Aramark

Good morning, and welcome to Aramark's second quarter 2020 earnings results conference call. My name is Cherie, and I will be your operator for today's call. At this time, I would like to inform you that this conference is being recorded for rebroadcast and that all participants are in a listen-only mode. We will open the conference call for questions at the conclusion of the company's remarks. I will now turn the call over to Felice Cassell, Vice President, Investor Relations and Corporate Affairs. Ms. Cassell, please proceed.

Thank you, and welcome to Aramark's second quarter fiscal 2020 earnings conference call and webcast. Certainly hope those listening are doing okay. This morning, we will be hearing from our Chief Executive Officer, John Zilmer, as well as our Chief Financial Officer, Tom Undruff. As a reminder, our notice regarding forward-looking statements is included in our press release this morning, which can be found on our website. During this call, we will be making comments that are forward-looking. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors, including those discussed in the risk factors, MD&A, and other sections of our annual report on Form 10-K and our other SEC filings. Additionally, we will be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in this morning's press release as well as on our website. With that, I will now turn the call over to John.

Thank you, Felice, and good morning, everyone. First and foremost, I hope all of you and your families are safe and healthy. I'd like to open the call with some thoughts and reflections on the current operating environment, share a few observations given the mission-critical role Aramark has played and will continue to play as a key enabler in the broader recovery and where we go from here. I will also review our quarterly performance as well as the proactive actions our board and management team are taking to position Aramark to emerge as an even stronger company. When I returned to Aramark in October, I never imagined we would be front and center amid a global crisis. with a critical mission ahead of us. During this pandemic, our teams have worked tirelessly on the front lines of hospitals, schools, and other facilities, providing safe and hygienic food, uniforms, and facility services. Our team members have stepped up in unimaginable ways to serve clients at countless locations. And as I shared with employees a few weeks back, these individuals are truly heroes working among heroes, helping us to get past this acute period. As we review the business with you today, Aramark is taking decisive actions to navigate this challenging environment while pursuing paths to ultimately build a sustainable, growth-minded organization that can particularly flourish when the pandemic is behind us. Our strategies are deep rooted in our ability to leverage a diversified and flexible business portfolio, to join forces with an impactful network of world-class leaders and influential partners, to maintain strong liquidity and financial flexibility, and to unlock the long-term economic potential of the business. We are taking timely, proactive steps to adapt the company to the current challenging environment and to further bolster our already strong financial position. To that end, we recently announced an upsized offering of $1.5 billion of senior notes and an amendment to our existing credit agreement to provide additional financial flexibility and to further improve the company's already strong balance sheet, as well as available cash balances. a proactive drawdown on a revolver as a precautionary measure, similar to other prominent companies, the temporary reduction of salaries for certain executives, including the named executive officers, as well as the cash retainer fee of our directors, and other significant reductions to general corporate expenses. I know Tom plans to share his perspective, as well as actions underway to optimize working capital and defer capital expenditures as appropriate, to adapt the company without compromising the business and strengthen Aramark over the long term. We are managing through varying degrees of closures and cancellations of schools, colleges, businesses, and sporting events where the top line impact from these necessary governmental actions began in March and continues through today. To mitigate the bottom line impact, we are simultaneously flexing our highly variable cost structure. In some capacity, we are operating in hard-hit areas, such as education, helping to nourish students while schools are closed, serving over 25 million meals across hundreds of K-12 school districts, as well as business and industry, focused on the manufacturing and pharmaceutical sectors that remain in operation. We are in close touch with the professional sports leagues that are currently determining the most appropriate timeline for their return, including Major League Baseball. an important potential upcoming season for us that could represent an abridged schedule playing into late fall. Our leisure business is in operation in some of our larger properties, including Lake Powell, Pikes Peak, and Lake Quinault, with reduced attendance, and Yosemite and Denali are currently closed. Denali is largely accessed by Alaska-bound cruise ships with a peak period typically from June to September. and corrections remains relatively stable as we assist clients supporting the safety and well-being of this population. Our teams in healthcare facilities and other, as well as uniforms, are admirably managing the demand in frontline care that includes food service, cleaning, and supplying PP&E for essential roles in hospitals and other critical industries. At healthcare facilities across the country, We've opened onsite pop-up grocery stores to serve as a one-stop shop for doctors, nurses, and other hospital staff to grab necessities on their way home. We've mobilized our emergency relief and large-scale event expertise to aid temporary field hospital operations in several cities. And at hundreds of essential businesses, state and municipal facilities, we're providing safe, hygienic meals and uniforms, as well as additional deep cleaning and facility services. In international, our diverse verticals across 18 countries are at different stages of managing through their respective operations. In Asia, where we primarily operate in healthcare, our business has largely recovered. We've been awarded new opportunities in this region, specifically in China, based on the strength of our response to the pandemic and the commitment we demonstrated to our clients. In Canada and Europe, most predominantly in Spain and Germany, we've seen a slowdown as a direct result of government mandated shutdowns with continued operations in healthcare and other essential businesses. Operations in Latin America have been affected to a lesser extent, and our teams are quickly adapting to changing conditions in that region. Broadly, we are complying with country-specific government protocols and expect to participate in the appropriate programs for employee support, business loans, tax deferrals, or reimbursement once these programs are formalized. As I mentioned earlier, I wanted to spend a moment discussing how the company has been contributing to the pandemic response. I'm proud and humbled by Aramark's efforts and those of our individual team members. We've created an effective platform that is joining forces with world-class and influential partners to foster a hospitality spirit throughout our portfolio and beyond. Recently, we were honored to join the Deborah and Leon Black family, the Mayor's Fund, Robin Hood, and the American Red Cross in supporting the healthcare heroes at the epicenter of the pandemic in New York City. Aramark employees are providing procurement, assembly, and delivery services for up to 500,000 packages of shelf-stable food and personal care products to staff at hospitals across the five boroughs through June. As part of our philanthropic program, we've donated over 150,000 pounds of food to local organizations and continue to provide food, supplies, and other resources to communities around the country. And as you may have seen yesterday, we are supporting the American Red Cross Coronavirus Outbreak Fund to honor the incredible healthcare workers for their hard work and sacrifice as part of the National Nurses Week and National Hospital Week. Uniforms has shifted certain production lines to manufacture millions of medical masks, scrubs, and gowns for healthcare providers and other critical industries. Our products are shipping to Aramark clients across the U.S. in the healthcare, pharmaceutical, biotech, medical device, and other vital industries where employees rely on these supplies to perform their jobs. As we look to the future, our teams have been working to define the new normal across our operations. We have developed comprehensive reopening plans, including new models for service delivery and customer engagement, all designed to ensure the safest, most hygienic environments. Our diverse supply chain remains stable and largely unaffected for frontline operators, clients, and customers. We're particularly focused on assisting in PPE supply replenishment, which our uniforms team is now helping enormously to address, as I just mentioned. We're closely monitoring commodity markets and seeking appropriate entry points to mitigate any potential future volatility. And our commitment to strong relationships with key strategic and preferred suppliers has been invaluable during this period. While focused on helping communities in need across the nation, we also recognize the immediate hardship this is having on many of our employees. In addition to offering support where we can, our government affairs team is working to identify opportunities for Aramark to be of service, in response to the pandemic and targeted stimulus that will help us provide that service. Aramark expects to see multiple benefits under the CARES Act, including employee retention tax credits, payroll tax deferral, NOL carryback modifications, and other stimulus measures, as we have every intent to fully reactivate the business and ultimately pursue the multiple growth opportunities ahead. While we are managing the complexities of the current environment, we've also continued to sharpen our organizational bench strength. That includes the return of Jack Donovan, a respected hospitality industry veteran, who was appointed President of Higher Education in March. Jack previously spent 18 years with Aramark, holding various leadership roles, including President of Higher Education and Group President of Education, Corrections, and Sports and Entertainment. He also served as Executive Vice President and Chief Growth Officer of Univar Corporation. We look forward to Jack's leadership and the impact it will have on one of our largest businesses. I'm confident that with our strengthened executive team, combined with our seasoned board and passionate employee talent, Aramark has the right people in place to quickly resize our flexible business and manage through even the most challenging periods while ensuring we will be fully prepared to perform strongly in the recovery. With that, Tom will now provide a detailed financial review of the business. Tom? Thank you, John.