Ian Bailey - Vice President of Investor Relations Eric Foss - President and CEO Frederick Sutherland - EVP and CFO.

Andrew Steinerman - JPMorgan Greg Bardi - Barclays Hamzah Mazari - Credit Suisse Gary Bisbee - RBC Capital Markets Suzi Stein - Morgan Stanley Brian Davis - Bank of America Stephen Grambling - Goldman Sachs Imran Ali - Wells Fargo Kevin Klein - Goldman Sachs Barbara Noverini - Morningstar Karen Eltrich - Mitsubishi Bank.

Good morning, and welcome to ARAMARK's Second Quarter of Fiscal 2014 Earnings Results Conference Call. At this time, I'd like to inform you that this conference is being recorded for rebroadcast, and then all participants are in a listen-only mode. We'll open the conference call for questions at the conclusion of the company's prepared remarks.

In order to accommodate all participants in the question queue, the company has requested that you limit yourself to one question and then re-queue if needed. I'll now turn the call over to Ian Bailey, Vice President of Investor Relations. Please go ahead, sir..

Thank you, and welcome to ARAMARK's conference call to review operating results for the second quarter of fiscal 2014. Here with me today are Eric Foss, our President and Chief Executive Officer; and Fred Sutherland, our Executive Vice President and Chief Financial Officer.

I'd like to remind you that any recordings used for transmission of this audio may not be done without the prior written consent of ARAMARK.

In today's discussion of results, unless otherwise noted we will be referencing ARAMARK's adjusted operating income, adjusted net income, adjusted corporate expenses, and adjusted EPS metrics which are non-GAAP financial measures.

These measures exclude the increased amortization and depreciation resulting from the company's going-private transaction in 2007, share-based compensation expenses, acquisition and divestitures, changes in currency translation rates, gains, losses and settlements that impact period-over-period comparability, severance, expenses related to our initial public offering, refinancing expenses, rebranding and other transformation-related expenses.

We'll also be referencing adjusted organic sales which exclude the impact of acquisitions, divestitures and currency translation. A full reconciliation of these calculations is available on the press release we issued this morning which has been posted to our website at www.aramark.com. We anticipate filing of one 10-Q this afternoon.

Additionally, various remarks that we may make in this call relating to matters that are not historical facts, including remarks about anticipated future costs and savings, future expectations, anticipations, beliefs, estimates, plans and prospects constitute forward-looking statements.

Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties and important factors hitting those discussed in Risk Factors, MD&A and other sections of our SEC filings. We disclaim any duty to update or revise such forward-looking statements as a result of future events or otherwise.

Lastly I'd like to reiterate our goal of addressing the full queue of questions during the Q&A session. Limiting yourself to one question and re-queuing if needed will greatly help us in addressing all of the participant inquiries today. With that, I'll turn the call over to Eric.

Eric?.

Thanks, Ian, and good morning, and thanks to everyone for joining us. I'm pleased to report another quarter of solid financial results, and as I'm sure most of you saw in our release this morning we achieved strong second quarter sales and grew adjusted operating income year-over-year in the mid single-digits.

Given our strong performance in the first half of the year and our continued confidence in the business going forward, we're raising our full year adjusted earnings per share guidance from a range of $1.30 to $1.40 to a range of $1.35 to $1.45.

Organic sales growth in the quarter grew 4%, which was achieved through a combination of strong new business, solid client retention as well as our base business expansion. This growth was also balanced across the organization with each of our business segments reporting sales increases in the quarter.

Our North America business grew to top line organically by 3% despite some headwinds from the weather. Our international business grew organic sales by 8% and our uniform business grew organic sales by 4%. In addition to the strong top line growth across the organization, our client retention rates and new business pipeline remain solid as well.

Our year-to-date retention is consistent with the mid 90s percentage for the fiscal year, and we were extremely pleased with announced newer expanded partnerships with a number of clients during second quarter.

This is an impressive list that includes the Chicago public school system, the Tennessee Titans, the University of Chicago Medical Center and St. Louis University, just to name a few. For the first half of 2014 we have achieved organic sales growth of 5%. And as I've mentioned before accelerating growth is one of our three key strategic imperatives.

And I think our revenue momentum demonstrates that our growth strategies and our focus on growth is working and continues to fuel confidence for us around our annual targets of 3% to 5% revenue growth.

Success with our clients, which is a key contributor accelerating this growth really revolves around three critical capabilities; innovation, service excellence at the moment of truth and really having the best people. And I'd like to take a moment this morning to expand a little bit on one aspect of the innovation component of this equation.

As a global provider of services in the food, facility management and uniform space, we're committed to enriching and nourishing lives. And one way we do that is by Innovating the Everyday.

Our key growth priority and program for us, we call Healthy for Life, which is a comprehensive platform by business that includes a variety of solutions to help consumers make healthier lifestyle decisions. Healthy for Life starts with the food we prepare and serve, where our culinary experts focus on covering the dietary spectrum.

That includes menu options, balancing less of what people don't need, calories, fat and sodium with more of what they do need, like protein, whole grains, vegetables and vegetarian choices. Education also plays a critical role. We offer demonstrations that really teach people how to cook healthier through health fairs.

We introduce people to these foods with product samples as well as wellness workshops, and we utilized our vast network of company dieticians to educate and enable people to make better choices.

In the online world, virtual wellness sections give easy access to nutritional information along with digital menu boards, mobile dining apps as well as Twitter and Facebook apps to make monitoring individual lifestyles easy and convenient.

Healthy for Life is currently rolled out in over 800 locations impacting millions of consumers, and in Higher Ed is an example we've seen immediate and sustained increases in student satisfaction, and our Higher Ed clients are giving us credit for impacting their students, not just in the way they eat, but in the way they learn.

Now, Healthy for Life is really one example of how we're Innovating the Everyday to drive continued growth across ARAMARK by enriching and nourishing lives. We also made good progress during second quarter with our second strategic imperative, activating productivity.

If you recall, this imperative balances reduction in our food, labor and SG&A costs, it also allows us to reinvest in growth, technology and people that will ultimately support our continued long-term success.

During the quarter we made good progress in standing up our shared service center in Nashville, and we continue to rollout our standardized enterprise-wide labor and workforce productivity management tools.

On the food productivity front, our efforts include a comprehensive development approach across the supply chain as well as including SKU and menu management initiatives. As you might expect, the combination of that sales growth and productivity improvement is allowing us to improve our profitability.

And for the total company, our second quarter adjusted operating income grew by 6%. Our North America food and facility services business was the most effected by the winter weather, and they grew their operating income 1%.

Our international food and facilities business grew adjusted operating income by 26%, and our uniform business grew adjusted operating income by 8%. So, for the first half of fiscal 2014 we've achieved a solid 12% growth in adjusted operating income. We continue to make progress against our third imperative, attracting and developing the best talent.

We've undertaken considerable efforts to strengthen and expand our college recruiting program which aims to deepen the bench strength of our management team. We've also launched a new training program for our frontline managers focusing on the specific components of our repeatable business model we call Excel.

For those of you who might be unfamiliar with our Excel framework, it's really designed to focus our team members on providing selling and service excellence at the moment of truth which is that critical moment when we provide our service to our clients and our consumers.

So, a strong quarter and solid performance across the first half of 2014, but before I turn the call over to Fred, let me also highlight the fact that we also made progress on our capital structure. We successfully refinanced the bulk of our outstanding debt during the second quarter, something that we identified to you as a priority during the IPO.

Also earlier this week, our board of directors declared a seven and a half cent quarterly dividend for the holders of shares of ARAMARK common stock, which will be payable on June 9 to the holders of record on May 19. And with that, I'll turn the call over to Fred and let him give you a few more details on the second quarter financials..

Thanks, Eric. In the second quarter we achieved sales of $3.5 billion and adjusted operating income of $197.8 million, with organic sales growth of 4% and adjusted operating income growth of 6%.

The severe winter weather was particularly disruptive to our North America food and facilities client locations, but regardless of the severe weather as our results for the quarter demonstrate, our business proved resilient and we benefited from both the geographic and sector diversity of our portfolio.

Adjusted net income for the quarter was $75.2 million compared to $53.6 million in the second quarter of 2013. Adjusted earnings per share were $0.31 versus $0.26 in the second quarter of '13.

The diluted share count in the second quarter was 243.4 million shares up quite a lot from the 208.6 million shares at the same period last year, primarily as a result of the company's initial public offering this past December.

As we detailed in the non-GAAP schedules attached to the press release, changes in currency rates for the prior year reduced sales by approximately 36 million and operating income by about 2 million.

Just as a remainder we normalized for these currency effects and our calculation of organic sales growth and adjusted operating income growth, but if you're looking at the absolute numbers you should keep this currency translation in mind.

Now, looking at the second quarter in a bit more detail, our North America food and support services segment sales were $2.4 billion with adjusted operating income of $143.5 million. Sales were up 3% organically, and adjusted operating income was up 1%.

Sales growth was particularly solid in both the education and sports leisure and correction sectors from additional new business. We estimate the client shutdowns and reduced operations had a negative impact on sales and adjusted operating income growth of about 1% and 5% to 6% respectively.

For example, we estimate that we missed serving approximately 10 million meals, school launches, in our K-12 division alone from school weather closures, and these are not made up. In addition, our business dining in the higher education divisions were also affected through lost service days, which are not made up.

In our international segment, second quarter sales were $744.1 million, an 8% organic increase. The increase was led by continued double-digit growth in our key emerging market geographies, and positive growth in Europe that actually accelerated slightly from the first quarter.

Second quarter adjusted operating income increased 26% to $27.9 million from our food, labor and SG&A productivity efforts. Compared to last year the quarter was aided somewhat by a shift in the Easter holiday, but still experience very strong double-digit growth.

Additionally during the quarter we took some actions to further reduce our international structure incurring some related severance costs. In our uniform segment, sales in the second quarter increased 4% organically to $361 million.

Adjusted operating income grew 8% to $37.6 million from a combination of solid sales growth in both merchandise and planned productivity initiatives, which outweighed the higher production and route costs from the severe weather.

Corporate expenses adjusted for the items described in the opening comments were $11.1 million in the quarter and about flat with last year. If you recall that during our IPO we highlighted our plan to refinance and extend our near-term debt maturities. And I'm pleased to report that we completed this during the quarter.

We refinanced approximately $4 billion of outstanding debt, essentially extending the 2021 the maturity of obligations that were previously coming due in 2016.

We did incur approximately $26 million in charges to our reported interest and financing costs related to these refinancing activities and we have provided a full description of these costs in our non-GAAP schedules.

Total debt as of the second quarter was $5.6 billion which represents a reduction of approximately 600 million from the same period in 2013. At quarter end, approximately 60% of this debt was fixed and 40% was floating. And we will likely look to increase the fixed percentage of our outstanding debt over the coming months.

The average effective interest rate on the company's debt portfolio post-hedging activities remains at about 5%. Company's total debt to adjusted EBITDA ratio on a trailing 12-month basis was 4.6 times as of quarter end, down from 5.5 times a year ago.

Liquidity remains strong and at quarter end the company had about $580 million of available borrowing capacity under 770 million revolver. Net capital expenditures for the quarter were $159.6 million compared to $160.7 million in the prior year quarter.

As you know, historically the company's CapEx has been around 3% of total sales, but can trend higher in a period of significant growth, large count retention activity or reinvestment. Also, as expected and consistent with historical patterns, non-cash working capital was use of cash during the second quarter of the fiscal year.

While our outlook for the remainder of the year remains unchanged, we are raising our expected full year 53-week adjusted earnings per share guidance to $1.35 to $1.45 range reflecting our actual first half performance. Now, let me turn the call back over to Eric..

Thanks, Fred. Well, as you can see we delivered another strong quarter of strong financial results.

And while there is no one factor that's singularly driving the momentum in our business, it's really a combination of balanced growth, innovation, our productivity initiatives and really a lot of hard work by our 270,000 talented team members across the globe.

That's proving to be a powerful combination and I want to express my thanks because I'm particularly appreciative to those team members that went above and beyond to satisfy our clients this quarter. I'm proud of their efforts, but honestly I'm not surprised.

It's their commitment, their innovation, their fortitude, they really is one of the many strengths that make ARAMARK a great company. And with that, Shannon, we will turn the back over to you, and we'll be happy to entertain any questions..

Yes, Eric, thank you. (Operator Instructions) And our first question will come from Andrew Steinerman with JPMorgan. Please go ahead..

Hi, all. I just wanted to get a sense, because your comment about the second half outlook is unchanged, but not as specific as you were last press release.

What should organic growth look like in the second half of the year, given that the first half is 5%?.

Good morning, Andrew, it's Eric. I think as we look forward we're comfortable and are going to remain consistent around the 3% to 5% revenue growth.

That's what we said we're committed to in terms of the long-term, and I think you can see the first half of the year, we performed very consistently within that range, and I think you'd expect us to -– and we'd expect the second half to look the same..

Okay, terrific, super. And Eric, also you mentioned the progress in the branding efforts; you had a vision that this could, you know, kind of change the customers' perspective of ARAMARK.

Have you had any feedback to validate your thesis?.

Sure. Good question, Andrew. Thanks for asking it, and I appreciate both of your questions. I think on the branding side we're, I think as everybody is aware we look to rebrand ourselves and we did that through a transformation of our logo, our tagline as well as a new brand message.

And so from the ARAMARK look to the star person to this whole brand around dreaming and doing, right? If you think about what it takes to be successful in this business, it's all about making sure there is innovation and it's all about making sure, and that's the dreaming, and then it's all about doing, which is really all about that moment of truth greatness and providing a great customer experience.

So, as we've gone through that branding effort you've seen it start to translate, and we'll continue to play out over the remaining months of this year relative to the new look on our vehicles, our uniforms, our print ad campaign that we launched across our major lines of business, I'd say the initial response has been very good, well received relative to our consumers, our clients as well as our current and potential employees, and I think over time as a team we collectively feel confident that you'll see it improve our brand equity, which will improve our overall awareness, which will ultimately help us relative to continuing to expand not only our existing business, but our new business base as well.

So, more to come, but we are very pleased with the initial efforts on the branding front..

Excellent. Thanks for sharing. I appreciate it..

Okay..

And next we will move to Manav Patnaik with Barclays..

Hi, this is actually Greg calling for Manav.

I was wondering if you could spend a minute and talk about your FX exposure, how much of an impact that had on the quarter, and remind us where your key exposures are?.

Sure. This is Fred. Our international business has principally exposure to the Euro and to the Chilean Peso. Those are the big currencies overall, and the British pound. The impact year-over-year of currency on the top line was just a little bit shy at $40 million, actually $36 million. And the impact on adjusted operating income was about $2 million.

Sorry, we also have exposure to the Canadian dollar. So, some of that exposure is within the North American segment which is the Canadian dollar, some of that is in the international, which is mostly Sterling, Euro and Chilean peso..

And then just one quick follow-up, could you also size the impact of the severe weather on the uniform business or provide some color there?.

Sure. I think -- let me comment on the weather broadly.

I think as you think about weather and the impact on our business, where you'll see it most is as Fred mentioned in his comments is in our education and business and industry sectors, and then the other dimensionalization of that will take place with lost truck days in our direct store delivered businesses, which are the uniform business that you ask about as well as our refreshment services business.

So, I think at the end of the day it was as you lose truck days that tends to be business that you don't make up, but, again, as we said our North America business, it was about a point of volume and somewhere in the mid single-digits relative to operating income..

Okay, thank you..

And next we move to Hamzah Mazari with Credit Suisse..

Hey, good morning, thank you. You mentioned innovation in some of the new expanded partnerships, St. Louis University for example in terms of how you are winning these accounts.

Maybe from an execution standpoint, give us some flavor as to how execution has maybe improved, and how that's helping you win, if at all, or maybe cost of service is lower relative to last year? And who you are competing with when you are going out to bid and winning these new partnerships? Thank you..

Sure. Well, I mean the competitive set, you know it and in addition to ourselves there is two other big food and facility companies out there that are our primary competitors.

And so, if you think about the three reasons why we tend to win business, they really center around the following three areas; one, our ability to show that we can innovate and bring new thinking to our clients that are looking for that, because it's so critically important for them in the constituent that they care about most, be that a fan, a student, a patient or an employee.

And so it really starts with our ability to bring innovative solutions to the constituents that matter most. The second is providing that moment of truth greatness, and that gets us a little bit to your question on execution.

As we've talked this Excel model that we are pursuing, it really has several different dimensions of growth, selling excellence, service excellence, executional excellence and marketing excellence.

You can see us advancing our thinking in all of those, and the benefit of -– let me take executional excellence as an example, executional excellence is really intended to build the framework by which we can identify adjacency selling opportunities within an existing client.

By doing that that's going to allow us to improve our base business performance. If you look at the first half of the year and look at that 5% revenue growth, you'll see that about half of that growth was driven by new business wins and the other half was driven by an improvement in our base business performance. And so that's the second example.

And then the third reason why we win clients is really having the right team on the ground and many of you heard me talk before that the business we are really in is not necessarily just the service business, it's the people business.

And so we are, again, very pleased with the progress and I give our operating teams tremendous credit for their deployment of this excel model and how it's beginning to have impact on our base business performance.

Does that answer your question?.

Yeah, that does. That's very helpful. Just a quick follow up along the same line.

How big is non-food services for you and as that gets to be a bigger part, is that an advantage? Is that a significant advantage in winning new business as well or does it not matter as much?.

Well, again, if you think about it, our businesses, we've got the biggest percentage of our businesses in foods. Our facilities business is very important as is our uniform business. Those businesses tend to be bid for the most part particularly in North America which is the majority of our business separately.

We'd love to leverage the power of one ARAMARK and we try to do that where applicable, but to a large extent those businesses tend to be bid a bit differently..

Okay, great. Thank you..

And next we will move to Gary Bisbee with RBC Capital Markets..

Hi, guys. Good morning. On the U.S. food and sports services business, I realize the comparisons look a little funny because of the weather this quarter and last quarter, the snapback from the hurricane and hockey walkout the year before.

But if you back those out, it does look like there was some deceleration, is that just a normal lumpiness in the business or is it maybe it's just all of those issues or is there anything in which the momentum really change in any way?.

No. I don't think there is anything changed relative to the momentum.

I mean if you look at, we had some fairly significant new business that we had added late last year and in the early part of this year, but now, I think as we look at our 4% growth in total and our 3% growth in North America and you factor in kind of that point of weather we talked about.

I think we continue to feel very good about our growth overall and certainly about our growth vis-à-vis the competitive set in the marketplace. So, no, I don't think there is anything that we've seen in terms of slowing down at the top line.

But you do see some variability quarter to quarter just because businesses are growing at different rates and their contribution to the total sales vary somewhat quarter by quarter because some of the businesses are seasonal..

Okay, great. And then a follow up, just part of IPO you talked a lot about using consumer insights more than the company had done in the past to improve merchandizing and ultimately drive sales growth. And I remember the time you gave a number of examples within the sports and leisure market and also within the education particularly higher ed market.

Are there similar opportunities in the rest of your end markets like business and industry and K to 12 and what not, and I asked from the perspective of having study to lunch room here and thought about what could change and what has changed.

And some of the examples you have given in the past in sports and in higher ed seem real obvious and like big impact type examples and I am not sure I can think of nearly -- it's positive of benefit on some of your other end markets. When does it understand how you are thinking about the potential throughout the portfolio on the top line? Thank you..

Yeah, it's a good question. I'd say broadly speaking consumer insights can set the table and can have impact across most of our businesses. I think as you tend to get into some areas of our business that have less what I am going to call retail and kind of branded opportunities within that environment.

You might see the upside opportunity be a little less so. So if you think about the two to two reference, in particular, our higher ed and our sports and entertainment business. Those two obviously rely a lot on the retail side of the business and the branded side of the business.

So probably more opportunities there than we would see in others although consumer insights are an important part of the entire strategy for all of those businesses.

And we are very proactive in soliciting feedback and input from all lines of business, particularly from the employees and business and industry or business dining as well as students even at the K-12 level..

Okay, thank you..

And next we move to Suzi Stein with Morgan Stanley..

Hi, good morning.

Can you just talk about what you are seeing in some of your international businesses just maybe highlight some key markets for us?.

Sure. I think if you think about our international business again is as we said, a very strong quarter for us across the international business with very strong top line and bottom line growth.

If you look at our European business, the great news is that we are growing that business through the first half of the year above 3%, and our profits are up strong double-digit.

So the combination of pretty aggressive cost and productivity efforts along with us continuing to win new business in continuing to build our base business is made for very strong first half of the year and we expect that to continue through the second half.

In emerging markets again through the first half we continue to grow mid teen, strong double-digit and again grow our profitability double-digit as well with strong performance in China and Chile as a couple of key countries for us.

And again we continue to see opportunities and look for opportunities to expand our presence on the emerging market front. So I mean we are extremely pleased with the whole international portfolio both in Europe as well as our emerging markets business..

Okay. And then on the uniform margins, I don't remember if there is anything in terms of seasonality, but the margin seem to jump around a bit quarter by quarter.

Is there anything that we should be thinking about heading into next quarter or the rest of the year just in terms of how that should trend?.

Well, I'll make the point and then Fred can add to the point. I think you will see some lumpiness particularly as it is impacted by new business startups.

But the fact is, again, if you look at our uniform business, we've seen very strong margin improvement, not only year-to-date but last year and would expect us to continue to show margin improvement. But, yes, can it vary from quarter to quarter, of course it can.

And another fact on the uniform business is starting January 1st the company starts paying payroll taxes, which it doesn't pay for the full year for everyone because of the caps, and that's pretty common in the business.

So it's really the best comparison is to look at the same quarter year-over-year because of these -- their slight variabilities as opposed to sequentially quarter-to-quarter..

Okay.

And if I can maybe stick in one more, I guess, what you gave you the confidence, there is EPS guidance, was that simply a function of the better revenue growth or is there something happening on the expense side that also led to that decision?.

Well, I think if you look at our race to the guidance, there is a couple of things there, one is just based on our first half momentum of the business, we are very pleased with that.

We did also -- within that we have some interest expense favorability that's a part of that, and that plus the confidence in our outlook for the second half of the year allowed us to take the guidance off. So those were the variables that we considered..

Great, thank you..

And next we will move to Sara Gubins with Bank of America..

Brian Davis - Bank of America:.

. :.

Sure. Well, I think as we look and think about our new business; one, we continue to see good momentum on the new business front in terms of some of the highlights I mentioned on a year-to-date basis. In addition to that is we look at the pipeline.

I think we see a pretty robust pipeline of new business and continue to see those favorable outsourcing trends that you references as being very favorable, not just on the international market, but we continue to see -- if you think about kind of year-to-date and the new business wins, I mean, they've been fairly broad-based.

I think I highlighted new business wins literally across everyone of our big lines of business from sports, to education, to healthcare and we would expect that to continue. So I think as we think about the outsourcing trends, we see them certainly every bit as encouraging as we did at the time of the IPO and perhaps even a little more so..

Terrific. Thank you. And then my other question is regards to input prices like coffee. Coffee is up a lot this year, up over 80%, I think. I am wondering what flexibility you guys have to either pass along increases for input costs like coffee or to just absorb them into your cost structure. Thank you..

This is Fred. Coffee obviously is not an important part of our overall product mix, but having said that increasingly our operations are retail and in retail operations you do have the ability subject to the market to pass along price increases. And a big part of our coffee is our refreshment services business.

And there again we have the right to go back to our clients with price increases. So we do some purchasing out to limit our exposure. But generally we have been pretty quick to react in change in prices and make adjustments either in terms of mix, a product or pricing to our clients and our customers..

Terrific. Thank you, guys..

Thank you..

And next we will move to Stephen Grambling with Goldman Sachs..

Hi, thanks for taking the questions. First, in the press release mentioned some reinvestment in growth, technology and people. And I appreciate the color on the standardized workforce management tools being rolled out as well as the rebranding. But can you provide a little more color on each of these buckets of reinvestments and where those are going.

And perhaps as a related topic, you mentioned upfront cost from taking on some new businesses. Can you just remind us how to think about that maturation? Thanks..

Sure. Let me try to take that Stephen. I think, first of all relative to the investments; let me try to break down those three buckets a little bit more for you. If you think about our investments on the growth side, it's largely come an investment in sales feet on the street.

We continue to see new business opportunities as we talked about given the outsourcing trends and a pretty robust pipeline of potential impending clients. So that's one area of investment. The second area of investment is on the branding side as we talked about the need for us to rebrand.

And so there is a fairly significant investment on the rebranding front as well. As you think about capability, one of the things that we started a year ago and have continued this year and will continue into the coming years is to make sure that we have got the tools, the training and the technology.

But on the training front, we are making a very big investment in capability, particularly capability at the frontline. It also involves leadership capability and functional capability. But our big, big investment right now is in the area of kind of frontline and frontline leadership tools and training.

And then on the technology side, as we said at the time of the IPO, you will continue to see us make a very major investment in tools and technology that will allow us to make more timely and better decisions with better data. So those are really the three buckets, and again those will continue. We want to do that.

And it's important for us to not just capture cost and productivity to expand margins, but to capture cost and productivity to reinvest for the future of this business. And you will continue to see us do that.

Relative to the maturation of any type of new business startup, the way I would describe it generally is, you'll see typically in that startup, the first quarter or so because of the heavy resources.

If you think about the big businesses that we've started up, in the corrections business or in the sports business or in the Chicago Public Schools as a few examples. Those are very intensive startups. And so you will see us typically -- our margins would be negative in the first quarter or so they begin to improve.

Through the first year margins continue to be challenged. And then in the second year, they get to kind of a more normalized state of the margin structure of those businesses. So there is no doubt in the first quarter and really throughout the first year that those startup costs are fairly significant for new business.

Still the right decisions if you look at the average duration of our relationship's that tends to be about a decade, so it's the right decision. But you do face some headwinds in the startup phase.

Does that answer your question?.

Yeah, that's all very, very helpful. And if I can sneak one more quick one in there, just be as you look across this very broad business, I mean, how would you characterize the health of the consumer based on what you are seeing when you exclude the weather both in North America and then international. Thanks..

Sure, thanks. I think the consumer is still very cautious and will continue to be. I think she is continuing to be very cautious, and that's the way I'd characterize the consumer. And I think that will probably be the case for a while..

Okay, thanks. Best of luck..

Thank you..

Next we will move to Imran Ali with Wells Fargo..

Good morning, guys. Thanks for taking my questions. You discussed to a 200 million to 300 million total cost savings opportunity previously.

Is that still the right number with the next two to three years or have you got other areas of opportunity as we progress through this year?.

Well, I think the way we characterized our approach to cost and productivity is we are in the early innings. I think we've dimensionalized opportunities. I think you will continue to see us reframe those opportunities and continue down that path.

And again because we are in the early innings, we feel there is a long, long runway of opportunity for us across our businesses..

Great, thank you.

And just following up on a previous question if I may, you talked about coffee I think in a little bit, but can you talk about your overall inflation expectations for this year and 2015 if possible?.

Sure. To-date the overall inflation in the business has been roughly flat. This is in the food side between flat and 1%. We are seeing some pickup in that inflation rate more into the year-over-year 1% to 1.50% range, and expect that that may trend up somewhat as we go forward.

So we are thinking of it somewhere in that range of 1% or 2%, maybe a little higher as we trend towards the end of the year. And of course then we react to that for our round price increases and then quite a bit of what we call menu engineering, which is really substituting products within our menus..

Great. Thanks very much..

And next we move to Kevin Klein with Goldman Sachs..

Hi, thanks for taking the questions.

I was just wondering from an operating standpoint when you have various businesses facing the inclement weather, can you just describe, are you able to, let's say, cut back on ordering, let's say, perishables and will not to try to adjust if you feel like there is going to be, let's say, shutdowns or limited visitation, or is it hard to really steer the business in that way, because you are committed to certain quality aspects?.

Hi, Kevin. It's Eric. Let me just make a couple of points. I think a couple of things. One, I am big believer in kind of controlling what we can control and unfortunately weather isn't one that we feel like we are much in control of. So if you think about the winter weather and largely due to snow and loss school days or loss businesses that are shut.

The fact is that we don't feel we can influence that a lot and therefore we don't try to control it or manage it much. I think the important part to point out is that we are going to deal with weather on occasion. I think the important part is just if you look at the quarter despite the fact that we did have some weather impact in North America.

The key is we deliver the 4% growth, the mid single-digit operating income and strong EPS growth. And so to me it really is all about the breadth and the resilience of the portfolio that helps us deal with weather.

But it's pretty tough for us with minimal notice on the weather to try to re-architect the supply chain or manage cost proactively to get ahead of it. So, I'd say pretty limited opportunities to do what you are asking..

That's fair. Thank you.

And if I could just sneak one more in, I know sometimes you get a tailwind depending on how certain teams do in terms of playoff runs on the stadium side as you look out to next quarter the way your -- the NBA and NHL well, playoff lining up to the -- expected to be a tailwind or a tough comp?.

Yeah, I think as we look at the sports business again, in any given quarter it can have some variability. We've got a couple of NHL team still in and I think one NBA team still in. And then obviously major league baseball is the big sport we are in right now.

So I think within any given quarter you can either have the playoffs or other things affect your sports business. But I think the good news is overall we feel great about our partnerships with the leader and major league baseball, leader in the NHL, leader in the NFL.

And so we feel very good about our overall presence and over time that's going to build the strong enviable portfolio for us in the sports and entertainment world. So, again, minimal impact relative to the year on an ongoing basis with some variability within quarters..

Thank you..

And next we have Barbara Noverini with Morningstar..

Good morning, everybody..

Hi, Barbara..

I comment you for innovating nutritionally sound programs such as Healthy for Life. In creating healthier menu, I'd think that maybe our food or ingredient cost might be a little bit higher perhaps you are using more perishables and what not.

Let's say, also have the educational component which probably adds to the overall cost of delivering such a program.

So can you talk a little bit about pricing for such a platform relative to your standard offerings, our customers willing to pay a premium price for healthier menus?.

Yeah, I think for us we look at any particular initiative and make sure that we understand the cost of those products. And then build our pricing strategy accordingly. So I mean I think the fact is the health and wellness craze is here to stay.

As we talked about with our Healthy for Life initiative, we think we've got a great innovative way to bring great solutions to the consumer across all of our menus. Ultimately, we are big believers in letting them make the choice, but yes, in this instance we would take into account what was happening to relative to ingredient cost.

Obviously a lot of our pricing starts and ends with the consumer and we try to make sure we go consumer insights to understand how they define value within value, the importance of price, and then we put out pricing strategies and initiatives in place accordingly..

And are most of these programs done on a retail basis or this sort of the fixed price per head program that you build out in university?.

A very fine line of business, so it just depends on what the configuration is by line of business. So in some instances it would be retail and in other instances it will be built into the cost of a program, higher education will be a good example..

Got it. Thanks very much..

Okay, thank you..

And next we have Karen Eltrich with Mitsubishi Bank..

Thank you. A couple of questions following up, first on the coffee question, obviously that's at elevated prices. But in the past I remember you guys saying one of the more bigger challenges for you is the fact that you have to get free milk out with the coffee and that is that record high prices as well.

What can you do to mitigate that?.

So I think again, the point I would leave you with on the commodity front in inflationary front is overall inflation year-to-date has been fairly benign. I think as we look forward to Fred's point, we may see some movement of that. But again overall I would describe the inflationary outlook as we think about it as fairly benign.

It's important to note that as we look at any type of inflationary pressures, we would look to incorporate that into our pricing strategies and/or find cost and productivity initiatives to offset it.

So I think the point I want to leave with you on inflation and commodity inflation specifically is we feel very confident in our ability to manage that on a go-forward basis..

Karen Eltrich - Mitsubishi Bank:.

ACA:.

Well, again, there is I think several questions in there. I think the fact is that, if you are talking about the impact on our business dining clients in business and industry and have we seen any significant changes there relative to behavior either from companies or from the employees themselves relative to engaging in our food offering.

I would say no, we see no discernible changes..

Great. Thank you very much..

Thank you..

And it appears there are no further questions in queue at this time. I would like to turn the conference back over to management for any closing or additional remarks..

Well, first of all Shannon, thanks for your help this morning. And for everyone on the call, we appreciate your continued interest in ARAMARK and look forward to speaking to you at the end of our third quarter. Have a great day..

Thank you for participating. Have a nice day. All parties may now disconnect..