| Income Before Income Taxes | $ | | | | $ | | | NOTE 11.
The fair value of the Company's debt at December 27, 2024 and September 27, 2024 was $ million and $ million, respectively. The carrying value of the Company's debt at December 27, 2024 and September 27, 2024 was $ million and $ 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 have been classified as Level 2 in the fair value hierarchy levels.
As part of the Union Supply acquisition completed in fiscal 2022, the Company recorded a contingent consideration obligation. During the three months ended December 27, 2024, the Company adjusted the contingent consideration liability, resulting in expense of $ million, which is included in "Cost of services provided (exclusive of depreciation and amortization)" on the Condensed Consolidated Statements of Income. The earnout period has ended and the contingent consideration liability at December 27, 2024 and September 27, 2024 was $ million and , respectively. The contingent consideration liability is expected to be fully paid out in the second quarter of fiscal 2025.
Item 2.
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 three months ended December 27, 2024 and December 29, 2023 should be read in conjunction with our audited consolidated financial statements and the notes to those statements for the fiscal year ended September 27, 2024 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on November 19, 2024.
Our discussion contains forward-looking statements, such as our plans, objectives, opinions, expectations, anticipations, intentions and beliefs, that are based upon our current expectations but that involve risks and uncertainties. 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 described under the heading "Special Note About Forward-Looking Statements" and elsewhere in this Quarterly Report on Form 10-Q. In the following discussion and analysis of financial condition and results of operations, certain financial measures may be considered "non-GAAP financial measures" under SEC rules. These rules require supplemental explanation and reconciliation, which is provided elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a leading global provider of food and facilities services to education, healthcare, business & industry and sports, leisure & corrections clients. Our largest market is the United States, which is supplemented by an additional 15-country footprint. We also provide our services on a more limited basis in several additional countries and in offshore locations. Through our established brand, broad geographic presence and employees, we anchor our business in our partnerships with thousands of clients. Through these partnerships, we serve millions of consumers including students, patients, employees, sports fans and guests worldwide. We operate our business in two geographic reportable segments: Food and Support Services United States ("FSS United States") and Food and Support Services International ("FSS International").
Our FSS United States reportable segment 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 reportable segments are presented separately as corporate expenses.
Current Business Environment
We continue to see improving macroeconomic trends where global inflationary costs in product, energy and labor have moderated. In addition, we continue to see elevated market interest rates and volatility in foreign currencies. We expect these conditions to continue in the near-term, and we regularly evaluate and believe we take appropriate actions to mitigate risk in these areas. These actions include management of operating costs, including supply chain initiatives and pricing actions, and managing interest rate risk through the use of interest rate swaps.
Seasonality
Our revenue and operating results have varied, and we expect them to continue to vary, 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 the first half of our fiscal year in operations that provide services to sports and leisure clients. This lower level of activity, historically, has been partially offset during the first half of our fiscal year 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 the second half of our fiscal year, which is partially offset by the effect of summer recess at colleges, universities and schools in our educational operations. For cash flows, historically there has been cash usage during our first fiscal quarter due to lower activity within our sports and leisure clients as well as payments related to employee incentives. Conversely, historically there have been cash inflows during our fourth fiscal quarter due to an inflow of customer prepayments particularly within our Higher Education business in anticipation of the fall semester and higher activity within our sports and leisure clients.
Foreign Currency Fluctuations
The impact from foreign currency translation 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. 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 September 30th. The fiscal year ending October 3, 2025 is a fifty-three week period and the fiscal year ended September 27, 2024 is a fifty-two week period.
Results of Operations
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 three months ended December 27, 2024 and December 29, 2023 (in millions). | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Change |
| December 27, 2024 | | December 29, 2023 | | $ | | % |
| Revenue | $ | 4,552.1 | | | $ | 4,407.8 | | | $ | 144.3 | | | 3.3 | % |
| Costs and Expenses: | | | | | | | |
| Cost of services provided (exclusive of depreciation and amortization) | 4,151.2 | | | 4,045.1 | | | 106.1 | | | 2.6 | % |
| Other operating expenses | 183.6 | | | 195.7 | | | (12.1) | | | (6.2) | % |
| Total costs and expenses | 4,334.8 | | | 4,240.8 | | | 94.0 | | | 2.2 | % |
| Operating income | 217.3 | | | 167.0 | | | 50.3 | | | 30.1 | % |
|
| Interest Expense, net | 75.8 | | | 114.6 | | | (38.8) | | | (33.8) | % |
| Income Before Income Taxes | 141.5 | | | 52.4 | | | 89.1 | | | 170.0 | % |
| Provision for Income Taxes | 35.8 | | | 23.9 | | | 11.9 | | | 49.8 | % |
| Net income | $ | 105.7 | | | $ | 28.5 | | | $ | 77.2 | | | *** |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Change |
Revenue by Segment(1) | | December 27, 2024 | | December 29, 2023 | | $ | | % |
| FSS United States | | $ | 3,301.0 | | | $ | 3,212.8 | | | $ | 88.2 | | | 2.7 | % |
| FSS International | | 1,251.1 | | | 1,195.0 | | | 56.1 | | | 4.7 | % |
| | $ | 4,552.1 | | | $ | 4,407.8 | | | $ | 144.3 | | | 3.3 | % |
| | | | | | | | |
| | Three Months Ended | | Change |
| Operating Income by Segment | | December 27, 2024 | | December 29, 2023 | | $ | | % |
| FSS United States | | $ | 193.7 | | | $ | 174.8 | | | $ | 18.9 | | | 10.8 | % |
| FSS International | | 53.7 | | | 46.3 | | | 7.4 | | | 16.1 | % |
| Corporate | | (30.1) | | | (54.1) | | | 24.0 | | | 44.2 | % |
| | $ | 217.3 | | | $ | 167.0 | | | $ | 50.3 | | | 30.1 | % |
*** Not meaningful
(1) As a percentage of total revenue, FSS United States represented 72.5% and 72.9% and FSS International represented 27.5% and 27.1% for the three months ended December 27, 2024 and December 29, 2023, respectively.
Consolidated Overview
Revenue increased by approximately 3.3% during the three month period of fiscal 2025 compared to the prior year period. The increase during this period was primarily attributable to base business growth, including volume growth and contract price increases, partially offset by the negative impact of foreign currency translation (1.4%).
The following table presents the cost of services provided (exclusive of depreciation and amortization) by segment and as a percent of revenue for the three months ended December 27, 2024 and December 29, 2023 (in millions). | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
| | December 27, 2024 | | December 29, 2023 |
| Cost of services provided (exclusive of depreciation and amortization) | | $ | | % of Revenue | | $ | | % of Revenue |
| FSS United States | | $ | 2,979.9 | | | 90.3 | % | | $ | 2,919.3 | | | 90.9 | % |
| FSS International | | 1,171.3 | | | 93.6 | % | | 1,125.8 | | | 94.2 | % |
| | $ | 4,151.2 | | | 91.2 | % | | $ | 4,045.1 | | | 91.8 | % |
The following table presents the percentages attributable to the components in cost of services provided (exclusive of depreciation and amortization) for the three months ended December 27, 2024 and December 29, 2023. | | | | | | | | | | | | | | |
|
| Cost of services provided (exclusive of depreciation and amortization) components | | December 27, 2024 | | December 29, 2023 |
| Food and support service costs | | 30.9 | % | | 30.5 | % |
| Personnel costs | | 44.8 | % | | 43.9 | % |
| Other direct costs | | 24.3 | % | | 25.6 | % |
| | 100.0 | % | | 100.0 | % |
Operating income increased by $50.3 million during the three month period of fiscal 2025 compared to the prior year period driven by base business volume growth, cost management and improved supply chain economics. The increase in operating income was also attributable to prior year expenses related to the separation and distribution of the Uniform segment ($29.0 million), which was partially offset by higher contingent consideration expenses as compared to the prior year period ($10.6 million).
Interest Expense, net, decreased by 33.8% during the three month period of fiscal 2025 compared to the prior year period. The decrease was primarily due to the prior year payment of a $23.9 million call premium, a prior year $7.9 million non-cash loss for the write-off of unamortized deferred financing costs related to the repayment of the 6.375% Senior Notes due May 1, 2025 (the "6.375% 2025 Notes") and lower Receivables Facility borrowings.
The Provision for Income Taxes for the three month periods of fiscal 2025 and fiscal 2024 were recorded at an effective tax rate of 25.3% and 45.6%, respectively. During the three month period of fiscal 2024, we recorded a $7.1 million valuation allowance adjustment against certain foreign tax credits, as it is more likely than not a tax benefit will not be realized due to the reduction of future forecasted foreign income as a result of the separation and distribution of the Uniform segment (see Note 6 to the condensed consolidated financial statements).
Segment Results
FSS United States Segment
The FSS United States reportable segment consists of five sectors which have similar economic characteristics and comprise a single operating segment. The five sectors of the FSS United States reportable segment are Business & Industry, Education, Healthcare, Sports, Leisure & Corrections and Facilities & Other.
Revenue for each of these sectors is summarized as follows (in millions): | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Change |
| December 27, 2024 | | December 29, 2023 | | % |
| Business & Industry | $ | 432.2 | | | $ | 383.1 | | | 12.8 | % |
| Education | 1,141.1 | | | 1,112.3 | | | 2.6 | % |
| Healthcare | 404.6 | | | 399.1 | | | 1.4 | % |
| Sports, Leisure & Corrections | 950.3 | | | 903.6 | | | 5.2 | % |
| Facilities & Other | 372.8 | | | 414.7 | | | (10.1) | % |
| $ | 3,301.0 | | | $ | 3,212.8 | | | 2.7 | % |
The Healthcare, Education and Facilities & Other sectors generally have high-single digit operating income margins and the Business & Industry and Sports, Leisure & Corrections sectors generally have mid-single digit operating income margins.
FSS United States segment revenue increased by approximately 2.7% during the three month period of fiscal 2025 compared to the prior year period. The increase was primarily attributable to base business growth, including volume growth and contract price increases. The Business & Industry increase was primarily due to net new business and higher volumes in base business. The Facilities & Other decrease was due to the exit of some lower margin accounts occurring later in fiscal 2024.
Operating income increased by $18.9 million during the three month period of fiscal 2025 compared to the prior year period. The increase was primarily attributable to base business volume growth, cost management, and improved supply chain economics, which was partially offset by higher contingent consideration expenses as compared to the prior year period ($10.6 million).
FSS International Segment
FSS International segment revenue increased by approximately 4.7% during the three month period of fiscal 2025 compared to the prior year period. The increase was primarily attributable to base business growth, including volume growth and contract price increases, and net new business growth, partially offset by the negative impact of foreign currency translation (5.1%).
Operating income increased by $7.4 million during the three month period of fiscal 2025 compared to the prior year period. The increase was mainly attributable to the volume growth in base business, net new business, cost management, improved supply chain economics and lower currency translation losses from Argentina hyperinflation ($3.2 million) (see Note 1 to the condensed consolidated financial statements).
Corporate
Corporate expenses, those administrative expenses not allocated to the business segments, decreased by $24.0 million during the three month period of fiscal 2025 compared to the prior year period. The decrease was mainly attributable to prior year expenses related to the separation and distribution of the Uniform segment ($29.0 million), partially offset by increases in acquisition costs and share-based compensation expense.
Liquidity and Capital Resources
Overview
As of December 27, 2024, we had $484.1 million of cash and cash equivalents, $42.8 million of marketable securities, $1,158.1 million of availability under our senior secured revolving credit facility and $75.0 million of availability under our Receivables Facility. A significant portion of our cash and cash equivalents are held in mature, liquid geographies where we have operations. As of December 27, 2024, we had $862.2 million of outstanding foreign currency borrowings.
On January 17, 2025, we issued a notice of conditional redemption for the 5.000% Senior Notes due April 2025 (the “5.000% 2025 Notes”). We notified holders of our election to redeem the entire $551.5 million aggregate principal amount of the 5.000% 2025 Notes on February 18, 2025, at a redemption price equal to 100.000% of the aggregate principal amount, plus accrued and unpaid interest up to the redemption date. In connection with the redemption, we have completed a syndication process for new United States dollar denominated term loans due June 2030 in an aggregate principal amount of up to $1,395.0 million (the “New United States Term B-8 Loans”), which shall be in the form of a fungible upsize to our existing United States Term B-8 Loans due 2030. We anticipate that the New United States Term B-8 Loans will be incurred on February 18, 2025 concurrent with the redemption of the 5.000% 2025 Notes, with the remaining proceeds following the redemption to be used to refinance existing term loans and pay related fees and expenses.
We believe that our cash and cash equivalents, marketable securities and availability under our revolving credit facility and Receivables Facility will be adequate to meet anticipated cash requirements for the foreseeable future to fund working capital, capital spending, debt service obligations, refinancings, dividends and other cash needs. We also have flexibility to optimize working capital and defer certain capital expenditures as appropriate without a material impact to the business. We believe that our assumptions used to estimate our liquidity and working capital requirements are reasonable. For additional information regarding the risks associated with our liquidity and capital resources, see Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on November 19, 2024.
The table below summarizes our cash activity (in millions): | | | | | | | | | | | |
| Three Months Ended |
| December 27, 2024 | | December 29, 2023 |
| Net cash used in operating activities | $ | (587.2) | | | $ | (657.1) | |
| Net cash used in investing activities | (230.8) | | | (198.0) | |
| Net cash provided by (used in) financing activities | 642.7 | | | (779.0) | |
Reference to the Condensed Consolidated Statements of Cash Flows will facilitate understanding of the discussion that follows.
Cash Flows Used in Operating Activities
Cash used in operating activities decreased by $69.9 million during the three month period of fiscal 2025 compared to the prior year period. The higher net income and a lower use of cash from the change in operating assets and liabilities more than offset non-cash gains and losses and adjustments to non-operating cash transactions compared to the prior year period. The favorable change in operating assets and liabilities compared to the prior year period of $23.7 million was primarily due to:
•Accrued expenses by $77.0 million, resulting in a lower use of cash primarily due to the timing of interest and income tax payments, lower recognition of deferred income in our Higher Education business, partially offset by higher employee incentive payments, the timing of payroll and higher commission payments mainly in our Sports business; and
•Receivables by $49.5 million, resulting in a lower use of cash due to the timing of collections.
These changes in operating assets and liabilities more than offset:
•Accounts payable by $80.7 million, resulting in a higher use of cash due to the timing of disbursements; and
•Inventories by $19.4 million, resulting in a lower source of cash due to increased purchases from new business.
The "Other operating activities" caption in both periods reflect adjustments to net income in the current year and prior year periods related to non-cash gains and losses and adjustments to non-operating cash transactions.
Cash Flows Used in Investing Activities
Cash flows used in investing activities were $32.9 million higher during the three month period of fiscal 2025 compared to the prior year period primarily due to higher investment in the acquisitions of certain businesses ($28.1 million).
Cash Flows Provided by (Used in) Financing Activities
During the three month period of fiscal 2025, cash provided by financing activities was primarily impacted by borrowings under the Receivables Facility ($525.0 million) and borrowings under the revolving credit facility ($178.4 million).
During the three month period of fiscal 2024, cash used in financing activities was primarily impacted by repayment of the 6.375% 2025 Notes ($1,500.0 million), which was offset by borrowings under the Receivables Facility ($600.0 million) and borrowings under the revolving credit facility ($209.7 million).
The "Other financing activities" caption also reflects a use of cash during the three month periods of fiscal 2025 and fiscal 2024 primarily related to taxes paid by us when we withhold shares upon an employee's exercise or vesting of equity awards to cover income taxes. The three month period of fiscal 2024 also includes the payment of a call premium on the 6.375% 2025 Notes ($23.9 million).
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 our subordinated debt); and fundamentally change our business. The indentures governing our senior notes contain similar provisions. As of December 27, 2024, 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 generally accepted accounting principles in the United States ("U.S. GAAP"). Covenant Adjusted EBITDA is defined as net income of
Aramark Services, Inc. ("ASI") and its restricted subsidiaries plus interest expense, net, provision 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 ASI stockholders, which is a U.S. GAAP measure of ASI'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 ASI and its restricted subsidiaries only and does not include the results of Aramark. | | | | | |
| Twelve Months Ended |
(in millions) | December 27, 2024 |
| Net income Attributable to ASI stockholders | $ | 339.6 | |
|
|
| Interest expense, net | 328.0 | |
| Provision for Income Taxes | 114.9 | |
| Depreciation and Amortization | 443.2 | |
Share-based compensation expense(1) | 63.7 | |
Unusual or non-recurring (gains) and losses(2) | (22.8) | |
|
Pro forma EBITDA for certain transactions(3) | 5.1 | |
Other(4) | 92.9 | |
Covenant Adjusted EBITDA | $ | 1,364.6 | |
(1) Represents share-based compensation expense resulting from the application of accounting for stock options, stock appreciation rights, restricted stock units, performance stock units and deferred stock unit awards.
(2) Represents the fiscal 2024 gain from the sale of our remaining equity investment in the San Antonio Spurs NBA franchise ($25.1 million) and the fiscal 2024 non-cash charge for the impairment of certain assets related to a business that was sold ($2.3 million).
(3) Represents the annualizing of net EBITDA from certain acquisitions and divestitures made during the period.
(4) "Other" includes adjustments to remove the impact attributable to the adoption of certain accounting standards that are made to the calculation in accordance with the Credit Agreement and indentures ($52.3 million), non-cash adjustments to inventory based on expected usage ($18.2 million), charges related to a ruling on a foreign tax matter ($6.8 million), severance charges ($6.7 million), non-cash charges related to the impairment of a trade name ($3.3 million), contingent consideration expense related to acquisition earn outs, net of reversals ($2.4 million), the impact of hyperinflation in Argentina ($2.2 million), income related to non-United States governmental wage subsidies ($1.1 million) and other miscellaneous expenses.
Our covenant requirements and actual ratios for the twelve months ended December 27, 2024 are as follows: | | | | | | | | | | | |
| Covenant
Requirement | | Actual
Ratio |
Consolidated Secured Debt Ratio(1) | ≤ 5.125x | | 2.58x |
Interest Coverage Ratio (Fixed Charge Coverage Ratio)(2) | ≥ 2.000x | | 3.95x |
(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, not to exceed 5.125x. Consolidated total indebtedness secured by a lien is defined in the Credit Agreement as total indebtedness consisting of debt for borrowed money, finance leases, debt in respect of sales-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 our Credit Agreement (other than the lenders in respect of ASI's United States Term B Loans, which lenders do not benefit from the maximum Consolidated 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 certain 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 (1) incur additional indebtedness, other than the incremental capacity provided for under our Credit Agreement and pursuant to certain specified exceptions, and (2) make certain restricted payments, other than pursuant to certain specified exceptions. However, any failure to maintain the minimum Interest Coverage Ratio would not result in a default or an event of default under either the Credit Agreement or the indentures governing the senior notes. The minimum Interest Coverage Ratio is at least 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 and for certain non-cash or nonrecurring interest expense. The indentures governing our senior notes include a similar requirement which is referred to as a Fixed Charge Coverage Ratio.
We and our subsidiaries and affiliates may from time to time, in our 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.
Supplemental Consolidating Information
Pursuant to Regulation S-X Rule 13-01, which simplifies certain disclosure requirements for guarantors and issuers of guaranteed securities, we are not required to provide condensed consolidating financial statements for Aramark and its subsidiaries, including the guarantors and non-guarantors under our Credit Agreement and the indentures governing our senior notes. ASI, the borrower under our Credit Agreement and the indentures governing our senior notes, and its restricted subsidiaries together comprise substantially all of our assets, liabilities and operations, and there are no material differences between the consolidating information related to Aramark and Aramark Intermediate Holdco Corporation, the direct parent of ASI and a guarantor under our Credit Agreement, on the one hand, and ASI and its restricted subsidiaries on a standalone basis, on the other hand.
Other
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 condensed consolidated financial statements. We insure portions of our risk related to general liability, automobile liability, workers’ compensation liability claims as well as certain property damage risks through a wholly owned captive insurance subsidiary (the "Captive") as part of our approach to risk finance. The Captive is subject to the regulations within its domicile of Bermuda, including regulations established by the Bermuda Monetary Authority (the "BMA") relating to levels of liquidity and solvency as such concepts are defined by the BMA. The Captive was in compliance with these regulations as of December 27, 2024. These regulations may have the effect of limiting our ability to access certain cash and cash equivalents held by the Captive for uses other than for the payment of our general liability, automobile liability, workers’ compensation liability, certain property damage and related Captive costs. As of December 27, 2024 and September 27, 2024, cash and cash equivalents at the Captive were $98.7 million and $94.7 million, respectively. The Captive also invests in United States Treasury securities where the amount as of December 27, 2024 and September 27, 2024 was $42.8 million and $42.3 million, respectively, and is recorded in "Prepayments and other current assets" on the Condensed Consolidated Balance Sheets.
Critical Accounting Policies and Estimates
Our significant accounting policies are described in the notes to the audited consolidated financial statements included in our Annual Report on Form 10-K, filed with the SEC on November 19, 2024. For a more complete discussion of the critical accounting policies and estimates that we have identified in the preparation of our condensed consolidated financial statements,
please refer to our Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, filed with the SEC on November 19, 2024.
In preparing our financial statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts of assets, liabilities, revenue 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.
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 Standard Updates
See Note 1 to the condensed consolidated financial statements for a full description of recent accounting standard updates, including the expected dates of adoption.
Item 3. 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 market risk associated with debt obligations as of December 27, 2024 has not materially changed from September 27, 2024 (see Part II, Item 7A "Quantitative and Qualitative Disclosure About Market Risk" in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024 filed with the SEC on November 19, 2024). See Note 3 to the condensed consolidated financial statements related to the changes in our debt levels. See Note 4 to the condensed consolidated financial statements for a discussion of our derivative instruments and Note 11 for the disclosure of the fair value and related carrying value of our debt obligations as of December 27, 2024.
Item 4. Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our 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 our Chief Executive Officer and Chief Financial Officer, concluded that our 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 us 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 our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosures. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. No change in our internal control over financial reporting occurred during our first quarter of fiscal 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
Item 1. Legal Proceedings
From time to time, we and our subsidiaries are party to various legal actions, proceedings and investigations involving claims incidental to the conduct of our business, including those brought by clients, customers, 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, ESG-related non-financial disclosure 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, we do not believe that any such actions, proceedings or investigations are likely to be, individually or in the aggregate, material to our 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 our business, financial condition, results of operations or cash flows.
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 December 27, 2024.
See Note 9 to the condensed consolidated financial statements.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024 filed with the SEC on November 19, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Share repurchase activity during the three months ended December 27, 2024 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares (or Units) Purchased(1) | | Average Price Paid Per Share (or Units)(2) | | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(1) | | Approximate Dollar Value of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs(1) (in thousands) |
| September 28, 2024 to October 25, 2024 | | — | | | — | | | — | | | — | |
| October 26, 2024 to November 22, 2024 | | — | | | — | | | — | | | — | |
| November 23, 2024 to December 27, 2024 | | 24,743 | | | $ | 37.48 | | | 24,743 | | | $ | 499,073 | |
| Total | | 24,743 | | | | | 24,743 | | | |
(1) On November 5, 2024, our Board of Directors approved a share repurchase program under which we are authorized to repurchase up to $ million of our outstanding common stock. The share repurchase program does not have a fixed expiration date and may be terminated at any time.
(2) Average price paid per share includes costs associated with the repurchases.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the three months ended December 27, 2024, , or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).
Item 6. Exhibits
See the Exhibit Index which is incorporated herein by reference.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 4, 2025. | | | | | | | | | | | | | | | | | | | | |
| | | | Aramark |
| | | |
| | | | By: | | /s/ CHRISTOPHER T. SCHILLING |
| | | | Name: | | Christopher T. Schilling |
| | | | Title: | | Senior Vice President, Controller and Chief Accounting Officer
(Principal Accounting Officer and Authorized Signatory) |
Exhibit Index | | | | | | | | |
| Exhibit No. | | Description |
| | |
| | |
| | |
| | The following financial information from Aramark's Quarterly Report on Form 10-Q for the period ended December 27, 2024 formatted in inline XBRL: (i) Condensed Consolidated Balance Sheets as of December 27, 2024 and September 27, 2024; (ii) Condensed Consolidated Statements of Income for the three months ended December 27, 2024 and December 29, 2023; (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended December 27, 2024 and December 29, 2023; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended December 27, 2024 and December 29, 2023; (v) Condensed Consolidated Statements of Stockholders' Equity for the three months ended December 27, 2024 and December 29, 2023; and (vi) Notes to condensed consolidated financial statements. |
| 104 | | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q; included in Exhibit 101 Inline XBRL document set. |
* Filed herewith.
The XBRL instance document does not appear in the interactive data file because the XBRL tags are embedded within the inline XBRL document.
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.
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