' Equity for the fiscal years ended
September 28, 2018, September 29, 2017 and September 30, 2016
Notes to Consolidated Financial Statements
Schedule II—Valuation and Qualifying Accounts and Reserves for the fiscal
years ended September 28, 2018, September 29, 2017 and September 30, 2016
S-2
S-3
S-4
S-5
S-6
S-7
S-8
S-54
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.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Aramark and subsidiaries (the Company) as of September 28,
2018 and September 29, 2017, the related consolidated statements of income, comprehensive income, cash flows, and stockholders’
equity for each of the fiscal years ended September 28, 2018, September 29, 2017 and September 30, 2016 and the related notes
and the financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of September 28, 2018 and September 29,
2017, and the results of its operations and its cash flows for each of the fiscal years ended September 28, 2018, September 29,
2017 and September 30, 2016, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of September 28, 2018, 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 21, 2018, expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company's auditor since 2002.
Philadelphia, Pennsylvania
November 21, 2018
S-1
S-2
S-2
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 28, 2018 AND SEPTEMBER 29, 2017
(in thousands, except share amounts)
FOR THE FISCAL YEARS ENDED SEPTEMBER 28, 2018, SEPTEMBER 29, 2017 AND SEPTEMBER 30, 2016
ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(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
(Benefit) Provision for Income Taxes
Net income
Earnings per share attributable to Aramark stockholders:
Weighted Average Shares Outstanding:
Basic
Diluted
Basic
Diluted
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
$
15,789,633
$
14,604,412
$
14,415,829
13,990,185
12,988,973
12,890,408
14,963,496
13,796,355
13,669,515
596,182
377,129
826,137
354,261
471,876
(96,564)
568,440
555
508,212
299,170
808,057
287,415
520,642
146,455
374,187
264
2.31
2.24
$
$
1.53
1.49
$
$
245,771
253,352
244,453
251,557
495,765
283,342
746,314
315,383
430,931
142,699
288,232
426
287,806
1.19
1.16
242,286
248,763
$
$
$
Less: Net income attributable to noncontrolling interest
Net income attributable to Aramark stockholders
567,885
$
373,923
$
The accompanying notes are an integral part of these consolidated financial statements.
Current Assets:
ASSETS
Cash and cash equivalents
Receivables (less allowances: 2018 - $52,682; 2017 - $53,416)
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:
Common stock, par value $.01 (authorized: 600,000,000 shares; issued:
2018—279,314,297 shares and 2017—277,111,042; and
outstanding: 2018—246,744,438 shares and 2017—245,593,961
shares)
Capital surplus
Retained earnings
Accumulated other comprehensive loss
Treasury stock (shares held in treasury: 2018—32,569,859 shares and
2017—31,517,081 shares)
Total stockholders' equity
September 28, 2018
September 29, 2017
$
$
$
$
$
$
215,025
1,790,433
724,802
171,165
2,901,425
901,874
2,296,331
3,198,205
(1,820,111)
1,378,094
5,610,568
2,136,844
1,693,171
13,720,102
30,907
1,018,920
422,299
1,018,033
2,490,159
7,213,077
977,215
10,093
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
2,793
3,132,421
710,519
(91,223)
2,771
3,014,546
247,050
(123,760)
(724,952)
3,029,558
13,720,102
$
(681,546)
2,459,061
11,006,229
$
The accompanying notes are an integral part of these consolidated financial statements.
S-3
S-4
S-3
Aramark 2018 Form 10-K Current Assets:
ASSETS
Inventories
Prepayments and other current assets
Total current assets
Property and Equipment, at cost:
Land, buildings and improvements
Service equipment and fixtures
Goodwill
Other Intangible Assets
Other Assets
Current Liabilities:
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:
1,790,433
724,802
171,165
2,901,425
901,874
2,296,331
3,198,205
1,378,094
5,610,568
2,136,844
1,693,171
1,018,920
422,299
1,018,033
2,490,159
7,213,077
977,215
10,093
2,793
3,132,421
710,519
(91,223)
(724,952)
3,029,558
238,797
1,615,993
610,732
187,617
2,653,139
673,616
2,003,177
2,676,793
1,042,031
4,715,511
1,120,824
1,474,724
78,157
955,925
487,573
846,440
2,368,095
5,190,331
978,944
9,798
2,771
3,014,546
247,050
(123,760)
(681,546)
2,459,061
Common stock, par value $.01 (authorized: 600,000,000 shares; issued:
2018—279,314,297 shares and 2017—277,111,042; and
outstanding: 2018—246,744,438 shares and 2017—245,593,961
shares)
Capital surplus
Retained earnings
Accumulated other comprehensive loss
Treasury stock (shares held in treasury: 2018—32,569,859 shares and
2017—31,517,081 shares)
Total stockholders' equity
The accompanying notes are an integral part of these consolidated financial statements.
$
13,720,102
$
11,006,229
ARAMARK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 28, 2018 AND SEPTEMBER 29, 2017
(in thousands, except share amounts)
ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED SEPTEMBER 28, 2018, SEPTEMBER 29, 2017 AND SEPTEMBER 30, 2016
(in thousands, except per share data)
Cash and cash equivalents
$
215,025
$
Receivables (less allowances: 2018 - $52,682; 2017 - $53,416)
September 28, 2018
September 29, 2017
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
(Benefit) Provision for Income Taxes
Less - Accumulated depreciation
(1,820,111)
(1,634,762)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term borrowings
30,907
$
13,720,102
$
11,006,229
$
$
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 28, 2018
15,789,633
$
September 29, 2017
14,604,412
$
September 30, 2016
14,415,829
$
13,990,185
596,182
377,129
14,963,496
826,137
354,261
471,876
(96,564)
568,440
555
567,885
2.31
2.24
245,771
253,352
$
$
$
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
The accompanying notes are an integral part of these consolidated financial statements.
S-3
S-4
S-4
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 28, 2018, SEPTEMBER 29, 2017 AND SEPTEMBER 30, 2016
FOR THE FISCAL YEARS ENDED SEPTEMBER 28, 2018, SEPTEMBER 29, 2017 AND SEPTEMBER 30, 2016
(in thousands)
(in thousands)
Fiscal Year Ended
September 28, 2018
568,440
$
September 29, 2017
374,187
$
September 30, 2016
288,232
$
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
$
20,647
(31,253)
39,311
3,675
157
32,537
600,977
555
600,422
$
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
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Deferred income taxes
Share-based compensation expense
Changes in operating assets and liabilities:
Accounts Receivable
Inventories
Accounts Payable
Accrued Expenses
Prepayments and Other Current Assets
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, net of cash acquired
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 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
September 28, 2018
September 29, 2017
September 30, 2016
Fiscal Year Ended
$
568,440
$
374,187
$
288,232
596,182
(104,289)
88,276
(45,891)
(40,187)
42,450
26,658
(111,386)
1,576
(2,225)
27,747
(628,604)
10,491
37,985
(283,447)
(1,994,822)
(6,879)
(2,865,276)
3,177,313
(973,689)
(254,200)
(103,115)
21,507
(24,410)
(49,253)
1,794,153
(23,772)
238,797
508,212
(37,856)
65,155
(111,423)
(21,147)
95,536
93,965
26,804
31,959
(9,342)
37,337
(552,729)
18,906
8,114
(2,273)
(147,963)
(2,539)
(678,484)
3,851,417
(3,911,992)
(13,800)
(100,813)
28,779
(100,000)
(42,277)
(288,686)
86,217
152,580
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)
1,399,988
(1,363,534)
(82,000)
(92,074)
35,705
(749)
(54,741)
(157,405)
30,164
122,416
152,580
The accompanying notes are an integral part of these consolidated financial statements.
$
215,025
$
238,797
$
The accompanying notes are an integral part of these consolidated financial statements.
1,047,351
1,053,387
S-5
S-6
S-5
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 28, 2018, SEPTEMBER 29, 2017 AND SEPTEMBER 30, 2016
FOR THE FISCAL YEARS ENDED SEPTEMBER 28, 2018, SEPTEMBER 29, 2017 AND SEPTEMBER 30, 2016
(in thousands)
(in thousands)
September 28, 2018
September 29, 2017
September 30, 2016
Fiscal Year Ended
$
568,440
$
374,187
$
288,232
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
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
$
568,440
$
374,187
$
288,232
20,647
(31,253)
39,311
3,675
157
32,537
600,977
555
19,992
5,903
19,449
10,130
1,549
57,023
431,210
264
(24,670)
3,080
(8,426)
21,184
(5,383)
(14,215)
274,017
426
273,591
Comprehensive income attributable to Aramark stockholders
$
600,422
$
430,946
$
The accompanying notes are an integral part of these consolidated financial statements.
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Deferred income taxes
Share-based compensation expense
Changes in operating assets and liabilities:
Accounts Receivable
Inventories
Prepayments and Other Current Assets
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, net of cash acquired
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 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
596,182
(104,289)
88,276
(45,891)
(40,187)
42,450
26,658
(111,386)
1,576
(2,225)
27,747
508,212
(37,856)
65,155
(111,423)
(21,147)
95,536
93,965
26,804
31,959
(9,342)
37,337
1,047,351
1,053,387
(628,604)
10,491
37,985
(283,447)
(1,994,822)
(6,879)
(2,865,276)
3,177,313
(973,689)
(254,200)
(103,115)
21,507
(24,410)
(49,253)
1,794,153
(23,772)
238,797
(552,729)
18,906
8,114
(2,273)
(147,963)
(2,539)
(678,484)
3,851,417
(3,911,992)
(13,800)
(100,813)
28,779
(100,000)
(42,277)
(288,686)
86,217
152,580
$
215,025
$
238,797
$
S-5
S-6
The accompanying notes are an integral part of these consolidated financial statements.
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)
1,399,988
(1,363,534)
(82,000)
(92,074)
35,705
(749)
(54,741)
(157,405)
30,164
122,416
152,580
S-6
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED SEPTEMBER 28, 2018, SEPTEMBER 29, 2017 AND SEPTEMBER 30, 2016
(in thousands)
Balance, October 2, 2015
$
1,883,359
$
2,666
$ 2,784,730
$
(228,641) $
(166,568) $ (508,828)
Total
Stockholders'
Equity
Common
Stock
Capital
Surplus
Retained
Earnings /
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Net income attributable to Aramark
stockholders
Other comprehensive income (loss)
Capital contributions from issuance
of common stock
Share-based compensation expense
Tax benefits related to stock
incentive plans
Repurchases of Common Stock
Payments of dividends
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
$
287,806
(14,215)
(40,056)
(92,943)
(33,778) $
(180,783) $ (548,884)
$
(8,013)
9,142
373,923
45
35,679
65,155
57,023
GAAP"). All significant intercompany transactions and accounts have been eliminated.
Adoption of new accounting
standard
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)
Balance, September 29, 2017
$
2,459,061
$
2,771
$ 3,014,546
$
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
567,885
32,537
29,621
88,276
(43,406)
(104,416)
22
29,599
88,276
Balance, September 28, 2018
$
3,029,558
$
2,793
$ 3,132,421
$
(132,662)
$
(123,760) $ (681,546)
(102,237)
247,050
567,885
32,537
(43,406)
(104,416)
710,519
$
(91,223) $ (724,952)
The accompanying notes are an integral part of these consolidated financial statements.
S-7
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 the United States, which is supplemented by
an additional 18-country footprint. The Company operates its business in three reportable segments that share many of the same
operating characteristics:
•
Food and Support Services United States ("FSS United States") - 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. See Note 14 for further discussion over the FSS United States
reporting segment reclassification and name change.
•
•
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") - Provides a full service employee uniform solution, including design,
sourcing and manufacturing, delivery, cleaning and maintenance on a contract basis. Directly markets personalized
uniforms and accessories, provides managed restroom services and rents uniforms, work clothing, outerwear,
particulate-free garments and non-garment items and related services, including mats, shop towels and first aid
supplies, to clients in a wide range of industries in the United States, Puerto Rico, Canada and through a joint venture
in Japan, including the manufacturing, transportation, construction, restaurants and hotels, healthcare and
pharmaceutical industries.
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.
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 28, 2018, September 29, 2017, September 30, 2016 were each fifty-two week periods.
Fiscal Year
New Accounting Standards Updates
Adopted Standards
In August 2018, the Financial Accounting Standards Board ("FASB") issued an accounting standards update ("ASU") to change
the accounting for costs incurred to implement cloud computing arrangements to be consistent with the internal-use software
guidance. The guidance is effective for the Company in the first quarter of fiscal 2020 and early adoption is permitted. The
Company early adopted the guidance in the fourth quarter of fiscal 2018, using the prospective method, which did not have a
material impact on the consolidated financial statements.
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 early adopted the guidance in the third quarter of fiscal 2018, using the modified retrospective method as if the
Company had adopted the standard as of the beginning of fiscal 2018. The guidance did not have a material impact on the
consolidated financial statements.
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 early adopted the guidance in the first quarter of fiscal 2018, which did not have an impact
on the consolidated financial statements.
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
early adopted the guidance in the first quarter of fiscal 2018, which did not have an impact on the consolidated financial
statements.
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
S-8
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Aramark (the "Company") is a leading global provider of food, facilities and uniform services to education, healthcare, business
& industry, and sports, leisure & corrections clients. The Company's core market is the United States, which is supplemented by
an additional 18-country footprint. The Company operates its business in three reportable segments that share many of the same
operating characteristics:
•
•
•
Food and Support Services United States ("FSS United States") - 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. See Note 14 for further discussion over the FSS United States
reporting segment reclassification and name change.
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") - Provides a full service employee uniform solution, including design,
sourcing and manufacturing, delivery, cleaning and maintenance on a contract basis. Directly markets personalized
uniforms and accessories, provides managed restroom services and rents uniforms, work clothing, outerwear,
particulate-free garments and non-garment items and related services, including mats, shop towels and first aid
supplies, to clients in a wide range of industries in the United States, Puerto Rico, Canada and through a joint venture
in Japan, including the manufacturing, transportation, construction, restaurants and hotels, healthcare and
pharmaceutical industries.
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 28, 2018, September 29, 2017, September 30, 2016 were each fifty-two week periods.
New Accounting Standards Updates
Adopted Standards
In August 2018, the Financial Accounting Standards Board ("FASB") issued an accounting standards update ("ASU") to change
the accounting for costs incurred to implement cloud computing arrangements to be consistent with the internal-use software
guidance. The guidance is effective for the Company in the first quarter of fiscal 2020 and early adoption is permitted. The
Company early adopted the guidance in the fourth quarter of fiscal 2018, using the prospective method, which did not have a
material impact on the consolidated financial statements.
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 early adopted the guidance in the third quarter of fiscal 2018, using the modified retrospective method as if the
Company had adopted the standard as of the beginning of fiscal 2018. The guidance did not have a material impact on the
consolidated financial statements.
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 early adopted the guidance in the first quarter of fiscal 2018, which did not have an impact
on the consolidated financial statements.
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
early adopted the guidance in the first quarter of fiscal 2018, which did not have an impact on the consolidated financial
statements.
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
S-8
S-8
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
adoption is permitted. The Company early adopted the guidance in the fourth quarter of fiscal 2018, which did not have a
material impact on the 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 early adopted the guidance in the first quarter of fiscal 2018, which did not have an impact on the
consolidated financial statements.
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 was permitted. The Company adopted the guidance in the first quarter of fiscal 2018, which did not have an
impact on the consolidated financial statements.
Standards Not Yet Adopted (from most to least recent date of issuance)
In August 2018, the FASB issued an ASU which adds, modifies and removes several disclosure requirements related to defined
benefit pension plans. The guidance is effective for the Company in the first quarter of fiscal 2022 and early adoption is
permitted. The Company is currently evaluating the impact of the pronouncement.
In August 2018, the FASB issued an ASU which adds, modifies and removes several disclosure requirements related to fair
value measurements. 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 July 2018, the FASB issued two ASUs regarding the lease recognition standard. The guidance provides clarification on issues
identified regarding the adoption of the standard, provides an additional transition method to adopt the standard and provides an
additional practical expedient to lessors. 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 July 2018, the FASB issued an ASU which clarifies, corrects errors in or makes minor improvements to the Codification. The
guidance is effective for the Company either upon issuance or in the first quarter of fiscal 2020, depending on the amendment.
There was no impact on the consolidated financial statements related to the amendments that were effective upon issuance of
the guidance and the Company is currently evaluating the impact of the remaining amendments of the pronouncement.
In February 2018, the FASB issued an ASU which provides clarification regarding guidance related to the financial instrument
standard. 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 financial instrument standard, as described below.
In February 2018, the FASB issued an ASU which allows for the reclassification of stranded tax effects resulting from the Tax
Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. 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 September 2017, the FASB issued an ASU to provide additional implementation guidance with respect to the revenue
recognition standard (see below) and the leases recognition standard. The guidance is effective for the Company in the first
quarter of fiscal 2019 with respect to the revenue recognition standard and in the first quarter of fiscal 2020 with respect to the
lease recognition standard. Early adoption is permitted. The Company will adopt this standard in conjunction with the revenue
recognition standard and the lease recognition standard, both as described below.
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.
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 expects adoption of this standard to result in no impact to net income. However, certain balances will
be reclassified from Cost of Services Provided to Interest and Other Financing Costs, net on the Consolidated Statements of
Income.
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 does not
expect adoption to impact the consolidated financial statements.
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 does not expect adoption to have a material
impact on the consolidated financial statements.
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 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 continues to review 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. Under this guidance, equity investments, other than those accounted for under the equity method of
accounting or those that result in consolidation of the investee, are to be measured at fair value with the changes in fair value
recognized in net income. The guidance is effective for the Company in the first quarter of fiscal 2019 and will be adopted
using a modified retrospective approach, with a cumulative transition adjustment recorded to retained earnings. The Company
has a cost method investment that it is studying to determine if a write up to fair value is warranted.
In May 2014, the FASB issued an ASU on revenue from contracts with customers which supersedes most current revenue
recognition guidance. The standard outlines a single comprehensive model which requires an entity to recognize the amount of
revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Additionally, the standard
requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with
customers. The guidance is effective for the Company beginning in the first quarter of fiscal 2019 and the Company plans to
adopt the ASU then.
In connection with the new revenue recognition guidance, the Company has completed its comprehensive contract review
project, including contracts relating to its recent acquisitions, and an evaluation of the standard's impact on the timing and
presentation of various financial aspects of its contractual arrangements. While the Company expects that the standard will not
have a material impact on the timing of revenue recognition or net income, it will have an impact on the financial statement line
item classification of certain items. Upon adoption of the new standard, the following changes are expected to occur:
•
•
•
certain fees, estimated to be approximately $375.0 million annually, in the Uniform segment, currently recognized as a
reduction to “Cost of services provided,” will be recognized in “Sales;”
costs to obtain contracts related to employee commissions, currently expensed to “Cost of service provided” at
contract inception, will be capitalized in “Other Assets” and expensed on a straight-line basis to “Cost of services
provided” over the expected customer relationship period; and
client contract investments, currently capitalized within “Other Assets” and amortized to “Depreciation and
amortization” will continue to be expensed over the contract life as either a leasehold improvement in “Property and
equipment, net” (approximately $760.0 million as of September 28, 2018) or as an “Other Asset” (approximately
$265.0 million as of September 28, 2018) and primarily classified in “Depreciation and amortization” or "Cost of
services provided."
The Company identified and is implementing appropriate changes to business processes, controls and systems to support
recognition and disclosure under the new standard. The Company will adopt the standard using the modified retrospective
transition method, resulting in the recognition of an estimated cumulative transition adjustment, net of tax, between $75.0
million and $100.0 million to retained earnings effective as of September 29, 2018. The adjustment to retained earnings will
reflect the unwinding of previously recognized costs to obtain contracts, along with the associated deferred tax impact from the
unwinding of these costs.
Revenue Recognition
The Company recognizes sales when persuasive evidence of an arrangement exists, delivery has occurred or services have been
rendered, the fee is fixed and determinable and collectability is reasonably assured. In each of the Company's operating
segments, sales are recognized in the period in which services are provided pursuant to the terms of the Company's contractual
relationships with its clients. The Company generally records sales on food and support services contracts (both profit and loss
contracts and client interest contracts) on a gross basis as the Company is the primary obligor and service provider.
Certain profit and loss contracts include payments to the client, typically calculated as a fixed or variable percentage of various
categories of sales and income. In some cases these contracts require minimum guaranteed payments, typically contingent on
certain future events. These expenses are currently 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 these contracts also include any associated management fees, client
S-9
S-9
S-10
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
adoption is permitted. The Company early adopted the guidance in the fourth quarter of fiscal 2018, which did not have a
material impact on the 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 early adopted the guidance in the first quarter of fiscal 2018, which did not have an impact on the
consolidated financial statements.
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 was permitted. The Company adopted the guidance in the first quarter of fiscal 2018, which did not have an
impact on the consolidated financial statements.
Standards Not Yet Adopted (from most to least recent date of issuance)
In August 2018, the FASB issued an ASU which adds, modifies and removes several disclosure requirements related to defined
benefit pension plans. The guidance is effective for the Company in the first quarter of fiscal 2022 and early adoption is
permitted. The Company is currently evaluating the impact of the pronouncement.
In August 2018, the FASB issued an ASU which adds, modifies and removes several disclosure requirements related to fair
value measurements. 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 July 2018, the FASB issued two ASUs regarding the lease recognition standard. The guidance provides clarification on issues
identified regarding the adoption of the standard, provides an additional transition method to adopt the standard and provides an
additional practical expedient to lessors. 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 July 2018, the FASB issued an ASU which clarifies, corrects errors in or makes minor improvements to the Codification. The
guidance is effective for the Company either upon issuance or in the first quarter of fiscal 2020, depending on the amendment.
There was no impact on the consolidated financial statements related to the amendments that were effective upon issuance of
the guidance and the Company is currently evaluating the impact of the remaining amendments of the pronouncement.
In February 2018, the FASB issued an ASU which provides clarification regarding guidance related to the financial instrument
standard. 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 financial instrument standard, as described below.
In February 2018, the FASB issued an ASU which allows for the reclassification of stranded tax effects resulting from the Tax
Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. 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 September 2017, the FASB issued an ASU to provide additional implementation guidance with respect to the revenue
recognition standard (see below) and the leases recognition standard. The guidance is effective for the Company in the first
quarter of fiscal 2019 with respect to the revenue recognition standard and in the first quarter of fiscal 2020 with respect to the
lease recognition standard. Early adoption is permitted. The Company will adopt this standard in conjunction with the revenue
recognition standard and the lease recognition standard, both as described below.
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.
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 expects adoption of this standard to result in no impact to net income. However, certain balances will
be reclassified from Cost of Services Provided to Interest and Other Financing Costs, net on the Consolidated Statements of
Income.
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 does not
expect adoption to impact the consolidated financial statements.
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 does not expect adoption to have a material
impact on the consolidated financial statements.
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 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 continues to review 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. Under this guidance, equity investments, other than those accounted for under the equity method of
accounting or those that result in consolidation of the investee, are to be measured at fair value with the changes in fair value
recognized in net income. The guidance is effective for the Company in the first quarter of fiscal 2019 and will be adopted
using a modified retrospective approach, with a cumulative transition adjustment recorded to retained earnings. The Company
has a cost method investment that it is studying to determine if a write up to fair value is warranted.
In May 2014, the FASB issued an ASU on revenue from contracts with customers which supersedes most current revenue
recognition guidance. The standard outlines a single comprehensive model which requires an entity to recognize the amount of
revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Additionally, the standard
requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with
customers. The guidance is effective for the Company beginning in the first quarter of fiscal 2019 and the Company plans to
adopt the ASU then.
In connection with the new revenue recognition guidance, the Company has completed its comprehensive contract review
project, including contracts relating to its recent acquisitions, and an evaluation of the standard's impact on the timing and
presentation of various financial aspects of its contractual arrangements. While the Company expects that the standard will not
have a material impact on the timing of revenue recognition or net income, it will have an impact on the financial statement line
item classification of certain items. Upon adoption of the new standard, the following changes are expected to occur:
•
•
•
certain fees, estimated to be approximately $375.0 million annually, in the Uniform segment, currently recognized as a
reduction to “Cost of services provided,” will be recognized in “Sales;”
costs to obtain contracts related to employee commissions, currently expensed to “Cost of service provided” at
contract inception, will be capitalized in “Other Assets” and expensed on a straight-line basis to “Cost of services
provided” over the expected customer relationship period; and
client contract investments, currently capitalized within “Other Assets” and amortized to “Depreciation and
amortization” will continue to be expensed over the contract life as either a leasehold improvement in “Property and
equipment, net” (approximately $760.0 million as of September 28, 2018) or as an “Other Asset” (approximately
$265.0 million as of September 28, 2018) and primarily classified in “Depreciation and amortization” or "Cost of
services provided."
The Company identified and is implementing appropriate changes to business processes, controls and systems to support
recognition and disclosure under the new standard. The Company will adopt the standard using the modified retrospective
transition method, resulting in the recognition of an estimated cumulative transition adjustment, net of tax, between $75.0
million and $100.0 million to retained earnings effective as of September 29, 2018. The adjustment to retained earnings will
reflect the unwinding of previously recognized costs to obtain contracts, along with the associated deferred tax impact from the
unwinding of these costs.
Revenue Recognition
The Company recognizes sales when persuasive evidence of an arrangement exists, delivery has occurred or services have been
rendered, the fee is fixed and determinable and collectability is reasonably assured. In each of the Company's operating
segments, sales are recognized in the period in which services are provided pursuant to the terms of the Company's contractual
relationships with its clients. The Company generally records sales on food and support services contracts (both profit and loss
contracts and client interest contracts) on a gross basis as the Company is the primary obligor and service provider.
Certain profit and loss contracts include payments to the client, typically calculated as a fixed or variable percentage of various
categories of sales and income. In some cases these contracts require minimum guaranteed payments, typically contingent on
certain future events. These expenses are currently 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 these contracts also include any associated management fees, client
S-9
S-10
S-10
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Advanced payments received from clients are reflected as deferred income within “Accrued expenses and other current
liabilities.” Deferred income is recognized in “Sales” over the period of expected benefit, as the related services are provided.
The timing of revenue recognition may differ from the timing of invoicing to customers. The Company records an accounts
receivable balance when revenue is recognized prior to or at the time of invoicing the customer. A majority of the Company’s
receivables balances are based on contracts with customers.
The Company estimates and reserves for its bad debt exposure based on its experience with past due accounts and collectibility,
the aging of accounts receivable and its analysis of customer data. Bad debt expense is classified within “Cost of services provided.”
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, net." Income from rebates, allowances and volume discounts is recognized based on actual purchases
in the fiscal period relative to total actual 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, net" are deducted
from the costs capitalized. Upon adoption of the new revenue recognition standard, there will be no significant changes to the
accounting for vendor consideration.
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).
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The summary of the components of comprehensive income is as follows (in thousands):
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
Pre-Tax
Amount
Tax
Effect
Pre-Tax
Amount
Tax
Effect
Pre-Tax
Amount
Tax
Effect
After-
Tax
Amount
$ 374,187
After-
Tax
Amount
$ 288,232
After-
Tax
Amount
$568,440
Pension plan adjustments
29,650
(9,003)
20,647
22,548
(2,556)
19,992
(37,957)
13,287
(24,670)
(31,003)
(250)
(31,253)
5,903
—
5,903
18,547
(15,467)
3,080
Net income
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
55,445
(16,134)
39,311
31,884
(12,435)
19,449
(23,437)
15,011
(8,426)
5,185
(1,510)
3,675
16,606
(6,476)
10,130
34,861
(13,677)
21,184
157
—
157
2,383
(834)
1,549
(8,282)
2,899
(5,383)
59,434
(26,897)
32,537
79,324
(22,301)
57,023
(16,268)
2,053
(14,215)
600,977
555
431,210
264
274,017
426
Accumulated other comprehensive loss consists of the following (in thousands):
$600,422
$ 430,946
$ 273,591
September 28, 2018
September 29, 2017
Pension plan adjustments
Foreign currency translation adjustments
Cash flow hedges
Share of equity investee's accumulated
other comprehensive loss
$
$
(24,628) $
(93,811)
36,192
(8,976)
(91,223) $
(45,275)
(62,558)
(6,794)
(9,133)
(123,760)
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. During the fourth quarter of fiscal 2018, Argentina was
determined to be a highly inflationary economy. As a result, the Company remeasured the financial statements of Argentina's
operations in accordance with the accounting guidance for highly inflationary economies. The impact of the remeasurement
was a foreign currency transaction loss of approximately $3.8 million during fiscal 2018 to the consolidated financial
statements. Transaction gains and losses exclusive of Argentina's operations are included in the Company's operating results for
fiscal 2018, fiscal 2017 and fiscal 2016 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.
S-11
S-11
S-12
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
subsidies or incentive fees based upon the Company's performance under the contract. Sales from direct marketing activities are
The summary of the components of comprehensive income is as follows (in thousands):
recognized upon shipment. All sales related taxes are presented on a net basis.
Advanced payments received from clients are reflected as deferred income within “Accrued expenses and other current
liabilities.” Deferred income is recognized in “Sales” over the period of expected benefit, as the related services are provided.
The timing of revenue recognition may differ from the timing of invoicing to customers. The Company records an accounts
receivable balance when revenue is recognized prior to or at the time of invoicing the customer. A majority of the Company’s
receivables balances are based on contracts with customers.
The Company estimates and reserves for its bad debt exposure based on its experience with past due accounts and collectibility,
the aging of accounts receivable and its analysis of customer data. Bad debt expense is classified within “Cost of services provided.”
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, net." Income from rebates, allowances and volume discounts is recognized based on actual purchases
in the fiscal period relative to total actual 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, net" are deducted
from the costs capitalized. Upon adoption of the new revenue recognition standard, there will be no significant changes to the
accounting for vendor consideration.
Use of Estimates
materially differ from those estimates.
Comprehensive Income
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
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).
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
Net income
Pre-Tax
Amount
Tax
Effect
After-
Tax
Amount
$568,440
Pre-Tax
Amount
Tax
Effect
After-
Tax
Amount
$ 374,187
Pre-Tax
Amount
Tax
Effect
Pension plan adjustments
29,650
(9,003)
20,647
22,548
(2,556)
19,992
(37,957)
13,287
After-
Tax
Amount
$ 288,232
(24,670)
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
(31,003)
(250)
(31,253)
5,903
—
5,903
18,547
(15,467)
3,080
55,445
(16,134)
39,311
31,884
(12,435)
19,449
(23,437)
15,011
(8,426)
5,185
(1,510)
3,675
16,606
(6,476)
10,130
34,861
(13,677)
21,184
157
—
157
2,383
(834)
1,549
(8,282)
2,899
(5,383)
59,434
(26,897)
32,537
79,324
(22,301)
57,023
(16,268)
2,053
600,977
555
431,210
264
(14,215)
274,017
426
$600,422
$ 430,946
$ 273,591
Accumulated other comprehensive loss consists of the following (in thousands):
September 28, 2018
September 29, 2017
Pension plan adjustments
Foreign currency translation adjustments
Cash flow hedges
Share of equity investee's accumulated
other comprehensive loss
$
$
(24,628) $
(93,811)
36,192
(8,976)
(91,223) $
(45,275)
(62,558)
(6,794)
(9,133)
(123,760)
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. During the fourth quarter of fiscal 2018, Argentina was
determined to be a highly inflationary economy. As a result, the Company remeasured the financial statements of Argentina's
operations in accordance with the accounting guidance for highly inflationary economies. The impact of the remeasurement
was a foreign currency transaction loss of approximately $3.8 million during fiscal 2018 to the consolidated financial
statements. Transaction gains and losses exclusive of Argentina's operations are included in the Company's operating results for
fiscal 2018, fiscal 2017 and fiscal 2016 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.
S-11
S-12
S-12
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of inventories are as follows:
Food
Career apparel and linens(1)
Parts, supplies and novelties
September 28, 2018
September 29, 2017
31.6%
65.7%
2.7%
100.0%
36.9%
60.5%
2.6%
100.0%
(1)
Increase during fiscal 2018 due to the acquisition of AmeriPride. See Note 2.
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 2018, fiscal 2017 and fiscal 2016 was $270.0 million, $237.9
million, and $234.8 million, respectively. The increase from fiscal 2017 to fiscal 2018 is primarily driven by the acquisition of
AmeriPride (see Note 2).
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 United States segment, resulting in a loss of approximately $5.1 million, which is included in "Cost of services provided"
in the Consolidated Statement of Income. Also during fiscal 2016, the Company recorded an impairment charge of
approximately $6.0 million, which is included in "Cost of services provided" in the Consolidated Statements of Income, to
write off certain idle service equipment in the Uniform segment.
Other Assets
The following table presents details of "Other Assets" as presented in the Consolidated Balance Sheets (in thousands):
Client contract investments(1)
Miscellaneous investments(2)
Long-term receivables
Computer software costs, net(3)
Interest rate swap agreements
Other(4)
September 28, 2018
September 29, 2017
$
$
1,034,476
239,547
90,068
152,188
54,708
122,184
1,693,171
$
$
981,300
247,601
72,406
111,005
—
62,412
1,474,724
(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 $183.6 million, $159.6 million and $142.5 million during fiscal 2018,
fiscal 2017 and fiscal 2016, 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 $155.1 million and $173.8
million at September 28, 2018 and September 29, 2017, 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 ten years.
Other consists of noncurrent deferred tax assets, pension assets and deferred financing costs on certain revolving credit
facilities.
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other Accrued Expenses and Liabilities
thousands):
The following table presents details of "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets (in
September 28, 2018
September 29, 2017
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):
September 28, 2018
September 29, 2017
Deferred income
Accrued client expenses
Accrued taxes
Accrued insurance and interest
Other
Deferred income tax payable
Deferred compensation
Pension-related liabilities
Interest rate swap agreements
Other noncurrent liabilities
$
$
$
$
299,089
$
98,282
96,855
164,890
358,917
1,018,033
$
503,429
$
226,558
28,478
—
218,750
977,215
$
294,781
84,138
75,156
87,143
305,222
846,440
570,893
229,663
14,164
9,313
154,911
978,944
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.
Supplemental Cash Flow Information
(1) During fiscal 2018, the Company was in a net refund position, primarily due to the impact of the Tax Cuts and Jobs Act (see
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
$
307.1
$
(1.1)
$
201.7
126.3
275.4
55.6
(dollars in millions)
Interest paid
Income taxes (refunded) paid(1)
Note 8).
Significant noncash activities follow:
•
•
During fiscal 2018, fiscal 2017 and fiscal 2016, the Company executed capital lease transactions. The present
value of the future rental obligations was approximately $34.0 million, $55.4 million and $36.4 million for the
respective periods, which is included in property and equipment and long-term borrowings.
During fiscal 2018, fiscal 2017 and fiscal 2016, cashless settlements of the exercise price and related employee
minimum tax withholding liabilities of share-based payment awards were approximately $19.0 million, $32.7
million and $40.1 million, respectively.
NOTE 2. ACQUISITIONS AND DIVESTITURES:
AmeriPride Services, Inc. ("AmeriPride") Acquisition
On January 19, 2018, the Company completed the acquisition of AmeriPride, a uniform and linen rental and supply company in
the U.S. and Canada, pursuant to the Agreement and Plan of Merger ("AmeriPride Merger Agreement") dated as of October 13,
2017, by and among the Company, AmeriPride, Timberwolf Acquisition Corporation, and Bruce M. Steiner, in his capacity as
Stockholder Representative. Upon completion of the acquisition, AmeriPride became a wholly owned subsidiary of the
S-13
S-13
S-14
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of inventories are as follows:
Other Accrued Expenses and Liabilities
Food
Career apparel and linens(1)
Parts, supplies and novelties
September 28, 2018
September 29, 2017
31.6%
65.7%
2.7%
100.0%
36.9%
60.5%
2.6%
100.0%
(1)
Increase during fiscal 2018 due to the acquisition of AmeriPride. See Note 2.
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 2018, fiscal 2017 and fiscal 2016 was $270.0 million, $237.9
million, and $234.8 million, respectively. The increase from fiscal 2017 to fiscal 2018 is primarily driven by the acquisition of
AmeriPride (see Note 2).
Income was not material.
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
During fiscal 2016, the Company received proceeds of approximately $9.5 million related to the sale of a building within the
FSS United States segment, resulting in a loss of approximately $5.1 million, which is included in "Cost of services provided"
in the Consolidated Statement of Income. Also during fiscal 2016, the Company recorded an impairment charge of
approximately $6.0 million, which is included in "Cost of services provided" in the Consolidated Statements of Income, to
write off certain idle service equipment in the Uniform segment.
Other Assets
The following table presents details of "Other Assets" as presented in the Consolidated Balance Sheets (in thousands):
Client contract investments(1)
Miscellaneous investments(2)
Long-term receivables
Computer software costs, net(3)
Interest rate swap agreements
Other(4)
$
$
1,034,476
$
239,547
90,068
152,188
54,708
122,184
981,300
247,601
72,406
111,005
—
62,412
1,693,171
$
1,474,724
(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 $183.6 million, $159.6 million and $142.5 million during fiscal 2018,
fiscal 2017 and fiscal 2016, 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 $155.1 million and $173.8
million at September 28, 2018 and September 29, 2017, respectively).
(3)
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 ten years.
(4)
Other consists of noncurrent deferred tax assets, pension assets and deferred financing costs on certain revolving credit
facilities.
The following table presents details of "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets (in
thousands):
September 28, 2018
September 29, 2017
Deferred income
Accrued client expenses
Accrued taxes
Accrued insurance and interest
Other
$
$
299,089
$
98,282
96,855
164,890
358,917
1,018,033
$
294,781
84,138
75,156
87,143
305,222
846,440
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 28, 2018
September 29, 2017
$
$
503,429
226,558
28,478
—
218,750
977,215
$
$
570,893
229,663
14,164
9,313
154,911
978,944
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.
September 28, 2018
September 29, 2017
Supplemental Cash Flow Information
(dollars in millions)
Interest paid
Income taxes (refunded) paid(1)
Fiscal Year Ended
$
September 28, 2018
307.1
(1.1)
$
September 29, 2017
201.7
126.3
$
September 30, 2016
275.4
55.6
(1) During fiscal 2018, the Company was in a net refund position, primarily due to the impact of the Tax Cuts and Jobs Act (see
Note 8).
Significant noncash activities follow:
•
•
During fiscal 2018, fiscal 2017 and fiscal 2016, the Company executed capital lease transactions. The present
value of the future rental obligations was approximately $34.0 million, $55.4 million and $36.4 million for the
respective periods, which is included in property and equipment and long-term borrowings.
During fiscal 2018, fiscal 2017 and fiscal 2016, cashless settlements of the exercise price and related employee
minimum tax withholding liabilities of share-based payment awards were approximately $19.0 million, $32.7
million and $40.1 million, respectively.
NOTE 2. ACQUISITIONS AND DIVESTITURES:
AmeriPride Services, Inc. ("AmeriPride") Acquisition
On January 19, 2018, the Company completed the acquisition of AmeriPride, a uniform and linen rental and supply company in
the U.S. and Canada, pursuant to the Agreement and Plan of Merger ("AmeriPride Merger Agreement") dated as of October 13,
2017, by and among the Company, AmeriPride, Timberwolf Acquisition Corporation, and Bruce M. Steiner, in his capacity as
Stockholder Representative. Upon completion of the acquisition, AmeriPride became a wholly owned subsidiary of the
S-13
S-14
S-14
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company and its results will be included in the Company's Uniform segment. The total consideration paid for AmeriPride was
$995.4 million, partially offset by $84.9 million of cash acquired. In order to finance the AmeriPride acquisition, the Company
entered into a long-term financing agreement (see Note 5). During the fiscal year ended September 28, 2018, the Company
incurred acquisition-related costs of $12.7 million, included in "Selling and general corporate expenses," and $5.2 million of
commitment fees, included in "Interest and Other Financing Costs, net" in the Company’s Consolidated Statements of Income.
Consideration
The Company has accounted for the AmeriPride acquisition as a business combination under the acquisition method of
accounting. The Company has preliminarily allocated the purchase price for the transaction based upon the estimated fair value
of net assets acquired and liabilities assumed at the date of acquisition. Accordingly, the preliminary purchase price allocation is
subject to change. The Company expects to finalize the allocation of the purchase price upon finalization of the valuation of
certain taxes. Any adjustments to the preliminary fair values will be made as soon as practicable but no later than one year from
the acquisition date. These adjustments may have a material impact on the Company's results of operations and financial
position. For tax purposes, this acquisition is a taxable transaction.
Recognition and Measurement of Assets Acquired and Liabilities Assumed at Fair Value
The following tables summarize the preliminary fair values of the tangible and identifiable intangible assets acquired and
liabilities assumed at the acquisition date (in thousands):
Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities
$
$
$
$
237,807
959,347
1,197,154
136,751
64,974
201,725
Intangible Assets
The following table identifies the Company’s preliminary allocations of purchase price to the intangible assets acquired by
category:
Intangible Assets
Customer relationship assets
Trade names
Total intangible assets
$
$
Estimated Fair
Value
(in millions)
Weighted-
Average
Estimated
Useful Life
(in years)
297.0
15
24.0 3 to indefinite
321.0
The estimated fair value of the customer relationship assets was determined using the “multi-period excess earnings method”
which considers the present value of net cash flows expected to be generated by the customer relationships, excluding any cash
flows related to contributory assets. The fair value of the two trade names acquired were determined using the “relief-from-
royalty method” which considers the discounted estimated royalty payments that are expected to be avoided as a result of the
trademarks being owned.
Goodwill
The Company recorded approximately $364.6 million of goodwill in connection with its preliminary purchase price allocation
relating to the AmeriPride acquisition, all of which was recognized in the Uniform reporting segment. Factors that contributed
to the Company’s preliminary recognition of goodwill include the Company’s intent to expand and complement its existing
uniform business and to enhance its customer service experience, in addition to the anticipated synergies the Company expects
to generate from the acquisition. Goodwill related to the AmeriPride acquisition may be revised upon final determination of the
purchase price allocation.
Avendra, LLC ("Avendra") Acquisition
On December 11, 2017, the Company completed the acquisition of Avendra, a hospitality procurement services provider in
North America, which included the merger of Capital Merger Sub, LLC, a wholly owned subsidiary of the Company, with
Avendra, pursuant to the Agreement and Plan of Merger ("Avendra Merger Agreement") dated as of October 13, 2017, by and
among Aramark Services, Inc. (“ASI”), a wholly owned subsidiary of the Company, Avendra, Capital Merger Sub, LLC, and
Marriott International, Inc., in its capacity as Holder Representative. Avendra continued as the surviving entity of the merger
and is a wholly owned subsidiary of the Company whose financial results are included within the FSS United States reporting
segment from December 11, 2017. The total consideration paid for Avendra was $1,386.4 million, partially offset by $87.3
million of cash and restricted investments acquired. In order to finance the Avendra acquisition, the Company entered into a
long-term financing agreement (see Note 5). During the fiscal year ended September 28, 2018, the Company incurred
acquisition-related costs of $11.5 million, included in "Selling and general corporate expenses," and $6.7 million of
commitment fees, included in "Interest and Other Financing Costs, net" in the Company’s Consolidated Statements of Income.
Consideration
The Company has accounted for the Avendra acquisition as a business combination under the acquisition method of accounting.
The Company has finalized its allocation of the purchase price for the transaction based upon the fair value of net assets
acquired and liabilities assumed at the date of acquisition. For tax purposes, this acquisition is a taxable transaction.
Recognition and Measurement of Assets Acquired and Liabilities Assumed at Fair Value
The following tables summarize the fair values of the tangible and identifiable intangible assets acquired and liabilities assumed
at the acquisition date (in thousands):
Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities
$
$
$
$
157,614
1,345,532
1,503,146
111,087
5,681
116,768
Weighted-
Average
Estimated
Useful Life
(in years)
15
indefinite
The following table identifies the Company’s allocations of purchase price to the intangible assets acquired by category:
Estimated Fair
Value
(in millions)
Customer relationship assets
Trade name
Total intangible assets
$
$
567.0
222.0
789.0
The fair value of the customer relationship assets was determined using the “multi-period excess earnings method” which
considers the present value of net cash flows expected to be generated by the customer relationships, excluding any cash flows
related to contributory assets. The fair value of the trade name was determined using the “relief-from-royalty method” which
considers the discounted estimated royalty payments that are expected to be avoided as a result of the trademarks being owned.
Goodwill
The Company recorded approximately $530.5 million of goodwill in connection with its purchase price allocation relating to
the Avendra acquisition, all of which was recognized in the FSS United States reporting segment. Factors that contributed to the
Company’s recognition of goodwill include the Company’s intent to expand its buying scale through Avendra’s procurement
capabilities and to expand its customer base outside of its traditional industries, in addition to the anticipated synergies the
Company expects to generate from the acquisition.
Combined Sales and Earnings for AmeriPride and Avendra
S-15
S-15
S-16
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company and its results will be included in the Company's Uniform segment. The total consideration paid for AmeriPride was
$995.4 million, partially offset by $84.9 million of cash acquired. In order to finance the AmeriPride acquisition, the Company
entered into a long-term financing agreement (see Note 5). During the fiscal year ended September 28, 2018, the Company
incurred acquisition-related costs of $12.7 million, included in "Selling and general corporate expenses," and $5.2 million of
commitment fees, included in "Interest and Other Financing Costs, net" in the Company’s Consolidated Statements of Income.
Consideration
The Company has accounted for the AmeriPride acquisition as a business combination under the acquisition method of
accounting. The Company has preliminarily allocated the purchase price for the transaction based upon the estimated fair value
of net assets acquired and liabilities assumed at the date of acquisition. Accordingly, the preliminary purchase price allocation is
subject to change. The Company expects to finalize the allocation of the purchase price upon finalization of the valuation of
certain taxes. Any adjustments to the preliminary fair values will be made as soon as practicable but no later than one year from
the acquisition date. These adjustments may have a material impact on the Company's results of operations and financial
position. For tax purposes, this acquisition is a taxable transaction.
Recognition and Measurement of Assets Acquired and Liabilities Assumed at Fair Value
The following tables summarize the preliminary fair values of the tangible and identifiable intangible assets acquired and
liabilities assumed at the acquisition date (in thousands):
Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities
$
$
$
$
237,807
959,347
1,197,154
136,751
64,974
201,725
Intangible Assets
category:
The following table identifies the Company’s preliminary allocations of purchase price to the intangible assets acquired by
Customer relationship assets
Trade names
Total intangible assets
$
$
Estimated Fair
Value
(in millions)
Weighted-
Average
Estimated
Useful Life
(in years)
297.0
15
24.0 3 to indefinite
321.0
The estimated fair value of the customer relationship assets was determined using the “multi-period excess earnings method”
which considers the present value of net cash flows expected to be generated by the customer relationships, excluding any cash
flows related to contributory assets. The fair value of the two trade names acquired were determined using the “relief-from-
royalty method” which considers the discounted estimated royalty payments that are expected to be avoided as a result of the
trademarks being owned.
Goodwill
The Company recorded approximately $364.6 million of goodwill in connection with its preliminary purchase price allocation
relating to the AmeriPride acquisition, all of which was recognized in the Uniform reporting segment. Factors that contributed
to the Company’s preliminary recognition of goodwill include the Company’s intent to expand and complement its existing
uniform business and to enhance its customer service experience, in addition to the anticipated synergies the Company expects
to generate from the acquisition. Goodwill related to the AmeriPride acquisition may be revised upon final determination of the
purchase price allocation.
Avendra, LLC ("Avendra") Acquisition
On December 11, 2017, the Company completed the acquisition of Avendra, a hospitality procurement services provider in
North America, which included the merger of Capital Merger Sub, LLC, a wholly owned subsidiary of the Company, with
Avendra, pursuant to the Agreement and Plan of Merger ("Avendra Merger Agreement") dated as of October 13, 2017, by and
among Aramark Services, Inc. (“ASI”), a wholly owned subsidiary of the Company, Avendra, Capital Merger Sub, LLC, and
Marriott International, Inc., in its capacity as Holder Representative. Avendra continued as the surviving entity of the merger
and is a wholly owned subsidiary of the Company whose financial results are included within the FSS United States reporting
segment from December 11, 2017. The total consideration paid for Avendra was $1,386.4 million, partially offset by $87.3
million of cash and restricted investments acquired. In order to finance the Avendra acquisition, the Company entered into a
long-term financing agreement (see Note 5). During the fiscal year ended September 28, 2018, the Company incurred
acquisition-related costs of $11.5 million, included in "Selling and general corporate expenses," and $6.7 million of
commitment fees, included in "Interest and Other Financing Costs, net" in the Company’s Consolidated Statements of Income.
Consideration
The Company has accounted for the Avendra acquisition as a business combination under the acquisition method of accounting.
The Company has finalized its allocation of the purchase price for the transaction based upon the fair value of net assets
acquired and liabilities assumed at the date of acquisition. For tax purposes, this acquisition is a taxable transaction.
Recognition and Measurement of Assets Acquired and Liabilities Assumed at Fair Value
The following tables summarize the fair values of the tangible and identifiable intangible assets acquired and liabilities assumed
at the acquisition date (in thousands):
Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities
$
$
$
$
157,614
1,345,532
1,503,146
111,087
5,681
116,768
Intangible Assets
The following table identifies the Company’s allocations of purchase price to the intangible assets acquired by category:
Estimated Fair
Value
(in millions)
Customer relationship assets
Trade name
Total intangible assets
$
$
567.0
222.0
789.0
Weighted-
Average
Estimated
Useful Life
(in years)
15
indefinite
The fair value of the customer relationship assets was determined using the “multi-period excess earnings method” which
considers the present value of net cash flows expected to be generated by the customer relationships, excluding any cash flows
related to contributory assets. The fair value of the trade name was determined using the “relief-from-royalty method” which
considers the discounted estimated royalty payments that are expected to be avoided as a result of the trademarks being owned.
Goodwill
The Company recorded approximately $530.5 million of goodwill in connection with its purchase price allocation relating to
the Avendra acquisition, all of which was recognized in the FSS United States reporting segment. Factors that contributed to the
Company’s recognition of goodwill include the Company’s intent to expand its buying scale through Avendra’s procurement
capabilities and to expand its customer base outside of its traditional industries, in addition to the anticipated synergies the
Company expects to generate from the acquisition.
Combined Sales and Earnings for AmeriPride and Avendra
S-15
S-16
S-16
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Included in the Company’s Consolidated Statements of Income for the fiscal year ended September 28, 2018 were combined
sales from AmeriPride and Avendra of approximately $522.2 million related to these entities. Combined net income for the
results of AmeriPride and Avendra was approximately $8 million for the fiscal year ended September 28, 2018, which excludes
the impact of the increased interest expense incurred from the financing of the acquisitions and acquisition related costs
included in the Corporate segment.
Unaudited Pro Forma Results of Operations for AmeriPride and Avendra
The following table reflects the unaudited pro forma combined results of operations for the fiscal years ended September 28,
2018 and September 29, 2017 for the Company, assuming the closing of both acquisitions occurred on October 1, 2016:
Fiscal Year Ended
Unaudited (in thousands)
September 28, 2018
September 29, 2017
Total sales
Net income
$
16,014,463 $
15,378,832
624,334
328,932
The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of
operations had the closing of the acquisitions taken place on October 1, 2016. Furthermore, the pro forma results do not purport
to project the future results of operations of the Company.
The unaudited pro forma information primarily reflects the following adjustments:
•
•
•
•
adjustments to amortization expense related to identifiable intangible assets acquired;
adjustments to depreciation expense related to the fair value of property and equipment acquired;
adjustments to interest expense to reflect the long-term financing agreements used to finance the acquisitions (see Note
5); and
adjustments for the tax effect of the aforementioned adjustments.
Other Acquisitions
During fiscal 2018, the Company paid net cash consideration of approximately $30.6 million for various acquisitions, excluding
the purchases of AmeriPride and Avendra. 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.
During the fourth quarter of fiscal 2016, the Company acquired the assets of HPSI, a group purchasing organization, in its FSS
United States segment for cash consideration of $140.0 million.
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 HPSI and Avoca did not have a material impact on the Company's
consolidated financial statements.
Divestiture
During the fourth quarter of fiscal 2018, the Company announced that it signed an agreement to sell its Healthcare Technologies
("HCT") business for $300.0 million. The sale closed during the first quarter of fiscal 2019. The Company intends to use a
majority of the proceeds to repay debt. The Company also plans to repurchase $50 million of its common stock.
NOTE 3. SEVERANCE AND ASSET WRITE-DOWNS:
During fiscal 2018, the Company commenced a new phase of strategic reinvestment and reorganization actions to streamline
and improve efficiencies and effectiveness of its selling, general and administrative functions, which resulted in a net severance
charge of approximately $36.6 million during fiscal 2018.
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.
During fiscal 2016, the Company continued to refine its focus on streamlining and improving the efficiency and effectiveness
of its selling, general and administrative functions. As a result, the Company recorded net severance charges of approximately
$24.9 million during fiscal 2016.
The following table summarizes the unpaid obligations for severance and related costs as of September 28, 2018, which are
included in "Accrued payroll and related expenses" in the Consolidated Balance Sheets. These unpaid obligations are expected
to be paid through fiscal 2019.
(in millions)
September 29, 2017
Net Charges
September 28, 2018
Severance and Related Costs Accrual $
17.8
36.6
(37.8) $
16.6
Payments and
Other
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 or region 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 2018, which determined goodwill was not impaired. The Company performs its annual
impairment test as of the end of the fiscal month of August.
Changes in total goodwill during fiscal 2018 is as follows (in thousands):
Segment
FSS United States
FSS International
Uniform
Translation
and Other
September 29, 2017
Acquisitions
September 28, 2018
$
$
3,493,756
$
534,698
$
— $
4,028,454
637,816
583,939
2,656
372,204
(14,093)
(408)
626,379
955,735
4,715,511
$
909,558
$
(14,501) $
5,610,568
During the first quarter of fiscal 2018, $173.3 million of goodwill related to certain Canadian businesses was reclassified out of
the FSS United States segment and into the FSS International segment (see Note 14), which is reflected in the opening balance
as of September 29, 2017. Goodwill related to the AmeriPride acquisition made during fiscal 2018 may be revised upon final
determination of the purchase price allocation (see Note 2).
Other intangible assets consist of (in thousands):
September 28, 2018
September 29, 2017
Gross
Amount
Accumulated
Amortization
Net
Amount
Gross
Amount
Accumulated
Amortization
Net
Amount
Customer relationship assets
$ 2,244,215
$ (1,156,811) $ 1,087,404
$ 1,376,812
$ (1,063,350) $
313,462
Trade names
1,050,825
(1,385)
1,049,440
807,362
—
807,362
$ 3,295,040
$ (1,158,196) $ 2,136,844
$ 2,184,174
$ (1,063,350) $ 1,120,824
During fiscal 2018, the Company acquired customer relationship assets and trade names with values of approximately $887.5
million and $246.0 million, respectively. During fiscal 2017, the Company acquired customer relationship assets and trade
names with values of approximately $67.0 million and $22.9 million, respectively. Customer relationship assets are being
amortized principally on a straight-line basis over the expected period of benefit, 5 to 24 years, with a weighted average life of
approximately 15 years. The Aramark, Avendra and a majority of the 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 2018, which did not result in an impairment charge. Other intangible asset values related to the
AmeriPride acquisition made during fiscal 2018 may be revised upon final determination of the purchase price allocation (see
Note 2). Amortization of other intangible assets for fiscal 2018, fiscal 2017 and fiscal 2016 was approximately $112.1 million,
$87.9 million and $98.5 million, respectively.
S-17
S-17
S-18
Aramark 2018 Form 10-K Included in the Company’s Consolidated Statements of Income for the fiscal year ended September 28, 2018 were combined
sales from AmeriPride and Avendra of approximately $522.2 million related to these entities. Combined net income for the
results of AmeriPride and Avendra was approximately $8 million for the fiscal year ended September 28, 2018, which excludes
the impact of the increased interest expense incurred from the financing of the acquisitions and acquisition related costs
included in the Corporate segment.
Unaudited Pro Forma Results of Operations for AmeriPride and Avendra
The following table reflects the unaudited pro forma combined results of operations for the fiscal years ended September 28,
2018 and September 29, 2017 for the Company, assuming the closing of both acquisitions occurred on October 1, 2016:
Fiscal Year Ended
Unaudited (in thousands)
September 28, 2018
September 29, 2017
Total sales
Net income
$
16,014,463 $
15,378,832
624,334
328,932
The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of
operations had the closing of the acquisitions taken place on October 1, 2016. Furthermore, the pro forma results do not purport
to project the future results of operations of the Company.
The unaudited pro forma information primarily reflects the following adjustments:
adjustments to amortization expense related to identifiable intangible assets acquired;
adjustments to depreciation expense related to the fair value of property and equipment acquired;
adjustments to interest expense to reflect the long-term financing agreements used to finance the acquisitions (see Note
•
•
•
•
5); and
Other Acquisitions
During fiscal 2018, the Company paid net cash consideration of approximately $30.6 million for various acquisitions, excluding
the purchases of AmeriPride and Avendra. 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.
During the fourth quarter of fiscal 2016, the Company acquired the assets of HPSI, a group purchasing organization, in its FSS
United States segment for cash consideration of $140.0 million.
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 HPSI and Avoca did not have a material impact on the Company's
consolidated financial statements.
Divestiture
During the fourth quarter of fiscal 2018, the Company announced that it signed an agreement to sell its Healthcare Technologies
("HCT") business for $300.0 million. The sale closed during the first quarter of fiscal 2019. The Company intends to use a
majority of the proceeds to repay debt. The Company also plans to repurchase $50 million of its common stock.
NOTE 3. SEVERANCE AND ASSET WRITE-DOWNS:
During fiscal 2018, the Company commenced a new phase of strategic reinvestment and reorganization actions to streamline
and improve efficiencies and effectiveness of its selling, general and administrative functions, which resulted in a net severance
charge of approximately $36.6 million during fiscal 2018.
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.
During fiscal 2016, the Company continued to refine 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.
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the unpaid obligations for severance and related costs as of September 28, 2018, which are
included in "Accrued payroll and related expenses" in the Consolidated Balance Sheets. These unpaid obligations are expected
to be paid through fiscal 2019.
(in millions)
September 29, 2017
Net Charges
Payments and
Other
September 28, 2018
Severance and Related Costs Accrual $
17.8
36.6
(37.8) $
16.6
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 or region 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 2018, which determined goodwill was not impaired. The Company performs its annual
impairment test as of the end of the fiscal month of August.
Changes in total goodwill during fiscal 2018 is as follows (in thousands):
adjustments for the tax effect of the aforementioned adjustments.
$
4,715,511
$
909,558
$
Segment
FSS United States
FSS International
Uniform
September 29, 2017
3,493,756
$
637,816
$
583,939
$
534,698
2,656
372,204
Acquisitions
Translation
and Other
— $
(14,093)
(408)
(14,501) $
September 28, 2018
4,028,454
626,379
955,735
5,610,568
During the first quarter of fiscal 2018, $173.3 million of goodwill related to certain Canadian businesses was reclassified out of
the FSS United States segment and into the FSS International segment (see Note 14), which is reflected in the opening balance
as of September 29, 2017. Goodwill related to the AmeriPride acquisition made during fiscal 2018 may be revised upon final
determination of the purchase price allocation (see Note 2).
Other intangible assets consist of (in thousands):
September 28, 2018
September 29, 2017
Gross
Amount
Accumulated
Amortization
Net
Amount
Gross
Amount
Accumulated
Amortization
Net
Amount
Customer relationship assets
$ 2,244,215
Trade names
1,050,825
$ 3,295,040
$ (1,156,811) $ 1,087,404
1,049,440
$ (1,158,196) $ 2,136,844
(1,385)
$ 1,376,812
$ (1,063,350) $
313,462
807,362
$ 2,184,174
—
807,362
$ (1,063,350) $ 1,120,824
During fiscal 2018, the Company acquired customer relationship assets and trade names with values of approximately $887.5
million and $246.0 million, respectively. During fiscal 2017, the Company acquired customer relationship assets and trade
names with values of approximately $67.0 million and $22.9 million, respectively. Customer relationship assets are being
amortized principally on a straight-line basis over the expected period of benefit, 5 to 24 years, with a weighted average life of
approximately 15 years. The Aramark, Avendra and a majority of the 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 2018, which did not result in an impairment charge. Other intangible asset values related to the
AmeriPride acquisition made during fiscal 2018 may be revised upon final determination of the purchase price allocation (see
Note 2). Amortization of other intangible assets for fiscal 2018, fiscal 2017 and fiscal 2016 was approximately $112.1 million,
$87.9 million and $98.5 million, respectively.
S-17
S-18
S-18
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Based on the recorded balances at September 28, 2018, total estimated amortization of all acquisition-related intangible assets
for fiscal years 2019 through 2023 follows (in thousands):
$
2019
2020
2021
2022
2023
113,202
112,560
104,750
84,019
75,996
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 March 2022
Senior secured term loan facility, due February 2023
Senior secured term loan facility, due March 2024
Senior secured term loan facility, due March 2025
5.125% senior notes, due January 2024
5.000% senior notes, due April 2025
3.125% senior notes, due April 2025(1)
4.750% senior notes, due June 2026
5.000% senior notes, due February 2028
Receivables Facility, due May 2021
Capital leases
Other
Less—current portion
September 28, 2018
77,000
$
399,568
139,106
1,325,923
1,656,919
902,908
590,884
373,240
494,082
1,136,472
—
143,388
4,494
7,243,984
(30,907)
7,213,077
$
September 29, 2017
—
$
1,125,858
—
1,403,429
—
903,654
589,733
379,429
493,464
—
254,200
114,400
4,321
5,268,488
(78,157)
5,190,331
$
(1)
This is a Euro denominated borrowing. See the disclosure below in the Senior Notes section for further information.
As of September 28, 2018, there was approximately $913.8 million of outstanding foreign currency borrowings.
Senior Secured Credit Agreement
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").
The Credit Agreement includes senior secured term loan facilities consisting of the following as of September 28, 2018:
•
•
•
•
A U.S. dollar denominated term loan to Aramark Services, Inc. ("ASI") in the amount of $1,325.9 million, due 2024,
("U.S. Term Loan B due 2024") and $1,656.9 million, due 2025 ("U.S. Term Loan B due 2025");
A yen denominated term loan to ASI in the amount of ¥10,777.8 million (approximately $94.8 million), due 2022 (the
"Yen Term Loan due 2022");
A Canadian dollar denominated term loan to Aramark Canada Ltd. in the amount of CAD200.0
million (approximately $154.9 million), due 2022, (the "Canadian Term Loan due 2022") and CAD179.6 million
(approximately $139.1 million), due 2023 (the "Canadian Term Loan A-1 due 2023"); and
A euro denominated term loan to Aramark Investments Limited, a U.K. borrower, in an amount of €129.1
million (approximately $149.8 million), due 2022 (the "Euro Term Loan due 2022").
The Credit Agreement also includes 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.
The revolving credit facility has a final maturity date of March 28, 2022. As of September 28, 2018, there was approximately
$902.8 million available for borrowing under the revolving credit facility. The Company's revolving credit facility includes a
S-19
S-19
S-20
$250.0 million sublimit for letters of credit. 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. 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. The actual spreads within all
ranges referred to above are based on a Consolidated Leverage Ratio, as defined in the Credit Agreement.
The primary borrower under the senior secured credit facilities is ASI. In addition, certain subsidiaries of ASI are borrowers of
the term loan facilities and/or the revolving credit facility. The Company is not a guarantor under the senior secured credit
facilities and is not subject to the covenants or obligations under the Credit Agreement.
Term Loans
U.S. Term Loan B due 2024 and Yen Term Loan due 2022
On May 24, 2018, ASI entered into Amendment No. 5 ("Amendment No. 5") to the Credit Agreement. Amendment No. 5
changed the applicable interest rate on the outstanding borrowings related to the U.S. Term Loan B due 2024. As a result of the
amendment, the applicable margin on the U.S. Term Loan due 2024 was changed from 2.00% for borrowings based on the
LIBOR rate to 1.75% and from 1.00% for borrowings based on the base rate to 0.75%. There were no other material changes to
the terms of the U.S. Term Loan B due 2024.
On May 11, 2018, ASI entered into Amendment No. 4 ("Amendment No. 4") to the Credit Agreement. Amendment No. 4
changed the applicable interest rate on the outstanding borrowings related to the Yen Term Loan due 2022. As a result of the
amendment, the applicable margin on the Yen Term Loan due 2022 was changed from 1.75% to 1.50%. All other terms related
to the Yen Term Loan due 2022 remained unchanged.
U.S. Term Loan B due 2025
On December 11, 2017, ASI entered into Incremental Amendment No. 2 (“Incremental Amendment No. 2”) to the Credit
Agreement. Incremental Amendment No. 2 provided for an incremental senior secured credit facility under the Credit
Agreement, the U.S. Term Loan B due 2025, comprised of a U.S. dollar denominated term loan made to ASI in an amount
equal to $1,785.0 million, due on March 11, 2025. On June 12, 2018, the Company entered into Amendment No. 6
("Amendment No. 6") to the Credit Agreement, which changed the applicable interest rate on the outstanding U.S. Term Loan B
due 2025 borrowings. There were no other material changes to the terms of the U.S. Term Loan B due 2025 as a result of
Amendment No. 6.
The U.S. Term Loan B due 2025 bears interest at a rate equal to, at the Company’s option, either (a) a LIBOR rate determined
by reference to the costs of funds for deposits in U.S. dollars for the interest period relevant to such borrowing adjusted for
certain additional costs or (b) a base rate determined by reference to the highest of (1) the prime rate of the administrative agent,
(2) the federal funds rate plus 0.50% and (3) the LIBOR rate plus 1.00% plus an applicable margin set initially at 2.00% for
borrowings based on the LIBOR rate and 1.00% for borrowings based on the base rate, in each case, subject to a reduction of
0.25% upon compliance by the Company with a consolidated leverage ratio of 3.00 to 1.00. As a result of Amendment No. 6,
the applicable margin was changed from 2.00% for borrowings based on the eurocurrency (LIBOR) rate to 1.75%, subject to a
LIBOR floor of 0.00%, and from 1.00% for borrowings based on the base rate to 0.75%, subject to a minimum base rate of
0.00%.
The net proceeds from the U.S. Term Loan B due 2025 were used to finance the Avendra acquisition and, together with
approximately $200.0 million of proceeds from a borrowing made under the Credit Agreement’s revolving credit facility, to
repay the $633.8 million of principal outstanding on the U.S. Term Loan A due 2022 under the Credit Agreement, along with
accrued interest and certain fees and related expenses. The Company recorded $5.7 million of charges to "Interest and Other
Financing Costs, net" in the Consolidated Statements of Income for fiscal 2018 for the write-off of debt issuance costs.
The Company capitalized third-party costs of approximately $8.9 million directly attributable to the U.S. Term Loan B due
2025, which are included in "Long-Term Borrowings" in the Consolidated Balance Sheets as of September 28, 2018.
The Company is required to make quarterly principal repayments on the U.S. Term Loan B due 2025 in quarterly amounts of
1.00% per annum of the funded total principal amount and is subject to substantially similar terms relating to guarantees,
collateral, mandatory prepayments and covenants that are applicable to the Company’s existing U.S. Term Loan B due 2024
outstanding under the Credit Agreement.
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Based on the recorded balances at September 28, 2018, total estimated amortization of all acquisition-related intangible assets
for fiscal years 2019 through 2023 follows (in thousands):
$
2019
2020
2021
2022
2023
113,202
112,560
104,750
84,019
75,996
NOTE 5. BORROWINGS:
Long-term borrowings, net, are summarized in the following table (in thousands):
Senior secured revolving credit facility, due March 2022
$
77,000
$
September 28, 2018
September 29, 2017
Senior secured term loan facility, due March 2022
Senior secured term loan facility, due February 2023
Senior secured term loan facility, due March 2024
Senior secured term loan facility, due March 2025
5.125% senior notes, due January 2024
5.000% senior notes, due April 2025
3.125% senior notes, due April 2025(1)
4.750% senior notes, due June 2026
5.000% senior notes, due February 2028
Receivables Facility, due May 2021
Capital leases
Other
Less—current portion
399,568
139,106
1,325,923
1,656,919
902,908
590,884
373,240
494,082
1,136,472
—
143,388
4,494
7,243,984
(30,907)
1,125,858
1,403,429
—
—
—
903,654
589,733
379,429
493,464
—
254,200
114,400
4,321
5,268,488
(78,157)
$
7,213,077
$
5,190,331
(1)
This is a Euro denominated borrowing. See the disclosure below in the Senior Notes section for further information.
As of September 28, 2018, there was approximately $913.8 million of outstanding foreign currency borrowings.
Senior Secured Credit Agreement
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").
The Credit Agreement includes senior secured term loan facilities consisting of the following as of September 28, 2018:
A U.S. dollar denominated term loan to Aramark Services, Inc. ("ASI") in the amount of $1,325.9 million, due 2024,
("U.S. Term Loan B due 2024") and $1,656.9 million, due 2025 ("U.S. Term Loan B due 2025");
A yen denominated term loan to ASI in the amount of ¥10,777.8 million (approximately $94.8 million), due 2022 (the
"Yen Term Loan due 2022");
A Canadian dollar denominated term loan to Aramark Canada Ltd. in the amount of CAD200.0
million (approximately $154.9 million), due 2022, (the "Canadian Term Loan due 2022") and CAD179.6 million
(approximately $139.1 million), due 2023 (the "Canadian Term Loan A-1 due 2023"); and
A euro denominated term loan to Aramark Investments Limited, a U.K. borrower, in an amount of €129.1
million (approximately $149.8 million), due 2022 (the "Euro Term Loan due 2022").
The Credit Agreement also includes 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.
The revolving credit facility has a final maturity date of March 28, 2022. As of September 28, 2018, there was approximately
$902.8 million available for borrowing under the revolving credit facility. The Company's revolving credit facility includes a
•
•
•
•
$250.0 million sublimit for letters of credit. 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. 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. The actual spreads within all
ranges referred to above are based on a Consolidated Leverage Ratio, as defined in the Credit Agreement.
The primary borrower under the senior secured credit facilities is ASI. In addition, certain subsidiaries of ASI are borrowers of
the term loan facilities and/or the revolving credit facility. The Company is not a guarantor under the senior secured credit
facilities and is not subject to the covenants or obligations under the Credit Agreement.
Term Loans
U.S. Term Loan B due 2024 and Yen Term Loan due 2022
On May 24, 2018, ASI entered into Amendment No. 5 ("Amendment No. 5") to the Credit Agreement. Amendment No. 5
changed the applicable interest rate on the outstanding borrowings related to the U.S. Term Loan B due 2024. As a result of the
amendment, the applicable margin on the U.S. Term Loan due 2024 was changed from 2.00% for borrowings based on the
LIBOR rate to 1.75% and from 1.00% for borrowings based on the base rate to 0.75%. There were no other material changes to
the terms of the U.S. Term Loan B due 2024.
On May 11, 2018, ASI entered into Amendment No. 4 ("Amendment No. 4") to the Credit Agreement. Amendment No. 4
changed the applicable interest rate on the outstanding borrowings related to the Yen Term Loan due 2022. As a result of the
amendment, the applicable margin on the Yen Term Loan due 2022 was changed from 1.75% to 1.50%. All other terms related
to the Yen Term Loan due 2022 remained unchanged.
U.S. Term Loan B due 2025
On December 11, 2017, ASI entered into Incremental Amendment No. 2 (“Incremental Amendment No. 2”) to the Credit
Agreement. Incremental Amendment No. 2 provided for an incremental senior secured credit facility under the Credit
Agreement, the U.S. Term Loan B due 2025, comprised of a U.S. dollar denominated term loan made to ASI in an amount
equal to $1,785.0 million, due on March 11, 2025. On June 12, 2018, the Company entered into Amendment No. 6
("Amendment No. 6") to the Credit Agreement, which changed the applicable interest rate on the outstanding U.S. Term Loan B
due 2025 borrowings. There were no other material changes to the terms of the U.S. Term Loan B due 2025 as a result of
Amendment No. 6.
The U.S. Term Loan B due 2025 bears interest at a rate equal to, at the Company’s option, either (a) a LIBOR rate determined
by reference to the costs of funds for deposits in U.S. dollars for the interest period relevant to such borrowing adjusted for
certain additional costs or (b) a base rate determined by reference to the highest of (1) the prime rate of the administrative agent,
(2) the federal funds rate plus 0.50% and (3) the LIBOR rate plus 1.00% plus an applicable margin set initially at 2.00% for
borrowings based on the LIBOR rate and 1.00% for borrowings based on the base rate, in each case, subject to a reduction of
0.25% upon compliance by the Company with a consolidated leverage ratio of 3.00 to 1.00. As a result of Amendment No. 6,
the applicable margin was changed from 2.00% for borrowings based on the eurocurrency (LIBOR) rate to 1.75%, subject to a
LIBOR floor of 0.00%, and from 1.00% for borrowings based on the base rate to 0.75%, subject to a minimum base rate of
0.00%.
The net proceeds from the U.S. Term Loan B due 2025 were used to finance the Avendra acquisition and, together with
approximately $200.0 million of proceeds from a borrowing made under the Credit Agreement’s revolving credit facility, to
repay the $633.8 million of principal outstanding on the U.S. Term Loan A due 2022 under the Credit Agreement, along with
accrued interest and certain fees and related expenses. The Company recorded $5.7 million of charges to "Interest and Other
Financing Costs, net" in the Consolidated Statements of Income for fiscal 2018 for the write-off of debt issuance costs.
The Company capitalized third-party costs of approximately $8.9 million directly attributable to the U.S. Term Loan B due
2025, which are included in "Long-Term Borrowings" in the Consolidated Balance Sheets as of September 28, 2018.
The Company is required to make quarterly principal repayments on the U.S. Term Loan B due 2025 in quarterly amounts of
1.00% per annum of the funded total principal amount and is subject to substantially similar terms relating to guarantees,
collateral, mandatory prepayments and covenants that are applicable to the Company’s existing U.S. Term Loan B due 2024
outstanding under the Credit Agreement.
S-19
S-20
S-20
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Canadian Term Loan A-1 due 2023
On February 28, 2018, ASI entered into Incremental Amendment No. 3 (“Incremental Amendment No. 3”) to the Credit
Agreement. Incremental Amendment No. 3 provided for an incremental, senior secured credit facility under the Credit
Agreement, the Canadian Term Loan A-1 due 2023, comprised of a Canadian dollar denominated term loan made to Aramark
Canadian Term Loan A-1 due 2023
Canada Limited ("ACL"), a company organized under the laws of Canada and an indirect subsidiary of ASI in an amount equal
On February 28, 2018, ASI entered into Incremental Amendment No. 3 (“Incremental Amendment No. 3”) to the Credit
to CAD200 million (approximately $139.1 million net as of September 28, 2018) due on February 28, 2023.
Agreement. Incremental Amendment No. 3 provided for an incremental, senior secured credit facility under the Credit
Agreement, the Canadian Term Loan A-1 due 2023, comprised of a Canadian dollar denominated term loan made to Aramark
The net proceeds from the Canadian Term Loan A-1 due 2023 were used to pay down certain borrowings on the revolving
Canada Limited ("ACL"), a company organized under the laws of Canada and an indirect subsidiary of ASI in an amount equal
credit facility and to pay fees and expenses related to the consummation of Incremental Amendment No. 3.
to CAD200 million (approximately $139.1 million net as of September 28, 2018) due on February 28, 2023.
The Canadian Term Loan A-1 due 2023 bears interest at a rate equal to, at the Company’s option, either (a) a Bank Act of
Canada rate determined by reference to offered rates for bankers' acceptances, increased by 0.10% depending on the lender
The net proceeds from the Canadian Term Loan A-1 due 2023 were used to pay down certain borrowings on the revolving
party or (b) a base rate or Canadian base rate determined by reference to the higher of (1) the prime rate of the administrative
credit facility and to pay fees and expenses related to the consummation of Incremental Amendment No. 3.
agent and (2) the Bank Act of Canada rate plus 1.00% plus an applicable margin set initially at 1.75% for borrowings based on
The Canadian Term Loan A-1 due 2023 bears interest at a rate equal to, at the Company’s option, either (a) a Bank Act of
the Bank Act of Canada rate and 0.75% for borrowings based on the Canadian base rate, in each case, subject to a reduction of
Canada rate determined by reference to offered rates for bankers' acceptances, increased by 0.10% depending on the lender
0.125% per each decline of 0.50 to 1.00 in the Company's consolidated leverage ratio from 4.75 to 1.00. Accordingly, the
party or (b) a base rate or Canadian base rate determined by reference to the higher of (1) the prime rate of the administrative
applicable margin spread for the Canadian Term Loan A-1 due 2023 is 1.25% to 1.75% (as of September 28, 2018 - 1.625%)
agent and (2) the Bank Act of Canada rate plus 1.00% plus an applicable margin set initially at 1.75% for borrowings based on
with respect to Bank Act of Canada borrowings, subject to a floor of 0.00%, and 0.25% to 0.75% (as of September 28, 2018 -
the Bank Act of Canada rate and 0.75% for borrowings based on the Canadian base rate, in each case, subject to a reduction of
0.625%) with respect to Canadian base rate borrowings, subject to a floor of 0.00%.
0.125% per each decline of 0.50 to 1.00 in the Company's consolidated leverage ratio from 4.75 to 1.00. Accordingly, the
The Canadian Term Loan A-1 due 2023 requires the payment of installments in quarterly principal amounts of CAD2.5 million
applicable margin spread for the Canadian Term Loan A-1 due 2023 is 1.25% to 1.75% (as of September 28, 2018 - 1.625%)
from March 31, 2018 through December 31, 2019, CAD3.75 million from March 31, 2020 through December 31, 2020,
with respect to Bank Act of Canada borrowings, subject to a floor of 0.00%, and 0.25% to 0.75% (as of September 28, 2018 -
CAD5.0 million from March 31, 2021 through December 31, 2021, CAD7.5 million from March 31, 2022 through December
0.625%) with respect to Canadian base rate borrowings, subject to a floor of 0.00%.
31, 2022, and CAD115.0 million at maturity. The Canadian Term Loan A-1 due 2023 is subject to substantially similar terms
The Canadian Term Loan A-1 due 2023 requires the payment of installments in quarterly principal amounts of CAD2.5 million
currently relating to guarantees, collateral, mandatory prepayments and covenants that are applicable to the Company’s existing
from March 31, 2018 through December 31, 2019, CAD3.75 million from March 31, 2020 through December 31, 2020,
term loans outstanding under the Credit Agreement.
CAD5.0 million from March 31, 2021 through December 31, 2021, CAD7.5 million from March 31, 2022 through December
31, 2022, and CAD115.0 million at maturity. The Canadian Term Loan A-1 due 2023 is subject to substantially similar terms
Canadian Term Loan due 2022 and Euro Term Loan due 2022
currently relating to guarantees, collateral, mandatory prepayments and covenants that are applicable to the Company’s existing
The applicable margin spread for the Canadian Term Loan due 2022 and the senior secured revolving credit facility is 1.50% to
term loans outstanding under the Credit Agreement.
2.25% with respect to eurocurrency (LIBOR) borrowings, bankers’ acceptance ("BA") rate borrowings and letters of credit fees
Canadian Term Loan due 2022 and Euro Term Loan due 2022
and 0.50% to 1.25% with respect to U.S. and Canadian base rate borrowings. The applicable margin for the Euro Term Loan
due 2022 is 1.50%.
The applicable margin spread for the Canadian Term Loan due 2022 and the senior secured revolving credit facility is 1.50% to
2.25% with respect to eurocurrency (LIBOR) borrowings, bankers’ acceptance ("BA") rate borrowings and letters of credit fees
Incremental Facilities
and 0.50% to 1.25% with respect to U.S. and Canadian base rate borrowings. The applicable margin for the Euro Term Loan
The Credit Agreement provides that the Company has the right at any time to request one or more incremental term loan
due 2022 is 1.50%.
facilities or increases under existing term loan facilities and/or additional revolving credit facilities or increases under the
Incremental Facilities
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
The Credit Agreement provides that the Company has the right at any time to request one or more incremental term loan
in accordance with the Credit Agreement (the "Consolidated Secured Debt Ratio")) would not exceed 3.00 to 1.00, plus any
facilities or increases under existing term loan facilities and/or additional revolving credit facilities or increases under the
amount of loans and commitments optionally prepaid and terminated under the senior secured credit facilities. The lenders
existing revolving credit facility in an amount up to $1,400.0 million of incremental commitments in the aggregate plus an
under these facilities are not under any obligation to provide any such incremental facilities or commitments, and any such
unlimited amount so long as the pro forma Consolidated Secured Debt to Covenant Adjusted EBITDA ratio (each as calculated
addition of or increase in facilities or commitments will be subject to customary conditions precedent.
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
Prepayments and Amortization
under these facilities are not under any obligation to provide any such incremental facilities or commitments, and any such
The Credit Agreement requires us to prepay outstanding term loans, subject to certain exceptions, with:
addition of or increase in facilities or commitments will be subject to customary conditions precedent.
•
Prepayments and Amortization
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
The Credit Agreement requires us to prepay outstanding term loans, subject to certain exceptions, with:
required to the extent excess cash flow for the applicable year exceeds $10.0 million;
•
•
•
•
•
50% of ASI's annual excess cash flow (as defined in the Credit Agreement) with stepdowns to 25% and 0% upon ASI's
100% of the net cash proceeds of all nonordinary course asset sales or other dispositions of property subject to certain
reaching certain Consolidated Secured Debt Ratio thresholds; provided, further, that such prepayment shall only be
exceptions and customary reinvestment rights; provided, further, that such prepayment shall only be required to the
required to the extent excess cash flow for the applicable year exceeds $10.0 million;
extent net cash proceeds exceeds $100.0 million; and
100% of the net cash proceeds of all nonordinary course asset sales or other dispositions of property subject to certain
100% of the net cash proceeds of any incurrence of debt, but excluding proceeds from certain debt permitted under the
exceptions and customary reinvestment rights; provided, further, that such prepayment shall only be required to the
Credit Agreement.
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.
S-21
S-21
S-21
S-22
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 due 2024 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.
The Company made optional prepayments of approximately $260.4 million, $330.6 million and $160.0 million of outstanding
U.S. dollar term loans, during fiscal 2018, 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 due 2024 and the Yen Term Loan
due 2022 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 Canadian Term Loan due 2022 in quarterly amounts of 4.4%, 5.0%, 7.5%, 10.1% and
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 due 2022
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 28, 2018, 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 due 2024 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 28, 2018 was 2.05x.
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.
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Canadian Term Loan A-1 due 2023
On February 28, 2018, ASI entered into Incremental Amendment No. 3 (“Incremental Amendment No. 3”) to the Credit
Agreement. Incremental Amendment No. 3 provided for an incremental, senior secured credit facility under the Credit
Agreement, the Canadian Term Loan A-1 due 2023, comprised of a Canadian dollar denominated term loan made to Aramark
Canadian Term Loan A-1 due 2023
Canada Limited ("ACL"), a company organized under the laws of Canada and an indirect subsidiary of ASI in an amount equal
On February 28, 2018, ASI entered into Incremental Amendment No. 3 (“Incremental Amendment No. 3”) to the Credit
to CAD200 million (approximately $139.1 million net as of September 28, 2018) due on February 28, 2023.
Agreement. Incremental Amendment No. 3 provided for an incremental, senior secured credit facility under the Credit
Agreement, the Canadian Term Loan A-1 due 2023, comprised of a Canadian dollar denominated term loan made to Aramark
The net proceeds from the Canadian Term Loan A-1 due 2023 were used to pay down certain borrowings on the revolving
Canada Limited ("ACL"), a company organized under the laws of Canada and an indirect subsidiary of ASI in an amount equal
credit facility and to pay fees and expenses related to the consummation of Incremental Amendment No. 3.
to CAD200 million (approximately $139.1 million net as of September 28, 2018) due on February 28, 2023.
The Canadian Term Loan A-1 due 2023 bears interest at a rate equal to, at the Company’s option, either (a) a Bank Act of
Canada rate determined by reference to offered rates for bankers' acceptances, increased by 0.10% depending on the lender
The net proceeds from the Canadian Term Loan A-1 due 2023 were used to pay down certain borrowings on the revolving
party or (b) a base rate or Canadian base rate determined by reference to the higher of (1) the prime rate of the administrative
credit facility and to pay fees and expenses related to the consummation of Incremental Amendment No. 3.
agent and (2) the Bank Act of Canada rate plus 1.00% plus an applicable margin set initially at 1.75% for borrowings based on
The Canadian Term Loan A-1 due 2023 bears interest at a rate equal to, at the Company’s option, either (a) a Bank Act of
the Bank Act of Canada rate and 0.75% for borrowings based on the Canadian base rate, in each case, subject to a reduction of
Canada rate determined by reference to offered rates for bankers' acceptances, increased by 0.10% depending on the lender
0.125% per each decline of 0.50 to 1.00 in the Company's consolidated leverage ratio from 4.75 to 1.00. Accordingly, the
party or (b) a base rate or Canadian base rate determined by reference to the higher of (1) the prime rate of the administrative
applicable margin spread for the Canadian Term Loan A-1 due 2023 is 1.25% to 1.75% (as of September 28, 2018 - 1.625%)
agent and (2) the Bank Act of Canada rate plus 1.00% plus an applicable margin set initially at 1.75% for borrowings based on
with respect to Bank Act of Canada borrowings, subject to a floor of 0.00%, and 0.25% to 0.75% (as of September 28, 2018 -
the Bank Act of Canada rate and 0.75% for borrowings based on the Canadian base rate, in each case, subject to a reduction of
0.625%) with respect to Canadian base rate borrowings, subject to a floor of 0.00%.
0.125% per each decline of 0.50 to 1.00 in the Company's consolidated leverage ratio from 4.75 to 1.00. Accordingly, the
The Canadian Term Loan A-1 due 2023 requires the payment of installments in quarterly principal amounts of CAD2.5 million
applicable margin spread for the Canadian Term Loan A-1 due 2023 is 1.25% to 1.75% (as of September 28, 2018 - 1.625%)
from March 31, 2018 through December 31, 2019, CAD3.75 million from March 31, 2020 through December 31, 2020,
with respect to Bank Act of Canada borrowings, subject to a floor of 0.00%, and 0.25% to 0.75% (as of September 28, 2018 -
CAD5.0 million from March 31, 2021 through December 31, 2021, CAD7.5 million from March 31, 2022 through December
0.625%) with respect to Canadian base rate borrowings, subject to a floor of 0.00%.
31, 2022, and CAD115.0 million at maturity. The Canadian Term Loan A-1 due 2023 is subject to substantially similar terms
The Canadian Term Loan A-1 due 2023 requires the payment of installments in quarterly principal amounts of CAD2.5 million
currently relating to guarantees, collateral, mandatory prepayments and covenants that are applicable to the Company’s existing
from March 31, 2018 through December 31, 2019, CAD3.75 million from March 31, 2020 through December 31, 2020,
term loans outstanding under the Credit Agreement.
CAD5.0 million from March 31, 2021 through December 31, 2021, CAD7.5 million from March 31, 2022 through December
31, 2022, and CAD115.0 million at maturity. The Canadian Term Loan A-1 due 2023 is subject to substantially similar terms
Canadian Term Loan due 2022 and Euro Term Loan due 2022
currently relating to guarantees, collateral, mandatory prepayments and covenants that are applicable to the Company’s existing
The applicable margin spread for the Canadian Term Loan due 2022 and the senior secured revolving credit facility is 1.50% to
term loans outstanding under the Credit Agreement.
2.25% with respect to eurocurrency (LIBOR) borrowings, bankers’ acceptance ("BA") rate borrowings and letters of credit fees
Canadian Term Loan due 2022 and Euro Term Loan due 2022
and 0.50% to 1.25% with respect to U.S. and Canadian base rate borrowings. The applicable margin for the Euro Term Loan
due 2022 is 1.50%.
The applicable margin spread for the Canadian Term Loan due 2022 and the senior secured revolving credit facility is 1.50% to
2.25% with respect to eurocurrency (LIBOR) borrowings, bankers’ acceptance ("BA") rate borrowings and letters of credit fees
Incremental Facilities
and 0.50% to 1.25% with respect to U.S. and Canadian base rate borrowings. The applicable margin for the Euro Term Loan
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
Incremental Facilities
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
The Credit Agreement provides that the Company has the right at any time to request one or more incremental term loan
in accordance with the Credit Agreement (the "Consolidated Secured Debt Ratio")) would not exceed 3.00 to 1.00, plus any
facilities or increases under existing term loan facilities and/or additional revolving credit facilities or increases under the
amount of loans and commitments optionally prepaid and terminated under the senior secured credit facilities. The lenders
existing revolving credit facility in an amount up to $1,400.0 million of incremental commitments in the aggregate plus an
under these facilities are not under any obligation to provide any such incremental facilities or commitments, and any such
unlimited amount so long as the pro forma Consolidated Secured Debt to Covenant Adjusted EBITDA ratio (each as calculated
addition of or increase in facilities or commitments will be subject to customary conditions precedent.
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
Prepayments and Amortization
under these facilities are not under any obligation to provide any such incremental facilities or commitments, and any such
The Credit Agreement requires us to prepay outstanding term loans, subject to certain exceptions, with:
addition of or increase in facilities or commitments will be subject to customary conditions precedent.
Prepayments and Amortization
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
due 2022 is 1.50%.
The Credit Agreement requires us to prepay outstanding term loans, subject to certain exceptions, with:
required to the extent excess cash flow for the applicable year exceeds $10.0 million;
50% of ASI's annual excess cash flow (as defined in the Credit Agreement) with stepdowns to 25% and 0% upon ASI's
100% of the net cash proceeds of all nonordinary course asset sales or other dispositions of property subject to certain
reaching certain Consolidated Secured Debt Ratio thresholds; provided, further, that such prepayment shall only be
exceptions and customary reinvestment rights; provided, further, that such prepayment shall only be required to the
required to the extent excess cash flow for the applicable year exceeds $10.0 million;
extent net cash proceeds exceeds $100.0 million; and
100% of the net cash proceeds of all nonordinary course asset sales or other dispositions of property subject to certain
100% of the net cash proceeds of any incurrence of debt, but excluding proceeds from certain debt permitted under the
exceptions and customary reinvestment rights; provided, further, that such prepayment shall only be required to the
Credit Agreement.
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
S-21
Credit Agreement.
•
•
•
•
•
•
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 due 2024 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.
The Company made optional prepayments of approximately $260.4 million, $330.6 million and $160.0 million of outstanding
U.S. dollar term loans, during fiscal 2018, 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 due 2024 and the Yen Term Loan
due 2022 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 Canadian Term Loan due 2022 in quarterly amounts of 4.4%, 5.0%, 7.5%, 10.1% and
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 due 2022
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 28, 2018, 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 due 2024 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 28, 2018 was 2.05x.
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.
S-21
S-22
S-22
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 4.80x for the fiscal year ended September 28, 2018.
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 2028
On January 18, 2018, ASI issued $1,150.0 million aggregate principal amount of 5.000% Senior Notes due February 1, 2028
(the "2028 Notes"). The net proceeds from the 2028 Notes were used to finance the AmeriPride acquisition, to pay down certain
borrowings under the revolving credit facility and to pay fees related to the transaction. During the second quarter of fiscal
2018, the Company capitalized third-party costs of approximately $14.2 million directly attributable to the 2028 Notes, which
are included in "Long-Term Borrowings" in the Consolidated Balance Sheets.
The 2028 Notes were issued pursuant to an indenture, dated as of January 18, 2018 (the "2028 Notes Indenture"), entered into
by and among ASI, the Company and certain other Aramark entities, as guarantors, and the U.S. Bank National Association, as
trustee. The 2028 Notes were issued at par.
The 2028 Notes are senior unsecured obligations of ASI. The 2028 Notes rank equal in right of payment to all of the Issuer's
existing and future senior indebtedness and will rank senior in right of payment to the Issuer's future subordinated indebtedness.
The 2028 Notes are guaranteed on a senior, unsecured basis by the Company and substantially all of the domestic subsidiaries
of ASI. The guarantees of the 2028 Notes rank equal in right of payment to all of the senior obligations of such guarantor. The
2028 Notes are effectively subordinated to all of ASI's existing and future secured indebtedness, 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 2028 Notes. Interest on the 2028 Notes is payable on February 1 and August 1 of each year, commencing on
August 1, 2018.
At any time prior to February 1, 2023, ASI has the option to redeem all or a part of the 2028 Notes at a purchase price equal to
100% of the principal amount of such 2028 Notes plus an applicable premium and accrued and unpaid interest, if any, to but not
including the date of redemption. Prior to February 1, 2021, ASI has the option to redeem up to 40% of the aggregate principal
amount of all 2028 Notes at a purchase price equal to 105% of the principal amount of such 2028 Notes plus accrued and
unpaid interest, if any, to but not including the date of redemption, with the net cash proceeds of one or more equity offerings,
provided that at least 50% of the sum of the aggregate principal amount of the 2028 Notes originally issued remain outstanding
immediately after the purchase.
The 2028 Notes Indenture contains 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 2028 Notes Indenture also provides for events of default which, if any of them occurs, would permit or require
the principal of and accrued interest on the applicable series of 2028 Notes to become or to be declared due and payable.
Further, a failure to pay any obligations under the 2028 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.
5.000% Senior Notes due 2025 and 3.125% Senior Notes due 2025
On March 22, 2017, ASI issued $600.0 million of 5.000% Senior Notes due April 1, 2025 (the "5.000% 2025 Notes"). The
5.000% 2025 Notes were issued pursuant to an indenture (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. On March 27, 2017, Aramark International Finance S.à r.l. ("AIFS"), 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"). The 3.125% 2025 Notes were issued pursuant to an indenture (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. 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 2028 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, the 5.000% 2025 Notes and the 2028 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.
5.125% Senior Notes due 2024 and 4.75% Senior Notes due 2026
On December 17, 2015, ASI issued $400 million of 5.125% Senior Notes due January 15, 2024 (the "Original 2024 Notes"),
pursuant to an indenture, dated as of December 17, 2015 (the "2024 Base Indenture"), entered into by ASI, the Company and
certain other Aramark entities, as guarantors of the Original 2024 Notes, and The Bank of New York Mellon, as trustee. The
Original 2024 Notes were issued at par and the net proceeds were used for general corporate purposes and to reduce the
outstanding balance under the Company's revolving credit facility. The Company paid approximately $6.0 million in financing
fees related to the offering of the Original 2024 Notes.
On May 31, 2016, ASI issued $1,000 million aggregate principal amount of senior unsecured notes, consisting of $500
million of additional 5.125% Senior Notes due January 15, 2024 (the "New 2024 Notes") and $500 million of 4.75%Senior
Notes due June 1, 2026 (the "2026 Notes"). The New 2024 Notes constitute a further issuance of the Original 2024 Notes
(together with the New 2024 Notes, the "2024 Notes"). The New 2024 Notes were issued pursuant to the Base Indenture, as
supplemented by the supplemental indenture, dated as of May 31, 2016 (the "2024 Supplemental Indenture" and together with
the 2024 Base Indenture, the "2024 Notes Indenture"), entered into by ASI, the Company and certain other Aramark entities, as
guarantors of the New 2024 Notes, and The Bank of New York Mellon, as trustee. The 2026 Notes were issued pursuant to the
indenture, dated as of May 31, 2016 (the "2026 Notes Indenture"), entered into by ASI, the Company and certain other Aramark
entities, as guarantors of the 2026 Notes and The Bank of New York Mellon, as trustee. The New 2024 Notes were issued at a
premium of $18.8 million, which created an effective yield of 4.6%. The premium was recorded to "Long-Term Borrowings" in
the Consolidated Balance Sheets and is amortized to "Interest and Other Financing Costs, net" in the Consolidated Statements
of Income until maturity in 2024.
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 the ASI's existing and future senior debt and senior in the right of payment to the 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
S-23
S-23
S-24
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 4.80x for the fiscal year ended September 28, 2018.
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 2028
On January 18, 2018, ASI issued $1,150.0 million aggregate principal amount of 5.000% Senior Notes due February 1, 2028
(the "2028 Notes"). The net proceeds from the 2028 Notes were used to finance the AmeriPride acquisition, to pay down certain
borrowings under the revolving credit facility and to pay fees related to the transaction. During the second quarter of fiscal
2018, the Company capitalized third-party costs of approximately $14.2 million directly attributable to the 2028 Notes, which
are included in "Long-Term Borrowings" in the Consolidated Balance Sheets.
The 2028 Notes were issued pursuant to an indenture, dated as of January 18, 2018 (the "2028 Notes Indenture"), entered into
by and among ASI, the Company and certain other Aramark entities, as guarantors, and the U.S. Bank National Association, as
trustee. The 2028 Notes were issued at par.
The 2028 Notes are senior unsecured obligations of ASI. The 2028 Notes rank equal in right of payment to all of the Issuer's
existing and future senior indebtedness and will rank senior in right of payment to the Issuer's future subordinated indebtedness.
The 2028 Notes are guaranteed on a senior, unsecured basis by the Company and substantially all of the domestic subsidiaries
of ASI. The guarantees of the 2028 Notes rank equal in right of payment to all of the senior obligations of such guarantor. The
2028 Notes are effectively subordinated to all of ASI's existing and future secured indebtedness, 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 2028 Notes. Interest on the 2028 Notes is payable on February 1 and August 1 of each year, commencing on
August 1, 2018.
At any time prior to February 1, 2023, ASI has the option to redeem all or a part of the 2028 Notes at a purchase price equal to
100% of the principal amount of such 2028 Notes plus an applicable premium and accrued and unpaid interest, if any, to but not
including the date of redemption. Prior to February 1, 2021, ASI has the option to redeem up to 40% of the aggregate principal
amount of all 2028 Notes at a purchase price equal to 105% of the principal amount of such 2028 Notes plus accrued and
unpaid interest, if any, to but not including the date of redemption, with the net cash proceeds of one or more equity offerings,
provided that at least 50% of the sum of the aggregate principal amount of the 2028 Notes originally issued remain outstanding
immediately after the purchase.
The 2028 Notes Indenture contains 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 2028 Notes Indenture also provides for events of default which, if any of them occurs, would permit or require
the principal of and accrued interest on the applicable series of 2028 Notes to become or to be declared due and payable.
Further, a failure to pay any obligations under the 2028 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.
5.000% Senior Notes due 2025 and 3.125% Senior Notes due 2025
On March 22, 2017, ASI issued $600.0 million of 5.000% Senior Notes due April 1, 2025 (the "5.000% 2025 Notes"). The
5.000% 2025 Notes were issued pursuant to an indenture (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. On March 27, 2017, Aramark International Finance S.à r.l. ("AIFS"), 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"). The 3.125% 2025 Notes were issued pursuant to an indenture (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. 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 2028 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, the 5.000% 2025 Notes and the 2028 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.
5.125% Senior Notes due 2024 and 4.75% Senior Notes due 2026
On December 17, 2015, ASI issued $400 million of 5.125% Senior Notes due January 15, 2024 (the "Original 2024 Notes"),
pursuant to an indenture, dated as of December 17, 2015 (the "2024 Base Indenture"), entered into by ASI, the Company and
certain other Aramark entities, as guarantors of the Original 2024 Notes, and The Bank of New York Mellon, as trustee. The
Original 2024 Notes were issued at par and the net proceeds were used for general corporate purposes and to reduce the
outstanding balance under the Company's revolving credit facility. The Company paid approximately $6.0 million in financing
fees related to the offering of the Original 2024 Notes.
On May 31, 2016, ASI issued $1,000 million aggregate principal amount of senior unsecured notes, consisting of $500
million of additional 5.125% Senior Notes due January 15, 2024 (the "New 2024 Notes") and $500 million of 4.75%Senior
Notes due June 1, 2026 (the "2026 Notes"). The New 2024 Notes constitute a further issuance of the Original 2024 Notes
(together with the New 2024 Notes, the "2024 Notes"). The New 2024 Notes were issued pursuant to the Base Indenture, as
supplemented by the supplemental indenture, dated as of May 31, 2016 (the "2024 Supplemental Indenture" and together with
the 2024 Base Indenture, the "2024 Notes Indenture"), entered into by ASI, the Company and certain other Aramark entities, as
guarantors of the New 2024 Notes, and The Bank of New York Mellon, as trustee. The 2026 Notes were issued pursuant to the
indenture, dated as of May 31, 2016 (the "2026 Notes Indenture"), entered into by ASI, the Company and certain other Aramark
entities, as guarantors of the 2026 Notes and The Bank of New York Mellon, as trustee. The New 2024 Notes were issued at a
premium of $18.8 million, which created an effective yield of 4.6%. The premium was recorded to "Long-Term Borrowings" in
the Consolidated Balance Sheets and is amortized to "Interest and Other Financing Costs, net" in the Consolidated Statements
of Income until maturity in 2024.
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 the ASI's existing and future senior debt and senior in the right of payment to the 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
S-23
S-24
S-24
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes are guaranteed on a senior, unsecured basis by the Company and substantially all of the domestic subsidiaries of ASI. The
2024 Notes and 2026 Notes and the guarantees thereof are effectively subordinated to all existing and future secured debt of
ASI and the guarantors, to the extent of the value of the assets securing such debt, and structurally subordinated to all of the
liabilities of any of 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. Interest on the 2026 Notes is payable on June 1 and December 1 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 such notes, plus accrued and unpaid interest, if any, 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 the 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 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.
Fiscal 2017 Refinancing Transactions
During fiscal 2017, 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 to pay down a portion of the existing U.S. Term Loan B due 2024 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 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.
Receivables Facility
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. During the third
quarter of fiscal 2018, the Company extended the terms of the Receivables Facility from May 2019 to May 2021. The purchase
limit increased from $350.0 million to $400.0 million and the additional seasonal capacity of the Receivables Facility increased
from $50.0 million to $100.0 million from October through March. All other terms and conditions remain largely unchanged.
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 28, 2018, there were no borrowings outstanding on the Receivables Facility. At September 29, 2017, the amount
of outstanding borrowings under the Receivables Facility was $254.2 million.
Future Maturities and Interest and Other Financing Costs, net
At September 28, 2018, annual maturities on long-term borrowings maturing in the next five fiscal years and thereafter
(excluding the $58.5 million reduction to long-term borrowings from debt issuance costs and the increase of $12.4 million from
the premium on the 2024 Notes) are as follows (in thousands):
$
30,907
42,799
78,892
467,390
107,978
Thereafter
6,562,177
2019
2020
2021
2022
2023
$
$
The components of interest and other financing costs, net, are summarized as follows (in thousands):
Interest expense
Interest income
Other financing costs
Total
September 28, 2018
September 29, 2017
September 30, 2016
Fiscal Year Ended
353,048
$
285,995
$
(9,238)
10,451
(5,942)
7,362
354,261
$
287,415
$
315,166
(5,288)
5,505
315,383
During the first quarter of 2019, the Company extended the maturity dates of the Revolving Credit Facility, Yen Term Loan due
2022, Canadian Term Loan due 2022, Canadian Term Loan due 2023 and Euro Term Loan due 2022 to October 1, 2023.
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 and how the hedging instrument's effectiveness in offsetting the hedged risk will be assessed prospectively
and retrospectively. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly effective in offsetting cash flows of hedged items.
Cash Flow Hedges
The Company has approximately $2.6 billion notional amount of outstanding interest rate swap agreements as of September 28,
2018, which fixes the rate on a like amount of variable rate borrowings through the first quarter of fiscal 2023. During fiscal
2018, the Company entered into approximately $1.6 billion notional amount of 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 notional amounts
of $600.0 million matured during fiscal 2018. As a result of the Credit Agreement entered into in fiscal 2017, 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.
S-25
S-25
S-26
Aramark 2018 Form 10-K 2024 Notes and 2026 Notes and the guarantees thereof are effectively subordinated to all existing and future secured debt of
ASI and the guarantors, to the extent of the value of the assets securing such debt, and structurally subordinated to all of the
liabilities of any of 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. Interest on the 2026 Notes is payable on June 1 and December 1 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 such notes, plus accrued and unpaid interest, if any, 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 the 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 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.
Fiscal 2017 Refinancing Transactions
During fiscal 2017, 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 to pay down a portion of the existing U.S. Term Loan B due 2024 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 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.
Receivables Facility
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. During the third
quarter of fiscal 2018, the Company extended the terms of the Receivables Facility from May 2019 to May 2021. The purchase
limit increased from $350.0 million to $400.0 million and the additional seasonal capacity of the Receivables Facility increased
from $50.0 million to $100.0 million from October through March. All other terms and conditions remain largely unchanged.
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 28, 2018, there were no borrowings outstanding on the Receivables Facility. At September 29, 2017, the amount
of outstanding borrowings under the Receivables Facility was $254.2 million.
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes are guaranteed on a senior, unsecured basis by the Company and substantially all of the domestic subsidiaries of ASI. The
Future Maturities and Interest and Other Financing Costs, net
At September 28, 2018, annual maturities on long-term borrowings maturing in the next five fiscal years and thereafter
(excluding the $58.5 million reduction to long-term borrowings from debt issuance costs and the increase of $12.4 million from
the premium on the 2024 Notes) are as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
$
30,907
42,799
78,892
467,390
107,978
6,562,177
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 28, 2018
September 29, 2017
September 30, 2016
$
$
353,048
(9,238)
10,451
354,261
$
$
285,995
(5,942)
7,362
287,415
$
$
315,166
(5,288)
5,505
315,383
During the first quarter of 2019, the Company extended the maturity dates of the Revolving Credit Facility, Yen Term Loan due
2022, Canadian Term Loan due 2022, Canadian Term Loan due 2023 and Euro Term Loan due 2022 to October 1, 2023.
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 and how the hedging instrument's effectiveness in offsetting the hedged risk will be assessed prospectively
and retrospectively. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly effective in offsetting cash flows of hedged items.
Cash Flow Hedges
The Company has approximately $2.6 billion notional amount of outstanding interest rate swap agreements as of September 28,
2018, which fixes the rate on a like amount of variable rate borrowings through the first quarter of fiscal 2023. During fiscal
2018, the Company entered into approximately $1.6 billion notional amount of 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 notional amounts
of $600.0 million matured during fiscal 2018. As a result of the Credit Agreement entered into in fiscal 2017, 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.
S-25
S-26
S-26
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to
interest expense as interest payments are made on the Company’s variable-rate debt. As of September 28, 2018 and
September 29, 2017, approximately $36.2 million and ($6.8) million of unrealized net of tax gains (losses) related to the interest
rate swaps were included in "Accumulated other comprehensive loss," respectively.
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 on Other
comprehensive income (loss) (in thousands):
Interest rate swap agreements
Cross currency swap agreements
September 28, 2018
55,445
$
—
55,445
$
Fiscal Year Ended
September 29, 2017
31,884
$
—
31,884
$
September 30, 2016
(21,321)
$
(2,116)
(23,437)
$
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 28, 2018, the Company has contracts for approximately 15.4 million gallons outstanding through fiscal 2019. The
Company does not record its gasoline and diesel fuel agreements as hedges for accounting purposes. The impact on earnings
related to the change in fair value of these unsettled contracts was not material in both fiscal 2018 and 2017 and was a gain of
approximately $8.1 million for fiscal 2016. 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 28, 2018, the Company had foreign currency forward exchange contracts outstanding with notional amounts
of €59.0 million, £4.5 million and CAD20.0 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.
The following table summarizes the location and fair value, using Level 2 inputs (see Note 15 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 28, 2018
September 29, 2017
ASSETS
Designated as hedging instruments:
Interest rate swap agreements
Interest rate swap agreements
Not designated as hedging instruments:
Foreign currency forward exchange contracts
Gasoline and diesel fuel agreements
Prepayments and other
current assets
Noncurrent Assets
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
$
$
$
$
$
1,459
$
54,708
209
$
3,623
59,999
$
— $
—
— $
—
—
80
3,626
3,706
1,196
9,313
10,509
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 28,
September 29,
September 30,
2018
2017
2016
Fiscal Year Ended
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
$
$
$
$
$
5,185
—
5,185
$
$
16,606
—
16,606
$
$
32,800
2,061
34,861
(7,360) $
(1,277) $
(685)
(67)
(7,427) $
(2,242) $
(886)
(2,163) $
14,443
$
(8,847)
(9,532)
25,329
The Company has an outstanding Japanese yen denominated term loan in the amount of ¥10,777.8 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 €129.1 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 28, 2018, the net of tax gain expected to be reclassified from "Accumulated other comprehensive loss" into
earnings over the next twelve months based on current market rates is approximately $8.3 million.
S-27
S-27
S-28
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to
interest expense as interest payments are made on the Company’s variable-rate debt. As of September 28, 2018 and
September 29, 2017, approximately $36.2 million and ($6.8) million of unrealized net of tax gains (losses) related to the interest
rate swaps were included in "Accumulated other comprehensive loss," respectively.
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 on Other
comprehensive income (loss) (in thousands):
Interest rate swap agreements
Cross currency swap agreements
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
$
$
55,445
—
55,445
$
$
31,884
—
31,884
$
$
(21,321)
(2,116)
(23,437)
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 28, 2018, the Company has contracts for approximately 15.4 million gallons outstanding through fiscal 2019. The
Company does not record its gasoline and diesel fuel agreements as hedges for accounting purposes. The impact on earnings
related to the change in fair value of these unsettled contracts was not material in both fiscal 2018 and 2017 and was a gain of
approximately $8.1 million for fiscal 2016. 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 28, 2018, the Company had foreign currency forward exchange contracts outstanding with notional amounts
of €59.0 million, £4.5 million and CAD20.0 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.
The following table summarizes the location and fair value, using Level 2 inputs (see Note 15 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 28, 2018
September 29, 2017
ASSETS
Designated as hedging instruments:
Interest rate swap agreements
Interest rate swap agreements
Not designated as hedging instruments:
Foreign currency forward exchange contracts
Gasoline and diesel fuel agreements
Prepayments and other
current assets
Noncurrent Assets
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
$
$
$
$
$
$
1,459
54,708
209
$
3,623
59,999
$
— $
—
— $
—
—
80
3,626
3,706
1,196
9,313
10,509
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 28,
2018
September 29,
2017
September 30,
2016
Fiscal Year Ended
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
$
$
$
$
$
5,185
—
5,185
$
$
16,606
—
16,606
$
$
32,800
2,061
34,861
(7,360) $
(1,277) $
(685)
(67)
(7,427) $
(2,242) $
(886)
(2,163) $
$
14,443
(8,847)
(9,532)
25,329
The Company has an outstanding Japanese yen denominated term loan in the amount of ¥10,777.8 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 €129.1 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 28, 2018, the net of tax gain expected to be reclassified from "Accumulated other comprehensive loss" into
earnings over the next twelve months based on current market rates is approximately $8.3 million.
S-27
S-28
S-28
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. EMPLOYEE PENSION AND PROFIT SHARING PLANS:
The following table sets forth changes in the projected benefit obligation and the fair value of plan assets for these plans (in
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 2018,
fiscal 2017 and fiscal 2016 was $22.5 million, $27.5 million and $32.4 million, respectively. The Company also maintains
similar contributory and non-contributory defined contribution retirement plans at several of its international operations,
primarily in Canada and the United Kingdom. The total expense of these international plans for fiscal 2018, fiscal 2017 and
fiscal 2016 was $8.6 million, $6.9 million and $9.4 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 2018, fiscal 2017 and fiscal 2016 (in thousands):
Service cost
Interest cost
Expected return on plan assets
Settlements and curtailments
Amortization of prior service cost
Recognized net loss
Net periodic pension cost (income)
September 28, 2018
September 29, 2017
September 30, 2016
Fiscal Year Ended
$
$
$
7,121
10,579
(22,864)
3,312
116
1,646
(90) $
8,834
8,398
(18,350)
—
122
3,400
2,404
$
$
7,850
11,041
(17,679)
159
107
1,504
2,982
S-29
S-29
thousands):
September 28, 2018
September 29, 2017
$
333,672
$
Change in benefit obligation:
Benefit obligation, beginning
Impact of AmeriPride acquisition
Foreign currency translation
Service cost
Interest cost
Employee contributions
Actuarial loss (gain)
Benefits paid
Settlements and curtailments(1)
Change in control payment
Benefit obligation, ending
Change in plan assets:
Fair value of plan assets, beginning
Impact of AmeriPride acquisition
Foreign currency translation
Employer contributions
Employee contributions
Actual return on plan assets
Benefits paid
Settlements(1)
Change in control payment
Fair value of plan assets, end
Funded Status at end of year
$
$
366,426
$
333,672
341,538
$
319,985
79,605
(11,312)
7,121
10,579
2,571
(10,869)
(16,862)
(22,662)
(5,417)
73,273
(12,359)
13,988
2,571
23,971
(16,862)
(10,877)
(5,417)
409,826
339,313
—
13,883
8,834
8,398
2,261
(24,923)
(14,316)
222
—
—
14,564
4,285
2,261
14,759
(14,316)
—
—
341,538
7,866
2.8%
2.4%
6.1%
2.9%
2.4%
$
43,400
$
(1)
Fiscal 2018 includes the impact of the Canadian pension plan freeze and the UK pension plan settlement resulting from the transfer of
members out of the plan.
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 loss
before taxes)
59,481
$
(16,081)
48,067
23,056
(15,190)
77,717
September 28, 2018
September 29, 2017
The following weighted average assumptions were used to determine pension expense of the respective fiscal years:
September 28, 2018
September 29, 2017
The following weighted average assumptions were used to determine the funded status of the respective fiscal years:
September 28, 2018
September 29, 2017
Discount rate
Rate of compensation increase
Long-term rate of return on assets
Discount rate
Rate of compensation increase
S-30
3.2%
2.0%
5.8%
3.3%
2.1%
Aramark 2018 Form 10-K 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 2018,
fiscal 2017 and fiscal 2016 was $22.5 million, $27.5 million and $32.4 million, respectively. The Company also maintains
similar contributory and non-contributory defined contribution retirement plans at several of its international operations,
primarily in Canada and the United Kingdom. The total expense of these international plans for fiscal 2018, fiscal 2017 and
fiscal 2016 was $8.6 million, $6.9 million and $9.4 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 2018, fiscal 2017 and fiscal 2016 (in thousands):
Service cost
Interest cost
Expected return on plan assets
Settlements and curtailments
Amortization of prior service cost
Recognized net loss
Net periodic pension cost (income)
September 28, 2018
September 29, 2017
September 30, 2016
Fiscal Year Ended
$
$
7,121
$
10,579
(22,864)
3,312
116
1,646
(90) $
$
8,834
8,398
(18,350)
—
122
3,400
2,404
$
7,850
11,041
(17,679)
159
107
1,504
2,982
S-29
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets 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
Impact of AmeriPride acquisition
Foreign currency translation
Service cost
Interest cost
Employee contributions
Actuarial loss (gain)
Benefits paid
Settlements and curtailments(1)
Change in control payment
Benefit obligation, ending
Change in plan assets:
Fair value of plan assets, beginning
Impact of AmeriPride acquisition
Foreign currency translation
Employer contributions
Employee contributions
Actual return on plan assets
Benefits paid
Settlements(1)
Change in control payment
Fair value of plan assets, end
Funded Status at end of year
September 28, 2018
333,672
$
79,605
(11,312)
7,121
10,579
2,571
(10,869)
(16,862)
(22,662)
(5,417)
366,426
$
September 29, 2017
339,313
$
—
13,883
8,834
8,398
2,261
(24,923)
(14,316)
222
—
333,672
$
$
$
341,538
73,273
(12,359)
13,988
2,571
23,971
(16,862)
(10,877)
(5,417)
409,826
43,400
$
$
319,985
—
14,564
4,285
2,261
14,759
(14,316)
—
—
341,538
7,866
(1)
Fiscal 2018 includes the impact of the Canadian pension plan freeze and the UK pension plan settlement resulting from the transfer of
members out of the plan.
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 loss
before taxes)
$
59,481
(16,081)
48,067
23,056
(15,190)
77,717
September 28, 2018
September 29, 2017
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 28, 2018
September 29, 2017
3.2%
2.0%
5.8%
2.8%
2.4%
6.1%
The following weighted average assumptions were used to determine the funded status of the respective fiscal years:
Discount rate
Rate of compensation increase
September 28, 2018
September 29, 2017
3.3%
2.1%
2.9%
2.4%
S-30
S-30
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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 28, 2018 was $364.0 million. During fiscal 2018, settlement gains and
actuarial losses of approximately $3.9 million and $22.2 million, respectively, were recognized in other comprehensive income
(before taxes) and $1.6 million of amortization of actuarial losses was recognized as net periodic pension cost during such
period. The estimated portion of net actuarial loss included in accumulated other comprehensive income (loss) as of
September 28, 2018 expected to be recognized in net periodic pension cost during fiscal 2019 is approximately $1.5 million
(before taxes).
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 loss (before taxes) and $3.6 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 28, 2018 and September 29, 2017 (in thousands):
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets(1)
September 28, 2018
September 29, 2017
$
$
16,081
15,935
—
141,401
140,547
126,210
(1)
The change in the fair value of the plan assets relates to certain plans being in a funded status position.
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, 20-50% invested in debt securities and 0-10% in real estate investments and cash and cash
equivalents. Performance of the plans is monitored on a regular basis and adjustments of the asset allocations are made when
deemed necessary.
The weighted-average long-term rate of return on assets has been determined based on an estimated weighted-average of long-
term returns of major asset classes, taking into account historical performance of plan assets, the current interest rate
environment, plan demographics, acceptable risk levels and the estimated value of active asset management.
The fair value of plan assets for the Company's defined benefit pension plans as of September 28, 2018 and September 29, 2017
is as follows (see Note 16 for a description of the fair value levels) (in thousands):
Cash and cash equivalents and other
$
20,568
$
20,568
$
— $
September 28, 2018
Quoted prices in
active markets
Level 1
Significant other
observable inputs
Level 2
Significant
unobservable inputs
Level 3
11,689
11,689
—
Equity securities:
Investment trusts
Investment funds:
Equity funds
Fixed income funds
Real estate
Total
Investment funds:
Equity funds
Fixed income funds
Real estate
Total
409,826
$
32,257
$
367,124
$
September 29, 2017
Quoted prices in
active markets
Level 1
Significant other
observable inputs
Level 2
Significant
unobservable inputs
Level 3
Cash and cash equivalents and other
741
$
741
$
— $
220,853
146,271
10,445
202,253
128,155
10,389
$
$
$
—
—
—
—
—
—
220,853
146,271
—
202,253
128,155
—
341,538
$
741
$
330,408
$
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 34%) and
international companies (approximately 66%) that are diversified across industry, country and stock market capitalization.
Investments in fixed income securities consist of international 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.
During fiscal 2018, the Company amended certain Canadian pension plans to freeze benefit accruals. The plan will be closed to
new participants and current participants will no longer earn additional benefits.
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 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):
—
—
—
—
—
—
—
10,445
10,445
10,389
10,389
Fiscal 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024 – 2028
$
15,433
15,497
16,086
16,469
16,867
89,884
The estimated benefit payments above are based on assumptions about future events. Actual benefit payments may vary
significantly from these estimates.
$3.7 million.
The expected contributions to be paid to the Company's defined benefit pension plans during fiscal 2019 are approximately
S-31
S-31
S-32
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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 28, 2018 was $364.0 million. During fiscal 2018, settlement gains and
actuarial losses of approximately $3.9 million and $22.2 million, respectively, were recognized in other comprehensive income
(before taxes) and $1.6 million of amortization of actuarial losses was recognized as net periodic pension cost during such
period. The estimated portion of net actuarial loss included in accumulated other comprehensive income (loss) as of
September 28, 2018 expected to be recognized in net periodic pension cost during fiscal 2019 is approximately $1.5 million
(before taxes).
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 loss (before taxes) and $3.6 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 28, 2018 and September 29, 2017 (in thousands):
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets(1)
September 28, 2018
September 29, 2017
$
16,081
$
15,935
—
141,401
140,547
126,210
(1)
The change in the fair value of the plan assets relates to certain plans being in a funded status position.
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, 20-50% invested in debt securities and 0-10% in real estate investments and cash and cash
equivalents. Performance of the plans is monitored on a regular basis and adjustments of the asset allocations are made when
deemed necessary.
The weighted-average long-term rate of return on assets has been determined based on an estimated weighted-average of long-
term returns of major asset classes, taking into account historical performance of plan assets, the current interest rate
environment, plan demographics, acceptable risk levels and the estimated value of active asset management.
The fair value of plan assets for the Company's defined benefit pension plans as of September 28, 2018 and September 29, 2017
is as follows (see Note 16 for a description of the fair value levels) (in thousands):
Cash and cash equivalents and other
Equity securities:
Investment trusts
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 28, 2018
20,568
$
$
11,689
220,853
146,271
10,445
409,826
$
September 29, 2017
741
$
202,253
128,155
10,389
341,538
$
$
$
$
Quoted prices in
active markets
Level 1
Significant other
observable inputs
Level 2
Significant
unobservable inputs
Level 3
20,568
$
— $
11,689
—
—
—
32,257
$
—
220,853
146,271
—
367,124
$
—
—
—
—
10,445
10,445
Quoted prices in
active markets
Level 1
Significant other
observable inputs
Level 2
Significant
unobservable inputs
Level 3
741
$
— $
—
—
—
—
741
$
202,253
128,155
—
330,408
$
—
—
10,389
10,389
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 34%) and
international companies (approximately 66%) that are diversified across industry, country and stock market capitalization.
Investments in fixed income securities consist of international 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.
During fiscal 2018, the Company amended certain Canadian pension plans to freeze benefit accruals. The plan will be closed to
new participants and current participants will no longer earn additional benefits.
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 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 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024 – 2028
15,433
15,497
16,086
16,469
16,867
89,884
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 2019 are approximately
$3.7 million.
S-31
S-32
S-32
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Multiemployer Defined Benefit Pension Plans
The Company provided more than 5 percent of the total contributions for the following plans and plan years:
The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining
agreements ("CBA") that cover its union-represented employees. The risks of participating in these multiemployer plans are
different from single-employer plans in the following respects:
a. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of
other participating employers.
b.
c.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by
the remaining participating employers.
If the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to
pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The Company's participation in these plans for fiscal 2018 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 2018 and 2017 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 2018,
fiscal 2017 and fiscal 2016 contributions.
Pension
Fund
National Retirement Fund
EIN/
Pension
Plan
Number
13-6130178
/ 001
Pension Protection
Act Zone Status
2018
Critical
2017
FIP/RP Status
Pending/
Implemented
Contributions by the Company
(in thousands)
2018
2017
2016
Surcharge
Imposed
Critical
Implemented
$
4,147 $
7,541 $
6,675
UNITE HERE Retirement
Fund (1)
Local 1102 Retirement Trust (2) 13-1847329
82-0994119
/ 001
/ 001
Critical
N/A
Implemented
3,686
Endangered
Critical
Implemented
1,206
N/A
397
N/A
339
Central States SE and SW
Areas Pension Plan
36-6044243
/ 001
Critical and
Declining
Critical and
Declining
Implemented
4,128
3,836
3,723
Range of
Expiration
Dates of
CBAs
5/4/2018 -
9/30/2021
8/31/2015 -
8/13/2021
6/30/2019 -
10/31/2020
1/31/2007 -
1/31/2023
1/31/2023
No
No
No
No
No
23-2627428
/ 001
36-6513567
/ 001
52-6148540
/ 001
Critical
Critical
Implemented
Green
Green
N/A
Critical
Critical
Implemented
37-6155648
/ 001
Critical and
Declining
Critical and
Declining
Implemented
319
907
501
37
336
216
898
813
No
4/26/2019
429
82
404
83
No
No
4/14/2019 -
12/31/2019
N/A
Pension Plan for Hospital &
Health Care Employees
Philadelphia & Vicinity
Local 731 Private Scavengers
and Garage Attendants
Pension Trust Fund (3)
SEIU National Industry
Pension Fund (4)
Local 171 Pension Plan (5)
Other funds
Total contributions
17,692
15,170
14,415
$
32,623 $
28,689 $
26,668
(1)
Effective January 1, 2018, the UNITE HERE portion of the National Retirement Fund was spun off into the newly formed UNITE HERE Retirement Fund.
(2) Over 90% of the Company's participants in this fund are covered by a single CBA that expires on 6/30/2019.
(3)
Effective October 1, 2017, the Local 731 Textile Maintenance and Laundry Craft Pension Plan merged into the Local 731 Private Scavengers and Garage Attendants
Pension Trust Fund.
(4) Over 75% of the Company's participants in this fund are covered by a single CBA that expires on 12/31/2019.
(5) During fiscal 2018, the Company negotiated with a union to discontinue its participation in the fund.
S-33
S-33
S-34
Pension
Fund
Local 1102 Retirement Trust
Contributions to the plan
exceeded more than 5%
of total contributions (as
of the plan's year-end)
12/31/2017 and 12/31/2016
At the date the Company's financial statements were issued, Forms 5500 were not available for the plan years ending in 2018.
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.
The components of income before income taxes by source of income are as follows (in thousands):
The (benefit) provision for income taxes consists of (in thousands):
United States
Non-U.S.
Current:
Federal
State and local
Non-U.S.
Deferred:
Federal
State and local
Non-U.S.
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
326,277
145,599
471,876
$
$
362,783
157,859
520,642
$
$
284,216
146,715
430,931
September 28, 2018
September 29, 2017
September 30, 2016
Fiscal Year Ended
(48,249) $
111,175
$
11,356
44,618
7,725
(113,475)
7,408
1,778
(104,289)
(96,564) $
15,455
57,681
184,311
(21,956)
3,165
(19,065)
(37,856)
39,510
15,750
35,023
90,283
47,323
(740)
5,833
52,416
146,455
$
142,699
$
$
$
$
Current taxes receivable of $7.5 million and $9.6 million at September 28, 2018 and September 29, 2017, respectively, are
included in "Prepayments and other current assets" in the Consolidated Balance Sheets. Current income taxes payable of $47.9
million and $30.7 million at September 28, 2018 and September 29, 2017, respectively, are included in "Accrued expenses and
other current liabilities" in the Consolidated Balance Sheets.
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Multiemployer Defined Benefit Pension Plans
The Company provided more than 5 percent of the total contributions for the following plans and plan years:
b.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by
At the date the Company's financial statements were issued, Forms 5500 were not available for the plan years ending in 2018.
Pension
Fund
Local 1102 Retirement Trust
Contributions to the plan
exceeded more than 5%
of total contributions (as
of the plan's year-end)
12/31/2017 and 12/31/2016
NOTE 8. INCOME TAXES:
The Company accounts for income taxes using the asset and liability method. Under this method, the provision for income
taxes represents income taxes payable or refundable for the current year plus the change in deferred taxes during the year.
Deferred taxes result from differences between the financial and tax bases in assets and liabilities and are adjusted for changes
in tax rates and enacted tax legislation. Valuation allowances are recorded to reduce deferred tax assets when it is more likely
than not that a tax benefit will not be realized.
The components of income before income taxes by source of income are as follows (in thousands):
United States
Non-U.S.
September 28, 2018
$
$
326,277
145,599
471,876
Fiscal Year Ended
September 29, 2017
362,783
157,859
520,642
$
$
$
$
September 30, 2016
284,216
146,715
430,931
The (benefit) 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 28, 2018
September 29, 2017
September 30, 2016
Fiscal Year Ended
$
$
(48,249) $
11,356
44,618
7,725
(113,475)
7,408
1,778
(104,289)
(96,564) $
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
Current taxes receivable of $7.5 million and $9.6 million at September 28, 2018 and September 29, 2017, respectively, are
included in "Prepayments and other current assets" in the Consolidated Balance Sheets. Current income taxes payable of $47.9
million and $30.7 million at September 28, 2018 and September 29, 2017, respectively, are included in "Accrued expenses and
other current liabilities" in the Consolidated Balance Sheets.
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.
the remaining participating employers.
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 2018 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 2018 and 2017 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 2018,
fiscal 2017 and fiscal 2016 contributions.
Pension
Fund
EIN/
Pension
Plan
Number
Pension Protection
Act Zone Status
Contributions by the Company
(in thousands)
2018
2017
2018
2017
2016
Surcharge
Imposed
FIP/RP Status
Pending/
Implemented
National Retirement Fund
13-6130178
Critical
Critical
Implemented
$
4,147 $
7,541 $
6,675
UNITE HERE Retirement
82-0994119
Critical
N/A
Implemented
3,686
Fund (1)
Local 1102 Retirement Trust (2) 13-1847329
Endangered
Critical
Implemented
1,206
N/A
397
N/A
339
Central States SE and SW
Areas Pension Plan
36-6044243
/ 001
Critical and
Declining
Critical and
Declining
Implemented
4,128
3,836
3,723
Pension Plan for Hospital &
23-2627428
Critical
Critical
Implemented
336
216
Local 731 Private Scavengers
36-6513567
Green
Green
N/A
898
813
No
4/26/2019
Range of
Expiration
Dates of
CBAs
5/4/2018 -
9/30/2021
8/31/2015 -
8/13/2021
6/30/2019 -
10/31/2020
1/31/2007 -
1/31/2023
1/31/2023
No
No
No
No
No
No
No
/ 001
/ 001
/ 001
/ 001
/ 001
/ 001
Health Care Employees
Philadelphia & Vicinity
and Garage Attendants
Pension Trust Fund (3)
SEIU National Industry
Pension Fund (4)
Local 171 Pension Plan (5)
Other funds
Total contributions
52-6148540
Critical
Critical
Implemented
37-6155648
/ 001
Critical and
Declining
Critical and
Declining
Implemented
429
82
404
83
4/14/2019 -
12/31/2019
N/A
17,692
15,170
14,415
$
32,623 $
28,689 $
26,668
319
907
501
37
(1)
Effective January 1, 2018, the UNITE HERE portion of the National Retirement Fund was spun off into the newly formed UNITE HERE Retirement Fund.
(2) Over 90% of the Company's participants in this fund are covered by a single CBA that expires on 6/30/2019.
(3)
Effective October 1, 2017, the Local 731 Textile Maintenance and Laundry Craft Pension Plan merged into the Local 731 Private Scavengers and Garage Attendants
Pension Trust Fund.
(4) Over 75% of the Company's participants in this fund are covered by a single CBA that expires on 12/31/2019.
(5) During fiscal 2018, the Company negotiated with a union to discontinue its participation in the fund.
S-33
S-34
S-34
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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):
As of September 28, 2018 and September 29, 2017, the components of deferred taxes are as follows (in thousands):
United States statutory income tax rate
Increase (decrease) in taxes, resulting from:
State income taxes, net of Federal tax benefit
Foreign taxes
Permanent book/tax differences
Uncertain tax positions
U.S. Tax Reform - Remeasurement of deferred taxes
U.S. Tax Reform - Foreign tax credit valuation
allowance
Tax credits & other
Effective income tax rate
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
24.5 %
35.0%
35.0%
3.2
3.3
(1.2)
(0.3)
(49.3)
2.8
(3.5)
(20.5)%
2.3
(4.3)
(3.8)
1.4
—
—
(2.5)
28.1%
2.3
(1.4)
0.3
0.1
—
—
(3.2)
33.1%
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 28, 2018, certain subsidiaries have recorded deferred tax assets of $26.3 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 and foreign net operating loss ("NOL") carryforwards will not be realized. As a result, the Company has recorded a
valuation allowance of approximately $14.6 million on the deferred tax asset related to these state and foreign NOL
carryforwards. The impact of the change in valuation allowances for state and foreign NOLs is presented in the State income
taxes, net of Federal tax benefit and Foreign taxes lines, respectively, of the effective income tax rate reconciliation.
As of September 28, 2018, the Company has approximately $32.3 million of foreign tax credit ("FTC") carryforwards, which
expire in 2027, and approximately $1.3 million of interest restriction carryforwards. The Company believes it is more likely
than not that the full benefit of these FTC carryforwards and interest restriction carryforwards will not be realized. As a result,
the Company has recorded valuation allowances of approximately $13.1 million and approximately $1.3 million on the deferred
tax assets related to these FTC carryforwards and interest restriction carryforwards, respectively. The change in the valuation
allowance for the FTC carryforwards is the result of the “Tax Cuts and Jobs Act” discussed below.
Deferred tax liabilities:
Property and equipment
Investments
Inventory
Derivatives
Other
Other intangible assets, including goodwill
Gross deferred tax liability
Deferred tax assets:
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
Rollfoward of the valuation allowance is as follows:
Balance, beginning of year
Additions(1)
Subtractions(2)
Balance, end of year
September 28, 2018
September 29, 2017
$
126,345
$
12,213
474,263
63,835
21,599
17,450
715,705
40,240
136,603
19,338
60,576
256,757
(29,023)
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
(7,352)
(4,161)
—
(11,513)
$
487,971
$
September 28, 2018
September 29, 2017
$
$
(11,513) $
(21,101)
3,591
(29,023) $
(1) Mainly driven by the Tax Cuts and Jobs Act impacting the ability to utilize FTC carryforwards going forward, as well as the inability to use foreign NOL
carryforwards.
(2) Planning resulted in taxable income in separate Company states that had historical losses.
Deferred tax liabilities of approximately $503.4 million and $570.9 million as of September 28, 2018 and September 29, 2017,
respectively, are included in "Deferred Income Taxes and Other Noncurrent Liabilities" in the Consolidated Balance Sheets.
Deferred tax assets of approximately $15.5 million and $17.6 million as of September 28, 2018 and September 29, 2017,
respectively, are included in "Other Assets" in the Consolidated Balance Sheets.
The Company has approximately $29.1 million of total gross unrecognized tax benefits as of September 28, 2018, 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 28, 2018
September 29, 2017
$
$
30,812
$
709
1,505
(2,368)
(1,569)
29,089
$
22,752
9,323
4,028
(3,972)
(1,319)
30,812
The Company has approximately $4.9 million and $5.0 million accrued for interest and penalties as of September 28, 2018 and
September 29, 2017, respectively, and recorded an immaterial amount and approximately ($1.0) million in interest and penalties
during fiscal 2018 and fiscal 2017, respectively. Interest and penalties related to unrecognized tax benefits are recorded in
"(Benefit) Provision for income taxes" in the Consolidated Statements of Income.
S-35
S-35
S-36
Aramark 2018 Form 10-K
United States statutory income tax rate
Increase (decrease) in taxes, resulting from:
State income taxes, net of Federal tax benefit
Foreign taxes
Permanent book/tax differences
Uncertain tax positions
U.S. Tax Reform - Remeasurement of deferred taxes
U.S. Tax Reform - Foreign tax credit valuation
allowance
Tax credits & other
Effective income tax rate
September 28, 2018
September 29, 2017
September 30, 2016
24.5 %
35.0%
35.0%
3.2
3.3
(1.2)
(0.3)
(49.3)
2.8
(3.5)
(20.5)%
2.3
(4.3)
(3.8)
1.4
—
—
(2.5)
28.1%
2.3
(1.4)
0.3
0.1
—
—
(3.2)
33.1%
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
uncertain tax positions are recognized as part of the income tax provision.
As of September 28, 2018, certain subsidiaries have recorded deferred tax assets of $26.3 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 and foreign net operating loss ("NOL") carryforwards will not be realized. As a result, the Company has recorded a
valuation allowance of approximately $14.6 million on the deferred tax asset related to these state and foreign NOL
carryforwards. The impact of the change in valuation allowances for state and foreign NOLs is presented in the State income
taxes, net of Federal tax benefit and Foreign taxes lines, respectively, of the effective income tax rate reconciliation.
As of September 28, 2018, the Company has approximately $32.3 million of foreign tax credit ("FTC") carryforwards, which
expire in 2027, and approximately $1.3 million of interest restriction carryforwards. The Company believes it is more likely
than not that the full benefit of these FTC carryforwards and interest restriction carryforwards will not be realized. As a result,
the Company has recorded valuation allowances of approximately $13.1 million and approximately $1.3 million on the deferred
tax assets related to these FTC carryforwards and interest restriction carryforwards, respectively. The change in the valuation
allowance for the FTC carryforwards is the result of the “Tax Cuts and Jobs Act” discussed below.
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision for income taxes varies from the amount determined by applying the United States Federal statutory rate to
As of September 28, 2018 and September 29, 2017, the components of deferred taxes are as follows (in thousands):
pretax income as a result of the following (all percentages are as a percentage of income before income taxes):
Fiscal Year Ended
Deferred tax liabilities:
Property and equipment
Investments
Other intangible assets, including goodwill
Inventory
Derivatives
Other
Gross deferred tax liability
Deferred tax assets:
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
limitation, developments in tax law and ongoing discussions with tax authorities. Accrued interest and penalties associated with
Rollfoward of the valuation allowance is as follows:
Balance, beginning of year
Additions(1)
Subtractions(2)
Balance, end of year
September 28, 2018
September 29, 2017
$
$
126,345
12,213
474,263
63,835
21,599
17,450
715,705
40,240
136,603
19,338
60,576
256,757
(29,023)
487,971
$
$
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
September 28, 2018
September 29, 2017
$
$
(11,513) $
(21,101)
3,591
(29,023) $
(7,352)
(4,161)
—
(11,513)
(1) Mainly driven by the Tax Cuts and Jobs Act impacting the ability to utilize FTC carryforwards going forward, as well as the inability to use foreign NOL
carryforwards.
(2) Planning resulted in taxable income in separate Company states that had historical losses.
Deferred tax liabilities of approximately $503.4 million and $570.9 million as of September 28, 2018 and September 29, 2017,
respectively, are included in "Deferred Income Taxes and Other Noncurrent Liabilities" in the Consolidated Balance Sheets.
Deferred tax assets of approximately $15.5 million and $17.6 million as of September 28, 2018 and September 29, 2017,
respectively, are included in "Other Assets" in the Consolidated Balance Sheets.
The Company has approximately $29.1 million of total gross unrecognized tax benefits as of September 28, 2018, 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 28, 2018
30,812
$
709
1,505
(2,368)
(1,569)
29,089
$
September 29, 2017
22,752
$
9,323
4,028
(3,972)
(1,319)
30,812
$
The Company has approximately $4.9 million and $5.0 million accrued for interest and penalties as of September 28, 2018 and
September 29, 2017, respectively, and recorded an immaterial amount and approximately ($1.0) million in interest and penalties
during fiscal 2018 and fiscal 2017, respectively. Interest and penalties related to unrecognized tax benefits are recorded in
"(Benefit) Provision for income taxes" in the Consolidated Statements of Income.
S-35
S-36
S-36
Aramark 2018 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unrecognized tax benefits are not expected to significantly change within the next 12 months.
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 2014. 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 2014. However, an unfavorable settlement of a particular issue would require use of the Company's cash.
On December 22, 2017, “H.R.1,” commonly referred to as the “Tax Cuts and Jobs Act” (the “Tax Legislation”) was signed into
U.S. law. The Tax Legislation, which was effective on January 1, 2018, significantly revises the U.S. tax code by, among other
things, lowering the corporate income tax rate from 35.0% to 21.0% and implementing new international tax provisions that
includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. Though certain key aspects of the new
law are effective January 1, 2018 and have an immediate accounting impact, other significant provisions are not effective or
may not result in accounting implications for the Company until after the fiscal year ended September 28, 2018.
The legislation requires the Company to use a blended rate for its fiscal 2018 tax year by applying a prorated percentage of days
before and after the January 1, 2018 effective date. As a result, the Company's 2018 annual statutory rate has been reduced to
24.5%.
During fiscal 2018, the Company made reasonable estimates related to certain impacts of the Tax Legislation and, in
accordance with the Securities and Exchange Commission (“SEC”) Staff Accountant Bulletin No. 118, Income Tax Accounting
Implications of the Tax Cut and Jobs Act (“SAB 118”), recorded a provisional estimate during the measurement period, when it
does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the
change in tax law.
As a result of the enactment of the Tax Legislation, the Company was required to recognize the effect of the corporate income
tax rate change on its deferred tax assets and liabilities in fiscal 2018, the period in which the legislation was enacted. The
Company recorded a tax benefit from the corporate income tax rate change and certain other adjustments, which resulted in a
noncash benefit to the (benefit) provision for income taxes of approximately $237.8 million, which was recorded to the
Consolidated Statements of Income for the fiscal year ended September 28, 2018. A corresponding reduction to the Company's
deferred income tax liability was also recorded to the Consolidated Balance Sheets during the fiscal year ended September 28,
2018.
The Tax Legislation also requires the Company to calculate a one-time transition tax on unremitted earnings of certain non-U.S.
subsidiaries. Based on a provisional estimate, the Company believes there is no transition tax due, net of foreign tax credits. As
a result of the Tax Legislation, the Company re-assessed the ability to recover its $27.2 million of FTC carryforwards. Based on
currently available information, the Company believes it will not generate sufficient foreign source income in the carryforward
period to utilize a portion of these credits. As a result, the Company recorded a valuation allowance of $13.1 million against its
foreign tax credit carryforward during the fiscal year ending September 28, 2018 as a provisional estimate.
The Tax Legislation contains additional international provisions which may impact the Company prospectively, including the
tax on “Global Intangible Low-Taxed Income” (“GILTI”). The Company is currently unable to provide a reasonable provisional
estimate as to whether additional deferred tax assets and liabilities should be recognized for basis differences expected to
reverse as GILTI in future years, pending clarification of interpretive issues and the availability of the necessary information to
develop a reasonable estimate. Accordingly, the Company has yet to determine whether GILTI tax should be recorded as a
period expense or measured as a deferred tax asset or liability.
As the result of the new rules, which include a shift from a worldwide system of taxation to a participation exemption system,
the Company generally will not incur additional U.S. tax liability on the distribution of unremitted foreign earnings. However,
other items continue to trigger additional tax expense for which no deferred tax liability has been recorded, including Section
986(c) currency gain/loss, foreign withholding taxes and state taxes. As a result, the Company has performed a preliminary
assessment of its indefinite reinvestment position, pending further analysis and expected guidance around newly enacted
legislation of U.S. taxation of foreign multinational companies, including the transition tax, GILTI and the potential tax
liabilities attributable to repatriation under the Tax Legislation. Accordingly, the provisional estimate of undistributed earnings
of certain foreign subsidiaries for which no deferred tax liability was recorded amounted to approximately $86.3 million as of
September 28, 2018. The provisional estimate of foreign withholding tax cost associated with remitting these earnings is
approximately $5.1 million. Such amount has not been accrued by the Company as it believes those foreign earnings are
permanently reinvested.
The provisional amounts are based on information available at this time and subject to change due to several factors, including
but not limited to, management’s further assessment of the Tax Legislation and related regulatory guidance and guidance that
may be issued and actions the Company may take as a result of the Tax Legislation.
The Tax Legislation also contains limitations on the deductibility of interest expense and certain executive compensation that
are not expected to impact the Company until fiscal years ending after September 28, 2018. The Company continues to evaluate
their impact on the financial statements.
The Company will finalize the accounting for tax effects of the enactment of the Tax Legislation during the measurement
period, will reflect adjustments to the provisional amounts recorded and will record additional tax effects in the periods such
adjustments are identified.
NOTE 9. STOCKHOLDERS' EQUITY:
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 through February 1, 2019. During the first quarter of fiscal 2018, the Company completed a
repurchase of approximately 0.6 million shares of its common stock for $24.4 million. During the second quarter of fiscal 2017,
the Company completed a repurchase of approximately 2.8 million shares of its common stock for $100.0 million.
The following table presents the Company's dividend payments to its stockholders (in millions):
Dividend payments
$
103.1
$
100.8
$
92.1
September 28, 2018
September 29, 2017
September 30, 2016
On November 7, 2018, a $0.11 dividend per share of common stock was declared, payable on December 6, 2018, to
shareholders of record on the close of business on November 26, 2018.
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
RSUs
PSUs (1)
Deferred Stock and Other Units
Taxes related to share-based compensation
Cash Received from Option Exercises
Tax Benefit on Share Deliveries (2)
September 28, 2018
September 29, 2017
September 30, 2016
Fiscal Year Ended
$
$
$
$
$
$
18.5
24.1
43.7
2.0
88.3
24.1
21.5
7.4
$
$
$
20.4
20.8
21.6
2.4
65.2
24.2
28.8
23.3
18.8
21.4
13.9
2.8
56.9
22.3
35.7
32.0
(1) During the third quarter of fiscal 2018, the Company increased the expected adjusted earnings per share target attainment percentage for both the
fiscal 2016 and fiscal 2017 PSU grants, resulting in additional share-based compensation expense. The target for the 2016 PSU grants was achieved as
(2) The tax benefit on option exercises and restricted stock unit deliveries is included in "Accrued Expenses" in the Consolidated Statements of Cash
of the end of fiscal 2018.
Flows.
S-37
S-37
S-38
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unrecognized tax benefits are not expected to significantly change within the next 12 months.
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 2014. 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 2014. However, an unfavorable settlement of a particular issue would require use of the Company's cash.
On December 22, 2017, “H.R.1,” commonly referred to as the “Tax Cuts and Jobs Act” (the “Tax Legislation”) was signed into
U.S. law. The Tax Legislation, which was effective on January 1, 2018, significantly revises the U.S. tax code by, among other
things, lowering the corporate income tax rate from 35.0% to 21.0% and implementing new international tax provisions that
includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. Though certain key aspects of the new
law are effective January 1, 2018 and have an immediate accounting impact, other significant provisions are not effective or
may not result in accounting implications for the Company until after the fiscal year ended September 28, 2018.
The legislation requires the Company to use a blended rate for its fiscal 2018 tax year by applying a prorated percentage of days
before and after the January 1, 2018 effective date. As a result, the Company's 2018 annual statutory rate has been reduced to
24.5%.
2018.
During fiscal 2018, the Company made reasonable estimates related to certain impacts of the Tax Legislation and, in
accordance with the Securities and Exchange Commission (“SEC”) Staff Accountant Bulletin No. 118, Income Tax Accounting
Implications of the Tax Cut and Jobs Act (“SAB 118”), recorded a provisional estimate during the measurement period, when it
does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the
change in tax law.
As a result of the enactment of the Tax Legislation, the Company was required to recognize the effect of the corporate income
tax rate change on its deferred tax assets and liabilities in fiscal 2018, the period in which the legislation was enacted. The
Company recorded a tax benefit from the corporate income tax rate change and certain other adjustments, which resulted in a
noncash benefit to the (benefit) provision for income taxes of approximately $237.8 million, which was recorded to the
Consolidated Statements of Income for the fiscal year ended September 28, 2018. A corresponding reduction to the Company's
deferred income tax liability was also recorded to the Consolidated Balance Sheets during the fiscal year ended September 28,
The Tax Legislation also requires the Company to calculate a one-time transition tax on unremitted earnings of certain non-U.S.
subsidiaries. Based on a provisional estimate, the Company believes there is no transition tax due, net of foreign tax credits. As
a result of the Tax Legislation, the Company re-assessed the ability to recover its $27.2 million of FTC carryforwards. Based on
currently available information, the Company believes it will not generate sufficient foreign source income in the carryforward
period to utilize a portion of these credits. As a result, the Company recorded a valuation allowance of $13.1 million against its
foreign tax credit carryforward during the fiscal year ending September 28, 2018 as a provisional estimate.
The Tax Legislation contains additional international provisions which may impact the Company prospectively, including the
tax on “Global Intangible Low-Taxed Income” (“GILTI”). The Company is currently unable to provide a reasonable provisional
estimate as to whether additional deferred tax assets and liabilities should be recognized for basis differences expected to
reverse as GILTI in future years, pending clarification of interpretive issues and the availability of the necessary information to
develop a reasonable estimate. Accordingly, the Company has yet to determine whether GILTI tax should be recorded as a
period expense or measured as a deferred tax asset or liability.
As the result of the new rules, which include a shift from a worldwide system of taxation to a participation exemption system,
the Company generally will not incur additional U.S. tax liability on the distribution of unremitted foreign earnings. However,
other items continue to trigger additional tax expense for which no deferred tax liability has been recorded, including Section
986(c) currency gain/loss, foreign withholding taxes and state taxes. As a result, the Company has performed a preliminary
assessment of its indefinite reinvestment position, pending further analysis and expected guidance around newly enacted
legislation of U.S. taxation of foreign multinational companies, including the transition tax, GILTI and the potential tax
liabilities attributable to repatriation under the Tax Legislation. Accordingly, the provisional estimate of undistributed earnings
of certain foreign subsidiaries for which no deferred tax liability was recorded amounted to approximately $86.3 million as of
September 28, 2018. The provisional estimate of foreign withholding tax cost associated with remitting these earnings is
approximately $5.1 million. Such amount has not been accrued by the Company as it believes those foreign earnings are
permanently reinvested.
The provisional amounts are based on information available at this time and subject to change due to several factors, including
but not limited to, management’s further assessment of the Tax Legislation and related regulatory guidance and guidance that
may be issued and actions the Company may take as a result of the Tax Legislation.
The Tax Legislation also contains limitations on the deductibility of interest expense and certain executive compensation that
are not expected to impact the Company until fiscal years ending after September 28, 2018. The Company continues to evaluate
their impact on the financial statements.
The Company will finalize the accounting for tax effects of the enactment of the Tax Legislation during the measurement
period, will reflect adjustments to the provisional amounts recorded and will record additional tax effects in the periods such
adjustments are identified.
NOTE 9. STOCKHOLDERS' EQUITY:
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 through February 1, 2019. During the first quarter of fiscal 2018, the Company completed a
repurchase of approximately 0.6 million shares of its common stock for $24.4 million. During the second quarter of fiscal 2017,
the Company completed a repurchase of approximately 2.8 million shares of its common stock for $100.0 million.
The following table presents the Company's dividend payments to its stockholders (in millions):
Dividend payments
$
103.1
September 28, 2018
September 29, 2017
100.8
$
September 30, 2016
92.1
$
On November 7, 2018, a $0.11 dividend per share of common stock was declared, payable on December 6, 2018, to
shareholders of record on the close of business on November 26, 2018.
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
RSUs
PSUs (1)
Deferred Stock and Other Units
Taxes related to share-based compensation
Cash Received from Option Exercises
Tax Benefit on Share Deliveries (2)
September 28, 2018
$
$
$
$
$
$
18.5
24.1
43.7
2.0
88.3
24.1
21.5
7.4
Fiscal Year Ended
September 29, 2017
20.4
20.8
21.6
2.4
65.2
24.2
28.8
23.3
$
$
$
September 30, 2016
18.8
21.4
13.9
2.8
56.9
22.3
35.7
32.0
(1) During the third quarter of fiscal 2018, the Company increased the expected adjusted earnings per share target attainment percentage for both the
fiscal 2016 and fiscal 2017 PSU grants, resulting in additional share-based compensation expense. The target for the 2016 PSU grants was achieved as
of the end of fiscal 2018.
(2) The tax benefit on option exercises and restricted stock unit deliveries is included in "Accrued Expenses" in the Consolidated Statements of Cash
Flows.
S-37
S-38
S-38
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
No compensation expense was capitalized. Prior to the fourth quarter of fiscal 2018, the Company has applied a forfeiture
assumption of 8.7% per annum in the calculation of such expenses. This rate was reduced to approximately 6.4% per annum in
the fourth quarter of fiscal 2018 based on actual forfeiture activity.
The below table summarizes the unrecognized compensation expense as of September 28, 2018 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)
$
$
22.6
56.6
24.1
103.3
Weighted-Average
Period (Years)
2.14
2.47
1.49
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 method providing a reasonable estimate in comparison to actual experience. 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 28, 2018
20%
1.03% - 1.11%
6.25
2.25% - 2.94%
$8.75
Fiscal Year Ended
September 29, 2017
25%
1.11% - 1.21%
6.25
2.14% - 2.20%
$8.47
September 30, 2016
30%
1.15% - 1.25%
6.25
1.50% - 2.04%
$9.21
Options
Outstanding at September 29, 2017
Granted
Exercised
Forfeited and expired
Outstanding at September 28, 2018
Exercisable at September 28, 2018
Expected to vest at September 28, 2018
Shares
(000s)
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value ($000s)
Weighted-
Average
Remaining
Term (Years)
13,074
1,914
$
$
(1,111) $
(575) $
13,302
8,469
4,498
$
$
$
24.39
40.67
21.00
34.37
26.60
21.36
35.64
$
$
$
218,450
183,456
33,177
6.2
5.0
8.1
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total intrinsic value exercised (in millions)
$
Total fair value that vested (in millions)
$
16.6
17.3
$
32.2
17.7
49.9
17.5
September 28, 2018
September 29, 2017
September 30, 2016
Fiscal Year Ended
The Company no longer grants PBOs under the 2013 Stock Plan. All PBOs remain exercisable for ten years from the date of
Performance-Based Options
grant.
A summary of PBO activity is presented below:
Outstanding at September 29, 2017
Options
Granted
Exercised
Forfeited and expired
Outstanding at September 28, 2018
Exercisable at September 28, 2018
Shares
(000s)
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Weighted-
Average
Remaining
Value ($000s)
Term (Years)
2,182
$
— $
(302) $
(5) $
1,875
1,875
$
$
12.28
—
11.21
10.90
12.46
12.46
$
$
57,317
57,317
3.0
3.0
The total intrinsic value of PBOs exercised during fiscal 2018, fiscal 2017 and fiscal 2016 was $7.4 million, $26.6 million and
$39.2 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 29, 2017
Granted
Vested
Forfeited
Outstanding at September 28, 2018
Units
(000s)
Weighted Average
Grant Date Fair
Value
1,935
1,369
(586)
(310)
2,408
$
$
$
$
$
31.44
40.34
31.73
37.01
36.66
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. 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, which vested at the end of fiscal 2018. 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. During fiscal 2018, the Company granted PSUs subject to the level of achievement
of adjusted earnings per share and return on invested capital for the cumulative three year performance period 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.
S-39
S-39
S-40
Aramark 2018 Form 10-K No compensation expense was capitalized. Prior to the fourth quarter of fiscal 2018, the Company has applied a forfeiture
assumption of 8.7% per annum in the calculation of such expenses. This rate was reduced to approximately 6.4% per annum in
the fourth quarter of fiscal 2018 based on actual forfeiture activity.
The below table summarizes the unrecognized compensation expense as of September 28, 2018 related to nonvested awards
and the weighted-average period they are expected to be recognized:
Unrecognized
Compensation Expense
(in millions)
Weighted-Average
Period (Years)
$
$
22.6
56.6
24.1
103.3
2.14
2.47
1.49
TBOs
RSUs
PSUs
Total
Stock Options
Time-Based Options
from the date of grant.
TBOs vest solely based upon continued employment over a four year time period. All TBOs remain exercisable for ten years
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 method providing a reasonable estimate in comparison to actual experience. 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 28, 2018
September 29, 2017
September 30, 2016
Fiscal Year Ended
1.03% - 1.11%
1.11% - 1.21%
1.15% - 1.25%
2.25% - 2.94%
2.14% - 2.20%
1.50% - 2.04%
25%
6.25
$8.47
30%
6.25
$9.21
20%
6.25
$8.75
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Weighted-
Average
Remaining
Value ($000s)
Term (Years)
Outstanding at September 29, 2017
Options
Granted
Exercised
Forfeited and expired
Outstanding at September 28, 2018
Exercisable at September 28, 2018
Expected to vest at September 28, 2018
Shares
(000s)
13,074
1,914
$
$
$
$
$
(1,111) $
(575) $
13,302
8,469
4,498
24.39
40.67
21.00
34.37
26.60
21.36
35.64
$
$
$
218,450
183,456
33,177
6.2
5.0
8.1
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total intrinsic value exercised (in millions)
Total fair value that vested (in millions)
Performance-Based Options
Fiscal Year Ended
$
September 28, 2018
16.6
17.3
September 29, 2017
32.2
$
17.7
September 30, 2016
49.9
$
17.5
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 29, 2017
Granted
Exercised
Forfeited and expired
Outstanding at September 28, 2018
Exercisable at September 28, 2018
Shares
(000s)
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value ($000s)
Weighted-
Average
Remaining
Term (Years)
2,182
$
— $
(302) $
(5) $
$
$
1,875
1,875
12.28
—
11.21
10.90
12.46
12.46
$
$
57,317
57,317
3.0
3.0
The total intrinsic value of PBOs exercised during fiscal 2018, fiscal 2017 and fiscal 2016 was $7.4 million, $26.6 million and
$39.2 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 29, 2017
Granted
Vested
Forfeited
Outstanding at September 28, 2018
Units
(000s)
Weighted Average
Grant Date Fair
Value
1,935
1,369
(586)
(310)
2,408
$
$
$
$
$
31.44
40.34
31.73
37.01
36.66
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. 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, which vested at the end of fiscal 2018. 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. During fiscal 2018, the Company granted PSUs subject to the level of achievement
of adjusted earnings per share and return on invested capital for the cumulative three year performance period 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.
S-39
S-40
S-40
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
approximately $84.3 million at September 28, 2018 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 28, 2018.
Rental expense for all operating leases was $187.5 million, $170.0 million and $180.7 million for fiscal 2018, fiscal 2017 and
fiscal 2016, 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 28, 2018 (in thousands):
2019
2020
2021
2022
2023
2024-Thereafter
Total minimum rental obligations
$
$
213,439
109,152
81,105
72,020
64,352
358,302
898,370
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.
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance Stock Units
Outstanding at September 29, 2017
Granted
Vested
Forfeited
Outstanding at September 28, 2018
Units
(000s)
Weighted
Average Grant
Date Fair Value
1,270
736
(211)
(181)
1,614
$
$
$
$
$
31.82
38.95
28.79
35.40
34.99
Deferred Stock Units
Deferred Stock Units are issued only to non-employee members of the Board of Directors of the Company and represent the
right to receive shares of the Company's common stock in the future. Each deferred stock unit will be converted to one share of
the Company's common stock on the first day of the seventh month after which such director ceases to serve as a member of the
Board of Directors. The grant-date fair value of deferred stock units is based on the fair value of the Company's common stock.
The deferred stock units vest on the day prior to the next annual meeting of stockholders (which is generally one year after
grant). The Company granted 49,193 deferred stock units during fiscal 2018. 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
$
567,885
$
373,923
$
287,806
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
Shares:
Basic weighted-average shares outstanding
Effect of dilutive securities
Diluted weighted-average shares outstanding
Basic Earnings Per Share:
245,771
7,581
253,352
244,453
7,104
251,557
Net income attributable to Aramark stockholders
Diluted Earnings Per Share:
Net income attributable to Aramark stockholders
$
$
2.31
2.24
$
$
1.53
1.49
$
$
242,286
6,477
248,763
1.19
1.16
Share-based awards to purchase 1.6 million, 3.9 million and 2.1 million shares were outstanding at September 28, 2018,
September 29, 2017 and September 30, 2016, respectively, but were not included in the computation of diluted earnings per
common share, as their effect would have been antidilutive. In addition, PSUs related to 1.2 million shares, 1.2 million shares
and 0.6 million shares were outstanding at September 28, 2018, 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. COMMITMENTS AND CONTINGENCIES:
The Company has capital and other purchase commitments of approximately $675.4 million at September 28, 2018, primarily
in connection with commitments for capital projects and client contract investments to help finance improvements or
renovations at the facilities in which the Company operates.
At September 28, 2018, the Company also has letters of credit outstanding in the amount of $60.2 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
S-41
S-41
S-42
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
approximately $84.3 million at September 28, 2018 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 28, 2018.
Rental expense for all operating leases was $187.5 million, $170.0 million and $180.7 million for fiscal 2018, fiscal 2017 and
fiscal 2016, 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 28, 2018 (in thousands):
$
2019
2020
2021
2022
2023
2024-Thereafter
Total minimum rental obligations
$
213,439
109,152
81,105
72,020
64,352
358,302
898,370
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.
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance Stock Units
Outstanding at September 29, 2017
Granted
Vested
Forfeited
Outstanding at September 28, 2018
Units
(000s)
Weighted
Average Grant
Date Fair Value
1,270
736
(211)
(181)
1,614
$
$
$
$
$
31.82
38.95
28.79
35.40
34.99
Deferred Stock Units
Deferred Stock Units are issued only to non-employee members of the Board of Directors of the Company and represent the
right to receive shares of the Company's common stock in the future. Each deferred stock unit will be converted to one share of
the Company's common stock on the first day of the seventh month after which such director ceases to serve as a member of the
Board of Directors. The grant-date fair value of deferred stock units is based on the fair value of the Company's common stock.
The deferred stock units vest on the day prior to the next annual meeting of stockholders (which is generally one year after
grant). The Company granted 49,193 deferred stock units during fiscal 2018. 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):
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
Earnings:
Shares:
Net income attributable to Aramark stockholders
$
567,885
$
373,923
$
287,806
Basic weighted-average shares outstanding
Effect of dilutive securities
Diluted weighted-average shares outstanding
245,771
7,581
253,352
244,453
7,104
251,557
Basic Earnings Per Share:
Diluted Earnings Per Share:
Net income attributable to Aramark stockholders
Net income attributable to Aramark stockholders
$
$
2.31
2.24
$
$
1.53
1.49
$
$
242,286
6,477
248,763
1.19
1.16
Share-based awards to purchase 1.6 million, 3.9 million and 2.1 million shares were outstanding at September 28, 2018,
September 29, 2017 and September 30, 2016, respectively, but were not included in the computation of diluted earnings per
common share, as their effect would have been antidilutive. In addition, PSUs related to 1.2 million shares, 1.2 million shares
and 0.6 million shares were outstanding at September 28, 2018, 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. COMMITMENTS AND CONTINGENCIES:
The Company has capital and other purchase commitments of approximately $675.4 million at September 28, 2018, primarily
in connection with commitments for capital projects and client contract investments to help finance improvements or
renovations at the facilities in which the Company operates.
At September 28, 2018, the Company also has letters of credit outstanding in the amount of $60.2 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
S-41
S-42
S-42
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. QUARTERLY RESULTS (Unaudited):
The following tables summarize the Company's unaudited quarterly results for fiscal 2018 and fiscal 2017 (in thousands, except
per share amounts):
Sales
Cost of services provided
Net income
Net income attributable to Aramark
stockholders
Earnings per share:
Basic
Diluted
Dividends declared per common share
Sales
Cost of services provided
Net income
Net income attributable to Aramark
stockholders
Earnings per share:
Basic
Diluted
Dividends declared per common share
NOTE 14. BUSINESS SEGMENTS:
Quarter Ended
December 29, 2017
March 30, 2018
June 29, 2018
September 28, 2018
$
3,965,118
$
3,939,311
$
3,971,606
$
3,520,064
292,440
3,561,509
27,716
3,524,804
72,716
3,913,598
3,383,810
175,568
292,284
27,569
72,577
175,455
$
$
1.19
1.16
0.105
$
0.11
0.11
0.105
$
0.29
0.29
0.105
0.71
0.69
0.105
Quarter Ended
December 30, 2016
March 31, 2017
June 30, 2017
September 29, 2017
$
3,735,383
$
3,621,628
$
3,593,277
$
3,299,329
125,435
3,226,196
70,231
3,232,366
65,364
3,654,124
3,231,082
113,157
125,339
70,151
65,295
113,138
$
$
0.51
0.50
0.103
$
0.29
0.28
0.103
$
0.27
0.26
0.103
0.46
0.45
0.103
Prior to fiscal 2018, the Company reported its operating results in three reportable segments: FSS North America, FSS
International and Uniform. Beginning in fiscal 2018, the segment reporting structure was modified to align more closely with
the Company’s management and internal reporting structure, which was changed on September 30, 2017. Specifically, a
majority of the Canadian operations, previously in the FSS North America segment, were combined with the FSS International
reportable segment. The FSS North America reportable segment was then renamed the FSS United States reportable segment.
All prior period segment information has been restated to reflect the new reportable segment structure. Management believes
this new presentation enhances the utility of the segment information, as it reflects the Company’s current management
structure and operating organization. The financial statement effect of this segment realignment was not material. 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 77% of the global sales is related to food
services and 23% is related to facilities services. Financial information by segment follows (in millions):
FSS United States
FSS International
Uniform
S-43
Sales
Fiscal Year Ended
September 28, 2018
10,137.8
$
September 29, 2017
9,748.0
$
September 30, 2016
9,582.6
$
3,655.8
1,996.0
3,291.7
1,564.7
$
15,789.6
$
14,604.4
$
3,269.5
1,563.7
14,415.8
S-43
The following geographic data include sales generated by subsidiaries within that geographic area and net property &
equipment based on physical location (in millions):
Sales
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
$
$
11,795.6
3,994.0
15,789.6
$
$
11,098.0
3,506.4
14,604.4
$
$
11,011.5
3,404.3
14,415.8
S-44
$
$
$
$
$
$
490.2
185.3
195.3
870.8
(124.5)
746.3
(315.4)
430.9
363.6
55.9
73.9
2.4
495.8
371.7
99.8
70.7
3.3
545.5
September 28, 2018
September 29, 2017
September 30, 2016
Operating Income
Fiscal Year Ended
$
680.5
150.9
182.6
1,014.0
(187.9)
826.1
(354.3)
$
596.8
162.1
182.3
941.2
(133.1)
808.1
(287.4)
471.8
$
520.7
$
Depreciation and Amortization
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
405.0
$
372.7
$
596.2
$
508.2
$
Capital Expenditures and
Client Contract Investments and Other*
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
494.3
$
420.4
$
64.8
123.4
3.0
84.1
332.5
1.2
55.3
77.2
3.0
66.1
67.5
1.0
912.1
$
555.0
$
Identifiable Assets
September 28, 2018
September 29, 2017
$
$
8,482.8
$
2,072.0
2,991.7
173.6
6,962.3
2,013.6
1,828.7
201.6
13,720.1
$
11,006.2
Interest and Other Financing Costs, net
Income Before Income Taxes
FSS United States
FSS International
Uniform
Corporate
Operating Income
FSS United States
FSS International
Uniform
Corporate
FSS United States
FSS International
Uniform
Corporate
* Includes amounts acquired in business combinations
FSS United States
FSS International
Uniform
Corporate
United States
Foreign
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. QUARTERLY RESULTS (Unaudited):
per share amounts):
The following tables summarize the Company's unaudited quarterly results for fiscal 2018 and fiscal 2017 (in thousands, except
Sales
Cost of services provided
Net income
Net income attributable to Aramark
stockholders
Earnings per share:
Basic
Diluted
Dividends declared per common share
Sales
Cost of services provided
Net income
Net income attributable to Aramark
stockholders
Earnings per share:
Basic
Diluted
Dividends declared per common share
NOTE 14. BUSINESS SEGMENTS:
Quarter Ended
December 29, 2017
March 30, 2018
June 29, 2018
September 28, 2018
$
3,965,118
$
3,939,311
$
3,971,606
$
3,520,064
292,440
3,561,509
27,716
3,524,804
72,716
3,913,598
3,383,810
175,568
292,284
27,569
72,577
175,455
$
1.19
1.16
0.105
$
0.11
0.11
0.105
$
0.29
0.29
0.105
0.71
0.69
0.105
Quarter Ended
December 30, 2016
March 31, 2017
June 30, 2017
September 29, 2017
$
3,735,383
$
3,621,628
$
3,593,277
$
3,299,329
125,435
3,226,196
70,231
3,232,366
65,364
3,654,124
3,231,082
113,157
125,339
70,151
65,295
113,138
$
0.51
0.50
0.103
$
0.29
0.28
0.103
$
0.27
0.26
0.103
0.46
0.45
0.103
$
$
FSS United States
FSS International
Uniform
Corporate
Operating Income
Interest and Other Financing Costs, net
Income Before Income Taxes
FSS United States
FSS International
Uniform
Corporate
FSS United States
FSS International
Uniform
Corporate
Prior to fiscal 2018, the Company reported its operating results in three reportable segments: FSS North America, FSS
International and Uniform. Beginning in fiscal 2018, the segment reporting structure was modified to align more closely with
the Company’s management and internal reporting structure, which was changed on September 30, 2017. Specifically, a
majority of the Canadian operations, previously in the FSS North America segment, were combined with the FSS International
reportable segment. The FSS North America reportable segment was then renamed the FSS United States reportable segment.
All prior period segment information has been restated to reflect the new reportable segment structure. Management believes
this new presentation enhances the utility of the segment information, as it reflects the Company’s current management
structure and operating organization. The financial statement effect of this segment realignment was not material. 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 77% of the global sales is related to food
services and 23% is related to facilities services. Financial information by segment follows (in millions):
* Includes amounts acquired in business combinations
FSS United States
FSS International
Uniform
Corporate
September 28, 2018
680.5
150.9
182.6
1,014.0
(187.9)
826.1
(354.3)
471.8
$
$
Operating Income
Fiscal Year Ended
September 29, 2017
596.8
$
162.1
182.3
941.2
(133.1)
808.1
(287.4)
520.7
$
September 30, 2016
490.2
$
185.3
195.3
870.8
(124.5)
746.3
(315.4)
430.9
$
Depreciation and Amortization
Fiscal Year Ended
September 28, 2018
405.0
$
September 29, 2017
372.7
$
September 30, 2016
363.6
$
64.8
123.4
3.0
596.2
$
55.3
77.2
3.0
508.2
$
55.9
73.9
2.4
495.8
$
Capital Expenditures and
Client Contract Investments and Other*
Fiscal Year Ended
September 28, 2018
494.3
$
September 29, 2017
420.4
$
September 30, 2016
371.7
$
84.1
332.5
1.2
66.1
67.5
1.0
$
912.1
$
555.0
$
99.8
70.7
3.3
545.5
Identifiable Assets
September 28, 2018
8,482.8
$
September 29, 2017
6,962.3
$
2,072.0
2,991.7
173.6
2,013.6
1,828.7
201.6
$
13,720.1
$
11,006.2
FSS United States
FSS International
Uniform
Sales
Fiscal Year Ended
September 28, 2018
September 29, 2017
September 30, 2016
10,137.8
$
9,748.0
$
3,655.8
1,996.0
3,291.7
1,564.7
9,582.6
3,269.5
1,563.7
15,789.6
$
14,604.4
$
14,415.8
$
$
S-43
The following geographic data include sales generated by subsidiaries within that geographic area and net property &
equipment based on physical location (in millions):
United States
Foreign
Sales
Fiscal Year Ended
September 28, 2018
11,795.6
September 29, 2017
11,098.0
$
September 30, 2016
11,011.5
$
3,994.0
3,506.4
15,789.6
$
14,604.4
$
3,404.3
14,415.8
$
$
S-44
S-44
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
United States
Foreign
Property and Equipment, net
September 28, 2018
September 29, 2017
$
$
1,065.9
312.2
1,378.1
$
$
838.2
203.8
1,042.0
NOTE 15. 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 28, 2018 and September 29, 2017 was $7,303.1 million and
$5,450.1 million, respectively. The carrying value of the Company's debt at September 28, 2018 and September 29, 2017 was
$7,244.0 million and $5,268.5 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 16. 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. The 5.125% Senior Notes due 2024 (the
"2024 Notes"), 5.000% Senior Notes due April 1, 2025 (the "5.000% 2025 Notes"), 3.125% Senior Notes due April 1, 2025 (the
"3.125% 2025 Notes" and, together with the 5.000% 2025 Notes, the "2025 Notes"), 4.75% Senior Notes due June 1, 2026
("2026 Notes") and 5.000% Senior Notes due February 1, 2028 (the "2028 Notes") are obligations of the Company's wholly-
owned subsidiary, Aramark Services, Inc., (other than the 3.125% 2025 Notes, which are obligations of the Company's wholly
owned subsidiary, Aramark International Finance S.a.r.l) and are each jointly and severally guaranteed on a senior unsecured
basis by the Company and substantially all of the Company's existing and future domestic subsidiaries (excluding the
Receivables Facility subsidiary) ("Guarantors"). All other subsidiaries of the Company, either direct or indirect, are non
guarantors and do not guarantee the 2024 Notes, 2025 Notes, 2026 Notes or 2028 Notes ("Non-Guarantors"). The Guarantors
also guarantee certain other debt. 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. Other intangible assets have been allocated to the
subsidiaries based on management's estimates.
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEETS
September 28, 2018
(in thousands)
Aramark
(Parent)
Issuers
Guarantors
Guarantors
Eliminations
Consolidated
Non
Cash and cash equivalents
$
$
50,716
$
29,844
$
134,460
$
— $
215,025
ASSETS
Current Assets:
Receivables
Inventories
assets
Prepayments and other current
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
current liabilities
Total current liabilities
Long-term Borrowings
Deferred Income Taxes and Other
Noncurrent Liabilities
Intercompany Payable
Redeemable Noncontrolling Interest
5
—
—
—
5
—
—
—
—
—
—
—
—
—
—
1,038
15,857
21,411
89,022
28,341
173,104
443,599
592,259
1,345,796
116,686
86,100
63,654
1,151,802
1,660,596
1,013,523
4,783,547
336,230
653,917
—
—
—
—
—
—
—
88
88
—
—
—
1,790,433
724,802
171,165
2,901,425
1,378,094
5,610,568
1,018,920
1,440,332
2,490,159
7,213,077
977,215
—
10,093
3,029,553
7,441,605
90,049
844,245
(11,405,452)
—
29,684
1,919,795
100,754
1,264,976
187,365
329,443
—
2,136,844
(2,002)
1,693,171
$ 3,029,558
$ 7,862,510
$10,223,692
$ 4,011,796
$(11,407,454) $13,720,102
$
— $
— $
26,564
$
4,343
$
— $
30,907
128,460
483,606
406,854
205,807
334,267
926,794
1,436,964
— 6,651,110
82,097
307,643
718,840
479,870
432,583
466,331
78,301
— 4,827,084
955,407
(5,782,491)
—
10,093
—
Total Stockholders' Equity
3,029,558
444,550
3,401,123
1,779,378
(5,625,051)
3,029,558
$ 3,029,558
$ 7,862,510
$10,223,692
$ 4,011,796
$(11,407,454) $13,720,102
S-45
S-45
S-46
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
United States
Foreign
Property and Equipment, net
September 28, 2018
September 29, 2017
$
$
1,065.9
312.2
1,378.1
$
$
838.2
203.8
1,042.0
NOTE 15. 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 28, 2018 and September 29, 2017 was $7,303.1 million and
$5,450.1 million, respectively. The carrying value of the Company's debt at September 28, 2018 and September 29, 2017 was
$7,244.0 million and $5,268.5 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 16. 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. The 5.125% Senior Notes due 2024 (the
"2024 Notes"), 5.000% Senior Notes due April 1, 2025 (the "5.000% 2025 Notes"), 3.125% Senior Notes due April 1, 2025 (the
"3.125% 2025 Notes" and, together with the 5.000% 2025 Notes, the "2025 Notes"), 4.75% Senior Notes due June 1, 2026
("2026 Notes") and 5.000% Senior Notes due February 1, 2028 (the "2028 Notes") are obligations of the Company's wholly-
owned subsidiary, Aramark Services, Inc., (other than the 3.125% 2025 Notes, which are obligations of the Company's wholly
owned subsidiary, Aramark International Finance S.a.r.l) and are each jointly and severally guaranteed on a senior unsecured
basis by the Company and substantially all of the Company's existing and future domestic subsidiaries (excluding the
Receivables Facility subsidiary) ("Guarantors"). All other subsidiaries of the Company, either direct or indirect, are non
guarantors and do not guarantee the 2024 Notes, 2025 Notes, 2026 Notes or 2028 Notes ("Non-Guarantors"). The Guarantors
also guarantee certain other debt. 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. Other intangible assets have been allocated to the
subsidiaries based on management's estimates.
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEETS
September 28, 2018
(in thousands)
Aramark
(Parent)
Issuers
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
50,716
$
29,844
$
134,460
$
— $
215,025
1,038
15,857
21,411
89,022
28,341
443,599
592,259
1,345,796
116,686
86,100
63,654
1,151,802
1,660,596
1,013,523
173,104
4,783,547
336,230
653,917
844,245
187,365
329,443
3,029,553
7,441,605
90,049
—
—
29,684
1,919,795
100,754
1,264,976
$ 3,029,558
$ 7,862,510
$10,223,692
$ 4,011,796
(11,405,452)
—
(2,002)
1,693,171
$(11,407,454) $13,720,102
—
—
—
—
—
—
—
88
88
—
1,790,433
724,802
171,165
2,901,425
1,378,094
5,610,568
—
2,136,844
1,018,920
1,440,332
2,490,159
7,213,077
977,215
—
10,093
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
current liabilities
Total current liabilities
Long-term Borrowings
Deferred Income Taxes and Other
Noncurrent Liabilities
Intercompany Payable
Redeemable Noncontrolling Interest
5
—
—
—
5
—
—
—
—
—
$
— $
— $
26,564
$
4,343
$
— $
30,907
128,460
483,606
406,854
205,807
334,267
926,794
1,436,964
— 6,651,110
82,097
—
—
—
432,583
466,331
— 4,827,084
—
10,093
307,643
718,840
479,870
78,301
955,407
—
—
(5,782,491)
—
(5,625,051)
Total Stockholders' Equity
3,029,558
444,550
3,401,123
1,779,378
$ 3,029,558
$ 7,862,510
$10,223,692
$ 4,011,796
3,029,558
$(11,407,454) $13,720,102
S-45
S-46
S-46
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEETS
September 29, 2017
(in thousands)
Aramark
(Parent)
Aramark
Services,
Inc.
Guarantors
Non
Guarantors
Eliminations
Consolidated
$ 111,512
$
37,513
$
89,767
$
— $
238,797
848,739
9,135,305
4,006,141
— 13,990,185
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
current liabilities
Total current liabilities
Long-term Borrowings
Deferred Income Taxes and Other
Noncurrent Liabilities
Intercompany Payable
Redeemable Noncontrolling Interest
5
—
—
—
5
—
—
—
—
—
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
3,874,647
90,090
1,569,193
236,800
667,760
567,277
177,141
311,112
2,459,056
—
5,248,858
29,683
90,049
914,000
—
53,538
1,112,076
$ 2,459,061
$ 5,680,145
$ 7,704,982
$ 3,529,283
(8,365,240)
—
(2,002)
1,474,724
$ (8,367,242) $11,006,229
$
— $
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)
—
—
—
—
—
—
—
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
Total Stockholders' Equity
2,459,061
392,575
597,523
1,405,689
$ 2,459,061
$ 5,680,145
$ 7,704,982
$ 3,529,283
2,459,061
$ (8,367,242) $11,006,229
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended September 28, 2018
(in thousands)
Aramark
(Parent)
Issuers
Guarantors
Guarantors
Eliminations
Consolidated
$
— $1,027,573
$10,432,088
$4,329,972
$
— $15,789,633
Non
Expense allocations
— (374,970)
353,628
— 1,017,355
10,128,055
4,172,347
— 15,317,757
Sales
Costs and Expenses:
Cost of services provided
Depreciation and amortization
Selling and general corporate
expenses
Interest and other financing costs, net
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
net of tax
Other comprehensive income (loss),
Comprehensive income attributable
to Aramark stockholders
—
—
—
—
—
—
—
19,466
483,106
93,610
195,093
329,027
158,064
(2,048)
23,972
27,282
21,342
10,218
304,033
(3,521)
(143,452)
157,625
50,409
—
—
—
—
—
—
596,182
377,129
354,261
—
471,876
(96,564)
—
568,440
567,885
567,885
13,739
447,485
107,216
—
—
—
555
(567,885)
(567,885)
—
—
—
555
567,885
13,739
446,930
107,216
(567,885)
567,885
32,537
43,686
3,178
(36,776)
(10,088)
32,537
$ 600,422
$
57,425
$
450,108
$
70,440
$ (577,973) $
600,422
S-47
S-47
S-48
Aramark 2018 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEETS
September 29, 2017
(in thousands)
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the year ended September 28, 2018
(in thousands)
Cash and cash equivalents
$
$ 111,512
$
37,513
$
89,767
$
— $
238,797
ASSETS
Current Assets:
Receivables
Inventories
assets
Prepayments and other current
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
current liabilities
Total current liabilities
Long-term Borrowings
Deferred Income Taxes and Other
Noncurrent Liabilities
Intercompany Payable
Redeemable Noncontrolling Interest
Aramark
(Parent)
Aramark
Services,
Inc.
Guarantors
Guarantors
Eliminations
Consolidated
Non
5
—
—
—
5
—
—
—
—
—
—
—
—
—
—
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
3,874,647
29,683
53,538
90,049
914,000
1,112,076
90,090
1,569,193
236,800
667,760
567,277
177,141
311,112
2,459,056
5,248,858
(8,365,240)
—
—
1,120,824
(2,002)
1,474,724
—
—
—
—
—
—
—
88
88
—
—
—
1,615,993
610,732
187,617
2,653,139
1,042,031
4,715,511
955,925
1,334,013
2,368,095
5,190,331
978,944
—
9,798
$ 2,459,061
$ 5,680,145
$ 7,704,982
$ 3,529,283
$ (8,367,242) $11,006,229
$
— $
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
319,253
670,400
665,997
425,297
513,797
39,850
— 5,224,196
747,347
(5,971,543)
—
9,798
—
Total Stockholders' Equity
2,459,061
392,575
597,523
1,405,689
(2,395,787)
2,459,061
$ 2,459,061
$ 5,680,145
$ 7,704,982
$ 3,529,283
$ (8,367,242) $11,006,229
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 income (loss),
net of tax
Comprehensive income attributable
to Aramark stockholders
Aramark
(Parent)
Issuers
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
— $1,027,573
$10,432,088
$4,329,972
$
— $15,789,633
848,739
9,135,305
4,006,141
— 13,990,185
19,466
483,106
93,610
158,064
(2,048)
353,628
23,972
27,282
21,342
—
—
—
—
596,182
377,129
354,261
—
—
—
—
195,093
—
329,027
— (374,970)
— 1,017,355
10,128,055
4,172,347
— 15,317,757
—
—
567,885
567,885
10,218
(3,521)
—
13,739
304,033
(143,452)
—
157,625
50,409
—
447,485
107,216
—
—
(567,885)
(567,885)
471,876
(96,564)
—
568,440
—
—
555
—
—
555
567,885
13,739
446,930
107,216
(567,885)
567,885
32,537
43,686
3,178
(36,776)
(10,088)
32,537
$ 600,422
$
57,425
$
450,108
$
70,440
$ (577,973) $
600,422
S-47
S-48
S-48
Aramark 2018 Form 10-K
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the year ended September 29, 2017
(in thousands)
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended September 30, 2016
(in thousands)
Sales
Costs and Expenses:
Cost of services provided
Depreciation and amortization
Selling and general corporate
expenses
Interest and other financing costs, net
Expense allocations
Income before Income Taxes
Provision for Income Taxes
Equity in Net Income of Subsidiaries
Net income
Less: Net income attributable to
noncontrolling interest
Net income attributable to Aramark
stockholders
Other comprehensive income, net of
tax
Comprehensive income attributable
to Aramark stockholders
Aramark
(Parent)
Aramark
Services,
Inc.
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
— $1,041,490
$ 9,708,157
$3,854,765
$
— $14,604,412
941,031
8,507,680
3,540,262
— 12,988,973
17,502
416,979
73,731
138,304
(3,171)
318,199
20,561
17,181
29,843
—
—
—
—
508,212
299,170
287,415
—
—
—
—
140,305
—
273,405
(348,042)
— 1,024,201
—
9,377,991
3,681,578
— 14,083,770
—
—
373,923
373,923
17,289
5,139
—
330,166
98,144
—
173,187
43,172
—
12,150
232,022
130,015
—
—
(373,923)
(373,923)
520,642
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
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
net of tax
Other comprehensive income (loss),
Comprehensive income (loss)
attributable to Aramark
stockholders
Aramark
(Parent)
Aramark
Services,
Inc.
Guarantors
Guarantors
Eliminations
Consolidated
Non
$
— $1,025,664
$ 9,670,207
$3,719,958
$
— $14,415,829
939,925
8,536,196
3,414,287
— 12,890,408
15,670
406,154
73,941
— 1,024,475
9,378,918
3,581,505
— 13,984,898
134,705
293,072
130,153
(2,513)
(358,897)
308,928
1,189
427
—
762
—
291,289
104,377
—
426
18,484
24,824
49,969
138,453
37,895
—
—
287,806
287,806
186,912
100,558
(287,806)
(287,806)
—
—
—
—
—
—
—
495,765
283,342
315,383
—
430,931
142,699
—
288,232
426
—
—
—
—
—
—
—
—
287,806
762
186,486
100,558
(287,806)
287,806
(14,215)
(16,093)
(7,284)
1,176
22,201
(14,215)
$273,591
$ (15,331) $
179,202
$ 101,734
$ (265,605) $
273,591
S-49
S-49
S-50
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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)
Aramark
Services,
Inc.
Guarantors
Guarantors
Eliminations
Consolidated
Non
$
— $1,041,490
$ 9,708,157
$3,854,765
$
— $14,604,412
941,031
8,507,680
3,540,262
— 12,988,973
17,502
416,979
73,731
— 1,024,201
9,377,991
3,681,578
— 14,083,770
140,305
273,405
138,304
(3,171)
(348,042)
318,199
17,289
5,139
—
—
330,166
98,144
—
264
20,561
17,181
29,843
173,187
43,172
—
—
373,923
373,923
12,150
232,022
130,015
(373,923)
(373,923)
—
—
—
—
—
—
—
508,212
299,170
287,415
—
520,642
146,455
—
374,187
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
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the year ended September 30, 2016
(in thousands)
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sales
Costs and Expenses:
Cost of services provided
Depreciation and amortization
Selling and general corporate
expenses
Interest and other financing costs, net
Expense allocations
Income Before Income Taxes
Provision for Income Taxes
Equity in Net Income of Subsidiaries
Net income
Less: Net income attributable to
noncontrolling interest
Net income attributable to Aramark
stockholders
Other comprehensive income (loss),
net of tax
Comprehensive income (loss)
attributable to Aramark
stockholders
Aramark
(Parent)
Aramark
Services,
Inc.
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
— $1,025,664
$ 9,670,207
$3,719,958
$
— $14,415,829
—
—
—
134,705
—
293,072
(358,897)
— 1,024,475
—
—
—
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
S-49
S-50
S-50
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended September 28, 2018
(in thousands)
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended September 29, 2017
(in thousands)
Net cash provided by operating activities
$
— $ 111,541
$
690,218
$ 311,179
$
(65,587) $ 1,047,351
Net cash provided by operating activities
$
— $ 261,282
$
779,801
$ 200,579
$ (188,275) $ 1,053,387
Aramark
(Parent)
Issuers
Guarantors
Non
Guarantors
Eliminations
Consolidated
Aramark
(Parent)
Aramark
Services,
Inc.
Guarantors
Guarantors
Eliminations
Consolidated
Non
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
(Decrease) increase in cash and cash
equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of period
$
—
—
(13,133)
2,252
(532,923)
4,301
(82,548)
3,938
— (2,381,800)
(3,095)
—
— (2,395,776)
244,581
328
(283,713)
(103,065)
(4,112)
(185,787)
—
—
(628,604)
10,491
— (2,240,284)
(6,879)
—
— (2,865,276)
— 3,012,072
(833,854)
—
—
(28,142)
165,241
(111,693)
— 3,177,313
(973,689)
—
Proceeds from long-term borrowings
— 3,451,164
—
400,253
Payments of long-term borrowings
— (3,572,268)
(19,851)
(319,873)
— 3,851,417
— (3,911,992)
—
—
—
—
—
—
—
(103,115)
21,507
(24,410)
(45,905)
197,144
—
—
—
—
(2,958)
(383,074)
(254,200)
—
—
—
(390)
120,343
—
—
—
—
—
65,587
(254,200)
(103,115)
21,507
(24,410)
(49,253)
—
— 2,223,439
(414,174)
(80,699)
65,587
1,794,153
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:
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
—
—
—
—
—
—
—
—
—
—
—
—
—
5
5
(20,939)
(443,262)
(88,528)
494
14,780
3,632
—
(37,130)
(104,992)
(69,401)
(89,846)
36,946
29,916
(428,666)
(159,972)
—
(100,813)
28,779
(100,000)
(69,172)
—
—
—
—
(13,800)
—
—
—
(2,973)
29,868
254,536
(322,142)
(120,669)
(107,774)
(344,966)
(24,221)
188,275
188,275
63,662
6,169
16,386
47,850
31,344
73,381
—
—
—
—
—
—
—
—
—
—
—
—
(552,729)
18,906
(142,122)
(2,539)
(678,484)
(13,800)
(100,813)
28,779
(100,000)
(42,277)
—
(288,686)
86,217
152,580
—
—
(23,772)
238,797
Cash and cash equivalents, end of period
$
$ 111,512
$
37,513
$
89,767
$
— $
238,797
—
(60,796)
(7,669)
44,693
111,512
37,513
89,767
5
5
$
50,716
$
29,844
$ 134,460
$
— $
215,025
S-51
S-51
S-52
Aramark 2018 Form 10-K CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended September 29, 2017
(in thousands)
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended September 28, 2018
(in thousands)
Net cash provided by operating activities
$
— $ 111,541
$
690,218
$ 311,179
$
(65,587) $ 1,047,351
Net cash provided by operating activities
$
— $ 261,282
$
779,801
$ 200,579
$ (188,275) $ 1,053,387
Aramark
(Parent)
Issuers
Guarantors
Guarantors
Eliminations
Consolidated
Non
Aramark
(Parent)
Aramark
Services,
Inc.
Guarantors
Non
Guarantors
Eliminations
Consolidated
Proceeds from long-term borrowings
— 3,012,072
—
165,241
— 3,177,313
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:
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
equivalents
period
(Decrease) increase in cash and cash
Cash and cash equivalents, beginning of
—
—
—
—
—
—
—
—
—
—
5
5
(13,133)
(532,923)
(82,548)
2,252
4,301
3,938
(628,604)
10,491
— (2,381,800)
244,581
(103,065)
— (2,240,284)
(3,095)
328
(4,112)
(6,879)
— (2,395,776)
(283,713)
(185,787)
— (2,865,276)
(833,854)
(28,142)
(111,693)
—
(103,115)
21,507
(24,410)
(45,905)
—
—
—
—
(254,200)
—
—
—
(2,958)
(390)
197,144
(383,074)
120,343
65,587
— 2,223,439
(414,174)
(80,699)
65,587
1,794,153
—
(60,796)
(7,669)
44,693
111,512
37,513
89,767
—
—
—
—
—
—
—
—
—
—
—
(973,689)
(254,200)
(103,115)
21,507
(24,410)
(49,253)
—
(23,772)
238,797
Cash and cash equivalents, end of period
$
$
50,716
$
29,844
$ 134,460
$
— $
215,025
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
(107,774)
63,662
—
—
—
—
(2,973)
(322,142)
(344,966)
6,169
(13,800)
—
—
—
29,868
(120,669)
(24,221)
16,386
47,850
31,344
73,381
—
—
—
—
—
188,275
188,275
—
—
(13,800)
(100,813)
28,779
(100,000)
(42,277)
—
(288,686)
86,217
152,580
$ 111,512
$
37,513
$
89,767
$
— $
238,797
S-51
S-52
S-52
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended September 30, 2016
(in thousands)
Net cash provided by operating activities
$
— $
160,790
$ 587,572
$ 124,191
$
(5,239) $
867,314
Aramark
(Parent)
Aramark
Services,
Inc.
Guarantors
Non
Guarantors
Eliminations
Consolidated
Cash flows from investing activities:
Purchases of property and
equipment, client contract
investments and other
Disposals of property and equipment
Acquisitions of businesses, net of
cash acquired
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term borrowings
Payments of long-term borrowings
Net change in funding under the
Receivables Facility
Payments of dividends
Proceeds from issuance of common
stock
Repurchase of common stock
Other financing activities
Change in intercompany, net
Net cash provided by (used in) financing
activities
Increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of period
$
—
—
—
—
—
(22,326)
1,832
(419,009)
20,353
(71,197)
4,639
—
1,576
(18,918)
(231)
5,202
(393,685)
(199,146)
(1,438)
(267,142)
—
—
—
—
—
(512,532)
26,824
(199,377)
5,340
(679,745)
— 1,397,714
— (1,217,292)
—
(15,418)
2,274
(130,824)
— 1,399,988
— (1,363,534)
—
—
—
—
—
—
—
—
5
5
—
(92,074)
35,705
(749)
(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
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED SEPTEMBER 28, 2018, SEPTEMBER 29, 2017 AND SEPTEMBER 30, 2016
ARAMARK AND SUBSIDIARIES
Balance,
Beginning of
Period
Additions
Charged to
Income
Reductions
Deductions
from
Reserves
(1)
Balance,
End of
Period
Description
Fiscal Year 2018
Fiscal Year 2017
Fiscal Year 2016
Reserve for doubtful accounts, advances & current notes receivable $
53,416 $
22,009 $
22,743 $
52,682
Reserve for doubtful accounts, advances & current notes receivable $
48,058 $
18,141 $
12,783 $
53,416
Reserve for doubtful accounts, advances & current notes receivable $
39,023 $
21,913 $
12,878 $
48,058
(1) Amounts determined not to be collectible and charged against the reserve and translation.
S-53
S-53
S-54
Aramark 2018 Form 10-K ARAMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended September 30, 2016
(in thousands)
Net cash provided by operating activities
$
— $
160,790
$ 587,572
$ 124,191
$
(5,239) $
867,314
Aramark
(Parent)
Aramark
Services,
Inc.
Guarantors
Guarantors
Eliminations
Consolidated
Non
Proceeds from long-term borrowings
— 1,397,714
2,274
Payments of long-term borrowings
— (1,217,292)
(15,418)
(130,824)
— 1,399,988
— (1,363,534)
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:
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
equivalents
period
Increase (decrease) in cash and cash
Cash and cash equivalents, beginning of
—
—
—
—
—
—
—
—
—
—
—
—
—
5
5
(22,326)
(419,009)
(71,197)
1,832
20,353
4,639
—
1,576
(231)
(199,146)
5,202
(1,438)
(18,918)
(393,685)
(267,142)
—
—
—
—
—
(82,000)
—
—
—
—
(92,074)
35,705
(749)
—
—
—
—
—
—
—
—
—
—
—
—
(512,532)
26,824
(199,377)
5,340
(679,745)
(82,000)
(92,074)
35,705
(749)
(54,741)
—
30,164
122,416
(51,495)
(2,513)
(733)
(197,623)
(187,423)
379,807
5,239
(125,814)
(205,354)
168,524
5,239
(157,405)
16,058
(11,467)
25,573
31,792
42,811
47,808
Cash and cash equivalents, end of period
$
$
47,850
$
31,344
$
73,381
$
— $
152,580
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED SEPTEMBER 28, 2018, SEPTEMBER 29, 2017 AND SEPTEMBER 30, 2016
ARAMARK AND SUBSIDIARIES
Balance,
Beginning of
Period
Additions
Charged to
Income
Reductions
Deductions
from
Reserves
(1)
Balance,
End of
Period
Description
Fiscal Year 2018
Reserve for doubtful accounts, advances & current notes receivable $
Fiscal Year 2017
Reserve for doubtful accounts, advances & current notes receivable $
Fiscal Year 2016
Reserve for doubtful accounts, advances & current notes receivable $
53,416 $
22,009 $
22,743 $
52,682
48,058 $
18,141 $
12,783 $
53,416
39,023 $
21,913 $
12,878 $
48,058
(1) Amounts determined not to be collectible and charged against the reserve and translation.
S-53
S-54
S-54
Aramark 2018 Form 10-K Copies of any of the following exhibits are available to Stockholders for the cost of reproduction upon written request to the
Secretary, Aramark, 1101 Market Street, Philadelphia, PA 19107.
EXHIBIT INDEX
Exhibit No.
Description
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 3.1 to Aramark’s Quarterly
4.1
Report on Form 10-Q filed with the SEC on May 8, 2018, pursuant to the Exchange Act (file number
001-36223))
.
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
guarantor, the subsidiary guarantors named therein and The Bank of New York Mellon, as trustee (incorporated
by reference to Exhibit 4.2 of Aramark’s Current Report on Form 8-K filed with the SEC on June 6, 2016,
pursuant to the Exchange Act (file number 001-36223)).
Indenture, dated as of May 31, 2016, among Aramark Services, Inc., as issuer, Aramark, as parent guarantor, the
subsidiary guarantors named therein and The Bank of New York Mellon, as trustee (incorporated by reference to
Exhibit 4.3 of Aramark’s Current Report on Form 8-K filed with the SEC on June 6, 2016, pursuant to the
Exchange Act (file number 001-36223)).
4.3
4.4
4.5
4.6
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)).
Indenture, dated as of January 18, 2018, among Aramark Services, Inc., as issuer, Aramark, as parent guarantor,
the subsidiary guarantors named therein and U.S. Bank National Association, as trustee (incorporated by reference
to Exhibit 4.1 to Aramark’s Current Report on Form 8-K filed with the SEC on January 24, 2018 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)).
S-55
S-56
S-55
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 001-36223)).
10.3
Incremental Amendment No. 2, dated as of December 11, 2017, among Aramark Services, Inc., Aramark
Intermediate HoldCo Corporation (“Holdings”) and certain wholly-owned subsidiaries of Aramark Services, Inc.,
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 Aramark Services, Inc., Holdings, 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. and certain wholly-owned
domestic subsidiaries of Aramark Services, Inc., the financial institutions from time to time party thereto (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 December 12, 2017 pursuant to the Exchange Act
(file number 001-36223)).
10.4
Incremental Amendment No. 3, dated as of February 28, 2018, among Aramark Services, Inc., ARAMARK
Canada Ltd., and Aramark Intermediate HoldCo Corporation (“Holdings”), 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 Aramark Services, Inc.,
Holdings, 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. and certain wholly-owned domestic subsidiaries of Aramark Services,
Inc., the financial institutions from time to time party thereto (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 Quarterly Report on Form 10-Q filed
with the SEC on May 8, 2018, pursuant to the Exchange Act (file number 001-36223)).
10.5 Amendment No. 4, dated as of May 11, 2018, among Aramark Services, Inc. (the “Company”), Sumitomo Mitsui
Banking Corp. (the “Yen Term C Lender”) 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 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. and certain wholly-owned domestic subsidiaries of the Company, the financial institutions from time to
time party thereto (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 Quarterly Report on Form 10-Q filed with the SEC on August 7, 2018,
pursuant to the Exchange Act (file number 001-36223)).
10.6 Amendment No. 5, dated as of May 24, 2018, among Aramark Services, Inc. (the “Company”), Aramark
Intermediate HoldCo Corporation (“Holdings”), certain wholly-owned subsidiaries of the Company, each
Converting U.S. Term B-2 Lender (as defined therein), the Additional U.S. Term B-2 Lender (as defined therein),
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, Holdings, 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. and certain wholly-owned domestic
subsidiaries of the Company, the financial institutions from time to time party thereto (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 May 31, 2018 pursuant to the Exchange Act (file number 001-36223)).
Aramark 2018 Form 10-K Copies of any of the following exhibits are available to Stockholders for the cost of reproduction upon written request to the
Secretary, Aramark, 1101 Market Street, Philadelphia, PA 19107.
EXHIBIT INDEX
Exhibit No.
Description
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 3.1 to Aramark’s Quarterly
Report on Form 10-Q filed with the SEC on May 8, 2018, 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)).
4.3
4.4
4.2 Supplemental 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 4.2 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)).
4.5
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)).
4.6
Indenture, dated as of January 18, 2018, among Aramark Services, Inc., as issuer, Aramark, as parent guarantor,
the subsidiary guarantors named therein and U.S. Bank National Association, as trustee (incorporated by reference
to Exhibit 4.1 to Aramark’s Current Report on Form 8-K filed with the SEC on January 24, 2018 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
10.3
10.4
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 001-36223)).
Incremental Amendment No. 2, dated as of December 11, 2017, among Aramark Services, Inc., Aramark
Intermediate HoldCo Corporation (“Holdings”) and certain wholly-owned subsidiaries of Aramark Services, Inc.,
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 Aramark Services, Inc., Holdings, 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. and certain wholly-owned
domestic subsidiaries of Aramark Services, Inc., the financial institutions from time to time party thereto (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 December 12, 2017 pursuant to the Exchange Act
(file number 001-36223)).
Incremental Amendment No. 3, dated as of February 28, 2018, among Aramark Services, Inc., ARAMARK
Canada Ltd., and Aramark Intermediate HoldCo Corporation (“Holdings”), 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 Aramark Services, Inc.,
Holdings, 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. and certain wholly-owned domestic subsidiaries of Aramark Services,
Inc., the financial institutions from time to time party thereto (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 Quarterly Report on Form 10-Q filed
with the SEC on May 8, 2018, pursuant to the Exchange Act (file number 001-36223)).
10.5 Amendment No. 4, dated as of May 11, 2018, among Aramark Services, Inc. (the “Company”), Sumitomo Mitsui
Banking Corp. (the “Yen Term C Lender”) 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 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. and certain wholly-owned domestic subsidiaries of the Company, the financial institutions from time to
time party thereto (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 Quarterly Report on Form 10-Q filed with the SEC on August 7, 2018,
pursuant to the Exchange Act (file number 001-36223)).
10.6 Amendment No. 5, dated as of May 24, 2018, among Aramark Services, Inc. (the “Company”), Aramark
Intermediate HoldCo Corporation (“Holdings”), certain wholly-owned subsidiaries of the Company, each
Converting U.S. Term B-2 Lender (as defined therein), the Additional U.S. Term B-2 Lender (as defined therein),
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, Holdings, 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. and certain wholly-owned domestic
subsidiaries of the Company, the financial institutions from time to time party thereto (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 May 31, 2018 pursuant to the Exchange Act (file number 001-36223)).
S-55
S-56
S-56
Aramark 2018 Form 10-K 10.7 Amendment No. 6, dated as of June 12, 2018, among Aramark Services, Inc. (the “Company”), Aramark
Intermediate HoldCo Corporation (“Holdings”), certain wholly-owned subsidiaries of the Company, each
Converting U.S. Term B-3 Lender (as defined therein), the Additional U.S. Term B-3 Lender (as defined therein),
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, Holdings, 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. and certain wholly-owned domestic
subsidiaries of the Company, the financial institutions from time to time party thereto (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 June 18, 2018 pursuant to the Exchange Act (file number 001-36223)).
10.8 Amendment No. 7 (the “Amendment”), dated as of October 1, 2018, among Aramark Services, Inc. (the
“Company”), Aramark Intermediate HoldCo Corporation (“Holdings”), Aramark Intermediate HoldCo
Corporation (“Holdings”), ARAMARK Canada Ltd. (the “Canadian Borrower”), ARAMARK Investments
Limited, ARAMARK Limited (together with ARAMARK Investments Limited, the “UK Borrowers”),
ARAMARK Ireland Holdings Limited, ARAMARK Regional Treasury Europe, Designated Activity Company
(together with ARAMARK Ireland Holdings Limited, the “Irish Borrowers”), ARAMARK Holdings Deutschland
GMBH (as successor by merger to ARAMARK Holdings GmbH & Co. KG, the “German Borrower”), Aramark
International Finance S.à r.l. (the “Luxembourg Borrower”), certain other 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, Holdings, the Canadian Borrower, the UK Borrower, the Irish Borrowers,
the German Borrower, the Luxembourg Borrower and certain other wholly-owned domestic subsidiaries of the
Company, the financial institutions from time to time party thereto (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 October 4, 2018 pursuant to the Exchange Act (file number 001-36223)).
10.9 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 001-36223)).
10.10 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)).
10.11† 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)).
10.12† 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)).
10.13† 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)).
10.14† 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)).
10.15† 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)).
10.16† 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)).
10.17† 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)).
10.18† 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)).
10.19† 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)).
10.20† 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)).
10.21† 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
10.22† 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
10.23† Form of Indemnification Agreement (Directors) (incorporated by reference to Exhibit 10.17 to Aramark's Annual
Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange Act (file number
number 001-36223)).
Act (file number 001-16807)).
001-36223).
10.24†
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)).
10.25†
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)).
10.26†
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)).
10.27†
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)).
10.28†
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)).
10.29† 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)).
10.30† 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)).
10.31† 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)).
10.32† 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)).
10.33† 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)).
10.34† 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)).
10.35† 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)).
10.36† 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)).
10.37† 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)).
10.38† 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)).
S-57
S-58
S-57
Aramark 2018 Form 10-K 10.7 Amendment No. 6, dated as of June 12, 2018, among Aramark Services, Inc. (the “Company”), Aramark
Intermediate HoldCo Corporation (“Holdings”), certain wholly-owned subsidiaries of the Company, each
Converting U.S. Term B-3 Lender (as defined therein), the Additional U.S. Term B-3 Lender (as defined therein),
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, Holdings, 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. and certain wholly-owned domestic
subsidiaries of the Company, the financial institutions from time to time party thereto (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 June 18, 2018 pursuant to the Exchange Act (file number 001-36223)).
10.8 Amendment No. 7 (the “Amendment”), dated as of October 1, 2018, among Aramark Services, Inc. (the
“Company”), Aramark Intermediate HoldCo Corporation (“Holdings”), Aramark Intermediate HoldCo
Corporation (“Holdings”), ARAMARK Canada Ltd. (the “Canadian Borrower”), ARAMARK Investments
Limited, ARAMARK Limited (together with ARAMARK Investments Limited, the “UK Borrowers”),
ARAMARK Ireland Holdings Limited, ARAMARK Regional Treasury Europe, Designated Activity Company
(together with ARAMARK Ireland Holdings Limited, the “Irish Borrowers”), ARAMARK Holdings Deutschland
GMBH (as successor by merger to ARAMARK Holdings GmbH & Co. KG, the “German Borrower”), Aramark
International Finance S.à r.l. (the “Luxembourg Borrower”), certain other 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, Holdings, the Canadian Borrower, the UK Borrower, the Irish Borrowers,
the German Borrower, the Luxembourg Borrower and certain other wholly-owned domestic subsidiaries of the
Company, the financial institutions from time to time party thereto (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 October 4, 2018 pursuant to the Exchange Act (file number 001-36223)).
10.9 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 001-36223)).
10.10 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)).
10.11† 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)).
10.12† 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)).
10.13† 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)).
10.14† 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)).
10.15† 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)).
10.16† 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)).
10.17† 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)).
10.18† 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)).
10.19† 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)).
10.20† 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)).
10.21† 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)).
10.22† 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)).
10.23† Form of Indemnification Agreement (Directors) (incorporated by reference to Exhibit 10.17 to Aramark's Annual
Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange Act (file number
001-36223).
10.24†
10.25†
10.26†
10.27†
10.28†
Indemnification Agreement dated May 7, 2012 between Eric Foss and Aramark Services, Inc. (incorporated by
reference to Exhibit 10.6 to Aramark Services, Inc.’s Quarterly Report on Form 10-Q filed with the SEC on
May 9, 2012, pursuant to the Exchange Act (file number 001-04762)).
Indemnification Agreement dated December 12, 2012 between Stephen R. Reynolds and Aramark Services,
Inc. (incorporated by reference to Exhibit 10.22 to Aramark Services, Inc.’s Annual Report on Form 10-K filed
with the SEC on December 20, 2012, pursuant to the Exchange Act (file number 001-04762)).
Indemnification Agreement dated February 4, 2014 between Daniel J. Heinrich and Aramark (incorporated by
reference to Exhibit 10.1 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on February 5,
2014, pursuant to the Exchange Act (file number 001-36223)).
Indemnification Agreement dated February 4, 2014 between Stephen Sadove and Aramark (incorporated by
reference to Exhibit 10.2 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on February 5,
2014, pursuant to the Exchange Act (file number 001-36223)).
Indemnification Agreement dated April 6, 2015, between Stephen P. Bramlage, Jr. and Aramark (incorporated
by reference to Exhibit 10.3 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on May 13, 2015,
pursuant to the Exchange Act (file number 001-36223)).
10.29† 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)).
10.30† 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)).
10.31† 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)).
10.32† 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)).
10.33† 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)).
10.34† 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)).
10.35† 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)).
10.36† 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)).
10.37† 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)).
10.38† 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)).
S-57
S-58
S-58
Aramark 2018 Form 10-K 10.39† Amended and Restated Aramark Executive Leadership Council Management Incentive Bonus Plan (incorporated
by reference to Exhibit 10.2 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on February 6,
2018, pursuant to the Exchange Act (file number 001-36233)).
10.40*† Amended and Restated Aramark Executive Leadership Council Management Incentive Bonus Plan.
10.41† 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)).
10.42† 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)).
10.43† 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)).
10.44† 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)).
10.45† 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)).
10.46† 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)).
10.47† 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)).
10.48† 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)).
10.49† 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)).
10.50† 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)).
10.51† 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)).
10.52† 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)).
10.53† 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)).
10.54† Form of Restricted Stock Award Agreement with Aramark (incorporated by reference to Exhibit 10.4 to Aramark
Services, Inc.’s Current Report on Form 8-K filed with the SEC on June 26, 2013, pursuant to the Exchange Act
(file number 001-04762)).
10.55† 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)).
10.56† 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)).
10.57† 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)).
10.58† 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)).
10.59† 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)).
10.60† 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)).
10.61† 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)).
10.62† 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)).
10.63† 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)).
10.64† 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)).
10.65† 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)).
10.66† 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)).
10.67† 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
10.68† 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
10.69† 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
Act (file number 001-36223)).
Act (file number 001-36223)).
001-36223)).
10.70† 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)).
10.71† 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)).
10.72† 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)).
10.73† 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)).
10.74† 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)).
10.75† 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)).
10.76† 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)).
10.77† 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)).
10.78† Form of Restricted Stock Unit Award (Time Vesting) (Retirement Notice/Full Vest) (incorporated by reference
to Exhibit 10.70 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant
to the Exchange Act (file number 001-36223).
10.79† Form of Performance Stock Unit Award (Retirement Notice/Full Vest) (incorporated by reference to Exhibit 10.71
to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange
Act (file number 001-36223).
S-59
S-60
S-59
Aramark 2018 Form 10-K 10.39† Amended and Restated Aramark Executive Leadership Council Management Incentive Bonus Plan (incorporated
by reference to Exhibit 10.2 to Aramark’s Quarterly Report on Form 10-Q filed with the SEC on February 6,
2018, pursuant to the Exchange Act (file number 001-36233)).
10.40*† Amended and Restated Aramark Executive Leadership Council Management Incentive Bonus Plan.
10.41† 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)).
10.42† 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)).
10.43† 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
10.44† 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
(file number 001-36233)).
number 001-16807)).
number 001-04762)).
number 001-04762)).
number 001-04762)).
10.45† 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
10.46† 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)).
10.47† 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
10.48† 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
10.49† 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)).
10.50† 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)).
10.51† 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
10.52† 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
number 001-04762)).
Act (file number 001-04762)).
10.53† 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)).
10.54† Form of Restricted Stock Award Agreement with Aramark (incorporated by reference to Exhibit 10.4 to Aramark
Services, Inc.’s Current Report on Form 8-K filed with the SEC on June 26, 2013, pursuant to the Exchange Act
(file number 001-04762)).
10.55† 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)).
10.56† 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)).
10.57† 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)).
10.58† 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)).
10.59† 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)).
10.60† 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)).
10.61† 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)).
10.62† 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)).
10.63† 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)).
10.64† 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)).
10.65† 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)).
10.66† 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)).
10.67† 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)).
10.68† 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)).
10.69† 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)).
10.70† 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)).
10.71† 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)).
10.72† 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)).
10.73† 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)).
10.74† 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)).
10.75† 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)).
10.76† 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)).
10.77† 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)).
10.78† Form of Restricted Stock Unit Award (Time Vesting) (Retirement Notice/Full Vest) (incorporated by reference
to Exhibit 10.70 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant
to the Exchange Act (file number 001-36223).
10.79† Form of Performance Stock Unit Award (Retirement Notice/Full Vest) (incorporated by reference to Exhibit 10.71
to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange
Act (file number 001-36223).
S-59
S-60
S-60
Aramark 2018 Form 10-K 10.80† Form of Non-Qualified Stock Option Award (Retirement Notice/Full Vest) (incorporated by reference to Exhibit
10.72 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the
Exchange Act (file number 001-36223).
10.81† Form of Restricted Stock Unit Award (Time Vesting) (Retirement Notice/2Y Vest) (incorporated by reference
to Exhibit 10.73 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017
pursuant to the Exchange Act (file number 001-36223).
10.82† Form of Performance Stock Unit Award (Retirement Notice/2Y Vest) (incorporated by reference to Exhibit 10.74
to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange
Act (file number 001-36223).
10.83† Form of Non-Qualified Stock Option Award (Retirement Notice/2Y Vest) (incorporated by reference to Exhibit
10.75 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the
Exchange Act (file number 001-36223).
10.84† Form of Restricted Stock Unit Award (Relative TSR Vesting) (incorporated by reference to Exhibit 10.76 to
Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange Act
(file number 001-36223).
10.85† Form of Performance Stock Unit Award (Relative TSR Vesting) (incorporated by reference to Exhibit 10.77 to
Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange Act
(file number 001-36223).
10.86† Form of Non-Qualified Stock Option Award (Relative TSR Vesting) (incorporated by reference to Exhibit
10.78 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the
Exchange Act (file number 001-36223).
10.87† Form of Schedule I to Performance Stock Unit Award (incorporated by reference to Exhibit 10.79 to Aramark's
Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange Act (file
number 001-36223).
10.88† Form of Schedule I to Restricted Stock Unit Award (Relative TSR Vesting) (incorporated by reference to Exhibit
10.80 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the
Exchange Act (file number 001-36223).
10.89† Form of Schedule I to Performance Stock Unit Award (Relative TSR Vesting) (incorporated by reference to
Exhibit 10.81 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to
the Exchange Act (file number 001-36223).
10.90† Form of Schedule I to Non-Qualified Stock Option Award (Relative TSR Vesting) (incorporated by reference
to Exhibit 10.82 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017
pursuant to the Exchange Act (file number 001-36223).
10.91† 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)).
10.92† 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)).
10.93† 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)).
10.94† 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)).
10.95† 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)).
10.96 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).
10.97 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).
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 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.
S-61
S-62
S-61
Aramark 2018 Form 10-K 10.80† Form of Non-Qualified Stock Option Award (Retirement Notice/Full Vest) (incorporated by reference to Exhibit
10.72 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the
Exchange Act (file number 001-36223).
10.81† Form of Restricted Stock Unit Award (Time Vesting) (Retirement Notice/2Y Vest) (incorporated by reference
to Exhibit 10.73 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017
pursuant to the Exchange Act (file number 001-36223).
10.82† Form of Performance Stock Unit Award (Retirement Notice/2Y Vest) (incorporated by reference to Exhibit 10.74
to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange
Act (file number 001-36223).
10.83† Form of Non-Qualified Stock Option Award (Retirement Notice/2Y Vest) (incorporated by reference to Exhibit
10.75 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the
Exchange Act (file number 001-36223).
10.84† Form of Restricted Stock Unit Award (Relative TSR Vesting) (incorporated by reference to Exhibit 10.76 to
Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange Act
10.85† Form of Performance Stock Unit Award (Relative TSR Vesting) (incorporated by reference to Exhibit 10.77 to
Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange Act
(file number 001-36223).
(file number 001-36223).
10.86† Form of Non-Qualified Stock Option Award (Relative TSR Vesting) (incorporated by reference to Exhibit
10.78 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the
Exchange Act (file number 001-36223).
10.87† Form of Schedule I to Performance Stock Unit Award (incorporated by reference to Exhibit 10.79 to Aramark's
Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the Exchange Act (file
number 001-36223).
10.88† Form of Schedule I to Restricted Stock Unit Award (Relative TSR Vesting) (incorporated by reference to Exhibit
10.80 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to the
Exchange Act (file number 001-36223).
10.89† Form of Schedule I to Performance Stock Unit Award (Relative TSR Vesting) (incorporated by reference to
Exhibit 10.81 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017 pursuant to
the Exchange Act (file number 001-36223).
10.90† Form of Schedule I to Non-Qualified Stock Option Award (Relative TSR Vesting) (incorporated by reference
to Exhibit 10.82 to Aramark's Annual Report on Form 10-K filed with the SEC on November 22, 2017
pursuant to the Exchange Act (file number 001-36223).
10.91† 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)).
10.92† 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)).
10.93† 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)).
10.94† 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)).
10.95† 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)).
10.96 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).
10.97 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).
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 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.
S-61
S-62
S-62
Aramark 2018 Form 10-K Selected Operational and Financial Metrics
Constant Currency Sales
Constant Currency Sales represents sales growth, adjusted to eliminate the impact of currency translation.
Legacy Business Sales
Legacy Business Sales represents sales excluding the impact of currency translation and the sales of AmeriPride and Avendra.
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; merger and integration charges 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.
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; merger and integration charges; the effects of refinancings on interest and other financing costs, net; the impact of tax
reform 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.
Adjusted EPS (Constant Currency)
Adjusted EPS (Constant Currency) represents Adjusted EPS 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.
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 Constant Currency Sales, Adjusted Operating Income (including on a constant currency basis), Covenant Adjusted EBITDA,
Adjusted Net Income (including on a constant currency basis), Adjusted EPS (including on a constant currency basis) 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. Constant Currency Sales, 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
related to streamlining initiatives ($36.6 million for fiscal 2018 and $18.4 million for fiscal 2017), adjustments to eliminate consulting
costs incurred in the applicable period related to streamlining initiatives ($20.2 million for fiscal 2018 and $3.1 million for fiscal 2017),
incurring duplicate rent charges to build out and ready the Company’s new headquarters while occupying its existing headquarters
($7.7 million for fiscal 2018) and other charges ($3.1 million for fiscal 2018 and $6.8 million for fiscal 2017).
Merger and Integration Related Charges - adjustments to eliminate merger and integration charges primarily related to the Avendra
and AmeriPride acquisitions, including deal costs, costs for transitional employees and integration related consulting costs ($78.1
million for fiscal 2018) and other deal costs.
Gains, losses and settlements impacting comparability – adjustments to eliminate certain transactions that are not indicative of our
ongoing operational performance, primarily for income/loss from prior years’ loss experience under our casualty insurance program
($14.9 million gain for fiscal 2018 and $6.5 million gain for fiscal 2017), pension plan charges ($5.0 million loss for fiscal 2018), charges
related to a joint venture liquidation and acquisition ($7.5 million for fiscal 2018), expenses related to acquisition costs ($2.1 million for
fiscal 2017), charges related to hyperinflation in Argentina ($3.8 million for fiscal 2018), certain consulting costs ($1.0 million for fiscal
2018 and $3.7 million for fiscal 2017), certain environmental charges ($5.0 million for fiscal 2018) and the impact of the change in fair
value related to certain gasoline and diesel agreements ($0.2 million gain for fiscal 2018 and $0.4 million loss for fiscal 2017).
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.
Effect of tax reform on provision for income taxes - adjustments to eliminate the impact of tax reform that is not indicative of our
ongoing tax position based on the new tax policies and certain other adjustments.
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.
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
and costs of our acquisitions of each of Avendra, LLC ("Avendra") and AmeriPride Services, Inc. ("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 and costs of our acquisitions 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 and benefits of the acquisitions 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; 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; 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 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.
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
ADJUSTED CONSOLIDATED OPERATING INCOME MARGIN
(Unaudited) ($ In thousands)
Sales (as reported)
Operating Income (as reported)
Operating Income Margin (as reported)
Sales (as reported)
Effect of Currency Translation
Constant Currency Sales
Operating Income (as reported)
Amortization of Acquisition-Related Customer Relationship Intangible Assets
Resulting from the 2007 LBO
Share-Based Compensation
Severance and Other Charges
Merger and Integration Related Charges
Gains, Losses and Settlements impacting comparability
Adjusted Operating Income
Effect of Currency Translation
Adjusted Operating Income (Constant Currency)
Adjusted Operating Income Growth since 2013
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
Constant Currency Sales
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
Constant Currency Sales
Estimated Impact of 53rd Week
Constant Currency Sales including Estimated Impact of 53rd Week
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)
Fiscal 2018
Fiscal 2017
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
15,789,633
826,137
5.23 %
15,789,633
(161,870 )
15,627,763
826,137
37,756
89,465
67,577
79,908
7,578
1,108,421
(6,788 )
1,101,633
41.84 %
7.05 %
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 %
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
14,604,412
808,057
5.53 %
14,604,412
—
14,604,412
808,057
57,585
67,089
28,328
—
912
961,971
—
961,971
6.59 %
Fiscal 2015
14,329,135
627,938
4.38 %
14,329,135
—
(9,377 )
14,319,758
627,938
110,080
72,800
66,545
(421 )
3,793
880,735
—
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:
Loss from Discontinued Operations,
net of tax
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
Merger and Integration Related Charges
Effects of Acquisitions and Divestitures
Branding
Initial Public Offering-Related
Expenses, including share-based
compensation
Gains, Losses and Settlements
impacting comparability
Effects of Refinancing on Interest
and Other Financing Costs, net
Effect of Tax Reform on Provision
For Income Taxes
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)
Estimated Impact of 53rd Week
Adjusted Net Income (Constant Currency)
Including Estimated Impact of 53rd Week
Diluted Weighted Average Shares
Outstanding
Adjusted Earnings Per Share (Constant
Currency as reported in each respective
year) Excluding Estimated Impact of 53rd Week
Adjusted Earnings Per Share (Constant
Currency as reported in each respective
year) Including Estimated Impact of 53rd Week
Adjusted Earnings Per Share Growth
(Constant Currency)
Adjusted Earnings Per Share Growth
since 2013
12 Months
Ended
9/28/2018
12 Months
Ended
9/29/2017
12 Months
Ended
9/30/2016
12 Months
Ended
10/2/2015
12 Months
Ended
10/3/2014
12 Months
Ended
9/27/2013
$
567,885
$
373,923
$
287,806
$
235,946
$
148,956
$
69,356
—
—
—
—
—
1,030
37,756
89,465
67,577
79,908
—
—
—
7,578
57,585
67,089
28,328
—
—
—
—
912
17,773
31,491
(221,998 )
—
78,174
59,358
41,736
—
275
—
—
13,447
31,267
—
110,080
72,800
66,545
—
(421 )
—
—
3,793
—
—
129,505
47,522
53,554
—
(71 )
26,910
56,133
1,911
25,705
—
(77,032 )
568,912
(4,798 )
$
564,114
$
(69,039 )
490,289
989
491,278
$
$
(87,025 )
425,038
7,802
432,840
$
$
(102,485 )
386,258
—
386,258
$
$
(128,442 )
361,683
(18,171 )
343,512
$
$
155,443
19,417
113,464
—
(5,992 )
968
—
(10,251 )
39,830
—
(118,694 )
264,571
(3,941 )
260,630
567,885
$
373,923
$
287,806
$
235,946
$
148,956
$
69,356
253,352
2.24
50.34 %
$
251,557
1.49
28.45 %
$
248,763
1.16
20.83 %
$
246,616
0.96
52.38 %
$
237,451
0.63
90.91 %
$
209,370
0.33
568,912
$
490,289
$
425,038
$
386,258
$
361,683
$
264,571
253,352
2.25
$
251,557
1.95
564,114
—
$
491,278
—
$
$
248,763
1.71
$
246,616
1.57
$
237,451
1.52
$
209,370
1.26
432,840
—
$
386,258
—
$
343,512
(8,796 )
$
260,630
—
564,114
$
491,278
$
432,840
$
386,258
$
334,716
$
260,630
253,352
251,557
248,763
246,616
237,451
209,370
2.23
$
1.95
$
1.74
$
1.57
$
1.45
$
1.24
2.23
$
1.95
$
1.74
$
1.57
$
1.41
$
1.24
14.36 %
12.07 %
10.83 %
11.35 %
13.71 %
78.57 %
$
$
$
$
$
$
$
$
$
$
ARAMARK AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
LEGACY BUSINESS SALES (CONSTANT CURRENCY)
(Unaudited)
($ in thousands)
Sales (as reported)
Effect of Currency Translation
Constant Currency Sales
Effect of AmeriPride and Avendra Acquisitions
Legacy Business Sales
Sales (as reported)
Constant Currency Sales Growth
Legacy Business Sales Growth
$
$
$
12 Months Ended
9/28/2018
15,789,633
(161,870 )
15,627,763
(522,188 )
15,105,575
12 Months Ended
9/29/2017
14,604,412
7.01 %
3.43 %
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
DEAR FELLOW
SHAREHOLDERS
I AM PLEASED TO REPORT THAT 2018
WAS ANOTHER RECORD YEAR FOR OUR
COMPANY ACROSS KEY FINANCIAL
METRICS, INCLUDING REVENUE, MARGIN,
PROFIT, AND EARNINGS.
We also strengthened our bal ance sheet and smoothly
integrated the two largest acquisitions in Aramark’s history.
As the capstone of our achievements, 2018 marked our
fifth straight year of double-digit adjusted EPS growth—
a feat matched by exceptionally few companies—as we
continue our transformation journey to ensure consistently
profitable growth. Our winning results are detailed in this
report, and I applaud the entire Aramark team for this
year’s success. Let me share the 2018 highlights with you.
Eric J. Foss,
Chairman, President, and
Chief Executive Officer
CORPOR ATE INFORMA TION
SENIOR MANAGEMENT
BOARD OF DIRECTORS
TRANSFER AGENT
Eric J. Foss
Chairman, President, and
Chief Executive Officer
Stephen P. Bramlage, Jr.
Executive Vice President and
Chief Financial Officer
Harrald Kroeker*
Senior Vice President, Integration
Lynn B. McKee
Executive Vice President,
Human Resources
Stephen R. Reynolds
Executive Vice President,
General Counsel and Secretary
*Retiring effective December 31, 2018
Eric J. Foss
Chairman, President, and
Chief Executive Officer, Aramark
Computershare
480 Washington Blvd.
Jersey City, NJ 07310
CORPORATE HEADQUARTERS
2400 Market Street
Philadelphia, PA 19103
215-238-3000
WEBSITE
www.aramark.com
INVESTOR RELATIONS
DEPARTMENT
215-409-7287
investorrelations@aramark.com
AUDITOR
KPMG LLP
Philadelphia, PA
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
Calvin Darden
Former Senior Vice President,
U.S. Operations, United Parcel
Service, Inc.
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
Former Executive Vice President,
Customer Support Services &
Chief Information Officer,
Cardinal Health, Inc.
John A. Quelch
Dean, Miami Business School, and
Vice Provost, University of Miami
Stephen I. Sadove
Former Chairman and Chief
Executive Officer, Saks
Incorporated
5910_CVR_C1.indd 2
5910_CVR_C1.indd 2
12/19/18 9:54 PM
12/19/18 9:54 PM
A
R
A
M
A
R
K
2
0
1
8
A
N
N
U
A
L
R
E
P
O
R
T
EXPERIENCES
THAT MATTER
www.aramark.com
2018 | Annual Report
©2018 Aramark
5910_CVR_C1.indd 1
5910_CVR_C1.indd 1
12/19/18 9:54 PM
12/19/18 9:54 PM