1 Managed Services, Managed Better
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Managed Services, Managed Better
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Special Note about Forward-Looking Statements
This presentation includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views as to future events and financial performance with respect to our operations. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “aim,” “anticipate,” “are confident,” “estimate,” “expect,” “will be,” “will continue,” “will likely result,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.
Factors that might cause such a difference include: unfavorable economic conditions; ramifications of any future terrorist attacks or increased security alert levels; increased operating costs, including labor-related and energy costs; shortages of qualified personnel or increases in labor costs; costs and possible effects of further unionization of our workforce; currency risks and other risks associated with international markets; risks associated with acquisitions, including acquisition integration issues and costs; our ability to integrate and derive the expected benefits from our recent acquisitions; competition; decline in attendance at client facilities; unpredictability of sales and expenses due to contract terms and terminations; the impact of natural disasters on our sales and operating results; the risk that clients may become insolvent; the contract intensive nature of our business, which may lead to client disputes; high leverage; claims relating to the provision of food services; costs of compliance with governmental regulations and government investigations; liability associated with noncompliance with governmental regulations, including regulations pertaining to food services, the environment, the Federal school lunch program, Federal and state employment and wage and hour laws and import and export controls and customs laws; dram shop compliance and litigation; inability to retain current clients and renew existing client contracts; determination by customers to reduce their outsourcing and use of preferred vendors; seasonality; and other risks that are set forth in the “Risk Factors” sections of ARAMARK’s SEC filings.
For further information regarding risks and uncertainties associated with ARAMARK's business, please refer to the "Management's Discussion and Analysis of Results of Operations and Financial Condition" and "Risk Factors” and other sections of ARAMARK's SEC filings, including, but not limited to, our annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting ARAMARK's investor relations department via its web site www.aramark.com.
Forward-looking statements speak only as of the date made. We undertake no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date as of which they are made. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, us.
Important DisclosureIn this presentation, we mention certain financial measures that are considered non-GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes items different than those prepared or presented in accordance with generally accepted accounting principles. We have prepared disclosures and reconciliations of non-GAAP financial measures that were used in this presentation and may be used periodically by management when discussing the Company's financial results with investors and analysts, which are available on our website www.aramark.com.
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ARAMARK: An Outsourced Services Leader
Leading provider of food, facilities and uniform services to Business, Education, Healthcare, Government and Sports & Entertainment clients
Mid-teens average annual EPS growth since 2001 IPO with strong cash flow
240,000 employees in 19 countries
Broad and deep management ownership that fosters entrepreneurial culture Food & Support 86%
Uniform & Career Apparel 14%
2005 Sales: $11.0 billion
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Cafés, Executive Dining Rooms
Catering
Retail and C-Stores
Conference Center Management
Refreshment Services
Concessions
Event Planning
On-site Restaurants
Lodging
Uniform Rental / Lease
Nationwide Service
National Account Programs
Clean Rooms
WearGuard & Crest Brands
Direct Sale Offerings
Managed & National Account Programs
QSR / Healthcare Leader
Galls Brand
Public Safety
Catalog Business
Services Provided
Uniform ServicesFood & Support Services
Energy Management
Groundskeeping
Laundry & Linen Services
Plant Operations
Central Transportation
Building Commissioning
Clinical Equipment Services
Environmental Services
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Total SalesNet IncomeDiluted Earnings Per ShareCash Flow*DividendCash Returned to ShareholdersAdditional Repurchase Authorization
Up 8% to $11.0BUp 10% to $288MUp 13% to $1.53
Up 18% to $612MUp 27% to $0.28**$215M***
$200M
* From operating activities.** On an annualized basis (2006 vs. 2005).*** Open market share repurchases and cash dividends.
Fiscal Year 2005 Highlights
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Entrepreneurial Culture Through Ownership
Employee ownership reaches deep into the organization
Over 19,000 employee owners – direct and through benefit plans
Critical advantage for a services company
Management & Employees
34%
Public Investors66%
Current Economic Ownership*
*As of 12/31/05.
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Drivers of Outsourcing
Client focus on core business
“Customer” (end-user) satisfaction is critical to client
Improved effectiveness often important to client’s success
Client cost reduction
About 40% of New ARAMARK Business in 2004-2005 Came From Previously Self-Operated Clients
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International 24%
2005 Sales: $9.4 Billion Sector Analysis*
Worldwide Food & Support Services
Significant Diversification Across Business Sectors
Business
* Estimated. Education
Healthcare
Sports & Entertainment
U.S. 76%
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Spain
2005 Sales: $2.3 billion
International Food & Support Services
BelgiumKorea
Other
2005 Sales Including Minority JV’s*:$3.4 billion
Chile U.K.
CanadaGermany
Majority Owned Subs
Japan
* Includes $2.3 billion of international sales as reported plus $1.1 billion of sales from minority-owned JV’s.
** Increased ownership to 90% in February 2005.
Ireland**
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On-site service provider
– Contract with client (Business, College, Hospital)
– Service directly affects “customer” (Employee, Student, Patient, Fan)
– “Embedded” in the client organization – mid 90% retention
Focus to improve outcomes important to client
Cost efficiencies through common practices and purchasing volume
Business Model
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Customer knowledge – Understand preferences through research and operational
experience
Tailor service offerings to increase customer satisfaction– Broad, retail-oriented food service offerings– Improved environment through facilities management
Improve economics to client through:– Increased customer spend and participation– Higher quality / efficiency to support client’s mission– Standardized operation and volume to drive cost efficiencies
How We Add Value
Value is More Than Just Low Cost
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Additional penetration into self-operated clients– Healthcare, Education are underpenetrated
Higher usage at existing clients– Improved service offerings attract more customers
from on-site population
Additional services– Cross-selling food and facilities services
International expansion– Grow from current 19 country base
Growth Opportunities
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Penetration into Self-Op Clients – Healthcare
Self-Op Conversion StrategyEnterprise sales forceThought leadership platformClient intimacy
Differentiation StrategyComprehensive portfolio with best-in-class delivery
Patient centered platform
Enabling environments
Self-op Potential
$24B
Non-Target
OtherShare
ARAMARKShare
UntappedConsumer
Spend
Opportunity: $36B
Source Data: NRA;AHA
Self-OpPotential
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Higher Usage at Existing Clients –Higher Education
Convenience Solutions
Same store sales up 16%
eCommerce and POS Solutions
Check average up 27%
Lifestyle Meal Plan Marketing and Customer Loyalty Programs
Voluntary Plan enrollment up 15%
Earn Points
Product Mix and Marketing Programs:
Driving Higher Margin Base Business Growth through….
Note: Percentages represent year-over-year increases in the account
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2000 2001 2002 2003 2004 2005
Higher Usage at Existing Clients –Sports & Entertainment
Per Capita Spending At Fenway Park
14% CAGR Yawkee Way
Concourse,Rt Field Restaurant
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Clinical Technology
Facilities
Food4%
11%
10%1%
Additional Services – Healthcare
We Provide Food, Facilities and CTS For Only 4% of Our Healthcare Clients
1,000 Healthcare Facilities 2004 - 2005 New Business
New service to existing clientNew multiple
service to new client
New single service to new client
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International Expansion
Achieve Top 3 presence in countries representing80%+ of world’s GDP
Accelerate organic growth –build B&I, diversify into Healthcare, Education and S&E
Make selective acquisitions
Focus on the end consumer
Europe HealthcareOpportunity: $43B
Strategy
Europe Education Opportunity: $22B
Self-OpPotential
Self-OpPotential
Source: Gira
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ARAMARK: Uniform & Career Apparel
Rental: Uniform ServicesDirect Marketing: WearGuard/Crest and Galls
A leading U.S. provider with approximately $1.6 billion in sales in fiscal 2005
WearGuard/Crest
GallsUniform Services
Sourcing, Manufacturing, Distribution
Workwear, Image ApparelMass Personalization / DesignManaged Account ProgramsQuick Service Restaurant LeaderHealthcare
Uniform Rental / Lease/ Direct PurchaseDust ControlClean RoomNationwide Network
Public SafetyEquipment / SuppliesApparelAccessoriesManaged Account Programs
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Broad line of rental and direct sale career apparel covering nearly all job categories
A nationwide network of uniform rental service facilities covering 90% of the top 200 markets
Broad, direct distribution through catalog, outbound telemarketing, sales force and internet
Best-in-class global uniform manufacturing / sourcing to reduce costs and control quality
Business Model
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Important component of employer branding
– Particularly service companies
– Significant customizing capability
Consistent employee image
Increased employee satisfaction
Improved employee protection
How We Add Value
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Penetration of “non-user” population
– 26 million potential “first-time” users
– Currently about 50% of new sales
Ancillary sales to existing customers
– Cross-sell allied, sanitation products
Nationwide clients
– Ability to standardize products, services and cost
Growth Opportunities
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Transforming the Uniform Business
Sales Excellence Margin ExpansionShift to a sales driven organization– 30% increase in headcount– 20% increase in productivity– Focus on hiring, on-
boarding, training, retention– Improved sales tools– Sales as a career path
MerchandisePlant and operationsDelivery and distributionLaborBusiness processes
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Organic sales growth
Margin improvement
Cash flow
Acquisition strategy
Operating & Financial Discipline
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Long-Term Financial Objectives
Top-line organic growth: 6-8%Key Focus: Mission One
Operating income growth: 8-12%Key Focus: product mix, labor management
EPS Growth: 12-14%Key Focus: optimal capital structure
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Product costs– Supply chain driven– Production discipline and
operational efficiency– Product mix and marketing
programs– Uniform sourcing and
manufacturing initiatives
Labor and related costs – Labor management tools– Technology driven initiatives– Medical costs– Workers’ compensation
Costs as % of total
Labor
ProductOther
Drivers of Margin Expansion
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0
100
200
300
400
500
600
700
2001 2002 2003 2004 20050.0
0.5
1.0
1.5
2.0
2.5
3.0
2003 2004 2005
CAPEX DA
Strong Cash Flow Dynamics
Net Capex Trends as a % of Sales
Significant cash sales component– 30%+ of total
Scale drives attractive vendor terms
Cash Flow from Operating Activities*
%
Low inventory requirements– Food approximately 2-3% of sales – Facilities inventory is negligible
Working Capital Dynamics
* From continuing operations.
$ Million
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Acquisition Strategy
Disciplined and Return-FocusedTarget: 15% after-tax IRR EPS accretive in 1-2 years
StrategiesStrengthen existing services and client portfolio– Fine Host, Harrison, CTS
Add or strengthen key services– ServiceMaster
Expand International reach– AIM Services (Japan), Campbell Catering (Ireland),
Central Restaurantes (Chile), Travers (Canada), Restauracion Colectiva & Rescot (Spain), Catering Alliance (UK), Bright China Service Industries (China)
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History of Solid Performance
$0
$2
$4
$6
$8
$10
$12
'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05$0
$50
$100
$150
$200
$250
$300
Sales - billions
Reflects actual amounts originally reported in Form 10K Annual Reports. Not restated for discontinued operations (Educational Resources business sold in FY 2003). Fiscal 2003 includes insurance proceeds of $19.7 million net of tax and income from discontinued operations of $35.7 million. Effective beginning FY 2002 goodwill is no longer amortized. 1985 is a 9 month period. 1986, 1992, 1997, 2003 are 53 week years.
Net Income - millions
Sales
Net Income
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Managed Services, Managed Better
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Fiscal Year EndedOctober 3, 2003 October 1, 2004 September 30, 2005
Reconciliation of net purchases of property and equipment and client contract investments: Purchases of property and equipment and client contract investments (298,606)$ (308,763)$ (315,560)$ Disposals of property and equipment 28,183 20,503 21,581 Net purchases of property and equipment and client contract investments (270,423)$ (288,260)$ (293,979)$
ARAMARK Corporation Consolidated Sales 9,447,815$ 10,192,240$ 10,963,360$
Net purchases of property and equipment and client contract investments as a percentage of sales 2.9% 2.8% 2.7%
(In Thousands)
Net capital expenditures, expressed as a percentage of sales, is a metric utilized by management to review cash flow dynamics, which long term investors may find useful.
ARAMARK CORPORATION AND SUBSIDIARIESRECONCILIATION OF NON-GAAP MEASURESNET CAPITAL EXPENDITURES AS A PERCENTAGE OF SALES(Unaudited)
Reconciliation of Non-GAAP Measures –Net Capital Expenditures as a Percentage of Sales