Kate Pearlman - Aramark Eric J. Foss - Aramark Stephen P. Bramlage - Aramark.

Stephen Grambling - Goldman Sachs & Co. LLC Mario Cortellacci - Macquarie Capital (USA), Inc. Toni M. Kaplan - Morgan Stanley & Co. LLC Gary Bisbee - RBC Capital Markets LLC Manav Patnaik - Barclays Capital, Inc. Andrew John Wittmann - Robert W. Baird & Co., Inc. Dan Dolev - Instinet LLC Anjaneya K. Singh - Credit Suisse Securities (USA) LLC.

Good morning and welcome to Aramark's Fourth Quarter 2017 Earnings Results Conference Call. At this time, I would like to inform you that this conference is being recorded for rebroadcast and that all participants are in a listen-only mode. We will open the conference call for questions at the conclusion of the company's prepared remarks.

In order to accommodate all participants in the question queue, please initially limit yourself to one question and one follow-up. I will now turn the call over to Kate Pearlman, Vice President of Investor Relations. Kate, please proceed..

Thank you and welcome to Aramark's conference call to review operating results for the fourth quarter and full year 2017. Here with me today are Eric Foss, our Chairman, President and Chief Executive Officer; and Steve Bramlage, our Executive Vice President and Chief Financial Officer.

I would like to remind you that our notice regarding forward-looking statements is included in our press release this morning, which can be found in the Investor Relations section on our website, www.aramark.com, and is detailed on page 2 of our earnings slide deck.

During this call, we will be making comments that are forward-looking including our expectations for fiscal 2018.

Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors including those discussed in the notice regarding forward-looking statements and in the Risk Factors, MD&A, and other sections of our Annual Report on Form 10-K and our other SEC filings.

Additionally, we'll be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in this morning's press release as well as on our website. With that, I will turn the call over to Eric..

improving our competitive position, enhancing our scaling capabilities, entering new geographies and channels. The pending acquisitions of Avendra and AmeriPride meet all of these objectives and will drive sustainable shareholder value creation.

In terms of integration/planning updates, I'm pleased to announce that we've appointed Harrald Kroeker to the position of Senior Vice President-Integrations to lead the integration, planning and implementation work for both of these transactions.

Many of you have met Harrald as he has been leading our global operations excellence team that has driven significant improvements across food and labor productivity over the past several years.

Harrald is an experienced, strategic and operational executive with an impressive track record of leading successful integrations across large-scale, complex, consumer-driven companies. Harrald will be leveraging talent from Avendra and AmeriPride, as well as Aramark to focus on achieving the synergies as quickly and efficiently as possible.

We're looking forward to welcoming the Avendra and AmeriPride teams to the Aramark family and to the contributions that their experienced management teams will make to our ongoing success. We continue to be encouraged by the progress we're making to execute against this clear and focused strategy.

So turning to our outlook for 2018, we expect revenue growth to be within our long-term framework. Adjusted EPS in the range of $2.10 to $2.20. At the midpoint of that range, this would represent the fifth consecutive year of double-digit adjusted EPS growth.

And please note that this outlook does not include the impact of the acquisitions of Avendra or AmeriPride, which, as we previously disclosed, are expected to be dilutive to adjusted EPS in the first year and accretive to cash flow.

In closing, 2018 will be a pivotal year for the company as we drive continued growth in our base business by executing against our strategic imperatives, and we also begin the integration of two strategic acquisitions.

I'm encouraged by our progress and the momentum that we have heading into 2018, which is a real tribute to the strength and commitment of our entire organization. Finally, I want to thank all of our team members who deliver service excellence every day to our customers across the world.

I also want to salute the heroic efforts of our Aramark team members who supported our clients, consumers and the broad communities in the face of several unprecedented natural disasters, and who will continue to do so with the clean-up efforts that lie ahead.

And I also want to thank over 10,000 team members who recently volunteered at our annual day of service, impacting nearly 500,000 families and communities where we operate across the world. With that, let me turn the call over to Steve for a more detailed review of our financial results..

Thanks, Eric, and good morning. As I look back on our performance in 2017, our operating results for the full year and the fourth quarter were right where we expected them to be. Importantly, revenue growth accelerated in the fourth quarter and our productivity initiatives continued to gain traction.

I'm also obviously pleased by our cash flow generation, the strength of our balance sheet and with our financial flexibility, which are paving the way for the two acquisitions that we recently announced. Turning now to the Q4 sales reconciliation. Sales on a GAAP basis were $3.65 billion in the quarter.

This represents an increase of 3% with currency tailwinds of $24 million or almost 1%. This was due to the U.S. dollar weakening specifically against the Canadian dollar, the euro and the Chilean peso. Organic sales for the company grew by 2% in the quarter, driven by growth in North America and international and modest revenue growth in Uniforms.

There was no material impact from mergers and acquisition activity on any of our financial results in the quarter. However, there was an estimated revenue headwind of $25 million or almost 1% related to natural disasters. Our operations were impacted by three severe hurricanes in the United States and Puerto Rico, as well as the earthquake in Mexico.

After factoring in this impact, our revenue growth was at the low end of our multi-year framework just as we expected it to be. Adjusted operating income was $255 million in the fourth quarter, which is comparable to the prior year.

We continue to drive productivity improvements in our North America and international base accounts and further efficiencies in SG&A, which were partly offset by planned reinvestments in technology and capabilities.

Also, there was an estimated $17 million or 7% impact on AOI from natural disasters related to lost business, inventory, spoilage and asset impairments. I would note that our Uniforms business absorbed approximately half of this impact due to the permanent shuttering of a portion of our Puerto Rican operations.

Currency did not have a material impact on margin or AOI in the quarter. AOI margins decreased 20 basis points on a constant currency basis to 7%, clearly, impacted by an estimated 45 basis point headwind related to the natural disasters. Adjusted EPS increased by 10% or $0.05 over the prior year quarter to $0.54 a share.

As AOI was flat in the quarter, because of the natural disaster impact we just mentioned, the increase was driven by lower interests and taxes. Interest expense declined versus prior year due to the impact of our recent refinancing.

Our tax rate benefited almost equally from our tax planning efforts and the new accounting standards related to share-based compensation. Finally, there was no material impact from dilution in the quarter due to the share repurchase earlier this year.

However, the estimated EPS impact due to the natural disasters on our business growth was approximately $0.05 per share, meaning the underlying improvement in the fourth quarter adjusted EPS was well balanced. Turning now to cash flow and capital structure.

As a reminder, we define free cash flow as cash flow from operations less net capital expenditures. The company reported record free cash flow of $520 million this year, which is a reflection of strong operating results and disciplined working capital management.

As Eric mentioned earlier, we achieved our target leverage ratio of 3.5 times a year earlier than we had originally anticipated, which demonstrates not only the strength of our cash generation but the efforts of our team to manage capital effectively.

Finally, as depicted on the slide and mentioned on our last call, our reported cash flows in 2016 and 2017 were also positively impacted by a reclassification due to the accounting rule change related to share-based compensation. This is a net reclassification in both years between the operating and financing sections of our cash flow statement.

This reclass does not impact either the cash available to the company for use or our leverage levels. Corporate liquidity remains very strong, as reflected in the $1.2 billion in cash and revolver availability at the end of the quarter. We also have robust financial flexibility as there are no significant maturities until 2022.

I'm really pleased with where the balance sheet is positioned at the end of 2017, having demonstrated that the combination of our strong, consistent cash flows and disciplined financial management enabled the company to delever quickly following the IPO.

After we complete the pending acquisitions, we will remain laser-focused on aggressive debt repayment so that we can once again quickly delever back to our targeted leverage range. Finally, let me turn to our business outlook for 2018. First, please note this outlook does not include the impact of the pending acquisitions of Avendra and AmeriPride.

And as we mentioned last month, these transactions are expected to be dilutive to adjusted EPS but accretive to free cash flow in 2018. Aramark will finance the transactions through the issuance of new debt, which will result in increased interest expense and a leverage ratio initially in the mid-4 times range.

After the transactions close, we will update our outlook accordingly. With this in mind, we are expecting the current operations of the company to generate adjusted EPS in the range of $2.10 to $2.20 per share.

We're anticipating strong improvements in our operating performance this year, driven by food and labor productivity initiatives and continue reductions in SG&A. Interest expense is expected to be approximately $260 million as the benefits of the recent refinancing will be somewhat offset by an expectation of rising interest rates.

Our effective tax rate is expected to increase approximately 250 basis points versus 2017.

While we're going to continue to benefit from our tax planning initiatives, there will be less of a benefit from the accounting rule change related to share-based compensation as the higher levels of excess tax benefits related to the equity awards from the IPO have now been recognized.

It's worth noting that our estimated tax rate does not reflect any of the pending legislative changes currently under consideration. Finally, we do not anticipate a material impact from currency in the year.

This year, we expect an increase in cash taxes of roughly $100 million largely related to the timing of tax credits, the impact of higher income, and the lower tax deductible benefit related to share-based compensation. In spite of these higher cash taxes, we are still expecting to generate over $400 million in free cash flow.

We also anticipate that our capital spending will be approximately 3.5% of sales which is consistent with our average investment over the last two years as we continue to invest in growth and technology.

Finally, turning to our expectations for the first half 2018 performance, we're expecting our revenue momentum to continue with growth in the front half of the multiyear framework driven by broad based growth across a number of key factors.

Consistent with prior years, we expect our margin expansion will be weighted towards the second half due to the timing of reinvestments and new account on-boarding. With regards to the first quarter, we're expecting earnings to be comparable to the prior year as the impact of the new accounts start-ups will be most heavily felt in that quarter.

I'll now turn the call back over to Eric for some closing remarks, in advance of Q&A..

Thanks, Steve. And with that I think operator, we're ready to open up the lines for Q&A..

Thank you. We will now begin the question-and-answer session. And our first question on the line comes from Mr. Stephen Grambling from Goldman Sachs. Please go ahead..

Hey. Good morning. Thanks for taking our question..

Hi. Good morning..

I think that probably the biggest thing on folks' minds is just the sales run rate. I think this has been a consistent point of questioning and concern as you've been below the algorithm for now, I think three years, and even this quarter you kind of have an asterisk around it.

So is there any way that you can help us quantify the size of new business wins' potential contribution in 2018 at the current run rate and how that might compare to prior years at this point? Thanks..

Sure, Stephen. It's Eric. Well, first of all, let me just reiterate, I think, as both Steve and I mentioned a couple of things related to growth. I think, first and foremost, our growth was as expected in the quarter and within the framework in the quarter, again ex the hurricanes.

And so if you think about that, the way I would describe it across kind of the three lines of business is we had very broad-based growth in North America, very strong momentum across our International business, and we returned to growth in our Uniform business. And so I think is as you look at that, Q4 was exactly as we predicted.

I think, as we mentioned in the past, the leading indicators of consumer satisfaction in client loyalty that started to improve in the middle part of last year continue to be very, very good. Our retention rates are in the mid-90%s. And to your question on new business, 2017 was one of the best new business years in the company's history.

So I think all in, there's been a lot of questions around when will you return to within framework growth. The simple answer is we did in Q4.

Nuanced one follow-up. You had very, very strong organic growth in the International segment. I guess, I would have thought we would have seen a little bit more margin flow through there.

As you think about the margin opportunity ahead, can you just give us a little bit of a broad outline around how to think about margins in each one of the segments, and in the International segment in particular? Thanks..

Sure. Well, I just said, we had phenomenal growth in our international business and I think a fairly significant driver, some of that margin pressure was the startup of a very large new account. So I think it's as simple as that, Stephen.

I think as we think about margin broadly, again, as you know, we've made great progress over the last several years. We continue to have a high degree of confidence and conviction around the whole margin topic.

And as we think about margin going forward, I continue to see strong margin growth coming from our North America business, growth from our international business.

And then I think as you think about the international business, you'll probably continue to see some margin pressures in first quarter or so of the year with a very strong margin pickup as we get through the onboarding of this new business and some of the costs related to the startup of that new business, as we put Uniforms into service before we recognize some of that revenue.

So, nothing's changed from a margin perspective. Again, specific to your international question, that margin pressure was largely driven by the startup cost connected to a very large new account..

Thank you. Our next question on the on the line comes from Hamzah Mazari from Macquarie. Please go ahead..

Hi. This is Mario Cortellacci filling in for Hamzah. Could you give us a sense of whether a consolidation has helped the Uniform market or whether you expect benefits to come later? And maybe you can outline what that looks like for us..

Well, let me let me just back up maybe and talk a little bit about how we think about the Uniform business. I think I'd start, as I mentioned during the call we had when we announced the AmeriPride acquisition, that this is a business we absolutely love. Why do we love it? We love it because it's got good margins. It's got strong cash flow.

It can be accretive to growth and profitability of the company. And so I think as we think about the marketplace in 2017, there's no doubt that the consolidations that took place did drive some disruptions.

And I think the fact is, as we look at our 2017 results, we think as we head into 2018, you're going to see a very different level of performance from our Uniform business. So what have we done and what are we doing? Well, you're seeing it play out. One of our top M&A priorities was to acquire AmeriPride. We did that.

That gives us a lot of different things around scale and increased competitiveness and synergy capture, et cetera. And then, second, on the strategy side, we're continuing to execute against what we need to, to grow the business, achieve all of the things we need to on the productivity side in terms of an effective cost structure.

So I think as we look at the business, it continues to be a business that we like. And we're very much excited about the AmeriPride – getting the deal completed and moving forward with our integration efforts..

Okay. Thank you. And just one quick follow-up.

Could you walk us through how you think about the sports calendar this year and whether there are any comp issues we should pay attention to?.

Well, when you say – are you talking about 2018?.

Correct..

Yeah. Well, let me let me start with 2017....

Okay..

...because I do think in 2017 we did see some pressure relative to baseball attendance, and we've actually seen a little bit of pressure on the football attendance side as well. As you think about the real factors that drive that, it tends to be driven by their attendance and/or the lapping of how our teams perform in the playoffs.

And so, it's probably better as we get closer to those respective playoff runs for us to give you that dynamic relative to who's in the playoffs versus a year ago. But I would say there's nothing of significance that we see at this point in time that we've called out as a big headwind..

All right. Thank you so much..

Thank you. Our next question on the line comes from Toni Kaplan from Morgan Stanley. Please go ahead..

Hi. Good morning. I wanted to ask about your 100 basis points target for EBIT margin expansion through 2018. I think you laid it out at your Investor Day a couple of years ago. So even backing out the impact of the hurricane this quarter, it doesn't seem that that is perhaps an attainable target anymore.

Is that fair? Or are there some factors in 2018 that can still get you to the 100 basis points?.

Yeah. I think we continue to have confidence and conviction around the 100 basis points, Toni. So I think if you think about – obviously, there was some hurricane impact on the 2017 number. There's a couple of other things I might point you to.

One was, when we have year-over-year the significant uptick in new business wins, you're going to have a little heavier startup costs than normal, as well as the fact that we stood up the facility's business are probably two things that you saw happen in 2017 that won't be as much of a headwind in 2018.

But as we think about 2018 and we think about the 100 basis point mark, I think Steve and I and the organization continue to be committed to, have a lot of confidence and conviction around it.

And, again, our focus is really around attacking the complexity across the food supply chain, making sure we drive continued productivity across labor and making sure we have the right SG&A structure above-unit.

So, Steve, you want to add anything?.

Yeah, I would. I think we absolutely have line of sight to that number. And on an annual basis, obviously, what drops through doesn't necessarily happen on a straight line one way or the other.

But as we sit here today, especially when we look at just the pace of the investments we've made in technology and when you just look at the overall map of the company, I think we've got very good line of sight to being able to ultimately close that 100 basis point gap by the time we finish the fiscal year of 2018 with the business that we have today..

Okay. That's very helpful. And then, just wanted to ask in the North America Food Services segment, just were there any specific client types that were stronger, any specific types that were weaker? I just wanted to get a sense of where the positives and negatives were on that growth in North America? Thanks..

And, Toni, I'm assuming you're talking about Q4 specifically?.

Yes. Thank you..

education, business, dining, leisure, corrections. Actually, healthcare/hospitality also returned to growth in the quarter. And really of the North America Food and Facilities business, the business that saw some pressure was the Sports business. I mentioned some of the attendance challenges that we had.

But other than that, the rest of the business in North America performed very well relative to run rate and relative to our expectations..

Thank you. Our next question on the line comes from Mr. Gary Bisbee from RBC Capital. Please go ahead..

Let me push back on that last one a bit. So even if we assume most of that $25 million hurricane impact within North America Food, you're still under 2% in terms of the organic revenue growth you delivered.

And while I realize the business came back into the 3% ex the hurricanes overall, I think everybody on the phone here would or at least on the investor and analyst side, would argue sub-2% is a pretty disappointing number given all the new business wins that you've been citing.

I realize the education ones came on partway through the quarter, a lot of them, and so you'd expect that to be better. But at the segment level, what's going on in North America? Why wasn't it stronger and can you help us understand what that looks like the next couple of quarters? Thanks..

Well, Gary, it's Eric. Let me let me start again. I just want to be perfectly clear that the growth of the North America segment ex hurricanes was 3% in the quarter. And....

How does that – help me with that math. $25 million divided by the revenue from a year ago is like 80 basis points or something, 90 basis points. And you did 0.8%, and unless I saw that wrong in the release, so you add those two up, you don't get 3.

Am I missing something here?.

Yeah. Hey, let me try to help, Gary. So, let me start with the entity level first, then we'll go on North America. So our entity level revenue ex the hurricane impact was on framework within the 3%. The $25 million of revenue impact for the hurricanes was almost exclusively in the North America FSS segment.

There was a de minimis impact on the Uniform number and so the North America all organic growth number ex hurricane was around that 2% number for clarity. The company's framework number was the 3% that we were referring to previously..

Yeah, right. And so I guess I'm wondering, the 2% I think is below – ex the hurricane is below what we would have expected given the positive commentary and everything but sports growing.

So I guess I'm just wondering, is there any more color you could – either color your could help us understand why or commentary to help us understand if that business should get over 3% with all the new business that you've talked about bringing on?.

Yeah. Let me let me maybe go a level deeper for you, Gary. So I think relative to expectations, if there was one business that was off, it would have been the sports business, and specifically related to attendance. I think the other thing that may be a variable, I mean, we're getting pretty deep into the weeds.

But just for color commentary, there were a couple of trading days lost on the education business that shifted based on the timing of a school start-up.

But, again, I think what we're trying to convey is not only the way we finished fourth quarter, but the way we started in October is very consistent with what we expected from a growth perspective, and that that growth was very, very broad-based across sectors in North America..

Yeah.

I would reiterate that, obviously, there's – we don't provide specific expectations around segment revenue within a quarter for a variety of reasons, but because we're at that point in the conversation to Eric's point that the decline and participation at the Major League Baseball level was a point on the North America revenue versus where we had entered the quarter.

So that's worthy I think of keeping in mind as well..

Okay. Great. And then the follow-up, just the international sort of going the other way, it was quite a bit stronger than – in the quarter, the organic growth.

Were there some seasonal or sometimes there's events that move around timing stuff that helped, or is there some reason that it was so strong? And maybe how do we think about that going forward? Thanks a lot..

Yeah. I think, again, if you look at the international business, Gary, I would not project the fourth quarter growth rate going forward. Again, that was driven by the onboarding of a fairly significant new business win.

Having said that, if you look at the performance of our international business, which grew mid-single digit for the year, that's the kind of, I think, growth rate you should expect as we think about 2018 going forward..

Yeah. And I would remind everyone that we talk about lumpiness within the business on a quarterly basis, and that lumpiness becomes magnified as you go down in the individual segments. So I would come back to it.

It's difficult to extrapolate up or down from any individual quarter, certainly more difficult at a segment level, and we caution people therefore not to try to model that..

Fair enough. Appreciate the color. Thank you..

Sure..

Thank you. Our next question on line comes from Manav Patnaik. Please go ahead..

Thank you. Good morning, guys. My first quarter is just around the $2.20 EPS target that you set out in 2015. I think up until even last quarter it sounds like that was probably going to be on the low end of whatever you were going to guide. And I was just wondering if you could walk through what's helped and hurt in getting to that number.

I know debt refi and tax deposit is, maybe energy was negative, but maybe just some color on when you first gave that guidance to where we are today at the $2.15, at the midpoint, what the moving pieces are..

Sure. I'll take a stab at that. I mean, to my knowledge, the only commentary we provided previously around 2018 expectations was when we did the Investor Day back in 2015 and we talked about an aspirational EPS target of $2.20. So let me start there.

Really, the only difference between the midpoint of our range of $2.10 to $2.20 and that $2.20 that we set out at the I Day in 2015 is currency. So there's about a $0.05 a share currency impact when you just look at the difference in rates today versus the rates today versus the rates that existed in 2015.

So from my perspective, we are expecting EPS completely consistent at the midpoint of that range with the guidance that we set out for ourselves at the I Day in 2015. That's another – what would be the fifth consecutive year of double-digit EPS growth.

So the moving pieces – of course, the individual lines moved around a little bit, and so on a year-over-year basis, we'll have a little more tax headwind in the form of a higher rate than we add in 2017 based on the stock-based comp changes I referenced earlier.

Interest is pretty close to the same, maybe a very modest headwind depending on what rates actually end up doing. And then we clearly are going to have significant business growth, positive contribution as we continue to progress towards the margin target that we've referenced and we've got the top line growth.

So, you put all those together, you get yourself to kind of a double-digit midpoint number, which, from my perspective, is exactly the number that we set out for ourselves in 2015 for 2018..

Okay. And then on the top line, and I guess, you said at least 3% for 2018, again, I think I got the impression last quarter that 3% to 5% was well within reach. I guess, at least 3% doesn't put you there.

But did you in your comments talk about the first half being faster growth than the second half, maybe just some color on the assumptions for 2018 on the top line?.

From a revenue perspective, no, we expect the revenue over the course of 2018 to consistently be within framework. And so, our margin expansion will clearly be more weighted to the second half of the year.

But from a revenue standpoint, we will enter the year in framework for all the reasons that we've talked about previously, and I would expect this to be largely within framework for the entire year..

Thank you. Our next question on the line comes from Andy Wittmann from Baird. Please go ahead..

Oh, great. Sorry. Steve, just a clarification on that last one. On the North American food, just given the size of that business when you guys were talking about at least 3% organic revenue growth for the year, that must imply that the North American food is in that 3% range.

And is that expected to ramp through the year or was that one that is going to come in, in framework as well?.

Well, back to my earlier comment, right, we don't provide specific expectations for revenue within a sector and certainly not within a quarter.

I would tell you, we certainly expect generally better year-over-year revenue growth performance out of the North America FSS segment than we had in 2017 for all the reasons that we talked about, a lot of that strong new business. Booked new business momentum that we have is sitting in the North America FSS segment.

So, I would expect generally better revenue performance from all three of our individual segments over the course of 2018..

Got it. And then, just as it relates to that comment that you made on flattish EPS, I guess, because of reinvestment, if that was the main reason in 1Q. I guess, there were some reinvestment also 1Q last year.

Is it the fact that maybe you don't feel as much stock comp benefit this year as you did last year or what are some of the other factors that are holding back 1Q specifically?.

Well, specifically on EPS, for sure, the tax rate is going to be higher. So, that's going to be a negative year-over-year comparison for us. And while we have start-up compression every first quarter specifically in the higher education segment, those tend to be larger accounts generally and as revenue is growing year-over-year.

Because we have higher revenue in the first quarter, we will have modestly higher start-up expenses. So, it's a combination of growing revenue and some of the start-up that comes with that as well as a higher tax rate on a year-over-year basis..

Got it. And then maybe, Eric, just more broadly for you on just retention, it sounds like you're expecting consistent retention.

Maybe an aspiration, a little bit higher of improving retention, you're doing today to attack that, and how much of the retention rate of Aramark versus your peers do you think is part of the reason for the growth disconnect (46:59)?.

Well, again, yeah, if you think about the growth, our retention rates, I think, have been pretty consistent and I think are pretty consistent relative to the competitive peers on the food and facility side. Again, it's going to vary by line of business, somewhere from kind of low 90s to high 90s that gets you kind of a mid-90s.

And I think as we've said in the past, we certainly set targets for each of our sectors to improve retention rates.

Having said that, as you think about the algorithm for us and I think largely if you looked at it for the industry, if you think about the growth algorithm, you'll see about half the growth coming from new business and about half the growth coming from base business. That's been the history.

That certainly is the way we plan 2018, and I think that's very consistent with what you'd see from our competitors, peers..

All right. Thank you..

Thank you. Our next question on line comes from Dan Dolev from Nomura Instinet. Please go ahead..

Hey, guys. Thanks for taking my question. I think on August 8th, you reiterated the guidance. Was there anything that went wrong in, say, the last seven weeks of the quarter that resulted in organic growth in North America being that weak? Thank you..

Well, again, I guess we'll come back to the topic at the risk of being repetitive. So in Q4 for North America, ex the hurricane, the growth was very consistent with our expectations. So as....

I would reiterate that..

...we saw the way the quarter played out, we saw broad-based growth across the education sector, the business dining sector, the leisure, corrections and including healthcare hospitality that grew. The Sports business declined.

That was the one area that if there was a mild surprise, it was really due to some of the things we saw in the attendance side on both baseball and the startup to the football season.

But, again, I just want to come back to the point that from Steve's perspective, from my perspective, from the company's perspective, what we told you was going to play out in Q4, ex the hurricanes, played out in Q4.

And that was, Q4 was going to be the first quarter where we saw growth ,for the company, for the enterprise within the framework, which we did.

We think that bodes well because obviously we finished with much better momentum that within framework growth in Q4, which sets us up for 2018, a lot of that has been driven by a very successful new business year we had in 2017 that began to ramp up in the fourth quarter and will continue.

And, certainly, as we looked at what we saw happen during the early part of 2018, that has continued. So that's the story in North America.

Steve, do you want add anything?.

Yeah. I don't recall (50:42) there is not a specific date, to be candid with you. But I can tell you that with the exception of baseball performance over the last month-and-a-half, as Eric referenced, being a little bit weaker than we had thought.

I don't think there's anything different in where the company's results landed outside of the hurricanes versus what we have been expecting over the course of the entire quarter..

I understand. Thank you.

And then, my follow-up is I think you mentioned that the impact of the hurricanes was predominantly in FSS, North America, that $25 million? Is that a fair statement?.

From a revenue perspective, that is true. From an AOI perspective, that is more evenly split between the Uniform business and the North America FSS business, and there's a touch in International as well.

And the reason that Uniforms is disproportionately impacted on the AOI line is that we have two facilities in the Uniform segment in Puerto Rico, both of them took direct hits. And we currently anticipate that one of those facilities will not be reopening, and we have permanently written it off..

Is your Uniform geographic split not as levered towards the hurricane-affected areas that it wasn't as much – because your competitor basically highlighted a specific decline in revenue as a result of the hurricanes. That's why I'm asking..

I can't speak for anyone else's particular exposure from a geographical standpoint, so I probably can't answer that question specifically..

Okay. I appreciate it. Thank you very much, guys..

Thank you. Our next question on line comes from Anj Singh from Credit Suisse. Please go ahead..

Hi. Thanks for taking my question. First off, I wanted to follow up on some earlier questions. It seems you're saying new business wins are the strongest they've been. Retention rates are strong. You've lapped a lot of headwinds, yet you're firing at the lower end of the framework.

So, as we look ahead, what is it that gets you closer to the midpoint of your longer-term framework? Because I think there was some anticipation that for 2018 you'd be closer to, say, 4% organic growth rather than 3%.

So if you could just help us understand that?.

Well, again, I'll just talk to the composition of the growth. So as we think about our 2018 growth rates, I think what you'll see is about half of that growth will come from new business, and about half will come from an improvement in our base business.

So, we don't build into the algorithm any improvement in retention, although we have initiatives to try to drive improved retention. Relative to 2018, our revenue guidance, as we talked about, was at least 3%. And as you think about that, that is within the framework.

And as we think about 2018, I think what we're trying to convey is we have the same degree of confidence and continue to be encouraged by the growth momentum. So, getting growth in the fourth quarter within the framework was a milestone that was important to us, assuming it was important to you.

The fact that we've done that and the fact that, as I've mentioned, that growth rate is encouraging as we look at 2018 is where you're going to see the business perform at at least 3% level. And I think beyond that, we'll see how the year plays out, and that's where I'd leave it..

Yeah.

We continue to feel we're going to be significantly better off entering the year than we were last year, and the lumpiness that's inherent in this business, whether it's a quarter-by-quarter look, whether it's line-of-business-by-line-of-business look, is the reason that we don't be more prescriptive or that we are not more prescriptive in trying to fine-tune some of this because we just aren't that accurate at that granular level, but we will be significantly better entering in this year and over the course of the year than we were in 2017, and we feel very confident in that..

Okay. Fair enough. Shifting gears a little bit, I was wondering if you can give us an update on your technology initiatives particularly as it relates to the pricing productivity opportunity. I know that's one that you've been excited about, Eric.

So, perhaps where are we on that journey? Is that contributing at all to your 2018 outlook? Maybe some thoughts on when that can become a little bit more of a material tailwind. Thanks..

Yeah. I think we're pleased with where we are, and certainly, as you think about the base growth and our ability to effectively manage mix and the pricing levers, I think there's no doubt that the work we've done is beginning to pay off. So, again, we're at a point where I think as we get later in the year, we'll talk more about the impact.

I think as we've said all along, one of the things that is a little bit of a limiter to us relative to pricing is the ability to gain control of point of sale system as a data and analytics point for us. But, again, I think we continue to make progress.

Having said that, the technology that we're deploying across the margin march, everything from how we effectively manage labor with Kronos, the Ariba rollout, those rollouts will have more immediate impact particularly as you think about 2018 than the pricing tools and technology..

Understood. Thank you..

Thank you. We have no further questions at this time. I would now like to turn the call over to Eric for closing remarks..

Great. Well, thank you very much. We appreciate you joining us as always, and we appreciate your interest in Aramark. Everybody, have a great day. Thank you..

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect..