-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ntW1Yyviewi3qVcVwLwwtG0ojlV1vo9Wd4l8A4Vc/d9mWpaUm6WU+ZKFcPxKIfeS 98uG5QVXvRHGGne/4vPtRg== 0000950116-95-000186.txt : 19950516 0000950116-95-000186.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950116-95-000186 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARAMARK CORP CENTRAL INDEX KEY: 0000757523 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 232319139 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18998 FILM NUMBER: 95539794 BUSINESS ADDRESS: STREET 1: THE ARA TOWER STREET 2: 1101 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19107 BUSINESS PHONE: 2152383000 MAIL ADDRESS: STREET 1: ARA GROUP INC STREET 2: 1101 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19107 FORMER COMPANY: FORMER CONFORMED NAME: ARA GROUP INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ARA HOLDING CO DATE OF NAME CHANGE: 19880515 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1995 Commission file number 1-8827 ARAMARK CORPORATION (Exact name of registrant as specified in its charter) Delaware 23-2319139 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) ARAMARK TOWER 1101 Market Street Philadelphia, Pennsylvania 19107 (Address of principal executive offices) (Zip Code) (215) 238-3000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Class A common stock outstanding at April 28, 1995: 2,163,931 Class B common stock outstanding at April 28, 1995: 24,844,868 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands)
ASSETS March 31, September 30, 1995 1994 ------------ ------------- Current Assets: Cash and cash equivalents $ 19,552 $ 27,426 Short-term investments held by the Canadian subsidiary -- 16,203 Receivables 437,149 433,550 Inventories, at lower of cost or market 274,602 256,950 Prepayments and other current assets 104,774 69,865 ---------- ----------- Total current assets 836,077 803,994 ---------- ----------- Property and Equipment, net 709,016 681,907 Goodwill 492,461 438,725 Other Assets 251,043 197,324 ---------- ----------- $2,288,597 $2,121,950 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term borrowings $ 8,062 $ 9,391 Accounts payable 323,045 372,908 Accrued expenses and other liabilities 400,240 374,902 ---------- ----------- Total current liabilities 731,347 757,201 ---------- ----------- Long-Term Borrowings 1,139,043 981,949 Deferred Income Taxes and Other Noncurrent Liabilities 181,247 168,638 Minority Interest 316 10,812 Common Stock Subject to Potential Repurchase Under Provisions of Shareholders' Agreement 22,315 20,791 Shareholders' Equity Excluding Common Stock Subject to Repurchase: Class C preferred stock, redemption value $1,000 15,698 16,949 Class A common stock, par value $.01 21 21 Class B common stock, par value $.01 256 243 Capital surplus 521 -- Earnings retained for use in the business 212,160 178,587 Cumulative translation adjustment 7,988 7,550 Impact of potential repurchase feature of common stock (22,315) (20,791) ---------- ----------- Total 214,329 182,559 ---------- ----------- $2,288,597 $2,121,950 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In Thousands, Except Per Share Amounts)
For the Three Months Ended For the Six Months Ended ----------------------------- ----------------------------- March 31, April 1, March 31, April 1, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Revenues $ 1,364,518 $ 1,257,614 $ 2,745,034 $ 2,549,634 ----------- ----------- ----------- ----------- Costs and Expenses: Cost of services provided 1,255,607 1,156,230 2,520,272 2,335,956 Depreciation and amortization 39,034 34,845 76,047 69,226 Selling and general corporate expenses 18,431 17,069 37,060 33,472 ----------- ----------- ----------- ----------- 1,313,072 1,208,144 2,633,379 2,438,654 ----------- ----------- ----------- ----------- Operating income 51,446 49,470 111,655 110,980 Interest Expense, net 29,442 28,275 54,875 57,756 ----------- ----------- ----------- ----------- Income before income taxes 22,004 21,195 56,780 53,224 Provision for Income Taxes 8,548 7,750 22,612 20,890 Minority Interest 106 321 65 823 ----------- ----------- ----------- ----------- Income before Cumulative Effect of Change in Accounting for Income Taxes and Extraordinary Item 13,350 13,124 34,103 31,511 Cumulative Effect of Change in Accounting for Income Taxes -- -- -- 1,277 Extraordinary Item due to Early Extinguishment of Debt (net of income taxes) -- 117 -- 819 ----------- ----------- ----------- ----------- Net income $ 13,350 $ 13,007 $ 34,103 $ 29,415 =========== =========== =========== =========== Earnings Per Share: Income before cumulative effect of change in accounting for income taxes and extraordinary item $.26 $.25 $.68 $.61 Net income $.26 $.25 $.68 $.57 ==== ==== ==== ====
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands)
For the Six Months Ended ---------------------------------- March 31, April 1, 1995 1994 ----------- ---------- Cash flows from operating activities: Net income $ 34,103 $ 29,415 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 76,047 69,226 Income taxes deferred (1,822) (1,818) Minority interest 65 823 Extraordinary item -- 819 Cumulative effect of accounting change -- 1,277 Changes in noncash working capital (77,587) (63,465) Other operating activities (1,854) (3,579) ----------- ---------- Net cash provided by operating activities 28,952 32,698 ----------- ---------- Cash flows from investing activities: Purchases of property and equipment (81,944) (59,197) Disposals of property and equipment 15,100 6,190 Sale of investments 16,203 6,194 Divestiture of certain businesses 1,583 5,223 Purchase of subsidiary stock (20,310) -- Acquisition of certain businesses (116,519) (6,279) Other investing activities 2,787 (2,048) ----------- ---------- Net cash used in investing activities (183,100) (49,917) ----------- ---------- Cash flows from financing activities: Proceeds from additional long-term borrowings 176,711 52,863 Payment of long-term borrowings including premiums (27,096) (27,082) Proceeds from issuance of common stock 7,613 10,584 Repurchase of stock (9,223) (21,435) Other financing activities (1,731) (1,446) ----------- ---------- Net cash provided by financing activities 146,274 13,484 ----------- ---------- Decrease in cash and cash equivalents (7,874) (3,735) Cash and cash equivalents, beginning of period 27,426 27,801 ----------- ---------- Cash and cash equivalents, end of period $ 19,552 $ 24,066 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 ARAMARK CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: ------------------------------------------- The condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, the statements include all adjustments (which include only normal recurring adjustments) required for a fair statement of financial position, results of operations and cash flows for such periods. The results of operations for the interim periods are not necessarily indicative of the results for a full year. (2) ACQUISITIONS: ------------ During the first quarter, the Company acquired Harry M. Stevens, a provider of food and support services to stadiums and arenas, and Rainier News a magazine distribution company, for approximately $130 million in cash, notes and preferred stock, and additionally completed the buyback of the remaining minority interest of its Canadian subsidiary for cash consideration of $20.3 million. The acquisitions have been accounted for by the purchase method. The costs of the acquisitions were allocated to the assets acquired and liabilities assumed based upon a preliminary estimate of their respective fair values and will be finalized during fiscal 1995. Amounts allocated to goodwill are being amortized on a straight-line basis over 40 years. Recently, the Company terminated its agreement to purchase the TW Recreational Services subsidiary of Flagstar Companies, Inc. (3) EARLY EXTINGUISHMENT OF DEBT: ---------------------------- During the first six months of fiscal 1994, the Company redeemed $13.4 million of its 12.5% subordinated debentures for total cash premiums of $1.2 million. The redemption premium (net of applicable income tax benefit of $0.5 million) is reflected in the Condensed Consolidated Statements of Income as an "Extraordinary Item". In April 1995, the Company redeemed its $125 million 12% subordinated debentures due 2000 and its $50 million 10.25% senior note due 1998 and issued $150 million of 8.15% senior notes due 2005 and $100 million of 8% senior notes due 2002. The premium related to the early extinguishment of the debt, $6.7 million after tax, will be reflected as an extraordinary item in the fiscal 1995 third quarter. (4) CAPITAL STOCK: ------------- During the first six months of fiscal 1995, pursuant to the ARAMARK Ownership Program, employees purchased 2,751,395 shares or $16.5 million of Class B Common Stock for $7.6 million of cash and $8.9 million of deferred payment obligations. (5) SUPPLEMENTAL CASH FLOW INFORMATION: ---------------------------------- The Company made interest payments of $51.5 million and $54.5 million and income tax payments of $33.4 million and $23.9 million during the first six months of fiscal 1995 and 1994, respectively. During the first six months of fiscal 1995, the Company purchased $1.3 million of its Preferred Stock and $15.3 million of its Class B Common Stock, issuing $7.3 million in subordinated installment notes as partial consideration, and contributed $1.4 million of Class A Common Stock to its employee benefit plans. In connection with the acquisitions described in Note 2, the company issued promissory notes and preferred stock of a subsidiary totaling $8 million. 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (6) ARAMARK SERVICES, INC. AND SUBSIDIARIES: --------------------------------------- The following financial information has been summarized from the separate consolidated financial statements of ARAMARK Services, Inc. (a wholly owned subsidiary of ARAMARK Corporation) and the subsidiaries which it currently owns. ARAMARK Services, Inc. is the borrower under the revolving credit facility and certain other senior debt agreements and incurs the interest expense thereunder. This interest expense is only partially allocated to all of the other subsidiaries of ARAMARK Corporation.
For the Three Months Ended For the Six Months Ended --------------------------------- -------------------------------- March 31, April 1, March 31, April 1, 1995 1994 1995 1994 ----------- ------------ -------------- --------- (in thousands) Revenues $779.0 $707.7 $1,532.9 $1,423.2 Cost of services provided 730.9 665.5 1,436.0 1,335.5 Income before cumulative effect of change in accounting for income taxes 6.7 2.8 16.5 8.2 Cumulative effect of change in accounting for income taxes -- -- -- 0.3 Net income 6.7 2.8 16.5 7.9
March 31, September 30, 1995 1994 ---------- ------------- (in thousands) Current assets $ 345.1 $ 355.8 Noncurrent assets 1,401.1 1,223.8 Current liabilities 411.2 398.8 Noncurrent liabilities 1,235.1 1,093.6 Minority interest 0.3 10.8 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS - --------------------- Overview - -------- Revenues of $1.4 billion for the second quarter and $2.7 billion for the six-month period increased 9% and 8%, respectively, over the comparable prior year periods. Second quarter operating income of $51.4 million was $2 million or 4% higher than the prior year period. The increase is due to improved earnings in all business segments, as discussed below, partially offset by increased costs related to the change in corporate identity and also the seasonal operating loss related to the recent Harry M. Stevens (Stevens) acquisition (see note 2 to the condensed consolidated financial statements). Operating income for the six month period of $111.7 million was slightly higher than the prior year period, with improvements in business segment earnings being offset by the impact of the National Hockey League and Major League Baseball strikes in the United States and Canada, and the corporate identity costs and the Stevens seasonal loss noted above. Excluding the impact of the hockey and baseball strikes and the Stevens acquisition, it is estimated that operating income would have been approximately 4% higher for the second quarter and the six months and, net income would have been about 13% higher for the six month period. The Company's operating income margin for the six month period decreased to 4.1% in fiscal 1995 from 4.4% in fiscal 1994. The decrease in margin is due primarily to the hockey and baseball strikes and increased corporate expenses referred to above. Second quarter interest expense increased $1.2 million, or 4%, due to increases in debt levels from financing acquisitions and increases in short-term interest rates, partially offset by the favorable impact of refinancing certain of the Company's subordinated debentures during fiscal 1994. (See notes 2 and 3 to the condensed consolidated financial statements). Interest expense for the six month period decreased $2.9 million compared to the prior year period, primarily due to the refinancing described above offset by the increase in interest due to the acquisitions. Segment Results - --------------- Food, Leisure and Support Services segment revenues increased 7% and 6%, respectively, for the three and six month periods due to new accounts and increased volume at both domestic and international food businesses and due to the Stevens acquisition, partially offset by the impact of the National Hockey League and Major League Baseball strikes. Uniform Services segment revenues increased 11% and 12%, respectively, for the three and six month periods, reflecting increased volume at both uniform rental operations and at WearGuard. Health & Education segment revenues increased 13% and 12%, respectively for the three and six month periods resulting from new contracts at Spectrum Healthcare Services and continued enrollment and tuition increases at Children's World. Distributive segment revenues for the three and six month periods increased 7% and 5%, respectively, due to increased unit volume and the effect of the first quarter acquisition (see note 2). Food, Leisure and Support Services segment operating income for the fiscal second quarter and six month period increased 13% and 7%, respectively, compared to the comparable prior year period. The increases are attributable to increased revenues in the domestic food businesses, partially offset by the seasonal impact of the Stevens acquisition and the impact of the hockey and baseball strikes. Excluding the effects of the strikes and the acquisition, segment operating income would have been 11% and 9% higher for the second quarter and six month periods, respectively. Uniform Services operating income increased 1% and 5% for the three and six month periods, respectively, due to the higher volume, partially offset by increases in merchandise and other operating costs. Health & Education segment operating income increased 7% and 4% for the three and six month periods, respectively, due to volume related improvements in operating income at Children's World. Distributive segment second quarter operating income increased 1% over the prior year period, due primarily to the recent acquisition. Distributive segment operating income for the six month period decreased 5% compared to the prior year period, with increases related to unit volume and the acquisition, being off-set by higher operating expenses. 8 On January 11, 1995, the National Hockey League entered into a new labor accord. A shortened hockey season began on January 20, 1995. The Major League Baseball strike which began on August 12, 1994 ended on April 2, 1995. The announced plan is to have a shortened 1995 season with 144 games or 89% of the normal schedule. Although the delay of the start of the season will have a negative impact on the Company's third quarter results, management does not believe the planned abbreviated season will have a material adverse impact on its full year 1995 operating results. FINANCIAL CONDITION - ------------------- The Company's indebtedness increased $156 million during the first six months of fiscal 1995, principally to finance acquisitions (see note 2 to the condensed consolidated financial statements), capital expenditures and a seasonal increase in working capital. In April 1995, the Company redeemed its $125 million 12% subordinated debentures due 2000 and its $50 million 10.25% senior note due 1998 and issued $150 million of 8.15% senior notes due 2005 and $100 million of 8% senior notes due 2002. The premium related to the early extinguishment of the debt, $6.7 million after tax, will be reflected as an extraordinary item in the fiscal 1995 third quarter. Remaining proceeds from the note offering were used to reduce outstanding borrowings on the credit facility. The financing transactions extended overall maturities and decreased the Company's average borrowing rate. The Company currently has approximately $450 million of unused committed credit availability under its $1 billion revolving credit facility, which management believes, along with cash flows from operations, is sufficient to fund operating requirements. 9 PART II - OTHER INFORMATION Item 1: Not Applicable. - ------- Item 2: Not Applicable. - ------- Item 3: Not Applicable. - ------- Item 4: Submission of Matters to a Vote of Security Holders. - ------- (a) The Annual Meeting of Stockholders was held on February 14, 1995. (b) Not Applicable. (c) A proposal to approve the Company's 1991 Stock Ownership Plan, as amended (the "Plan") was voted upon and approved. There were 24,831,396 affirmative votes and 8,208 negative or abstained votes cast with respect to the approval of the Plan. There were 24,839,604 affirmative votes and no negative or abstained votes cast with respect to the uncontested election of directors. (d) Not Applicable. Item 5: Not Applicable. - ------- Item 6: Exhibits. - ------- (a) (1) Exhibit 4 - 1991 Stock Ownership Plan, as amended, is incorporated by reference to the Company's Proxy Statement filed with the Securities and Exchange Commission on January 11, 1995 (2) Exhibit 11 - Computation of Fully Diluted Earnings Per Share (3) Exhibit 27 - Financial Data Schedule (b) None 10 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ARAMARK CORPORATION /s/ Alan J. Griffith ---------------------------------------- Alan J. Griffith Vice President & Controller and Chief Accounting Officer May 15, 1995 11 EXHIBIT 11 ARAMARK CORPORATION AND SUBSIDIARIES COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (1) (Unaudited) (In Thousands, except per share data)
Three Months Ended Six Months Ended ---------------------------- ---------------------------- March 31, April 1, March 31, April 1, 1995 1994 1995 1994 ---------- ----------- ---------- --------- Earnings: Net Income $ 13,350 $ 13,007 $ 34,103 $ 29,415 Preferred stock dividends (273) (301) (530) (811) -------- -------- -------- -------- Earnings applicable to common stock $ 13,077 $ 12,706 $ 33,573 $ 28,604 ======== ======== ======== ======== Shares: Weighted average number of common shares outstanding (2) 47,588 47,514 46,660 46,639 Impact of potential exercise opportunities under the ARAMARK Ownership Program 2,633 3,241 3,074 3,572 -------- -------- -------- -------- Total common and common equivalent shares 50,221 50,755 49,734 50,211 ======== ======== ======== ======== Fully diluted earnings per common and common equivalent share $.26 $.25 $.68 $.57 ==== ==== ==== ====
(1) Primary and fully diluted earnings per share are approximately the same. (2) Includes Class B plus Class A Common Shares stated on a Class B Common Share Equivalent Basis. EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS SEP-29-1995 OCT-01-1994 MAR-31-1995 $19,552 0 437,149 14,899 274,602 836,077 1,355,895 646,879 2,288,597 731,347 1,139,043 277 0 15,698 198,354 2,288,597 0 2,745,034 0 2,520,272 76,047 3,585 54,875 56,780 22,612 34,103 0 0 0 34,103 0 $.68
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