Aramark sees record sales despite absence of NHL

Aramark Corp. on Wednesday reported record second-quarter sales of $2.7 billion, up 6% from the same quarter in 2004, despite the continued absence of the National Hockey League.

Second-quarter net income increased 14% to $53.1 million and diluted earnings per share were 28 cents, an increase of 17% from the prior year quarter, despite the $110 million judgment dealt to the Philadelphia-based concessionaire in March for serving beer to a visibly intoxicated fan who later was involved in an automobile accident.

The quarterly results include an after-tax gain of 4 cents per share from a real estate sale by an equity affiliate and a 2 cents per share charge from the company's plan to exit its West Africa oil services business and management separation costs in the U.K.

For the first six months of fiscal 2005, sales increased 8% to $5.4 billion, net income increased 10% to $125.5 million and diluted earnings per share increased 12% to 66 cents from the prior year period.

"With our strong first-half performance, we are solidly on our way to achieving our planned objectives for the full year," chairman and CEO Joseph Neubauer said in a statement. "Our performance is especially gratifying in view of the absence of NHL hockey for the full six months. We are very focused on achieving sustained profitable growth in all of our businesses.

"I am particularly pleased with the second-quarter margin improvement in our domestic food and support services and uniform rental segments. Through operational focus, financial discipline and strong execution, we are continuing to create value for our clients, customers and shareholders."

The NHL season was officially canceled in February after an entire season off the ice due to a salary dispute between players and owners.

In the company's U.S. food and support services sector, second-quarter sales were $1.7 billion, driven by solid growth in the healthcare and education sectors. Sales growth was 2%, and 5% after adjusting for acquisitions, the NHL lockout and the Easter holiday's impact on the education business.

Segment operating income was $77.6 million, up 27% from the prior year quarter and up 11% after adjusting for the real estate sale gain of $9.7 million. The operating margin improved 30 basis points to 4%, excluding the gain.

Sales for the international food and support services sector were $569 million in the second quarter, up 20% from the year-ago period, including a 6% currency translation benefit. Organic growth was 2%. Segment operating income of $17.7 million was down from $23.2 million in the 2004 second quarter and includes a $7.4 million charge relating to the company's planned exit of its oil services business in West Africa and management separation costs in the U.K.

Sales in Aramark's uniform rental division were up 8% to $281 million for the quarter, with organic growth of 5%. Direct marketing sales were $103 million, down 5% from the year-ago period.

The company anticipates third-quarter sales of $2.75 billion to $2.8 billion and diluted earnings per share between 36 cents and 38 cents.

For fiscal year 2005, Aramark expects sales of $10.8 billion to $11.1 billion. Excluding the net impact of the second quarter's real estate gain and international write-off, which increased earnings per share by 2 cents, the company expects full-year diluted earnings per share to be between $1.50 and $1.56.

Aramark stock rose 6 cents to $25.41 per share in Wednesday morning trading.