Ian Bailey - Vice President, Investor Relations Eric Foss - President and CEO Fred Sutherland - Executive Vice President and CFO.

Manav Patnaik - Barclays Andrew Steinerman - J.P. Morgan Gary Bisbee - RBC Capital Markets Andrew Wittmann - Baird Jeff Farmer - Wells Fargo Denny Galindo - Morgan Stanley Sara Gubins - Bank of America Merrill Lynch Stephen Grambling - Goldman Sachs Suzi Stein - Morgan Stanley.

Please standby, we are about to begin. Good day. And welcome to ARAMARK’s Third Quarter Fiscal 2014 Earnings Results Conference Call. At this time, I would like to inform you that this broadcast is being recorded for rebroadcast and all participants are in 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 then re-queue if needed. I will now turn the call over to Ian Bailey, Vice President of Investor Relations. Mr.

Bailey, please proceed..

Thank you. And welcome to ARAMARK 's conference call to review operating results for the third 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 would like to remind you that any recording used or 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 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, re-branding and other transformation-related expenses.

We will also be referencing adjusted organic sales which exclude the impact of acquisitions, divestitures and currency translation. A full reconciliation of these calculations is available in the press release we issued this morning which has been posted to our website at www.aramark.com.

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 including 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 whether as a result of future events or otherwise.

Lastly, I would like to reiterate our goal of addressing the full queue of questions during the Q&A session. Limiting yourself to one question and then 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?.

Thank you, Ian, and good morning. And thanks to everyone for joining us. We are pleased to report another quarter of solid financial results.

This is our third earnings call since the IPO and it’s the third call in a row, where we are posting solid numbers and delivering meaningful improvements in our profitability and we are achieving this despite the challenging consumer and macro environment.

This is also the second call in the row where we have been able to increase our adjusted EPS outlook for the year. As you saw in our release this morning, our full year fiscal 2014 expectations was taken up to a range of a $1.45 to a $1.50 per share on a 53-week journey basis.

Year-to-date, we have deliver organic sales growth at the upper end of our annual guidance framework of 3% to 5% and an 11% increase year-to-date, the improvement in our adjusted operating income is also at the upper end of that framework. An adjusted EPS for the first nine months of 2014 is up in excess of 20%.

So, clearly, we have a lot to be proud of with our financial performance this year and our results are reflective of several factors. The, first, is the 270,000 team members across ARAMARK that made this success possible and I want to show my appreciation and thank them for their efforts.

It’s also the results of our clearly defined strategy, which is focused on and organized around accelerating growth, activating productivity for growth, as well as margin expansion and then attracting and retaining the best talent.

Through this strategy, consumer insights are really leading to innovations and we are increasingly able to deliver on our right to win to compete and win effectively in the marketplace.

This innovation comes in many shapes and sizes, from opening the first Panera restaurant on the college campus to partnering with Starbucks on their new pilot project of Mobile Coffee Trucks for college campuses to a new dynamic pricing model focused against delivering against the right consumer value proposition.

Innovation at ARAMARK is an increasingly important cultural and competitive strength. Also embedded in this -- transformative strategy is our continued focus on strengthening our selling capabilities, boosting our client retention through enhanced focus on quality, as well as building the ARAMARK brand.

Our productivity efforts are centered on the significant cost buckets of food, labor and SG&A and we are focused on reinvesting in our people through a combination of better recruiting, onboarding and improve training and leadership development.

And finally, we are reworking our infrastructure in many of our core systems to support this transformation to ensure our frontline associates have the tools and technology to deliver a consistently high quality customer experience. Clearly, this strategy is working and the details of our third quarter financial results are great validation.

We showed strong imbalance revenue growth and financial performance across all reportable segments. Global organic sales growth for the quarter was up 4% with our North America business growing the topline organically by 4%, our international business grew organic sales by 6% and our uniform business posted revenue growth of 3%.

Importantly, this momentum was diversified across geographies, business verticals, as well as new and existing clients. Another highlight of the quarter was our role as the food service provider for the FIFA World Cup tournament in Brazil.

Our team in Brazil did a great job delivering service excellence in a very large, complicated and geographically diverse environment. Just imagine the scope of performing across 12 venues at 64 tournament games with approximately 3 million fans in attendance.

We are honored to have won this marquee global event and to demonstrate once again our ability to deliver exceptional service on such a large scale. Our client retention rates and new business pipeline remain solid. Year-to-date retention is consistent with the mid 90s percentage for the fiscal year that we have targeted.

Our net new business trends for the year are solid. It was another quarter of impressive new wins, including the University of Kentucky, which year-to-date is the largest self-op conversion of 2014 in the higher education sector.

We are extremely proud to have the university as a 15-year ARAMARK partner and look forward to delivering an innovative on-campus experience for them. Other notable wins in the quarter include the University of Miami Hospital and the Plainfield School District in Illinois, the fourth largest school district in the state with almost 30,000 students.

In the area of branding, on our last call I mentioned the importance of our Healthy for Life platform and our commitment continues in this vital area and I am proud to report on this latest initiative.

We recently launched a multiyear partnership with a highly respected Children's Hospital of Philadelphia for research study in educational program to improve the health and well-being of families in underserved communities. Our goal is to lay the foundation for a low-cost, sustainable model that can be replicated across the country.

So our strategic efforts to accelerate growth are working. Moving on to our second strategic imperative, activating cost and productivity improvements, it was also a good quarter of progress.

Important productivity milestones were met, including the transfer of a number of corporate processing functions to our Nashville shared-service center and we've also begun to relocate certain fuel processes as well.

As I mentioned last quarter, we continue to rollout tools to help our frontline managers control food cost, optimized menu options and more efficiently schedule labor, while there is still much to do in both of these areas and frankly, we are identifying better ways of doing things continuously, we are making progress with these initiatives and resulting margin expansion that follows is evident.

We expect by year end to successfully complete our productivity program we launched in 2013 and as we approach fiscal 2015 we are beginning to think about how these programs can be supplemented and expanded to drive further gains in the coming year.

As evidence by our results, the combination of topline growth and productivity improvement is meaningfully improving our profitability. For the total company, our third quarter adjusted operating income grew double-digit at 10%. Across segments, our Food and Support Services North America business grew their adjusted operating income 10%.

Our Food and Support Services business in international grew adjusted operating income by 22% and our Uniform business grew their adjusted operating income by 8%. For the first nine months of fiscal 2014 across the company we've achieved a solid 11% growth in adjusted operating income, as well as improved our operating margins by 40 basis points.

Our third strategic priority is to ensure we attract and retain the best talent, a lot of effort is being invested in developing programs that insurer are recruiting, training and recognizing our valued employees, so that we developed the most engaged workforce possible.

These efforts are translated into lower turnover and better employee satisfaction, which allows us to deliver great service at the moment of truth, ultimately improving service levels to both clients and consumers.

We recently completed formal training sessions for 3000 of our frontline managers to help them deliver unparalleled customer service to improve the customer experience and deepen customer loyalty. We also launched a comprehensive campus recruiting program designed to develop our next generation of leaders.

Our strong execution of this clear and focused strategy is positioning ARAMARK to compete and win not only today but well into the future. Finally, last week, our Board of Directors declared $0.075 quarterly dividend for holders of shares of ARAMARK common stock payable September 9, 2014 to holders of record on August 19, 2014.

And with that, let me turn the call over to Fred for more detailed review of our third quarter financials.

Fred?.

Thanks, Eric. In the third quarter, we achieved sales of $3.6 million and adjusted operating income of $192.4 million. As Eric mentioned, organic sales growth in the period was 4% and adjusted operating income growth was 10%. Adjusted net income for the quarter was $77.8 million compared to $59.4 million in the third quarter of 2013.

Adjusted earnings per share were $0.32 versus $0.28 in the third quarter of 2013. The diluted share count in the third quarter was 243.7 million shares, up from 208.3 million shares in the same period last year, primarily as a result of the company's IPO this past December.

As detailed in the non-GAAP schedules attached to our press release, changes in currency rates from the prior year reduced sales by approximately $23 million, with a minimal effect on operating income.

Now looking at the third quarter and a bit more detail, our North America Food and Support Services segment sales were $2.5 million with adjusted operating income of $122.2 million. Sales were up 4% organically and adjusted operating income was up 10%.

Sales growth was particularly solid in the Education, Healthcare, Hospitality, Corrections and Parks businesses from higher new business. In our International segment, third quarter sales were $765.2 million, a 6% organic increase.

This increase was led by continuing double-digit growth in our key emerging market geographies and positive organic sales growth in Europe. Third quarter adjusted operating income increased 22% to $39.2 million from our food, labor and SG&A productivity efforts.

In our Uniform segment, sales in the third quarter increased 3% organically to $367.1 million. Adjusted operating income grew 8% to $45.6 million from a combination of solid sales growth in both merchandise and plant productivity initiatives.

Corporate expenses adjusted for the items described in our opening comments were $14.6 million for the quarter. The year-over-year increase was expected, as some areas of reinvestment particularly around technology solutions reached implementation stages during the third quarter.

With food inflation so top of mind recently, we did want to take a moment to discuss how we think about the issue and provide some details about how we manage through commodity price increases.

While our business is certainly not immune to food cost increases, we do have certain structural and operational advantages that factor into our management of these costs. It’s a company that derives a significant revenue stream from food service.

We are obviously affected by food inflation but it is also important to remember that we generate about 10% of our revenue from our Uniform segment and about 50% of revenue comes from facility services. Additionally, about 30% of our food service contracts are management fee based, cost plus, contracts where we do not bear input costs.

So the structural combination of non-food service activities and cost-plus contracts insulate about half of our revenues from the impact of food inflation.

From an operational standpoint, we have centralized supply chain and culinary functions that leverage purchasing volumes, work to protect costs through fixed-price contracts and some forward purchasing and optimize menus through SKU rationalization and menu substitution.

And finally, we can work with our clients to increase prices although there are sometimes lag effect due to the need, for example, to publish a college board plan rate in advance.

Turning to the balance sheet, total debt as of the third quarter end was $5.7 billion, which represents a reduction of approximately $525 million from the same period in 2013. The company's total debt-to-adjusted EBITDA ratio on trailing 12-month basis was 4.6 at the end of the quarter, down from 5.3 a year ago. The liquidity remains strong.

At the quarter end, the company had approximately $590 million of available borrowing capacity under its $770 million revolving credit facility. Net capital expenditures year-to-date were $310.5 million compared to $254.9 million in the prior year period.

Our rate of capital spending increased year-over-year as we focused on several key account renewals, a number of large new account wins and spending on technology. The result, we expect that CapEx for the year will be in the range of about 0.5% of sales above our expectations going into the year.

As expected, non-cash working capital was use of cash during the first three quarters. Consistent with historical patterns, we expect a non-cash working capital will be a source of cash in the fourth quarter.

As it relates to our outlook, third quarter results were bit better than we expected from a combination of better sales, stronger flow through and lower interest expense. We’re pleased to carry this third quarter performance through to our annual outlook thereby increasing our adjusted EPS expectation to a range of $1.45 to $1.50 per share.

Now let me turn the call back over to Eric..

Thanks Fred. Well, that let concludes our prepared comments. And John, if you would, we’re happy to entertain any questions..

(Operator Instructions) Our first question comes from Manav Patnaik with Barclays..

Hey good morning gentlemen, good quarter. I guess, I just wanted to get an update from you in terms of the competitive environment in the U.S. and maybe specifically tie it up to the M&A pipelines as well. Because one of your European competitors, obviously, just went public.

And they've been touting their story as being more aggressive of acquisitions in the U.S.

And I just want to get your perspective on that?.

Sure, well, let me take the first and then I’ll ask Fred to comment on the M&A front. But I think relative to the competitive environment, I think the competitive environment remains rational. If you look at, what we try to do the last couple of years, certainly what we try to do since going public is to accelerate our growth momentum.

We’ve successfully done that. I think if you look at our results competitively versus our primary competitors both in third quarter as well as year-to-date, I think you are seeing industry-leading growth come from us right now.

So we’d like know what we’re seeing in the marketplace relative to improving our competitive position in picking up market share. That growth has been pretty balanced across both improving our base performance, which is about 50% of that growth as well as picking up net new business. We mentioned a couple of wins in the quarter.

So as we go forward, I mean, that’s very consistent with not only our expectations, but what we’ve talked about in terms of the long-term growth model. Fred, you want to comment on M&A..

Sure. On M&A, specifically in North America, if we like where we stand in food service business, as you know, we’re one of the top providers. We really compete pretty effectively across all of the geographic geographies and the market verticals.

And while there are opportunities from time-to-time in food services in North America, we don't see that, for us, as a particularly important driver of our overall performance. With respect to facility services and uniform services, there are also opportunities from time to time.

And they probably would be for us over time a little more important to help us build out geography and provide particular facilities, some additional scope of services, so we can see M&A probably playing a little bit more role in those two service categories..

We’ll take our next question from Andrew Steinerman with J.P. Morgan..

Hi everybody. When looking at the wording of the outlook, you chose to, kind of, quote over 3% to 5% multi-year outlook and then give the EPS range for the year.

Given we only have one last quarter, I just wanted to confirm on a same week basis, you're still looking to be kind of 3% to 5% organic growth in the fourth fiscal quarter?.

Yeah. I think -- Andy, this is Eric. I think that algorithm that we’ve committed to that is multiyear, is one that we want to keep out there at that 3% to 5%. I think you’ve heard us talk before and will continue to hear us talk about. There can and will be some quarter-to-quarter variability to that.

But I think the important point is as we look at the numbers that we delivered, we continue, as we look to the future to be encouraged by the outsourcing opportunity. The confidence that we’ve got and the strategies and plans leads us to the continued outlook of driving continued growth in creating long-term shareholder value.

So I think, that's very consistent with where we’ve been certainly and where we’re headed. So having said that, we don't want to get into specific quarterly guidance..

We’ll go next to Gary Bisbee with RBC Capital Markets..

Hi, guys. Good morning. The fiscal year guidance, if you look at what that implies for earnings in the fourth quarter, it is little profit growth.

I guess I just wanted to get a sense for how much of that may be conservatism or are there some reasons that we should think about either I don't know, if it's something on the margins? And as part of that, if you could also just confirm what the extra week means for earnings. Obviously, it's helpful for revenue.

I believe you'd said it's actually negative for cash flow because some costs get pulled forward, cash costs but what about earnings? Thank you..

So we expect in general as you’re saying, our framework for the annual -- our annual increase in adjusted operating income is in the high single-digits. As Eric mentioned, we’re operating now as far as in the upper half, top end of that range.

We continue to expect that our adjusted operating income growth would be consistent and that annual framework will hold up. And with respect to EPS, the impact of the 53rd week is somewhere around the penny a share, maybe slightly higher than that..

We’ll take our next question from Andrew Wittmann with Baird..

Hi, guys. Good morning..

Morning..

Eric, I wanted to dig into some of your comments that you had about the business environment and, specifically, kind of your overall impression about the net new business and maybe how that's tracking versus the targets that you had going into the year.

I think there's been some pretty good wins here, but I didn't know how this compared to what you thought you'd be getting.

So I think some commentary on that to flesh that out would be helpful?.

Sure. Andrew, happy to, again, if you look at our third quarter, if you look at our year-to-date performance and if you look at our kind of long term growth of that 3% to 5% top-line, again, the way this business model will work is about half of that growth will come from the performance of our base business.

That’s certainly consistent with what we saw in third quarter, its consistent with what we’ve seen year-to-date where roughly two points of that's coming from our base business combination of pricing as well as is volume growth coming from our pursuit of adjacency selling opportunities.

The other half of that growth, again, in the quarter a couple of points is coming from net new business. And as we look at the full year and as you go back and think about what we've added this year relative to some of the key client wins. It’s going to be one of our best years ever.

We had a record year, if you remember in 2013 and again had some big wins late in the year, a couple of the State Department corrections businesses.

But if you look at year-to-date, we feel very comfortable with the net new business that we’ve won and as we look at that pipeline, as it develops for the rest of this year in 2015 again, we’re very encouraged..

Our next question will come from Jeff Farmer with Wells Fargo..

Thank you. Just following up on that question and sort of the line of earnings questions that you talked about earlier, you had these two pretty healthy upward EPS revisions for ‘14.

So again, what, if anything, does this mean to FY ‘15 EPS growth in the context of the longer term, low-double-digit EPS growth guidance? You alluded to it, but I'm just curious.

Have you pulled forward any revenue recognition opportunities, any margin opportunities? Any reason to believe that life gets a little bit more challenging in terms of meeting that double-digit EPS growth guidance as you get into FY ‘15?.

Well, we talk about full-year 2015 guidance later as we close down the year. But I think the fact is that what we feel comfortable with is the multi-year guidance that we give.

Again, 3% to 5% top-line growth, which translates to mid to high single-digit, adjusted operating income, which translates to double-digit earnings per share is the algorithm and the business model that we continue to be comfortable with..

(Operator Instructions) We’ll go next to Suzi Stein with Morgan Stanley..

Hi. This is Denny Galindo on for Suzi Stein. As we look at the margin expansion this year, it's been better than expected every quarter. And I wonder if you could give a little bit more color on where this margin expansion is coming from and maybe the mix of drivers, whether more of it's from pricing, more of it from efficiency or something else.

And then how does this compare to your expectations during the roadshow?.

Well, the answer of last question, it’s very consistent with what we laid out at the roadshow. So I think what you heard us talk a lot about at the roadshow is the game we’re playing is one of continuing to accelerate our growth, well, also expanding margin. So I think I use the term multiple times.

This is an organization where have to dribble with both hands and make sure we accelerate the top-line revenue growth while also expanding margins. That's exactly the game and the skills set we’ve demonstrated through the first three quarters as a public company. I also mentioned as we did the roadshow that we will invest back in the business.

So as we capture some of the cost and productivity, we will invest back in the business, that will be largely focused on growth initiatives and building our brand. It will be focused on making sure, we’ve got an investment in people capability, particularly in the frontline.

And it will be focused on making sure we’ve got the right tools and technology to effectively run this business. If you look at what's driving the 40 basis points of margin improvement year-to-date, it comes across the spectrum of supply chain food, labor and SG&A.

Again, if you look at our performance this year, I think about half of that will probably come from SG&A and the other half will come from a combination of food and labor with the heaviest part of that, probably being on the labor side. We do have some headwind as we have some of the start-up contracts, particularly, on the food side.

So that's just typical what you’d experience as you’re gaining new business wins. But -- and as we go forward, I think the composition of that will shift probably more to about 80% of the cost captured on food and labor and 20% to 25% on the SG&A side.

So does that answer your question?.

Yes, it does. Thank you very much..

Okay. Thanks..

We’ll take our next question from Sara Gubins with Bank of America Merrill Lynch..

Thank you. Just following up on that.

For food pricing, what are you assuming in your guidance for the end of the year? And maybe could you help us think about the potential drag headed into next year?.

I just want to make sure, I understand your question.

When you say food price, are you talking about food inflation or you talking about our pricing approach?.

Sorry. Inflation and probably therefore after that, your pricing approach but primarily inflation..

Okay. So a couple things on inflation. I think as Fred mentioned in his comments. I think there's a couple of things to keep in mind relative to food inflation. Number one is just the diversity of this business model allows you to manage inflationary pressures, I think pretty proactively. So let me try to describe that to you.

Part of that diversity model is driven by the sectors and services in which we provide service. So again, remember, in addition to the food business, we have a uniform business, facilities business, the healthcare technology business.

Second is if you look at our contract structure, we have both P&L contracts where we would absorb those costs but we also have client interest contracts where those costs would get pass through to the client. Third, we have the option of both menu management optionality as well as pricing actions.

So again, we purchase a very diverse market basket of goods and when you have a few of those categories there might be pressure, recently we've seen some pressure in protein and dairy category. Again it's important to note that those two categories represent a pretty small portion of the overall market basket of about 15%.

And again, this point around uniforms and facilities, about 25% of our business is non-food and then 30% of our contract types are client interest where the cost gone of flow-through to our P&L. That then lead just to what can we do about menu and pricing.

And we’re confident in our ability that we can price through a lot of inflationary pressures and our offset debt with the cost and productivity initiatives. So I think my simple point here is we feel confident in our ability to deal effectively with inflationary concerns..

We’ll take our next question from Stephen Grambling with Goldman Sachs..

Hey, good morning and thanks for taking my questions. I guess, the first is a follow-up on some of the margin commentary.

And if you could just expand on, maybe the puts and takes in cost control, specifically helping to quantify the investments being made in the sales force versus the benefits that you're getting for some of these labor management tools?.

Sure. I'll comment and then let Fred jump in as well. I think relative to the cost and productivity in the investments. We feel very good and I think the accelerated revenue growth is depicting the investments that we've made on the selling resource side are actually paying off for us.

I think the same is true relative to the capability and what's happening on the customer experience side, as well as the technology and tools that are front-line managers in particular very excited about to help them manage fairly dynamic business.

So, I think, those investments are ones that, in the branding work is one that we talk a little bit about and I think it's important that as we rolled out the brand, the early reaction has been very, very positive, whether you talk to consumers or clients or our current or potential employee.

So, I think, we feel good about the investments and the return we’re getting. Do you want to make any comments, Fred, about just the whole cost bucket..

Yeah. I think, we've gotten balance. Clearly, the SG&A initiatives are little easier to execute because they don’t involve the broad field down to the unit level but as Eric mentioned, we're rolling out significant number of tools and training and standardized process for our frontline manager.

On the sales reinvestment, remember that our business outside of Uniform business is not a business with literally hundreds of sales folks, hundreds and hundreds. Its -- these markets are higher education, business market, fairly well-defined, finite -- business to business, finite set of clients. And so, we look at each one of those market verticals.

What are sales resources? What should those sales force resource be? And then we are gradually where we think we’re a bit short, spending money to bring more sales resources. And as we do that there is no reason to believe that their productivity, once they hit, once they hit sort of run rate would be any different then our existing sales recourses..

(Operator Instructions) We go next to Andrew Wittmann with Baird..

Hi, guys. Thank for taking my follow up. I wanted to dig in a little bit to the growth rates and particularly in maybe Uniform and International. While still good, they did decelerate a little bit, particularly in International. I guess, maybe a little commentary around that would be helpful.

Specifically, how much of a contributor was the World Cup and was there a lost contract there or it was just kind of normal lumpiness that you'd see in that segment?.

Sure, Andrew. Let me take the international one and I'll let, Fred, talk about Uniform business. I think, if you look our International business, I think we are pretty pleased. We saw our International business, if you look at Europe business, we grew in the quarter, I think, probably one of the few competitors to see that type of growth in Europe.

We saw business across the U.K., Ireland and Germany all grow. The important emerging market business are double-digit growth again was up about 11%, again I think that compares very well versus what have you seen from others and we’ve done that, we are also making good progress on the margin front.

So, we saw double-digit growth in the emerging markets across China and South America. Relative to your question on the FIFA World Cup, it’s a really small contributor to the overall revenue, I mean, it's well less than a 0.5% of revenue in the quarter. So it's very deminimis..

On Uniform, our growth outlook for the Uniform business is pretty much the same, I think, you’ll see that our growth rate may bounce around a little bit quarter-to-quarter, its not a typical for the industry just given some of the ebbs and flows of the business, direct sales as they affect one quarter versus another.

So we still view Uniform business is a business that will fit very much within our overall growth model I'd add one thing that Eric -- what Eric said about the FIFA World Cup.

Because we work through -- largely through other contracts to work with us at these venues, in fact, we were not recognizing the full gross revenues of all of the FIFA volume, just an accounting thing and so that’s why, as Eric mentioned, it really had deminimis impact on the quarter..

We’ll go once again to Suzi Stein with Morgan Stanley..

Hey. I just had a follow-up on the CapEx, it ticked up in the quarter, as you mentioned.

And I was curious exactly maybe some more color on what types of investments you were making and is any of this CapEx related to the Kentucky win or other big wins? And how do client investments play a big role in winning a large contract like the Kentucky contract?.

Sure. So our CapEx did tickup in the third quarter, so year-to-date was in first six months of the year. Year-to-date we were running behind prior year, we are about even a little bit above prior year through the nine month. And think of our CapEx growth being divided into a couple of buckets.

One is key renewals and another is key new business, another is the ramp up and technology spend and another, which is not a factor right now, but will be more of a factor over the year, next year to is increasing our capacity in the Uniform business.

So we have successfully renewed several large key accounts in our higher education space and there have been and will be some capital associated with that, these are new long-term contracts and then some of these key new accounts that we brought on U.K as one. That capital associated with them. And capital is, in some of these bid not an important.

But really think of the capital as a way to transform, let’s say a college campus. So as the college, particularly university the self-operated is looking to really become much more sophisticated and modernize, and much more student focused and what they offer. There is typically some sort of physical transformation that goes along with that.

It may be the dinning hall or it maybe the student union, it maybe food service, portable food service facilities, it maybe food service, many facilities inside dome and typically we are happy to work with client to help fund part of that. We look at as an investment in the account.

We expect a good return on that investment and then as you probably know from the accounting point of view, we amortize that investment against our P&L over the life of the contract, typically if there is meaningful investment we would be getting a long-term contract, 10 or 15 years.

And then finally that investment if the contract were to be terminated earlier would be essentially the unamortized value owed back to us from the client..

And we’ll take another follow-up from Stephen Grambling with Goldman Sachs..

Hey. Thanks again. And this is, I think, another follow-up to, I think, Andrew's question earlier. As you look at the number of contracts that are coming up for proposal.

Are you seeing any change in the number from, I guess, previously insourced potential customers versus those that are already outsourced?.

I would say the trend is fairly consistent. Again as we look at the pipeline, again, one of the things we absolutely don’t control is the timing of that.

But I think one of things that has happened over the last couple of years is with the healthcare situation and labor costs rising as we have seen particularly in the education space, in the healthcare space probably an increased movement from in-housed to outsource.

But I think as we look at the pipeline going forward, the composition of that looks fairly consistent..

That’s helpful. Thank you..

Thank you..

It appears there are no further questions at this time. Ian, I’d like to return the conference to you..

Thank you for joining us today and I’ll be available if you have any follow-up questions all day long. Thanks operator..

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