ARAMARK Reports Second Quarter Sales and Earnings

Business Wire, May 7, 2002

Business Editors

PHILADELPHIA--(BUSINESS WIRE)--May 7, 2002

ARAMARK Corporation (NYSE:RMK)

-- Earnings per share, excluding the gain on sale of the Red Sox investment,
were $0.19

-- Net income, excluding the Red Sox gain, rose 36% from a year ago on a 14%
sales increase

ARAMARK Corporation (NYSE:RMK), a world leader in managed services, today reported consolidated sales of $2.15 billion for its second fiscal quarter ended March 29, 2002, a 14% increase from a year ago.

Net income, including the $38 million pretax gain from the sale of ARAMARK's ownership interest in the Boston Red Sox, was $64.4 million or $0.31 per diluted share. Net income, excluding the Red Sox gain, was $40.0 million or $0.19 per diluted share, compared with $23.8 million or $0.13 per share reported in the comparable period last year.

If the fiscal 2001 results had been reported on the basis of the new accounting rules for goodwill, net income a year ago would have been $29.3 million or $0.16 per diluted share. After adjusting for goodwill and eliminating the Red Sox gain, net income for the second quarter of fiscal 2002 was up 36%.

For the first six months of fiscal 2002, consolidated sales were $4.26 billion, up 11% from the comparable period last year. Excluding the Red Sox gain, net income for the first half was $91.5 million or $0.46 per diluted share.

Based on comparable accounting for goodwill, net income a year ago would have been $78.0 million or $0.43 per share, and the year-to-year increase for the fiscal 2002 first half would have been 17%. Net income for the first six months of 2002, including the Red Sox gain, was $115.8 million or $0.58 per diluted share.

"We are pleased to be able to report these results in this challenging economic environment," said Joseph Neubauer, Chairman and CEO of ARAMARK. "Our recession-resilient businesses continued to perform well and we were able to achieve tighter cost controls in our more economically sensitive business lines. At the same time, ARAMARK continued its focus on retaining existing clients and expanding client relationships. In addition, our cash flow continued strong."

"Our results also benefited from the inclusion of ARAMARK ServiceMaster Facility Services for a full quarter for the first time since its acquisition at the end of last November," Mr. Neubauer continued. "The integration process is on schedule and clients have been very receptive to the combination of our two organizations, while ARAMARK ServiceMaster's performance is already making a positive net contribution to ARAMARK's bottom line. Another bright spot during the quarter was the significantly improved profitability in our uniform businesses, reflecting effective cost controls as well as lower energy costs this quarter. Finally, the company benefited from strong cash generation and a low interest rate environment."

In ARAMARK's Food and Support Services - U.S. segment, second quarter sales increased 24% from a year ago. Organic sales growth, which is adjusted to eliminate the effect of acquisitions (including ARAMARK ServiceMaster), divestitures, and management's estimate of the negative impact of the events of September 11, was approximately 4%.

The segment's operating income for the current quarter was up 28% after adjusting for the goodwill accounting change. Organic growth, including management's estimate of the effects of September 11, was about 5%.

Sales for the Food and Support Services - International segment for the quarter increased 1% from last year's second quarter. Organic growth in both sales and operating income was about 1% (with the latter adjusted for goodwill accounting).

Growth overseas was adversely affected by economic weakness in several of the countries in which ARAMARK operates, principally due to softness at existing client locations, as well as by foreign currency translation, which reduced reported sales by about 3%.

Both of ARAMARK's Uniform and Career Apparel segments achieved improved profits for the quarter. In the Rental segment, sales increased 1% while operating income, adjusted for goodwill, increased 7%. New sales achieved expected higher levels but continuing weak employment levels, particularly in existing client locations in the manufacturing and automotive industries, limited overall sales growth.

Effective cost management and lower energy costs contributed to improved profitability. In the Direct Marketing segment, sales declined 3% but operating income increased almost 89% from a year ago, reflecting the benefits of offshore manufacturing as well as operational efficiencies.

Sales of work clothes and outerwear were soft, due to lower employment levels and a mild winter, but safety equipment sales continued strong.

Second quarter sales for the Educational Resources segment were 2% below a year ago, as the soft economy led to reduced enrollments. However, operating income was essentially flat, reflecting tight cost controls.

Mr. Neubauer concluded, "Given our overall financial performance through the second fiscal quarter, we now expect earnings per share for the third quarter to be substantially in line with analysts' current consensus estimate of $0.29 per diluted share. Despite the continuing uncertain economic outlook for the remainder of our fiscal year, we remain comfortable with the current consensus earnings estimate of $1.14 per share for the full year since we believe that our effective cost controls, strong cash generation and attractive interest rates should offset the risk of continued economic uncertainty in our third and fourth quarters."