PHILADELPHIA--(BUSINESS WIRE)--Aramark (NYSE: ARMK) today reported third quarter fiscal 2019 results.
“Our performance in the third quarter was strong and broad-based, anchored in a relentless focus on innovative growth strategies that directly engage the millions of consumers we serve every day,” said Eric J. Foss, Aramark’s Chairman, President and CEO. "We continue to advance our brand and product offerings as part of our commitment to combine technology, convenience and curation across our portfolio. This disciplined approach, combined with the exemplary efforts of our global team members, drove solid year-to-date results, positioning us well to achieve our full year expectations.
“The foundation we are creating provides us with ample opportunity to infuse sales growth and optimize our investments to scale the business,” Foss added. “As a testament to our enhanced financial flexibility, our Board has authorized a share repurchase program. Collectively, these purposeful strategies fuel our ability to drive value creation for our stakeholders."
1 Constant Currency.
THIRD QUARTER RESULTS*
Consolidated Revenue was $4.0 billion in the quarter, an increase of 1.0%. Adjusted Revenue grew 5.8% over the prior-year, attributed to a 3.7% growth in the legacy business and a 2.1% increase related to an accounting rule change. Legacy Revenue expansion was driven by new business wins and base business growth across the segments:
- FSS United States growth of 1.5% led by strength in stadiums and arenas as well as business dining.
- FSS International increase of 9.8% due to growth across geographies with particularly strong performance in Europe, South America and China.
- Uniform & Career Apparel grew 3.1% from improved pricing and volume as well as the continued integration of AmeriPride into the portfolio.
| Revenue | |||||
| Q3 '19 | Q3 '18 | Change | Adjusted Revenue Change | Legacy Revenue Change | |
| FSS United States1 | $2,414M | $2,501M | (3.5)% | 0.9% | 1.5% |
| FSS International | 950 | 930 | 2.2% | 10.0% | 9.8% |
| Uniform & Career Apparel | 647 | 541 | 19.7% | 20.1% | 3.1% |
| Total Company | $4,011M | $3,972M | 1.0% | 5.8% | 3.7% |
| Difference between GAAP Revenue and Adjusted Revenue reflects the elimination of currency translation and divestitures impact. | |
| Difference between Adjusted Revenue and Legacy Revenue reflects the accounting rule changes pursuant to ASC 606. | |
| 1 | Q3 '18 GAAP results include divested Healthcare Technologies revenue of $107 million. This has been excluded from the calculation of adjusted revenue change and legacy revenue change for comparison purposes. |
- FSS United States exhibited operational efficiencies from greater purchasing scale and productivity improvement in the base business.
- FSS International demonstrated broad-based growth with particular strength in Canada and Emerging Markets.
- Uniform & Career Apparel capitalized on synergies related to the AmeriPride acquisition with additional efficiency from operational performance.
| Operating Income | Adjusted Operating Income | |||||
| Q3 '19 | Q3 '18 | Change | Q3 '19 | Q3 '18 | Constant-Currency Change | |
| FSS United States2 | $128M | $136M | (6)% | $156M | $155M | 1% |
| FSS International | 40 | 44 | (8)% | 43 | 47 | (4)% |
| Uniform & Career Apparel | 54 | 57 | (6)% | 67 | 70 | (4)% |
| Corporate | (33) | (49) | 34% | (29) | (42) | 31% |
| Total Company | $189M | $187M | 1% | $237M | $231M | 4% |
| 2 | Q3 '18 GAAP results include divested Healthcare Technologies operating income of $8 million. This has been excluded from thecalculation of Adjusted Operating Income constant-currency change for comparison purposes. |
| * | May not total due to rounding. |
GAAP SUMMARY
On a GAAP basis, revenue was $4.0 billion, operating income was $189 million, net income attributable to Aramark stockholders was $83 million, and diluted earnings per share were $0.33. This compares to the third quarter of 2018 where revenue was $4.0 billion, operating income was $187 million, net income attributable to Aramark stockholders was $73 million and diluted earnings per share were $0.29. Third quarter GAAP diluted earnings per share increased 14% year-over-year. As of the end of the third quarter net cash provided by operating activities was $208 million year-to-date compared to the prior year total of $146 million.
CAPITAL STRUCTURE & FREE CASH FLOW
The Company made continued progress in de-leveraging by reducing its net debt position by $672 million compared to the prior year. Total trailing 12-month net debt to covenant adjusted EBITDA was 4.1x at the end of the quarter, a 0.5x improvement versus the end of the third quarter of 2018. Through nine months, Free Cash Flow improved $158 million compared to prior year. This increase can be attributed to a disciplined management of working capital and investment spend. At quarter-end the Company had approximately $1.1 billion in cash and availability on its revolving credit facility.
SHARE REPURCHASE
Subsequent to the end of the third quarter, the Board approved a share repurchase program of up to $200 million of Aramark's common stock. Repurchases may be made from time to time on the open market or through privately negotiated transactions. The repurchase program has been authorized through July 2022.
CURRENCY
A stronger U.S. dollar decreased revenue by approximately $77 million and had a negative impact of approximately $3 million on operating income. It also had a one-cent unfavorable impact on GAAP and adjusted earnings per share.
2019 OUTLOOK
Aramark provides its expectations for legacy business revenue growth, full-year adjusted EPS and full-year free cash flow on a non-GAAP basis, and does not provide a reconciliation of such forward-looking non-GAAP measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for the impact of the change in fair value related to certain gasoline and diesel agreements, severance and other charges and the effect of currency translation.
The Company maintains the following performance outlook for Fiscal 2019:
- Legacy business revenue growth expectations of approximately 3%.
- Adjusted EPS of $2.20 to $2.30 per share. This includes four cents of unfavorable currency impact.
- Free cash flow of $500 million. This includes approximately $50 million in cash outlay related to the divestiture of the Healthcare Technologies business and approximately $50 million in spending on the integrations of Avendra and AmeriPride.
- Net debt to covenant adjusted EBITDA of 3.8x by the end of the fiscal year.
About Aramark
Aramark (NYSE: ARMK) proudly serves Fortune 500 companies, world champion sports teams, state-of-the-art healthcare providers, the world’s leading educational institutions, iconic destinations and cultural attractions, and numerous municipalities in 19 countries around the world. Our 270,000 team members deliver experiences that enrich and nourish millions of lives every day through innovative services in food, facilities management and uniforms. We work to put our sustainability goals into action by focusing on initiatives that engage our employees, empower healthy living, preserve our planet and build local communities. Aramark is recognized as one of the World’s Most Admired Companies by FORTUNE, as well as an employer of choice by the Human Rights Campaign and DiversityInc. Learn more at www.aramark.com or connect with us on Facebook and Twitter.
