-----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, IfMz47rqoIazzXtOelCO6OYeUjooPc6v/HdZX+R0xL3kRJSxIGNByyYfL5aV0Xx4 xpgluag06F9ciejf6KSmZQ== 0000950116-00-000277.txt : 20000215 0000950116-00-000277.hdr.sgml : 20000215 ACCESSION NUMBER: 0000950116-00-000277 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 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: 0927 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08827 FILM NUMBER: 543941 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 10-Q 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 December 31, 1999 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 January 28, 2000: 2,498,809 Class B common stock outstanding at January 28, 2000: 64,090,278 - -------------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands) ASSETS ------ December 31, October 1, 1999 1999 ------------ ---------- Current Assets: Cash and cash equivalents $ 21,895 $ 27,690 Receivables 564,381 578,393 Inventories, at lower of cost or market 373,308 369,791 Prepayments and other current assets 128,466 68,492 ---------- ---------- Total current assets 1,088,050 1,044,366 ---------- ---------- Property and Equipment, net 938,304 933,715 Goodwill 605,476 603,017 Other Assets 287,812 289,445 ---------- ---------- $2,919,642 $2,870,543 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities: Current maturities of long-term borrowings $ 31,368 $ 24,761 Accounts payable 326,456 387,127 Accrued expenses and other liabilities 540,021 513,865 ---------- ---------- Total current liabilities 897,845 925,753 ---------- ---------- Long-Term Borrowings 1,706,537 1,609,659 Deferred Income Taxes and Other Noncurrent Liabilities 245,650 188,560 Common Stock Subject to Potential Repurchase Under Provisions of Shareholders' Agreement 20,000 20,000 Shareholders' Equity Excluding Common Stock Subject to Repurchase: Class A common stock, par value $.01 25 27 Class B common stock, par value $.01 621 656 Capital surplus - 57,356 Earnings retained for use in the business 71,606 93,376 Accumulated other comprehensive income (loss) (2,642) (4,844) Impact of potential repurchase feature of common stock (20,000) (20,000) ---------- ---------- Total 49,610 126,571 ---------- ---------- $2,919,642 $2,870,543 ========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements. - 1 - ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In Thousands, Except Per Share Amounts) For the Three Months Ended -------------------------- December 31, January 1, 1999 1999 ------------- ---------- Sales $1,760,736 $1,648,465 ---------- ---------- Costs and Expenses: Cost of services provided 1,591,679 1,498,347 Depreciation and amortization 51,664 45,821 Selling and general corporate expenses 22,533 19,485 ---------- ---------- 1,665,876 1,563,653 ---------- ---------- Operating income 94,860 84,812 Interest Expense, net 33,784 34,536 ---------- ---------- Income before income taxes 61,076 50,276 Provision for Income Taxes 23,806 20,193 ---------- ---------- Net income $ 37,270 $ 30,083 ========== =========== Earnings Per Share: Basic $.40 $.33 ==== ==== Diluted $.38 $.30 ==== ==== The accompanying notes are an integral part of these condensed consolidated financial statements. - 2 - ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) For the Three Months Ended -------------------------- December 31, January 1, 1999 1999 ------------- ---------- Cash flows from operating activities: Net income $ 37,270 $ 30,083 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 51,664 45,821 Income taxes deferred 649 1,001 Changes in noncash working capital (92,376) (67,515) Other operating activities (6,641) (3,279) --------- --------- Net cash provided by (used in) operating activities (9,434) 6,111 --------- --------- Cash flows from investing activities: Purchases of property and equipment (38,374) (29,824) Disposals of property and equipment 4,982 4,474 Divestiture of certain businesses - 1,219 Acquisition of certain businesses (18,123) (1,759) Other investing activities (3,816) (2,178) --------- --------- Net cash used in investing activities (55,331) (28,068) --------- --------- Cash flows from financing activities: Proceeds from additional long-term borrowings 156,291 42,270 Payment of long-term borrowings (52,806) (7,608) Repurchase of stock (46,398) (3,734) Proceeds from issuance of common stock 1,883 2,091 --------- --------- Net cash provided by financing activities 58,970 33,019 --------- --------- Increase (decrease) in cash and cash equivalents (5,795) 11,062 Cash and cash equivalents, beginning of period 27,690 20,614 --------- --------- Cash and cash equivalents, end of period $ 21,895 $ 31,676 ========= ========= The accompanying notes are an integral part of these condensed consolidated financial statements. - 3 - 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) CAPITAL STOCK: ------------- During the first quarter of fiscal 2000, pursuant to the ARAMARK Ownership Program, employees purchased 458,683 shares or $3.2 million of Class B Common Stock for $1.9 million cash plus $1.3 million of deferred payment obligations. Pursuant to a December 1999 agreement, in January 2000 the Company repurchased 2,658,636 shares of class B common stock for $40.4 million ($20.2 million in cash and $20.2 million in subordinated installment notes). Accordingly, the total consideration of $40.4 million was reclassified from shareholders' equity and reflected as a liability in the accompanying balance sheet as of December 31, 1999. (3) SUPPLEMENTAL CASH FLOW INFORMATION: ----------------------------------- The Company made interest payments of $22.5 million and $22.7 million and income tax payments of $12.6 million and $18.4 million during the first quarter of fiscal 2000 and 1999, respectively. During the first quarter of fiscal 2000, the Company purchased $3.0 million of its Class A Common Stock and $83.3 million of its Class B Common Stock, issuing $39.9 million in subordinated installment notes as partial consideration, and contributed $7.1 million of Class A Common Stock to its employee benefit plans. (4) 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 ------------------------------------- December 31, January 1, 1999 1999 ------------ ---------- (in millions) Sales $1,162.8 $1,083.8 Cost of services provided 1,093.1 1,013.6 Net income 10.6 13.9 December 31, October 1, 1999 1999 ------------ -------- (in millions) Current assets $ 571.5 $ 519.4 Noncurrent assets 2,051.6 1,977.9 Current liabilities 591.1 574.0 Noncurrent liabilities 1,833.3 1,737.3 - 4 - NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (5) EARNINGS PER SHARE: ------------------- The Company follows the provisions of Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." Earnings per share is reported on a Common Stock, Class B equivalent basis (which reflects Common Stock, Class A shares converted to a Class B basis, ten for one). Earnings applicable to common stock and common shares utilized in the calculation of basic and diluted earnings per share are as follows: Three Months Ended ------------------------------- December 31, January 1, 1999 1999 ------------ ---------- (in thousands, except per share data) Earnings: Net income $37,270 $30,083 ======= ======= Shares: Weighted average number of common shares outstanding used in basic earnings per share calculation 92,121 90,566 Impact of potential exercise opportunities under the ARAMARK Ownership Plan 7,187 8,568 ------- ------- Total common shares used in diluted earnings per share calculation 99,308 99,134 ======= ======= Basic earnings per common share $.40 $.33 ==== ==== Diluted earnings per common share $.38 $.30 ==== ==== (6) COMPREHENSIVE INCOME: --------------------- Pursuant to the provisions of SFAS No. 130, "Reporting Comprehensive Income", comprehensive income includes all changes in shareholders' equity during a period, except those resulting from investment by and distributions to shareholders. Components of comprehensive income include net income, changes in foreign currency translation adjustments and unrealized holding gains/losses in marketable equity securities. Total comprehensive income was $39.5 million and $32.1 million for the three months ended December 31, 1999 and January 1, 1999, respectively. - 5 - NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (7) SEGMENT INFORMATION Sales and operating income by segment are as follows: Three Months Ended ---------------------------- December 31, January 1, Sales 1999 1999 --------------------------------------------- ------------ ---------- (in thousands) Food and Support Services - United States $1,045,919 $ 943,890 Food and Support Services - International 253,653 250,801 Uniform and Career Apparel - Rental 238,659 225,106 Uniform and Career Apparel - Direct Marketing 120,265 134,255 Educational Resources 102,240 94,413 ---------- ---------- $1,760,736 $1,648,465 ========== ========== Three Months Ended ---------------------------- December 31, January 1, Operating Income 1999 1999 --------------------------------------------- ------------ ---------- (in thousands) Food and Support Services - United States $ 43,861 $41,200 Food and Support Services - International 12,799 9,600 Uniform and Career Apparel - Rental 31,076 26,791 Uniform and Career Apparel - Direct Marketing 5,494 5,003 Educational Resources 7,828 7,274 -------- ------- 101,058 89,868 Corporate and Other (6,198) (5,056) -------- ------- Operating Income 94,860 84,812 Interest Expense, Net (33,784) (34,536) -------- ------- Income Before Income Taxes $ 61,076 $50,276 ======== ======= - 6 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND - ------- FINANCIAL CONDITION RESULTS OF OPERATIONS - --------------------- In fiscal 1999, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." Prior year segment results have been restated to conform with the current year segment presentation. See note 7 to the condensed consolidated financial statements for the segment operating results for the first quarter of fiscal 2000 and fiscal 1999. Overview - -------- Sales for the first quarter of fiscal 2000 of $1.8 billion increased 7% over the prior year period, with increases in the Food and Support Services, Uniform and Career Apparel - Rental and Educational Resources segments being partially offset by a decline in sales at the Uniform and Career Apparel - Direct Marketing segment. Operating income of $94.9 million increased 12% over the prior year due to increased earnings in all operating segments. The Company's operating margin increased to 5.4% from 5.1% due primarily to the leveraging of fixed costs, effective cost controls and the impact of the National Basketball Association (NBA) labor dispute in the prior year first quarter. Interest expense, net was $33.8 million, a decrease of 2% from the prior year period due primarily to lower debt levels. Segment Results - --------------- Sales - Food and Support Services - United States segment sales were 11% higher than the prior year due to increased volume (5%), the impact of acquisitions (5%) and the impact of the NBA labor dispute on the prior year results (1%). Sales in the Food and Support Services - International segment increased 1% over the prior year period due to new accounts (4%) and increased volume (3%), partially offset by the unfavorable impact of foreign currency translation (4%) and the impact of a divestiture (2%). Sales in the Uniform and Career Apparel - Rental segment increased 6% due to increased volume. Uniform and Career Apparel - - Direct Marketing segment sales decreased 10% from the prior year period. The decrease was due to a decline in sales of uniforms and career apparel (13%), resulting from a planned reduction of catalog circulation, partially offset by increased sales of safety equipment and related accessories (3%), primarily from the acquisition of Dyna Corporation in the second quarter of fiscal 1999. Educational Resources segment sales increased 8% versus the prior year due to pricing and new locations. Operating Income - Food and Support Services - United States segment operating income increased 6% due to the sales increases noted above and the impact of the NBA labor dispute in the prior year, partially offset by increased operating costs, including a provision for a receivable from a customer that filed for bankruptcy. Food and Support Services - International segment operating income increased 33% versus the prior year due primarily to a gain from the sale of an asset plus the sales increases noted above, partially offset by the negative impact of foreign currency translation. Uniform and Career Apparel - Rental segment operating income increased 16% versus the prior year period due to the sales increases noted above and leveraging of fixed costs, partially offset by costs related to the startup of certain manufacturing operations. Operating income in the Uniform and Career Apparel - Direct Marketing segment increased 10% versus the prior year due to increased margins and reduced catalog and other costs, partially offset by startup costs related to a new distribution facility and lower sales. Educational Resources segment operating income increased 8% due to the sales growth noted above. FINANCIAL CONDITION - ------------------- The Company's indebtedness increased $103 million in the first three months of fiscal 2000, principally to finance seasonal working capital needs, common stock repurchases and capital additions. The Company currently has approximately $475 million of unused committed credit availability under its credit facilities, which management believes, along with cash flows from operations, is sufficient to fund operating requirements. - 7 - Pursuant to a December 1999 agreement, in January 2000 the Company repurchased 2,658,636 shares of class B common stock for $40.4 million ($20.2 million in cash and $20.2 million in subordinated installment notes). Accordingly, the total consideration of $40.4 million was reclassified from shareholders' equity and reflected as a liability in the accompanying balance sheet as of December 31, 1999. YEAR 2000 READINESS DISCLOSURE - ------------------------------ To date, the Company's internal financial and operational systems have experienced no material adverse impact from the transition to the Year 2000. In addition, the Company is not aware that any of its customers, suppliers or other third parties with whom it has business relationships have experienced any significant Year 2000 issues that affect the Company. While unforeseen Year 2000 related failures could still occur, the Company does not currently expect that any such failures would have a material adverse impact on the Company's operations and financial condition. The Company does not expect to incur any significant additional costs relating to Year 2000 issues. PART II - OTHER INFORMATION Item 1 through 5 are not applicable. - ------------------------------------ Item 6: Exhibits. - ------ -------- (a) Exhibit 27 - Financial Data Schedule for the three months ended December 31, 1999. (b) Not Applicable - 8 - 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 February 14, 2000 /s/ Alan J. Griffith ------------------------------ Alan J. Griffith Vice President, Controller and Chief Accounting Officer - 9 - EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Income filed as part of Form 10-Q and is qualified in its entirety by reference to such Form 10-Q. 1,000 U.S. DOLLARS 3-MOS SEP-29-2000 OCT-02-1999 DEC-31-1999 1 21,895 0 564,381 26,176 373,308 1,088,050 1,921,863 983,559 2,919,642 897,845 1,706,537 0 0 646 48,964 2,919,642 0 1,760,736 0 1,591,679 51,664 4,239 33,784 61,076 23,806 37,270 0 0 0 37,270 .40 .38
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