Exhibit 99.1
Exhibit 99.1
Managed Services, Managed Better
Special Note about Forward-Looking Statements
This presentation 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; costs and possible effects of union organizing activities; 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 our 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 and government investigations; liability associated with noncompliance with governmental regulations, including regulations pertaining to food services, the environment, Federal and state employment laws and wage and hour laws and import and export controls and customs laws; inability to retain current clients and renew existing client contracts; determination by customers to reduce their 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.
Important Disclosure
In this presentation, we mention certain financial measures that are considered non-GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes items different than those prepared or presented in accordance with generally accepted accounting principles. We have prepared disclosures and reconciliations of non-GAAP financial measures that were used in this presentation and may be used periodically by management when discussing the Company’s financial results with investors and analysts, which are available on our website www.aramark.com.
An Outsourced Services Leader
Growth driven by worldwide trend to outsource support services
Outsourcing crosses all sectors of the economy
Business, healthcare, education, government, sports and entertainment
On-site relationship-driven service model creates high client
retention rates
Broad and deep management ownership fosters entrepreneurial
culture
A world leader in $600 billion outsourced services sector
Drivers of Outsourcing
Client focus on core business
Gain access to world-class capabilities, efficiencies
Service innovation, quality and end-user satisfaction
Cost effectiveness: Control operating costs
40% of new ARAMARK business in 2001-2003 came from previously self-operated clients
ARAMARK: Our Financial Profile
2003 Sales
($9.4 billion)
Food & Support 84%
Uniform & Career Apparel 16%
2003 Segment Operating Income ($592.8 million)1
Food & Support 77%
Uniform & Career Apparel 23%
1) Operating Income excludes $30.1 million of corporate expenses and $10.7 million of other expenses which are deducted in calculating consolidated operating income.
Food & Support Services Provided
Business Services
Campus Services
Correctional Services
Healthcare Support Services
Facility Services
Refreshment Services
School Support Services
Sports and Entertainment
International
Food Services:
A $300 Billion World Wide Opportunity
worldwide food service US food service
120 100 80 60 40 20 0
North America Europe South America Asia Pacific
Self Operated
Contracted Out
40 35 30 25 20 15 10 5 0
Business Edu. S&E HC Corr.
Sources: Company estimates, Morgan Stanley, Credit Suisse First Boston
ARAMARK Food & Support Services
$8 Billion Sales Worldwide
U.S. 82%
International 18%
Sector Analysis*
Sports and Entertainment
Correctional
Healthcare
Business
Education
* Estimated breakdown
ARAMARK: Our International Profile
2003 Sales International Segment $1.4 billion
Canada
U.K.
Germany
Other
Korea
Belgium
Spain
2003 Sales Including Minority JV’s $2.6 billion
Majority Owned Subs
Japan
Ireland
Chile*
The Company believes that the inclusion of sales from minority-owned JV’s is useful as it demonstrates the breadth of our sales volume managed internationally ($1.4 billion international sales as reported plus $1.2 billion sales from minority-owned JV’s).
* During the second quarter of fiscal 2004, ARAMARK increased its ownership in Chile from 20% to 51%, resulting in the consolidation of Chile for financial reporting purposes.
Facility Services:
Another $300 Billion World Wide Opportunity
worldwide facilities services
240 200 160 120 80 40 0
Europe & ROW United States
Self Operated
Contracted Out
US facilities services
50 40 30 20 10 0
Business Education Healthcare
Sources: Company estimates, Morgan Stanley, Credit Suisse First Boston
ARAMARK Facility Services
Client and Revenue Breakdown
Education 25%
Business 30%
Business
Healthcare
Education
Healthcare 45%
Fiscal 2003 estimated sector breakdown
ARAMARK Uniform & Career Apparel
A leading U.S. provider with approximately $1.5 billion in sales in fiscal 2003
Rental: A nationwide service network covering 180 of the top 200 markets
Direct Marketing: Direct sales of a broad career apparel line through catalog, outbound telemarketing and internet
Uniform Rental / Lease
Dust Control
Clean Room
Nationwide Service
National Account Programs
Direct Sale Offerings
WearGuard & Crest Brands
Direct Purchase Products
Mass Personalization
Managed Account Programs
ApparelOne Direct Sale HQ
QSR Leader
Healthcare
Design Expertise
QSR / Healthcare
Design
Manufacturing
Distribution
Public Safety
Equipment / Supplies
Apparel
Accessories
Uniforms: A $20 Billion U.S. Opportunity
# Employees (millions)
Non-Addressable Market
84 56
Addressable Market
Employees Potential Who Purchase Uniform Wearers
20
10
26
Employees Who Rent
Sources: Company estimates, Bureau of Labor Statistics (1999)
ARAMARK Key Strategies & Objectives
Entrepreneurial approach to solving customer challenges through broad management ownership
Specific programs to drive organic growth
Emphasis on profit margin, cash flow and ROIC
Disciplined and “return-oriented” acquisition strategy
Entrepreneurial Culture Through Ownership
Ownership well distributed post-IPO on 12/11/01
Employee ownership reaches deep into the organization
Over 4,000 direct and 13,000 indirect employee owners
Public float consists roughly of institutional (90%) and retail (10%) owners
Current Economic Ownership*
Retirement Plans 11%
Management & Employees 30%
Public Investors 59%
*3Q04 Data
How We Achieve Our Goals: Mission One
Through Mission One, ARAMARK is striving to be number one in profitable organic growth by providing a full portfolio of unmatched services to our clients
Maximizing Retention Results
Disciplined client and end-user satisfaction measurement systems
Management compensation aligned to reward retention success
On-site service model builds client loyalty
95 94 93 92 91 90
95%
93%
95%
93%
92% 92%
Total Food & Uniform Support Services Services
FY 03 FY 02
Increasing “Client Market Share”
How do we drive it higher?
Focus on quality and innovation
Marketing and promotion of products
Food Service “Build-out”
Food Courts
Catering
On-Site Convenience Stores
Vending
Coffee Kiosks
Branded concepts
“Share of Stomach” Among Existing Clients
20%
55%
Higher Education Business
Growth Through Branded Concepts
ARAMARK Proprietary Brands
External Brands
Mission One: Cross-Selling Successes
Approx. $100 million in multi-service business sold in 2003
Building the One Best Team
Fueling the talent pipeline
Leadership development
Five specific leadership development programs for 5,000 management employees
Workforce diversity
Reinforcing the culture of highly ethical standards and customer service
Operating & Financial Discipline
Organic growth - Driven by Mission One
Margin Improvement
Cash Flow
Return on Invested Capital
Acquisitions
Accelerating Organic Growth
Meaningful progress from Mission One efforts
9 month 2004 organic growth = 6%
Good progress toward our stated 6 – 8% objective
Drivers of Margin Expansion
Product Costs (35-40%)
Product mix
Purchasing efficiencies
Self manufacturing of uniforms
Labor Cost (40-45%)
Labor management tools
Unit specific labor management metrics
Push labor up the supply chain
Overhead (10-20%)
Growth differential
Cash Flow Matches Net Income*
Low capital intensity
Focused on adding value through optimal capital structure of debt and equity
Strong cash flow generation supports debt service with a Y/E ‘03 debt to EBITDA ratio of 2.2x and EBITDA to interest ratio of 5.6x
Objective to retain investment grade rating
Actual Results
$millions
300 250 200
150 100
50
0
$274
$264
$265
$251
$195
$161
$163
Income from Continuing Ops
Internal Cash Flow
$149
2000 2001 2002 2003
*Income represents income from continuing operations, as reported, and internal cash flow represents income from continuing operations plus non-cash charges, such as depreciation, amortization, and deferred taxes, less all capital expenditures and non recurring gains.
2003 Internal Cash Flow*
$600 $500 $400 $300 $200 $100 $0
$265
$30 $13 $271 $263
D&A
Deferred Taxes
Other**
Net CapEX
$274
Income from Cont Ops
Internal CF
* Defined as Income from continuing operations, plus non-cash charges such as depreciation and amortization and deferred taxes, less net capital expenditures and non-recurring gains.
** Other income and insurance proceeds, net of taxes.
After-Tax Return on Invested Capital *
14.2% - 17.0%
20% 16% 12% 8% 4% 0%
After-Tax ROIC
2000 2001 2002 2003
* Fiscal 2002 includes a gain of $37.9 million related to the sale of ARAMARK’s ownership interests in the Boston Red Sox and a related entity, and a gain of $5.8 million resulting principally from the sale of a residual interest in a previously divested business.
Acquisition Strategy
Disciplined and return-focused
Target: 15% after-tax IRR, EPS accretive in 1-2 years
Strategies
Strengthen existing services and client portfolio
Fine Host, Harrison and CTS
Add or strengthen key services
ServiceMaster
Expand international reach
AIM Services (Japan), Campbell Catering (Ireland),
Central de Restaurantes (Chile), Travers (Canada), Restauracion Colectiva & Rescot (Spain), Catering Alliance (UK), Bright China Service Industries (China)
History of Solid Performance
Sales Trends
Billions
Sales
$10.0 $8.0 $6.0 $4.0 $2.0 $0.0
‘85 ‘86 ‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03
Reflects actual amounts originally reported in Form 10K Annual Reports filed with the SEC. Not restated for discontinued operations (Educational Resources business sold in FY 2003).
* 1985 is a 9 month period
** 1986, 1992, 1997, 2003 are 53 week years
History of Solid Performance
Millions Net Income Trends
Net Income
$300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $0.0
‘85 ‘86 ‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03
Reflects actual amounts originally reported in Form 10K Annual Reports filed with the SEC. Not restated for discontinued operations (Educational Resources business sold in FY 2003). Effective beginning FY 2002 goodwill is no longer amortized.
* 1985 is a 9 month period
** 1986, 1992, 1997, 2003 are 53 week years
Long-Term Financial Objectives
Top-line organic growth:
Key Focus: Mission One
Operating income growth:
Key Focus: Product mix, labor management
EPS growth:
Key Focus: Cash Flow
6-8% 8-12% 12-14%
Challenges and Positives
Key Challenges
Contract start-up costs and other costs in Healthcare business
Uncertainty around recent investigation of Galls
Parks business
Positives
Strong organic growth
New business wins
Solid cash flow model
ARAMARK Key Strengths
Robust outsourcing trends
Best-in-class service provider
Diversified client and revenue portfolio
History of financial integrity and performance
Barriers to entry
Strong, incentivized management team focused on profitable growth
Managed Services, Managed Better
ARAMARK CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
ORGANIC GROWTH
(Unaudited)
(In thousands)
Management believes that presentation of organic sales growth in the fiscal 2004 and 2003 third quarter and nine-month periods, as adjusted to eliminate the effects of acquisitions, divestitures, the forward shift in our fiscal calendar (fiscal 2003 was a 53 week year) and the impact of currency translation, provides useful information to investors because it enhances comparability between the current year and prior year reporting periods. Elimination of the currency translation effect provides constant currency comparisons without the distortion of currency rate fluctuations. The fiscal calendar shift adjustment is made since fiscal 2003 was a 53 week year, resulting in fiscal 2004 starting one week later than normal. This results in a lack of service day comparability in the Education sector when comparing operating results between fiscal periods. Adjusting sales and estimated operating income for this difference in the fiscal calendar enhances comparability between the quarterly and year-to-date periods.
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 | % | ||||||||||
Estimated 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 - U.S. Sales (as reported) | $ | 1,753,072 | $ | 1,623,463 | 8 | % | ||||||||||||||||
Estimated Effect of Calendar Shift | 24,425 | — | ||||||||||||||||||||
Effect of Acquisitions and Divestitures | (9,617 | ) | (7,913 | ) | ||||||||||||||||||
Food and Support Services - U.S. 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 | % | ||||||||||||||||
ARAMARK Corporation And Subsidiaries – Reconciliation of Non-GAAP
Measures
EBITDA
(Unaudited, in Thousands)
Fiscal Year Ended
October 3, 2003 September 27, 2002
Net income $301,092 $269,912
Less: Income from discontinued operations, net (35,724) (18,592)
Add: Interest and other financing costs, net 142,469 136,432
Add: Provision for income taxes 144,185 141,829
Operating income, as reported 552,022 529,581
Add: Other expense 10,700 -
Less: Other income - (43,695)
Less: Insurance proceeds (31,990) -
Operating income, as adjusted 530,732 485,886
Add: Depreciation and amortization 262,944 229,608
EBITDA $793,676 $715,494
Debt $1,729,881 $1,875,180
EBITDA $793,676 $715,494
Debt to EBITDA Ratio 2.2 2.6
EBITDA $793,676
Interest and other financing costs, net $142,469
EBITDA to Interest Ratio 5.6
EBITDA represents operating income (defined as net income before income from discontinued operations, interest and taxes) before depreciation and amortization, a measurement used by management to measure operating performance. EBITDA is not a recognized term under generally accepted accounting principles and does not purport to be an alternative to operating income as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies calculate EBITDA identically, this presentation of EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments, debt service requirements or capital expenditure requirements.
The fiscal 2003 fourth quarter includes approximately $32 million of business interruption proceeds from the final settlement of the Company’s September 11, 2001 claim. During the fourth quarter of fiscal 2003, ARAMARK reached agreement for the sale of its 15% interest in a previously divested periodicals distribution business to the majority shareholder, and wrote down this investment to the expected recoverable amount. The resulting pre-tax charge of $10.7 million is included in “Other (income) expense.” During fiscal 2002, the Company sold its ownership interests in the Boston Red Sox and a related entity, resulting in a pre-tax gain of $37.9 million, and recorded a pre-tax gain of $5.8 million, resulting principally from the sale of a residual interest in a previously divested business. The Company believes that operating income, adjusted to reflect the exclusion of these items, is useful to investors because it will enable them to focus on management’s performance regarding the Company’s core operations during the relevant fiscal periods by eliminating items not directly related to those operations.
ARAMARK Corporation And Subsidiaries – Reconciliation of Non-GAAP Measures
Cash Flow Before Working Capital And After Capital Expenditures (Internal Cash Flow)
(Unaudited, in Thousands)
Fiscal Year Ended
October 3, 2003 September 27, 2002 September 28, 2001 September 29, 2000
Cash flow before working capital and after capital expenditures:
Income from continuing operations $265,368 $251,320 $162,739 $148,583
Depreciation and amortization 262,944 229,608 214,561 197,746
Income taxes deferred 29,675 17,740 10,182 3,073
Other income and insurance proceeds, net of taxes (13,100) (30,803) - -
Net purchases of property and equipment and client contract investments (270,423) (203,735) (192,062) (188,062)
Cash flow before working capital and after capital expenditures $274,464 $264,130 $195,420 $161,340
Reconciliation of cash flow before working capital and after capital expenditures
to net cash provided by operating activities from continuing operations: $274,464 $264,130 $195,420 $161,340
Net purchases of property and equipment and client contract
investments 270,423 203,735 192,062 188,062
Other income and insurance proceeds, net of taxes 13,100 30,803 - -
(Gain) loss on investments 10,700 (45,320) - -
Changes in noncash working capital 59,766 103,026 (65,127) 17,477
Net proceeds from sale of receivables - 39,105 140,885 -
Other operating activities (22,192) (17,475) (21,417) (20,484)
Net cash provided by operating activities from continuing operations $606,261 $578,004 $441,823 $346,395
Reconciliation of net purchases of property and equipment:
Purchases of property and equipment and client contract investments $(298,606) $(219,767) $(204,529) $(203,047)
Disposals of property and equipment 28,183 16,032 12,467 14,985
Net purchases of property and equipment and client contract investments $(270,423) $(203,735) $(192,062) $(188,062)
Cash flow before working capital and after capital expenditures (or Internal Cash Flow), as defined by ARAMARK is an internal operating metric used by management to evaluate cash flows from normal operations of our business, excluding the impact of working capital changes. This metric eliminates the volatility of working capital changes which long term investors may find useful.
ARAMARK CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
RETURN ON INVESTED CAPITAL
(Unaudited)
(In Millions)
Return on invested capital is an operating metric used by management to evaluate the cash rate of return on capital that the Company has invested.
This metric helps the Company to evaluate the effectiveness of its capital allocation, and is a metric which long term investors may find useful.
Fiscal Year Ended | ||||||||||||||||
October 3, 2003 | September 27, 2002 * | September 28, 2001 | September 29, 2000 | |||||||||||||
Earnings from continuing operations before interest and taxes, as reported | $ | 552.0 | $ | 529.6 | $ | 415.5 | $ | 385.9 | ||||||||
Add: Amortization of goodwill | — | — | 22.3 | 19.3 | ||||||||||||
Add: Amortization of intangible assets acquired through business combinations | 49.5 | 42.8 | 21.4 | 19.7 | ||||||||||||
Earnings from continuing operations before amortization of goodwill, amortization of acquired intangible assets, interest and taxes | $ | 601.5 | $ | 572.4 | $ | 459.2 | $ | 424.9 | ||||||||
Provision for taxes (37.5%) | (225.6 | ) | (214.7 | ) | (172.2 | ) | (159.3 | ) | ||||||||
Earnings from continuing operations before amortization of goodwill, amortization of acquired intangible assets and interest | $ | 375.9 | $ | 357.8 | $ | 287.0 | $ | 265.6 | ||||||||
Total shareholders’ equity (end of period) | $ | 1,039.0 | $ | 858.2 | $ | 246.9 | $ | 111.5 | ||||||||
Total debt (end of period) | 1,729.9 | 1,875.6 | 1,670.6 | 1,837.4 | ||||||||||||
Invested capital (end of period) | $ | 2,768.9 | $ | 2,733.8 | $ | 1,917.5 | $ | 1,948.9 | ||||||||
Less: Invested capital related to discontinued operations of ARAMARK Educational Resources (end of period) | — | (210.7 | ) | (233.3 | ) | (218.2 | ) | |||||||||
Invested capital (end of period), as adjusted | $ | 2,768.9 | $ | 2,523.1 | $ | 1,684.2 | $ | 1,730.7 | ||||||||
Total shareholders’ equity (prior year) | $ | 858.2 | $ | 246.9 | $ | 111.5 | $ | 126.6 | ||||||||
Total debt (prior year) | 1,875.6 | 1,670.6 | 1,837.4 | 1,634.4 | ||||||||||||
Invested capital (prior year) | $ | 2,733.8 | $ | 1,917.5 | $ | 1,948.9 | $ | 1,761.0 | ||||||||
Less: Invested capital related to discontinued operations of ARAMARK Educational Resources (prior year) | (210.7 | ) | (233.3 | ) | (218.2 | ) | (198.4 | ) | ||||||||
Invested capital (prior year), as adjusted | $ | 2,523.1 | $ | 1,684.2 | $ | 1,730.7 | $ | 1,562.6 | ||||||||
Average invested capital | $ | 2,646.0 | $ | 2,103.7 | $ | 1,707.5 | $ | 1,646.7 | ||||||||
Return on Invested Capital | 14.2 | % | 17.0 | % | 16.8 | % | 16.1 | % | ||||||||
* | Fiscal 2002 includes a gain of $37.9 million related to the sale of ARAMARK's ownership interests in the Boston Red Sox and a related entity, and a gain of $5.8 million resulting principally from the sale of a residual interest in a previously divested business. |