Aramark · NYSE:ARMK
Aramark — Investor Presentation (September 2004)
36 slides from Aramark's investor presentation, Sep 13, 2004
Slide 1: Managed Services, Managed Better
Exhibit 99.1 Managed Services, Managed Better
Slide 2: Special Note about Forward-Looking Statements
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 statemen
Slide 3: An Outsourced Services Leader
An Outsourced Services Leader Growth driven by worldwide trend to outsource support services Outsourcing crosses all sectors of the economy Business, healthcare, education, government, sports and entertainment On-site relationship-driven service model creates high client retention rates Broad and de
Slide 4: Drivers of Outsourcing
Drivers of Outsourcing Client focus on core business Gain access to world-class capabilities, efficiencies Service innovation, quality and end-user satisfaction Cost effectiveness: Control operating costs 40% of new ARAMARK business in 2001-2003 came from previously self-operated clients
Slide 5: ARAMARK: Our Financial Profile
ARAMARK: Our Financial Profile 2003 Sales ($9.4 billion) Food & Support 84% Uniform & Career Apparel 16% 2003 Segment Operating Income ($592.8 million)1 Food & Support 77% Uniform & Career Apparel 23% 1) Operating Income excludes $30.1 million of corporate expenses and $10.7 million of other expense
Slide 6: Food & Support Services Provided
Food & Support Services Provided Business Services Campus Services Correctional Services Healthcare Support Services Facility Services Refreshment Services School Support Services Sports and Entertainment International
Slide 7: Food Services: A $300 Billion World Wide Opportunity
Food Services: A $300 Billion World Wide Opportunity worldwide food service US food service 120 100 80 60 40 20 0 North America Europe South America Asia Pacific Self Operated Contracted Out 40 35 30 25 20 15 10 5 0 Business Edu. S&E HC Corr. Sources: Company estimates, Morgan Stanley, Credit Suisse
Slide 8: ARAMARK Food & Support Services
ARAMARK Food & Support Services $8 Billion Sales Worldwide U.S. 82% International 18% Sector Analysis* Sports and Entertainment Correctional Healthcare Business Education * Estimated breakdown
Slide 9: ARAMARK: Our International Profile
ARAMARK: Our International Profile 2003 Sales International Segment $1.4 billion Canada U.K. Germany Other Korea Belgium Spain 2003 Sales Including Minority JV’s $2.6 billion Majority Owned Subs Japan Ireland Chile* The Company believes that the inclusion of sales from minority-owned JV’s is useful
Slide 10: Facility Services: Another $300 Billion World Wide Opportunity
Facility Services: Another $300 Billion World Wide Opportunity worldwide facilities services 240 200 160 120 80 40 0 Europe & ROW United States Self Operated Contracted Out US facilities services 50 40 30 20 10 0 Business Education Healthcare Sources: Company estimates, Morgan Stanley, Credit Suisse
Slide 11: ARAMARK Facility Services Client and Revenue Breakdown
ARAMARK Facility Services Client and Revenue Breakdown Education 25% Business 30% Business Healthcare Education Healthcare 45% Fiscal 2003 estimated sector breakdown
Slide 12: ARAMARK Uniform & Career Apparel
ARAMARK Uniform & Career Apparel A leading U.S. provider with approximately $1.5 billion in sales in fiscal 2003 Rental: A nationwide service network covering 180 of the top 200 markets Direct Marketing: Direct sales of a broad career apparel line through catalog, outbound telemarketing and internet
Slide 13: Uniforms: A $20 Billion U.S. Opportunity
Uniforms: A $20 Billion U.S. Opportunity # Employees (millions) Non-Addressable Market 84 56 Addressable Market Employees Potential Who Purchase Uniform Wearers Employees Who Rent Sources: Company estimates, Bureau of Labor Statistics (1999)
Slide 14: ARAMARK Key Strategies & Objectives
ARAMARK Key Strategies & Objectives Entrepreneurial approach to solving customer challenges through broad management ownership Specific programs to drive organic growth Emphasis on profit margin, cash flow and ROIC Disciplined and “return-oriented” acquisition strategy
Slide 15: Entrepreneurial Culture Through Ownership
Entrepreneurial Culture Through Ownership Ownership well distributed post-IPO on 12/11/01 Employee ownership reaches deep into the organization Over 4,000 direct and 13,000 indirect employee owners Public float consists roughly of institutional (90%) and retail (10%) owners Current Economic Ownershi
Slide 16: How We Achieve Our Goals: Mission One
How We Achieve Our Goals: Mission One Through Mission One, ARAMARK is striving to be number one in profitable organic growth by providing a full portfolio of unmatched services to our clients
Slide 17: Maximizing Retention Results
Maximizing Retention Results Disciplined client and end-user satisfaction measurement systems Management compensation aligned to reward retention success On-site service model builds client loyalty 95 94 93 92 91 90 95% 93% 95% 93% 92% 92% Total Food & Uniform Support Services Services FY 03 FY 02
Slide 18: Increasing "Client Market Share"
Increasing “Client Market Share” How do we drive it higher? Focus on quality and innovation Marketing and promotion of products Food Service “Build-out” Food Courts Catering On-Site Convenience Stores Vending Coffee Kiosks Branded concepts “Share of Stomach” Among Existing Clients 20% 55% Higher Edu
Slide 19: Growth Through Branded Concepts
Growth Through Branded Concepts ARAMARK Proprietary Brands External Brands
Slide 20: Mission One: Cross-Selling Successes
Mission One: Cross-Selling Successes Approx. $100 million in multi-service business sold in 2003
Slide 21: Building the One Best Team
Building the One Best Team Fueling the talent pipeline Leadership development Five specific leadership development programs for 5,000 management employees Workforce diversity Reinforcing the culture of highly ethical standards and customer service
Slide 22: Operating & Financial Discipline
Operating & Financial Discipline Organic growth - Driven by Mission One Margin Improvement Cash Flow Return on Invested Capital Acquisitions
Slide 23: Accelerating Organic Growth
Accelerating Organic Growth Meaningful progress from Mission One efforts 9 month 2004 organic growth = 6% Good progress toward our stated 6 – 8% objective
Slide 24: Drivers of Margin Expansion
Drivers of Margin Expansion Product Costs (35-40%) Product mix Purchasing efficiencies Self manufacturing of uniforms Labor Cost (40-45%) Labor management tools Unit specific labor management metrics Push labor up the supply chain Overhead (10-20%) Growth differential
Slide 25: Cash Flow Matches Net Income
Cash Flow Matches Net Income* Low capital intensity Focused on adding value through optimal capital structure of debt and equity Strong cash flow generation supports debt service with a Y/E ‘03 debt to EBITDA ratio of 2.2x and EBITDA to interest ratio of 5.6x Objective to retain investment grade rat
Slide 26: 2003 Internal Cash Flow
2003 Internal Cash Flow* $600 $500 $400 $300 $200 $100 $0 $265 $30 $13 $271 $263 D&A Deferred Taxes Other** Net CapEX $274 Income from Cont Ops Internal CF * Defined as Income from continuing operations, plus non-cash charges such as depreciation and amortization and deferred taxes, less net capital
Slide 27: After-Tax Return on Invested Capital
After-Tax Return on Invested Capital * 14.2% - 17.0% 20% 16% 12% 8% 4% 0% After-Tax ROIC 2000 2001 2002 2003 * Fiscal 2002 includes a gain of $37.9 million related to the sale of ARAMARK’s ownership interests in the Boston Red Sox and a related entity, and a gain of $5.8 million resulting principall
Slide 28: Acquisition Strategy
Acquisition Strategy Disciplined and return-focused Target: 15% after-tax IRR, EPS accretive in 1-2 years Strategies Strengthen existing services and client portfolio Fine Host, Harrison and CTS Add or strengthen key services ServiceMaster Expand international reach AIM Services (Japan), Campbell Ca
Slide 29: History of Solid Performance: Sales Trends
History of Solid Performance Sales Trends Billions Sales $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 ‘85 ‘86 ‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 Reflects actual amounts originally reported in Form 10K Annual Reports filed with the SEC. Not restated for discontinued operations (Edu
Slide 30: History of Solid Performance: Net Income Trends
History of Solid Performance Millions Net Income Trends Net Income $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $0.0 ‘85 ‘86 ‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 Reflects actual amounts originally reported in Form 10K Annual Reports filed with the SEC. Not restated for dis
Slide 31: Long-Term Financial Objectives
Long-Term Financial Objectives Top-line organic growth: Key Focus: Mission One Operating income growth: Key Focus: Product mix, labor management EPS growth: Key Focus: Cash Flow 6-8% 8-12% 12-14%
Slide 32: Challenges and Positives
Challenges and Positives Key Challenges Contract start-up costs and other costs in Healthcare business Uncertainty around recent investigation of Galls Parks business Positives Strong organic growth New business wins Solid cash flow model
Slide 33: ARAMARK Key Strengths
ARAMARK Key Strengths Robust outsourcing trends Best-in-class service provider Diversified client and revenue portfolio History of financial integrity and performance Barriers to entry Strong, incentivized management team focused on profitable growth
Slide 34: Reconciliation of Non-GAAP Measures: Organic Growth
Managed Services, Managed Better ARAMARK CORPORATION AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES ORGANIC GROWTH (Unaudited) (In thousands) Management believes that presentation of organic sales growth in the fiscal 2004 and 2003 third quarter and nine-month periods, as adjusted to eliminate
Slide 35: Reconciliation of Non-GAAP Measures: EBITDA
ARAMARK Corporation And Subsidiaries – Reconciliation of Non-GAAP Measures EBITDA (Unaudited, in Thousands) Fiscal Year Ended October 3, 2003 September 27, 2002 Net income $301,092 $269,912 Less: Income from discontinued operations, net (35,724) (18,592) Add: Interest and other financing costs, net
Slide 36: Reconciliation of Non-GAAP Measures: Internal Cash Flow
ARAMARK Corporation And Subsidiaries – Reconciliation of Non-GAAP Measures Cash Flow Before Working Capital And After Capital Expenditures (Internal Cash Flow) (Unaudited, in Thousands) Fiscal Year Ended October 3, 2003 September 27, 2002 September 28, 2001 September 29, 2000 Cash flow before workin