10-Q 1 q32014aramark10-q.htm 10-Q Q3 2014 ARAMARK 10-Q
    

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 June 27, 2014
OR
¨
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)
Aramark Tower
1101 Market Street
Philadelphia, Pennsylvania
19107
(Address of principal executive offices)
(Zip Code)
(215) 238-3000
(Registrant’s telephone number, including area code)
___________________________________________
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
x  (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
The number of shares of the registrant's common stock outstanding as of July 25, 2014: 233,086,773
 









PART I—FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands, Except Share Amounts)
 
 
June 27, 2014
 
September 27, 2013
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
122,419

 
$
110,998

Receivables
1,494,709

 
1,405,843

Inventories, at lower of cost or market
543,210

 
541,972

Prepayments and other current assets
194,862

 
228,352

Total current assets
2,355,200

 
2,287,165

Property and Equipment, net
988,603

 
977,323

Goodwill
4,619,214

 
4,619,987

Other Intangible Assets
1,298,407

 
1,408,764

Other Assets
1,013,578

 
973,867

 
$
10,275,002

 
$
10,267,106

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current Liabilities:
 
 
 
Current maturities of long-term borrowings
$
104,106

 
$
65,841

Accounts payable
766,450

 
888,969

Accrued expenses and other current liabilities
1,129,981

 
1,434,443

Total current liabilities
2,000,537

 
2,389,253

Long-Term Borrowings
5,585,603

 
5,758,229

Deferred Income Taxes and Other Noncurrent Liabilities
959,135

 
1,047,002

Common Stock Subject to Repurchase and Other
10,005

 
168,915

Stockholders' Equity:
 
 
 
Common stock, par value $.01 (authorized: 600,000,000 shares; issued: 2014– 253,398,028 shares and 2013–219,585,247 shares; and outstanding: 2014– 232,608,825 shares and 2013–201,798,518 shares)
2,534

 
2,194

Capital surplus
2,529,129

 
1,693,663

Accumulated deficit
(409,378
)
 
(479,233
)
Accumulated other comprehensive loss
(69,106
)
 
(59,225
)
Treasury stock (shares held in treasury: 2014– 20,789,203 shares and 2013–17,786,729 shares)
(333,457
)
 
(253,692
)
Total stockholders' equity
1,719,722

 
903,707

 
$
10,275,002

 
$
10,267,106


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

1



ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Amounts)
 
 
Three Months
Ended
 
Three Months
Ended
 
June 27, 2014
 
June 28, 2013
Sales
$
3,620,057

 
$
3,490,030

Costs and Expenses:
 
 
 
Cost of services provided
3,275,409

 
3,178,092

Depreciation and amortization
124,917

 
135,808

Selling and general corporate expenses
78,448

 
52,534

 
3,478,774

 
3,366,434

Operating income
141,283

 
123,596

Interest and Other Financing Costs, net
71,186

 
80,917

Income Before Income Taxes
70,097

 
42,679

Provision for Income Taxes
23,181

 
14,705

Net income
46,916

 
27,974

Less: Net income attributable to noncontrolling interests
43

 
226

Net income attributable to Aramark stockholders
$
46,873

 
$
27,748

 
 
 
 
Earnings per share attributable to Aramark stockholders:
 
 
 
Basic
$
0.20

 
$
0.14

Diluted
$
0.19

 
$
0.13

Weighted Average Shares Outstanding:
 
 
 
Basic
231,854

 
201,364

Diluted
243,739

 
208,326

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

2


ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Amounts)
 
 
Nine Months
Ended
 
Nine Months
Ended
 
June 27, 2014
 
June 28, 2013
Sales
$
10,885,145

 
$
10,429,682

Costs and Expenses:
 
 
 
Cost of services provided
9,790,036

 
9,481,859

Depreciation and amortization
387,058

 
404,512

Selling and general corporate expenses
288,739

 
164,181

 
10,465,833

 
10,050,552

Operating income
419,312

 
379,130

Interest and Other Financing Costs, net
256,613

 
341,392

Income Before Income Taxes
162,699

 
37,738

Provision for Income Taxes
57,750

 
6,476

Net income
104,949

 
31,262

Less: Net income attributable to noncontrolling interests
398

 
804

Net income attributable to Aramark stockholders
$
104,551

 
$
30,458

 
 
 
 
Earnings per share attributable to Aramark stockholders:
 
 
 
Basic
$
0.47

 
$
0.15

Diluted
$
0.45

 
$
0.15

Weighted Average Shares Outstanding:
 
 
 
Basic
223,143

 
201,607

Diluted
234,822

 
208,703


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


3


ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In Thousands)

 
Three Months
Ended
 
Three Months
Ended
 
June 27, 2014
 
June 28, 2013
Net income
$
46,916

 
$
27,974

Other comprehensive income (loss), net of tax:
 
 
 
Pension plan adjustments
(567
)
 
(571
)
Foreign currency translation adjustments
248

 
(7,197
)
Fair value of cash flow hedges
(9,947
)
 
3,797

Other comprehensive income (loss), net of tax
(10,266
)
 
(3,971
)
Comprehensive income
36,650

 
24,003

Less: Net income attributable to noncontrolling interests
43

 
226

Comprehensive income attributable to Aramark stockholders
$
36,607

 
$
23,777



 
Nine Months
Ended
 
Nine Months
Ended
 
June 27, 2014
 
June 28, 2013
Net income
$
104,949

 
$
31,262

Other comprehensive income (loss), net of tax:
 
 
 
Pension plan adjustments
(875
)
 
(1,701
)
Foreign currency translation adjustments
(718
)
 
(31,153
)
Fair value of cash flow hedges
(8,288
)
 
12,740

Other comprehensive income (loss), net of tax
(9,881
)
 
(20,114
)
Comprehensive income
95,068

 
11,148

Less: Net income attributable to noncontrolling interests
398

 
804

Comprehensive income attributable to Aramark stockholders
$
94,670

 
$
10,344



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

4




ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
 
 
Nine Months
Ended
 
Nine Months
Ended
 
June 27, 2014
 
June 28, 2013
Cash flows from operating activities:
 
 
 
Net income
$
104,949

 
$
31,262

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 
 
Depreciation and amortization
387,058

 
404,512

Income taxes deferred
(46,190
)
 
(46,454
)
Share-based compensation expense
83,017

 
12,328

Changes in noncash working capital
(562,432
)
 
(328,085
)
Other operating activities
16,158

 
62,763

Net cash (used in) provided by operating activities
(17,440
)
 
136,326

Cash flows from investing activities:
 
 
 
Purchases of property and equipment, client contract investments and other
(326,317
)
 
(263,591
)
Disposals of property and equipment
15,807

 
8,740

Proceeds from divestitures
24,000

 
919

Acquisition of certain businesses, net of cash acquired
(20,335
)
 
(22,566
)
Other investing activities
8,574

 
24,425

Net cash used in investing activities
(298,271
)
 
(252,073
)
Cash flows from financing activities:
 
 
 
Proceeds from long-term borrowings
1,725,047

 
3,223,127

Payments of long-term borrowings
(1,919,980
)
 
(3,048,041
)
Net change in funding under the Receivables Facility
50,000

 
36,200

Payments of dividends
(34,696
)
 

Proceeds from initial public offering, net
524,081

 

Proceeds from issuance of common stock
3,701

 
4,882

Distribution in connection with spin-off of Seamless Holdings

 
(47,352
)
Repurchase of common stock
(2,085
)
 
(38,419
)
Other financing activities
(18,936
)
 
(53,577
)
Net cash provided by financing activities
327,132

 
76,820

Increase (decrease) in cash and cash equivalents
11,421

 
(38,927
)
Cash and cash equivalents, beginning of period
110,998

 
136,748

Cash and cash equivalents, end of period
$
122,419

 
$
97,821


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


5


ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 27, 2014
(Unaudited)
(In Thousands)

 
Total
 
Common
Stock
 
Capital
Surplus
 
Accumulated Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Treasury Stock
Balance, September 27, 2013
$
903,707

 
$
2,194

 
$
1,693,663

 
$
(479,233
)
 
$
(59,225
)
 
$
(253,692
)
Net income attributable to Aramark stockholders
104,551

 
 
 
 
 
104,551

 
 
 
 
Other comprehensive income (loss)
(9,881
)
 
 
 
 
 
 
 
(9,881
)
 
 
Capital contributions from issuance of common stock
42,764

 
60

 
42,704

 
 
 
 
 
 
Capital contributions from initial public offering
524,081

 
280

 
523,801

 
 
 
 
 
 
Compensation expense related to stock incentive plans
83,017

 
 
 
83,017

 
 
 
 
 
 
Tax benefits related to stock incentive plans
27,236

 
 
 
27,236

 
 
 
 
 
 
Change due to termination of provision in Stockholders' Agreement (see Note 8)
158,708

 
 
 
158,708

 
 
 
 
 
 
Purchases of common stock
(79,765
)
 
 
 
 
 
 
 
 
 
(79,765
)
Payments of dividends
(34,696
)
 
 
 
 
 
(34,696
)
 
 
 
 
Balance, June 27, 2014
$
1,719,722

 
$
2,534

 
$
2,529,129

 
$
(409,378
)
 
$
(69,106
)
 
$
(333,457
)

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

6


ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 28, 2013
(Unaudited)
(In Thousands)

 
Total
 
Total
Aramark
Stockholders'
Equity
 
Common
Stock
 
Capital
Surplus
 
Accumulated Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Treasury Stock
 
Noncontrolling
Interest
Balance, September 28, 2012
$
966,864

 
$
933,017

 
$
2,159

 
$
1,636,128

 
$
(444,479
)
 
$
(73,745
)
 
$
(187,046
)
 
$
33,847

Net income
30,674

 
30,458

 
 
 
 
 
30,458

 
 
 
 
 
216

Other comprehensive income (loss)
(20,114
)
 
(20,114
)
 
 
 
 
 
 
 
(20,114
)
 
 
 
 
Capital contributions from issuance of common stock
20,437

 
20,437

 
28

 
20,409

 
 
 
 
 
 
 
 
Compensation expense related to stock incentive plans
12,328

 
12,328

 
 
 
12,328

 
 
 
 
 
 
 
 
Tax benefits related to stock incentive plans
3,566

 
3,566

 
 
 
3,566

 
 
 
 
 
 
 
 
Decrease in common stock subject to repurchase obligation, net
13,903

 
13,903

 
 
 
13,903

 
 
 
 
 
 
 
 
Purchases of common stock
(60,167
)
 
(60,167
)
 
 
 


 
 
 
 
 
(60,167
)
 
 
Distributions of Seamless Holdings
(138,173
)
 
(104,110
)
 
 
 
 
 
(104,110
)
 
 
 
 
 
(34,063
)
Balance, June 28, 2013
$
829,318

 
$
829,318

 
$
2,187

 
$
1,686,334

 
$
(518,131
)
 
$
(93,859
)
 
$
(247,213
)
 
$


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



7


ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1)
BASIS OF PRESENTATION:
On January 26, 2007, ARAMARK Holdings Corporation, a Delaware corporation controlled by investment funds associated with GS Capital Partners, CCMP Capital Advisors, J.P. Morgan Partners, Thomas H. Lee Partners and Warburg Pincus LLC (collectively, the “Sponsors”), Joseph Neubauer, Chairman and former Chief Executive Officer of ARAMARK Holdings Corporation, and certain other members of ARAMARK Holdings Corporation's management, acquired all of the outstanding shares of ARAMARK Holdings Corporation's wholly-owned subsidiary, ARAMARK Corporation, in a going-private transaction.
On December 12, 2013, ARAMARK Holdings Corporation's common stock began trading on the New York Stock Exchange under the symbol "ARMK" after its initial public offering ("IPO") of 28,000,000 shares of its common stock at a price of $20.00 per share (see Note 8).
On May 9, 2014, ARAMARK Holdings Corporation changed its name to Aramark (the “Company”) pursuant to Section 253 of the Delaware General Corporation Law. ARAMARK Holdings Corporation amended Article FIRST of ARAMARK Holdings Corporation's Amended and Restated Certificate of Incorporation to change its corporate name to Aramark pursuant to a Certificate of Ownership and Merger filed with the Secretary of State of the State of Delaware on May 9, 2014. Also on May 9, 2014, the By-laws of the Company were amended and restated to reflect the name change to Aramark. The Company's wholly-owned subsidiary, ARAMARK Corporation, also changed its name on May 9, 2014 to Aramark Services, Inc.
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 significant intercompany transactions and accounts have been eliminated. The Company has an ownership interest in a subsidiary with a redeemable noncontrolling interest. The Company classifies redeemable noncontrolling interests outside of stockholders' equity in the Condensed Consolidated Balance Sheets in “Common Stock Subject to Repurchase and Other.” As of June 27, 2014 and September 27, 2013, the redeemable noncontrolling interest related to the subsidiary was approximately $10.0 million and $10.2 million, respectively. For the three and nine months ended June 27, 2014, net income attributable to redeemable noncontrolling interest was less than $0.1 million and $0.4 million, respectively. Distributions to redeemable noncontrolling interest was $0.6 million for the nine months ended June 27, 2014. For the three and nine months ended June 28, 2013, net income attributable to redeemable noncontrolling interest was $0.2 million and $0.6 million, respectively. Distributions to redeemable noncontrolling interest was $0.7 million for the nine months ended June 28, 2013.
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 (“SEC”) and should be read in conjunction with the audited consolidated financial statements, and the notes to those statements, included in the Company's prospectus, dated December 11, 2013, filed with the SEC pursuant to Rule 424(b) of the Securities Act of 1933, on December 12, 2013. The Condensed Consolidated Balance Sheet as of September 27, 2013 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 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.
(2)
DIVESTITURES:
Fiscal 2014
McKinley Chalet Hotel
On October 7, 2013, the Company completed the sale of its McKinley Chalet Hotel (the "Chalet") located adjacent to Denali National Park for approximately $24.0 million in cash. The transaction resulted in a pretax loss of approximately $6.7 million (net of tax loss of approximately $9.1 million), which is included in "Cost of services provided" in the Condensed Consolidated Statements of Income for the nine months ended June 27, 2014. The pretax loss includes a write-off of an allocation of goodwill of approximately $12.8 million (see Note 5). The results of operations and cash flows associated with the Chalet divestiture were not material to the Company's Condensed Consolidated Statements of Income and Cash Flows.
Fiscal 2013
Spin-off of Seamless Holdings Corporation (now a part of GrubHub Inc.)

8


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

On October 29, 2012, the Company completed the spin-off of its majority interest in Seamless North America, LLC ("Seamless") to its stockholders.
In the spin-off, Aramark Services, Inc. distributed all of the issued and outstanding shares of the common stock of Seamless Holdings Corporation (“Seamless Holdings”), an entity formed for the purpose of completing the spin-off and whose assets primarily consisted of the Company's former interest in Seamless, to its parent company and sole stockholder, ARAMARK Intermediate. Thereafter, ARAMARK Intermediate distributed such shares to the Company, its parent company and sole stockholder, who then distributed all of the shares of Seamless Holdings on a pro rata basis to the holders of the Company's common stock as of October 26, 2012, the record date, through a tax-free stock dividend. Each stockholder of the Company received one share of Seamless Holdings common stock for each share of the Company's common stock held as of the record date.
Until October 29, 2012, Seamless Holdings and its subsidiaries were part of the Company and its assets, liabilities, results of operations, and cash flows are included in the amounts reported in these condensed consolidated financial statements until that date. Following the spin-off, Seamless Holdings is an independent company and the Company retains no ownership interest in Seamless Holdings or Seamless. The Company's proforma results of operations for fiscal 2013 would not have been materially different than reported assuming the spin-off and related transactions had occurred at the beginning of the prior year period.
(3)
SUPPLEMENTAL FINANCIAL INFORMATION:
The Company made interest payments of approximately $223.5 million and $298.0 million and income tax payments of approximately $61.5 million and $65.0 million during the nine months ended June 27, 2014 and June 28, 2013, respectively.
As of June 27, 2014 and September 27, 2013, “Accumulated other comprehensive loss” consists of pension plan adjustments (net of tax) of approximately ($31.4) million and ($30.5) million, respectively, foreign currency translation adjustments (net of tax) of approximately $2.6 million and $3.3 million, respectively, fair value of cash flow hedges (net of tax) of approximately ($32.3) million and ($24.0) million, respectively, and share of equity investees' accumulated other comprehensive loss (net of tax) of approximately ($8.0) million and ($8.0) million, respectively.
For the three and nine months ended June 27, 2014 and June 28, 2013, the tax effects on comprehensive income were as follows (in thousands):
 
Three Months
Ended
 
Three Months
Ended
 
June 27, 2014
 
June 28, 2013
Foreign currency translation adjustments
$
1,383

 
$
4,658

Fair value of cash flow hedges
6,451

 
(2,651
)
Pension plan adjustments
305

 
398

 
 
 
 
 
Nine Months
Ended
 
Nine Months
Ended
 
June 27, 2014
 
June 28, 2013
Foreign currency translation adjustments
$
5,410

 
$
11,679

Fair value of cash flow hedges
5,108

 
(8,187
)
Pension plan adjustments
471

 
1,009

(4) SEVERANCE AND ASSET WRITE-DOWNS:
During fiscal 2013, the Company initiated a series of actions and developed plans to drive efficiencies through the consolidation and centralization of select functions. As a result, the Company recorded charges during the second quarter of fiscal 2013 of approximately $40.8 million for severance and related costs. During the third quarter of fiscal 2013, the Company enhanced the benefits under its severance policy which resulted in an additional charge of approximately $6.6 million related to planned terminations initiated during the second quarter. In addition, during the second quarter of fiscal 2013, the Company recorded charges of approximately $11.7 million for goodwill impairments and other asset write-downs of approximately $11.4 million primarily related to the write-offs of certain client contractual investments. During fiscal 2014, as a result of additional cost saving and productivity initiatives and refinements to the Company's original plans for consolidation and centralization initiatives and actual attrition of the workforce, the Company recorded a reduction to severance expense of approximately ($1.3) million and a net severance charge of approximately $0.5 million during the three and nine months ended June 27, 2014, respectively.

9


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of June 27, 2014 and September 27, 2013, the Company had an accrual of approximately $27.0 million and $46.7 million, respectively, related to the unpaid obligations for these costs.
(5)
GOODWILL AND OTHER INTANGIBLE ASSETS:
Goodwill represents the excess of the fair value of consideration paid for an acquired entity over the fair value of assets acquired and liabilities assumed in a business combination. Goodwill is not amortized and is subject to an impairment test that the Company conducts annually or more frequently if a change in circumstances or the occurrence of events indicates that potential impairment exists, using discounted cash flows.
Changes in total goodwill during the nine months ended June 27, 2014 follow (in thousands):
Segment
September 27, 2013
 
Acquisitions and Divestitures
 
Translation
 
June 27, 2014
FSS North America
$
3,595,048

 
$
(11,103
)
 
$
(42
)
 
$
3,583,903

FSS International
451,154

 

 
9,378

 
460,532

Uniform
573,785

 
994

 

 
574,779

 
$
4,619,987

 
$
(10,109
)
 
$
9,336

 
$
4,619,214

The reduction in goodwill for Food and Support Services—North America ("FSS North America") is primarily related to the Chalet divestiture (see Note 2). The amounts recorded for acquisitions during fiscal 2014 may be revised upon final determination of the purchase price allocations.
Other intangible assets consist of (in thousands):
 
June 27, 2014
 
September 27, 2013
 
Gross
Amount
 
Accumulated
Amortization
 
Net
Amount
 
Gross
Amount
 
Accumulated
Amortization
 
Net
Amount
Customer relationship assets
$
1,900,663

 
$
(1,362,098
)
 
$
538,565

 
$
1,892,484

 
$
(1,242,578
)
 
$
649,906

Trade names
761,475

 
(1,633
)
 
759,842

 
760,491

 
(1,633
)
 
758,858

 
$
2,662,138

 
$
(1,363,731
)
 
$
1,298,407

 
$
2,652,975

 
$
(1,244,211
)
 
$
1,408,764

Acquisition-related intangible assets consist of customer relationship assets, the Aramark trade name and other trade names. Customer relationship assets are being amortized principally on a straight-line basis over the expected period of benefit, 5 to 24 years, with a weighted average life of approximately 12 years. The Aramark trade name is an indefinite lived intangible asset and is not amortizable but is evaluated for impairment at least annually.
Amortization of intangible assets for the nine months ended June 27, 2014 and June 28, 2013 was approximately $120.7 million and $143.9 million, respectively.
(6)
BORROWINGS:
Long-term borrowings are summarized in the following table (in thousands):
 
 
June 27,
2014
 
September 27,
2013
Senior secured revolving credit facility
 
$
163,442

 
$
10,000

Senior secured term loan facility, due July 2016
 
75,261

 
3,032,349

Senior secured term loan facility, due September 2019
 
1,392,797

 
1,393,559

Senior secured term loan facility, due February 2021
 
2,605,544

 

5.75% senior notes, due March 2020
 
1,000,000

 
1,000,000

Receivables Facility, due May 2017
 
350,000

 
300,000

Capital leases
 
57,334

 
52,385

Other
 
45,331

 
35,777

 
 
5,689,709

 
5,824,070

Less—current portion
 
(104,106
)
 
(65,841
)
 
 
$
5,585,603

 
$
5,758,229


10


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company used the net proceeds from its IPO to repay borrowings of approximately $154.1 million on the senior secured revolving credit facility that were borrowed during the first quarter of fiscal 2014 and $370.0 million on the senior secured term loan facility (see Note 8).
Senior Secured Credit Agreement
Senior Secured Term Loan Facilities
2014 Amendment Agreements
On February 24, 2014, Aramark Services, Inc. entered into an Amendment Agreement (“2014 Amendment Agreement”) to the Amended and Restated Credit Agreement dated as of March 26, 2010 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”). The 2014 Amendment Agreement amends and restates the Credit Agreement effective as of February 24, 2014. Among other things, the 2014 Amendment Agreement provides for approximately $3,982.0 million in the aggregate of new term loans, $2,582.0 million of which have a maturity date of February 24, 2021 and $1,400.0 million of which have a maturity date of September 7, 2019. The term loans due on February 24, 2021 include €140.0 million of term loans denominated in euros, £115.0 million of term loans denominated in sterling and ¥5,042.0 million of term loans denominated in yen. The new term loans were borrowed on February 24, 2014 and the proceeds were used to refinance existing term loans due 2016 and 2019 (with the exception of approximately $75.0 million in term loans due 2016 borrowed by Aramark Services, Inc.’s Canadian subsidiary, which remain outstanding). All U.S. dollar denominated new term loans have an applicable margin of 2.50% for eurocurrency (LIBOR) borrowings, subject to a LIBOR floor of 0.75%, and an applicable margin of 1.50% for base-rate borrowings, subject to a minimum base rate of 1.75%. The new yen denominated and Euro denominated term loans have an applicable margin of 2.75% and the new sterling denominated terms loans have an applicable margin of 3.25%. The term loans due on February 24, 2021 were borrowed with an original issue discount of 0.50%. The term loans due on September 7, 2019 were borrowed with an original issue discount of 0.25%.
During the second quarter of fiscal 2014, approximately $22.9 million of lender fees and third-party costs directly attributable to the term loans of the 2014 Amendment Agreement were capitalized and are included in the Condensed Consolidated Balance Sheets. Approximately $3.4 million and $5.1 million of the third-party costs were paid to entities affiliated with GS Capital Partners and J.P. Morgan Partners, respectively. The Company also recorded charges to "Interest and Other Financing Costs, net” in the Condensed Consolidated Statements of Income for the nine months ended June 27, 2014 consisting of $13.1 million of third-party costs and $12.6 million of non-cash charges for the write-off of deferred financing costs and original issue discount.
Amendment Agreement No. 1
On March 28, 2014, Aramark Services, Inc. entered into Amendment Agreement No. 1 to the 2014 Amendment Agreement, which allowed Aramark Services, Inc. to borrow Canadian dollar denominated term loan in an amount of CAD34.0 million, due February 2021.
2013 Amendment Agreements
Amendment Agreement No. 4
On February 22, 2013, Aramark Services, Inc. entered into Amendment Agreement No. 4 (“Amendment Agreement No. 4”) to the Credit Agreement which provided for, among other things, additional term loans and the extension of a portion of the revolving credit facility. On March 7, 2013, Aramark Services, Inc. borrowed $1,400 million of term loans pursuant to Amendment Agreement No. 4. The new term loans were borrowed by Aramark Services, Inc. with an original issue discount of 0.50%. During the second quarter of fiscal 2013, approximately $16.8 million of third-party costs directly attributable to Amendment Agreement No. 4 were capitalized and are included in “Other Assets” in the Condensed Consolidated Balance Sheets, of which approximately $6.8 million were paid to entities affiliated with GS Capital Partners and J.P. Morgan Partners.
Amendment Agreement No. 3
On December 20, 2012, Aramark Services, Inc. amended the senior secured credit agreement ("Amendment Agreement No. 3") to, among other things, borrow $670 million of new term loans to repay approximately $650 million of existing term loans and to fund certain discounts, fees and costs associated with the amendment. During the first quarter of fiscal 2013, approximately $11.6 million of third-party costs directly attributable to Amendment Agreement No. 3 were expensed and are included in “Interest and Other Financing Costs, net” in the Condensed Consolidated Statements of Income. Approximately $4.6 million of the third-party costs were paid to entities affiliated with GS Capital Partners and J.P. Morgan Partners.
Senior Secured Revolving Credit Facility
The 2014 Amendment Agreement also provides for the extension, from January 26, 2017 to February 24, 2019, of the maturity of $565.0 million in revolving lender commitments of the existing $605.0 million revolving credit facility under the Credit

11


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Agreement. The 2014 Amendment Agreement also increases the revolving lender commitments by $165.0 million, for a total revolving credit facility of $770.0 million.
During the second quarter of fiscal 2014, approximately $4.8 million of third-party costs directly attributable to the revolving credit facility of the 2014 Amendment Agreement were capitalized and are included in “Other Assets” in the Condensed Consolidated Balance Sheets.
5.75% Senior Notes due 2020
On March 7, 2013, Aramark Services, Inc. issued $1,000 million of 5.75% Senior Notes due 2020 (the “Senior Notes”) pursuant to a new indenture, dated as of March 7, 2013 (the “Indenture”), entered into by Aramark Services, Inc.
During the second quarter of fiscal 2013, approximately $13.8 million of third-party costs directly attributable to the Senior Notes were capitalized and are included in “Other Assets” in the Condensed Consolidated Balance Sheets. Approximately $7.3 million of the third-party costs were paid to entities affiliated with GS Capital Partners and J.P. Morgan Partners.
Repurchase of 8.50% Senior Notes due 2015, Senior Floating Rate Notes due 2015 and 8.625% / 9.375% Senior Notes due 2016
In February 2013, the Company and Aramark Services, Inc. commenced a tender offer to purchase for cash any and all of the 8.625% / 9.375% Senior Notes due 2016, the 8.50% Senior Notes due 2015 and the Senior Floating Notes due 2015 (collectively, the "Notes"). On March 7, 2013, the Company used a portion of the aggregate proceeds of the Senior Notes offering and the borrowings under the new term loans pursuant to Amendment Agreement No. 4 to purchase all Notes tendered by March 6, 2013, the early tender date.
During the second quarter of fiscal 2013, in connection with the tender offer and the full and complete satisfaction and discharge of the remaining aggregate principal of the Notes, the Company recorded $39.8 million of charges to "Interest and Other Financing Costs, net” in the Condensed Consolidated Statements of Income consisting of $12.9 million of third party costs for the tender offer premium and $26.9 million of non-cash charges for the write-off of deferred financing costs.
(7)
DERIVATIVE INSTRUMENTS:
The Company enters into contractual derivative arrangements to manage changes in market conditions related to interest on debt obligations, foreign currency exposures and exposure to fluctuating gasoline and diesel fuel prices. Derivative instruments utilized during the period include interest rate swap agreements, foreign currency forward exchange contracts and gasoline and diesel fuel agreements. All derivative instruments are recognized as either assets or liabilities on the balance sheet at fair value at the end of each quarter. The counterparties to the Company’s contractual derivative agreements are all major international financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. For designated hedging relationships, the Company formally documents the hedging relationship and its risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method of measuring ineffectiveness. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting cash flows of hedged items.
Cash Flow Hedges
The Company has outstanding $2.9 billion notional amount of interest rate swap agreements, fixing the rate on a like amount of variable rate borrowings. During the second quarter of fiscal 2014, as a result of the 2014 Amendment Agreement, the Company de-designated the interest rate swap agreements as the terms of the interest rate swaps did not match the terms of the new term loans. Prior to the 2014 Amendment Agreement, these agreements met the required criteria to be designated as cash flow hedging instruments. As a result of the de-designation, the mark-to-market values of the Company's cash flow hedges included in Accumulated Other Comprehensive Loss, which was approximately $22.8 million of unrealized net of tax losses, were frozen as of the de-designation date and will be reclassified into earnings as the underlying hedged transactions affect earnings. In February 2014, the Company amended the interest rate swap agreements to match the terms of the new term loans under the 2014 Amendment Agreement to meet the criteria to be designated as cash flow hedging instruments. During the third quarter of fiscal 2014, the Company entered into $500 million notional amount of forward starting interest rate swap agreements, fixing the rate on a like amount of variable rate borrowings. Changes in the fair value of a derivative that is designated as and meets all the required criteria for a cash flow hedge are recorded in accumulated other comprehensive income (loss) and reclassified into earnings as the underlying hedged item affects earnings. As of June 27, 2014 and

12


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 27, 2013, approximately ($26.2) million and ($20.5) million of unrealized net of tax losses related to the interest rate swaps were included in “Accumulated other comprehensive loss,” respectively. The hedge ineffectiveness for these cash flow hedging instruments during the nine months ended June 27, 2014 and June 28, 2013 was not material.
The Company has outstanding $75.4 million amortizing cross currency swap to mitigate the risk of variability in principal and interest payments on the Canadian subsidiary’s variable rate debt denominated in U.S. dollars. During the second quarter of fiscal 2014, approximately $82.7 million of amortizing cross currency swaps matured. The agreement fixes the rate on the variable rate borrowings and mitigates changes in the Canadian dollar/U.S. dollar exchange rate. During the nine months ended June 27, 2014 and June 28, 2013, approximately $5.6 million and $4.7 million of unrealized net of tax gains (losses) related to the swap were added to “Accumulated other comprehensive loss,” respectively. Approximately ($2.6) million and ($5.5) million were reclassified to offset net translation gains (losses) on the foreign currency denominated debt during the nine months ended June 27, 2014 and June 28, 2013, respectively. As of June 27, 2014 and September 27, 2013, unrealized net of tax losses of approximately ($6.1) million and ($3.5) million related to the cross currency swap were included in “Accumulated other comprehensive loss,” respectively. The hedge ineffectiveness for this cash flow hedging instrument during the nine months ended June 27, 2014 and June 28, 2013 was not material.
As a result of Amendment Agreement No. 3, the Company de-designated the cross currency swap that hedged the Canadian subsidiary's term loan with a maturity date of January 26, 2014. Prior to Amendment Agreement No. 3, these contracts met the required criteria to be designated as cash flow hedging instruments. As a result, approximately $3.2 million was reclassified from “Accumulated other comprehensive loss” in the Condensed Consolidated Balance Sheets to “Interest and Other Financing Costs, net” in the Condensed Consolidated Statements of Income during the nine months ended June 28, 2013.
The following table summarizes the net of tax effect of our derivatives designated as cash flow hedging instruments on Comprehensive Income (Loss) (in thousands):
 
 
Three Months
Ended
 
Three Months
Ended
 
June 27, 2014
 
June 28, 2013
Interest rate swap agreements
$
(9,567
)
 
$
5,297

Cross currency swap agreements
(380
)
 
(1,500
)
 
$
(9,947
)
 
$
3,797

 
 
 
 
 
Nine Months
Ended
 
Nine Months
Ended
 
June 27, 2014
 
June 28, 2013
Interest rate swap agreements
$
(5,641
)
 
$
11,595

Cross currency swap agreements
(2,647
)
 
1,145

 
$
(8,288
)
 
$
12,740

Derivatives not Designated in Hedging Relationships
In fiscal 2013, the Company elected to de-designate the cross currency swaps as a result of Amendment Agreement No. 3. As a result, changes in the fair value of these swaps are recorded in earnings. During the second quarter of fiscal 2014, the cross currency swap matured. For the nine months ended June 27, 2014, the Company recorded a pretax gain of approximately $5.8 million for the change in the fair value of these swaps in “Interest and Other Financing Costs, net” in the Condensed Consolidated Statements of Income. For the three and nine months ended June 28, 2013, the Company recorded a pretax gain of approximately $2.4 million and $4.6 million for the change in the fair value of these swaps in “Interest and Other Financing Costs, net” in the Condensed Consolidated Statements of Income, respectively.
The Company entered into a series of pay fixed/receive floating gasoline and diesel fuel agreements based on the Department of Energy weekly retail on-highway index in order to limit its exposure to price fluctuations for gasoline and diesel fuel. During fiscal 2014, the Company has entered into contracts for approximately 8.4 million gallons. As of June 27, 2014, the Company has contracts for approximately 5 million gallons outstanding for fiscal 2014 and fiscal 2015. The Company does not record its gasoline and diesel fuel agreements as hedges for accounting purposes. As such, changes in the fair value of these contracts are recorded in earnings. The impact on earnings related to the change in fair value of these contracts for the three and nine month periods of fiscal 2014 and fiscal 2013 were not material.
As of June 27, 2014, the Company had foreign currency forward exchange contracts outstanding with notional amounts of €16.1 million, £7.3 million and CAD33.8 million to mitigate the risk of changes in foreign currency exchange rates on intercompany loans to certain international subsidiaries. Gains and losses on these foreign currency exchange contracts are

13


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

recognized in income currently as the contracts were not designated as hedging instruments, substantially offsetting currency transaction gains and losses on the intercompany loans.
The Company's interest rate swap agreements are subject to master netting arrangements, which serve as credit mitigants to both the Company and its counterparties under certain situations. The Company presents the net asset or liability position of its derivative fair values on the Condensed Consolidated Balance Sheets. The following table summarizes the location and fair value, using Level 2 inputs, of the Company’s derivatives designated and not designated as hedging instruments in our Condensed Consolidated Balance Sheets (in thousands):
 
 
Balance Sheet Location
 
June 27, 2014
 
September 27, 2013
ASSETS
 
 
 
 
 
 
Not designated as hedging instruments:
 
 
 
 
 
 
Gasoline and diesel fuel agreements
 
Prepayments
 
590

 
37

 
 
 
 
$
590

 
$
37

 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
Designated as hedging instruments:
 
 
 
 
 
 
Interest rate swap agreements
 
Accrued Expenses
 
$

 
$
3,494

Interest rate swap agreements
 
Other Noncurrent Liabilities
 
40,067

 
30,431

Cross currency swap agreements
 
Other Noncurrent Liabilities
 
11,767

 
16,129

 
 
 
 
51,834

 
50,054

 
 
 
 
 
 
 
Not designated as hedging instruments:
 
 
 
 
 
 
Foreign currency forward exchange contracts
 
Accounts Payable
 
264

 
366

Cross currency swap agreements
 
Accrued Expenses
 

 
12,818

 
 
 
 
$
52,098

 
$
63,238

The following table summarizes the location of (gain) loss reclassified from “Accumulated other comprehensive loss” into earnings for derivatives designated as hedging instruments and the location of (gain) loss from the derivatives not designated as hedging instruments in the Condensed Consolidated Statements of Income (in thousands):

14


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
 
 
 
Three Months
Ended
 
Three Months
Ended
 
 
Account
 
June 27, 2014
 
June 28, 2013
Designated as hedging instruments:
 
 
 
 
 
 
Interest rate swap agreements
 
Interest Expense
 
$
6,933

 
$
5,740

Cross currency swap agreements
 
Interest Expense
 
2,971

 
250

 
 

 
$
9,904

 
$
5,990

 
 
 
 
 
 
 
Not designated as hedging instruments:
 
 
 
 
 
 
Cross currency swap agreements
 
Interest Expense
 
$

 
$
(2,429
)
Gasoline and diesel fuel agreements
 
Cost of services provided
 
(533
)
 
250

Foreign currency forward exchange contracts
 
Interest Expense
 
1,122

 
1,764

 
 
 
 
$
589

 
$
(415
)
 
 
 
 
 
 
 
 
 
 
 
Nine Months
Ended
 
Nine Months
Ended
 
 
Account
 
June 27, 2014
 
June 28, 2013
Designated as hedging instruments:
 
 
 
 
 
 
Interest rate swap agreements
 
Interest Expense
 
$
23,116

 
$
16,950

Cross currency swap agreements
 
Interest Expense
 
(1,853
)
 
3,256

 
 
 
 
$
21,263

 
$
20,206

 
 
 
 
 
 
 
Not designated as hedging instruments:
 
 
 
 
 
 
Cross currency swap agreements
 
Interest Expense
 
$
(5,111
)
 
$
(1,408
)
Gasoline and diesel fuel agreements
 
Cost of services provided
 
(669
)
 
119

Foreign currency forward exchange contracts
 
Interest Expense
 
5,407

 
(4,278
)
 
 
 
 
$
(373
)
 
$
(5,567
)
At June 27, 2014, the net of tax loss expected to be reclassified from “Accumulated other comprehensive loss” into earnings over the next twelve months based on current market rates is approximately $19.5 million.
 
(8)
CAPITAL STOCK:
On December 17, 2013, the Company completed the IPO of 28,000,000 shares of its common stock at a price of $20.00 per share, raising approximately $524.1 million, net of costs directly related to the IPO. GS Capital Partners and J.P. Morgan Partners received approximately $6.5 million and $6.5 million, respectively, of underwriters' discounts relating to the shares sold by the Company which were included in the costs directly related to the IPO. The Company used the net proceeds to repay borrowings on the senior secured revolving credit facility and a portion of the principal on the senior secured term loan facility (see Note 6). In addition, the Company paid cash bonuses and certain other expenses of approximately $5.0 million related to the IPO, which were included in the Condensed Consolidated Statements of Income.
Prior to the IPO, pursuant to the Amended and Restated Stockholders Agreement of the Company, upon termination of employment from the Company or one of its subsidiaries, members of the Company’s management (other than Mr. Neubauer) who held shares of common stock could have caused the Company to repurchase all of their initial investment shares (as defined) or shares acquired as a result of the exercise of Installment Stock Purchase Opportunities at appraised fair market value. Generally, payment for shares repurchased could have been, at the Company’s option, in cash or installment notes, which would be effectively subordinated to all indebtedness of the Company. The amount of this potential repurchase obligation had been classified outside of stockholders' equity. With the completion of the IPO, this provision was terminated. The amount of common stock subject to repurchase as of June 27, 2014 and September 27, 2013 was $0 and $158.7 million, respectively.
During the nine months ended June 27, 2014, the Company paid dividends of approximately $34.7 million to its stockholders. On August 6, 2014, the Company's Board declared a $0.075 dividend per share of common stock, payable on September 9, 2014, to shareholders of record on the close of business on August 19, 2014.

15


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(9)
SHARE-BASED COMPENSATION:
On November 12, 2013, the Board of Directors (the "Board") approved, and the stockholders of Aramark adopted by written consent, the Aramark 2013 Stock Incentive Plan (the “2013 Stock Plan”), which became effective on December 1, 2013. The 2013 Stock Plan provides that the total number of shares of common stock that may be issued under the 2013 Stock Plan is 25,500,000. In connection with the adoption of the 2013 Stock Plan, the Board approved, and the stockholders of Aramark adopted by written consent, the Fifth Amended and Restated Aramark 2007 Management Stock Incentive Plan (the “Fifth Amended Stock Plan”) which amended certain terms of the 2007 Management Stock Incentive Plan ("2007 MSIP") in contemplation of the IPO, including providing that no awards will be granted under the Fifth Amended Stock Plan shortly following the consummation of an initial public offering, as grants following the IPO are made under the 2013 Stock Plan.
During the three and nine months ended June 27, 2014, share-based compensation expense was approximately $10.0 million, before taxes of $3.9 million, and approximately $83.0 million, before taxes of $32.4 million, respectively. During the three and nine months ended June 28, 2013, share-based compensation expense was approximately $3.5 million, before taxes of $1.4 million, and approximately $12.3 million, before taxes of $4.9 million, respectively.
Stock Options
Time-Based Options
The Company granted 1.9 million time-based options with a weighted-average grant-date fair value of $6.65 during the first quarter of fiscal 2014. The compensation cost charged to expense during the three and nine months ended June 27, 2014 for time-based options was approximately $2.9 million and $9.7 million, respectively. The compensation cost charged to expense during the three and nine months ended June 28, 2013 for time-based options was approximately $1.8 million and $5.8 million, respectively.
Performance-Based Options
On November 11, 2013, the Compensation Committee approved an amendment to all outstanding 2007 MSIP Option Agreements (the “Performance Option Amendment”) modifying the vesting provisions relating to outstanding performance-based options granted under the 2007 MSIP. The Performance Option Amendment provides that in the event of an initial public offering of Aramark, subject to continued employment on such date, 50% of any then-unvested performance-based options that did not meet applicable performance thresholds in prior years (the “Missed Year Options”) will become vested if the initial public offering price for the common stock of Aramark equals or exceeds $20.00 per share. In addition, during the 18 month period following the initial public offering, if the closing trading price for common stock of Aramark equals or exceeds $25.00 per share over any consecutive twenty day trading period, 100% of the Missed Year Options will become vested. There were a total of approximately 5.0 million Missed Year Options which fully vested in the second quarter of fiscal 2014 as all performance targets were met. The fair values of the Missed Year Options were valued at the award modification date using a Monte-Carlo option model, which simulates a range of possible future stock prices and estimates the probabilities of meeting the modified vesting provision of the trading price for the common stock of Aramark equaling or exceeding $25.00 per share over any consecutive twenty day trading period during the 18 month period following the initial public offering. The following weighted-average assumptions were used in estimating the fair value of the Missed Year Options: estimated volatility (30%), expected dividend yield (1.5%), expected life (3-8 years) and risk-free rate (0.66%-2.63%). The weighted-average fair value of the Missed Year Options modified on November 11, 2013 was $10.19 per option.
During the three and nine months ended June 27, 2014, the Company recognized a charge to expense of approximately $1.6 million and $57.0 million for performance-based options, respectively. The nine months ended June 27, 2014 includes approximately $50.9 million related to the Missed Year Options that were modified. During the three and nine months ended June 28, 2013, $1.5 million and $4.9 million was charged to expense for performance-based options, respectively.
Installment Stock Purchase Opportunities (“ISPOs”)
The Company recorded approximately $0.4 million and $1.6 million of compensation expense related to ISPOs and the exchanged restricted stock and non-qualified stock options during the three and nine months ended June 27, 2014, respectively. The Company recorded approximately $0.2 million and $0.8 million of compensation expense related to ISPOs during the three and nine months ended June 28, 2013, respectively.
Time-Based Restricted Stock Units
The Restricted Stock Unit Agreement provides for grants of restricted stock units (“RSUs”), 25% of which will vest and be settled in shares on each of the first four anniversaries of the date of grant, subject to the participant’s continued employment with the Company through each such anniversary. The grant-date fair value of RSUs is based on the fair value of the

16


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Company’s common stock. Participants holding RSUs will receive the benefit of any dividends paid on shares in the form of additional RSUs. The unvested RSUs are subject to forfeiture if employment is terminated other than due to death, disability or retirement, and the units are nontransferable while subject to forfeiture.
The Company granted 2,048,785 RSUs during the first quarter of fiscal 2014 at a weighted-average grant-date fair value of $20.45. Compensation expense for RSUs is recognized on a straight-line basis over the vesting period during which employees perform related services. The compensation cost charged to expense during the three and nine months ended June 27, 2014 for RSUs was approximately $3.6 million and $9.9 million, respectively.
Performance Stock Units
Under the 2013 Stock Plan, the Company is authorized to grant Performance Stock Units ("PSUs") to its employees. A participant is eligible to become vested in a number of PSUs equal to a percentage, higher or lower, of the target number of PSUs granted based on the level of the Company’s achievement of performance conditions. The first 33% of the award will vest if and when the Company achieves these performance conditions while the remaining 67% will generally vest ratably over the next two anniversaries of the date of grant, subject to the achievement of the performance condition in the first year of grant and the participant's continued employment with the Company through each such anniversary. The grant-date fair value of the PSUs is based on the fair value of the Company's common stock.
On December 20, 2013, the Company granted 466,763 PSUs with a weighted-average grant-date fair value of $23.92 with performance conditions based upon the achievement of a level of earnings per share. The compensation cost charged to expense during the three and nine months ended June 27, 2014 for PSUs was approximately $1.5 million and $3.3 million, respectively.
Deferred Stock Units
The Company granted 60,088 deferred stock units during the nine months ended June 27, 2014. The compensation cost charged to expense during the three and nine months ended June 27, 2014 for deferred stock units was approximately $0 and $1.5 million, respectively. The Company granted 42,462 deferred stock units during the nine months ended June 28, 2013. The compensation cost charged to expense during the nine months ended June 28, 2013 for deferred stock units was approximately $0.6 million.
(10) ACCOUNTS RECEIVABLE SECURITIZATION:
The Company has an agreement (the "Receivables Facility") with several financial institutions whereby it sells on a continuous basis an undivided interest in all eligible trade accounts receivable, as defined in the Receivables Facility. In May 2014, the Company amended the Receivables Facility to increase the maximum amount from $300.0 million to $350.0 million and extend the maturity date from January 2015 to May 2017. In addition, the Receivable Facility will now include a seasonal tranche which will increase the capacity of the Receivable Facility by $25.0 million. Pursuant to the Receivables Facility, the Company formed ARAMARK Receivables, LLC, a wholly-owned, consolidated, bankruptcy-remote subsidiary. ARAMARK Receivables, LLC was formed for the sole purpose of buying and selling receivables generated by certain subsidiaries of the Company. Under the Receivables Facility, the Company and certain of its subsidiaries transfer without recourse all of their accounts receivable to ARAMARK Receivables, LLC. As collections reduce previously transferred interests, interests in new, eligible receivables are transferred to ARAMARK Receivables, LLC, subject to meeting certain conditions. At June 27, 2014 and September 27, 2013, the amount of outstanding borrowings under the Receivables Facility was $350.0 million and $300.0 million and is included in “Long-Term Borrowings,” respectively.
(11)
EQUITY INVESTMENTS:
The Company’s principal equity method investment is its 50% ownership interest in AIM Services Co., Ltd., a Japanese food and support services company (approximately $188.9 million and $190.7 million at June 27, 2014 and September 27, 2013, respectively, which is included in “Other Assets” in the Condensed Consolidated Balance Sheets). Summarized financial information for AIM Services Co., Ltd. follows (in thousands):
 
Three Months
Ended
 
Three Months
Ended
 
June 27, 2014
 
June 28, 2013
Sales
$
390,862

 
$
398,610

Gross profit
45,171

 
47,148

Net income
6,239

 
6,803


17


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
Nine Months
Ended
 
Nine Months
Ended
 
June 27, 2014
 
June 28, 2013
Sales
$
1,156,205

 
$
1,294,082

Gross profit
130,735

 
149,553

Net income
19,572

 
22,183

The period to period comparisons of the summarized financial information for AIM Services Co., Ltd., presented in U.S. dollars above, is significantly impacted by currency translation. Aramark’s equity in undistributed earnings of AIM Services Co., Ltd., net of amortization related to purchase accounting for the 2007 going-private transaction, was $2.5 million and $7.9 million for the three and nine months ended June 27, 2014, respectively. Aramark’s equity in undistributed earnings of AIM Services Co., Ltd., net of amortization related to purchase accounting for the 2007 going-private transaction, was $2.8 million and $8.0 million for the three and nine months ended June 28, 2013, respectively.
(12)
BUSINESS SEGMENTS:
Sales, operating income and depreciation and amortization by reportable segment follow (in thousands):
 
Three Months
Ended
 
Three Months
Ended
Sales 
June 27, 2014
 
June 28, 2013
FSS North America
$
2,487,739

 
$
2,405,860

FSS International
765,206

 
727,516

Uniform
367,112

 
356,654

 
$
3,620,057

 
$
3,490,030

 
Three Months
Ended
 
Three Months
Ended
Operating Income
June 27, 2014
 
June 28, 2013
FSS North America
$
95,546

 
$
73,146

FSS International
36,722

 
28,694

Uniform
46,857

 
35,388

 
179,125

 
137,228

Corporate
(37,842
)
 
(13,632
)
Operating Income
141,283

 
123,596

Interest and Other Financing Costs, net
(71,186
)
 
(80,917
)
Income Before Income Taxes
$
70,097

 
$
42,679

 
 
 
Three Months
Ended
 
Three Months
Ended
Depreciation and Amortization
June 27, 2014
 
June 28, 2013
FSS North America
$
92,237

 
$
94,893

FSS International
14,385

 
14,956

Uniform
17,622

 
25,522

Corporate
673

 
437

 
$
124,917

 
$
135,808



18


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
Nine Months
Ended
 
Nine Months
Ended
Sales 
June 27, 2014
 
June 28, 2013
FSS North America
$
7,504,970

 
$
7,217,759

FSS International
2,284,944

 
2,154,567

Uniform
1,095,231

 
1,057,356

 
$
10,885,145

 
$
10,429,682

 
 
Nine Months
Ended
 
Nine Months
Ended
Operating Income
June 27, 2014
 
June 28, 2013
FSS North America
$
384,096

 
$
298,935

FSS International
76,957

 
37,877

Uniform
123,716

 
89,761

 
584,769

 
426,573

Corporate
(165,457
)
 
(47,443
)
Operating Income
419,312

 
379,130

Interest and Other Financing Costs, net
(256,613
)
 
(341,392
)
Income Before Income Taxes
$
162,699

 
$
37,738


 
Nine Months
Ended
 
Nine Months
Ended
Depreciation and Amortization
June 27, 2014
 
June 28, 2013
FSS North America
$
280,239

 
$
279,902

FSS International
43,760

 
46,754

Uniform
62,024

 
76,964

Corporate
1,035

 
892

 
$
387,058

 
$
404,512

In the first and second fiscal quarters, within the FSS North America segment, historically there has been a lower level of activity at the sports and leisure food service operations that is partly offset by increased activity in the educational operations. However, in the third and fourth fiscal quarters, historically there has been a significant increase at sports and leisure accounts that is partially offset by the effect of summer recess at the educational accounts.
(13)
NEW ACCOUNTING STANDARD UPDATES:
In June 2014, the FASB issued an accounting standard update (“ASU”) which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The guidance is effective for the Company beginning in the first quarter of fiscal 2017. The Company is currently evaluating the impact of the pronouncement relative to its stock incentive awards.
In May 2014, the FASB issued an ASU on revenue from contracts with customers. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The guidance is effective for the Company beginning in the first quarter of fiscal 2018. The Company is currently evaluating the impact of the pronouncement.
In January 2014, the FASB issued an ASU which states that companies should not account for certain service concession arrangements with public-sector entities as leases and should not recognize the related infrastructure as property, plant and equipment. The guidance is effective for the Company beginning in the first quarter of fiscal 2016. The Company is currently evaluating the impact of the pronouncement.
In July 2013, the FASB issued an ASU which requires unrecognized tax benefits to be offset against a deferred tax asset for a net operating loss carryforward, similar tax loss or tax credit carryforward in certain situations. The guidance will likely change the balance sheet presentation of certain unrecognized tax benefits. The guidance is effective in the first quarter of fiscal 2015. The Company is currently evaluating the impact of the pronouncement.

19


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In February 2013, the FASB issued an ASU which requires companies to disclose information about reclassifications out of accumulated other comprehensive income (“AOCI”). Companies also are required to present reclassifications by component when reporting changes in AOCI balances. For significant items reclassified out of AOCI to net income in their entirety in the period, companies must report the effect of the reclassifications on the respective line items in the statement where net income is presented. The Company adopted the guidance in the first quarter of fiscal 2014 which did not have a material impact on the condensed consolidated financial statements.
In December 2011, the FASB issued an ASU that requires companies with financial instruments and derivative instruments that are offset on the balance sheet or subject to a master netting arrangement to provide additional disclosures regarding the instruments impact on a company’s financial position. In January 2013, the FASB issued an accounting standard update to clarify the scope of this ASU. The Company adopted the guidance in the first quarter of fiscal 2014 which did not have a material impact on the condensed consolidated financial statements.
(14)
COMMITMENTS AND CONTINGENCIES:
Certain of the Company’s lease arrangements, primarily vehicle leases, with terms of one to eight years, contain provisions related to residual value guarantees. The maximum potential liability to the Company under such arrangements was approximately $127.2 million at June 27, 2014 if the terminal fair value of vehicles coming off lease was zero. Consistent with past experience, management does not expect any significant payments will be required pursuant to these arrangements. No amounts have been accrued for guarantee arrangements at June 27, 2014.
From time to time, the Company and its subsidiaries are a party to various legal actions and investigations involving claims incidental to the conduct of its business, including actions by clients, customers, employees, government entities and third parties, including under federal, state, international, national, provincial and local employment laws, wage and hour laws, discrimination laws, immigration laws, human health and safety laws, import and export controls and customs laws, environmental laws, false claims or whistleblower statutes, minority, women and disadvantaged business enterprise statutes, tax codes, antitrust and competition laws, consumer protection statutes, procurement regulations, intellectual property laws, food safety and sanitation laws, cost and accounting principles, the Foreign Corrupt Practices Act, the U.K. Bribery Act, other anti-corruption laws, lobbying laws, motor carrier safety laws, data privacy laws and alcohol licensing and service laws, or alleging negligence and/or breaches of contractual and other obligations. Based on information currently available, advice of counsel, available insurance coverage, established reserves and other resources, the Company does not believe that any such actions are likely to be, individually or in the aggregate, material to its business, financial condition, results of operations or cash flows. However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to the Company’s business, financial condition, results of operations or cash flows.
(15) FAIR VALUE OF ASSETS AND LIABILITIES:
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are classified based upon the level of judgment associated with the inputs used to measure their fair value. The hierarchical levels related to the subjectivity of the valuation inputs are defined as follows:
Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2—inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument
Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement
Recurring Fair Value Measurements
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, borrowings and derivatives. Management believes that the carrying value of cash and cash equivalents, accounts receivable and accounts payable are representative of their respective fair values. In conjunction with the fair value measurement of the derivative instruments, the Company made an accounting policy election to measure the credit risk of its derivative instruments, that are subject to master netting agreements, on a net basis by counterparty portfolio. The fair value of the

20


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Company’s debt at June 27, 2014 and September 27, 2013 was $5,747.7 million and $5,854.9 million, respectively. The carrying value of the Company’s debt at June 27, 2014 and September 27, 2013 was $5,689.7 million and $5,824.1 million, respectively. The fair values were computed using market quotes, if available, or based on discounted cash flows using market interest rates as of the end of the respective periods. The inputs utilized in estimating the fair value of the Company's debt has been classified as level 2 in the fair value hierarchy levels.
During the first quarter of fiscal 2014, the Company's obligation to repurchase shares was eliminated (see Note 8). The following table presents the changes in the Company's common stock subject to repurchase for which level 3 inputs were significant to their valuation for the nine months ended June 27, 2014 (in thousands):
 
Common Stock
Subject to
Repurchase
Balance, September 27, 2013
$
158,708

Repurchases of common stock
(763
)
Reclassification of common stock subject to repurchase
(157,945
)
Balance, June 27, 2014
$

 (16) EARNINGS PER SHARE:
Basic earnings per share is computed using the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of share-based awards.
The following table sets forth the computation of basic and diluted earnings per share attributable to Aramark stockholders (in thousands, except per share data):
 
 
Three Months
Ended
 
Three Months
Ended
 
 
June 27, 2014
 
June 28, 2013
Earnings:
 
 
 
 
Net income attributable to Aramark stockholders
 
$
46,873

 
$
27,748

Shares:
 
 
 
 
Basic weighted-average shares outstanding
 
231,854

 
201,364

Effect of dilutive securities
 
11,885

 
6,962

Diluted weighted-average shares outstanding
 
243,739

 
208,326

 
 
 
 
 
Basic Earnings Per Share:
 
 
 
 
Net income attributable to Aramark stockholders
 
$
0.20

 
$
0.14

 
 
 
 
 
Diluted Earnings Per Share:
 
 
 
 
Net income attributable to Aramark stockholders
 
$
0.19

 
$
0.13



21


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
 
Nine Months
Ended
 
Nine Months
Ended
 
 
June 27, 2014
 
June 28, 2013
Earnings:
 
 
 
 
Net income attributable to Aramark stockholders
 
$
104,551

 
$
30,458

Shares:
 
 
 
 
Basic weighted-average shares outstanding
 
223,143

 
201,607

Effect of dilutive securities
 
11,679

 
7,096

Diluted weighted-average shares outstanding
 
234,822

 
208,703

 
 
 
 
 
Basic Earnings Per Share:
 
 
 
 
Net income attributable to Aramark stockholders
 
$
0.47

 
$
0.15

 
 
 
 
 
Diluted Earnings Per Share:
 
 
 
 
Net income attributable to Aramark stockholders
 
$
0.45

 
$
0.15

Share-based awards to purchase 1.6 million shares and 2.8 million shares were outstanding for the three month periods of fiscal 2014 and fiscal 2013, respectively, but were not included in the computation of diluted earnings per share, as their effect would have been antidilutive. In addition, performance-based options and performance stock units to purchase 2.2 million and 7.9 million shares were outstanding for the three month periods of fiscal 2014 and fiscal 2013, respectively, but were not included in the computation of diluted earnings per share, as the performance targets were not yet met. Share-based awards to purchase 1.3 million and 5.2 million shares were outstanding for the nine month periods of fiscal 2014 and fiscal 2013, respectively, but were not included in the computation of diluted earnings per share, as their effect would have been antidilutive. In addition, performance-based options and performance stock units to purchase 3.4 million and 9.5 million shares were outstanding during the nine month periods of fiscal 2014 and fiscal 2013, respectively, but were not included in the computation of diluted earnings per share, as the performance targets were not yet met.
(17)
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF ARAMARK AND SUBSIDIARIES:
The following condensed consolidating financial statements of the Company have been prepared pursuant to Rule 3-10 of Regulation S-X.

These condensed consolidating financial statements have been prepared from the Company’s financial information on the same basis of accounting as the consolidated financial statements. Interest expense and certain other costs are partially allocated to all of the subsidiaries of the Company. Goodwill and other intangible assets have been allocated to the subsidiaries based on management’s estimates. The 5.75% Senior Notes are an obligation of the Company's wholly-owned subsidiary, Aramark Services, Inc., and are jointly and severally guaranteed on a senior unsecured basis by the Company and substantially all of the Company’s existing and future domestic subsidiaries (excluding the receivables facility subsidiary) (“Guarantors”). Each of the Guarantors is wholly-owned, directly or indirectly, by the Company. All other subsidiaries of the Company, either direct or indirect, do not guarantee the Senior Notes (“Non-Guarantors”). The Guarantors also guarantee certain other debt.


22


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


 ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
June 27, 2014
(in millions)
 
 
Aramark  (Parent)
 
Aramark Services, Inc.
(Issuer)
 
Guarantors 
 
Non
Guarantors
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
29.6

 
$
46.5

 
$
46.3

 
$

 
$
122.4

Receivables

 
0.6

 
331.7

 
1,162.4

 

 
1,494.7

Inventories, at lower of cost or market

 
15.4

 
445.2

 
82.6

 

 
543.2

Prepayments and other current assets

 
15.7

 
77.4

 
101.8

 

 
194.9

Total current assets

 
61.3

 
900.8

 
1,393.1

 

 
2,355.2

 
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment, net

 
24.1

 
777.6

 
186.9

 

 
988.6

Goodwill

 
173.1

 
3,982.7

 
463.4

 

 
4,619.2

Investment in and Advances to Subsidiaries
1,720.7

 
5,904.5

 
510.6

 
119.2

 
(8,255.0
)
 

Other Intangible Assets

 
29.7

 
1,132.3

 
136.4

 

 
1,298.4

Other Assets

 
69.3

 
673.5

 
272.8

 
(2.0
)
 
1,013.6

 
$
1,720.7

 
$
6,262.0

 
$
7,977.5

 
$
2,571.8

 
$
(8,257.0
)
 
$
10,275.0

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term borrowings
$

 
$
44.9

 
$
13.1

 
$
46.1

 
$

 
$
104.1

Accounts payable
0.2

 
162.5

 
373.7

 
230.1

 

 
766.5

Accrued expenses and other liabilities
0.8

 
202.1

 
611.3

 
315.7

 
0.1

 
1,130.0

Total current liabilities
1.0

 
409.5

 
998.1

 
591.9

 
0.1

 
2,000.6

Long-term Borrowings

 
4,661.6

 
44.2

 
879.8

 

 
5,585.6

Deferred Income Taxes and Other Noncurrent Liabilities

 
320.0

 
562.5

 
76.6

 

 
959.1

Intercompany Payable

 

 
5,405.0

 
1,073.4

 
(6,478.4
)
 

Common Stock Subject to Repurchase and Other

 

 
10.0

 

 

 
10.0

Total Stockholders' Equity
1,719.7

 
870.9

 
957.7

 
(49.9
)
 
(1,778.7
)
 
1,719.7

 
$
1,720.7

 
$
6,262.0

 
$
7,977.5

 
$
2,571.8

 
$
(8,257.0
)
 
$
10,275.0




23


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
September 27, 2013
(in millions)
 
 
Aramark  (Parent)
 
Aramark Services, Inc.
(Issuer)
 
Guarantors 
 
Non
Guarantors
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
23.0

 
$
40.5

 
$
47.5

 
$

 
$
111.0

Receivables

 
1.4

 
242.9

 
1,161.6

 

 
1,405.9

Inventories, at lower of cost or market

 
15.9

 
441.0

 
85.1

 

 
542.0

Prepayments and other current assets

 
46.2

 
103.1

 
79.0

 

 
228.3

Total current assets

 
86.5

 
827.5

 
1,373.2

 

 
2,287.2

 
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment, net

 
24.4

 
751.2

 
201.7

 

 
977.3

Goodwill

 
173.1

 
3,994.6

 
452.3

 

 
4,620.0

Investment in and Advances to Subsidiaries
1,062.7

 
6,267.4

 
444.8

 
124.5

 
(7,899.4
)
 

Other Intangible Assets

 
32.6

 
1,230.0

 
146.1

 

 
1,408.7

Other Assets

 
68.4

 
629.5

 
278.0

 
(2.0
)
 
973.9

 
$
1,062.7

 
$
6,652.4

 
$
7,877.6

 
$
2,575.8

 
$
(7,901.4
)
 
$
10,267.1

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term borrowings
$

 
$
22.5

 
$
12.0

 
$
31.3

 
$

 
$
65.8

Accounts payable

 
147.0

 
448.3

 
293.7

 

 
889.0

Accrued expenses and other liabilities
0.3

 
230.2

 
875.6

 
328.3

 
0.1

 
1,434.5

Total current liabilities
0.3

 
399.7

 
1,335.9

 
653.3

 
0.1

 
2,389.3

Long-term Borrowings

 
5,101.7

 
40.4

 
616.1

 

 
5,758.2

Deferred Income Taxes and Other Noncurrent Liabilities

 
326.2

 
618.3

 
102.5

 

 
1,047.0

Intercompany Payable

 

 
5,016.0

 
1,305.7

 
(6,321.7
)
 

Common Stock Subject to Repurchase and Other
158.7

 

 
10.2

 

 

 
168.9

Total Stockholders' Equity
903.7

 
824.8

 
856.8

 
(101.8
)
 
(1,579.8
)
 
903.7

 
$
1,062.7

 
$
6,652.4

 
$
7,877.6

 
$
2,575.8

 
$
(7,901.4
)
 
$
10,267.1


 
 

24


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the three months ended June 27, 2014
(in millions)
 
 
Aramark  (Parent)
 
Aramark Services, Inc.
(Issuer)
 
Guarantors 
 
Non
Guarantors
 
Eliminations
 
Consolidated
Sales
$

 
$
265.3

 
$
2,302.0

 
$
1,052.8

 
$

 
$
3,620.1

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of services provided

 
235.4

 
2,070.3

 
969.7

 

 
3,275.4

Depreciation and amortization

 
2.6

 
98.5

 
23.8

 

 
124.9

Selling and general corporate expenses
1.1

 
38.8

 
33.9

 
4.7

 

 
78.5

Interest and other financing costs, net

 
62.7

 
(0.1
)
 
8.6

 

 
71.2

Expense allocations

 
(79.5
)
 
67.6

 
11.9

 

 

 
1.1

 
260.0

 
2,270.2

 
1,018.7

 

 
3,550.0

Income (Loss) before Income Taxes
(1.1
)
 
5.3

 
31.8

 
34.1