Aramark - Quarter Report: 2024 June (Form 10-Q)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARAMARK AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

Three Months Ended

Nine Months Ended

June 28, 2024

June 30, 2023

June 28, 2024

June 30, 2023

Net income from Continuing Operations

Income from Discontinued Operations, net of tax

Net income

Other comprehensive (loss) income, net of tax

Foreign currency translation adjustments

()

Fair value of cash flow hedges

()

Share of equity investee's comprehensive income

Other comprehensive (loss) income, net of tax

()

Comprehensive income

Less: Net (loss) income attributable to noncontrolling interests

()

Comprehensive income attributable to Aramark stockholders

Proceeds from sale of equity investments

Other investing activities

() Net cash (used in) provided by investing activities of Continuing Operations() Cash flows from financing activities of Continuing Operations:

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

Other financing activities

()()Net cash (used in) provided by financing activities of Continuing Operations() Discontinued Operations:Net cash provided by operating activities Net cash used in investing activities ()Net cash used in financing activities ()Net cash provided by Discontinued Operations Effect of foreign exchange rates on cash and cash equivalents and restricted cash() (Decrease) Increase in cash and cash equivalents and restricted cash() Cash and cash equivalents and restricted cash, beginning of period Cash and cash equivalents and restricted cash, end of period$ $

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Supplemental disclosure of cash flow information	Nine Months Ended
(in millions)	June 28, 2024	June 30, 2023
Interest paid	$	$
Income taxes paid

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated Balance Sheets:


Balance Sheet classification
(in thousands)	June 28, 2024	June 30, 2023
Cash and cash equivalents	$	$
Restricted cash in Prepayments and other current assets
Cash and cash equivalents in Current assets of discontinued operations
Total cash and cash equivalents and restricted cash	$	$

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARAMARK AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(in thousands)

Total Stockholders' Equity

Common Stock

Capital Surplus

Retained Earnings

Accumulated Other
Comprehensive Loss

Treasury Stock

Balance, September 29, 2023

()

Net income attributable to Aramark stockholders

Other comprehensive loss

()

Capital contributions from issuance of common stock

Share-based compensation expense

Repurchases of common stock

()

Separation of Uniform Segment (see Note 2)

()

Payments of dividends ($ per share)

()

Balance, December 29, 2023

()

Net income attributable to Aramark stockholders

Other comprehensive loss

()

Capital contributions from issuance of common stock

Share-based compensation expense

Purchase of noncontrolling
interest

()

Repurchase of common stock

()

Separation of Uniform Segment (see Note 2)

Payments of dividends ($ per share)

()

Balance, March 29, 2024

()

Net income attributable to Aramark stockholders

Other comprehensive loss

()

Capital contributions from issuance of common stock

Share-based compensation expense

Repurchase of common stock

()

Payments of dividends ($ per share)

()

Balance, June 28, 2024

()

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARAMARK AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(in thousands)

Total Stockholders' Equity

Common Stock

Capital Surplus

Retained Earnings

Accumulated Other
Comprehensive Loss

Treasury Stock

Balance, September 30, 2022

()

Net income attributable to Aramark stockholders

Other comprehensive income

Capital contributions from issuance of common stock

Share-based compensation expense

Repurchases of common stock

()

Payments of dividends ($ per share)

()

Balance, December 30, 2022

()

Net income attributable to Aramark stockholders

Other comprehensive loss

()

Capital contributions from issuance of common stock

Share-based compensation expense

Repurchase of common stock

()

Payments of dividends ($ per share)

()

Balance, March 31, 2023

()

Net income attributable to Aramark stockholders

Other comprehensive income

Capital contributions from issuance of common stock

Share-based compensation expense

Repurchase of common stock

()

Payments of dividends ($ per share)

()

Balance, June 30, 2023

()

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1.

-country footprint. The Company also provides services on a more limited basis in several additional countries and in offshore locations. The Company operates its business in reportable segments that share many of the same operating characteristics: Food and Support Services United States ("FSS United States") and Food and Support Services International ("FSS International").

On September 30, 2023, the Company completed the previously announced separation and distribution of its Aramark Uniform and Career Apparel ("Uniform") segment into an independent publicly traded company, Vestis Corporation ("Vestis"), and the historical results of the Uniform segment have been reflected as discontinued operations in the Company's condensed consolidated financial statements for all periods prior to the separation and distribution. Assets and liabilities associated with the Uniform segment are classified as assets and liabilities of discontinued operations in the Company's Condensed Consolidated Balance Sheet as of September 29, 2023. Additional disclosures regarding the separation and distribution are provided in Note 2.

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

$ Foreign currency translation adjustments () Fair value of cash flow hedges() () () Share of equity investee's comprehensive income () Other comprehensive (loss) income() () () Comprehensive income Less: Net (loss) income attributable to noncontrolling interests() Comprehensive income attributable to Aramark stockholders$ $ Nine Months EndedJune 28, 2024June 30, 2023Pre-Tax AmountTax EffectAfter-Tax AmountPre-Tax AmountTax EffectAfter-Tax AmountNet income $ $ Foreign currency translation adjustments() () () Fair value of cash flow hedges() ()() ()Share of equity investee's comprehensive income () Other comprehensive (loss) income () () () Comprehensive income Less: Net loss attributable to noncontrolling interests()()Comprehensive income attributable to Aramark stockholders$ $ $ $()$ $ $()$ Trade names () () $ $()$ $ $()$

Amortization of intangible assets for the nine months ended June 28, 2024 and June 30, 2023 was $ million and $ million, respectively.

NOTE 5.

$ Senior secured term loan facility, due April 2026 Senior secured term loan facility, due January 2027 Senior secured term loan facility, due April 2028 Senior secured term loan facility, due June 2030

% senior notes, due April 2025

% senior notes, due April 2025(1)

% senior notes, due May 2025

% senior notes, due February 2028

Receivables Facility, due July 2026 Finance leases Other Less—current portion()()$ $


(1)			This is a Euro denominated borrowing.

As of June 28, 2024, the Company had approximately $ million of outstanding foreign currency borrowings.

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

million of availability under the senior secured revolving credit facility.

As of June 28, 2024, the % Senior Notes due April 1, 2025 and % Senior Notes due April 1, 2025 mature within one year. The Company intends to repay, redeem or otherwise refinance the outstanding obligations related to these securities.

Senior Secured Credit Agreement

On March 27, 2024, the Company amended its existing Credit Agreement (“Amendment No. 14”), to provide for, among other things, the repricing of all the United States dollar denominated Term B-5 Loans previously outstanding under the Credit Agreement (“U.S. Term B-5 Loans due 2028”) and the repricing of all the United States dollar denominated Term B-6 Loans previously outstanding under the Credit Agreement (“U.S. Term B-6 Loans due 2030”).

As a result of the Amendment No. 14, (i) U.S. Term B-5 Loans due 2028 previously outstanding under the Credit Agreement were replaced with new United States dollar denominated Term B-7 Loans (“U.S. Term B-7 Loans due 2028”) in an amount equal to $ million due in April 2028 and (ii) U.S. Term B-6 Loans due 2030 previously outstanding under the Credit Agreement were replaced with the new United States dollar denominated Term B-8 Loans (“U.S. Term B-8 Loans due 2030”) in an amount equal to $ million due in June 2030, each with an interest rate equal to the sum of (a) the Term SOFR Rate (as defined in the Credit Agreement) plus (b) an applicable margin of % plus (c) a credit spread adjustment of % (as compared to the interest rate for the U.S. Term B-5 Loans due 2028 and the U.S. Term B-6 Loans due 2030 equal to the sum of (a) the Term SOFR Rate plus (b) an applicable margin of % plus (c) a credit spread adjustment between % and % (depending on the selected interest period)).

The U.S. Term B-7 Loans due 2028 do not require any quarterly repayments of the principal amount and require the payment of $ million at maturity. The U.S. Term B-8 Loans due 2030 require repayment of principal in quarterly installments of $ million from March 31, 2024 through March 31, 2030 and $ million at maturity.

The Company capitalized $ million of transaction costs directly attributable to the repricings in Amendment No. 14, which are included in “Long-Term Borrowings” on the Condensed Consolidated Balance Sheet as of June 28, 2024. Amounts paid for capitalized transaction costs are included within “Other financing activities” on the Condensed Consolidated Statement of Cash Flows for the nine months ended June 28, 2024. Additionally, the Company recorded $ million of charges to "Interest Expense, net" on the Condensed Consolidated Statements of Income for the nine months ended June 28, 2024, consisting of a $ million non-cash loss for the write-off of unamortized deferred financing costs and discount on the U.S. Term B-5 Loans due 2028 and U.S. Term B-6 Loans due 2030 and the payment of $ million of transaction costs related to the repricings.

6.375% Senior Notes due 2025 Repayment

On October 2, 2023, the Company repaid the $ million % 2025 Notes in conjunction with the separation and distribution of the Uniform segment (see Note 2). The Company recorded $ million of charges to "Interest Expense, net" in the Condensed Consolidated Statements of Income for the nine months ended June 28, 2024, consisting of the payment of a $ million call premium and a $ million non-cash loss for the write-off of unamortized deferred financing costs on the % 2025 Notes. The amount paid for the call premium is included within "Other financing activities" on the Condensed Consolidated Statements of Cash Flows for the nine months ended June 28, 2024.

NOTE 6.

billion notional amount of outstanding interest rate swap agreements as of June 28, 2024, which fix the rate on a like amount of variable rate borrowings with varying maturities through December of fiscal 2028. During the second quarter of fiscal 2024, $ million notional amount of previously forward starting interest rate swap agreements to hedge the cash flow risk of variability in interest payments on variable rate borrowings became effective.

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

million and $ million, respectively, of unrealized net of tax gains related to the interest rate swaps were included in "Accumulated other comprehensive loss" on the Condensed Consolidated Balance Sheets. $ $ $ $ Interest rate swap agreementsOther Assets )$()$()$()

As of June 28, 2024, the Company has a Euro denominated term loan in the amount of € million. The term loan was designated as a hedge of the Company's net Euro currency exposure represented by certain holdings in the Company's European affiliates.

At June 28, 2024, 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 $ million.

NOTE 7.

performance obligation, which is satisfied over time. The Company primarily accounts for its performance obligations under the series guidance, using the as-invoiced practical expedient when applicable. The Company applies the right to invoice practical expedient to record revenue as the services are provided, given the nature of the services provided and the frequency of billing under the customer contracts. Under this practical expedient, the Company recognizes revenue in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date and for which the Company has the right to invoice the customer. Certain arrangements include performance obligations which include variable consideration (primarily per transaction fees). For these arrangements, the Company does not need to estimate the variable consideration for the contract and allocate to the entire performance obligation; therefore, the variable fees are recognized in the period they are earned.

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

$ $ $ Education

Healthcare(1)

Sports, Leisure & Corrections

Facilities & Other(1)

Total FSS United States FSS International: Europe Rest of World Total FSS International Total Revenue$ $ $ $


(1)			Beginning in fiscal 2024, management began reporting results for healthcare facility services within "Healthcare", whereas the results were previously reported within "Facilities & Other". As such, the "Healthcare" and "Facilities & Other" results for the three and nine months ended June 30, 2023 were recast to reflect this change.

Contract Balances

Deferred income is recognized in "Accrued expenses and other current liabilities" on the Condensed Consolidated Balance Sheets when the Company has received consideration, or has the right to receive consideration, in advance of the transfer of the performance obligation of the contract to the customer, primarily prepaid meal plans. The consideration received remains a liability until the goods or services have been provided to the customer. The Company classifies deferred income as current as the deferred income is expected to be recognized in the next 12 months. If the Company cannot render its performance obligation according to contract terms after receiving the consideration in advance, amounts may be contractually required to be refunded to the customer.

During the nine months ended June 28, 2024, deferred income increased related to customer prepayments and decreased related to income recognized during the period as a result of satisfying the performance obligation or return of funds related to non-performance. For the nine months ended June 28, 2024, the Company recognized $ million of revenue that was included in deferred income at the beginning of the period. $

NOTE 8.

million 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.

During the nine months ended June 30, 2023, the Company recorded a benefit to the "Provision for Income Taxes from Continuing Operations" on the Condensed Consolidated Statements of Income of $ million for the reversal of a valuation allowance at a foreign subsidiary driven by the Company's ability to utilize the deferred tax assets based on future taxable income expected due to the acquisition of a business.

NOTE 9.

dividend per share of common stock, payable on September 3, 2024, to stockholders of record on the close of business on August 19, 2024.

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

million shares of preferred stock authorized, with a par value of $ per share. At June 28, 2024 and September 29, 2023, shares of preferred stock were issued or outstanding.

NOTE 10.

period ending September 27, 2024, two-thirds of these PSUs became subject to new adjusted performance targets and an adjusted performance period for the period ending September 29, 2023 and the remaining one-third of these PSUs will be subject to new adjusted performance targets for the period ending September 27, 2024. The PSUs granted in fiscal 2023, which were subject to performance targets for the period ending October 3, 2025, were amended to be subject to adjusted performance targets primarily to reflect the Company on a post-spin off basis. The Committee also approved adjustments increasing the maximum aggregate number of shares authorized for awards under the 2023 Stock Plan by an additional million shares. $ $ $ TBO-Rs RSUs PSUs Deferred Stock Units

ESPP(1)

$ $ $ $ Taxes related to share-based compensation$ $ $ $ Cash Received from Option Exercises/ESPP Purchases Tax Benefit on Share Deliveries


(1)			The Company suspended its ESPP beginning in the second quarter of fiscal 2023.

$ RSUs $ PSUs $

NOTE 11.

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

$ $ $ Income from Discontinued Operations, net of tax Net income attributable to Aramark stockholders$ $ $ $ Shares:

Basic weighted-average shares outstanding

Effect of dilutive securities

Diluted weighted-average shares outstanding

Basic earnings per share attributable to Aramark stockholders:Income from Continuing Operations$ $ $ $ Income from Discontinued Operations Basic earnings per share attributable to Aramark

stockholders

$ $ $ $ Diluted earnings per share attributable to Aramark stockholders:Income from Continuing Operations$ $ $ $ Income from Discontinued Operations Diluted earnings per share attributable to Aramark

stockholders

$ $ $ $

PSUs(2)


(1)			Share-based awards were not included in the computation of diluted earnings per common share, as their effect would have been antidilutive.
(2)			PSUs were not included in the computation of diluted earnings per common share, as the performance targets were not yet met.

NOTE 12.

, contain provisions related to residual value guarantees. The maximum potential liability to the Company under such arrangements was approximately $ million at June 28, 2024 if the terminal fair value of vehicles coming off lease was . Consistent with past experience, management does not expect any significant required payments pursuant to these arrangements. amounts have been accrued for the guarantee arrangements at June 28, 2024.

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, customers, 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,

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 13.

reportable segments: FSS United States and FSS International. Corporate includes general expenses not specifically allocated to an individual segment and share-based compensation expense (see Note 10). Approximately % of the global revenue is related to food services and % is related to facilities services. During the nine months ended June 30, 2023, the Company received proceeds of $ million relating to the recovery of the Company's investment (possessory interest) at of the National Park Service sites within the FSS United States segment. The Company recorded a gain related to the recovery of its investment, which is included in "Cost of services provided (exclusive of depreciation and amortization)" on the Condensed Consolidated Statements of Income. $ $ $ FSS International Total Revenue$ $ $ $ $ $ $ FSS International Total Segment Operating Income Corporate()()()()Total Operating Income$ $ $ $

Three Months Ended

Nine Months Ended

Reconciliation to Income from Continuing Operations Before Income Taxes

June 28, 2024

June 30, 2023

June 28, 2024

June 30, 2023

Total Operating Income

Gain on Sale of Equity Investments, net

()

Interest Expense, net

Income from Continuing Operations Before Income Taxes

NOTE 14.

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The fair value of the Company's debt at June 28, 2024 and September 29, 2023 was $ million and $ million, respectively. The carrying value of the Company's debt at June 28, 2024 and September 29, 2023 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 based on the fair value of the expected payments with a separate amount that was accounted for as compensation expense and recognized on the Condensed Consolidated Statements of Income over the earnout period. The Company performed a fair value assessment of the contingent consideration obligation based on the terms and conditions of the Union Supply purchase agreement, using internal models. The inputs utilized in estimating the fair value of the contingent consideration have been classified as Level 3 in the fair value hierarchy levels and are subject to risk and uncertainty. The calculation of fair value is dependent on several subjective factors including the determination of earnings and profitability. If assumptions or estimates vary from what was expected, the fair value of the contingent consideration liability may materially change. During the nine months ended June 30, 2023, the Company adjusted the contingent consideration liability to the fair value of the future expected payment, resulting in income of $ million, which is comprised of the adjusted contingent consideration liability recorded as part of the acquisition and reversal of a portion of compensation expense previously recognized in the Condensed Consolidated Statements of Income since the acquisition. The income is included in "Cost of services provided (exclusive of depreciation and amortization)" on the Condensed Consolidated Statements of Income. The contingent consideration liability at June 28, 2024 and September 29, 2023 was $ million and $ million, respectively.

As part of the Next Level acquisition completed in fiscal 2021, the Company recorded a contingent consideration obligation based on the fair value of the expected payments. The Company performed a fair value assessment of the contingent consideration obligation based on the terms and conditions of the Next Level purchase agreement, as amended, using internal models. The inputs utilized in estimating the fair value of the contingent consideration have been classified as Level 3 in the fair value hierarchy levels and are subject to risk and uncertainty. During the nine months ended June 30, 2023, the Company adjusted the contingent consideration liability to the fair value of the future expected payment, resulting in income 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 fair value of the contingent consideration liability at June 28, 2024 and September 29, 2023 was .

NOTE 15.

billion, terminating in August 2029, (ii) new Canadian Term A-4 Loans in an amount equal to C$ million, due in August 2029, (iii) new Euro Term A-3 Loans in an amount equal to € million, due in August 2029, (iv) new U.S. Term A Loans in an amount equal to $ million, due in August 2029, (v) new U.S. Term A-1 Loans in an amount equal to $ million, due in August 2029 and (vi) new GBP Term A Loans in an amount equal to £ million, due in August 2029. The new Term A Loans were applied by the Company to refinance in full the Canadian Term A-3 Loans and Euro Term A-2 Loans and are subject to customary springing maturity provisions with respect to the U.S. Term B-7 Loans and the % Senior Notes due 2028, as further specified in Amendment No. 15.

The new 2024 Tranche Revolving Commitments bear interest at a rate equal to, at the Company’s option, depending on the currency of the loans borrowed under the new 2024 Tranche Revolving Commitments, either (a) a Term CORRA rate, (b) a Term SOFR rate, (c) a EURIBOR rate, (d) Canadian base rate determined by the higher of (1) prime rate of the administrative agent or (2) the Term CORRA rate plus %, (e) base rate determined by the highest of (1) the prime rate of the administrative agent, (2) the federal funds rate plus % or (3) the Term SOFR rate plus %, or (f) a SONIA rate plus an applicable margin set initially at % for borrowings based on the Term CORRA rate, Term SOFR rate and EURIBOR rate, % for borrowings based on the SONIA rate and % for borrowings based on the Canadian base rate or base rate, in

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

%, subject to a reduction upon the Company achieving improvement in the consolidated leverage ratio.

The new Canadian Term A-4 Loans bear interest at a rate equal to, at the Company’s option, either (a) a Term CORRA rate or (b) a base rate or Canadian base rate determined by reference to the higher of (1) the prime rate of the administrative agent and (2) the Term CORRA rate plus % plus an applicable margin set initially at % for borrowings based on the Term CORRA rate and % for borrowings based on the Canadian base rate, in each case, subject to a reduction upon the Company achieving improvement in the consolidated leverage ratio.

The new Euro Term A-3 Loans bear interest at a rate equal to a EURIBOR rate plus an applicable margin set initially at %, subject to a reduction upon the Company achieving improvement in the consolidated leverage ratio.

The new U.S. Term A Loans and new U.S. Term A-1 Loans bear interest at a rate determined by reference to either (a) a Term SOFR rate 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 % or (3) the Term SOFR rate plus %, plus an applicable margin set initially at %, subject to a reduction upon the Company achieving improvement in the consolidated leverage ratio.

The new GBP Term A Loans bear interest at a rate equal to a SONIA rate plus an applicable margin set initially at %, subject to a reduction upon the Company achieving improvement in the consolidated leverage.

The Canadian Term A-4 Loans, Euro Term A-3 Loans, U.S. Term A Loans, U.S. Term A-1 Loans and GBP Term A Loans require repayment of principal in quarterly installments equal to % of the original principal amount funded on the Closing Date, respectively, with the remainder due at maturity.

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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 and nine months ended June 28, 2024 and June 30, 2023 should be read in conjunction with our audited consolidated financial statements and the notes to those statements for the fiscal year ended September 29, 2023 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on November 21, 2023.

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 core market is the United States, which is supplemented by an additional 14-country footprint. 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 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. Administrative expenses not allocated to our two reportable segments are presented separately as corporate expenses.

On September 30, 2023, we completed the previously announced separation and distribution of our Aramark Uniform and Career Apparel ("Uniform") segment into an independent publicly traded company, Vestis Corporation ("Vestis"), and the historical results of the Uniform segment have been reflected as discontinued operations in our condensed consolidated financial statements for all periods prior to the separation and distribution. Assets and liabilities associated to the Uniform segment are classified as assets and liabilities of discontinued operations in our Condensed Consolidated Balance Sheet as of September 29, 2023. Additional disclosures regarding the separation and distribution are provided in Note 2 to the condensed consolidated financial statements.

Current Business Environment

We continue to see improving inflation trends where inflationary costs in product, energy and labor have moderated over the first nine months of fiscal 2024, particularly in the United States. In addition, we continue to see elevated market interest rates and significant changes 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.

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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 years ending September 27, 2024 and September 29, 2023 are both fifty-two week periods.

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 and nine months ended June 28, 2024 and June 30, 2023 (in millions).


	Three Months Ended				Change
	June 28, 2024		June 30, 2023		$		%
Revenue	$	4,376.1	$	4,053.0	$	323.1	8.0	%
Costs and Expenses:
Cost of services provided (exclusive of depreciation and amortization)	4,040.8		3,754.5		286.3		7.6	%
Other operating expenses	173.6		165.9		7.7		4.5	%
	4,214.4		3,920.4		294.0		7.5	%
Operating income	161.7		132.6		29.1		22.0	%
Gain on Sale of Equity Investments, net	—		(376.0)		376.0		100.0	%
Interest Expense, net	81.5		112.4		(30.9)		(27.4)	%
Income from Continuing Operations Before Income Taxes	80.2		396.2		(316.0)		(79.8)	%
Provision for Income Taxes from Continuing Operations	22.1		109.5		(87.4)		(79.8)	%
Net income from Continuing Operations	$	58.1	$	286.7	$	(228.6)	(79.7)	%


	Three Months Ended				Change
Revenue by Segment(1)	June 28, 2024		June 30, 2023		$		%
FSS United States	$	3,144.5	$	2,890.6	$	253.9	8.8	%
FSS International	1,231.6		1,162.4		69.2		6.0	%
	$	4,376.1	$	4,053.0	$	323.1	8.0	%

	Three Months Ended				Change
Operating Income by Segment	June 28, 2024		June 30, 2023		$		%
FSS United States	$	140.1	$	123.5	$	16.6	13.4	%
FSS International	52.3		39.6		12.7		32.1	%
Corporate	(30.7)		(30.5)		(0.2)		(0.3)	%
	$	161.7	$	132.6	$	29.1	22.0	%

(1) As a percentage of total revenue, FSS United States represented 71.9% and 71.3% and FSS International represented 28.1% and 28.7% for the three months ended June 28, 2024 and June 30, 2023, respectively.

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	Nine Months Ended				Change
	June 28, 2024		June 30, 2023		$		%
Revenue	$	12,983.8	$	11,882.9	$	1,100.9	9.3	%
Costs and Expenses:
Cost of services provided (exclusive of depreciation and amortization)	11,955.1		10,967.7		987.4		9.0	%
Other operating expenses	541.0		505.6		35.4		7.0	%
	12,496.1		11,473.3		1,022.8		8.9	%
Operating income	487.7		409.6		78.1		19.1	%
Gain on Sale of Equity Investments, net	—		(376.0)		376.0		100.0	%
Interest Expense, net	282.4		326.9		(44.5)		(13.6)	%
Income from Continuing Operations Before Income Taxes	205.3		458.7		(253.4)		(55.2)	%
Provision for Income Taxes from Continuing Operations	65.7		119.9		(54.2)		(45.3)	%
Net income from Continuing Operations	$	139.6	$	338.8	$	(199.2)	(58.8)	%

Pro forma EBITDA for certain transactions(3)

2.4

Other(4)

106.8

Covenant Adjusted EBITDA

$1,307.1

(1) Represents share-based compensation expense resulting from the application of accounting for stock options, restricted stock units, performance stock units, deferred stock unit awards and employee stock purchases (see Note 10 to the condensed consolidated financial statements).

(2) Represents 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 ($51.8 million), charges related to our spin-off of the Uniform segment ($42.0 million), income related to non-United States governmental wage subsidies ($13.6 million), the reversal of contingent consideration liabilities related to acquisition earn outs, net of expense ($12.8 million), net severance charges ($10.1 million), the impact of hyperinflation in Argentina ($8.9 million), non-cash charges for inventory write-downs ($6.1 million), non-cash charges related to the impairment of a trade name ($3.3 million), non-cash charges related to information technology assets ($2.1 million), multiemployer pension plan withdrawal charges ($2.0 million) and other miscellaneous expenses.

Our covenant requirement and actual ratio for the twelve months ended June 28, 2024 are as follows:


	Covenant Requirement	Actual Ratio
Consolidated Secured Debt Ratio(1)	≤ 5.125x	2.69x
Interest Coverage Ratio (Fixed Charge Coverage Ratio)(2)	≥ 2.000x	3.69x

(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 U.S. 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.

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(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 (1) incur additional indebtedness, other than the incremental capacity provided for under our Credit Agreement and pursuant to specified exceptions, and (2) make certain restricted payments, other than pursuant to certain 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 our Credit Agreement as consolidated interest expense excluding interest income, adjusted for acquisitions and dispositions, further adjusted 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 in 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 June 28, 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 June 28, 2024 and September 29, 2023, cash and cash equivalents at the Captive were $15.7 million and $32.8 million, respectively. The Captive also invests in United States Treasury securities where the amount as of June 28, 2024 and September 29, 2023 was $114.3 million and $110.7 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 21, 2023. 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 21, 2023.

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.

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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 June 28, 2024 has not materially changed from September 29, 2023 (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 29, 2023 filed with the SEC on November 21, 2023). However, we completed several debt related transactions during the nine month period of fiscal 2024 that significantly reduced our consolidated debt and the applicable margin used to calculate our interest expense. As a result, we reduced our related exposure to this market risk. During the first quarter of fiscal 2024, we redeemed the 6.375% Senior Notes due 2025 of $1,500.0 million from the proceeds received in conjunction with the separation and distribution of the Uniform segment. In addition, the Uniform segment United States term loans of $800.0 million due 2025 and $700.0 million due 2028 were removed from our condensed consolidated financial statements as a result of the separation and distribution of the Uniform segment on September 30, 2023. During the second quarter of fiscal 2024, we entered into Amendment No. 14 to the Credit Agreement, which provides for a reduction of the applicable margin for U.S. denominated Term B Loans. As of June 28, 2024, the 5.000% Senior Notes due April 1, 2025 and 3.125% Senior Notes due April 1, 2025 mature within one year. We intend to repay, redeem or otherwise refinance the outstanding obligations related to these securities. On August 2, 2024, we entered into Amendment No. 15 to the Credit Agreement, which refinanced and replaced our approximately $1.2 billion multi-currency revolving credit facility and approximately $225 million Term A Loans due April 2026 into an amended $1.4 billion multi-currency revolving credit facility and $500 million Term A Loans, extending the maturity to August 2029, adding revolving credit facility capacity of approximately $250 million, reducing the applicable margin and utilizing the net proceeds from the increased principal amount of Term A Loans to reduce the outstanding revolving credit facility balance by approximately $275 million. See Note 5 and Note 15 to the condensed consolidated financial statements related to the changes in our debt levels. See Note 6 to the condensed consolidated financial statements for a discussion of our derivative instruments and Note 14 for the disclosure of the fair value and related carrying value of our debt obligations as of June 28, 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 third quarter of fiscal 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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, 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, international, 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 June 28, 2024.

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 29, 2023 filed with the SEC on November 21, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

During the three months ended June 28, 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 August 6, 2024.

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
10.1†						Amendment, dated May 29, 2024, to the Letter Agreement dated December 11, 2023, by and between Thomas Ondrof and Aramark (incorporated by reference to exhibit 10.1 to Aramark's Current Report on Form 8-K filed with the SEC on May 29, 224 (file number 001-36223)).
31.1*						Certification of John J. Zillmer, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of James J. Tarangelo, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*						Certification of John J. Zillmer, Chief Executive Officer, and James J. Tarangelo, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101						The following financial information from Aramark's Quarterly Report on Form 10-Q for the period ended June 28 , 2024 formatted in inline XBRL: (i) Condensed Consolidated Balance Sheets as of June 28 , 2024 and September 29, 2023; (ii) Condensed Consolidated Statements of Income for the three and nine months ended June 28 , 2024 and June 30 , 2023; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended Jun e 28 , 2024 and June 30 , 2023; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended June 28 , 2024 and June 30 , 2023; (v) Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended June 28 , 2024 and June 30 , 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.

† Identifies exhibits that consist of management contract or compensatory arrangement.

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.

The XBRL instance document does not appear in the interactive data file because the XBRL tags are embedded within the inline XBRL document.

Aramark - Quarter Report: 2024 June (Form 10-Q)

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