ARAMARK CORP/DE - 10-Q Quarterly Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended July 2, 2004

Commission file number 001-16807

ARAMARK CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		23-3086414
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

ARAMARK Tower 1101 Market Street Philadelphia, Pennsylvania		19107
(Address of principal executive offices)		(Zip Code)

(215) 238-3000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class A common stock outstanding at July 30, 2004: 74,877,489 shares

Class B common stock outstanding at July 30, 2004: 110,804,980 shares

PART I—FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands)


	July 2, 2004			October 3, 2003
ASSETS
Current Assets:
Cash and cash equivalents	$	44,763		$	44,475
Receivables		707,909			663,750
Inventories, at lower of cost or market		452,178			430,672
Prepayments and other current assets		67,569			87,695

Total current assets		1,272,419			1,226,592

Property and Equipment, net		1,199,312			1,184,320
Goodwill		1,563,941			1,422,639
Other Intangible Assets		280,358			294,290
Other Assets		374,022			339,736

	$	4,690,052		$	4,467,577

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term borrowings	$	27,152		$	18,176
Accounts payable		458,816			529,830
Accrued expenses and other liabilities		802,307			867,783

Total current liabilities		1,288,275			1,415,789

Long-Term Borrowings		1,917,072			1,711,705
Deferred Income Taxes and Other Noncurrent Liabilities		330,651			301,111
Shareholders’ Equity:
Class A common stock, par value $.01		930			1,044
Class B common stock, par value $.01		1,289			1,116
Capital surplus		995,075			910,562
Earnings retained for use in the business		1,004,649			854,129
Accumulated other comprehensive income		12,168			3,940
Treasury stock		(860,057	)		(731,819	)

Total shareholders’ equity		1,154,054			1,038,972

	$	4,690,052		$	4,467,577

The accompanying notes are an integral part of these condensed consolidated financial statements.

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In Thousands, Except Per Share Amounts)


	For the Three Months Ended				For the Nine Months Ended
	July 2, 2004		June 27, 2003		July 2, 2004		June 27, 2003
Sales	$	2,594,924	$	2,340,554	$	7,571,310	$	6,859,800

Costs and Expenses:
Cost of services provided		2,356,471		2,118,788		6,881,367		6,228,382
Depreciation and amortization		74,781		66,163		218,106		192,599
Selling and general corporate expenses		31,722		27,150		95,217		86,519

		2,462,974		2,212,101		7,194,690		6,507,500

Operating income		131,950		128,453		376,620		352,300
Interest and Other Financing Costs, net		30,873		40,776		92,443		110,996

Income from continuing operations before income taxes		101,077		87,677		284,177		241,304
Provision for Income Taxes		36,617		23,826		105,711		81,227

Income from continuing operations		64,460		63,851		178,466		160,077
Income from discontinued operations, net		—		25,453		—		35,724

Net income	$	64,460	$	89,304	$	178,466	$	195,801

Earnings Per Share - Basic:
Income from continuing operations	$	0.34	$	0.33	$	0.94	$	0.84
Net income	$	0.34	$	0.47	$	0.94	$	1.02
Earnings Per Share - Diluted:
Income from continuing operations	$	0.33	$	0.33	$	0.92	$	0.81
Net income	$	0.33	$	0.45	$	0.92	$	0.99

The accompanying notes are an integral part of these condensed consolidated financial statements.

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)


	For the Nine Months Ended
	July 2, 2004			June 27, 2003
Cash flows from operating activities from continuing operations:
Income from continuing operations	$	178,466		$	160,077
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization		218,106			192,599
Income taxes deferred		21,539			19,082
Changes in noncash working capital		(138,381	)		(131,084	)
Other operating activities		(39,618	)		(16,590	)

Net cash provided by operating activities from continuing operations		240,112			224,084

Cash flows from investing activities from continuing operations:
Purchases of property and equipment and client contract investments		(212,710	)		(191,838	)
Disposals of property and equipment		12,708			17,938
Proceeds from sale of investment		8,500			—
Acquisition of businesses, net of cash acquired		(141,286	)		(202,254	)
Divestiture of businesses		—			248,077
Other investing activities		4,718			576

Net cash used in investing activities from continuing operations		(328,070	)		(127,501	)

Cash flows from financing activities from continuing operations:
Proceeds from additional long-term borrowings		352,842			260,174
Payment of long-term borrowings		(167,249	)		(217,637	)
Proceeds from issuance of common stock		37,578			20,601
Repurchase of stock		(118,803	)		(168,574	)
Dividend payments		(27,946	)		—
Other financing activities		11,824			2,333

Net cash provided by (used in) financing activities from continuing operations		88,246			(103,103	)

Net cash provided by discontinued operations		—			14,722

Increase in cash and cash equivalents		288			8,202
Cash and cash equivalents, beginning of period		44,475			31,572

Cash and cash equivalents, end of period	$	44,763		$	39,774

The accompanying notes are an integral part of these condensed consolidated financial statements.

ARAMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

The condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Certain prior period balances have been reclassified to conform to the current period classification. In the opinion of the Company, the statements include all adjustments (which include only normal recurring adjustments) required for a fair statement of financial position, results of operations and cash flows for such periods. The results of operations for interim periods are not necessarily indicative of the results for a full year, due to the seasonality of some of our business activities and the possibility of changes in general economic conditions.

(2) DISCONTINUED OPERATIONS:

During the second quarter of fiscal 2003, the Company executed a definitive agreement for the sale of ARAMARK Educational Resources (AER) to Knowledge Learning Corporation, Inc. for approximately $250 million in cash. The sale, which closed on May 9, 2003, resulted in an after-tax gain of $23.6 million.

AER is accounted for as a discontinued operation in the accompanying financial statements in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” AER’s results of operations and cash flows have been removed from the Company’s results of continuing operations for fiscal 2003. All related disclosures have also been adjusted to reflect the discontinued operation. Summarized selected financial information from discontinued operations is as follows:


	Three Months June 27, 2003			Nine Months June 27, 2003
	(in thousands)
Sales	$	37,060		$	264,277

Income before income taxes	$	3,129		$	20,174
Income tax provision		(1,228	)		(8,002	)

Income from discontinued operations, net		1,901			12,172
After-tax gain on sale		23,552			23,552

Net income	$	25,453		$	35,724

(3) SUPPLEMENTAL CASH FLOW INFORMATION, ETC.:

The Company made interest payments of $92.2 million and $106.5 million and income tax payments of $85.7 million and $76.4 million during the first nine months of fiscal 2004 and 2003, respectively. During the first quarter of fiscal 2004, the Company completed the sale of its interest in a previously divested periodicals distribution business and received cash proceeds of $8.5 million. During the first nine months of fiscal 2003, the Company received business interruption proceeds of approximately $7.3 million. Pension expense related to defined benefit pension plans was not material for the three and nine month periods of both fiscal 2004 and 2003, and funding requirements for such plans will not be material in fiscal 2004.

Cash provided by operating activities includes tax benefits of approximately $24.7 million and $22.1 million from the employee exercise of non-qualified stock options during the first nine months of fiscal 2004 and 2003, respectively.

(4) COMPREHENSIVE INCOME:

Pursuant to the provisions of SFAS No. 130, “Reporting Comprehensive Income,” comprehensive income includes all changes to shareholders’ equity during a period, except those resulting from investments by and distributions to shareholders. Components of comprehensive income include net income, changes in foreign currency translation adjustments, minimum pension liability and changes in the fair value of cash flow hedges (net of tax). Total comprehensive income was $62.3 million and $186.7 million for the three and nine months ended July 2, 2004, respectively, and $102.8 million and $216.9 million for the three and nine months ended June 27, 2003, respectively.

(5) CAPITAL STOCK:

During the first nine months of fiscal 2004, 2.6 million options were granted to purchase common stock under the 2001 Equity Incentive Plan (2001 EIP). The options vest ratably over four years, with an exercise price equal to the fair market value at the date of grant. Additionally, during the first nine months of fiscal 2004, the Company issued 0.2 million restricted stock units under the 2001 EIP. The restricted stock units vest ratably over four years and are settled by conversion into Class A or Class B common stock. Compensation expense related to the restricted stock units is recognized ratably over the vesting period based on the fair value of the shares at date of grant, and totaled $0.6 million for the nine months ended July 2, 2004. During the first nine months of fiscal 2004, employees, through stock option exercises, purchased approximately 5.5 million shares of common stock for $49.4 million, of which $11.2 million was satisfied through the exchange of previously-owned shares. Also, during the first nine months of fiscal 2004, approximately 14.1 million Class A shares were converted to Class B shares.

During the first nine months of fiscal 2004, the Company repurchased 4.3 million shares of Class B common stock at an aggregate cost of approximately $117.0 million, leaving approximately $100.8 million available for common stock repurchases under the existing Board of Director’s authorization.

During the first nine months of fiscal 2004, the Company paid cash dividends totaling $27.9 million ($0.05/share in each of the first three quarters of fiscal 2004). At its August 3, 2004 meeting, the Board of Directors declared a dividend in the amount of $0.05 per share, payable on September 9, 2004 to holders of record of the Company’s Class A and Class B common stock at the close of business on August 13, 2004.

(6) GOODWILL AND OTHER INTANGIBLE ASSETS:

The Company follows the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” Goodwill, allocated by reportable segment, follows (in thousands):


	October 3, 2003		Acquisitions		Translation and Other			July 2, 2004
Food and Support Services – United States	$	1,053,394	$	23,648	$	—		$	1,077,042
Food and Support Services – International		85,278		101,712		(82	)		186,908
Uniform and Career Apparel – Rental		174,548		16,024		—			190,572
Uniform and Career Apparel – Direct Marketing		109,419		—		—			109,419

	$	1,422,639	$	141,384	$	(82	)	$	1,563,941

Goodwill additions during the nine months ended July 2, 2004 reflect (i) the acquisition of Catering Alliance (UK) and an increased investment in Central de Restaurantes (Chile) in the Food and Support – International segment, (ii) the acquisition of several regional uniform rental companies and (iii) the acquisition of a small U.S. catering business. These amounts may be revised upon final determination of the purchase price allocations. In the Food and Support Services – United States segment, during the first quarter of fiscal 2004, a final allocation adjustment of approximately $18 million was recorded to increase goodwill, of which approximately $16 million reduced the amount initially allocated to other intangible assets acquired with the Fine Host acquisition, reflecting the results of an independent appraisal of these assets.

Other intangible assets consist of (in thousands):


	July 2, 2004							October 3, 2003
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Customer relationship assets	$	477,075	$	(200,497	)	$	276,578	$	444,712	$	(160,000	)	$	284,712
Other		21,345		(17,565	)		3,780		23,248		(13,670	)		9,578

	$	498,420	$	(218,062	)	$	280,358	$	467,960	$	(173,670	)	$	294,290

All intangible assets are amortizable and consist primarily of contract rights, customer lists and non-compete agreements. The intangible assets are being amortized on a straight-line basis over the expected period of benefit, 3 to 20 years. Intangible assets of approximately $40.0 million were acquired through business combinations during the first nine months of fiscal 2004. Amortization of intangible assets for the first nine months of fiscal 2004 was approximately $37.3 million. Amortization for the first nine months of fiscal 2003 was approximately $36.6 million, which included $1.2 million related to the write-off of certain contract assets.

(7) EARNINGS PER SHARE:

The Company follows the provisions of SFAS No. 128, “Earnings per Share.” Earnings applicable to common stock and common shares used in the calculation of basic and diluted earnings per share follow:


	Three Months Ended				Nine Months Ended
	July 2, 2004		June 27, 2003		July 2, 2004		June 27, 2003
	(in thousands, except per share data)
Earnings:
Income from continuing operations	$	64,460	$	63,851	$	178,466	$	160,077

Net income	$	64,460	$	89,304	$	178,466	$	195,801

Shares:
Weighted average number of common shares outstanding used in basic earnings per share calculations		189,446		190,727		189,131		191,383
Impact of potential exercise opportunities under the ARAMARK Ownership and Equity Incentive Plans		4,331		5,648		5,031		7,111

Total common shares used in diluted earnings per share calculations		193,777		196,375		194,162		198,494

Basic earnings per common share:
Income from continuing operations	$	0.34	$	0.33	$	0.94	$	0.84

Net income	$	0.34	$	0.47	$	0.94	$	1.02

Diluted earnings per common share:
Income from continuing operations	$	0.33	$	0.33	$	0.92	$	0.81

Net income	$	0.33	$	0.45	$	0.92	$	0.99

Options to purchase 172,580 shares were outstanding at July 2, 2004, but were not included in the computation of diluted earnings per common share for the three months then ended, as the effect would have been antidilutive. Options to purchase 553,920 shares were outstanding at July 2, 2004, but were not included in the computation of diluted earnings per common share for the nine months then ended, as the effect would have been antidilutive.

The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, in accounting for its stock compensation plans. Accordingly, no compensation expense has been recognized related to stock options. If compensation cost for these plans had been determined using the fair-value method prescribed by SFAS No. 123, “Accounting for Stock Based Compensation,” the Company’s net income and earnings per share would have been reduced to the following pro forma amounts:


	Three Months Ended				Nine Months Ended
	July 2, 2004		June 27, 2003		July 2, 2004		June 27, 2003
	(in thousands, except per share data)
Net Income
As reported	$	64,460	$	89,304	$	178,466	$	195,801

Pro forma	$	60,817	$	86,134	$	168,354	$	186,849

Earnings per share
As reported:
Basic	$	0.34	$	0.47	$	0.94	$	1.02

Diluted	$	0.33	$	0.45	$	0.92	$	0.99

Pro forma:
Basic	$	0.32	$	0.45	$	0.89	$	0.98

Diluted	$	0.31	$	0.44	$	0.87	$	0.94

(8) ACCOUNTING FOR DERIVATIVE INSTRUMENTS:

The Company follows the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities—an Amendment of FASB Statement No. 133.” Derivative financial instruments, such as interest rate swaps and forward exchange contract agreements, are used to manage changes in market conditions related to debt obligations and foreign currency exposures. All derivatives are recognized on the balance sheet at fair value at the end of each quarter. The counterparties to the Company’s derivative agreements are major international banks. The Company continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties.

As of July 2, 2004, the Company had $320 million and 93 million British pounds of interest rate swap agreements, which are designated as cash flow hedging instruments, fixing the rate on a like amount of variable rate borrowings and $300 million of swap agreements designated as fair-value hedging instruments. Changes in the fair value of a derivative that is designated as and meets all the required criteria for a cash flow hedge are recorded in accumulated other comprehensive income (loss) and reclassified into earnings as the underlying hedged item affects earnings. Amounts reclassified into earnings related to interest rate swap agreements are included in interest expense. During the first nine months of fiscal 2004 and 2003, respectively, credits of approximately $1.0 million (net of tax) and $2.3 million (net of tax) related to interest rate swaps were recorded in comprehensive income. As of July 2, 2004, approximately $0.2 million of net unrealized gains related to interest rate swaps were included in “Accumulated other comprehensive income.” Changes in the fair value of a derivative that is designated as and meets all the required criteria for a fair value hedge are recognized currently in earnings, offset by recognizing currently in earnings the change in the fair value of the underlying hedged item. As of July 2, 2004, approximately $3.6 million has been included in “Other Non-current Liabilities,” with an offsetting decrease in “Long-term borrowings” in the condensed consolidated balance sheet related to fair value hedges. During the second quarter of fiscal 2004, the Company terminated $200 million of interest rate swap agreements which were designated as fair value hedges. The terminations resulted in a gain of $13.9 million, which will be recognized as an adjustment to interest expense over the remaining term of the hedged loans. The hedge ineffectiveness for cash flow and fair value hedging instruments for the first nine months of fiscal 2004 and 2003 was not material.

As of July 2, 2004, the Company had foreign currency forward exchange contracts outstanding, with notional amounts of 30.3 million Euros and 81 million Canadian dollars, to mitigate the risk of changes in foreign currency exchange rates on short-term intercompany loans to certain international subsidiaries. Gains and losses on these foreign currency exchange contracts are recognized in income currently, substantially offsetting currency transaction gains and losses on the short-term intercompany loans. As of July 2, 2004, the fair-value of these foreign exchange contracts was $(1.2) million, which is included in “Accrued expenses and other liabilities.” Net foreign currency transaction gains and losses were not material during the periods presented.

(9) ACCOUNTS RECEIVABLE SECURITIZATION:

The Company has an agreement (the Receivables Facility) with several financial institutions whereby it sells on a continuous basis an undivided interest in all eligible trade accounts receivable, as defined in the Receivables Facility. Pursuant to the Receivables Facility, the Company 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 subsidiaries of the Company. Under the Receivables Facility, certain subsidiaries of the Company transfer without recourse all of their accounts receivable to ARAMARK Receivables, LLC. ARAMARK Receivables, LLC, in turn, has sold and, subject to certain conditions, may from time to time sell an undivided interest in these receivables up to $200 million. The Company has retained collection and administrative responsibility for the participating interest sold, and has retained an undivided interest in the transferred receivables of approximately $187.6 million and $235.1 million at July 2, 2004 and October 3, 2003, respectively, which is subject to a security interest. This two-step transaction is accounted for as a sale of receivables following the provisions of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities—a Replacement of FASB Statement No. 125.” At July 2, 2004 and October 3, 2003, respectively, $159.4 million and $160.7 million of accounts receivable were sold and removed from the condensed consolidated balance sheet. The loss on the sale of receivables was $2.1 million and $2.8 million for the first nine months of fiscal 2004 and 2003, respectively, and is included in “Interest and other financing costs, net.”

(10) SEGMENT INFORMATION:

Sales and operating income by reportable segment follow:


	Three Months Ended				Nine Months Ended
Sales	July 2, 2004		June 27, 2003		July 2, 2004		June 27, 2003
	(in thousands)
Food and Support Services—United States	$	1,753,072	$	1,623,463	$	5,088,326	$	4,712,854
Food and Support Services—International		474,696		362,701		1,364,112		1,052,255
Uniform and Career Apparel—Rental		262,312		253,517		778,480		759,281
Uniform and Career Apparel—Direct Marketing		104,844		100,873		340,392		335,410

	$	2,594,924	$	2,340,554	$	7,571,310	$	6,859,800


	Three Months Ended						Nine Months Ended
Operating Income	July 2, 2004			June 27, 2003			July 2, 2004			June 27, 2003
	(in thousands)
Food and Support Services—United States	$	89,523		$	85,897		$	240,323		$	227,206
Food and Support Services—International		19,010			16,181			58,306			47,252
Uniform and Career Apparel—Rental		29,095			28,869			84,686			80,868
Uniform and Career Apparel—Direct Marketing		2,457			4,201			18,807			18,832

		140,085			135,148			402,122			374,158
Corporate		(8,135	)		(6,695	)		(25,502	)		(21,858	)

Operating Income		131,950			128,453			376,620			352,300
Interest Expense, net		(30,873	)		(40,776	)		(92,443	)		(110,996	)

Income Before Income Taxes	$	101,077		$	87,677		$	284,177		$	241,304

Interest expense in the 2003 third quarter included a debt extinguishment charge of approximately $7.7 million.

In the first and second fiscal quarters, within the Food and Support Services—United States segment, historically there has been a lower level of activity at the higher margin sports, entertainment and recreational food service operations which is partly offset by increased activity in the educational operations. However, in the third and fourth fiscal quarters, historically there has been a significant increase at sports, entertainment and recreational accounts which is partially offset by the effect of summer recess on the educational accounts. In addition, there is a seasonal increase in volume of directly marketed work clothing during the first fiscal quarter.

(11) ACQUISITIONS:

During the second quarter of fiscal 2004, the Company acquired Catering Alliance, a contract caterer in the United Kingdom, for approximately $85 million in cash, and increased its ownership in Central de Restaurantes (Chile) from 20% to 51% for approximately $37 million in cash. The Company’s pro forma results of operations for the first nine months of fiscal 2004 would not have been materially different than reported, assuming that these acquisitions had occurred at the beginning of the fiscal period.

During fiscal 2003, the Company acquired three regional uniform rental companies for a total of approximately $27 million in cash. The Company’s pro forma results of operations for the first nine months of fiscal 2003 would not have been materially different than reported, assuming that these acquisitions had occurred at the beginning of the period. On September 30, 2002, the Company completed the acquisition of the Clinical Technology Services (CTS) business from Premier, Inc. for approximately $100 million in cash. Additionally, in mid-December 2002, the Company closed the acquisition of the assets of Fine Host Corporation, a food service management company, for approximately $95 million. The results of Fine Host have been included starting in the second quarter of fiscal 2003. The pro forma results of operations for the first nine months of fiscal 2003 would not have been materially different than reported, assuming that these acquisitions had occurred at the beginning of the period.

(12) NEW/PROPOSED ACCOUNTING PRONOUNCEMENTS:

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. The Company has adopted the disclosure provisions of this statement (see Note 7). In March 2004, the FASB issued a Proposed SFAS – “Share-Based Payment: an amendment of FASB Statements No. 123 and 95.” The proposed standard would require companies to expense share-based payments to employees, including stock options, based on the fair value of the award at grant date. The proposed statement would eliminate the intrinsic value method of accounting for stock options permitted by APB No. 25 “Accounting for Stock Issued to Employees,” currently followed by the Company (see Note 7 – Earnings Per Share).

(13) FINANCING ACTIVITIES:

Effective June 21, 2004, ARAMARK Ireland Holdings Ltd. (AIHL) established a new GBP 150 million revolving credit facility, with borrowings available in multiple currencies. The credit facility expires in June 2009. The agreement contains an option for AIHL to increase the amount of the facility to GBP 250 million, subject to the lender banks’ approval. Interest on borrowings is based on the relevant currency LIBOR plus a spread of 0.375% to 1.50% (as of July 2, 2004 – 0.70%). The spread decreases 0.05% if the facility utilization (as defined) is less than 50%. The spreads are based on credit ratings of ARAMARK Corporation as defined. The credit facility contains restrictive covenants which provide, among other things, limitations on liens and dispositions of material assets by ARAMARK Corporation and its Consolidated Subsidiaries, which are consistent with the US Credit Facility. The terms of the credit facility also require that ARAMARK Corporation maintain certain specified ratios of cash flow to fixed charges and total borrowings to EBITDA, which are consistent with the US Credit Facility.

Effective March 31, 2004, the Company established a new $900 million revolving credit facility, consisting of an $800 million US dollar tranche and a $100 million Canadian dollar equivalent tranche. The new credit facility replaced the previous $1 billion credit facility and the Canadian C$70 million and C$25 million credit facilities, and expires in March 2009. The agreement contains an option for the Company to increase the amount of the facility to $1.25 billion, subject to the lender banks’ approval. Interest on US borrowings is based on the Prime Rate or LIBOR plus a spread of 0.31% to 0.95% (as of July 2, 2004 – 0.60%). Interest on Canadian borrowings is based on the Canadian Prime Rate or Canadian Bankers Acceptance Rate plus a spread of 0.31% to 0.95% (as of July 2, 2004 – 0.60%). The spreads increase between 0.1% and 0.25% (as of July 2, 2004 – 0.125%) if the facility utilization (as defined) is 50% or more. There is a facility fee ranging from 0.09% to 0.30% (as of July 2, 2004 – 0.15%). The spreads and fee margins are based on credit ratings as defined. The new credit facility contains restrictive covenants which provide, among other things, limitations on liens and dispositions of material assets. The terms of the credit facility also require that the Company maintain certain specified ratios of cash flow to fixed charges and total borrowings to EBITDA, as defined.

During the first quarter of fiscal 2004, the Company entered into a Japanese yen denominated borrowing agreement and borrowed the equivalent of $50 million. The note bears interest at 1.2% and matures in October 2006. This note has been designated as a hedge of the Company’s net Japanese currency exposure represented by the equity investment in our Japanese affiliate, AIM Services Co., Ltd. During the second quarter of fiscal 2004, the Company repaid its 30 million GBP and 30 million Euro private placement notes.

During the third quarter of fiscal 2003, the Company completed a tender offer for its 6-3/4% guaranteed notes due August 1, 2004 issued by ARAMARK Services, Inc. and guaranteed by ARAMARK Corporation. The total cash consideration paid for the purchase of the notes, including accrued interest, was $102 million. Additionally, during the third quarter of fiscal 2003, the Company retired a $45 million term loan due March 2005. These two transactions resulted in an extinguishment charge of $7.7 million which is included in “Interest and Other Financing Costs, net.”

(14) COMMITMENTS AND CONTINGENCIES:

ARAMARK has guaranteed certain indebtedness of an investee entity in the maximum amount of $9 million. Certain of the Company’s operating lease arrangements, primarily vehicle leases, with terms of one to eight years, contain provisions related to residual value guarantees. The maximum potential liability to ARAMARK under such arrangements was approximately $77 million at July 2, 2004 if the terminal fair value of vehicles coming off lease was zero. Consistent with past experience, management does not expect any significant payments will be required pursuant to these arrangements. No amounts have been accrued for guarantee arrangements at July 2, 2004.

During the third quarter of fiscal 2003, the Company reduced the provision for income taxes by approximately $8.4 million, based upon the settlement of certain of its open tax years.

The Company may be exposed to liability resulting from the non-performance of certain indemnification obligations by an entity currently in bankruptcy from which the Company acquired a business in fiscal 2000. The amount of such exposure cannot be quantified at the present time due to uncertainty with respect to the number and amount of claims, if any, originating from or relating to the pre-acquisition period. The Company has $25 million of insurance coverage for such exposure with a $5 million retained loss limit.

Regarding the Company’s settlement of the Civil Complaint in Illinois involving our school support services business (“Settlement”), as referenced in our Annual Report on Form 10-K for the year ended October 3, 2003 and our Quarterly Reports on Form 10-Q for the quarterly periods ended January 2, 2004 and April 2, 2004, on July 30, 2004, the Illinois Court granted final approval of the Settlement Agreement. The payment of the Settlement, which has been fully reserved, is contingent upon the 30-day appeal period expiring. The funds will be distributed to the Illinois school district class members who file properly executed claim forms. We can give no assurance that such settlement will not be appealed, or if it is reversed, whether the outcome of any such claim would have a material adverse effect upon us. We do not know whether any settlement of the Civil Complaint will have an impact on the government investigation.

From time to time, we are a party to various legal actions involving claims incidental to the conduct of our business, including actions by clients, customers and employees, including under federal and state employment laws and wage and hour laws. Based on information currently available, advice of counsel, available insurance coverage and established reserves, we do not believe that any such actions or investigations are likely to be, individually or in the aggregate, material to our business, financial condition, results of operations or cash flows. However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to our business, financial condition, results of operations or cash flows.

On July 21, 2004, Agents of the Department of Commerce, among others, executed a search warrant at the Lexington, Kentucky facilities of Galls, Inc., a subsidiary of the Company, to gather records in connection with record keeping and documentation of certain export sales. A grand jury subpoena has also been issued from the United States District Court in the District of Columbia seeking certain records at the California facilities of Galls, among others. The investigation surrounds the possible failure to obtain proper export licenses or prepare accurate shipping declarations in connection with the export of handcuffs, helmets and related products. Galls is providing records in response and is cooperating fully in the investigation. The Company can give no assurance as to the outcome of this investigation.

(15) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF ARAMARK CORPORATION AND SUBSIDIARIES:

The following condensed consolidating financial statements of ARAMARK Corporation and subsidiaries have been prepared pursuant to Rule 3-10 of Regulation S-X. These condensed consolidating financial statements have been prepared from the Company’s financial information on the same basis of accounting as the condensed consolidated financial statements. ARAMARK Services, Inc. is the borrower under the Credit Agreement and certain other senior debt and incurs interest expense thereunder. The interest expense and certain administrative costs are only partially allocated to all of the other subsidiaries of the Company. The Company has fully and unconditionally guaranteed certain debt obligations of ARAMARK Services, Inc., its wholly-owned subsidiary, which totaled $1.9 billion as of July 2, 2004. The other subsidiaries do not guarantee any registered securities of the Company or ARAMARK Services, Inc., although certain other subsidiaries guarantee, along with the Company, certain other unregistered debt.

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

July 2, 2004

(In Millions)


	ARAMARK Services, Inc. and Subsidiaries		Other Subsidiaries		ARAMARK Corporation		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	34.6	$	10.1	$	0.1	$	—		$	44.8
Receivables		505.0		202.2		0.7		—			707.9
Inventories, at lower of cost or market		112.3		339.9		—		—			452.2
Prepayments and other current assets		60.6		3.4		3.6		—			67.6

Total current assets		712.5		555.6		4.4		—			1,272.5

Property and Equipment, net		453.6		743.5		2.2		—			1,199.3
Goodwill		1,078.0		485.9		—		—			1,563.9
Intercompany Receivables		1,534.0		765.9		—		(2,299.9	)		—
Investment in Subsidiaries		—		—		2,723.6		(2,723.6	)		—
Other Intangible Assets		230.1		50.3		—		—			280.4
Other Assets		266.9		104.6		2.5		—			374.0

	$	4,275.1	$	2,705.8	$	2,732.7	$	(5,023.5	)	$	4,690.1

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term borrowings	$	20.8	$	6.4	$	—	$	—		$	27.2
Accounts payable		359.0		87.1		12.7		—			458.8
Accrued expenses and other liabilities		551.6		238.4		12.3		—			802.3

Total current liabilities		931.4		331.9		25.0		—			1,288.3

Long-Term Borrowings		1,903.2		13.9		—		—			1,917.1
Deferred Income Taxes and Other Noncurrent Liabilities		213.5		97.5		19.7		—			330.7
Intercompany Payable		374.9		391.0		1,534.0		(2,299.9	)		—
Shareholders’ Equity		852.1		1,871.5		1,154.0		(2,723.6	)		1,154.0

	$	4,275.1	$	2,705.8	$	2,732.7	$	(5,023.5	)	$	4,690.1

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

October 3, 2003

(In Millions)


	ARAMARK Services, Inc. and Subsidiaries		Other Subsidiaries		ARAMARK Corporation		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	40.5	$	3.9	$	0.1	$	—		$	44.5
Receivables		462.9		200.8		0.1		—			663.8
Inventories, at lower of cost or market		112.4		318.3		—		—			430.7
Prepayments and other current assets		70.1		15.3		2.3		—			87.7

Total current assets		685.9		538.3		2.5		—			1,226.7

Property and Equipment, net		448.6		733.3		2.4		—			1,184.3
Goodwill		957.6		465.0		—		—			1,422.6
Other Intangible Assets		237.4		56.9		—		—			294.3
Intercompany Receivable		1,452.7		765.8		—		(2,218.5	)		—
Investment in Subsidiaries		—		—		2,536.7		(2,536.7	)		—
Other Assets		237.3		99.8		2.6		—			339.7

	$	4,019.5	$	2,659.1	$	2,544.2	$	(4,755.2	)	$	4,467.6

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term borrowings	$	13.5	$	4.7	$	—	$	—		$	18.2
Accounts payable		410.1		98.2		21.5		—			529.8
Accrued expenses and other liabilities		621.2		235.2		11.4		—			867.8

Total current liabilities		1,044.8		338.1		32.9		—			1,415.8

Long-Term Borrowings		1,700.8		10.9		—		—			1,711.7
Deferred Income Taxes and Other Noncurrent Liabilities		185.0		96.5		19.6		—			301.1
Intercompany Payable		326.6		439.2		1,452.7		(2,218.5	)		—
Shareholders’ Equity		762.3		1,774.4		1,039.0		(2,536.7	)		1,039.0

	$	4,019.5	$	2,659.1	$	2,544.2	$	(4,755.2	)	$	4,467.6

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

For the three months ended July 2, 2004

(In Millions)


	ARAMARK Services, Inc. and Subsidiaries			Other Subsidiaries		ARAMARK Corporation		Eliminations			Consolidated
Sales	$	1,833.8		$	761.1	$	—	$	—		$	2,594.9
Equity in Net Income of Subsidiaries		—			—		64.5		(64.5	)		—
Management Fee Income		—			—		6.3		(6.3	)		—

		1,833.8			761.1		70.8		(70.8	)		2,594.9
Costs and Expenses:
Cost of services provided		1,720.0			644.4		—		(7.9	)		2,356.5
Depreciation and amortization		44.7			30.0		—		—			74.7
Selling and general corporate expenses		15.8			8.0		6.3		1.6			31.7

		1,780.5			682.4		6.3		(6.3	)		2,462.9

Operating income		53.3			78.7		64.5		(64.5	)		132.0
Interest and Other Financing Costs, net:
Interest expense, net		30.7			0.2		—		—			30.9
Intercompany interest, net		(9.1	)		9.1		—		—			—

Interest and Other Financing Costs, net		21.6			9.3		—		—			30.9

Income before income taxes		31.7			69.4		64.5		(64.5	)		101.1
Provision for Income Taxes		10.3			26.3		—		—			36.6

Net income	$	21.4		$	43.1	$	64.5	$	(64.5	)	$	64.5

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

For the three months ended June 27, 2003

(In Millions)


	ARAMARK Services, Inc. and Subsidiaries			Other Subsidiaries		ARAMARK Corporation		Eliminations			Consolidated
Sales	$	1,650.8		$	689.8	$	—	$	—		$	2,340.6
Equity in Net Income of Subsidiaries		—			—		89.3		(89.3	)		—
Management Fee Income		—			—		7.0		(7.0	)		—

		1,650.8			689.8		96.3		(96.3	)		2,340.6
Costs and Expenses:
Cost of services provided		1,543.5			582.2		—		(6.9	)		2,118.8
Depreciation and amortization		37.7			28.4		—		0.1			66.2
Selling and general corporate expenses		12.7			7.7		6.8		—			27.2

		1,593.9			618.3		6.8		(6.8	)		2,212.2

Operating income		56.9			71.5		89.5		(89.5	)		128.4
Interest and Other Financing Costs, net:
Interest expense, net		40.4			0.2		0.2		—			40.8
Intercompany interest, net		(8.9	)		9.1		—		(0.2	)		—

Interest and Other Financing Costs, net		31.5			9.3		0.2		(0.2	)		40.8

Income from continuing operations before income taxes		25.4			62.2		89.3		(89.3	)		87.6
Provision for Income Taxes		8.7			15.1		—		—			23.8

Income from continuing operations		16.7			47.1		89.3		(89.3	)		63.8
Income from discontinued operations, net		—			25.5		—		—			25.5

Net income	$	16.7		$	72.6	$	89.3	$	(89.3	)	$	89.3

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

For the nine months ended July 2, 2004

(In Millions)


	ARAMARK Services, Inc. and Subsidiaries			Other Subsidiaries		ARAMARK Corporation		Eliminations			Consolidated
Sales	$	5,608.5		$	1,962.8	$	—	$	—		$	7,571.3
Equity in Net Income of Subsidiaries		—			—		178.5		(178.5	)		—
Management Fee Income		—			—		23.5		(23.5	)		—

		5,608.5			1,962.8		202.0		(202.0	)		7,571.3
Costs and Expenses:
Cost of services provided		5,240.2			1,666.6		—		(25.4	)		6,881.4
Depreciation and amortization		129.1			88.8		—		0.2			218.1
Selling and general corporate expenses		45.9			24.1		23.2		2.0			95.2

		5,415.2			1,779.5		23.2		(23.2	)		7,194.7

Operating income		193.3			183.3		178.8		(178.8	)		376.6
Interest and Other Financing Costs, net
Interest expense, net		91.4			0.7		0.3		—			92.4
Intercompany interest, net		(27.1	)		27.4		—		(0.3	)		—

Interest and Other Financing Costs, net		64.3			28.1		0.3		(0.3	)		92.4

Income before income taxes		129.0			155.2		178.5		(178.5	)		284.2
Provision for Income Taxes		45.5			60.2		—		—			105.7

Net income	$	83.5		$	95.0	$	178.5	$	(178.5	)	$	178.5

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

For the nine months ended June 27, 2003

(In Millions)


	ARAMARK Services, Inc. and Subsidiaries			Other Subsidiaries		ARAMARK Corporation		Eliminations			Consolidated
Sales	$	4,998.9		$	1,860.9	$	—	$	—		$	6,859.8
Equity in Net Income of Subsidiaries		—			—		195.8		(195.8	)		—
Management Fee Income		—			—		22.7		(22.7	)		—

		4,998.9			1,860.9		218.5		(218.5	)		6,859.8
Costs and Expenses:
Cost of services provided		4,662.2			1,588.4		—		(22.3	)		6,228.3
Depreciation and amortization		108.6			83.8		—		0.2			192.6
Selling and general corporate expenses		41.9			22.6		21.9		0.2			86.6

		4,812.7			1,694.8		21.9		(21.9	)		6,507.5

Operating income		186.2			166.1		196.6		(196.6	)		352.3
Interest and Other Financing Costs, net:
Interest expense, net		109.4			0.8		0.8		—			111.0
Intercompany interest, net		(26.7	)		27.5		—		(0.8	)		—

Interest and Other Financing Costs, net		82.7			28.3		0.8		(0.8	)		111.0

Income from continuing operations before income taxes		103.5			137.8		195.8		(195.8	)		241.3
Provision for Income Taxes		36.1			45.1		—		—			81.2

Income from continuing operations		67.4			92.7		195.8		(195.8	)		160.1
Income from discontinued operations, net		—			35.7		—		—			35.7

Net income	$	67.4		$	128.4	$	195.8	$	(195.8	)	$	195.8

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the nine months ended July 2, 2004

(In Millions)


	ARAMARK Services, Inc. and Subsidiaries			Other Subsidiaries			ARAMARK Corporation			Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	96.8		$	150.5		$	(7.2	)	$	—	$	240.1
Cash flows from investing activities:
Purchases of property and equipment and client contract investments		(124.1	)		(88.7	)		0.1			—		(212.7	)
Disposals of property and equipment		8.8			3.9			—			—		12.7
Proceeds from sale of investment		—			8.5			—			—		8.5
Acquisitions of businesses, net of cash acquired		(119.3	)		(22.0	)		—			—		(141.3	)
Other investing activities		0.7			4.0			—			—		4.7

Net cash used in investing activities		(233.9	)		(94.3	)		0.1			—		(328.1	)

Cash flows from financing activities:
Proceeds from additional long-term borrowings		352.6			0.2			—			—		352.8
Payment of long-term borrowings		(163.0	)		(4.2	)		—			—		(167.2	)
Proceeds from issuance of common stock		—			—			37.6			—		37.6
Repurchase of stock		—			—			(118.8	)		—		(118.8	)
Change in intercompany, net		(68.6	)		(46.0	)		114.6			—		—
Payment of dividend		—			—			(27.9	)		—		(27.9	)
Other financing activities		10.2			—			1.6			—		11.8

Net cash provided by (used in) financing activities		131.2			(50.0	)		7.1			—		88.3

Increase (decrease) in cash and cash equivalents		(5.9	)		6.2			—			—		0.3
Cash and cash equivalents, beginning of period		40.5			3.9			0.1			—		44.5

Cash and cash equivalents, end of period	$	34.6		$	10.1		$	0.1		$	—	$	44.8

ARAMARK CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the nine months ended June 27, 2003

(In Millions)


	ARAMARK Services, Inc. and Subsidiaries			Other Subsidiaries			ARAMARK Corporation			Eliminations		Consolidated
Net cash provided by (used in) operating activities from continuing operations	$	53.9		$	196.0		$	(25.8	)	$	—	$	224.1
Cash flows from investing activities from continuing operations:
Purchases of property and equipment and client contract investments		(104.8	)		(86.9	)		(0.2	)		—		(191.9	)
Disposals of property and equipment		13.8			4.1			—			—		17.9
Acquisition of businesses, net of cash acquired		(173.5	)		(28.7	)		—			—		(202.2	)
Divestiture of businesses		—			248.1			—			—		248.1
Other investing activities		(1.4	)		2.0			—			—		0.6

Net cash provided by (used in) investing activities from continuing operations		(265.9	)		138.6			(0.2	)		—		(127.5	)

Cash flows from financing activities from continuing operations:
Proceeds from additional long-term borrowings		259.3			0.9			—			—		260.2
Payment of long-term borrowings		(212.5	)		(5.1	)		—			—		(217.6	)
Repurchase of stock		—			—			(168.6	)		—		(168.6	)
Proceeds from issuance of common stock		—			—			20.6			—		20.6
Other financing activities		(0.7	)		—			3.0			—		2.3
Change in intercompany, net		175.7			(346.6	)		170.9			—		—

Net cash provided by (used in) financing activities from continuing operations		221.8			(350.8	)		25.9			—		(103.1	)

Net cash provided by discontinued operations		—			14.7			—			—		14.7

Increase (decrease) in cash and cash equivalents		9.8			(1.5	)		(0.1	)		—		8.2
Cash and cash equivalents, beginning of period		19.1			12.3			0.2			—		31.6

Cash and cash equivalents, end of period	$	28.9		$	10.8		$	0.1		$	—	$	39.8

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following discussion and analysis of our results of operations and financial condition for the three and nine-month periods ended July 2, 2004 and June 27, 2003 should be read in conjunction with the quarterly financial statements and notes thereto contained in this Form 10-Q and our audited consolidated financial statements, and the notes to those statements, for the fiscal year ended October 3, 2003. Our discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, opinions, expectations, anticipations and intentions and beliefs. 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 the Special Note About Forward-Looking Statements and elsewhere in this quarterly report on Form 10-Q. In the following discussion and analysis of results of operations and financial condition, certain financial measures may be considered “non-GAAP financial measures” under Securities and Exchange Commission rules. These rules require supplemental explanation and reconciliation, which are provided in Exhibit 99.1 to this quarterly report on Form 10-Q, and incorporated by reference herein.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s significant accounting policies are described in the notes to the consolidated financial statements included in our 2003 Annual Report on Form 10-K filed with the Securities and Exchange Commission. As described in such notes, the Company recognizes sales in the period in which services are provided pursuant to the terms of our contractual relationships with our clients.

In preparing our financial statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts of assets, liabilities, sales 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. We discuss below the more significant estimates and related assumptions used in the preparation of our consolidated financial statements. If actual results were to differ materially from the estimates made, the reported results could be materially affected.

Asset Impairment Determinations

As a result of the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill is no longer amortized. Under this accounting standard, goodwill is subject to an impairment test that we conduct at least annually, using a discounted cash flow technique.

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. We apply Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” in order to determine whether or not an asset was impaired. This standard requires an impairment analysis when indicators of impairment are present. If such indicators are present, the standard indicates that if the sum of the future expected cash flows from the asset, undiscounted and without interest charges, is less than the carrying value, an asset impairment must be recognized in the financial statements. The amount of the impairment is the difference between the fair value of the asset and the carrying value of the asset.

In making future cash flow analyses of various assets, the Company makes 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.

•

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 income statement.

Environmental Loss Contingencies

Accruals for environmental loss contingencies (i.e., environmental reserves) are recorded when it is probable that a liability has been incurred and the amount can reasonably be estimated. Management views the measurement of environmental reserves as a critical accounting estimate because of the considerable uncertainty surrounding estimation, including the need to forecast well into the future. We are involved in legal proceedings under state, federal and local environmental laws in connection with operations of our uniform rental segment or businesses conducted by our predecessors. The calculation of environmental reserves is based on the evaluation of currently available information, prior experience in the remediation of contaminated sites and assumptions with respect to government regulations and enforcement activity, changes in remediation technology and practices, and financial obligations and credit worthiness of other responsible parties and insurers.

Litigation and Claims

The Company is a party to various legal actions including, among others, employment matters, compliance with government regulations, including import and export controls and customs laws, federal and state employment laws, including wage and hour laws, contractual disputes and other matters arising in the ordinary course of business. These claims may be brought by, among others, the government, clients, customers and employees. Management considers 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, management considers, 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.

•

Advice of counsel.

Allowance for Doubtful Accounts

We encounter risks associated with sales and the collection of the associated accounts receivable. We record a provision for accounts receivable that are considered to be uncollectible. In order to calculate the appropriate provision, management analyzes the credit-worthiness of specific customers and the aging of customer balances. Management also considers general and specific industry economic conditions, industry concentration and contractual rights and obligations.

Management believes that the accounting estimate related to the allowance for doubtful accounts is a “critical accounting estimate” because the underlying assumptions used for the allowance can change from time to time and uncollectible accounts could potentially have a material impact on our results of operations.

Inventory Obsolescence

We record an inventory obsolescence reserve for obsolete, excess and slow-moving inventory. In calculating our inventory obsolescence reserve, management analyzes historical data regarding customer demand within specific product categories and makes assumptions regarding economic conditions within customer specific industries, as well as style and product changes. Management believes that its 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 financial results.

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 revision.

RESULTS OF CONTINUING OPERATIONS

On May 9, 2003, our former Educational Resources Segment was sold and the fiscal 2003 operating results for this business are reported as “discontinued operations.” The tables below present sales and operating income from continuing operations.

These tables present our sales and operating income, and related percentages attributable to each operating segment, for the three and nine-months ended July 2, 2004 and June 27, 2003. As further discussed below, fiscal 2003 was a 53 week year and the 53^rd week, which ended on October 3, 2003, was included in fourth quarter fiscal 2003 results. This condition affects comparability of the fiscal 2004/2003 interim periods.


	Three Months Ended								Nine Months Ended
	July 2, 2004				June 27, 2003				July 2, 2004				June 27, 2003
Sales by Reportable Segment	$		%		$		%		$		%		$		%
	(dollars in millions)
Food & Support Services - United States	$	1,753.1	68	%	$	1,623.5	69	%	$	5,088.3	67	%	$	4,712.8	69	%
Food & Support Services - International		474.7	18	%		362.7	15	%		1,364.1	18	%		1,052.3	15	%
Uniform and Career Apparel - Rental		262.3	10	%		253.5	11	%		778.5	10	%		759.3	11	%
Uniform and Career Apparel - Direct Marketing		104.8	4	%		100.9	5	%		340.4	5	%		335.4	5	%

	$	2,594.9	100	%	$	2,340.6	100	%	$	7,571.3	100	%	$	6,859.8	100	%


	Three Months Ended										Nine Months Ended
	July 2, 2004					June 27, 2003					July 2, 2004					June 27, 2003
Operating Income by Reportable Segment	$			%		$			%		$			%		$			%
	(dollars in millions)
Food & Support Services - United States	$	89.5		68	%	$	85.9		67	%	$	240.3		64	%	$	227.2		65	%
Food & Support Services - International		19.0		14	%		16.2		13	%		58.3		16	%		47.3		13	%
Uniform and Career Apparel - Rental		29.1		22	%		28.9		22	%		84.7		22	%		80.9		23	%
Uniform and Career Apparel - Direct Marketing		2.5		2	%		4.2		3	%		18.8		5	%		18.8		5	%
Corporate		(8.1	)	-6	%		(6.7	)	-5	%		(25.5	)	-7	%		(21.9	)	-6	%

	$	132.0		100	%	$	128.5		100	%	$	376.6		100	%	$	352.3		100	%

Consolidated Overview

Sales of $2.6 billion for the fiscal 2004 third quarter and $7.6 billion for the nine-month period increased 11% and 10%, respectively, over the prior year periods. Sales increased in the third quarter of fiscal 2004 in all four business segments. Excluding the impact of acquisitions, divestitures and foreign currency translation, and, as further explained below (see Food and Support Services – United States segment), adjusting for the effect of the forward shift in our fiscal calendar (fiscal 2003 was a 53 week year) on the Education sector, consolidated sales increased 8% and 6% for the three and nine month periods, respectively. Operating income for the fiscal 2004 third quarter was $132.0 million and $376.6 million for the nine-month period, an increase of 3% and 7%, respectively, compared to the prior year periods. Excluding acquisitions, divestitures and the impact of foreign currency translation, and adjusting for the effect of the calendar shift noted above, operating income increased 1% and 2% for the three and nine month periods, respectively. Consolidated operating income margins were comparable during the nine month periods (5.0% in 2004 compared to 5.1% in 2003), and decreased somewhat in the 2004 three month period (from 5.5% in 2003 to 5.1% in 2004). Initial operating losses associated with the start-up of certain healthcare contracts, and lower margins in both the uniform rental and direct marketing segments, reduced the consolidated margin for the three month period.

Interest and other financing costs for the three and nine-month periods decreased $9.9 million and $18.6 million, respectively, from the prior year periods. Interest expense in the 2003 third quarter included a debt extinguishment charge of approximately $7.7 million. In addition, both average interest rates and borrowing levels were lower in the 2004 three and nine month periods. The effective income tax rate for the fiscal 2004 nine-month period was 37.2% compared to 33.7% in fiscal 2003. In the third quarter of fiscal 2003 the tax provision was reduced by approximately $8.4 million, as a result of the settlement of certain open tax years.

Income from continuing operations for the 2004 three and nine month periods was $64.5 million and $178.5 million, compared to $63.9 million and $160.1 million in the prior year periods, reflecting increases of 1% and 11%, respectively. Net income in fiscal

2003 (which includes the operating results from the divested childcare business) for the three and nine month periods was $89.3 million and $195.8 million, respectively.

Fiscal 2004 third quarter diluted earnings per share from continuing operations was $0.33 per share compared to $0.33 per share in fiscal 2003. The fiscal 2003 third quarter included $0.02 per share resulting from the income tax adjustment and debt extinguishment charge described above. The weighted average share count for the three month periods was 193.8 million shares and 196.4 million shares in fiscal 2004 and 2003, respectively, reflecting the impact of the Company’s ongoing share repurchase program.

For the nine month period, diluted earnings per share from continuing operations was $0.92 per share compared to $0.81 per share in fiscal 2003. The weighted average share count for the nine-month periods was 194.2 million shares and 198.5 million shares in fiscal 2004 and 2003, respectively.

Segment Results

The following tables present a fiscal 2004/2003 comparison of reportable segment sales and operating income together with the amount of and percentage change between periods.


	Three Months Ended								Nine Months Ended
	July 2, 2004		June 27, 2003		Change				July 2, 2004		June 27, 2003		Change
Sales by Reportable Segment	July 2, 2004		June 27, 2003		$		%		July 2, 2004		June 27, 2003		$		%
	(dollars in millions)
Food & Support Services - United States	$	1,753.1	$	1,623.5	$	129.6	8	%	$	5,088.3	$	4,712.8	$	375.5	8	%
Food & Support Services - International		474.7		362.7		112.0	31	%		1,364.1		1,052.3		311.8	30	%
Uniform and Career Apparel - Rental		262.3		253.5		8.8	3	%		778.5		759.3		19.2	3	%
Uniform and Career Apparel - Direct Marketing		104.8		100.9		3.9	4	%		340.4		335.4		5.0	1	%

	$	2,594.9	$	2,340.6	$	254.3	11	%	$	7,571.3	$	6,859.8	$	711.5	10	%


	Three Months Ended											Nine Months Ended
	July 2, 2004			June 27, 2003			Change					July 2, 2004			June 27, 2003			Change
Operating Income by Reportable Segment	July 2, 2004			June 27, 2003			$			%		July 2, 2004			June 27, 2003			$			%
	(dollars in millions)
Food & Support Services - United States	$	89.5		$	85.9		$	3.6		4	%	$	240.3		$	227.2		$	13.1		6	%
Food & Support Services - International		19.0			16.2			2.8		17	%		58.3			47.3			11.0		23	%
Uniform and Career Apparel - Rental		29.1			28.9			0.2		1	%		84.7			80.9			3.8		5	%
Uniform and Career Apparel - Direct Marketing		2.5			4.2			(1.7	)	-40	%		18.8			18.8			—		—	%
Corporate		(8.1	)		(6.7	)		(1.4	)	21	%		(25.5	)		(21.9	)		(3.6	)	16	%

	$	132.0		$	128.5		$	3.5		3	%	$	376.6		$	352.3		$	24.3		7	%

Food and Support Services—United States Segment

Food and Support Services – United States segment sales for both the three and nine-month periods increased 8% over the prior year periods due to acquisitions (approximately 2% for the nine-month period), net new accounts (approximately 3% and 2%, respectively) and increased volume/base business (approximately 5% and 4%, respectively). Reported base business sales (sales to existing clients) for the third quarter were unfavorably affected by the fiscal calendar shift. Fiscal 2003 was a 53 week year, resulting in fiscal 2004 starting one week later than normal. This results in a lack of service day comparability in the Education sector when comparing quarterly operating results between fiscal years. Management estimates that this calendar shift in the Education sector reduced volume/base business growth by approximately 2% in the third quarter of 2004.

For the third quarter, reported sales in the Education sector were about flat to prior year, reflecting the calendar shift described above. The Healthcare/Corrections sector reported high single digit sales growth due to base business growth and net new accounts. The Facilities sector reported low double digit sales growth resulting from both net new accounts and base business growth. Sales in the Sports and Entertainment sector grew in the low double digits due to increased parks and convention center activity and growth at stadium accounts. The 2004 third quarter sales growth in the Business Services sector was in the mid single digits reflecting both base business growth and net new accounts.

Segment operating income for the three and nine-month periods increased 4% and 6% compared to the prior year periods. Acquisitions contributed approximately 1% and 4% of the growth in the three and nine month periods, respectively. Management estimates that the impact of the calendar shift related to the Education sector reduced the operating income growth rate for the 2004 third quarter by approximately 3%. Fiscal 2004 segment operating income was influenced by a number of factors. The favorable effect of base business and new account sales growth was constrained as a result of start-up transition costs at new healthcare accounts, increased healthcare clinical service labor and material costs, higher labor-related expenses (including workers’ compensation, state unemployment insurance and healthcare costs), and somewhat higher food costs, particularly at Education accounts. Broadly affecting year over year comparisons, improved operating performance in the Sports & Entertainment Sector was effectively offset by lower operating income in the Facilities Sector.

Food and Support Services—International Segment

Sales in the Food and Support Services – International segment for the three and nine month periods increased 31% and 30%, respectively, compared to the prior year. Excluding the impact of foreign currency translation, sales increased 22% and 16% for the three and nine month periods due to acquisitions (approximately 18% and 10%, respectively), net new accounts (approximately 2% and 4%, respectively), and increased volume (approximately 2% in each period). For the third quarter, Spain, Belgium and Canada experienced strong sales growth while increases in the United Kingdom and Germany were due entirely to acquisitions and foreign currency translation.

Operating income in this segment for the three and nine month periods increased 17% and 23% compared to the prior year periods. Excluding the impact of foreign currency translation, operating income increased 9% for both the three and nine month periods, with acquisitions contributing approximately 10% and 7%, respectively. In the third quarter, Spain, Belgium and Canada experienced strong earnings growth, while earnings in the United Kingdom were negatively impacted by higher operating costs and lost business. The fiscal 2004 nine month period includes currency transaction gains of approximately $0.8 million.

Uniform and Career Apparel—Rental Segment

Uniform and Career Apparel – Rental segment sales for both the three and nine month periods increased 3% compared to the prior year. Third quarter growth was attributable to pricing (approximately 1%) and increased volume (approximately 2%). Sales growth in this segment continues to be constrained by the slow recovery in employment levels, particularly in the manufacturing sector.

Operating income in this segment for the three and nine month periods increased 1% and 5% compared to the prior year periods due primarily to the increased sales and lower merchandise costs, partially offset by higher fuel and labor-related costs, and increased sales force expense. We anticipate that the fuel and labor-related cost pressures will continue into the fourth quarter of fiscal 2004.

Uniform and Career Apparel—Direct Marketing Segment

Uniform and Career Apparel – Direct Marketing segment sales increased 4% in the third quarter of fiscal 2004 compared to the prior year, while sales for the nine month period were about 1% higher than prior year. In the third quarter, sales increased in the healthcare, quick-serve restaurant and safety products markets, partially offset by a decrease in sales in the work clothing direct mail market. Segment operating income decreased approximately 40% for the 2004 three month period and was equal to last year for the nine month period. Third quarter operating income decreased significantly due to gross margin reduction in the public safety products business related to changes in sales mix, and higher advertising and administrative expenses. For the nine month period, the public safety products reduction effectively offset increased operating income in the remainder of the direct marketing business.

Corporate

Corporate expenses, those administrative expenses not allocated to the business segments, were $8.1 million and $25.5 million for the three and nine-month periods of fiscal 2004, compared to $6.7 million and $21.9 million for the comparable prior year periods. The principal cost increases in both periods include finance administration, insurance, travel and stock compensation.

OUTLOOK

Although recent national employment statistics and general economic indicators have shown improvement, we anticipate the recovery impact on our businesses will be gradual and moderate for the next several quarters. In particular, the slow recovery in employment levels, particularly in the manufacturing sector, increases in labor-related costs, continuing start-up costs at new clients and other cost pressures may continue to have a dampening effect on our operating results. In addition, we have reduced our fourth quarter expectations for the parks business as a result of the publicity surrounding the western drought. Finally, the recent federal government investigation concerning export sales at Galls has had an adverse impact on our Uniform – Direct Marketing Segment. While Galls’ actual export sales are less than 5% of its total sales, the uncertainty surrounding the investigation has very recently started to affect our business. As a result, we now expect fourth quarter operating income for our direct marketing segment to be well below prior year.

FINANCIAL CONDITION AND LIQUIDITY

Reference to the condensed consolidated statements of cash flows will facilitate understanding of the discussion that follows.

Cash provided by operating activities from continuing operations for the nine-month period was $240 million in fiscal 2004 compared to $224 million in fiscal 2003, an increase of $16 million. Increased cash flow resulting from higher income and non-cash charges was partially offset by slightly higher working capital requirements and a reduction in noncurrent insurance liabilities in the current year nine month period.

On April 1, 2004, Fitch Ratings upgraded the Company’s $1.7 billion senior unsecured guaranteed debt rating to ‘BBB’ from ‘BBB-’.

Effective June 21, 2004, ARAMARK Ireland Holdings Ltd. (AIHL) established a new GBP 150 million revolving credit facility, with borrowings available in multiple currencies. The credit facility expires in June 2009. The agreement contains an option for AIHL to increase the amount of the facility to GBP 250 million, subject to the lender banks’ approval. Interest on borrowings is based on the relevant currency LIBOR plus a spread of 0.375% to 1.50% (as of July 2, 2004 – 0.70%). The spread decreases 0.05% if the facility utilization (as defined) is less than 50%. The spreads are based on credit ratings of ARAMARK Corporation as defined. The credit facility contains restrictive covenants which provide, among other things, limitations on liens and dispositions of material assets, which are consistent with the US Credit Facility. The terms of the credit facility also require that ARAMARK maintain certain specified ratios of cash flow to fixed charges and total borrowings to EBITDA, which are consistent with the US Credit Facility.

During the second quarter of fiscal 2004, the Company acquired Catering Alliance, a contract caterer in the United Kingdom, for approximately $85 million in cash, and increased its ownership in Central de Restaurantes (Chile) from 20% to 51% for approximately $37 million in cash. The Company funded these acquisitions through borrowings under the revolving credit facility.

During the third quarter of fiscal 2003, the Company completed a tender offer for its 6-3/4% guaranteed notes due August 1, 2004, issued by ARAMARK Services, Inc. and guaranteed by ARAMARK Corporation. The total cash consideration paid for the purchase of the notes, including accrued interest, was $102 million. Additionally, during the third quarter of fiscal 2003, the Company retired a $45 million term loan due March 2005. These two transactions resulted in an extinguishment charge of $7.7 million, which is included in “Interest and Other Financing Costs, net,” and were financed through borrowings under the Company’s former $1 billion bank credit facility.

At July 30, 2004, there was approximately $700 million of unused committed credit availability under our senior revolving credit facility. Additionally, the Company has a shelf registration statement on file with the SEC for the issuance of up to $400 million of debt securities. The Company currently expects to fund acquisitions, capital expenditures and other liquidity needs from cash provided from operating activities, normal disposals of property and equipment, and borrowings available under our credit facilities, or registered or private note issuances. As of July 2, 2004, there was approximately $260.0 million outstanding in foreign currency borrowings.

The following table summarizes the Company’s future obligations for debt repayments, capital leases, 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 October 3, 2003. Debt increased and guarantees decreased during the nine month period as described herein, and the Company has outstanding letters of credit in support of insurance arrangements of $22.1 million. Also, during the nine months of fiscal 2004, ARAMARK entered into long-term lease arrangements with an aggregate rental commitment of approximately $110 million, related principally to its Corporate headquarters facility. Other than these changes, since October 3, 2003, there has been no material change in the Company’s future obligations.


			Payments Due by Period
Contractual Obligations as of October 3, 2003	Total		Less than 1 year		1-3 years		3-5 years		After 5 years
Long-term borrowings	$	1,715,272	$	13,542	$	830,394	$	854,636	$	16,700
Capital lease obligations		14,609		4,634		4,606		3,385		1,984
Operating leases		531,202		175,949		127,581		78,484		149,188
Purchase obligations ⁽¹⁾		107,736		77,562		28,049		1,800		325
Other long-term liabilities reflected on the balance sheet ⁽²⁾		110,688		—		30,825		—		79,863

	$	2,479,507	$	271,687	$	1,021,455	$	938,305	$	248,060


			Amount of Commitment Expiration Per Period
Other Commercial Commitments as of October 3, 2003	Total Amounts Committed		Less than 1 year		1-3 years		3-5 years		Over 5 years
Letters of credit	$	46,279	$	37,034	$	9,245	$	—	$	—
Guarantees		24,269		24,269		—		—		—

	$	70,548	$	61,303	$	9,245	$	—	$	—

⁽¹⁾	Represents capital commitments in connection with several long-term concession contracts and other purchase commitments.

⁽²⁾	Primarily represents certain unfunded employee retirement obligations and $30 million related to the Fine Host holdback (See Note 3 to the consolidated financial statements, included in the fiscal 2003 Form 10-K).

During the first quarter of fiscal 2004, ARAMARK completed the sale of its 15% interest in a previously divested periodicals distribution business and received cash proceeds of $8.5 million. As part of this transaction, ARAMARK was released from debt guarantees of approximately $16.0 million, which are included in the table above.

The Company’s 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 financial statements. ARAMARK may be exposed to liability resulting from the non-performance of certain indemnification obligations by an entity currently in bankruptcy from which ARAMARK acquired a business in fiscal 2000. The amount of such exposure cannot be quantified at the present time due to uncertainty with respect to the number and amount of claims, if any, originating from or relating to the pre-acquisition period. ARAMARK has $25 million of insurance coverage for such exposure with a $5.0 million retained loss limit. The Company is self-insured for a limited portion of the risk retained under its general liability and workers’ compensation arrangements. When required, self-insurance reserves are recorded based on actuarial analyses.

NEW/PROPOSED ACCOUNTING PRONOUNCEMENTS

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views as to future events and financial performance with respect to our operations. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “aim,” “anticipate,” “estimate,” “expect,” “will be,” “will continue,” “will likely result,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause such a difference include: unfavorable economic conditions; ramifications of any future terrorist attacks or increased security alert levels; increased operating costs, including labor-related and energy costs; shortages of qualified personnel or increases in labor costs; costs and possible effects of union organizing activities; currency risks and other risks associated with international markets; risks associated with acquisitions, including acquisition integration costs; our ability to integrate and derive the expected benefits from our recent acquisitions; competition; decline in attendance at client facilities; unpredictability of sales and expenses due to contract terms and terminations; the contract intensive nature of our business, which may lead to client disputes; high leverage; claims relating to the provision of food services; costs of compliance with governmental regulations and government investigations; liability associated with noncompliance with governmental regulations, including regulations pertaining to food services, the environment, Federal and state employment laws and wage and hour laws and import and export controls and customs laws; inability to retain current clients and renew existing client contracts; determination by customers to reduce their outsourcing and use of preferred vendors; seasonality; and other risks that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Results of Operations and Financial Condition” section and other sections of our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

Forward-looking statements speak only as of the date made. We undertake no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date as of which they are made. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements included in this report or that may be made in other filings with the Securities and Exchange Commission or elsewhere from time to time by, or on behalf of, us.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of interest rate changes and manage this exposure through the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps. We do not enter into contracts for trading purposes and do not use leveraged instruments. The market risk associated with debt obligations and other significant instruments as of July 2, 2004, has not materially changed from October 3, 2003 (See Item 7A of the Annual Report on Form 10-K), other than as described in Notes 8 and 13 to the condensed consolidated financial statements.

ITEM 4.

CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this report, are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Change in Internal Control over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the Company’s third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Based on information currently available, advice of counsel, available insurance coverage and established reserves, we do not believe that any such actions or investigations are likely to be, individually or in the aggregate, material to our business, financial condition, results of operations or cash flows. However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to our business, financial condition, results of operations or cash flows.

On July 21, 2004, Agents of the Department of Commerce, among others, executed a search warrant at the Lexington, Kentucky facilities of Galls, a division of the Company, to gather records in connection with record keeping and documentation of certain export sales and a grand jury subpoena was subsequently issued from the United States District Court in the District of Columbia seeking certain records at Galls’ California facilities, among others. The investigation surrounds the possible failure to obtain proper export licenses or prepare accurate shipping declarations in connection with the export of Galls products. Galls is providing records in response and is cooperating fully in the investigation. The Company can give no assurance as to the outcome of this investigation.

ITEM 2.

CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES


Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as a result of Publicly Announced Plans or Programs¹	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs
Month 1 (April 3, 2004 – April 30, 2004)	0		N/A	0	$	140,803,202
Month 2 (May 1, 2004 – May 28, 2004)	500,000	$	27.16	500,000	$	127,224,542
Month 3 (May 29, 2004 – July 2, 2004)	940,000	$	28.08	940,000	$	100,824,883

⁽¹⁾

On May 28, 2002, the Company announced the establishment of a Stock Repurchase Program. Under the Stock Repurchase Program, the Board of Directors approved the use of up to $200 million to repurchase shares of the Company’s Class A or Class B common stock. On May 8, 2003, the Company announced the addition of $150 million to the repurchase program and on February 3, 2004, the Company announced the addition of another $150 million to the repurchase program. The repurchase program will expire when all monies authorized for use in the program have been utilized.

ITEM 6.

EXHIBITS AND REPORTS ON FORM 8-K

(a) —Exhibits:


10.1		£150,000,000 Credit Facility for ARAMARK Ireland Holdings Limited dated June 21, 2004.

10.2		Agreement Relating to Employment and Post Employment Competition with Lynn B. McKee dated May 5, 2004.

10.3		Letter Agreement with Brian G. Mulvaney dated May 29, 2004.

31.1		Certification of William Leonard pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of L. Frederick Sutherland pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of William Leonard pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of L. Frederick Sutherland pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1		Reconciliation of non-GAAP financial measures.

(b) —Reports on Form 8-K:

On May 12, 2004, the Company furnished a Form 8-K to provide a press release announcing its financial results for the quarter ended April 2, 2004.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


				ARAMARK CORPORATION

August 13, 2004				/s/ JOHN M. LAFFERTY
				John M. Lafferty Senior Vice President, Controller and Chief Accounting Officer