UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 29, 2000 Commission file number 1-8827
----------------- ------
ARAMARK CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2319139
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ARAMARK Tower
1101 Market Street
Philadelphia, Pennsylvania 19107
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(Address of principal executive offices) (Zip Code)
(215) 238-3000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class A common stock outstanding at January 26, 2001: 2,386,896
Class B common stock outstanding at January 26, 2001: 61,808,076
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
ASSETS
------
December 29, September 29,
2000 2000
------------ ------------
Current Assets:
Cash and cash equivalents $ 29,737 $ 24,592
Receivables 611,326 585,630
Inventories, at lower of cost or market 417,117 416,413
Prepayments and other current assets 140,847 72,230
------------ -----------
Total current assets 1,199,027 1,098,865
---------- -----------
Property and Equipment, net 1,050,523 1,053,243
Goodwill 680,748 684,940
Other Assets 397,156 362,335
---------- -----------
$3,327,454 $3,199,383
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term borrowings $ 67,075 $ 59,736
Accounts payable 356,760 431,123
Accrued expenses and other liabilities 577,712 576,001
----------- -----------
Total current liabilities 1,001,547 1,066,860
----------- ------------
Long-Term Borrowings 1,939,605 1,777,660
Deferred Income Taxes and Other Noncurrent Liabilities 226,296 223,367
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement 20,000 20,000
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Class A common stock, par value $.01 24 24
Class B common stock, par value $.01 584 598
Earnings retained for use in the business 168,992 149,771
Accumulated other comprehensive income (loss) (9,594) (18,897)
Impact of potential repurchase feature of
common stock (20,000) (20,000)
----------- ----------
Total 140,006 111,496
----------- ----------
$3,327,454 $3,199,383
========== ==========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-1-
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Amounts)
For the Three Months Ended
----------------------------------
December 29, December 31,
2000 1999
----------- ----------
Sales $1,947,278 $1,767,615
---------- ----------
Costs and Expenses:
Cost of services provided 1,751,969 1,598,558
Depreciation and amortization 58,629 51,664
Selling and general corporate expenses 24,814 22,533
---------- ----------
1,835,412 1,672,755
---------- ----------
Operating income 111,866 94,860
Interest Expense, net 40,597 33,784
---------- ----------
Income before income taxes 71,269 61,076
Provision for Income Taxes 27,841 23,806
---------- ----------
Net income $ 43,428 $ 37,270
========== ==========
Earnings Per Share:
Basic $.51 $.40
==== ====
Diluted $.48 $.38
==== ====
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-2-
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
For the Three Months Ended
-------------------------------
December 29, December 31,
2000 1999
------------ ------------
Cash flows from operating activities:
Net income $ 43,428 $ 37,270
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 58,629 51,664
Income taxes deferred 1,002 649
Changes in noncash working capital (171,372) (92,376)
Other operating activities (10,359) (6,641)
--------- ---------
Net cash used in operating activities (78,672) (9,434)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (45,101) (38,374)
Disposals of property and equipment 6,039 4,982
Sale of investments 8,240 -
Acquisition of certain businesses (22,207) (18,123)
Other investing activities 4,245 (3,816)
--------- ---------
Net cash used in investing activities (48,784) (55,331)
--------- ---------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 150,014 156,291
Payment of long-term borrowings (2,380) (52,806)
Repurchase of stock (16,481) (46,398)
Proceeds from issuance of common stock 1,448 1,883
--------- ---------
Net cash provided by financing activities 132,601 58,970
--------- ---------
Increase (decrease) in cash and cash equivalents 5,145 (5,795)
Cash and cash equivalents, beginning of period 24,592 27,690
--------- ---------
Cash and cash equivalents, end of period $ 29,737 $ 21,895
========= =========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-3-
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
--------------------------------------------
The condensed consolidated financial statements included herein have
been prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of the Company, the statements include all
adjustments (which include only normal recurring adjustments) required
for a fair statement of financial position, results of operations and
cash flows for such periods. The results of operations for the interim
periods are not necessarily indicative of the results for a full year.
(2) CAPITAL STOCK:
-------------
During the first quarter of fiscal 2001, pursuant to the ARAMARK
Ownership Program, employees purchased 270,630 shares or $2.8 million
of Class B Common Stock for $1.4 million cash plus $1.4 million of
deferred payment obligations.
(3) SUPPLEMENTAL CASH FLOW INFORMATION:
-----------------------------------
The Company made interest payments of $36.5 million and $22.5 million
and income tax payments of $24.5 million and $12.6 million during the
first quarter of fiscal 2001 and 2000, respectively. During the first
quarter of fiscal 2001, the Company purchased $26.7 million of its
Class B Common Stock, issuing $10.2 million in installment notes as
partial consideration.
(4) EARNINGS PER SHARE:
-------------------
The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share." Earnings per share is
reported on a Common Stock, Class B equivalent basis (which reflects
Common Stock, Class A shares converted to a Class B basis, ten for
one). Earnings applicable to common stock and common shares utilized in
the calculation of basic and diluted earnings per share are as follows:
Three Months Ended
-------------------------------------
December 29, December 31,
2000 1999
------------ ------------
(in thousands, except per share data)
Earnings:
Net income $43,428 $37,270
======= =======
Shares:
Weighted average number of common
shares outstanding used in basic
earnings per share calculation 84,973 92,121
Impact of potential exercise opportunities
under the ARAMARK Ownership Plan 5,580 7,187
------- -------
Total common shares used in diluted
earnings per share calculation 90,553 99,308
====== =======
Basic earnings per common share $.51 $.40
==== ====
Diluted earnings per common share $.48 $.38
==== ====
-4-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(5) COMPREHENSIVE INCOME:
---------------------
Pursuant to the provisions of SFAS No. 130, "Reporting Comprehensive
Income", comprehensive income includes all changes in shareholders'
equity during a period, except those resulting from investment by and
distributions to shareholders. Components of comprehensive income
include net income, changes in foreign currency translation adjustments
and changes in the fair value of cash flow hedges (net of tax). Total
comprehensive income was $52.7 million and $39.5 million for the three
months ended December 29, 2000 and December 31, 1999, respectively.
(6) ACCOUNTING FOR DERIVATIVE INSTRUMENTS:
--------------------------------------
The Company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities"-an
amendment of FASB Statement No. 133, on September 30, 2000. SFAS No.
133 requires the transition adjustment resulting from adopting these
Statements to be reported in net income or other comprehensive income,
as appropriate, as the cumulative effect of a change in accounting
principle. In accordance with the transition provisions of SFAS No.
133, the Company recorded a cumulative transition adjustment to
decrease Other Comprehensive Income by approximately $2.5 million (net
of tax), to recognize the fair value of its derivative instruments as
of the date of adoption.
The Company utilizes derivative financial instruments, such as interest
rate swaps and forward exchange contract agreements to manage changes
in market conditions related to debt obligations and foreign currency
exposures. As of December 29, 2000, the Company has $350 million of
interest rate swap agreements fixing the rate on a like amount of
variable rate borrowings. There were no forward exchange contract
agreements outstanding as of December 29, 2000.
The Company recognizes all derivatives on the balance sheet at fair
value at the end of each quarter. Changes in the fair value of a
derivative that is designated as and meets all the required criteria
for a cash flow hedge are recorded in accumulated other comprehensive
income and reclassified into earnings as the underlying hedged item
affects earnings. Amounts reclassified into earnings related to
interest rate swap agreements are included in interest expense. During
the quarter ended December 29, 2000, unrealized net losses of
approximately $4.1 million (net of tax) related to interest rate swaps
were recorded in Other Comprehensive Income, including the
approximately $2.5 million cumulative transition adjustment as of
September 30, 2000. As of December 29, 2000, approximately $4.1 million
of net unrealized losses related to interest rate swaps was included in
Accumulated Other Comprehensive Income, approximately $2.4 million of
which is expected to be reclassified into earnings during the next
twelve months. The hedge ineffectiveness for existing derivative
instruments for the quarter ending December 29, 2000 was not material.
-5-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(7) SEGMENT INFORMATION:
--------------------
Sales and operating income by segment are as follows:
Three Months Ended
---------------------------------------
December 29, December 31,
Sales 2000 1999
-------------------------------------------- ------------- -------------
(in thousands)
Food and Support Services - United States $1,186,334 $1,045,919
Food and Support Services - International 265,339 253,653
Uniform and Career Apparel - Rental 250,383 238,659
Uniform and Career Apparel - Direct Marketing 132,055 127,144
Educational Resources 113,167 102,240
---------- ----------
$1,947,278 $1,767,615
========== ==========
Three Months Ended
---------------------------------------
December 29, December 31,
Operating Income 2000 1999
-------------------------------------------- -------------- -------------
(in thousands)
Food and Support Services - United States $59,950 $43,861
Food and Support Services - International 9,940 12,799
Uniform and Career Apparel - Rental 31,841 31,076
Uniform and Career Apparel - Direct Marketing 8,697 5,494
Educational Resources 6,306 7,828
------- --------
116,734 101,058
Corporate and Other (4,868) (6,198)
------- --------
Operating Income 111,866 94,860
Interest Expense, Net (40,597) (33,784)
------- --------
Income Before Income Taxes $71,269 $ 61,076
======= ========
Included in "Corporate and Other" in the first quarter of fiscal 2001
is a gain of $6.6 million resulting from the redemption of preferred
stock by an entity which the Company divested in fiscal 1997. Also
included in "Corporate and Other" in fiscal 2001 are charges related to
certain litigation pertaining to a previously divested entity ($1.5
million), merger and acquisition related costs ($0.5 million), and the
immaterial cumulative effect ($2.6 million) of a change by the
Educational Resources business in accounting for non-refundable
registration fees pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 101.
(8) ACQUISITIONS:
------------
During the first quarter of fiscal 2001, the Company acquired the UK
food and support services business of the Campbell Bewley Group
Limited, issuing stock (8% interest) of a subsidiary as consideration.
Additionally, the Company acquired a 45% interest in the Campbell
Bewley Group Limited's food and support services business in Ireland
for approximately $19 million in cash.
-6-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF ARAMARK CORPORATION
-------------------------------------------------------------------
AND SUBSIDIARIES:
----------------
The following condensed consolidating financial statements of ARAMARK
Corporation and subsidiaries have been prepared pursuant to Rule 3-10
of Regulation S-X.
These condensed consolidating financial statements have been prepared
from the Company's financial information on the same basis of
accounting as the condensed consolidated financial statements. ARAMARK
Services, Inc. is the borrower under the Credit Agreement and certain
other senior debt and incurs interest expense thereunder. The interest
expense and certain administrative costs are only partially allocated
to all of the other subsidiaries of the Company. The Company has fully
and unconditionally guaranteed certain debt obligations of ARAMARK
Services, Inc., its wholly-owned subsidiary, which totaled $2.1 billion
as of December 29, 2000. The Non-guarantor subsidiaries do not
guarantee any registered securities of the Company or ARAMARK Services,
Inc., although certain Non-guarantor subsidiaries guarantee, along with
the Company, certain other unregistered debt.
-7-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEETS
December 29, 2000
(In Millions)
ASSETS
------
ARAMARK
Services, Inc.
and Non-Guarantor ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------- ------------- ----------- ------------ ------------
Current Assets:
Cash and cash equivalents $ 17.6 $ 11.8 $ 0.3 $ - $ 29.7
Receivables 404.2 206.4 0.7 - 611.3
Inventories, at lower of cost or market 84.1 333.0 - - 417.1
Prepayments and other current assets 95.8 43.5 1.6 - 140.9
--------- --------- --------- --------- ---------
Total current assets 601.7 594.7 2.6 - 1,199.0
--------- --------- --------- --------- ---------
Property and Equipment, net 243.5 804.9 2.1 - 1,050.5
Goodwill 194.6 486.2 - - 680.8
Intercompany Receivable 2,216.1 105.6 - (2,321.7) -
Investment in Subsidiaries - - 1,585.8 (1,585.8) -
Other Assets 164.6 229.7 2.9 - 397.2
--------- --------- --------- --------- ---------
$ 3,420.5 $ 2,221.1 $ 1,593.4 $ (3,907.5) $ 3,327.5
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term borrowings $ 66.0 $ 1.1 $ - $ - $ 67.1
Accounts payable 229.2 72.7 54.9 - 356.8
Accrued expenses and other liabilities 382.3 183.8 11.6 - 577.7
--------- --------- --------- --------- ---------
Total current liabilities 677.5 257.6 66.5 - 1,001.6
--------- --------- --------- --------- ---------
Long-Term Borrowings 1,938.9 0.7 - - 1,939.6
Deferred Income Taxes and Other Noncurrent Liabilities 68.4 97.7 60.2 - 226.3
Intercompany Payable 545.8 469.2 1,306.7 (2,321.7) -
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement - - 20.0 - 20.0
Shareholders' Equity Excluding Common Stock -
Subject to Repurchase 189.9 1,395.9 140.0 (1,585.8) 140.0
--------- --------- --------- --------- ---------
$ 3,420.5 $ 2,221.1 $ 1,593.4 $ (3,907.5) $ 3,327.5
========= ========= ========= ========= =========
-8-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEETS
September 29, 2000
(In Millions)
ASSETS
------
ARAMARK
Services, Inc.
and Non-Guarantor ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------- ------------- ------------ ------------ ------------
Current Assets:
Cash and cash equivalents $ 19.5 $ 4.8 $ 0.3 $ - $ 24.6
Receivables 391.7 193.4 0.6 - 585.7
Inventories, at lower of cost or market 83.4 333.0 - - 416.4
Prepayments and other current assets 25.9 44.6 1.7 - 72.2
--------- --------- --------- --------- ---------
Total current assets 520.5 575.8 2.6 - 1,098.9
--------- --------- --------- --------- ---------
Property and Equipment, net 232.4 818.8 2.1 - 1,053.3
Goodwill 196.0 488.9 - - 684.9
Intercompany Receivable 2,186.4 105.6 - (2,292.0) -
Investment in Subsidiaries - - 1,533.0 (1,533.0) -
Other Assets 124.2 235.4 2.7 - 362.3
--------- --------- --------- --------- ---------
$ 3,259.5 $ 2,224.5 $ 1,540.4 $ (3,825.0) $ 3,199.4
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term borrowings $ 57.7 $ 2.0 $ - $ - $ 59.7
Accounts payable 254.3 120.9 55.9 - 431.1
Accrued expenses and other liabilities 343.1 221.4 11.5 - 576.0
--------- --------- --------- --------- ---------
Total current liabilities 655.1 344.3 67.4 - 1,066.8
--------- --------- --------- --------- ---------
Long-Term Borrowings 1,776.8 0.9 - - 1,777.7
Deferred Income Taxes and Other Noncurrent Liabilities 61.4 97.5 64.5 - 223.4
Intercompany Payable 590.6 424.4 1,277.0 (2,292.0) -
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement - - 20.0 - 20.0
Shareholders' Equity Excluding Common Stock -
Subject to Repurchase 175.6 1,357.4 111.5 (1,533.0) 111.5
--------- --------- --------- --------- ---------
$ 3,259.5 $ 2,224.5 $ 1,540.4 $ (3,825.0) $ 3,199.4
========= ========= ========= ========= =========
-9-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the three months ended December 29, 2000
(In Millions)
ARAMARK
Services, Inc.
and Non-Guarantor ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------- ------------- ----------- ------------ ------------
Sales $ 1,231.2 $ 716.1 $ - $ - $ 1,947.3
Equity in Net Income of Subsidiaries - - 43.4 (43.4) -
Management Fee Income - - 10.0 (10.0) -
--------- --------- --------- --------- ---------
1,231.2 716.1 53.4 (53.4) 1,947.3
Costs and Expenses:
Cost of services provided 1,149.2 611.6 - (8.8) 1,752.0
Depreciation and amortization 23.4 35.2 - 0.1 58.7
Selling and general corporate expenses 9.5 6.6 8.7 - 24.8
--------- --------- --------- --------- ---------
1,182.1 653.4 8.7 (8.7) 1,835.5
--------- --------- --------- --------- ---------
Operating income 49.1 62.7 44.7 (44.7) 111.8
Interest, net:
Interest expense, net 39.3 - 1.3 - 40.6
Intercompany interest, net (5.3) 6.6 - (1.3) -
--------- --------- --------- --------- ---------
Interest Expense, net 34.0 6.6 1.3 (1.3) 40.6
--------- --------- --------- --------- ---------
Income before income taxes 15.1 56.1 43.4 (43.4) 71.2
Provision for Income Taxes 9.9 17.9 - - 27.8
--------- --------- --------- --------- ---------
Net income $ 5.2 $ 38.2 $ 43.4 $ (43.4) $ 43.4
========= ========= ========= ========= =========
-10-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the three months ended December 31, 1999
(In Millions)
ARAMARK
Services, Inc.
and Non-Guarantor ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------- ------------- ----------- ------------ ------------
Sales $ 1,162.8 $ 604.8 $ - $ - $ 1,767.6
Equity in Net Income of Subsidiaries - - 37.3 (37.3) -
Management fee Income - - 8.2 (8.2) -
--------- --------- --------- --------- ---------
1,162.8 604.8 45.5 (45.5) 1,767.6
Costs and Expenses:
Cost of services provided 1,093.1 511.3 - (5.9) 1,598.5
Depreciation and amortization 21.2 30.4 - 0.1 51.7
Selling and general corporate expenses 11.5 5.2 5.9 (0.1) 22.5
--------- --------- --------- --------- ---------
1,125.8 546.9 5.9 (5.9) 1,672.7
--------- --------- --------- --------- ---------
Operating income 37.0 57.9 39.6 (39.6) 94.9
Interest, net:
Interest expense, net 31.3 0.2 2.3 - 33.8
Intercompany interest, net (11.4) 13.7 - (2.3) -
--------- --------- --------- --------- ---------
Interest Expense, net 19.9 13.9 2.3 (2.3) 33.8
--------- --------- --------- --------- ---------
Income before income taxes 17.1 44.0 37.3 (37.3) 61.1
Provision for Income Taxes 6.5 17.3 - - 23.8
--------- --------- --------- --------- ---------
Net income $ 10.6 $ 26.7 $ 37.3 $ (37.3) $ 37.3
========= ========= ========= ========= =========
-11-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the three months ended December 29, 2000
(In Millions)
ARAMARK
Services, Inc.
and Non-Guarantor ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------- ------------- ----------- ------------ ------------
Net cash used in operating activities $ (28.6) $ (34.5) $ (15.5) $ - $ (78.6)
Cash flows from investing activities:
Purchases of property and equipment (27.4) (17.7) - - (45.1)
Disposals of property and equipment 0.9 5.1 - - 6.0
Sale of investments - 8.2 - - 8.2
Acquisition of certain businesses (19.6) (2.6) - - (22.2)
Other investing activities (0.6) 4.9 - - 4.3
--------- --------- --------- --------- ---------
Net cash used in investing activities (46.7) (2.1) - - (48.8)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 150.0 - - - 150.0
Payment of long-term borrowings (1.2) (1.2) - - (2.4)
Repurchase of stock - - (16.5) - (16.5)
Proceeds from issuance of common stock - - 1.4 - 1.4
Change in intercompany, net (75.4) 44.8 30.6 - -
--------- --------- --------- --------- ---------
Net cash provided by financing activities 73.4 43.6 15.5 - 132.5
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents (1.9) 7.0 - - 5.1
Cash and cash equivalents, beginning of period 19.5 4.8 0.3 - 24.6
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of period $ 17.6 $ 11.8 $ 0.3 $ - $ 29.7
========= ========= ========= ========= =========
-12-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the three months ended December 31, 1999
(In Millions)
ARAMARK
Services, Inc.
and Non-Guarantor ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------ ------------- ----------- ------------ ------------
Net cash provided by (used in) operating activities $ (5.8) $ (11.0) $ 7.4 $ - $ (9.4)
Cash flows from investing activities:
Purchases of property and equipment (17.4) (20.9) - - (38.3)
Disposals of property and equipment 0.7 4.3 - - 5.0
Acquisition of certain businesses - (18.1) - - (18.1)
Other investing activities (4.8) 1.0 - - (3.8)
--------- --------- --------- --------- ---------
Net cash used in investing activities (21.5) (33.7) - - (55.2)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 156.3 - - - 156.3
Payment of long-term borrowings (52.7) (0.1) - - (52.8)
Repurchase of stock - - (46.4) - (46.4)
Proceeds from issuance of common stock - - 1.8 - 1.8
Change in intercompany, net (79.5) 42.4 37.1 - -
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities 24.1 42.3 (7.5) - 58.9
--------- --------- --------- --------- ---------
Decrease in cash and cash equivalents (3.2) (2.4) (0.1) - (5.7)
Cash and cash equivalents, beginning of period 20.3 7.2 0.2 - 27.7
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of period $ 17.1 $ 4.8 $ 0.1 $ - $ 22.0
========= ========= ========= ========= =========
-13-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
- ---------------------
The following discussion should be read in conjunction with the business segment
information included in Note 7 to the condensed consolidated financial
statements.
Overview
- --------
Sales for the first quarter of fiscal 2001 of $1.9 billion increased 10% over
the prior year period, with sales increasing in all operating segments.
Excluding the impact of acquisitions, primarily in the Food and Support Services
- - United States segment, and the unfavorable impact of foreign currency
translation, sales increased 7% over the prior year. Operating income of $111.9
million increased 18% over the prior year due to increased earnings in the Food
and Support Services and Uniform and Career Apparel segments, partially offset
by a decline in earnings in the Educational Resources segment. Excluding the
impact of acquisitions, foreign currency translation and asset sale gains ($6.6
million and $3.8 million in fiscal 2001 and fiscal 2000, respectively),
operating income increased 13% over the prior year period. The Company's
operating income margin increased to 5.7% from 5.4% due primarily to the
leveraging of fixed costs in the Food and Support Services - United States
segment. Interest expense, net increased $6.8 million or 20% over the prior
year, due primarily to increased debt levels to fund acquisitions, stock
repurchases and working capital requirements.
Segment Results
- ---------------
Sales - Food and Support Services - United States segment sales increased 13%
over the prior year period due to the Ogden acquisition (approximately 7%) and
increased volume (approximately 6%). Sales in the Food and Support Services -
International segment increased 17% compared to the prior year (excluding the
unfavorable impact of foreign currency translation) due to increased volume
(approximately 8%), new accounts (approximately 7%) and acquisitions
(approximately 2%). Sales in the Uniform and Career Apparel - Rental segment
increased 5% due primarily to increased volume and, to a lesser extent,
increased prices. Uniform and Career Apparel - Direct Marketing sales increased
4% over the prior year due primarily to increased sales to the safety equipment
and accessories market, which were also adversely impacted in the first quarter
of fiscal 2000 by the startup of a new distribution facility. Educational
Resources segment sales increased 11%. Excluding the impact resulting from the
revenue accounting change (see note 7), sales increased 10% versus the prior
year due to new locations and pricing, partially offset by lower enrollment at
existing locations.
Operating Income - Food and Support Services - United States segment operating
income increased 37%. Excluding the impact of acquisitions, operating income
increased 29% due to the sales increases noted above and effective cost
controls. Food and Support Services - International segment operating income
decreased 22% from the prior year. Excluding the unfavorable impact of foreign
currency translation and an asset sale gain in the prior year first quarter,
operating income increased 26% due to the sales increases noted above and
effective cost controls. Uniform and Career Apparel - Rental segment operating
income increased 2% compared to the prior year as a result of the sales increase
noted above and the elimination of manufacturing start up costs incurred in the
prior year, partially offset by increased fuel, energy and other operating
costs. Operating income in the Uniform and Career Apparel - Direct Marketing
segment increased 58% over the prior year period due to increased sales noted
above and reduced operating costs. Operating results in this segment were
adversely impacted in the prior year first quarter by startup costs related to a
new distribution facility. Educational Resources segment operating income
decreased 19%. Operating results were adversely affected by reduced enrollment
at mature centers and continuing high labor and employee medical costs. It is
anticipated that reduced enrollment at mature centers and difficult labor
conditions may continue to adversely affect results in this segment during the
remainder of fiscal 2001.
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FINANCIAL CONDITION AND LIQUIDITY - Reference to the condensed consolidated
statement of cash flows on page 3 will facilitate understanding of the
discussion that follows.
Cash used in operating activities was $79 million, reflecting seasonal increases
in working capital requirements, principally accounts receivable and reduced
accrued liabilities related to timing of certain payments (taxes, commissions
and interest). Debt increased by $169 million during the first quarter of fiscal
2001, principally to fund the working capital requirements discussed above,
acquisitions, capital expenditures and common stock repurchases. Additionally,
in connection with the Campbell Bewley transaction (see Note 8) the Company
assumed approximately $21 million of indebtedness.
During the first quarter of fiscal 2001, the Company repurchased $26.7 million
of its Class B Common Stock, issuing $10.2 million in installment notes as
partial consideration. Additionally, the Company received approximately $1.4
million related to the issuance of Class B Common Stock through the exercise of
installment stock purchase opportunities. The Company has generally exercised
its option to repurchase Common Stock when shares have become available. The
amount of such repurchases and other liquidity needs, including those related to
employee benefit plans, in the near term will likely approximate or exceed the
fiscal 2000 level.
In January 2001, the Company reduced the Educational Resources credit facility
from $125 million to $25 million. Currently, the Company has approximately $220
million of unused committed credit availability under its credit facilities.
Additionally, the Company has registration statements on file with the
Securities and Exchange Commission for the issuance of up to $500 million of
debt securities. The Company currently expects to continue 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 its credit facilities or note issuances.
FORWARD-LOOKING STATEMENTS
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The Private Securities Litigation Reform Act of 1995 provides a safe harbor from
civil litigation for forward-looking statements that reflect the Company's
current views as to future events and financial performance with respect to its
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. These statements are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed or
implied in the forward-looking statements. Factors that might cause such a
difference include the possibility of greater than anticipated operating costs,
lower sales volumes, the performance and costs of integration of acquisitions,
fluctuations in costs of insurance, materials, labor and fuel, financing
availability, the outcome of environmental and litigation matters, competition
in terms of price and service, the ability of the Company to retain clients and
obtain new clients on satisfactory terms, fluctuations or reductions in
enrollment in the Educational Resources segment, and the effects of general
economic conditions. Forward-looking statements speak only as of the date made.
The Company undertakes no obligation to update any forward-looking statements to
reflect the events or circumstances arising after the date as of which they are
made.
As a result of these risks and uncertainties, readers are cautioned not to place
undue reliance on the forward-looking statements included in this report or that
may be made elsewhere from time to time by, or on behalf of, the Company.
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PART II - OTHER INFORMATION
Items 1 through 6 are not applicable.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARAMARK CORPORATION
February 12, 2001 /s/ John M. Lafferty
---------------------------
John M. Lafferty
Senior Vice President, Controller
and Chief Accounting Officer
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