aramark Presentation03.14.06

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1 Managed Services, Managed Better

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Transcript of aramark Presentation03.14.06

Page 1: aramark Presentation03.14.06

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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);

Restauracion Colectiva & Rescot (Spain); Central Restaurantes (Chile); Catering Alliance (UK); Bright China Service Industries, Golden Collar (China)

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History of Solid Performance

$0

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$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