Aramark (ARMK) FY 2021 MD&A

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of Aramark's (the "Company," "we," "our" and "us") financial condition and results of operations for the fiscal years ended October 1, 2021 and October 2, 2020 should be read in conjunction with our audited consolidated financial statements and the notes to those statements. Discussion and analysis of our financial condition and results of operations for the fiscal year ended October 2, 2020 compared to the fiscal year ended September 27, 2019 is included under the heading Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Fiscal 2020 Compared to Fiscal 2019 and - Liquidity and Capital Resources” in our Annual Report on Form 10-K filed for the fiscal year ended October 2, 2020 with the Securities and Exchange Commission ("SEC") on November 24, 2020.

Our discussion contains forward-looking statements, such as our plans, objectives, opinions, expectations, anticipations, intentions and beliefs, that are based upon our current expectations but that involve risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in those forward-looking statements as a result of a number of factors, including those set forth under "Risk Factors," "Special Note About Forward-looking Statements" and "Business" sections and elsewhere in this Annual Report on Form 10-K ("Annual Report"). In the following discussion and analysis of financial condition and results of operations, certain financial measures may be considered “non-GAAP financial measures” under SEC rules. These rules require supplemental explanation and reconciliation, which is provided elsewhere in this Annual Report.

Overview

We are a leading global provider of food, facilities and uniform services to education, healthcare, business & industry and sports, leisure & corrections clients. Our core market is the United States, which is supplemented by an additional 18-country footprint. Through our established brand, broad geographic presence and employees, we anchor our business in our partnerships with thousands of clients. Through these partnerships we serve millions of consumers including students, patients, employees, sports fans and guests worldwide.

We operate our business in three reportable segments:

•Food and Support Services United States ("FSS United States") - Food, refreshment, specialized dietary and support services, including facility maintenance and housekeeping, provided to business, educational and healthcare institutions and in sports, leisure and other facilities serving the general public in the United States.

•Food and Support Services International ("FSS International") - Food, refreshment, specialized dietary and support services, including facility maintenance and housekeeping, provided to business, educational and healthcare institutions and in sports, leisure and other facilities serving the general public. We have operations in 18 countries outside the United States. Our largest international operations are in Canada, Chile, China, Germany, Ireland and the United Kingdom, and in a majority of these countries we are one of the leading food and/or facility services providers. We also have operations in Japan through our 50% ownership of AIM Services Co., Ltd., which is a leader in providing outsourced food services in Japan.

•Uniform and Career Apparel ("Uniform") - Provides a full service employee uniform solution, including design, sourcing and manufacturing, delivery, cleaning and maintenance on a contract basis. We directly market personalized uniforms and accessories, provide managed restroom services and rent uniforms, work clothing, outerwear, particulate-free garments and non-garment items and related services, including mats, shop towels and first aid supplies, to clients in a wide range of industries in the United States, Canada, Puerto Rico and through a joint venture in Japan, including the manufacturing, transportation, construction, restaurant and hotel, healthcare and pharmaceutical industries.

Our Food and Support Services operations focus on serving clients in five principal sectors: Business & Industry, Education, Healthcare, Sports, Leisure & Corrections and Facilities & Other. Our FSS International reportable segment provides a similar range of services as those provided to our FSS United States clients and operates in the same sectors. Administrative expenses not allocated to our three reportable segments are presented separately as corporate expenses.

Impact of COVID-19 on our Business

The COVID-19 pandemic ("COVID-19") has disrupted and is expected to continue to disrupt our business, which has and could continue to materially affect our operating results, cash flows and/or financial condition for an extended period of time. The decline in our operations from COVID-19 caused a deterioration in our revenue, operating income (loss) and net (loss) income for the fiscal years ended October 1, 2021 and October 2, 2020. Our financial results began to improve during the

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second half of fiscal 2021 as lockdowns were lifted and operations began to re-open as well as from actions to reduce variable and fixed costs, including headcount reductions primarily taken during the second half of fiscal 2020. COVID-19 has adversely affected global economies, financial markets and the overall environment for our business. The ongoing impact of COVID-19 on our longer-term operational and financial performance will depend on future developments, including the availability, widespread distribution and acceptance of safe and effective COVID-19 vaccines, the emergence of COVID-19 variants, our ability to effectively hire and retain personnel, governmental response to the pandemic and the continuation of governmental relief programs. Many of these future developments are outside of our control and all are highly uncertain and cannot be predicted.

In response to COVID-19, we continue to remain principally focused on the safety and well-being of our employees, clients and everyone we serve, while simultaneously taking timely, proactive measures to adapt to the current environment. We continue to modify our business model in response to the disruption caused by COVID-19 by strengthening our available liquidity, focusing on flexible, low fixed-cost operations and diversifying our service offerings, geographic mix and client portfolio.

While certain of our operating sectors have been significantly impacted to date, we continue to work toward mitigating these negative impacts. These efforts have included significant variable and fixed cost reductions, including headcount reductions primarily during fiscal 2020, contractual negotiations and efforts to provide additional products and services arising in the current environment. We have also taken advantage of relief provisions, including the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), the Consolidated Appropriations Act of 2021 ("CAA") and other United States and foreign governmental programs. The operating environment, however, remains very fluid with changes in the number of COVID-19 cases and progress in the vaccination effort significantly contributing to the ability and willingness of private businesses and governments to open or remain open, even at limited levels.

In the FSS United States segment, the impacts to our operating sectors are further described as follows:

•Education – We welcomed students and educators back to in-person learning at the start of the school year in both K-12 and Higher Education. Higher Education implemented enhanced on-campus experiences that included additional meal flexibility and digital innovation, despite retail and event catering volumes being slower to recover. K-12 continues to participate in universal government-sponsored meal programs.

•Sports, Leisure & Corrections – Fans largely returned to stadiums at full capacity for the Major League Baseball season and the National Football League season which is underway. Leisure remained active as National Parks continued to serve as an attractive vacation destination, while conference centers and events had less activity. Corrections had already returned to pre-COVID-19 levels.

•Business & Industry – Companies introduced greater in-person return-to-work activity, although at a measured pace, particularly with white-collar clients.

•Facilities & Other – Operations remain positive, surpassing pre-COVID-19 levels, as locations continue to increase in-person activity, while we continue to offer additional project-oriented services to ensure locations are ready and safe.

•Healthcare – Operations continue to gradually improve with a higher level of voluntary procedures, routine medical appointments and hospital visitations, despite retail and catering volumes being slower to recover.

Within the FSS International segment, we are at various stages of response depending on geography. China continues its recovery due to our efforts on the frontlines, particularly in Healthcare, while South America continues to experience strong performance in extractive services. Europe and Canada continue to recover as restrictions ease.

In the Uniform segment, our business serves a range of clients. Operations have resumed across the segment, although below pre-pandemic levels for some products or services, associated with hospitality. In addition, we continue to be a solution-oriented service focusing on safety and hygiene. In response to COVID-19, we increased inventory levels, particularly related to personal protective equipment ("PPE"). During fiscal 2021, we recorded inventory write-downs and reserves related to PPE due to a decline in demand.

In all business segments, we continue to leverage our flexible operating model to execute cost mitigation plans while continuing to support our clients. During fiscal 2021, we saw improved profitability from clients re-opening after COVID-19 restrictions began to lift as well as from the actions to reduce variable and fixed costs, including headcount reductions taken during the second half of fiscal 2020. We continue to evaluate and react to the potential effects of a prolonged disruption and the continued impact on our results of operations. These items may include, but are not limited to: the financial condition of our clients, mainly within the Uniform segment; supply chain disruptions that caused delivery delays, lower fill rates and higher substitution rates for a wide-range of products; and increases in inflation causing food supply chain and labor challenges. We expect these items to continue into fiscal 2022, along with the potential for costs related to COVID-19 testing or vaccine mandates. However, we continue to evaluate and react in order to take appropriate actions to mitigate the risk in these areas.

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We undertook many actions as it relates to our available liquidity in response to COVID-19. See "Liquidity and Capital Resources" below for additional disclosure around these actions taken. Also, see “Item 1A. Risk Factors” for an additional discussion of risks and potential risks of COVID-19 on our business, financial condition and results of operations.

Acquisition

On June 4, 2021, we completed the acquisition of Next Level Hospitality ("Next Level"), a premier provider of culinary and environmental services in the senior living industry, specializing in skilled nursing and rehabilitation facilities (see Note 2 to the audited consolidated financial statements). The cash consideration paid for Next Level was $226.1 million.

Seasonality

Our revenue and operating results have varied from quarter to quarter as a result of different factors. Historically, within our FSS United States segment, there has been a lower level of activity during our first and second fiscal quarters in operations that provide services to sports and leisure clients. This lower level of activity, historically, has been partially offset during our first and second fiscal quarters by the increased activity levels in our educational operations. Conversely, historically there has been a significant increase in the provision of services to sports and leisure clients during our third and fourth fiscal quarters, which is partially offset by the effect of summer recess at colleges, universities and schools in our educational operations. As described above, during the COVID-19 pandemic, and in following periods, our business and results of operations have not and may continue to not experience our historically typical patterns of seasonality.

Sources of Revenue

Our clients engage us, generally through written contracts, to provide our services at their locations. Depending on the type of client and service, we are paid either by our client or directly by the consumer to whom we have been provided access by our client. We typically use either profit and loss contracts or client interest contracts in our FSS United States and FSS International segments. These contracts differ in their provision for the amount of financial risk we bear and, accordingly, the potential compensation, profits or fees we may receive. Under profit and loss contracts, we receive all of the revenue from, and bear all of the expenses of, the provision of our services at a client location. For fiscal 2021, approximately two-thirds of our FSS United States and FSS International segment revenue was derived from profit and loss contracts. Client interest contracts include management fee contracts, under which our clients reimburse our operating costs and pay us a management fee, which may be calculated as a fixed dollar amount or a percentage of revenue or operating costs. Some management fee contracts entitle us to receive incentive fees based upon our performance under the contract, as measured by factors such as revenue, operating costs and customer satisfaction surveys. For fiscal 2021, approximately one-third of our FSS United States and FSS International segment revenue was derived from client interest contracts. In response to the changed circumstances caused by COVID-19, we partnered with clients, mainly within the Business & Industry sector, to renegotiate or temporarily suspend certain terms and financial structures, particularly in profit and loss contracts, in order to mitigate lost revenues caused by partial or full closure of client premises.

For our Uniform segment, we typically serve our rental clients under written service contracts for an initial term of three to five years. As the majority of our clients purchase on a recurring basis, our backlog of orders at any given time consists principally of orders in the process of being filled. With the exception of certain governmental bid business, most of our direct marketing business is conducted under invoice arrangement with repeat clients. To a large degree, our direct marketing business is relationship-driven. While we have long-term relationships with our larger clients, we generally do not have contracts with these clients.

Costs and Expenses

Our costs and expenses are comprised of cost of services provided (exclusive of depreciation and amortization), depreciation and amortization and selling and general corporate expenses. Cost of services provided (exclusive of depreciation and amortization) consists of direct expenses associated with our operations, which includes food costs, wages, other labor-related expenses (including workers' compensation, severance, state unemployment insurance and federal or state mandated health benefits and other healthcare costs), insurance, fuel, utilities, piece goods and clothing and equipment. Depreciation and amortization expenses mainly relate to assets used in generating revenue. Selling and general corporate expenses include sales commissions, severance, share-based compensation and other unallocated costs related to administrative functions including finance, legal and human resources.

Interest and Other Financing Costs, net

Interest and other financing costs, net, relates primarily to interest expense on long-term borrowings. Interest and other financing costs, net also includes third-party costs associated with long-term borrowings that were capitalized and are being amortized over the term of the borrowing.

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(Benefit) Provision for Income Taxes

The (benefit) provision for income taxes represents federal, foreign, state and local income taxes. Our effective tax rate differs from the statutory United States income tax rate due to the effect of state and local income taxes, tax rates in foreign jurisdictions, tax credits and certain nondeductible expenses. Our effective tax rate will change from quarter to quarter based on recurring and nonrecurring factors including, but not limited to, the geographical mix of earnings, state and local income taxes, tax audit settlements, share-based award exercise activity and enacted tax legislation, including certain business tax credits. The income tax benefit in both fiscal 2021 and fiscal 2020 was impacted by governmental programs, such as the CARES Act and CAA, while both fiscal 2020 and fiscal 2019 were impacted by United States tax reform enacted in the "Tax Cuts and Jobs Act" (see Note 10 to the audited consolidated financial statements). Changes in judgment due to the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of the change.

Foreign Currency Fluctuations

The impact from foreign currency translation assumes constant foreign currency exchange rates based on the rates in effect for the prior year period being used in translation for the comparable current year period. We believe that providing the impact of fluctuations in foreign currency rates on certain financial results can facilitate analysis of period-to-period comparisons of business performance.

Fiscal Year

Our fiscal year is the fifty-two or fifty-three week period which ends on the Friday nearest to September 30th. The fiscal year ended October 1, 2021 was a fifty-two week period and the fiscal year ended October 2, 2020 was a fifty-three week period.

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Results of Operations

Fiscal 2021 Compared to Fiscal 2020

The following tables present an overview of our results on a consolidated and segment basis with the amount of and percentage change between periods for the fiscal years 2021 and 2020 (dollars in millions).

*** Not meaningful

(1) As a percentage of total revenue, FSS United States represented 56.3% and 57.4%, FSS International represented 23.7% and 23.0% and Uniform represented 20.0% and 19.6% for fiscal 2021 and fiscal 2020, respectively.

Consolidated Overview

Revenue decreased by approximately 5.7% during fiscal 2021 compared to the prior year period, which was mainly due to COVID-19. The impact from our clients either reducing or ceasing operations was more significant during fiscal 2021 as the pandemic did not materially affect operations until late in the second quarter of fiscal 2020. Revenue began to improve during the second half of fiscal 2021 as lockdowns were lifted and operations began to re-open. The decrease in revenue was also attributable to the estimated impact of the 53rd week in fiscal 2020 (approximately 1.3%). Foreign currency translation favorably impacted fiscal 2021 (approximately 1.3%).

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The following table presents the cost of services provided (exclusive of depreciation and amortization) by segment and as a percent of revenue for the fiscal years ended October 1, 2021 and October 2, 2020.

(1) During fiscal 2020, Cost of services provided (exclusive of depreciation and amortization) included severance charges related to COVID-19. The severance charges by segment are the following: FSS United States ($51.8 million), FSS International ($87.3 million) and Uniform ($4.9 million) (see Note 2 to the audited consolidated financial statements).

The following table presents the percentages attributable to the components in cost of services provided (exclusive of depreciation and amortization) for fiscal 2021 and fiscal 2020.

Operating income (loss) increased by approximately $456.3 million during fiscal 2021 compared to the prior year period. Operating income (loss) was negatively impacted during both fiscal 2021 and 2020 by COVID-19 as clients either reduced or ceased operations at certain locations across all of our segments. Operating income (loss) began to improve during the second half of fiscal 2021 as lockdowns were lifted and operations began to re-open. In addition, operating income (loss) benefited from both United States and non-United States governmental labor related tax credits, which were higher in fiscal 2021 than fiscal 2020 (see Note 1 to the audited consolidated financial statements). The increase in operating income (loss) during fiscal 2021 was attributable to:

•improved profitability from client re-openings as well as from actions to reduce variable and fixed costs, including headcount reductions primarily taken during the second half of fiscal 2020;

•prior year non-cash goodwill impairment charge in the FSS International segment (approximately $198.6 million) (see Note 4 to the audited consolidated financial statements);

•prior year severance charges, mainly related to COVID-19, and current year severance accrual reversals (approximately $166.0 million);

•prior year non-cash charges related to operating lease right-of-use ("ROU") assets, property and equipment and other assets in the FSS United States and FSS International segments, primarily related to client contracts that were reassessed due to the impact of COVID-19 (approximately $30.6 million);

•prior year non-cash charges related to operating lease ROU assets, property and equipment and other assets from disposal by abandonment of certain rental properties in the FSS United States segment (approximately $28.5 million); and

•prior year non-cash charges related to information technology assets in the FSS United States segment due to discontinued use and non-renewal or expiration of contracts with specific vendors (approximately $26.1 million).

These increases in operating income (loss) during fiscal 2021 more than offset:

•higher personnel costs from incentive expenses related to the annual bonus and employer retirement matching contributions;

•higher share-based compensation expense (approximately $40.7 million) (see Note 12 to the audited consolidated financial statements);

•non-cash inventory charges, mainly to write down personal protective equipment ("PPE") to its net realizable value in the Uniform segment (approximately $25.0 million);

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•higher personnel costs related to sales growth initiatives (approximately $23.8 million); and

•prior year gain from the insurance proceeds received related to property damage from a tornado in Nashville (approximately $16.3 million).

During fiscal 2021, a non-cash gain related to an equity investment of approximately $137.9 million was recorded, which was partially offset by a non-cash loss from the termination of certain defined benefit pension plans of approximately $60.9 million.

Interest and Other Financing Costs, net, increased 4.9% during fiscal 2021 compared to the prior year period. The increase for fiscal 2021 was primarily due to the issuance of $1,500.0 million of 6.375% Senior Notes, due 2025 (the "6.375% 2025 Notes") in April 2020, partially offset by lower interest from the repayments of $900.0 million of the 5.125% Senior Notes due 2024 (the "5.125% 2024 Notes") in January of fiscal 2020 and $500.0 million of the 4.75% Senior Notes due 2026 (the "4.75% 2026 Notes") during the third quarter of fiscal 2021 and from lower borrowings on the receivables facility and revolving credit facility.

The Benefit for Income Taxes for fiscal 2021 was recorded at an effective rate of 30.6% compared to an effective rate of 28.8% in the prior year. As a result of the CARES Act, we recorded a net benefit to the (Benefit) Provision for Income Taxes of approximately $12.0 million and $58.4 million during fiscal 2021 and fiscal 2020, respectively. The (Benefit) Provision for Income Taxes during fiscal 2021 and fiscal 2020 includes the Net Operating Losses ("NOL") expected to be carried back to Pre-Tax Cut and Jobs Act years, which are benefited at an income tax rate of 35.0% as opposed to the current year rate of 21.0%. During fiscal 2021, we recorded a valuation allowance of $36.5 million against certain foreign tax credits that were re-established by the NOL carryback. Within the FSS International segment, we also recorded during fiscal 2021 and fiscal 2020 a valuation allowance against deferred tax assets in certain subsidiaries from cumulative losses of approximately $22.0 million and $21.4 million, respectively. The effective tax rate for fiscal 2020 also includes income tax benefits of approximately $46.2 million as a result of an excess tax benefit recognized in relation to equity awards exercised during fiscal 2020, including by the former Chairman, President and Chief Executive Officer. The Loss Before Taxes for fiscal 2020 includes a non-cash impairment charge of goodwill of $198.6 million, which is nondeductible for income tax purposes.

Segment Results

FSS United States Segment

The FSS United States reportable segment consists of five sectors which have similar economic characteristics and comprise a single operating segment. The five sectors of the FSS United States reportable segment are Business & Industry, Education, Healthcare, Sports, Leisure & Corrections and Facilities & Other.

Revenue for each of these sectors is summarized as follows (in millions):

The Healthcare sector had high-single digit operating income margins, consistent with prior year. The Education and Facilities & Other sectors had mid-single digit operating income margins, consistent with prior year. The Business & Industry sector had negative mid-single digit operating income margins, consistent with prior year. The Sports, Leisure & Corrections sector had mid-single digit operating income margins, compared to negative low-single digits in the prior year. As described above, during the COVID-19 pandemic, and in following periods, operating income margins in the FSS United States sectors may differ from our otherwise historical patterns.

FSS United States segment revenue decreased by approximately 7.6% during fiscal 2021 compared to the prior year period. The decrease was primarily attributable to COVID-19, which significantly impacted our Business and Industry sector due to many clients working from home instead of the office for a majority of fiscal 2021 compared to half of fiscal 2020 and our Education sector where clients during the 2020-2021 school year either reduced or ceased operations at certain locations, and instead opted for virtual or remote learning. The decrease in revenue was also impacted by the estimated impact of the 53rd week in fiscal 2020 (approximately 1.5%). The Healthcare sector increased due to the acquisition of Next Level Hospitality, which contributed $108.9 million of revenue during fiscal 2021.

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Operating income increased by approximately $126.5 million during fiscal 2021 compared to the prior year period. The increase during fiscal 2021 was attributable to:

•higher profitability from clients re-opening as well as from actions to reduce variable and fixed costs, including headcount reductions primarily taken during the second half of fiscal 2020;

•prior year severance charges, mainly related to COVID-19, and current year severance accrual reversals (approximately $55.6 million);

•prior year non-cash charges related to operating lease ROU assets, property and equipment and other assets from disposal by abandonment of certain rental properties (approximately $28.5 million);

•prior year non-cash charges related to information technology assets due to discontinued use and non-renewal or expiration of contracts with specific vendors (approximately $26.1 million); and

•prior year non-cash charges related to operating lease ROU assets, property and equipment and other assets, primarily related to client contracts that were reassessed due to the impact of COVID-19 (approximately $19.4 million).

These increases in operating income during fiscal 2021 more than offset higher insurance expenses, mainly from our medical program due to operations returning (approximately $9.2 million), and higher personnel costs from sales growth initiatives (approximately $7.1 million) and from incentive expenses related to the annual bonus and employer retirement matching contributions.

FSS International Segment

FSS International segment revenue decreased by approximately 2.7% during fiscal 2021 compared to the prior year period. The decrease was attributable to the negative impact of COVID-19 from restrictions and higher levels of lockdowns from government mandates in certain countries for a majority of fiscal 2021 compared to half of fiscal 2020, partially offset by the positive impact of foreign currency translation (approximately 5.2%).

Operating income (loss) increased by approximately $402.4 million during fiscal 2021 compared to the prior year period. The increase was mainly attributable to:

•improved profitability from clients re-opening after COVID-19 restrictions began to lift as well as from actions to reduce variable and fixed costs, including headcount reductions taken during the second half of fiscal 2020;

•higher labor related tax credits provided from government assistance programs (see Note 1 to the audited consolidated financial statements);

•prior year non-cash goodwill impairment charge (approximately $198.6 million);

•prior year severance charges, mainly related to COVID-19, and current year severance accrual reversals (approximately $107.5 million);

•higher charges in the prior year related to a client contract dispute (approximately $12.4 million); and

•prior year non-cash charges related to property and equipment from client contracts that were reassessed due to the impact of COVID-19 (approximately $11.2 million).

These increases in operating income during fiscal 2021 more than offset higher personnel costs from incentive expenses related to the annual bonus.

Uniform Segment

Uniform segment revenue decreased by approximately 3.8% during fiscal 2021 compared to the prior year period. The decrease was primarily attributable to the greater negative impact of COVID-19 in the current year period compared to fiscal 2020 and the estimated impact of the 53rd week in fiscal 2020 (approximately 1.7%), partially offset by improved pricing.

Operating income decreased by approximately $50.7 million during fiscal 2021 compared to the prior year period. The decrease was attributable to the negative impact of COVID-19, from clients either reducing or ceasing operations at certain locations for a majority of fiscal 2021 compared to half of fiscal 2020. While the negative impact of COVID-19 was partially offset by both United States and non-United States governmental labor related tax credits, the benefit from the credits was lower in fiscal 2021 than fiscal 2020 (see Note 1 to the audited consolidated financial statements). The decrease in operating income was attributable to:

•non-cash inventory charges, mainly to write down PPE to its net realizable value (approximately $25.0 million);

•higher personnel costs related to sales growth initiatives (approximately $16.7 million);

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•prior year gain from the insurance proceeds received related to property damage from a tornado in Nashville (approximately $16.3 million);

•higher personnel costs from incentive expenses related to the annual bonus and employer retirement matching contributions;

•prior year favorable non-cash settlement of a multiemployer pension plan obligation (approximately $6.7 million); and

•higher severance charges compared to the prior year period (approximately $3.0 million).

These decreases in operating income during fiscal 2021 more than offset:

•favorable impact of headcount reductions taken during the second half of fiscal 2020;

•favorable in-service rental merchandise amortization compared to fiscal 2020; and

•lower merger and integration charges from the AmeriPride acquisition (approximately $2.4 million).

Corporate

Corporate expenses, those administrative expenses not allocated to the business segments, increased by approximately $21.9 million during fiscal 2021 compared to the prior year period. The increase was attributable to:

•higher share-based compensation expense (approximately $40.7 million) (see Note 12 to the audited consolidated financial statements); and

•higher personnel costs from incentive expenses related to the annual bonus.

These increases in corporate expenses during fiscal 2021 more than offset:

•the favorable change in fair value of certain gasoline and diesel agreements (approximately $6.4 million);

•effective cost discipline and prior year mitigating actions, including headcount reductions primarily taken during the second half of fiscal 2020; and

•prior year severance charges, mainly related to COVID-19, and current year severance accrual reversals (approximately $6.0 million).

Liquidity and Capital Resources

Overview

Our principal sources of liquidity are cash generated from operating activities, funds from borrowings and existing cash on hand. As of October 1, 2021, we had $532.6 million of cash and cash equivalents, approximately $1,091.6 million of availability under our senior secured revolving credit facility and $400.0 million of availability under the receivables facility. A significant portion of our cash and cash equivalents are held in mature, liquid geographies where we have operations. As of October 1, 2021, there were approximately $869.5 million of outstanding foreign currency borrowings.

In response to the COVID-19 pandemic, we undertook a number of actions during fiscal 2020 to enhance our cash position, including increasing borrowings under our revolving credit facility and under our receivables facility, renegotiations of client contracts, salary and other compensation adjustments and reductions to general corporate expenses. In addition, on April 27, 2020, Aramark Services Inc. (“ASI”), our indirect wholly owned subsidiary, issued $1,500.0 million aggregate principal amount of 6.375% 2025 Notes. We continue to apply effective cost discipline to mitigate the negative impacts of COVID-19 as well as take advantage of relief provisions, including the CARES Act, CAA, and other United States and foreign governmental programs (see Note 1 to the audited consolidated financial statements). During fiscal 2021, we repaid $780.0 million of outstanding borrowings under our United States revolving credit facility, $500.0 million aggregate principal amount of 4.750% 2026 Notes and $315.6 million of outstanding borrowings under the receivables facility utilizing cash and cash equivalents on hand. Additionally, during fiscal 2021, we made $244.2 million of net repayments on term loan borrowings.

On April 6, 2021, we entered into Amendment No. 11 ("Amendment No. 11") to the Credit Agreement, dated as of March 28, 2017 (as supplemented or otherwise modified from time to time, the "Credit Agreement"), which, among other things, increased the availability on the revolving credit facility by $200.0 million and extended the maturity dates on a portion of the revolving credit facility, a portion of the Canadian dollar denominated term loan due October 2023, a portion of the euro denominated term loan due October 2023 and all of the yen denominated term loan due October 2023, in each case, to April 2026. We also extended the maturity date of the United States dollar denominated term loan due 2024 to April 2028. In addition, on June 25, 2021, we extended the maturity date of our receivables facility from June 2022 to June 2024 (see Note 5 to the audited consolidated financial statements).

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While the full impact of COVID-19 on our long-term liquidity remains uncertain, we currently believe that our cash and cash equivalents and availability under our revolving credit facility and receivables facility will be adequate to meet anticipated cash requirements for the foreseeable future to fund working capital, capital spending, debt service obligations, refinancings, dividends and other cash needs. As a result of the refinancings executed in fiscal 2021, we have no significant debt maturities due until 2025 and we believe we have sufficient flexibility to manage the impact of COVID-19, based on our current assumptions. We also have flexibility to optimize working capital and defer certain capital expenditures as appropriate without a material impact to the business. We believe that our assumptions used to estimate our liquidity and working capital requirements are reasonable; however, due to the unprecedented current environment, we cannot assure that our assumptions will be correct and, as a consequence, our ability to be predictive is uncertain. For additional information regarding the impact of COVID-19, including on our liquidity and capital resources, see Part I, Item 1A, "Risk Factors."

The table below summarizes our cash activity (in millions):

Reference to the audited Consolidated Statements of Cash Flows will facilitate understanding of the discussion that follows.

Cash Flows Provided by Operating Activities

Cash provided by operating activities increased by approximately $480.4 million during fiscal 2021 compared to fiscal 2020, primarily driven by a $552.6 million favorable increase in operating assets and liabilities and by a lower net loss, as discussed in "Results of Operations" above. These increases were partially offset by non-cash gains and losses, including the prior year non-cash impairment charges related to goodwill and other assets of approximately $283.7 million, the current year non-cash gain from our equity investment of approximately $137.9 million and the loss on termination of certain defined benefit pension plans of approximately $60.9 million. The $552.6 million favorable change in operating assets and liabilities compared to the prior year period was primarily due to:

•Accounts payable by $594.2 million, generating a source of cash during fiscal 2021 compared to a use of cash in fiscal 2020 due to the reduction in the prior year balance from COVID-19 and the timing of disbursements whereas the current year balance has increased from client re-openings;

•Accrued expenses by $404.8 million, generating a source of cash during fiscal 2021 compared to a use of cash in fiscal 2020 primarily due to the following: operations returning, including higher client advances within our Higher Education business; the deferral of payments permitted under the CARES Act; lower commission payments in our Sports business; and lower payments related to the annual bonus, partially offset by current year severance payments from headcount reductions made in the second half of fiscal 2021; and

•Prepayment and Other Current Assets by $188.4 million, generating a source of cash during fiscal 2021 compared to a use of cash in fiscal 2020 mainly from proceeds received in the second quarter of fiscal 2021 related to the fiscal 2020 federal income tax return (approximately $93.6 million), whereas the prior year period income tax receivable balance increased due to our net loss position.

These changes in operating assets and liabilities more than offset:

•Receivables by $652.9 million, generating a use of cash during fiscal 2021 compared to a source of cash during fiscal 2020 due to the reduction in the prior year balance from COVID-19, whereas the current year balance has increased due to client re-openings.

Fiscal 2021 and fiscal 2020 include approximately $159.1 million and $101.3 million, respectively, of proceeds associated with labor related tax credits from many foreign jurisdictions in which we operate as a form of relief from COVID-19 (see Note 1 to the audited consolidated financial statements). During fiscal 2021 and fiscal 2020, we received income of approximately $17.0 million and $15.5 million, respectively, related to favorable loss experience in older insurance years under our general liability, automobile liability and workers' compensation programs. The "Change in other noncurrent liabilities" caption was a use of cash during fiscal 2021 compared to a source of cash in fiscal 2020 due to the deferral of the employer portion of social security taxes as permitted under the CARES Act (see Note 1 to the audited consolidated financial statements) and changes in insurance reserves. The "Changes in other assets" caption was less of a source of cash during fiscal 2021 compared to fiscal 2020 mainly from the increase to in-service rental merchandise as customer installations were reduced in fiscal 2020 from the impact of COVID-19. The "Other operating activities" caption reflects mainly adjustments to net loss in the current year and prior year

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periods related to non-cash gains and losses, including current year inventory write-downs within the Uniform segment and adjustments to non-operating cash gains and losses, including call premium expenses for debt repayments and the gain from the insurance proceeds of $16.3 million related to property damage from a tornado at one of our Uniform locations in Nashville during fiscal 2020.

Cash Flows Used in Investing Activities

The net cash flows used in investing activities were higher during fiscal 2021 compared to fiscal 2020 due to the acquisition of Next Level Hospitality for $226.1 million (see Note 2 to the audited consolidated financial statements). This increase was partially offset by lower capital expenditures. The "Disposals of property and equipment" caption for fiscal 2020 includes approximately $21.5 million of insurance proceeds related to a tornado at one of our Uniform locations in Nashville. The "Proceeds from governmental agencies related to property and equipment" caption includes approximately $10.0 million and $15.3 million of proceeds during fiscal 2021 and 2020, respectively, relating to the recovery of our investment (possessory interest) at one of the National Park Service sites within our Sports, Leisure & Corrections sector. Fiscal 2020 also includes approximately $8.3 million during fiscal 2020 of proceeds from government grants related to the relocation to our headquarters.

Cash Flows (Used In) Provided by Financing Activities

During fiscal 2021, cash used in financing activities was impacted by the following:

•the repayment of borrowings under the United States revolving credit facility ($780.0 million);

•repayment of the aggregate principal amount of the 4.750% 2026 Notes ($500.0 million);

•repayments under the receivables facility ($315.6 million);

•net repayments of term loan borrowings ($244.2 million);

•payment of fees and expenses related to refinancing activities, which is included in "Other financing activities," including debt issuance costs ($17.5 million) and the call premium ($11.9 million) from the repayment of the 4.750% 2026 Notes; and

•payment of an earnout related to a prior year acquisition ($7.4 million).

During fiscal 2020, cash provided by financing activities was impacted by the following:

•issuance of the 6.375% 2025 Notes ($1,500.0 million);

•issuance of a new United States dollar denominated term loan due January 2027, net of original issue discount ($898.9 million);

•an increase in borrowings under the revolving credit facility ($849.9 million);

•an increase in funding under the receivables facility ($315.6 million);

•an increase in proceeds from issuance of common stock as a result of higher stock option exercises ($90.0 million); and

•cash proceeds received from a stockholder in connection with short-swing profits earned through transactions in our common stock, which are included in "Other financing activities" ($14.8 million); which more than offset

•repayment of the aggregate principal amount of the 5.125% 2024 Notes ($900.0 million); and

•payment of fees and expenses related to refinancing activities, which is included in "Other financing activities," including a call premium ($23.1 million) and debt issuance costs ($29.4 million).

The "Other financing activities" caption also reflects a use of cash during fiscal 2021 and fiscal 2020, primarily related to taxes paid by us when we withhold shares upon an employee's exercise or vesting of equity awards to cover income taxes.

During the second quarter of fiscal 2020, we repurchased 0.3 million shares of our common stock for $6.5 million under the fiscal 2019 share repurchase program, which will expire in July 2022.

On February 2, 2021, our stockholders approved the Third Amended and Restated 2013 Stock Incentive Plan, which amended and restated our 2013 Incentive Plan last amended on January 29, 2020. The Third Amended and Restated 2013 Stock Incentive Plan provides for up to 3.5 million of new shares authorized for issuance to participants, in addition to the shares that remained available for issuance under the 2013 Incentive Plan as of February 2, 2021.

On February 2, 2021, our stockholders approved the Aramark 2021 Employee Stock Purchase Plan (“ESPP”). The ESPP allows eligible employees to contribute up to 10% of their eligible pay toward the quarterly purchase of our common stock, subject to an annual maximum dollar amount. The purchase price is 85% of the lesser of the i) fair market value per share of our common

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stock as determined on the purchase date or ii) fair market value per share of our common stock as determined on the first trading day of the quarterly offering period. Purchases under the ESPP are made in March, June, September and December. The aggregate number of shares of common stock that may be issued under the ESPP may not exceed 12.5 million shares. Our first purchase window began on April 1, 2021. There were 0.5 million shares purchased under the ESPP during the fiscal year ended October 1, 2021.

We intend to continue to pay cash dividends on our common stock, subject to our compliance with applicable law, and depending on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in our debt agreements, business prospects and other factors that our Board of Directors may deem relevant. However, the payment of any future dividends will be at the discretion of our Board of Directors and our Board of Directors may, at any time, determine not to continue to declare quarterly dividends.

Covenant Compliance

The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of our subsidiaries to: incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends, make distributions or repurchase our capital stock; make investments, loans or advances; repay or repurchase any subordinated debt, except as scheduled or at maturity; create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries; make certain acquisitions; engage in certain transactions with affiliates; amend material agreements governing our subordinated debt (or any indebtedness that refinances our subordinated debt); and fundamentally change our business. The indentures governing our senior notes contain similar provisions. As of October 1, 2021, we were in compliance with these covenants.

As stated above, the Credit Agreement and the indentures governing our senior notes contain provisions that restrict our ability to pay dividends and repurchase stock (collectively, "Restricted Payments"). In addition to customary exceptions, the Credit Agreement and indentures permit Restricted Payments in the aggregate up to an amount that increases quarterly by 50% of our Consolidated Net Income, as such term is defined in these debt agreements, subject to being in compliance with the interest coverage ratio described below.

Under the Credit Agreement, we are required to satisfy and maintain specified financial ratios and other financial condition tests and covenants. The indentures governing our senior notes also require us to comply with certain financial ratios in order to take certain actions. Our continued ability to meet those financial ratios, tests and covenants can be affected by events beyond our control, and there can be no assurance that we will meet those ratios, tests and covenants.

On April 22, 2020, as a result of the impact of COVID-19 on our business, ASI entered into Amendment No. 9 to the Credit Agreement. Amendment No. 9 provided for a covenant waiver period which suspended the Consolidated Secured Debt Ratio covenant required under the credit agreement for four fiscal quarters, commencing with the fourth quarter of fiscal 2020 through the third quarter of fiscal 2021, subject to, among other things, ongoing compliance with a minimum liquidity condition of $400.0 million and restrictions on making certain restricted payments (including share repurchases) and investments in unrestricted subsidiaries, in each case, as set forth in Amendment No. 9. This exclusion was intended to prevent the effects of COVID-19 from impacting the covenant calculation. The covenant waiver period expired at the beginning of the fourth quarter of fiscal 2021. The Consolidated Secured Debt Ratio debt covenant is once again effective and the amendment adjusted period ended October 1, 2021 consists of results from the third quarter of fiscal 2019 through the first quarter of fiscal 2020 plus the fourth quarter of fiscal 2021, excluding the results of the second quarter of fiscal 2020 through the third quarter of fiscal 2021.

These financial ratios, tests and covenants involve the calculation of certain measures that we refer to in this discussion as "Covenant Adjusted EBITDA." Covenant Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP. Covenant Adjusted EBITDA is defined as net income (loss) of ASI and its restricted subsidiaries plus interest and other financing costs, net, provision (benefit) for income taxes, and depreciation and amortization, further adjusted to give effect to adjustments required in calculating covenant ratios and compliance under our Credit Agreement and the indentures governing our senior notes.

Our presentation of these measures has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. You should not consider these measures as alternatives to net income (loss) or operating income (loss) determined in accordance with U.S. GAAP. Covenant Adjusted EBITDA, as presented by us, may not be comparable to other similarly titled measures of other companies because not all companies use identical calculations.

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The following is a reconciliation of net income attributable to ASI stockholder, which is a U.S. GAAP measure of ASI''s operating results, to Covenant Adjusted EBITDA as defined in our debt agreements. The terms and related calculations are defined in the Credit Agreement and the indentures governing our senior notes. Covenant Adjusted EBITDA is a measure of ASI and its restricted subsidiaries only and does not include the results of Aramark.

(1)    The covenant waiver period outlined in Amendment No. 9 to our Credit Agreement expired at the beginning of the fourth quarter of fiscal 2021. The Consolidated Secured Debt Ratio debt covenant is once again effective and the amendment adjusted period ended October 1, 2021 consists of results from the third quarter of fiscal 2019 through the first quarter of fiscal 2020 plus the fourth quarter of fiscal 2021, excluding the results of the second quarter of fiscal 2020 through the third quarter of fiscal 2021.

(2)    Represents share-based compensation expense resulting from the application of accounting for stock options, restricted stock units, performance stock units and deferred stock units awards and employee stock purchases (see Note 12 to the audited consolidated financial statements).

(3)    Represents the fiscal 2021 non-cash gain from an observable price change on our equity investment ($137.9 million) and the fiscal 2021 non-cash loss from the termination of certain defined benefit pension plans ($60.9 million).

(4)    Represents our estimated share of EBITDA, primarily from our AIM Services Co., Ltd. equity method investment, not already reflected in our Net (loss) income attributable to ASI stockholder. EBITDA for this equity method investee is calculated in a manner consistent with consolidated Covenant Adjusted EBITDA but does not represent cash distributions received from this investee.

(5)    Represents the annualizing of net EBITDA from acquisitions made during the period.

(6)    "Other" for the twelve months ended October 1, 2021 includes non-cash charges for inventory write-downs to net realizable value and for excess inventory related to personal protective equipment ($36.0 million), labor charges, incremental expenses and other expenses associated with closed or partially closed client locations resulting from the COVID-19 pandemic, net of United States and non-United States governmental labor related tax credits ($28.4 million), adjustments to remove the impact attributable to the adoption of certain accounting standards that are made to the calculation in accordance with the Credit Agreement and indentures ($25.3 million), expenses related to merger and integration related charges ($22.2 million), gain from a funding agreement related to a legal matter ($10.0 million), reversal of severance charges ($8.2 million), the gain from the change in fair value related to certain gasoline and diesel agreements ($5.9 million), a favorable settlement of a legal matter ($4.7 million), non-cash impairment charges related to various assets ($3.8 million), charges related to a client contract dispute ($2.6 million), expenses related to the impact of the ice storm in Texas ($2.5 million), a non-cash charge related to an environmental matter ($2.5 million), non-cash charges related to information technology assets ($2.2 million), the impact of hyperinflation in Argentina ($1.8 million) and other miscellaneous expenses.

(7)    "Other" for the amendment adjusted period ended October 1, 2021 includes labor charges, incremental expenses and other expenses associated with closed or partially closed client locations resulting from the COVID-19 pandemic, net of United States and non-United States governmental labor related tax credits ($45.7 million benefit), expenses related to merger and integration related charges ($40.1 million), charges related to certain legal settlements ($27.9 million), adjustments to remove the impact attributable to the adoption of certain accounting standards that are made to the calculation in accordance with the Credit Agreement and indentures ($25.0 million), non-cash charges for inventory write-downs ($16.4 million), non-cash impairment charges related to various assets ($11.9 million), reversal of severance

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charges ($11.2 million), compensation expense for retirement contributions and employee training programs funded by the benefits from United States tax reform ($10.9 million), cash compensation charges associated with the retirement of our former chief executive officer ($10.4 million), gain from a funding agreement related to a legal matter ($10.0 million), advisory fees related to shareholder matters ($7.7 million), closing costs mainly related to customer contracts ($7.3 million), the impact of hyperinflation in Argentina ($5.7 million), non-cash charges related to information technology assets ($5.1 million), the gain from the change in fair value related to certain gasoline and diesel agreements ($3.2 million) and other miscellaneous expenses.

Our covenant requirements and actual ratios for the twelve months ended October 1, 2021 are as follows:

(1)    The Credit Agreement requires ASI to maintain a maximum Consolidated Secured Debt Ratio, defined as consolidated total indebtedness secured by a lien to Covenant Adjusted EBITDA, of 5.125x. Consolidated total indebtedness secured by a lien is defined in the Credit Agreement as total indebtedness consisting of debt for borrowed money, finance leases, debt in respect of sales-leaseback transactions, disqualified and preferred stock and advances under the receivables facility secured by a lien reduced by the amount of cash and cash equivalents on the consolidated balance sheet that is free and clear of any lien. Non-compliance with the maximum Consolidated Secured Debt Ratio could result in the requirement to immediately repay all amounts outstanding under the Credit Agreement, which, if ASI's lenders under our Credit Agreement (other than the lenders in respect of ASI's U.S. Term B Loans, which lenders do not benefit from the maximum Consolidated Debt Ratio covenant) failed to waive any such default, would also constitute a default under the indentures governing our senior notes. The Consolidated Secured Debt Ratio debt covenant was calculated per the terms in Amendment No. 9 to our Credit Agreement, which consists of results from the third quarter of fiscal 2019 through the first quarter of fiscal 2020 plus the fourth quarter of fiscal 2021, excluding the results of the second quarter of fiscal 2020 through the third quarter of fiscal 2021.

(2)    Our Credit Agreement establishes an incurrence-based minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA to consolidated interest expense, the achievement of which is a condition for us to incur additional indebtedness and to make certain restricted payments and does not result in a default or an event of default under the Credit Agreement or the indentures governing the senior notes. If we do not maintain this minimum Interest Coverage Ratio calculated on a pro forma basis for any such additional indebtedness or restricted payments, we could be prohibited from being able to (1) incur additional indebtedness, other than the incremental capacity provided for under the Credit Agreement and pursuant to specified exceptions, and (2) make certain restricted payments, other than pursuant to certain exceptions. However, any failure to maintain the Interest Coverage Ratio would not result in a default or an event of default under either the Credit Agreement or the indentures governing the senior notes. The minimum Interest Coverage Ratio is 2.000x for the term of the Credit Agreement. Consolidated interest expense is defined in the Credit Agreement as consolidated interest expense excluding interest income, adjusted for acquisitions and dispositions, further adjusted for certain non-cash or nonrecurring interest expense and our estimated share of interest expense from one equity method investee. The indentures governing our senior notes include a similar requirement which is referred to as a Fixed Charge Coverage Ratio. The Interest Coverage Ratio was calculated based on the twelve months ended October 1, 2021 and was not required to be adjusted similar to the Consolidated Secured Debt Ratio as prescribed under the terms of Amendment No. 9 to our Credit Agreement.

We and our subsidiaries and affiliates may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt securities (including any publicly issued debt securities), in privately negotiated or open market transactions, by tender offer or otherwise, or extend or refinance any of our outstanding indebtedness.

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The following table summarizes our future obligations for debt repayments, finance leases, estimated interest payments, future minimum rental and similar commitments under noncancelable operating leases as well as contingent obligations related to outstanding letters of credit and guarantees as of October 1, 2021 (dollars in thousands):

(1)Excludes the $53.5 million reduction to long-term borrowings from debt issuance costs and $0.8 million reduction from the discount on the U.S. Term B-4 Loans due 2027.

(2)These amounts represent future interest payments related to our existing debt obligations based on fixed and variable interest rates specified in the associated debt agreements and reflect any current hedging arrangements. Payments related to variable debt are based on applicable rates at October 1, 2021 plus the specified margin in the associated debt agreements for each period presented. The amounts provided relate only to existing debt obligations and do not assume the refinancing or replacement of such debt. The average debt balance for each fiscal year from 2022 through 2027 is $7,477.1 million, $7,407.9 million, $7,346.3 million, $5,379.9 million, $2,933.9 million and $2,334.7 million, respectively. The weighted average interest rate of our existing debt obligations for each fiscal year from 2022 through 2027 is 4.17%, 3.87%, 3.89%, 3.81%, 3.39% and 3.80%, respectively (see Note 5 to the audited consolidated financial statements for the terms and maturities of existing debt obligations).

(3)Represents commitments for capital projects to help finance improvements or renovations at the facilities in which we operate.

(4)Includes certain unfunded employee retirement obligations, contingent consideration, deferred social security taxes, self-insurance obligations, severance obligations and other obligations.

We have excluded from the table above uncertain tax liabilities due to the uncertainty of the amount and period of payment. As of October 1, 2021, we have gross uncertain tax liabilities of $65.4 million (see Note 10 to the audited consolidated financial statements). During fiscal 2021, we made contributions totaling $3.6 million into our defined benefit pension plans. Estimated contributions to our defined benefit pension plans in fiscal 2022 are $6.3 million (see Note 9 to the audited consolidated financial statements).

We have an agreement (the "Receivables Facility") with three financial institutions where we sell on a continuous basis an undivided interest in all eligible accounts receivable, as defined in the Receivables Facility. The maximum amount available under the Receivables Facility is $400.0 million. In addition, the Receivables Facility includes a seasonal tranche which increases the capacity of the Receivables Facility and the maximum amount available by $100.0 million from October through March. During the third quarter of fiscal 2021, we extended the scheduled maturity date of the Receivables Facility from June 2022 to June 2024. All other terms and conditions of the agreement remained largely unchanged. As of October 1, 2021, there are no outstanding borrowings under the Receivables Facility. Amounts borrowed under the Receivables Facility fluctuate monthly based on our funding requirements and the level of qualified receivables available to collateralize the Receivables Facility.

Pursuant to the Receivables Facility, we formed ARAMARK Receivables, LLC, a wholly-owned, consolidated, bankruptcy-remote subsidiary. ARAMARK Receivables, LLC was formed for the sole purpose of buying and selling receivables generated by certain of our subsidiaries. Under the Receivables Facility, we and certain of our subsidiaries transfer without recourse all of

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our accounts receivable to ARAMARK Receivables, LLC. As collections reduce previously transferred interests, interests in new, eligible receivables are transferred to ARAMARK Receivables, LLC, subject to meeting certain conditions.

Supplemental Consolidating Information

Pursuant to Regulation S-X Rule 13-01, which simplified certain disclosure requirements for guarantors and issuers of guaranteed securities, we are no longer required to provide condensed consolidating financial statements for Aramark and its subsidiaries, including the guarantors and non-guarantors under our Credit Agreement and the indentures governing our senior notes. ASI, the borrower under our Credit Agreement and the indentures governing our senior notes, and its restricted subsidiaries together comprise substantially all of our assets, liabilities and operations, and there are no material differences between the consolidating information related to Aramark and Aramark Intermediate Holdco Corporation, the direct parent of ASI and a guarantor under our Credit Agreement, on the one hand, and ASI and its restricted subsidiaries on a standalone basis, on the other hand.

Other

Our business activities do not include the use of unconsolidated special purpose entities and there are no significant business transactions that have not been reflected in the accompanying audited consolidated financial statements. We insure portions of our general liability, automobile liability and workers’ compensation risks through a wholly owned captive insurance subsidiary (the "Captive") to enhance our risk financing strategies. The Captive is subject to regulations within its domicile of Bermuda, including regulations established by the Bermuda Monetary Authority (the "BMA") relating to levels of liquidity and solvency as such concepts are defined by the BMA. The Captive was in compliance with these regulations as of October 1, 2021. These regulations may have the effect of limiting our ability to access certain cash and cash equivalents held by the Captive for uses other than for the payment of our general liability, automobile liability and workers’ compensation claims and related Captive costs. As of October 1, 2021 and October 2, 2020, cash and cash equivalents at the Captive were $194.3 million and $92.1 million, respectively.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in the notes to the audited consolidated financial statements included in this Annual Report. As described in such notes, we recognize revenue in the period in which the performance obligation is satisfied. See Note 7 to our audited consolidated financial statements for further information related to our revenue recognition policy.

In preparing our financial statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are most significant where they involve levels of subjectivity and judgment necessary to account for highly uncertain matters or matters susceptible to change, and where they can have a material impact on our financial condition and operating performance. If actual results were to differ materially from the estimates made, the reported results could be materially affected.

Asset Impairment Determinations

Goodwill, the Aramark trade name and other trade names are primarily indefinite lived intangible assets that are not amortized and are subject to an impairment test that we conduct annually or more frequently if a change in circumstances or the occurrence of events indicates that potential impairment exists. The impairment test may first consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Examples of qualitative factors include, macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, entity-specific events, events affecting reporting units and sustained changes in our stock price. If results of the qualitative assessment indicate a more likely than not determination or if a qualitative assessment is not performed, a quantitative test is performed by comparing the estimated fair value using discounted cash flow calculations of each reporting unit with its estimated net book value.

We perform the assessment of goodwill at the reporting unit level. Within our FSS International segment, each country or region is evaluated separately since they are relatively autonomous and separate goodwill balances have been recorded for each entity. During the fourth quarter of fiscal 2021, we performed the annual impairment test for goodwill for each of our reporting units using a quantitative testing approach. Based on our evaluation performed, we determined that the fair value of each of the reporting units significantly exceeded its respective carrying amount, and therefore, we determined that goodwill was not impaired.

During fiscal 2020, we identified a triggering event from the decline in our stock price resulting from COVID-19. As a result, we performed a quantitative impairment test as of March 27, 2020 and recognized a non-cash impairment charge of $198.6 million related to one reporting unit within our FSS International segment in the Consolidated Statements of (Loss) Income for the fiscal year ended October 2, 2020. For tax purposes, the impairment charge was not tax deductible. The impaired reporting unit has a remaining goodwill balance of $91.0 million as of October 1, 2021.

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The determination of fair value for each reporting unit includes assumptions, which are considered Level 3 inputs, that are subject to risk and uncertainty. The discounted cash flow calculations are dependent on several subjective factors including the timing of future cash flows, the underlying margin projection assumptions, future growth rates and the discount rate. If our assumptions or estimates in our fair value calculations change or if future cash flows, margin projections or future growth rates vary from what was expected, including those assumptions relating to the duration and severity of COVID-19, this may impact our impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges.

With respect to our other long-lived assets, we are required to test for asset impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, we compare the sum of the future expected cash flows from the asset, undiscounted and without interest charges, to the asset’s carrying value. If the sum of the future expected cash flows from the asset is less than the carrying value, an impairment would be recognized for the difference between the estimated fair value and the carrying value of the asset.

In making future cash flow analyses of various assets, we make assumptions relating to the following:

•    The intended use of assets and the expected future cash flows resulting directly from such use;

•    Comparable market valuations of businesses similar to Aramark's business segments;

•    Industry specific economic conditions;

•    Competitor activities and regulatory initiatives; and

•    Client and customer preferences and behavior patterns.

We believe that an accounting estimate relating to asset impairment is a critical accounting estimate because the assumptions underlying future cash flow estimates are subject to change from time to time and the recognition of an impairment could have a significant impact on our consolidated statements of (loss) income.

During fiscal 2020, we recorded non-cash impairment charges related to the following: abandonment of rental properties ($28.5 million), information technology assets from either discontinue of use or contracts terminated ($26.1 million) and from client contracts that were reassessed due to the impact of COVID-19 ($30.6 million).

Litigation and Claims

From time to time, we and our subsidiaries are party to various legal actions, proceedings and investigations involving claims incidental to the conduct of our businesses, including those brought by clients, consumers, employees, government entities and third parties under, among others, federal, state, international, national, provincial and local employment laws, wage and hour laws, discrimination laws, immigration laws, human health and safety laws, import and export controls and customs laws, environmental laws, false claims or whistleblower statutes, procurement regulations, intellectual property laws, food safety and sanitation laws, cost and accounting principles, the Foreign Corrupt Practices Act, the U.K. Bribery Act, other anti-corruption laws, lobbying laws, motor carrier safety laws, data privacy and security laws and alcohol licensing and service laws, or alleging negligence and/or breach of contractual and other obligations. We consider the measurement of litigation reserves as a critical accounting estimate because of the significant uncertainty in some cases relating to the outcome of potential claims or litigation and the difficulty of predicting the likelihood and range of potential liability involved, coupled with the material impact on our results of operations that could result from litigation or other claims. In determining legal reserves, we consider, among other issues:

•    interpretation of contractual rights and obligations;

•    the status of government regulatory initiatives, interpretations and investigations;

•    the status of settlement negotiations;

•    prior experience with similar types of claims;

•    whether there is available insurance; and

•    advice of counsel.

We are involved in a dispute with a client regarding Aramark’s provision of services pursuant to a contract. We continue to simultaneously litigate the matter and attempt to reach a negotiated resolution. We recorded a reserve for this matter as it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. As of October 1, 2021 and October 2, 2020, we have accrued our best estimate of the probable loss associated with this contract, which is approximately $19.1 million and $16.3 million, respectively. We continue to believe it is reasonably possible that this potential exposure may change in the near term based on the outcome of either the settlement negotiations or through continued litigation.

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Allowance for Credit Losses

We encounter credit loss risks associated with the collection of receivables. We analyze historical experience, current general and specific industry economic conditions, industry concentrations, such as exposure to small and medium-sized businesses, the non-profit healthcare sector, federal and local governments, and reasonable and supportable forecasts that affect the collectability of the reported amount in estimating credit losses. The accounting estimate related to the allowance for credit losses is a critical accounting estimate because the underlying assumptions used for the allowance can change from time to time and credit losses could potentially have a material impact on our results of operations. We adopted a new accounting standard related to the measurement of expected credit losses as of October 3, 2020 (the first day of fiscal 2021) (see Note 1 to the audited consolidated financial statements).

As of October 1, 2021 and October 2, 2020, our allowance for credit losses was approximately $79.6 million and $74.9 million, respectively.

Inventory Obsolescence

We record an inventory obsolescence reserve for obsolete, excess and slow-moving inventory, principally in the Uniform segment. In calculating our inventory obsolescence reserve, we analyze historical and projected data regarding customer demand within specific product categories and make assumptions regarding economic conditions within customer specific industries, as well as style and product changes. Our accounting estimate related to inventory obsolescence is a critical accounting estimate because customer demand in certain of our businesses can be variable and changes in our reserve for inventory obsolescence could materially affect our results of operations.

As of October 1, 2021 and October 2, 2020, our reserve for inventory obsolescence was approximately $45.7 million and $36.7 million, respectively.

Self-Insurance Reserves

We self-insure for obligations related to certain risks that we retain under our casualty program, which includes general liability, automobile liability and workers’ compensation claims, as well as for our employee health care benefit programs. The accounting estimates related to our self-insurance reserves are critical accounting estimates because changes in our claim experience, our ability to settle claims or other estimates and judgments we use could potentially have a material impact on our results of operations. Our reserves for retained costs associated with our casualty program are estimated through actuarial methods, with the assistance of third-party actuaries, using loss development assumptions based on our claims history. Our casualty program reserves take into account reported claims as well as incurred-but-not-reported losses using loss development factors based upon past experience. In order to determine the loss development factors, we make judgments relating to the nature, frequency, severity, and age of claims, and industry, regulatory, and company-specific trends impacting the development of claims. The actual cost to settle our self-insured casualty claim liabilities can differ from our reserve estimates because of a number of uncertainties, including the inherent difficulty in estimating the severity of a claim and the potential amount to defend and settle a claim.

As of October 1, 2021 and October 2, 2020, our self-insurance reserves were approximately $235.7 million and $250.1 million, respectively.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. We make assumptions, judgments and estimates to determine the current income tax provision (benefit), deferred tax asset and liabilities and valuation allowance recorded against a deferred tax asset. The assumptions, judgments and estimates relative to the current income tax provision (benefit) take into account current tax laws, their interpretation and possible results of foreign and domestic tax audits. Changes in tax law, their interpretation and resolution of tax audits could significantly impact the income taxes provided in our consolidated financial statements. Assumptions, judgments and estimates relative to the amount of deferred income taxes take into account future taxable income. Any of the assumptions, judgments and estimates mentioned above could cause the actual income tax obligations to differ from our estimates.

As of October 1, 2021 and October 2, 2020, our valuation allowance reserves recorded against deferred tax assets were approximately $97.5 million and $39.0 million, respectively (see Note 10 to the audited consolidated financial statements).

Critical accounting estimates and the related assumptions are evaluated periodically as conditions warrant, and changes to such estimates are recorded as new information or changed conditions require.

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New Accounting Standards Updates

See Note 1 to the audited consolidated financial statements for a full description of recent accounting standards updates, including the expected dates of adoption.