-----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, Z6L53tMBc3J6FuGnC7BNDu+eYFw+wQhZnL3q0XzTlt5+1Bzh6dCOeKlbF8VxnE9c Pbu0iUpUbNeYmCTLxnrU1g== 0000950116-94-000107.txt : 19940824 0000950116-94-000107.hdr.sgml : 19940824 ACCESSION NUMBER: 0000950116-94-000107 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940701 FILED AS OF DATE: 19940815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARA GROUP INC 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: 94543913 BUSINESS ADDRESS: STREET 1: THE ARA TOWER STREET 2: 1101 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19107 BUSINESS PHONE: 2152383000 FORMER COMPANY: FORMER CONFORMED NAME: ARA HOLDING CO DATE OF NAME CHANGE: 19880515 10-Q 1 FORM 10-Q (JULY 1, 1994) 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 July 1, 1994 Commission file number 1-8827 ------------ ------ THE ARA GROUP, INC. ------------------------------------------------------------------------ (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) The ARA 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 29, 1994: 2,104,347 Class B common stock outstanding at July 29, 1994: 24,707,847 ------------------------------------------------------------------------ 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE ARA GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands) ASSETS ------
July 1, October 1, 1994 1993 ------- ---------- Current Assets: Cash and cash equivalents $ 38,750 $ 27,801 Receivables 410,163 388,768 Inventories, at lower of cost or market 246,897 249,858 Prepayments and other current assets 88,529 63,381 ---------- ---------- Total current assets 784,339 729,808 ---------- ---------- Property and Equipment, net 663,071 648,379 Goodwill 437,145 446,261 Other Assets 201,668 216,193 ---------- ---------- $2,086,223 $2,040,641 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities: Current maturities of long-term borrowings $ 10,847 $ 15,615 Accounts payable 300,835 329,129 Accrued expenses and other liabilities 376,818 340,722 ---------- ---------- Total current liabilities 688,500 685,466 ---------- ---------- Long-Term Borrowings 1,018,563 1,008,674 Deferred Income Taxes and Other Noncurrent Liabilities 184,255 182,693 Minority Interest 16,810 18,084 Common Stock Subject to Potential Repurchase Under Provisions of Shareholders' Agreement 23,186 21,651 Shareholders' Equity Excluding Common Stock Subject to Repurchase: Class C preferred stock, redemption value $1,000 17,617 34,596 Class A common stock, par value $.01 21 21 Class B common stock, par value $.01 247 243 Earnings retained for use in the business 154,250 104,827 Cumulative translation adjustment 5,960 6,037 Impact of potential repurchase feature of common stock (23,186) (21,651) ---------- ---------- Total 154,909 124,073 ---------- ---------- $2,086,223 $2,040,641 ========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements.
3
THE ARA GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In Thousands, Except Per Share Amounts) For the Three Months Ended For the Nine Months Ended --------------------------------- -------------------------------- July 1, July 2, July 1, July 2, 1994 1993 1994 1993 ------------ ------------ ------------ ------------ Revenues $1,309,085 $1,242,155 $3,858,719 $3,645,493 ------------ ------------ ------------ ------------ Costs and Expenses: Cost of services provided 1,185,363 1,124,615 3,521,319 3,325,596 Depreciation and amortization 34,362 32,986 103,588 97,568 Selling and general corporate expenses 15,947 16,140 49,419 47,858 Other expense (income) - (190) - (4,535) ------------ ------------ ------------ ------------ 1,235,672 1,173,551 3,674,326 3,466,487 ------------ ------------ ------------ ------------ Operating income 73,413 68,604 184,393 179,006 Interest Expense, net 26,352 29,499 84,108 93,561 ------------ ------------ ------------ ------------ Income before income taxes 47,061 39,105 100,285 85,445 Provision for Income Taxes 19,572 16,481 40,462 34,233 Minority Interest 368 344 1,191 1,106 ------------ ------------ ------------ ------------ Income before Cumulative Effect of Change in Accounting for Income Taxes and Extraordinary Item 27,121 22,280 58,632 50,106 Cumulative Effect of Change in Accounting for Income Taxes - - 1,277 - Extraordinary Item due to Early Extinguishment of Debt (net of income taxes) 2,518 902 3,337 5,199 ------------ ------------ ------------ ------------ Net income $ 24,603 $ 21,378 $ 54,018 $ 44,907 ============ ============ ============ ============ Earnings Per Share: Income before cumulative effect of change in accounting for income taxes and extraordinary item $.53 $.44 $1.15 $.98 Net income $.48 $.42 $1.05 $.87 ==== ==== ===== ==== The accompanying notes are an integral part of these condensed consolidated financial statements.
4
THE ARA GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands) For the Nine Months Ended --------------------------------- July 1, July 2, 1994 1993 -------- -------- Cash flows from operating activities: Net income $ 54,018 $ 44,907 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 103,588 97,568 Income taxes deferred (4,099) 240 Minority interest 1,191 1,106 Cumulative effect of accounting change 1,277 - Extraordinary item 3,337 5,199 Changes in noncash working capital (41,417) (21,632) Other operating activities (6,759) 2,992 -------- -------- Net cash provided by operating activities 111,136 130,380 -------- -------- Cash flows from investing activities: Purchases of property and equipment (93,931) (95,125) Disposals of property and equipment 7,705 8,422 Divestiture of certain businesses 6,887 - Sale of investment 6,194 15,945 Acquisition of certain businesses (9,839) (13,449) Other investing activities (755) (5,002) -------- -------- Net cash used in investing activities (83,739) (89,209) -------- -------- Cash flows from financing activities: Proceeds from additional long-term borrowings 87,168 107,170 Payment of long-term borrowings including premiums (84,393) (89,536) Proceeds from issuance of common stock 12,060 9,308 Repurchase of stock (29,305) (42,423) Payment of special dividend - (24,157) Other financing activities (1,978) (3,015) -------- -------- Net cash used in financing activities (16,448) (42,653) -------- -------- Increase (decrease) in cash and cash equivalents 10,949 (1,482) Cash and cash equivalents, beginning of period 27,801 23,785 -------- -------- Cash and cash equivalents, end of period $ 38,750 $ 22,303 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements.
5 THE ARA GROUP, INC. 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 EXPENSE (INCOME): ----------------------- During the first nine months of fiscal 1993, the Company sold all of its remaining 864,000 shares of stock of Living Centers of America, Inc. for $15.9 million. Other expense (income) in fiscal 1993 includes the gain from the sale of this investment of $8.0 million and a $3.5 million addition to the claims and litigation reserve. (3) EARLY EXTINGUISHMENT OF DEBT: ----------------------------- Through July 1, 1994, the Company has redeemed $65.8 million of its 12.5% subordinated debentures ($52.4 million in the fiscal third quarter). As a result of cash premiums paid in connection with the redemption, the Company recorded an extraordinary item of $3.3 million and $2.5 million (net of tax benefit of $2.2 million and $1.7 million) for the nine month and three month periods ended July 1, 1994, respectively. In July, 1994 the Company redeemed the remaining $116.3 million of 12.5% debentures outstanding and will record an extraordinary item for debt extinguishment of $4.3 million (net of tax benefit of $2.9 million) in the fiscal 1994 fourth quarter. The debt extinguishments were financed through additional borrowings under the Company's revolving credit facility. During the first nine months of fiscal 1993, the Company repurchased $100 million of its 10.55% senior notes (issuing $100 million of 8.25% senior notes) and redeemed $12.3 million of its 12.5% subordinated debentures. As a result of cash premiums paid in connection with these transactions the Company recorded an extraordinary item of $5.2 million (net of tax benefit of $3.3 million). (4) REVOLVING CREDIT AGREEMENT -------------------------- Subsequent to July 1, 1994, the revolving credit facility was amended to, among other matters, increase the maximum borrowing limit from $650 million to $800 million, and extend the final maturity to October 2001. (5) CAPITAL STOCK: -------------- During the first nine months of fiscal 1994, pursuant to the ARA Ownership Program, employees purchased 2,555,606 shares or $16.1 million of Class B Common Stock for $12.1 million of cash plus $4.0 million of deferred payment obligations. 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (6) SUPPLEMENTAL CASH FLOW INFORMATION: ----------------------------------- The Company made interest payments of $76.1 million and $80.3 million and income tax payments of $38.4 million and $26.7 million during the first nine months of fiscal 1994 and 1993, respectively. During the first nine months of fiscal 1994, the Company repurchased $17.0 million of its Preferred Stock and $24.3 million of its Common Stock, issuing $11.9 million in subordinated installment notes as partial consideration, and contributed $3.5 million of Class A Common Stock to its employee benefit plans. (7) ARA SERVICES, INC. AND SUBSIDIARIES: ------------------------------------ The following financial information has been summarized from the separate consolidated financial statements of ARA Services, Inc. (a wholly owned subsidiary of The ARA Group, Inc.) and the subsidiaries which it currently owns. ARA 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 The ARA Group, Inc.
For the Three Months Ended For the Nine Months Ended -------------------------- ------------------------- July 1, July 2, July 1, July 2, 1994 1993 1994 1993 ---- ---- ---- ---- (in millions) Revenues $681.8 $643.7 $2,105.0 $1,992.1 Cost of services provided 642.8 607.8 1,978.3 1,870.9 Income before cumulative effect of change in accounting for income taxes and extraordinary item 2.1 1.5 10.3 10.7 Cumulative effect of change in accounting for income taxes - - 0.3 - Extraordinary item - - - 4.3 Net income 2.1 1.5 10.0 6.4
July 1, October 1, 1994 1993 ------ ---------- (in millions) Current assets $ 331.6 $ 339.9 Noncurrent assets 1,259.2 1,221.2 Current liabilities 365.9 364.6 Noncurrent liabilities 1,147.1 1,126.1 Minority interest 16.8 18.1 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS - - --------------------- Overview - - -------- Revenues of $1.3 billion for the third quarter and $3.9 billion for the nine month period increased 5% and 6%, respectively, over the comparable prior year periods. Operating income for the third quarter was 7% higher than the prior year quarter. Operating income for the nine months increased 3% over the comparable prior year period. Excluding fiscal 1993 "other income" of $4.5 million, operating income increased 6% for the nine months. (See note 2 to the condensed consolidated financial statements). The Company's operating margin for the nine months of both fiscal 1994 and 1993, was 4.8% Interest expense for the three and nine month periods decreased 11% and 10%, respectively, compared to the prior year due primarily to the favorable impact of refinancing certain of the Company's long-term notes and subordinated debentures. Income before cumulative effect of change in accounting for income taxes and extraordinary item for the third quarter and nine months increased 22% and 17%, respectively. Net income for the nine months includes a $1.3 million cumulative effect adjustment for a change in method of accounting for income taxes. Extraordinary items attributed to the early extinguishment of debt equaled $2.5 million and $0.9 million for the third quarter of fiscal 1994 and 1993, respectively, and $3.3 million and $5.2 million for the nine months of fiscal 1994 and 1993, respectively See note 3 to the condensed consolidated financial statements. Segment Results - - --------------- Food, Leisure and Support Services segment revenues increased 4% and 5%, respectively, for the three and nine month periods due to new domestic food service accounts, new arena and convention center contracts and the September 1993 acquisition of a Spanish food service company, partially offset by a 1% revenue decline due to the unfavorable effect of currency exchange rates. Uniform Services segment revenues increased 11% for the three and nine months reflecting increased volume from uniform rental operations and WearGuard. Health and Education Services segment revenues increased 8% for the three and nine month periods due primarily to new contracts and higher base business volume at Spectrum Healthcare and continued enrollment growth at Children's World. The Distributive Services segment revenues increased approximately 2% for the three and nine month periods due to volume increases in certain geographical areas. Food, Leisure and Support Services segment operating income increased 11% and 8% for the three and nine month periods, respectively, due to higher revenues plus the positive effect of lower operating costs at certain recreational facilities. Uniform Services segment operating income increased 6% and 8% for the respective three and nine month periods primarily due to increased sales volume partially offset by the impact of somewhat higher operating and marketing costs. Health and Education segment operating income increased 13% for the third quarter and 9% for the nine months due primarily to higher revenues. Distributive Services segment third quarter operating income was about equal to the prior year due to higher operating costs offsetting the effect of the revenue growth. Operating income for this segment increased 3% for the nine month period due to higher revenues combined with first quarter operating efficiencies. On August 12, 1994, the Major League Baseball Players Association went on strike resulting in an interruption at the stadiums where the Company provides food service. Due to the uncertainty about the length of the strike at this time, the Company cannot determine the financial impact. 8 FINANCIAL CONDITION - - ------------------- During the first nine months of fiscal 1994, cash flow generated from operating activities principally financed seasonal working capital requirements, capital expenditures and stock repurchases. Indebtedness increased $5 million during the nine months ended July 1, 1994. During July 1994, the Company amended its revolving credit agreement and redeemed its remaining $116.3 million of 12.5% debentures - see notes 3 and 4 to the condensed consolidated financial statements. The Company currently has approximately $315 million of unused committed credit (after the July 1994 redemption of the 12.5% debentures) available under its $800 million revolving credit facility. The Company has announced plans for a tender offer for the remaining minority interest of its Canadian subsidiary. The tender offer is expected to be completed by calendar yearend and the investment will approximate $30 million. 9 PART II - OTHER INFORMATION Items 1 through 4 are not applicable. - - ------------------------------------- Item 5: None. - - ------- Item 6: Exhibits and Reports on Form 8-K - - ------- (a) (1) Exhibit 11 - Computation of Fully Diluted Earnings Per Share (2) Exhibit 23 - Consent of Independent Securities Appraiser (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. THE ARA GROUP, INC. s/Alan J. Griffith --------------------------------------- Alan J. Griffith August 15, 1994 Controller and Chief Accounting Officer EX-11 2 EXHIBIT 11 (EARNINGS PER SHARE) 11
EXHIBIT 11 THE ARA GROUP, INC. AND SUBSIDIARIES COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (1) (Unaudited) (In Thousands, except per share data) Three Months Ended Nine Months Ended ---------------------------- ----------------------------- July 1, July 2, July 1, July 2, 1994 1993 1994 1993 ------- ------- ------- ------- Earnings: Net Income $24,603 $21,378 $54,018 $44,907 Preferred stock dividends (266) (366) (1,077) (366) ------- ------- ------- ------- Earnings applicable to common stock $24,337 $21,012 $52,941 $44,541 ======= ======= ======= ======= Shares: Weighted average number of common shares outstanding (2) 47,444 45,927 46,727 45,732 Impact of potential exercise opportunities under the ARA Ownership Program 3,131 3,941 3,476 5,187 ------ ------ ------ ------ Total common and common equivalent shares 50,575 49,868 50,203 50,919 ====== ====== ====== ====== Fully diluted earnings per common and common equivalent share $.48 $.42 $1.05 $.87 ==== ==== ===== ==== (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-23 3 EXHIBIT 23 (CONSENT OF APPRAISERS) 12 EXHIBIT 23 CONSENT OF INDEPENDENT SECURITIES APPRAISERS As independent securities appraisers, we hereby consent to the inclusion of our appraisal valuation of the ARA Class B Common Stock and to the references to our firm and to such appraisal in the Company's previously filed Registration Statements on Form S-8, Registration Nos. 33-11818, 33- 30879, 33-33329 and 33-44002. Houlihan, Lokey, Howard & Zukin 1650 Tysons Boulevard, Suite 565 McLean, VA 22102 May 19, 1994 By: s/Louis A. Paone -------------------------------- Louis A. Paone Managing Director -----END PRIVACY-ENHANCED MESSAGE-----