EXHIBIT 99
FORWARD-LOOKING STATEMENTS
SUMMARY OF IMPORTANT FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
As indicated previously, this report contains forward-looking statements that
are subject to a number of risks and uncertainties. Sodexho Marriott Services,
Inc. (the "Company") cautions readers that the following important factors,
among others, in some cases have affected, and in the future could affect, the
Company's actual results of operations. The factors set forth below do not
constitute all factors which investors should consider prior to making an
investment decision with respect to the Company's securities. Further, investors
should not assume that the information contained below is complete or accurate
in all respects following the date of this filing. The Company assumes no
obligation to update any forward-looking statements or any of the factors
discussed below.
CHANGES IN OPERATIONS. On March 27, 1998, the Company, formerly named
Marriott International, Inc. (as formerly named, "Old Marriott"), consummated a
series of transactions (the "Transactions") that, among other things, resulted
in: (i) a spin-off to Old Marriott's stockholders of all businesses of Old
Marriott other than its food service and facilities management business through
a special dividend of stock in a new company which now uses the name "Marriott
International, Inc." ("New Marriott"); (ii) the acquisition through a merger of
the North American operations of Sodexho Alliance, S.A. ("Sodexho"); and (iii)
the refinancing of certain outstanding indebtedness. Following the Transactions,
the Company was renamed Sodexho Marriott Services, Inc. As a result of the
Transactions, the Company's operations were significantly changed. The
distribution of the lodging business narrowed the Company's operations to its
food service and facilities management business (as expanded by the addition of
the North American operations of Sodexho), and caused the Company's debt
obligations, as a percentage of its assets, to increase significantly. The
Company's business strategy is based on the belief that it will be able to
integrate successfully the North American operations of Sodexho into its
existing operations, expand its business, and reduce its debt over a reasonable
period of time. There can no assurance, however, that the Company's efforts to
execute this strategy will be successful, or that a failure to do so will not
have a material adverse effect on the Company's business, results of operations,
and financial condition. In addition, because the Company is less diversified
than it was prior to the Transactions, the results of operations of the Company
will be more susceptible to competitive and market factors specific to its core
businesses.
LIMITED HISTORY AS AN INDEPENDENT FOOD SERVICE AND FACILITIES MANAGEMENT
COMPANY. The Company has been operating for only a limited period of time as an
independent, publicly owned, food service and facilities management company. In
addition, the Company's management does not have prior experience in operating
and managing a public company with significant leverage or the integration into
the Company's operations of an acquisition the size of Sodexho North America.
Further, the Company must take steps to assure that certain corporate services
now being provided to the Company for limited periods of time by New Marriott
eventually will be adequately performed by the Company or third-party
contractors. Any or all of these factors could have a material adverse effect on
the Company's business, results of operations, and financial condition.
SUBSTANTIAL INDEBTEDNESS. The Company's indebtedness under its credit
facility agreements is currently in excess of $1.2 billion and bears interest at
rates that float with certain indices. The size of the Company's indebtedness
and the restrictive covenants, events of default and other restrictions on the
Company's activities contained in its credit facility agreements may limit the
Company's ability to respond to market conditions, satisfy capital expenditure
requirements, meet contractual or financial obligations, incur additional debt
or engage in other activities. As a result, significant losses by the Company or
certain activities by it could cause the Company to violate the terms of its
credit facility agreements and thereby impair the Company's liquidity and limit
its ability to raise additional capital. Moreover, the failure to make required
debt payments could result in an acceleration of the Company's indebtedness, in
which case the lenders thereunder would be entitled to exercise their remedies,
including foreclosing on collateral. In view of the Company's leverage, any new
financings and refinancings by the Company of the Company's indebtedness, if
available at all, may be at higher interest rates and may contain terms
significantly less advantageous than would have been available to the Company
absent the Transactions. In addition, a rise in interest rates would cause the
Company's payment obligations to increase, even though the Company has hedged a
significant portion of its interest rate risk. The occurrence of any of these
events could restrict the Company's ability to finance its future operations,
meet capital needs or engage in other business activities that may be in the
interest of the Company. There can be no assurance that the Company will be able
to obtain additional capital, if needed, on acceptable terms, or that the
occurrence of any of the foregoing events would not have a material adverse
effect on the Company's business, results of operations and financial condition.
CONTRACTUAL ARRANGEMENTS. The Company's ability to continue the growth of
its food service and facilities management business depends on whether it can
continue to obtain new contracts, or renewals of existing contracts, on
satisfactory terms. The majority of the food service and facilities management
contracts of the Company are either based on fixed-price terms or terminable by
clients on short notice (generally from 30 to 120 days), or both. Therefore, the
Company's results of operations are dependent to a significant extent on its
ability to estimate and control costs associated with the provision of services
under these contracts. The Company's costs are subject to increases as a result
of rising labor and supply costs, many of which are outside its control. In
addition, the terms of the Company's operating contracts, distribution
agreements, franchise agreements and leases are influenced by contract terms
offered by the Company's competitors, general economic conditions, and other
factors. There can be no assurance that some or all of these factors will not
adversely affect the Company's operating margins or its ability to enter into
satisfactory future contracts, or that these factors would not have a material
adverse effect on the Company's business, results of operations, and financial
condition.
COMPETITION. The food service and facilities management industries are
highly competitive. The Company competes in these industries with numerous other
vendors of varying sizes, many of which have significant financial resources.
The continued success of the Company will be dependent, in large part, upon its
ability to compete in such areas as the quality of food and facilities
management services, the nature and scope of specialized services, and upon the
Company's ability to contain costs.
ECONOMIC CONDITIONS. A decline in international, national or regional
economic conditions could result in reduced demand for the outsourcing of food
and facilities management services and create pressure on the Company to enter
into contractual arrangements less favorable than those currently in effect or
under consideration. Accordingly, such a decline could have a material adverse
effect on the Company's business, results of operations, and financial
condition.
LIMITED GEOGRAPHIC FOCUS. The Company is not currently expected to expand
its international presence beyond Canada. The Company's licensing arrangements
with New Marriott and Sodexho to use the names "Marriott" and "Sodexho" cover
only the U.S. and Canada. As a practical matter, since the Company will be
allowed to use its corporate name only in the U.S. and Canada, and since Sodexho
controls or has significant interests in companies competing in other countries
in the food service and facilities management sector, it is unlikely that the
Company will engage in significant operations outside the U.S. and Canada. As a
result, the Company will be more susceptible to a downturn in the U.S. and
Canadian economies than a company that is actively engaged in various other
markets.
RELATIONSHIP WITH SODEXHO. As part of the Transactions, the Company and
Sodexho entered into certain arrangements under which Sodexho provides the
Company with a variety of consulting and advisory services and other assistance
and has guaranteed a portion of the Company's indebtedness. Sodexho also has
licensed to the Company the use of the name "Sodexho." These arrangements may
have the effect of causing the Company to be reliant to a substantial degree on
its relationship with Sodexho. Each of these arrangements has a finite term, and
the failure to renew any such arrangements on comparable terms could have a
material adverse effect on the Company's business, results of operations, and
financial condition. Similar effects also might result in the event Sodexho were
to encounter financial or other difficulties that could prevent it from
providing such services or assistance to the Company.
SEASONAL NATURE OF THE COMPANY'S BUSINESS. The food service and facilities
management business has been characterized historically by seasonal fluctuations
in overall demand for services, particularly in the education sector where sales
are stronger during the academic year. There can be no assurance that these
fluctuations will not have a material adverse effect on the Company's business,
results of operations, and financial condition.
CERTAIN ANTI-TAKEOVER EFFECTS. As of November 27, 1998, Sodexho, the
Company's largest stockholder, beneficially owned approximately 48% of the
outstanding shares of the Company's common stock. Sodexho has agreed pursuant to
a tax sharing and indemnification agreement entered into among the Company, New
Marriott and Sodexho not to acquire 50 percent or more of the Company's common
stock for three years after the Transactions, and the certificate of
incorporation of the Company generally provides that no person may acquire 50
percent or more of the Company's common stock until the end of such period.
Consequently, no change in control of the Company is expected to occur during
the three years following the Transactions. In addition, because Sodexho owns a
large percentage of the Company's common stock it may be able to exercise
significant influence over many matters requiring stockholder approval. Pursuant
to a stockholder agreement with the Company, Sodexho also has the right to
nominate three members of the Company's Board. As a result, Sodexho's
relationship with the Company may have the effect of, among other things,
preventing a change in control of the Company at any time without the agreement
of Sodexho.
USE OF TRADENAMES. New Marriott has licensed the "Marriott" name to the
Company in certain limited respects for a period of four years after the
Transactions. The Company will not have the right to use the "Marriott" name
after the expiration of the four-year period. In addition, Sodexho has licensed
the "Sodexho" name to the Company under a royalty agreement having a ten-year
term. The "Sodexho" name, which has been used in the food service and facilities
management business in North America for the past four years, is not as well
known in that market as the "Marriott" name. The Company may have to make
additional expenditures to position its new name in the marketplace and cannot
predict with certainty the extent to which the substitution of a new name may
adversely affect its retention and acquisition of clients. Further, to the
extent that the Company fails to perform its obligations under its license
agreements with New Marriott or Sodexho, each of New Marriott and Sodexho could
successfully prevent the Company from using their respective names, which could
adversely affect the Company's retention and acquisition of clients and its
financial performance.
DIVIDEND POLICY. Historically, the Company has paid regular quarterly
dividends. The Company expects to pay quarterly dividends, subject to the
restrictive covenants contained in the Company's credit facility agreements and
other relevant considerations. In general, the restrictive covenants do not
permit the Company to pay dividends to stockholders in an amount greater than 40
percent of the Company's net income, or 45 percent when the ratio of the
Company's consolidated debt to EBITDA (as defined in the documentation for the
credit facility agreements) is less than 4 but not less than 3. This restriction
will no longer apply when such ratio is less than 3. The payment and amount of
cash dividends on the Company's common stock will be subject to the sole
discretion of the Company's Board, which will review the Company's dividend
policy at such times as may be deemed appropriate. Payment of dividends on the
Company's common stock will depend upon the Company's financial position,
capital requirements, profitability and such other factors as the Company's
Board deems relevant.
FLUCTUATING PRICES OF THE COMPANY'S COMMON STOCK. The Company's common
stock is listed and traded on the New York Stock Exchange and certain other U.S.
exchanges. Prices at which the Company's common stock trades fluctuate
significantly and could be influenced by many factors, including, among others,
the continuing depth and liquidity of the market for the Company's common stock,
investor perception of the Company, the Company's dividend policy and general
economic and market conditions.