cik0-20221230

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 30, 2022

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 001-36223

___________________________________________



Aramark
(Exact name of registrant as specified in its charter)
Delaware		20-8236097
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

2400 Market Street		19103
Philadelphia,	Pennsylvania
(Address of principal executive offices)		(Zip Code)

(215) 238-3000

(Registrant's telephone number, including area code)

___________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock,	par value $0.01 per share	ARMK	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of January 27, 2023, the number of shares of the registrant's common stock outstanding is 260,512,774.


TABLE OF CONTENTS
			Page
PART I - Financial Information
	Item 1.	Financial Statements (Unaudited)	1
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statements of Income	2
		Condensed Consolidated Statements of Comprehensive Income	3
		Condensed Consolidated Statements of Cash Flows	4
		Condensed Consolidated Statements of Stockholders' Equity	5
		Notes to Condensed Consolidated Financial Statements	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3.	Quantitative and Qualitative Disclosure About Market Risk	26
	Item 4.	Controls and Procedures	26

PART II - Other Information
	Item 1.	Legal Proceedings	27
	Item 1A.	Risk Factors	27
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
	Item 3.	Defaults Upon Senior Securities	27
	Item 4.	Mine Safety Disclosures	27
	Item 5.	Other Information	27
	Item 6.	Exhibits	27

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Special Note About Forward-Looking Statements

This report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current expectations as to future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our operations, our liquidity and capital resources, the conditions in our industry and our growth strategy. In some cases, forward-looking statements can be identified by words such as "outlook," "aim," "anticipate," "are or remain or continue to be confident," "have confidence," "estimate," "expect," "will be," "will continue," "will likely result," "project," "intend," "plan," "believe," "see," "look to" and other words and terms of similar meaning or the negative versions of such words. These forward-looking statements are subject to risks and uncertainties that may change at any time, actual results or outcomes may differ materially from those that we expected.

Some of the factors that we believe could affect or continue to affect our results include without limitation: unfavorable economic conditions; natural disasters, global calamities, climate change, pandemics, including the ongoing COVID-19 pandemic, energy shortages, sports strikes and other adverse incidents; geopolitical events including, but not limited to, the ongoing conflict between Russia and Ukraine and its effects on global supply chains, inflation, volatility and disruption of global financial markets; the failure to retain current clients, renew existing client contracts and obtain new client contracts; a determination by clients to reduce their outsourcing or use of preferred vendors; competition in our industries; increased operating costs and obstacles to cost recovery due to the pricing and cancellation terms of our food and support services contracts; currency risks and other risks associated with international operations, including compliance with a broad range of laws and regulations, including the United States Foreign Corrupt Practices Act; risks associated with suppliers from whom our products are sourced; disruptions to our relationship with our distribution partners; the contract intensive nature of our business, which may lead to client disputes; our expansion strategy and our ability to successfully integrate the businesses we acquire and costs and timing related thereto; continued or further unionization of our workforce; liability resulting from our participation in multiemployer defined benefit pension plans; the inability to hire and retain key or sufficient qualified personnel or increases in labor costs; laws and governmental regulations including those relating to food and beverages, the environment, wage and hour and government contracting; liability associated with noncompliance with applicable law or other governmental regulations; new interpretations of or changes in the enforcement of the government regulatory framework; increases or changes in income tax rates or tax-related laws; environmental regulations; potential liabilities, increased costs, reputational harm, and other adverse effects based on our commitments and stakeholder expectations relating to environmental, social and governance considerations; the failure to maintain food safety throughout our supply chain, food-borne illness concerns and claims of illness or injury; a cybersecurity incident or other disruptions in the availability of our computer systems or privacy breaches; our leverage; variable rate indebtedness that subjects us to interest rate risk; the inability to generate sufficient cash to service all of our indebtedness; debt agreements that limit our flexibility in operating our business; risks associated with the impact, timing or terms of the proposed spin-off of Aramark Uniform Services (our Uniform segment) as an independent publicly traded company to our stockholders (the "proposed spin-off'"); risks associated with the expected benefits and costs of the proposed spin-off, including the risk that the expected benefits of the proposed spin-off will not be realized within the expected time frame, in full or at all, and the risk that conditions to the proposed spin-off will not be satisfied and/or that the proposed spin-off will not be completed within the expected time frame, on the expected terms or at all; the expected qualification of the proposed spin-off as a tax-free transaction for United States federal income tax purposes, including whether or not an Internal Revenue Service ruling will be sought or obtained; the risk that any consents or approvals required in connection with the proposed spin-off will not be received or obtained within the expected time frame, on the expected terms or at all; risks associated with expected financing transactions undertaken in connection with the proposed spin-off and risks associated with indebtedness incurred in connection with the proposed spin-off; the risk of increased costs from lost synergies, costs of restructuring transactions and other costs incurred in connection with the proposed spin-off; retention of existing management team members as a result of the proposed spin-off; reaction of customers, our employees and other parties to the proposed spin-off; and the impact of the proposed spin-off on our business and the risk that the proposed spin-off may be more difficult, time-consuming or costly than expected, including the impact on our resources, systems, procedures and controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties; and other factors set forth under the heading “Part I, Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations" herein and headings "Part I, Item 1A Risk Factors," "Part I, Item 3 Legal Proceedings" and "Part II, Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations" and other sections of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC") on November 22, 2022 as such factors may be updated from time to time in our other periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov and which may be obtained by contacting Aramark's investor relations department via its website at www.aramark.com. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and in our other filings with the SEC. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included

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herein or that may be made elsewhere from time to time by, or on behalf of, us. Forward-looking statements speak only as of the date made. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, changes in our expectations, or otherwise, except as required by law.

PART I

Item 1. Financial Statements

ARAMARK AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share amounts)


	December 30, 2022		September 30, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	305,050	$	329,452
Receivables (less allowances: $56,939 and $56,388)	2,299,810		2,147,957
Inventories	569,815		552,386
Prepayments and other current assets	260,467		262,195
Total current assets	3,435,142		3,291,990
Property and Equipment, net	2,032,035		2,032,045
Goodwill	5,554,019		5,515,124
Other Intangible Assets	2,090,250		2,113,726
Operating Lease Right-of-use Assets	612,897		592,145
Other Assets	1,566,199		1,537,406
	$	15,290,542	$	15,082,436
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term borrowings	$	102,712	$	65,047
Current operating lease liabilities	68,550		68,858
Accounts payable	1,092,642		1,322,936
Accrued expenses and other current liabilities	1,420,314		1,829,045
Total current liabilities	2,684,218		3,285,886
Long-Term Borrowings	8,056,256		7,345,860
Noncurrent Operating Lease Liabilities	301,961		305,623
Deferred Income Taxes and Other Noncurrent Liabilities	1,096,563		1,106,587
Commitments and Contingencies (see Note 10)
Redeemable Noncontrolling Interests	8,281		8,840
Stockholders' Equity:
Common stock, par value $0.01 (authorized: 600,000,000 shares; issued: 299,586,124 shares and 297,555,924 shares; and outstanding: 260,370,546 shares and 258,728,942 shares)	2,996		2,976
Capital surplus	3,739,583		3,681,966
Retained earnings	450,249		406,784
Accumulated other comprehensive loss	(83,491)		(111,571)
Treasury stock (shares held in treasury: 39,215,578 shares and 38,826,982 shares)	(966,074)		(950,515)
Total stockholders' equity	3,143,263		3,029,640
	$	15,290,542	$	15,082,436

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

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ARAMARK AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands, except per share data)


	Three Months Ended
	December 30, 2022		December 31, 2021
Revenue	$	4,600,998	$	3,948,260
Costs and Expenses:
Cost of services provided (exclusive of depreciation and amortization)	4,162,084		3,571,045
Depreciation and amortization	136,484		135,518
Selling and general corporate expenses	102,784		101,450
	4,401,352		3,808,013
Operating income	199,646		140,247
Interest and Other Financing Costs, net	101,345		93,017
Income Before Income Taxes	98,301		47,230
Provision for Income Taxes	24,650		4,523
Net income	73,651		42,707
Less: Net (loss) income attributable to noncontrolling interests	(500)		96
Net income attributable to Aramark stockholders	$	74,151	$	42,611

Earnings per share attributable to Aramark stockholders:
Basic	$	0.29	$	0.17
Diluted	$	0.28	$	0.17
Weighted Average Shares Outstanding:
Basic	259,454		256,470
Diluted	261,414		258,045























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
	December 30, 2022		December 31, 2021
Net income	$	73,651	$	42,707
Other comprehensive income, net of tax
Pension plan adjustments	—		1,779
Foreign currency translation adjustments	34,837		(7,070)
Fair value of cash flow hedges	(6,165)		22,777
Share of equity investee's comprehensive income	(592)		260
Other comprehensive income, net of tax	28,080		17,746
Comprehensive income	101,731		60,453
Less: Net (loss) income attributable to noncontrolling interests	(500)		96
Comprehensive income attributable to Aramark stockholders	$	102,231	$	60,357

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

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ARAMARK AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Three Months Ended
	December 30, 2022		December 31, 2021
Cash flows from operating activities:
Net income	$	73,651	$	42,707
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization	136,484		135,518
Asset write-downs	23,436		—
Reduction of contingent consideration liability (see Note 12)	(29,941)		—
Deferred income taxes	13,532		(73)
Share-based compensation expense	24,043		24,651
Changes in operating assets and liabilities:
Accounts Receivable	(115,465)		(148,437)
Inventories	(11,468)		19,597
Prepayments and Other Current Assets	8,775		(5,280)
Accounts Payable	(259,995)		(160,886)
Accrued Expenses	(440,950)		(403,474)
Payments made to clients on contracts	(33,868)		(8,353)
Other operating activities	4,561		643
Net cash used in operating activities	(607,205)		(503,387)
Cash flows from investing activities:
Purchases of property and equipment and other	(102,559)		(73,722)
Disposals of property and equipment	4,066		8,079

Acquisition of certain businesses, net of cash acquired	(3,505)		(57,028)
Acquisition of certain equity method investments	—		(64,000)

Other investing activities	17,874		9,020
Net cash used in investing activities	(84,124)		(177,651)
Cash flows from financing activities:
Proceeds from long-term borrowings	301,790		107,523
Payments of long-term borrowings	(26,304)		(19,074)
Net change in funding under the Receivables Facility	395,065		500,000
Payments of dividends	(28,566)		(28,209)
Proceeds from issuance of common stock	29,611		11,710

Other financing activities	(16,330)		(6,993)
Net cash provided by financing activities	655,266		564,957
Effect of foreign exchange rates on cash and cash equivalents	11,661		(1,043)
Decrease in cash and cash equivalents	(24,402)		(117,124)
Cash and cash equivalents, beginning of period	329,452		532,591
Cash and cash equivalents, end of period	$	305,050	$	415,467


	Three Months Ended
(in millions)	December 30, 2022		December 31, 2021
Interest paid	$	113.5	$	91.7
Income taxes paid	12.0		12.2

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)