BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

ARAMARK Corporation (the “Company” or “ARAMARK”) was acquired on January 26, 2007 through a merger transaction with RMK Acquisition Corporation, a Delaware corporation controlled by investment funds associated with GS Capital Partners, CCMP Capital Advisors, J.P. Morgan Partners, Thomas H. Lee Partners and Warburg Pincus LLC (collectively, the “Sponsors”), Joseph Neubauer, Chairman and former Chief Executive Officer of ARAMARK, and certain other members of the Company’s management. The acquisition was accomplished through the merger of RMK Acquisition Corporation with and into ARAMARK Corporation with ARAMARK Corporation being the surviving company (the “Transaction”).

The Company is a wholly-owned subsidiary of ARAMARK Intermediate Holdco Corporation, which is wholly-owned by ARAMARK Holdings Corporation (the “Parent Company”). ARAMARK Holdings Corporation, ARAMARK Intermediate Holdco Corporation and RMK Acquisition Corporation were formed for the purpose of facilitating the Transaction. The Company’s operating results are included in the consolidated federal tax returns filed by the Parent Company. Any realized tax effects or credits attributable to the Company’s operations accrue to the Company based upon the Parent Company’s procedures for allocating the costs and benefits to its subsidiaries. The provision for income taxes in the accompanying Consolidated Statements of Income approximate the provisions that would be required if the Company were a separate taxpayer. All income tax payments are made by the Company on behalf of the Parent Company (see Note 18).

On March 30, 2007, ARAMARK Corporation was merged with and into ARAMARK Services, Inc. with ARAMARK Services, Inc. being the surviving corporation. In connection with the consummation of the merger, ARAMARK Services, Inc. changed its name to ARAMARK Corporation.

The consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling financial interest is maintained. For those material consolidated subsidiaries in which the Company’s ownership is less than 100%, the outside stockholders’ interests are shown as noncontrolling interest in the accompanying Consolidated Balance Sheets. All significant intercompany transactions and accounts have been eliminated. The consolidated financial statements exclude the accounts of ARAMARK Holdings Corporation and ARAMARK Intermediate Holdco Corporation, but do reflect the Sponsors’ investment cost basis allocated to the assets and liabilities acquired on January 26, 2007 and the Parent Company’s common stock subject to repurchase. See Note 18 for further discussion of ARAMARK Holdings Corporation.

Fiscal Year

The Company’s fiscal year is the fifty-two or fifty-three week period which ends on the Friday nearest September 30th. The fiscal years ended September 28, 2012, September 30, 2011 and October 1, 2010 were each fifty-two week periods.

New Accounting Standard Updates

In January 2010, the FASB issued an accounting standard update that requires new disclosures about recurring and non-recurring fair value measurements. The new disclosures include significant transfers into and out of level 1 and 2 measurements and changes the current disclosure requirement of level 3 measurement activity from a net basis to a gross basis. The standard also clarifies existing disclosure guidance about the level of disaggregation, inputs and valuation techniques. The new and revised disclosures were effective for ARAMARK in fiscal 2010, except for the revised disclosures about level 3 measurement activity, which became effective for ARAMARK in the first quarter of fiscal 2012 (see Note 15).

In May 2011, the FASB issued an accounting standard update that is intended to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards. The new standard does not extend the use of fair value but rather provides clarification of existing guidance and additional disclosures. The Company adopted this guidance prospectively beginning in the second quarter of fiscal 2012. The standard update has resulted in expanded disclosures, specifically regarding level 3 fair value measurements (see Note 9 and Note 15).

In September 2011, the FASB issued an accounting standard update that simplifies how entities test goodwill for impairment. The amendment permits an entity to first assess 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 as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The guidance is effective for the Company beginning in fiscal 2013; however, early adoption is permitted. The Company is currently evaluating the impact of this pronouncement.

In June 2011, the FASB issued an accounting standard update that modifies the presentation of comprehensive income in the financial statements. The standard requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This standard eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. In December 2011, the FASB issued an accounting standard update which deferred the portion of this update related to the presentation of reclassification adjustments between other comprehensive income and net income. The guidance is effective retrospectively for the Company beginning in the first quarter of fiscal 2013. The Company is currently evaluating the impact of this pronouncement.

In September 2011, the FASB issued an accounting standard update that requires companies participating in multiemployer pension plans to disclose more information about their involvement in the plans, specifically related to the amount of employer contributions made to each significant plan and to all plans in the aggregate, whether an employer’s contributions represent more than 5% of total contributions to the plan, whether any plans are subject to a funding improvement plan, the expiration date(s) of the collective bargaining agreement(s) and any minimum funding arrangements, the most recent certified funded status of the plan, as determined by the plan’s “zone status,” (required by the Pension Protection Act of 2006) and a description of the nature and effect of any changes affecting comparability for each period an income statement is presented. The Company adopted this accounting standard update on September 28, 2012 (see Note 7).

In December 2011, the FASB issued an accounting standard update that requires companies with financial instruments and derivative instruments that are offset on the balance sheet or subject to a master netting arrangement to provide additional disclosures regarding the instruments impact on a company’s financial position. The guidance is effective for the Company beginning in the first quarter of fiscal 2014. The Company is currently evaluating the impact of this pronouncement.

In June 2012, the FASB issued an accounting standard update which amends the guidance on testing indefinite-lived intangible assets, other than goodwill, for impairment. The amendment permits an entity to perform a qualitative impairment assessment before proceeding to the two-step impairment test. The guidance is effective for the Company beginning in fiscal 2013; however early adoption is permitted. The Company is currently evaluating the impact of this pronouncement.

Revenue Recognition

In each of the Company’s operating segments, sales are recognized in the period in which services are provided pursuant to the terms of the Company’s contractual relationships with its clients. Sales from direct marketing activities are recognized upon shipment. All sales related taxes are presented on a net basis.

Vendor Consideration

Consideration received from vendors is accounted for as an adjustment to the cost of the vendor’s products or services and reported as a reduction of “Cost of services provided” or “Inventories.”

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.

Comprehensive Income

Comprehensive income includes all changes to shareholder’s equity during a period, except those resulting from investments by and distributions to shareholders. Components of comprehensive income include net income (loss), changes in foreign currency translation adjustments (net of tax), pension plan adjustments (net of tax), changes in the fair value of cash flow hedges (net of tax) and changes to the share of any equity investees' comprehensive income (net of tax).

Comprehensive income consists of the following (in thousands):



	Fiscal Year Ended			Fiscal Year Ended			Fiscal Year Ended
	September 28, 2012			September 30, 2011			October 1, 2010
Net income	$	141,896		$	101,197		$	30,688
Pension plan adjustments	(16,208		)	(4,058		)	(12,304		)
Foreign currency translation adjustments	(4,368		)	366			2,220
Fair value of cash flow hedges	34,976			54,873			15,252
Share of equity investee's comprehensive loss	(10,800		)	—			—
Comprehensive income	145,496			152,378			35,856
Less: Net income attributable to noncontrolling interest	3,648			1,125			—
Comprehensive income attributable to ARAMARK shareholder	$	141,848		$	151,253		$	35,856

The tax effects on comprehensive income were as follows (in thousands):



	Fiscal Year Ended			Fiscal Year Ended			Fiscal Year Ended
	September 28, 2012			September 30, 2011			October 1, 2010
Pension plan adjustments	$	8,646		$	2,207		$	6,620
Foreign currency translation adjustments	2,684			(5,515		)	(6,581		)
Fair value of cash flow hedges	(22,197		)	(36,050		)	(9,838		)
Share of equity investee's comprehensive loss	7,200			—			—

Accumulated other comprehensive loss consists of the following (in thousands):



	September 28, 2012			September 30, 2011
Pension plan adjustments	$	(50,268	)	$	(34,060	)
Foreign currency translation adjustments	20,429			24,797
Fair value of cash flow hedges	(33,106		)	(68,082		)
Share of equity investee's Accumulated Other Comprehensive loss	(10,800		)	—
	$	(73,745	)	$	(77,345	)

Currency Translation

Gains and losses resulting from the translation of financial statements of non-U.S. subsidiaries are reflected as a component of accumulated other comprehensive income (loss) in shareholder’s equity. Transaction gains and losses included in operating results for fiscal 2012, fiscal 2011 and fiscal 2010 were immaterial.

Current Assets

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Inventories are valued at the lower of cost (principally the first-in, first-out method) or market. Personalized work apparel, linens and other rental items in service are recorded at cost and are amortized over their estimated useful lives, which primarily range from one to four years. The amortization rates used are based on the Company’s specific experience.

The components of inventories are as follows:



	September 28, 2012		September 30, 2011
Food	39.5	%	38.7	%
Career apparel and linens	57.2	%	55.9	%
Parts, supplies and novelties	3.3	%	5.4	%
	100.0	%	100.0	%

Property and Equipment

Property and equipment are stated at cost and are depreciated over their estimated useful lives on a straight-line basis. Gains and losses on dispositions are included in operating results. Maintenance and repairs are charged to current operations, and replacements and significant improvements are capitalized. The estimated useful lives for the major categories of property and equipment are 10 to 40 years for buildings and improvements and 3 to 10 years for service equipment and fixtures. Depreciation expense during fiscal 2012, fiscal 2011 and fiscal 2010 was $236.6 million, $234.5 million, and $240.8 million, respectively.

Other Assets

Other assets consist primarily of investments in 50% or less owned entities, client contract investments, deferred financing costs, computer software costs and long-term receivables. Investments in which the Company owns more than 20% but less than a majority are accounted for using the equity method. Investments in which the Company owns less than 20% are accounted for under the cost method. Client contract investments generally represent a cash payment provided by the Company to help finance improvement or renovation at the facility from which the Company operates. These amounts are amortized over the contract period. If a contract is terminated prior to its maturity date, the Company is generally reimbursed for the unamortized client contract investment amount. Amortization expense for client contract investments was $86.9 million, $76.7 million and $67.8 million during fiscal 2012, fiscal 2011 and fiscal 2010, respectively.

The Company’s principal equity method investment is its 50% ownership interest in AIM Services Co., Ltd., a Japanese food and support services company (approximately $233.4 million and $269.7 million at September 28, 2012 and September 30, 2011, respectively, which is included in “Other Assets” in the Consolidated Balance Sheets). Summarized financial information for AIM Services Co., Ltd. follows (in thousands):



	September 28, 2012		September 30, 2011
Current assets	$	433,584	$	402,381
Noncurrent assets	222,813		215,475
Current liabilities	374,062		321,025
Noncurrent liabilities	74,680		67,008

	Fiscal Year Ended		Fiscal Year Ended		Fiscal Year Ended
	September 28, 2012		September 30, 2011		October 1, 2010
Sales	$	1,916,620	$	1,772,143	$	1,589,709
Gross profit	222,033		222,970		198,980
Net income	39,174		41,949		38,559

ARAMARK’s equity in undistributed earnings of AIM Services Co., Ltd., net of amortization related to purchase accounting for the Transaction, was $14.7 million, $18.0 million and $15.5 million for fiscal 2012, fiscal 2011 and fiscal 2010, respectively, and is recorded as a reduction of "Cost of services provided" in the Consolidated Statements of Income. During fiscal 2012, fiscal 2011 and fiscal 2010, the Company received $34.9 million, $10.5 million and $8.2 million of cash distributions from AIM Services Co., Ltd, respectively.

Other Accrued Expenses and Liabilities

Accrued expenses and other current liabilities consist principally of insurance accruals, advanced payments from clients, taxes, interest, fair value of interest rate swaps and accrued commissions. Advanced payments from clients as of September 28, 2012 and September 30, 2011 were $278.5 million and $242.3 million, respectively. The Company is self-insured for the risk retained under its health and welfare and general liability and workers’ compensation arrangements. Self-insurance reserves are recorded based on historical claims experience and actuarial analyses. As of September 28, 2012 and September 30, 2011, $92.2 million and $86.7 million of insurance accruals were included in accrued expenses and other current liabilities, respectively.

Noncurrent liabilities consist primarily of deferred compensation, insurance accruals, pension liabilities, redeemable noncontrolling interests, fair value of interest rate swaps and other hedging agreements and asset retirement obligations.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, current and long-term borrowings, derivatives and the Parent Company’s common stock subject to repurchase.

Share-Based Compensation

The Company recognizes compensation cost related to share-based payment transactions in the consolidated financial statements. The cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award). See Note 10 for additional information on share-based compensation.

Supplemental Cash Flow Information



	Fiscal Year Ended		Fiscal Year Ended		Fiscal Year Ended
(dollars in millions)	September 28, 2012		September 30, 2011		October 1, 2010
Interest paid	$	368.9	$	386.4	$	409.3
Income taxes paid	$	82.5	$	64.9	$	34.8

Significant noncash activities follow:


•	During fiscal 2012, fiscal 2011 and fiscal 2010, the Company executed capital lease transactions. The present value of the future rental obligations was approximately $17.0 million, $16.2 million and $3.2 million for the respective periods, which is included in property and equipment and long-term borrowings.


•	During fiscal 2012, fiscal 2011 and fiscal 2010, approximately $6.7 million, $4.8 million and $5.2 million of common stock of the Parent Company was repurchased through the issuance of promissory notes, respectively.


•	During fiscal 2012, fiscal 2011 and fiscal 2010, cashless settlements of the exercise price and related employee minimum tax withholding liabilities of share-based payment awards were approximately $27.0 million, $25.9 million and $9.6 million, respectively.


•	During fiscal 2012, the Company paid an advance to the Parent Company which was reduced by approximately $30.1 million attributable to the tax benefit related to interest on the Parent Company Notes (see Note 18).