10-Q 1 q12016aramark10-q.htm 10-Q 10-Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

___________________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
___________________________________________

For the quarterly period ended January 1, 2016 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 the 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
x  
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of January 29, 2016, the number of shares of the registrant's common stock outstanding is 241,907,914.






Special Note About Forward-Looking Statements
This report 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, without limitation, conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “outlook,” “aim,” “anticipate,” “are confident,” “estimate,” “expect,” “will be,” “will continue,” “will likely result,” “project,” “intend,” “plan,” “believe,” “see,” “look to” and other words and terms of similar meaning or the negative versions of such words.
Forward-looking statements speak only as of the date made. All statements we make relating to our estimated and projected earnings, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include without limitation: unfavorable economic conditions; natural disasters, global calamities, sports strikes and other adverse incidents; the failure to retain current clients, renew existing client contracts and obtain new client contracts; a determination by clients to reduce their outsourcing or use of preferred vendors; competition in our industries; increased operating costs and obstacles to cost recovery due to the pricing and cancellation terms of our food and support services contracts; the inability to achieve cost savings through our cost reduction efforts; our expansion strategy; the failure to maintain food safety throughout our supply chain, food-borne illness concerns and claims of illness or injury; governmental regulations including those relating to food and beverages, the environment, wage and hour and government contracting; liability associated with noncompliance with applicable law or other governmental regulations; new interpretations of or changes in the enforcement of the government regulatory framework; currency risks and other risks associated with international operations, including Foreign Corrupt Practices Act, U.K. Bribery Act and other anti-corruption law compliance; continued or further unionization of our workforce; liability resulting from our participation in multiemployer defined benefit pension plans; risks associated with suppliers from whom our products are sourced; disruptions to our relationship with, or to the business of, our primary distributor; the inability to hire and retain sufficient qualified personnel or increases in labor costs; healthcare reform legislation; the contract intensive nature of our business, which may lead to client disputes; seasonality; disruptions in the availability of our computer systems or privacy breaches; failure to achieve and maintain effective internal controls; our leverage; the inability to generate sufficient cash to service all of our indebtedness; debt agreements that limit our flexibility in operating our business; and other factors set forth under the headings Item 1A “Risk Factors,” Item 3 “Legal Proceedings” and Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations" and other sections of our Annual Report on Form 10-K, filed with the SEC on December 1, 2015, as such factors may be updated from time to time in our other periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov and which may be obtained by contacting Aramark’s investor relations department via its website www.aramark.com. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other filings with the SEC. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, us. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, changes in our expectations, or otherwise, except as required by law.



PART I
Item 1.    Financial Statements
ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
 
January 1, 2016
 
October 2, 2015
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
115,358

 
$
122,416

Receivables (less allowances: 2016 - $42,650; 2015 - $39,023)
1,494,072

 
1,444,574

Inventories
563,408

 
575,263

Prepayments and other current assets
213,829

 
236,870

Total current assets
2,386,667

 
2,379,123

Property and Equipment, net
927,278

 
959,345

Goodwill
4,548,379

 
4,558,968

Other Intangible Assets
1,077,534

 
1,111,980

Other Assets
1,210,036

 
1,186,941

 
$
10,149,894

 
$
10,196,357

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current Liabilities:
 
 
 
Current maturities of long-term borrowings
$
54,186

 
$
81,427

Accounts payable
650,655

 
850,040

Accrued expenses and other current liabilities
1,023,478

 
1,249,521

Total current liabilities
1,728,319

 
2,180,988

Long-Term Borrowings
5,485,964

 
5,184,597

Deferred Income Taxes and Other Noncurrent Liabilities
955,855

 
937,311

Redeemable Noncontrolling Interest
9,980

 
10,102

Stockholders' Equity:
 
 
 
Common stock, par value $.01 (authorized: 600,000,000 shares; issued: 2016—269,080,682 shares and 2015—266,564,567 shares; and outstanding: 2016—241,789,984 shares and 2015—239,917,320 shares)
2,687

 
2,666

Capital surplus
2,817,686

 
2,784,730

Accumulated deficit
(159,020
)
 
(228,641
)
Accumulated other comprehensive loss
(161,566
)
 
(166,568
)
Treasury stock (shares held in treasury: 2016—27,290,698 shares and 2015—26,647,247 shares)
(530,011
)
 
(508,828
)
Total stockholders' equity
1,969,776

 
1,883,359

 
$
10,149,894

 
$
10,196,357


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 data)
 
Three Months Ended
 
January 1, 2016
 
January 2, 2015
Sales
$
3,710,275

 
$
3,702,353

Costs and Expenses:
 
 
 
Cost of services provided
3,294,523

 
3,287,281

Depreciation and amortization
127,518

 
125,283

Selling and general corporate expenses
74,141

 
87,886

 
3,496,182

 
3,500,450

Operating income
214,093

 
201,903

Interest and Other Financing Costs, net
71,320

 
71,923

Income Before Income Taxes
142,773

 
129,980

Provision for Income Taxes
49,337

 
44,360

Net income
93,436

 
85,620

Less: Net income attributable to noncontrolling interest
93

 
123

Net income attributable to Aramark stockholders
$
93,343

 
$
85,497

 
 
 
 
Earnings per share attributable to Aramark stockholders:
 
 
 
Basic

$0.39

 

$0.36

Diluted

$0.38

 

$0.35

Weighted Average Shares Outstanding:
 
 
 
Basic
240,521

 
234,621

Diluted
247,613

 
244,724


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

2


ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands)
 
Three Months Ended
 
January 1, 2016
 
January 2, 2015
Net income
$
93,436

 
$
85,620

Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustments
(10,572
)
 
(24,211
)
Fair value of cash flow hedges
15,574

 
(8,778
)
Other comprehensive income (loss), net of tax
5,002

 
(32,989
)
Comprehensive income
98,438

 
52,631

Less: Net income attributable to noncontrolling interest
93

 
123

Comprehensive income attributable to Aramark stockholders
$
98,345

 
$
52,508





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


3


ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
Three Months Ended
 
January 1, 2016
 
January 2, 2015
Cash flows from operating activities:
 
 
 
Net income
$
93,436

 
$
85,620

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization
127,518

 
125,283

Deferred income taxes
21,399

 
(11,955
)
Share-based compensation expense
15,270

 
15,792

Changes in operating assets and liabilities
(456,127
)
 
(455,004
)
Other operating activities
3,179

 
(3,566
)
Net cash used in operating activities
(195,325
)
 
(243,830
)
Cash flows from investing activities:
 
 
 
Purchases of property and equipment, client contract investments and other
(91,499
)
 
(127,732
)
Disposals of property and equipment
2,017

 
1,813

Acquisition of certain businesses, net of cash acquired
(231
)
 
(944
)
Other investing activities
3,579

 
2,225

Net cash used in investing activities
(86,134
)
 
(124,638
)
Cash flows from financing activities:
 
 
 
Proceeds from long-term borrowings
431,736

 
370,710

Payments of long-term borrowings
(172,522
)
 
(14,595
)
Net change in funding under the Receivables Facility
25,000

 
25,000

Payments of dividends
(22,853
)
 
(20,225
)
Proceeds from issuance of common stock
7,512

 
3,784

Other financing activities
5,528

 
12,918

Net cash provided by financing activities
274,401

 
377,592

Increase (decrease) in cash and cash equivalents
(7,058
)
 
9,124

Cash and cash equivalents, beginning of period
122,416

 
111,690

Cash and cash equivalents, end of period
$
115,358

 
$
120,814

 
 
Three Months Ended
(dollars in millions)
 
January 1, 2016
 
January 2, 2015
Interest paid
 
$
51.7

 
$
52.6

Income taxes paid
 
10.8

 
13.8


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

4


ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)

 
Total
Stockholders'
Equity
 
Common
Stock
 
Capital
Surplus
 
Accumulated Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Treasury Stock
Balance, October 2, 2015
$
1,883,359

 
$
2,666

 
$
2,784,730

 
$
(228,641
)
 
$
(166,568
)
 
$
(508,828
)
Net income attributable to Aramark stockholders
93,343

 
 
 
 
 
93,343

 
 
 
 
Other comprehensive income (loss)
5,002

 
 
 
 
 
 
 
5,002

 
 
Capital contributions from issuance of common stock
11,275

 
21

 
11,254

 
 
 
 
 
 
Compensation expense related to stock incentive plans
15,270

 
 
 
15,270

 
 
 
 
 
 
Tax benefits related to stock incentive plans
6,432

 
 
 
6,432

 
 
 
 
 
 
Repurchases of common stock
(21,183
)
 
 
 
 
 
 
 
 
 
(21,183
)
Payments of dividends
(23,722
)
 
 
 
 
 
(23,722
)
 
 
 
 
Balance, January 1, 2016
$
1,969,776

 
$
2,687

 
$
2,817,686

 
$
(159,020
)
 
$
(161,566
)
 
$
(530,011
)

 
Total
Stockholders'
Equity
 
Common
Stock
 
Capital
Surplus
 
Accumulated Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Treasury Stock
Balance, October 3, 2014
$
1,718,036

 
$
2,561

 
$
2,575,011

 
$
(382,463
)
 
$
(106,298
)
 
$
(370,775
)
Net income attributable to Aramark stockholders
85,497

 
 
 
 
 
85,497

 
 
 
 
Other comprehensive income (loss)
(32,989
)
 
 
 
 
 
 
 
(32,989
)
 
 
Capital contributions from issuance of common stock
23,227

 
36

 
23,191

 
 
 
 
 
 
Compensation expense related to stock incentive plans
15,792

 
 
 
15,792

 
 
 
 
 
 
Tax benefits related to stock incentive plans
14,450

 
 
 
14,450

 
 
 
 
 
 
Repurchases of common stock
(48,581
)
 
 
 
 
 
 
 
 
 
(48,581
)
Payment of dividends
(20,451
)
 
 
 
 
 
(20,451
)
 
 
 
 
Balance, January 2, 2015
$
1,754,981

 
$
2,597

 
$
2,628,444

 
$
(317,417
)
 
$
(139,287
)
 
$
(419,356
)

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


5

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Aramark (the “Company”) is a leading global provider of food, facilities and uniform services to education, healthcare, business & industry, and sports, leisure & corrections clients. The Company's core market is North America (composed of the United States and Canada), which is supplemented by an additional 19-country footprint serving many of the fastest growing global geographies. The Company operates its business in three reportable segments that share many of the same operating characteristics: Food and Support Services North America ("FSS North America"), Food and Support Services International ("FSS International") and Uniform and Career Apparel ("Uniform").
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 Form 10-K filed with the SEC on December 1, 2015. The Condensed Consolidated Balance Sheet as of October 2, 2015 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.
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.
New Accounting Standard Updates
In January 2016, the Financial Accounting Standards Board ("FASB") issued an accounting standard update ("ASU") to address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The guidance is effective for the Company in the first quarter of fiscal 2019 and early adoption is permitted. The Company is currently evaluating the impact of the pronouncement.
In November 2015, the FASB issued an ASU to simplify the presentation of deferred income taxes to require all deferred tax liabilities and assets to be classified as noncurrent in a classified statement of financial position. The guidance is effective for the Company in the first quarter of fiscal 2018 and early adoption is permitted. The Company is currently evaluating the impact of the pronouncement.
In July 2015, the FASB issued an ASU which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. The guidance is effective for the Company in the first quarter of fiscal 2017 and early adoption is permitted. The Company is currently evaluating the impact of the pronouncement.
In April 2015, the FASB issued an ASU on debt issuance costs which requires presentation on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts, and will no longer be recorded as a separate asset. The Company adopted the retrospective guidance in the first quarter of fiscal 2016 (see Note 4).
In June 2014, the FASB issued an ASU on stock compensation which requires that a performance target affecting 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 which outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In July 2015, the FASB voted to defer the effective date of the new revenue standard by one year, but to permit entities to adopt one year earlier if they choose (i.e., the original effective date). The guidance is effective for the Company beginning in the first quarter of fiscal 2019. 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 Company adopted the guidance in the first quarter of fiscal 2016 which did not have a material impact on the condensed consolidated financial statements.

6

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Comprehensive Income
Comprehensive income includes all changes to stockholders' equity during a period, except those resulting from investments by and distributions to stockholders. Components of comprehensive income include net income (loss), changes in foreign currency translation adjustments (net of tax), pension plan adjustments (net of tax), changes in the fair value of cash flow hedges (net of tax) and changes to the share of any equity investees' comprehensive income (net of tax).
The summary of the components of comprehensive income (loss) is as follows (in thousands):
 
Three Months Ended
 
January 1, 2016
 
January 2, 2015
 
Pre-Tax Amount
Tax Effect
After-Tax Amount
 
Pre-Tax Amount
Tax Effect
After-Tax Amount
Net income
 
 
$
93,436

 
 
 
$
85,620

Foreign currency translation adjustments
(10,563
)
(9
)
(10,572
)
 
(29,040
)
4,829

(24,211
)
Fair value of cash flow hedges
16,079

(505
)
15,574

 
(22,310
)
13,532

(8,778
)
Other comprehensive income (loss)
5,516

(514
)
5,002

 
(51,350
)
18,361

(32,989
)
Comprehensive income
 
 
98,438

 
 
 
52,631

Less: Net income attributable to noncontrolling interest
 
 
93

 
 
 
123

Comprehensive income attributable to Aramark stockholders
 
 
$
98,345

 
 
 
$
52,508

Accumulated other comprehensive loss consists of the following (in thousands):
 
January 1, 2016
 
October 2, 2015
Pension plan adjustments
$
(40,597
)
 
$
(40,597
)
Foreign currency translation adjustments
(82,113
)
 
(71,541
)
Cash flow hedges
(33,557
)
 
(49,131
)
Share of equity investee's accumulated other comprehensive loss
(5,299
)
 
(5,299
)
 
$
(161,566
)
 
$
(166,568
)
Property, Plant and Equipment
During the first quarter of fiscal 2016, the Company recorded an additional impairment charge of approximately $1.7 million, which is included in "Cost of services provided" in the Condensed Consolidated Statement of Income, to write down the book value of one of its buildings within the FSS North America segment to its fair value. The Company is in the process of preparing this building for sale.
Other Assets
Other assets consist primarily of investments in 50% or less owned entities, client contract investments, computer software costs and long-term receivables. Client contract investments generally represent a cash payment provided by the Company to help finance improvement or renovation at the facility from which the Company operates. These amounts are amortized over the contract period. If a contract is terminated prior to its maturity date, the Company is generally reimbursed for the unamortized client contract investment amount. Client contract investments, net of accumulated amortization, were $796.7 million and $782.7 million as of January 1, 2016 and October 2, 2015, respectively.

7

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 $151.3 million and $152.5 million at January 1, 2016 and October 2, 2015, 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
 
January 1, 2016
 
January 2, 2015
Sales
$
342,096

 
$
361,820

Gross profit
39,742

 
40,338

Net income
7,023

 
6,584

The period to period comparisons of the summarized financial information for AIM Services Co., Ltd., presented in U.S. dollars above, are significantly impacted by currency translation. The Company’s equity in undistributed earnings of AIM Services Co., Ltd. was $3.0 million and $2.9 million for the three months ended January 1, 2016 and January 2, 2015, respectively, and is recorded as a reduction of "Cost of services provided" in the Condensed Consolidated Statements of Income.
NOTE 2. SEVERANCE:
The Company previously initiated a series of actions and developed plans to drive efficiencies through the consolidation and centralization of select functions. As of January 1, 2016 and October 2, 2015, the Company had an accrual of approximately $18.6 million and $26.0 million, respectively, related to the unpaid obligations for these costs.
In addition, the Company incurred approximately $4.4 million of severance charges during fiscal 2015 from its decision to exit certain operations within the FSS International segment, $3.1 million of which was unpaid as of January 1, 2016.
NOTE 3. 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 three months ended January 1, 2016 follow (in thousands):
Segment
October 2, 2015
 
Translation
 
January 1, 2016
FSS North America
$
3,583,365

 
$
(82
)
 
$
3,583,283

FSS International
400,824

 
(10,507
)
 
390,317

Uniform
574,779

 

 
574,779

 
$
4,558,968

 
$
(10,589
)
 
$
4,548,379

Other intangible assets consist of the following (in thousands):
 
January 1, 2016
 
October 2, 2015
 
Gross
Amount
 
Accumulated
Amortization
 
Net
Amount
 
Gross
Amount
 
Accumulated
Amortization
 
Net
Amount
Customer relationship assets
$
1,851,955

 
$
(1,519,582
)
 
$
332,373

 
$
1,859,689

 
$
(1,494,885
)
 
$
364,804

Trade names
746,794

 
(1,633
)
 
745,161

 
748,809

 
(1,633
)
 
747,176

 
$
2,598,749

 
$
(1,521,215
)
 
$
1,077,534

 
$
2,608,498

 
$
(1,496,518
)
 
$
1,111,980

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, 3 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 three months ended January 1, 2016 and January 2, 2015 was approximately $32.0 million and $35.0 million, respectively.

8

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4. BORROWINGS:
Long-term borrowings are summarized in the following table (in thousands):
 
 
January 1,
2016
 
October 2,
2015
Senior secured revolving credit facility, due February 2019
 
$
44,271

 
$
70,000

Senior secured term loan facility, due July 2016
 

 
74,130

Senior secured term loan facility, due September 2019
 
1,190,070

 
1,189,371

Senior secured term loan facility, due February 2021
 
2,472,892

 
2,489,235

5.75% senior notes, due March 2020
 
991,017

 
990,540

5.125% senior notes, due January 2024
 
393,996

 

Receivables Facility, due May 2017
 
375,000

 
350,000

Capital leases
 
55,045

 
57,660

Other
 
17,859

 
45,088

 
 
5,540,150

 
5,266,024

Less—current portion
 
(54,186
)
 
(81,427
)
 
 
$
5,485,964

 
$
5,184,597

During the first quarter of fiscal 2016, the Company early adopted the April 2015 ASU on debt issuance costs, which requires these costs to be presented on the balance sheet as a direct reduction of long-term borrowings, similar to the presentation of debt discounts. As a result of the retrospective adoption, approximately $27.7 million of debt issuance costs were reclassified from "Other Assets" to "Long-Term Borrowings" on the Condensed Consolidated Balance Sheet, as of October 2, 2015.
During the first quarter of fiscal 2016, the Company repaid a U.S. dollar denominated term loan of a Canadian subsidiary that had been borrowed under the Company's senior secured credit agreement and was due in July 2016 in the amount of $74.1 million.
On December 17, 2015, Aramark Services, Inc. (the "Issuer"), a subsidiary of the Company, issued $400 million of 5.125% Senior Notes (the "2024 Notes"), due January 15, 2024, pursuant to an indenture, dated as of December 17, 2015 (the “Indenture”), entered into by the Issuer, certain other Aramark entities, as guarantors of the 2024 Notes and the Bank of New York Mellon, as trustee. The 2024 Notes were issued at par and the net proceeds were used for general corporate purposes and to reduce the outstanding balance under the Company's revolving credit facility. The Company paid approximately $6.0 million in financing fees related to the 2024 Notes. The 2024 Notes are senior unsecured obligations of the Issuer. The 2024 Notes rank equal in right of payment to all of the Issuer’s existing and future senior debt. The 2024 Notes are guaranteed on a senior, unsecured basis by the Company and substantially all of the domestic subsidiaries of the Issuer. Interest on the 2024 Notes is payable on January 15 and July 15 of each year. The 2024 Notes and guarantees are effectively subordinated to all existing and future secured debt of the Issuer and the guarantors, to the extent of the value of the assets securing such debt, and structurally subordinated to all of the liabilities of any of the Issuer's subsidiaries that do not guarantee the 2024 Notes.
NOTE 5. 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.

9

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cash Flow Hedges
The Company has $2.9 billion notional amount of outstanding 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 January 1, 2016 and October 2, 2015, approximately ($33.6) million and ($43.3) 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 three months ended January 1, 2016 and January 2, 2015 was not material.
During the first quarter of fiscal 2016, the Company repaid a U.S. dollar denominated term loan of a Canadian subsidiary in the amount of $74.1 million. As a result of this repayment, the Company terminated its $74.1 million of outstanding amortizing cross currency swap agreements, which resulted in a pre-tax charge of approximately $1.1 million recorded to "Interest and Other Financing Costs, net" in the Condensed Consolidated Statements of Income for the three months ended January 1, 2016. The termination of these agreements resulted in the Company receiving $5.7 million of proceeds.
The following table summarizes the net of tax effect of our derivatives designated as cash flow hedging instruments on Comprehensive Income (in thousands):
 
 
Three Months Ended
 
January 1, 2016
 
January 2, 2015
Interest rate swap agreements
$
11,082

 
$
(7,246
)
Cross currency swap agreements
(2,074
)
 
3,742

 
$
9,008

 
$
(3,504
)
Derivatives not Designated in Hedging Relationships
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 the first quarter of fiscal 2016, the Company entered into contracts for approximately 2.3 million gallons. As of January 1, 2016, the Company has contracts for approximately 11.9 million gallons outstanding for fiscal 2016 and fiscal 2017. The Company does not record its gasoline and diesel fuel agreements as hedges for accounting purposes. The impact on earnings related to the change in fair value of these contracts was a loss of approximately $0.9 million for the three months ended January 1, 2016. The impact on earnings related to the change in fair value of these contracts for the three months ended January 2, 2015 was a loss of approximately $3.6 million.
As of January 1, 2016, the Company had foreign currency forward exchange contracts outstanding with notional amounts of €112.0 million, £114.0 million and CAD122.5 million to mitigate the risk of changes in foreign currency exchange rates on short-term intercompany loans to certain international subsidiaries. Gains and losses on these foreign currency exchange contracts are recognized in income as the contracts were not designated as hedging instruments, substantially offsetting currency transaction gains and losses on the short-term intercompany loans.

10

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 the Condensed Consolidated Balance Sheets (in thousands):
 
 
Balance Sheet Location
 
January 1, 2016
 
October 2, 2015
ASSETS
 
 
 
 
 
 
Designated as hedging instruments:
 
 
 
 
 
 
Cross currency swap agreements
 
Prepayments
 
$

 
$
7,523

 
 
 
 
$

 
$
7,523

LIABILITIES
 
 
 
 
 
 
Designated as hedging instruments:
 
 
 
 
 
 
Interest rate swap agreements
 
Accrued expenses
 
$
3,732

 
$
6,086

Interest rate swap agreements
 
Other Noncurrent Liabilities
 
35,798

 
51,762

 
 
 
 
39,530

 
57,848

 
 
 
 
 
 
 
Not designated as hedging instruments:
 
 
 
 
 
 
Foreign currency forward exchange contracts
 
Accounts Payable
 
500

 
922

Gasoline and diesel fuel agreements
 
Accounts Payable
 
5,341

 
4,419

 
 
 
 
5,841

 
5,341

 
 
 
 
$
45,371

 
$
63,189

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 for the Company's derivatives not designated as hedging instruments in the Condensed Consolidated Statements of Income (in thousands):
 
 
 
 
Three Months Ended
 
 
Account
 
January 1, 2016
 
January 2, 2015
Designated as hedging instruments:
 
 
 
 
 
 
Interest rate swap agreements
 
Interest Expense
 
$
9,017

 
$
7,658

Cross currency swap agreements
 
Interest Expense
 
2,061

 
(3,423
)
 
 
 
 
11,078

 
4,235

Not designated as hedging instruments:
 
 
 
 
 
 
Gasoline and diesel fuel agreements
 
Costs of services provided
 
$
2,505


$
4,313

Foreign currency forward exchange contracts
 
Interest Expense
 
5,090


(1,581
)
 
 
 
 
7,595

 
2,732

 
 
 
 
$
18,673

 
$
6,967

At January 1, 2016, 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 $16.6 million.
NOTE 6. STOCKHOLDERS' EQUITY:
During the three months ended January 1, 2016 and January 2, 2015, the Company paid dividends of approximately $22.9 million and $20.2 million to its stockholders, respectively. On February 2, 2016, the Company's Board declared a $0.095 dividend per share of common stock, payable on March 7, 2016, to shareholders of record on the close of business on February 16, 2016.
NOTE 7. SHARE-BASED COMPENSATION:
Share-based compensation expense for the three months ended January 1, 2016 and January 2, 2015 was approximately $15.3 million, before taxes of approximately $6.0 million and approximately $15.8 million, before taxes of approximately $6.2 million, respectively. The compensation expense recognized is classified as "Selling and general corporate expenses" in the Condensed Consolidated Statements of Income. No compensation expense was capitalized.

11

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Stock Options
Time-Based Options
The Company granted 2.3 million time-based options with a weighted-average grant-date fair value of $9.21 per option during the three months ended January 1, 2016. The Company recorded compensation expense during the three months ended January 1, 2016 and January 2, 2015 for time-based options of approximately $4.9 million and $3.9 million, respectively.
Performance-Based Options
During the three months ended January 2, 2015, approximately $2.5 million was charged to expense for performance-based options.
Time-Based Restricted Stock Units ("RSUs")
The Company granted 0.6 million RSUs during the three months ended January 1, 2016 at a weighted-average grant-date fair value of $31.93 per RSU. The compensation cost charged to expense during the three months ended January 1, 2016 and January 2, 2015 for RSUs was approximately $5.7 million and $4.6 million, respectively.
Performance Stock Units
Under the 2013 Stock Plan, the Company is authorized to grant Performance Stock Units and Performance Restricted Stock ("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 the performance condition. Prior to fiscal 2016, the Company granted three year PSUs with the first 33% of the award vesting on the first anniversary of the grant date, if and to the extent 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 an adjusted earnings per share-based performance condition in the first year of grant and the participant's continued employment with the Company through each such anniversary. During the first quarter of fiscal 2016, the Company granted PSUs with cliff vesting subject to the achievement of a performance condition in the third fiscal year of grant and the participant's continued employment with the Company. The grant-date fair value of the PSUs is based on the fair value of the Company's common stock.
The Company granted 0.7 million PSUs during the three months ended January 1, 2016 at a weighted-average grant-date fair value of $31.42 per PSU with performance conditions based upon the achievement of a level of adjusted earnings per share. The Company recorded compensation expense during the three months months ended January 1, 2016 and January 2, 2015 for PSUs of approximately $4.0 million and $4.4 million, respectively.
Deferred Stock Units ("DSUs")
The compensation cost charged to expense during the three months ended January 1, 2016 for DSUs was approximately $0.3 million.

12

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8. 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 the Company's stockholders (in thousands, except per share data):
 
 
Three Months Ended
 
 
 
January 1, 2016
 
January 2, 2015
 
Earnings:
 
 
 
 
 
Net income attributable to Aramark stockholders
 

$93,343

 

$85,497

 
Shares:
 
 
 
 
 
Basic weighted-average shares outstanding
 
240,521

 
234,621

 
Effect of dilutive securities
 
7,092

 
10,103

 
Diluted weighted-average shares outstanding
 
247,613

 
244,724

 
 
 
 
 
 
 
Basic Earnings Per Share:
 
 
 
 
 
Net income attributable to Aramark stockholders
 

$0.39

 

$0.36

 
 
 
 
 
 
 
Diluted Earnings Per Share:
 
 
 
 
 
Net income attributable to Aramark stockholders
 

$0.38

 

$0.35

 
Share-based awards to purchase 3.8 million and 1.5 million shares were outstanding for the three months ended January 1, 2016 and January 2, 2015, respectively, but were not included in the computation of diluted earnings per common share, as their effect would have been antidilutive. In addition, PSUs related to 0.7 million shares and 1.5 million shares of performance-based options and PSUs were outstanding for the three month periods of January 1, 2016 and January 2, 2015, respectively, but were not included in the computation of diluted earnings per common share, as the performance targets were not yet met.
NOTE 9. 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 $124.2 million at January 1, 2016 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 January 1, 2016.
From time to time, the Company and its subsidiaries are a party to various legal actions, proceedings and investigations involving claims incidental to the conduct of their business, including actions by clients, consumers, 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 and security 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.

13

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 10. BUSINESS SEGMENTS:
The Company reports its operating results in three reportable segments: FSS North America, FSS International and Uniform and Career Apparel ("Uniform"). Corporate includes general expenses not specifically allocated to an individual segment and share-based compensation expense (see Note 7). Financial information by segment follows (in millions):
 
Sales
 
Three Months Ended
 
January 1, 2016
 
January 2, 2015
FSS North America
$
2,622.7

 
$
2,564.4

FSS International
694.9

 
758.7

Uniform
392.7

 
379.3

 
$
3,710.3

 
$
3,702.4

 
Operating Income
 
Three Months Ended
 
January 1, 2016
 
January 2, 2015
FSS North America
$
168.3

 
$
162.4

FSS International
30.1

 
30.7

Uniform
50.3

 
54.5

 
248.7

 
247.6

Corporate
(34.6
)
 
(45.7
)
Operating Income
214.1

 
201.9

Interest and Other Financing Costs, net
(71.3
)
 
(71.9
)
Income Before Income Taxes
$
142.8

 
$
130.0


NOTE 11. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL 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 Company’s debt at January 1, 2016 and October 2, 2015 was $5,624.5 million and $5,341.3 million, respectively. The carrying value of the Company’s debt at January 1, 2016 and October 2, 2015 was $5,540.2 million and $5,266.0 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.

14

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 12. 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 condensed 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 due March 2020 ("2020 Notes") and the 2024 Notes are obligations of the Company's wholly-owned subsidiary, Aramark Services, Inc., and are each 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 2020 Notes or the 2024 Notes (“Non-Guarantors”). The Guarantors also guarantee certain other debt.

15

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


CONDENSED CONSOLIDATING BALANCE SHEETS
January 1, 2016
(in thousands)
 
Aramark (Parent)
 
Aramark Services, Inc.
(Issuer)
 
Guarantors
 
Non
Guarantors
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
5

 
$
25,077

 
$
33,155

 
$
57,121

 
$

 
$
115,358

Receivables

 

 
310,538

 
1,183,534

 

 
1,494,072

Inventories, at lower of cost or market

 
15,348

 
480,625

 
67,435

 

 
563,408

Prepayments and other current assets

 
60,569

 
62,106

 
91,154

 

 
213,829

Total current assets
5

 
100,994

 
886,424

 
1,399,244

 

 
2,386,667

Property and Equipment, net

 
22,488

 
755,362

 
149,428

 

 
927,278

Goodwill

 
173,104

 
3,982,737

 
392,538

 

 
4,548,379

Investment in and Advances to Subsidiaries
1,969,871

 
5,446,898

 
529,362

 
57,412

 
(8,003,543
)
 

Other Intangible Assets

 
29,729

 
956,485

 
91,320

 

 
1,077,534

Other Assets

 
39,159

 
931,767

 
241,112

 
(2,002
)
 
1,210,036

 
$
1,969,876

 
$
5,812,372

 
$
8,042,137

 
$
2,331,054

 
$
(8,005,545
)
 
$
10,149,894

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

 
$
21,919

 
$
13,014

 
$
19,253

 
$

 
$
54,186

Accounts payable

 
134,410

 
279,271

 
236,974

 

 
650,655

Accrued expenses and other liabilities
100

 
137,749

 
621,755

 
263,786

 
88

 
1,023,478

Total current liabilities
100

 
294,078

 
914,040

 
520,013

 
88

 
1,728,319

Long-term Borrowings

 
4,694,807

 
41,835

 
749,322

 

 
5,485,964

Deferred Income Taxes and Other Noncurrent Liabilities

 
387,400

 
533,294

 
35,161

 

 
955,855

Intercompany Payable

 

 
4,909,146

 
1,122,575

 
(6,031,721
)
 

Redeemable Noncontrolling Interest

 

 
9,980

 

 

 
9,980

Total Stockholders' Equity
1,969,776

 
436,087

 
1,633,842

 
(96,017
)
 
(1,973,912
)
 
1,969,776

 
$
1,969,876

 
$
5,812,372

 
$
8,042,137

 
$
2,331,054

 
$
(8,005,545
)
 
$
10,149,894



16

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


CONDENSED CONSOLIDATING BALANCE SHEETS
October 2, 2015
(in thousands)
 
 
Aramark (Parent)
 
Aramark Services, Inc.
(Issuer)
 
Guarantors 
 
Non
Guarantors
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
5

 
$
31,792

 
$
42,811

 
$
47,808

 
$

 
$
122,416

Receivables

 
3,721

 
295,618

 
1,145,235

 

 
1,444,574

Inventories, at lower of cost or market

 
15,981

 
487,551

 
71,731

 

 
575,263

Prepayments and other current assets

 
59,706

 
74,395

 
102,769

 

 
236,870

Total current assets
5

 
111,200

 
900,375

 
1,367,543

 

 
2,379,123

Property and Equipment, net

 
20,713

 
785,274

 
153,358

 

 
959,345

Goodwill

 
173,104

 
3,982,737

 
403,127

 

 
4,558,968

Investment in and Advances to Subsidiaries
1,883,454

 
5,586,010

 
479,517

 
16,121

 
(7,965,102
)
 

Other Intangible Assets

 
29,729

 
985,449

 
96,802

 

 
1,111,980

Other Assets

 
40,128

 
919,811

 
229,004

 
(2,002
)
 
1,186,941

 
$
1,883,459

 
$
5,960,884

 
$
8,053,163

 
$
2,265,955

 
$
(7,967,104
)
 
$
10,196,357

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

 
$
21,921

 
$
13,013

 
$
46,493

 
$

 
$
81,427

Accounts payable

 
152,844

 
419,188

 
278,008

 

 
850,040

Accrued expenses and other liabilities
100

 
135,540

 
818,610

 
295,183

 
88

 
1,249,521

Total current liabilities
100

 
310,305

 
1,250,811

 
619,684

 
88

 
2,180,988

Long-term Borrowings

 
4,366,341

 
44,464

 
773,792

 

 
5,184,597

Deferred Income Taxes and Other Noncurrent Liabilities

 
415,284

 
500,632

 
21,395

 

 
937,311

Intercompany Payable

 

 
5,096,806

 
1,075,836

 
(6,172,642
)
 

Redeemable Noncontrolling Interest

 

 
10,102

 

 

 
10,102

Total Stockholders' Equity
1,883,359

 
868,954

 
1,150,348

 
(224,752
)
 
(1,794,550
)
 
1,883,359

 
$
1,883,459

 
$
5,960,884

 
$
8,053,163

 
$
2,265,955

 
$
(7,967,104
)
 
$
10,196,357



17

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the three months ended January 1, 2016
(in thousands)
 
 
Aramark (Parent)
 
Aramark Services, Inc.
(Issuer)
 
Guarantors 
 
Non
Guarantors
 
Eliminations
 
Consolidated
Sales
$

 
$
256,743

 
$
2,517,067

 
$
936,465

 
$

 
$
3,710,275

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of services provided

 
234,974

 
2,199,744

 
859,805

 

 
3,294,523

Depreciation and amortization

 
3,463

 
106,277

 
17,778

 

 
127,518

Selling and general corporate expenses

 
36,846

 
32,493

 
4,802

 

 
74,141

Interest and other financing costs, net

 
63,583

 
(449
)
 
8,186

 

 
71,320

Expense allocations

 
(94,050
)
 
97,551

 
(3,501
)
 

 

 

 
244,816

 
2,435,616

 
887,070

 

 
3,567,502

Income before Income Taxes

 
11,927

 
81,451

 
49,395

 

 
142,773

Provision for Income Taxes

 
4,829

 
26,774

 
17,734

 

 
49,337

Equity in Net Income of Subsidiaries
93,343

 

 

 

 
(93,343
)
 

Net income
93,343

 
7,098

 
54,677

 
31,661

 
(93,343
)
 
93,436

Less: Net income attributable to noncontrolling interest

 

 
93

 

 

 
93

Net income attributable to Aramark stockholders
93,343

 
7,098

 
54,584

 
31,661

 
(93,343
)
 
93,343

Other comprehensive income (loss), net of tax
5,002

 
9,885

 
(1,562
)
 
(13,965
)
 
5,642

 
5,002

Comprehensive income attributable to Aramark stockholders
$
98,345

 
$
16,983

 
$
53,022

 
$
17,696

 
$
(87,701
)
 
$
98,345



18

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the three months ended January 2, 2015
(in thousands)
 
Aramark (Parent)
 
Aramark Services, Inc.
(Issuer)
 
Guarantors 
 
Non
Guarantors
 
Eliminations
 
Consolidated
Sales
$

 
$
248,369

 
$
2,426,898

 
$
1,027,086

 
$

 
$
3,702,353

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of services provided

 
208,887

 
2,131,695

 
946,699

 

 
3,287,281

Depreciation and amortization

 
2,664

 
101,464

 
21,155

 

 
125,283

Selling and general corporate expenses
1,083

 
48,122

 
34,506

 
4,175

 

 
87,886

Interest and other financing costs

 
63,891

 
(469
)
 
8,501

 

 
71,923

Expense allocations
(1,083
)
 
(83,016
)
 
72,094

 
12,005

 

 

 

 
240,548

 
2,339,290

 
992,535

 

 
3,572,373

Income (Loss) before Income Taxes

 
7,821

 
87,608

 
34,551

 

 
129,980

Provision (Benefit) for Income Taxes

 
2,806

 
29,185

 
12,369

 

 
44,360

Equity in Net Income of Subsidiaries
85,497

 

 

 

 
(85,497
)
 

Net income
85,497

 
5,015

 
58,423

 
22,182

 
(85,497
)
 
85,620

Less: Net income attributable to noncontrolling interest

 

 
123

 

 

 
123

Net income attributable to Aramark stockholders
85,497

 
5,015

 
58,300

 
22,182

 
(85,497
)
 
85,497

Other comprehensive income (loss), net of tax
(32,989
)
 
376

 
(1,996
)
 
(43,834
)
 
45,454

 
(32,989
)
Comprehensive income (loss) attributable to Aramark stockholders
$
52,508

 
$
5,391

 
$
56,304

 
$
(21,652
)
 
$
(40,043
)
 
$
52,508



19

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the three months ended January 1, 2016
(in thousands)

 
Aramark (Parent)
 
Aramark Services, Inc.
(Issuer)
 
Guarantors 
 
Non
Guarantors
 
Eliminations
 
Consolidated
Net cash provided by (used in) operating activities
$
64

 
$
(22,569
)
 
$
(162,469
)
 
$
(67,731
)
 
$
57,380

 
$
(195,325
)
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment, client contract investments and other

 
(4,038
)
 
(72,101
)
 
(15,360
)
 

 
(91,499
)
Disposals of property and equipment

 

 
2,017

 

 

 
2,017

Acquisitions of businesses, net of cash acquired

 

 
(231
)
 

 

 
(231
)
Other investing activities

 
493

 
4,824

 
(1,738
)
 

 
3,579

Net cash used in investing activities

 
(3,545
)
 
(65,491
)
 
(17,098
)
 

 
(86,134
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term borrowings

 
393,969

 

 
37,767

 

 
431,736

Payments of long-term borrowings

 
(67,480
)
 
(2,818
)
 
(102,224
)
 

 
(172,522
)
Net change in funding under the Receivables Facility

 

 

 
25,000

 

 
25,000

Payments of dividends

 
(22,853
)
 

 

 

 
(22,853
)
Proceeds from issuance of common stock

 
7,512

 

 

 

 
7,512

Other financing activities

 
6,332

 
(589
)
 
(215
)
 

 
5,528

Change in intercompany, net
(64
)
 
(298,081
)
 
221,711

 
133,814

 
(57,380
)
 

Net cash provided by (used in) financing activities
(64
)
 
19,399

 
218,304

 
94,142

 
(57,380
)
 
274,401

Increase (decrease) in cash and cash equivalents

 
(6,715
)
 
(9,656
)
 
9,313

 

 
(7,058
)
Cash and cash equivalents, beginning of period
5

 
31,792

 
42,811

 
47,808

 

 
122,416

Cash and cash equivalents, end of period
$
5

 
$
25,077

 
$
33,155

 
$
57,121

 
$

 
$
115,358



20

ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the three months ended January 2, 2015
(in thousands)

 
Aramark (Parent)
 
Aramark Services, Inc.
(Issuer)
 
Guarantors 
 
Non
Guarantors
 
Eliminations
 
Consolidated
Net cash provided by (used in) operating activities
$
811

 
$
(1,993
)
 
$
(301,393
)
 
$
59,076

 
$
(331
)
 
$
(243,830
)
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment, client contract investments and other

 
(11,254
)
 
(103,277
)
 
(13,201
)
 

 
(127,732
)
Disposals of property and equipment

 
173

 
922

 
718

 

 
1,813

Acquisitions of businesses, net of cash acquired

 

 
(944
)
 

 

 
(944
)
Other investing activities

 
195

 
2,215

 
(185
)
 

 
2,225

Net cash used in investing activities

 
(10,886
)
 
(101,084
)
 
(12,668
)
 

 
(124,638
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term borrowings

 
329,600

 

 
41,110

 

 
370,710

Payments of long-term borrowings

 
(5,480
)
 
(3,618
)
 
(5,497
)
 

 
(14,595
)
Net change in funding under the Receivables Facility

 

 

 
25,000

 

 
25,000

Payments of dividends

 
(20,225
)
 

 

 

 
(20,225
)
Proceeds from issuance of common stock

 
3,784

 

 

 

 
3,784

Other financing activities