Document

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 June 30, 2017 Commission File Number: 001-36223

image0a08.jpg

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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x  
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of July 28, 2017, the number of shares of the registrant's common stock outstanding is 245,105,108.


    
TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Table of Contents

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 or remain confident," "have confidence," "estimate," "expect," "will be," "will continue," "will likely result," "project," "intend," "plan," "believe," "see," "look to" and other words and terms of similar meaning or the negative versions of such words.
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 November 23, 2016 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)
 
June 30, 2017
 
September 30, 2016
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
154,674

 
$
152,580

Receivables (less allowances: 2017 - $49,447; 2016 - $48,058)
1,532,879

 
1,476,349

Inventories
567,564

 
587,155

Prepayments and other current assets
209,325

 
276,487

Total current assets
2,464,442

 
2,492,571

Property and Equipment, net
981,536

 
1,023,083

Goodwill
4,702,397

 
4,628,881

Other Intangible Assets
1,121,541

 
1,111,883

Other Assets
1,380,455

 
1,325,654

 
$
10,650,371

 
$
10,582,072

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current Liabilities:
 
 
 
Current maturities of long-term borrowings
$
74,237

 
$
46,522

Accounts payable
729,041

 
847,588

Accrued expenses and other current liabilities
1,098,624

 
1,290,635

Total current liabilities
1,901,902

 
2,184,745

Long-Term Borrowings
5,440,143

 
5,223,514

Deferred Income Taxes and Other Noncurrent Liabilities
975,715

 
1,003,013

Redeemable Noncontrolling Interest
9,844

 
9,794

Stockholders' Equity:
 
 
 
Common stock, par value $.01 (authorized: 600,000,000 shares; issued: 2017—276,454,403 shares and 2016—272,565,923 shares; and outstanding: 2017—245,023,211 shares and 2016—244,713,580 shares)
2,765

 
2,726

Capital surplus
2,994,994

 
2,921,725

Retained earnings/(Accumulated deficit)
159,182

 
(33,778
)
Accumulated other comprehensive loss
(156,073
)
 
(180,783
)
Treasury stock (shares held in treasury: 2017—31,431,192 shares and 2016—27,852,343 shares)
(678,101
)
 
(548,884
)
Total stockholders' equity
2,322,767

 
2,161,006

 
$
10,650,371

 
$
10,582,072


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

1
Table of Contents

ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
 
Three Months Ended
 
June 30, 2017
 
July 1, 2016
Sales
$
3,593,277

 
$
3,586,908

Costs and Expenses:
 
 
 
Cost of services provided
3,232,366

 
3,233,884

Depreciation and amortization
126,440

 
122,363

Selling and general corporate expenses
79,792

 
61,317

 
3,438,598

 
3,417,564

Operating income
154,679

 
169,344

Interest and Other Financing Costs, net
61,483

 
103,764

Income Before Income Taxes
93,196

 
65,580

Provision for Income Taxes
27,832

 
20,722

Net income
65,364

 
44,858

Less: Net income attributable to noncontrolling interest
69

 
93

Net income attributable to Aramark stockholders
$
65,295

 
$
44,765

 
 
 
 
Earnings per share attributable to Aramark stockholders:
 
 
 
Basic
$
0.27

 
$
0.18

Diluted
$
0.26

 
$
0.18

Weighted Average Shares Outstanding:
 
 
 
Basic
244,266

 
242,831

Diluted
251,156

 
249,057

 
Nine Months Ended
 
June 30, 2017
 
July 1, 2016
Sales
$
10,950,288

 
$
10,872,005

Costs and Expenses:
 
 
 
Cost of services provided
9,757,892

 
9,738,117

Depreciation and amortization
378,258

 
370,172

Selling and general corporate expenses
223,984

 
208,165

 
10,360,134

 
10,316,454

Operating income
590,154

 
555,551

Interest and Other Financing Costs, net
224,791

 
246,835

Income Before Income Taxes
365,363

 
308,716

Provision for Income Taxes
104,334

 
103,925

Net income
261,029

 
204,791

Less: Net income attributable to noncontrolling interest
244

 
329

Net income attributable to Aramark stockholders
$
260,785

 
$
204,462

 
 
 
 
Earnings per share attributable to Aramark stockholders:
 
 
 
Basic
$
1.07

 
$
0.85

Diluted
$
1.04

 
$
0.82

Weighted Average Shares Outstanding:
 
 
 
Basic
244,399

 
241,740

Diluted
251,548

 
248,322

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

2
Table of Contents

ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands)
 
Three Months Ended
 
June 30, 2017
 
July 1, 2016
Net income
$
65,364

 
$
44,858

Other comprehensive income (loss), net of tax
 
 
 
Pension plan adjustments
—

 
(5,383
)
Foreign currency translation adjustments
16,994

 
(2,105
)
Fair value of cash flow hedges
580

 
(441
)
Other comprehensive income (loss), net of tax
17,574

 
(7,929
)
Comprehensive income
82,938

 
36,929

Less: Net income attributable to noncontrolling interest
69

 
93

Comprehensive income attributable to Aramark stockholders
$
82,869

 
$
36,836

 
Nine Months Ended
 
June 30, 2017
 
July 1, 2016
Net income
$
261,029

 
$
204,791

Other comprehensive income, net of tax
 
 
 
Pension plan adjustments
—

 
(5,383
)
Foreign currency translation adjustments
(4,258
)
 
3,655

Fair value of cash flow hedges
28,968

 
7,269

Other comprehensive income, net of tax
24,710

 
5,541

Comprehensive income
285,739

 
210,332

Less: Net income attributable to noncontrolling interest
244

 
329

Comprehensive income attributable to Aramark stockholders
$
285,495

 
$
210,003


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


3
Table of Contents

ARAMARK AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
Nine Months Ended
 
June 30, 2017
 
July 1, 2016
Cash flows from operating activities:
 
 
 
Net income
$
261,029

 
$
204,791

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization
378,258

 
370,172

Deferred income taxes
(21,094
)
 
54,291

Share-based compensation expense
50,318

 
43,556

Changes in operating assets and liabilities
(251,872
)
 
(286,103
)
Other operating activities
32,550

 
23,833

Net cash provided by operating activities
449,189

 
410,540

Cash flows from investing activities:
 
 
 
Purchases of property and equipment, client contract investments and other
(340,294
)
 
(350,170
)
Disposals of property and equipment
14,917

 
18,029

Acquisition of certain businesses, net of cash acquired
(130,094
)
 
(59,377
)
Other investing activities
1,701

 
7,194

Net cash used in investing activities
(453,770
)
 
(384,324
)
Cash flows from financing activities:
 
 
 
Proceeds from long-term borrowings
3,707,408

 
1,398,395

Payments of long-term borrowings
(3,561,500
)
 
(1,245,449
)
Net change in funding under the Receivables Facility
82,000

 
(9,730
)
Payments of dividends
(75,543
)
 
(68,873
)
Proceeds from issuance of common stock
23,048

 
23,296

Repurchase of stock
(100,000
)
 
—

Other financing activities
(68,738
)
 
(49,764
)
Net cash provided by financing activities
6,675

 
47,875

Increase in cash and cash equivalents
2,094

 
74,091

Cash and cash equivalents, beginning of period
152,580

 
122,416

Cash and cash equivalents, end of period
$
154,674

 
$
196,507


 
 
Nine Months Ended
(dollars in millions)
 
June 30, 2017
 
July 1, 2016
Interest paid
 
$
147.3

 
$
174.0

Income taxes paid
 
$
81.3

 
$
26.2


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

4
Table of Contents
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. The Company's core market is North America (composed of the United States and Canada), which is supplemented by an additional 17-country footprint. 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 November 23, 2016. The Condensed Consolidated Balance Sheet as of September 30, 2016 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 Standards Updates
In May 2017, the Financial Accounting Standards Board ("FASB") issued an accounting standards update ("ASU") to clarify the determination of the customer of the operation services in a service concession arrangement. The guidance is effective for the Company in the first quarter of fiscal 2019 and early adoption is permitted. The Company will adopt this standard in conjunction with the revenue recognition standard, as described below. The Company is currently evaluating the impact of the pronouncement.
In May 2017, the FASB issued an ASU to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. 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 March 2017, the FASB issued an ASU to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. 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 February 2017, the FASB issued an ASU to clarify the accounting guidance for partial sales of nonfinancial assets. 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 January 2017, the FASB issued an ASU to simplify the subsequent measurement of goodwill as part of the impairment test. The guidance is effective for the Company in the first quarter of fiscal 2021 and early adoption is permitted. The Company is currently evaluating the impact of the pronouncement.
In January 2017, the FASB issued an ASU to clarify the definition of a business. 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 October 2016, the FASB issued an ASU to require entities to recognize the income tax consequences of certain intercompany assets transfers at the transaction date. 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 August 2016, the FASB issued an ASU to address the classification of certain cash receipts and cash payments in the Statement of Cash Flows. 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 June 2016, the FASB issued an ASU to require entities to account for expected credit losses on financial instruments including trade receivables. The guidance is effective for the Company in the first quarter of fiscal 2021 and early adoption is permitted. The Company is currently evaluating the impact of the pronouncement.

5
Table of Contents
ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In March 2016, the FASB issued an ASU to update several aspects of the accounting for share-based payment transactions. Upon adoption, the ASU requires that excess tax benefits for share-based payments be recorded as a reduction to the provision for income taxes and reflected within cash flows from operating activities rather than being recorded within stockholders’ equity and reflected within cash flows from financing activities. The standard also clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on a cash flow statement, and provides an accounting policy election to account for forfeitures as they occur.
The Company elected to early adopt the guidance as of the beginning of its first quarter of fiscal 2017. The impact to the Condensed Consolidated Statements of Income was $6.2 million and $18.4 million of excess tax benefit recorded as a reduction to the provision for income taxes for the three and nine months ended June 30, 2017. The adoption impact to the Condensed Consolidated Balance Sheets was a cumulative-effect adjustment of approximately $9.8 million to increase retained earnings for previously unrecognized excess tax benefits. The Company applied the guidance related to the presentation in the Condensed Consolidated Statements of Cash Flows on a retrospective basis. The excess tax benefits of $18.4 million and $21.7 million for share-based awards are included in operating activities, previously classified in financing activities, and approximately $22.7 million and $23.9 million of cash paid for employee taxes for withheld shares are included in financing activities, previously classified in operating activities, for the nine months ended June 30, 2017 and July 1, 2016, respectively. As a result of the adoption, the excess tax benefits are no longer included in the calculation of diluted shares under the treasury stock method, which increased the diluted shares outstanding by approximately 1.4 million shares for both the three and nine months ended June 30, 2017. The Company elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period.
In February 2016, the FASB issued an ASU requiring lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets and to disclose key information about lease arrangements. The guidance is effective for the Company in the first quarter of fiscal 2020 and early adoption is permitted. The Company is in the process of developing an inventory of its lease arrangements in order to determine the impact the adoption of this ASU will have on its condensed consolidated financial statements and related disclosures. Based on the assessment to date, the Company expects adoption of this standard to result in a material increase in lease-related assets and liabilities on its Condensed Consolidated Balance Sheets, but does not expect it to have a significant impact on its Condensed Consolidated Statements of Income or Cash Flows.
In January 2016, the FASB issued an 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 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 2018 and early adoption is permitted. The Company is currently evaluating the impact of the pronouncement.
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 Company adopted the guidance in the first quarter of fiscal 2017 which did not have an impact on the condensed consolidated financial statements.
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. As the new standard will supersede most existing revenue guidance affecting the Company, it could impact revenue and cost recognition on contracts across all reportable segments. The Company has been closely monitoring the FASB activity related to the new standard and continues to work to conclude on specific interpretative issues. The Company also continues to make progress on a comprehensive contract review project in order to develop a full understanding of the adoption impact on the consolidated financial statements.
Comprehensive Income
Comprehensive income includes all changes to stockholders' equity during a period, except those resulting from investments by and distributions to stockholders. Components of comprehensive income include net income, changes in foreign currency translation adjustments (net of tax), 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 or loss (net of tax).

6
Table of Contents
ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The summary of the components of comprehensive income (loss) is as follows (in thousands):
 
Three Months Ended
 
June 30, 2017
 
July 1, 2016
 
Pre-Tax Amount
Tax Effect
After-Tax Amount
 
Pre-Tax Amount
Tax Effect
After-Tax Amount
Net income
 
 
$
65,364

 
 
 
$
44,858

Pension plan adjustments
—

—

—

 
(8,282
)
2,899

(5,383
)
Foreign currency translation adjustments
14,529

2,465

16,994

 
4,142

(6,247
)
(2,105
)
Fair value of cash flow hedges
951

(371
)
580

 
(730
)
289

(441
)
Other comprehensive income (loss)
15,480

2,094

17,574

 
(4,870
)
(3,059
)
(7,929
)
Comprehensive income
 
 
82,938

 
 
 
36,929

Less: Net income attributable to noncontrolling interest
 
 
69

 
 
 
93

Comprehensive income attributable to Aramark stockholders
 
 
$
82,869

 
 
 
$
36,836

 
Nine Months Ended
 
June 30, 2017
 
July 1, 2016
 
Pre-Tax Amount
Tax Effect
After-Tax Amount
 
Pre-Tax Amount
Tax Effect
After-Tax Amount
Net income
 
 
$
261,029

 
 
 
$
204,791

Pension plan adjustments
—

—

—

 
(8,282
)
2,899

(5,383
)
Foreign currency translation adjustments
(11,429
)
7,171

(4,258
)
 
17,190

(13,535
)
3,655

Fair value of cash flow hedges
47,489

(18,521
)
28,968

 
2,351

4,918

7,269

Other comprehensive income (loss)
36,060

(11,350
)
24,710

 
11,259

(5,718
)
5,541

Comprehensive income
 
 
285,739

 
 
 
210,332

Less: Net income attributable to noncontrolling interest
 
 
244

 
 
 
329

Comprehensive income attributable to Aramark stockholders
 
 
$
285,495

 
 
 
$
210,003

Accumulated other comprehensive loss consists of the following (in thousands):
 
June 30, 2017
 
September 30, 2016
Pension plan adjustments
$
(65,267
)
 
$
(65,267
)
Foreign currency translation adjustments
(72,719
)
 
(68,461
)
Cash flow hedges
(7,405
)
 
(36,373
)
Share of equity investee's accumulated other comprehensive loss
(10,682
)
 
(10,682
)
 
$
(156,073
)
 
$
(180,783
)
Other Assets
Other assets consist primarily of client contract investments, investments in 50% or less owned entities, 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 generally 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 $900.1 million and $865.0 million as of June 30, 2017 and September 30, 2016, respectively.
Income Taxes
Effective for the first quarter of fiscal 2017, the earnings since the beginning of the fiscal year of certain of the Company's foreign subsidiaries are intended to be indefinitely reinvested in operations outside the U.S. and, therefore, U.S. taxes have not been recorded on those earnings.

7
Table of Contents
ARAMARK AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2. ACQUISITIONS:
During the nine month period of fiscal 2017, the Company paid cash consideration of approximately $130.1 million for various acquisitions. The sales, net income, assets and liabilities of the acquisitions did not have a material impact on the Company's condensed consolidated financial statements.
During the second quarter of fiscal 2016, the Company completed the purchase of Avoca Handweavers Limited ("Avoca"), an Irish retail and café business, for cash consideration of approximately $65.8 million (approximately $59.2 million, net of cash acquired). The sales, net income, assets and liabilities of Avoca did not have a material impact on the Company's condensed consolidated financial statements.
NOTE 3. SEVERANCE:
During the third quarter of fiscal 2017, the Company updated its previously initiated actions on streamlining and improving the efficiencies and effectiveness of its selling, general and administrative functions. The Company recorded net severance charges of approximately $18.4 million during the three and nine month periods of fiscal 2017. For the three and nine month periods of fiscal 2016, the Company recorded net severance charges of approximately $1.9 million and $9.0 million, respectively.
As of June 30, 2017 and September 30, 2016, the Company had an accrual of approximately $27.3 million and $26.1 million, respectively, related to the unpaid obligations for these actions.
NOTE 4. 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 30, 2017 follow (in thousands):
Segment
September 30, 2016
 
Acquisition
 
Translation
 
June 30, 2017
FSS North America
$
3,635,614

 
$
32,497

 
$
(1,138
)
 
$
3,666,973

FSS International
418,488

 
32,022

 
6,029

 
456,539

Uniform
574,779

 
4,106

 
—

 
578,885

 
$
4,628,881

 
$
68,625

 
$
4,891

 
$
4,702,397

Goodwill related to the acquisitions made during the nine months ended June 30, 2017 may be revised upon final determination of the purchase price allocation.
Other intangible assets consist of the following (in thousands):
 
June 30, 2017
 
September 30, 2016
 
Gross
Amount
 
Accumulated
Amortization
 
Net
Amount
 
Gross
Amount
 
Accumulated
Amortization
 
Net
Amount
Customer relationship assets
$
1,357,151

 
$
(1,034,710
)
 
$
322,441

 
$
1,793,739

 
$
(1,462,058
)
 
$
331,681

Trade names
799,100

 
—

 
799,100

 
781,835

 
(1,633
)
 
780,202

 
$
2,156,251

 
$
(1,034,710
)
 
$
1,121,541

 
$
2,575,574

 
$
(1,463,691
)
 
$
1,111,883

During the nine months ended June 30, 2017, the Company acquired customer relationship assets and trade names with preliminary values of approximately $55.6 million and $17.8 million, respectively. 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 14 years. The Aramark and other trade names are indefinite lived intangible assets and are not amortizable but are evaluated for impairment at least annually.
Amortization of intangible assets for the nine months ended June 30, 2017 and July 1, 2016 was approximately $66.3 million and $75.9 million, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5. BORROWINGS:
Long-term borrowings, net, are summarized in the following table (in thousands):
 
 
June 30, 2017
 
September 30, 2016
Senior secured revolving credit facility, due March 2022
 
$
155,700

 
$
—

Senior secured term loan facility, due September 2019
 
—

 
840,305

Senior secured term loan facility, due February 2021
 
—

 
2,450,749

Senior secured term loan facility, due March 2022
 
835,607

 
—

Senior secured term loan facility, due March 2024
 
1,736,423

 
—

5.750% senior notes, due March 2020
 
—

 
227,032

5.125% senior notes, due January 2024
 
904,014

 
905,095

4.750% senior notes, due June 2026
 
493,320

 
492,886

5.000% senior notes, due April 2025
 
589,450

 
—

3.125% senior notes, due April 2025
 
366,822

 
—

Receivables Facility, due May 2019
 
350,000

 
268,000

Capital leases
 
78,447

 
78,615

Other
 
4,597

 
7,354

 
 
5,514,380

 
5,270,036

Less—current portion
 
(74,237
)
 
(46,522
)
 
 
$
5,440,143

 
$
5,223,514

As of June 30, 2017, there was approximately $571.4 million of outstanding foreign currency borrowings.
Fiscal 2017 Refinancing Transactions
On March 22, 2017, Aramark Services, Inc. ("ASI"), an indirect wholly owned subsidiary of the Company, issued $600.0 million of 5.000% Senior Notes due April 1, 2025 (the "5.000% 2025 Notes"). On March 27, 2017, Aramark International Finance S.à r.l. ("AIFS" and, together with ASI, "the Issuers"), an indirect wholly owned subsidiary of the Company, issued €325.0 million of 3.125% Senior Notes due April 1, 2025 (the "3.125% 2025 Notes" and, together with the 5.000% 2025 Notes, the "Notes").
On March 28, 2017, ASI and certain of its subsidiaries entered into a Credit Agreement (the "Credit Agreement"), which replaced the existing Amended and Restated Credit Agreement, originally dated January 26, 2007, and last amended on March 28, 2014 (the "Previous Credit Agreement"). Among other things, the Credit Agreement provides for the following as of June 30, 2017:
•
A U.S. dollar denominated term loan to ASI in the amount of $641.9 million, due 2022, ("U.S. Term Loan A") and $1.7 billion, due 2024 ("U.S. Term Loan B");
•
A Canadian dollar denominated term loan to Aramark Canada Ltd. in the amount of CAD131.7 million, due 2022 (approximately $101.6 million) ("Canadian Term Loan");
•
A yen denominated term loan to ASI in the amount of ¥11,079.2 million, due 2022 (approximately $98.6 million) ("Yen Term Loan"); and
•
A revolving credit facility available for loans in U.S. dollars, Canadian dollars, euros and pounds sterling to ASI and certain foreign borrowers with aggregate commitments under the Credit Agreement of $1.0 billion and a final maturity date of March 28, 2022.
The net proceeds from the Notes and borrowings under the senior secured term loan facilities under the Credit Agreement were used to repay all existing outstanding borrowings under the term loans under the Previous Credit Agreement, to redeem ASI's 5.750% senior notes, due March 2020 (the "2020 Notes"), and to pay certain fees and related expenses. The Company recorded $27.0 million of charges to "Interest and Other Financing Costs, net" in the Condensed Consolidated Statements of Income for the nine months ended June 30, 2017, consisting of $23.7 million of non-cash charges for the write-off of deferred financing costs and original issue discount and $3.3 million for the call premium on the 2020 Notes.
During the nine months ended June 30, 2017, the Company capitalized third-party costs of approximately $15.1 million directly attributable to the Notes and approximately $16.4 million directly attributable to the new senior secured term loan facilities under the Credit Agreement, which are included in "Long-Term Borrowings" in the Condensed Consolidated Balance Sheets.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company also capitalized third-party costs of approximately $8.2 million during the second quarter of fiscal 2017, directly attributable to the senior secured revolving credit facility, which are included in "Other Assets" in the Condensed Consolidated Balance Sheets.
Senior Secured Credit Agreement
The applicable margin spread for the U.S. Term Loan B is 1.75% to 2.00% (as of June 30, 2017—2.00%) with respect to eurocurrency (LIBOR) borrowings, subject to a LIBOR floor of 0.00%, and 0.75% to 1.00% (as of June 30, 2017—1.00%) with respect to base-rate borrowings, subject to a minimum base rate of 0.00%. The applicable margin spread for the U.S. Term Loan A, Canadian Term Loan and the senior secured revolving credit facility is 1.50% to 2.25% (as of June 30, 2017—1.75%) with respect to eurocurrency (LIBOR) borrowings, bankers’ acceptance ("BA") rate borrowings and letters of credit fees and 0.50% to 1.25% (as of June 30, 2017—0.75%) with respect to U.S. and Canadian base rate borrowings. The applicable margin for the Yen Term Loan is 1.75%. In addition to paying interest on outstanding principal under the senior secured credit facilities, the Company is required to pay a commitment fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. The commitment fee rate ranges from 0.25% to 0.40% per annum (as of June 30, 2017—0.30%). The actual spreads within all ranges referred to above are based on a Consolidated Leverage Ratio, as defined in the Credit Agreement.
The Company's revolving credit facility includes a $250.0 million sublimit for letters of credit.
The Credit Agreement provides that the Company has the right at any time to request one or more incremental term loan facilities or increases under existing term loan facilities and/or additional revolving credit facilities or increases under the existing revolving credit facility in an amount up to $1,400.0 million of incremental commitments in the aggregate plus an unlimited amount so long as the pro forma Consolidated Secured Debt to Covenant Adjusted EBITDA ratio (each as defined in the Credit Agreement (the "Consolidated Secured Debt Ratio")) would not exceed 3.00 to 1.00, plus any amount of loans and commitments optionally prepaid and terminated under the senior secured credit facilities. The lenders under these facilities are not under any obligation to provide any such incremental facilities or commitments, and any such addition of or increase in facilities or commitments will be subject to customary conditions precedent. The revolving credit facility may be drawn by ASI as well as by certain foreign subsidiaries of ASI. Each foreign borrower is subject to a sublimit of $150.0 million with respect to borrowings under the revolving credit facility.
As of June 30, 2017, there was approximately $842.8 million available for borrowing under the revolving credit facility.
Prepayments and Amortization
The Credit Agreement requires us to prepay outstanding term loans, subject to certain exceptions, with:
•
50% of ASI's annual excess cash flow (as defined in the Credit Agreement) with stepdowns to 25% and 0% upon ASI's reaching certain Consolidated Secured Debt Ratio thresholds; provided, further, that such prepayment shall only be required to the extent excess cash flow for the applicable year exceeds $10.0 million;
•
100% of the net cash proceeds of all nonordinary course asset sales or other dispositions of property subject to certain exceptions and customary reinvestment rights; provided, further, that such prepayment shall only be required to the extent net cash proceeds exceeds $100.0 million; and
•
100% of the net cash proceeds of any incurrence of debt, but excluding proceeds from certain debt permitted under the Credit Agreement.
The foregoing mandatory prepayments will be applied to the term loan facilities on a pro rata basis and will reduce the obligations to make scheduled amortization payments on a dollar for dollar basis as directed by the Company. The Company may voluntarily repay outstanding loans under the senior secured credit facilities at any time without premium or penalty, other than (i) customary "breakage" costs with respect to LIBOR loans and (ii) with respect to any voluntary prepayments of the U.S. Term Loan B in connection with any repricing transaction (as defined in the Credit Agreement) effected prior to September 28, 2017, a 1% prepayment premium. Prepaid term loans may not be reborrowed.
If a change of control as defined in the Credit Agreement occurs, this will cause an event of default under the Credit Agreement. Upon an event of default, the new senior secured credit facilities may be accelerated, in which case the Company would be required to repay all outstanding loans plus accrued and unpaid interest and all other amounts outstanding under the new senior secured credit facilities under the Credit Agreement.
The Company is required to make quarterly principal repayments on the U.S. Term Loan B and the Yen Term Loan in quarterly amounts of 1.00% per annum of their funded total principal amount. The Company is required to make quarterly principal repayments on the U.S. Term Loan A and the Canadian Term Loan in quarterly amounts of 5.0%, 5.0%, 7.5%, 10.0% and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

15.0% per annum of their funded total principal amount in the first, second, third, fourth and fifth years after the closing date of the senior secured credit facilities under the Credit Agreement, respectively.
Guarantees
All obligations under the Credit Agreement are unconditionally guaranteed by Aramark Intermediate HoldCo Corporation and, subject to certain exceptions, substantially all of ASI's existing and future wholly-owned domestic subsidiaries excluding certain immaterial subsidiaries, receivables facility subsidiaries, certain other customarily excluded subsidiaries and certain subsidiaries designated under the Credit Agreement as "unrestricted subsidiaries", referred to, collectively, as the U.S. Guarantors. All obligations under the senior secured credit facilities, and the guarantees of those obligations, are secured by (i) a pledge of 100% of the capital stock of ASI, (ii) pledges of 100% of the capital stock (or 65% of voting stock and 100% of non-voting stock, in the case of the stock of foreign subsidiaries) held by ASI, Aramark Intermediate HoldCo Corporation or any of the U.S. Guarantors and (iii) a security interest in, and mortgages on, substantially all tangible assets of Aramark Intermediate HoldCo Corporation, ASI or any of the U.S. Guarantors.
Certain Covenants
The Credit Agreement contains certain covenants that, among other things, restrict, subject to certain exceptions, ASI's ability and the ability of its restricted subsidiaries to: incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends, make distributions or repurchase its capital stock; make investments, loans or advances; repay or repurchase any subordinated debt, except as scheduled or at maturity; create restrictions on the payment of dividends or other transfers to ASI from its restricted subsidiaries; make certain acquisitions; engage in certain transactions with affiliates; amend material agreements governing ASI's subordinated debt; and fundamentally change ASI's business. In addition, the Credit Agreement requires ASI to comply with a maximum Consolidated Secured Debt Ratio maintenance covenant. The Credit Agreement also contains certain customary affirmative covenants, such as financial and other reporting, and certain events of default. At June 30, 2017, ASI was in compliance with all of these covenants.
The Credit Agreement requires ASI to maintain a maximum Consolidated Secured Debt Ratio, defined as consolidated total indebtedness secured by a lien to Covenant Adjusted EBITDA, of 5.125x. Consolidated total indebtedness secured by a lien is defined in the Credit Agreement as total indebtedness outstanding under the Credit Agreement, capital leases, advances under the Receivables Facility and any other indebtedness secured by a lien reduced by the amount of cash and cash equivalents on the consolidated balance sheet that is free and clear of any lien. Non-compliance with the maximum Consolidated Secured Debt Ratio could result in the requirement to immediately repay all amounts outstanding under the Credit Agreement, which, if ASI's revolving credit facility lenders failed to waive any such default, would also constitute a default under the indentures governing the senior notes.
The Credit Agreement establishes an incurrence-based minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA to consolidated interest expense, as a condition for ASI and its restricted subsidiaries to incur additional indebtedness and to make certain restricted payments. The minimum Interest Coverage Ratio is 2.00x for the term of the Credit Agreement. If ASI does not maintain this minimum Interest Coverage Ratio calculated on a pro forma basis for any such additional indebtedness or restricted payments, it could be prohibited from being able to incur additional indebtedness, other than the additional funding provided for under the Credit Agreement and pursuant to specified exceptions, and make certain restricted payments, other than pursuant to certain exceptions.
A failure to pay any obligations under the Credit Agreement as they become due or any event causing amounts to become due prior to their stated maturity could result in a cross-default and potential acceleration of the Company’s other outstanding debt obligations, including the senior notes.
Senior Notes
5.000% Senior Notes due 2025 and 3.125% Senior Notes due 2025
The 5.000% 2025 Notes were issued pursuant to an indenture, dated as of March 22, 2017 (the "5.000% 2025 Notes Indenture"), entered into by and among ASI, the Company and certain other Aramark entities, as guarantors, and The Bank of New York Mellon, as trustee. The 5.000% 2025 Notes were issued at par. The 3.125% 2025 Notes were issued pursuant to an indenture, dated as of March 27, 2017 (the "3.125% 2025 Notes Indenture"), entered into by and among AIFS, the Company and certain other Aramark entities, as guarantors, The Bank of New York Mellon, as trustee and registrar, and The Bank of New York Mellon, London Branch, as paying agent and transfer agent. The 3.125% 2025 Notes were issued at par.
The Notes are senior unsecured obligations of the respective Issuers. Each series of the Notes ranks equal in right of payment to all of the respective Issuer's existing and future senior indebtedness, including the senior secured credit facilities under the Credit Agreement, and, in the case of the 5.000% 2025 Notes with respect to ASI, ASI's 5.125% Senior Notes due 2024 (the "2024 Notes") and 4.750% Senior Notes due 2026 (the "2026 Notes") and will rank senior in right of payment to the respective

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Issuer's future subordinated indebtedness. The Notes are guaranteed on a senior, unsecured basis by the Company and substantially all of the domestic subsidiaries of ASI and the 3.125% 2025 Notes are guaranteed on a senior, unsecured basis by ASI. The guarantees of the Notes rank equal in right of payment to all of the senior obligations of such guarantor, including guarantees of the senior secured credit facilities, the 2024 Notes, the 2026 Notes and the 5.000% 2025 Notes or 3.125% 2025 Notes, as applicable, and in the case of the 3.125% 2025 Notes with respect to ASI, ASI’s obligations under the senior secured credit facilities, the 2024 Notes, the 2026 Notes and the 5.000% 2025 Notes. Each series of the Notes and the related guarantees thereof are effectively subordinated to all of the respective Issuers' existing and future secured indebtedness, including obligations and/or guarantees of the senior secured credit facilities under the Credit Agreement, to the extent of the value of the assets securing that indebtedness, and structurally subordinated to all of the liabilities of any of ASI's subsidiaries that do not guarantee the Notes. Interest on the Notes is payable on April 1 and October 1 of each year, commencing on October 1, 2017. Interest accrues from March 22, 2017 for the 5.000% 2025 Notes and interest accrues from March 27, 2017 for the 3.125% 2025 Notes.
In the event of certain types of changes of control, the holders of the Notes may require the applicable Issuer to purchase for cash all or a portion of their Notes at a purchase price equal to 101% of the principal amount of such Notes, plus accrued and unpaid interest, if any, to, but not including, the purchase date. Beginning April 1, 2020, ASI has the option to redeem all or a portion of the 5.000% 2025 Notes at any time at the redemption prices set forth in the 5.000% 2025 Notes Indenture, plus accrued and unpaid interest. Beginning April 1, 2020, AIFS has the option to redeem all or a portion of the 3.125% 2025 Notes at any time at the redemption prices set forth in the 3.125% 2025 Notes Indenture, plus accrued and unpaid interest.
The 5.000% 2025 Notes Indenture and the 3.125% 2025 Notes Indenture contain covenants limiting ASI's ability and the ability of its restricted subsidiaries to: incur additional indebtedness or issue certain preferred shares; pay dividends and make certain distributions, investments and other restricted payments; create certain liens; sell assets; enter into transactions with affiliates; limit the ability of restricted subsidiaries to make payments to ASI; enter into sale and leaseback transactions; merge, consolidate, sell or otherwise dispose of all or substantially all of ASI's and its restricted subsidiaries assets; and designate ASI's subsidiaries as unrestricted subsidiaries. The 5.000% 2025 Notes Indenture and the 3.125% 2025 Notes Indenture also provide for events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the applicable series of Notes to become or to be declared due and payable. Further, a failure to pay any obligations under the 5.000% 2025 Notes Indenture or the 3.125% 2025 Notes Indenture as they become due or any event causing amounts to become due prior to their stated maturity could result in a cross-default and potential acceleration of the Company’s other outstanding debt obligations, including the other senior notes and obligations under the Credit Agreement.
Fiscal 2016 Refinancing Transactions
On May 31, 2016, ASI issued $1.0 billion principal amount of senior unsecured notes, consisting of the 2024 Notes and the 2026 Notes. The 2024 Notes were issued pursuant to an indenture dated as of December 17, 2015, as supplemented by the supplemental indenture, dated as of May 31, 2016, entered into by ASI, certain other Aramark entities, as guarantors of the 2024 Notes and the Bank of New York Mellon, as trustee. The 2026 Notes were issued pursuant to the indenture, dated as of May 31, 2016, entered into by ASI, certain other Aramark entities, as guarantors of the 2026 Notes and The Bank of New York Mellon, as trustee. The 2024 Notes were issued at a premium of $18.8 million, which created an effective yield of 4.6%. The premium was recorded to "Long-Term Borrowings" in the Condensed Consolidated Balance Sheets and will be amortized to "Interest and Other Financing Costs, net" in the Condensed Consolidated Statements of Income until maturity in 2024. The 2026 Notes were issued at par.
The net proceeds from the 2024 Notes and the 2026 Notes and premium from the 2024 Notes were used to redeem $194.1 million of the senior secured term loan facility due September 2019 (the "2019 Term Loans"), repay $771.2 million principal of the 2020 Notes, pay a $22.2 million call premium on the 2020 Notes, pay $11.1 million of accrued interest on the 2020 Notes and fees and costs associated with the 2024 Notes and 2026 Notes. As a result of the issuance of the 2024 Notes and 2026 Notes, the Company recorded charges of approximately $30.2 million, to "Interest and Other Financing Costs, net" in the Condensed Consolidated Statements of Income for the nine months ended July 1, 2016, consisting of $22.2 million for the call premium on the 2020 Notes and $8.0 million of non-cash charges for the write-off of debt issuance costs and debt discount on the 2020 Notes and 2019 Term Loans. The Company also paid approximately $14.2 million in debt issuance costs spread evenly between the 2024 Notes and 2026 Notes, which were recorded as a reduction to "Long-Term Borrowings" in the Condensed Consolidated Balance Sheets.
On December 17, 2015, ASI issued $400 million of 2024 Notes, pursuant to an indenture, dated as of December 17, 2015, entered into by ASI, 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. The Company paid approximately $6.0 million in financing fees related to the 2024 Notes.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Future Maturities
After giving effect to the refinancing activity during the second quarter of fiscal 2017, at June 30, 2017, annual maturities on long-term borrowings maturing between fiscal years 2017 and 2022 and thereafter (excluding the $49.0 million reduction to long-term borrowings from debt issuance costs and the increase of $15.6 million from the premium on the 2024 Notes) are as follows (in thousands):
2017
$
20,297

2018
78,204

2019
414,698

2020
117,647

2021
125,111

2022
766,729

Thereafter
4,025,127

NOTE 6. 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 the risk of 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 previously entered into approximately $2.4 billion notional amount of outstanding interest rate swap agreements, fixing the rate on a like amount of variable rate borrowings. During the third quarter of fiscal 2017, the Company entered into $200.0 million notional amount of forward starting interest rate swap agreements to hedge the cash flow risk of variability in interest payments on variable rate borrowings. In addition, interest rate swaps with a notional amount of $350.0 million matured during the third quarter of fiscal 2017. As a result of the Credit Agreement, the Company de-designated the previous 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 Credit Agreement, these agreements met the required criteria to be designated as cash flow hedging instruments. The Company then amended the interest rate swap agreements to match the terms of the new term loans under the Credit Agreement to meet the criteria to be designated as cash flow hedging instruments. As a result of the de-designation, the Company recorded charges to "Interest and Other Financing Costs, net" in the Condensed Consolidated Statements of Income for the nine months ended June 30, 2017 of approximately $2.9 million for the changes in market value of the interest rate swaps.
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. Approximately ($7.4) million and ($36.4) million of unrealized net of tax losses related to the interest rate swaps were included in "Accumulated other comprehensive loss" as of June 30, 2017 and September 30, 2016, respectively. As of June 30, 2017, such amount principally represents the fair value of the original interest rate swap agreements on the de-designation date, which will be recognized in income over the original anticipated cash flow period. The hedge ineffectiveness for these cash flow hedging instruments during the nine months ended June 30, 2017 and July 1, 2016 was not material.

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

The following table summarizes the effect of our derivatives designated as cash flow hedging instruments (effective portion) on Other comprehensive income (loss) (in thousands):
 
Three Months Ended
 
June 30, 2017
 
July 1, 2016
Interest rate swap agreements
$
(2,721
)
 
$
(8,947
)
 
Nine Months Ended
 
June 30, 2017
 
July 1, 2016
Interest rate swap agreements
$
33,261

 
$
(23,916
)
Cross currency swap agreements
—

 
(2,116
)
 
$
33,261

 
$
(26,032
)
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. As of June 30, 2017, the Company has contracts for approximately 20.2 million gallons outstanding for fiscal 2017 and fiscal 2018. 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 unsettled contracts was a loss of approximately $2.6 million and approximately $3.6 million for the three and nine months ended June 30, 2017, respectively. The impact on earnings related to the change in fair value of these unsettled contracts was a gain of approximately $10.7 million and $7.9 million for the three and nine months ended July 1, 2016, respectively. The change in fair value for unsettled contracts is included in "Selling and general corporate expenses" in the Condensed Consolidated Statements of Income. When the contracts settle, the gain or loss is recorded to"Costs of services provided" in the Condensed Consolidated Statements of Income.
As of June 30, 2017, the Company had foreign currency forward exchange contracts outstanding with notional amounts of €47.0 million, £50.3 million and CAD14.0 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.
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
 
June 30, 2017
 
September 30, 2016
ASSETS
 
 
 
 
 
 
Not designated as hedging instruments:
 
 
 
 
 
 
Gasoline and diesel fuel agreements
 
Prepayments and other current assets
 
$
102

 
$
3,878

LIABILITIES
 
 
 
 
 
 
Designated as hedging instruments:
 
 
 
 
 
 
Interest rate swap agreements
 
Accrued expenses and other current liabilities
 
$
1,210

 
$
5,929

Interest rate swap agreements
 
Other Noncurrent Liabilities
 
12,271

 
34,919

 
 
 
 
13,481

 
40,848

 
 
 
 
 
 
 
Not designated as hedging instruments:
 
 
 
 
 
 
Foreign currency forward exchange contracts
 
Accounts payable
 
178

 
447

 
 
 
 
$
13,659

 
$
41,295


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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
 
 
Income Statement Location
 
June 30, 2017
 
July 1, 2016
Designated as hedging instruments:
 
 
 
 
 
 
Interest rate swap agreements
 
Interest expense
 
$
3,732

 
$
8,217

Not designated as hedging instruments:
 
 
 
 
 
 
Gasoline and diesel fuel agreements
 
Costs of services provided / Selling and general corporate expenses
 
$
2,404

 
$
(8,997
)
Foreign currency forward exchange contracts
 
Interest expense
 
1,673

 
(4,441
)
 
 
 
 
4,077

 
(13,438
)
 
 
 
 
$
7,809

 
$
(5,221
)
 
 
 
 
Nine Months Ended
 
 
Income Statement Location
 
June 30, 2017
 
July 1, 2016
Designated as hedging instruments:
 
 
 
 
 
 
Interest rate swap agreements
 
Interest Expense
 
$
14,288

 
$
26,322

Cross currency swap agreements
 
Interest Expense
 
—

 
2,061

 
 
 
 
14,288

 
28,383

Not designated as hedging instruments:
 
 
 
 
 
 
Gasoline and diesel fuel agreements
 
Costs of services provided / Selling and general corporate expenses
 
$
2,787

 
$
(1,921
)
Foreign currency forward exchange contracts
 
Interest Expense
 
(3,134
)
 
(5,216
)
 
 
 
 
(347
)
 
(7,137
)
 
 
 
 
$
13,941

 
$
21,246

At June 30, 2017, 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 $2.9 million.
NOTE 7. STOCKHOLDERS' EQUITY:
During the nine months ended June 30, 2017 and July 1, 2016, the Company paid dividends of approximately $75.5 million and $68.9 million to its stockholders, respectively. On August 2, 2017, the Company's Board declared a $0.103 dividend per share of common stock, payable on September 5, 2017, to shareholders of record on the close of business on August 16, 2017.
During fiscal 2017, the Board of Directors authorized a new share repurchase program providing for purchases of up to $250 million of Aramark common stock over the next two years, pursuant to which the Company repurchased approximately 2.8 million shares of its common stock for $100.0 million in the second quarter of fiscal 2017.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8. SHARE-BASED COMPENSATION:
The following table summarizes the share-based compensation expense and related information for Time-Based Options ("TBOs"), Time-Based Restricted Stock Units ("RSUs"), Performance Stock Units and Performance Restricted Stock ("PSUs"), and Deferred Stock and Other Units classified as "Selling and general corporate expenses" in the Condensed Consolidated Statements of Income (in millions).
 
 
Three Months Ended
 
Nine Months Ended
 
 
June 30, 2017
 
July 1, 2016
 
June 30, 2017
 
July 1, 2016
TBOs
 
$
5.2

 
$
4.8

 
$
15.7

 
$
14.4

RSUs
 
5.0

 
5.3

 
16.4

 
16.4

PSUs
 
5.0

 
3.4

 
16.4

 
10.7

Deferred Stock and Other Units
 
0.4

 
0.7

 
1.8

 
2.1

 
 
$
15.6

 
$
14.2

 
$
50.3

 
$
43.6

 
 
 
 
 
 
 
 
 
Taxes related to share-based compensation
 
$
5.7

 
$
5.5

 
$
18.6

 
$
17.0

The below table summarizes the number of shares granted and the weighted-average grant-date fair value per unit during the nine months ended June 30, 2017:
 
 
Shares Granted (in millions)
 
Weighted-Average Grant-Date Fair Value (dollars per share)
TBOs
 
2.7

 
$
8.47

RSUs
 
1.4

 
$
34.09

PSUs
 
0.4

 
$
34.12

 
 
4.5

 
 
NOTE 9. 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
 
Nine Months Ended
 
June 30, 2017
 
July 1, 2016
 
June 30, 2017
 
July 1, 2016
Earnings:
 
 
 
 
 
 
 
Net income attributable to Aramark stockholders
$
65,295

 
$
44,765

 
$
260,785

 
$
204,462

Shares:
 
 
 
 
 
 
 
Basic weighted-average shares outstanding
244,266

 
242,831

 
244,399

 
241,740

Effect of dilutive securities
6,890

 
6,226

 
7,149

 
6,582

Diluted weighted-average shares outstanding
251,156

 
249,057

 
251,548

 
248,322

 
 
 
 
 
 
 
 
Basic Earnings Per Share:
 
 
 
 
 
 
 
Net income attributable to Aramark stockholders
$
0.27

 
$
0.18

 
$
1.07

 
$
0.85

Diluted Earnings Per Share:
 
 
 
 
 
 
 
Net income attributable to Aramark stockholders
$
0.26

 
$
0.18

 
$
1.04

 
$
0.82

Share-based awards to purchase 3.7 million and 2.4 million shares were outstanding for the three months ended June 30, 2017 and July 1, 2016, 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 1.2 million shares and 0.7 million shares were outstanding for the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

three month periods of June 30, 2017 and July 1, 2016, respectively, but were not included in the computation of diluted earnings per common share, as the performance targets were not yet met.
Share-based awards to purchase 3.9 million and 3.4 million shares were outstanding for the nine months ended June 30, 2017 and July 1, 2016, 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 1.2 million shares and 0.7 million shares were outstanding for the nine month period of June 30, 2017 and July 1, 2016, respectively, but were not included in the computation of diluted earnings per common share, as the performance targets were not yet met.
NOTE 10. 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 $94.6 million at June 30, 2017 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 30, 2017.
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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 11. BUSINESS SEGMENTS:
The Company reports its operating results in three reportable segments: FSS North America, FSS International and Uniform. Corporate includes general expenses not specifically allocated to an individual segment and share-based compensation expense (see note 8). In the Company's food and support services segments, approximately 80% of the global sales is related to food services and 20% is related to facilities services. Financial information by segment follows (in millions):
 
Sales
 
Three Months Ended
 
June 30, 2017
 
July 1, 2016
FSS North America
$
2,491.6

 
$
2,487.9

FSS International
713.9

 
709.7

Uniform
387.8

 
389.3

 
$
3,593.3

 
$
3,586.9

 
Operating Income
 
Three Months Ended
 
June 30, 2017
 
July 1, 2016
FSS North America
$
120.1

 
$
100.7

FSS International
25.8

 
38.5

Uniform
45.0

 
52.2

 
190.9

 
191.4

Corporate
(36.2
)
 
(22.1
)
Operating Income
154.7

 
169.3

Interest and Other Financing Costs, net
(61.5
)
 
(103.7
)
Income Before Income Taxes
$
93.2

 
$
65.6

 
Sales
 
Nine Months Ended
 
June 30, 2017
 
July 1, 2016
FSS North America
$
7,713.9

 
$
7,630.7

FSS International
2,065.5

 
2,068.7

Uniform
1,170.9

 
1,172.6

 
$
10,950.3

 
$
10,872.0

 
Operating Income
 
Nine Months Ended
 
June 30, 2017
 
July 1, 2016
FSS North America
$
457.3

 
$
406.3

FSS International
88.6

 
93.0

Uniform
144.2

 
146.3

 
690.1

 
645.6

Corporate
(99.9
)
 
(90.1
)
Operating Income
590.2

 
555.5

Interest and Other Financing Costs, net
(224.8
)
 
(246.8
)
Income Before Income Taxes
$
365.4

 
$
308.7


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 12. 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 June 30, 2017 and September 30, 2016 was $5,680.8 million and $5,365.6 million, respectively. The carrying value of the Company's debt at June 30, 2017 and September 30, 2016 was $5,514.4 million and $5,270.0 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 have been classified as level 2 in the fair value hierarchy levels.
NOTE 13. 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.
The condensed consolidating financial statements are presented for: (i) Aramark (the "Parent"); (ii) Aramark Services, Inc. and Aramark International Finance S.à r.l. (the "Issuers"); (iii) the guarantors; (iv) the non guarantors; (v) elimination entries necessary to consolidate the Parent with the Issuers, the guarantor and non guarantors; and (vi) the Company on a consolidated basis. Each of the guarantors is wholly-owned, directly or indirectly, by the Company. All other subsidiaries of the Company, either direct or indirect, are non guarantors and do not guarantee the 2024 Notes, the 2026 Notes and the Notes. The guarantors also guarantee certain other debt. See note 5 for additional descriptions of the Notes. 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

CONDENSED CONSOLIDATING BALANCE SHEETS
June 30, 2017
(in thousands)

 
Aramark (Parent)
 
Issuers
 
Guarantors
 
Non
Guarantors
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
5

 
$
26,162

 
$
30,995

 
$
97,512

 
$
—

 
$
154,674

Receivables
—

 
941

 
377,810

 
1,154,128

 
—

 
1,532,879

Inventories
—

 
15,824

 
474,963

 
76,777

 
—

 
567,564

Prepayments and other current assets
—

 
14,079

 
76,477

 
118,769

 
—

 
209,325

Total current assets
5

 
57,006

 
960,245

 
1,447,186

 
—

 
2,464,442

Property and Equipment, net
—

 
30,635

 
748,979

 
201,922

 
—

 
981,536

Goodwill
—

 
173,104

 
4,071,585

 
457,708

 
—

 
4,702,397

Investment in and Advances to Subsidiaries
2,322,762

 
5,803,683

 
462,014

 
915,177

 
(9,503,636
)
 
—

Other Intangible Assets
—

 
29,684

 
969,692

 
122,165

 
—

 
1,121,541

Other Assets
—

 
80,217

 
1,034,314

 
267,926

 
(2,002
)
 
1,380,455

 
$
2,322,767

 
$
6,174,329

 
$
8,246,829

 
$
3,412,084

 
$
(9,505,638
)
 
$
10,650,371

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

 
$
50,988

 
$
15,751

 
$
7,498

 
$
—

 
$
74,237

Accounts payable
—

 
133,216

 
318,097

 
277,728

 
—

 
729,041

Accrued expenses and other current liabilities
—

 
203,851

 
588,006

 
306,679

 
88

 
1,098,624

Total current liabilities
—

 
388,055

 
921,854

 
591,905

 
88

 
1,901,902

Long-term Borrowings
—

 
4,928,734

 
62,351

 
449,058

 
—

 
5,440,143

Deferred Income Taxes and Other Noncurrent Liabilities
—

 
429,342

 
516,552

 
29,821

 
—

 
975,715

Intercompany Payable
—

 
—

 
5,276,339

 
1,018,040

 
(6,294,379
)
 
—

Redeemable Noncontrolling Interest
—

 
—

 
9,844

 
—

 
—

 
9,844

Total Stockholders' Equity
2,322,767

 
428,198

 
1,459,889

 
1,323,260

 
(3,211,347
)
 
2,322,767

 
$
2,322,767

 
$
6,174,329

 
$
8,246,829

 
$
3,412,084

 
$
(9,505,638
)
 
$
10,650,371



20
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2016
(in thousands)

 
Aramark (Parent)
 
Aramark Services, Inc.
 
Guarantors 
 
Non
Guarantors
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
5

 
$
47,850

 
$
31,344

 
$
73,381

 
$
—

 
$
152,580

Receivables
—

 
167

 
265,124

 
1,211,058

 
—

 
1,476,349

Inventories
—

 
15,284

 
492,855

 
79,016

 
—

 
587,155

Prepayments and other current assets
—

 
69,033

 
98,779

 
108,675

 
—

 
276,487

Total current assets
5

 
132,334

 
888,102

 
1,472,130

 
—

 
2,492,571

Property and Equipment, net
—

 
30,201

 
782,347

 
210,535

 
—

 
1,023,083

Goodwill
—

 
173,104

 
3,982,737

 
473,040

 
—

 
4,628,881

Investment in and Advances to Subsidiaries
2,161,101

 
5,450,692

 
598,759

 
230,488

 
(8,441,040
)
 
—

Other Intangible Assets
—

 
29,729

 
894,274

 
187,880

 
—

 
1,111,883

Other Assets
—

 
56,850

 
1,028,887

 
241,919

 
(2,002
)
 
1,325,654

 
$
2,161,106

 
$
5,872,910

 
$
8,175,106

 
$
2,815,992

 
$
(8,443,042
)
 
$
10,582,072

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

 
$
21,998

 
$
15,598

 
$
8,926

 
$
—

 
$
46,522

Accounts payable
—

 
156,471

 
415,481

 
275,636

 
—

 
847,588

Accrued expenses and other current liabilities
100

 
145,314

 
827,213

 
319,447

 
(1,439
)
 
1,290,635

Total current liabilities
100

 
323,783

 
1,258,292

 
604,009

 
(1,439
)
 
2,184,745

Long-term Borrowings
—

 
4,570,931

 
62,892

 
589,691

 
—

 
5,223,514

Deferred Income Taxes and Other Noncurrent Liabilities
—

 
440,839

 
510,254

 
51,920

 
—

 
1,003,013

Intercompany Payable
—

 
—

 
4,619,489

 
1,400,741

 
(6,020,230
)
 
—

Redeemable Noncontrolling Interest
—

 
—

 
9,794

 
—

 
—

 
9,794

Total Stockholders' Equity
2,161,006

 
537,357

 
1,714,385

 
169,631

 
(2,421,373
)
 
2,161,006

 
$
2,161,106

 
$
5,872,910

 
$
8,175,106

 
$
2,815,992

 
$
(8,443,042
)
 
$
10,582,072



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the three months ended June 30, 2017
(in thousands)
 
 
Aramark (Parent)
 
Issuers
 
Guarantors 
 
Non
Guarantors
 
Eliminations
 
Consolidated
Sales
$
—

 
$
274,030

 
$
2,346,917

 
$
972,330

 
$
—

 
$
3,593,277

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of services provided
—

 
247,571

 
2,082,456

 
902,339

 
—

 
3,232,366

Depreciation and amortization
—

 
4,288

 
104,394

 
17,758

 
—

 
126,440

Selling and general corporate expenses
—

 
37,969

 
35,189

 
6,634

 
—

 
79,792

Interest and other financing costs, net
—

 
58,831

 
(847
)
 
3,499

 
—

 
61,483

Expense allocations
—

 
(67,250
)
 
62,913

 
4,337

 
—

 
—

 
—

 
281,409

 
2,284,105

 
934,567

 
—

 
3,500,081

Income (Loss) before Income Tax
—

 
(7,379
)
 
62,812

 
37,763

 
—

 
93,196

Provision (Benefit) for Income Taxes
—

 
(3,087
)
 
17,424

 
13,495

 
—

 
27,832

Equity in Net Income of Subsidiaries
65,295

 
—

 
—

 
—

 
(65,295
)
 
—

Net income (loss)
65,295

 
(4,292
)
 
45,388

 
24,268

 
(65,295
)
 
65,364

Less: Net income attributable to noncontrolling interest
—

 
—

 
69

 
—

 
—

 
69

Net income (loss) attributable to Aramark stockholders
65,295

 
(4,292
)
 
45,319

 
24,268

 
(65,295
)
 
65,295

Other comprehensive income, net of tax
17,574

 
4,034

 
1,495

 
57,622

 
(63,151
)
 
17,574

Comprehensive income (loss) attributable to Aramark stockholders
$
82,869

 
$
(258
)
 
$
46,814

 
$
81,890

 
$
(128,446
)
 
$
82,869


22
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the nine months ended June 30, 2017
(in thousands)

 
Aramark (Parent)
 
Issuers
 
Guarantors
 
Non
Guarantors
 
Eliminations
 
Consolidated
Sales
$
—

 
$
785,435

 
$
7,310,795

 
$
2,854,058

 
$
—

 
$
10,950,288

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of services provided
—

 
713,520

 
6,404,749

 
2,639,623

 
—

 
9,757,892

Depreciation and amortization
—

 
12,851

 
313,350

 
52,057

 
—

 
378,258

Selling and general corporate expenses
—

 
105,283

 
102,978

 
15,723

 
—

 
223,984

Interest and other financing costs, net
—

 
212,651

 
(2,207
)
 
14,347

 
—

 
224,791

Expense allocations
—

 
(210,077
)
 
201,245

 
8,832

 
—

 
—

 
—

 
834,228

 
7,020,115

 
2,730,582

 
—

 
10,584,925

Income (Loss) before Income Tax
—

 
(48,793
)
 
290,680

 
123,476

 
—

 
365,363

Provision (Benefit) for Income Taxes
—

 
(19,186
)
 
82,727

 
40,793

 
—

 
104,334

Equity in Net Income of Subsidiaries
260,785

 
—

 
—