-----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, Qjo5FzVrvC2cJsilXosxw8pW7z+5a1/S8gnYNyZd4CxINl97S5mYGAuKYpC7+wv6 yspyBJNfAFi2abejLNm7XA== 0000950116-97-000218.txt : 19970221 0000950116-97-000218.hdr.sgml : 19970221 ACCESSION NUMBER: 0000950116-97-000218 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961227 FILED AS OF DATE: 19970210 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: 97522554 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 December 27, 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) The 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 24, 1997: 2,060,934 Class B common stock outstanding at January 24, 1997: 21,748,763 - -------------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands)
ASSETS ------ December 27, September 27, 1996 1996 ------------ ------------- Current Assets: Cash and cash equivalents $ 22,545 $ 25,283 Receivables 622,256 576,447 Inventories, at lower of cost or market 349,043 316,043 Prepayments and other current assets 139,474 67,977 ----------- ----------- Total current assets 1,133,318 985,750 ----------- ----------- Property and Equipment, net 828,654 824,635 Goodwill 675,100 643,880 Other Assets 299,424 376,505 ----------- ----------- $ 2,936,496 $ 2,830,770 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities: Current maturities of long-term borrowings $ 28,443 $ 26,041 Accounts payable 414,226 496,040 Accrued expenses and other liabilities 499,648 441,760 ----------- ----------- Total current liabilities 942,317 963,841 ----------- ----------- Long-Term Borrowings 1,436,515 1,321,865 Deferred Income Taxes and Other Noncurrent Liabilities 239,081 230,249 Common Stock Subject to Potential Repurchase Under Provisions of Shareholders' Agreement 19,193 18,614 Shareholders' Equity Excluding Common Stock Subject to Repurchase: Class A common stock, par value $.01 19 20 Class B common stock, par value $.01 218 227 Earnings retained for use in the business 313,380 309,437 Cumulative translation adjustment 4,966 5,131 Impact of potential repurchase feature of common stock (19,193) (18,614) ----------- ----------- Total 299,390 296,201 ----------- ----------- $ 2,936,496 $ 2,830,770 =========== ===========
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 27, December 29, 1996 1995 ------------ ------------ Revenues $ 1,686,751 $ 1,549,374 ----------- ----------- Costs and Expenses: Cost of services provided 1,540,226 1,413,632 Depreciation and amortization 48,606 44,693 Selling and general corporate expenses 21,190 22,025 Other expense (income) -- (2,850) ----------- ----------- 1,610,022 1,477,500 ----------- ----------- Operating income 76,729 71,874 Interest Expense, net 30,484 30,252 ----------- ----------- Income before income taxes 46,245 41,622 Provision for Income Taxes 18,590 16,633 ----------- ----------- Net income $ 27,655 $ 24,989 =========== =========== Earnings Per Share $ .61 $ .52 =========== =========== 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 27, December 29, 1996 1995 ------------ ------------ Cash flows from operating activities: Net income $ 27,655 $ 24,989 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 48,606 44,693 Income taxes deferred (1,619) (5,961) Changes in noncash working capital (142,276) (75,890) Other operating activities (1,725) (671) --------- --------- Net cash used in operating activities (69,359) (12,840) --------- --------- Cash flows from investing activities: Purchases of property and equipment (32,590) (32,658) Disposals of property and equipment 3,330 3,522 Divestiture of certain businesses -- 50,823 Acquisition of certain businesses (4,093) (5,471) Other investing activities (1,255) (2,649) --------- --------- Net cash provided by (used in) investing activities (34,608) 13,567 --------- --------- Cash flows from financing activities: Proceeds from additional long-term borrowings 141,443 16,125 Payment of long-term borrowings (24,567) (1,483) Repurchase of stock (16,335) (18,350) Other financing activities 688 27 --------- --------- Net cash provided by (used in) financing activities 101,229 (3,681) --------- --------- Decrease in cash and cash equivalents (2,738) (2,954) Cash and cash equivalents, beginning of period 25,283 23,082 --------- --------- Cash and cash equivalents, end of period $ 22,545 $ 20,128 ========= ========= 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) OTHER INCOME: ------------- In 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 statement of income. The divested operations were not material to the Company's consolidated revenues or operating income. (3) CAPITAL STOCK: -------------- During the first quarter of fiscal 1997, pursuant to the ARAMARK Ownership Program, employees purchased 227,262 shares or $2.9 million of Class B Common Stock for $2.3 million cash plus $0.6 million of deferred payment obligations. (4) SUPPLEMENTAL CASH FLOW INFORMATION: ----------------------------------- The Company made interest payments of $27.7 million and $28.8 million and income tax payments of $5.5 million and $8.0 million during the first quarter of fiscal 1997 and 1996, respectively. During the first quarter of fiscal 1997, the Company purchased $18.7 million of its Class B Common Stock, issuing $10.3 million in subordinated installment notes as partial consideration. (5) SUBSEQUENT EVENT: ----------------- In January 1997, the Company sold an approximate 83% interest in its business which provides specialized services for hospital emergency rooms and other specialties and medical services to correctional institutions. In fiscal 1996, this business had approximately $500 million in annual revenues and a normalized operating margin of approximately 4%. The gain from the sale, which will be finalized and recognized in the second quarter of fiscal 1997, will increase net income by approximately $70 million. 4 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 -------------------------------------- December 27, December 29, 1996 1995 ------------ ------------ (in millions) Revenues $ 903.3 $833.3 Cost of services provided 847.8 785.7 Net income 9.0 2.2 December 27, September 27, 1996 1996 ------------ ------------ (in millions) Current assets $ 460.0 $ 395.2 Noncurrent assets 1,725.7 1,630.0 Current liabilities 531.0 495.1 Noncurrent liabilities 1,535.4 1,419.6 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS - --------------------- Overview - -------- Revenues of $1.7 billion for the first quarter of fiscal 1997 were 9% higher than the prior year period. First quarter operating income of $76.7 million was $7.7 million or 11% higher than the prior year period (excluding other income of $2.9 million in fiscal 1996 - see note 2 to the condensed consolidated financial statements), with increased earnings in the Food and Support Services, Uniform Services and Health and Education segments being partially offset by a significant decline in Distributive segment earnings. First quarter interest expense was equal with the prior year period, as the impact of increased debt levels to finance acquisitions and working capital requirements was offset by lower interest rates. Segment Results - --------------- Revenues - Food and Support Services segment revenues increased 8% due to new accounts and increased volume, primarily in the United States food businesses. Uniform Services segment revenues increased 12% due to the impact of recent acquisitions and increased volume in both the uniform rental and direct marketing businesses. Health and Education segment revenues increased 15% due to new contracts at correctional institutions in the healthcare business and enrollment growth, pricing and new locations at Children's World. Distributive segment revenues decreased 3% from the prior year period due to a decline in same store sales, partially offset by the impact of recent acquisitions. Operating Income, Before Other Income - Food and Support Services, Uniform Services and Health and Education segment operating income increased 21%, 15% and 18%, respectively, due to the increased revenues noted above plus effective control of operating costs. The Distributive segment incurred an operating loss of $2.2 million, a decrease of approximately $8 million from the prior year period. Results for this segment continue to be severely impacted by higher operating expenses due to costs of servicing new customers and reduced margins and volume resulting from increased competition and consolidation in the magazine wholesale distribution industry. The Company continues to believe it is well positioned to take advantage of the current competitive conditions in this industry. However, the future impact of these changes is uncertain at this time. The Company projects that fiscal 1997 operating income in the Distributive segment will continue to be significantly below historical levels achieved prior to fiscal 1996. FINANCIAL CONDITION - ------------------- The Company's indebtedness increased $117.1 million in the first three months of fiscal 1997, principally to finance seasonal working capital needs and capital additions. In November 1996, the Company issued $125 million of 7.10% senior notes due December 2006. The net proceeds from the note offering were used to repay borrowings under the $1 billion credit facility. The Company currently has approximately $575 million of unused credit availability under its credit facilities, which management believes, along with cash flows from operations, is sufficient to fund operating requirements. 6 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 27 - Financial Data Schedule (b) None 7 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 10, 1997 s/Alan J. Griffith ------------------------------- Alan J. Griffith Vice President, Controller and Chief Accounting Officer 8 EX-11 2 EXHIBIT 11 EXHIBIT 11 ARAMARK CORPORATION AND SUBSIDIARIES COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (Unaudited) (In thousands, except per share data) Three Months Ended ----------------------------- December 27, December 29, 1996 1995 ------------ ------------ Earnings: Net Income $ 27,655 $ 24,989 Preferred stock dividends -- (249) -------- -------- Earnings applicable to common stock $ 27,655 $ 24,740 ======== ======== Shares: Weighted average number of common shares outstanding (1) 42,344 44,924 Impact of potential exercise opportunities under the ARAMARK Ownership Plan 2,712 2,702 -------- -------- Total common and common equivalent shares 45,056 47,626 ======== ======== Fully diluted earnings per common share (2) $ .61 $ .52 ======== ======== (1) Includes Class B plus Class A Common Shares stated on a Class B Common Share Equivalent Basis. (2) Primary and fully diluted earnings per share are approximately the same. EX-27 3 FINANCIAL DATA SCHEDULE
5 0000757523 ARAMARK CORPORATION & SUBSIDIARIES 1,000 3-MOS OCT-03-1997 SEP-28-1996 DEC-27-1996 22,545 0 622,256 20,345 349,043 1,133,318 1,615,212 786,558 2,936,496 942,317 1,436,515 0 0 237 299,153 2,936,496 0 1,686,751 0 1,540,226 48,606 2,826 30,484 46,245 18,590 27,655 0 0 0 27,655 0 0.61
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