Year-to-Date Results
For the first nine months of fiscal 2004, sales increased 10 percent to $7.6
billion. Organic sales growth was 6 percent. Organic growth excludes the impact
of acquisitions, divestitures and foreign currency fluctuations. For the third
fiscal quarter and first nine months of fiscal 2004, organic growth is also
adjusted to reflect the impact of a calendar shift that caused ARAMARK’s
domestic education sector to have one less service week in both the third quarter
and the first nine months of fiscal 2004 compared to the corresponding periods
in fiscal 2003. Income from continuing operations for the first nine months
was $178.5 million as compared to $160.1 million in the prior year period and
diluted earnings per share were $0.92 as compared to $0.81 in the prior year
period. Excluding two non-operating items for the third quarter of last year
– a $4.7 million debt extinguishment charge, net of tax, and the settlement
of certain open tax years that reduced the company’s provision for income
taxes by approximately $8.4 million – year-to-date income from continuing
operations rose 14 percent and diluted earnings per share increased 16 percent.
Chief Executive Officer’s
Comments
“Our performance for the third quarter, as well as for the first nine
months of fiscal 2004, clearly demonstrates that we continue to execute well
on our Mission One growth strategy,” said William Leonard, President and
Chief Executive Officer of ARAMARK. “While we are very pleased with our
strong organic growth across-the-board in both economically sensitive and non-sensitive
businesses, we continue to feel the effects of start up costs and other cost
pressures for some healthcare contracts and increasing labor-related expenses
in all of our lines of business.”
Food and Support Services
In ARAMARK’s Food and Support Services – U.S. segment,
third quarter sales of $1.8 billion were 8 percent higher than the same quarter
a year ago, representing organic sales growth of 9 percent. For the U.S. Food
and Support Services segment, organic growth is adjusted to reflect the impact
of the calendar shift described above on ARAMARK’s domestic education
sector. Segment operating income increased 4 percent to $89.5 million. The impact
of the aforementioned calendar shift reduced the operating income growth rate
by about 3 percentage points.
Sales for the Food and Support Services – International segment rose 31 percent to $475 million compared with the same period last year. The impact of changes in currency translation rates increased reported sales by about 9 percentage points. Organic sales growth for the segment was 5 percent, with Canada, Belgium and Spain delivering particularly strong performances. Operating income in this segment rose to $19.0 million, a 17 percent increase compared with the prior year, with currency translation contributing about 8 percentage points.
Uniform and Career Apparel
In ARAMARK’s Uniform Career Apparel – Rental
segment, sales of $262 million for the third quarter were up 3 percent compared
with the same period in 2003. Organic sales growth was 3 percent. Operating
income of $29.1 million represented a 1 percent increase over the prior year
quarter. Productivity improvements were more than offset by higher vehicle fuel
costs, sales force ramp up and labor-related expenses.
In ARAMARK’s Direct Marketing segment, third quarter sales increased 4 percent to $105 million. Organic growth was also 4 percent. Operating income declined to $2.5 million due to product mix and increased marketing and administrative expenses.
Financial Guidance for
Fourth Quarter and Fiscal Year 2004
In its fourth quarter of fiscal 2003, ARAMARK reported diluted earnings per
share of $0.54. These results included insurance proceeds related to ARAMARK’s
operations at the World Trade Center as well as a loss associated with the disposal
of a residual interest in the Company’s Magazine and Book operations.
Adjusted for these items, earnings per share in the fiscal fourth quarter of
2003 were $0.47. In addition, 2003 was a 53-week year and the financial impact
of that extra week was entirely in last year’s fiscal fourth quarter.
The extra week is estimated to have increased fourth quarter 2003 diluted earnings
per share by roughly 7 to 8 percent.
ARAMARK expects its fourth quarter 2004 earnings will be affected by several factors including contract start-up costs and other cost pressures in its healthcare business. The Company also reduced its expectations for the parks business as a result of the negative publicity surrounding the drought in its western parks. In addition, the recent Federal government investigation concerning export sales at Galls and the resulting uncertainty’s effect on Galls’ business has begun to have an adverse impact on the Uniform – Direct Marketing segment.
ARAMARK expects to report sales of $2.5 to $2.6 billion for the 2004 fourth quarter and diluted earnings per share of $0.46 to $0.48. This fourth quarter estimate implies full year sales of $10.1 to $10.2 billion and diluted earnings per share of $1.38 to $1.40, which is consistent with the original estimate for fiscal year 2004 of $1.38 to $1.44 per share and implies a 52-week EPS growth in the low to mid-teens range, in line with the longer term earnings per share targets.
Conference Call and
Related Financial Information
In conjunction with its third quarter earnings release, ARAMARK will discuss
its results in a conference call broadcast live over the Internet on August
11, 2004 at 10:00 a.m. EST. Interested parties are invited to log on to www.aramark.com
to listen to this webcast. A recording of the conference call will be available
on that website.
The balance sheet, income statement and other financial information related to the third fiscal quarter of 2004 are attached to this press release and can also be found on the Investor Relations section of ARAMARK’s website at www.aramark.com.
Certain previously undisclosed financial information relating to a completed fiscal period, as well as reconciliations of non-GAAP financial measures that are disclosed in the conference call will also be available on the Investor Relations section of ARAMARK’s website.
About ARAMARK
ARAMARK Corporation is a
world leader in providing award-winning food and facilities management services
to health care institutions, universities and school districts, stadiums and
arenas, international and domestic corporations, as well as providing uniform
and career apparel. ARAMARK was ranked number one in its industry in the 2004
FORTUNE 500 survey and was also named one of "America's Most Admired
Companies" by FORTUNE magazine in 2004, consistently ranking since 1998
as one of the top three most admired companies in its industry as evaluated
by peers. Headquartered in Philadelphia, ARAMARK has approximately 200,000 employees
serving clients in 18 countries.
Forward-Looking Statements
This press release includes
“forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 that reflect our current views as to future events and financial
performance with respect to our operations. These statements can be identified
by the fact that they do not relate strictly to historical or current facts.
They use words such as "aim," "anticipate," "estimate," "expect," "will be,"
"will continue," "will likely result," "project," "intend," "plan," "believe"
and other words and terms of similar meaning in conjunction with a discussion
of future operating or financial performance.
These statements are subject to risks and uncertainties that could cause actual
results to differ materially from those expressed or implied in the forward-looking
statements.
Factors that might cause such a difference include: unfavorable economic conditions,
ramifications of any future terrorist attacks or increased security alert levels;
increased operating costs including labor-related and energy costs; shortages
of qualified personnel or increases in labor costs; currency risks and other
risks associated with international markets; risks associated with acquisitions,
including acquisition integration costs; our ability to integrate and derive
the expected benefits from recent acquisitions; competition; decline in attendance
at client facilities; unpredictability of sales and expenses due to contract
terms and terminations; the contract intensive nature of our business, which
may lead to client disputes; high leverage; claims relating to the provision
of food services; costs of compliance with governmental regulations; liability
associated with non-compliance with governmental regulations, including regulations
pertaining to food service , the environment and Federal and state employment
laws and wage and hour laws; inability to retain current clients and renew existing
client contracts; determination by customers to reduce outsourcing and use of
preferred vendors; seasonality and other risks that are set forth in the “Risk
Factors” sections of ARAMARK’s SEC filings.
For further information regarding risks and uncertainties associated with ARAMARK's
business, please refer to the "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and "Risk Factors” and other sections
of ARAMARK's SEC filings, including, but not limited to, our annual report on
Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained
by contacting ARAMARK's investor relations department via its web site www.aramark.com.
Forward-looking statements speak only as of the date made. We undertake no obligation
to update any forward-looking statements to reflect the events or circumstances
arising after the date as of which they are made. As a result of these risks
and uncertainties, readers are cautioned not to place undue reliance on the
forward-looking statements included herein or that may be made elsewhere from
time to time by, or on behalf of, us.
| Contacts: | |
| Media Relations: ARAMARK Corporation Michelle Davidson, 215-238-3523 Davidson-Michelle@aramark.com |
Investor Relations: ARAMARK Corporation Gary Sender, 215-238-3361 Sender-Gary@aramark.com |
| Three
Months Ended |
||
| July 2, 2004 | June 27, 2003 | |
| Sales | $2,594,924 | $2,340,554 |
| Costs and Expenses: | ||
| Cost of services provided | 2,356,471 | 2,118,788 |
| Depreciation and amortization | 74,781 | 66,163 |
| Selling and general corporate expenses | 31,722 | 27,150 |
| 2,462,974 | 2,212,101 | |
| Operating income | 131,950 | 128,453 |
| Interest and other financing costs, net (2) | 30,873 | 40,776 |
| Income from continuing operations before income taxes | 101,077 | 87,677 |
| Provision for income taxes (2) | 36,617 | 23,826 |
| Income from continuing operations | 64,460 | 63,851 |
| Income from discontinued operations, net (1) | - | 25,453 |
| Net income | $64,460 | $89,304 |
| Earnings Per Share - Basic: | ||
| Income from continuing operations | $0.34 | $0.33 |
| Net income | $0.34 | $0.47 |
| Earnings Per Share - Diluted: | ||
| Income from continuing operations | $0.33 | $0.33 |
| Net income | $0.33 | $0.45 |
| Weighted Average Shares Outstanding: | ||
| Basic | 189,446 | 190,727 |
| Diluted | 193,777 | 196,375 |
(1) - The fiscal 2003 condensed consolidated statement of income has been presented to reflect ARAMARK Educational Resources as a discontinued operation.
(2) - In the third quarter of fiscal 2003, ARAMARK completed a tender offer to purchase approximately $94.3 million of its 6.75% Guaranteed Notes due August 1, 2004, for approximately $101.9 million, including accrued interest, and retired a $45 million term loan due March 2005. These two transactions resulted in an extinguishment charge of $7.7 million ($4.7 million net of tax) which is included in "Interest and other financing costs, net" in the accompanying financial schedule. Additionally, in the third quarter of fiscal 2003, ARAMARK reduced the provision for income taxes, based upon the settlement of open tax years, by approximately $8.4 million. Income from continuing operations and diluted earnings per share from continuing operations, excluding the impact of these items, were $60.1 million and $0.31, respectively for the three months ended June 27, 2003.
| Nine
Months Ended |
||
| July 2, 2004 | June 27, 2003 | |
| Sales | $7,571,310 | $6,859,800 |
| Costs and Expenses: | ||
| Cost of services provided | 6,881,367 | 6,228,382 |
| Depreciation and amortization | 218,106 | 192,599 |
| Selling and general corporate expenses | 95,217 | 86,519 |
| 7,194,690 | 6,507,500 | |
| Operating income | 376,620 | 352,300 |
| Interest and other financing costs, net (2) | 92,443 | 110,996 |
| Income from continuing operations before income taxes | 284,177 | 241,304 |
| Provision for income taxes (2) | 105,711 | 81,227 |
| Income from continuing operations | 178,466 | 160,077 |
| Income from discontinued operations, net (1) | - | 35,724 |
| Net income | $178,466 | $195,801 |
| Earnings Per Share - Basic: | ||
| Income from continuing operations | $0.94 | $0.84 |
| Net income | $0.94 | $1.02 |
| Earnings Per Share - Diluted: | ||
| Income from continuing operations | $0.92 | $0.81 |
| Net income | $0.92 | $0.99 |
| Weighted Average Shares Outstanding: | ||
| Basic | 189,131 | 191,383 |
| Diluted | 194,162 | 198,494 |
(1) - The fiscal 2003 condensed consolidated statement of income has been presented to reflect ARAMARK Educational Resources as a discontinued operation.
(2) - In the third quarter of fiscal 2003, ARAMARK completed a tender offer to purchase approximately $94.3 million of its 6.75% Guaranteed Notes due August 1, 2004, for approximately $101.9 million, including accrued interest, and retired a $45 million term loan due March 2005. These two transactions resulted in an extinguishment charge of $7.7 million ($4.7 million net of tax) which is included in "Interest and other financing costs, net" in the accompanying financial schedule. Additionally, in the third quarter of fiscal 2003, ARAMARK reduced the provision for income taxes, based upon the settlement of open tax years, by approximately $8.4 million. Income from continuing operations and diluted earnings per share from continuing operations, excluding the impact of these items, were $156.3 million and $0.79, respectively for the nine months ended June 27, 2003.
| July 2, 2004 | October 3, 2003 | |
| Assets | ||
| Current Assets | $1,272,419 | $1,226,592 |
| Property and Equipment, net | 1,199,312 | 1,184,320 |
| Goodwill | 1,563,941 | 1,422,639 |
| Other Assets | 654,380 | 634,026 |
| $4,690,052 | $4,467,577 | |
| Liabilities and Shareholders' Equity | ||
| Current Liabilities (1) | $1,288,275 | $1,415,789 |
| Long-Term Borrowings | 1,917,072 | 1,711,705 |
| Other Liabilities | 330,651 | 301,111 |
| Total Shareholders' Equity | 1,154,054 | 1,038,972 |
| $4,690,052 | $4,467,577 |
(1) - Includes $27.2 million and $18.2 million of current maturities of long-term borrowings as of July 2, 2004 and October 3, 2003, respectively.
| Nine
Months Ended |
||
| Cash flows from operating activities from continuing operations: | ||
| Income from continuing operations | $178,466 | $160,077 |
| Adjustments
to reconcile income from continuing operations to net cash provided by operating activities: |
||
| Depreciation and amortization | 218,106 | 192,599 |
| Income taxes deferred | 21,539 | 19,082 |
| Changes in noncash working capital | (138,381) | (131,084) |
| Other operating activities | (39,618) | (16,590) |
| Net cash provided by operating activities from continuing operations | 240,112 | 224,084 |
| Cash flows from investing activities from continuing operations: | ||
| Net purchases of property and equipment and client contract investments | (200,002) | (173,900) |
| Proceeds from sale of investment | 8,500 | - |
| Divestiture of certain businesses | - | 248,077 |
| Acquisitions and other investing activities | (136,568) | (201,678) |
| Net cash used in investing activities from continuing operations | (328,070) | (127,501) |
| Cash flows from financing activities from continuing operations: | ||
| Net proceeds from long-term borrowings | 185,593 | 42,537 |
| Dividend payments | (27,946) | - |
| Proceeds from issuance of common stock | 37,578 | 20,601 |
| Repurchase of stock and other financing activities | (106,979) | (166,241) |
| Net cash provided by financing activities from continuing operations | 88,246 | 103,103 |
| Net cash provided by discontinued operations (1) | - | 14,722 |
| Increase in cash and cash equivalents | $288 | $8,202 |
(1) - The fiscal 2003 statement of cash flows has been presented to reflect ARAMARK Educational Resources as a discontinued operation.
| Three Months Ended | ||
| July 2, 2004 | June 27, 2003 | |
| Sales | ||
| Food and Support Services - United States | $1,753,072 | $1,623,463 |
| Food and Support Services - International | 474,696 | 362,701 |
| Uniform and Career Apparel - Rental | 262,312 | 253,517 |
| Uniform and Career Apparel - Direct Marketing | 104,844 | 100,873 |
| $2,594,924 | $2,340,554 |
|
| Operating Income | ||
| Food and Support Services - United States | $89,523 | $85,897 |
| Food and Support Services - International | 19,010 | 16,181 |
| Uniform and Career Apparel - Rental | 29,095 | 28,869 |
| Uniform and Career Apparel - Direct Marketing | 2,457 | 4,201 |
| Corporate and Other | (8,135) | (6,695) |
| $131,950 | $128,453 |
|
| Nine Months Ended | ||
| July 2, 2004 | June 27, 2003 | |
| Sales | ||
| Food and Support Services - United States | $5,088,326 | $4,712,854 |
| Food and Support Services - International | 1,364,112 | 1,052,255 |
| Uniform and Career Apparel - Rental | 778,480 | 759,281 |
| Uniform and Career Apparel - Direct Marketing | 340,392 | 335,410 |
| $7,571,310 | $6,859,800 |
|
| Operating Income | ||
| Food and Support Services - United States | $240,323 | $227,206 |
| Food and Support Services - International | 58,306 | 47,252 |
| Uniform and Career Apparel - Rental | 84,686 | 80,868 |
| Uniform and Career Apparel - Direct Marketing | 18,807 | 18,832 |
| Corporate and Other | (25,502) | (21,858) |
| $376,620 | $352,300 |
|
| Three Months Ended | % Change |
Nine Months Ended | % Change |
|||
| July
2, 2004 |
June
27, 2003 |
July
2, 2004 |
June
27, 2003 |
|||
| ARAMARK Corporation Consolidated Sales (as reported) | $2,594,924 | $2,340,554 | 11% | $7,571,310 | $6,859,800 | 10% |
| Effect of Calendar Shift | 24,425 | - | 30,964 | - | ||
| Effect of Currency Translation | - | 25,195 | - | 123,490 | ||
| Effect of Acquisitions and Divestitures | (81,578) | (9,053) | (225,515) | (21,169) | ||
| ARAMARK Corporation Consolidated Sales (as adjusted) | $2,537,771 | $2,356,696 | 8% | $7,376,759 | $6,962,121 | 6% |
| Food and Support Services - United States - Sales (as reported) | $1,753,072 | $1,623,463 | 8% | |||
| Effect of Calendar Shift | 24,425 | - | ||||
| Effect of Acquisitions and Divestitures | (9,617) | (7,913) | ||||
| Food and Support Services - United States - Sales (as adjusted) | $1,767,880 | $1,615,550 | 9% | |||
| Food and Support Services - International - Sales (as reported) | $474,696 | $362,701 | 31% | |||
| Effect of Currency Translation | - | 25,195 | ||||
| Food and Support Services - International - Sales, Excluding Translation | 474,696 | 387,896 | 22% | |||
| Effect of Acquisitions | (68,988) | - | ||||
| Food and Support Services - International - Sales (as adjusted) | $405,708 | $387,896 | 5% | |||
| Food and Support Services - International - Operating Income (as reported) | $19,010 | $16,181 | 17% | |||
| Effect of Currency Translation | - | 1,283 | ||||
| Food and Support Services - International - Operating Income, Excluding Translation | $19,010 | $17,464 | 9% | |||
Three
Months Ended |
%
Change |
Nine
Months Ended |
%
Change |
|||
| July
2, 2004 |
June
27, 2003 |
July
2, 2004 |
June
27 , 2003 |
|||
| Income from continuing operations (as reported) | $64,460 | $63,851 | $178,466 | $160,077 | ||
| Add: Debt extinguishment charges | - | 4,687 | - | 4,687 | ||
| Less: Tax provision adjustment | - | (8,439) | - | (8,439) | ||
| Income from continuing operations (as adjusted) | $64,460 | $60,099 | 7% | $178,466 | $156,325 | 14% |
| Earnings Per Share - Diluted | ||||||
| Income from continuing operations (as reported) | $0.33 | $0.33 | $0.92 | $0.81 | ||
| Add: Debt extinguishment charges | - | 0.02 | - | 0.02 | ||
| Less: Tax provision adjustment | - | (0.04) | - | (0.04) | ||
| Income from continuing operations (as adjusted) | $0.33 | $0.31 | $0.92 | $0.79 | 16% | |
| Three Months Ended | |
|
October
3, 2003 |
|
|
|
|
| Diluted EPS - Income from continuing operations - As reported | $0.54 |
| Add: Other expense | 0.03 |
| Less: Insurance proceeds | (0.10) |
| Diluted EPS - Income from continuing operations - As adjusted | $0.47 |