-----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, Jz1Stbm5E5drLuj6kme/R+ulAS1qDl46phyjqxrGsQC61desbTHbCUAR9IahCQEp xVw12vjRXQXV1+j+rskNhg== 0000950116-96-000772.txt : 19961024 0000950116-96-000772.hdr.sgml : 19961024 ACCESSION NUMBER: 0000950116-96-000772 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960628 FILED AS OF DATE: 19960812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARAMARK CORP CENTRAL INDEX KEY: 0000757523 STANDARD INDUSTRIAL CLASSIFICATION: 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: 96608246 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 10Q 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 June 28, 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 July 26, 1996: 1,994,849 Class B common stock outstanding at July 26, 1996: 23,027,082 - - -------------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands) ASSETS
June 28, September 29, 1996 1995 ------------ ---------------- Current Assets: Cash and cash equivalents $ 21,060 $ 23,082 Receivables 533,568 488,920 Inventories, at lower of cost or market 305,506 285,510 Prepayments and other current assets 82,132 64,772 ---------- ---------- Total current assets 942,266 862,284 ----------- ---------- Property and Equipment, net 791,840 756,082 Goodwill 645,481 506,193 Other Assets 285,625 475,127 ---------- ---------- $2,665,212 $2,599,686 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term borrowings $ 14,491 $ 8,384 Accounts payable 365,614 440,761 Accrued expenses and other liabilities 456,359 399,458 ---------- --------- Total current liabilities 836,464 848,603 ---------- ---------- Long-Term Borrowings 1,311,902 1,274,771 Deferred Income Taxes and Other Noncurrent Liabilities 231,830 204,968 Common Stock Subject to Potential Repurchase Under Provisions of Shareholders' Agreement 16,820 19,060 Shareholders' Equity Excluding Common Stock Subject to Repurchase: Class C preferred stock, redemption value $1,000 5,396 14,965 Class A common stock, par value $.01 20 21 Class B common stock, par value $.01 232 235 Earnings retained for use in the business 275,172 247,805 Cumulative translation adjustment 4,196 8,318 Impact of potential repurchase feature of common stock (16,820) (19,060) ---------- ---------- Total 268,196 252,284 ---------- ---------- $2,665,212 $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 Nine Months Ended ------------------------------------ ----------------------------------- June 28, June 30, June 28, June 30, 1996 1995 1996 1995 ---------- ---------- -------------- --------- Revenues $1,546,296 $1,423,824 $4,560,296 $4,168,858 ---------- ---------- ---------- ---------- Costs and Expenses: Cost of services provided 1,407,732 1,290,258 4,164,639 3,810,530 Depreciation and amortization 45,787 40,365 136,265 116,412 Selling and general corporate expenses 19,068 18,535 61,353 55,595 Other expense (income) - - (2,850) - ---------- ---------- ---------- ---------- 1,472,587 1,349,158 4,359,407 3,982,537 ---------- ---------- ---------- ---------- Operating income 73,709 74,666 200,889 186,321 Interest Expense, net 28,580 27,309 88,900 82,184 ---------- ---------- ---------- ---------- Income before income taxes 45,129 47,357 111,989 104,137 Provision for Income Taxes 15,324 19,300 41,896 41,977 ---------- ---------- ---------- ---------- Income before Extraordinary Item 29,805 28,057 70,093 62,160 Extraordinary Item due to Early Extinguishment of Debt (net of income taxes) 1,169 6,686 2,758 6,686 ---------- ---------- ---------- ---------- Net income $ 28,636 $ 21,371 $ 67,335 $ 55,474 ========== =========== ========== ========== Earnings Per Share: Income before extraordinary item $.64 $.56 $1.47 $1.24 Net income $.61 $.43 $1.41 $1.10 ==== ==== ===== =====
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 Nine Months Ended ------------------------------ June 28, June 30, 1996 1995 ----------- --------- Cash flows from operating activities: Net income $ 67,335 $ 55,474 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 136,265 116,412 Income taxes deferred (25,343) (2,399) Extraordinary item 2,758 6,686 Changes in noncash working capital (89,961) (36,813) Other operating activities (9,810) (3,590) --------- --------- Net cash provided by operating activities 81,244 135,770 --------- --------- Cash flows from investing activities: Purchases of property and equipment (119,197) (125,854) Disposals of property and equipment 5,761 16,538 Divestiture of certain businesses 50,823 2,483 Sale of investments -- 16,203 Purchase of subsidiary stock -- (20,386) Acquisition of certain businesses (10,445) (144,503) Other investing activities (11,628) (44) --------- --------- Net cash used in investing activities (84,686) (255,563) --------- --------- Cash flows from financing activities: Proceeds from additional long-term borrowings 166,568 337,983 Payment of long-term borrowings including premiums (128,250) (209,085) Proceeds from issuance of common stock 13,674 9,162 Repurchase of stock (48,956) (21,618) Other financing activities (1,616) (4,637) --------- --------- Net cash provided by financing activities 1,420 111,805 --------- --------- Decrease in cash and cash equivalents (2,022) (7,988) Cash and cash equivalents, beginning of period 23,082 27,426 --------- --------- Cash and cash equivalents, end of period $ 21,060 $ 19,438 ========= =========
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. During the third quarter of fiscal 1996, the Company replaced its existing credit facility with a new $1 billion credit facility. The new facility is non-amortizing and matures on June 30, 2001. The Company wrote off the unamortized balance of financing costs related to the old credit facility which is reflected as an extraordinary item for debt extinguishment of $1.2 million (net of tax benefit of $0.8 million). During the third quarter of fiscal 1995, the Company redeemed its $125 million 12% subordinated debentures due 2000 and its $50 million 10.25% senior note due 1998, resulting in an early extinguishment item of $6.7 million (net of tax benefit of $4.4 million). (4) CAPITAL STOCK: During the first nine months of fiscal 1996, pursuant to the ARAMARK Ownership Program, employees purchased 1,797,998 shares or $15.1 million of Class B Common Stock for $13.7 million of cash and $1.4 million of deferred payment obligations. As of the end of the third quarter, the Company exchanged 8,606 shares of its Preferred Stock for 539,441 shares of Class B Common Stock. In July the Company called for the redemption of all its outstanding Preferred Stock as of September 4, 1996 for cash of approximately $5.4 million. (5) SUPPLEMENTAL CASH FLOW INFORMATION: The Company made interest payments of $81.9 million and $76.8 million and income tax payments of $70.6 million and $40.7 million during the first nine months of fiscal 1996 and 1995, respectively. During the first nine months of fiscal 1996, the Company purchased $1.0 million of its Preferred Stock, $28.1 million of its Class A Common Stock and $39.6 million of its Class B Common Stock, issuing $19.7 million in subordinated installment notes as partial consideration, and contributed $1.6 million of Class A Common Stock to its employee benefit plans. 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 Nine Months Ended ------------------------------ ----------------------------- June 28, June 30, June 28, June 30, 1996 1995 1996 1995 ----------- ----------- ------------ --------- (in thousands) Revenues $789.6 $739.8 $2,443.0 $2,272.7 Cost of services provided 748.3 694.8 2,307.9 2,130.8 Net income 2.8 3.5 10.2 20.0
June 28, September 29, 1996 1995 -------- ------------- (in thousands) Current assets $ 355.9 $ 366.4 Noncurrent assets 1,595.4 1,545.5 Current liabilities 435.1 435.3 Noncurrent liabilities 1,412.0 1,377.8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Overview Revenues were $1.5 billion for the third quarter and $4.6 billion for the nine month period, representing increases of 9% over the comparable prior year periods. Third quarter operating income of $73.7 million was approximately $1 million lower than the prior year period, due to a significant decline in the earnings of the Distributive segment, which more than offset increased earnings in the Food, Leisure & Support, Uniform Services and Health & Education segments. Operating income for the nine month period of $200.9 million was 8% 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 earnings decline in 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 of the decreased earnings of the Distributive segment, the Company's operating income margin for the nine month period (before other income) decreased to 4.3% from 4.5% in the comparable prior year period. Excluding the Distributive segment, operating income increased 13% and 19% over the comparable prior year three month and nine month periods, respectively. Interest expense for the three and nine month periods increased $1.3 million or 5% and $6.7 million or 8%, 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. The effective income tax rate decreased for both the third quarter and the nine months due to the favorable impact resulting from the settlement of an audit of certain prior years' federal income tax returns in June 1996. Segment Results Revenues - Food, Leisure and Support Services segment third quarter revenues increased 7% due primarily to new accounts and increased volume at both U.S. and international food businesses. Food Leisure and Support Services segment revenues for the nine month period increased 8% due to the volume growth noted above, acquisitions and the return of baseball and hockey. Uniform Services segment revenues increased 16% and 17% over the prior year three and nine month periods, respectively, 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 third quarter increased 8% compared to the prior year period due to enrollment growth and pricing at Children's World and new contracts at correctional institutions in the healthcare business. Health and Education segment revenues for the nine month period increased 4% over the prior year period due primarily to the increased revenues at Children's World noted above. Distributive segment revenues for the three and nine month periods increased 8% and 12%, respectively, due to acquisitions completed during fiscal 1995 and the impact of the change in customer mix in 1996. Operating Income, before Other Expense (Income) - Food, Leisure and Support Services segment third quarter operating income increased 17% compared to the prior year period due to the revenue growth noted above. Operating income for the nine month period increased 24% from the prior year period due to increased revenues in the food business and the return of baseball and hockey. Uniform Services segment operating income for the third quarter increased 10% 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 nine 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 work clothing direct marketing business incurred in the first fiscal quarter. Health and Education segment third quarter and year-to-date operating income increased 7% over the comparable prior year periods, primarily due to the revenue increases at Children's World partially offset by increased operating costs in the healthcare business. The Distributive segment incurred an operating loss of $3.8 million in the fiscal third quarter. Operating income for this segment was approximately $10 million and $18 million lower compared to the prior year three and nine month periods, respectively. Results continue to be impacted by higher operating expenses due to the costs of servicing new customers and the increased competition and consolidation in the magazine wholesale distribution industry. The Company believes it is well positioned to take advantage of the current competitive conditions, however, the future impact of these changes is uncertain at this 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 $43 million in the first nine 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 $380 million of unused credit availability under its $1 billion 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: Not Applicable. Item 5: Not Applicable. Item 6: Exhibits. (a) (1) Exhibit 11 - Computation of Fully Diluted Earnings Per Share (2) 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 August 12, 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 Nine Months Ended ------------------------------ ----------------------------- June 28, June 30, June 28, June 30, 1996 1995 1996 1995 --------- ----------- --------- --------- Earnings: Net Income $ 28,636 $ 21,371 $ 67,335 $ 55,474 Preferred stock dividends (236) (261) (731) (791) -------- -------- -------- -------- Earnings applicable to common stock $ 28,400 $ 21,110 $ 66,604 $ 54,683 ======== ======== ======== ======== Shares: Weighted average number of common shares outstanding (2) 43,909 46,928 44,624 46,667 Impact of potential exercise opportunities under the ARAMARK Ownership Program 2,469 2,486 2,678 2,931 -------- -------- -------- -------- Total common and common equivalent shares 46,378 49,414 47,302 49,598 ======== ======== ======== ======== Fully diluted earnings per common and common equivalent share $ .61 $ .43 $ 1.41 $ 1.10 ======== ======== ======== ========
(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 0000757523 ARAMARK CORPORATION 1,000 9-MOS SEP-27-1996 SEP-30-1995 JUN-28-1996 21,060 0 533,568 16,529 305,506 942,266 1,543,545 751,705 2,665,212 836,464 1,311,902 0 5,396 252 262,548 2,665,212 0 4,560,296 0 4,164,639 136,265 4,394 88,900 111,989 41,896 70,093 0 2,758 0 67,335 0 $1.41
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