cik0-20231229

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 29, 2023

¨ 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 26, 2024, the number of shares of the registrant's common stock outstanding is 262,453,791.


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	6
		Notes to Condensed Consolidated Financial Statements	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosure About Market Risk	27
	Item 4.	Controls and Procedures	27

PART II - Other Information
	Item 1.	Legal Proceedings	28
	Item 1A.	Risk Factors	28
	Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	28
	Item 3.	Defaults Upon Senior Securities	28
	Item 4.	Mine Safety Disclosures	28
	Item 5.	Other Information	28
	Item 6.	Exhibits	28

Table of Contents

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," "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, and 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, energy shortages, sports strikes and other adverse incidents; geopolitical events including, but not limited to, the ongoing conflict between Russia and Ukraine and the growing conflict in the Middle East, global supply chain disruptions, 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; the inability to hire and retain key or sufficient qualified personnel or increases in labor costs; our expansion strategy and our ability to successfully integrate the businesses we acquire and costs and timing related thereto; risks associated with the recently completed spin-off of Aramark Uniform and Career Apparel ("Uniform") as an independent publicly traded company to our stockholders; continued or further unionization of our workforce; liability resulting from our participation in multiemployer defined benefit pension plans; 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; 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; and other factors set forth under the 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 (the "SEC") on November 21, 2023 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 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 29, 2023		September 29, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	295,597	$	1,927,088
Receivables (less allowances: $36,836 and $31,506)	2,198,781		1,970,782
Inventories	367,614		403,707
Prepayments and other current assets	305,428		297,519
Current assets of discontinued operations	—		620,931
Total current assets	3,167,420		5,220,027
Property and Equipment, net	1,490,475		1,425,973
Goodwill	4,661,018		4,615,986
Other Intangible Assets	1,824,457		1,804,473
Operating Lease Right-of-use Assets	597,965		572,268
Other Assets	678,114		728,678
Noncurrent Assets of Discontinued Operations	—		2,503,836
	$	12,419,449	$	16,871,241
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term borrowings	$	41,513	$	1,543,032
Current operating lease liabilities	50,178		51,271
Accounts payable	1,096,193		1,271,859
Accrued payroll and related expenses	367,339		479,827
Accrued expenses and other current liabilities	934,191		1,288,454
Current liabilities of discontinued operations	—		395,524
Total current liabilities	2,489,414		5,029,967
Long-Term Borrowings	5,930,220		5,098,662
Noncurrent Operating Lease Liabilities	244,420		245,871
Deferred Income Taxes	399,901		410,935
Other Noncurrent Liabilities	500,728		503,129
Noncurrent Liabilities of Discontinued Operations	—		1,861,735
Commitments and Contingencies (see Note 11)
Redeemable Noncontrolling Interests	8,132		8,224
Stockholders' Equity:
Common stock, par value $0.01 (authorized: 600,000,000 shares; issued: 302,432,929 shares and 301,069,012 shares; and outstanding: 262,368,455 shares and 261,450,373 shares)	3,024		3,011
Capital surplus	3,847,489		3,825,620
Retained earnings	79,299		964,158
Accumulated other comprehensive loss	(89,011)		(98,237)
Treasury stock (shares held in treasury: 40,064,474 shares and 39,618,639 shares)	(994,167)		(981,834)
Total stockholders' equity	2,846,634		3,712,718
	$	12,419,449	$	16,871,241

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 29, 2023		December 30, 2022
Revenue	$	4,407,765	$	3,913,720
Costs and Expenses:
Cost of services provided (exclusive of depreciation and amortization)	4,045,078		3,591,802
Depreciation and amortization	105,544		102,597
Selling and general corporate expenses	90,193		67,636
	4,240,815		3,762,035
Operating income	166,950		151,685

Interest Expense, net	114,562		100,951
Income from Continuing Operations Before Income Taxes	52,388		50,734
Provision for Income Taxes from Continuing Operations	23,871		12,736
Net income from Continuing Operations	28,517		37,998
Less: Net loss attributable to noncontrolling interests	(19)		(500)
Net income from Continuing Operations attributable to Aramark stockholders	28,536		38,498
Income from Discontinued Operations, net of tax	—		35,653
Net income attributable to Aramark stockholders	$	28,536	$	74,151

Basic earnings per share attributable to Aramark stockholders:
Income from Continuing Operations	$	0.11	$	0.15
Income from Discontinued Operations	—		0.14
Basic earnings per share attributable to Aramark stockholders	$	0.11	$	0.29

Diluted earnings per share attributable to Aramark stockholders:
Income from Continuing Operations	$	0.11	$	0.15
Income from Discontinued Operations	—		0.13
Diluted earnings per share attributable to Aramark stockholders	$	0.11	$	0.28

Weighted Average Shares Outstanding:
Basic	262,053		259,454
Diluted	264,287		261,414
























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 29, 2023		December 30, 2022
Net income from Continuing Operations	$	28,517	$	37,998
Income from Discontinued Operations, net of tax	—		35,653
Net income	28,517		73,651
Other comprehensive (loss) income, net of tax

Foreign currency translation adjustments	15,349		34,837
Fair value of cash flow hedges	(37,532)		(6,165)
Share of equity investee's comprehensive income	—		(592)
Other comprehensive (loss) income, net of tax	(22,183)		28,080
Comprehensive income	6,334		101,731
Less: Net loss attributable to noncontrolling interests	(19)		(500)
Comprehensive income attributable to Aramark stockholders	$	6,353	$	102,231

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 29, 2023		December 30, 2022
Cash flows from operating activities of Continuing Operations:
Net income from Continuing Operations	$	28,517	$	37,998
Adjustments to reconcile Net income from Continuing Operations to Net cash used in operating activities of Continuing Operations
Depreciation and amortization	105,544		102,597
Asset write-downs	—		18,316
Reduction of contingent consideration liability (see Note 13)	—		(29,941)

Deferred income taxes	1,175		12,806
Share-based compensation expense	13,654		20,574
Changes in operating assets and liabilities:
Receivables	(209,339)		(100,528)
Inventories	33,303		6,868
Prepayments and Other Current Assets	(7,864)		4,549
Accounts Payable	(180,799)		(254,225)
Accrued Expenses	(460,413)		(415,251)
Payments made to clients on contracts	(45,075)		(33,868)
Other operating activities	64,220		14,357
Net cash used in operating activities of Continuing Operations	(657,077)		(615,748)
Cash flows from investing activities of Continuing Operations:
Purchases of property and equipment and other	(115,621)		(88,904)
Disposals of property and equipment	4,420		3,347



Acquisition of certain businesses, net of cash acquired	(83,316)		(3,505)


Other investing activities	(3,451)		17,874
Net cash used in investing activities of Continuing Operations	(197,968)		(71,188)
Cash flows from financing activities of Continuing Operations:
Proceeds from long-term borrowings	228,221		301,790
Payments of long-term borrowings	(1,538,997)		(19,415)
Net change in funding under the Receivables Facility	600,000		395,065
Payments of dividends	(24,915)		(28,566)
Proceeds from issuance of common stock	4,496		28,198
Other financing activities	(47,808)		(14,538)
Net cash (used in) provided by financing activities of Continuing Operations	(779,003)		662,534
Discontinued Operations:
Net cash provided by operating activities	—		8,543
Net cash used in investing activities	—		(12,936)
Net cash used in financing activities	—		(5,476)
Net cash used in Discontinued Operations	—		(9,869)
Effect of foreign exchange rates on cash and cash equivalents and restricted cash	5,334		11,661
Decrease in cash and cash equivalents and restricted cash	(1,628,714)		(22,610)
Cash and cash equivalents and restricted cash, beginning of period	1,972,367		365,431
Cash and cash equivalents and restricted cash, end of period	$	343,653	$	342,821

Table of Contents


Supplemental disclosure of cash flow information	Three Months Ended
(in millions)	December 29, 2023		December 30, 2022
Interest paid	$	111.5	$	113.5
Income taxes paid	45.4		12.0

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


Balance Sheet classification	Three Months Ended
(in thousands)	December 29, 2023		December 30, 2022
Cash and cash equivalents	$	295,597	$	288,228
Restricted cash in Prepayments and other current assets	48,056		37,771
Cash and cash equivalents in Current assets of discontinued operations	—		16,822
Total cash and cash equivalents and restricted cash	$	343,653	$	342,821

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	$	3,712,718	$	3,011	$	3,825,620	$	964,158	$	(98,237)	$	(981,834)
Net income attributable to Aramark stockholders	28,536						28,536
Other comprehensive loss	(22,183)								(22,183)
Capital contributions from issuance of common stock	8,228		13		8,215
Share-based compensation expense	13,654				13,654
Repurchases of common stock	(12,333)										(12,333)
Separation of Uniform Segment (see Note 2)	(855,105)						(886,514)		31,409
Payments of dividends ($0.095 per share)	(26,881)						(26,881)
Balance, December 29, 2023	$	2,846,634	$	3,024	$	3,847,489	$	79,299	$	(89,011)	$	(994,167)


	Total Stockholders' Equity		Common Stock		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock
Balance, September 30, 2022	$	3,029,640	$	2,976	$	3,681,966	$	406,784	$	(111,571)	$	(950,515)
Net income attributable to Aramark stockholders	74,151						74,151
Other comprehensive income	28,080								28,080
Capital contributions from issuance of common stock	33,594		20		33,574
Share-based compensation expense	24,043				24,043
Repurchases of common stock	(15,559)										(15,559)
Payments of dividends ($0.11 per share)	(30,686)						(30,686)
Balance, December 30, 2022	$	3,143,263	$	2,996	$	3,739,583	$	450,249	$	(83,491)	$	(966,074)

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. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Aramark (the "Company") is a leading global provider of food and facilities services to education, healthcare, business & industry and sports, leisure & corrections clients. The Company's core market is the United States, which is supplemented by an additional 14-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 two 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 Sheets as of September 29, 2023. Additional disclosures regarding the separation and distribution are provided in Note 2.

The condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and should be read in conjunction with the audited consolidated financial statements, and the notes to those statements, included in the Company's Form 10-K filed with the SEC on November 21, 2023. The Condensed Consolidated Balance Sheet as of September 29, 2023 was derived from audited financial statements which have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. In the opinion of the Company, the statements include all adjustments, which are of a normal, recurring nature, required for a fair presentation for the periods presented. The results of operations for interim periods are not necessarily indicative of the results for a full year, due to the seasonality of some of the Company's business activities and the possibility of changes in general economic conditions.

The condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling financial interest is maintained. All intercompany transactions and accounts have been eliminated.

New Accounting Standards Updates

Adopted Standards (from most to least recent date of issuance)

In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2022-04 Liabilities - Supplier Finance Programs (Subtopic 405-50) to enhance the transparency of supplier finance programs, which may be referred to as reverse factoring, payables finance or structured payables arrangements. The guidance requires that a buyer in a supplier finance program disclose the program's nature, activity and potential magnitude. The guidance was effective for the Company in the first quarter of fiscal 2024. The Company reviewed existing supplier finance agreements and enhanced disclosures with qualitative and quantitative information about its supplier finance program, but the adoption of this guidance did not have a material impact on the condensed consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers which required that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606") as if it had originated the contracts. The guidance was effective for the Company in the first quarter of fiscal 2024. The adoption of this guidance did not have a material impact on the condensed consolidated financial statements.

Standards Not Yet Adopted (from most to least recent date of issuance)

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. The guidance will require improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance is effective for the Company's annual disclosures for fiscal 2026 and early adoption is permitted. The Company is currently evaluating the impact of this standard.

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to enhance the reportable segment disclosures. The guidance will require additional disclosures about significant

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

segment expenses. The guidance is effective for the Company's annual disclosures for fiscal 2025 and early adoption is permitted. The Company is currently evaluating the impact of this standard.

Other new accounting pronouncements recently issued or newly effective were not applicable to the Company, did not have a material impact on the condensed consolidated financial statements or are not expected to have a material impact on the condensed consolidated financial statements.

Comprehensive Income

Comprehensive income includes all changes to stockholders' equity during a period, except those resulting from investments by and distributions to stockholders. Components of comprehensive income include net income, changes in foreign currency translation adjustments (net of tax), changes in the fair value of cash flow hedges (net of tax) and changes to the share of any equity investees' comprehensive loss (net of tax).

The summary of the components of comprehensive income is as follows (in thousands):


	Three Months Ended
	December 29, 2023				December 30, 2022
	Pre-Tax Amount	Tax Effect	After-Tax Amount		Pre-Tax Amount	Tax Effect	After-Tax Amount
Net income			$	28,517			$	73,651

Foreign currency translation adjustments	15,349	—	15,349		37,069	(2,232)	34,837
Fair value of cash flow hedges	(50,719)	13,187	(37,532)		(8,331)	2,166	(6,165)
Share of equity investee's comprehensive loss	—	—	—		(592)	—	(592)
Other comprehensive (loss) income	(35,370)	13,187	(22,183)		28,146	(66)	28,080
Comprehensive income			6,334				101,731
Less: Net loss attributable to noncontrolling interests			(19)				(500)
Comprehensive income attributable to Aramark stockholders			$	6,353			$	102,231

The amounts in the table above exclude the impact of a $5.1 million pension plan adjustment and $26.3 million currency translation adjustment during the three months ended December 29, 2023 related to the separation and distribution of the Uniform segment (see Note 2).

Accumulated other comprehensive loss consists of the following (in thousands):


	December 29, 2023		September 29, 2023
Pension plan adjustments	$	(9,165)	$	(14,241)
Foreign currency translation adjustments	(151,433)		(193,115)
Cash flow hedges	71,587		109,119

	$	(89,011)	$	(98,237)

Currency Translation

Gains and losses resulting from the translation of financial statements of non-United States subsidiaries are reflected as a component of accumulated other comprehensive loss in stockholder's equity. Beginning in fiscal 2018, Argentina was determined to have a highly inflationary economy. As a result, the Company remeasures the financial statements of Argentina's operations in accordance with the accounting guidance for highly inflationary economies. The impact of the Argentina remeasurement was a foreign currency transaction loss of $3.9 million and $1.1 million during the three month periods ended December 29, 2023 and December 30, 2022, respectively. The impact of foreign currency transaction gains and losses exclusive of Argentina's operations included in the Company's operating results during the three month periods of both fiscal 2024 and 2023 were immaterial to the condensed consolidated financial statements.

Current Assets

The Company insures portions of its 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 its approach to risk finance. The Captive is subject to regulations within its domicile of Bermuda, including regulations established by the Bermuda Monetary Authority (the "BMA") relating to levels of liquidity and solvency as such concepts are defined by the BMA. The Captive was in compliance with these regulations as of December 29, 2023. These regulations may have the

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

effect of limiting the Company's ability to access certain cash and cash equivalents held by the Captive for uses other than for the payment of its general liability, automobile liability, workers' compensation liability, certain property damage and related Captive costs. As of December 29, 2023 and September 29, 2023, cash and cash equivalents at the Captive were $14.4 million and $32.8 million, respectively. The Captive also invests in United States Treasury securities where the amount as of December 29, 2023 and September 29, 2023 was $111.7 million and $110.7 million, respectively, and is recorded in "Prepayments and other current assets" on the Condensed Consolidated Balance Sheets.

Within the FSS International segment, the Company receives certain cash on behalf of the Company's clients, which is contractually restricted from withdrawal and usage. This restricted cash is recorded in "Prepayments and other current assets" on the Condensed Consolidated Balance Sheets.

Property and Equipment and Operating Lease Right-of-use Assets

During fiscal 2023, the Company completed a strategic review of certain administrative locations, taking into account facility capacity and current utilization, among other factors. Based on this review, the Company vacated or otherwise reduced its usage at certain of these locations, resulting in an analysis of the recoverability of the assets associated with the locations. As a result, for the three months ended December 30, 2022, the Company recorded an impairment charge of $18.3 million within its FSS United States segment, which is included in "Cost of services provided (exclusive of depreciation and amortization)" on the Condensed Consolidated Statements of Income. The impairment charge consisted of operating lease right-of-use assets of $7.9 million and property and equipment of $10.4 million.

Other Assets

Other assets consist primarily of costs to obtain or fulfill contracts (including employee sales commissions), long-term receivables, investments in 50% or less owned entities and computer software costs.

For investments in 50% or less owned entities accounted for under the equity method of accounting, the carrying amount as of December 29, 2023 and September 29, 2023 was $71.2 million and $73.5 million, respectively.

For investments in 50% or less owned entities, other than those accounted for under the equity method of accounting, the Company measures these investments at cost, less any impairment and adjusted for changes in fair value resulting from observable price changes for an identical or a similar investment of the same issuer due to the lack of readily available fair values related to those investments. The carrying amount of equity investments without readily determinable fair values as of both December 29, 2023 and September 29, 2023 was $83.6 million.

Supply Chain Finance Program

The Company has agreements with third-party administrators that allow participating vendors to voluntarily elect to sell payment obligations from the Company to financial institutions as part of a Supply Chain Finance Program ("SCF Program"). The Company's payment terms to the financial institutions, including the timing and amount of payments, are based on the original supplier invoices. When participating vendors elect to sell one or more of the Company's payment obligations, the Company's rights and obligations to settle the payable on their contractual due date are not impacted. The Company has no economic or commercial interest in a vendor's decision to sell the Company's payment obligations. The Company agrees on commercial terms with vendors for the goods and services procured, which are consistent with payment terms observed at other peer companies in the industry, and the terms are not impacted by the SCF Program. For the SCF Program, the Company does not provide asset pledges, or other forms of guarantees, as security for the committed payment to the financial institutions. As of December 29, 2023 and September 29, 2023, the Company had $3.1 million and $2.8 million, respectively, of outstanding payment obligations to the financial institutions as part of the SCF Program recorded in "Accounts payable" on the Condensed Consolidated Balance Sheets.

Other Current and Noncurrent Liabilities

The Company is self-insured for certain obligations related to its employee health care benefit programs as well as for certain risks retained under its general liability, automobile liability, workers' compensation liability and certain property damage programs. Reserves for these programs are estimated through actuarial methods, with the assistance of third-party actuaries using loss development assumptions based on the Company's claims history.

Impact of COVID-19

The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") provided for deferred payment of the employer portion of social security taxes through the end of calendar 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% of the amount due December 31, 2022. Approximately $47.6 million of deferred social security taxes were paid in fiscal 2023.

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2. DISCONTINUED OPERATIONS:

On September 30, 2023, the Company completed the previously announced separation and distribution of its Uniform segment into an independent publicly traded company, Vestis. The separation was structured as a tax free spin-off, which occurred by way of a pro rata distribution to Aramark stockholders. Each of the Aramark stockholders received one share of Vestis common stock for every two shares of Aramark common stock held of record as of the close of business on September 20, 2023. Vestis is now an independent public company under the symbol “VSTS” on the New York Stock Exchange.

In connection with the separation and distribution, the Company entered into or adopted several agreements that provide a framework for the relationship between the Company and Vestis, including, but not limited to the following:

Separation and Distribution Agreement - governs the rights and obligations of the parties regarding the distribution following the completion of the separation, including the transfer of assets and assumption of liabilities, and establishes certain rights and obligations between the Company and Vestis following the distribution, including procedures with respect to claims subject to indemnification and related matters.

Transition Services Agreement - governs services between the Company and Vestis and their respective affiliates to provide each other on an interim, transitional basis, various services, including, but not limited to, administrative, information technology and cybersecurity support services and certain finance, treasury, tax and governmental function services. The services will terminate no later than 24 months following the distribution date.

Tax Matters Agreement - governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.

Employee Matters Agreement - governs the allocation of liabilities and responsibilities relating to employment matters, employee compensation and benefits plans and programs and other related matters.

Under these agreements, the Company will continue to provide certain services to Vestis following the separation and distribution. The agreements do not provide the Company with the ability to influence the operating or financial policies of Vestis subsequent to the separation date. During the three months ended December 29, 2023, the value of the services provided to Vestis were immaterial to the Company's financial statements with no outstanding receivables balance as of December 29, 2023.

The historical results of the Uniform segment have been reflected as discontinued operations in the Company's consolidated financial statements for all periods prior to the separation and distribution on September 30, 2023.

Details of "Income from Discontinued Operations, net of tax" are as follows (in thousands):


	Three Months Ended
	December 30, 2022
Revenue	$	687,278
Costs and Expenses:
Cost of services provided (exclusive of depreciation and amortization)	570,282
Depreciation and amortization	33,887
Selling and general corporate expenses	35,148
	639,317
Operating income	47,961
Interest Expense, net	394
Income from Discontinued Operations Before Income Taxes	47,567
Provision for Income Taxes from Discontinued Operations	11,914
Income from Discontinued Operations, net of tax	$	35,653

During the three months ended December 30, 2022, the Company incurred charges of $5.0 million related to the Company's separation and distribution of its Uniform segment, including salaries and benefits, recruiting and relocation costs, accounting and legal related expenses, branding and other costs, of which $3.5 million was recorded within "Income from Discontinued Operations, net of tax" and $1.5 million was recorded within "Selling and general corporate expenses" on the Condensed Consolidated Statements of Income.

During the three months ended December 29, 2023, the Company incurred $20.0 million of banker fees related to the separation and distribution of its Uniform segment and $8.8 million of charitable contribution expense for the contribution of Vestis shares to a donor advised fund in order to fund charitable contributions, which were recorded within "Selling and general corporate expenses" on the Condensed Consolidated Statements of Income.

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ARAMARK AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the Uniform segment assets and liabilities classified as discontinued operations in the Company's Condensed Consolidated Balance Sheets (in thousands):


	September 29, 2023
ASSETS
Cash and cash equivalents	$	36,051
Receivables (less allowance: $25,066)	392,916
Inventories	174,720
Prepayments and other current assets	17,244
Current assets of discontinued operations	620,931
Property and Equipment, net	664,530
Goodwill	963,543
Other Intangible Assets	238,609
Operating Lease Right-of-use Assets	57,890
Other Assets	579,264
Noncurrent Assets of Discontinued Operations	$	2,503,836

LIABILITIES
Current maturities of long-term borrowings	$	53,910
Current operating lease liabilities	19,935
Accounts payable	134,497
Accrued payroll and other related expenses	113,770
Accrued expenses and other current liabilities	73,412
Current liabilities of discontinued operations	395,524
Long-Term Borrowings	1,567,910
Noncurrent Operating Lease Liabilities	46,084
Deferred Income Taxes	199,535
Other Noncurrent Liabilities	48,206
Noncurrent Liabilities of Discontinued Operations	$	1,861,735

In the fourth quarter of fiscal 2023, the Uniform legal entity entered into the Uniform credit agreement. The Uniform credit agreement included a revolving credit facility, a United States dollar denominated term loan in the amount of $800.0 million due September 2025 and a United States dollar denominated term loan in the amount of $700.0 million due September 2028, which are recorded in "Noncurrent Liabilities of Discontinued Operations" on the Condensed Consolidated Balance Sheets as of September 29, 2023. Also in the fourth quarter of fiscal 2023, the Uniform legal entity paid a cash dividend to the Company of $1,456.7 million. On October 2, 2023, the Company used the proceeds from the cash dividend, along with cash on hand, to repay the $1,500.0 million 6.375% Senior Notes due May 1, 2025 (the "6.375% 2025 Notes") (see Note 4).

The Company recorded its distribution of Vestis' net assets as a decrease in "Retained Earnings". The amount recorded reflected the carrying amounts, as of September 29, 2023, of the net assets distributed offset by the holdback of Vestis shares upon distribution of $8.8 million and $3.6 million of net cash received from Vestis post-separation. The Company also recorded a net decrease to "Accumulated other comprehensive loss" of $