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Aramark: Reports Third Quarter 2017 Earnings

Philadelphia / PA. (arm) Aramark, the 15 billion USD, Fortune 200 global leader in food, facilities management and uniforms, reported third quarter fiscal results.

«Our operating momentum continues as we make consistent progress against our strategic priorities, which led to another quarter of solid performance», said Eric J. Foss, Chairman, President and CEO. «Our results reflect broad-based strength fueled by a constant focus on innovating across the entire portfolio in quality, premium offerings, health + wellness, and technology to create a differentiated experience for Aramark customers».

«Simultaneously, our productivity expansion remains on track and is enabling reinvestment in growth and capability», Foss continued. «Our performance positions us well to achieve our 2017 full-year outlook and to continue driving future shareholder value creation».
1 Constant Currency

Third Quarter Results*

Sales
Q3 ’17 Q3 ’16 Change Organic Change
FSS North America USD2’492M USD2’488M 0.1% 0.4%
FSS International 714 710 1% 4%
Uniform + Career Apparel 388 389 (0.4%) (0.4%)
Total Company USD3’593M USD3’587M 0.2% 1%

.

Operating Income AOI
Q3 ’17 Q3 ’16 Change Q3 ’17 Q3 ’16 Change
FSS North America USD120M USD101M 19% USD142M USD125M 14%
FSS International 26 38 (33)% 36 39 (6)%
Uniform + Career Apparel 45 52 (14)% 46 52 (11)%
Corporate (36) (22) (64%) (15) (14) (11)%
Total Company USD155M USD169M (9)% USD209M USD201M 4%
Effect of Currency Translation 1
Constant Currency AOI USD210M

* May not total due to rounding.

Consolidated revenues were USD 3.6 billion in the quarter, an organic increase of 1 percent over the prior-year period.  The North America segment was positively impacted by growth in Sports, Leisure and Corrections, Business + Industry and Education.  The International segment delivered strong, broad-based organic growth, while Uniform sales were down modestly as expected.

The Company drove strong productivity improvements in North America and International base accounts, while continuing to reinvest in technology and capabilities.  International margins were also impacted by the timing of certain expenses, as well as the timing of the Easter holiday. Uniform income was impacted by installation costs related to the onboarding of new business.

Third Quarter Summary

On a GAAP basis, sales were USD 3.6 billion, operating income was USD 155 million, net income attributable to Aramark stockholders was USD 65 million and diluted earnings per share were USD 0.26.  This compares to the third quarter of 2016 where, on a GAAP basis, sales were USD 3.6 billion, operating income was USD 169 million, net income attributable to Aramark stockholders was USD 45 million and diluted earnings per share were USD 0.18.  Third quarter GAAP diluted earnings per share increased 44 percent year-over-year. Tax expense benefited from the results of tax planning efforts and the adoption of new accounting standards related to share-based compensation.

Adjusted net income was USD 100 million or USD 0.40 per share, versus adjusted net income of USD 84 million or USD 0.34 per share in the third quarter of 2016.  A stronger U.S. dollar decreased sales by approximately USD 33 million, but had no material impact on operating income or earnings per share.

Capital Structure + Liquidity

Total trailing 12-month net debt to covenant adjusted Ebitda was 3.8x, a 10 basis point reduction versus the prior year measurement.  Corporate liquidity remains strong, and at quarter-end the company had approximately USD 1.0 billion in cash and availability on its revolving credit facility.

2017 Outlook

The Company provides its expectations for full-year adjusted EPS and full-year free cash flow on a non-GAAP basis, and does not provide a reconciliation of such forward-looking non-GAAP measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for the impact of the change in fair value related to certain gasoline and diesel agreements, severance and other charges and the effect of currency translation.

The Company’s outlook for 2017 adjusted EPS remains unchanged within a range of USD 1.90 to USD 2.00 per share, which includes 1 cent of currency headwind.  Further, the Company is now expecting full-year free cash flow of greater than USD 425 million.