FILED PURSUANT TO RULE 424(B)(3)
File Number 333-144884
ARAMARK CORPORATION
SUPPLEMENT NO. 1 TO
MARKET MAKING PROSPECTUS DATED
JANUARY 4, 2010
THE DATE OF THIS SUPPLEMENT IS JANUARY 15, 2010
ON JANUARY 13, 2010, ARAMARK CORPORATION
FILED THE ATTACHED FORM 8-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 30, 2009
ARAMARK CORPORATION
(Exact name of registrant as specified in charter)
| Delaware | 001-04762 | 95-2051630 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
1101 Market Street Philadelphia, Pennsylvania | 19107 | |
| (Address of Principal Executive Offices) | Zip Code |
Registrant’s telephone, including area code: 215-238-3000
N/A
(Former name and former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ARAMARK Corporation (the “Registrant”) filed a Form 8-K on November 4, 2009 (the “November Form 8-K”) to report the acquisition of the facilities management and property management businesses of Veris plc (“Subsidiaries of ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited”) by ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited, subsidiaries of the Registrant. The purchase price was approximately €50.2 million in cash (the purchase price that was reported in the November Form 8-K was €50.8 million—the purchase price changed due to certain adjustments mandated by the Share Purchase Agreement). This amendment is being filed to amend and supplement Item 9.01 of the November Form 8-K to include the financial statements and pro forma financial information required by parts (a) and (b) of Item 9.01 of Form 8-K.
Except as described above, all other information in and exhibits to the November Form 8-K remain unchanged.
| Item 9.01 | Financial Statements and Exhibits |
| (a) | Financial Statements of Businesses Acquired. |
Attached hereto as Exhibit 99.1, and incorporated herein by reference, are the audited combined financial statements of Subsidiaries of ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited as of and for the ten month period ended October 31, 2009.
| (b) | Pro Forma Financial Information. |
Attached hereto as Exhibit 99.2, and incorporated herein by reference, is the required unaudited pro forma condensed combined financial information, which was developed by applying pro forma adjustments to the separate historical audited consolidated financial statements of the Registrant included in its fiscal 2009 Form 10-K.
| (d) | Exhibits |
Exhibit No. | Description | |
10.1 | Share Purchase Agreement among Veris plc, ARAMARK Ireland Holdings Limited, ARAMARK Investments Limited and ARAMARK Corporation dated October 2009 (incorporated by reference to Exhibit 10.1 to ARAMARK Corporation’s Current Report on Form 8-K filed with the SEC on November 4, 2009, pursuant to the Exchange Act (file number 001-04762)) | |
23.1 | Consent of Independent Registered Public Accounting Firm | |
99.1 | Combined Financial Statements of Subsidiaries of ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited | |
99.2 | Unaudited Pro Forma Condensed Combined Financial Information | |
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 hereunto duly authorized.
| ARAMARK CORPORATION | ||||
| Date: January 13, 2010 | By: | /S/ L. FREDERICK SUTHERLAND | ||
| Name: | L. Frederick Sutherland | |||
| Title: | Executive Vice President and Chief Financial Officer | |||
EXHIBIT INDEX
Exhibit No. | Description | |
10.1 | Share Purchase Agreement among Veris plc, ARAMARK Ireland Holdings Limited, ARAMARK Investments Limited and ARAMARK Corporation dated October 2009 (incorporated by reference to Exhibit 10.1 to ARAMARK Corporation’s Current Report on Form 8-K filed with the SEC on November 4, 2009, pursuant to the Exchange Act (file number 001-04762)) | |
23.1 | Consent of Independent Registered Public Accounting Firm | |
99.1 | Combined Financial Statements of Subsidiaries of ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited | |
99.2 | Unaudited Pro Forma Condensed Combined Financial Information | |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
ARAMARK Corporation:
We consent to the incorporation by reference in the registration statements (Nos. 333-143232 and 333-143233) on Form S-8 of ARAMARK Corporation and subsidiaries of our report dated January 13, 2010, with respect to the combined balance sheet of the subsidiary companies of ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited as of October 31, 2009 and the related profit and loss account, statement of total recognised gains and losses and cash flow statement for the 10 month period ended October 31, 2009, which report appears in the Form 8-K/A of ARAMARK Corporation filed on January 13, 2010.
/s/ KPMG
Dublin, Ireland
January 13, 2010
Exhibit 99.1
Subsidiaries of ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited
Non-statutory combined financial statements
10 month period ended 31 October 2009
| Contents | Page | |
Independent auditor’s report | 2 | |
Statement of accounting policies | 3 | |
Profit and loss account | 6 | |
Statement of total recognised gains and losses | 7 | |
Balance sheet | 8 | |
Cash flow statement | 9 | |
Notes forming part of the combined financial statements | 10 | |
Independent Auditor’s Report
To the directors of ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited
We have audited the accompanying combined balance sheet of the subsidiaries of ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited (as defined in note 1 therein) as at October 31, 2009 and the related Profit and Loss account, Statement of Total Recognised Gains and Losses and Cash Flow Statement for the 10 month period then ended. These combined financial statements are the responsibility of the Directors. Our responsibility is to express an opinion thereon, based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the companies as of October 31, 2009 and the results of their operations and cash flows for the 10 month period then ended in conformity with Financial Reporting Standards as issued by the Accounting Standards Board, and as promulgated by Chartered Accountants Ireland (Irish GAAP).
| /s/KPMG |
| Dublin, Ireland |
| January 13, 2010 |
2
Group of certain ARAMARK subsidiaries
Statement of accounting policies
for the period ended 31 October 2009
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group’s non-statutory combined financial statements.
Basis of preparation
The non-statutory combined financial statements are prepared in euro in accordance with generally accepted accounting principles in Ireland under the historical cost convention and comply with financial reporting standards of the Accounting Standards Board, as promulgated by Chartered Accountants Ireland.
The Group non-statutory combined financial statements combine the financial statements of the entities listed in note 1 as at 31 October 2009, as set out in that note.
Turnover
Turnover is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts and value added tax. Turnover comprises fees for building consultancy, property management fees, and commissions on other services provided. Turnover is recognised as services are provided.
Turnover is accrued for services provided by the accounting date but not invoiced and deferred if services are invoiced but not fully provided by the accounting date. Turnover on long term projects and on-going management is spread over the period in which the services are being provided.
Where the Group acts as principal in the provision of these services, turnover is recognised together with a corresponding cost of sale. Where the Group acts as agent in the provision of these services, the turnover recognised amounts to the net fee earned.
Foreign currencies
Transactions denominated in foreign currencies are recorded in a company’s functional currency at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates of exchange prevailing at that date. Any gains or losses arising from a change in exchange rates subsequent to the date of the transaction are dealt with in the profit and loss account.
For the purposes of the combination, the closing rate/ net investment method is used, under which translation gains or losses are included in the profit and loss reserve.
3
Group of certain ARAMARK subsidiaries
Statement of accounting policies(continued)
for the period ended 31 October 2009
Taxation
Current tax is provided on the group’s taxable profits, at amounts expected to be paid using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date. Provision is made at the rates expected to apply when the timing differences reverse. Timing differences are differences between the group’s taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in taxable profits in periods different from those in which they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Leases
Tangible fixed assets acquired under finance leases are included in the balance sheet at their equivalent capital value and are depreciated over the shorter of the lease term and their useful lives. The interest element of these obligations is charged to the profit and loss account over the relevant period. The capital element of the future payments is treated as a liability.
Rental payments under operating leases are charged to the profit and loss account on a straight line basis over the lease term.
Pensions
Group companies operate a defined benefit pension scheme and multiple defined contribution schemes. The assets of each scheme are held separately from those of the company in independently administered funds. The amount charged against profits for the defined contribution schemes represent the contributions payable in respect of the financial year.
For the defined benefit scheme, the amount charged to operating profit is the cost of accruing pension benefits promised to employees over the year plus any benefit improvements granted to members by the company during the year. Other finance charges/income in the profit and loss account include a credit equivalent to the company’s expected return on the pension scheme’s assets over the year, offset by a charge equal to the expected increase in the scheme’s liabilities over the year. The difference between the market value of the scheme’s assets and the present value of the scheme’s liabilities is disclosed as an asset/liability on the balance sheet, net of deferred tax (to the extent that it is recoverable). Any difference between the expected return on assets and that actually achieved, and any changes in the liabilities over the year due to changes in assumptions or experience within the scheme, are recognised in the statement of total recognised gains and losses.
Pension scheme assets are measured using market values. For quoted securities the current bid price is taken as market value. Pension scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability.
4
Group of certain ARAMARK subsidiaries
Statement of accounting policies(continued)
for the period ended 31 October 2009
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and provision for impairment. Depreciation is calculated to write off the cost of tangible fixed assets on a straight line basis over their expected useful lives using the following rates:
Fixtures and fittings | 10 | % | |
Computer equipment | 33 | % | |
Motor vehicles | 20 | % |
Intangible assets
Intangible fixed assets are stated at cost less accumulated amortisation and provision for impairment.
Amortisation is calculated to write off the cost of intangible fixed assets on a straight line basis over their expected useful lives using the following rates:
Computer software | 10 | % |
Financial fixed assets
Investments in subsidiaries are shown at cost less provision for impairment.
Client monies
Certain companies in the Group have operational control over client monies to facilitate the provision of property services. These monies belong to clients. These monies are not recognised on the balance sheet but the amount thereof is disclosed in a note to the non-statutory combined financial statements.
5
Group of certain ARAMARK subsidiaries
Profit and loss account
for the period ended 31 October 2009
| Notes | 10 month € | ||||
Turnover - continuing operations | 50,736,641 | ||||
Cost of sales | (38,038,524 | ) | |||
Gross profit | 12,698,117 | ||||
Selling, general and administrative expenses | (10,269,410 | ) | |||
Operating profit - continuing operations | 2,428,707 | ||||
Gain on disposal of tangible fixed assets | 2,028 | ||||
Profit on ordinary activities before interest | 2,430,735 | ||||
Interest receivable and similar income | 2 | 81,581 | |||
Interest payable and similar charges | 3 | (808,990 | ) | ||
Profit on ordinary activities before taxation | 1,703,326 | ||||
Tax on profit on ordinary activities | 4 | (306,197 | ) | ||
Profit for the financial period | 1,397,129 | ||||
6
Group of certain ARAMARK subsidiaries
Statement of total recognised gains and losses
for the period ended 31 October 2009
| Notes | 10 month € | ||||
Profit for the financial period | 1,397,129 | ||||
Actual gain on post employment pension schemes | 14 | 550,000 | |||
Related deferred tax liability | (65,125 | ) | |||
Currency translation differences | 155,396 | ||||
Total recognised gains for the financial period | 12 | 2,037,400 | |||
7
Group of certain ARAMARK subsidiaries
Balance sheet
as at 31 October 2009
| Notes | 31 October € | ||||
Fixed assets | |||||
Intangible assets | 5 | 9,275 | |||
Tangible assets | 6 | 674,180 | |||
Financial assets | 7 | 14,044,689 | |||
| 14,728,144 | |||||
Current assets | |||||
Stocks | 8 | 261,790 | |||
Debtors | 9 | 11,878,572 | |||
Cash at bank and in hand | 6,005,149 | ||||
| 18,145,511 | |||||
Creditors:amounts falling due within one year | 10 | (14,405,901 | ) | ||
Net current assets | 3,739,610 | ||||
Total assets less current liabilities | 18,467,754 | ||||
Creditors:amounts falling due after more than one year | 10 | (44,288 | ) | ||
Net assets before post employment liabilities | 18,423,466 | ||||
Post employment liabilities (net of deferred taxation) | 14 | (678,125 | ) | ||
Net assets | 17,745,341 | ||||
Capital and reserves | |||||
Called up share capital | 11 | 337,023 | |||
Capital conversion reserve fund | 308 | ||||
Share premium | 216,585 | ||||
Capital contribution | 11 | 9,618,477 | |||
Profit and loss account | 12 | 7,572,948 | |||
Shareholders’ funds | 12 | 17,745,341 | |||
8
Group of certain ARAMARK subsidiaries
Cash flow statement
for the period ended 31 October 2009
| Notes | 10 month € | ||||
Net cash inflow from operating activities | 13 | 1,742,640 | |||
Returns on investments and servicing of finance | 13 | (675,593 | ) | ||
Capital expenditure and financial investment | 13 | (61,708 | ) | ||
Taxation | (613,507 | ) | |||
Net cash inflow before financing | 391,832 | ||||
Financing | 13 | (947,950 | ) | ||
Decrease in cash | (556,118 | ) | |||
Cash at bank and in hand, start of period | 6,561,267 | ||||
Cash at bank and in hand, end of period | 6,005,149 | ||||
9
Group of certain ARAMARK subsidiaries
Notes forming part of the combined financial statements
| 1 | Basis of preparation, ownership and operations |
Background, ownership and operations
Up to 30 October 2009, the various entities listed below were wholly owned subsidiaries of Veris plc, a listed Irish entity. Effective 30 October 2009, the entities were acquired by ARAMARK Corporation, via two intermediate holding companies : (i) ARAMARK Ireland Holdings Limited, which acquired the Irish-registered companies, and (ii) ARAMARK Investments Limited, which acquired the UK-registered companies. The acquired companies, which are primarily involved in the provision of property management and facilities management services in Ireland and the UK, are as follows:
| Name | Activity | |
| Registered in Ireland | ||
Irish Estates (Management) Limited | Property management | |
Irish Estates (Facilities Management) Limited | Facilities management | |
Vector Workplace and Facility Management Limited | Facilities management | |
Spokesoft Technologies Limited | Software development | |
Glenrye Properties Services Limited | Property management | |
Premier Management Company (Dublin) Limited | Property management | |
| Registered in the UK | ||
Veris UK Limited | Investment holding | |
Orange Environmental Building Services Limited | Facilities management | |
Orange Support Services Limited | Facilities management | |
Vector Environmental Services Limited | Environmental and process engineering consultancy | |
Prior to the disposal of its subsidiaries, Veris plc undertook a number of restructuring steps, all of which have been reflected in the financial statements for the 10 month period ended 31 October 2009, as follows:
| • | Contributed capital to Veris UK Limited to enable it to discharge bank loans in the amount of €9.6 million. |
| • | Charged management charges to certain of the subsidiaries being disposed of. |
| • | Made tax group relief elections between certain of the subsidiaries being disposed of. |
| • | Paid a non-cash dividend to Veris plc from one of the subsidiaries being disposed of. |
| • | Cleared all intragroup balances between Veris plc and the subsidiaries being disposed of. |
10
Group of certain ARAMARK subsidiaries
Notes(continued)
| 1 | Basis of preparation, ownership and operations(continued) |
Basis of preparation
These non-statutory combined financial statements have been prepared in order to facilitate reporting by ARAMARK Corporation in the U.S. The principles which have been followed in their preparation are as follows:
| • | Generally Accepted Accounting Principles in Ireland (“Irish GAAP”) have been followed, as summarised in the Statement of Accounting Policies. |
| • | While all of the entities are now, ultimately, subsidiaries of ARAMARK Corporation, the entities together do not form a group for consolidation purposes, and consolidated financial statements were historically prepared only at the Veris plc level. Accordingly, these financial statements have been prepared on a combined basis. All balance sheet captions and other equity balances have been aggregated. |
| • | As these are special purpose financial statements, comparative information has not been included. |
| • | The results and balance sheets of sterling denominated entities have been translated at average and period rates respectively, both of which were €1 = Stg£0.90. |
11
Group of certain ARAMARK subsidiaries
Notes(continued)
| 2 | Interest receivable and similar income |
10 month € | |||
Bank interest received | 140,581 | ||
Other finance income | 109,000 | ||
Interest on post employment scheme liabilities | (168,000 | ) | |
| 81,581 | |||
| 3 | Interest payable and similar charges |
10 month € | |||
Interest payable on bank overdraft | 402 | ||
Interest on bank loans, repayable within five years | 803,202 | ||
Finance lease interest | 12,570 | ||
Foreign exchange gains, net | (7,184 | ) | |
| 808,990 | |||
12
Group of certain ARAMARK subsidiaries
Notes(continued)
| 4 | Tax on profit on ordinary activities |
10 month period ended € | ||
Corporation tax at 12.5% | 276,746 | |
Underprovision in prior period | 17,836 | |
| 294,582 | ||
Deferred tax | 11,615 | |
| 306,197 | ||
The effective rate of Irish corporation tax assessed for the year is different from the standard rate of corporation tax. The differences are explained below:
10 month period ended 31 October 2009 € | |||
Profit on ordinary activities before taxation | 1,703,326 | ||
Profit on ordinary activities at corporation tax rate in Ireland of 12.5% | 212,916 | ||
Effects of: | |||
Capital allowances less than depreciation | 10,356 | ||
Expenses allowable for tax purposes | (7,475 | ) | |
Income tax at higher rate | 6,664 | ||
Income tax withheld | (12,720 | ) | |
Losses not utilised in the period | 3,957 | ||
Group relief surrendered | 29,039 | ||
Other differences | 34,009 | ||
Adjustment in respect of previous periods | 17,836 | ||
Total current tax | 294,582 | ||
13
Group of certain ARAMARK subsidiaries
Notes(continued)
| 5 | Intangible assets - software |
31 October € | ||
Cost | ||
At beginning of period | 111,411 | |
Additions | — | |
At end of period | 111,411 | |
Amortisation | ||
At beginning of period | 93,410 | |
Amortisation in period | 8,726 | |
At end of period | 102,136 | |
Net book value | 9,275 | |
14
Group of certain ARAMARK subsidiaries
Notes(continued)
| 6 | Tangible fixed assets |
| Group | Fixtures and fittings € | Computer equipment € | Motor vehicles € | Total € | ||||||||
Cost | ||||||||||||
At beginning of period | 1,228,134 | 643,956 | 1,063,295 | 2,935,385 | ||||||||
Additions | 12,383 | 13,740 | 44,070 | 70,193 | ||||||||
Disposals | (9,730 | ) | (8,500 | ) | (27,954 | ) | (46,184 | ) | ||||
Translation adjustment | — | — | 25,327 | 25,327 | ||||||||
At end of period | 1,230,787 | 649,196 | 1,104,738 | 2,984,721 | ||||||||
Depreciation | ||||||||||||
At beginning of period | 997,105 | 555,295 | 553,212 | 2,105,612 | ||||||||
Charge for period | 51,554 | 44,804 | 144,416 | 240,774 | ||||||||
Disposals | (9,730 | ) | (8,028 | ) | (21,969 | ) | (39,727 | ) | ||||
Translation adjustment | — | — | 3,882 | 3,882 | ||||||||
At end of period | 1,038,929 | 592,071 | 679,541 | 2,310,541 | ||||||||
Net book value | ||||||||||||
At 31 October 2009 | 191,858 | 57,125 | 425,197 | 674,180 | ||||||||
| 7 | Financial fixed assets – Investments in subsidiaries |
31 October 2009 € | ||
Balance, start of period | 13,270,572 | |
Currency translation difference | 774,117 | |
Balance, end of period | 14,044,689 | |
One of the group companies, Veris UK Limited, was not required to prepare consolidated financial statements for it and its subsidiaries (Orange Environmental Building Services Limited and Orange Support Services Limited) as it availed of the exemption provided by the preparation by Veris plc of consolidated financial statements. Accordingly its investment in subsidiaries is shown at cost.
15
Group of certain ARAMARK subsidiaries
Notes(continued)
| 8 | Stocks |
31 October 2009 € | ||
Work in progress | 45,343 | |
Consumables | 216,447 | |
| 261,790 | ||
The replacement cost of stocks at 31 October 2009 did not differ significantly from the amounts shown above.
| 9 | Debtors |
31 October 2009 € | ||
Amounts falling due within one year | ||
Trade debtors | 9,785,086 | |
Prepayments | 1,479,057 | |
VAT receivable | 296,585 | |
Other debtors and accrued income | 271,791 | |
Deferred tax asset (i) | 46,053 | |
| 11,878,572 | ||
(i) The movement on the deferred tax asset was as follows: | ||
At beginning of period | 57,668 | ||
Charge for the period | (11,615 | ) | |
At end of period | 46,053 | ||
16
Group of certain ARAMARK subsidiaries
Notes(continued)
| 10 | Creditors |
Amounts falling due within one year
31 October € | ||
Trade creditors | 8,954,180 | |
Deferred income | 2,122,791 | |
PAYE/PRSI | 440,239 | |
Corporation tax | 185,234 | |
VAT payable | 277,701 | |
Accruals and other creditors | 2,357,326 | |
Finance lease obligations | 68,430 | |
| 14,405,901 | ||
Amounts falling due after more than one year
31 October € | ||
Finance lease obligations | 44,288 | |
| 11 | Capital and reserves |
As set out in Note 1, the share capital, capital conversion reserve fund and share premium balances have been arrived at by aggregating those balances in each of the subsidiary entities, except that the share capital of a company owned by another group company has been eliminated.
During the 10 month period ended 31 October 2009, Veris plc contributed €9.6 million in capital to Veris UK Limited (Note 1).
The profit and loss account balance represents the aggregation of the profit and loss account balances of each of the subsidiary entities.
17
Group of certain ARAMARK subsidiaries
Notes(continued)
| 12 | Reconciliation of movement on profit and loss account and shareholders’ funds |
Profit and loss account | Shareholders’ funds | |||||
10 month period ended 31 October 2009 € |
10 month period ended 31 October 2009 € | |||||
Balance, beginning of period | 6,532,352 | 7,086,268 | ||||
Total recognised gains and losses for the financial period | 2,037,400 | 2,037,400 | ||||
Capital contribution from Veris plc | — | 9,618,477 | ||||
Non-cash distribution (i) | (996,804 | ) | (996,804 | ) | ||
Balance, end of period | 7,572,948 | 17,745,341 | ||||
(i) During the period, a non-cash dividend was paid to the then parent entity, Veris plc. |
| |||||
| 13 | Notes to the cash flow statement |
| (a) | Reconciliation of operating profit to operating cash flows |
10 month 31 October 2009 € | |||
Operating profit | 2,430,735 | ||
Depreciation of tangible fixed assets | 240,774 | ||
Amortisation of intangible fixed assets | 8,726 | ||
Profit on disposal of fixed assets | (2,028 | ) | |
Movement in stocks | (98,687 | ) | |
Movement in debtors | 4,277,019 | ||
Movement in creditors | (5,292,513 | ) | |
Foreign exchange movements | 178,614 | ||
Net cash inflow from operating activities | 1,742,640 | ||
18
Group of certain ARAMARK subsidiaries
Notes(continued)
| 13 | Notes to the cash flow statement(continued) |
10 month € | |||||
(b) | Analysis of cash flows | ||||
Returns on investments and servicing of finance | |||||
Interest paid | (803,604 | ) | |||
Interest received | 140,581 | ||||
Interest element of finance lease payments | (12,570 | ) | |||
Net cash outflow | (675,593 | ) | |||
Capital expenditure and financial investment | |||||
Purchase of tangible fixed assets | (70,193 | ) | |||
Sale of tangible fixed assets | 8,485 | ||||
Net cash outflow | (61,708 | ) | |||
Financing | |||||
Repayment of bank loans | (10,480,712 | ) | |||
Capital contribution from Veris plc | 9,618,477 | ||||
Capital element of finance lease payments | (85,715 | ) | |||
Net cash outflow | (947,950 | ) | |||
19
Group of certain ARAMARK subsidiaries
Notes(continued)
| 14 | Pension information |
Up to 31 December 2008 pensions for employees were funded through two defined benefit pension schemes and multiple defined contribution schemes. One of the defined benefit schemes, the Irish Estates (Management) Retirement Benefits Plan, was wound up with effect from 31 December 2008. The assets of the scheme were assumed by the other defined benefit scheme, the Irish Estates Pension Scheme, from that date. The wind up and transfer of assets and liabilities had no impact on the financial statements as there was no change in the benefits under the schemes and the two schemes had already been treated as a single entity for the purposes of Financial Reporting Standard No. 17 (FRS 17),Retirement Benefits.
The charge for the period in respect of the defined contribution schemes represents contributions payable by the group to the schemes and amounted to €27,501. There were outstanding contributions of €2,290 at the balance sheet date.
In relation to the defined benefit scheme, valuations are carried out every three years by independent actuarial consultants. The latest actuarial valuation of the scheme was carried out at 1 January 2009. The actuarial reports are available for inspection by members of the scheme and are not available for public inspection.
The group accounts for its defined benefit scheme in accordance with FRS 17. The valuations of the defined benefit scheme used for the purposes of FRS 17 disclosures have been based on the most recent actuarial valuations as identified and updated by the independent actuaries to take account of the requirements of FRS 17 in order to assess the liabilities as at 31 October 2009. The valuations have been performed using the projected unit method. Scheme assets are stated at their market value at the balance sheet date.
The main assumptions used by the actuary at 31 October 2009 were as follows:
| 2009 | |||
Rate of increase in pensionable salaries | 3.00 | % | |
Discount rate applied to scheme liabilities | 5.75 | % | |
Inflation rate | 1.50 | % | |
Expected return on plan assets at beginning of period | 6.17 | % | |
20
Group of certain ARAMARK subsidiaries
Notes(continued)
| 14 | Pension information(continued) |
The deficit in the scheme is as follows:
2009 € | |||
Present value of funded defined benefit obligations | (3,392,000 | ) | |
Fair value of plan assets | 2,617,000 | ||
Deficit in the schemes | (775,000 | ) | |
Related deferred tax asset | 96,875 | ||
Net pension (liability) recognised in the balance sheet | (678,125 | ) | |
Movement in present value of defined benefit obligation | |||
2009 €’000 | |||
At 1 January | 3,425 | ||
Current service cost | 48 | ||
Interest cost | 168 | ||
Actuarial (gains) | (280 | ) | |
Benefits paid | (2 | ) | |
Contributions by members | 33 | ||
At 31 October | 3,392 | ||
21
Group of certain ARAMARK subsidiaries
Notes(continued)
| 14 | Pension information(continued) |
Movements in fair value of plan assets
| 2009 €’000 | |||
At 1 January | 2,129 | ||
Expected return on plan assets | 109 | ||
Actuarial gains | 270 | ||
Contributions by employer | 78 | ||
Contributions by members | 33 | ||
Benefits paid | (2 | ) | |
At 31 October | 2,617 | ||
The fair value of the plan assets and the return on those assets were as follows:
| 2009 Fair value €’000 | ||
Equities | 1,588 | |
Fixed interest | 950 | |
Property | 79 | |
Total plan assets | 2,617 | |
Actual return on plan assets | 379 | |
22
Group of certain ARAMARK subsidiaries
Notes(continued)
| 14 | Pension information(continued) |
The following are the amounts that have been included in the profit and loss account:
| 2009 €’000 | |||
Included in payroll costs | |||
Current service costs | 48 | ||
Net operating profit charge | 48 | ||
Included in finance costs | |||
Expected return on plan assets | (109 | ) | |
Interest on pension scheme liabilities | 168 | ||
Net finance cost | 59 | ||
The following actuarial gains and losses have been recognised directly in equity:
2009 €’000 | |||
Cumulative loss at 1 January | (569 | ) | |
Gains recognised during the period | 550 | ||
Cumulative loss at 31 October | (19 | ) | |
23
Group of certain ARAMARK subsidiaries
Notes(continued)
| 14 | Pension information(continued) |
History of plans
Balance sheet
| 31 Oct 2009 €’000 | 31 Dec 2008 €’000 | 31 Dec 2007 €’000 | 31 Dec 2006 €’000 | 31 Dec 2005 €’000 | |||||||||||
Present value of scheme liabilities | (3,392 | ) | (3,425 | ) | (3,515 | ) | (3,813 | ) | (3,450 | ) | |||||
Fair value of scheme assets | 2,617 | 2,129 | 3,248 | 3,250 | 2,741 | ||||||||||
(Deficit) | (775 | ) | (1,296 | ) | (267 | ) | (563 | ) | (709 | ) | |||||
| Experience adjustments | |||||||||||||||
| 31 Oct 2009 €’000/% | 31 Dec 2008 €’000/% | 31 Dec 2007 €’000/% | 31 Dec 2006 €’000/% | 31 Dec 2005 €’000/% | |||||||||||
Experience adjustments on scheme liabilities | 74 | 85 | (152 | ) | (13 | ) | (51 | ) | |||||||
as a percentage of scheme liabilities | 2.2 | % | 2.5 | % | 4.3 | % | 0.3 | % | 1.5 | % | |||||
Experience adjustments on scheme assets | 270 | (1,310 | ) | (307 | ) | 166 | 287 | ||||||||
As a percentage of scheme assets | 10.3 | % | (61.5 | %) | (9.5 | %) | 5.1 | % | 10.5 | % | |||||
The group expects to contribute approximately €60,000 to its defined benefit plan in the next financial year.
24
Group of certain ARAMARK subsidiaries
Notes(continued)
| 15 | Operating leases |
Annual commitments under non-cancellable operating leases are as follows:
| 2009 Land, Buildings & Other € | ||
Leases expiring: | ||
After one year | 21,292 | |
Between two and five years | 101,898 | |
| 123,190 | ||
| 16 | Client monies |
In addition to the cash balance disclosed on the balance sheet, the following monies, held on behalf of customers and clients, were held in designated accounts and were not recognised on the balance sheet:
2009 € | ||
Client monies | 18,151,218 | |
| 17 | Summary of certain significant Irish GAAP/US GAAP differences |
The significant differences between Irish GAAP and Generally Accepted Accounting Principles in the United States of America (“US GAAP”) that are of relevance to these financial statements are as follows:
| - | Presentation of assets—Certain combined companies have operational control over common area maintenance funds received in advance from clients to fund the management of property services. These funds are not recognised on the balance sheet under Irish GAAP but represent assets and liabilities under US GAAP. |
| - | Acquisition accounting—Under Irish GAAP, the acquisition of certain UK subsidiaries acquired by the immediate parent, Veris UK Limited, is recorded on the books of the ultimate parent company, Veris plc, and is reflected as a single unconsolidated “Investment in financial assets” caption in the financial statements of Veris UK Limited. Under US GAAP, accounting for acquisitions would have been “pushed down” to, or reflected on the books of the immediate parent, Veris UK Limited when those subsidiaries were acquired in 2007. This would have resulted in the recording of goodwill, customer-related intangible assets and a related deferred tax liability. The customer-related intangible assets would have been depreciated in equal annual instalments over their estimated useful life of 10 years. |
| - | Deferred taxes—Under Irish GAAP, deferred taxes are recorded in respect of timing differences between the recognition of items for tax and accounting purposes, subject to certain exceptions and to the extent that realization of a gain or loss is probable, as described in the note on accounting policies in the financial statements. Under US GAAP, deferred taxes are accounted for in full on all temporary differences using the liability method. A valuation allowance is established in respect of those deferred tax assets where it is more likely than not that some portion will remain unrealised. |
There are no other Irish GAAP/US GAAP differences that have a significant effect on these financial statements.
| 18 | Approval of financial statements |
The directors of ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited approved these financial statements on 13 January 2010.
*******
25
Exhibit 99.2
Unaudited Pro Forma Condensed Combined Financial Information
On October 30, 2009, ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited, subsidiaries of ARAMARK Corporation (the “Registrant”), completed the acquisition of the facilities management and property management businesses of Veris plc, an Irish company, for consideration of approximately €50.2 million in cash. These business interests include Vector, IEFM Ltd, Premier Property Management, Orange, Glenrye and Irish Estates Management, all of which are companies that were owned by Veris plc. The facilities management business provides a broad range of facility and project management and consulting services for clients across a wide range of industrial and commercial sectors in Ireland and the United Kingdom. The property management business operates three business units – commercial, residential and retail – through which it manages mixed and single use property developments.
The following unaudited pro forma condensed combined balance sheet and statement of operations have been developed by applying pro forma adjustments to the separate historical audited consolidated financial statements of ARAMARK Corporation included in ARAMARK Corporation’s Form 10-K for the fiscal year ended October 2, 2009, the separate historical audited combined financial statements of the Subsidiaries of ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited (the “Group”) as of and for the ten months ended October 31, 2009 attached hereto as Exhibit 99.1 to this Form 8-K/A and the separate historical unaudited combined statement of operations of the Group for the two months ended December 31, 2008. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results.
The following unaudited pro forma condensed combined balance sheet at October 2, 2009 presents the Registrant’s historical financial position as though the acquisition had occurred on October 2, 2009.
The following unaudited pro forma condensed combined statement of operations for the year ended October 2, 2009 presents the combined results of the Registrant’s operations including the results of operations of the Group as if the acquisition had occurred on October 4, 2008, the first day of the Registrant’s 2009 fiscal year.
The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. The unaudited pro forma condensed combined financial information is presented for informational purposes only. The unaudited pro forma condensed combined financial information does not purport to represent what the Registrant’s financial position or results of operations would have been had the acquisition actually occurred on the dates indicated and it does not purport to project the Registrant’s results of operations for any future period. There were no material transactions between ARAMARK Corporation and the Group during the period presented in the unaudited pro forma condensed combined financial statements that would need to be eliminated.
The unaudited pro forma condensed combined balance sheet and statement of operations should be read in conjunction with the separate historical audited consolidated financial statements of ARAMARK Corporation included in ARAMARK Corporation’s Form 10-K for the fiscal year ended October 2, 2009, the separate historical audited combined financial statements of the Group as of and for the ten months ended October 31, 2009 attached hereto as Exhibit 99.1 to this Form 8-K/A and the accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements. All pro forma adjustments and their underlying assumptions are described more fully in the accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting under accounting principles generally accepted in the United States of America (“U.S. GAAP”). The acquisition accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these preliminary estimates (for example estimates as to the value of intangible assets) and the final acquisition accounting will occur and these differences could have a significant impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company’s future results of operations and financial position.
The unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisition or the costs to combine or associated with the combination of the operations of ARAMARK Corporation and the Group or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.
In addition, future results may vary significantly from the results reflected in the unaudited pro forma condensed combined financial information set forth herein due to certain factors beyond the Registrant’s control. See “Risk Factors” in the Registrant’s annual report on Form 10-K for the fiscal year ended October 2, 2009 for more information regarding these risks.
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This presentation of unaudited condensed combined financial information includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views as to future events and financial performance with respect to our operations. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “aim,” “anticipate,” “are confident,” “estimate,” “expect,” “will be,” “will continue,” “will likely result,” “project,” “intend,” “plan,” “believe,” “look to” and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause such a difference include: unfavorable economic conditions, including ramifications of any future terrorist attacks or increased security alert levels; increased operating costs, including increased food costs, labor-related, energy or product sourcing and distribution costs; shortages of qualified personnel or increases in labor costs; costs and possible effects of further unionization of our workforce; currency risks and other risks associated with international markets; risks associated with acquisitions, including acquisition integration issues and costs; our ability to integrate and derive the expected benefits from our recent acquisitions; competition; a decline in attendance at client facilities; the unpredictability of sales and expenses due to contract terms and terminations; the impact of natural disasters or a flu pandemic on our sales and operating results; the risk that clients may become insolvent; the risk that our insurers may become insolvent or may liquidate; the contract intensive nature of our business, which may lead to client disputes; high leverage; claims relating to the provision of food services; costs of compliance with governmental regulations and government investigations; liability associated with noncompliance with our business conduct policy and governmental regulations, including regulations pertaining to food services, the environment, the Federal school lunch program, Federal and state employment and wage and hour laws, human health and safety laws and import and export controls and customs laws; dram shop compliance and litigation; contract compliance and administration issues, inability to retain current clients and renew existing client contracts; a determination by customers to reduce their outsourcing and use of preferred vendors; seasonality; our competitor’s activities or announced planned activities; the effect on our operations of increased leverage and limitations on our flexibility as a result of increased restrictions in our debt agreements; potential future conflicts of interest between our Sponsors and other stakeholders; the impact on our business if we are unable to generate sufficient cash to service all of our indebtedness; the inability of our subsidiaries to generate enough cash flow to repay our debt; risks related to the structuring of our debt; our potential inability to repurchase our notes upon a change of control; and other risks that are set forth in the “Risk Factors,” “Legal Proceedings” and “Management Discussion and Analysis of Financial Condition and Results of Operations” sections of and elsewhere in ARAMARK’s SEC filings, copies of which may be obtained by contacting ARAMARK’s investor relations department via its website www.aramark.com.
Forward-looking statements speak only as of the date made. We undertake no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date as of which they are made. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements included in this report or that may be made in other filings with the Securities and Exchange Commission or elsewhere from time to time by, or on behalf of, us.
2
ARAMARK CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(in thousands US$)
| ARAMARK Corporation October 2, 2009 | Subsidiaries of ARAMARK Ireland Holdings Ltd. and ARAMARK Investments Ltd. October 31, 2009 | U.S. GAAP Adjustments (Note 4) | Pro Forma Adjustments (Note 5) | Pro Forma Combined | |||||||||||||||
| ASSETS | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 224,644 | $ | 8,839 | $ | (82,771 | ) a) | $ | 150,712 | ||||||||||
Receivables | 807,974 | 15,240 | 823,214 | ||||||||||||||||
Inventories | 464,157 | 386 | 464,543 | ||||||||||||||||
Prepayments and other current assets | 191,659 | 2,245 | $ | 26,716 | a) | 220,620 | |||||||||||||
Total current assets | 1,688,434 | 26,710 | 26,716 | (82,771 | ) | 1,659,089 | |||||||||||||
Property and Equipment, net | 1,160,511 | 1,005 | 1,161,516 | ||||||||||||||||
Goodwill | 4,526,376 | — | 42,550 | b) | 4,568,926 | ||||||||||||||
Investment in Subsidiaries | — | 20,673 | (20,673 | ) c) | — | ||||||||||||||
Other Intangible Assets | 2,056,337 | — | 39,742 | b) | 2,096,079 | ||||||||||||||
Other Assets | 867,767 | — | 867,767 | ||||||||||||||||
| $ | 10,299,425 | $ | 48,388 | $ | 26,716 | $ | (21,152 | ) | $ | 10,353,377 | |||||||||
| LIABILITIES AND SHAREHOLDER’S EQUITY | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Current maturities of long-term borrowings | $ | 43,943 | $ | 100 | $ | 44,043 | |||||||||||||
Accounts payable | 669,704 | 13,179 | 682,883 | ||||||||||||||||
Accrued expenses and other current liabilities | 1,020,932 | 7,926 | $ | 26,716 | a) | 1,055,574 | |||||||||||||
Total current liabilities | 1,734,579 | 21,205 | 26,716 | $ | — | 1,782,500 | |||||||||||||
Long-Term Borrowings | 5,677,740 | 65 | 5,677,805 | ||||||||||||||||
Deferred Income Taxes and Other Noncurrent Liabilities | 1,350,346 | 998 | 4,968 | b) | 1,356,312 | ||||||||||||||
Common Stock Subject to Repurchase | 176,395 | — | 176,395 | ||||||||||||||||
Shareholder’s Equity: | |||||||||||||||||||
Common stock | — | 496 | (496 | ) c) | — | ||||||||||||||
Capital surplus | 1,445,451 | 14,476 | (14,476 | ) c) | 1,445,451 | ||||||||||||||
Earnings retained for use in the business | 48,608 | 8,344 | (8,344 | ) c) | 48,608 | ||||||||||||||
Accumulated other comprehensive income (loss) | (133,694 | ) | 2,804 | (2,804 | ) c) | (133,694 | ) | ||||||||||||
Total shareholder’s equity | 1,360,365 | 26,120 | — | (26,120 | ) | 1,360,365 | |||||||||||||
| $ | 10,299,425 | $ | 48,388 | $ | 26,716 | $ | (21,152 | ) | $ | 10,353,377 | |||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
3
ARAMARK CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands US$)
| ARAMARK Corporation Fiscal Year Ended October 2, 2009 | Subsidiaries of ARAMARK Ireland Holdings Ltd. and ARAMARK Investments Ltd. Ten Months Ended October 31, 2009 | Subsidiaries of ARAMARK Ireland Holdings Ltd. and ARAMARK Investments Ltd. Two Months Ended December 31, 2008 | U.S. GAAP Adjustments (Note 4) | Pro Forma Adjustments (Note 6) | Pro Forma Combined | |||||||||||||||||
Sales | $ | 12,297,869 | $ | 69,373 | $ | 18,430 | $ | 12,385,672 | ||||||||||||||
Costs and Expenses: | ||||||||||||||||||||||
Cost of services provided | 11,173,725 | 51,903 | 12,862 | 11,238,490 | ||||||||||||||||||
Depreciation and amortization | 503,123 | 342 | 83 | $ | 3,692 | a) | 507,240 | |||||||||||||||
Selling and general corporate expenses | 183,492 | 13,804 | 3,373 | $ | 276 | b) | 200,945 | |||||||||||||||
| 11,860,340 | 66,049 | 16,318 | 276 | 3,692 | 11,946,675 | |||||||||||||||||
Operating Income | 437,529 | 3,324 | 2,112 | (276 | ) | (3,692 | ) | 438,997 | ||||||||||||||
Interest and Other Financing Costs, net | 472,305 | 995 | 1 | (276 | ) b) | (700 | ) b) | 472,325 | ||||||||||||||
Income (Loss) Before Income Taxes | (34,776 | ) | 2,329 | 2,111 | — | (2,992 | ) | (33,328 | ) | |||||||||||||
Provision (Benefit) for Income Taxes | (27,865 | ) | 418 | 264 | — �� | (175 | ) c) | (27,358 | ) | |||||||||||||
Net income (loss) | $ | (6,911 | ) | $ | 1,911 | $ | 1,847 | $ | — | $ | (2,817 | ) | $ | (5,970 | ) | |||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
4
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(in thousands)
NOTE 1—DESCRIPTION OF TRANSACTION
On October 30, 2009, ARAMARK Ireland Holdings Limited and ARAMARK Investments Limited, subsidiaries of ARAMARK Corporation (the “Company”), completed the acquisition of the facilities management and property management businesses of Veris plc, an Irish company, (the “Group”) for consideration of approximately €50.2 million (approximately $73.9 million) in cash. These business interests include Vector, IEFM Ltd, Premier Property Management, Orange, Glenrye and Irish Estates Management, all of which are companies that were owned by Veris plc.
NOTE 2—BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial statements have been prepared using the acquisition method of accounting under accounting principles generally accepted in the United States of America (“U.S. GAAP”). The acquisition accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing the unaudited pro forma condensed combined financial statements. Differences between these preliminary estimates (for example estimates as to the value of intangible assets) and the final acquisition accounting will occur and these differences could have a significant impact on the unaudited pro forma condensed combined financial statements and the combined company’s future results of operations and financial position.
The unaudited pro forma condensed combined balance sheet assumes that the acquisition of the Group took place on October 2, 2009, the end of the Company’s 2009 fiscal year, and combines the Company’s audited October 2, 2009 balance sheet with the audited balance sheet of the Group as of October 31, 2009.
The unaudited pro forma condensed combined statement of operations for the fiscal year ended October 2, 2009 assumes that the acquisition of the Group took place on October 4, 2008, the first day of the Company’s 2009 fiscal year. The unaudited pro forma condensed combined statement of operations for the fiscal year ended October 2, 2009 combines the Company’s audited consolidated statement of operations for the fiscal year ended October 2, 2009 with the Group’s audited combined statement of operations for the ten months ended October 31, 2009 and the Group’s unaudited combined statement of operations for the two months ended December 31, 2008.
The pro forma condensed combined statements of operations have been prepared for informational purposes only and do not purport to be indicative of the actual results that would have been achieved by the Company or the combined Company for the period presented or that will be achieved by the Company or the combined Company in the future.
The Group’s financial statements were prepared in accordance with accounting principles generally accepted in Ireland (“Irish GAAP”). Certain adjustments have been made to the historical financial statements of the Group to conform to U.S. GAAP (see Note 4). In addition, certain reclassifications have been made to the historical financial statements of the Group to conform with the Company’s presentation, primarily related to the presentation of depreciation and amortization.
The unaudited pro forma condensed combined financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and certain note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading.
5
NOTE 3—CONVERSION OF HISTORICAL FINANCIAL STATEMENTS OF THE GROUP TO UNITED STATES DOLLARS
The audited condensed combined balance sheet of the Group at October 31, 2009 is reported in euros. Presented below is a schedule that reflects the translation of the financial position of the Group at October 31, 2009 into U.S. dollars. The Group’s balance sheet data was translated from euros to U.S. dollars using an exchange rate of €1 = US$1.4719:
| Subsidiaries of ARAMARK Ireland Holdings Ltd. and ARAMARK Investments Ltd. October 31, 2009 | Subsidiaries of ARAMARK Ireland Holdings Ltd. and ARAMARK Investments Ltd. October 31, 2009 | |||||
| € | US$ | |||||
| ASSETS | ||||||
Current Assets: | ||||||
Cash and cash equivalents | € | 6,005 | $ | 8,839 | ||
Receivables | 10,354 | 15,240 | ||||
Inventories | 262 | 386 | ||||
Prepayments and other current assets | 1,525 | 2,245 | ||||
Total current assets | 18,146 | 26,710 | ||||
Property and Equipment, net | 683 | 1,005 | ||||
Investment in Subsidiaries | 14,045 | 20,673 | ||||
| € | 32,874 | $ | 48,388 | |||
| LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||
Current Liabilities: | ||||||
Current maturities of long-term borrowings | € | 68 | $ | 100 | ||
Accounts payable | 8,954 | 13,179 | ||||
Accrued expenses and other current liabilities | 5,384 | 7,926 | ||||
Total current liabilities | 14,406 | 21,205 | ||||
Long-Term Borrowings | 44 | 65 | ||||
Deferred Income Taxes and Other Noncurrent Liabilities | 678 | 998 | ||||
Shareholder’s Equity: | ||||||
Common stock | 337 | 496 | ||||
Capital surplus | 9,835 | 14,476 | ||||
Earnings retained for use in the business | 5,669 | 8,344 | ||||
Accumulated other comprehensive income | 1,905 | 2,804 | ||||
Total shareholder’s equity | 17,746 | 26,120 | ||||
| € | 32,874 | $ | 48,388 | |||
6
The audited condensed combined statement of operations of the Group for the ten months ended October 31, 2009 and the unaudited condensed combined statement of operations for the Group for the two months ended December 31, 2008 are reported in euros. Presented below is a schedule that reflects the translation of the results of operations data of the Group for the ten months ended October 31, 2009 and the two months ended December 31, 2008 into U.S. dollars. The Group’s statements of operations data were translated from euros to U.S. dollars using an average exchange rate of €1 = US$1.3673:
| Subsidiaries of ARAMARK Ireland Holdings Ltd. and ARAMARK Investments Ltd. Ten Months Ended October 31, 2009 | Subsidiaries of ARAMARK Ireland Holdings Ltd. and ARAMARK Investments Ltd. Ten Months Ended October 31, 2009 | Subsidiaries of ARAMARK Ireland Holdings Ltd. and ARAMARK Investments Ltd. Two Months Ended December 31, 2008 | Subsidiaries of ARAMARK Ireland Holdings Ltd. and ARAMARK Investments Ltd. Two Months Ended December 31, 2008 | |||||||||
| € | US$ | € | US$ | |||||||||
Sales | € | 50,737 | $ | 69,373 | € | 13,479 | $ | 18,430 | ||||
Costs and Expenses: | ||||||||||||
Cost of services provided | 37,960 | 51,903 | 9,407 | 12,862 | ||||||||
Depreciation and amortization | 250 | 342 | 61 | 83 | ||||||||
Selling and general corporate expenses | 10,096 | 13,804 | 2,467 | 3,373 | ||||||||
| 48,306 | 66,049 | 11,935 | 16,318 | |||||||||
Operating Income | 2,431 | 3,324 | 1,544 | 2,112 | ||||||||
Interest and Other Financing Costs, net | 728 | 995 | 1 | 1 | ||||||||
Income Before Income Taxes | 1,703 | 2,329 | 1,543 | 2,111 | ||||||||
Provision for Income Taxes | 306 | 418 | 193 | 264 | ||||||||
Net income | € | 1,397 | $ | 1,911 | € | 1,350 | $ | 1,847 | ||||
All U.S. GAAP adjustments in Note 4 and pro forma adjustments in Notes 5 and 6 were also translated from euros into U.S. dollars using the exchange rates noted above.
NOTE 4—UNAUDITED U.S. GAAP ADJUSTMENTS
As discussed in Note 2, certain adjustments have been made to the historical financial statements of the Group to conform to U.S. GAAP.
a) The unaudited pro forma condensed combined balance sheet includes the following U.S. GAAP adjustment:
| • | Certain companies in the Group have operational control over funds received in advance from clients to fund the management of property services. These funds are not recognized on the balance sheet of the Group under Irish GAAP but represent assets and liabilities under U.S. GAAP. The amount of funds received in advance from clients at October 31, 2009 not recognized on the Group’s balance sheet was €18,151 ($26,716). |
7
b) The unaudited pro forma condensed combined statement of operations includes the following U.S. GAAP adjustment:
| • | Under Irish GAAP, the interest cost component of net periodic pension cost is included in “Interest and Other Financing Costs, net.” Under U.S. GAAP, the interest cost component for the Group’s defined benefit pension plan is included in “Selling and general corporate expenses.” The interest cost component of net periodic pension cost that has been reclassified from “Interest and Other Financing Costs, net” to “Selling and general corporate expenses” for the year ended October 2, 2009 was €202 ($276). |
NOTE 5—UNAUDITED PRO FORMA ADJUSTMENTS TO CONDENSED COMBINED BALANCE SHEET
a) The adjustment to cash and cash equivalents includes the elimination of the cash and cash equivalents balance of the Group of €6,005 ($8,839) since the purchase price of approximately €50.2 million (approximately $73.9 million) was net of the cash acquired.
b) The following table sets forth the pro forma adjustments included in the unaudited pro forma condensed combined balance sheet as of October 2, 2009 related to the preliminary allocation of the purchase price for the acquisition of the Group (amounts in US$):
Purchase price | $ | 73,932 | |||||
Less: Net assets acquired (excludes cash and cash equivalents acquired of $8,839) | (3,392 | ) | |||||
Purchase price in excess of net assets acquired | 77,324 | ||||||
Allocations to net assets acquired: | |||||||
Customer relationship assets (1) | 39,742 | ||||||
Deferred income taxes (2) | (4,968 | ) | |||||
Preliminary adjustments to net assets acquired | 34,774 | ||||||
Pro forma adjustment to goodwill (3) | $ | 42,550 | |||||
| (1) | Customer relationship assets are required to be measured at fair value. The fair value of these customer relationship assets is normally determined primarily through the use of the “income approach,” which requires an estimate or forecast of all the expected future cash flows through the use of the multi-period excess earnings method. At this time, the Company does not have sufficient information as to the amount, timing and risk of the estimated future cash flows needed to value the customer relationship assets. Some of the more significant assumptions inherent in the development of estimated cash flows, from the perspective of a market participant, include: the amount and timing of projected future cash flows (including revenue, cost of revenue, sales and marketing expenses and working capital/contributory asset charges) and the discount rate selected to measure the risks inherent in the future cash flows. However, for purposes of these unaudited pro forma condensed combined financial statements, using currently available information, such as the Group’s historical and projected revenues, customer attrition rates, cost structure, and certain other high-level assumptions, the fair value of the customer relationship assets was estimated by the Company. The estimated value of the customer relationship assets of $39,742 has a weighted average useful life of 10 years and will be amortized over such period. This preliminary estimate of fair value and weighted-average useful life will likely be different from the final acquisition accounting, and the difference could have a significant impact on the unaudited pro forma condensed combined financial statements. |
| (2) | Represents the estimated deferred taxes related to the preliminary purchase accounting adjustments calculated at an effective tax rate of 12.5%. |
| (3) | Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized but rather subject to a fair value impairment test at least annually. In addition, there may be other fair value adjustments that we have not yet estimated that could affect the calculation of goodwill. |
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c) Since the Company acquired 100% of the outstanding common stock of the Group, the historical investment in subsidiaries and equity balances of the Group have been eliminated.
NOTE 6—UNAUDITED PRO FORMA ADJUSTMENTS TO CONDENSED COMBINED STATEMENT OF OPERATIONS
a) Represents the amortization of customer relationship assets based upon the preliminary estimates of fair value and useful life in Note 5 b(1).
b) Since the Company purchased the Group with cash and incurred no additional debt as a result of the acquisition, all net interest expense of the Group except the interest expense related to its capital leases was eliminated as the interest expense in the combined statement of operations primarily related to long-term borrowings repaid by Veris plc with the proceeds of the acquisition of the Group by the Company.
c) Represents the following two adjustments to the provision (benefit) for income taxes:
| • | The income tax effect of the pro forma adjustments noted above, calculated at an effective tax rate of 35.0%. |
| • | An adjustment was recorded to conform the provision for income taxes of the Group’s audited condensed combined statement of operations for the ten months ended October 31, 2009 and the Group’s unaudited condensed combined statement of operations for the two months ended December 31, 2008 to 35.0%, the Company’s statutory income tax rate. |
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