# Aramark (ARMK) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Aramark's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1584509/000158450922000236/cik0-20220930.htm
Accession: 0001584509-22-000236
Filing date: 2022-11-22
Report date: 2022-09-30
Extracted from a later financial-section MD&A body after the formal Item 7 span was a short reference.
Confidence: high

Company profile: /company/ARMK/
All MD&A years: /company/ARMK/mda/
Previous year: /company/ARMK/mda/fy2021/ (FY 2021)
Next year: /company/ARMK/mda/fy2023/ (FY 2023)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of Aramark's (the "Company," "we," "our" and "us") financial condition and results of operations for the fiscal years ended September 30, 2022 and October 1, 2021 should be read in conjunction with our audited consolidated financial statements and the notes to those statements. Discussion and analysis of our financial condition and results of operations for the fiscal year ended October 1, 2021 compared to the fiscal year ended October 2, 2020 is included under the heading Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Fiscal 2021 Compared to Fiscal 2020 and - Liquidity and Capital Resources” in our Annual Report on Form 10-K filed for the fiscal year ended October 1, 2021 with the Securities and Exchange Commission ("SEC") on November 23, 2021.

Our discussion contains forward-looking statements, such as our plans, objectives, opinions, expectations, anticipations, intentions and beliefs, that are based upon our current expectations but that involve risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in those forward-looking statements as a result of a number of factors, including those set forth under "Risk Factors," "Special Note About Forward-looking Statements" and "Business" sections and elsewhere in this Annual Report on Form 10-K ("Annual Report"). In the following discussion and analysis of financial condition and results of operations, certain financial measures may be considered “non-GAAP financial measures” under SEC rules. These rules require supplemental explanation and reconciliation, which is provided elsewhere in this Annual Report.

Overview

We are a leading global provider of food, facilities and uniform services to education, healthcare, business & industry and sports, leisure & corrections clients. Our core market is the United States, which is supplemented by an additional 18-country footprint. Through our established brand, broad geographic presence and employees, we anchor our business in our partnerships with thousands of clients. Through these partnerships we serve millions of customers including students, patients, employees, sports fans and guests worldwide.

We operate our business in three reportable segments:

•Food and Support Services United States ("FSS United States") - Food, refreshment, specialized dietary and support services, including facility maintenance and housekeeping, provided to business, educational and healthcare institutions and in sports, leisure and other facilities serving the general public in the United States.

•Food and Support Services International ("FSS International") - Food, refreshment, specialized dietary and support services, including facility maintenance and housekeeping, provided to business, educational and healthcare institutions and in sports, leisure and other facilities serving the general public. We have operations in 18 countries outside the United States. Our largest international operations are in Canada, Chile, China, Germany, Spain and the United Kingdom, and in a majority of these countries we are one of the leading food and/or facility services providers. We also have operations in Japan through our 50% ownership of AIM Services Co., Ltd., which is a leader in providing outsourced food services in Japan.

•Uniform and Career Apparel ("Uniform") - Provides a full-service employee uniform solution, resulting in a contracted and recurring revenue model. The customer base is serviced by a leading geographic footprint in the United States and Canada with programs focused on uniforms, floor mats, towels, linens, managed restroom and first aid services. Customers operate in a wide range of industries in the United States and Canada.

Our Food and Support Services operations focus on serving clients in five principal sectors: Business & Industry, Education, Healthcare, Sports, Leisure & Corrections and Facilities & Other. Our FSS International reportable segment provides a similar range of services as those provided to our FSS United States clients and operates in the same sectors. Administrative expenses not allocated to our three reportable segments are presented separately as corporate expenses.

Business Update

Recent global events, including the COVID-19 pandemic ("COVID-19"), have adversely affected global economies, disrupted global supply chains and labor force participation and created significant volatility and disruption of financial markets. COVID-19 related disruptions negatively impacted our financial and operating results beginning in the second quarter of fiscal 2020 through the first half of fiscal 2021. Our financial results started to improve during the second half of fiscal 2021 and continued to improve throughout fiscal 2022 as COVID-19 restrictions were lifted and operations re-opened. In addition, the

28

Table of Contents

ongoing conflict between Russia and Ukraine, countries in which we do not have direct operations, further disrupted global supply chains and heightened volatility and disruption of global financial markets. The ongoing volatility and disruption of financial markets caused by these global events, as well as other current global economic factors, triggered inflation in our food and labor costs, increased market interest rates and has driven significant changes in foreign currencies. The impact on our longer-term operational and financial performance will depend on future developments, including our response and governmental response to inflation, our interest rate hedging strategy, the duration and severity of the ongoing volatility and disruption of global financial markets and our ability to effectively hire and retain personnel. Some of these future developments are outside of our control and are highly uncertain.

We continue to remain principally focused on the safety and well-being of our employees, clients and everyone we serve, while simultaneously taking timely, proactive measures to adapt to the current environment. Throughout fiscal 2022, we saw continued improved profitability from clients re-opening as COVID-19 restrictions eased as well as from effective management of operating costs, including supply chain initiatives, and pricing pass-throughs to mitigate the effects of elevated inflation. We continue to evaluate and react to the effects of a prolonged global disruption, including items such as inflationary pressures on food and product costs, greater labor challenges and the financial condition of our clients in certain businesses. We expect these challenges to continue into fiscal 2023, and we regularly evaluate and react in order to take appropriate actions to mitigate the risk in these areas.

In the FSS United States segment, the current environment of our sectors are as follows:

•Education – Education saw strong performance during the start of the new academic year. In Higher Education and K-12, teams implemented enhanced pricing strategies for meal plans and on-campus retail outlets.

•Sports, Leisure & Corrections – Sports saw high attendance levels with better-than-historic per capita spending. Leisure experienced increased guest activity, particularly in National Parks. Corrections revenue growth was led by the Union Supply acquisition and new business wins.

•Business & Industry – Companies continued to experience a steady increase of in-person activity as return-to-office continued, particularly in September 2022. Some clients have implemented customized offerings and meal subsidies, which helped to increase participation rates.

•Facilities & Other – Revenue growth was driven by higher levels of activity at existing clients and new business wins. We continue to offer our core business offerings, with an added focus on new engineering solutions and client project services.

•Healthcare – Revenue growth was led by increased client activity related to elective surgeries, clinical care and retail along with higher net growth from newly awarded contracts, improved retention rates and additional services.

Within the FSS International segment, we continue to recover, returning to pre-pandemic revenue levels. South America continues to experience strong performance in extractive services. Europe and Canada continue to recover with the improved activity levels, especially in sports and entertainment venues driven by higher per capita spending, increased business and industry activity and education due to the start of the fall semester.

In the Uniform segment, our business serves a range of clients, focusing on solution-oriented services driving safety and hygiene. Client operations have resumed, which, combined with increasing levels of net new client wins in both recurring rental and adjacency services and improved pricing, has enabled the segment to continue to surpass pre-pandemic revenue levels.

Aramark’s Intention to Spin-off Uniform Segment

On May 10, 2022, we announced our intention to spin-off our Uniform segment into an independent publicly traded company to our stockholders. The proposed spin-off is intended to be a tax-free transaction to us and our stockholders for United States federal income tax purposes. The proposed spin-off is expected to be completed in the second half of fiscal 2023, subject to certain customary conditions, including final approval of our Board of Directors, receipt of a favorable opinion and Internal Revenue Service ruling with respect to the tax-free nature of the transaction, the effectiveness of a registration statement on Form 10 to be filed with the SEC and the receipt of other regulatory approvals. Refer to Note 15 to the audited consolidated financial statements for the Uniform segment financial disclosures.

29

Table of Contents

Acquisition

On June 2, 2022, we completed the acquisition of Union Supply Group Inc. ("Union Supply"), a commissary goods and services supplier, for cash consideration of $199.6 million, plus contingent consideration (see Note 2 and Note 16 to the audited consolidated financial statements).

On June 4, 2021, we completed the acquisition of Next Level Hospitality ("Next Level"), a premier provider of culinary and environmental services in the senior living industry, specializing in skilled nursing and rehabilitation facilities, for cash consideration of $226.1 million, plus contingent consideration (see Note 2 and Note 16 to the audited consolidated financial statements).

Seasonality

Our revenue and operating results have varied, and we expect them to continue to vary, from quarter to quarter as a result of different factors. Historically, within our FSS United States segment, there has been a lower level of activity during our first and second fiscal quarters in operations that provide services to sports and leisure clients. This lower level of activity, historically, has been partially offset during our first and second fiscal quarters by the increased activity levels in our educational operations. Conversely, historically there has been a significant increase in the provision of services to sports and leisure clients during our third and fourth fiscal quarters, which is partially offset by the effect of summer recess at colleges, universities and schools in our educational operations. Recently, our business and results of operations have started to resemble our historically typical patterns of seasonality following the disruption caused by COVID-19.

Sources of Revenue

Our clients engage us, generally through written contracts, to provide our services at their locations. Depending on the type of client and service, we are paid either by our client or directly by the customer to whom we have been provided access by our client. We typically use either profit and loss contracts or client interest contracts in our FSS United States and FSS International segments. These contracts differ in their provision for the amount of financial risk we bear and, accordingly, the potential compensation, profits or fees we may receive. Under profit and loss contracts, we receive all of the revenue from, and bear all of the expenses of, the provision of our services at a client location. For fiscal 2022, approximately two-thirds of our FSS United States and FSS International segment revenue was derived from profit and loss contracts. Client interest contracts include management fee contracts, under which our clients reimburse our operating costs and pay us a management fee, which may be calculated as a fixed dollar amount or a percentage of revenue or operating costs. Some management fee contracts entitle us to receive incentive fees based upon our performance under the contract, as measured by factors such as revenue, operating costs and customer satisfaction surveys. For fiscal 2022, approximately one-third of our FSS United States and FSS International segment revenue was derived from client interest contracts. In response to the early stages of the COVID-19 pandemic, in certain instances, mainly within the Business & Industry sector, we renegotiated contract terms by temporarily transitioning from profit and loss contracts to client interest contracts in order to mitigate lost profits. As COVID restrictions lifted and operations re-opened, we are working with our clients to transition back to profit and loss contracts, as appropriate.

For our Uniform segment, we typically serve our rental clients under written service contracts for an initial term of three to five years. As the majority of our clients purchase on a recurring basis, our backlog of orders at any given time consists principally of orders in the process of being filled. With the exception of certain governmental bid business, most of our direct marketing business is conducted under invoice arrangement with repeat clients. To a large degree, our direct marketing business is relationship-driven. While we have long-term relationships with our larger clients, we generally do not have contracts with these clients within our direct marketing business.

Costs and Expenses

Our costs and expenses are comprised of cost of services provided (exclusive of depreciation and amortization), depreciation and amortization and selling and general corporate expenses. Cost of services provided (exclusive of depreciation and amortization) consists of direct expenses associated with our operations, which includes food costs, wages, other labor-related expenses (including workers' compensation, severance, state unemployment insurance and federal or state mandated health benefits and other healthcare costs), insurance, fuel, utilities, piece goods and clothing and equipment. Direct expense related to food costs within Cost of services provided (exclusive of depreciation and amortization) are offset by rebates, vendor allowances and volume discounts. Depreciation and amortization expenses mainly relate to assets used in generating revenue. Selling and general corporate expenses include sales commissions, severance, share-based compensation and other unallocated costs related to administrative functions including finance, legal and human resources.

Interest and Other Financing Costs, net

Interest and other financing costs, net, relates primarily to interest expense on long-term borrowings. Interest and other financing costs, net also includes third-party costs associated with long-term borrowings that were capitalized and are being amortized over the term of the borrowing.

30

Table of Contents

Provision (Benefit) for Income Taxes

The Provision (Benefit) for Income Taxes represents federal, foreign, state and local income taxes. Our effective tax rate differs from the statutory United States income tax rate due to the effect of state and local income taxes, tax rates in foreign jurisdictions, tax credits and certain nondeductible expenses. Our effective tax rate will change from quarter to quarter based on recurring and nonrecurring factors including, but not limited to, the geographical mix of earnings, state and local income taxes, tax audit settlements, share-based award exercise activity and enacted tax legislation, including certain business tax credits. The Provision (Benefit) for Income Taxes in fiscal 2021 was impacted by governmental programs, such as the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") and Consolidated Appropriations Act of 2021 (see Note 10 to the audited consolidated financial statements). Changes in judgment due to the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of the change.

Foreign Currency Fluctuations

The impact from foreign currency translation assumes constant foreign currency exchange rates based on the rates in effect for the prior year period being used in translation for the comparable current year period. We believe that providing the impact of fluctuations in foreign currency rates on certain financial results can facilitate analysis of period-to-period comparisons of business performance.

Fiscal Year

Our fiscal year is the fifty-two or fifty-three week period which ends on the Friday nearest to September 30th. The fiscal years ended September 30, 2022 and October 1, 2021 were each a fifty-two week period.

31

Table of Contents

Results of Operations

Fiscal 2022 Compared to Fiscal 2021

The following tables present an overview of our results on a consolidated and segment basis with the amount of and percentage change between periods for the fiscal years 2022 and 2021 (dollars in millions).

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended","","Change","","Change"],["","","September 30, 2022","","October 1, 2021","","$","","%"],["Revenue","","$","16,326.6","","","$","12,096.0","","","$","4,230.6","","","35.0","%"],["Costs and Expenses:"],["Cost of services provided (exclusive of depreciation and amortization)","","14,767.5","","","11,007.2","","","3,760.3","","","34.2","%"],["Other operating expenses","","930.7","","","897.4","","","33.3","","","3.7","%"],["","","15,698.2","","","11,904.6","","","3,793.6","","","31.9","%"],["Operating income","","628.4","","","191.4","","","437.0","","","228.2","%"],["Gain on Equity Investment","","\u2014","","","(137.9)","","","(137.9)","","","(100.0)","%"],["Loss on Defined Benefit Pension Plan Termination","","\u2014","","","60.9","","","(60.9)","","","(100.0)","%"],["Interest and Other Financing Costs, net","","372.8","","","401.3","","","(28.5)","","","(7.1)","%"],["Income (Loss) Before Income Taxes","","255.6","","","(132.9)","","","388.5","","","292.4","%"],["Provision (Benefit) for Income Taxes","","61.4","","","(40.7)","","","102.1","","","251.3","%"],["Net income (loss)","","$","194.2","","","$","(92.2)","","","$","286.4","","","310.6","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended","","Change","","Change"],["Revenue by Segment(1)","","September 30, 2022","","October 1, 2021","","$","","%"],["FSS United States","","$","10,030.8","","","$","6,809.3","","","$","3,221.5","","","47.3","%"],["FSS International","","3,656.4","","","2,866.2","","","790.2","","","27.6","%"],["Uniform","","2,639.4","","","2,420.5","","","218.9","","","9.0","%"],["","","$","16,326.6","","","$","12,096.0","","","$","4,230.6","","","35.0","%"],["","","Fiscal Year Ended","","Change","","Change"],["Operating Income by Segment(1)","","September 30, 2022","","October 1, 2021","","$","","%"],["FSS United States","","$","449.0","","","$","131.8","","","$","317.2","","","240.8","%"],["FSS International","","112.5","","","58.2","","","54.3","","","93.2","%"],["Uniform","","218.1","","","120.8","","","97.3","","","80.5","%"],["Corporate","","(151.2)","","","(119.4)","","","(31.8)","","","(26.7","%)"],["","","$","628.4","","","$","191.4","","","$","437.0","","","228.2","%"]]
[[/GREPCENT_TABLE]]

(1) As a percentage of total revenue, FSS United States represented 61.4% and 56.3%, FSS International represented 22.4% and 23.7% and Uniform represented 16.2% and 20.0% for fiscal 2022 and fiscal 2021, respectively.

Consolidated Overview

Revenue increased by 35.0% during fiscal 2022 compared to the prior year period, which was primarily attributable to base business growth, including from operations re-opening across all business segments after COVID-19 restrictions lifted, growth in net new business and pricing pass-throughs. In addition, the Next Level and Union Supply acquisitions contributed to the revenue growth (3.0%). Foreign currency translation unfavorably impacted revenue during fiscal 2022 (2.6%).

32

Table of Contents

The following table presents the cost of services provided (exclusive of depreciation and amortization) by segment and as a percent of revenue for the fiscal years ended September 30, 2022 and October 1, 2021.

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended"],["","","September 30, 2022","","October 1, 2021"],["Cost of services provided (exclusive of depreciation and amortization)","","$","","% of Revenue","","$","","% of Revenue"],["FSS United States","","$","9,145.0","","","91.2","%","","$","6,237.6","","","91.6","%"],["FSS International","","3,456.5","","","94.5","%","","2,719.2","","","94.9","%"],["Uniform","","2,166.0","","","82.1","%","","2,050.4","","","84.7","%"],["","","$","14,767.5","","","90.5","%","","$","11,007.2","","","91.0","%"]]
[[/GREPCENT_TABLE]]

The following table presents the percentages attributable to the components in cost of services provided (exclusive of depreciation and amortization) for fiscal 2022 and fiscal 2021.

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended"],["Cost of services provided (exclusive of depreciation and amortization) components","","September 30, 2022","","October 1, 2021"],["Food and support service costs(1)","","26.5","%","","24.3","%"],["Personnel costs(2)","","47.7","%","","50.3","%"],["Other direct costs","","25.8","%","","25.4","%"],["","","100.0","%","","100.0","%"]]
[[/GREPCENT_TABLE]]

(1) Food and support service costs represented a higher proportion of total cost of services provided (exclusive of depreciation and amortization) during fiscal 2022 mainly from operations reopening as COVID-19 restrictions were lifted and food cost inflation.

(2) Personnel costs decreased as a percentage of total cost of services provided (exclusive of depreciation and amortization) during fiscal 2022 due to food and support service costs increasing at a higher proportion as compared to personnel costs.

Operating income increased by $437.0 million during fiscal 2022 compared to the prior year period, which was driven by base business growth, including from clients re-opening after COVID-19 restrictions lifted, effective cost management and higher vendor discounts from stabilizing supply chain disruptions with our suppliers. The increase in operating income during fiscal 2022 was also attributable to integration costs incurred during fiscal 2021 related to the AmeriPride acquisition that occurred in fiscal 2018 (see Note 2 to the audited consolidated financial statements), lower personnel costs from incentive expenses related to the annual bonus, non-cash income related to the reduction of the contingent consideration liability related to the earn-out of the Next Level acquisition ($20.7 million) and lower insurance expenses, mainly related to our medical program ($18.0 million).

These increases in operating income during fiscal 2022 more than offset:

•increased inflationary costs in food and labor;

•higher expenses incurred related to new business when compared to the prior year period;

•lower United States and non-United States governmental labor related tax credits received in relation to COVID-19 when compared to the prior year period (see Note 1 to the audited consolidated financial statements);

•higher share-based compensation expense (see Note 12 to the audited consolidated financial statements);

•unfavorable severance between years ($26.9 million) (see Note 3 to the audited consolidated financial statements);

•lower income related to favorable loss experience in older insurance years under our general liability, automotive liability and workers' compensation liability programs when compared to fiscal 2021 ($16.2 million); and

•negative impact of foreign currency translation (approximately $7.0 million).

During fiscal 2021, a non-cash gain related to an equity investment of $137.9 million was recorded, which was partially offset by a non-cash loss from the termination of certain defined benefit pension plans of $60.9 million.

Interest and Other Financing Costs, net, decreased 7.1% during fiscal 2022 compared to the prior year period. The decrease for fiscal 2022 was primarily due to lower interest expense from the repayment of the 4.750% Senior Notes due 2026 ("2026 Notes") during the third quarter of fiscal 2021. The decrease was also due to charges related to the repayment of the 2026 Notes, including $11.9 million of a call premium payment and $4.1 million related to the write-off of unamortized debt issuance costs.

33

Table of Contents

The Provision for Income Taxes for fiscal 2022 was recorded at an effective rate of 24.0% compared to a Benefit for Income Taxes recorded at an effective rate of 30.6% in the prior year. During fiscal 2022, we recorded a benefit to the "Provision (Benefit) for Income Taxes" within the Consolidated Statements of Income (Loss) of $8.5 million for the reversal of a valuation allowance at a subsidiary in the FSS International segment driven by our ability to utilize the deferred tax assets based on future taxable income expected due to the acquisition of a business. We also recorded a benefit to the "Provision (Benefit) for Income Taxes" within the Consolidated Statements of Income (Loss) of $4.2 million due to a state tax law change during fiscal 2022. As a result of the CARES Act, we recorded a net benefit to the "Provision (Benefit) for Income Taxes" within the Consolidated Statements of Income (Loss) of $12.0 million during fiscal 2021. The Provision (Benefit) for Income Taxes during fiscal 2021 includes the Net Operating Losses ("NOL") expected to be carried back to Pre-Tax Cut and Jobs Act years, which are benefited at an income tax rate of 35.0% as opposed to the current year rate of 21.0%. During fiscal 2021, we recorded a valuation allowance of $36.5 million against certain foreign tax credits that were re-established by the NOL carryback. Within the FSS International segment, we also recorded during fiscal 2021 a valuation allowance against deferred tax assets in certain subsidiaries from cumulative losses of $22.0 million.

Segment Results

FSS United States Segment

The FSS United States reportable segment consists of five sectors which have similar economic characteristics and comprise a single operating segment. The five sectors of the FSS United States reportable segment are Business & Industry, Education, Healthcare, Sports, Leisure & Corrections and Facilities & Other.

Revenue for each of these sectors is summarized as follows (in millions):

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended","","Change"],["","","September 30, 2022","","October 1, 2021","","%"],["Business & Industry","","$","1,081.2","","","$","695.7","","","55.4","%"],["Education","","3,161.5","","","2,124.4","","","48.8","%"],["Healthcare","","1,235.8","","","891.2","","","38.7","%"],["Sports, Leisure & Corrections","","2,722.0","","","1,511.3","","","80.1","%"],["Facilities & Other","","1,830.3","","","1,586.7","","","15.4","%"],["","","$","10,030.8","","","$","6,809.3","","","47.3","%"]]
[[/GREPCENT_TABLE]]

The Healthcare sector had high-single digit operating income margins, consistent with prior year. The Facilities & Other sector had high-single digit operating income margins, compared to mid-single digit operating income margins in the prior year. The Education and Sports, Leisure & Corrections sectors had mid-single digit operating income margins, consistent with prior year. The Business & Industry sector had negative low-single digit operating income margins, compared to negative mid-single digit operating income margins in the prior year. As described above, during the COVID-19 pandemic, and in following periods, operating income margins in the FSS United States sectors may differ from our otherwise historical patterns, particularly in the Business & Industry sector.

FSS United States segment revenue increased by approximately 47.3% during fiscal 2022 compared to the prior year period. The increase was primarily attributable to base business growth, including from operations re-opening across all sectors after COVID-19 restrictions lifted, net new business growth and pricing pass-throughs. The Sports, Leisure & Corrections sector increased due to the acquisition of Union Supply, which contributed $82.5 million of revenue during fiscal 2022, and higher per capita customer spending in stadiums and arenas. In addition, the Next Level acquisition, that occurred in third quarter of fiscal 2021, contributed $277.3 million more of revenue during fiscal 2022 compared to fiscal 2021 to our Healthcare sector.

Operating income increased by $317.2 million during fiscal 2022 compared to the prior year period. The increase during fiscal 2022 was attributable to:

•growth in base business, including from clients re-opening after COVID-19 restrictions lifted, effective cost management and higher vendor discounts from stabilizing supply chain disruptions with our suppliers;

•non-cash income related to the reduction of the contingent consideration liability related to the earn-out of the Next Level acquisition ($20.7 million);

•lower insurance expenses, mainly related to our medical program ($25.0 million); and

•lower personnel costs from incentive expenses related to the annual bonus.

These increases in operating income during fiscal 2022 more than offset the following:

34

Table of Contents

•increased inflationary costs in food and labor;

•higher expenses incurred related to new business when compared to the prior year period;

•lower income related to favorable loss experience in older insurance years under our general liability, automotive liability and workers' compensation liability program when compared to fiscal 2021 ($16.2 million); and

•unfavorable severance between years ($6.2 million).

FSS International Segment

FSS International segment revenue increased by approximately 27.6% during fiscal 2022 compared to the prior year period. The increase was primarily attributable to base business growth, including from operations re-opening after COVID-19 restrictions lifted, net new business growth and pricing pass-throughs. The growth in revenue was partially offset by the negative impact of foreign currency translation (10.6%).

Operating income increased by $54.3 million during fiscal 2022 compared to the prior year period. The increase was mainly attributable to growth in base business, including from clients re-opening after COVID-19 restrictions lifted, and the favorable impact related to a client contract dispute ($9.6 million).

These increases in operating income during fiscal 2022 more than offset the following:

•lower labor related tax credits provided from governmental assistance programs when compared to the prior year period (see Note 1 to the audited consolidated financial statements);

•increased inflationary costs in food and labor;

•unfavorable severance between years ($28.5 million); and

•the negative impact of foreign currency translation (approximately $6.6 million).

Uniform Segment

Uniform segment revenue increased by approximately 9.0% during fiscal 2022 compared to the prior year period. The increase was primarily attributable to base business growth within our uniform rental business, including from clients re-opening after COVID-19 restrictions lifted, net increases in new business and improved pricing.

Operating income increased by $97.3 million during fiscal 2022 compared to the prior year period. The increase was attributable to increased base business growth within the uniform rental business, including from client re-openings after COVID-19 restrictions lifted, net new business, improved pricing, lower rental merchandise in-service expense and lower costs as a result of the fiscal 2021 reduction in headcount. The increase in operating income was also attributable to:

•lower personnel costs from incentive expenses related to the annual bonus;

•prior year integration charges related to the AmeriPride acquisition that occurred in fiscal 2018 (see Note 2 to the audited consolidated financial statements); and

•favorable severance between years ($8.0 million).

These increases in operating income during fiscal 2022 more than offset the following:

•lower labor related tax credits provided by government assistance programs in response to COVID-19 (see Note 1 to the audited consolidated financial statements);

•increased inflationary costs in labor;

•higher insurance expenses when compared to the prior year period ($7.0 million); and

•personnel expenses related to our intention to spin-off the Uniform segment ($4.1 million).

Corporate

Corporate expenses, those administrative expenses not allocated to the business segments, increased by $31.8 million during fiscal 2022 compared to the prior year period. The increase was attributable to:

•higher share-based compensation expense (see Note 12 to the audited consolidated financial statements);

•the unfavorable change in fair value of certain gasoline and diesel agreements ($12.2 million); and

•accounting and legal fees related to our intention to spin-off the Uniform segment ($5.2 million).

These increases in corporate expenses during fiscal 2022 more than offset lower personnel costs from incentive expenses related to the annual bonus.

35

Table of Contents

Liquidity and Capital Resources

Overview

Our principal sources of liquidity are cash generated from operating activities, funds from borrowings, investments in marketable securities and existing cash on hand. As of September 30, 2022, we had $329.5 million of cash and cash equivalents, $1,105.6 million of availability under our senior secured revolving credit facility and $395.1 million of availability under the Receivables Facility. A significant portion of our cash and cash equivalents are held in mature, liquid geographies where we have operations. As of September 30, 2022, there were $748.5 million of outstanding foreign currency borrowings.

We believe that our cash and cash equivalents, marketable securities and availability under our revolving credit facility and Receivables Facility will be adequate to meet anticipated cash requirements for the foreseeable future to fund working capital, capital spending, debt service obligations, refinancings, dividends and other cash needs. We have no significant debt maturities due until 2025. We also have flexibility to optimize working capital and defer certain capital expenditures as appropriate without a material impact to the business. We believe that our assumptions used to estimate our liquidity and working capital requirements are reasonable. For additional information regarding the risks associated with our liquidity and capital resources, see Part I, Item 1A, "Risk Factors."

The table below summarizes our cash activity (in millions):

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended"],["","September 30, 2022","","October 1, 2021"],["Net cash provided by operating activities","$","694.5","","","$","657.1"],["Net cash used in investing activities","(831.3)","","","(634.4)"],["Net cash used in financing activities","(37.7)","","","(2,005.3)"]]
[[/GREPCENT_TABLE]]

Reference to the audited Consolidated Statements of Cash Flows will facilitate understanding of the discussion that follows.

Cash Flows Provided by Operating Activities

Cash provided by operating activities increased by $37.4 million during fiscal 2022 compared to fiscal 2021. The change was driven by net income in fiscal 2022 of $194.2 million compared to a net loss in fiscal 2021 of $92.2 million, as discussed in "Results of Operations" above, and favorable non-cash adjustments to net income (loss) between fiscal years of $141.0 million. The change in net income (loss) and non-cash adjustments to net income (loss) was partially offset by the change in cash from operating assets and liabilities of $426.2 million, which was due to the recovery of our businesses after COVID-19 restrictions lifted. The change in operating assets and liabilities compared to the prior year period was primarily due to:

•Accrued expenses by $253.6 million, generating a lower source of cash during fiscal 2022 compared to fiscal 2021 primarily due to the following: higher payments related to the annual bonus; payment of social security taxes in the current year whereas payment was previously deferred in the prior year as permitted under the CARES Act (see Note 1 to the audited consolidated financial statements); impact of client advances within our Higher Education business from operations returning; and higher commission payments in our Sports business in the current year compared to the prior year from the return of operations;

•Receivables by $172.5 million, generating a greater use of cash during fiscal 2022 compared to fiscal 2021 as operations returned following the lifting of COVID-19 restrictions, new business and timing of collections;

•Prepayment and Other Current Assets by $105.7 million, generating a use of cash during fiscal 2022 compared to a source of cash in fiscal 2021 mainly from proceeds received in the second quarter of fiscal 2021 related to the fiscal 2020 federal income tax return ($93.6 million); and

•Inventories by $64.0 million, generating a greater use of cash during fiscal 2022 compared to fiscal 2021 primarily due to operations returning after COVID-19 restrictions lifted, the impact of inflation and increased purchasing from new business.

These changes in operating assets and liabilities more than offset:

•Accounts payable by $169.6 million, generating a greater source of cash during fiscal 2022 compared to fiscal 2021 as operations returned following the lifting of COVID-19 restrictions, new business and timing of disbursements.

Fiscal 2022 and fiscal 2021 include $57.7 million and $159.1 million, respectively, of proceeds associated with labor related tax credits from many foreign jurisdictions in which we operate as a form of relief from COVID-19 (see Note 1 to the audited consolidated financial statements). During fiscal 2022 and fiscal 2021, we received proceeds of $1.9 million and $17.0 million, respectively, related to favorable loss experience in older insurance years under our general liability, automobile liability and

36

Table of Contents

workers' compensation programs. "Payments made to clients on contracts" generated a lower use of cash during fiscal 2022 compared to fiscal 2021 primarily due to timing. The "Changes in other assets" caption was driven by an increase to in-service rental merchandise from operations returning after COVID-19 restrictions lifted, which more than offset higher cash distributions received from our 50% ownership interest in AIM Services Co., Ltd. in fiscal 2022 compared to fiscal 2021. The "Other operating activities" caption reflects mainly adjustments to net income (loss) in the current year and prior year periods related to certain non-cash gains and losses and adjustments to non-operating cash gains and losses.

Cash Flows Used in Investing Activities

The net cash flows used in investing activities were higher during fiscal 2022 compared to fiscal 2021 due to a higher level of acquisitions of certain businesses, new equity method investments and purchases of marketable securities in fiscal 2022. During fiscal 2022, we acquired Union Supply for $199.6 million (see Note 2 to the audited consolidated financial statements) and made other acquisitions ($140.4 million). During fiscal 2021, we acquired Next Level for $226.1 million (see Note 2 to the audited consolidated financial statements) and made other acquisitions ($39.7 million). The "Other investing activities" caption includes $19.0 million and $10.0 million of proceeds received during fiscal 2022 and 2021, respectively, relating to the recovery of our investment (possessory interest) at one of the National Park Service sites within our Sports, Leisure & Corrections sector.

Cash Flows Used In Financing Activities

During fiscal 2022, cash used in financing activities was impacted by the following:

•payment of dividends ($113.1 million);

•borrowing under the Receivables Facility ($104.9 million); and

•the repayment of 5.000% 2025 Senior Notes and foreign term loans ($66.7 million).

During fiscal 2021, cash used in financing activities was impacted by the following:

•the repayment of borrowings under the United States revolving credit facility ($780.0 million);

•repayment of the aggregate principal amount of the 2026 Notes ($500.0 million);

•repayments under the Receivables Facility ($315.6 million);

•net repayments of term loan borrowings ($244.2 million);

•payment of dividends ($112.0 million); and

•payment of fees and expenses related to refinancing activities, which is included in "Other financing activities," including debt issuance costs ($17.5 million) and the call premium ($11.9 million) from the repayment of the 2026 Notes.

The "Other financing activities" caption also reflects a use of cash during fiscal 2022 and fiscal 2021, primarily related to taxes paid by us when we withhold shares upon an employee's exercise or vesting of equity awards to cover income taxes.

We intend to continue to pay cash dividends on our common stock, subject to our compliance with applicable law, and depending on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in our debt agreements, business prospects and other factors that our Board of Directors may deem relevant. However, the payment of any future dividends will be at the discretion of our Board of Directors and our Board of Directors may, at any time, determine not to continue to declare quarterly dividends.

Covenant Compliance

The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of our subsidiaries to: incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends, make distributions or repurchase our capital stock; make investments, loans or advances; repay or repurchase any subordinated debt, except as scheduled or at maturity; create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries; make certain acquisitions; engage in certain transactions with affiliates; amend material agreements governing our subordinated debt (or any indebtedness that refinances our subordinated debt); and fundamentally change our business. The indentures governing our senior notes contain similar provisions. As of September 30, 2022, we were in compliance with these covenants.

As stated above, the Credit Agreement and the indentures governing our senior notes contain provisions that restrict our ability to pay dividends and repurchase stock (collectively, "Restricted Payments"). In addition to customary exceptions, the Credit Agreement and indentures permit Restricted Payments in the aggregate up to an amount that increases quarterly by 50% of our

37

Table of Contents

Consolidated Net Income, as such term is defined in these debt agreements, subject to being in compliance with the interest coverage ratio described below.

Under the Credit Agreement, we are required to satisfy and maintain specified financial ratios and other financial condition tests and covenants. The indentures governing our senior notes also require us to comply with certain financial ratios in order to take certain actions. Our continued ability to meet those financial ratios, tests and covenants can be affected by events beyond our control, and there can be no assurance that we will meet those ratios, tests and covenants.

These financial ratios, tests and covenants involve the calculation of certain measures that we refer to in this discussion as "Covenant Adjusted EBITDA." Covenant Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP. Covenant Adjusted EBITDA is defined as net income (loss) of Aramark Services, Inc. ("ASI") and its restricted subsidiaries plus interest and other financing costs, net, provision (benefit) for income taxes, and depreciation and amortization, further adjusted to give effect to adjustments required in calculating covenant ratios and compliance under our Credit Agreement and the indentures governing our senior notes.

Our presentation of these measures has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. You should not consider these measures as alternatives to net income or operating income determined in accordance with U.S. GAAP. Covenant Adjusted EBITDA, as presented by us, may not be comparable to other similarly titled measures of other companies because not all companies use identical calculations.

The following is a reconciliation of Net income (loss) attributable to ASI stockholder, which is a U.S. GAAP measure of ASI''s operating results, to Covenant Adjusted EBITDA as defined in our debt agreements. The terms and related calculations are defined in the Credit Agreement and the indentures governing our senior notes. Covenant Adjusted EBITDA is a measure of ASI and its restricted subsidiaries only and does not include the results of Aramark.

[[GREPCENT_TABLE]]
[["","","Twelve Months Ended"],["(in millions)","","September 30, 2022","","October 1, 2021"],["Net income (loss) attributable to ASI stockholders","","$","194.5","","","$","(90.8)"],["Interest and other financing costs, net","","372.7","","","401.4"],["Provision (Benefit) for income taxes","","61.5","","","(40.6)"],["Depreciation and amortization","","532.3","","","550.7"],["Share-based compensation expense(1)","","95.5","","","71.1"],["Unusual or non-recurring (gains) and losses(2)","","\u2014","","","(77.1)"],["Pro forma EBITDA for equity method investees(3)","","8.4","","","10.2"],["Pro forma EBITDA for certain transactions(4)","","11.8","","","11.2"],["Other(5)(6)","","45.0","","","102.5"],["Covenant Adjusted EBITDA","","$","1,321.7","","","$","938.6"]]
[[/GREPCENT_TABLE]]

(1)    Represents share-based compensation expense resulting from the application of accounting for stock options, restricted stock units, performance stock units, deferred stock units awards and employee stock purchases (see Note 12 to the audited consolidated financial statements).

(2)    Represents the fiscal 2021 non-cash gain from an observable price change on an equity investment ($137.9 million) and the fiscal 2021 non-cash loss from the termination of certain defined benefit pension plans ($60.9 million).

(3)    Represents our estimated share of EBITDA, primarily from our AIM Services Co., Ltd. equity method investment, not already reflected in our Net Income (Loss) attributable to ASI stockholders. EBITDA for this equity method investee is calculated in a manner consistent with consolidated Covenant Adjusted EBITDA but does not represent cash distributions received from this investee.

(4)    Represents the annualizing of net EBITDA from acquisitions made during the period.

(5)    "Other" for the twelve months ended September 30, 2022 includes adjustments to remove the impact attributable to the adoption of certain accounting standards that are made to the calculation in accordance with the Credit Agreement and indentures ($34.8 million), the reversal of a contingent consideration liability related to an acquisition earn out ($20.7 million), non-cash charges for inventory write-downs to net realizable value and fixed asset write-offs related to personal protective equipment ($20.5 million), severance charges ($19.6 million), United States and non-United States governmental labor related tax credits resulting from the COVID-19 pandemic ($17.3 million), favorable impact related to a client contract dispute ($9.6 million), charges related to the Company's intention to spin-off the Uniform segment

38

Table of Contents

($9.3 million), gain from a funding agreement related to a legal matter ($6.5 million), the loss from the change in fair value related to certain gasoline and diesel agreements ($6.4 million), compensation expense related to an acquisition earn out contingent on employees staying until the performance period ends ($5.6 million), the gain from the insurance proceeds received related to property damage from a tornado in Nashville ($4.0 million), the impact of hyperinflation in Argentina ($3.5 million), due diligence charges related to acquisitions ($2.5 million) and other miscellaneous expenses.

(6)    "Other" for the twelve months ended October 1, 2021 includes non-cash charges for inventory write-downs to net realizable value and for excess inventory related to personal protective equipment ($36.0 million), labor charges, incremental expenses and other expenses associated with closed or partially closed client locations resulting from the COVID-19 pandemic, net of United States and non-United States governmental labor related tax credits ($28.4 million), adjustments to remove the impact attributable to the adoption of certain accounting standards that are made to the calculation in accordance with the Credit Agreement and indentures ($25.3 million), expenses related to merger and integration related charges ($22.2 million), gain from a funding agreement related to a legal matter ($10.0 million), reversal of severance charges ($8.2 million), the gain from the change in fair value related to certain gasoline and diesel agreements ($5.9 million), a favorable settlement of a legal matter ($4.7 million), non-cash impairment charges related to various assets ($3.8 million), charges related to a client contract dispute ($2.6 million), expenses related to the impact of the ice storm in Texas ($2.5 million), a non-cash charge related to an environmental matter ($2.5 million), non-cash charges related to information technology assets ($2.2 million), the impact of hyperinflation in Argentina ($1.8 million) and other miscellaneous expenses.

Our covenant requirements and actual ratios for the twelve months ended September 30, 2022 are as follows:

[[GREPCENT_TABLE]]
[["","Covenant Requirements","","Actual Ratios"],["Consolidated Secured Debt Ratio(1)","\u2264 5.125x","","2.73x"],["Interest Coverage Ratio (Fixed Charge Coverage Ratio)(2)","\u2265 2.000x","","3.55x"]]
[[/GREPCENT_TABLE]]

(1)    The Credit Agreement requires ASI to maintain a maximum Consolidated Secured Debt Ratio, defined as consolidated total indebtedness secured by a lien to Covenant Adjusted EBITDA, not to exceed 5.125x. Consolidated total indebtedness secured by a lien is defined in the Credit Agreement as total indebtedness consisting of debt for borrowed money, finance leases, debt in respect of sales-leaseback transactions, disqualified and preferred stock and advances under the Receivables Facility secured by a lien reduced by the amount of cash and cash equivalents on the consolidated balance sheet that is free and clear of any lien. Non-compliance with the maximum Consolidated Secured Debt Ratio could result in the requirement to immediately repay all amounts outstanding under the Credit Agreement, which, if ASI's lenders under our Credit Agreement (other than the lenders in respect of ASI's United States Term B Loans, which lenders do not benefit from the maximum Consolidated Debt Ratio covenant) failed to waive any such default, would also constitute a default under the indentures governing our senior notes.

(2)    Our Credit Agreement establishes an incurrence-based minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA to consolidated interest expense, the achievement of which is a condition for us to incur additional indebtedness and to make certain restricted payments and does not result in a default under the Credit Agreement or the indentures governing the senior notes. If we do not maintain this minimum Interest Coverage Ratio calculated on a pro forma basis for any such additional indebtedness or restricted payments, we could be prohibited from being able to (1) incur additional indebtedness, other than the incremental capacity provided for under the Credit Agreement and pursuant to specified exceptions, and (2) make certain restricted payments, other than pursuant to certain exceptions. However, any failure to maintain the minimum Interest Coverage Ratio would not result in a default or an event of default under either the Credit Agreement or the indentures governing the senior notes. The minimum Interest Coverage Ratio is at least 2.000x for the term of the Credit Agreement. Consolidated interest expense is defined in the Credit Agreement as consolidated interest expense excluding interest income, adjusted for acquisitions and dispositions, further adjusted for certain non-cash or nonrecurring interest expense and our estimated share of interest expense from one equity method investee. The indentures governing our senior notes include a similar requirement which is referred to as a Fixed Charge Coverage Ratio.

We and our subsidiaries and affiliates may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt securities (including any publicly issued debt securities), in privately negotiated or open market transactions, by tender offer or otherwise, or extend or refinance any of our outstanding indebtedness.

39

Table of Contents

The following table summarizes our future obligations for debt repayments, finance leases, estimated interest payments, future minimum rental and similar commitments under noncancelable operating leases as well as contingent obligations related to outstanding letters of credit and guarantees as of September 30, 2022 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Payments Due by Period"],["Contractual Obligations as of September 30, 2022","","Total","","Less than 1 year","","1-3 years","","3-5 years","","More than 5 years"],["Long-term borrowings(1)","","$","7,305,832","","","$","37,602","","","$","4,235,247","","","$","1,152,526","","","$","1,880,457"],["Finance lease obligations","","158,027","","","28,589","","","48,901","","","33,825","","","46,712"],["Estimated interest payments(2)","","927,800","","","270,600","","","467,400","","","164,000","","","25,800"],["Operating leases and other noncancelable commitments","","436,507","","","81,729","","","126,332","","","82,221","","","146,225"],["Purchase obligations(3)","","665,221","","","267,049","","","140,809","","","85,555","","","171,808"],["Other liabilities(4)","","709,009","","","215,546","","","242,531","","","30,783","","","220,149"],["","","$","10,202,396","","","$","901,115","","","$","5,261,220","","","$","1,548,910","","","$","2,491,151"],["","","Amount of Commitment Expiration by Period"],["Other Commercial Commitments as of September 30, 2022","","Total Amounts Committed","","Less than 1 year","","1-3 years","","3-5 years","","More than 5 years"],["Letters of credit","","$","87,517","","","$","76,445","","","$","11,072","","","$","\u2014","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

(1)Excludes the $41.6 million reduction to long-term borrowings from debt issuance costs, $0.7 million reduction from the discount on the United States Term B-4 Loans due 2027 and finance lease obligations.

(2)These amounts represent future interest payments related to our existing debt obligations based on fixed and variable interest rates specified in the associated debt agreements and reflect any current hedging arrangements. Payments related to variable debt are based on applicable rates at September 30, 2022 plus the specified margin in the associated debt agreements for each period presented. The amounts provided relate only to existing debt obligations and do not assume the refinancing or replacement of such debt. The average debt balance for each fiscal year from 2023 through 2028 is $7,421.0 million, $7,327.5 million, $5,324.5 million, $2,941.4 million, $2,347.8 million and $791.8 million, respectively. The weighted average interest rate of our existing debt obligations for each fiscal year from 2023 through 2028 is 3.65%, 3.74%, 3.63%, 3.02%, 3.20% and 3.26%, respectively (see Note 5 to the audited consolidated financial statements for the terms and maturities of existing debt obligations).

(3)Represents mainly the commitments for capital projects to help finance improvements or renovations at the facilities in which we operate.

(4)Includes certain unfunded employee retirement obligations, contingent consideration obligations related to acquisitions, deferred social security taxes, self-insurance obligations and other obligations.

We have excluded from the table above uncertain tax liabilities due to the uncertainty of the amount and period of payment. As of September 30, 2022, we have gross uncertain tax liabilities of $80.2 million (see Note 10 to the audited consolidated financial statements). During fiscal 2022, we made contributions totaling $5.7 million into our defined benefit pension plans. Estimated contributions to our defined benefit pension plans in fiscal 2023 are $2.8 million (see Note 9 to the audited consolidated financial statements).

We have a Receivables Facility agreement with three financial institutions where we sell on a continuous basis an undivided interest in all eligible accounts receivable, as defined in the Receivables Facility. The maximum amount available under the Receivables Facility as of September 30, 2022 is $500.0 million. During the third quarter of fiscal 2022, we increased the purchase limit available under the Receivables Facility from $400.0 million to $500.0 million and the additional seasonal tranche of $100.0 million has been eliminated. All other terms and conditions of the agreement remained largely unchanged. As of September 30, 2022, there are $104.9 million outstanding under the Receivables Facility. Amounts borrowed under the Receivables Facility fluctuate monthly based on our funding requirements and the level of qualified receivables available to collateralize the Receivables Facility.

Pursuant to the Receivables Facility, we formed ARAMARK Receivables, LLC, a wholly-owned, consolidated, bankruptcy-remote subsidiary. ARAMARK Receivables, LLC was formed for the sole purpose of buying and selling receivables generated by certain of our subsidiaries. Under the Receivables Facility, we and certain of our subsidiaries transfer without recourse all of our accounts receivable to ARAMARK Receivables, LLC. As collections reduce previously transferred interests, interests in new, eligible receivables are transferred to ARAMARK Receivables, LLC, subject to meeting certain conditions.

40

Table of Contents

Supplemental Consolidating Information

Pursuant to Regulation S-X Rule 13-01, which simplified certain disclosure requirements for guarantors and issuers of guaranteed securities, we are no longer required to provide condensed consolidating financial statements for Aramark and its subsidiaries, including the guarantors and non-guarantors under our Credit Agreement and the indentures governing our senior notes. ASI, the borrower under our Credit Agreement and the indentures governing our senior notes, and its restricted subsidiaries together comprise substantially all of our assets, liabilities and operations, and there are no material differences between the consolidating information related to Aramark and Aramark Intermediate Holdco Corporation, the direct parent of ASI and a guarantor under our Credit Agreement, on the one hand, and ASI and its restricted subsidiaries on a standalone basis, on the other hand.

Other

Our business activities do not include the use of unconsolidated special purpose entities and there are no significant business transactions that have not been reflected in the accompanying audited consolidated financial statements. We insure portions of our risk in general liability, automobile liability, workers’ compensation liability and property liability through a wholly owned captive insurance subsidiary (the "Captive") to enhance our risk financing strategies. The Captive is subject to the regulations within its domicile of Bermuda, including regulations established by the Bermuda Monetary Authority (the "BMA") relating to levels of liquidity and solvency as such concepts are defined by the BMA. The Captive was in compliance with these regulations as of September 30, 2022. These regulations may have the effect of limiting our ability to access certain cash and cash equivalents held by the Captive for uses other than for the payment of our general liability, automobile liability, workers’ compensation liability, property liability and related Captive costs. As of September 30, 2022 and October 1, 2021, cash and cash equivalents at the Captive were $23.1 million and $194.3 million, respectively. During fiscal 2022, the Captive began investing a portion of its cash and cash equivalents in United States Treasury securities to improve returns on the Captive's assets. The amount of this investment as of September 30, 2022 was $78.2 million and recorded in "Prepayments and other current assets" on the Consolidated Balance Sheets.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in the notes to the audited consolidated financial statements included in this Annual Report.

In preparing our financial statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are most significant where they involve levels of subjectivity and judgment necessary to account for highly uncertain matters or matters susceptible to change, and where they can have a material impact on our financial condition and operating performance. If actual results were to differ materially from the estimates made, the reported results could be materially affected.

Critical accounting estimates and the related assumptions are evaluated periodically as conditions warrant, and changes to such estimates are recorded as new information or changed conditions require.

Asset Impairment Determinations

Indefinite lived intangible assets that are not amortized are subject to an impairment test that we conduct annually or more frequently if a change in circumstances or the occurrence of events indicates that potential impairment exists. For goodwill, the impairment test may first consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Examples of qualitative factors include, macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, entity-specific events, events affecting reporting units and sustained changes in our stock price. If results of the qualitative assessment indicate a more likely than not determination or if a qualitative assessment is not performed, a quantitative test is performed by comparing the estimated fair value using a discounted cash flow method or market method for each reporting unit with its estimated net book value.

We perform the assessment of goodwill at the reporting unit level. Within our FSS International segment, each country or region is evaluated separately since they are relatively autonomous and separate goodwill balances have been recorded for each entity. During the fourth quarter of fiscal 2022, we performed the annual impairment test for goodwill for each of our reporting units using a quantitative testing approach. Based on the evaluation performed, we determined that the fair value of each of the reporting units significantly exceeded its respective carrying amount, and therefore, we determined that goodwill was not impaired.

The determination of fair value for each reporting unit includes assumptions, which are considered Level 3 inputs, that are subject to risk and uncertainty. The discounted cash flow calculations are dependent on several subjective factors including the timing of future cash flows, the underlying margin projection assumptions, future growth rates and the discount rate. The market based method is dependent on several subjective factors including the determination of market multiples and future cash

41

Table of Contents

flows. If our assumptions or estimates in our fair value calculations change or if future cash flows, margin projections or future growth rates vary from what was expected, this may impact our impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges.

With respect to our other long-lived assets, we are required to test for asset impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, we compare the sum of the future expected cash flows from the asset, undiscounted and without interest charges, to the asset’s carrying value. If the sum of the future expected cash flows from the asset is less than the carrying value, an impairment would be recognized for the difference between the estimated fair value and the carrying value of the asset.

In making future cash flow analyses of various assets, we make assumptions relating to the following:

•    the intended use of assets and the expected future cash flows resulting directly from such use;

•    comparable market valuations of businesses similar to Aramark's business segments;

•    industry specific economic conditions;

•    competitor activities and regulatory initiatives; and

•    client and customer preferences and behavior patterns.

We believe that an accounting estimate relating to asset impairment is a critical accounting estimate because the assumptions underlying future cash flow estimates are subject to change from time to time and the recognition of an impairment could have a significant impact on our Consolidated Statements of Income (Loss).

Litigation and Claims

From time to time, we and our subsidiaries are party to various legal actions, proceedings and investigations involving claims incidental to the conduct of our businesses, including those brought by clients, customers, employees, government entities and third parties under, among others, federal, state, international, national, provincial and local employment laws, wage and hour laws, discrimination laws, immigration laws, human health and safety laws, import and export controls and customs laws, environmental laws, false claims or whistleblower statutes, procurement regulations, intellectual property laws, food safety and sanitation laws, cost and accounting principles, the Foreign Corrupt Practices Act, the U.K. Bribery Act, other anti-corruption laws, lobbying laws, motor carrier safety laws, data privacy and security laws and alcohol licensing and service laws, or alleging negligence and/or breach of contractual and other obligations. We consider the measurement of litigation reserves as a critical accounting estimate because of the significant uncertainty in some cases relating to the outcome of potential claims or litigation and the difficulty of predicting the likelihood and range of potential liability involved, coupled with the material impact on our results of operations that could result from litigation or other claims. In determining legal reserves, we consider, among other issues:

•    interpretation of contractual rights and obligations;

•    the status of government regulatory initiatives, interpretations and investigations;

•    the status of settlement negotiations;

•    prior experience with similar types of claims;

•    whether there is available insurance; and

•    advice of counsel.

We were involved in a dispute with a client regarding our provision of services pursuant to a contract. During fiscal 2022, we resolved the matter by entering into a settlement agreement with the client whereby our obligations totaled $13.6 million, resulting in a reversal of previously reserved amounts of $5.7 million, which is included in "Cost of services provided (exclusive of depreciation and amortization)" on the Consolidated Statements of Income (Loss).

Allowance for Credit Losses

We encounter credit loss risks associated with the collection of receivables. We analyze historical experience, current general and specific industry economic conditions, industry concentrations, such as exposure to small and medium-sized businesses, the non-profit healthcare sector, federal and local governments, and reasonable and supportable forecasts that affect the collectability of the reported amount in estimating credit losses. The accounting estimate related to the allowance for credit losses is a critical accounting estimate because the underlying assumptions used for the allowance can change from time to time and credit losses could potentially have a material impact on our results of operations. We adopted a new accounting standard related to the measurement of expected credit losses as of October 3, 2020 (the first day of fiscal 2021).

42

Table of Contents

As of September 30, 2022 and October 1, 2021, our allowance for credit losses was $56.4 million and $79.6 million, respectively.

Inventory Obsolescence

We record an inventory obsolescence reserve for obsolete, excess and slow-moving inventory, principally in the Uniform segment. In calculating our inventory obsolescence reserve, we analyze historical and projected data regarding customer demand within specific product categories and make assumptions regarding economic conditions within customer specific industries, as well as style and product changes. Our accounting estimate related to inventory obsolescence is a critical accounting estimate because customer demand in certain of our businesses can be variable and changes in our reserve for inventory obsolescence could materially affect our results of operations.

As of September 30, 2022 and October 1, 2021, our reserve for inventory obsolescence was $51.3 million and $45.7 million, respectively.

Self-Insurance Reserves

We self-insure for obligations related to certain risks that we retain under our casualty program, which includes general liability, automobile liability and workers’ compensation liability, as well as for property liability and employee healthcare benefit programs. The accounting estimates related to our self-insurance reserves are critical accounting estimates because changes in our claim experience, our ability to settle claims or other estimates and judgments we use could potentially have a material impact on our results of operations. Our reserves for retained costs associated with our casualty program are estimated through actuarial methods, with the assistance of third-party actuaries, using loss development assumptions based on our claims history. Our casualty program reserves take into account reported claims as well as incurred-but-not-reported losses using loss development factors based upon past experience. In order to determine the loss development factors, we make judgments relating to the nature, frequency, severity, and age of claims, and industry, regulatory and company-specific trends impacting the development of claims. The actual cost to settle our self-insured casualty claim liabilities can differ from our reserve estimates because of a number of uncertainties, including the inherent difficulty in estimating the severity of a claim and the potential amount to defend and settle a claim.

As of September 30, 2022 and October 1, 2021, our self-insurance reserves were $254.4 million and $235.7 million, respectively.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. We make assumptions, judgments and estimates to determine the current income tax provision (benefit), deferred tax asset and liabilities and valuation allowance recorded against a deferred tax asset. The assumptions, judgments and estimates relative to the current income tax provision (benefit) take into account current tax laws, their interpretation and possible results of foreign and domestic tax audits. Changes in tax law, their interpretation and resolution of tax audits could significantly impact the income taxes provided in our consolidated financial statements. Assumptions, judgments and estimates relative to the amount of deferred income taxes take into account future taxable income. Any of the assumptions, judgments and estimates mentioned above could cause the actual income tax obligations to differ from our estimates.

As of September 30, 2022 and October 1, 2021, our valuation allowance reserves recorded against deferred tax assets were $83.8 million and $97.5 million, respectively (see Note 10 to the audited consolidated financial statements).

43

Table of Contents

New Accounting Standards Updates

See Note 1 to the audited consolidated financial statements for a full description of recent accounting standards updates, including the expected dates of adoption.