-----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, AlCg1zPGEZemW38O4gnhe5+aFjsIYMTTY6akiA6/3kudmiyGUmpE8BsW/VKTGXVZ wPZjVHx92W9DUhrxSsxXHQ== 0000950116-00-001249.txt : 20000516 0000950116-00-001249.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950116-00-001249 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 635881 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 March 31, 2000 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 19107-2988 - ---------------------------------------- ---------- (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, 2000: 2,461,792 Class B common stock outstanding at April 28, 2000: 61,876,660 - ------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands) ASSETS ------
March 31, October 1, 2000 1999 ---------- ---------- Current Assets: Cash and cash equivalents $ 26,473 $ 27,690 Receivables 547,303 578,393 Inventories, at lower of cost or market 384,443 369,791 Prepayments and other current assets 102,747 68,492 ---------- ---------- Total current assets 1,060,966 1,044,366 ---------- ---------- Property and Equipment, net 957,438 933,715 Goodwill 606,619 603,017 Other Assets 320,209 289,445 ---------- ---------- $2,945,232 $2,870,543 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities: Current maturities of long-term borrowings $ 19,959 $ 24,761 Accounts payable 383,148 387,127 Accrued expenses and other liabilities 501,386 513,865 ---------- ---------- Total current liabilities 904,493 925,753 ---------- ---------- Long-Term Borrowings 1,719,569 1,609,659 Deferred Income Taxes and Other Noncurrent Liabilities 225,700 188,560 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 $.01 628 656 Capital surplus 5,221 57,356 Earnings retained for use in the business 94,422 93,376 Accumulated other comprehensive income (loss) (4,826) (4,844) Impact of potential repurchase feature of common stock (20,000) (20,000) ---------- ---------- Total 75,470 126,571 ---------- ---------- $2,945,232 $2,870,543 ========== ==========
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 31, April 2, March 31, April 2, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Sales $1,740,401 $1,658,845 $3,501,137 $3,307,310 ---------- ---------- ---------- ---------- Costs and Expenses: Cost of services provided 1,591,681 1,521,102 3,183,360 3,019,449 Depreciation and amortization 52,737 48,709 104,401 94,530 Selling and general corporate expenses 21,826 22,846 44,359 42,331 ---------- ---------- ---------- ---------- 1,666,244 1,592,657 3,332,120 3,156,310 ---------- ---------- ---------- ---------- Operating income 74,157 66,188 169,017 151,000 Interest Expense, net 36,734 34,929 70,518 69,465 ---------- ---------- ---------- ---------- Income before income taxes 37,423 31,259 98,499 81,535 Provision for Income Taxes 14,607 11,832 38,413 32,025 ---------- ---------- ---------- ---------- Net income $ 22,816 $ 19,427 $ 60,086 $ 49,510 ========== ========== ========== ========== Earnings Per Share: Basic $.25 $.20 $.66 $.53 Diluted $.24 $.19 $.62 $.49
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 31, April 2, 2000 1999 --------- --------- Cash flows from operating activities: Net income $ 60,086 $ 49,510 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 104,401 94,530 Income taxes deferred 1,865 2,414 Changes in noncash working capital (34,458) (17,939) Other operating activities (11,940) (10,571) --------- --------- Net cash provided by operating activities 119,954 117,944 --------- --------- Cash flows from investing activities: Purchases of property and equipment (96,114) (74,754) Disposals of property and equipment 7,718 6,466 Sale of investments - 40,722 Divestiture of certain businesses - 8,380 Acquisition of certain businesses (32,487) (60,614) Other investing activities (30,042) (10,109) --------- --------- Net cash used in investing activities (150,925) (89,909) --------- --------- Cash flows from financing activities: Proceeds from additional long-term borrowings 182,542 5,897 Payment of long-term borrowings (82,434) (34,641) Proceeds from issuance of common stock 31,893 13,492 Repurchase of stock (102,247) (11,309) Other financing activities - (31) --------- --------- Net cash provided by (used in) financing activities 29,754 (26,592) --------- --------- Increase (decrease) in cash and cash equivalents (1,217) 1,443 Cash and cash equivalents, beginning of period 27,690 20,614 --------- --------- Cash and cash equivalents, end of period $ 26,473 $ 22,057 ========= =========
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) CAPITAL STOCK: ------------- During the first six months of fiscal 2000, pursuant to the ARAMARK Ownership Program, employees purchased 6,093,330 shares of Class B Common Stock for total consideration of $35.6 million consisting of $31.9 million in cash plus $3.7 million of deferred payment obligations. (3) SUPPLEMENTAL CASH FLOW INFORMATION: ---------------------------------- The Company made interest payments of $67.8 million and $66.6 million and income tax payments of $42.4 million and $46.0 million during the first six months of fiscal 2000 and 1999, respectively. During the first six months of fiscal 2000, the Company purchased $14.3 million of its Class A Common Stock and $151.7 million of its Class B Common Stock, issuing $63.8 million in installment notes as partial consideration, and contributed $7.1 million of Class A Common Stock to its employee benefit plan. (4) 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 $20.6 million and $60.1 million for the three and six months ended March 31, 2000, respectively; and $15.8 million and $48.0 million for the three and six months ended April 2, 1999, respectively. (5) ACQUISITIONS: ------------ On March 29, 2000, the Company entered into a definitive agreement to acquire substantially all of the food and beverage concessions and venue businesses of Ogden Corporation for $236 million in cash. The acquisition will be financed through the Company's existing revolving credit facility and is expected to close during the fiscal third quarter. During the second quarter of fiscal 1999, the Company acquired Restaura, Inc. a provider of food and support services, and Dyna Corporation, a leading distributor of emergency medical supplies for approximately $46 million and $13 million in cash, respectively. 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 2, March 31, April 2, 2000 1999 2000 1999 ----------- ----------- -------------- --------- (in millions) Sales $1,161.7 $1,119.0 $2,324.5 $2,202.7 Cost of services provided 1,095.7 1,053.3 2,188.8 2,066.8 Net income 7.8 10.0 18.4 23.9
March 31, October 1, 2000 1999 ------------ -------- (in millions) Current assets $ 535.7 $ 519.4 Noncurrent assets 2,102.7 1,977.9 Current liabilities 579.2 574.0 Noncurrent liabilities 1,854.9 1,737.3
(7) 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 Six Months Ended March 31, April 2, March 31, April 2, 2000 1999 2000 1999 ------------ ---------- ------------ ------- (in thousands, except per share data) Earnings: Net income $22,816 $19,427 $60,086 $49,510 ======= ======= ======= ======= Shares: Weighted average number of common shares outstanding used in basic earnings per share calculation 90,510 95,158 91,315 92,865 Impact of potential exercise opportunities under the ARAMARK Ownership Plan 5,487 6,952 6,339 7,770 ------- ------- ------- ------- Total common shares used in diluted earnings per share calculation 95,997 102,110 97,654 100,635 ======= ======= ======= ======= Basic earnings per common share $.25 $.20 $.66 $.53 ==== ==== ==== ==== Diluted earnings per common share $.24 $.19 $.62 $.49 ==== ==== ==== ====
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (8) SEGMENT INFORMATION: -------------------- Sales and operating income by segment are as follows:
Three Months Ended Six Months Ended ------------------------------- -------------------------- March 31, April 2, March 31, April 2, Sales 2000 1999 2000 1999 -------------------------------------------- ------------- ---------- ------------ ----------- (in thousands) Food and Support Services - United States $1,021,828 $975,905 $2,067,747 $1,919,796 Food and Support Services - International 257,674 249,531 511,327 500,332 Uniform and Career Apparel - Rental 240,780 224,948 479,439 450,053 Uniform and Career Apparel - Direct Marketing 109,065 106,742 229,330 240,997 Educational Resources 111,054 101,719 213,294 196,132 ---------- ---------- ---------- ---------- $1,740,401 $1,658,845 $3,501,137 $3,307,310 ========== ========== ========== ==========
Three Months Ended Six Months Ended ----------------------------- -------------------------- March 31, April 2, March 31, April 2, Operating Income 2000 1999 2000 1999 -------------------------------------------- ------------ ----------- ------------ -------- (in thousands) Food and Support Services - United States $ 32,415 $ 29,723 $ 76,276 $ 70,923 Food and Support Services - International 11,242 11,771 24,041 21,371 Uniform and Career Apparel - Rental 24,232 21,004 55,308 47,795 Uniform and Career Apparel - Direct Marketing 2,001 (368) 7,495 4,635 Educational Resources 10,776 11,379 18,604 18,653 -------- -------- -------- -------- 80,666 73,509 181,724 163,377 Corporate and Other (6,509) (7,321) (12,707) (12,377) -------- -------- -------- -------- Operating Income 74,157 66,188 169,017 151,000 Interest Expense, Net (36,734) (34,929) (70,518) (69,465) -------- -------- -------- -------- Income Before Income Taxes $ 37,423 $ 31,259 $ 98,499 $ 81,535 ======== ======== ======== ========
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 8 to the condensed consolidated financial statements for the segment operating results. Overview - -------- Sales of $1.7 billion for the second quarter and $3.5 billion for the six-month period increased 5% and 6%, respectively, over the prior year periods. Sales increased in all operating segments in the second quarter. For the six month period, sales increases in the Food and Support Services, Uniform and Career Apparel - Rental, and Educational Resources segments were partially offset by a decline in sales in the Uniform and Career Apparel - Direct Marketing segment. Operating income of $74.2 million for the second quarter and $169 million for the six month period increased 12% over the respective prior year periods, primarily due to strong performances in the Food and Support Services - United States segment and the Uniform and Career Apparel segments. The Company's operating margin for the six months increased to 4.8% from 4.6% due primarily to the leveraging of fixed costs and effective cost controls. Interest expense, net for the three and six-month periods increased 5% and 2%, respectively, over the prior year periods due primarily to increased borrowing levels. Segment Results - --------------- Sales - Food and Support Services - United States segment sales for the three and six month periods increased 5% and 8% versus the comparable prior year periods due to new accounts (2% and 1%, respectively), increased volume (2% and 4%, respectively), and the impact of acquisitions (1% and 3%, respectively). Sales in the Food and Support Services - International segment increased 3% and 2% for the three and six month periods due to new accounts (5%) and increased volume (3%), partially reduced by the unfavorable impact of foreign currency translation (4%) and the impact of a divestiture (1% and 2%, respectively). Uniform and Career Apparel - Rental segment sales for both the three and six month periods increased 7% over the prior year due primarily to increased volume. Uniform and Career Apparel - Direct Marketing segment sales increased 2% for the second quarter and decreased 5% for the six months versus the respective prior year periods. Segment sales performance reflects a decrease in sales of uniforms and career apparel for the three and six month periods, primarily as a result of a planned reduction of catalog circulation (approximately 2% and 8%, respectively), and an increase in sales of safety equipment and related accessories for the three and six month periods due to increased volume and the acquisition of Dyna Corporation in the second quarter of fiscal 1999 (approximately 4% and 3%, respectively). Educational Resources segment sales increased 9% from the prior year for both the three and six month periods due to pricing and new locations, partially offset by a decrease in enrollment at existing locations. Operating Income - Food and Support Services - United States segment operating income increased 9% and 8% for the three and six month periods due to the sales increases noted above and the impact of the NBA labor dispute in the prior year, which were partially offset by increased operating costs, including a provision in the first quarter for a receivable from a customer that filed for bankruptcy. Food and Support Services - International segment operating income for the three and six month periods decreased 4% and increased 12%, respectively from the prior year periods. Excluding the impact of asset sale gains from both years and foreign currency translation, operating income for the three and six month periods increased 8% and 2%, respectively, due to the sales increases noted above, partially offset by increased operating costs. Uniform and Career Apparel - - Rental segment operating income for the three and six month periods increased 15% and 16% versus the respective prior year periods 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 for the second quarter of fiscal 2000 was $2 million versus a loss of $368 thousand in the prior year period. The improved earnings are due to the sales increases noted above, increased margins and reduced catalog and other costs, partially offset by continuing start-up costs related to a new distribution center. Operating income for the six month period increased 62% over the prior year period due to increased margins and reduced catalog and other costs, partially offset by the distribution center startup costs noted above and lower sales. Educational Resources segment operating income for the three month period decreased 5% and was equal with prior year for the six month period. Operating results have been adversely impacted by increased labor and other operating costs resulting from tight labor markets. FINANCIAL CONDITION - ------------------- The Company's indebtedness increased $105 million in the first six months of fiscal 2000, principally to finance seasonal working capital needs, common stock repurchases and capital additions. The Company currently has approximately $500 million of unused committed credit availability under its revolving credit facilities, which management believes, along with cash flows from operations, is sufficient to fund operating requirements. On March 29, 2000, the Company entered into a definitive agreement to acquire substantially all of the food and beverage concessions and venue businesses of Ogden Corporation for $236 million in cash. The acquisition will be financed through the Company's existing revolving credit facility and is expected to close during the fiscal third quarter. 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 8, 2000. (b) Not Applicable. (c) There were 56,032,677 affirmative votes and 146,979 votes withheld or abstained with respect to the uncontested election of directors. (d) Not Applicable. Item 5: Not Applicable. - ------- Item 6: Exhibits - ------- -------- (a) Exhibit 27 - Financial Data Schedule (b) Not Applicable. 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 May 15, 2000 s/Alan J. Griffith ------------------ Alan J. Griffith Vice President, Controller and Chief Accounting Officer 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. 6-MOS SEP-29-2000 OCT-02-1999 MAR-31-2000 1 26,473 0 547,303 25,627 384,443 1,060,966 1,964,412 1,006,974 2,945,232 904,493 1,719,569 0 0 653 74,817 2,945,232 0 3,501,137 0 3,183,360 104,401 6,170 70,518 98,499 38,413 60,086 0 0 0 60,086 $.66 $.62
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