Aramark (ARMK) 2011 Q4 法說會逐字稿

Good afternoon, and welcome, ladies and gentlemen, to the ARAMARK Corporation fourth-quarter and full-year 2011 earnings conference call. At this time, I'd like to inform you that this conference is being recorded for rebroadcast, and that 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 would now like to turn the conference over to Chris Holland, Senior Vice President, Finance and Treasurer. Please proceed, Chris.

Thank you. Welcome to ARAMARK Corporation's conference call to review the results of our fourth quarter and full year of fiscal 2011. Here with me today are Joe Neubauer, our Chairman and Chief Executive Officer, and Fred Sutherland, our Executive Vice President and Chief Financial Officer. Joe, Fred, and I will present an overview of our fourth-quarter and full-year results, and business operation, after which there will be an opportunity for phone-in participants to ask questions.

I'd like to remind you that any recording or other use for 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 8-K we filed earlier today, which contains our fourth-quarter and full-year results for fiscal 2011, and can be found on our website at www.ARAMARK.com. In today's discussion of results, we mention certain non-GAAP financial measures. And, as required by SEC rules, reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available on our website.

Our discussion of 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, the impact of stock option expense, as well as the results of our Galls subsidiary, which was divested at the end of fiscal 2011 and are classified as Discontinued Operations in our financial statements. These items are all detailed in the schedules posted to our website before the call.

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-Qs. We disclaim any duty to update or revise such forward-looking statements whether as a result of future events or otherwise.

I'd now like to turn the program over to Joe Neubauer.

Good afternoon, ladies and gentlemen, and thank you for joining us as we review fiscal 2011 fourth-quarter and full-year results. I'll begin broadly by discussing our 2011 performance and accomplishments before turning the call over to Fred and Chris who will detail our operating and financial results for you for the quarter and for the year. I'm pleased to report that during fiscal 2011, we delivered balanced growth in sales and profits, improved margins, and produced another year of robust cash flow. And I would also like to thank all of our 250,000 team members around the world for their important contributions to these results.

Throughout the year, we continued to see a somewhat uncertain economic climate, in which our less economically sensitive businesses delivered strong results, while growth in our more cyclical businesses was more modest. We also had another year of solid client retention with 94% retention rate overall, including a 95% rate in North America, which was consistent with our 2010 levels and our targets long term. I'm proud of our team's accomplishments throughout 2011.

In addition to our solid financial performance and our business momentum, we continued to position ARAMARK for future growth with important strategic investments in several of our higher growth and higher margin sectors, in which we enjoy leadership positions. In March, we acquired Masterplan, a large independent provider of clinical technology services and medical equipment parts, to add to our healthcare clinical technology services business, further enhancing our position as the leading independent clinical technology services provider in this attractive healthcare segment. Later in the year, we also announced the acquisition of Filterfresh, which further broadens our service capabilities, and solidifies our leading position in the national office refreshment services sector with its attractive growth and margin opportunities.

During the year, we also successfully repositioned Seamless, the leading online food ordering business in the US, by selling minority position to Spectrum Equity Investors, a leading player in the digital media and eCommerce sectors. This better positions Seamless to pursue continued robust growth in the rapidly expanding consumer segments for online and mobile phone ordering. In September, we completed the repositioning of our uniform segment with the divestiture of our non-core Galls subsidiary, streamlining our organizational structure and focusing on our core uniform business.

In addition to our other business accomplishments, we were also able to responsibly return cash to our shareholders for the first time since going private back in 2007, with minimal year-end effect on our capital structure.

Now, a couple of comments on the 2011 financial results. For the full year, fiscal 2011, reported sales were $13.1 billion, a 5% increase from 2010, with organic growth of 4%. Our adjusted operating income for the year was $719 million, up 12% versus 2010. Our global food and support services business delivered solid organic growth, with a strong profit growth and improving margins. Our uniform rental business also delivered strong profit growth in what continues to be a challenging pricing and unemployment environment.

I am pleased, but not yet satisfied, with these results, and proud of the teams for delivering them. As you can imagine, we have more to do in this year, 2012. And now, let me turn the call over to Fred for additional details on the quarter, as well as the year.

Thanks, Joe. I'd like to first take you through our consolidated financial performance, and then I'll discuss our business segments. We reported fiscal 2011 fourth quarter sales of $3.3 billion, which was up 6% from the prior-year quarter results. Organic sales growth, which, as you know, excludes the impact of currency translation, acquisitions, and divestitures, was up 3% for the quarter. Adjusted operating income was $196 million, up 11% from the prior year level. For the full year of fiscal 2011, sales were $13.1 billion, up 5% over the prior year period, and up 4% on an organic growth basis. Our adjusted operating income of $719 million was up 12% from the prior year.

Now, turning to our North American Food and Support Services segment, fourth quarter reported sales were up 4% to $2.3 billion, led primarily by growth of the education and healthcare sectors, while sales in the Business & Industry and Sports & Entertainment sectors were broadly flat versus the prior year. Organic sales growth was 2% in the quarter, partly reflecting, in comparison to earlier quarters this year, the normal seasonal change in sales mix between our higher-growing and lower-growing sectors. For the full year, reported sales were up 4% to $9 billion, with organic growth of 3%. Sales growth for the year was also led by solid growth in education and healthcare.

Turning now to the sectors within North America. Our Business & Industry overall sector sales were somewhat up for the quarter and for the full year. The sector was led by our business dining operations, which finished the year very much in line with the trends we've seen in recent quarters of low-single-digit top-line growth, driven primarily by base business growth. Our Refreshment Services business, led by office coffee services, also delivered solid growth in the quarter.

The education sector had mid-single-digit sales growth for the quarter, and high-single-digit sales growth for the full year, with strong growth in our higher education food and facilities business, resulting from a good combination of base business growth and new sales from contract wins in the prior year. In our healthcare sector, we realized low-double-digit sales growth for the quarter, and high-single-digit sales growth for the year, driven both by the acquisition in March of Masterplan within our Clinical Technology Services business, as Joe mentioned earlier, as well as by solid base business growth across the sector.

Sales in our Sports & Entertainment sector for the quarter were about equal to prior year. While we saw low-single-digit sales decline for the full year, as solid base business growth in our NHL venues and in our stadiums was more than offset by the impact of prior year lost business, a reduced number of shows in our amphitheaters, and sales in the prior year related to the Winter Olympics. In general, we have seen increased per capita spending and stable attendance levels this year across our stadiums and arenas.

Adjusted operating income in the North American Food and Support Services segment was up 14% in the quarter to $143 million, led by strong profit growth in our education and healthcare sectors, and solid profit growth in sports and entertainment. For the full year, segment adjusted operating income grew 13% to $514 million, again, led by strong profit growth in education and healthcare.

Now, turning to the International Food and Support Services segment. Fourth quarter reported sales of $676 million were up 15% from the prior year period, with organic sales growth of 9%. Organic growth in the quarter was generally positive in most of our country operations, with particularly strong contributions from Chile, Germany, and Spain. For the full year, reported sales were up 12% to $2.7 billion. Organic growth was 8% led primarily by strong growth in Chile, Germany, China, Ireland, and Spain, which more than offset a sales decline in the UK and in Korea. Fourth quarter adjusted operating income was $27 million, up 41% from the prior year, with currency translation contributing about 7 percentage points of growth. Results in the quarter primarily reflect strong turnaround performance in the UK and Ireland, along with solid profit growth in Chile, Germany, and Spain.

For the full year, adjusted operating income was $91 million, up 8% on a reported basis from $84 million in the prior year, led by solid profit growth in Germany. Currency translation contributed approximately $4 million of the profit increase in the year. And in addition, as we've mentioned in previous quarters, a number of other unusual items contributed a net reduction of approximately $3 million in income for the year.

In our Uniform and Career Apparel segment, fourth quarter sales of $332 million were up 1% from the year-ago quarter, as reported, and about flat on an organic basis. For the full year, segment sales of $1.3 billion were up 1% from the prior year on both a reported and organic basis. We are continuing to balance an investment and additional sales personnel resources to support future improved sales growth while maintaining discipline and pricing. We are gaining improved traction in our new sales efforts. During the fourth quarter, the volume of new sales delivered by our sales force significantly exceeded the prior year's quarter result.

The segment's fourth quarter adjusted operating income of $34 million was down 11% compared to last year, primarily as a result of restructuring expenses following our successful divestiture of our Galls subsidiary in September, which allowed us to further streamline our uniform group organizational structure and permanently reduce certain overhead costs. The profit in the quarter was also affected by the additional investments we made in growing our sales force, as well as year-over-year increases in fuel and fabric costs. For the full year, adjusted operating income was $146 million, up 10% compared to last year, reflecting our consistent long-term focus on improving operating efficiencies and our efficiency efforts in this business, allowing us to drive ongoing margin improvements.

Corporate expenses, which exclude the items Chris mentioned earlier, were $8.5 million in the quarter compared to $7 million a year ago. For the year, expenses were $32.2 million compared to $29.8 million in the prior year. As we look at fiscal 2012, we anticipate another year of solid overall financial performance, although we do expect some variability in quarter-to-quarter results.

Now, let me turn it back over to Chris for some additional details in the quarter and the full year.

Thanks, Fred. I'd like to comment on our financing, capital structure, and cash flow. Our adjusted EBITDA for the trailing 12 months ending September 30 was $1.10 billion, up from $1.083 billion at July 1, 2011, and up from $1.036 billion at October 1, 2010. Interest and other financing costs were $111 million for the fourth quarter compared to $109 million in the prior year. For the year, interest and other financing costs were $426 million compared to $445 million in the prior year. The decrease is primarily driven by interest income of approximately $14 million recorded in the second quarter related to the settlement of UK VAT claims from prior years, and the $8 million of expense recorded in the second quarter of 2010 related to the credit agreement amendment and term loan extension we completed in March of 2010.

Total ARAMARK Corp reported debt at the end of the fourth quarter was $5.638 billion. Our secured debt as defined in our credit agreement totaled $3.565 billion, including a term loan balance of $3.294 billion, with no outstanding borrowings under our revolving credit facility. Our accounts receivable securitization facility had $226 million utilized at quarter end. We continue to enjoy a strong liquidity position, with approximately $645 million of available capacity under a revolving credit facility as of quarter end, as well as approximately $125 million in excess cash on hand, which we have utilized to help fund the Filterfresh acquisition and our seasonal working capital needs during the first quarter of fiscal 2012.

Based on our trailing adjusted EBITDA, our secured debt ratio was 3.17 times as of September 30, down nicely from 3.41 times as of July 1, 2011, and down from 3.37 times as of October 1, 2010. Overall, we are pleased with our EBITDA growth during the quarter and the year, and our resulting ratio improvement. And we anticipate continued ratio momentum over time.

Net capital expenditures for the quarter were $92 million compared to $112 million in the prior year quarter. For the full year, net capital expenditures totaled $272 million compared to $264 million last year, as we continue to prudently manage investments in growth opportunities and in our infrastructure. Given certain investment priorities in our infrastructure, and our sales growth objectives in 2012, we do anticipate somewhat more of an increase in net capital expenditures this coming fiscal year.

Consistent with our expectations and historical patterns, working capital was a significant source of cash for us during the fourth quarter, allowing us to end the year as expected with working capital as a relatively moderate use of cash overall when excluding the effect related to certain divestiture transactions. We would anticipate a similar moderate level of investment in working capital during fiscal 2012.

For the full year, we are pleased with our solid free cash flow performance before acquisitions and divestitures, as we generated approximately $250 million of free cash flow in fiscal 2011 at ARAMARK Corp -- a total that exceeded our plan, and reflects our solid growth in operating income, as well as our CapEx and working capital discipline.

For the full year, we spent a total of $157 million on acquisitions compared to $86 million in the prior year. This year's spending related primarily to the acquisition of Masterplan within our North American healthcare sector in March. We continue to evaluate and seek to make strategic investments in certain sectors and geographies, such as the previously disclosed acquisition of the Filterfresh office coffee service business, but we will be prudent and disciplined in the pursuit of these opportunities. As Joe mentioned, during the fourth quarter, we also completed the sale of our non-core Galls subsidiary, using the proceeds to reduce our net debt at year end.

As we have previously committed, it's very important to us that ARAMARK maintains a strong financial position. And the various acquisitions we have made recently, along with the dividend earlier this year, needed to fit within this guideline. We are pleased that our operating and cash flow performance in 2011 has allowed us, as intended, to end the year with a total debt ratio, when including the debt at holdings, that is only slightly above the prior year's level. And as I mentioned earlier, our cash on hand at year end covered a significant majority of the Filterfresh purchase, which we closed in early October.

Now, let me turn the call back to Joe to wrap up.

So, in conclusion, I'm pleased with our performance, and proud of our teams for their accomplishments in 2011, the 75th anniversary of our Company. As we move forward into 2012 and beyond, we're focusing a great deal of energy around a number of internal initiatives aimed at delivering improved organic growth and continued margin improvement in the coming years. We believe we still have significant opportunities to enhance and standardize our processes across the business, bringing efficiencies, clarity, and improved effectiveness to how we serve our clients and customers every day around the world. During 2012, we are planning to make further progress along this journey of process standardization, which we believe will help us to drive ongoing growth and margin improvements.

Despite a persistently uncertain economic environment, we continue to remain excited about the growth opportunities we see across our portfolio of businesses. While certain businesses and countries will be more challenged than others, the diversity of our sectors, clients, and geographies provide us with a good balance to continue to mitigate those challenges and grow our Company.

Finally, we will look to build on the momentum of 2011, and the efforts of our teams around the globe as we work towards our ambition of making One ARAMARK the most valued client partner, the most efficient operator, and the company with the most engaged team of people. As we pursue these worthy goals, you can be sure that we'll continue to invest prudently in pursuit of growth while managing our cost structure and cash flow in a disciplined manner.

Thank you again for your time this afternoon, and your continued support of ARAMARK. We would now be happy to take any questions that you may have.

(Operator Instructions) Reza Vahabzadeh with Barclays Capital.

A question on people's mind is the potential impact of NBA not having a season this year. Can you touch on that?

This is Fred, Reza. The impact on us is relatively minimal. We have about five or so MBA teams operating in arenas where we provide the food service. So I'd guess that the impact is somewhere in the $20 million to $30 million range in revenues.

And then you talked, Fred, about solid performance expected in 2012 but some variability in quarter-to-quarter performance. Can you elaborate on that? Is it because of the year over year comparisons? Is it because of your investments in any particular initiatives? Or is it because of foreign currency?

It's a couple things. One is we expect our growth rate to build as we progress during the year. And then secondly, we did have some unusual items in the as-reported numbers last year, quarter by quarter, which we disclosed at the time, so you'd have to adjust for those.

And when you're saying that the business will build over time, is that because of some of your wins that you expect to come onboard or is it because of macroeconomic expectations?

It's not macroeconomic expectations. We're assuming that the economy, frankly, doesn't get any better and doesn't get any worse. But we are building sales momentum. I talked briefly about in the uniform business how we boosted our sales force year over year. Really the fourth quarter was the first quarter this year where the sales force headcount has been above prior year. And also building sales resources in the food and facility side. And we expect our retention to be slightly better in 2012 and 2011. So something that builds as we work through the year.

In the USFS business, the business has been driven by strong growth in education and healthcare, more sluggish performance in sports, and B&I businesses. Would you anticipate that trend to generally continue? Do you foresee continued wins in education and healthcare like in the last year or so?

Yes, Reza, this is Chris. I think, and we talked about the portfolio and the sectors having really different fundamentals in terms of their level of outsourcing. And just the rate of growth achievable in each. And so we've been continuing to increase the level of new sales resources, for example, in healthcare and education, because in both food and facilities, large portions of those markets continue to be self-operated. Compared to business which is largely, consider it, fully outsourced, really, on the food side. And the same thing broadly speaking with respect to major league sports. So both the underlying fundamentals, demographics and level of outsourcing, I think, will continue to drive disparities between growth and education and healthcare versus growth in B&I and S&E over time. Obviously if we do at some point see a stronger economic tail wind, we would certainly anticipate D&I and S&E to benefit from that but we're not counting on it.

And then in terms of acquisitions, do you generally foresee more opportunities along the lines of Masterplan and Filterfresh? And on the divestiture side, are there more assets that are non-core to the business?

Yes, I think we're trying to be very strategic in acquisitions. And as Joe said, both Masterplan and Filterfresh were very unique opportunities for us to strengthen two positions where we're leaders with higher margins and higher growth. We'll continue to look for those opportunities. There's not a lot of them. But certainly we'll pursue acquisitions that strengthen us strategically and make sense economically. I think from a divestiture standpoint there's certainly nothing at this point that we're contemplating.

I missed one item that you mentioned, Fred, which was the impact of foreign currency on the international revenue business.

Yes, I think the report in the fourth quarter was 15% and the organic was 9% on the top.

Karru Martinson with Deutsche Bank.

When we look at the industry for acquisitions, are you seeing a shift in multiples?

I don't think so. As we think about the economic environment, things were looking better earlier in the year and obviously have been a lot more uncertain in recent months. So I think at this point, I wouldn't say there's any real material change in multiples. Obviously, the credit markets somewhat impact what PE buyers can do so that probably puts a little bit of a damper on it. But I think the environment's probably broadly consistent.

And I think last call, we talked about that your exposure in southern Europe and Spain is very much more healthcare and education oriented. Has there been any change on that front or is that still your exposure there?

That's still our exposure. Spain is our principal operation along the border of southern Europe and it continues to be a business that's dominated by education first and healthcare.

And we referenced strong growth in Spain for both the quarter and the year and that was on the back of strong new business in the education sector actually.

And then with the solid retention rate, what are you seeing on the competitive landscape? Are folks being rational or is there some attempt at market share grabs?

Continues to be a very competitive business, both in food and facilities on the one hand and Uniform Services on the other. And that really results from the fact that the overall economy, as we know, is not growing significantly. And that always leads to more keen competition. I think it's fair to say that we haven't seen the competitive landscape change meaningfully over the last few quarters. We expect the business to remain quite competitive as we move further into 2012.

Karen Eltrich with Goldman Sachs.

You mentioned for the economy you're expecting it not to get better, not to get worse, as you do your planning. What kind of behavior are you seeing from your corporate clients? You'd said previously that while it doesn't appear they're hiring, they are re-adding certain perks. Is that behavior still continuing or is there any signs of a pullback?

This is Fred. Of course, I may ask you that question, actually, on behalf of. We could poll, actually, those of you who have asked us questions what you're seeing, and it would be some market intelligence for us. But I think we saw for a while a loosening of the purse strings. I don't think we see those purse strings continuing to loosen. If anything, we see them, the situation stabilizing, or if anything a bit of a pullback, particularly in financial services. It's not what I would call a big negative trend but at best it's stable.

And what kind of pipeline are you seeing on the convention side of the business?

I think it's okay. We had actually a pretty decent year in 2011. And I think at this point we would expect pretty stable performance looking into 2012. Again, assuming there's not some significant economic change versus the current state. Again, that business is relatively small within our Sports & Entertainment portfolio, and certainly very small relative to the entire Company. But certainly from a couple of years ago, its really returned to a more stable nature, really for the last couple of years.

And actually was happy to hear that Europe was sighted out, a couple countries sighted for growth, driving the international growth. Are there any pockets of weakness in that territory? Are you seeing any signs of the austerity measures having an impact?

The UK has been tough from a growth standpoint for a couple of years now. And I think it's going to continue to be difficult on the top line. What we did accomplish was really get the business in a position from an infrastructure standpoint where it can contribute profitably to our growth. And it did do that in 2011. But I think the UK will continue to be a pretty challenged growth environment. And again there, we're more heavily B&I weighted than we are certainly, as we said, in Spain and even in Germany.

Great, and final question. Any initial thoughts on commodity outlook for next year?

In 2011, we experienced overall price increases against our market basket of purchases in the mid to high single digits. We are expecting that there will be some amelioration of that as we move into 2012. So our expectation overall is for food price increases in the range of about 5%.

Bryan Hunt with Wells Fargo Securities.

This is Kevin McClure in for Brian. Chris, on the last conference call you mentioned that you'd noticed a slowdown in decision-making among some clients, maybe they were a little unwilling to commit in light of economic uncertainty and pushed out some of the new business. Can you give us an update for 2012 what you believe new business could look like?

I think we have, and it was more as we talked about within healthcare, corrections, and even the schools business where we've seen very strong pipelines. And I think continue to see very strong pipelines today. But a level of decision-making that has been a little bit frustrating. We're certainly hoping as the pipeline continues to build that we'll start to see more rapid decision-making. But we can't control that. We can go after the right kinds of business and hopefully put good propositions in front of clients. And we're continuing to do that. But we certainly expect to have a stronger new business year in '12 than we did in '11 overall.

And then talking about Europe, I know there's been a lot of interest in your European operations. How would you characterize the growth opportunity? You mentioned Spain was doing well, Germany has done well, but are there other opportunities? Can you call out some nations where you believe you could expand into in light of government austerity?

We are certainly concerned what's going on now in the Eurozone and the government debt issues and the like. And the recent announcements about reduced growth rates there overall are not going to be particularly helpful for economic activity and therefore not particularly helpful for our business. Our principal operations, as you may know, are in the UK and Germany. We've got good solid positions in both businesses. We've improved our profitability in both businesses. We see some opportunities in some other market segments outside of the traditional B&I segments, which are the dominant segments in which we compete in both businesses. So I'd say that we're cautiously optimistic that we can continue to achieve reasonable growth rates in those economies. But we're realistic about it.

And the growth, if you look overall at our growth in the fourth quarter in international it was really driven outside of the traditional countries, traditional European countries. So we're seeing very high growth rates in Chile, Argentina, Peru, Colombia. Much of that is tied to mining. We have a very solid and leading business serving the mining sector, food and facilities, throughout that portion of South America. We saw very high growth rates in China. So the overall growth in international is being driven really more by emerging markets than by the traditional European economies.

And are you guys in the running to provide services at the 2012 Olympics? Is that even business that you could win? How do those contracts work?

This is Joe. We've been doing Olympic games since 1968. And we're back again in London and we're happy to be there. We are going to take care of the athletes village and the officials there. We've been at it now for about a 1.5 years These things take a while to plan, to execute and then to deliver. And we do them. There's a selection committee, there is a bidding process. It's quite an elaborate process. And we've been fortunate that we've done every Olympic village as long as I can remember, which is quite a while now here. We don't do them for a significant profit. This is really a marquee event for us. And we do it, really, to be the best in the business, which is what you have to do. Particularly feeding the athletes. You can imagine if you don't do that right the repercussions of that.

Could you provide maybe an estimate as to the sales impact that the Olympics could have within your S&E business?

In London, it would probably be $50 million or less.

And last for us, what are your plans for addressing the maturity of the 5% notes in June?

Between free cash flow that we anticipate to generate during fiscal 2012 and revolver availability, our current intention is to just handle the maturity with the revolver and free cash flow.

(Operator Instructions) Carla Casella with JPMorgan.

This is Paul Simenauer for Carla Casella. I was just wondering if you could maybe talk about how you're thinking about your uniform business long term.

We've been in the uniform business since 1979, '78 -- maybe '77 Joe says. So we've been in the business for a long time. As you know, we're the second largest company in the business. It's been a great business for us. I think if you look at the results for 2011, you'll see that we've improved the profitability in the business quite a bit. We've streamlined the business through the integration of WearGuard, direct sale operations, into our larger ARAMARK Uniform Services rental business. And we've divested Galls. So we have one streamlined monolithic rental and sales organization that competes nationally, competes very well.

The outlook for the business actually we think is bright. We think our growth rates will improve as we move through the year, as I mentioned earlier, because we are successfully ramping up our sales force. We have a number of profitability initiatives underway in that business, similar to what was referred to by Joe in the food and facilities business. And we think there's more efficiencies to be gained over the next 12 to 18 months through those programs. And the management there is very focused on driving both improved rate of new sales and continuing efficiency. And so we feel very good about the business and think the outlook for it is bright.

Is that business sellable at all?

I don't know. I might ask you that question. It's not something that we think too much about.

I was also wondering how you're thinking about your capital structure long term.

Sure. As you know, earlier this year, we extended the maturity on our revolving credit facility into 2015, so we're in a very good position from a liquidity standpoint. Obviously, a big portion of the term loan had been extended out to 2016. So obviously it's something we spend a lot of time thinking about and preparing for. And as we're dealing with the 2012 maturities, as we work through the rest of 2012 and into 2013, we'll appropriately manage the maturity profiles as we get closer to needing to do so. We obviously enjoy a nice capital structure today with lots of liquidity and we'll prudently plan to deal with maturities as we get a little bit further down the road.

Cynthia Bush with Teachers Insurance.

Can you expand a little bit more on the potential impact of a cancellation of the season by the NBA and how that might impact both your margins as well as your top line?

This is Fred. As I mentioned, our business with the NBA, providing service and venues where NBA teams are playing, is relatively small. It's five individual venues. And the revenues associated with that are in the range of $25 million or so. So the impact on the overall Company of a lockout for the full season, while it's certainly not zero, it's not really material to the total business at all.

And then I know at one point you guys had been pondering an IPO. Where are you on that thought process?

Actually, I didn't know we were pondering an IPO. Where did you read that?

Okay -- where are you?

I guess the way I'd answer that is to say we're very focused on growing the business and improving the profitability of the business. We've provided, after five years of successfully growing the business, we've provided what we thought was some reasonable liquidity for our shareholders. But as Chris said, we were very disciplined about doing that in the context of a prudent capital structure and not fouling up our capital structure as a result of that. So, frankly, right now, we're focused on growing the business and improving the profitability and maintaining a strong cash flow. And it pretty much stops there.

Thank you. At this time, we have no further questions in the queue. I'll turn the conference back over to Chris for any additional or closing remarks.

Thank you. Thanks, everybody, for joining us. And let us be the first to wish you a nice Thanksgiving next week. And we appreciate your support.

Thank you. That does conclude our conference for today. Thank you for participating and have a nice day. All parties may now disconnect.