Aramark

Previous wording

The following discussion and analysis of Aramark's (the "Company," "we," "our" and "us") financial condition and results of operations for the three and nine months ended June 28, 2024 and June 30, 2023 should be read in conjunction with our audited consolidated financial statements and the notes to those statements for the fiscal year ended September 29, 2023 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on November 21, 2023.

Current wording

The following discussion and analysis of Aramark's (the "Company," "we," "our" and "us") financial condition and results of operations for the three months ended December 27, 2024 and December 29, 2023 should be read in conjunction with our audited consolidated financial statements and the notes to those statements for the fiscal year ended September 27, 2024 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on November 19, 2024.

Previous wording

We are a leading global provider of food and facilities services to education, healthcare, business & industry and sports, leisure & corrections clients. Our core market is the United States, which is supplemented by an additional 14-country footprint. Through our established brand, broad geographic presence and employees, we anchor our business in our partnerships with thousands of clients. Through these partnerships, we serve millions of consumers including students, patients, employees, sports fans and guests worldwide. We operate our business in two reportable segments: Food and Support Services United States ("FSS United States") and Food and Support Services International ("FSS International").

Current wording

We are a leading global provider of food and facilities services to education, healthcare, business & industry and sports, leisure & corrections clients. Our largest market is the United States, which is supplemented by an additional 15-country footprint. We also provide our services on a more limited basis in several additional countries and in offshore locations. Through our established brand, broad geographic presence and employees, we anchor our business in our partnerships with thousands of clients. Through these partnerships, we serve millions of consumers including students, patients, employees, sports fans and guests worldwide. We operate our business in two geographic reportable segments: Food and Support Services United States ("FSS United States") and Food and Support Services International ("FSS International").

Previous wording

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

Current wording

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

Previous wording

We continue to see improving inflation trends where inflationary costs in product, energy and labor have moderated over the first nine months of fiscal 2024, particularly in the United States. In addition, we continue to see elevated market interest rates and significant changes in foreign currencies. We expect these conditions to continue in the near-term, and we regularly evaluate and believe we take appropriate actions to mitigate risk in these areas. These actions include management of operating costs, including supply chain initiatives and pricing actions, and managing interest rate risk through the use of interest rate swaps.

Current wording

We continue to see improving macroeconomic trends where global inflationary costs in product, energy and labor have moderated. In addition, we continue to see elevated market interest rates and volatility in foreign currencies. We expect these conditions to continue in the near-term, and we regularly evaluate and believe we take appropriate actions to mitigate risk in these areas. These actions include management of operating costs, including supply chain initiatives and pricing actions, and managing interest rate risk through the use of interest rate swaps.

Previous wording

Our fiscal year is the fifty-two or fifty-three week period which ends on the Friday nearest September 30th. The fiscal years ending September 27, 2024 and September 29, 2023 are both fifty-two week periods.

Current wording

Our fiscal year is the fifty-two or fifty-three week period which ends on the Friday nearest September 30th. The fiscal year ending October 3, 2025 is a fifty-three week period and the fiscal year ended September 27, 2024 is a fifty-two week period.

Previous wording

The following tables present an overview of our results on a consolidated and segment basis with the amount of and percentage change between periods for the three and nine months ended June 28, 2024 and June 30, 2023 (in millions).

Current wording

The following tables present an overview of our results on a consolidated and segment basis with the amount of and percentage change between periods for the three months ended December 27, 2024 and December 29, 2023 (in millions).

Previous wording

(1) As a percentage of total revenue, FSS United States represented 71.9% and 71.3% and FSS International represented 28.1% and 28.7% for the three months ended June 28, 2024 and June 30, 2023, respectively.

Current wording

(1) As a percentage of total revenue, FSS United States represented 72.5% and 72.9% and FSS International represented 27.5% and 27.1% for the three months ended December 27, 2024 and December 29, 2023, respectively.

Previous wording

FSS International segment revenue increased by approximately 6.0% and 11.0% during the three and nine month periods of fiscal 2024 compared to the prior year periods, respectively. The increase during both the three and nine month periods of fiscal 2024 was primarily attributable to base business growth, including volume growth and contract price increases, and net new business growth partially offset by the negative impact of foreign currency translation (10.0% and 6.3%, respectively).

Current wording

Revenue increased by approximately 3.3% during the three month period of fiscal 2025 compared to the prior year period. The increase during this period was primarily attributable to base business growth, including volume growth and contract price increases, partially offset by the negative impact of foreign currency translation (1.4%).

Previous wording

The following table presents the cost of services provided (exclusive of depreciation and amortization) by segment and as a percent of revenue for the three and nine months ended June 28, 2024 and June 30, 2023 (in millions).

Current wording

The following table presents the cost of services provided (exclusive of depreciation and amortization) by segment and as a percent of revenue for the three months ended December 27, 2024 and December 29, 2023 (in millions).

Previous wording

The following table presents the percentages attributable to the components in cost of services provided (exclusive of depreciation and amortization) for the three and nine months ended June 28, 2024 and June 30, 2023.

Current wording

The following table presents the percentages attributable to the components in cost of services provided (exclusive of depreciation and amortization) for the three months ended December 27, 2024 and December 29, 2023.

Previous wording

Interest Expense, net, decreased by 27.4% and 13.6% during the three and nine month periods of fiscal 2024 compared to the prior year periods, respectively. The decrease during the three and nine month periods of fiscal 2024 was primarily due to lower interest expense related to the repayment of the 6.375% Senior Notes due May 1, 2025 ("6.375% 2025 Notes") (see Note 5 to the condensed consolidated financial statements). Additionally, the decrease during the nine month period of fiscal 2024 was partially offset by the payment of a $23.9 million call premium, a $7.9 million non-cash loss for the write-off of unamortized deferred financing costs related to the repayment of the 6.375% 2025 Notes (see Note 5 to the condensed consolidated financial statements), higher borrowings on the Receivables Facility, a $1.6 million non-cash loss for the write-off of unamortized deferred financing costs and discount on the U.S. Term B-5 Loans due 2028 and U.S. Term B-6 Loans due 2030 and transaction costs related to the repricing of these loans (see Note 5 to the condensed consolidated financial statements).

Current wording

Interest Expense, net, decreased by 33.8% during the three month period of fiscal 2025 compared to the prior year period. The decrease was primarily due to the prior year payment of a $23.9 million call premium, a prior year $7.9 million non-cash loss for the write-off of unamortized deferred financing costs related to the repayment of the 6.375% Senior Notes due May 1, 2025 (the "6.375% 2025 Notes") and lower Receivables Facility borrowings.

Previous wording

The provision for income taxes for the three and nine month periods of fiscal 2024 was recorded at an effective tax rate of 27.5% and 32.0%, respectively. During the nine month period ended June 28, 2024, we recorded a $7.1 million valuation allowance recorded against certain foreign tax credits, as it is more likely than not a tax benefit will not be realized due to the reduction of future forecasted foreign income as a result of the separation and distribution of the Uniform segment (see Note 8 to the condensed consolidated financial statements). The provision for income taxes for the three and nine month periods ended June 30, 2023 was recorded at an effective tax rate of 27.7% and 26.2%, respectively. During the three and nine months ended June 30, 2023, we recorded an income tax provision of $101.2 million related to the sale of our 50% ownership interest in AIM Services Co., Ltd. Additionally, during the nine month period ended June 30, 2023, we recorded an income tax benefit of $3.8 million for the reversal of a valuation allowance against deferred tax assets within a foreign subsidiary due to an acquisition of a business (see Note 8 to the condensed consolidated financial statements).

Current wording

The Provision for Income Taxes for the three month periods of fiscal 2025 and fiscal 2024 were recorded at an effective tax rate of 25.3% and 45.6%, respectively. During the three month period of fiscal 2024, we recorded a $7.1 million valuation allowance adjustment against certain foreign tax credits, as it is more likely than not a tax benefit will not be realized due to the reduction of future forecasted foreign income as a result of the separation and distribution of the Uniform segment (see Note 6 to the condensed consolidated financial statements).

Previous wording

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

Current wording

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

Previous wording

Revenue increased by approximately 8.0% and 9.3% during the three and nine month periods of fiscal 2024 compared to the prior year periods, respectively. The increase during these periods was primarily attributable to base business growth, including volume growth and contract price increases, and net new business, partially offset by the negative impact of foreign currency translation (2.9% and 1.7%, respectively).

Current wording

FSS International segment revenue increased by approximately 4.7% during the three month period of fiscal 2025 compared to the prior year period. The increase was primarily attributable to base business growth, including volume growth and contract price increases, and net new business growth, partially offset by the negative impact of foreign currency translation (5.1%).

Previous wording

As of June 28, 2024, we had $436.1 million of cash and cash equivalents, $114.3 million of marketable securities and approximately $702.2 million of availability under our senior secured revolving credit facility. A significant portion of our cash and cash equivalents are held in mature, liquid geographies where we have operations. As of June 28, 2024, we had approximately $739.4 million of outstanding foreign currency borrowings. As of June 28, 2024, the 5.000% Senior Notes due April 1, 2025 and 3.125% Senior Notes due April 1, 2025 mature within one year. We intend to repay, redeem or otherwise refinance the outstanding obligations related to these securities.

Current wording

As of December 27, 2024, we had $484.1 million of cash and cash equivalents, $42.8 million of marketable securities, $1,158.1 million of availability under our senior secured revolving credit facility and $75.0 million of availability under our Receivables Facility. A significant portion of our cash and cash equivalents are held in mature, liquid geographies where we have operations. As of December 27, 2024, we had $862.2 million of outstanding foreign currency borrowings.

Previous wording

We believe that our cash and cash equivalents, marketable securities and availability under our revolving credit facility will be adequate to meet anticipated cash requirements for the foreseeable future to fund working capital, capital spending, debt service obligations, refinancings, dividends and other cash needs. We also have flexibility to optimize working capital and defer certain capital expenditures as appropriate without a material impact to the business. We believe that our assumptions used to estimate our liquidity and working capital requirements are reasonable. For additional information regarding the risks associated with our liquidity and capital resources, see Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on November 21, 2023.

Current wording

We believe that our cash and cash equivalents, marketable securities and availability under our revolving credit facility and Receivables Facility will be adequate to meet anticipated cash requirements for the foreseeable future to fund working capital, capital spending, debt service obligations, refinancings, dividends and other cash needs. We also have flexibility to optimize working capital and defer certain capital expenditures as appropriate without a material impact to the business. We believe that our assumptions used to estimate our liquidity and working capital requirements are reasonable. For additional information regarding the risks associated with our liquidity and capital resources, see Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on November 19, 2024.

Previous wording

Cash used in operating activities decreased by $119.9 million during the nine month period of fiscal 2024 compared to the nine month period of fiscal 2023. The lower net income and a greater use of cash from the change in operating assets and liabilities for the nine month period of fiscal 2024 was more than offset by the add-back of non-cash gains and losses and adjustments to non-operating cash transactions as compared to the prior year period. The unfavorable change in operating assets and liabilities compared to the prior year period of $66.0 million was primarily due to:

Current wording

Cash used in operating activities decreased by $69.9 million during the three month period of fiscal 2025 compared to the prior year period. The higher net income and a lower use of cash from the change in operating assets and liabilities more than offset non-cash gains and losses and adjustments to non-operating cash transactions compared to the prior year period. The favorable change in operating assets and liabilities compared to the prior year period of $23.7 million was primarily due to:

Previous wording

•Accrued expenses by $106.8 million, resulting in a greater use of cash during the nine month period of fiscal 2024 compared to the nine month period of fiscal 2023 primarily due to the timing of income tax payments, higher recognition of deferred income in our Higher Education business, the timing of payroll, higher client payments related to our revenue contracts in our Sports business and the timing of interest, insurance and other payments; partially offset by the prior year payment of social security taxes deferred under the CARES Act and lower employee incentive payments; and

Current wording

•Accrued expenses by $77.0 million, resulting in a lower use of cash primarily due to the timing of interest and income tax payments, lower recognition of deferred income in our Higher Education business, partially offset by higher employee incentive payments, the timing of payroll and higher commission payments mainly in our Sports business; and

Previous wording

During the nine month periods of fiscal 2024 and 2023, we received proceeds of approximately $1.0 million and $15.3 million, respectively, related to favorable loss experience in older insurance years under our general liability, automobile liability and workers' compensation liability programs. The "Other operating activities" caption in both periods reflect adjustments to net income in the current year and prior year periods related to non-cash gains and losses and adjustments to non-operating cash transactions.

Current wording

The "Other operating activities" caption in both periods reflect adjustments to net income in the current year and prior year periods related to non-cash gains and losses and adjustments to non-operating cash transactions.

Previous wording

Cash flows used in investing activities were $379.4 million during the nine month period of fiscal 2024 compared to $323.5 million cash flows provided by investing activities during the nine month period of fiscal 2023. The change was primarily due to the prior year proceeds from the sale of equity investments ($633.2 million) (see Note 1 to the condensed consolidated financial statements). In addition, the nine month period of fiscal 2024 had higher acquisitions of certain businesses ($56.8 million) and higher purchases of property and equipment ($29.6 million), offset by lower net purchases of United States Treasury securities related to our captive insurance subsidiary ($31.2 million) compared to the prior year period.

Current wording

Cash Flows Used in Investing Activities

Previous wording

During the nine month period of fiscal 2023, cash provided by financing activities was primarily impacted by the issuance of new U.S. Term B-6 Loans due 2030 ($1,089.0 million), borrowings under the revolving credit facility ($397.2 million) and borrowings under the Receivables Facility ($395.1 million), partially offset by repayments of U.S. Term B-3 Loans due 2025 ($1,664.8 million) and yen denominated term loans due 2026 ($63.0 million).

Current wording

During the three month period of fiscal 2025, cash provided by financing activities was primarily impacted by borrowings under the Receivables Facility ($525.0 million) and borrowings under the revolving credit facility ($178.4 million).

Previous wording

During the nine month period of fiscal 2024, cash used in financing activities was primarily impacted by repayment of the 6.375% 2025 Notes ($1,500.0 million), partially offset by borrowings under the Receivables Facility ($599.0 million) and borrowings under the revolving credit facility ($248.0 million).

Current wording

During the three month period of fiscal 2024, cash used in financing activities was primarily impacted by repayment of the 6.375% 2025 Notes ($1,500.0 million), which was offset by borrowings under the Receivables Facility ($600.0 million) and borrowings under the revolving credit facility ($209.7 million).

Previous wording

The "Other financing activities" caption also reflects a use of cash during the nine month periods of fiscal 2024 and fiscal 2023 primarily related to taxes paid by us when we withhold shares upon an employee's exercise or vesting of equity awards to cover income taxes. The nine month period of fiscal 2024 also includes the payment of a call premium on the 6.375% 2025 Notes ($23.9 million) and the nine month period of fiscal 2023 also includes the payment of debt issuance costs on the U.S. Term B-6 Loans due 2030 ($8.0 million).

Current wording

The "Other financing activities" caption also reflects a use of cash during the three month periods of fiscal 2025 and fiscal 2024 primarily related to taxes paid by us when we withhold shares upon an employee's exercise or vesting of equity awards to cover income taxes. The three month period of fiscal 2024 also includes the payment of a call premium on the 6.375% 2025 Notes ($23.9 million).

Previous wording

The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of our subsidiaries to: incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends; make distributions or repurchase our capital stock; make investments, loans or advances; repay or repurchase any subordinated debt, except as scheduled or at maturity; create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries; make certain acquisitions; engage in certain transactions with affiliates; amend material agreements governing our subordinated debt (or any indebtedness that refinances our subordinated debt); and fundamentally change our business. The indentures governing our senior notes contain similar provisions. As of June 28, 2024, we were compliant with these covenants.

Current wording

The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of our subsidiaries to: incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends; make distributions or repurchase our capital stock; make investments, loans or advances; repay or repurchase any subordinated debt, except as scheduled or at maturity; create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries; make certain acquisitions; engage in certain transactions with affiliates; amend material agreements governing our subordinated debt (or any indebtedness that refinances our subordinated debt); and fundamentally change our business. The indentures governing our senior notes contain similar provisions. As of December 27, 2024, we were in compliance with these covenants.

Previous wording

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

Current wording

These financial ratios, tests and covenants involve the calculation of certain measures that we refer to in this discussion as "Covenant Adjusted EBITDA." Covenant Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States ("U.S. GAAP"). Covenant Adjusted EBITDA is defined as net income of

Previous wording

The following is a reconciliation of net income attributable to ASI stockholders, which is a U.S. GAAP measure of ASI's operating results, to Covenant Adjusted EBITDA as defined in our debt agreements. The terms and related calculations are defined in the Credit Agreement and the indentures governing our senior notes. Covenant Adjusted EBITDA is a measure of

Current wording

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

Previous wording

(1) Represents share-based compensation expense resulting from the application of accounting for stock options, restricted stock units, performance stock units, deferred stock unit awards and employee stock purchases (see Note 10 to the condensed consolidated financial statements).

Current wording

(1) Represents share-based compensation expense resulting from the application of accounting for stock options, stock appreciation rights, restricted stock units, performance stock units and deferred stock unit awards.

Previous wording

(2) Represents the fiscal 2024 non-cash charge for the impairment of certain assets related to a business that was sold ($2.3 million).

Current wording

(2) Represents the fiscal 2024 gain from the sale of our remaining equity investment in the San Antonio Spurs NBA franchise ($25.1 million) and the fiscal 2024 non-cash charge for the impairment of certain assets related to a business that was sold ($2.3 million).

Previous wording

(4) "Other" includes adjustments to remove the impact attributable to the adoption of certain accounting standards that are made to the calculation in accordance with the Credit Agreement and indentures ($51.8 million), charges related to our spin-off of the Uniform segment ($42.0 million), income related to non-United States governmental wage subsidies ($13.6 million), the reversal of contingent consideration liabilities related to acquisition earn outs, net of expense ($12.8 million), net severance charges ($10.1 million), the impact of hyperinflation in Argentina ($8.9 million), non-cash charges for inventory write-downs ($6.1 million), non-cash charges related to the impairment of a trade name ($3.3 million), non-cash charges related to information technology assets ($2.1 million), multiemployer pension plan withdrawal charges ($2.0 million) and other miscellaneous expenses.

Current wording

(4) "Other" includes adjustments to remove the impact attributable to the adoption of certain accounting standards that are made to the calculation in accordance with the Credit Agreement and indentures ($52.3 million), non-cash adjustments to inventory based on expected usage ($18.2 million), charges related to a ruling on a foreign tax matter ($6.8 million), severance charges ($6.7 million), non-cash charges related to the impairment of a trade name ($3.3 million), contingent consideration expense related to acquisition earn outs, net of reversals ($2.4 million), the impact of hyperinflation in Argentina ($2.2 million), income related to non-United States governmental wage subsidies ($1.1 million) and other miscellaneous expenses.

Previous wording

Our covenant requirement and actual ratio for the twelve months ended June 28, 2024 are as follows:

Current wording

Our covenant requirements and actual ratios for the twelve months ended December 27, 2024 are as follows:

Previous wording

(1) The Credit Agreement requires ASI to maintain a maximum Consolidated Secured Debt Ratio, defined as consolidated total indebtedness secured by a lien to Covenant Adjusted EBITDA, not to exceed 5.125x. Consolidated total indebtedness secured by a lien is defined in the Credit Agreement as total indebtedness consisting of debt for borrowed money, finance leases, debt in respect of sales-leaseback transactions, disqualified and preferred stock and advances under the Receivables Facility secured by a lien reduced by the amount of cash and cash equivalents on the consolidated balance sheet that is free and clear of any lien. Non-compliance with the maximum Consolidated Secured Debt Ratio could result in the requirement to immediately repay all amounts outstanding under the Credit Agreement, which, if ASI's lenders under our Credit Agreement (other than the lenders in respect of ASI's U.S. Term B Loans, which lenders do not benefit from the maximum Consolidated Debt Ratio covenant) failed to waive any such default, would also constitute a default under the indentures governing our senior notes.

Current wording

(1) The Credit Agreement requires ASI to maintain a maximum Consolidated Secured Debt Ratio, defined as consolidated total indebtedness secured by a lien to Covenant Adjusted EBITDA, not to exceed 5.125x. Consolidated total indebtedness secured by a lien is defined in the Credit Agreement as total indebtedness consisting of debt for borrowed money, finance leases, debt in respect of sales-leaseback transactions, disqualified and preferred stock and advances under the Receivables Facility secured by a lien reduced by the amount of cash and cash equivalents on the consolidated balance sheet that is free and clear of any lien. Non-compliance with the maximum Consolidated Secured Debt Ratio could result in the requirement to immediately repay all amounts outstanding under the Credit Agreement, which, if ASI's lenders under our Credit Agreement (other than the lenders in respect of ASI's United States Term B Loans, which lenders do not benefit from the maximum Consolidated Debt Ratio covenant) failed to waive any such default, would also constitute a default under the indentures governing our senior notes.

Previous wording

(2) Our Credit Agreement establishes an incurrence-based minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA to consolidated interest expense, the achievement of which is a condition for us to incur additional indebtedness and to make certain restricted payments. If we do not maintain this minimum Interest Coverage Ratio calculated on a pro forma basis for any such additional indebtedness or restricted payments, we could be prohibited from being able to (1) incur additional indebtedness, other than the incremental capacity provided for under our Credit Agreement and pursuant to specified exceptions, and (2) make certain restricted payments, other than pursuant to certain exceptions. However, any failure to maintain the minimum Interest Coverage Ratio would not result in a default or an event of default under either the Credit Agreement or the indentures governing the senior notes. The minimum Interest Coverage Ratio is at least 2.000x for the term of the Credit Agreement. Consolidated interest expense is defined in our Credit Agreement as consolidated interest expense excluding interest income, adjusted for acquisitions and dispositions, further adjusted for certain non-cash or nonrecurring interest expense. The indentures governing our senior notes include a similar requirement which is referred to as a Fixed Charge Coverage Ratio.

Current wording

(2) Our Credit Agreement establishes an incurrence-based minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA to consolidated interest expense, the achievement of which is a condition for us to incur certain additional indebtedness and to make certain restricted payments. If we do not maintain this minimum Interest Coverage Ratio calculated on a pro forma basis for any such additional indebtedness or restricted payments, we could be prohibited from being able to (1) incur additional indebtedness, other than the incremental capacity provided for under our Credit Agreement and pursuant to certain specified exceptions, and (2) make certain restricted payments, other than pursuant to certain specified exceptions. However, any failure to maintain the minimum Interest Coverage Ratio would not result in a default or an event of default under either the Credit Agreement or the indentures governing the senior notes. The minimum Interest Coverage Ratio is at least 2.000x for the term of the Credit Agreement. Consolidated interest expense is defined in the Credit Agreement as consolidated interest expense excluding interest income, adjusted for acquisitions and dispositions and for certain non-cash or nonrecurring interest expense. The indentures governing our senior notes include a similar requirement which is referred to as a Fixed Charge Coverage Ratio.

Previous wording

Our business activities do not include the use of unconsolidated special purpose entities and there are no significant business transactions that have not been reflected in the accompanying condensed consolidated financial statements. We insure portions of our risk in general liability, automobile liability, workers’ compensation liability claims as well as certain property damage risks through a wholly owned captive insurance subsidiary (the "Captive") as part of our approach to risk finance. The Captive is subject to the regulations within its domicile of Bermuda, including regulations established by the Bermuda Monetary Authority (the "BMA") relating to levels of liquidity and solvency as such concepts are defined by the BMA. The Captive was in compliance with these regulations as of June 28, 2024. These regulations may have the effect of limiting our ability to access certain cash and cash equivalents held by the Captive for uses other than for the payment of our general liability, automobile liability, workers’ compensation liability, certain property damage and related Captive costs. As of June 28, 2024 and September 29, 2023, cash and cash equivalents at the Captive were $15.7 million and $32.8 million, respectively. The Captive also invests in United States Treasury securities where the amount as of June 28, 2024 and September 29, 2023 was $114.3 million and $110.7 million, respectively, and is recorded in "Prepayments and other current assets" on the Condensed Consolidated Balance Sheets.

Current wording

Our business activities do not include the use of unconsolidated special purpose entities and there are no significant business transactions that have not been reflected in the accompanying condensed consolidated financial statements. We insure portions of our risk related to general liability, automobile liability, workers’ compensation liability claims as well as certain property damage risks through a wholly owned captive insurance subsidiary (the "Captive") as part of our approach to risk finance. The Captive is subject to the regulations within its domicile of Bermuda, including regulations established by the Bermuda Monetary Authority (the "BMA") relating to levels of liquidity and solvency as such concepts are defined by the BMA. The Captive was in compliance with these regulations as of December 27, 2024. These regulations may have the effect of limiting our ability to access certain cash and cash equivalents held by the Captive for uses other than for the payment of our general liability, automobile liability, workers’ compensation liability, certain property damage and related Captive costs. As of December 27, 2024 and September 27, 2024, cash and cash equivalents at the Captive were $98.7 million and $94.7 million, respectively. The Captive also invests in United States Treasury securities where the amount as of December 27, 2024 and September 27, 2024 was $42.8 million and $42.3 million, respectively, and is recorded in "Prepayments and other current assets" on the Condensed Consolidated Balance Sheets.