aramark InvestorDay2005

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aramark InvestorDay2005

  1. 1. ARAMARK Investor Day May 18, 2005
  2. 2. Agenda 1:05 Creating Value Joe Neubauer 1:20 Financial Overview Fred Sutherland 1:40 Marketing Strategy Chris Malone 1:55 Break 2:10 Business, Jack Donovan Sports & Entertainment 2:35 Education Andrew Kerin and Healthcare 3:00 Q&A 3:20 Break 3:35 International Ravi Saligram 4:00 Uniform and Career Apparel Thomas Vozzo 4:25 Q&A 4:45 Wrap Up Joe Neubauer 2 5:00 General Session Ends Financial Objectives Creating Value Marketing Strategy
  3. 3. 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 quot;aim,quot; quot;anticipate,quot; quot;estimate,quot; quot;expect,quot; quot;will be,quot; quot;will continue,quot; quot;will likely result,quot; quot;project,quot; quot;intend,quot; quot;plan,quot; quot;believequot; 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 union organizing activities; currency risks and other risks associated with international markets; risks associated with acquisitions, including acquisition integration 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 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, Federal and state employment laws and wage and hour laws and import and export controls and customs laws; dram shop 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 quot;Management's Discussion and Analysis of Results of Operations and Financial Conditionquot; and quot;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 Disclosure In this presentation, we mention certain financial measures that are considered non-GAAP. Generally, a non-GAAP financial measure is a 3 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 Financial Objectives Creating Value Marketing Strategy results with investors and analysts, which are available on our website www.aramark.com.
  4. 4. Joe Neubauer Chairman and CEO ARAMARK
  5. 5. The ARAMARK Opportunity Tap into large, available, growing businesses Deliver sustained, profitable growth Well positioned to capture opportunities 5 Financial Objectives Creating Value Marketing Strategy
  6. 6. Performance Since IPO* Sales growth: 11% CAGR EPS growth: 15% CAGR EBITDA of $2.8 billion > $2.4 billion reinvested into businesses – $1.4 billion in acquisitions – $1.0 billion in capex > $615 million returned to shareholders * Sales, EPS growth through fiscal 2004; all other fiscal 2002 through March 2005; 6 Financial Objectives Creating Value Marketing Strategy
  7. 7. Other Accomplishments Acquired > 25 companies Increased international presence Fortune rankings – #1 industry survey rank – Top three “Most Admired” Companies for outsourcing 7 Financial Objectives Creating Value Marketing Strategy
  8. 8. Management Committee Jack Donovan President Business, Sports & Entertainment Andrew Kerin President Healthcare and Education Ravi Saligram President International Thomas Vozzo President Uniform and Career Apparel Fred Sutherland Chief Financial Officer Bart Colli General Counsel Tim Cost Corporate Affairs Lynn McKee Human Resources 8 Financial Objectives Creating Value Marketing Strategy
  9. 9. Our Focus The Consumer Core portfolio of services to respond to trends Strategic partners 9 Financial Objectives Creating Value Marketing Strategy
  10. 10. Breadth of ARAMARK Clients 300 of top 350 colleges 400 of S&P 500 60 of America’s 100 best hospitals Most of the Fortune 50 10 Financial Objectives Creating Value Marketing Strategy
  11. 11. Creating Value
  12. 12. Mission One Helps Us Achieve Our Goals Through Mission One, ARAMARK is Striving to be #1 in Profitable Organic Growth by Providing a Full Portfolio of Unmatched Services to Our Clients 12 Financial Objectives Creating Value Marketing Strategy
  13. 13. Creating Value
  14. 14. Opportunities for Growth 80% of 1,200 U.S. state correctional facilities 90% of Germany’s healthcare facilities 75% of England’s education facilities …Are Still Self-Op 14 Financial Objectives Creating Value Marketing Strategy
  15. 15. Joe Neubauer Chairman and CEO ARAMARK
  16. 16. Reconciliation of Non-GAAP Measures - EBITDA ARAMARK CORPORATION AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES - EBITDA (Unaudited) (In Thousands) EBITDA represents operating income (defined as net income before income from discontinued operations, interest and taxes) before depreciation and amortization, a measureme management to measure operating performance. EBITDA is not a recognized term under generally accepted accounting principles and does not purport to be an alternative to op as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies calculate EBITDA identically, this present EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA is not intended to be a measure of free cash flow for management's use, as it does not consider certain cash requirements such as interest payments, tax payments, debt service requirements or capital expenditure requirements. Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended Six Months Ended September 27, 2002 October 3, 2003 October 1, 2004 April 1, 2005 Net income $ 269,912 $ 301,092 $ 263,104 $ 125,540 Less: Income from discontinued operations, net (18,592) (35,724) - - Add: Interest and other financing costs, net 136,432 142,469 122,362 64,635 Add: Provision for income taxes 141,829 144,185 152,112 69,671 Operating income, as reported 529,581 552,022 537,578 259,846 Add: Depreciation and amortization 229,608 262,944 297,993 156,552 EBITDA $ 759,189 $ 814,966 $ 835,571 $ 416,398 16 Financial Objectives Creating Value Marketing Strategy
  17. 17. Fred Sutherland ARAMARK Executive Vice President and Chief Financial Officer
  18. 18. FY 2005 First Half Results Sales up 8% to $5.4 billion – Consolidated adjusted sales growth: 5% - 6% – US Food and Support adjusted growth about 7% – Uniform Rental organic growth: 5% Solid consolidated operating margin performance despite NHL impact – US Food & Support margins up EPS up 12% to $0.66 Repurchased 3.2 million shares for $85 million 18 Financial Objectives Creating Value Marketing Strategy
  19. 19. Long-Term Financial Objectives Organic Revenue Growth targets: 6-8% New Sales 8-12% Lost Business (4)-(6)% Base Growth 3-5% Operating Income Growth targets: 8-12% 10-20 bp margin improvement per year EPS Growth targets: 12-14% Free cash flow deployment 19 Financial Objectives Creating Value Marketing Strategy
  20. 20. Recent Performance vs. Objectives Financial 2005 First Half Achievement Metric Results vs. Objective Revenue Growth (Adj.) 5.5% - New sales - Lost business - Base business Consolidated Margins ↓ 10 bp - US Food and Support ↑ 20 bp - Uniform Rental Flat EPS growth 12% 20 Financial Objectives Creating Value Marketing Strategy
  21. 21. Growth Opportunities Exist in All Sectors Outsourcing penetration rates vary – Many sectors are significantly self-operated Base business growth opportunities exist across all sectors – Significant portion of spend not captured – Opportunity for add-on services 21 Financial Objectives Creating Value Marketing Strategy
  22. 22. Operating Margin Initiatives and Opportunities Product costs – Supply chain driven – Production discipline and operational efficiency – Product mix and marketing programs Costs as % of total – Uniform sourcing and manufacturing initiatives Other Product Labor costs Labor Related Labor – Labor management tools – Technology driven initiatives Labor-related costs – Medical Costs – Workers’ Compensation 22 Financial Objectives Creating Value Marketing Strategy
  23. 23. Production Discipline and Efficiency – Business Services Case Study Initiative to enhance and standardize production processes and reduce food cost Targeted areas include: – SKU rationalization – Menu standardization – Food production discipline Early results at focus locations are positive: Food costs as % of sales Q2 2004 Q2 2005 44.0% 42.2% 23 Financial Objectives Creating Value Marketing Strategy
  24. 24. Product Mix and Marketing Programs –Higher Education Case Study Campus Account Example Driving Higher Margin Base Business Growth through…. Convenience Solutions Earn Points – 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% Note: Percentages represent year-over-year increases in the account 24 Financial Objectives Creating Value Marketing Strategy
  25. 25. Uniform Sourcing and Labor Cost Initiatives Merchandise improvements: – Driving towards 75% self-manufacturing – Savings of 20 – 30% versus outside purchase Route operations: − Route Optimization – pilot shows 2 hours weekly route savings − Handhelds – installed in all routes to drive increased accuracy, reduce redundancy and improve route efficiency; should generate 2+ hours in weekly route savings Plant improvements: – Wash floor and sort system automation – Labor reduction of 5 – 10 EE’s per plant from sortation system 25 Financial Objectives Creating Value Marketing Strategy
  26. 26. Labor Management Tools – Higher Education Case Study ASSESS MANAGE PLAN SCHEDULE STAFF Campus Account Example Web based training tools and scheduling software deployed Discipline, utilization of tools and base business growth yield results - Base Business Growth ↑ 10% y-o-y - Labor as % of sales ↓ 140 bp y-o-y 26 Financial Objectives Creating Value Marketing Strategy
  27. 27. Technology Initiatives - Help Drive Labor Efficiencies Customer Connect Overview RefreshTECH Overview Technology driven business process Technology driven solution applied to transformation project for Uniform Group Refreshment Services business Hand-held terminals and new back-office systems Service Reps maximize efficiencies by utilizing drive significant cost-reduction and efficiencies hand-held terminals Specific benefits include End-to-end integrated system improves route efficiency, warehouse management, as well as – Standard pricing customer service – A/R and A/P centralization Specific benefits include – Credit card processing – Elimination of route paperwork and labor – Product preference history to anticipate client needs – Improved accuracy – Optimal management of stock – Electronic capturing of signatures – Electronic capturing of signatures – Better management of price changes 27 Financial Objectives Creating Value Marketing Strategy
  28. 28. Medical Cost and Workers’ Compensation Initiatives Medical Costs Workers’ Compensation Key changes implemented Enrollment changes – Enhanced utilization of - Safety/Loss Control health provider networks • Centralized and expanded – Expanded mail-order - Claims Management pharmacy participation • Centralized and expanded Care/Disease Management - Reporting/Financial Program • Unit level accountability – Targets specific, high cost First half 2005 results chronic illnesses - Overall cost reduced 9% 2005 growth reduced to - Loss per $1K payroll down 11% single digits 28 Financial Objectives Creating Value Marketing Strategy
  29. 29. Strong Cash Flow Dynamics Working Capital Dynamics Significant cash sales component Low inventory requirements – 30%+ of total – Food approximately 2-3% of sales Scale drives attractive vendor terms – Facilities inventory is negligible Net Capex Trends% of Sales Internal Cash Flow ($ millions) $400 % 3.50 $350 3.25 $300 3.00 Income from 2.75 $250 continuing 2.50 OPS 2.25 $200 CAPEX 2.00 Internal $150 DA 1.75 Cash Flow 1.50 $100 1.25 1.00 $50 0.75 $0 0.50 29 2003 2004 FH 2004 FH 2005 2000 2001 2002 2003 2004 Financial Objectives Creating Value Marketing Strategy
  30. 30. Cash Flow Deployment Target Metrics Cash Deployment Priorities Capex approximates D&A Invest / Reinvest in Business Debt/EBITDA range = 2:1 – 3:1 Commitment to Investment Grade Rating 15% after-tax IRR Disciplined acquisition strategy $615 million returned since IPO Return cash to shareholders – Dividend – Repurchases Compounded EPS growth in mid-teens since 2001 IPO 30 Financial Objectives Creating Value Marketing Strategy
  31. 31. Reconciliation of Non-GAAP Measures - Adjusted Sales Growth ARAMARK CORPORATION AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES ADJUSTED SALES GROWTH (Unaudited) (In thousands) Management believes that presentation of sales growth in the year-to-date periods adjusted to eliminate the effects of acquisitions, divestitures, the impact of currency translation (organic growth) and, for fiscal 2005, the effect of the National Hockey League strike and the estimated effect of the Easter holiday timing on the Education Sector sales, provides useful information to investors because it enhances comparability between the current year and prior year reporting periods. Elimination of the currency translation effect provides constant currency comparisons without the distortion of currency rate fluctuations. Six Months Ended % April 1, 2005 April 2, 2004 Change ARAMARK Corporation Consolidated Sales (as reported) $ 5,389,375 $ 4,976,386 8% Effect of Currency Translation - 59,837 Effect of Acquisitions and Divestitures (180,537) (28,271) 5,208,838 5,007,952 4% NHL Strike - (62,016) Estimated Effect of Timing of Easter Holidays on Education Sector 7,048 - ARAMARK Corporation Consolidated Sales (as adjusted) $ 5,215,886 $ 4,945,936 5.5% Food and Support Services - U.S. Sales (as reported) $ 3,482,236 $ 3,333,586 4% Effect of Acquisitions and Divestitures (3,706) (1,631) 3,478,530 3,331,955 NHL Strike - (62,016) Estimated Effect of Timing of Easter Holidays on Education Sector 7,048 - Food and Support Services - U.S. Sales (as adjusted) $ 3,485,578 $ 3,269,939 7% 31 Financial Objectives Creating Value Marketing Strategy
  32. 32. Reconciliation of Non-GAAP Measures – Adjusted Operating Income Margin ARAMARK CORPORATION AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES ADJUSTED OPERATING INCOME MARGIN - FOOD AND SUPPORT SERVICES U.S. (Unaudited) (In thousands) In the second quarter of fiscal 2005, ARAMARK recorded a $9.7 million gain related to a real estate sale by an equity affiliate. The table below is presented to illustrate the effect of this gain on operating income margin, which we define as operating income expressed as a percentage of sales. Six Months Ended April 1, 2005 April 2, 2004 Change Food and Support Services - U.S. Sales (as reported) $ 3,482,236 $ 3,333,586 Food and Support Services - U.S. Operating Income (as reported) $ 172,282 $ 150,432 Food and Support Services - U.S. Operating Income Margin (as reported) 4.9% 4.5% Food and Support Services - U.S. Sales (as reported) $ 3,482,236 $ 3,333,586 Food and Support Services - U.S. Operating Income (as reported) $ 172,282 $ 150,432 Less: Gain on Sale (9,737) - Food and Support Services - U.S. Operating Income (as adjusted) $ 162,545 $ 150,432 32 Food and Support Services - U.S. Operating Income Margin (as adjusted) 4.7% 4.5% 0.2% Financial Objectives Creating Value Marketing Strategy
  33. 33. 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) Cash flow before working capital and after capital expenditures, as defined by ARAMARK, is an internal operating metric used by management to evaluate cash flows from normal operations of our business, excluding the impact of working capital changes and unusual gains. This metric eliminates the volatility of working capital changes which long term investors may find useful. Fiscal Year Ended September 29, 2000 September 28, 2001 September 27, 2002 October 3, 2003 October 1, 2004 Cash flow before working capital and after capital expenditures: Income from continuing operations $ 148,583 $ 162,739 $ 251,320 $ 265,368 $ 263,104 Depreciation and amortization 197,746 214,561 229,608 262,944 297,993 Income taxes deferred 3,073 10,182 17,740 29,675 32,749 Other income and insurance proceeds, net of taxes - - (30,803) (13,100) - Net purchases of property and equipment and client contract investments (188,062) (192,062) (203,735) (270,423) (288,260) Cash flow before working capital and after capital expenditures $ 161,340 $ 195,420 $ 264,130 $ 274,464 $ 305,586 Reconciliation of cash flow before working capital and after capital expenditures to net cash provided by operating activities from continuing operations: $ 161,340 $ 195,420 $ 264,130 $ 274,464 $ 305,586 Net purchases of property and equipment and client contract investments 188,062 192,062 203,735 270,423 288,260 Other income and insurance proceeds, net of taxes - - 30,803 13,100 - (Gain) loss on investments - - (45,320) 10,700 - Changes in noncash working capital 17,477 (65,127) 103,026 59,766 (43,068) Net proceeds from sale of receivables - 140,885 39,105 - - Other operating activities (20,484) (21,417) (17,475) (22,192) (33,212) Net cash provided by operating activities from continuing operations $ 346,395 $ 441,823 $ 578,004 $ 606,261 $ 517,566 Net cash used in investing activities from continuing operations $ (432,553) $ (247,837) $ (1,031,393) $ (269,215) $ (439,440) Net cash provided by (used in) financing activities from continuing operations $ 73,794 $ (217,071) $ 435,976 $ (338,865) $ (77,282) Reconciliation of net purchases of property and equipment: Purchases of property and equipment and client contract investments $ (203,047) $ (204,529) $ (219,767) $ (298,606) $ (308,763) Disposals of property and equipment 14,985 12,467 16,032 28,183 20,503 33 $ - $ (188,062) # $ (192,062) #$ (203,735) # $ (270,423) # $ (288,260) Financial Objectives Creating Value Marketing Strategy
  34. 34. Reconciliation of Non-GAAP Measures – Net Capital Expenditures as a Percentage of Sales ARAMARK CORPORATION AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES NET CAPITAL EXPENDITURES AS A PERCENTAGE OF SALES (Unaudited) (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. Fiscal Year Ended Six Months Ended October 3, 2003 October 1, 2004 April 2, 2004 April 1, 2005 Reconciliation of net purchases of property and equipment: Purchases of property and equipment and client contract investments $ (298,606) $ (308,763) $ (138,023) $ (150,358) Disposals of property and equipment 28,183 20,503 8,160 7,705 Net purchases of property and equipment and client contract investments $ (270,423) $ (288,260) $ (129,863) $ (142,653) ARAMARK Corporation Consolidated Sales $ 9,447,815 $ 10,192,240 $ 4,976,386 $ 5,389,375 Net purchases of property and equipment and client contract investments as a percentage of sales 2.9% 2.8% 2.6% 2.6% 34 Financial Objectives Creating Value Marketing Strategy
  35. 35. Chris Malone Senior Vice President MARKETING
  36. 36. Customer Focused Growth Strategy Competitive Differentiation Customer Insight Customer & Client Thought Satisfaction Increased Leadership Base Business Growth + Retention + New Business = Organic Growth Operational Product & Service Excellence Innovation Client Alignment 36 Financial Objectives Creating Value Marketing Strategy
  37. 37. Insight & Thought Leadership Foundational Customer Insights Campus Master Planning Studies That Drive New Dining Programs at 19 Major Universities 200,000 Customers Interviewed 2,500 Clients Interviewed at 1,200 Dining Locations at 800 Accounts 37 Financial Objectives Creating Value Marketing Strategy
  38. 38. Lunch Share of Stomach Less than 50% share across most sectors Bring From Home reflects unmet needs Offsite competition greatest in Campus and Business % of Meals per Week Offsite Home Skip Onsite High School Dining 53% 19% 11% 17% Campus Dining 35% * 25% 38% 2% Business Dining 29% 21% 5% 45% Hospital Dining 13% 11% 37% 39% Total 6% 20% 31% 43% 38 * Includes meals eaten from and at home/room Financial Objectives Creating Value Marketing Strategy
  39. 39. Lunch Participation & Frequency Daily Lunch Participation High School Dining 64% Campus Dining 64% Business Dining 49% Hospital Dining 48% Total 54% 39 Financial Objectives Creating Value Marketing Strategy
  40. 40. Lunch Participation & Frequency Low FREQUENCY drives daily participation levels Weekly onsite lunch participation is universally high Innovation needed to capture additional purchase occasions Weekly Lunch Participation High School Dining 87% 50% 12% 25% Campus Dining 40% * 80% 13% 27% Business Dining 85% 22% 34% 29% Hospital Dining 79% 25% * 20% 34% Total 18% 31% 83% 33% 1 Meal/ 2-3 Meals/Week 4+ Meals/Week Week 40 * Includes weekend meals Financial Objectives Creating Value Marketing Strategy
  41. 41. Convenience & Grocery Retailing Tapping At/From Home & On-the-Go Meals # of Stores Growth Rate Convenience Over 200 Over 25% Retailing Profile Convenience Stores, Grocery Stores & Retail Walls in Campus and Business locations 41 Financial Objectives Creating Value Marketing Strategy
  42. 42. Specialty Coffee Retailing Capturing morning & break time meals # of Sites Growth Rate Specialty Coffee Over 600 Over 10% Retailing Profile Business, Campus, Healthcare and Sports & Entertainment locations 42 Financial Objectives Creating Value Marketing Strategy
  43. 43. Retail Dining Experiences Building onsite meal purchase frequency # of Schools Growth Rate U.B.U. Lounge Over 100 Over 10% & 12 Spot Brands Profile High Schools & Middle Schools 43 Financial Objectives Creating Value Marketing Strategy
  44. 44. Industry Innovation Awards 2005 FM Best 2005 MenuMasters 2005 Team 2005 ADA Clinical Convenience Best Onsite Menu Casual Line Nutrition Excellence Retailing Concept 2004 RCA Best 2005 NAUMD 2005 FM Best Customer 2005 NACUFS New Product Image of the Year Service Concept Best Big Idea 44 Financial Objectives Creating Value Marketing Strategy
  45. 45. Accelerating Innovation & Growth ARAMARK Innovation Center – Retail concept development – 120 full-time professionals – Opens June 2005 45 Financial Objectives Creating Value Marketing Strategy
  46. 46. Customer Focused Growth Strategy Competitive Differentiation Customer Insight Customer & Client Increased Thought Satisfaction Leadership Base Business Growth + Retention + New Business = Organic Growth Operational Product & Service Excellence Innovation Client Alignment 46 Financial Objectives Creating Value Marketing Strategy
  47. 47. Jack Donovan President ARAMARK BUSINESS, SPORTS AND ENTERTAINMENT
  48. 48. Sectors Served Business & Industry Corrections Stadiums & Arenas Convention Centers & Parks 48 Business, Sports Education International Uniforms and Entertainment and Healthcare
  49. 49. Business & Industry Business Dining Refreshments Conference Centers
  50. 50. Opportunity B&I revenue opportunity over $30 billion – Solutions for any size B&I client • Refreshments applications for sites with 20 or more people • Business dining for sites with over 500 employees • Emerging integrated facility management model for office locations – Food, plant operation & maintenance, housekeeping, mailroom services, meeting planning, and conference center management 50 Business, Sports Education International Uniforms and Entertainment and Healthcare
  51. 51. Business and Industry Scan Trend ARAMARK Implication Base business growth from higher participation and Stable employment levels check averages. Entice employees to remain on-site. Dining, refreshment Employers desire to services, catering, convenience retailing build employee drive productivity satisfaction. Utilize capability to respond to national procurement Client organizations are processes. Manage cost to reduce/eliminate client working to reduce costs subsidy. Provide fresh, continually updated dining concepts. Use Customers demand a blend of national, local and ARAMARK brands. “retail” experience Emphasis on appealing to the health conscious. Use single cup brewing systems to deliver high quality Availability of customer branded refreshments. Use hand held technology. facing technology 51 Business, Sports Education International Uniforms and Entertainment and Healthcare
  52. 52. “It’s a New Day” Fast Facts Fast Facts Employees spend an average Every employee who buys 37% less time away from one more meal onsite a week work when they buy their adds 11.8 more hours main meal at the onsite worked annually. dining service. When we ask clients what’s important, they consistently respond: • Productivity • Lower healthcare costs • Morale • Employee satisfaction According to a survey published by Chief Executive magazine, CEOs see people issues as the most important rising factor in creating shareholder value. 52 Business, Sports Education International Uniforms and Entertainment and Healthcare
  53. 53. Customer-Centric Programming National Research Account Focus Groups Strategy Daypart/Neighborhood Planning Works Best If Solution Set Growth Plan Tactics Brand Strategy Improve Improve Enhance Improve Increase Focus on Speed of Value/ Retail Healthy Check Non-User Service PerceptionExperience Perception Average Comm. 53 Business, Sports Education International Uniforms and Entertainment and Healthcare
  54. 54. Business Customer Segments LIGHT/NON USERS HEAVY USERS 0 – 1X per week 4 – 5X per week Get Away Brown Baggers = 24% Convenience Café Lovers = 15% *Healthy Desk Brown Baggers = 18% Time Pressed Refuelers = 11% 26% 42% 32% MEDIUM USERS 2 -3X per week *Greatest opportunities to deliver new solutions Relaxed Offsite Eaters = 10% *Healthy Offsite Eaters = 22% 54 Business, Sports Education International Uniforms and Entertainment and Healthcare
  55. 55. How Do We Create a Customer Centric Experience? Everyday Favorites Including: And…Guest Restaurants! 55 Business, Sports Education International Uniforms and Entertainment and Healthcare
  56. 56. Personal – Memorable – Ever Changing Training Merchandising Standards of Brand Communication Operation Positioning Image & Targeted Menu Environment Mix 56 Business, Sports Education International Uniforms and Entertainment and Healthcare
  57. 57. Refreshment Services Environment Solutions Equipment Complete Breaktime Experience Brands Service Technology 57 Business, Sports Education International Uniforms and Entertainment and Healthcare
  58. 58. Refreshment Services – National Account Management Most experienced national refreshments company Provide combined office coffee and vending Client Benefits with ARAMARK: Dedicated ARAMARK National Account Manager Most comprehensive refreshments product line Centralized billing and reporting RefreshTECH World class service culture 58 Business, Sports Education International Uniforms and Entertainment and Healthcare
  59. 59. Corrections
  60. 60. Opportunity 1,200 state facilities – $1.5 billion food, $900 million commissary – 80% unconverted 3,100 county facilities – $1 billion food, $600 million commissary – Commissary and property room management serve as base business build-outs 60 Business, Sports Education International Uniforms and Entertainment and Healthcare
  61. 61. Corrections Scan Trend ARAMARK Implication Focus on state system conversion. State systems strive to control ”OpEx” model insures compliance. costs & improve service levels Assist self-op counties in taking a “second look” at contracting. Offer efficient operation County budgets continue to tighten of commissary and property rooms. New product and service offerings to spur Inmate populations continue base business growth. Build commissary to grow modestly check average through marketing programs. 61 Business, Sports Education International Uniforms and Entertainment and Healthcare
  62. 62. Growth Strategy – Corrections Continued focus on state systems Conversion of remaining county programs Commissary focus Property room add-ons to existing food/commissary accounts 62 Business, Sports Education International Uniforms and Entertainment and Healthcare
  63. 63. Sports & Entertainment Stadiums & Arenas Cultural Attractions, Convention Centers & Parks
  64. 64. Opportunity – Sports Exceeds $8 billion food & retail – Major league professional sports venues • Baseball, Football, Basketball, Hockey – Top tier minor league venues • Baseball – Emerging professional sports leagues • Indoor lacrosse • Indoor soccer • Arena League Football – Amphitheatres over 5,000 seats 64 Business, Sports Education International Uniforms and Entertainment and Healthcare
  65. 65. Pro Partnership Roster – Stadiums & Arenas 65 Business, Sports Education International Uniforms and Entertainment and Healthcare
  66. 66. Opportunity- Convention Centers, Parks and Cultural Attractions Exceeds $6 billion food & retail Serves 5 of the “Big Ten” convention centers – Las Vegas, New Orleans, Philadelphia, Anaheim, Los Angeles Parks – Lake Powell, Denali, Lake Tahoe Day parks/cultural attractions – Ellis Island, Hearst Castle, Baltimore Science Center 66 Business, Sports Education International Uniforms and Entertainment and Healthcare
  67. 67. Sports & Entertainment Scan Trend ARAMARK Implication Unique offerings by venue. Utilize local sports Major Leagues create celebrity into brand offerings. a better fan experience Increasing use of Expand use of handheld technology. customer facing technology Minor leagues seek to emulate Increase focus on minor league teams - the fan experience created by 70% unconverted. the major leagues Marketing ARAMARK operated venues with client Increasing demand for trade organizations. Additional opportunity for show and professional concession sales. association events Base business growth through increased customer Tourism returning counts at lodging and day parks. after 9/11 67 Business, Sports Education International Uniforms and Entertainment and Healthcare
  68. 68. Customer Facing Technology e D Inn pe ce nc em o Ex an rie on vat n nh st ion Fa E ra te ‘M d R al os en ec u ita se tV Sp o g ab a p rea n i le r C Inc z e Fa Pe n 68 s’ Business, Sports Education International Uniforms and Entertainment and Healthcare
  69. 69. Improve the Fan Interaction Cashless – Ease of use for families – Ease of use for client Game 6 entertainment – Proven higher spend Diamond Improves speed of Club service 69 Business, Sports Education International Uniforms and Entertainment and Healthcare
  70. 70. Spend Comparison: Per Capita 2x Game 6 Diamond Game 6 Game 6 Club Club General Level Concessions Concessions 70 Business, Sports Education International Uniforms and Entertainment and Healthcare
  71. 71. Case Study: Adding Value to S&E Clients Concourse, Rt Field Restaurant Per Capita Spending At Fenway Park Yawkey Way 14.0% 14.0% 13.9% 13.9% 9.0% 9.0% 9.4% 9.4% 2000 2001 2002 2003 2004 71 Business, Sports Education International Uniforms and Entertainment and Healthcare
  72. 72. Jack Donovan President ARAMARK BUSINESS, SPORTS AND ENTERTAINMENT
  73. 73. Andrew Kerin President ARAMARK HEALTHCARE AND EDUCATION
  74. 74. Higher Education
  75. 75. ARAMARK in Higher Education Facility Services Dining Services Comprehensive Master Facility Planning Management Culinary Building Development Maintenance Venue Design Custodial Grounds Residential, Energy Retail and Management Catering Services Capital Project Management Building Commissioning 75 Business, Sports Education International Uniforms and Entertainment and Healthcare
  76. 76. Higher Education Platform Enabling the Mission Institutional Goals Delivered Outcomes Enhance the Institutional Brand Competitive Differentiation Cater to the Gen Y Student Distinctive Environments and Experiences 21st Century Living and Learning Environments Growth and Optimization Enhanced Institutional Assets Transformation Showcasing the Institution: Lifelong Connection Donors, Alumni, Parents 76 Business, Sports Education International Uniforms and Entertainment and Healthcare
  77. 77. Higher Education Opportunity Target Opportunity: $40 billion Redefine Opportunity Total facilities maintenance Dining Services Facility Services and operations budget ARAMARK ARAMARK Current Uptapped Total student spend on Competitors dining Self-Op Current Competitors Untapped Strategies to Penetrate Opportunity Self-Op Current Competitor New account acquisition Untapped Existing client service Competitor Self-Op Current expansion Untapped ARAMARK Untapped ARAMARK Current Increase customer share at Data based on 1,600 4-year higher-ed institutions existing accounts Sources: GeoStrategy Competitive Analysis, June 2004 Chronicle of Higher Ed Almanac 2004, 77 American School and University M&O Spending Issue 2004 Business, Sports Education International Uniforms and Entertainment and Healthcare
  78. 78. New Account Acquisition Segmentation and Targeting Convert the Capture self-operation competitor share Segmented sales force with focus on self-op New Account Opportunity: Propensity to change $17 billion - 1,600 Accounts research Dining Services Facility Services Senior-level entry point Industry Competitor Competitor Positioning/Messaging Awareness building campaign Self-Op Self-Op Thought leadership Industry presence Source: AS&U Privatization Study 78 Business, Sports Education International Uniforms and Entertainment and Healthcare
  79. 79. Existing Client Service Expansion Cross-Sell: Food and Facility Cross-Sell – The President’s Challenge Dining Opportunity: – Segmentation and targeting $4 billion Facility Facility Services Expansion – Enterprise teams – Asset management services Facility Services Current Client Expansion – Technical services Revenue Opportunity: – Comprehensive facility $1.2 billion management Facility Service Expansion 79 Business, Sports Education International Uniforms and Entertainment and Healthcare
  80. 80. Increased Consumer Spend at Existing Accounts Annual Consumer Spend - $4.5 billion Convenience Retailing Uncaptured Opportunity - $3.3 billion Customer Loyalty Program Uncaptured MarketMATCH Resident Spend Master Planning Uncaptured Non-Resident Spend Enhanced POS Solutions Captured Spend eCommerce Web Sites During the academic year: Average resident spend on food, convenience, grocery items = $3,502 Average non-resident spend on food, convenience, grocery items = $1,667 Source: Spring 2004 Student Spend DiningStyles Survey 80 Business, Sports Education International Uniforms and Entertainment and Healthcare
  81. 81. K-12 School Districts
  82. 82. ARAMARK in K-12 School Districts Construction Construction Management Management Building Building Grounds Grounds Commissioning Commissioning Food Food Concessions National School Concessions National School Services Services Breakfast Program Breakfast Program Satellite Satellite Maintenance Maintenance Feeding Feeding National School National School Catering Catering Lunch Program Lunch Program Vending Vending Facility Facility Uniforms Uniforms Services Services Nutrition On-Site Nutrition On-Site Programs Retail Concepts Programs Retail Concepts Energy Energy Vending/ Vending/ Central Food Central Food Uniforms Uniforms Production Production Custodial Custodial 82 Business, Sports Education International Uniforms and Entertainment and Healthcare
  83. 83. K-12 Platform Partners for Progress Delivered Outcomes Institutional Goals District Pride Student Achievement Resource Optimization Budget Management Student Satisfaction Service Excellence Improved Learning Environment Employee Development Improved Student Nutrition Community Engagement Motivated Employees 83 Business, Sports Education International Uniforms and Entertainment and Healthcare
  84. 84. K-12 Opportunity Total Opportunity: Strategies to Penetrate $36 billion Food Services Facility Services Self-Operation Conversion ARAMARK Current Expand Services with Current ARAMARK Untapped Clients Competitor Current Capture Untapped Student Self-Op Competitor Untapped Spend Self-Op Current Competitor Untapped Competitor Self-Op Sources: NCES, Census Data 2002 Current Chronicle of Higher Ed Almanac 2004, Untapped ARAMARK ARAMARK American School and University M&O Spending Issue 2004 Current Untapped 84 Business, Sports Education International Uniforms and Entertainment and Healthcare
  85. 85. New Client Acquisition Self- Op Opportunity: $29 billion Strategies for Converting the Self-Op Food Services Outsource Segmentation and Targeting – Enrollment and square footage Self-Operate – High demographic growth – States legislatively open to outsourcing Awareness-Building Campaign Facility Services Outsource Thought Leadership Industry Association Presence Self-Operate Source: AS&U Privatization Study 85 Business, Sports Education International Uniforms and Entertainment and Healthcare
  86. 86. Existing Client Service Expansion Food Cross-Sell Opportunity Cross-Sell: Food and Facilities Opportunity: – The President’s Challenge $2 billion Facility Opportunity Facility Services Expansion – Total Facility Management – Property Management Current Client Facility Services Revenue – Additional Technical Services Expansion Opportunity: $800 million Facility Up-Sell Opportunity 86 Business, Sports Education International Uniforms and Entertainment and Healthcare
  87. 87. Increasing Student Spend at Existing Accounts Customer Expansion Opportunity: Strategies $2.6 billion Attract non-user participation 12 Increase frequency of current users Lunch 1 11 Additional day parts Key Initiatives 2 10 Mid-PM Snack Retail dining concepts Mid-AM Snack Promotions: Celebrity Lunch Lady 3 Java City, smoothies, catering 9 Pre-pay debit card and POS technology After-School Snack Breakfast 4 8 5 7 6 Source: ARAMARK research 2004. 2005 87 Business, Sports Education International Uniforms and Entertainment and Healthcare
  88. 88. Healthcare
  89. 89. ARAMARK in Healthcare Uniform Services Apparel One—Total uniform solution Galls public safety Facility Services Main Food Services Specialty Hospital Programs Hospital World Class Patient Environmental Services Services Laundry and Linen Café dining Central Transportation Retail management Patient Service Associates JAVA City Facility Operations Small site solutions Management Convenience stores Energy Management Vending Medical Office Grounds Maintenance Buildings and Labs Office coffee Capital Program Management Office services Strategic Facilities Planning Senior Living Supply Chain Management Clinical Technology Services Maintenance management services Life-cycle management advisory services Capital Asset Protection Program Regional shared services Network technologies parts sourcing 89 Business, Sports Education International Uniforms and Entertainment and Healthcare
  90. 90. Healthcare Platform Best Environments, Best Care Institutional Goals Delivered Outcomes Quality Care Distinctive Environments and Experiences Competitive Advantage Employer of Choice Patient Satisfaction Patient/Employee Employee Satisfaction Satisfaction Improved Throughput Resource Optimization 90 Business, Sports Education International Uniforms and Entertainment and Healthcare
  91. 91. Healthcare Opportunity Self-Op Conversion Strategy Total Opportunity : $36B – Enterprise sales force ARAMARK Other – Thought leadership platform Share Share – Client intimacy Non- Differentiation Strategy Target Self-op – Comprehensive portfolio with Potential best-in-class delivery Self-Op Untapped $24BPotential – Patient centered platform Consumer Spend – Enabling environments 91 Source Data: NRA;AHA Business, Sports Education International Uniforms and Entertainment and Healthcare
  92. 92. Share of Client Spend — Service Expansion Mission One Strategy Service Expansion Opportunity: $7 Billion Vertical sales force Base business build-out ARAMARK toolkit Today Cross training of on-site teams CTS President’s Challenge Food Facility 92 Business, Sports Education International Uniforms and Entertainment and Healthcare
  93. 93. Share of Customer Strategies: Additional day parts Outpatients/visitors Healthcare Customer Share 5.1 weekly opportunities per customer Speed and convenience for employees Outcomes: Off-site Skip Small site solutions (Bakery Cafes) Specialty coffee solutions Bring Catering From On-site Home WebFood remote kiosk and ordering system Convenience retailing and gift shops Credit card and payroll deduct $1 billion base growth opportunity Sources: Internal surveys; National Restaurant Association 2005 Industry Forecast * Customized, proprietary psychographic segmentation 93 Business, Sports Education International Uniforms and Entertainment and Healthcare
  94. 94. Enterprise and Service Expansion Results Today: 1,300 Healthcare Clients 2004 New Business: 90% Enterprise or Vertical Service Expansion New single service to new client Facilities New service to existing client Food 4% New multiple service to Clinical new client Technology Enterprise Vertical service We provide food, facilities and CTS expansion for only 4% of our Healthcare clients 94 Business, Sports Education International Uniforms and Entertainment and Healthcare
  95. 95. Questions and Answers
  96. 96. Ravi Saligram President ARAMARK INTERNATIONAL
  97. 97. ARAMARK International’s Reported Revenues $1.8 $’s in billions R CA G 13% $1.4 $1.2 $1.1 $1.0 $1.0 1999 2000 2001 2002 2003 2004 97 Business, Sports Education International Uniforms and Entertainment and Healthcare
  98. 98. ARAMARK International’s True Size and Scope 2004 Revenues 2004 Reported Revenues Including JV’s $1.8 billion $3.1 billion Canada Majority UK Japan Owned Subs Other Korea Germany Ireland Spain Chile Belgium Includes $1.8 billion of international sales as reported plus $1.3 billion of sales from minority-owned JV’s. 98 Business, Sports Education International Uniforms and Entertainment and Healthcare
  99. 99. Concentration in Europe with Growth in Asia and the Americas Americas Europe Asia 99 Business, Sports Education International Uniforms and Entertainment and Healthcare
  100. 100. ARAMARK International’s Operating Income Growth $66 $’s in millions $60 R CAG % 16 $46 $40 $39 $32 3.6% Operating 3.3% Margin 1999 2000 2001 2002 2003 2004 100 Business, Sports Education International Uniforms and Entertainment and Healthcare
  101. 101. Consumer Trends in Europe and Japan Consumer Demographic/ ARAMARK Behavioral Shift Trends Implications/Response Obesity/ • Healthy Options • Fresh Foods/Menus Well Being Single • Convenience • Grab’n Go, Coffee Bars Households • Snacking • C Stores Aging • Senior Homes • Growth in Senior Sector Population 101 Business, Sports Education International Uniforms and Entertainment and Healthcare
  102. 102. Client Trends in Europe and Japan Client ARAMARK Behavioral Shift Trends Implications/Response B&I Maturing • Fixed Price/P&L • End-Consumer Focus Hospital Cost • Increased • Focus on Hospitals Sector; Pressures Outsourcing Utilize US Expertise 102 Business, Sports Education International Uniforms and Entertainment and Healthcare
  103. 103. Driving Added Value to Clients: Success Stories Sector Country Site Theme Results Effect Awarded Mid Defence (MOD) UK Wattisham Retail # of transactions Hants Super Innovation tripled, average Mac spend doubled Showcase/ Healthcare China Punan Pioneering Client eliminated Advocacy Hospital, Partnership logistics dept.; Shanghai staff/patient meals revenue up 50%+ S&E Spain Montemelo Drive Attendance New Sites Race Track Attendance doubled; best F1Grand Prix 103 Business, Sports Education International Uniforms and Entertainment and Healthcare
  104. 104. ARAMARK International Strategies 1. Achieve a top 3 presence in countries representing 80%+ of world’s GDP 2. Accelerate organic growth . . . build B&I, diversify into Healthcare, Education and S&E 3. Drive margin improvement 4. Selective acquisitions 5. Focus on the end consumer 104 Business, Sports Education International Uniforms and Entertainment and Healthcare

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