PHILADELPHIA--(BUSINESS WIRE)--Aramark (NYSE: ARMK) today reported fourth quarter and full-year fiscal 2020 results.
“I am incredibly proud of our teams across the globe for their tireless work serving clients and communities in this extraordinary time of need,” said John Zillmer, Aramark’s Chief Executive Officer. “This dedication, combined with our resilient platform, flexible operating model and steadfast commitment to effectively manage cash flow and liquidity, enabled us to deliver quarter-over-quarter business improvement and cash availability of $2.6 billion at quarter-end. While navigating the unusual challenges of the current environment, we remain focused on fully realizing Aramark’s potential for accelerated long-term growth and enhanced efficiency.”
FOURTH QUARTER RESULTS*Consolidated revenue was $2.7 billion in the quarter, down 32% compared to prior year from the impact of COVID-19. Organic Revenue, which adjusts for the effect of currency as well as the 53rd week of operations, declined 36% year-over-year.
Client reopenings as well as Aramark's expanded service offerings contributed to sequential improvement in business performance across all segments compared to the third quarter:
| Q3 '20 Change (%) | Q4 '20 Change (%) | Q3 '20 Organic Revenue Change (%) | Q4 '20 Organic Revenue Change (%) | |
| FSS United States | (56)% | (41)% | (56)% | (45)% |
| FSS International | (46)% | (30)% | (41)% | (31)% |
| Uniform & Career Apparel | (12)% | (2)% | (12)% | (9)% |
| Total Company | (46)% | (32)% | (45)% | (36)% |
- FSS United States drove progress while continuing to manage through business interruption.
| Sector | Q4 Activity |
| Education | Served approximately 90% of Higher Ed client locations in some manner, while experiencing lower retail and catering volumes. Actively participated in universal government-sponsored meal programs in K-12. |
| Sports, Leisure & Corrections | Stadium attendance remained limited as leagues included fans based on local jurisdiction. Leisure reflected increased activity with modified operations. Corrections remained stable. |
| Business & Industry | Companies remained measured in return-to-work practices with reduced operations as decisions were driven largely by need and corporate culture as well as local regulatory restrictions. |
| Healthcare | Signs of strengthened performance as elective procedures increased and visitor restrictions began to ease in the quarter. |
| Facilities & Other | Provided more frequent and comprehensive services as client locations carefully reopened. |
- FSS International navigated government-imposed protocols across regions while continuing to win new business driven by the front-line response to COVID-19. Europe demonstrated improving trends as shutdowns gradually eased in the summer months with the Company managing through the latest government restrictions. Rest of World improvement was led by another quarter of double-digit growth in China that was more than offset by COVID-related impact in Canada and South America.
| *May not foot due to rounding |
- Uniform & Career Apparel experienced improving trends, particularly in the rental business as well as increased client demand for adjacency services, including Personal Protective Equipment (PPE), supported by additional sales resources.
| Revenue | ||||||
| Q4 '20 | Q4 '19 | Change ($) | Change (%) | Organic Revenue Change ($) | Organic Revenue Change (%) | |
| FSS United States | $1,429M | $2,408M | ($979M) | (41)% | ($1,095M) | (45)% |
| FSS International | 629 | 898 | (269) | (30)% | (280) | (31)% |
| Uniform & Career Apparel | 634 | 646 | (11) | (2)% | (56) | (9)% |
| Total Company | $2,692M | $3,951M | ($1,259M) | (32)% | ($1,431M) | (36)% |
- FSS United States reflected initial re-start costs, particularly in Education and Sports, Leisure & Corrections, as client operations reactivated throughout the quarter.
- FSS International was impacted by various stages of government-imposed shutdowns, while benefiting from cost-reduction strategies implemented in the third quarter.
- Uniform & Career Apparel generated income from improved business performance as well as lower merchandise costs and route optimization.
- Corporate included equity-based compensation expense resulting from certain actions taken in the fourth quarter as described in the Company's Current Report on Form 8-K filed on September 8, 2020.
| Operating (Loss) Income | Adjusted Operating (Loss) Income | |||||||
| Q4 '20 | Q4 '19 | Change (%) | Q4 '20 | Q4 '19 | Change ($) | Constant Currency Change ($) | Constant Currency Change (%) | |
| FSS United States | ($53M) | $156M | (134)% | ($6M) | $205M | ($211M) | ($211M) | (103)% |
| FSS International | (58) | 49 | (219)% | (30) | 56 | (86) | (86) | (154)% |
| Uniform & Career Apparel | 50 | 47 | 6% | 57 | 71 | (14) | (15) | (20)% |
| Corporate | (32) | (46) | 30% | (33) | (13) | (20) | (20) | (162%) |
| Total Company | ($94M) | $206M | (146)% | ($12M) | $320M | ($331M) | ($332M) | (104)% |
Operating (Loss) Income results include a 53rd week of operations.
FOURTH QUARTER GAAP SUMMARYFourth quarter fiscal 2020 GAAP results included a 53rd week of operations. GAAP results across all metrics in the quarter were affected by the impact of COVID-19. On a GAAP basis, revenue was $2.7 billion, operating loss was $94 million, net loss attributable to Aramark stockholders was $149 million and diluted loss per share was $0.59. Comparatively, fourth quarter 2019 revenue was $4.0 billion, operating income was $206 million, net income attributable to Aramark stockholders was $86 million and diluted earnings per share were $0.34. A reconciliation of GAAP to Non-GAAP measures is included in the Appendix.
FISCAL 2020 SUMMARYFiscal 2020 GAAP results also reflected a 53rd week of operations with GAAP results across all metrics affected by the impact of COVID-19. On a GAAP basis, revenue was $12.8 billion, operating loss was $265 million, net loss attributable to Aramark stockholders was $462 million and diluted loss per share was $1.83. Comparatively, fiscal 2019 revenue was $16.2 billion, operating income was $891 million, net income attributable to Aramark stockholders was $449 million and diluted earnings per share were $1.78.
Organic Revenue for the year declined 21% compared to fiscal 2019 with underlying growth in the first half of the year more than offset by the impact from COVID-19 throughout the remainder of the year. Adjusted Operating Income of $294 million was similarly affected by COVID-19 that led the Company to implement cost-reduction strategies, including renegotiation of client contracts, adjustment to salaries and other compensation as well as reduction to general corporate expenses.
CAPITAL STRUCTURE AND FREE CASH FLOWAramark maintained its focus on efficiency and cost-reduction initiatives that included management of capital expenditures and working capital. In the quarter, the Company generated Cash provided by operating activities of $252 million and Free Cash Flow of $146 million as effective cash management and seasonal cash inflows more than offset net loss from the impact of COVID-19 on operational performance.
In the fiscal year, Cash provided by operating activities totaled $177 million and Free Cash Flow was a use of $188 million driven by the reduction of earnings related to COVID-19. After the seasonal use of cash in the first fiscal quarter associated with Higher Education, the subsequent three quarters collectively generated positive cash flow.
At year-end, the Company had approximately $2.6 billion in cash and availability on its revolving credit facility. Subsequent to the end of the fourth quarter, Aramark repaid $680 million on its revolving credit facility.
DIVIDEND DECLARATIONThe Company's Board of Directors approved a quarterly dividend of 11 cents per share of common stock. The first quarter fiscal 2021 dividend will be payable on December 8, 2020, to stockholders of record at the close of business December 1, 2020.
BUSINESS UPDATEAramark executed business transformation strategies throughout the year that resulted in ongoing financial flexibility and increased business agility, including:
- Leadership and organizational changes;
- Strengthened client and supplier relationships;
- Renewed entrepreneurial spirit with a growth mindset;
- Investments in accelerated growth;
- Effective management of the flexible business model across a diverse portfolio; and
- Disciplined approach to variable cost structure that provided cash flow resilience.
These timely actions allowed Aramark to adapt quickly in the challenging environment, while preserving the ability to maximize future performance. The Company remains focused on offering safe and hygienic solutions for clients as well as innovation that creates seamless experiences, including cash-less and contact-free payment options. Through the launch of EverSafe™, Aramark is supporting the safe reopening and ongoing management of client locations. The Company also shifted certain production lines to manufacture PPE as well as continued to provide local communities essential meals and health supplies.
2021 OUTLOOKThe Company provides its expectations for organic revenue growth, Adjusted Operating Income and Free Cash Flow on a non-GAAP basis, and does not provide a reconciliation of such forward-looking non-GAAP measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for the impact of the change in fair value related to certain gasoline and diesel agreements, severance and other charges and the effect of currency translation. The fiscal 2021 outlook reflects management's current assumptions regarding the continued impact of COVID-19 on Aramark and its clients. The extent to which COVID-19 continues to impact business, operations, and financial results, including the duration and magnitude of such impact, will depend on numerous evolving factors that are difficult to accurately predict, including those discussed in the Risk Factors set forth in the Company's filings with the U.S. Securities and Exchange Commission.
In fiscal 2021, Aramark will continue to leverage its resilient operating model, while managing the business with a long-term mindset. The Company believes it is well-positioned to navigate the ever-changing environment with current performance expectations as follows:
- Organic revenue improvement over the course of the fiscal year;
- Adjusted Operating Income (AOI) reflecting a drop-through rate of 20%-25% in the first half of the year as a result of disciplined cost management, balanced by ongoing restart costs associated with client reopenings as well as continued investment to support growth opportunities; and
- Free Cash Flow in a range of $100 million use to $200 million generation, dependent on the pace of recovery and timing of underlying growth. The first quarter will include seasonal outflow associated with Higher Education followed by positive cash flow over the balance of the year. Comparatively, Free Cash Flow was a use of $188 million in Fiscal 2020.
As Aramark did through the COVID-19 challenges in fiscal 2020, the Company will continue executing its growth acceleration strategies throughout fiscal 2021, including initiatives expected to drive base business, increase retention rates and win new clients, while gaining ongoing efficiencies from the Company's fit-for-purpose actions.
"I am extremely encouraged by a number of positive trends across our business and expect ongoing improvement as the year progresses, with Aramark playing a key role in the broader recovery," Zillmer added. "The passion and energy inside the organization fuels my confidence in Aramark's ability to create a promising future for our valued employees, partners and shareholders."
About Aramark
Aramark (NYSE: ARMK) proudly serves the world’s leading educational institutions, Fortune 500 companies, world champion sports teams, prominent healthcare providers, iconic destinations and cultural attractions, and numerous municipalities in 19 countries around the world. We deliver innovative experiences and services in food, facilities management and uniforms to millions of people every day. We strive to create a better world by making a positive impact on people and the planet, including commitments to engage our employees; empower healthy consumers; build local communities; source ethically, inclusively and responsibly; operate efficiently and reduce waste. Aramark is recognized as a Best Place to Work by the Human Rights Campaign (LGBTQ+), DiversityInc, Equal Employment Publications and the Disability Equality Index. Learn more at www.aramark.com or connect with us on Facebook and Twitter.
