-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ScUcXIsk+50kgObw/CWLfnMdKPj+ha4R9VnrsFYuPnsWwhVB3xJPlOtjumRH8OGS l1aCKmmsTDKkmGB4WufnuA== 0000950116-96-000338.txt : 19960513 0000950116-96-000338.hdr.sgml : 19960513 ACCESSION NUMBER: 0000950116-96-000338 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960329 FILED AS OF DATE: 19960510 SROS: NONE 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: 001-08827 FILM NUMBER: 96559955 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 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 29, 1996 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 26, 1996: 2,039,689 Class B common stock outstanding at April 26, 1996: 22,863,499 - ------------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands) ASSETS
March 29, September 29, 1996 1995 ----------- ------------- Current Assets: Cash and cash equivalents $ 24,677 $ 23,082 Receivables 501,983 488,920 Inventories, at lower of cost or market 302,605 285,510 Prepayments and other current assets 112,896 64,772 ----------- ----------- Total current assets 942,161 862,284 ----------- ----------- Property and Equipment, net 783,443 756,082 Goodwill 641,747 506,193 Other Assets 283,979 475,127 ----------- ----------- $ 2,651,330 $ 2,599,686 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term borrowings $ 15,739 $ 8,384 Accounts payable 358,851 440,761 Accrued expenses and other liabilities 458,091 399,458 ----------- ----------- Total current liabilities 832,681 848,603 ----------- ----------- Long-Term Borrowings 1,308,477 1,274,771 Deferred Income Taxes and Other Noncurrent Liabilities 235,891 204,968 Common Stock Subject to Potential Repurchase Under Provisions of Shareholders' Agreement 19,512 19,060 Shareholders' Equity Excluding Common Stock Subject to Repurchase: Class C preferred stock, redemption value $1,000 .. 14,190 14,965 Class A common stock, par value $.01 20 21 Class B common stock, par value $.01 235 235 Earnings retained for use in the business 255,295 247,805 Cumulative translation adjustment 4,541 8,318 Impact of potential repurchase feature of common stock (19,512) (19,060) ----------- ----------- Total 254,769 252,284 ----------- ----------- $ 2,651,330 $ 2,599,686 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 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 29, March 31, March 29, March 31, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Revenues $ 1,464,626 $ 1,364,518 $ 3,014,000 $ 2,745,034 ----------- ----------- ----------- ----------- Costs and Expenses: Cost of services provided 1,343,275 1,255,607 2,756,907 2,520,272 Depreciation and amortization 45,785 39,034 90,478 76,047 Selling and general corporate expenses 20,260 18,431 42,285 37,060 Other expense (income) -- -- (2,850) -- ----------- ----------- ----------- ----------- 1,409,320 1,313,072 2,886,820 2,633,379 ----------- ----------- ----------- ----------- Operating income 55,306 51,446 127,180 111,655 Interest Expense, net 30,068 29,442 60,320 54,875 ----------- ----------- ----------- ----------- Income before income taxes 25,238 22,004 66,860 56,780 Provision for Income Taxes 9,939 8,654 26,572 22,677 ----------- ----------- ----------- ----------- Income before Extraordinary Item 15,299 13,350 40,288 34,103 Extraordinary Item due to Early Extinguishment of Debt (net of income taxes) 1,589 -- 1,589 -- ----------- ----------- ----------- ----------- Net income $ 13,710 $ 13,350 $ 38,699 $ 34,103 =========== =========== =========== =========== Earnings Per Share: Income before extraordinary item $ .32 $ .26 $ .84 $ .68 Net income $ .28 $ .26 $ .80 $ .68 =========== =========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands)
For the Six Months Ended --------------------------------- March 29, March 31, 1996 1995 ------------ ----------- Cash flows from operating activities: Net income $ 38,699 $ 34,103 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 90,478 76,047 Income taxes deferred (12,789) (1,822) Extraordinary item 1,589 -- Changes in noncash working capital (79,010) (77,587) Other operating activities (8,918) (1,789) --------- --------- Net cash provided by operating activities 30,049 28,952 --------- --------- Cash flows from investing activities: Purchases of property and equipment (77,222) (81,944) Disposals of property and equipment 5,995 15,100 Sale of investments -- 16,203 Divestiture of certain businesses 50,823 1,583 Purchase of subsidiary stock -- (20,310) Acquisition of certain businesses (10,295) (116,519) Other investing activities (7,431) 2,787 --------- --------- Net cash used in investing activities (38,130) (183,100) --------- --------- Cash flows from financing activities: Proceeds from additional long-term borrowings 129,219 176,711 Payment of long-term borrowings including premiums (93,078) (27,096) Proceeds from issuance of common stock 9,978 7,613 Repurchase of stock (35,822) (9,223) Other financing activities (621) (1,731) --------- --------- Net cash provided by financing activities 9,676 146,274 --------- --------- Increase/(decrease) in cash and cash equivalents 1,595 (7,874) Cash and cash equivalents, beginning of period 23,082 27,426 --------- --------- Cash and cash equivalents, end of period $ 24,677 $ 19,552 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 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) OTHER INCOME: During the first quarter of fiscal 1996, the Company sold a division of its Uniform Services business. The net selling price was approximately $51 million in cash and resulted in a pre-tax gain of $37 million, which was offset by other charges related to asset realization ($20 million) and insurance, legal and other matters ($14 million) and is reflected as "other expense (income)" in the accompanying consolidated statements of income. The divested operations were not material to the Company's revenues or operating income. (3) EARLY EXTINGUISHMENT OF DEBT: In January 1996, the Company redeemed its $80 million 8-1/4% senior note for a premium resulting in an extraordinary item for debt extinguishment of $1.6 million (net of tax benefit of $1.0 million) and issued a $125 million 6.79% senior note due January 2003, with annual principal repayments of $25 million beginning January 1999. (4) CAPITAL STOCK: During the first six months of fiscal 1996, pursuant to the ARAMARK Ownership Program, employees purchased 1,746,200 shares or $14.8 million of Class B Common Stock for $10.0 million of cash and $4.8 million of deferred payment obligations. (5) SUPPLEMENTAL CASH FLOW INFORMATION: The Company made interest payments of $54.6 million and $51.5 million and income tax payments of $46.3 million and $33.4 million during the first six months of fiscal 1996 and 1995, respectively. During the first six months of fiscal 1996, the Company purchased $.8 million of its Preferred Stock, $22.6 million of its Class A Common Stock and $24.0 million of its Class B Common Stock, issuing $11.5 million in subordinated installment notes as partial consideration, and contributed $1.5 million of Class A Common Stock to its employee benefit plans. ARAMARK CORPORATION AND SUBSIDIARIES 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 29, March 31, March 29, March 31, 1996 1995 1996 1995 --------- ----------- ---------- --------- (in thousands) Revenues $ 820.0 $ 779.0 $ 1,653.4 $ 1,532.9 Cost of services provided 773.9 730.9 1,559.6 1,436.0 Net income 5.2 6.7 7.4 16.5 March 29, September 29, 1996 1995 -------- ------------ (in thousands) Current assets $ 380.2 $ 366.4 Noncurrent assets 1,594.5 1,545.5 Current liabilities 454.7 435.3 Noncurrent liabilities 1,418.2 1,377.8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS - --------------------- Overview - -------- Revenues of $1.5 billion for the second quarter and $3.0 billion for the six month period increased 7% and 10%, respectively, over the comparable prior year periods. Second quarter operating income of $55.3 million was $3.9 million or 8% higher than the prior year period. As discussed below, the increase is attributable to increased earnings of the Food, Leisure & Support and Uniform Services segments, partially offset by a major decline in earnings of the Distributive segment. Operating income for the six month period of $127.2 million was 14% higher than the prior year period as a result of improved earnings in the Uniform Services, Health & Education and Food, Leisure & Support segments, including the positive impact in fiscal 1996 from the return of baseball and hockey, partially offset by the decline in earnings of the Distributive segment. Fiscal 1996 year-to-date results also include other income of $2.9 million (see note 2 to the condensed consolidated financial statements). As a result, the Company's operating income margin for the six month period (before other income) of 4.1% was unchanged from the comparable prior year period. Interest expense for the three and six month periods increased $0.6 million or 2% and $5.4 million or 10%, respectively, from the comparable prior year period due to increased debt levels to finance acquisitions, partially offset by the favorable impact of refinancing certain of the Company's subordinated debentures and lower interest rates. Segment Results - --------------- Revenues - Food, Leisure & Support Services segment second quarter revenues increased 7% due primarily to new accounts and increased volume at both U.S. and international food businesses. Food, Leisure & Support Services segment revenues for the six month period increased 9% due to the growth noted above, acquisitions and the return of baseball and hockey. Uniform Services segment revenues increased 17% over the prior year for both the three and six month periods due to the impact of recent acquisitions and increased volume in the uniform rental business, partially offset by the divestiture discussed in note 2 and decreased volume from direct marketing of work clothing. Health and Education segment revenues in the fiscal second quarter were equal with the prior year period and increased 1% on a year-to-date basis, with increases in enrollment and pricing at Children's World being offset by decreased revenues in the healthcare business due to the impact of the severe winter weather in the second quarter of fiscal 1996 and the expiration of a statewide correctional healthcare contract. Distributive segment revenues for the three and six month periods increased 5% and 13%, respectively, due to recent acquisitions. Operating Income, Before Other Expense (Income) - Food, Leisure & Support Services segment operating income increased 37% for the second quarter and 33% for the six month period due to increased revenues, the return of baseball and hockey in the first fiscal quarter and effective control of expenses. Uniform Services segment operating income for the second quarter increased 22% over the prior year period due to volume increases in the uniform rental business, recent acquisitions and cost reduction initiatives in the direct marketing business, partially offset by the impact of the divestiture described in note 2. Operating income for the six month period increased 9% over the prior year period, with increases related to uniform rental volume and acquisitions being partially offset by the divestiture and increased operating and marketing costs in the direct marketing business incurred in the first fiscal quarter. Health and Education segment second quarter operating income decreased 4% as a result of the impact of the revenue changes mentioned above. For the six month period, operating income increased 7% over the prior year, primarily due to the revenue related increases at Children's World. The Distributive segment incurred an operating loss in the fiscal second quarter. As a result operating income declined by approximately $8 million for both the second quarter and the six months compared to the prior year periods. Results were impacted by higher operating expenses due to increased competition and consolidation in the magazine wholesale distribution industry resulting from large retail chains consolidating magazine purchases from a reduced number of wholesalers. While the Company believes it is well positioned to take advantage of the current competitive conditions due to its size and reputation in this market, the future impact of these changes on the Distributive segment is uncertain at this point in time. For the remainder of fiscal 1996, the Company projects that operating income in the Distributive segment will continue to be significantly lower than the prior year period. FINANCIAL CONDITION - ------------------- The Company's indebtedness increased $41 million in the first six months of fiscal 1996, principally to finance seasonal working capital needs which was partially offset by the proceeds from the sale of a division (see note 2 to the condensed consolidated financial statements). The Company currently has approximately $370 million of unused credit availability under its revolving credit facility, which management believes, along with cash flows from operations, is sufficient to fund operating requirements. 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 13, 1996. (b) Not Applicable (c) (1) A proposal to approve the Company's Combined Stock Ownership Plan (the "Plan") was voted upon and approved. There were 22,920,119 affirmative votes and 49,208 negative or abstained votes cast with respect to the approval of the Plan. (2) A proposal to approve the Company's Stock Unit Retirement Plan (the "SURP") was voted upon and approved. There were 22,843,327 affirmative votes and 126,000 negative or abstained votes cast with respect to the approval of the SURP. (3) There were 22,930,669 affirmative votes and 38,658 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 4A - Combined Stock Ownership Plan, is incorporated by reference to the Company's Proxy Statement filed with the Securities and Exchange Commission on January 9, 1996. (2) Exhibit 4B - Stock Unit Retirement Plan is incorporated by reference to the Company's Proxy Statement filed with the Securities and Exchange Commission on January 9, 1996. (3) Exhibit 11 - Computation of Fully Diluted Earnings Per Share (4) Exhibit 27 - Financial Data Schedule (b) None 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 May 10, 1996 Vice President, Controller and Chief Accounting Officer EX-11 2 EXHIBIT 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 29, March 31, March 29, March 31, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Earnings: Net Income $ 13,710 $ 13,350 $ 38,699 $ 34,103 Preferred stock dividends (246) (273) (495) (530) -------- -------- -------- -------- Earnings applicable to common stock $ 13,464 $ 13,077 $ 38,204 $ 33,573 ======== ======== ======== ======== Shares: Weighted average number of common shares outstanding (2) 45,041 47,588 44,982 46,660 Impact of potential exercise opportunities under the ARAMARK Ownership Program 2,437 2,633 2,653 3,074 -------- -------- -------- -------- Total common and common equivalent shares 47,478 50,221 47,635 49,734 ======== ======== ======== ======== Fully diluted earnings per common and common equivalent share $ .28 $ .26 $ .80 $ .68 ======== ======== ======== ========
(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 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS SEP-27-1996 SEP-30-1995 MAR-29-1996 24,677 0 501,983 17,414 302,605 942,161 1,515,373 731,930 2,651,330 832,681 1,308,477 0 14,190 255 240,324 2,651,330 0 3,014,000 0 2,756,907 90,478 3,532 60,320 66,860 26,572 40,288 0 (1,589) 0 38,699 0 $.80
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