Exhibit 99.1
Prospectus Supplement Pursuant to Rule 424(b)(2)
To prospectus dated April 8, 2002 Registration Statement No. 333-85050
[LOGO] ARAMARK
ARAMARK Services, Inc.
$300,000,000
7.00% Notes due 2007
Fully and unconditionally guaranteed by
ARAMARK Corporation
Interest payable May 1 and November 1
Issue price: 99.801%
Interest on the notes is payable on May 1 and November 1 of each year,
beginning on November 1, 2002. The notes will mature on May 1, 2007.
The notes will be issued by ARAMARK Services, Inc. ("Services" or the
"Company") and will be senior debt securities. The notes will rank equally with
all other unsecured senior indebtedness of Services. The notes will be fully
and unconditionally guaranteed on a senior basis as to payment of principal and
interest by ARAMARK Corporation ("ARAMARK" or the "Guarantor"), the parent
corporation of the Company. The guarantee of the notes will be a senior
obligation of ARAMARK and will rank equally with all of ARAMARK's other
unsecured senior indebtedness.
The Company may redeem the notes in whole or in part at any time prior to their
maturity at the redemption prices described in this prospectus supplement.
Investing in the notes involves risks. See "Risk Factors" beginning on page S-6
of this prospectus supplement and page 5 of the accompanying prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the related prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
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Proceeds to Company
Price to Public Underwriting Discounts Before Expenses
--------------------------------------------------------------------------
Per Note 99.801% 0.60% 99.201%
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Total $299,403,000 $1,800,000 $297,603,000
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The notes are not and will not be listed on any securities exchange. Currently,
there is no established public trading market for the notes.
We expect to deliver the notes to investors through the book-entry delivery
system of The Depository Trust Company on or about April 22, 2002.
JPMorgan
Salomon Smith Barney Wachovia Securities
Banc One Capital Markets, Inc.
Credit Lyonnais Securities
Fleet Securities, Inc.
PNC Capital Markets, Inc.
April 17, 2002
TABLE OF CONTENTS
Prospectus Supplement Page
--------------------- ----
About this Prospectus Supplement............. S-2
Where You Can Find More
Information About Us....................... S-3
ARAMARK Corporation.......................... S-4
Summary of the Offering...................... S-5
Risk Factors................................. S-6
Use of Proceeds.............................. S-7
Capitalization............................... S-8
Selected Consolidated Financial Data......... S-9
Management's Discussion and Analysis of
Results of Operations and Financial
Condition.................................. S-11
Description of Notes......................... S-18
Certain United States Federal
Income Tax Considerations.................. S-23
Underwriting................................. S-25
Legal Opinions............................... S-26
Experts...................................... S-26
Prospectus Page
---------- ----
About this Prospectus........................ i
Special Note About Forward-Looking Statements 1
Where You Can Find More
Information About Us....................... 2
Prospectus Summary........................... 3
Risk Factors................................. 5
Recent Developments.......................... 13
Ratio of Earnings to Fixed Charges........... 13
Use of Proceeds.............................. 13
Dividend Policy.............................. 13
Selected Consolidated Financial Data......... 14
Unaudited Pro Forma Financial Information.... 16
Description of Other Indebtedness............ 18
Description of Our Debt Securities........... 20
Global Securities............................ 40
Plan of Distribution......................... 42
Validity of Securities and Guarantee......... 43
Experts...................................... 44
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ABOUT THIS PROSPECTUS SUPPLEMENT
These offering materials consist of two documents: (a) this prospectus
supplement, which describes the terms of the notes that the Company is
currently offering, and (b) the accompanying prospectus, which provides general
information about the Company's debt securities, some of which may not apply to
the notes that the Company is currently offering. The information in this
prospectus supplement replaces any inconsistent information included in the
accompanying prospectus.
At varying places in this prospectus supplement and the prospectus, we refer
you to other sections of such documents for additional information by
indicating the caption heading of such other sections. The page on which each
principal caption included in this prospectus supplement and the prospectus can
be found listed above in the Table of Contents. All cross-references in this
prospectus supplement are to captions contained in this prospectus supplement
and not in the accompanying prospectus, unless otherwise stated.
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information or to make any representation not contained in
this prospectus supplement or the accompanying prospectus, or incorporated by
reference, into this prospectus supplement or the prospectus. If anyone
provides you with different or inconsistent information, you should not rely on
it. You should not assume that the information appearing in this prospectus
supplement and the accompanying prospectus and any documents incorporated by
reference is accurate after the dates on the front covers of each of the
prospectus supplement and the accompanying prospectus and after the date of
filing of the incorporated documents. Our business, financial condition,
results of operations and prospects may have changed since those dates.
The distribution of this prospectus supplement and the accompanying
prospectus or any part of those documents and the offer and sale of the notes
may be restricted by law in certain jurisdictions. If you possess this
prospectus supplement and the accompanying prospectus, you should inform
yourself about and observe any
S-2
such restrictions. This prospectus supplement and the accompanying prospectus
are not an offer to sell these securities and are not soliciting an offer to
buy these securities in any jurisdiction where the offer or sale is not
permitted or where the person making the offer or sale is not qualified to do
so or to any person to whom it is not permitted to make such offer or sale. The
notes offered by this prospectus supplement are registered with the Securities
and Exchange Commission under registration statement number 333-85050 that was
declared effective on April 8, 2002.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
For more complete information about ARAMARK and the Company, you should read
this entire prospectus supplement and the accompanying prospectus as well as
the materials filed with the Securities and Exchange Commission that are
considered to be part of such prospectus. See "Where You Can Find More
Information About Us" in the accompanying prospectus.
S-3
ARAMARK CORPORATION
We are a leading provider of a broad range of outsourced services to
business, educational, healthcare and governmental institutions and sports,
entertainment and recreational facilities. We have leadership positions in food
and support services, uniform and career apparel services and childcare and
early education. We seek to continue to capitalize on favorable outsourcing
trends by offering a large and diverse client base an expanding portfolio of
services to meet their outsourcing needs. In fiscal 2001, we reported sales of
approximately $7.8 billion and net income of approximately $176.5 million. We
believe we will continue to grow our business by capitalizing on the continuing
growth of the outsourcing market, our market leadership positions and the added
access to capital that our public offering completed on December 14, 2001
provides us.
We provide or manage services in three strategic areas: Food and Support
Services, Uniform and Career Apparel and Educational Resources. We manage and
report our business activities through the following five operating segments:
Food and Support Services--United States--Provides food, refreshment and
support services, including facility maintenance and housekeeping, to business,
educational, governmental and healthcare institutions and in sports,
entertainment, recreational and other facilities serving the general public.
Food and support services are provided at client locations under various
contractual arrangements, which can include profit and loss, profit sharing or
management fee based agreements.
Food and Support Services--International--Provides food, refreshment and
support services, including facility maintenance and housekeeping, to business,
educational, governmental and healthcare institutions and in sports,
entertainment, recreational and other facilities serving the general public.
Operations are conducted primarily in Belgium, Canada, the Czech Republic,
Germany, Hungary, Mexico, Spain and the United Kingdom. Food and support
services are provided at client locations under various contractual
arrangements, which can include profit and loss, profit sharing or management
fee based agreements.
Uniform and Career Apparel--Rental--Provides uniform rental, cleaning,
maintenance and delivery services on a contract basis. Also provided are
walk-off mats, cleaning cloths, disposable towels and other environmental
control items and the direct sale of certain uniform and related products.
Uniform and Career Apparel--Direct Marketing--Sells personalized uniforms
and career apparel, public safety equipment and accessories directly to
businesses, public institutions and individuals.
Educational Resources--Provides infant, toddler, pre-school and school-age
learning programs through community-based childcare centers, before and after
school programs, employer on-site childcare centers and private elementary
schools. Sales are derived primarily from weekly or monthly payments received
directly from individual families under short-term agreements.
ARAMARK and Services, each a Delaware corporation, have their principal
executive offices at ARAMARK Tower, 1101 Market Street, Philadelphia,
Pennsylvania 19107, and their telephone number is (215) 238-3000.
S-4
SUMMARY OF THE OFFERING
The following summary describes the 7.00% notes due 2007 that Services is
offering to you in general terms only. You should read this summary together
with the more detailed information that is contained in, and incorporated by
reference into, the rest of this prospectus supplement and in the accompanying
prospectus.
Issuer...................... ARAMARK Services, Inc.
Notes Offered............... $300,000,000 principal amount of 7.00% notes due
2007.
Maturity Date............... May 1, 2007.
Issue Date for the Notes.... April 22, 2002.
Issue Price................. 99.801%
Interest Payment Dates...... Each May 1 and November 1, commencing November 1,
2002.
Ranking..................... The notes will be senior unsecured obligations of
Services and will rank equally with all other
unsecured, senior indebtedness of Services.
Guarantee................... ARAMARK will guarantee Services' obligations
under the notes. The guarantee will rank equally
with all other unsecured indebtedness of ARAMARK.
Services is a wholly owned subsidiary of ARAMARK.
Optional Redemption......... Services may redeem all or any portion of the
notes at its option at any time at the redemption
price described in "Description of
Notes--Optional Redemption." Services is not
required to establish a sinking fund to retire
the notes prior to maturity.
Certain Covenants........... The indenture governing the notes contains
covenants that, among other things, limit our
ability to merge or consolidate with or into any
person or to sell, lease or convey all or
substantially all of our assets.
Further Issues.............. These notes will be limited to $300 million in
aggregate principal amount. Services may,
however, "reopen" each of the series of notes and
issue an unlimited principal amount of additional
notes of that series in the future.
Form........................ Fully registered global notes in book-entry form.
Delivery and Clearance...... Services will deposit the global notes for the
7.00% notes due 2007 with The Depository Trust
Company in New York ("DTC").
No Listing of the Notes..... Services does not plan to make application to
list the notes on any securities exchange or to
include them in any automated quotation system.
Risk Factors................ See page S-6 of the prospectus supplement and
page 5 of the accompanying prospectus for a
description.
Trustee..................... Bank One Trust Company, National Association.
How to Reach Us............. Our principal executive offices are located at
ARAMARK Tower, 1101 Market Street, Philadelphia,
Pennsylvania 19107; telephone number (215)
238-3000.
S-5
RISK FACTORS
As part of your evaluation of us, you should take into account the risk we
face in our business and not solely our competitive strength and business
strategies. Our operations may be affected by prevailing economic conditions,
including the ramifications of the September 11/th/ terrorist attacks, our
business is impacted by our ability to hire qualified personnel, our growth
strategy involves risks, our operating results may be adversely affected if we
are unable to successfully integrate ServiceMaster Management Services or
derive the benefits we expect, we are subject to government regulation and
there is uncertainty concerning our continued use of Arthur Andersen as our
independent auditor. Our industry is in a period of consolidation and, at any
given time, ARAMARK is evaluating, and will continue to evaluate, opportunities
to expand our geographic presence and to increase our portfolio of managed
services. Our expansion strategy involves risks, such as integration risks,
diversion of management attention and the possible incurrence of additional
debt. Each of our three business groups is subject to additional risks. For
more information about these and other risks, see "Risk Factors" beginning on
page 5 of the accompanying prospectus. You should carefully consider these risk
factors together with all of the other information included in the prospectus.
This prospectus supplement and the accompanying prospectus include
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Exchange Act of 1934. Forward
looking 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," "estimate," "expect," "will be," "will continue," "will likely
result," "project," "intend," "plan," "believe" and other words and terms of
similar meaning in conjunction with a discussion of future operating or
financial performance.
Forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors (many of which are beyond our
control) that could cause actual results to differ materially from the future
results expressed or implied by such forward-looking statements. The
forward-looking statements regarding such matters are based on certain
assumptions and analyses made by us in light of our experience and our
perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate in the
circumstances.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, we cannot assure you that such expectations will be
correct. Important factors that could cause actual results to differ materially
from such expectations are disclosed below and in the accompanying prospectus.
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 prospectus
supplement, the accompanying prospectus, in filings made with the Securities
and Exchange Commission or that may be made elsewhere from time to time by, or
on behalf of, us.
Prior to this offering, there has been no public market for the notes.
Neither the Company nor ARAMARK intends to apply for listing of the notes on
any securities exchange. The underwriters may assist in resales of the notes,
but it is not required to do so. Although we expect that the notes will be made
eligible for trading through Market Axess, a secondary market for the notes may
not develop. If a secondary market does develop, it might not continue or it
might not be sufficiently liquid to allow you to resell any of your notes. If
any active public market does not develop, the market price and liquidity of
the notes may be adversely affected.
S-6
USE OF PROCEEDS
The net proceeds from this offering, after deducting discounts and
commissions and estimated expenses of the offering, will be approximately
$297.1 million. We intend to use the net proceeds from the sale of the notes to
repay borrowings under the bridge financing facility and the senior revolving
credit facility described below. In connection with the expiration of transfer
restrictions relating to shares of our Class A common stock on June 10, 2002,
ARAMARK is exploring various alternatives to increase liquidity in the market
for ARAMARK's publicly traded stock. Such alternatives may include share
buyback programs and similar measures. Any such program would be subject to
approval by ARAMARK's Board of Directors. Such measures, if undertaken, may
require additional borrowings under our existing senior revolving credit
facility.
On November 30, 2001, we completed the acquisition of the management
services division of The ServiceMaster Company (ServiceMaster Management
Services). We financed our acquisition of ServiceMaster Management Services and
related expenses by borrowing approximately an additional $200 million under
our existing senior revolving credit facility and $600 million under a new
bridge financing facility with a group of banks arranged by JPMorgan Chase
Bank, an affiliate of J.P. Morgan Securities Inc. A portion of the bridge
financing was repaid with proceeds from the public offering of class B common
stock completed on December 14, 2001.
As of March 29, 2002, there was $245 million outstanding under the bridge
financing facility. The bridge financing facility is unsecured and has a
one-year term, beginning on November 30, 2001. The Company is the borrower
under the bridge financing facility and ARAMARK and certain other subsidiaries
guarantee the obligations in the same manner as our senior revolving credit
facility. Interest under the bridge financing facility is based on, at our
option, LIBOR plus a spread ranging from 1.125% to 1.875% per annum and an
initial spread of 1.375% (with the spread increasing by 0.25% after six months
and by an additional 0.25% after nine months) or the higher of the prime rate
or 0.5% per annum over the federal funds rate. At March 29, 2002, the interest
rate on the bridge financing facility was 3.2%.
The Company is the borrower under a non-amortizing $1.0 billion senior
revolving credit facility, which matures in March 2005. Interest under the
senior revolving credit facility is based on, at our option, LIBOR plus a
spread ranging from 0.18% to 0.70% per annum, the certificate of deposit rate
plus a spread ranging from 0.28% to 0.80% per annum or the higher of the prime
rate or 0.50% per annum over the federal funds rate. The spread and fee margins
are based on certain financial ratios. The weighted average interest rate
including the commitment fee under the senior revolving credit facility on
March 29, 2002 was 2.4%. At March 29, 2002, there was approximately $500
million borrowings outstanding under this facility. Repayments of borrowings
under the senior revolving credit facility will not reduce the amount of
commitments under the facility.
Pending these uses, any net proceeds from this offering may be invested in
short-term, investment grade, interest-bearing securities, certificates of
deposit or direct or guaranteed obligations of the United States or may be used
for other general corporate purposes.
S-7
CAPITALIZATION
The following table shows the consolidated capitalization of ARAMARK as of
December 28, 2001 (1) on an historical basis, (2) on a pro forma basis after
giving effect to the repurchase of shares pursuant to the tender offer
completed on January 25, 2002 for total consideration of $314 million,
including transaction costs, and the additional repayment of $205 million
related to the ServiceMaster Management Services bridge financing, and (3) as
adjusted for the issuance of the notes and the application of the net proceeds
to repay borrowings under the bridge financing facility and the senior
revolving credit facility.
You should read this table in conjunction with the consolidated financial
statements and the related notes thereto contained in ARAMARK's fiscal 2001
Form 10-K and in ARAMARK's Quarterly Report on Form 10-Q for the three month
period ended December 28, 2001, each of which is incorporated into this
prospectus supplement and prospectus by reference and Management's Discussion
and Analysis of Results of Operations and Financial Condition included
elsewhere in this prospectus supplement.
December 28, 2001
----------------------------
Actual Pro forma Adjusted
-------- --------- --------
(in millions)
Long-Term Borrowings (including current maturities):
Senior Revolving Credit Facility (variable rate)(1)(2)(3).. $ 148.9 $ 667.9 $ 615.8
Bridge Financing Facility (variable rate) (2)(3)........... 450.0 245.0 --
Canadian Credit Facility (variable rate)................... 37.8 37.8 37.8
Bank Term Loan due July 2003 (variable rate)............... 45.0 45.0 45.0
Bank Term Loan due May 2005 (variable rate)(1)............. 125.0 125.0 125.0
United Kingdom term loan due December 2005 (variable rate). 20.0 20.0 20.0
6.75% Notes, due August 2004............................... 299.4 299.4 299.4
6.79% Notes, payable in installments through 2003.......... 50.0 50.0 50.0
7.00% Notes, due July 2006................................. 300.0 300.0 300.0
7.10% Notes, due December 2006............................. 124.9 124.9 124.9
7.25% Notes, due August 2007............................... 30.7 30.7 30.7
8.15% Notes, due May 2005.................................. 150.0 150.0 150.0
Other Senior Debt.......................................... 92.9 92.9 92.9
The Notes(3)............................................... -- -- 299.4
-------- -------- --------
Total debt............................................. 1,874.6 2,188.6 2,190.9
-------- -------- --------
Shareholders' Equity:
Common stock............................................... 2.0 2.0 2.0
Capital surplus............................................ 743.8 743.8 743.8
Earnings retained for use in the business.................. 334.6 334.6 334.6
Accumulated other comprehensive loss....................... (24.9) (24.9) (24.9)
Treasury stock(2).......................................... (75.4) (389.4) (389.4)
-------- -------- --------
Total shareholders' equity............................. 980.1 666.1 666.1
-------- -------- --------
Total capitalization................................ $2.854.7 $2,854.7 $2,857.0
======== ======== ========
- --------
(1) At December 28, 2001, there were in effect various interest rate swap
agreements which fix the rate on $200 million of variable rate debt at an
average effective rate of 8.3% for remaining periods ranging between 5
months and 17 months.
(2) The pro forma data reflect (a) the repurchase of approximately 13.7 million
shares of Class A common stock at $23 per share pursuant to the tender
offer completed on January 25, 2002 for approximately $314 million, and (b)
a partial repayment of the bridge financing facility of $205 million in
January 2002. Both were financed through additional borrowings under the
senior revolving credit facility.
(3) Assumes the issuance of the Notes net of underwriting fees and other
issuance costs of approximately $2.3 million. Net proceeds were used to
repay borrowings under the bridge financing and senior revolving credit
facilities.
S-8
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data. This
information should be read in conjunction with, and is qualified in its
entirety by reference to, ARAMARK's consolidated financial statements and the
related notes thereto contained in ARAMARK's fiscal 2001 Form 10-K and in
ARAMARK's Quarterly Report on Form 10-Q for the three month period ended
December 28, 2001, each of which is incorporated herein by reference and
Management's Discussion and Analysis of Results of Operations and Financial
Condition included elsewhere in this prospectus supplement. The income
statement data for the three months ended December 29, 2000 and December 28,
2001 and the balance sheet data as of December 28, 2001 have been derived from
unaudited financial statements, but in the opinion of management, those
unaudited financial statements reflect all adjustments necessary for a fair
presentation of the information contained therein.
ARAMARK Corporation and Subsidiaries
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Fiscal Year Ended on or near September 30, Three Months Ended
--------------------------------------------------- ------------------------
December 29, December 28,
1997 (1) 1998 (2) 1999 2000 2001 (3) (4) 2000 (3) (4) 2001 (3) (4)
-------- -------- -------- -------- ------------ ------------ ------------
(in millions, except per share amounts and ratios)
Income Statement Data:
Sales........................ $6,576.1 $6,638.9 $6,742.3 $7,262.9 $7,788.7 $1,947.3 $2,109.7
Operating income (4)......... 331.9 333.1 375.2 419.6 439.5 111.9 117.9
Interest and other financing
costs, net.................. 116.0 117.3 135.8 147.8 153.3 40.6 35.5
Income before extraordinary
item........................ 146.1 133.7 150.2 168.0 176.5 43.4 51.4
Net income (4)............... 146.1 129.2 150.2 168.0 176.5 43.4 51.4
Earnings per share (4) (5):
Basic..................... $ 0.58 $ 0.57 $ 0.80 $ 0.94 $ 1.03 $ 0.26 $ 0.29
Diluted................... $ 0.55 $ 0.53 $ 0.74 $ 0.88 $ 0.97 $ 0.24 $ 0.27
Ratio of earnings to fixed
charges (6)................. 2.3x 2.3x 2.2x 2.3x 2.3x 2.2x 2.5x
Balance sheet data (at period
end):
Total assets................. $2,753.6 $2,741.3 $2,870.5 $3,199.4 $3,216.4 $4,168.5
Long-term borrowings......... 1,213.9 1,705.0 1,609.7 1,777.7 1,635.9 1,828.0
Common stock subject to
potential repurchase (7).... 23.3 20.0 20.0 20.0 20.0 --
Shareholders' equity
(deficit) (8)............... 370.0 (78.9) 126.6 111.5 246.9 980.2
Other Financial Data:
EBITDA (9)................... $ 523.6 $ 528.9 $ 568.9 $ 640.4 $ 679.7 $ 170.5 $ 178.3
Net cash provided by/(used
in) operating activities.... 230.1 276.7 293.2 407.1 496.9 (78.7) (42.6)
Net cash used in investing
activities.................. (59.7) (189.6) (216.2) (483.6) (279.2) (48.8) (817.7)
Net cash provided by/(used
in) financing activities.... (168.3) (93.8) (69.9) 73.4 (217.5) 132.6 862.7
- --------
(1) Fiscal 1997 is a fifty-three week period, and includes other income of
$11.7 million.
(2) During fiscal 1998, the Company redeemed or replaced certain indebtedness,
resulting in extraordinary charges, net of taxes, of $4.5 million, or $0.04
per share.
(3) On November 30, 2001, ARAMARK completed the acquisition of the management
services division of the ServiceMaster Company (ServiceMaster Management
Services) for approximately $800 million in cash. The following pro forma
results assume the acquisition had occurred at the beginning of the
respective fiscal periods. These pro forma disclosures are unaudited and
are based on historical results, adjusted for the impact of certain
acquisition related items, such as: amortization of intangibles, increased
interest expense on acquisition debt and the related income tax effects.
Pro forma results do not reflect any synergies that might be achieved from
the combined operations, and therefore, in management's opinion, are not
indicative of what actual results may have been if the acquisition had
occurred at the beginning of the respective periods. Pro forma results are
not intended to be a projection of future results.
Three Months Ended Three Months Ended
Fiscal 2001 December 29, 2000 December 28, 2001
----------- ------------------ ------------------
Sales.................................. $8,768.9 $2,109.8 $2,271.2
Operating income....................... 486.8 125.7 124.2
Interest and other financing costs, net 206.4 56.7 41.1
Net income............................. 172.6 41.9 51.8
Earnings per share:
Basic.................................. $ 1.01 $ 0.25 $ 0.29
Diluted................................ 0.95 0.23 0.28
EBITDA (9)............................. 776.5 196.5 192.9
S-9
(4) ARAMARK adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" at the
beginning of fiscal 2002. With the adoption of SFAS No. 142, goodwill is no
longer subject to amortization. The elimination of goodwill amortization
would have increased operating income by $6.1 million, net income by
$5.3 million and basic and diluted earnings per share by $0.03 per share
for the three months ended December 29, 2000. The elimination of goodwill
amortization would have increased operating income by $25.4 million, net
income by $22.0 million, basic earnings per share by $0.13 per share and
diluted earnings per share by $0.12 per share for fiscal 2001. The
elimination of goodwill amortization would have resulted in a ratio of
earnings to fixed changes of 2.3x and 2.4x for the three months ended
December 29, 2000 and the fiscal year ended September 28, 2001,
respectively.
(5) Earnings per share amounts for all years presented have been restated to
reflect the merger exchange ratios, which had the effect of a two-for-one
stock split.
(6) For the purpose of determining the ratio of earnings to fixed charges,
earnings include pre-tax income plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest on all indebtedness (including
capitalized interest) plus that portion of operating lease rentals
representative of the interest factor (deemed to be one-third of operating
lease rentals).
(7) Excludes shares subject to repurchase in the tender offer. Reflects shares
of ARAMARK's common stock that prior to our corporate reorganization and
public offering on December 14, 2001, may have been required to be
repurchased under the ARAMARK stockholders' agreement, subject to a limit
on such repurchases in the ARAMARK senior revolving credit facility. In
connection with the stockholder vote on the corporate reorganization, the
stockholders' agreement was terminated.
(8) Fiscal 1998 shareholders' equity (deficit) reflects the repurchase of
approximately $530 million of the Company's Class A common stock pursuant
to a cash tender offer in June 1998. Shareholders' equity, as of December
28, 2001, reflects the impact of the public offering and the stock buyback
of 3.3 million shares of Class A common stock from employee benefit plans.
Shareholders' equity as of December 28, 2001 does not reflect the effect of
our tender offer which was completed in the second quarter of fiscal 2002
in which we acquired 13.7 million shares of class A common stock for
approximately $314 million.
(9) EBITDA represents net income before interest, taxes, depreciation and
amortization, a measurement used by management to measure operating
performance. EBITDA is not a recognized term under generally accepted
accounting principles and does not purport to be an alternative to
operating income as an indicator of operating performance or to cash flows
from operating activities as a measure of liquidity. Because not all
companies calculate EBITDA identically, this presentation of EBITDA may not
be comparable to other similarly titled measures of other companies.
Additionally, EBITDA is not intended to be a measure of free cash flow for
management's discretionary use, as it does not consider certain cash
requirements such as interest payments, debt service requirements, tax
payments or capital expenditure requirements.
S-10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis of our results of operations and
financial condition for the fiscal years ended September 29, 2000 and September
28, 2001 and for the three months ended December 29, 2000 and December 28, 2001
should be read in conjunction with Selected Consolidated Financial Data and our
audited consolidated financial statements and the notes to those statements
contained in ARAMARK's fiscal 2001 Form 10-K and in ARAMARK's Quarterly Report
on Form 10-Q for the three month period ended December 28, 2001, each of which
is incorporated into this prospectus supplement and prospectus by reference.
Our discussion contains forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Actual results and the timing of
events could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those set forth under
the Risk Factors section and elsewhere in this prospectus supplement and in the
Special Note About Forward Looking Statements and Risk Factors sections in the
accompanying prospectus.
Three Months Fiscal 2002 Compared to Three Months Fiscal 2001
Results of Operations
The following tables present our sales and operating income, and related
percentages attributable to each operating segment for the three months ended
December 29, 2000 and December 28, 2001. As discussed in Note 3 to the
condensed consolidated financial statements contained in ARAMARK's Quarterly
Report on Form 10-Q for the three month period ended December 28, 2001
incorporated herein by reference, the Company adopted the provisions of SFAS
No. 142, Goodwill and Other Intangible Assets, as of the beginning of fiscal
2002. As prescribed by SFAS No. 142, goodwill is no longer amortized, but must
be reviewed periodically for impairment. Accordingly, no goodwill amortization
is reflected in the fiscal 2002 results shown below. To facilitate
comparability, the Pro Forma fiscal 2001 amounts shown below have been adjusted
to eliminate goodwill amortization from the fiscal 2001 as reported results.
The following discussion of results compares fiscal 2002 operating results to
the Pro Forma fiscal 2001 results.
Three Months Ended
------------------------------------
December 29, 2000 December 28, 2001
----------------- -----------------
Sales $ % $ %
----- -------- ---- -------- ----
(dollars in millions)
Food & Support Services--United States.... $1,186.3 61% $1,313.2 62%
Food & Support Services--International.... 265.3 13 304.2 15
Uniform & Career Apparel--Rental.......... 250.4 13 250.6 12
Uniform & Career Apparel--Direct Marketing 132.1 7 128.5 6
Educational Resources..................... 113.2 6 113.2 5
-------- ---- -------- ----
$1,947.3 100% $2,109.7 100%
======== ==== ======== ====
Three Months Ended
------------------------------------------------------
Pro Forma
December 29, 2000 December 29, 2000 December 28, 2001
----------------- ---------------- -----------------
Operating Income $ % $ % $ %
---------------- -------- ---- -------- ---- --------- ----
(dollars in millions)
Food & Support Services--United States.... $ 60.4 54% $ 63.0 53% $ 67.0 57%
Food & Support Services--International.... 9.9 9 10.2 9 11.5 10
Uniform & Career Apparel--Rental.......... 32.0 28 33.3 28 30.3 26
Uniform & Career Apparel--Direct Marketing 8.8 8 9.6 8 9.8 8
Educational Resources..................... 6.5 6 7.3 6 7.2 6
-------- ---- -------- ---- --------- ----
117.6 105 123.4 104 125.8 107
Corporate and Other....................... (5.7) (5) (5.4) (4) (7.8) (7)
-------- ---- -------- ---- --------- ----
$ 111.9 100% $ 118.0 100% $ 118.0 100%
======== ==== ======== ==== ========= ====
S-11
Consolidated Overview
Sales for the first quarter of fiscal 2002 were $2.1 billion, an increase of
8% over fiscal 2001, driven by double-digit sales growth in the Food and
Support Services segments, while sales in the Uniform and Career Apparel
segments and the Educational Resources segment were essentially equal to the
prior year. Excluding the impact of acquisitions and foreign currency
translation, sales for the first quarter of fiscal 2002 increased 2% over the
prior year period. Operating income for the first quarter of fiscal 2002 of
$118 million was equal to the prior year pro forma operating income. Excluding
the impact of acquisitions, an unusual net gain in the first quarter of fiscal
2001 (see Note 8 to the condensed consolidated financial statements), and
foreign currency translation, consolidated operating income decreased 2%
compared to the prior year period. Higher unemployment levels in the United
States, particularly in the manufacturing and automotive sectors, the general
economic slowdown in the United States and the continuing effects of the
September 11, 2001 terrorist attacks, continued to adversely impact the 2002
first quarter results. Had the terrorist attacks of September 11/th/ not
occurred, management estimates that consolidated operating income, net income
and diluted earnings per share would have been approximately 3%, 4% and 4%
higher than reported, respectively.
Interest and other financing costs, net for the first quarter of fiscal 2002
decreased $5.1 million or 13% compared to the prior year due primarily to lower
interest rates. The effective tax rate for the first quarter of fiscal 2002 was
37.6% compared to 39.1% in the prior year first quarter, with the decrease due
primarily to the change in accounting for goodwill amortization. On a Pro Forma
basis adjusting to eliminate goodwill amortization in the fiscal 2001 period,
the effective tax rate was 37%.
Net income for the first quarter of fiscal 2002 of $51.4 million, was 6%
higher than the same quarter last year, adjusted for the goodwill accounting
change. This resulted in first quarter 2002 diluted earnings per share of
$0.27, based on a weighted average share count for the quarter of 188 million
shares. In the first quarter of 2001 our diluted EPS, adjusted for goodwill,
was also $0.27 per share on a lower base of 181 million shares.
Segment Results
Three Months Ended
-----------------------------
December Change
----------------- -----------
Sales by Segment 2000 2001 $ %
---------------- -------- -------- ------ ---
(dollars in millions)
Food & Support Services--United States.... $1,186.3 $1,313.2 $126.9 11%
Food & Support Services--International.... 265.3 304.2 38.9 15
Uniform & Career Apparel--Rental.......... 250.4 250.6 0.2 --
Uniform & Career Apparel--Direct Marketing 132.1 128.5 (3.6) (3)
Educational Resources..................... 113.2 113.2 0.0 --
-------- -------- ------ ---
Consolidated Sales........................ $1,947.3 $2,109.7 $162.4 8%
======== ======== ====== ===
Food and Support Services--United States segment sales increased 11% over
the prior year due to acquisitions, primarily ServiceMaster Management
Services, (approximately 8%) and net new accounts (approximately 3%). Sales
growth was strong in the Education, Healthcare and Correctional sectors, while
sales in the Business and Sports & Entertainment sectors decreased versus the
prior year due to continued softness in the economy, particularly depressed
employment levels in the manufacturing and automotive sectors, and the
continuing impact of the September 11/th/ terrorist attacks. Had the terrorist
attacks not occurred, management estimates that segment sales for the first
quarter of fiscal 2002 would have been approximately 1% higher than reported.
Sales in the Food and Support Services--International segment increased 15%
over the prior year period due to net new accounts (approximately 5%),
increased volume (approximately 3%) and the impact of acquisitions
(approximately 7%), with continued double digit growth in the United Kingdom
and strong single digit growth in the European markets. Sales in the Uniform
and Career Apparel--Rental segment were level with the prior year, with the
impact of price increases (approximately 1%) being offset by lower volume.
Sales growth
S-12
in this segment continues to be constrained by softness in the manufacturing,
automotive and airline sectors. Uniform and Career Apparel--Direct Marketing
segment sales decreased 3% compared to the prior year. The decrease was due
primarily to lower volume in work clothing products, partially offset by
increased sales of safety products. Again, the general softening of the
economy, a decrease in business spending and the mild winter weather have
adversely impacted first quarter 2002 sales in this segment. Educational
Resources segment sales were flat compared to the prior year with increases due
to pricing and new locations (approximately 2% and 3%, respectively) being
offset by the impact of lower enrollment at existing locations and closed
centers (approximately 3% and 2%, respectively).
Three Months Ended Change vs. Change vs.
December Reported Pro Forma
------------------------ ------------ -----------
Pro Forma
Operating Income by Segment 2000 2000 2001 $ % $ %
--------------------------- ------ --------- ------ ------ ---- ------ ---
(dollars in millions)
Food & Support Services--United States.... $ 60.4 $ 63.0 $ 67.0 $ 6.6 11% $ 4.0 6%
Food & Support Services--International.... 9.9 10.2 11.5 1.6 16 1.3 13
Uniform & Career Apparel--Rental.......... 32.0 33.3 30.3 (1.7) (5) (3.0) (9)
Uniform & Career Apparel--Direct Marketing 8.8 9.6 9.8 1.0 12 0.2 3
Educational Resources..................... 6.5 7.3 7.2 0.7 11 (0.1) (1)
Corporate and Other....................... (5.7) (5.4) (7.8) (2.1) 37 (2.4) 45
------ ------ ------ ------ ---- ------ ---
Consolidating Operating Income............ $111.9 $118.0 $118.0 $ 6.1 5% $ 0.0 0%
====== ====== ====== ====== ==== ====== ===
Food and Support Services--United States segment operating income increased
6%. Excluding the impact of acquisitions, operating income increased 1%. Strong
earnings growth in the Education and Healthcare sectors was largely offset by
lower earnings in the Business and Sports and Entertainment sectors compared to
the prior year period. Reduced employment levels and continuing soft economic
conditions (including the ongoing effects of the September 11/th/ terrorist
attacks) adversely impacted the first quarter results. Management estimates
that had the September 11/th/ terrorist attacks not occurred, first quarter
fiscal 2002 operating income in this segment would have been approximately 5%
higher than reported. Operating income in the Food and Support
Services--International segment increased 13%. Excluding the impact of
acquisitions and foreign currency translation, segment operating income
increased 6% over the prior year period due to the sales increases noted above,
partially offset by increased infrastructure costs and costs related to new
account acquisitions. Uniform and Career Apparel--Rental segment operating
income decreased 9% versus the prior year. The slowdown in the United States
economy has constrained both volume and pricing growth, negatively impacting
operating income. Operating income in the Uniform and Career Apparel--Direct
Marketing segment increased 3% over the prior year due to reduced product cost
and administrative expenses, partially offset by the impact of lower sales.
Educational Resources segment operating income decreased 1%. Operating results
in this segment continue to be adversely affected by reduced enrollment at
mature centers, partially offset by the impact of cost control initiatives to
reduce overhead costs. Excluding the unusual $1.6 million net gain included in
the prior year first quarter (see Note 8 to the condensed consolidated
financial statements), Corporate and Other costs increased 12% due primarily to
indirect costs related to the public offering process.
As discussed above, the continuing impact of the events of September 11,
2001 and the economic slowdown in the United States have negatively affected
fiscal 2002 first quarter operating results, and we anticipate such conditions
will continue into the second quarter of fiscal 2002.
S-13
Fiscal 2001 Compared to Fiscal 2000
Results of Operations
The following tables present our sales and operating income and related
percentages attributable to each operating segment for fiscal years 2000 and
2001.
Fiscal
------------------------------
2000 2001
-------------- --------------
Sales $ % $ %
----- -------- ---- -------- ----
(dollars in millions)
Food and Support Services--United States.... $4,396.3 61% $4,782.1 61%
Food and Support Services--International.... 1,001.9 14 1,109.3 14
Uniform and Career Apparel--Rental.......... 969.6 13 995.2 13
Uniform and Career Apparel--Direct Marketing 455.7 6 438.8 6
Educational Resources....................... 439.4 6 463.3 6
-------- ---- -------- ----
$7,262.9 100% $7,788.7 100%
======== ==== ======== ====
Fiscal
------------------------------
2000 2001
-------------- --------------
Operating Income $ % $ %
---------------- -------- ---- -------- ----
(dollars in millions)
Food and Support Services--United States.... $ 244.5 58% $ 264.7 60%
Food and Support Services--International.... 40.2 10 39.4 9
Uniform and Career Apparel--Rental.......... 118.5 28 119.7 27
Uniform and Career Apparel--Direct Marketing 10.8 2 15.6 4
Educational Resources....................... 32.3 8 25.4 6
-------- ---- -------- ----
446.3 464.8
Corporate and other......................... (26.7) (6) (25.3) (6)
-------- ---- -------- ----
$ 419.6 100% $ 439.5 100%
======== ==== ======== ====
Consolidated Overview
Sales for fiscal 2001 were $7.8 billion, an increase of 7% over fiscal 2000.
Sales increases in the Food and Support Services segments, the Uniform and
Career Apparel--Rental segment, and the Educational Resources segment were
partially offset by a decline in sales in the Uniform and Career
Apparel--Direct Marketing segment. Excluding the impact of acquisitions,
primarily in the Food and Support Services segments, and the unfavorable impact
of foreign currency translation, sales for fiscal 2001 increased 4% over the
prior year. Further excluding the estimated effect on sales of the September
11/th/ terrorist attacks, the increase would have been approximately 5%.
Operating income of $439.5 million increased $19.9 million or 5% over the prior
year. Excluding the impact of acquisitions and foreign currency translation,
operating income increased 3%. Higher unemployment levels in the United States
manufacturing and automotive sectors, along with increased energy costs, the
general economic slowdown in the United States, a litigation related charge,
and the terrorist attacks of September 11, 2001, have adversely impacted the
fiscal 2001 results. As discussed below, the Company was directly and
indirectly impacted by the terrorist attacks on September 11/th/ (primarily in
the Food and Support Services--United States segment). Had the terrorist
attacks not occurred, management estimates that operating income, net income
and diluted earnings per share would have been approximately 2%, 3% and 3%
higher in fiscal 2001, respectively.
Interest and other financing costs, net for fiscal 2001 increased 4%
compared to the prior year due to increased borrowing levels to fund
acquisitions, stock repurchases and working capital requirements, partially
offset by the impact of lower interest rates.
S-14
Segment Results
Fiscal Change
----------------- ------------
Sales by Segment 2000 2001 $ %
---------------- -------- -------- ------ ----
(dollars in millions)
Food and Support Services--United States.... $4,396.3 $4,782.1 $385.8 8.8%
Food and Support Services--International.... 1,001.9 1,109.3 107.4 10.7
Uniform and Career Apparel--Rental.......... 969.6 995.2 25.6 2.6
Uniform and Career Apparel--Direct Marketing 455.7 438.8 (16.9) (3.7)
Educational Resources....................... 439.4 463.3 23.9 5.4
-------- -------- ------ ----
Consolidated Sales.......................... $7,262.9 $7,788.7 $525.8 7.2%
======== ======== ====== ====
Food and Support Services--United States segment sales increased 9% over the
prior year due to acquisitions, primarily the Ogden Entertainment, Inc.
acquisition in the third quarter of fiscal 2000 (approximately 5%), net new
accounts (approximately 2%) and increased volume (approximately 2%). Softness
in employment levels, particularly in the manufacturing and automotive sectors,
slowed growth in the business services and vending sectors, while sales growth
was strong in the correctional and healthcare sectors. Sales in the sports and
entertainment sector were also adversely impacted by the general economic
slowdown and the terrorist attacks of September 11/th/. As a result of the
events of September 11/th/, customer locations in and around the World Trade
Center were either destroyed or closed and Major League Baseball and National
Football League games scheduled for September were postponed until fiscal 2002.
Had the terrorists attacks not occurred, management estimates that segment
sales would have been approximately 1% higher. Sales in the Food and Support
Services--International segment increased 11% over the prior year period.
Excluding the unfavorable impact of foreign currency translation, sales
increased 18% due to net new accounts (approximately 8%), increased volume
(approximately 5%) and the impact of the Campbell Bewley acquisition
(approximately 5%), with double-digit growth in the United Kingdom and European
markets. Sales in the Uniform and Career Apparel--Rental segment increased 3%
due to increased volume (approximately 2%) and pricing (approximately 1%).
Sales growth in this sector has been constrained by softness in the
manufacturing, automotive and airline sectors. Uniform and Career
Apparel--Direct Marketing segment sales decreased 4% compared to the prior year
due primarily to lower volume. The general softening of the economy and a
decrease in business spending have adversely impacted 2001 sales in this
segment. In fiscal 2000, sales to the safety equipment and accessories market
were adversely impacted by the startup of a distribution facility. Educational
Resources segment sales increased 5% over the prior year due primarily to
pricing (approximately 3%) and new locations (approximately 6%), partially
offset by lower enrollment at existing locations (approximately 4%).
Fiscal Change
-------------- ------------
Operating Income by Segment 2000 2001 $ %
--------------------------- ------ ------ ----- -----
(dollars in millions)
Food and Support Services--United States.... $244.5 $264.7 $20.2 8.3%
Food and Support Services--International.... 40.2 39.4 (0.8) (2.0)
Uniform and Career Apparel--Rental.......... 118.5 119.7 1.2 1.0
Uniform and Career Apparel--Direct Marketing 10.8 15.6 4.8 44.4
Educational Resources....................... 32.3 25.4 (6.9) (21.4)
Corporate and other......................... (26.7) (25.3) 1.4 5.2
------ ------ ----- -----
Consolidated Operating Income............... $419.6 $439.5 $19.9 4.7%
====== ====== ===== =====
Food and Support Services--United States segment operating income increased
8%. Excluding the impact of acquisitions, operating income increased 4% due to
the sales increases noted above, partially offset by the impact of the
September 11/th/ events, a litigation related charge and startup costs on a
large correctional services contract in the fourth quarter of fiscal 2001.
Excluding the litigation charge and startup costs, reported segment operating
income increased 12%. Additionally, had the terrorist attacks not occurred,
management estimates that
S-15
2001 segment operating income would have been approximately 3% higher than
reported. Reduced employment levels and generally soft economic conditions
(including the September 11/th/ impact) constrained profit growth, particularly
in the second half of fiscal 2001. Operating income in the Food and Support
Services--International segment decreased 2%. Excluding the unfavorable impact
of foreign currency translation, acquisitions, and an asset sale gain in the
prior year, segment operating income increased 14% over the prior year due to
the sales increases noted above, partially offset by increased infrastructure
and acquisition integration costs in the U.K. and increased food costs in
Germany as a result of previous bovine spongiform encephalopathy (BSE), or
so-called "mad cow disease," and foot and mouth disease outbreaks in Europe.
Uniform and Career Apparel--Rental segment operating income increased 1% over
the prior year due to the sales increases noted above and the absence of
garment manufacturing startup costs incurred in the prior year, partially
offset by increased fuel, energy and other operating costs. The slowdown in the
United States economy has constrained both volume and pricing growth,
negatively impacting operating income, particularly in the last half of fiscal
2001. Operating income in the Uniform and Career Apparel--Direct Marketing
segment increased 44% over the prior year due to reduced catalog, distribution
and administrative expenses, partially offset by the impact of lower sales.
Additionally, operating results in the segment were adversely impacted in the
prior year by start up costs related to a distribution facility. Educational
Resources segment operating income decreased 21%. Operating results in this
segment continue to be adversely affected by reduced enrollment at mature
centers and continuing high labor and employee medical costs.
Financial Condition and Liquidity
Reference to the condensed consolidated statements of cash flows contained
in ARAMARK's Quarterly Report on Form 10-Q will facilitate understanding of the
discussion that follows.
Cash used in operating activities in the first quarter was $42 million in
fiscal 2002. Excluding the impact of the accounts receivable sale, cash used in
operating activities was $84 million, comparable to the $79 million in fiscal
2001. Debt increased by $204 million, primarily due to the ServiceMaster
Management Services acquisition, the repurchase of stock from employee benefit
plans discussed below, and seasonal working capital requirements, partially
offset by the proceeds from our initial public stock offering.
As discussed further in Note 9 to the condensed consolidated financial
statements, on November 30, 2001, the Company completed the acquisition of the
management services division of The ServiceMaster Company (the ServiceMaster
Management Services business) for approximately $800 million. The acquisition
financing consisted of $200 million from the Company's revolving credit
facility and $600 million under a bridge financing facility with a group of
banks. The bridge facility is unsecured and matures on November 30, 2002. In
December 2001, $150 million of the bridge facility was repaid with a portion of
the proceeds from the initial public offering. An additional $200 million was
repaid in January 2002 and the Company currently intends to refinance the
remainder of the bridge financing with the proceeds of this offering.
As discussed further in Note 2 to the condensed consolidated financial
statements, on December 14, 2001, the Company completed an initial public
offering (IPO) of 34.5 million shares of its Class B common stock at a price of
$23.00 per share, raising approximately $743 million, net of issuance costs.
The proceeds from the IPO were used to complete a tender offer for up to 10% of
the outstanding Class A shares and to repay indebtedness under the bridge
facility and the revolving credit facility. Specifically, on December 14, 2001,
the Company purchased from its employee benefit plans approximately 3.3 million
Class A shares for $75.4 million, and on January 25, 2002 the Company completed
the tender offer for its class A common stock and purchased 13.7 million shares
for approximately $314 million.
Also, during the first quarter of fiscal 2002, pursuant to the ARAMARK
Ownership Program, employees purchased 481,170 shares or $2.5 million of Class
A Common Stock for $0.2 million cash plus $2.3 million of deferred payment
obligations. Additionally, on January 15, 2002, the Company completed the
annual stock option exercise period, resulting in the issuance of an additional
6.6 million shares.
S-16
At March 29, 2002, there is approximately $500 million of unused committed
credit availability under our senior revolving credit facility. The Company
currently expects to fund acquisitions, capital expenditures and other
liquidity needs from cash provided from operating activities, normal disposals
of property and equipment, and borrowings available under our credit facilities
or note issuances. As of March 29, 2002, there were approximately $85 million
outstanding in foreign currency borrowings.
New Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. In August 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. The Company is required to adopt these standards no later
than the beginning of fiscal 2003, and is currently evaluating the impact of
both.
S-17
DESCRIPTION OF NOTES
The following description of the notes (referred to in the accompanying
prospectus as the "Guaranteed Debt Securities") supplements the more general
description of the Guaranteed Debt Securities that appears in the accompanying
prospectus. You should read this section together with the section entitled
"Description of Our Debt Securities" in the accompanying prospectus. If there
are any inconsistencies between the information in this section and the
information in the prospectus, the information in this section controls. The
following summary of certain terms of the notes and the 2002 Guaranteed
Indenture (as defined below) does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Trust Indenture Act of
1939, as amended (the "TIA"), and to all of the provisions of the 2002
Guaranteed Indenture and those terms made a part of the 2002 Guaranteed
Indenture by reference to the TIA as in effect on the date of the closing of
the offering of the notes. Any capitalized terms that are defined in the
prospectus have the same meanings in this section unless a different definition
appears in this section.
General
The 7.00% notes due 2007 offered hereby are a series of Guaranteed Debt
Securities described in the accompanying prospectus.
The notes will be senior unsecured obligations of Services and will rank
equally with all other unsecured and senior indebtedness of Services. The notes
will mature at 100% of their principal amount on May 1, 2007 and will be
initially limited to an aggregate principal amount of $300,000,000. The 2002
Guaranteed Indenture does not limit the aggregate principal amount of
Guaranteed Debt Securities that may be issued thereunder and Services may,
without the consent of holders of the notes, create and issue additional notes
ranking equally with this series of notes and otherwise similar in all
respects, except the issue date and issue price.
The notes will bear interest at the rate per annum of 7.00% from April 22,
2002 or from the most recent Interest Payment Date to which interest has been
paid or provided for. Interest will be payable semiannually on May 1 and
November 1 of each year, commencing November 1, 2002 to the person in whose
name the note is registered at the close of business on April 15 and October
15, as the case may be, next preceding such Interest Payment Date. Interest
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. The notes will be issued in fully registered form, without coupons, in
denominations of $1,000 and integral multiples thereof.
The notes will be issued under an indenture (the "2002 Guaranteed
Indenture") dated as of April 8, 2002 among Services, as issuer, ARAMARK, as
guarantor, and Bank One Trust Company, National Association, as trustee (the
"Trustee").
The notes will be fully and unconditionally guaranteed on a senior unsecured
basis by ARAMARK (the "Guarantor") which guarantee will rank equally with all
unsecured senior indebtedness of ARAMARK.
The notes will be represented by one or more permanent global notes
registered in the name of The Depository Trust Company ("DTC") or its nominee.
The notes will trade in DTC's same-day funds settlement system until maturity.
Purchases of notes in secondary market trading must therefore be in immediately
available funds. Payment of principal of, and interest on, notes represented by
one or more permanent global notes registered in the name of or held by DTC or
its nominee, as the case may be, will be made in immediately available funds to
DTC or its nominee, as the case may be, as the registered owner and holder of
such permanent global note or notes. See "Global Securities" in the
accompanying prospectus.
S-18
Optional Redemption.
The notes will be redeemable, in whole or in part, at the option of
Services, at any time at a redemption price equal to the greater of:
. 100% of the principal amount of notes then outstanding to be redeemed, or
. as determined by a Quotation Agent, the sum of the present values of the
remaining scheduled payments of principal and interest (not including
the portion of any such payments of interest accrued as of the
redemption date) discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (determined on the third Business Day preceding
such redemption date),
plus, in each case, accrued and unpaid interest on the principal amount of the
note being redeemed to that redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the notes to be redeemed.
If less than all of the notes are to be redeemed, the Trustee will select the
notes to be redeemed by such method as the Trustee deems fair and appropriate.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date, interest will cease to accrue on the notes or portions
called for redemption on that redemption date.
The notes will not be entitled to the benefits of any sinking fund or other
mandatory redemption provisions.
"Adjusted Treasury Rate" means (i) the arithmetic mean of the yields under
the heading "Week Ending" published in the Statistical Release most recently
published prior to the date of determination under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the redemption date, of
the principal being redeemed plus (ii) 0.30%. If no maturity set forth under
such heading exactly corresponds to the maturity of such principal, yields for
the two published maturities most closely corresponding to the maturity of such
principal will be calculated pursuant to the immediately preceding sentence,
and the Adjusted Treasury Rate will be interpolated or extrapolated from such
yields on a straight-line basis, rounding in each of the relevant periods to
the nearest month.
"Business Day" means any day which is not a Saturday, a Sunday or a legal
holiday or a day on which banking institutions or trust companies in New York
City are authorized or obligated by law to close.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
trustee after consultation with us.
"Reference Treasury Dealer" means (1) J.P. Morgan Securities Inc. and its
successors; provided, however, that if the foregoing ceases to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer") the Company will substitute therefor another Primary Treasury Dealer;
and (2) any other Primary Treasury Dealer selected by the trustee after
consultation with us.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively-traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the terms of the notes,
then such other reasonably comparable index which will be designated by the
Company.
Certain Additional Covenants Applicable to the Notes
The covenants relating to the notes will not contain any provisions that are
intended to afford holders of the notes special protection in the event of
acquisitions or other investments that result in additional levels of
indebtedness. At the date of this prospectus supplement, none of the
Guarantor's assets was a Principal Property as defined in these covenants.
S-19
Merger or Consolidation
The 2002 Guaranteed Indenture provides that Services may not consolidate
with or merge with or into or wind up into, whether or not Services is the
surviving corporation, or sell, assign, convey, transfer or lease our
properties and assets substantially as an entirety to any Person, unless:
. the corporation formed by the consolidation or into which Services is
merged or the Person which acquires by conveyance or transfer, or which
leases Services' properties and assets substantially as an entirety (the
"successor corporation") is a corporation organized and existing under
the laws of the United States or any State or territory thereof or the
District of Columbia and expressly assumes by a supplemental indenture
the due and punctual payment of the principal of, and premium, if any,
and interest on all of Services' debt securities issued under the 2002
Guaranteed Indenture and the performance of every covenant in the 2002
Guaranteed Indenture on Services' part to be performed or observed;
. immediately after giving effect to such transaction, no Event of Default
under the 2002 Guaranteed Indenture, and no event which, after notice or
lapse of time, or both, would become an Event of Default, has happened
and is continuing; and
. in the case of a merger or consolidation or other transaction with
respect to Services, ARAMARK shall have confirmed its guarantee of the
successor corporation's obligations.
With respect to Guaranteed Debt Securities, the merger and consolidation
provisions described above are equally applicable to ARAMARK in its capacity as
guarantor of such debt securities.
Limitations on Liens.
ARAMARK will not, and will not permit any Restricted Subsidiary to, issue,
incur, create, assume, guarantee or suffer to exist any debt for borrowed money
secured by a mortgage, security interest, pledge, lien, charge or other
encumbrance (collectively, "mortgages") upon any Principal Property of ARAMARK
or any Restricted Subsidiary or upon any shares of stock or indebtedness of any
Restricted Subsidiary, whether such Principal Property, shares or indebtedness
are now existing or owned or hereafter created or acquired, without effectively
providing concurrently with the issuance, incurrence, creation, assumption or
guarantee of any such secured debt, or the grant of a mortgage with respect to
any such indebtedness, that the notes and related Guarantee (together with, if
ARAMARK so determines, any other indebtedness of or guarantee by ARAMARK
ranking equally with the Guarantee or any indebtedness of or guarantee by any
Restricted Subsidiary, as the case may be) will be secured equally and ratably
with (or, at the option of ARAMARK, prior to) such secured debt.
The foregoing restriction, however, will not apply to:
(a) mortgages on property existing at the time of acquisition by ARAMARK or
any Subsidiary, provided that such mortgages were in existence prior to,
and not incurred in contemplation of, such acquisition;
(b) mortgages on property, shares of stock or indebtedness or other assets
of any corporation existing at the time such corporation becomes a
Restricted Subsidiary, provided that such mortgages are not incurred in
anticipation of such corporation becoming a Restricted Subsidiary;
(c) mortgages on property, shares of stock or indebtedness to secure the
payment of all or any part of the purchase price thereof, or mortgages
on property, shares of stock or indebtedness to secure any indebtedness
for borrowed money incurred prior to, at the time of, or within 270 days
after, the latest of the acquisition thereof, or, in the case of
property, the completion of construction, the completion of
improvements, or the commencement of substantial commercial operation of
such property, for the purpose of financing all or any part of the
purchase price thereof, such construction, or the making of such
improvements;
(d) mortgages to secure indebtedness owing to ARAMARK or to a Restricted
Subsidiary;
(e) mortgages existing at the date of the issuance of the notes and the
related Guarantee;
S-20
(f) mortgages on property of a corporation existing at the time such
corporation is merged into or consolidated with ARAMARK or a Restricted
Subsidiary or at the time of a sale, lease or other disposition of the
properties of a corporation as an entirety or substantially as an
entirety to ARAMARK or a Restricted Subsidiary, provided that such
mortgage was not incurred in anticipation of such merger or
consolidation or sale, lease or other disposition;
(g) mortgages in favor of the United States or any State, territory or
possession thereof (or the District of Columbia), or any department,
agency, instrumentality or political subdivision of the United States or
any State, territory or possession thereof (or the District of
Columbia), to secure partial, progress, advance or other payments
pursuant to any contract or statute or to secure any indebtedness
incurred for the purpose of financing all or any part of the purchase
price or the cost of constructing or improving the property subject to
such mortgages; and
(h) extensions, renewals, refinancings or replacements of any mortgage
referred to in the foregoing clauses (a), (b), (c), (e), (f) and (g);
provided, however, that any mortgages permitted by any of the foregoing
clauses (a), (b), (c), (e), (f) and (g) will not extend to or cover any
property of ARAMARK or such Restricted Subsidiary, as the case may be,
other than the property, if any, specified in such clauses and
improvements.
Notwithstanding the restrictions outlined in the preceding two paragraphs,
ARAMARK or any Restricted Subsidiary will be permitted to issue, incur, create,
assume, guarantee or suffer to exist, debt secured by a mortgage which would
otherwise be subject to such restrictions, without equally and ratably securing
the notes and the related Guarantee, provided that after giving effect thereto,
the sum of (i) all debt so secured by mortgages (not including mortgages
permitted under clauses (a) through (h) above) and (ii) all Attributable Debt
with respect to Sale and Lease-Back Transactions with respect to any Principal
Property, at the time of determination, does not exceed 10% of the Consolidated
Tangible Assets of ARAMARK.
Limitations on Sale and Lease-Back Transactions.
ARAMARK will not, nor will it permit any Restricted Subsidiary to, enter
into any Sale and Lease-Back Transaction with respect to any Principal
Property, other than any such transaction involving a lease for a term of not
more than three years or any such transaction between ARAMARK and a Restricted
Subsidiary or between Restricted Subsidiaries, unless:
(a) ARAMARK or such Restricted Subsidiary would be entitled to incur
indebtedness secured by a mortgage on the Principal Property involved in
such transaction at least equal in amount to the Attributable Debt with
respect to such Sale and Lease-Back Transaction, without equally and
ratably securing the notes, pursuant to the limitation on liens in the
covenant described above; or
(b) ARAMARK will apply an amount equal to the greater of the net proceeds of
such sale or the Attributable Debt with respect to such Sale and
Lease-Back Transaction within 120 days of such sale to either (or a
combination of) the retirement (other than any mandatory retirement,
mandatory prepayment or sinking fund payment or by payment at maturity)
of debt for borrowed money of ARAMARK or a Restricted Subsidiary that
matures more than twelve months after the creation of such indebtedness
or the purchase, construction or development of other comparable
property.
Defined Terms Applicable to Covenants.
"Attributable Debt" when used in connection with a Sale and Lease-Back
Transaction involving a Principal Property means, at the time of determination,
the lesser of: (a) the fair value of such property (as determined in good faith
by the Board of Directors of ARAMARK); or (b) the present value of the total
net amount of rent required to be paid under such lease during the remaining
term thereof (including any renewal term or period for which such lease has
been extended), discounted at the rate of interest set forth or implicit in the
terms of such lease or, if not practicable to determine such rate, the interest
rate per annum borne by the notes compounded semi-annually. For purposes of the
foregoing definition, rent will not include amounts required to be paid by the
S-21
lessee, whether or not designated as rent or additional rent, on account of or
contingent upon maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount will be the lesser of the
net amount determined assuming termination upon the first date such lease may
be terminated (in which case the net amount shall also include the amount of
the penalty, but no rent will be considered as required to be paid under such
lease subsequent to the first date upon which it may be so terminated) or the
net amount determined assuming no such termination.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents, however designated, of corporate stock of
such Person.
"Consolidated Tangible Assets" of ARAMARK and its Subsidiaries means total
assets of ARAMARK and its Subsidiaries less goodwill, all determined in
accordance with generally accepted accounting principles.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Principal Property" means the land, land improvements, buildings and
fixtures (to the extent they constitute real property interests) (including any
leasehold interest therein) constituting the principal corporate office or any
distribution, operation or maintenance facility (whether now owned or hereafter
acquired) which: (a) is owned by ARAMARK or any Subsidiary; (b) has not been
determined in good faith by the Board of Directors of ARAMARK not to be
materially important to the total business conducted by ARAMARK and its
Subsidiaries taken as a whole; and (c) has a market value on the date as of
which the determination is being made in excess of 5.0% of Consolidated
Tangible Assets of ARAMARK as most recently determined on or prior to such date.
"Restricted Subsidiary" will mean any Subsidiary that owns any Principal
Property or any shares or debt of another Restricted Subsidiary.
"Sale and Lease-Back Transaction" will mean any arrangement with any person
providing for the leasing by ARAMARK or any Restricted Subsidiary of any
Principal Property, which property has been or is to be sold or transferred by
ARAMARK or such Restricted Subsidiary to such person.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time of determination owned
or controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person or a combination thereof and (ii) any
partnership of which more than 50% of the partnership's capital accounts,
distribution rights or general or limited partnership interests are owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
S-22
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
consequences as of the date of this offering memorandum regarding the purchase,
ownership and disposition of the notes. Except where noted, this summary deals
only with notes that are held as capital assets by a non-United States holder
who purchases the notes upon original issuance at their initial offering price.
A "non-United States holder" means a holder of our notes that is not any of
the following for U.S. federal income tax purposes:
. a citizen or resident of the United States;
. a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision thereof;
. an estate the income of which is subject to United States federal income
taxation regardless of its source; or
. a trust if (1) it is subject to the primary supervision of a court
within the United States and one or more United States persons have the
authority to control all substantial decisions of the trust, or (2) it
has a valid election in effect under applicable United States Treasury
regulations to be treated as a United States person.
This summary is based upon provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), and regulations, rulings and judicial decisions as of
the date of this offering memorandum. Those authorities may be changed, perhaps
retroactively, so as to result in United States federal income tax consequences
different from those summarized below. This summary does not represent a
detailed description of the federal income tax consequences to you in light of
your particular circumstances. In addition, it does not represent a detailed
description of the United States federal income tax consequences applicable to
you if you are subject to special treatment under the United States federal
income tax laws (including if you are a United States expatriate, "controlled
foreign corporation," "passive foreign investment company", "foreign personal
holding company" or a corporation that accumulates earnings to avoid federal
income tax). We cannot assure you that a change in law will not alter
significantly the tax considerations that we describe in this summary.
If a partnership holds our notes, the tax treatment of a partner will
generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding our notes, you
should consult your tax advisors.
If you are considering the purchase of notes, you should consult your own
tax advisors concerning the particular United States federal income tax
consequences to you of the ownership of the notes, as well as the consequences
to you arising under the laws of any other taxing jurisdiction.
United States Federal Withholding Tax
The 30% United States federal withholding tax will not apply to any payment
of principal or interest on the notes provided that:
. you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and applicable United States Treasury regulations;
. you are not a controlled foreign corporation that is related to us
through stock ownership;
. you are not a bank whose receipt of interest on the notes is described
in Section 881(c)(3)(A) of the Code; and
. either (a) you provide your name and address on an IRS Form W-8BEN (or
other applicable form), and certify, under penalty of perjury, that you
are not a United States person or (b) you hold your notes through
certain foreign intermediaries and satisfy the certification
requirements of applicable United
S-23
States Treasury regulations. Special certification rules apply to
certain non-United States holders that are entities rather than
individuals.
If you cannot satisfy the requirements described above, payments of interest
made to you will be subject to the 30% United States federal withholding tax,
unless you provide us with a properly executed:
. IRS Form W-8BEN (or other applicable form) claiming an exemption from,
or reduction in, withholding under the benefit of applicable tax treaty;
or
. IRS Form W-8ECI (or successor form) stating that interest paid on the
notes is not subject to withholding tax because it is effectively
connected with your conduct of a trade or business in the United States
(as discussed below under "--United States Federal Income Tax").
The 30% United States federal withholding tax generally will not apply to
any gain that you realize on the sale, exchange, retirement or other
disposition of notes.
United States Federal Income Tax
If you are engaged in a trade or business in the United States and interest
on the notes is effectively connected with the conduct of that trade or
business, you will be subject to United States federal income tax on that
premium or interest on a net income basis (although exempt from the 30%
withholding tax, provided certain certification and disclosure requirements
discussed above under "--United States Federal Withholding Tax" are satisfied),
in the same manner as if you were a United States person, as defined under the
Code. In addition, if you are a foreign corporation, you may be subject to a
branch profits tax equal to 30% (or lower applicable treaty rate) of your
effectively connected earnings and profits for the taxable year, subject to
adjustments.
Any gain realized on the disposition of the notes generally will not be
subject to United States federal income tax unless:
. the gain is effectively connected with your conduct of a trade or
business in the United States; or
. you are an individual who is present in the United States for 183 days
or more in the taxable year of that disposition, and certain other
conditions are met.
United States Federal Estate Tax
Your estate will not be subject to United States federal estate tax on notes
beneficially owned by you at the time of your death provided that:
. you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and applicable United States Treasury regulations;
and
. interest on those notes would not have been, if received at the time of
your death, effectively connected with the conduct by you of a trade or
business in the United States.
Information Reporting and Backup Withholding
In general, no information reporting or backup withholding will be required
regarding payments that we make to you provided that we do not have actual
knowledge or reason to know that you are a United States person, as defined
under the Code, and we have received from you the statement described above in
the fourth bullet point under "--United States Federal Withholding Tax" or, if
such payments are effectively connected with your trade or business in the
United States, a Form W-8ECI.
In addition, no information reporting or backup withholding will be required
regarding the proceeds of the sale of notes within the United States or
conducted through certain United States-related financial intermediaries, if
the payor receives the statement described above and does not have actual
knowledge or reason to know that you are a United States person, as defined
under the Code, or you otherwise establish an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against your United States federal income tax liability
provided the required information is furnished to the Internal Revenue Service.
S-24
UNDERWRITING
Subject to the terms and conditions in the underwriting agreement dated the
date of this prospectus supplement, we have agreed to sell to each underwriter,
and each underwriter has severally agreed to purchase from us, the principal
amount of notes that appears opposite its name in the table below.
------------------------------------------------------
Underwriter Principal Amount
------------------------------------------------------
J.P. Morgan Securities Inc........... $120,000,000
Salomon Smith Barney Inc............. 60,000,000
First Union Securities, Inc.......... 60,000,000
Banc One Capital Markets, Inc........ 15,000,000
Credit Lyonnais Securities (USA) Inc. 15,000,000
Fleet Securities, Inc................ 15,000,000
PNC Capital Markets, Inc............. 15,000,000
----------------
Total................................ $300,000,000
------------------------------------------------------
The underwriters are obligated to purchase all the notes if any of them are
purchased.
The underwriters initially propose to offer some of the notes directly to
the public at the public offering price set forth on the cover page of this
prospectus supplement and some of the notes to dealers at the public offering
price minus a concession of up to 0.35% of the principal amount of the notes.
In addition, the underwriters may allow, and those selected dealers may
reallow, a concession of up to 0.25% of the principal amount of the notes to
certain other dealers. After the initial offering, the underwriters may change
the public offering price and concessions.
The following table shows the underwriting discounts and commissions that
the Company is to pay to the underwriters in connection with this offering
(expressed as a percentage of the principal amount of the notes).
Paid by the Company
-------------------
Per note...... 0.60%
The notes are a new issue of securities with no established trading market.
The underwriters intend to make a secondary market for the notes. However, they
are not obligated to do so and may discontinue making a secondary market for
the notes at any time without notice. No assurance can be given as to how
liquid the trading market for the notes will be.
In connection with this offering, J.P. Morgan Securities Inc. may purchase
and sell notes in the open market. These transactions may include
over-allotment, covering transactions and stabilizing transactions.
Over-allotment involves sales of notes in excess of the principal amount of the
notes to be purchased by the underwriters in the offering, which creates a
short position. Covering transactions involve purchases of the notes in the
open market after the distribution has been completed in order to cover short
positions. Stabilizing transactions consist of certain bids or purchases of
notes made for the purpose of preventing or retarding a decline in the market
price of the notes while an offering is in progress.
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the notes. They may also cause the price of the
notes to be higher than the price that otherwise would exist in the open market
in the absence of these transactions. The underwriters may conduct these
transactions in the over-the-counter market or otherwise. If the underwriters
commence any of these transactions, they may discontinue them at any time.
J.P. Morgan Securities Inc. will make the notes available for distribution
on the Internet through a proprietary Web site and/or a third-party system
operated by Market Axess Inc., an Internet-based communications technology
provider. Market Axess Inc. is providing the system as a conduit for
communications between J.P. Morgan Securities Inc. and its customers and is not
a party to any transactions. Market Axess Inc. will not function as an
underwriter or agent, nor will Market Axess Inc. act as a broker for any
customer of J.P. Morgan Securities Inc. Market Axess Inc., a registered
broker-dealer, will receive
S-25
compensation from J.P. Morgan Securities Inc. based on transactions J.P. Morgan
Securities Inc. conducts through the system. J.P. Morgan Securities Inc. will
make the notes available to its customers through the Internet distributions,
whether made through a proprietary or third party system, on the same terms as
distributions made through other channels.
We estimate that our total expenses for this offering, excluding
underwriting discounts, will be approximately $500,000.
The underwriters and their affiliates have performed and continue to perform
investment banking and advisory services for us from time to time for which
they have received customary fees and expenses. The underwriters and their
affiliates may, from time to time, engage in transactions with and perform
services for us in the ordinary course of their business. We financed our
acquisition of ServiceMaster Management Services partly by entering into a new
bridge financing facility with a group of banks arranged by JPMorgan Chase
Bank, an affiliate of J.P. Morgan Securities Inc. In addition, JPMorgan Chase
Bank is a lender under our senior revolving credit facility. JPMorgan Chase
Bank will receive its pro rata share of and repayment of the bridge financing
facility and senior revolving credit facility. As described in "Use of
Proceeds," the net proceeds from the sale of the notes will be used to repay
indebtedness under the bridge financing facility and the senior credit
facility. Because some of the underwriters or affiliates of some of the
underwriters are lenders under these credit facilities and more than 10% of our
net proceeds from this offering will be used to repay indebtedness we owe them
under the bridge financing facility and the senior credit facility, the
offering will be conducted in conformity with Rule 2710(c)(8) of the Conduct
Rules of the National Association of Securities Dealers, Inc.
Bank One Trust Company, National Association, the trustee, is an affiliate
of Banc One Capital Markets, Inc., one of the underwriters.
First Union Securities, Inc., a subsidiary of Wachovia Corporation, conducts
its investment banking, institutional, and capital markets businesses under the
trade name of Wachovia Securities. Any references to "Wachovia Securities" in
this prospectus, however, do not include Wachovia Securities, Inc., a separate
broker-dealer subsidiary of Wachovia Corporation and sister affiliate of First
Union Securities, Inc. which may or may not be participating as a separate
selling dealer in the distribution of the notes.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make because of any of those
liabilities.
LEGAL OPINIONS
The validity of the notes and the guarantees offered hereby will be passed
upon for Services and ARAMARK by Simpson Thacher & Bartlett, New York, New
York, and for the underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The audited consolidated financial statements and schedule of ARAMARK
Corporation and subsidiaries included in ARAMARK's Annual Report on Form 10-K
for the year ended September 28, 2001 and the audited financial statements of
ServiceMaster Management Services Business included in the ARAMARK Corporation
and subsidiaries Form 8-K dated December 10, 2001 incorporated herein by
reference have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
giving said reports. Subsequent audited consolidated financial statements of
ARAMARK and the reports thereon of ARAMARK's independent public accountants,
also will be incorporated by reference in this prospectus in reliance upon the
authority of that firm as experts in giving those reports to the extent said
firm has audited those consolidated financial statements and consented to the
use of their reports thereon.
S-26
PROSPECTUS
- ---------
$1,000,000,000
[LOGO OF ARAMARK]
Debt Securities
of
ARAMARK Corporation
or
ARAMARK Services, Inc.
------------
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and the applicable prospectus
supplement carefully before you invest in any of our debt securities.
See "Risk Factors" beginning on page 5 to read about risks you should
consider before you invest in any of our debt securities.
------------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
------------
The date of this prospectus is April 8, 2002.
TABLE OF CONTENTS
About this Prospectus....................................................... i
Special Note About Forward-Looking Statements............................... 1
Where You Can Find More Information About Us................................ 2
Prospectus Summary.......................................................... 3
Risk Factors................................................................ 5
Recent Developments......................................................... 13
Ratio of Earnings To Fixed Charges.......................................... 13
Use of Proceeds............................................................. 13
Dividend Policy............................................................. 13
Selected Consolidated Financial Data........................................ 14
Unaudited Pro Forma Financial Information................................... 16
Description of Other Indebtedness........................................... 18
Description of Our Debt Securities.......................................... 20
Global Securities........................................................... 40
Plan of Distribution........................................................ 42
Validity of Securities and Guarantee........................................ 43
Experts..................................................................... 44
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that ARAMARK Corporation
and ARAMARK Services, Inc. filed with the Securities and Exchange Commission
(the "Commission") using a "shelf" registration process. Under the shelf
registration process, either ARAMARK Corporation or ARAMARK Services, Inc. may
offer from time to time up to an aggregate of $1,000,000,000 of debt
securities.
This prospectus provides you with a general description of the debt
securities that may be offered. Each time debt securities are sold, the issuer
will provide you with a prospectus supplement that will describe the specific
amounts, prices and other terms of the debt securities being offered. The
prospectus supplement may also add, update or change information contained in
this prospectus. Unless the context otherwise indicates, the terms ARAMARK
Corporation, ARAMARK, "we," "us" or "our" mean ARAMARK Corporation and its
subsidiaries and references to ARAMARK Services, Inc. or Services mean ARAMARK
Services, Inc. and its subsidiaries. The term "issuer" means either ARAMARK or
Services, depending on which registrant is offering the debt securities. The
term "issuers" is a collective reference to ARAMARK and Services.
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must
not rely on any unauthorized information. This prospectus does not offer to
sell or buy any securities in any jurisdiction where it is unlawful. You should
not assume that the information in this prospectus or any supplement is
accurate as of any date other then the date on the front of those documents.
i
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
from civil litigation for forward-looking statements 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," "estimate," "expect," "will be," "will continue," "will likely
result," "project," "intend," "plan," "believe" and other words and terms of
similar meaning in conjunction with a discussion of future operating or
financial performance.
Forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors (many of which are beyond our
control) that could cause actual results to differ materially from the future
results expressed or implied by such forward-looking statements. The forward-
looking statements regarding such matters are based on certain assumptions and
analyses made by us in light of our experience and our perception of historical
trends, current conditions and expected future developments, as well as other
factors we believe are appropriate in the circumstances. Factors that might
cause such a difference include:
. unfavorable economic conditions, including further ramifications of the
September 11th terrorist attacks or other terrorist attacks,
. increased operating costs,
. shortages of qualified personnel and other factors leading to increased
labor costs,
. costly compliance with governmental regulations,
. currency risks and other risks associated with international markets,
. risks associated with acquisitions, including our ability to integrate
and derive the expected benefits from our acquisition of ServiceMaster
Management Services and other acquisitions,
. competition,
. decline in attendance at client facilities,
. unpredictability of sales and expenses due to contract terms,
. our significant leverage,
. claims relating to the provision of food services,
. liability associated with non-compliance with governmental regulations,
including regulations pertaining to food services, the environment and
childcare service,
. seasonality, and
. adverse publicity concerning incidents at childcare centers.
In this prospectus and particularly in "Risk Factors", we have estimated the
impact that unfavorable economic conditions, including ramifications of the
September 11th terrorist attacks, the labor stoppage that disrupted the 1994
and 1995 Major League Baseball seasons, and the effect of event cancellations,
have had on our expected sales and results of operations. The actual impact of
such estimates may vary from those stated in this prospectus.
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 prospectus, in
filings made with the Securities and Exchange Commission or that may be made
elsewhere from time to time by, or on behalf of, us.
1
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. These filings are
available to the public over the Internet at the Securities and Exchange
Commission's web site at http://www.sec.gov. You may also read and copy any
document we file at the Securities and Exchange Commission's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference room.
We filed a registration statement on Form S-3 with the SEC covering the
offered securities. For further information on us and the offered securities,
you should refer to the registration statement and its exhibits. This
prospectus summarizes material provisions of the offered securities. Because
the prospectus may not contain all the information that you may find important,
you should review the full text of these documents. We have included copies of
these documents in an exhibit to our registration statement of which this
prospectus is a part.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus,
and information that we file later with the Securities and Exchange Commission
will automatically update and supersede this information.
We incorporate by reference the documents listed below, any filings that we
make after the date of filing the initial registration statement and prior to
the effectiveness of that registration statement, and any future filings made
by us with the Securities and Exchange Commission under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 until we sell all of the
securities that we have registered under the registration statements of which
this prospectus forms a part or terminate those registration statements.
. Our Annual Report on Form 10-K for the fiscal year ended September 28,
2001;
. Our Quarterly Report on Form 10-Q for the quarter ended December 28,
2001; and
. Our Current Reports on Form 8-K filed on December 10, 2001 and January
22, 2002.
You may request a copy of these filings at no cost by writing or telephoning
us at the following address or telephone number:
ARAMARK Corporation
1101 Market Street
Philadelphia, PA 19107
Attention: Ted Hill
Telephone: (215) 238-3361
2
PROSPECTUS SUMMARY
This summary provides a brief overview of the key aspects of ARAMARK
Corporation and the material terms of the securities that may be offered that
are known as of the date of this prospectus. For a more complete understanding
of the terms of a particular issuance of securities, before making your
investment decision, you should carefully read:
. this prospectus, which explains the general terms of the securities that
may be offered;
. the accompanying prospectus supplement for such issuance, which explains
the specific terms of the securities being offered and which may update
or change information in this prospectus; and
. the documents referred to in "Where You Can Find More Information About
Us" on page 2 for information about ARAMARK Corporation, including its
financial statements.
ARAMARK Corporation
We are a leading provider of a broad range of outsourced services to
business, educational, healthcare and governmental institutions and sports,
entertainment and recreational facilities. We have leadership positions in food
and support services, uniform and career apparel services and childcare and
early education. We seek to continue to capitalize on favorable outsourcing
trends by offering a large and diverse client base an expanding portfolio of
services to meet their outsourcing needs. In fiscal 2001, we reported sales of
approximately $7.8 billion and net income of approximately $176.5 million. We
believe we will continue to grow our business by capitalizing on the continuing
growth of the outsourcing market, our market leadership positions and the added
access to capital that our public offering completed on December 14, 2001
provides us.
We provide or manage services in three strategic areas: Food and Support
Services, Uniform and Career Apparel and Educational Resources. We manage and
report our business activities through the following five operating segments:
Food and Support Services--United States--Provides food, refreshment and
support services, including facility maintenance and housekeeping, to business,
educational, governmental and healthcare institutions and in sports,
entertainment, recreational and other facilities serving the general public.
Food and support services are provided at client locations under various
contractual arrangements, which can include profit and loss, profit sharing or
management fee based agreements.
Food and Support Services--International--Provides food, refreshment and
support services, including facility maintenance and housekeeping, to business,
educational, governmental and healthcare institutions and in sports,
entertainment, recreational and other facilities serving the general public.
Operations are conducted primarily in Belgium, Canada, the Czech Republic,
Germany, Hungary, Mexico, Spain and the United Kingdom. Food and support
services are provided at client locations under various contractual
arrangements, which can include profit and loss, profit sharing or management
fee based agreements.
Uniform and Career Apparel--Rental--Provides uniform rental, cleaning,
maintenance and delivery services on a contract basis. Also provided are walk-
off mats, cleaning cloths, disposable towels and other environmental control
items and the direct sale of certain uniform and related products.
Uniform and Career Apparel--Direct Marketing--Sells personalized uniforms
and career apparel, public safety equipment and accessories directly to
businesses, public institutions and individuals.
Educational Resources--Provides infant, toddler, pre-school and school-age
learning programs through community-based childcare centers, before and after
school programs, employer on-site childcare centers and private elementary
schools. Sales are derived primarily from weekly or monthly payments received
directly from individual families under short-term agreements.
ARAMARK and Services, each a Delaware corporation, have their principal
executive offices at ARAMARK Tower, 1101 Market Street, Philadelphia,
Pennsylvania 19107, and their telephone number is (215) 238-3000.
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Debt Securities and Guarantee
ARAMARK may offer from time to time debt securities. These debt securities
will be unsecured obligations of ARAMARK and will be either senior or
subordinated indebtedness. ARAMARK Services, Inc. may offer from time to time
its senior or subordinated debt securities which will be entitled to the
guarantee of ARAMARK. A guarantee issued by ARAMARK of senior debt securities
of Services will rank equally with all unsecured and unsubordinated
indebtedness of ARAMARK. A guarantee issued by ARAMARK of subordinated debt
securities of Services will be subordinated to all of ARAMARK's present and
future senior indebtedness, and will rank equally with all of ARAMARK's other
outstanding subordinated indebtedness.
The issuer of the debt securities, the specific title, the aggregate
principal amount, the purchase price, the maturity, the rate and time of
payment of any interest, any redemption provisions, the covenants and
repurchase provisions and any other specific terms of the debt securities, and
the agents and dealers or underwriters in connection with the sale of the debt
securities will be provided in the applicable supplement to this prospectus.
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RISK FACTORS
Investing in our debt securities involves risks, including the risks
described in this prospectus and in the other documents which are incorporated
herein by reference. Additional risks, including those that relate to the debt
securities that we will offer, will be included in the applicable prospectus
supplement. You should carefully consider the risk factors before investing in
any of our debt securities.
Our fiscal year ends on the Friday nearest September 30 in each year, and,
in this prospectus when we refer to fiscal years, we say fiscal and the year
number, as in fiscal 2001.
Risk Factors Relating to Our Business
Unfavorable economic conditions and increased operating costs adversely affect
our results of operations and financial condition.
Recently, our food and support services and uniform and career apparel
segments have been adversely affected by weaker economic conditions in the
United States, particularly with respect to manufacturing and technology
clients. Production cutbacks in the manufacturing industry adversely affected
our results of operations for fiscal 2001. Layoffs and business downturns have
increased among our business clients, which has negatively affected our sales.
We estimate that these unfavorable economic conditions reduced our consolidated
sales for fiscal 2001 by approximately 2% from the level of sales we would have
expected absent such conditions. A national or international economic downturn
reduces demand for our services in each of our operating segments, which has
resulted, and may in the future result, in the loss of business or increased
pressure to contract for business on less favorable terms than our generally
preferred terms. As further discussed in our Form 10-Q for the first quarter of
fiscal 2002, the continuing impact of the events of September 11, 2001 and the
economic slowdown in the United States have negatively affected fiscal 2002
first quarter operating results, and we anticipate such conditions will
continue.
Our profitability could be adversely affected if we were faced with cost
increases for food, fuel, utilities, wages, piece goods, clothing and
equipment, especially to the extent we were unable to recover such increased
costs through increases in the prices for our services, due to general economic
conditions, competitive conditions, or both. For example, substantial increases
in the cost of fuel and utilities resulted in substantial cost increases in our
uniform services business, and to a lesser extent in our food and support
services segment in fiscal 2001, which were not fully recoverable due to
general economic conditions, competitive conditions, or both. In particular,
our business segments that operate in California were negatively impacted by
significant increases in electricity, natural gas and fuel costs. We estimate
that our costs increased in the range of $6 million to $8 million in fiscal
2001 as a result of these factors. Increases in energy costs particularly
impact our uniform and career apparel business.
Our business may suffer if we are unable to hire and retain sufficient
qualified personnel or if labor costs continue to increase.
Over the past several years, the United States has experienced reduced
levels of unemployment. This has created a shortage of qualified workers at all
levels. Given that our workforce requires large numbers of entry level and
skilled workers and managers, continuation of low levels of unemployment could
compromise our ability in certain of our businesses to continue to provide
quality service or compete for new business. From time to time, we have had
difficulty in hiring and maintaining qualified management personnel,
particularly at the entry management level. We will continue to have
significant requirements to hire such personnel. Our success depends to a
substantial extent on the ability, experience and performance of our
management, particularly our Chairman and Chief Executive Officer, Joseph
Neubauer. With the completion of our public offering of common stock in
December 2001, we may experience more employees leaving our employ, as
employees will now have the ability to leave our employ with their ARAMARK
common stock, which they could not do before our public offering of Class B
common stock. We also regularly hire a large number of
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part-time workers, particularly in our food and support services segments. Any
difficulty we may encounter in hiring such workers could result in significant
increases in labor costs which could have a material adverse effect on our
business, financial condition and results of operations. Competition for labor
has resulted in wage increases that in some recent periods have had the effect
of substantially increasing our labor costs. Due to the labor intensive nature
of our businesses, a shortage of labor or increases in wage levels in excess of
normal levels could have a material adverse effect on our results of
operations.
Our expansion strategy involves risks.
We may seek to acquire companies or enter into joint ventures that
complement our business, and our inability to complete acquisitions, integrate
acquired companies successfully or enter into joint ventures may render us less
competitive. We may be evaluating acquisitions or engage in acquisition
negotiations at any given time. We cannot assure you that we will be able to
identify acquisition candidates or joint venture partners on commercially
reasonable terms or at all. If we make additional acquisitions, we also cannot
be sure that any benefits anticipated from the acquisitions will actually be
realized. Likewise, we cannot be sure that we will be able to obtain additional
financing for acquisitions. Such additional financing could be restricted by
the terms of our debt agreements or it could be more expensive than our current
debt. Additional debt financing for acquisitions could be significant and the
terms of such debt instruments could be more restrictive than our current
covenants. In addition, our ability to control the planning and operations of
our joint ventures may be subject to numerous restrictions imposed by the joint
venture agreements. Our joint venture partners may also have interests which
differ from ours.
The process of integrating acquired operations into our existing operations
may result in unforeseen operating difficulties and may require significant
financial, operational and managerial resources that would otherwise be
available for the ongoing development or expansion of our existing operations.
To the extent that we have miscalculated our ability to integrate and operate
the business to be acquired, we may have difficulty in achieving our operating
and strategic objectives. The diversion of management attention, particularly
in a difficult operating environment, may affect our sales. Possible future
acquisitions could result in the incurrence of additional debt and related
interest expense, contingent liabilities and amortization expenses related to
intangible assets, which could have a materially adverse effect on our
financial condition, operating results and/or cash flow, or in the issuance of
additional shares of our common stock.
If we are unable to successfully integrate ServiceMaster Management Services or
derive the benefits we expect, our operating results, sales and profits may be
materially adversely affected.
Our future results of operations and cash flow may depend in part upon our
ability to integrate ServiceMaster Management Services and achieve the
strategic operating objectives we anticipate from this acquisition. We have not
previously undertaken an integration process as large as the integration plans
required by this acquisition. In order to succeed, we will need to:
. capitalize on the opportunities afforded by ARAMARK's and
ServiceMaster's combined services offerings;
. maintain strong relationships with clients, which as a result of the
ServiceMaster acquisition will increase the number of our facilities
management clients by approximately 1,550 to approximately 1,800;
. combine and manage our employee base, which as a result of the
ServiceMaster acquisition will increase the number of our employees by
approximately 18,000 to a total of approximately 218,000; and
. integrate operating and financial systems.
ServiceMaster's business is based upon contractual relationships with
customers. Some or all of those customers may choose not to continue their
contractual relationship with us at the time of contract renewal. In
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addition, the acquisition of ServiceMaster Management Services increased our
debt levels by approximately $800 million, significantly exceeding historical
levels, and our interest expense in fiscal 2001 on a pro forma basis giving
effect to this acquisition would have increased by approximately $53 million.
As a result, we will need to manage effectively our cash position and working
capital levels.
The terrorist attacks of September 11, 2001, on the United States have directly
and indirectly negatively affected our operating results, sales and profits.
The September 11, 2001 terrorist attacks on New York City and Washington,
D.C. adversely affected our operating results in the fourth fiscal quarter of
2001. Had the terrorist attacks not occurred, management estimates that
consolidated operating income would have been approximately 2% higher in fiscal
2001. The effects of the September 11, 2001 terrorist attacks continued to
adversely impact the 2002 first quarter results. Management estimates that
consolidated operating income would have been approximately 3% higher than
reported if these terrorist attacks had not occurred. Our retail and food
service operations in the World Trade Center and our childcare and food service
operations at the Pentagon were directly affected by the attacks. Certain of
our other businesses were indirectly affected as described below. To the extent
the events of September 11th result in a further economic slowdown and
disruptions in the United States and Europe, the negative effects on our
business could be prolonged and pervasive; however, it is not possible to
estimate such effects at this time. The national and global response to these
terrorist attacks, including recent military, diplomatic and financial
responses and any possible reprisals as a consequence of these actions, may
materially adversely affect us in ways we cannot predict at this time.
Our business has been, and will continue to be affected in various ways
including, but not limited to:
. the loss of property such as operating equipment and merchandise
inventory;
. costs incurred in providing assistance to the victim relief efforts;
. direct costs of restoring our operations including cleanup, relocation,
data re-creation;
. impairment of intangible assets;
. lost sales and profits from closed and curtailed operations in the
affected areas;
. the lost opportunity to generate sales and profits as a result of
sporting and other recreational event cancellations/postponements and
reduced attendance at such events, reduced employment levels,
particularly in the airline and related industries, reduced visitation
at parks and resorts, and reduced attendance at conventions; and
. increased cost of property and liability insurance and possible
increased retentions due to uncertainty in the worldwide insurance and
reinsurance markets.
We anticipate a substantial portion of our direct costs and other losses
will be covered by insurance. We maintain workers compensation, general
liability, property damage and business interruption coverages. The process of
quantifying and compiling insurance claims and arranging settlements with
multiple insurance carriers is continuing and will be ongoing for an extended
time period.
Requirements imposed by governmental regulations or interpretation of
governmental regulations may change and require us to incur substantial
expenditures to comply.
We are subject to governmental regulation at the federal, state, provincial
and local level in many areas of our business, such as food safety and
sanitation, the sale of alcoholic beverages, environmental issues, childcare
and the services we provide in connection with governmentally funded
entitlement programs. While we endeavor to attain and maintain compliance with
all applicable laws and regulations, governmental units may make changes in the
regulatory frameworks within which we operate that may require either the
corporation as a whole or individual businesses to incur substantial increases
in costs in order to comply with such laws and
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regulations. While we attempt to comply with all applicable laws and
regulations, we cannot assure you that we are in full compliance with all
applicable laws and regulations or interpretations thereof at all times or that
we will be able to comply with any future laws, regulations or interpretations
thereof. If we fail to comply with applicable laws and regulations, we may be
subject to criminal sanctions or civil remedies, including fines or
injunctions. The cost of compliance or the consequences of non-compliance could
have a material adverse effect on our business and results of operations.
Changes in or new interpretations of the governmental regulatory framework may
affect our contract terms and may reduce our sales or profits.
A portion of our sales, estimated to be approximately 15% in fiscal 2001, is
derived from contracts with U.S. federal, state and local governments and
agencies. Changes or new interpretations in the statutory or regulatory
framework applicable to services provided under governmental contracts or
bidding procedures, particularly by our food and support services businesses,
could result in fewer contract wins or renewals, modifications to the methods
we apply to price government contracts, or in contract terms of shorter
duration than we have historically experienced, any of which could result in
sales or profits lower than we have historically achieved, which could have an
adverse effect on our results of operations.
Our international business results are influenced by currency fluctuations and
other factors that are different than in the U.S. market.
A significant portion of our sales is derived from international markets.
During fiscal 2001, approximately 14% of our sales were generated outside the
United States. The operating results of our international subsidiaries are
translated into U.S. dollars and such results are affected by movements in
foreign currencies relative to the U.S. dollar. Sales of our Food and Support
Services--International segment were unfavorably affected by currency
translation by approximately 7% for fiscal 2001.
Our international operations are also subject to other risks, including
national and local regulatory requirements; potential difficulties in staffing
and labor disputes; managing and obtaining support and distribution for local
operations; credit risk or financial condition of local customers; potential
imposition of restrictions on investments; potentially adverse tax
consequences, including imposition or increase of withholding and other taxes
on remittances and other payments by subsidiaries; foreign exchange
restrictions; and local political and social conditions. There can be no
assurance that the foregoing factors will not have a material adverse effect on
our international operations or on our consolidated financial condition and
results of operations.
Our operations are seasonal.
In the first and second fiscal quarters, within the Food and Support
Services--United States segment, there is a lower level of sales at the
historically higher margin sports, entertainment and recreational food service
operations which is partly offset by increased activity in the educational
sector. In the third and fourth fiscal quarters, there has historically been a
significant increase in sales at sports, entertainment and recreational
accounts, which is partially offset by the effect of summer recess in the
educational sector. The sales of WearGuard, one of our direct marketing
companies, generally increase during the first quarter of the fiscal year
because of the onset of colder weather in the northern tier of the United
States as well as the gift giving holidays. For these reasons, a quarter to
quarter comparison is not a good indication of our performance or how we will
perform in the future.
Our indebtedness may restrict certain growth opportunities.
As of December 28, 2001, we had approximately $1.9 billion of outstanding
indebtedness, including indebtedness incurred to finance the acquisition of
ServiceMaster Management Services and related expenses. The size of our
indebtedness may restrict the pursuit of certain new business opportunities. We
will also have
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to use a portion of our cash flow to service our debt, which may prevent us
from pursuing certain new business opportunities and certain acquisitions. If
we were to incur significant amounts of additional indebtedness, the agreements
relating to such indebtedness may include covenants more restrictive than our
current debt agreements. Failure to maintain certain financial ratios could
cause us to violate the terms of our credit facility agreements and thereby
result in acceleration of our indebtedness, impair our liquidity and limit our
ability to raise additional capital. Our failure to make required debt payments
could result in an acceleration of our indebtedness, in which case the lenders
thereunder would be entitled to exercise their remedies. We may incur
additional indebtedness in the future.
There is uncertainty concerning our continued use of Arthur Andersen LLP as our
independent auditor.
Our independent certified public accountant, Arthur Andersen, has informed
us that on March 14, 2002, the Department of Justice announced that Arthur
Andersen had been indicted on federal obstruction of justice charges arising
from the government's investigation of Enron. Arthur Andersen has pled not
guilty and a trial date of May 6, 2002 has been set. As a public company, we
are required to file with the SEC periodic financial statements audited or
reviewed by an independent, certified public accountant. The SEC has said that
it will continue accepting financial statements audited by Arthur Andersen, and
interim financial statements reviewed by it, so long as Arthur Andersen is able
to make certain representations to its clients. If the SEC ceases accepting
financial statements audited by Arthur Andersen, or if Arthur Andersen becomes
unable to make the required representations to us, or if we dismiss Arthur
Andersen or if for any other reasons Arthur Andersen is unable to perform
required audit-related services for us, we could experience additional costs or
delays in making filings with the SEC. For the foregoing reasons, we are
uncertain as to whether it will be necessary for us to secure the services of
another auditing firm to provide us with audits and reviews on an ongoing
basis.
Food and Support Services
Competition in our industry could adversely affect our results of operations.
There is significant competition in the food and support services business
from local, regional, national and international companies, of varying sizes,
many of which have substantial financial resources. Our ability to successfully
compete depends on our ability to provide quality services at a reasonable
price and to provide value to our customers. Certain of our competitors may be
willing to underbid us or accept a lower profit margin or expend more capital
in order to obtain or retain business. In addition, existing or potential
clients may elect to self operate their food service, eliminating the
opportunity for us to serve them or compete for the account. While we have a
significant international presence, should business sector clients require
multi-national bidding, we may be placed at a competitive disadvantage because
we may not be able to offer services in as many countries as some of our
competitors.
Sales of sports, entertainment and recreational services would be adversely
affected by a decline in attendance at client facilities or by a reduction or
cessation of events.
The portion of our food and support services business which provides
services in public facilities such as stadiums, arenas, amphitheaters,
convention centers and tourist and recreational attractions is sensitive to an
economic downturn, as expenditures to attend sporting events or concerts, take
vacations, or hold or attend conventions is funded to a partial or total extent
by discretionary income. A decrease in such discretionary income on the part of
potential attendees at events in our clients' facilities could result in a
reduction in our sales.
Further, because our exposure to the ultimate consumer of what we provide is
limited by our dependence on our clients to attract customers to their
facilities and events, our ability to respond to such a reduction in
attendance, and therefore our sales, is limited. For example, we have recently
experienced an increase in event cancellation at convention centers which we
believe is attributable to the current economic slowdown. As a result of such
cancellations, we estimate our consolidated sales for fiscal 2001 were reduced
by less than 1% from the level of sales we would have expected absent such
cancellations. We believe the impact of the terrorist attacks resulted in
additional event cancellations in our fourth fiscal quarter, as well as in the
first
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quarter of fiscal 2002. We estimate that had the terrorist attacks not
occurred, consolidated sales would have been approximately 1% higher and
operating income would have been approximately 2% higher in fiscal 2001, and
consolidated sales would have been approximately 1% higher and operating income
would have been approximately 3% higher in the first quarter of fiscal 2002
than reported results. There are other occurrences which could reduce events in
a facility or attendance at an event including labor disruptions involving
sports leagues, poor performance by the teams playing in a facility and
inclement weather, which would adversely affect sales and profits. Our sales
and results of operations were adversely affected by the labor stoppage that
disrupted the 1994 and 1995 Major League Baseball seasons. We estimated, at the
time, that our consolidated operating income would have been approximately 5%
higher in fiscal 1995 and approximately 3% higher in fiscal 1994 had the Major
League Baseball and other labor disruptions not occurred. The Major League
Baseball Collective Bargaining Agreement expired after the 2001 season. A
shortened or cancelled 2002 season could result in a substantial loss of sales
and reduced profits at Major League Baseball stadiums. In addition, many
professional sports teams, including some of our clients, are currently either
planning to move to a new facility or are considering doing so. Generally our
sports facility contracts do not entitle us to move to a new facility when the
sports team tenant of the present facility moves.
The pricing and cancellation terms of our food and support services contracts
may constrain our ability to recover costs and to make a profit on our
contracts.
The amount of risk that we bear and our profit potential vary depending on
the type of contract under which we provide food and support services. We may
be unable to fully recover costs on contracts that limit our ability to
increase prices. In addition, we provide many of our services under short term,
open ended cancelable contracts. Some of our profit and loss contracts contain
minimum guaranteed remittances to our client regardless of our sales or profit
at the facility involved. If sales do not exceed costs under a contract which
contains minimum guaranteed commissions, we will be liable for bearing any
losses which are incurred, as well as the guaranteed commission. Generally, our
contracts limit our ability to raise prices on the food, beverages and
merchandise we sell within a particular facility without the client's consent.
In addition, some of our contracts exclude certain events or products from the
scope of the contract, or give the client the right to modify the terms under
which we may operate at certain events. The refusal by individual clients to
permit the sale of some products at their venues, or the imposition by clients
of limits on prices which are not economically feasible for us, could adversely
affect our sales and results of operations.
Claims of illness or injury associated with the service of food and beverage to
the public could adversely affect us.
Claims of illness or injury relating to food quality or food handling are
common in the food service industry, and a number of these claims may exist at
any given time. As a result, we could be adversely affected by negative
publicity resulting from food quality or handling claims at one or more of the
facilities that we serve. In addition to decreasing our sales and profitability
at our facilities, adverse publicity could negatively impact our service
reputation, hindering our ability to renew contracts on favorable terms or to
obtain new business. In addition, broader trends in food consumption, such as
the recent concern about beef consumption in Europe, may from time to time
disrupt our business.
In fiscal 2001, one distributor provided approximately 55% of our U.S. food
and non-food products (approximately 37% of our consolidated purchases of food
and non-food products), and if our relationship or their business were to be
disrupted, we could experience short term disruptions to our operations and
cost structure.
If our relationship with, or the business of, our main U.S. distributor of
our food and non-food products were to be disrupted, we would have to arrange
alternative distributors and our operations and cost structure could be
adversely affected in the short-term.
Governmental regulations may subject us to significant liability.
Our operations are subject to various governmental regulations, including
those governing:
. the service of food and alcoholic beverages;
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. minimum wage and employment;
. governmentally funded entitlement programs;
. environmental protection; and
. human health and safety.
The regulations relating to each of our food and support service sectors are
many and complex. For example, while there are a variety of regulations at
various governmental levels relating to the handling, preparation and serving
of food (including in some cases requirements relating to the temperature of
food), and the cleanliness of food production facilities and the hygiene of
food-handling personnel, these regulations are enforced primarily at the local
public health department level. While we attempt to fully comply with all
applicable laws and regulations, we cannot assure you that we are in full
compliance with all applicable laws and regulations at all times or that we
will be able to comply with any future laws and regulations. Furthermore,
additional or amended regulations in this area may significantly increase the
cost of compliance. We are currently negotiating a settlement with the U.S.
government of certain matters related to public school food service programs,
and we do not believe such settlement will have a material adverse effect on
our financial condition or results of operations. It is possible, however, that
future claims could be asserted related to such public school programs, and
while management believes its interpretation of the applicable government
regulations is correct, no assurance can be given as to the outcome of such
claims, if asserted.
We serve alcoholic beverages at many facilities, and must comply with
applicable licensing laws, as well as state and local service laws, commonly
called dram shop statutes. Dram shop statutes generally prohibit serving
alcoholic beverages to certain persons such as an individual who is intoxicated
or a minor. If we violate dram shop laws, we may be liable to third parties for
the acts of the patron. Although we sponsor regular training programs to
minimize the likelihood of such a situation, we cannot guarantee that
intoxicated or minor patrons will not be served or that liability for their
acts will not be imposed on us. There can be no assurance that additional
regulation in this area would not limit our activities in the future or
significantly increase the cost of regulatory compliance. We must also obtain
and comply with the terms of licenses in order to sell alcoholic beverages in
the states in which we serve alcoholic beverages. Some of our contracts require
us to pay liquidated damages during any period in which our liquor license for
the facility is suspended, and most contracts are subject to termination if we
lose our liquor license for the facility.
Uniform and Career Apparel
Competition in the uniform rental industry could adversely affect our results
of operations.
We have a number of major national competitors with significant financial
resources. In addition there are strong regional and local uniform suppliers,
whom we believe may have strong customer loyalty. While most customers focus
primarily on quality of service, uniform rental is a price-sensitive service
and if existing or future competitors seek to gain or retain market share by
reducing prices, we may be required to lower prices, which would reduce our
sales and profits. The uniform rental business requires investment capital for
growth. Failure to maintain capital investment in this segment would put us at
a competitive disadvantage.
Environmental regulations may subject us to significant liability and limit our
ability to grow.
Our uniform rental segment is subject to various federal, state and local
laws and regulations governing, among other things, the generation, handling,
storage, transportation, treatment and disposal of water wastes and other
substances. In particular, industrial laundries use and must dispose of
detergent wastewater and other residues through publicly operated treatment
works or similar government facilities and are subject to volume and chemical
discharge limits and penalties and fines for non-compliance. In the past, we
have settled, or contributed to the settlement of, actions or claims brought
against us relating to the disposal of hazardous materials. Although past
settlements and contributions have not been material, there can be no assurance
that we will not have to expend material amounts to rectify the consequences of
any such disposal in the future. Further, under environmental laws, an owner or
lessee of real estate may be liable for the costs of removal or remediation of
certain hazardous or toxic substances located on or in or emanating from such
property, as well
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as related costs of investigation and property damage. Such laws often impose
liability without regard to whether the owner or lessee knew of or was
responsible for the presence of such hazardous or toxic substances. While we
conduct diligence investigations on acquired properties and attempt to fully
comply with all applicable laws and regulations, there can be no assurances
that acquired or leased locations have been operated in compliance with
environmental laws and regulations or that future uses or conditions will not
result in the imposition of liability upon us under such laws or expose us to
third party actions such as tort suits. In addition, such regulations may limit
our ability to identify suitable sites for new or expanded plants.
Educational Resources
Competition in the childcare and early education industry is extensive and
competitors may price their offerings below ours, which could cause a reduction
in our sales and profits.
Local nursery schools, childcare centers and in-home providers generally
charge less for their services than we do. Many church-affiliated and other
non-profit childcare centers have lower operating expenses than we do and may
receive donations and/or other funding to subsidize operating expenses.
Consequently, operators of such centers often charge tuition rates that are
less than our rates. In addition, fees for home-based care are normally
substantially lower than fees for center-based care because providers of home-
based care are not always required to satisfy the same health, safety,
insurance or operational regulations as our centers. Our competition also
includes other large, geographically broad-based, for-profit early education
and childcare companies. In addition, a number of states and local governments
are operating or considering operating public preschools. In recent periods,
reduced enrollment at mature centers and competitive pricing pressures have
reduced our sales and profits.
Adverse publicity and litigation concerning incidents at childcare centers
could adversely affect our business and results of operations.
Parent trust and referrals by other parents are very significant in the
maintenance and growth of our business, and any decrease in trust or referrals
can adversely affect our business. This trust is directly related to our
reputation and favorable brand identity. However, like many other childcare
providers, we are periodically subject to litigation alleging negligent hiring,
training or supervision, inappropriate contact with children or other acts
arising out of alleged incidents at our centers. Any adverse publicity
concerning such incidents at one of our childcare centers, or childcare centers
generally, could damage our reputation and could have an adverse effect on
enrollment at our centers. Claims in the past have been covered by insurance.
We believe our current claims will be covered by insurance. However, our
insurance premiums may increase substantially in the future as a consequence of
conditions in the insurance business generally, or our situation in particular,
and continuing publicity with respect to alleged instances of child abuse in
our industry could result in our inability to obtain insurance without a
substantial increase in cost. Furthermore, our current or future insurance
coverage may not protect us against all such claims.
The childcare industry is heavily regulated and our failure to comply with
those regulations could subject us to substantial liability or inhibit our
ability to operate.
Childcare centers are subject to numerous state, local and federal
regulations and licensing requirements which generally cover the fitness and
adequacy of buildings and equipment, the ratio of staff to enrolled children,
staff training, record keeping, the dietary program, the curriculum and
compliance with health and safety standards, and if we fail to comply with
these, we may be prohibited from operating one or more of our childcare
centers. Some changes, such as increasing the ratio of staff to enrolled
children, can result in significantly increased costs to operate our business.
If one of our centers fails to comply with applicable regulations, that center
could be subject to state sanctions. These sanctions may include fines,
corrective orders, probation or, in more serious cases, suspension or
revocation of the center's license to operate. Changes in the regulatory
frameworks within which we operate may cause us to incur substantial increases
in costs in order to comply. While we attempt to fully comply with all
applicable laws and regulations, we cannot assure you that
12
we are in full compliance with all applicable laws and regulations at all times
or that we will be able to comply with any future laws and regulations. If we
fail to comply with applicable laws and regulations, civil remedies, including
fines, could be imposed on us. The cost of compliance or the consequences of
non-compliance could have a material adverse effect on our business and results
of operations.
RECENT DEVELOPMENTS
The Public Offering and Merger
On December 14, 2001, ARAMARK completed a public offering of 34,500,000
shares of its class B common stock at a price of $23.00 per share, raising
approximately $742.9 million, net of issuance costs. Just prior to the
completion of the public offering, old ARAMARK Corporation merged with its
wholly owned subsidiary, ARAMARK Worldwide Corporation ("AWC"). Each
outstanding ARAMARK Corporation old class B and old class A common share was
exchanged for two shares and twenty shares, respectively, of the surviving
corporation's class A common stock. AWC's name was changed to ARAMARK
Corporation, and it succeeded to all of the assets, liabilities, rights and
obligations of old ARAMARK Corporation.
The Stock Buyback
On December 14, 2001, immediately prior to the completion of the public
offering, ARAMARK purchased 3,276,700 class A shares owned by employee benefit
plans for $23.00 per share, resulting in a cash expenditure of $75.4 million.
These shares, which are reflected as treasury shares, represented 10% of all
class A shares owned by these benefit plans.
On December 17, 2001, ARAMARK announced an offer to purchase up to 10% of
its class A common stock, excluding shares owned by benefit plans, for $23.00
per share. On January 25, 2002, ARAMARK completed the tender offer for its
class A common stock and purchased 13.6 million shares for approximately $314
million.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our consolidated ratio of earnings to fixed
charges for each of the five most recent fiscal years and the most recent
interim period.
ARAMARK Corporation and Subsidiaries
--------------------------------------------------
Fiscal Year Ended on
or near September 30, Three Months Ended
------------------------ -------------------------
December 29, December 28,
1997 1998 1999 2000 2001 2000 2001
---- ---- ---- ---- ---- ------------ ------------
Ratio of earnings to fixed
charges (1)............... 2.3x 2.3x 2.2x 2.3x 2.3x 2.2x 2.5x
- --------
(1) For the purpose of determining the ratio of earnings to fixed charges,
earnings include pre-tax income plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest on all indebtedness (including
capitalized interest) plus that portion of operating lease rentals
representative of the interest factor (deemed to be one-third of operating
lease rentals).
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, the
proceeds of the offering of debt securities will be used for general corporate
purposes, including but not limited to, repaying borrowings under a bridge
financing facility we entered into to partly finance the acquisition of the
management services division of the ServiceMaster Company and repaying
borrowings under our senior revolving credit facility.
DIVIDEND POLICY
We have not distributed any cash dividends on our common stock during the
last five fiscal years and currently have no plans to do so. The declaration of
future dividends is, however, subject to the discretion of our board of
directors in light of all relevant factors, including earnings, general
business conditions and liquidity requirements.
13
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data. This
information should be read in conjunction with, and is qualified in its
entirety by reference to, ARAMARK's consolidated financial statements and the
related notes thereto and Management's Discussion and Analysis of Results of
Operations and Financial Condition contained in ARAMARK's fiscal 2001 Form 10-K
and in ARAMARK's Quarterly Report on Form 10-Q for the three month period ended
December 28, 2001, each of which is incorporated herein by reference. The
income statement data for the three months ended December 29, 2000 and
December 28, 2001 and the balance sheet data as of December 28, 2001 have been
derived from unaudited financial statements, but in the opinion of management,
those unaudited financial statements reflect all adjustments necessary for a
fair presentation of the information contained therein.
ARAMARK Corporation and Subsidiaries
------------------------------------------------------------------------------
Fiscal Year Ended on or near September 30, Three Months Ended
---------------------------------------------------- -------------------------
December 29, December 28,
1997 (1) 1998 (2) 1999 2000 2001 (3) (4) 2000 (3) (4) 2001 (3) (4)
-------- -------- -------- -------- ------------ ------------ ------------
(in millions, except per share amounts and ratios)
Income Statement Data:
Sales................... $6,576.1 $6,638.9 $6,742.3 $7,262.9 $7,788.7 $1,947.3 $2,109.7
Operating income (4).... 331.9 333.1 375.2 419.6 439.5 111.9 117.9
Interest and other
financing costs, net... 116.0 117.3 135.8 147.8 153.3 40.6 35.5
Income before
extraordinary item..... 146.1 133.7 150.2 168.0 176.5 43.4 51.4
Net income (4).......... 146.1 129.2 150.2 168.0 176.5 43.4 51.4
Earnings per share (4)
(5):
Basic.................. $ 0.58 $ 0.57 $ 0.80 $ 0.94 $ 1.03 $ 0.26 $ 0.29
Diluted................ $ 0.55 $ 0.53 $ 0.74 $ 0.88 $ 0.97 $ 0.24 $ 0.27
Ratio of earnings to
fixed charges (6)...... 2.3x 2.3x 2.2x 2.3x 2.3x 2.2x 2.5x
Balance sheet data (at
period end):
Total assets............ $2,753.6 $2,741.3 $2,870.5 $3,199.4 $3,216.4 $4,168.5
Long-term borrowings.... 1,213.9 1,705.0 1,609.7 1,777.7 1,635.9 1,828.0
Common stock subject to
potential
repurchase (7)......... 23.3 20.0 20.0 20.0 20.0 --
Shareholders'
equity(deficit) (8).... 370.0 (78.9) 126.6 111.5 246.9 980.2
Other Financial Data:
EBITDA (9).............. $ 523.6 $ 528.9 $ 568.9 $ 640.4 $ 679.7 $ 170.5 $ 178.3
Net cash provided
by/(used in) operating
activities............. 230.1 276.7 293.2 407.1 496.9 (78.7) (42.6)
Net cash used in
investing activities... (59.7) (189.6) (216.2) (483.6) (279.2) (48.8) (817.7)
Net cash provided
by/(used in) financing
activities............. (168.3) (93.8) (69.9) 73.4 (217.5) 132.6 862.7
- --------
(1) Fiscal 1997 is a fifty-three week period, and includes other income of
$11.7 million.
(2) During fiscal 1998, the Company redeemed or replaced certain indebtedness,
resulting in extraordinary charges, net of taxes, of $4.5 million, or $0.04
per share.
14
(3) On November 30, 2001, ARAMARK completed the acquisition of the management
services division of the ServiceMaster Company (ServiceMaster Management
Services) for approximately $800 million in cash. The following pro forma
results assume the acquisition had occurred at the beginning of the
respective fiscal periods. These pro forma disclosures are unaudited and
are based on historical results, adjusted for the impact of certain
acquisition related items, such as: amortization of intangibles, increased
interest expense on acquisition debt and the related income tax effects.
Pro forma results do not reflect any synergies that might be achieved from
the combined operations, and therefore, in management's opinion, are not
indicative of what actual results may have been if the acquisition had
occurred at the beginning of the respective periods. Pro forma results are
not intended to be a projection of future results.
Three Months Ended Three Months Ended
Fiscal 2001 December 29, 2000 December 28, 2001
----------- ------------------ ------------------
Sales.................... $8,768.9 $2,109.8 $2,271.2
Operating income......... 486.8 125.7 124.2
Interest and other
financing costs, net.... 206.4 56.7 41.1
Net income............... 172.6 41.9 51.8
Earnings per share:
Basic.................... $ 1.01 $ 0.25 $ 0.29
Diluted.................. $ 0.95 $ 0.23 $ 0.28
EBITDA (9)............... $ 776.5 $ 196.5 $ 192.9
(4) ARAMARK adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" at the
beginning of fiscal 2002. With the adoption of SFAS No. 142, goodwill is no
longer subject to amortization. The elimination of goodwill amortization
would have increased operating income by $6.1 million, net income by
$5.3 million and basic and diluted earnings per share by $0.03 per share
for the three months ended December 29, 2000. The elimination of goodwill
amortization would have increased operating income by $25.4 million, net
income by $22.0 million, basic earnings per share by $0.13 per share and
diluted earnings per share by $0.12 per share for fiscal 2001. The
elimination of goodwill amortization would have resulted in a ratio of
earnings to fixed changes of 2.3x and 2.4x for the three months ended
December 29, 2000 and the fiscal year ended September 28, 2001,
respectively.
(5) Earnings per share amounts for all years presented have been restated to
reflect the merger exchange ratios, which had the effect of a two-for-one
stock split.
(6) For the purpose of determining the ratio of earnings to fixed charges,
earnings include pre-tax income plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest on all indebtedness (including
capitalized interest) plus that portion of operating lease rentals
representative of the interest factor (deemed to be one-third of operating
lease rentals).
(7) Excludes shares subject to repurchase in the tender offer. Reflects shares
of ARAMARK's common stock that prior to our corporate reorganization and
public offering on December 14, 2001, may have been required to be
repurchased under the ARAMARK stockholders' agreement, subject to a limit
on such repurchases in the ARAMARK senior revolving credit facility. In
connection with the stockholder vote on the corporate reorganization, the
stockholders' agreement was terminated.
(8) Fiscal 1998 shareholders' equity (deficit) reflects the repurchase of
approximately $530 million of the Company's Class A common stock pursuant
to a cash tender offer in June 1998. Shareholders' equity, as of December
28, 2001, reflects the impact of the public offering and the stock buyback
of 3.3 million shares of Class A common stock from employee benefit plans.
Shareholders' equity as of December 28, 2001 does not reflect the effect of
our tender offer which was completed in the second quarter of fiscal 2002
in which we acquired 13.6 million shares of class A common stock for
approximately $314 million.
(9) EBITDA represents net income before interest, taxes, depreciation and
amortization, a measurement used by management to measure operating
performance. EBITDA is not a recognized term under generally accepted
accounting principles and does not purport to be an alternative to
operating income as an indicator of operating performance or to cash flows
from operating activities as a measure of liquidity. Because not all
companies calculate EBITDA identically, this presentation of EBITDA may not
be comparable to other similarly titled measures of other companies.
Additionally, EBITDA is not intended to be a measure of free cash flow for
management's discretionary use, as it does not consider certain cash
requirements such as interest payments, debt service requirements, tax
payments or capital expenditure requirements.
15
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information for the three-months
ended December 28, 2001 is provided pursuant to Article 11 of Regulation S-X.
The unaudited pro forma financial information for the fiscal year ended
September 28, 2001 is incorporated by reference elsewhere in this registration
statement. The unaudited pro forma financial statements give pro forma effect
to the acquisition by ARAMARK of ServiceMaster Management Services for
approximately $800 million in cash (the "Acquisition"). The unaudited pro forma
consolidated statement of income was prepared as if the Acquisition occurred as
of the beginning of ARAMARK's 2001 fiscal year.
The pro forma adjustments are based upon available information and
assumptions that ARAMARK believes are reasonable. The pro forma adjustment to
reflect the allocation of the purchase price is based upon the preliminary
information currently available, which may be revised, as additional
information becomes available. The notes to the unaudited pro forma financial
statements provide a more detailed discussion of how such adjustments were
derived and presented in the pro forma financial statements. Such financial
statements have been compiled from historical financial statements and other
information, but do not purport to represent what ARAMARK's financial position
or results of operations actually would have been had the transactions occurred
on the date indicated, or to project ARAMARK's financial performance for any
future period. The pro forma statement of income does not reflect any synergies
or other operating benefits that may be realized as ARAMARK integrates
ServiceMaster Management Services with its existing operations.
Unaudited Pro Forma Consolidated Statement of Income
for the Three-Months Ended December 28, 2001
ServiceMaster Pro Forma
Management Adjustments Pro Forma
ARAMARK Services for the for the
Historical Historical (a) Acquisition Acquisition
. ---------- ------------- ----------- -----------
Sales...................... $2,109,688 $161,465 $ -- $2,271,153
Costs and Expenses:
Cost of services
provided................ 1,903,989 125,780 -- 2,029,769
Depreciation and
amortization............ 60,353 3,414 5,002(b) 68,769
Selling and general
corporate expenses...... 27,398 21,052 -- 48,450
---------- -------- ------- ----------
1,991,740 150,246 5,002 2,146,988
---------- -------- ------- ----------
Operating income......... 117,948 11,219 (5,002) 124,165
Interest and other
financing costs, net...... 35,498 -- 5,586(c) 41,084
---------- -------- ------- ----------
Income before income
taxes................... 82,450 11,219 (10,588) 83,081
Provision for Income
Taxes..................... 31,007 4,432 (4,130)(d) 31,309
---------- -------- ------- ----------
Net income............... $ 51,443 $ 6,787 $(6,458) $ 51,772
========== ======== ======= ==========
Earnings Per Share
Basic.................... $ 0.29 $ 0.29
Diluted.................. $ 0.27 $ 0.28
16
Notes to Unaudited Pro Forma Financial Statements
(a) Represents the unaudited historical financial statements of the
ServiceMaster Management Services business acquired for the two months
ended November 30, 2001, including the amounts related to the ServiceMaster
corporate campus which was also acquired.
(b) To reflect additional depreciation and amortization related to the tangible
and intangible assets acquired, based upon the following
depreciation/amortization periods:
Property and equipment.............................................. 30 Years
Service mark rights................................................. 3 Years
Non compete agreement............................................... 4 Years
Customer contract rights............................................ 10 Years
In accordance with the recently issued Statement of Financial Accounting
Standard No. 142, goodwill resulting from the acquisition is not amortized.
(c) To reflect additional interest expense resulting from the acquisition
related borrowings. The interest rate on the bridge financing is based on
LIBOR plus-1 3/8% or 4.2% (including the syndication fee). The average
interest rate on ARAMARK's senior revolving credit facility was 3.1%.
(d) To reflect the income tax effect resulting form the pro forma adjustments
using an effective tax rate of 39%.
17
DESCRIPTION OF OTHER INDEBTEDNESS
Senior Revolving Credit Facility
ARAMARK Services is the borrower under a non-amortizing $1.0 billion senior
revolving credit facility, which matures in March 2005. Interest under the
senior revolving credit facility is based on, at our option, LIBOR plus a
spread ranging from 0.18% to 0.70% per annum, the certificate of deposit rate
plus a spread ranging from 0.28% to 0.80% per annum or the higher of the prime
rate or 0.50% per annum over the federal funds rate. There is a commitment fee
ranging from 0.10% to 0.30% per annum on the entire commitment under the senior
revolving credit facility. The spread and fee margins are based on certain
financial ratios. The weighted average interest rate including the commitment
fee under the senior revolving credit facility on February 22, 2002 was 2.3%.
At February 22, 2002, there was approximately $595 million borrowings
outstanding under this facility.
The senior revolving credit facility contains restrictive covenants that,
among other things, limit our ability and the ability of some of our
subsidiaries to effect changes in our businesses or our corporate existence;
create liens securing additional indebtedness; dispose of all or substantially
all of our assets; and enter into some mergers and consolidations.
The terms of the senior revolving credit facility also require that we
maintain certain specified minimum ratios of cash flow to fixed charges and to
total borrowings and certain minimum levels of net worth.
The senior revolving credit facility also provides for general events of
default including:
. failure to pay principal of or interest on any loans under the senior
revolving credit facility;
. failure to perform or observe any covenant;
. acceleration of or failure to make payments in respect of debt in the
aggregate principal amount of $25,000,000 or more; and
. certain events of bankruptcy.
In addition, events of default include the occurrence of more than 30% of
the voting power of our voting securities being held by any person or group. If
any event of default occurs, the principal or interest on the borrowed amounts
may become or may be declared to be immediately due and payable.
Bridge Financing Facility
On November 30, 2001, we completed the acquisition of the management
services division of The ServiceMaster Company ("ServiceMaster Management
Services"). We financed our acquisition of ServiceMaster Management Services
and related expenses by borrowing approximately an additional $200 million
under our existing senior revolving credit facility and $600 million under a
new bridge financing facility with a group of banks arranged by JP Morgan Chase
Bank. A portion of the bridge financing was repaid with proceeds from the
public offering completed on December 14, 2001. As of February 22, 2002, there
was approximately $250 million outstanding under this facility. The bridge
financing facility is unsecured and has a one-year term, beginning on November
30, 2001. ARAMARK Services is the borrower under the bridge financing facility
and we and certain other subsidiaries guarantee the obligations in the same
manner as our senior revolving credit facility. Interest under the bridge
financing facility is based on, at our option, LIBOR plus a spread ranging from
1.125% to 1.875% per annum and an initial spread of 1.375% (with the spread
increasing by 0.25% after six months and by an additional 0.25% after nine
months) or the higher of the prime rate or 0.5% per annum over the federal
funds rate. The bridge financing facility has restrictive covenants, financial
covenants and events of default substantially similar to those included in our
senior revolving credit facility.
Our Publicly Traded Notes
We currently have $875 million principal amount of outstanding senior notes
that mature between 2004 and 2006. The notes are issued under an indenture
dated as of July 15, 1991, among ARAMARK Services,
18
us, as guarantor, and The Bank of New York, as trustee. The 6.75% Notes due
2004 and the 7.00% Notes due 2006 may be redeemed, in whole or in part, at any
time at our option at a redemption price equal to the greater of (i) 100% of
the principal amount or (ii) an amount based on the discounted present value of
scheduled principal and interest payments. The 7.10% Notes due 2006 and the
8.15% Notes due 2005 are not redeemable prior to their stated maturity. None of
the notes has the benefit of a sinking fund.
The notes are subject to certain covenants that, among other things, limit
our ability and the ability of some of our subsidiaries to incur additional
indebtedness unless the outstanding notes are secured equally and ratably with
such additional indebtedness; enter into sale and lease-back transactions; and
enter into some mergers and acquisitions.
The notes also provide for general events of default, which, if any of them
occurs, would require the principal or interest on the notes to become or to be
declared to be immediately due and payable.
Other Facilities
ARAMARK Canada Ltd., our indirectly held, wholly owned subsidiary is the
borrower under a non-amortizing C$70 million Canadian revolving credit facility
among the lenders party thereto and Canadian Imperial Bank of Commerce, as
administrative agent, and The Bank of Nova Scotia, as documentation agent. The
credit facility provides for either U.S. dollar or Canadian dollar borrowings
and matures in March 2003. At February 22, 2002, there was approximately $35
million of borrowings outstanding under this facility.
ARAMARK Services is the borrower under a loan agreement with Metropolitan
Life Insurance Company in an outstanding principal amount of $25 million,
evidenced by a 6.79% note due January 2003. ARAMARK Services is also the
borrower under a $75 million credit agreement provided by Sumitomo Mitsui
Banking Corporation and The Bank of Nova Scotia which matures in May 2005.
Interest under the credit agreement is based on either LIBOR plus a spread
ranging from 0.65% to 1.50% per annum or the higher of the prime rate or 0.50%
per annum over the federal funds rate. The spread is based on certain financial
ratios.
ARAMARK Services is also the borrower under a $50 million credit agreement
provided by KBC Bank which matures in May 2005. Interest under the credit
agreement is based on either LIBOR plus a spread ranging from 0.90% to 1.30%
per annum or the higher of the prime rate or 0.50% per annum over the federal
funds rate. The spread is based on certain financial ratios.
ARAMARK Services is also the borrower under a $45 million credit agreement
provided by BNP Paribas which matures in March 2005. Until April 4, 2002,
interest under the credit agreement is based on LIBOR plus a spread of 0.85%
per annum. Beginning April 4, 2002, interest under the credit agreement will be
fixed at 5.29%.
At February 22, 2002, our subsidiaries also had approximately $120 million
indebtedness outstanding under other indentures and/or credit facilities. In
addition, our subsidiaries have lease and other financial obligations that are
not classified as indebtedness under generally accepted accounting principles,
including an accounts receivable securitization facility described below.
ARAMARK has an agreement (the "Receivables Facility") with several financial
institutions whereby it sells on a continuous basis an undivided interest in
all eligible trade accounts receivable, as defined in the Receivables Facility.
Pursuant to the Receivables Facility, ARAMARK formed ARAMARK Receivables, LLC a
wholly-owned, special purpose, bankruptcy-remote subsidiary. ARAMARK
Receivables, LLC was formed for the sole purpose of buying and selling
receivables generated by certain subsidiaries of ARAMARK. Under the Receivables
Facility, certain subsidiaries of ARAMARK transfer without recourse all of
their accounts receivable to ARAMARK Receivables, LLC. ARAMARK Receivables,
LLC, in turn, has sold and, subject to certain conditions, may from time to
time sell an undivided interest in these receivables up to $200 million.
ARAMARK has retained collection and administrative responsibility for the
participating interest sold. The agreement expires in March 2004. This two-step
transaction is accounted for as a sale of receivables following the provisions
of SFAS No. 140.
19
DESCRIPTION OF OUR DEBT SECURITIES
Please note that in this section entitled "Description of Our Debt
Securities," references to ARAMARK refer only to ARAMARK Corporation and not to
any of its subsidiaries. References to ARAMARK Services or Services refer only
to ARAMARK Services, Inc. and not to any of its subsidiaries. Also, in this
section, references to "holders" mean those who own debt securities registered
in their own names, on the books that the trustee maintains for this purpose,
and not those who own beneficial interests in debt securities registered in
street name or in debt securities issued in book-entry form through one or more
depositaries. Owners of beneficial interests in the debt securities should read
the section below entitled "Global Securities."
THE 2002 INDENTURES
ARAMARK may offer from time to time debt securities. These debt securities
will be unsecured obligations of ARAMARK and will be either senior debt
securities ("Senior Debt Securities") or subordinated debt securities
("Subordinated Debt Securities"). ARAMARK Services, Inc. may offer from time to
time its senior or subordinated debt securities which will be entitled to the
guarantee of ARAMARK ("Guaranteed Debt Securities"). A guarantee issued by
ARAMARK of senior debt securities of Services will rank equally with all
unsecured and unsubordinated indebtedness of ARAMARK. A guarantee of
subordinated debt securities of Services will be subordinated to all of
ARAMARK's present and future senior indebtedness and will rank equally with all
of ARAMARK's other outstanding subordinated indebtedness.
The Guaranteed Debt Securities will be issued under the "2002 Guaranteed
Indenture" and the Senior Debt Securities and the Subordinated Debt Securities
will be issued under the "2002 Debt Indenture." Together the 2002 Guaranteed
Indenture and the 2002 Debt Indenture are called the "2002 Indentures." Unless
otherwise provided in the applicable prospectus supplement, the trustee under
the 2002 Indentures will be Bank One Trust Company, National Association (the
"Trustee").
The debt securities may be issued from time to time in one or more series.
The particular terms, including the issuer of the debt securities, of each
series that is offered by a prospectus supplement will be described in the
applicable prospectus supplement.
We have summarized selected provisions of the 2002 Indentures below. The
summary is not complete. The forms of the 2002 Indentures have been filed as
exhibits to the registration statement and you should read the 2002 Indentures
for provisions that may be important to you. Whenever we refer to this
prospectus or in the prospectus supplement to defined terms of the 2002
Indentures, those defined terms are incorporated by reference herein or
therein, as applicable. Capitalized terms used in this summary and not defined
in this summary have the meanings specified in the 2002 Indentures.
General
The Senior Debt Securities will rank equally with all of ARAMARK's other
unsecured and unsubordinated indebtedness. The Subordinated Debt Securities
will be subordinated in right of payment to the prior payment in full of
ARAMARK's senior indebtedness (including the Senior Debt Securities) as
described in the prospectus supplement applicable to any Subordinated Debt
Securities. The Guaranteed Debt Securities that are senior debt securities of
services will rank equally with all other unsecured and unsubordinated
indebtedness of Services. The Guaranteed Debt Securities that are subordinated
debt securities of Services will be subordinated in right of payment to the
prior payment in full of senior indebtedness of Services. A guarantee issued by
ARAMARK of senior debt securities of Services will rank equally with all
unsecured and unsubordinated indebtedness of ARAMARK. A guarantee of
subordinated debt securities of Services will be subordinated to all of
ARAMARK's present and future senior indebtedness and will rank equally with all
of ARAMARK's other outstanding subordinated indebtedness.
20
The 2002 Indentures provide that the debt securities may be issued without
limit as to aggregate principal amount, in one or more series, and in any
currency or currency units, in each case as established from time to time in or
under the authority granted by a resolution of our Board of Directors or as
established in one or more supplemental indentures. All debt securities of one
series need not be issued at the same time, and may vary as to interest rate,
maturity and other provisions and, unless otherwise provided, a series may be
"reopened," without the consent of the holders of the debt securities of that
series, for issuance of additional debt securities of that series ranking
equally with debt securities of that series and otherwise similar in all
respects except for issue date and issue price.
A prospectus supplement will include the terms of any debt securities being
offered ("Offered Debt Securities"). These terms will include some or all of
the following:
. the title of the Offered Debt Securities;
. whether the Offered Debt Securities are Senior Debt Securities,
Subordinated Debt Securities or Guaranteed Debt Securities;
. the total principal amount of the Offered Debt Securities;
. the dates on which the principal of the Offered Debt Securities will be
payable;
. the interest rate, which may be fixed or variable, of the Offered Debt
Securities and the interest payment dates for the Offered Debt
Securities; the places where payments on the Offered Debt Securities
will be payable; any terms upon which the Offered Debt Securities may be
redeemed at our option;
. any sinking fund or other provisions that would obligate us to
repurchase or otherwise redeem the Offered Debt Securities;
. our right, if any, to redeem the Offered Debt Securities at our option,
and the terms and conditions upon which the Offered Debt Securities may
be redeemed at our option;
. whether the Offered Debt Securities are defeasible;
. denominations of the Offered Debt Securities and the foreign currency or
currencies in which the Offered Debt Securities are issuable;
. the amount of payments of principal and interest which may be determined
by reference to an index;
. subordination provisions applicable to the Offered Debt Securities;
. any addition to or change in the Events of Default;
. the designation of any depositories, trustees (other than the Trustee),
Paying Agents, Authenticating Agents or other agents with respect to the
Offered Debt Securities;
. any addition to or modification or deletion of the covenants in the 2002
Indentures; and
. any other terms of the Offered Debt Securities not inconsistent with the
provisions of the 2002 Indentures.
If so provided in the applicable prospectus supplement, the debt securities
may be issued at a discount below their principal amount and ARAMARK or
Services, as the case may be, may pay less than the entire principal amount of
the debt securities upon declaration of acceleration of their maturity
("Original Issue Discount Securities"). The applicable prospectus supplement
will describe all material U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities.
The general provisions of the 2002 Indentures do not contain any provisions
that would limit ARAMARK's or Services' ability or the ability of their
subsidiaries to incur indebtedness or that would afford holders of the debt
securities protection in the event of a highly leveraged or similar transaction
involving
21
ARAMARK, Services or any of their subsidiaries. Please refer to the applicable
prospectus supplement for information with respect to any deletions from,
modifications of or additions, if any, to the Events of Default described below
that are applicable to the Offered Debt Securities or any covenants or other
provisions providing event risk or similar protection.
Form, Exchange and Transfer
The debt securities of each series will be issuable only in fully registered
form, without coupons. Unless otherwise indicated in the applicable prospectus
supplement, the securities will be issued in denominations of $1,000 each or
multiples thereof.
Subject to the terms of the 2002 Indentures and the limitations applicable
to global securities, debt securities may be transferred or exchanged at the
corporate trust office of the Trustee or at any other office or agency
maintained by us for that purpose, without the payment of any service charge
except for any taxes or other governmental charge. The registered holder of a
debt security will be treated as the owner of it for all purposes.
Any debt security which is to be redeemed only in part shall be surrendered
at the corporate trust office of the Trustee or other office or agency
maintained for that purpose with due endorsement by, or a written instrument of
transfer duly executed by, the Holder, if so required by the relevant issuer,
the Security Registrar or the Trustee and the relevant issuer shall execute,
and the Trustee shall authenticate and deliver to the Holder of such debt
security without service charge, a new debt security or debt securities of the
same series, of like tenor and form, of any authorized denomination as
requested by such Holder in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the debt security so
surrendered.
Payment
Unless otherwise indicated in the applicable prospectus supplement, payment
of interest on a debt security on any interest payment date will be made to the
person in whose name that debt security is registered at the close of business
on the regular record date for that interest payment.
Unless otherwise indicated in the applicable prospectus supplement,
principal, interest and any premium on our debt securities will be paid at
designated places. However, at our option, payment of interest may be made by
check mailed to the persons in whose names our debt securities are registered
or, if provided in the applicable prospectus supplement, by wire transfer to an
account designated by such persons on days specified in any prospectus
supplement.
All moneys paid by the relevant issuer to a Paying Agent for the payment of
the principal on and premium, if any, or interest on any debt security of any
series which remain unclaimed at the end of two years after the principal,
premium, if any, or interest will have become due and payable will be repaid to
the relevant issuer and the holder of the debt security will look only to the
relevant issuer as an unsecured general creditor for payment.
Redemption
If the debt securities of a series provide for mandatory redemption by the
relevant issuer or redemption at the election of the relevant issuer unless
otherwise provided in the applicable prospectus supplement, the redemption may
not be on less than 30 nor more than 60 days' notice and, in the event of
redemption in part, the debt securities to be redeemed will be selected by the
Trustee as it deems fair and appropriate. Notice of redemption will be mailed
to Holders of debt securities of the series to their last addresses as they
appear on the register of the debt securities for that series.
22
Guaranteed Debt Securities
ARAMARK will guarantee ("Guarantee") the punctual payment of the principal
of, premium, if any, and interest on the Guaranteed Debt Securities, when and
as the same will be due and payable. The Guarantee is absolute and
unconditional, irrespective of any circumstance that might otherwise constitute
a legal or equitable discharge of a surety or guarantor. To evidence the
Guarantee, a Guarantee executed by ARAMARK will be endorsed on each Guaranteed
Debt Security.
Merger or Consolidation
The 2002 Indentures provide that the relevant issuer may not consolidate
with or merge with or into or wind up into, whether or not such issuer is the
surviving corporation, or sell, assign, convey, transfer or lease our
properties and assets substantially as an entirety to any Person, unless:
. the corporation formed by the consolidation or into which the issuer is
merged or the Person which acquires by conveyance or transfer, or which
leases the issuer's properties and assets substantially as an entirety
(the "successor corporation") is a corporation organized and existing
under the laws of the United States or any State or territory thereof or
the District of Columbia and expressly assumes by a supplemental
indenture the due and punctual payment of the principal of, and premium,
if any, and interest on all the issuer's debt securities issued under
the applicable 2002 Indenture and the performance of every covenant in
the applicable 2002 Indenture on the issuer's part to be performed or
observed;
. immediately after giving effect to such transaction, no Event of Default
under the applicable 2002 Indenture, and no event which, after notice or
lapse of time, or both, would become an Event of Default, has happened
and is continuing;
. in the case of a merger or consolidation or other transaction with
respect to Services, ARAMARK shall have confirmed its guarantee of the
successor corporation's obligations; and
. the other conditions as may be specified in the applicable prospectus
supplement.
With respect to Guaranteed Debt Securities, the merger and consolidation
provisions described above are equally applicable to ARAMARK in its capacity as
Guarantor of such debt securities.
Corporate Existence
Subject to the terms of the applicable 2002 Indenture, the relevant issuer
and the Guarantor, if applicable, will do or cause to be done all things
necessary to preserve and keep in full force and effect the corporate
existence, charter and statutory rights of such issuer and the Guarantor, if
applicable; provided, however, that the relevant issuer and the Guarantor, if
applicable, will not be required to preserve any right if such issuer or
Guarantor determines that the preservation thereof is no longer desirable in
the conduct of its business.
Events of Default
Unless otherwise specified in the applicable prospectus supplement, each of
the following will constitute an event of default ("Event of Default") under
the 2002 Indentures with respect to the debt securities of any series:
. default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of that default
for a period of 30 days;
. default in the payment of the principal of and premium, if any, on any
debt security of that series at its Maturity;
. default in the deposit of any sinking fund payment, when and as due by
the terms of a debt security of that series;
23
. default in the performance, or breach, of any covenant or warranty in
the 2002 Indentures, other than a covenant or warranty a default in
whose performance or whose breach is elsewhere specifically dealt with
or which expressly has been included in the 2002 Indentures solely for
the benefit of debt securities of a series other than that series, and
continuance of such default or breach for a period of 60 days after
there has been given by registered or certified mail, to the issuer by
the applicable Trustee or to the issuer and the applicable Trustee by
the Holders of at least 25% in principal amount of the outstanding debt
securities of that series, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default";
. certain events of bankruptcy, insolvency or reorganization; or
. any other Event of Default provided with respect to debt securities of
that series.
The 2002 Indentures require the relevant issuer and the guarantor, if
applicable, to file with the Trustee, annually, an officers' certificate as to
compliance with all conditions and covenants under the applicable 2002
Indenture. The 2002 Indentures provide that the applicable Trustee may withhold
notice to the Holders of a series of debt securities of any default, except
payment defaults on those debt securities, if it considers such withholding to
be in the interest of the Holders of that series of debt securities.
If an Event of Default with respect to debt securities of any series at the
time outstanding occurs and is continuing, then in every case the applicable
Trustee or the Holders of not less than 25% in principal amount of our
outstanding debt securities of that series may declare the principal amount,
or, if any debt securities of that series are Original Issue Discount
Securities, that portion of the principal amount of those Original Issue
Discount Securities as may be specified in the terms of those Original Issue
Discount Securities, of all our debt securities of that series to be due and
payable immediately, by a notice in writing to the issuer, and to the
applicable Trustee if given by Holders, and upon any such declaration that
principal amount, or specified amount, plus accrued and unpaid interest, and
premium, if any, will become immediately due and payable. Upon payment of that
amount in the currency in which such debt securities are denominated (except as
otherwise provided in the 2002 Indentures or specified in the prospectus
supplement), all of our obligations in respect of the payment of principal of
the debt securities of that series will terminate.
If an Event of Default results from bankruptcy, insolvency or
reorganization, the principal amount of all the debt securities of a series, or
that portion of the principal amount of such debt securities as may be
specified in a prospectus supplement, will automatically become immediately due
and payable.
Subject to the provisions of the 2002 Indentures relating to the duties of
the Trustee, in case an Event of Default with respect to our debt securities of
a particular series occurs and is continuing, the Trustee will be under no
obligation to exercise any of its rights or powers under the applicable 2002
Indenture at the request, order or direction of any of the Holders of Debt
securities of that series, unless the Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in complying with such request or direction.
Subject to the provisions for the indemnification of the Trustee, the Holders
of a majority in principal amount of our outstanding debt securities of that
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee under the 2002
Indentures, or exercising any trust or power conferred on the applicable
Trustee with respect to our debt securities of that series.
At any time after a declaration of acceleration with respect to our debt
securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as provided in the
2002 Indentures, the Holders of a majority in principal amount of our
outstanding debt securities of that series, by written notice to us and the
Trustee, may rescind and annul such declaration and its consequences, subject
to any terms or conditions specified in the applicable prospectus supplement.
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Modification or Waiver
Without prior notice to or consent of any Holders, the relevant issuer, the
Guarantor, if applicable, and the Trustee, at any time and from time to time,
may modify the applicable 2002 Indenture for any of the following purposes:
. to evidence the succession of another corporation to the rights of the
relevant issuer or the Guarantor, if applicable, and the assumption by
that successor of the covenants and obligations under the applicable
2002 Indenture and under the debt securities or the guarantees issued
thereunder in accordance with the terms of the applicable 2002
Indenture;
. to add to the covenants for the benefit of the Holders of all or any
series of debt securities, and if those covenants are to be for the
benefit of less than all series, stating that those covenants are
expressly being included solely for the benefit of that series, or to
surrender any rights or powers of the issuer under the applicable 2002
Indenture;
. to add any additional Events of Default, and if those Events of Default
are to be applicable to less than all series, stating that those Events
of Default are expressly being included solely to be applicable to that
series;
. to change or eliminate any of the provisions of the applicable 2002
Indenture, provided that any such change or elimination will become
effective only when there is no outstanding debt security issued
thereunder of any series created prior to such modification which is
entitled to the benefit of such provision and as to which such
modification would apply;
. to secure the debt securities issued thereunder;
. to supplement any of the provisions of the applicable 2002 Indenture to
the extent necessary to permit or facilitate the defeasance and
discharge of any series of debt securities, provided that any such
action will not adversely affect the interests of the Holders of debt
securities of that series or any other series of debt securities issued
under the applicable 2002 Indenture in any material respect;
. to establish the form or terms of debt securities or guarantees as
permitted by the applicable 2002 Indenture;
. to evidence and provide for the acceptance of appointment thereunder by
a successor Trustee with respect to one or more series of debt
securities and to add to or change any of the provisions of the
applicable 2002 Indenture as is necessary to provide for or facilitate
the administration of the trusts thereunder by more than one Trustee; or
. to cure any ambiguity, to correct or supplement any provision in the
applicable 2002 Indenture which may be defective or inconsistent with
any other provision therein, to eliminate any conflict between the terms
of the applicable 2002 Indenture and the debt securities issued
thereunder and the Trust Indenture Act (the "TIA") or to make any other
provisions with respect to matters or questions arising under the
applicable 2002 Indenture which will not be inconsistent with any
provision of the applicable 2002 Indenture; provided those other
provisions do not adversely affect the interests of the Holders of
outstanding debt securities of any series created thereunder prior to
such modification in any material respect.
With the written consent of the Holders of not less than a majority in
principal amount of the outstanding debt securities of each series affected by
such modification voting separately, the relevant issuer, the Guarantor, if
applicable, and the Trustee may modify the applicable 2002 Indenture for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the applicable 2002 Indenture or of modifying in any
manner the rights of the Holders of debt securities under the applicable 2002
Indenture; provided, however, that such modifications may not, without the
consent of the Holder of each outstanding debt security of each series
affected, or, in certain cases, except as provided with respect to a series of
debt securities, modify the principal or interest terms, change the currency or
currencies in which monies are
25
payable on the securities, modify the sinking fund or analogous provisions for
any securities, impair the right to bring suit for the enforcement of payments
after the maturity or redemption of securities, reduce the percentage in
principal amount of securities whose holder's must consent to modifications or
waivers or conflict with the required provisions of the TIA or make those
changes or modifications specified in the applicable prospectus supplement as
requiring the consent of the Holder of each outstanding debt security for each
series affected.
A modification which changes or eliminates any covenant or other provision
of the applicable 2002 Indenture with respect to one or more particular series
of debt securities or which modifies the rights of the Holders of debt
securities of that series with respect to that covenant or other provision,
will be deemed not to affect the rights under the applicable 2002 Indenture of
the Holders of debt securities of any other series.
Each of the 2002 Indentures provide that the Holders of not less than a
majority in aggregate principal amount of the then outstanding debt securities
of any series, by notice to the Trustee, may on behalf of the Holders of the
debt securities of that series waive any Default or Event of Default and its
consequences under the applicable 2002 Indenture, except:
. a default in the payment of the principal of, premium, if any, or the
interest on or in the payment of any sinking fund installment or
analogous obligation with respect to any such debt security; or
. a default in respect of a covenant or provision of the applicable 2002
Indenture which cannot be modified or amended without the consent of the
Holder of each outstanding debt security of each series affected.
Discharge, Legal Defeasance and Covenant Defeasance
The applicable 2002 Indenture obligations with respect to the debt
securities of any series may be discharged, subject to the terms and conditions
as specified in the applicable prospectus supplement when either:
. all debt securities, with the exceptions provided for in the applicable
2002 Indenture, of that series have been delivered to the Trustee for
cancellation; or
. all debt securities of that series not theretofore delivered to the
Trustee for cancellation:
. have become due and payable or will become due and payable at their
Stated Maturity within one year; or are to be called for redemption
within one year; and
. certain events or conditions occur as specified in the applicable
prospectus supplement
and the relevant issuer or the Guarantor, as the case may be, has paid or
caused to be paid all sums payable under the applicable 2002 Indenture and
complied with certain other conditions.
In addition, each series of debt securities may provide additional or
different terms or conditions for the discharge or defeasance of some or all of
our obligations as may be specified in the applicable prospectus supplement.
If provision is made for the defeasance of debt securities of a series, and
if the debt securities of that series are registered securities and denominated
and payable only in U.S. dollars, then the provisions of the 2002 Indentures
relating to defeasance will be applicable except as otherwise specified in the
applicable prospectus supplement for debt securities of that series. Defeasance
provisions, if any, for debt securities denominated in a foreign currency or
currencies may be specified in the applicable prospectus supplement.
At the relevant issuer's option, either (1) such issuer and the Guarantor,
if applicable, will be deemed to have been discharged from its obligations with
respect to debt securities of any series, i.e. the "legal defeasance option,"
or (2) such issuer and the Guarantor, if applicable, will cease to be under any
obligation to comply with certain provisions of the applicable 2002 Indenture
with respect to certain covenants, if any,
26
specified in the applicable prospectus supplement with respect to debt
securities of any series, i.e. the "covenant defeasance option," at any time
after the conditions set forth in the applicable prospectus supplement have
been satisfied.
Governing Law
The 2002 Indentures and our debt securities will be governed by, and
construed in accordance with, the law of the State of New York.
THE 1991 INDENTURES
ARAMARK may offer subordinated securities (the "Subordinated Securities")
from time to time in one or more series under an indenture (the "1991
Subordinated Indenture") between ARAMARK and The Bank of New York, as Trustee
(the "Subordinated Trustee"). Unlike the 2002 Debt Indenture, ARAMARK may only
issue subordinated securities under the 1991 Subordinated Indenture. Services
may offer from time to time its debt securities which will be entitled to the
guarantee of ARAMARK (the "Guaranteed Securities") in one or more series under
an indenture (the "1991 Guaranteed Indenture") among ARAMARK, Services and The
Bank of New York, as Trustee (the "Guaranteed Trustee"). The 1991 Subordinated
Indenture and the 1991 Guaranteed Indenture are sometimes referred to
collectively as the "1991 lndentures," and the Subordinated Trustee and the
Guaranteed Trustee are sometimes referred to collectively as the "Trustee."
We have summarized selected provisions of the 1991 Indentures below. The
summary is not complete. The form of the 1991 Indentures have been filed as
exhibits to the registration statement and you should read the 1991 Indentures
for provisions that may be important to you. In this prospectus or in the
applicable prospectus supplement, whenever we refer to defined terms of the
1991 Indentures, those defined terms are incorporated by reference herein or
therein, as applicable. Capitalized terms used in this summary have the
meanings specified in the 1991 Indentures. We have included many of these
defined terms later in this prospectus under the subheading "--Defined Terms
Applicable to the 1991 Indentures."
General
Each of the 1991 Indentures provides that the debt securities may be issued
without limit as to aggregate principal amount in one or more series.
A prospectus supplement will include the terms of any debt securities being
offered under the 1991 Indentures ("Securities"). These terms will include some
or all of the following:
. the name of the issuer and the title of the Securities;
. whether the Securities are subordinated securities or guaranteed
securities;
. the aggregate principal amount of the Securities;
. the date or dates on which the principal of the Securities is payable;
. the rate or rates or the method for determining such rate or rates, if
any, at which the Securities will bear interest and the date or dates
from which such interest will accrue and the date or dates at which such
interest will be payable;
. any provisions relating to optional or mandatory redemption of the
Securities;
. if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which the Securities are authorized to be issued;
. the place or places at which ARAMARK or Services will make payments of
principal (and premium, if any) and interest, if any;
. the person to whom any Security of such series will be payable, if other
than the person in whose name that Security is registered at the close
of business on the regular record date for such interest;
27
. denominations of the Securities and the foreign currency or currencies
in which the Securities are issuable;
. the amount of payments of principal and interest which may be determined
by reference to an index;
. any additional covenants (or modifications to covenants contained in the
1991 Indentures);
. if other than the principal amount, the portion of the principal amount
of Securities of the series that will be payable upon acceleration of
the maturity;
. whether the Securities are defeasible;
. the Offer to Purchase Price and the Applicable Stated Maturity
applicable to the Securities of any series; and
. any other specific terms of the Securities not inconsistent with the
applicable 1991 lndenture.
One or more series of the Securities may be issued as original issue
discount securities. An original issue discount security is a Security,
including any zero-coupon Security, which is issued at a price lower than the
amount payable at the stated maturity or which provides that upon redemption or
acceleration of the maturity an amount less than the amount payable upon the
stated maturity will become due and payable.
Form, Exchange, Registration and Transfer
Securities may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed) at the Security Registrar's office or
at the office of any transfer agent designated by ARAMARK or Services, as the
case may be, for such purpose and referred to in an applicable prospectus
supplement, without the payment of any service charge except for any taxes and
other governmental charges. The transfer or exchange will be effected upon the
satisfaction of the Security Registrar or such transfer agent, as the case may
be, with the documents of title and identity of the person making the request.
ARAMARK and Services have appointed the Trustee as Security Registrar for the
Securities.
If there is any redemption in part, ARAMARK or Services, as the case may be,
will not be required to (i) issue, register the transfer of or exchange any
Security during a period beginning at the opening of business 15 days before
the mailing of a notice of redemption of Securities of like tenor and of the
series of which such Security is a part, and ending at the close of business on
the date of such mailing and (ii) register the transfer of or exchange any
Security selected for redemption, in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
Payment and Paying Agent
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal and premium (if any) on any Security will be made only against
surrender to the Paying Agent of such Security. Unless otherwise indicated in
an applicable Prospectus Supplement, principal and any premium, if any, and
interest on Securities will be payable, subject to any applicable laws and
regulations, at the office of the Paying Agent or Paying Agents as ARAMARK or
Services, as the case may be, may designate from time to time.
Unless otherwise indicated in an applicable prospectus supplement, payment
of interest on a Security on any interest payment date will be made to the
person in whose name the Security is registered at the close of business on the
regular record date for such interest. Unless otherwise indicated in an
applicable prospectus supplement, the corporate trust office of The Bank of New
York in The City of New York will be designated ARAMARK's and Services' sole
Paying Agent for payments with respect to Securities of each series.
All moneys paid by the relevant issuer to a Paying Agent for the payment of
the principal on and premium, if any, or interest on any debt security of any
series which remain unclaimed at the end of two years after the principal,
premium, if any, or interest will have become due and payable will be repaid to
the relevant issuer and the holder of the debt security will look only to the
relevant issuer as an unsecured general creditor for payment.
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Redemption
If the debt securities of a series provide for mandatory redemption by the
relevant issuer or redemption at the election of the relevant issuer, unless
otherwise provided in the applicable prospectus supplement, the redemption may
not be on less than 30 nor more than 60 days' notice and, in the event of
redemption in part, the debt securities to be redeemed will be selected by the
Trustee as it deems fair and appropriate. Notice of redemption will be mailed
to Holders of Securities of the series to their last addresses as they appear
on the register of the debt securities for that series.
Certain Covenants Applicable to Subordinated Securities and Guaranteed
Securities
Unless otherwise indicated in the applicable prospectus supplement, the
following covenants are applicable to Subordinated Securities and Guaranteed
Securities under the 1991 Indentures. In the past when we have offered a series
of debt securities under the 1991 Indentures, the applicable prospectus
supplement has specified that none of the following covenants summarized under
this subheading were applicable to such series.
Mergers, Consolidations and Certain Sales and Purchases of Assets. ARAMARK
may not:
. consolidate with or merge with or into any Person who is not a
Subsidiary or permit any Person who is not a Subsidiary to consolidate
with or merge with or into ARAMARK or any Subsidiary;
. directly or indirectly transfer, convey, sell, lease or otherwise
dispose of all or substantially all of its assets as an entirety; and
. and may not permit any Subsidiary to, acquire capital stock of any other
Person who is not a Subsidiary which results in such Person becoming a
Subsidiary or directly or indirectly purchase, lease or otherwise
acquire all or substantially all of the assets of any Person as an
entirety or any existing business of any Person, unless either
(X) the amount of consideration (including any indebtedness assumed by
or which becomes an obligation of ARAMARK or such Subsidiary in
connection therewith and the fair market value of property other
than cash, as determined in good faith by the Board of Directors)
paid for such capital stock or assets of any Person is less than or
equal to 1% of Consolidated Tangible Assets as of the most recently
available quarterly or annual consolidated balance sheet of
ARAMARK, or
(Y) the amount of consideration (including any indebtedness assumed by
or which becomes an obligation of ARAMARK or such Subsidiary in
connection therewith and the fair market value of property other
than cash, as determined in good faith by the Board of Directors)
paid for such Capital Stock or assets plus the aggregate amount of
consideration (including any indebtedness assumed by or which
becomes an obligation of ARAMARK or such Subsidiary in connection
therewith and the fair market value of property other than cash, as
determined in good faith by the Board of Directors) paid by ARAMARK
or its Subsidiaries for other such acquisitions (excluding
acquisitions referred to in clause (X) and excluding acquisitions
permitted below and excluding any acquisitions in respect of which
ARAMARK makes an Offer to Purchase in accordance with the
provisions of the following paragraph) consummated during the prior
12 months does not exceed 10% of the Consolidated Tangible Assets
of ARAMARK as of the most recently available quarterly or annual
consolidated balance sheet of ARAMARK.
Notwithstanding the foregoing, any transaction described above may occur if:
(1) the Successor Company is a domestic corporation, partnership, or trust
and expressly assumes the obligations of ARAMARK or Services, as the
case may be, under the applicable 1991 Indenture;
(2) immediately before and after giving effect to the transaction and
treating any indebtedness which becomes an obligation of ARAMARK or a
Subsidiary as a result of the transaction as having been incurred by
ARAMARK or such Subsidiary at the time of the transaction, no default
has happened and is continuing; and
29
(3) immediately after giving effect to the transaction or, if applicable,
the portion of the transaction that exceeds the amount of consideration
otherwise permitted above, the Consolidated Cash Flow Ratio of ARAMARK
or, if applicable, the Successor Company for the immediately preceding
four full fiscal quarters, for which quarterly or annual consolidated
financial statements of ARAMARK are available on a pro forma basis, as
if the transaction had taken place at the beginning of the four full
fiscal quarters, is equal to or greater than 2.0 to 1 or such other
Consolidated Cash Flow Ratios specified in the applicable prospectus
supplement.
No default in the performance, or breach, of the Mergers, Consolidations and
Certain Sales and Purchases of Assets covenant described above will be deemed
to have occurred so as to result in an Event of Default with regard to the
Securities of any series by reason of any merger, consolidation, divestiture,
sale, disposition or acquisition described above, unless and until ARAMARK
fails to make an Offer to Purchase within five business days of any such
merger, consolidation, divestiture, sale, disposition or acquisition at a price
equal to the Offer to Purchase Price.
Provision of Financial Statements. So long as ARAMARK is subject to the
Exchange Act, ARAMARK will file with the Commission the annual reports,
quarterly reports and other documents ("Documents") on or prior to the dates
("Required Filing Dates") the Documents are required to be filed. If ARAMARK is
not required to file Documents under the Exchange Act, ARAMARK will prepare
quarterly and annual financial statements including any notes in accordance
with generally accepted accounting principles (and with respect to any annual
financial statement, obtain an auditors' report by a firm of established
national reputation), and a quarterly and annual "Management's Discussion and
Analysis of Financial Condition and Results of Operations," prepared
substantially in accordance with the requirements of the Exchange Act
(collectively with the quarterly and annual financial statements, the
"Alternative Documents").
ARAMARK will within 30 days of each Required Filing Date transmit by mail to
all Holders, without cost, and file with the Trustee copies of the Documents or
the Alternative Documents. If ARAMARK is not required to file the Documents
with the Commission under the Exchange Act, then promptly upon written request
ARAMARK will supply copies of Alternative Documents to any prospective Holder.
Limitation on Restricted Payments. So long as the Securities of any series
are outstanding ARAMARK will not, and with respect to clauses (ii) through
(iv), will not permit any Subsidiary to, directly or indirectly:
(i) declare or pay any dividend or make any distribution in cash or
property, in respect of any class of its capital stock, or to the
holders of any class of its capital stock, including pursuant to a
merger or consolidation of ARAMARK, but excluding any dividends or
distributions payable solely in shares of its capital stock or in
options, warrants or other rights to acquire its capital stock,
(ii) purchase, redeem or otherwise acquire or retire for value any capital
stock of ARAMARK or any options, warrants or right to purchase or
acquire shares of capital stock of ARAMARK,
(iii) make, any loan, advance, capital contribution to or investment in, or
payment on a guarantee of any obligation of, any Affiliate, other
than ARAMARK, a Subsidiary or an Affiliate that becomes a Subsidiary
by reason of any such payment, or
(iv) declare or pay any dividend or make any distribution in cash or
property, in respect of any Minority Interest created, excluding any
dividends or distributions payable solely in shares of capital stock
of such Subsidiary or in options, warrants or other right to acquire
such capital stock.
The transactions described in clauses (i) through (iv), but only to the
extent they exceed in the aggregate in any fiscal year 2% of Consolidated
Tangible Assets as of the most recently available annual consolidated balance
sheet of ARAMARK, are referred to as "Restricted Payments", unless, at the time
of the Restricted Payment:
(1) no default, or an event that with the lapse of time or the giving of
notice, or both, would constitute a default, has occurred and is
continuing, or
30
(2) the transaction constitutes a Restricted Payment and, upon giving
effect to the Restricted Payment, the aggregate of all Restricted
Payments from the date of the original issuance of the Securities is
less than the sum of:
(a) 50% of cumulative Consolidated Net Income (or, in the case
cumulative Consolidated Net Income is negative, minus 100% of such
deficit) for the period from September 30, 1988 to the end of the
most recently available quarterly or annual consolidated income
statements of ARAMARK; provided, that the net income (loss) of any
Person acquired by ARAMARK in a pooling-of-interests transaction
for any period prior to the date of such transaction will not be
included in the calculation of cumulative Consolidated Net Income;
and
(b) 100% of the aggregate net proceeds, including the fair value of
property other than cash, from the issuance of Capital Stock of
ARAMARK (and, in the event ARAMARK merges or consolidates with
another Person in a transaction in which the outstanding common
stock of ARAMARK prior to the transaction is canceled, the
Consolidated Net Worth of such other Person but not less than zero)
and warrants, rights or options on Capital Stock and the principal
amount of Indebtedness of ARAMARK that has been converted into
Capital Stock of ARAMARK after the date of the original issuance of
securities of such series.
Restricted Payments will not include the following:
. the payment of any dividend within 60 days after declaration thereof if
at the declaration date such payment would have complied with the
foregoing provisions;
. any purchase, repurchase, redemption, defeasance or other acquisition or
retirement of ARAMARK's series preferred stock and dividends paid in
respect thereof; or
. payments in redemption of capital stock or options to purchase capital
stock but only to the extent that the cash payments, for either direct
cash payments or for cash principal payments on notes issued in
connection with any such redemption of capital stock or options, in
respect of such capital stock does not exceed in any fiscal year 1% of
Consolidated Tangible Assets as of the most recently available quarterly
or annual consolidated balance sheet of ARAMARK.
No default in the performance, or breach, of this covenant will be deemed to
have occurred so as to result in an Event of Default with respect to the
Securities of such series by reason of any Restricted Payment,
. if the Consolidated Cash Flow Ratio for the immediately preceding four
full fiscal quarters for which quarterly or annual consolidated
financial statements of ARAMARK are available, on a pro forma basis, as
if such Restricted Payment (or portion thereof) made after the end of
such four full fiscal quarters had been made at the beginning of such
four full fiscal quarters is equal to or greater than 2.0 to 1 or such
other ratios specified in the applicable prospectus supplement; or
. unless and until ARAMARK fails to make an Offer to Purchase the
Securities within five Business Days of such Restricted Payment at a
price equal to the Offer to Purchase Price.
Limitation on Certain Security Interests. The 1991 Indentures provide that
ARAMARK may not create, incur or allow any security interest in shares of
capital stock of Services, except those security interests relating to
indebtedness of Services, without providing that the Securities will be secured
equally and ratably with (or prior to) such security interest, except that the
foregoing will not apply to any security interest arising with respect to
indebtedness of any Subsidiary.
The holders of not less than a majority of the principal amount of
Securities of each series at the time outstanding may waive compliance by
ARAMARK. The limitation on certain security interests would automatically
terminate in the event of a merger or consolidation of ARAMARK and Services or
the sale of substantially all of the assets of Services or ARAMARK to the
other.
31
Certain Additional Terms Applicable To the Subordinated Securities
"Pari Passu Debt" means any Indebtedness of ARAMARK for money borrowed
whether outstanding at the date hereof or incurred thereafter, that ranks equal
with the Subordinated Securities.
Subordination
The Subordinated Securities (including principal and interest) will be
subordinated in right of payment to all present and future Senior Indebtedness.
"Senior Indebtedness" is defined in the 1991 Subordinated Indenture to mean
principal of, premium, if any, and interest on:
(1) all indebtedness incurred or guaranteed by ARAMARK, which is evidenced
by an instrument of indebtedness or reflected on the accounting records
of ARAMARK as a payable (excluding ARAMARK's 8 1/2% Subordinated Notes
Due 2003 which will rank equally with the Subordinated Securities, and
any other debt which by the terms of the instrument creating or
evidencing the same is not superior in right of payment to the
Subordinated Securities) including, without limitation:
(a) any amount payable with respect to any lease, conditional sale or
installment sale agreement or other financing instrument or
agreement which in accordance with generally accepted accounting
principles is, at the date hereof or at the time the lease,
conditional sale or installment sale agreement or other financing
instrument or agreement is entered into, or assumed or guaranteed
by, directly or indirectly, ARAMARK, required to be reflected as a
liability on the face of the balance sheet of ARAMARK;
(b) any amounts payable in respect to any interest rate exchange
agreement, currency exchange agreement or similar agreement; and
(c) any subordinated indebtedness of a corporation merged with or into
or acquired by ARAMARK; and
(2) any renewals or extensions or refunding of any Senior Indebtedness or
evidences of indebtedness issued in exchange for Senior Indebtedness.
In the event of the dissolution, winding up, liquidation or reorganization
of ARAMARK, all Senior Indebtedness must be paid in full, or provision made for
payment, before any payment or distribution is made upon principal of or
interest on Subordinated Securities.
As a result of subordination, in the event of liquidation or insolvency,
creditors of ARAMARK who are holders of Senior Indebtedness, may recover more,
ratably, than the holders of the Subordinated Securities. In addition,
subordination will prevent ARAMARK from making any payment with respect to the
Subordinated Securities in the event and during the continuation of any default
with respect to Senior Indebtedness that would permit or automatically effect
acceleration of the maturity, or if a payment with respect to the Subordinated
Securities would result in any such event of default with respect to Senior
Indebtedness, or if any payment with respect to Senior Indebtedness is then due
and payable.
The 1991 Subordinated Indenture does not limit the aggregate amount of
Senior Indebtedness which may be issued.
Certain Additional Covenants Applicable to Subordinated Securities
Unless otherwise indicated in the applicable Prospectus Supplement, the
following covenant, in addition to the covenants set forth under "Certain
Covenants Applicable to Subordinated Securities and Guaranteed Securities,"
will be applicable to the Subordinated Securities of any series.
Limitation on Layered Indebtedness and Subsidiary Preferred Stock. ARAMARK
will not
(i) permit any Restricted Subsidiary to incur any Indebtedness that would
rank subordinate in right of payment to any other Indebtedness of such
Restricted Subsidiary or to issue any Preferred Stock; or
32
(ii) incur any Indebtedness or, if ARAMARK and Services merge with or
consolidate into each other and such Successor Company becomes the
primary obligor with respect to any significant portion of the then
existing consolidated indebtedness owing to a bank or syndicate of
banks, incur any indebtedness which is subordinate in right of payment
to any other indebtedness for borrowed money of such Successor
Company,
unless, in either case, such Indebtedness (x) ranks equal to or is subordinate
in right of payment to the Subordinated Securities of any series and (y) has an
Average Life equal to or greater than the Average Life specified in the
applicable prospectus supplement and has a stated maturity on or after the date
specified in the applicable prospectus supplement.
The foregoing limitation will not apply to (A) distinctions between
categories of Indebtedness which exist by reason of any liens arising or
created in respect of some but not all Indebtedness or (B) any intercreditor
agreements to which ARAMARK is not a party among different classes of creditors
of ARAMARK.
Notwithstanding the foregoing, ARAMARK may:
(i) incur any subordinated Indebtedness in connection with the funding of a
payment in redemption of Capital Stock as is permitted under the
provisions described under "Certain Covenants Applicable to
Subordinated Securities and Guaranteed Securities -- Limitation on
Restricted Payments" above;
(ii) guarantee any Indebtedness of any Subsidiary;
(iii) incur any Indebtedness owed by ARAMARK to any Subsidiary provided
that such Indebtedness is at all times held by the Subsidiary of
ARAMARK, except that for purposes of this covenant, upon either the
transfer or other disposition by such Subsidiary of any Indebtedness
so permitted to a Person other than ARAMARK or another Subsidiary of
ARAMARK or the issuance (other than directors' qualifying shares),
sale, lease, transfer or other disposition of shares of Capital Stock
(including by consolidation or merger) of such Subsidiary to a Person
other than ARAMARK or another such wholly-owned Subsidiary such that
the Subsidiary is no longer a Subsidiary, the provisions of the
clause (iii) will no longer be applicable to such indebtedness and
such indebtedness will be deemed to have been Incurred at the time of
such transfer or other disposition;
(iv) and may permit any Restricted Subsidiary to, incur any Indebtedness of
a Person through the acquisition of such Person, subject to the
"Mergers, Consolidations and Certain Sales and Purchases of Assets"
covenant, so long as the Indebtedness was incurred by such Person
prior to the time
(A) such Person became a Subsidiary;
(B) such Person merges with or consolidates with or into a Subsidiary;
or
(C) another Subsidiary merges with or into such Person in a transaction
in which such Person becomes a Subsidiary, and such Indebtedness
was not Incurred in anticipation of such acquisition and was
outstanding prior to such acquisition;
(v) and may permit any Restricted Subsidiary to, incur subordinated
Indebtedness in principal amount and issue Preferred Stock having a
liquidation value which in aggregate does not exceed 2% of Consolidated
Tangible Assets as of the most recently available quarterly or annual
consolidated balance sheet outstanding; and
(vi) incur any Indebtedness in contemplation of a refunding or refinancing
of any existing Pari Passu Debt, provided that such new Indebtedness
(A) is Pari Passu Debt or is subordinate in right of payment to the
Subordinated Securities;
(B) does not exceed the principal amount of Indebtedness so refunded or
refinanced; and
(C) has an Average Life equal to or greater than the Average Life of
either of (x) the Securities of such series or (y) the Indebtedness
to be refunded or refinanced.
33
Certain Additional Terms Applicable to the Guaranteed Securities
Guarantee
ARAMARK will guarantee the punctual payment of the principal of, premium, if
any, and interest on the Guaranteed Securities, when and as the same shall be
due and payable. The guarantee is absolute and unconditional, regardless of any
circumstance that might otherwise constitute a legal or equitable discharge of
a surety or guarantor. To evidence the guarantee, a guarantee, executed by
ARAMARK will be endorsed on each Guaranteed Security.
Events of Default
Each of the following will constitute an event of default ("Event of
Default") with respect to any series of Securities:
. default in the payment of principal or premium, if any, when due,
including by reason of an Offer to Purchase that has been mailed;
. default for 30 days in the payment of interest when due;
. default in the deposit of any sinking fund payment, when and as due;
. default in the performance, or breach, of any covenant or warranty in
the 1991 Indentures, other than a covenant or warranty a default in
whose performance or whose breach is elsewhere specifically dealt with
or which expressly has been included in the 1991 Indentures solely for
the benefit of debt securities of a series other than that series, and
continuance of such default for 60 days after there has been given by
registered or certified mail, to the relevant issuer and the Guarantor,
if applicable, by the Trustee or to the relevant issuer and the
Guarantor, if applicable, and the Trustee by the Holders of at least 25%
in principal amount of the outstanding debt securities of that series, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default;"
. default in the performance, or breach of, the "Mergers, Consolidations
and Certain Sales and Purchases of Assets" covenant and the "Limitation
on Restricted Payments" covenant, including in each case a failure to
make an Offer to Purchase within the five business day period specified
in such sections;
. a default under any indebtedness for money borrowed by the relevant
issuer, the Guarantor, if applicable, and any Subsidiary of ARAMARK in
excess of $10,000,000, if such indebtedness is not discharged, or such
acceleration is not annulled, within 10 days after notice is given to
the relevant issuer by the Trustee or to the relevant issuer and the
Trustee by the Holders of at least 25% in principal amount of the
outstanding debt securities of that series;
. certain events of bankruptcy, insolvency or reorganization of ARAMARK,
Services or any Significant Subsidiary; and
. any other Event of Default provided with respect to debt securities of
that series.
Within 120 days after the end of each fiscal year, the relevant issuer and
the Guarantor, if applicable, are required to furnish to the Trustee an
officer's certificate stating whether such officers have obtained knowledge of
any default under the applicable 1991 Indenture during such fiscal year.
Upon an Event of Default with respect to the Securities of any series, the
Trustee or the Holders of 25% in principal amount of the outstanding Securities
of any series may declare due and payable immediately, by a notice in writing
to the relevant issuer (and to the Trustee if given by Holders of Securities),
all unpaid principal on the Securities of such series outstanding at that time.
All such unpaid principal will become immediately due and payable on all
outstanding Securities of such series.
34
The Holders of not less than a majority in principal amount of the
outstanding Securities of any series are authorized to waive any past default
and its consequences, except a default in the payment of principal (and
premium, if any, on) or interest on any Security, or a default with respect to
a covenant or provision which cannot be modified or amended without the consent
of the Holder of each outstanding Security of any series affected.
Subject to the applicable 1991 Indenture, the Trustee is under no obligation
to exercise any of its rights or powers under the applicable 1991 Indenture at
the request or direction of any of the Holders of Securities of any series
unless such Holders have offered to the Trustee reasonable indemnity. Subject
to the applicable 1991 Indenture and applicable law, the Holders of a majority
in principal amount of the Securities of any series outstanding at that time
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee.
Modification of the 1991 Indentures
Without the consent of any Holders, the relevant issuer, the Guarantor, if
applicable, if applicable, and the Trustee, at any time and from time to time,
may modify the applicable 1991 Indenture for any of the following purposes:
. to evidence the succession of another Person to the rights of the
relevant issuer or the Guarantor, if applicable, and the assumption by
that successor of the covenants and obligations under the applicable
1991 Indenture and under the debt securities or the guarantees issued
thereunder in accordance with the terms of the applicable 1991
Indenture;
. to add to the covenants for the benefit of the Holders of all or any
series of debt securities, and if those covenants are to be for the
benefit of less than all series, stating that those covenants are
expressly being included solely for the benefit of that series, or to
surrender any rights or powers of the issuer under the applicable 1991
Indenture;
. to add any additional Events of Default;
. to add to, change or eliminate any of the provisions of the applicable
1991 Indenture, provided that any such addition, change or elimination
(1) shall neither (a) apply to any debt securities of any series created
prior to such modification and entitled to the benefit of such provision
nor (b) modify the rights of the holder of such debt security with
respect to such provision or (2) will become effective only when there
is no outstanding debt security issued thereunder;
. to secure the debt securities issued thereunder;
. to add to or change any of the provisions of the applicable 1991
Indenture to such extent as shall be necessary to permit or facilitate
the issuance of debt securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons, or to
permit or facilitate the issuance of debt securities in uncertificated
form;
. to establish the form or terms of debt securities or guarantees as
permitted by the applicable 1991 Indenture;
. to evidence and provide for the acceptance of appointment thereunder by
a successor Trustee with respect to one or more series of debt
securities and to add to or change any of the provisions of the
applicable 1991 Indenture as is necessary to provide for or facilitate
the administration of the trusts thereunder by more than one Trustee; or
. to cure any ambiguity, to correct or supplement any provision in the
applicable 1991 Indenture which may be inconsistent with any other
provision therein, or to make any other provisions with respect to
matters or questions arising under the applicable 1991 Indenture
provided such actions shall not adversely affect the interests of the
Holders of outstanding debt securities of any series created thereunder
prior to such modification in any material respect.
35
The relevant issuer, and Guarantor, if applicable, and the Trustee may, with
the consent of holders of not less than 66 2/3% in principal amount of the debt
securities which are affected by the modification, modify the applicable 1991
Indenture or any supplemental indenture or the rights of the holders of the
debt securities issued under such 1991 Indenture, except that no such
modification may, without the consent of the holder of each outstanding debt
security affected thereby,
(a) change the stated maturity of the principal of, or any installment of
principal of or interest, if any, on, any Security,
(b) reduce the principal amount of, or premium or rate of interest, if any,
on, any Security,
(c) reduce the amount of principal of an original issue discount security
payable upon acceleration of the maturity,
(d) change the place or currency of payment of principal of, or premium or
interest, if any, on, any Security,
(e) impair the right to institute suit for the enforcement of any payment
on or with respect to any Security reduce the percentage in principal
amount of outstanding securities of any series, the consent of whose
holders is required for modification or amendment of the applicable
1991 Indenture or for waiver of compliance with certain provisions of
the applicable 1991 Indenture or for waiver of certain defaults, or
(f) modify any of the provisions enumerated under "Modification of the 1991
Indentures," except to increase any percentage or to provide that
certain other provisions of the 1991 Indentures cannot be modified or
waived without the consent of the Holder of each outstanding security
affected.
Defeasance
The prospectus supplement will provide if any defeasance provision will
apply to the Securities of the series offered. If any defeasance provision
applies to the Securities of any series, ARAMARK or Services, as the case may
be, may elect either
(A) to defease and be discharged from any and all obligations with respect
to such Securities, except for the obligations to register the transfer
or exchange of such Securities, to replace temporary or mutilated,
destroyed, lost or stolen Securities, to maintain an office or agency
in respect of the Securities and to hold moneys for payment in trust
("defeasance") or
(B) to be released from its obligations to comply with certain provisions
of the applicable 1991 Indenture with respect to certain covenants
("covenant defeasance").
In order to exercise defeasance or covenant defeasance, ARAMARK or Services,
as the case may be, must irrevocably deposit with the Trustee (or other
qualifying trustee), in trust, for the benefit of the holders, cash and/or U.S.
Government Obligations which through the payment of principal and interest in
accordance with their terms will provide cash in an amount sufficient to pay
the principal (and premium, if any) and interest on such Securities, and any
mandatory sinking fund or analogous payments thereon, on the scheduled due
dates.
A trust may be established only if, among other things, ARAMARK or Services,
as the case may be, has delivered to the Trustee an opinion of counsel (as
specified in the 1991 Indentures) to the effect that the Holders of such
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance or covenant
defeasance had not occurred. Such opinion, in the case of defeasance under
clause (A) above, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable Federal income tax law occurring
after the date of the 1991 Indentures. The prospectus supplement may further
describe the provisions, if any, permitting defeasance or covenant defeasance
with respect to the Securities of a particular series.
36
Solely Corporate Obligations
No recourse for payment of principal of or interest on any Security or for
any claim based on any Security or the 1991 lndentures may be made against any
director, officer or stockholder of ARAMARK or Services.
Governing Law
The 1991 Indentures and the Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
Defined Terms Applicable to 1991 Indentures
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Affiliate shall include, for purposes of the provisions described under
"Certain Covenants Applicable to Subordinated Securities and Guaranteed
Securities -- Limitation on Restricted Payments," without limitation, any
Person owning (a) 5% or more of ARAMARK's outstanding Common Stock, or (b) 5%
or more of ARAMARK's Voting Stock.
"Applicable Stated Maturity" means with respect to the securities of any
series means the date established pursuant to the terms of the applicable 1991
Indenture.
"Average Life" means as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
the number of years from the date of determination to the dates of each
successive scheduled principal payment of such indebtedness multiplied by the
amount of such principal payment by (ii) the sum of all principal payments.
"Capital Lease Obligations" of any Person means the obligations to pay rent
or other amounts under a lease arrangement conveying the right to use real or
personal property of such Person which are required to be classified and
accounted for as a capital lease or a liability on the face of a balance sheet
of such Person in accordance with generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents, however designated, of corporate stock of
such Person.
"Consolidated Cash Flow Available for Fixed Charges" means with respect to
ARAMARK and its Subsidiaries for any period Consolidated Net Income for such
period plus the aggregate amounts deducted in determining Consolidated Net
Income for such period in respect of (i) income taxes, (ii) Consolidated
Interest Expense, (iii) depreciation, amortization and other similar non-cash
charges and (iv) minority interest as determined in accordance with generally
accepted accounting principles.
"Consolidated Cash Flow Ratio" means with respect to ARAMARK and its
Subsidiaries for any period the ratio of (i) Consolidated Cash Flow Available
for Fixed Charges for the period for which such calculation is made to (ii)
Consolidated Interest Expense for such period; provided, that in making such
computation, the Consolidated Interest Expense will be reduced by the interest
expense attributable to any Indebtedness not outstanding at the end of the
period.
"Consolidated Interest Expense" means for any period the aggregate interest
expense (net of interest income) of ARAMARK and its Subsidiaries for such
period including, without limitation (i) the portion of any obligation in
respect of any Capital Lease Obligation allocable to interest expense in
accordance with generally accepted accounting principles and (ii) the portion
of any debt discount that will be amortized in such period.
"Consolidated Net Income" means for any period the consolidated net income
(or loss) of ARAMARK and its Subsidiaries determined in accordance with
generally accepted accounting principles, excluding any unusual items of gain
or loss.
37
"Consolidated Net Worth" of a Person other than ARAMARK means the
consolidated shareholders' equity of such Person and its subsidiaries, as
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Consolidated Tangible Assets" of ARAMARK and its Subsidiaries means total
assets of ARAMARK and its Subsidiaries less goodwill, all determined in
accordance with generally accepted accounting principles.
"Indebtedness" means (without duplication), with respect to any Person, (i)
every obligation of such Person for money borrowed, (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations Incurred in connection with the acquisition of property,
assets or businesses, (iii) every obligation of such Person issued or assumed
as the deferred purchase price of property (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business which
are not overdue by more than 90 days or which are being contested in good
faith), (iv) all Capital Lease Obligations of such Person and (v) every
obligation of the type referred to in clauses (i) through (iv) of another
Person and all dividends of another Person for the payment of which, in either
case, such Person has guaranteed or is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise.
"Minority Interests" means Capital Stock of a Restricted Subsidiary not
owned by ARAMARK or another Subsidiary.
"Offer to Purchase" means with respect to any series of Securities, a
written notice (referred to as the "Notice") delivered to the Trustee and given
by the relevant issuer or the Guarantor, if applicable, via first-class mail,
postage prepaid, to each Holder of Securities of such series at his address
appearing in the Security Register, stating that the Holder may elect to have
his Securities purchased by the relevant issuer, either in whole or in part in
integral multiples of $1,000 of principal amount, at the applicable purchase
price. The Notice shall specify a purchase date not less than 30 days nor more
than 60 days after the date of such Notice (referred to as the "Purchase
Date"). The Notice shall contain all instructions and materials necessary to
enable such Holder to tender Securities of such series pursuant to an Offer to
Purchase. The Notice, which will govern the terms of an Offer to Purchase, will
state:
(1) the section of the applicable 1991 lndenture under which the Offer to
Purchase is being made;
(2) that the Offer to Purchase is for any and all Securities of such
series, the applicable purchase price and the Purchase Date;
(3) the name and address of the Paying Agent and that Securities of such
series called for purchase must be surrendered to the Paying Agent to
collect the purchase price;
(4) that interest on any Security of such series not tendered or tendered
but not purchased by the relevant issuer will continue to accrue;
(5) that any Security of such series accepted for payment pursuant to an
Offer to Purchase will cease to accrue interest after the Purchase
Date;
(6) that each Holder of Securities of such series electing to have a
Security of such series purchased pursuant to an Offer to Purchase will
be required to surrender such Security to the Paying Agent at the
address specified in the Notice prior to the close of business on the
Purchase Date; and
(7) that Holders of Securities of such series will be entitled to withdraw
their election if the Paying Agent receives, not later than the close
of business on the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Security of such series the Holder delivered
for purchase, the certificate number of the Security the Holder
delivered and a statement that such Holder is withdrawing his election
to have the Securities purchased.
38
"Offer to Purchase Price" with respect to the Securities of any series means
the price or prices specified in the applicable prospectus supplement as the
price or prices at which an Offer to Purchase will be made in accordance with
the covenants described under "Certain Covenants Applicable to Subordinated
Securities and Guaranteed Securities -- Mergers, Consolidations and Certain
Sales and Purchases of Assets" and "-- Limitation on Restricted Payments."
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock" of any Person means Capital Stock of any class or classes
(however designated) which is preferred as to payments of dividends, or as to
the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of suchcorporation over shares of Capital Stock of any other class
of such Person.
"Restricted Subsidiary" means any domestic corporation of which more than 80
percent of the outstanding Voting Stock will, at the time as of which any
determination is being made, be owned by ARAMARK either directly or through
Subsidiaries.
"Significant Subsidiary" means each and any Subsidiary which (i) accounted
for more than 5% of the consolidated revenues of ARAMARK and its Subsidiaries
for the fiscal year ended on the date of the most recently available audited
consolidated balance sheet; (ii) accounted for more than 5% of the Consolidated
Net Income of ARAMARK and its Subsidiaries for the fiscal year ended on the
date of the most recently available audited consolidated balance sheet; or
(iii) was the owner of more than 5% of the consolidated assets of ARAMARK and
its Subsidiaries as of the date of the most recently available audited
consolidated balance sheet.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the relevant issuer or the
Guarantor, if applicable, or by one or more other Subsidiaries, or by the
relevant issuer or the Guarantor, if applicable, and one or more other
Subsidiaries.
"Successor Company" means in the case ARAMARK shall consolidate with or
merge with or into another Person or shall directly or indirectly transfer,
convey, sell, lease or otherwise dispose of all or substantially all of its
assets as an entirety, the Person formed by such consolidation or with or into
which ARAMARK is merged or the Person which acquires by transfer, conveyance,
sale, lease or otherwise the assets of ARAMARK substantially as an entirety.
"Voting Stock" means, with respect to any Person, Capital Stock (however
designated) having general voting power for the election of a majority of the
members of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time Capital Stock of any other class or
classes will have or might have voting power by reason of the happening of any
contingency).
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GLOBAL SECURITIES
Most offered securities will be book-entry (global) securities. Upon
issuance, all book-entry securities will be represented by one or more fully
registered global securities, without coupons. Each global security will be
deposited with, or on behalf of, The Depository Trust Company, ("DTC"), a
securities depository, and will be registered in the name of DTC or a nominee
of DTC. DTC will thus be the only registered holder of these securities.
Purchasers of securities may only hold interests in the global notes through
DTC if they are participants in the DTC system. Purchasers may also hold
interests through a securities intermediary -- banks, brokerage houses and
other institutions that maintain securities accounts for customers that has an
account with DTC or its nominee. DTC will maintain accounts showing the
security holdings of its participants, and these participants will in turn
maintain accounts showing the security holdings of their customers. Some of
these customers may themselves be securities intermediaries holding securities
for their customers. Thus, each beneficial owner of a book-entry security will
hold that security indirectly through a hierarchy of intermediaries, with DTC
at the "top" and the beneficial owner's own securities intermediary at the
"bottom."
The securities of each beneficial owner of a book-entry security will be
evidenced solely by entries on the books of the beneficial owner's securities
intermediary. The actual purchaser of the securities will generally not be
entitled to have the securities represented by the global securities registered
in its name and will not be considered the owner under the declaration. In most
cases, a beneficial owner will also not be able to obtain a paper certificate
evidencing the holder's ownership of securities. The book-entry system for
holding securities eliminates the need for physical movement of certificates
and is the system through which most publicly traded common stock is held in
the United States. However, the laws of some jurisdictions require some
purchasers of securities to take physical delivery of their securities in
definitive form. These laws may impair the ability to transfer book-entry
securities.
A beneficial owner of book-entry securities represented by a global security
may exchange the securities for definitive (paper) securities only if:
. DTC is unwilling or unable to continue as depositary for such global
security and we do not appoint a qualified replacement for DTC within 90
days; or
. We in our sole discretion decide to allow some or all book-entry
securities to be exchangeable for definitive securities in registered
form.
Unless we indicate otherwise, any global security that is exchangeable will
be exchangeable in whole for definitive securities in registered form, with the
same terms and of an equal aggregate principal amount. Definitive securities
will be registered in the name or names of the person or persons specified by
DTC in a written instruction to the registrar of the securities. DTC may base
its written instruction upon directions that it receives from its participants.
In this prospectus, for book-entry securities, references to actions taken
by security holders will mean actions taken by DTC upon instructions from its
participants, and references to payments and notices of redemption to security
holders will mean payments and notices of redemption to DTC as the registered
holder of the securities for distribution to participants in accordance with
DTC's procedures.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered under section 17A of the Securities Exchange Act of 1934.
The rules applicable to DTC and its participants are on file with the SEC.
We will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interest in the book-entry securities or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests.
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Clearstream and Euroclear
Links have been established among DTC, Clearstream Banking, societe anonyme,
Luxembourg ("Clearstream Banking SA") and Euroclear (two international clearing
systems that perform functions similar to those that DTC performs in the U.S.),
to facilitate the initial issuance of book-entry securities and cross-market
transfers of book-entry securities associated with secondary market trading.
Although DTC, Clearstream Banking SA and Euroclear have agreed to the
procedures provided below in order to facilitate transfers, they are under no
obligation to perform such procedures, and the procedures may be modified or
discontinued at any time.
Clearstream Banking SA and Euroclear will record the ownership interests of
their participants in much the same way as DTC, and DTC will record the
aggregate ownership of each of the U.S. agents of Clearstream Banking SA and
Euroclear, as participants in DTC.
When book-entry securities are to be transferred from the account of a DTC
participant to the account of a Clearstream Banking SA participant or a
Euroclear participant, the purchaser must send instructions to Clearstream
Banking SA or Euroclear through a participant at least one business day prior
to settlement. Clearstream Banking SA or Euroclear, as the case may be, will
instruct its U.S. agent to receive book-entry securities against payment. After
settlement, Clearstream Banking SA or Euroclear will credit its participant's
account. Credit for the book-entry securities will appear on the next day
(European time).
Because settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending book-entry
securities to the relevant U.S. agent acting for the benefit of Clearstream
Banking SA or Euroclear participants. The sale proceeds will be available to
the DTC seller on the settlement date. Thus, to the DTC participant, a cross
market transaction will settle no differently than a trade between two DTC
participants.
When a Clearstream Banking SA or Euroclear participant wishes to transfer
book-entry securities to a DTC participant, the seller must send instructions
to Clearstream Banking SA or Euroclear through a participant at least one
business day prior to settlement. In these cases, Clearstream Banking SA or
Euroclear will instruct its U.S. agent to transfer the book-entry securities
against payment. The payment will then be reflected in the account of the
Clearstream Banking SA or Euroclear participant the following day, with the
proceeds back-valued to the value date (which would be the preceding day, when
settlement occurs in New York). If settlement is not completed on the intended
value date (i.e. the trade fails), proceeds credited to the Clearstream Banking
SA or Euroclear participant's account would instead be valued as of the actual
settlement date.
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PLAN OF DISTRIBUTION
The debt securities may be sold:
. to or through underwriting syndicates represented by managing
underwriters;
. through one or more underwriters without a syndicate for them to offer
and sell to the public;
. through dealers or agents; or
. through a combination of any of these methods of sale.
The prospectus supplement for each series of securities we sell will
describe that offering, including:
. the name or names of any underwriters, dealers or agents;
. the purchase price and the proceeds to us from that sale;
. any underwriting discounts, commissions or agency fees and other items
constituting underwriters' or agents' compensation;
. any initial public offering price and any discounts or concessions
allowed or re-allowed or paid to dealers; and
. any securities exchanges on which the securities may be listed.
If underwriters are used in the sale, we will execute an underwriting
agreement with those underwriters relating to the securities that we will
offer. Unless otherwise set forth in the prospectus supplement, the obligations
of the underwriters to purchase these securities will be subject to conditions.
The underwriters will be obligated to purchase all of these securities if any
are purchased.
The securities subject to the underwriting agreement will be acquired by the
underwriters for their own account and may be resold by them from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
Underwriters may be deemed to have received compensation from us in the form of
underwriting discounts or commissions and may also receive commissions from the
purchasers of these securities for whom they may act as agent. Underwriters may
sell these securities to or through dealers. These dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agent. Any initial public offering price and any discounts or concessions
allowed or re-allowed or paid to dealers may be changed from time to time.
In connection with underwritten offerings of the offered securities and in
accordance with applicable law and industry practice, underwriters may over-
allot or effect transactions that stabilize, maintain or otherwise affect the
market price of the offered securities at levels above those that might
otherwise prevail in the open market, including by entering stabilizing bids,
effecting syndicate covering transactions or imposing penalty bids, each of
which is described below.
. A stabilizing bid means the placing of any bid, or the effecting of any
purchase, for the purpose of pegging, fixing or maintaining the price of
a security.
. A syndicate covering transaction means the placing of any bid on behalf
of the underwriting syndicate or effecting of any purchase to reduce a
short position created in connection with the offering.
. A penalty bid means an arrangement that permits the managing underwriter
to reclaim a selling concession from a syndicate member in connection
with the offering when offered securities originally sold by the
syndicate member are purchased in syndicate covering transactions.
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These transactions may be effected on the New York Stock Exchange, in the
over-the-counter market, or otherwise. Underwriters are not required to engage
in any of these activities, or to continue such activities if commenced.
If dealers are utilized in the sale of offered securities, we will sell such
offered securities to the dealers as principals. The dealers may then resell
such offered securities to the public at varying prices to be determined by
such dealers at the time of resale. The names of the dealers and the terms of
the transaction will be set forth in the prospectus supplement relating to that
transaction.
We may sell any of the securities through agents designated by us from time
to time. We will name any agent involved in the offer or sale of these
securities and will list commissions payable by us to these agents in the
prospectus supplement. These agents will be acting on a best efforts basis to
solicit purchases for the period of its appointment, unless we state otherwise
in the prospectus supplement. Any such agent may be deemed an underwriter as
that term is defined in the Securities Act of 1933, as amended.
We may authorize underwriters, dealers or agents to solicit offers by
institutions to purchase the securities subject to an agreement from us, at a
fixed price or prices stated in the prospectus supplement under delayed
delivery contracts providing for payment and delivery on a specified date in
the future. If we sell securities under these delayed delivery contracts, the
prospectus supplement will state that as well as the conditions to which these
delayed delivery contracts will be subject and the commissions payable for that
solicitation.
A prospectus in electronic format may be made available on Web sites
maintained by one or more of the underwriters of any offering of debt
securities. The underwriters may agree to allocate a percentage of the debt
securities offered from time to time to underwriters for sale to their online
brokerage account holders. Internet distributions may be allocated to the
underwriters that may make Internet distributions on the same basis as other
allocations.
Indemnification
We may indemnify underwriters, dealers or agents who participate in the
distribution of securities against certain liabilities relating to material
misstatements or omissions, including liabilities under the Securities Act of
1933 and agree to contribute to payments which these underwriters, dealers or
agents may be required to make.
No Assurance of Liquidity
The securities offered hereby may be a new issue of securities with no
established trading market. Any underwriters that purchase securities from us
may make a market in these securities. The underwriters will not be obligated,
however, to make a market and may discontinue market-making at any time without
notice to holders of the securities. The offered securities may or may not be
listed on a national securities exchange. We cannot assure you that there will
be liquidity in the trading market for any securities of any series.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
VALIDITY OF SECURITIES AND GUARANTEE
The validity of the debt securities and guarantees to be offered will be
passed upon for ARAMARK and Services by Simpson Thacher & Bartlett, New York,
New York.
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EXPERTS
The audited consolidated financial statements and schedule of ARAMARK
Corporation and subsidiaries included in ARAMARK's Annual Report on Form 10-K
for the year ended September 28, 2001 incorporated herein by reference have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated herein in
reliance upon the authority of said firm as experts in giving said reports.
Subsequent audited consolidated financial statements of ARAMARK and the reports
thereon of ARAMARK's independent public accountants, also will be incorporated
by reference in this prospectus in reliance upon the authority of that firm as
experts in giving those reports to the extent said firm has audited those
consolidated financial statements and consented to the use of their reports
thereon.
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