Aramark (ARMK) 2009 Q3 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to Aramark Corporation third quarter 2009 earnings conference call. At this time I would like to inform you this conference is recorded for rebroadcast at all participants are in a listen-only mode. At the request of the Company we will open the conference up for questions after the presentation.

I will now turn the call over to Chris Holland, Senior Vice President and Treasurer. Please proceed, Chris.

Thank you and welcome to Aramark Corporation's conference call to review the results of our operations for the third quarter of fiscal 2009. Here with me today is Fred Sutherland, our Executive Vice President and Chief Financial Officer. Fred and I will present an overview of our third quarter and our year-to-date results and business operations, after which there will be an opportunity for phone-in participants to ask questions.

I would like to remind you that any recording or other use or transmission of this audio may not be done without the prior written consent of Aramark. As we discuss the results, you may want to refer to the Form 10-Q we filed earlier today, which contains our third quarter results for fiscal 2009. This Form 10-Q can be found on our website at www.aramark.com.

In today's discussion of results we mention certain non-GAAP financial measures. The Form 10-Q as well as schedules we posted to our website today include reconciliations of these non-GAAP financial measures to the most comparable GAAP measures, as required by SEC rules.

Our discussion of adjusted operating income during today's call will, in each instance, exclude the incremental intangibles amortization and property and equipment depreciation expense resulting from the going private transaction, as well as the impact of stock option expense under FAS 123(R) and in the $34.2 million charge we recorded in the second quarter to reposition our Uniform and Career Apparel segment. All of these items are detailed in the schedule posted to our website before the call.

In addition, this quarter's sales and profits were affected somewhat by the timing of the Easter holiday, which resulted in a decrease in the number of service days in our third fiscal quarter as compared to the prior-year quarter. Various remarks that we may make in this call relating to matters that are not historical facts, including remarks about future expectations, anticipation, beliefs, estimates, plans and prospects constitute forward-looking statements. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties and important factors, including those discussed in the risk factors, MD&A and other sections of our Form 10-K and Form 10-Q we filed earlier today. We disclaim any duty to update or revise such forward-looking statements, whether as a result of future events or otherwise.

I would now like to turn the program over to Fred Sutherland.

Thanks, Chris. Good afternoon and thank you for joining us for our third quarter 2009 results call. I would like to review our business and operating results and then have Chris cover a few additional details on our performance for the quarter.

Turning to our consolidated results for the third quarter, we achieved sales of $3 billion, down 11% from the prior-year quarter. As with the first six months of the year, the growth rate in the third quarter was significantly affected by the relative year-over-year strength of the dollar. Organic sales growth, which excludes both the impact of currency changes and acquisitions, was down 7%, with 2 percentage points of that decline due to the fewer service days in the quarter.

Adjusted operating income was $137 million, down 12% from the prior-year level, with about 9 percentage points of the decline due to the combined negative impact of currency translation and, as I mentioned earlier, fewer service days in the quarter.

For the first nine months of fiscal 2009, sales were $9.2 billion, down 7% over the prior-year period, and down about 3% on an organic growth basis. Our adjusted operating income was down 8% to $467 million with currency translation contributing about 3 percentage points of the decline in operating income for the nine months. Overall, given the unprecedented operating environment, these are solid year-to-date results which demonstrate our team's ability to flex our cost structure and mitigate a significant portion of the negative profit impact from lower sales in certain sectors through an aggressive program of cost control and cost reduction.

As you all know, the economic environment remains quite challenging, and during the third quarter we saw continued deterioration in the sectors that are highly correlated to employment levels and consumer discretionary spending, such as business services, uniforms and sports and entertainment. Additionally, as a result of the seasonality of our businesses, the more affected sectors of business and industry and sports and entertainment hold more prominence in the third fiscal quarter, while our education sector becomes less prominent as colleges and universities are not in session for a good portion of the quarter.

While the macroeconomic and competitive environments remain as challenging as any we have ever witnessed, our business model continues to be quite robust, and we continue to see solid levels of new business and solid client retention.

Through the third quarter, annualized new sales in North America Food and Support Services are ahead of prior-year. Our international new sales are below prior year's record level but still quite solid and our uniform rental new sales are almost equal to last year's levels. Our retention rates remain generally consistent with our overall targets, running less than a percentage point below the prior year's nine-month result.

As a result, the bulk of the decline in our growth rate over the last year has been due to the decline in customer populations and consumer demand at our more cyclical client locations. As the level of employment and consumer spending stabilizes, we expect these locations to level out as well. In addition, our teams remain very much focused on the many growth opportunities available in our businesses, particularly in our less cyclical sectors.

Now, turning to our North American Food and Support Services segment, third quarter reported sales were down 7% to $2.1 billion, led by declines in business and industry and sports and entertainment sectors. The segment's growth rate reflected about 3 percentage points of decline due to the impact of fewer service days in the quarter. For the nine months, as-reported sales were down 4% to $6.3 billion with declines on an organic growth basis in the low single digits.

Turning to the sectors within the North American segment, in general the as-reported sales growth rates that I'm about to describe reflect a negative 1 percentage point impact from a weaker Canadian dollar. Our Business and Industry sector had low double-digit sales decline for the quarter and a high single-digit sales decline for the first nine months, resulting from a decline in Business Food Service and Refreshment Services, due again to lower populations and reduced discretionary spending across our account portfolio. While both our annualized new sales and our retention rates in this sector are improved over this period last year, this sector is especially sensitive to employment levels, and until there is stability and ultimately growth in employment, we expect it to remain challenged.

We have been and will continue to maintain a particularly sharp focus on our cost structure in this sector.

The Education sector had mid-single digit sales decline for the quarter, but growth would have been slightly positive if adjusted for the fewer service days in the quarter. The sector had flat growth for the first nine months with solid-based business growth in our Higher Education business offset by the impact of business loss earlier in the year in K-12.

In our Health Care sector we realized a low single-digit sales decline for the quarter and for the first nine months with solid base business growth being offset by the impact from certain loss business in the prior year as well as weakness in the Canadian dollar. We expect that the revenue growth in this sector should improve in the fourth quarter and in 2010 as we begin to realize the impact from improved levels of new business and retention results in 2009 compared to the prior year.

Our Sports and Entertainment sector had a mid-single-digit sales decline in the quarter and a low-double-digit sales decline for the first nine months. Results in both the quarter and the first nine months reflected a particular weakness in both our Convention Centers business and our Parks business while we experienced lower average attendance and spending at Major League Baseball games. So far this season, baseball average attendance is down about 6% across the League. We remain somewhat cautious about baseball through the remainder of the season and are continuing to focus our operating teams on both revenue enhancement programs as well as cost controls at our existing locations.

Adjusted operating income in the North American Food and Support Services segment fell 10% in the quarter to $87.4 million with a net impact of fewer service days and currency translation contributing about 8 percentage points of the income decline for the quarter. We achieved strong profit performance in Health Care and Higher Education on a comparable service days basis, but that was more than offset by profit declines in Business and Industry and Sports and Entertainment sectors. Cost mitigation and cost control efforts across all the businesses had a positive profit impact and contributed to the segments' solid margin performance in the quarter when adjusted for the impact of the fewer service days and currency.

For the nine months, the segment had adjusted operating income of $326.3 million, down about 4% from the prior year, with the weak Canadian dollar contributing about 3 percentage points of the decline. The segment results were led by strong profit performance in Higher Education and Health Care, offset by declines in the Business and Industry and Sports and Entertainment sectors.

Overall, we are satisfied with the segments' performance so far this year, given the significant challenges posed by the current economic environment. Our diversified portfolio of sectors, services and clients continues to be a source of strength and stability for us. Aramark's business model also provides us with the flexibility to react to softness in demand by quickly reducing cost, thereby allowing us to mitigate a meaningful portion of any demand-driven profit impact. As we move forward, we will need to continue to pursue both revenue enhancement and appropriate cost control, as we expect our more cyclical sectors to remain somewhat challenged, until we see stability and eventually improvement in employment levels in spending.

Turning to the International Food and Support Services segment, third quarter reported sales of $584.6 million were down 20% from the prior-year period as the negative impact of currency translation reduced sales by about 15 percentage points. Sales were down 5% on an organic basis with approximately 3 points of that decline due to the impact of the Beijing Olympics contract last year and fewer service days in this year's quarter. Overall results in the quarter were led by strong new business growth in Chile and China, offset by sales declines primarily due to lower populations and reduced discretionary spending across our business services accounts in many of our country operations.

For the nine months, currency translation reduced sales growth by about 18 percentage points, leading to reported sales that were down 15%. Positive organic growth of 3% was led primarily by new business-driven growth in Chile, Spain, the UK and China, excluding the effects of the Olympics contract last year. Third quarter operating income was $25.7 million, down 17% from the prior-year quarter. However, income growth would have been positive if the 21-percentage-point decline attributable to the net effect of currency translation and fewer service days in the quarter had been excluded.

For the first nine months, adjusted operating income was $68.5 million, down 15% compared to the prior year. This reported decline was almost entirely the result of the negative impact of currency translation, which reduced profit growth by about 14 percentage points in the nine-month period.

In our Uniform and Career Apparel segment, third-quarter sales of $379.9 million were down 11% from the year-ago quarter on both a reported and organic basis with our uniform rental business declining by about 7% and the direct marketing business declining by double digits. The sales decline in our rental business largely results from the reduction in the number of uniform wearers at our existing client locations as well as more clients going out of business.

The sharp sales decline in our direct marketing business was across the board as both our traditional business clients and government agency clients in our Galls division continued to curtail their spending significantly. For the nine months, segment sales were $1.2 billion, down 7% from the prior year on both a reported and organic basis with our uniform rental business down in the low-single digits. The segment's third-quarter adjusted operating income was $31.6 million, down from $36.9 million in the prior year.

The rental business delivered profits in line with last year, while the weak performance in the direct marketing business generated an operating loss during the quarter. For the nine months, adjusted operating income was $96.9 million, down from $113.4 million, due almost entirely to the very weak results in direct marketing.

Our efforts to integrate the WearGuard business into our much larger uniform rental business is well underway, and we are currently on schedule. We did recognize approximately $1.3 million of in-period costs associated with this transition in the third quarter, and we expect to incur additional costs over the next three quarters of about $2 million to $3 million in the aggregate, mostly related to relocation and shutdown costs.

Corporate expenses excluding the items that Chris mentioned earlier were $7.4 million in the quarter compared to $8.3 million in the year-ago quarter, reflecting reduced administrative spending. For the first nine months, expenses were $25.1 million compared to $24.6 million in the prior year.

Now let me turn it back to Chris for some additional details on the quarter and the year-to-date period.

I'd like to make a few comments on our financing, capital structure and cash flow. Our adjusted EBITDA for the trailing 12 months ending July 3 was $1.064 billion compared to $1.087 billion at April 3, 2009 and compared to $1.090 billion at June 27, 2008. Excluding the negative impact of currency, adjusted EBITDA would have been about flat in comparison to the prior-year level.

Interest and other financing costs were $119.4 million for the third quarter compared to $123.9 million in the prior year. For the nine months, interest and other financing costs were $363.8 million compared to $382.3 million in the prior year. Approximately 75% of our debt portfolio is at fixed interest rates, and our overall weighted average cost of debt is approximately 6.75%. Total reported debt at the end of the third quarter was $5.885 billion, down from $5.933 billion at the end of last year's third quarter. Our secured debt, as defined in our credit agreement, totaled $4.075 billion including a term loan balance of $3.719 billion and a revolver balance of $60 million.

Our accounts receivable securitization facility had $233 million utilized at quarter end.

We continue to enjoy a strong liquidity position overall, and as of quarter end we had approximately $525 million of available capacity under our $600 million revolving credit facility as well as $168 million of cash on the balance sheet. Based on our trailing adjusted EBITDA, and our secured debt ratio was 3.76 times as of July 3 compared to 3.65 times as of April 3, 2009 and 3.72 times in the year-ago quarter.

Our net capital expenditures for the quarter were $97 million compared to $78 million in the prior year. For the year-to-date period, net capital expenditures totaled $247 million compared to $218 million last year. For the full year we expect our capital expenditures to be roughly in line with the prior-year level but below our planned level of capital expenditures coming into this year.

We continued to show solid working capital performance in the third quarter, and for both the quarter and the year to date, our working capital performance has shown significant improvement compared to both prior-year levels as well as our own expectations. Our teams are continuing to do an excellent job in managing our receivables, and our days sales outstanding are improved as compared to last year.

Working capital management will continue to be a key focus and priority for us as we finish out our fiscal 2009 and as we move into fiscal 2010.

During the quarter we spent a total of $86 million on acquisitions, primarily related to contractually stipulated performance payments relating to our 2006 acquisition of Seamless Web, our online food ordering business. For the year-to-date period, we have spent a total of $135 million on acquisitions compared to $34 million in the prior-year period.

In this economic environment, we are continuing to seek to invest strategically in certain sectors and certain geographies, but we will continue to do so in a prudent manner. Now let me turn the call back to Fred.

So let me sum up our performance so far this fiscal year. Adjusting for currency and for the different number of service days, our Food and Support Services business has delivered comparable profits to prior-year on modestly negative sales growth. Our uniform rental business is performing relatively well in today's environment of very high unemployment and we are on track to better integrate our rental and direct sales operations and capabilities. Importantly, our new sales and client retention rates have held up relatively well, and our favorable business mix and aggressive cost reduction actions have largely mitigated the negative profit impact of higher unemployment and lower consumer spending. We have shown good discipline in our use of capital both for investment and in working capital management, and our cash flow has improved over last year and has exceeded our expectations.

While today's environment is certainly difficult and we expect it to remain so for a while, we continue to be very excited about Aramark's future and our ability to achieve continued growth and success over time. We are very focused on pursuing the many attractive growth opportunities before us, especially in our less cyclical sectors of Education and Health Care, as well as with our existing clients across all of our businesses.

With the talent and dedication of our teams and the scope and breadth of our service portfolio, we believe we are well positioned to seize the many opportunities we have in the months and the years ahead. Thank you again for your time this afternoon and for your support of Aramark. We would now be happy to take your questions.

(Operator instructions) Karru Martinson, Deutsche Bank.

Just so that we're clear, we have now anniversaried the lost business in Education; correct? And we shouldn't have that going forward?

We anniversaried the lost business in Education, I believe, in the fourth quarter.

So we still will have a little bit of a lingering effect from that going forward?

Yes, and actually there were some, I think, early in this fiscal year, as well. So it would really, I think, be in the first quarter of fiscal 2010, which would be December.

Okay, thank you, I appreciate that. Is there any kind of update on exiting the part of the direct marketing business aimed at the consumer and small business?

Yes. What we are doing as a part of the WearGuard restructuring that we talked about in the second quarter is that we are really doing two things. One is, we're restructuring and then relocating our distribution personalization operations from Norwell, Massachusetts down to an existing AUS distribution Center in Reno. And, number two, as part of that we are scaling back our sales base and moving away from very small businesses that would not be rental customers where we would simply be mailing them catalogs. And we are well underway in both of those, and the WearGuard business will probably shrink as a result of that by, I'd say, 30% to 40%.

And perhaps you could provide a little color just in terms of the Sports and Entertainment segment, where you guys talked about seeking revenue enhancements. What are some of the programs that you are driving there, given the trends in that segment?

Really, across all of the Sports and Entertainment verticals, which would be parks, convention centers and then the most significant component, which is stadiums and arenas, there has been a focus on value meals and value propositions, and it hasn't really been limited to sports and entertainment. We've done that also in our higher education business and our B&I group. So that's been pretty much the focus, to try to introduce combo meals, value packages and the like, given the pressure that the consumer is under.

Karen Eltrich, Goldman Sachs.

As you've said, you've done a great job at kind of curtailing working capital. Is there any thoughts to pulling back CapEx in this environment? And what strategic benefits do you see from maintaining these levels?

Sure. And actually, this year was a little bit of an anomaly, given that within the Sports and Entertainment business there were some large existing capital investments that we are committed to making coming into this year related to some of the new business we had signed and some of the new stadiums we had opened. So if you really exclude those as fairly unusual in nature, we would be showing a nice decline, frankly, in capital expenditures as compared to prior year. And as I mentioned in our prepared remarks, we are certainly going to finish the year nicely below planned level of expenditures, which really shows us dialing back in some of the areas where we have more discretion. Certainly within the uniform business, where our typical capital investments in a given year would be to help us increase capacity, build out new facilities, add automation, etc.; in this environment where we are contracting capacity, we are able to dial that back.

So, I think unfortunately this year is masked a little bit by some existing commitments that are fairly unusual in nature. Otherwise, you'd see a much more significant decline over prior year.

And you mentioned Seamless Web. And when we've asked you about that in the past, you've always said it's small. But if you look at a kind of a pure OpenTable that has north of a $600 million valuation, have you given any thoughts to strategic alternatives for Seamless Web?

Seamless Web is a very strategic asset for the Company. It's certainly very important within our business and industry sector. But it certainly has much broader applications across the various sectors and really Refreshment Services, Higher Education, ultimately Health Care as well. Anywhere you are operating in a 24-7 environment where you have a consumer who's going to want access to variety, the Seamless Web model has some applicability. So we do think it's a gem inside the Company and the traffic market leader.

At this point in time I think it's premature to comment beyond that with respect to any capital structure issues. We certainly are aware of OpenTable and the valuation. It's certainly an interesting evaluation. But I think Seamless is a critically strategically important asset for us as we look forward.

Reade Kem, Banc of America.

I was curious; I may have missed this in your comments, but the effect of food costs year-over-year on the top line?

We didn't talk explicitly about that; but the inflation in food costs, as you would expect, has come down pretty significantly from, let's say, a year ago where, at the peak, I think, in earlier calls we've talked about food costs year-over-year inflation being in the range of 8% or so, high-single digits. Food cost inflation that year-over-year is pretty much down to between 1% or 2%. So that has been -- there's been a clear improvement in that area.

Okay. And as we -- I recognize you don't give guidance, but as we take our model out the next couple of quarters, would we expect to maybe see a little bit more pressure on top line, just because that has slowed down so much, a little bit more, maybe, even?

I don't think it would have a significant impact overall in the top line. Food costs are less than 40% of our sales in the food service component. And within food and facilities, we have a significant facilities component, and of course we have the entire uniform business. So it certainly helped us control our costs. It has been one -- not the only factor, but a factor in helping us to control our cost. But we don't really think about it as being -- having a meaningful effect on the top line.

And then the comment you made on the retention -- I was just wondering if you could go into that a little bit more. Is that just a symptom of maybe a more competitive environment? And then, on that note, are you seeing any increase in willingness by your competitors to maybe give up some terms and the contracting of new business, if you could just comment on that?

It's a competitive environment and we've seen this before in previous business cycles. The environment tends to get more competitive as the economy weakens. And in our industry, I think, in that regard, is no different than many other industries. So the competition, which in all times is quite sharp, is particularly sharp.

And I think the point we were trying to make in the retention comment is that, notwithstanding the pressures of a weakening economy and the competitive pressures that that engenders, we are actually quite pleased with the fact that our client retention rates, which you will recall we normally target across all of the businesses to be in the mid-90s for the total Company, are running within 1 percentage point of the retention rate year-to-date through June of last year.

So we've been very focused on our existing clients and keeping them satisfied, and that particular metric shows that we have been pretty darn successful this year in maintaining a very high client retention rate.

I was just curious if you had a targeted level of cash you are shooting for. It was a pretty high level after the good free cash flow in the quarter. And then also on the cash flow statement, I was just wondering if you could talk a little bit about what you bought in terms of acquisitions this quarter.

Sure. Just, first, on the acquisition front, the overwhelming majority of the $86 million spent in the quarter again related to contractually stipulated earnout payments associated with the 2006 acquisition of Seamless Web. So that was the effectively it for the quarter. And for the year, as you recall earlier in the year, we completed the purchase of the remaining 20% of our Chilean business that we previously didn't own. So the majority of the spending this year were really to complete those two previous acquisitions.

On the cash side, really, we do not have a cash target we are shooting for. Frankly, as we move through the fiscal year and get to the fourth quarter, we are really not going to prepay term loan or reduce debt before the end of the fiscal year. And so we had a very strong free cash flow quarter with terrific working capital performance. And so you just saw that reflected in a higher cash balance. We do have a core amount of cash we need to run the Company from an operating perspective, and that's in the $70 million to $75 million range globally. And so we had roughly $100 million in excess of that at quarter end, and we'll again figure out how to deploy that as we approach the end of the fiscal year.

Reza Vahabzadeh, Barclays Capital.

Just on the service days issue that you mentioned, what was the percentage or dollar impact for the quarter?

From a revenue perspective it's about $50 million. And again, it's in the food and support business, and on the EBIT line about $8 million.

And was this all shifted into the second quarter, or is there a part of it that's going into the fourth quarter?

Most of it was shifted into the second quarter, and we talked about it during that quarter. There is a little bit of a benefit in the fourth quarter as well, but nowhere near this level of negative impact in the third quarter.

And were there any particular segments that were impacted by that more so than others within US FS?

Yes, the education business, in particular; and from a country perspective, Spain. Spain really shuts down across all sectors during the Easter week. And so in North America, primarily the education sector, and in international primarily Spain.

So it was really two things, the Easter holiday being in second -- third quarter versus second quarter, and then college and university schedules, particularly in the United States; colleges started and finished earlier.

So we are looking at all these percentage revenue changes for the US FS business. And I don't know if you can help us; when you look at the business excluding FX and the service day issue, did the US FS business weaken in the fiscal third quarter from second-quarter levels, excluding timing and FX?

Yes, it did weaken somewhat. The adjusted growth, which would be organic growth and then further adjusted by this service days issue, was negative 4%, and I believe in the second quarter it was negative a couple of percent. So it was a 1% or 2%, I think, decline in the comparable growth rate between the third quarter and the second quarter, looking at it year-over-year.

And as we said, that was driven really by two things; one, continued deterioration in demand at existing locations in the business sector, and sports and entertainment sector, because unemployment rates were higher in the June quarter than they were in the March quarter. And consumer and discretionary spending continued to decline. And then, secondly, the mix of business changes somewhat between the second quarter and the third quarter. The higher education and K-12 businesses become somewhat less important because the school years do not extend all the way through June. (multiple speakers) Sports and Entertainment, Major League Baseball picks up.

Got it. And do you see the business trend line having stabilized, or is there still some additional weakness to come, based on unemployment still, I guess, rising a little bit into your fourth quarter from the third quarter?

I think that's a very good question, one that we think a lot about. Our view is that there will be, likely, more weakness in the fourth quarter, more pressure on the top line in the fourth quarter than in the third quarter, in the more economically sensitive businesses. I'd expect that our uniform -- year-over-year uniform rental sales, that that decline will be higher in the fourth quarter than in the third quarter. And that's due to, as you point out, the average unemployment rate in the June quarter versus what looks like will be the average unemployment rate in the September quarter, the September unemployment rate is going to be higher.

And then, given that it's a rental business, it just takes a while for the decline to work its way through the numbers because it's rental. I wouldn't be surprised at all if we see some deterioration in business sector, in the business sector and in Sports and Entertainment. And also in outside of the United States, you may recall our international sales growth has been relatively robust recently. It stepped down in the June quarter, as in our experience the impact of rising unemployment on the recession, the downturn has lagged outside of the United States if you look particularly at Europe. And so we think that lag effect will carry into the fourth quarter. And so I would expect that our sales in Europe, for example, year-over-year would be weaker in the fourth quarter than in the third quarter.

And you are talking about ex-FX; right?

Yes. This is all on a constant currency basis. Having said that, of course, we've got the non-cyclical sectors that pretty much are chugging along, which are a significant percentage of the business. So the overall impact on the top line isn't going to be tremendous, but I would expect that there would be more pressure on growth in the fourth quarter.

On the other side of the equation, cost mitigation has obviously been your focus. I don't know if you can talk about the impact of cost mitigation in this quarter, third quarter, and then what's the ramp up on that front into your fourth-quarter and onward. I did notice that your SG&A was down $7 million year-over-year. I don't know if you can talk about that.

If one looks at the three quarters of this year, what one sees is year-over-year weakness in the top line. Again, as we've said numerous times, due to the higher unemployment and the lower spending. But relatively improved year-over-year performance at the EBIT line, and third quarter was no exception. If you work your way through what we've described as the adjusted growth rates, our North American Food and Support Service business, our international business and our Uniform Rental business all had better EBIT performance year-over-year than top-line performance. And that's, as we said, really attributable to all the efforts of the teams around the world, which started back in December or so -- November/December.

I think we have executed on the bulk of that, and I think now we are pretty much benefiting from that. So that will continue to be reflected in our results as we move forward.

So you are already at your full cost savings run rate?

Well, we are largely there. We also looked at various unemployment levels and, given the continued weakness in unemployment, or employment over the last couple of months, to be fair, we are taking another look at our cost structure to see, as we look towards next year, whether there are other pockets where we can reduce cost. We are being very careful not to do that in a way that affects quality or the level of service or that affects our sales efforts or our marketing efforts. But we are taking a look at it.

And last question -- you mentioned your retention rate is within 1 percentage point of prior year. What about pricing? Has pricing remained relatively constant, I mean, overall pricing and terms, versus prior years?

I would say, in general, in the food and support business that's probably an accurate statement. There will always be certain one-offs and anecdotes where you might see things that look a little strange. Within the uniform business, though, and I think we've talked about this for a couple of quarters, that pricing environment has certainly become more competitive. And in a declining volume environment that we and our competitors find ourselves in, people are being very aggressive to try to keep the volume they have and very aggressive, again, to try to win any new business they can.

So there's no question there, there has been a reduction in pricing overall. And I think we and the other larger competitors are all pretty much behaving the same way from that perspective at this point.

And the international business?

Again, I don't think there's been a real material change in pricing.

Bryan Hunt, Wells Fargo Securities.

I was wondering if you can talk about the Olympics impact in Q4 a year ago and what type of decline in revenues may we see in the upcoming quarter just from the Olympics?

I'll sort of ballpark the rough revenue amount, and I might not be able to do the math for you right away. But in the third quarter, again, it was about a $17 million-ish top line that was in last year's Q3 in China, not there this year. And I think the Q4 number is probably in the $60 million-ish range on the top line, again sort of an immaterial bottom-line impact. But call it $60 million of revenue in China in Q4 that won't be there this year.

And again, in Q4 a year ago, it was a 98-day period. Could you maybe give us off the top of your head, Chris, what the attribution was to that extra week of business?

Sure. I think it was about $250 million on the top line, and I think we gave these numbers last year, about $250 million on the top and sort of $13 million or $15 million on the EBIT line, maybe $15 million, $16 million on the EBIT line.

And, thank you; it will help us round out our models. And then, smartly, you all have pulled in your AR during this week economic period. Could you talk about your aged receivables and where those stand today versus a year ago, and how your bad debt is running?

Our aging has actually improved year-over-year, in line with the DSO improvement and our bad debt provision through the P&L is higher than last year. Some of that has just been our rental business, for example, is driven more mechanically, by formula, because we have literally tens and tens of thousands of customers. And we feel pretty good about the fact that, notwithstanding some high-profile bankruptcies that we are all aware of, of North American companies that are US companies that are clients of ours, we have been able to avoid any significant P&L impact as a result of that.

Looking at your payables on a year-over-year basis, you pushed them out roughly $80 million. Is there any more room there, or are you pretty much done on pushing out payables?

And actually, again, because of the fluctuations we see in our business, don't read anything into that. There hasn't been a strategy to push out our payables. So we try to pay our suppliers on terms, and we try to collect our receivables on terms and we've got everybody at the Company focused on doing both of those. So again, you're always going to see a little bit of noise, just depending on when the calendar cut off. But don't read anything into that.

And my last question -- given the economic pressures on everybody in this industry, are you seeing a greater opportunity to make acquisitions? Has that pipeline grown as the economy has weakened?

We have seen smaller to intermediate-sized companies that are under some stress and therefore potentially more interested in selling themselves. I guess the conflict or the argument on the other side or the pressure on the other side is that many of these companies think of their businesses as being worth the same multiples as they were worth 18 months or two years ago. And they're not, in this market.

And so then it's really a function of how much pressure the company feels or, if it's a family-owned company, how much pressure that family feels to sell or whether they're in a position where they can just wait a while and see if valuations improve.

And that does conclude our question and answer session. At this time I'd like to turn the call back to you, Mr. Holland, for any additional or closing remarks.

Thank you, Jamie. We appreciate everybody's attendance this afternoon, and we hope you have a terrific day.

And we do thank you for participating, and have a nice day. And all parties may now disconnect.