1
1994 10-K
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
/X/ Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 30, 1994 or
/ / Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to
__________
Commission file number: 1-8827
ARAMARK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2319139
(State of incorporation) (I.R.S. Employer Identification No.)
ARAMARK Tower
1101 Market Street
Philadelphia, Pennsylvania 19107
(Address of principal executive offices)
Telephone Number: 215-238-3000
The ARA Group, Inc.
(Former name, if changed since last report)
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Securities registered pursuant to Section 12(b) of the Act:
Name Of Each Exchange
Title Of Each Class On Which Registered
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13% Subordinated Debentures Due 1997 Philadelphia Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock, $.01 par value
Adjustable Rate Callable Nontransferable Series C Preferred Stock,
$1.00 par value
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Aggregate market value of the voting stock held by nonaffiliates: $554 million
Common stock outstanding at October 28, 1994:
Class A Common stock - 2,074,947 shares
Class B Common stock - 24,233,590 shares
Documents incorporated by reference: Portions of the registrant's Proxy
Statement for the 1995 annual meeting of stockholders are incorporated by
reference in Part III of this Report.
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Effective as of October 10, 1994, The ARA Group, Inc. changed its name to
ARAMARK Corporation, and ARA Services, Inc. changed its name to ARAMARK
Services, Inc. There was no change in ownership or control of the Company. As
used herein, references to the "Company" shall mean ARAMARK Corporation and its
subsidiaries (including ARAMARK Services, Inc.) unless the context otherwise
requires. References to "ARAMARK" shall mean ARAMARK Services, Inc. and its
subsidiaries unless the context otherwise requires.
PART I
Item 1. Business
Description of Business Segments
The Company is engaged in providing or managing services, including food,
leisure and support services, uniform services, health and education services
and distributive services. ARAMARK was organized in 1959 in Delaware. The
Company was formed in September 1984 by the management of ARAMARK and acquired
ARAMARK in December 1984 through a merger.
The Company provides most of its services in the United States. The
Company also conducts operations, primarily the management of food services, in
Belgium, Canada, the Czech Republic, Germany, Hungary, Japan, Korea, Mexico,
Spain and the United Kingdom.
Financial information by business segment and geographic area appears in
note 11 to the consolidated financial statements. The businesses of the Company
have been grouped into the segments described below.
Food, Leisure & Support Services
The Company provides food, refreshment, specialized dietary and support
services (including maintenance and housekeeping) to business, educational,
governmental and medical institutions. These services (and to a lesser extent,
merchandise operations) are also provided at leisure and other public facilities
such as convention centers, stadiums, parks, arenas, race tracks and
recreational facilities.
Food, refreshment, specialized dietary and support services are operated
at customer locations generally under contracts of indefinite duration which may
be subject to termination by either party. However, food and related services at
leisure and other public facilities generally are for fixed contract terms well
in excess of one year. The Company's food, leisure and support services are
performed under various financial arrangements including a management-fee basis
and a profit-and-loss basis. See note 2 to the consolidated financial
statements.
In most instances, the equipment and facilities used in providing these
services are owned by the customer. Vending machines and related equipment,
however, are generally owned by the Company.
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There is a high level of competition in the food, leisure and support
services business from local, regional and national companies as well as from
businesses and institutions which operate their own services. This competition
takes a number of different forms, including pricing, maintaining high food and
service standards, and innovative approaches to marketing with a strong emphasis
on securing and retaining customer accounts. The Company believes that it is a
significant provider of food, leisure and support services in the United States,
Spain, Germany, Belgium and Canada, but that its volume of such business is
small in relation to the total market. See note 10 to the consolidated financial
statements for information relating to the seasonal aspects of this business
segment.
Subsequent to yearend, the Company entered into agreements to acquire
certain Food, Leisure & Support Services businesses. See note 2 to the
consolidated financial statements.
Uniform Services
The Company rents, cleans, maintains and delivers personalized work
apparel and other textile items for customers throughout the United States on a
contract basis. Also provided are walk-off mats, cleaning cloths, disposable
towels, and other environmental control items.
The Company also operates one of the largest direct marketers of
personalized work clothing, uniforms, casual apparel and related accessories,
primarily in the United States.
Service contracts for the rental and laundering of work apparel and other
textile items are for well in excess of one year and typically for an initial
term of five years. Generally, the direct marketing business is conducted under
an invoice arrangement with customers.
The uniform rental services business is highly competitive in the areas
in which the Company operates, with numerous competitors in each major operating
area. Although no one uniform rental services company is predominant in this
industry, the Company believes that it is a significant competitor.
Competition in the sale of work clothing and related items is from
numerous retailers and other direct marketers at local, regional and national
levels. In this market, while the Company is a significant competitor, the
Company's volume of sales is small in relation to the total market.
The significant competitive factors in the uniform services business are
the quality of services provided to customers and the prices charged for such
services.
Health & Education Services
The Company provides management services (including physician staffing
and other specialized services) to hospital emergency and other departments and
to military healthcare facilities and clinics as well as medical services to
correctional institutions. The Company also provides child care services
primarily at Company-operated facilities, and to a lesser extent on customer
sites and in before and after school programs.
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Revenues from emergency and primary care management services are received
generally from the hospitals and clinics at which the care is provided under
contracts generally with a term of one or more years and from third party
payors. Revenues from medical services to correctional institutions are received
directly from governmental authorities under contracts with terms of one or more
years.
Child care services are provided to and are primarily paid for on a
weekly basis directly by individual families under short-term agreements. The
Company leases a significant number of its child care facilities under long-term
arrangements.
The Company believes it is a significant provider of emergency and
primary care management services, medical services to correctional institutions
and child care services in the United States.
Competition in all phases of this business segment is from both national
and local providers of health and education services as well as from private and
public institutions which provide for their own health and education services.
Significant competitive factors in the Company's health and education services
businesses are the quality of care, reputation, physical appearance of
facilities, the types of programs offered to the users of these services and the
prices charged for such services.
Distributive Services
The Company provides wholesale distribution of magazines, books and other
printed matter. These materials are purchased from national distributors and
publishers and are delivered to retail locations patronized by the general
public.
Distribution services are generally rendered under short-term agreements,
which ordinarily permit the return of unsold magazines and books with full
credit being given to the retailer and with the Company in turn receiving full
credit from its suppliers.
Competition in the distribution of books and periodicals exists primarily
from magazine and book subscriptions, direct distribution by publishers to
retailers and from other wholesale distributors. While the Company's volume of
business in the distribution of books and periodicals is small in relation to
the total market, the Company believes the volume of its wholesale periodical
and book distribution units makes it a significant wholesale distributor.
Subsequent to yearend the Company acquired a wholesale magazine and book
distribution business. See note 2 to consolidated financial statements.
Employees
The Company employs approximately 133,000 persons, both full and part
time, including approximately 30,000 employees outside the United States.
Approximately 22,700 employees in the United States are represented by various
labor unions.
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Item 2. Properties
The principal property and equipment of the Company are its service
equipment and fixtures (including vehicles) and real estate.
The service equipment and fixtures include vending, commissary, warehouse
and janitorial and maintenance equipment used primarily by the food, leisure and
support services segment, and laundry equipment used by the uniform services
segment. The vehicles include automobiles and delivery trucks used in the food,
leisure and support services segment and in the distributive services and
uniform services segments. The service equipment and fixtures represent
approximately 61% of the net book value of all fixed assets as of September 30,
1994.
The Company's real estate is comprised of child care facilities, of which
a significant number are held under long-term operating leases. The Company also
maintains other real estate and leasehold improvements which it uses in its
distributive services and uniform services segments and in commissary and
distribution operations in its food, leisure and support services segment.
Additional information concerning property and equipment (including other real
estate leases and noncancelable lease commitments) is included in notes 1 and 8
to the consolidated financial statements. No individual parcel of real estate
owned or leased is of material significance to the Company's total assets.
See note 11 to the consolidated financial statements for information
concerning the identifiable assets of the Company's business segments.
Item 3. Legal Proceedings
The Company and its subsidiaries are not parties to any lawsuits (other
than ordinary routine litigation incidental to its business) which are material
to the Company's business or financial condition. See note 8 to the consolidated
financial statements for additional information concerning legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 4A. Directors and Executive Officers of the Registrant
Name (Age as of November 1, 1994) Office Held Director/Officer Since
Joseph Neubauer (53)................................Chairman, President...................................1979
and Director
Robert J. Callander (63)............................Director..............................................1986
Alan K. Campbell (71)...............................Director..............................................1980
Ronald R. Davenport (58)............................Director..............................................1980
Davre J. Davidson (83)..............................Director..............................................1959
Philip L. Defliese (79).............................Director..............................................1979
Lee F. Driscoll, Jr. (68)...........................Director..............................................1973
Mitchell S. Fromstein (66)..........................Director..............................................1990
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Edward G. Jordan (64)...............................Director..............................................1980
Thomas H. Kean (59).................................Director..............................................1994
Reynold C. MacDonald (76)...........................Director..............................................1977
James E. Preston (61)...............................Director..............................................1993
Julian L. Carr, Jr. (48)............................Executive Vice President..............................1988
John R. Farquharson (56)............................Executive Vice President..............................1976
James E. Ksansnak (54)..............................Executive Vice President..............................1986
and Chief Financial Officer
William Leonard (46)................................Executive Vice President..............................1992
Martin W. Spector (56)..............................Executive Vice President,.............................1976
General Counsel and Secretary
L. Frederick Sutherland (42)........................Executive Vice President ............................1983
Richard H. Vent (53)................................Executive Vice President..............................1982
Brian J. Gail (48)..................................Senior Vice President.................................1994
Dean E. Hill (43)...................................Vice President........................................1993
John P. Kallelis (56)...............................Vice President........................................1982
Brian G. Mulvaney (38)..............................Vice President........................................1993
Anthony J. Tanzola (55).............................Vice President........................................1976
Alan J. Griffith (40)...............................Controller and Chief..................................1994
Accounting Officer
Melvin M. Mahoney (46)..............................Treasurer.............................................1985
Joan C. Mazzotti (44)...............................Assistant Secretary and...............................1994
Associate General Counsel
Donald S. Morton (46)...............................Assistant Secretary and...............................1985
Associate General Counsel
Richard M. Thon (38)................................Assistant Treasurer .................................1994
The principal occupations of the Company's directors and directorships
currently held by directors are as follows:
Mr. Neubauer has been president and chief executive officer of the
Company since February 1983 and the chairman since April 1984. He is a director
of Bell Atlantic - Pennsylvania, Inc., Federated Department Stores, Inc., First
Fidelity Bancorporation, Penn Mutual Life Insurance Co. and Versa Services Ltd.
Mr. Callander was vice chairman of Chemical Bank from February 1987 until
August 1990. He was president of Chemical Bank and Chemical Banking Corporation
from August 1990 to June 1992. He is a director of Barnes Group, Inc.,
Beneficial Corporation, Latin American Dollar Income Fund, New Asia Fund,
Omnicom Group, Inc., and Scudder World Income Opportunities Fund.
Dr. Campbell was vice chairman of the Company from April 1984 to February
1991 and was executive vice president from December 1980 until his retirement in
September 1990.
Mr. Davenport has been the chairman and president of Sheridan
Broadcasting Corporation since 1972. He is a director of Bell Atlantic -
Pennsylvania, Inc.
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Mr. Davidson founded ARAMARK in 1959, and was its chief executive officer
and chairman until his retirement in July 1977.
Mr. Defliese was the chairman and managing partner of Coopers & Lybrand
prior to his retirement in 1977 and is currently Professor Emeritus, Graduate
School of Business, Columbia University.
Mr. Driscoll was a partner in the Philadelphia law firm of Ballard,
Spahr, Andrews & Ingersoll from January 1984 until December 1990. He is a
director of Versa Services Ltd.
Mr. Fromstein has been chief executive officer and president of Manpower
Inc. since March 1976. He is a director of Manpower Inc. and ARI Network
Services, Inc.
Mr. Jordan served as the president of The American College from October
1982 until December 1987. He is a director of Acme Steel Company and Pittston,
Inc.
Former Governor Kean was the Governor of the State of New Jersey from
1982 until 1990. He has been the president of Drew University since 1990. He is
a director of Amerada Hess Corporation, Bell Atlantic Corporation, Beneficial
Corporation, Fiduciary Trust International and United Health Care Corporation.
Mr. MacDonald serves as a consultant to Acme Steel Company. He was
chairman of Acme Steel Company from June 1986 until May 1992. He is a director
of Acme Steel Company and Kaiser Resources.
Mr. Preston has been the chairman, president, chief executive officer and
a director of Avon Products, Inc. since 1989. He is a director of F. W.
Woolworth Company and Reader's Digest Association.
Except as set forth below, the principal occupations of the executive officers
throughout the past five years have been the performance of the functions of the
corporate offices shown above.
Mr. Carr was vice president of the Company from November 1988 until
February 1991 when he was elected to his current position.
Mr. Farquharson was vice president of the Company from 1976 until
February 1991 when he was elected to his current position.
Mr. Gail was elected senior vice president of the Company in August 1994.
Prior to joining the Company in May 1994, he was president and chief executive
officer and prior thereto senior vice president of FCB - Philadelphia.
Mr. Ksansnak was senior vice president of the Company from May 1986 until
February 1991 when he was elected to his current position.
Mr. Leonard was president of ARAMARK Uniform Services from 1984 until
March 1992 when he was elected to his current position.
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Mr. Sutherland was vice president and treasurer of the Company from 1983
until February 1991 when he was elected senior vice president. In May 1993 he
was elected to his current position.
Mr. Vent was vice president of the Company from 1982 until February 1991
when he was elected to his current position.
Mr. Hill was elected vice president of the Company in January 1993. Prior
to joining the Company in 1993, he was vice president of Farley Industries, Inc.
and Fruit of the Loom, Inc.
Mr. Mulvaney was vice president of ARAMARK Uniform Services from 1988
until February 1993 when he was elected to his current position.
Mr. Tanzola was vice president and controller of the Company from 1978
until 1993 when he assumed new responsibilities as vice president, controls.
Mr. Griffith was assistant controller of the Company from May 1985 until
November 1991 when he became the director of corporate planning. In December
1993 he became controller and chief accounting officer of the Company.
Mr. Mahoney was elected treasurer of the Company in February 1991. He had
been assistant treasurer since 1985.
Mr. Thon was elected assistant treasurer of the Company in August 1994.
Previously he held various treasury analyst positions since joining the Company
in 1987.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
There are currently 1,147 record holders of Class B common stock of the
Company, all of whom are employees or directors of the Company (or members of
their families or trusts created by them). There are currently 132 record
holders of the Class A common stock of the Company, all of whom are
institutional investors, Company benefit plans or individuals not employed by
the Company.
There is no established public trading market for the common stock of the
Company. However, employees of the Company are able to sell shares of common
stock through various programs maintained by the Company. See note 7 to the
consolidated financial statements for information regarding the Company's
shareholders' agreement.
Under the Company's primary credit agreement, there are various covenants
that restrict the amount of cash dividends that may be paid to the holders of
outstanding common stock of the Company and which also limit the amount of funds
that may be transferred by ARAMARK to the Company for such purpose. See note 4
to the consolidated financial statements.
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Item 6. Selected Financial Data
The following table presents summary consolidated financial data for the
Company. The following data should be read in conjunction with the consolidated
financial statements and the related notes thereto and Management's Discussion
and Analysis of Results of Operations and Financial Condition, each included
elsewhere herein.
ARAMARK Corporation and Subsidiaries
--------------------------------------------------------------
Fiscal Year Ended on or near
September 30
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1994 1993 1992(1) 1991 1990
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(In millions, except per share amounts and ratios)
Income Statement Data:
Revenues...................................... $5,161.6 $4,890.7 $4,865.3 $4,774.4 $4,595.5
Earnings before interest
and income taxes( 2) ....................... 272.0 268.9 261.6 260.2 257.0
Interest expense, net......................... 108.5 125.7 137.9 142.3 49.8
Income before extraordinary item
and cumulative effect of
change in accounting for income
taxes (3).................................. 95.0 84.3 70.7 64.2 51.8
Net income.................................... 86.1 77.1 67.4 64.2 51.8
Earnings per share: (4).......................
Income before extraordinary item
and cumulative effect of
change in accounting for income
taxes ( 3)............................... $1.87 $1.64 $1.40 $1.23 $.91
Net income................................. $1.69 $1.49 $1.33 $1.23 $.91
Ratio of earnings to fixed charges (5)........ 2.1x 1.9x 1.7x 1.6x 1.5x
Balance Sheet Data (at period end):
Total assets.................................. $2,122.0 $2,040.6 $2,005.0 $2,002.6 $1,917.2
Long-term borrowings: (6)
Senior...................................... 691.5 533.8 629.5 722.1 728.7
Subordinated................................ 290.4 474.9 413.5 415.1 369.1
Common stock subject to potential
repurchase (7).............................. 20.8 21.7 20.4 17.7 17.5
Shareholders' equity........................... 182.6 124.1 103.8 40.6 49.3
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(1) Fiscal 1992 is a fifty-three week period. See note 1 to the
consolidated financial statements.
(2) See note 2 to the consolidated financial statements.
(3) See notes 3 and 6 to the consolidated financial statements.
(4) Based on weighted average shares of common stock outstanding for
all periods. See note 1 to the consolidated financial statements.
(5) For the purposes 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).
(6) See note 4 to the consolidated financial statements.
(7) See note 7 to the consolidated financial statements.
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Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Fiscal 1994 Compared to Fiscal 1993
Overview. Revenues for the fiscal year ended September 30, 1994 were $5.2
billion, a 6% increase over fiscal 1993. Earnings before interest and taxes of
$272 million increased 1% compared to the prior year. Each of the Company's
business segments reflected improvements in operating earnings. However, the
1994 results were adversely impacted by the Major League Baseball strike in the
United States and Canada and costs associated with several corporate development
and strategic initiatives, including costs related to a change in corporate
identity. See note 11 to the consolidated financial statements. Earnings before
interest and taxes for both fiscal 1994 and fiscal 1993 include other income of
$5.8 million and $5.0 million, respectively, and in fiscal 1994 a gain of $4.7
million on the issuance of stock by an affiliate. See note 2 to the consolidated
financial statements.
The Company's operating income margin decreased to 5.2% from 5.5%. The
decrease in margin is due primarily to the baseball strike and increased general
corporate expenses referred to above.
Interest expense declined $17.2 million or 14%, due primarily to lower
borrowing levels and the impact of refinancing certain of the Company's
indebtedness. Fiscal 1994 and 1993 net income include an extraordinary item for
the early extinguishment of debt of $7.7 million and $7.2 million, respectively,
as described in note 3 to the consolidated financial statements. Fiscal 1994 net
income also includes a charge of $1.3 million related to the cumulative effect
of adopting Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. See note 6 to the consolidated financial statements.
Segment Results. Food, Leisure and Support Services segment revenues were
4% greater than prior year. Increases related to new accounts, primarily in the
U.S. business and education markets, and an acquisition of a company in Spain
were partially offset by the effects of a divestiture in late fiscal 1993 and
the baseball strike in fiscal 1994. See notes 2 and 11 to the consolidated
financial statements. Uniform Services segment revenues increased 11% as a
result of increased volume in both the uniform rental and direct marketing
businesses. Health and Education Services segment revenues increased 9% as a
result of new contracts at correctional institutions and hospitals and continued
enrollment growth in the child care services business. Revenues for the
Distributive Services segment increased 3% due to increased volume.
Operating income for the Food, Leisure and Support Services segment
increased 1% over the prior year. Increased earnings in the U.S. business dining
market and the gain from the sale of stock of an affiliate were offset by the
impact of the baseball strike, start-up costs on new contracts, and continued
sluggish economic conditions in selected European markets. Depreciation and
amortization in this segment increased by $9 million due to acquisition related
amortization and depreciation on recent capital projects. Uniform
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Services operating income increased 9% as a result of the revenue growth.
Operating income for the Health and Education Services segment increased 11%
due to revenue growth plus improvements in operating efficiency due to
leveraging of overhead costs. Distributive Services operating income increased
7%, primarily due to increased volume with costs remaining relatively constant.
At the time of the filing of this Annual Report, the Major League Baseball
strike, as well as the National Hockey League strike continue in the U.S. and
Canada. Due to the uncertainty as to the length of the strikes, the Company
cannot determine the potential impact on fiscal 1995 financial results. In
fiscal 1994, management estimates that consolidated operating income and income
before extraordinary item would have been approximately 3% and 5% higher,
respectively, had the baseball strike not occurred. See note 11 to the
consolidated financial statements.
Fiscal 1993 Compared to Fiscal 1992
Overview. Revenues for the fiscal year ended October 1, 1993 were $4.9
billion. Operating income for fiscal 1993 was $269 million, an increase of $7
million or 3% over fiscal 1992. Excluding the unfavorable impact of currency
translation, revenues and operating income increased 2% and 4%, respectively,
over fiscal 1992. Operating results for fiscal 1993 and fiscal 1992 include
other income of $5.0 million and $4.2 million, respectively. See note 2 to the
consolidated financial statements.
The Company's operating margin increased from 5.4% in fiscal 1992 to 5.5%
in fiscal 1993 reflecting declines in cost of services provided and selling and
general corporate expenses as a percentage of revenues. The declines are
primarily due to the favorable impact of effective controls of costs relative to
revenue growth plus the impact of unusual costs included in fiscal 1992 selling
and general corporate expenses in connection with a potential acquisition and
several special development programs.
Interest expense declined $12.2 million or 9% due primarily to lower
interest rates and the impact of refinancing the Company's senior notes and
subordinated debentures. Fiscal 1993 and 1992 net income includes an
extraordinary item due to early extinguishments of debt of $7.2 million and $3.3
million, respectively. See note 3 to the consolidated financial statements for a
description of the debt refinancings and extraordinary item. Income before the
extraordinary item for fiscal 1993 was $84.3 million, which exceeded the prior
year by 19%.
Segment Results. Food, Leisure and Support Services segment revenues
approximated prior year. The impact of new accounts in international and
domestic markets for this segment was offset by the adverse effect of economic
conditions in the United States and Canada on selected business dining and other
accounts and a 2% revenue decline attributable to unfavorable currency exchange
rates. Uniform Services segment revenues increased 15% due to the acquisition of
WearGuard in fiscal 1992 and growth in volume at uniform rental operations which
accounted for 3% of the increase. Health and Education Services segment
revenues, excluding the revenues of Living Centers which was divested in fiscal
1992, increased 12% due primarily to new contracts at correctional institutions
and hospitals, continued enrollment growth at Children's World and a fiscal 1992
acquisition of a business providing management services to hospital
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emergency departments. Revenues for the Distributive Services segment declined
slightly due to the continued adverse effect of the economic slowdown on
consumer spending particularly in southern California.
Operating income for the Food, Leisure and Support Services segment
increased 3% over the prior year. The positive effects of new business,
operating efficiencies, and effective controls over product and overhead costs
plus a fiscal 1993 divestiture gain, described in note 2, contributed to the
increase. This was partially offset by the previously described impact of
adverse economic conditions, start-up costs at new accounts, a 2% decline in
operating income attributable to unfavorable currency exchange rates and the
reserve established for potential adjustments described in note 2. Uniform
Services operating income increased 15% due to the acquisition of WearGuard in
fiscal 1992 and revenue growth coupled with higher operating margins at uniform
rental operations which accounted for 6% of the increase. Depreciation and
amortization expense increased by $7.5 million for this segment due primarily to
the acquisition of WearGuard in fiscal 1992. Excluding the fiscal 1992 operating
results and divestiture gain related to Living Centers, operating income for the
Health and Education Services segment increased 4% as higher revenues plus an
increase in operating income due to the fiscal 1992 acquisition described above
were partially offset by higher operating costs. Distributive Services operating
income declined 8% reflecting lower operating margins as a result of the impact
of the economic slowdown coupled with an increase in operating costs.
FINANCIAL CONDITION AND LIQUIDITY
Cash flows generated from operating activities during fiscal 1994 were
more than sufficient to finance capital expenditures, acquisitions and common
and preferred stock repurchases during the year. The Company expects to continue
to fund capital expenditures, acquisitions and other liquidity needs from cash
provided by operating activities, normal disposals of property and equipment and
borrowings available under its credit facility. As of September 30, 1994, the
Company has capital commitments of approximately $52 million related to several
long-term concession contracts at stadiums and arenas.
During fiscal 1994, the Company amended its credit facility, increasing
the maximum borrowing amount from $650 million to $800 million, and extending
the final maturity to October 2001. See note 4 to the consolidated financial
statements. Currently the Company has approximately $325 million of unused
committed credit availability under its credit facility. Subsequent to yearend,
the Company has entered into definitive agreements for the acquisition of three
businesses and is in the process of completing a tender offer for the remaining
minority interest of its Canadian subsidiary. See note 2 to the consolidated
financial statements. Although the credit availability is sufficient to fund
these transactions, the Company intends to increase the amount of the credit
facility to provide additional financing availability.
During fiscal 1994, the Company redeemed $182.3 million of its 12-1/2%
subordinated debentures. See note 3 to the consolidated financial statements.
During fiscal 1994, the Company repurchased $17.6 million of its Series C
Preferred Stock, repurchased $29.7 million of its Class B Common Stock and
issued $13.2 million of subordinated installment notes as partial consideration.
The Company also purchased $9.2
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million of its Class A Common Stock. Additionally, the Company issued $12.4
million of Class B Common Stock to eligible employees, primarily through the
exercise of installment stock purchase opportunities.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements and Schedules at page S-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
PART III
Items 10, 11, 12, and 13 of Part III are incorporated by reference to the
registrant's Proxy Statement for its 1995 Annual Stockholders' Meeting to be
filed with the Commission pursuant to Regulation 14A (except for the stock price
performance graph and the committee report on executive compensation in the
Company's Proxy Statement).
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Index to Financial Statements
See Index to Financial Statements and Schedules at page S-1.
(b) Reports on Form 8-K
None.
(c) Exhibits Required by Item 601 of Regulation S-K
See Index to Exhibits.
(d) Financial Statement Schedules
See Index to Financial Statements and Schedules at page S-1.
-12-
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ARAMARK CORPORATION
By: Alan J. Griffith
----------------------
Alan J. Griffith
Controller and Chief
Accounting Officer
November 22, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on November 22, 1994.
Signature Title
- --------- -----------------------------------
Joseph Neubauer Chairman and President and Director
Joseph Neubauer (Principal Executive Officer)
James E. Ksansnak Executive Vice President
James E. Ksansnak (Principal Financial Officer)
Alan J. Griffith Controller
Alan J. Griffith (Principal Accounting Officer)
Robert J. Callander
Alan K. Campbell
Ronald R. Davenport
Davre J. Davidson
Philip L. Defliese
Lee F. Driscoll, Jr. Directors
Mitchell S. Fromstein
Edward G. Jordan
Thomas H. Kean
Reynold C. MacDonald
James E. Preston
Martin W. Spector
Martin W. Spector
Attorney-in-Fact
-13-
15
ARAMARK CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
----
Report of Independent Public Accountants S-2
Report of Chartered Accountants S-3
Consolidated Balance Sheets - As of September 30, 1994
and October 1, 1993 S-4
Consolidated Statements of Income - Fiscal Years 1994, 1993
and 1992 S-6
Consolidated Statements of Cash Flows - Fiscal Years 1994, 1993
and 1992 S-7
Consolidated Statements of Shareholders' Equity - Fiscal
Years 1994, 1993 and 1992 S-8
Notes to Consolidated Financial Statements S-11
Consolidated Supporting Schedules Filed:
Schedule
Number
- --------
III - Condensed Financial Information of Registrant S-26
V - Property and Equipment S-30
VI - Accumulated Depreciation and Amortization of
Property and Equipment S-33
VIII - Valuation and Qualifying Accounts and Reserves S-36
X - Supplementary Income Statement Information S-37
All other schedules are omitted because they are not applicable, not
required, or the information required to be set forth therein is included in the
consolidated financial statements or in notes thereto.
S-1
16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ARAMARK Corporation:
We have audited the accompanying consolidated balance sheets of ARAMARK
Corporation (a Delaware corporation) (formerly The ARA Group, Inc.) and
subsidiaries as of September 30, 1994 and October 1, 1993, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three fiscal years in the period ended September 30, 1994. These
consolidated financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedules based on our
audits. We did not audit the financial statements of Versa Services Ltd., the
Company's Canadian subsidiary, which statements reflect assets representing 3.6%
of consolidated assets as of both September 30, 1994 and October 1, 1993, and
revenues representing 5.6%, 6.3% and 7.4% of consolidated revenues for the
fiscal years 1994, 1993 and 1992, respectively. Those statements were audited by
other auditors whose report has been furnished to us and our opinion, insofar as
it relates to the amounts included for Versa Services Ltd., is based solely on
the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of ARAMARK Corporation and subsidiaries as of September
30, 1994 and October 1, 1993, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended September 30, 1994,
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
financial statements are presented for purposes of complying with the Securities
and Exchange Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
As discussed in Note 6 to the consolidated financial statements, ARAMARK
Corporation changed its method of accounting for income taxes in fiscal 1994.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
November 7, 1994
S-2
17
REPORT OF CHARTERED ACCOUNTANTS
To The Directors of Versa Services Ltd.:
We have audited the consolidated balance sheets of Versa Services Ltd. as at
September 28, 1994 and September 29, 1993 and the consolidated statements of
income and retained earnings and cash flows for the fifty-two week period ended
September 28, 1994, the fifty-two week period ended September 29, 1993, and the
fifty-three week period ended September 30, 1992 (not presented separately
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at September 28,
1994 and September 29, 1993, and the results of its operations and the changes
in its financial position for the fifty-two week period ended September 28,
1994, the fifty-two week period ended September 29, 1993 and the fifty-three
week period ended September 30, 1992 in accordance with accounting principles
generally accepted in Canada.
Mississauga, Canada ERNST & YOUNG
November 16, 1994 Chartered Accountants
S-3
18
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1994 and October 1, 1993
(dollars in thousands, except per share amounts)
- --------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 27,426 $ 27,801
Short-term investments held by the
Canadian subsidiary 16,203 --
Receivables (less allowances: 1994, $12,423;
1993, $10,242) 433,550 388,768
Inventories 256,950 249,858
Prepayments and other current assets 69,865 63,381
- --------------------------------------------------------------------------------
Total current assets 803,994 729,808
- --------------------------------------------------------------------------------
Property and Equipment, at Cost:
Land, buildings and improvements 379,671 355,744
Service equipment and fixtures 888,134 783,393
Leased property under capital leases 8,204 8,204
- --------------------------------------------------------------------------------
1,276,009 1,147,341
Less-Accumulated depreciation 594,102 498,962
- --------------------------------------------------------------------------------
681,907 648,379
- --------------------------------------------------------------------------------
Goodwill 438,725 446,261
- --------------------------------------------------------------------------------
Other Assets 197,324 216,193
- --------------------------------------------------------------------------------
$2,121,950 $2,040,641
================================================================================
The accompanying notes are an integral part of these financial statements.
S-4
19
ARAMARK CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term borrowings $ 9,391 $ 15,615
Accounts payable 372,908 329,129
Accrued payroll and related expenses 142,911 132,045
Other accrued expenses and current liabilities 231,991 208,677
- ------------------------------------------------------------------------------------------------
Total current liabilities 757,201 685,466
- ------------------------------------------------------------------------------------------------
Long-Term Borrowings:
Senior 697,695 544,971
Subordinated 290,414 474,875
Obligations under capital leases 3,231 4,443
- ------------------------------------------------------------------------------------------------
991,340 1,024,289
Less-current portion 9,391 15,615
- ------------------------------------------------------------------------------------------------
Total long-term borrowings 981,949 1,008,674
- ------------------------------------------------------------------------------------------------
Deferred Income Taxes and Other Noncurrent Liabilities 168,638 182,693
Minority Interest 10,812 18,084
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement 20,791 21,651
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Series C preferred stock, redemption value $1,000;
authorized: 40,000 shares; issued: 1994 - 16,949 shares;
1993 - 34,596 shares 16,949 34,596
Class A common stock, par value $.01; authorized:
25,000,000 shares; issued: 1994 - 2,074,251 shares;
1993 - 2,068,396 shares 21 21
Class B common stock, par value $.01; authorized:
150,000,000 shares; issued: 1994 - 24,338,494 shares;
1993 - 24,276,512 shares 243 243
Earnings retained for use in the business 178,587 104,827
Cumulative translation adjustment 7,550 6,037
Impact of potential repurchase feature of common stock (20,791) (21,651)
- ------------------------------------------------------------------------------------------------
Total 182,559 124,073
- ------------------------------------------------------------------------------------------------
$2,121,950 $2,040,641
================================================================================================
The accompanying notes are an integral part of these financial statements.
S-5
20
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Fiscal Years Ended September 30, 1994, October 1, 1993 and
October 2, 1992
(dollars in thousands, except per share amounts)
- -------------------------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------------------------
Revenues $ 5,161,578 $ 4,890,738 $ 4,865,343
- -------------------------------------------------------------------------------------------------
Costs and Expenses:
Cost of services provided 4,686,086 4,432,840 4,412,374
Depreciation and amortization 143,763 130,511 125,798
Selling and general corporate expense 70,196 63,406 69,760
Other expense (income) (5,792) (4,955) (4,174)
- -------------------------------------------------------------------------------------------------
4,894,253 4,621,802 4,603,758
- -------------------------------------------------------------------------------------------------
Operating income 267,325 268,936 261,585
Gain on Issuance of Stock by an Affiliate 4,658 -- --
- -------------------------------------------------------------------------------------------------
Earnings before interest and income taxes 271,983 268,936 261,585
Interest Expense, net 108,499 125,671 137,862
- -------------------------------------------------------------------------------------------------
Income before income taxes 163,484 143,265 123,723
Provision For Income Taxes 67,119 57,526 51,507
Minority Interest 1,332 1,405 1,518
- -------------------------------------------------------------------------------------------------
Income Before Extraordinary Item and Cumulative
Effect of Change in Accounting for Income Taxes 95,033 84,334 70,698
Extraordinary Item Due to Early Extinguishments
of Debt (net of income taxes of $5,118 in 1994,
$4,660 in 1993 and $1,943 in 1992) 7,677 7,202 3,317
Cumulative Effect of Change in Accounting for
Income Taxes 1,277 -- --
- -------------------------------------------------------------------------------------------------
Net Income $ 86,079 $ 77,132 $ 67,381
=================================================================================================
Earnings Per Share:
Income before extraordinary item and
cumulative effect of change in
accounting for income taxes $1.87 $1.64 $1.40
Net income $1.69 $1.49 $1.33
=================================================================================================
The accompanying notes are an integral part of these financial statements.
S-6
21
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Fiscal Years Ended September 30, 1994, October 1, 1993 and
October 2, 1992 (in thousands)
1994 1993 1992
- ------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 86,079 $ 77,132 $ 67,381
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 143,763 130,511 125,798
Income taxes deferred (2,174) 6,058 13,695
Minority interest 1,332 1,405 1,518
Cumulative effect of accounting change 1,277 -- --
Gain on issuance of stock by affiliate (4,658) -- --
Extraordinary item 7,677 7,202 3,317
Changes in noncash working capital:
Receivables (40,557) (933) (31,451)
Inventories (6,915) (6,425) (9,901)
Prepayments (15,675) 53,288 10,265
Accounts payable 36,956 (11,395) 18,855
Accrued expenses 36,926 (198) 8,814
Changes in noncurrent liabilities (1,368) 8,541 (14,940)
Changes in other assets (6,445) 4,106 4,338
Other (9,186) (5,604) (6,822)
- ------------------------------------------------------------------------------------------
Net cash provided by operating activities 227,032 263,688 190,867
- ------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (145,935) (142,121) (157,313)
Disposals of property and equipment 11,525 11,348 11,073
Sale of investments 13,543 15,945 --
Divestiture of certain businesses 7,297 11,928 180,765
Increase in short-term investments (16,203) -- --
Purchase of subsidiary stock (17,623) -- --
Acquisition of certain businesses:
Working capital other than cash acquired (3,066) 8,697 (25,450)
Property and equipment (573) (4,544) (32,896)
Additions to intangibles (6,734) (45,547) (75,085)
Assumed borrowings -- 2,885 1,994
Other 7,758 (5,368) (3,241)
- ------------------------------------------------------------------------------------------
Net cash used in investing activities (150,011) (146,777) (100,153)
- ------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 167,329 108,174 5,076
Payment of long-term borrowings including premiums (210,511) (157,407) (85,647)
Redemption of preferred stock (17,647) (137) --
Proceeds from issuance of common stock 12,416 9,462 8,675
Repurchase of common stock (25,729) (45,795) (14,644)
Payment of special dividend -- (24,157) --
Payment of preferred stock dividend (1,917) -- --
Other (1,337) (3,035) (126)
- ------------------------------------------------------------------------------------------
Net cash used in financing activities (77,396) (112,895) (86,666)
- ------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (375) 4,016 4,048
Cash and cash equivalents, beginning of year 27,801 23,785 19,737
- ------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 27,426 $ 27,801 $ 23,785
==========================================================================================
The accompanying notes are an integral part of these financial statements.
S-7
22
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
(in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Impact of
Potential
Series C Class A Class B Cumulative Repurchase
Preferred Common Common Capital Retained Translation Feature of
Stock Stock Stock Surplus Earnings Adjustment Common Stock
-------- --------- --------- ------- -------- ----------- ------------
Balance, October 1, 1993 $ 34,596 $ 21 $ 243 $ -- $ 104,827 $ 6,037 $ (21,651)
Net income 86,079
Dividends on preferred stock (1,337)
Issuance of Class A common stock to
employee benefit plans 1 8,881
Issuance of Class B common stock 25 18,910
Retirement of common and preferred stock (17,647) (1) (25) (27,791) (10,982)
Change during the period 1,513 860
--------- --------- --------- ------- --------- --------- ---------
Balance, September 30, 1994 $ 16,949 $ 21 $ 243 $ -- $ 178,587 $ 7,550 $ (20,791)
========= ========= ========= ======== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
S-8
23
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED OCTOBER 1, 1993
(in thousands)
- -----------------------------------------------------------------------------------------------------------------------------------
Impact of
Potential
Series C Class A Class B Cumulative Repurchase
Preferred Common Common Capital Retained Translation Feature of
Stock Stock Stock Surplus Earnings Adjustment Common Stock
---------- --------- --------- -------- --------- ----------- ------------
Balance, October 2, 1992 $ -- $ 6 $ 53 $ -- $ 113,091 $ 11,070 $ (20,437)
Net income 77,132
Special dividend 34,733 (59,514)
Dividends on preferred stock (883)
Issuance of Class A common stock to
employee benefit plans 10,688
Issuance of Class B common stock 11 18,420
Retirement of common and preferred stock (137) (1) (3) (29,108) (24,801)
Common stock split 16 182 (198)
Change during the period (5,033) (1,214)
--------- --------- --------- --------- --------- --------- ---------
Balance, October 1, 1993 $ 34,596 $ 21 $ 243 $ -- $ 104,827 $ 6,037 $ (21,651)
========= ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
S-9
24
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED OCTOBER 2, 1992
(in thousands)
Impact of
Potential
Class A Class B Cumulative Repurchase
Common Common Capital Retained Translation Feature of
Stock Stock Surplus Earnings Adjustment Common Stock
-------- -------- ------- --------- ----------- ------------
Balance, September 27, 1991 $ 5 $ 56 $ -- $ 46,134 $ 12,081 $(17,662)
Net income 67,381
Issuance of Class A common stock to
employee benefit plans 1 8,619
Issuance of common stock 4 12,648
Retirement of common stock (7) (21,267) (424)
Change during the period (1,011) (2,775)
-------- -------- ------- -------- --------- --------
Balance, October 2, 1992 $ 6 $ 53 $ -- $113,091 $ 11,070 $(20,437)
======== ======== ======= ======== ========= ========
The accompanying notes are an integral part of these financial statements.
S-10
25
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Effective October 10, 1994 the Company changed its name from The ARA Group, Inc.
to ARAMARK Corporation.
FISCAL YEAR
The Company's fiscal year is the fifty-two or fifty-three week period which ends
on the Friday nearest September 30th. The years ended September 30, 1994,
October 1, 1993 and October 2, 1992 are fifty-two, fifty-two and fifty-three
week periods, respectively.
PRINCIPLES OF CONSOLIDATION, ETC.
The consolidated financial statements include the accounts of the Company and
all its subsidiaries. All significant intercompany balances and transactions
have been eliminated and net income is reduced by the portion of income
applicable to minority shareholders of less than wholly-owned subsidiaries.
Certain 1993 items have been reclassified to conform to the 1994 presentation.
In fiscal 1995, the Company is required to adopt the provisions of Statement of
Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for
Postemployment Benefits," and SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." Adoption of these standards will not have a
material impact on the consolidated financial statements.
CURRENCY TRANSLATION
Gains and losses resulting from the translation of financial statements of
non-U.S. subsidiaries are reflected as a currency translation adjustment in
shareholders' equity. Currency transaction gains and losses included in
operating results for fiscal 1994, 1993 and 1992 were not significant.
CURRENT ASSETS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. At September 30, 1994,
securities having maturities in excess of three months, all of which were owned
by the Company's Canadian subsidiary, are classified as short-term investments
and are recorded at cost which approximates market value.
Inventories are valued at the lower of cost (principally the first-in, first-out
method) or market. The LIFO (last-in, first-out) method of determining cost is
used to value directly marketed work clothing and casual apparel. The stated
value of inventories determined using the LIFO method is not significantly
different from replacement or current cost. Personalized work apparel and linens
in service are recorded at cost and are amortized over their estimated useful
lives, approximately two years. In accordance with industry practice, magazines
and books are sold to retailers with the right to return unsold items for
ultimate credit from the publishers.
The components of inventories as of the respective yearends are as follows:
1994 1993
- -------------------------------------------------------------------------------
Food 24.9% 29.0%
Work apparel, casual apparel and linens 60.9% 55.7%
Magazines and books 5.6% 4.7%
Parts, supplies and novelties 8.6% 10.6%
- -------------------------------------------------------------------------------
100.0% 100.0%
- -------------------------------------------------------------------------------
S-11
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over their
estimated useful lives on a straight-line basis. Gains and losses on
dispositions are included in operating results. Maintenance and repairs are
charged to operations currently, and replacements and significant improvements
are capitalized. The estimated useful lives for the major categories of property
and equipment are 10 to 40 years for buildings and improvements and 3 to 10
years for service equipment and fixtures.
GOODWILL
Goodwill, which represents the excess of cost over fair value of the net assets
of acquired businesses, is being amortized on a straight-line basis principally
over 40 years. The Company develops operating income projections for each of its
lines of business and evaluates the recoverability and amortization period of
goodwill using these projections. Based upon management's current assessment,
the estimated remaining amortization period of goodwill is appropriate and the
remaining balance is fully recoverable. Accumulated amortization at September
30, 1994 and October 1, 1993 is $113.7 million and $97.4 million, respectively.
OTHER ASSETS
Other assets consist primarily of investments in less than 50% owned entities,
contract rights, customer lists, long-term receivables and noncurrent marketable
equity securities. Investments in which the Company owns more than 20% but less
than a majority are accounted for using the equity method. Contract rights and
customer lists are being amortized on a straight-line basis over the expected
period of benefit, 5 to 20 years. Noncurrent marketable equity securities are
stated at the lower of aggregate cost or market. At September 30, 1994 and
October 1, 1993 the cost and market value of the Company's noncurrent marketable
equity securities approximated $2 million and $5 million, respectively.
OTHER LIABILITIES
Other noncurrent liabilities consist primarily of deferred compensation,
insurance accruals, deferred gains arising from sale and leaseback transactions
and subordinated installment notes arising from repurchases of common stock.
The Company is self-insured for a limited portion of the risk retained under its
general liability and workers' compensation insurance arrangements.
Self-insurance reserves are actuarially determined based on the estimated timing
of future insurance claim payments associated with the Company's retained risk.
The current and noncurrent portions of the self-insurance reserves for workers'
compensation insurance are accrued on a present value basis using a discount
rate which approximates a risk-free rate.
EARNINGS PER SHARE
Earnings per share is reported on a fully diluted Common Stock, Class B
equivalent basis (which reflects Common Stock, Class A shares converted to a
Class B basis; ten for one) and is based upon the weighted average number of
common shares outstanding during the respective periods, plus the common
equivalent shares, if dilutive, that would result from the exercise of stock
options. Fully diluted earnings per share approximates primary earnings per
share and is equivalent to fully diluted earnings per share under the
"two-class" method.
S-12
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
SUPPLEMENTAL CASH FLOW INFORMATION
1994 1993 1992
------ ------ ------
(in millions)
Interest Paid $108.2 $113.5 $127.3
Income Taxes Paid $ 54.0 $ 41.0 $ 39.0
Significant noncash investing and financing activities are as follows:
o During fiscal 1994, 1993, and 1992, the Company contributed $8.9 million,
$10.7 million, and $8.6 million, respectively, of Class A Common Stock to
its employee benefit plans to fund previously accrued obligations. In
addition, during fiscal 1994, 1993 and 1992 the Company contributed $1.8
million, $1.7 million and $1.7 million, respectively, of stock units to its
stock unit retirement plan in satisfaction of its accrued obligations. See
Note 5 to the consolidated financial statements.
o During the third quarter of fiscal 1993, the Company paid a special
dividend on its common stock which included $34.7 million of new Series C
Preferred Stock. See Note 7 to the consolidated financial statements.
o During fiscal 1994 and 1993, the Company received $4.0 million and $5.9
million, respectively, of employee notes under its Deferred Payment program
as partial consideration for the issuance of Common Stock Class B. Also,
during fiscal 1994, 1993, and 1992, the Company issued subordinated
installment notes of $13.2 million, $8.3 million and $7.1 million,
respectively, as part consideration for repurchases of Common Stock. See
Note 7 to the consolidated financial statements.
NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.:
During the fourth quarter of fiscal 1994, an affiliate, 33% owned by the
Company, sold common stock through a public offering. The Company sold
approximately 9% of its equity investment in connection with the public
offering, receiving net proceeds of $6.9 million and recorded a gain of $5.8
million, which is included in "Other expense (income)." At the time a
subsidiary/affiliate sells its stock to third parties, the Company recognizes
the resultant change in its net investment in the subsidiary/affiliate through
the income statement in accordance with the Securities and Exchange Commission
Staff Accounting Bulletin No. 51 (SAB No. 51). In accordance with SAB No. 51,
the Company recognized a pre-tax gain of $4.7 million, and recorded a related
tax provision of $1.9 million, representing the increase in book value of the
Company's remaining investment created by the sale of the incremental new shares
in the public offering. The Company's percentage ownership of the affiliate
after the transaction is 28%.
S-13
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.: (Continued)
In September 1993, the Company acquired an 80% interest in the contract food
service division of the HUSA Group ("HUSA"), a provider of food services to
hospitals, schools and governmental facilities located in Spain, for aggregate
consideration, including all costs, of approximately $30 million. The purchase
price of the HUSA acquisition was allocated principally to contract rights and
goodwill. The Company's unaudited pro forma results of operations for fiscal
1993 and 1992 would not be materially different assuming the acquisition
occurred as of the beginning of the respective periods.
During the fourth quarter of fiscal 1993, the Company sold Encore Service
Systems, Inc. for approximately $20 million resulting in a gain of approximately
$15 million. In addition, all of the Company's remaining shares of Living
Centers of America common stock were sold during fiscal 1993 for approximately
$16 million, resulting in a gain of approximately $8 million. These gains have
been included in "Other expense (income)" in the accompanying consolidated
statements of income. Also included in "Other expense (income)" is an amount of
$18 million to establish a reserve for potential adjustments related to certain
cost-based food service contracts. This resulted from a 1993 internal review of
billing procedures covering primarily insurance and employee fringe benefits.
The review revealed some past inconsistencies between the billings and the
literal contractual language.
During the second quarter of fiscal 1992, the Company acquired the assets of
WearGuard Corporation ("WearGuard"), a direct marketer of work clothing and
casual apparel and late in the third quarter acquired the business of
Coordinated Health Services, Inc. ("CHS"), a provider of physician staffing and
patient billing services for hospital emergency departments for aggregate
consideration of $124 million. Also in the second quarter of 1992, the Company
divested approximately 90% of its interest in Living Centers of America, Inc.
("Living Centers") in a sale of stock through a public offering. The net effect
of these transactions resulted in a reduction of the Company's indebtedness of
approximately $69 million. "Other expense (income)" of $4.2 million in fiscal
1992 represents a gain of $13 million on the Living Centers divestiture
transaction partially offset by charges for insurance and related matters.
The Company's fiscal 1992 financial statements reflect results of operations and
cash flows for WearGuard and CHS for seven months and four months, respectively.
The Company's unaudited pro forma results of operations for fiscal 1992 would
not be materially different assuming the acquisitions occurred as of the
beginning of the period.
Subsequent to fiscal yearend 1994, the Company has entered into definitive
agreements for the acquisition of three businesses (two are in the Food, Leisure
and Support business segment and one in the Distributive segment) for total
consideration, in the form of cash and preferred stock, of approximately $260
million. Revenues of these businesses would increase the Company's total
revenues by approximately 5.5%. The cash portion of the consideration will be
financed through the Company's existing Credit Agreement. The acquisitions,
subject to certain third party approvals, are presently expected to close by the
end of calendar year 1994.
In the fourth quarter of fiscal 1994, the Company initiated a tender offer for
the 30% minority interest of its Canadian subsidiary. The transaction is
expected to be completed by the end of calendar year 1994 for total
consideration of approximately $33 million, of which $17.6 million has been paid
as of September 30, 1994.
NOTE 3. EXTRAORDINARY ITEM:
The following items have been reflected as extraordinary items in the
consolidated financial statements.
During fiscal 1994, the Company redeemed the remaining $182.3 million of its
12-1/2% subordinated debentures for a premium. The debt extinguishment was
financed through borrowings under the Company's revolving credit facility. The
resultant extraordinary charge was $7.7 million or $0.15 per share.
S-14
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. EXTRAORDINARY ITEM: (Continued)
During fiscal 1993, the Company repurchased the entire $100 million of its
10.55% senior notes for a premium and concurrently issued $100 million of 8-1/4%
senior notes. The Company also paid a premium to redeem $38.6 million of its
12-1/2% subordinated debentures.
During fiscal 1992, the Company exchanged $28.6 million of 10% subordinated
debentures plus a premium for $28.6 million of its 13% subordinated debentures
and paid a premium to redeem $1.5 million of its 12-1/2% subordinated
convertible notes.
NOTE 4. BORROWINGS:
Long-term borrowings at September 30, 1994 and October 1, 1993 are summarized in
the following table:
1994 1993
---------- ----------
(in thousands)
SENIOR:
Credit facility borrowings $401,600 $ 260,700
10-1/4% note, due April 1998 50,000 50,000
8-1/4% notes, payable in installments through 1999 100,000 100,000
10-5/8% notes, due August 2000 100,000 100,000
Other, including mortgages and notes payable 46,095 34,271
- --------------------------------------------------------------------------------
697,695 544,971
- --------------------------------------------------------------------------------
SUBORDINATED:
8-1/2% subordinated notes, due June 2003 100,000 100,000
10% exchangeable debentures and notes, due August 2000 59,299 61,465
12% debentures, due April 2000 125,000 125,000
12-1/2% debentures, due July 2001 -- 182,295
12-1/2% convertible notes, due February 2000 2,340 2,340
13% debentures, due January 1997 3,775 3,775
- --------------------------------------------------------------------------------
290,414 474,875
- --------------------------------------------------------------------------------
OBLIGATIONS UNDER CAPITAL LEASES 3,231 4,443
- --------------------------------------------------------------------------------
991,340 1,024,289
Less-current portion 9,391 15,615
- --------------------------------------------------------------------------------
$ 981,949 $1,008,674
================================================================================
The $800 million revolving credit facility ("Credit Agreement") is provided by a
group of banks and matures in October 2001 with quarterly commitment reductions
of $12.5 million starting in December 1995 which increase annually thereafter.
Interest under the credit agreement is based on the Prime Rate plus a spread of
0% to 5/8% (as of September 30, 1994 - 0%), London Inter-Bank Offered Rate
(LIBOR) plus a spread of 1/8% to 1-1/8% (as of September 30, 1994 - 1/2%) or the
Certificate of Deposit Rate plus a spread of 1/4% to 1-1/4% (as of September 30,
1994 - 5/8%), at the option of the Company. The spread is based on certain
financial ratios and borrowing levels as defined. The Company pays a fee of 1/4
of 1% on the entire credit facility.
The 8-1/4% notes are payable in $20 million annual installments commencing March
1995 with a final maturity of March 1999. The $20 million installment due in
fiscal 1995 has been classified as non-current in the accompanying consolidated
balance sheet as the Company has the ability and intent to finance it through
additional borrowings under the Credit Agreement.
S-15
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. BORROWINGS: (Continued)
The 10-5/8% senior notes require a sinking fund payment of $50 million in
August 1999 with a final maturity in August 2000.
The 8-1/2% subordinated notes may be redeemed at the Company's option, in whole
or in part, beginning June 1998 at a price equal to 104.25% of their principal
amount and thereafter at prices declining to par in 2002, together with accrued
interest.
The 10% subordinated exchangeable debentures and notes may be exchanged at any
time in whole or part, at the option of the holder, for 10-5/8% senior notes due
August 2000 at an exchange ratio of .93.
The 12% subordinated debentures may be redeemed at the Company's option, in
whole or in part, beginning April 1995 at a price equal to 105% of the principal
amount and thereafter at prices declining to par in April 1997, together with
accrued interest.
The 12-1/2% subordinated convertible notes are convertible at par, in whole, at
the option of the holder, into a series of the Company's 13% subordinated
debentures due January 1997. At any time on or after January 15, 1998, the
Company may, at its option, redeem the notes, in whole or in part, at a price
equal to 100% of their principal amount plus accrued interest.
The 13% subordinated debentures may be redeemed by the Company on or after
January 15, 1996, in whole or in part, at a price equal to 100% of their
principal amount plus accrued interest.
The fair value of the Company's aggregate senior and subordinated debt, based
primarily on quoted market prices, was $705 million and $291 million,
respectively at September 30, 1994 and $568 million and $511 million,
respectively, at October 1, 1993. Accrued interest on borrowings totaling $23.6
million in 1994 and $29.2 million in 1993 is included in current liabilities as
"Other accrued expenses."
At September 30, 1994, the Company has $200 million of interest rate exchange
agreements fixing the rate on a like amount of borrowings under the Credit
Agreement at an average effective rate of 5.7% for remaining periods ranging
between 1 and 34 months. The counterparties to the interest rate exchange
agreements are major international banks. The Company continually monitors its
positions and the credit ratings of its counterparties, and does not anticipate
nonperformance by the counterparties. All interest rate agreements are accounted
for as hedges and the related gains or losses are recognized in income as a
component of interest expense over the period being hedged. As of October 1,
1993 the Company had $202 million of interest rate exchange agreements fixing
the rate on a like amount of variable rate borrowings at an average effective
rate of 6.3%. During fiscal 1993, the Company entered into a $28 million foreign
currency swap agreement maturing in August 1996, which hedges the currency
exposure of its net investment in Spain. See Note 2 to the consolidated
financial statements.
The fair value of the Company's swap agreements as of September 30, 1994 is
approximately $5.5 million. At October 1, 1993, the fair value of the swap
agreements was not significant.
The Credit Agreement contains restrictive covenants which provide, among other
things, limitations on the incurrence of debt, dispositions of material assets,
payment of dividends and repurchases of capital stock. The terms of the Credit
Agreement also limit the transfer of funds to the Company by its subsidiaries
and require that the Company maintain certain specified minimum ratios of cash
flow to fixed charges and to total borrowings and certain minimum levels of net
worth (as defined). At September 30, 1994, the Company was in compliance with
all of these covenants.
S-16
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. BORROWINGS: (Continued)
Long-term borrowings maturing in the next five years, excluding capital lease
obligations, are as follows:
Amount
-------------
(in thousands)
1995 $ 8,701
1996 22,080
1997 25,571
1998 71,771
1999 85,015
NOTE 5. EMPLOYEE PENSION AND PROFIT SHARING PLANS:
The Company maintains contributory and non-contributory defined benefit pension
plans, primarily in Canada and the United Kingdom, providing retirement benefits
to eligible employees not covered by collective bargaining agreements. Total
pension expense under these plans for fiscal 1994, 1993 and 1992 was $1.4
million, $1.3 million and $1.1 million, respectively. The Company's policy is to
fund the minimum contribution required under the applicable law.
Defined benefit pension expense for 1994, 1993 and 1992 includes the following
components:
1994 1993 1992
------- ------- -------
(in thousands)
Service cost - benefits earned during the period $ 1,791 $ 1,628 $ 1,758
Interest cost on projected benefit obligations 2,459 2,309 2,228
Change in market valuation and return on plan assets (37) (5,071) (675)
Net amortization and deferral (2,857) 2,456 (2,194)
------- ------- -------
$ 1,356 $ 1,322 $ 1,117
======= ======= =======
Assumptions:
Discount rate 8.4% 8.2% 8.2%
Compensation increase 5.3% 5.4% 5.4%
Rate of return on assets 8.4% 8.3% 8.4%
The discount rates and rates of return on assets represent weighted averages
that reflect the combined assumptions of plans located primarily in Canada and
the United Kingdom.
The defined benefit pension plans' funded status at September 30, 1994 and
October 1, 1993 is as follows:
1994 1993
------- -------
(in thousands)
Pension plan obligations:
Accumulated benefits (including vested benefits
of $26,805 and $24,047 in 1994 and 1993,
respectively) $ 26,983 $ 24,374
======== ========
Projected benefits $ 33,728 $ 31,050
Market value of assets (primarily listed
securities and government obligations) 35,179 32,665
-------- --------
Funded status 1,451 1,615
Unrecognized net loss (gain) 96 (767)
Unrecognized net transition asset (2,905) (3,206)
Unrecognized prior service cost 1,565 1,658
-------- -------
Prepaid (accrued) pension cost $ 207 $ (700)
======== =======
S-17
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. EMPLOYEE PENSION AND PROFIT SHARING PLANS: (Continued)
In the United States, the Company also maintains qualified contributory and
non-contributory retirement plans for eligible employees, with Company
contributions to the plans based on earnings performance or salary level.
Qualified non-contributory profit sharing plans are maintained by certain
businesses, with annual contributions determined by management. The Company has
a non-qualified stock unit retirement plan for certain employees. The total
expense of the above plans for fiscal 1994, 1993 and 1992 was $14.5 million,
$14.1 million and $13.6 million, respectively. During fiscal 1994, 1993 and
1992, the Company contributed 59,919 shares, 86,184 shares and 75,684 shares,
respectively, of Common Stock, Class A to these plans to fund previously accrued
obligations. In addition, during fiscal 1994, 1993 and 1992, the Company
contributed to the stock unit retirement plan 143,125 stock units, 159,144 stock
units and 175,596 stock units, respectively, which are convertible into Common
Stock, Class B, in satisfaction of its accrued obligations. The value of the
stock units was credited to capital surplus. The Company participates in various
multi-employer union administered pension plans. Contributions to these plans,
which are primarily defined benefit plans, result from contractual provisions of
labor contracts and were $11.9 million, $10.2 million and $10.3 million for
fiscal 1994, 1993 and 1992, respectively.
NOTE 6. INCOME TAXES:
Effective October 2, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes." Prior to fiscal 1994, the Company followed the provisions of
Accounting Principles Board Opinion No. 11. SFAS No. 109 requires deferred tax
assets or liabilities to be recognized for the estimated future tax effects of
temporary differences between the financial reporting and tax bases of the
Company's assets and liabilities based on the enacted tax law and statutory tax
rates applicable to the periods in which the temporary differences are expected
to affect taxable income. The cumulative effect of this change in accounting
principle was a charge of $1.3 million, or $0.03 per share, in the first quarter
of fiscal 1994.
The components of income before income taxes by source of income are as follows:
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
United States $143,052 $121,818 $ 99,582
Non-U.S. 20,432 21,447 24,141
- ---------------------------------------------------------------------------------------------------------------
$163,484 $143,265 $123,723
===============================================================================================================
The provision for income taxes consists of:
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
Current:
Federal $51,935 $34,345 $22,737
State and local 11,827 7,024 5,614
Non-U.S. 5,531 10,099 9,461
- ---------------------------------------------------------------------------------------------------------------
69,293 51,468 37,812
- ---------------------------------------------------------------------------------------------------------------
Deferred:
Federal (1,516) 5,230 11,034
State and local (351) 736 1,499
Non-U.S. (307) 92 1,162
- ---------------------------------------------------------------------------------------------------------------
(2,174) 6,058 13,695
- ---------------------------------------------------------------------------------------------------------------
$67,119 $57,526 $51,507
===============================================================================================================
S-18
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. INCOME TAXES: (Continued)
The provision for income taxes varies from the amount determined by applying the
United States Federal statutory rate to pre-tax income as a result of the
following:
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
(% of pre-tax income)
United States statutory income tax rate 35.0% 34.8% 34.0%
Increase (decrease) in taxes, resulting from:
State income taxes, net of Federal tax benefit 4.6 3.7 4.2
Permanent book/tax differences, primarily
resulting from purchase accounting 3.0 2.4 4.6
Tax credits (1.5) (1.5) (2.4)
Other, net (.1) .8 1.2
- ---------------------------------------------------------------------------------------------------------------
Effective income tax rate 41.0% 40.2% 41.6%
===============================================================================================================
As of September 30, 1994, the components of the net deferred tax asset are as
follows:
Deferred tax liabilities:
Property and equipment $64,718
Inventory 5,484
Other 4,725
-------
Gross deferred tax liability 74,927
-------
Deferred tax assets:
Insurance 17,797
Employee compensation and benefits 30,228
Accruals and allowances 20,648
Intangibles 9,954
Other 2,254
Valuation allowance (1,000)
------
Net deferred tax asset 79,881
------
Net deferred tax asset $ 4,954
======
The Company does not provide for U.S. or foreign taxes on the undistributed
earnings of non-U.S. subsidiaries that are considered to be permanently
reinvested. At September 30, 1994, undistributed earnings of these foreign
subsidiaries or affiliates totaled $38.7 million, which will not be subject to
U.S. tax until distributed as dividends. Foreign tax credits will be available
to reduce U.S. taxes on this income upon distribution. Determination of the
unrecognized deferred tax liability for temporary differences related to the
undistributed earnings is not practicable.
S-19
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. INCOME TAXES: (Continued)
The components of deferred income taxes for years prior to the adoption of SFAS
No. 109 are as follows:
1993 1992
---- ----
(in thousands)
Excess of tax over book depreciation $ 1,905 $ 5,445
Accrued vacation 52 (3,272)
Provision for insurance costs (3,009) (1,668)
Tax vs. book basis of dispositions 5,598 12,755
Other 1,512 435
------- -------
$ 6,058 $13,695
======= =======
NOTE 7. CAPITAL STOCK:
There are two classes of common stock authorized and outstanding, Common Stock,
Class A and Common Stock, Class B. Each Class A and Class B Share is entitled to
one vote on all matters submitted to stockholders, voting together as a single
class except where otherwise required by law. Each Class A Share is entitled to
ten times the dividends and other distributions payable on each Class B Share.
Class B Shares may be held only by employees, directors and their family
members, and upon termination of employment each Class B Share is automatically
converted into 1/10 of a Class A Share.
During the third quarter of fiscal 1993, the Company paid a special dividend of
$5 per Class B equivalent share on all shares of its Common Stock owned as of
April 19, 1993, with $2 per Class B equivalent share, or $24.2 million, paid in
cash and $3 per Class B equivalent share, or $34.7 million, in new Series C
Preferred Stock ("Preferred Stock"). Concurrent with the dividend, the Company
repurchased for cash 55,495 shares of its Class A Common Stock for $28.9
million.
Holders of the Preferred Stock are entitled to cumulative dividends payable
semi-annually; voting rights in the event of failure to pay dividends for four
consecutive periods (two years); and upon liquidation, $1,000 per share plus
accrued and unpaid dividends. The current dividend rate on the Preferred Stock
is $60 per share and is reset annually in December of each year at a rate equal
to $1,000 multiplied by 80% of Chemical Bank's announced prime rate of interest,
but not less than $60 per share nor greater than $100 per share. The Preferred
Stock may be repurchased, in whole or in part, at any time only at the Company's
option at a price equal to $1,000 per share plus accrued and unpaid dividends.
During fiscal 1994 the Company repurchased 17,647 preferred shares for $17.6
million.
On November 9, 1993, the Company's Board of Directors declared a four-for-one
split of the Class B and Class A Common Stock effected in the form of a stock
dividend to shareholders of record on November 10. The Company issued 18,158,097
shares of Common Stock, Class B and 1,544,868 shares of Common Stock, Class A in
connection with the stock split. The stated par value of $.01 per share of Class
B and Class A common stock was not changed.
As of September 30, 1994 the Company's stock option plans provided for the
issuance of up to 33,001,148 options to purchase shares of Common Stock, Class
B. The Company granted installment stock purchase opportunities under its stock
ownership program in fiscal 1994, 1993 and 1992 which provide for the purchase
of shares of Common Stock, Class B. Installment stock purchase opportunities are
exercisable in six annual installments with the exercise price of each purchase
opportunity equal to the current fair market value at the time the purchase
opportunity is granted. During fiscal 1994, the Company implemented a program to
extend non-qualified stock options to additional qualified employees. Under the
program, options vest after three years and may be exercised for a period of
three years after vesting. The exercise price of each option is equal to the
current fair market value at the date of grant. In 1993, the Company implemented
the Deferred Payment Program which enables holders of non-qualified stock
options and installment purchase opportunities to defer a portion of the total
amount required to exercise the options. Interest currently
S-20
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. CAPITAL STOCK: (Continued)
accrues on deferred payments at 6% compounded annually and is payable when the
deferred payments are due. At September 30, 1994 and October 1, 1993 the
receivables from individuals under the Deferred Payment Program were $9.8
million and $5.9 million, respectively, which are classified in the consolidated
balance sheet as a reduction of Shareholders' Equity. The Company holds as
collateral all shares purchased in which any portion of the purchase price is
financed under the Deferred Payment Program until the deferred payment is
received from the individual by the Company. Status of the options, including
installment stock purchase opportunities, under the various ownership programs
follows:
Number of Shares Average Option Price
---------------------------------- ---------------------------
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ----
Options granted 4,314,635 2,776,296 3,716,400 $11.19 $9.14 $8.13
Options exercised 2,588,030 4,904,360 1,757,568 $6.33 $3.14 $4.95
Options outstanding 10,383,764 10,030,024 12,500,840 $8.05 $6.26 $4.88
At September 30, 1994, 1,129,160 of the outstanding option shares were
exercisable at an average option price of $1.81. The Company has reserved
11,063,004 shares of Common Stock, Class B at September 30, 1994 for issuance of
stock pursuant to its employee ownership and benefit programs.
The Company and its shareholders are parties to an Amended and Restated
Shareholders' Agreement. Pursuant to this agreement, holders of common stock who
are individuals, upon their death, complete disability or normal retirement, may
cause the Company to repurchase up to 30% of their shares for cash at the then
appraised value, but only to the extent such repurchase by the Company is
permitted under the Credit Agreement. Under this Credit Agreement restriction,
repurchases of capital stock cannot exceed an aggregate limit, which amount was
$20.8 million at September 30, 1994 and $21.7 million at October 1, 1993.
Pursuant to interpretations of its rules related to "Redeemable Preferred
Stock," the Securities and Exchange Commission has requested that these amounts
representing the Company's potential repurchase of its Common Stock be presented
as a separate item and accordingly, the Company's Shareholders' Equity reflects
this reclassification in the consolidated financial statements. Also, the
Shareholders' Agreement provides that the Company may, at its option, repurchase
shares from individuals who are no longer employees. Such repurchased shares may
be resold to others including replacement personnel at prices equal to or
greater than the repurchase price. Generally, payment for shares repurchased can
be, at the Company's option, in cash or subordinated installment notes, which
are subordinated to all other indebtedness of the Company. Interest on these
notes is payable semi-annually and principal payments are made annually over
varying periods not to exceed ten years. The noncurrent portion of these notes
($24.9 million as of September 30, 1994, $20.4 million as of October 1, 1993) is
included in the consolidated balance sheets as "Other Noncurrent Liabilities"
and the current portion of these notes ($8.7 million as of September 30, 1994
and $6.2 million as of October 1, 1993) is included in the consolidated balance
sheets as "Accounts Payable."
NOTE 8. COMMITMENTS AND CONTINGENCIES:
1994 1993
- -------------------------------------------------------------------------------
(in thousands)
Facilities under capital leases $8,204 $8,204
Less-accumulated amortization 5,590 4,891
- -------------------------------------------------------------------------------
$2,614 $3,313
===============================================================================
Rental expense for all operating leases was $121.2 million, $119.4 million and
$118.5 million for fiscal 1994, 1993 and 1992, respectively.
S-21
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. COMMITMENTS AND CONTINGENCIES: (Continued)
Following is a schedule of the future minimum rental commitments under all
noncancelable leases as of September 30, 1994:
Fiscal Year Operating Capital
- -----------------------------------------------------------------------
(in thousands)
1995 $115,003 $ 962
1996 71,781 778
1997 63,407 695
1998 58,555 551
1999 53,384 368
Subsequent years 218,265 743
- ------------------------------------------------------------------------
Total minimum rental obligations $580,395 4,097
===============================================
Less-amount representing interest 866
- ------------------------------------------------------------------------
Present value of capital leases 3,231
Less-current portion 690
- -------------------------------------------------------------------------
Noncurrent obligations under capital leases $2,541
=========================================================================
The Company has capital commitments of approximately $52 million at September
30, 1994 in connection with several long-term concession contracts at stadiums
and arenas. The Company is party to certain claims and litigation arising in the
ordinary course of business, including a dispute with a former insurance carrier
involving certain coverages relating to prior years. The Company believes it has
meritorious defenses to the insurance and other claims and is of the opinion
that adequate reserves have been provided for the ultimate resolution of these
matters.
NOTE 9. ARAMARK SERVICES, INC. AND SUBSIDIARIES:
The following financial information has been summarized from the separate
consolidated financial statements of ARAMARK Services, Inc. (a wholly owned
subsidiary of ARAMARK Corporation) and the subsidiaries which it currently owns.
ARAMARK Services, Inc. is the borrower under the Credit Agreement and certain
other senior debt described in Note 4 and incurs the interest expense
thereunder. This interest expense is only partially allocated to all of the
other subsidiaries of ARAMARK Corporation.
1994 1993 1992
---- ---- ----
(in thousands)
Revenues $2,763,098 $2,607,630 $2,613,564
Cost of services provided 2,594,291 2,439,471 2,446,908
Net income (loss) 18,677 (357) 2,864
1994 1993
---- ----
(in thousands)
Current assets $ 355,841 $ 339,920
Noncurrent assets 1,223,750 1,221,164
Current liabilities 398,814 364,653
Noncurrent liabilities 1,093,563 1,126,087
Minority interest 10,812 18,084
S-22
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. QUARTERLY RESULTS (Unaudited):
The following table summarizes quarterly financial data for fiscal 1994 and
1993.
Fiscal Quarter
---------------------------------------------------
1994 First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------
(in thousands, except earnings per share)
Revenues $1,292,020 $1,257,614 $1,309,085 $1,302,859 $5,161,578
Cost of services provided 1,179,726 1,156,230 1,185,363 1,164,767 4,686,086
Income before extraordinary item
and cumulative effect of
accounting change 18,387 13,124 27,121 36,401 95,033
Extraordinary item (1) 702 117 2,518 4,340 7,677
Net income (2) 16,408 13,007 24,603 32,061 86,079
Earnings per share:
Income before extraordinary item
and cumulative effect of
accounting change $.36 $.25 $.53 $.73 $1.87
Net income $.32 $.25 $.48 $.64 $1.69
Fiscal Quarter
---------------------------------------------------
1993 First Second Third Fourth Year
- ----------------------------------------------------------------------------------------------------------------
(in thousands, except earnings per share)
Revenues $1,214,882 $1,188,456 $1,242,155 $1,245,245 $4,890,738
Cost of services provided 1,110,111 1,090,870 1,124,615 1,107,244 4,432,840
Income before extraordinary item 16,192 11,634 22,280 34,228 84,334
Extraordinary item (1) 4,297 -- 902 2,003 7,202
Net income 11,895 11,634 21,378 32,225 77,132
Earnings per share:
Income before extraordinary item $.32 $.23 $.44 $.68 $1.64
Net income $.24 $.23 $.42 $.64 $1.49
(1) See Note 3.
(2) Includes cumulative effect of change in accounting for income taxes of
$1,277 in the fiscal 1994 first quarter. See Note 6.
In the first and second fiscal quarters, within the Food, Leisure and Support
Services Segment there is a lower level of activity at the higher margin leisure
and recreational food service operations which is partly offset by increased
activity in the educational market. In addition, there is a seasonal increase in
volume of directly marketed work clothing and casual apparel during the first
quarter. Whereas in the third and fourth fiscal quarters, there is a significant
increase at leisure and recreational accounts which is partially offset by the
effect of summer closings in the educational market.
S-23
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. BUSINESS SEGMENTS:
The Company provides or manages services in the following business segments:
Food, Leisure and Support Services - Food, refreshment, specialized dietary and
support services, including maintenance and housekeeping, provided to business,
educational, governmental and medical institutions and in recreational and other
facilities serving the general public. Fiscal 1994 operating income includes a
$5.8 million gain on the sale of stock of an affiliate and the 1993 operating
income includes a $15 million gain from a divestiture and a reserve of
approximately $18 million for potential adjustments as described in Note 2. The
1994 segment operating results have been adversely impacted by the U.S. Major
League Baseball strike which began on August 12. Had the strike not occurred, it
is estimated that segment revenues and operating income would have been
approximately 2% and 6% greater than the reported results, respectively. Also,
total Company operating income and income before extraordinary items would have
been approximately 3% and 5% higher, respectively.
Uniform Services - Rental of personalized work apparel and linens for business
and institutions on a contract basis and the direct marketing of work clothing,
casual apparel, and accessories.
Health and Education Services - General management of child care centers, and
specialized services to emergency rooms, and other hospital specialties, and
medical services to correctional institutions. As described in Note 2, the
Company divested Living Centers, the operator of nursing care facilities, in
February 1992 and sold its remaining Living Centers common stock during fiscal
1993. Revenues related to Living Centers for fiscal 1992 were $132.8 million.
The Health and Education Services segment operating income for fiscal 1992
includes a divestiture gain of $13 million, as described in Note 2.
Approximately 40% of the segment operating income for fiscal 1992 was related to
Living Centers, including the 1992 divestiture gain. The operating income of
this segment, excluding Living Centers results, was $32.5 million in 1992.
Distributive Services - Wholesale distribution of magazines and other published
materials to retail locations patronized by the general public.
Revenues by segment are substantially comprised of services to unaffiliated
customers and clients. Operating income reflects expenses directly related to
individual segments plus an allocation of expenses applicable to more than one
segment. General corporate expenses include expenses not specifically
identifiable with an individual segment. Fiscal 1994 expenses include unusual
costs related to several corporate development and strategic initiatives,
including costs related to a change in corporate identity. In 1992 unusual costs
were incurred in connection with a potential acquisition and several special
development programs. Direct selling expenses are approximately 1% of revenues
for fiscal 1994, 1993 and 1992. Corporate assets consist principally of goodwill
not allocable to any individual segment and other noncurrent assets.
Revenues Operating Income
--------------------------------- -----------------------------------
1994 1993 1992 1994 1993 1992
----- ---- ---- ---- ---- ----
(in millions)
Food, Leisure &
Support Services $3,274.3 $3,149.6 $3,151.8 $138.4 $137.4 $133.2
Uniform Services 810.5 731.0 632.9 96.0 87.6 76.5
Health & Education 673.3 619.3 687.3 37.2 33.7 53.0
Distributive 403.5 390.8 393.3 26.5 24.8 27.1
-------- -------- -------- ------ ------ -------
Total $5,161.6 $4,890.7 $4,865.3 298.1 283.5 289.8
======== ======== ========
General Corporate and Other Expenses (30.8) (22.6) (28.2)
Gain on Sale of Remaining Living Centers Common Stock - 8.0 -
------ ------ -------
Operating Income 267.3 268.9 261.6
Gain on Issuance of Stock by an Affiliate 4.7 - -
Interest expense, net (108.5) (125.7) (137.9)
------ ------- -------
Income Before Income Taxes, Minority Interest,
Extraordinary Item, and Accounting Change $163.5 $ 143.2 $ 123.7
====== ======= =======
S-24
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. BUSINESS SEGMENTS: (Continued)
Depreciation and Amortization, Capital Expenditures and Identifiable Assets
Depreciation Capital
and Amortization Expenditures
------------------------------- ---------------------------------
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ----
(in millions)
Food, Leisure &
Support Services $ 85.5 $ 76.6 $ 75.9 $ 83.2 $ 82.4 $104.2
Uniform Services 36.3 33.9 26.4 39.9 37.9 67.1
Health & Education 16.5 15.1 18.5 18.4 22.5 15.6
Distributive 2.3 2.1 2.2 2.0 1.4 1.8
------ ------ ------ ------ ------ ------
140.6 127.7 123.0 143.5 144.2 188.7
Corporate 3.2 2.8 2.8 3.0 2.5 1.5
------ ------ ------ ------ ------ ------
$143.8 $130.5 $125.8 $146.5 $146.7 $190.2
====== ====== ====== ====== ====== ======
Identifiable Assets
-------------------------------------
1994 1993 1992
---- ---- ----
(in millions)
Food, Leisure &
Support Services $1,085.7 $1,054.6 $1,046.5
Uniform Services 608.7 570.7 567.6
Health & Education 280.2 261.3 241.0
Distributive 74.2 65.6 69.1
-------- -------- --------
2,048.8 1,952.2 1,924.2
Corporate 73.2 88.4 80.8
-------- -------- --------
$2,122.0 $2,040.6 $2,005.0
======== ======== ========
Most services are provided in the United States, with operations also being
conducted in Belgium, Canada, the Czech Republic, Germany, Hungary, Japan,
Korea, Mexico, Spain and the United Kingdom. The Company's non-U.S. operations
for each year contributed approximately 15% of total revenues and 9% of total
operating income, and identifiable assets for these operations were
approximately 11% of the total.
S-25
40
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ARAMARK CORPORATION
BALANCE SHEETS
SEPTEMBER 30, 1994 AND OCTOBER 1, 1993
(in thousands)
ASSETS
1994 1993
----------- ----------
Current Assets:
Receivables $ 498 $ 341
Inventories 187 270
Prepayments 2,032 1,411
----------- ----------
Total current assets 2,717 2,022
----------- ----------
Property & Equipment, net 9,436 7,857
Investment in Subsidiaries 634,154 611,573
Notes Receivable from ARAMARK Services, Inc. 225,000 400,000
Other Assets 6,634 6,304
----------- ----------
$ 877,941 $1,027,756
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 12,832 $ 10,457
Accrued expenses 23,093 25,760
----------- ----------
Total current liabilities 35,925 36,217
---------- ----------
Long-Term Borrowings 290,414 474,875
Other Noncurrent Liabilities 45,217 39,048
Payable to Subsidiaries 303,035 331,892
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement 20,791 21,651
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Series C preferred stock, redemption
value $1,000 16,949 34,596
Class A common stock, par value $.01 21 21
Class B common stock, par value $.01 243 243
Earnings retained for use in the business 178,587 104,827
Cumulative translation adjustment 7,550 6,037
Impact of potential repurchase feature of
common stock (20,791) (21,651)
---------- ----------
Total 182,559 124,073
---------- ----------
$ 877,941 $1,027,756
========== ==========
The accompanying notes are an integral part of these financial statements.
S-26
41
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
ARAMARK CORPORATION
STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994,
OCTOBER 1, 1993 AND OCTOBER 2, 1992
(in thousands)
1994 1993 1992
------- -------- ---------
Equity in Net Income of Subsidiaries $86,079 $ 67,640 $ 67,381
------- -------- --------
Gain on Divestiture of an affiliate - 14,570 -
------- -------- --------
Management Fee Income 67,571 49,592 48,426
------- -------- --------
General and Administrative Expenses 45,808 27,652 26,156
------- -------- --------
Interest (Income) Expense -
Intercompany interest income (38,778) (36,774) (37,481)
Interest expense 47,746 54,503 54,491
------- -------- --------
Interest Expense, net 8,968 17,729 17,010
------- -------- --------
Income before income taxes 98,874 86,421 72,641
Provision for Income Taxes 5,118 6,748 1,943
------- -------- --------
Income Before Extraordinary Item 93,756 79,673 70,698
Extraordinary Item Due to Early Extinguishments
of Debt (net of income taxes of $5,118
in 1994, $1,670 in 1993 and $1,943 in 1992) 7,677 2,541 3,317
------- ------- --------
Net income $86,079 $77,132 $67,381
======== ======== ========
The accompanying notes are an integral part of these financial statements.
S-27
42
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
ARAMARK CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994,
OCTOBER 1, 1993 AND OCTOBER 2, 1992
(in thousands)
1994 1993 1992
------- ------- -------
Cash flows from operating activities:
Net income $ 86,079 $ 77,132 $ 67,381
Equity in net income of subsidiaries (86,079) (67,640) (67,381)
Extraordinary item 7,677 2,541 3,317
Gain on divestiture - (14,570) -
Other, primarily noncash working capital (8,408) 4,298 (547)
------- ------- -------
Net cash provided by (used in) operating activities (731) 1,761 2,770
------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment (3,023) (2,486) (1,480)
Other 2,072 120 140
------- ------- -------
Net cash used in investing activities (951) (2,366) (1,340)
------- ------- -------
Cash flows from financing activities:
Proceeds from additional long-term borrowings - 100,000 -
Payment of long-term borrowings including
premiums (194,694) (45,470) (3,952)
Change in notes receivable from
ARAMARK Services, Inc. 175,000 (100,000) -
Change in intercompany payable to
subsidiaries 54,253 106,702 8,491
Redemption of preferred stock (17,647) (137) -
Proceeds from issuance of common stock 12,416 9,462 8,675
Repurchase of common stock (25,729) (45,795) (14,644)
Payment of special dividend - (24,157) -
Dividends paid to preferred shareholders (1,917) - -
------- ------- -------
Net cash provided by (used in) financing activities 1,682 605 (1,430)
------- ------- -------
Change in cash $ - $ - $ -
======= ======= =======
The accompanying notes are an integral part of these financial statements.
S-28
43
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
ARAMARK CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1.
These statements should be read in conjunction with the Company's
consolidated financial statements and notes thereto beginning on page S-4.
Property and equipment are stated at cost and are depreciated over
their estimated useful lives on a straight-line basis.
Other assets consist primarily of long-term receivables arising from
the divestiture of subsidiaries.
Other noncurrent liabilities consist primarily of deferred compensation
and subordinated installment notes arising from repurchases of common stock.
Note 2.
During fiscal 1993, certain subsidiaries of the Company made a dividend
distribution totaling approximately $140 million. This transaction resulted in a
reduction in the payable to subsidiaries.
Note 3.
The Company has guaranteed certain obligations of ARAMARK Services,
Inc., its wholly-owned subsidiary, primarily those incurred pursuant to the
Credit Agreement borrowings. See Note 4 to the Company's consolidated
financial statements. Total guarantees were $725 million on September 30, 1994.
S-29
44
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
Additions, at Cost
------------------------------
Balance, as of Acquisition Retirements, Balance, as of
October 1, of Including September 30,
Classification 1993 Businesses(1) Other Divestitures Other(2) 1994
- -------------- --------------- -------------- ----------- ------------ -------- --------------
(in thousands)
Land, buildings and improvements $ 355,744 $ -- $ 24,815 $ 13,716 $ 12,828 $ 379,671
Service equipment and fixtures 783,393 573 121,120 17,064 112 888,134
Leased property under capital
leases 8,204 -- -- -- -- 8,204
---------- ---------- ---------- ----------- ---------- ----------
Total $1,147,341 $ 573 $ 145,935 $ 30,780 $ 12,940 $1,276,009
========== ========== ========== ========== ========== ==========
(1) Represents the fair market value at the date of acquisition of assets
acquired in business combinations accounted for as purchases.
(2) Reflects primarily the adoption of SFAS No. 109 and the impact of
currency translation.
S-30
45
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED OCTOBER 1, 1993
Additions, at Cost
------------------------
Balance, as of Acquisition Retirements, Balance, as of
October 2, of Including October 1,
Classification 1992 Businesses(1) Other Divestitures Other(2) 1993
- -------------- ------------- ------------- ------- ------------- -------- -------------
(in thousands)
Land, buildings and improvements $ 349,648 $ 9 $ 30,875 $ 12,285 $ (12,503) $ 355,744
Service equipment and fixtures 672,753 4,535 111,246 14,512 9,371 783,393
Leased property under capital
leases 9,956 -- -- 1,752 -- 8,204
---------- ----------- ----------- ----------- ----------- ----------
Total $1,032,357 $ 4,544 $ 142,121 $ 28,549 $ (3,132) $1,147,341
========== ========== ========== ========== =========== ==========
(1) Represents the fair market value at the date of acquisition of assets
acquired in business combinations accounted for as purchases.
(2) Reflects the impact of currency translation and reclassification of
assets between categories.
S-31
46
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED OCTOBER 2, 1992
Additions, at Cost
------------------------
Balance, as of Acquisition Retirements, Balance, as of
September 27, of Including October 2,
Classification 1991 Businesses(1) Other Divestitures Other(2) 1992
- -------------- -------------- ------------ ----- ------------ -------- ------------
(in thousands)
Land, buildings and improvements $ 426,944 $ 13,038 $ 33,755 $ 123,425 $ (664) $ 349,648
Service equipment and fixtures 572,141 17,864 123,558 40,683 (127) 672,753
Leased property under capital
leases 10,213 1,994 -- 2,251 -- 9,956
----------- ------------ ----------- ------------ ----------- -----------
Total $1,009,298 $ 32,896 $ 157,313 $ 166,359 $ (791) $1,032,357
=========== =========== =========== ============ =========== ==========
(1) Represents the fair market value at the date of acquisition of assets
acquired in business combinations accounted for as purchases.
(2) Reflects the impact of currency translation.
S-32
47
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
Balance, as of Charged Retirements, Balance, as of
October 1, to Including September 30,
Classification 1993 Income(1) Divestitures 1994
- -------------- -------------- ---------- ------------- --------------
(in thousands)
Buildings and improvements $103,888 $ 17,564 $ 4,299 $117,153
Service equipment and fixtures 390,183 89,243 8,067 471,359
Leased property under capital leases 4,891 699 -- 5,590
-------- --------- -------- --------
Total $498,962 $107,506 $ 12,366 $594,102
========= ========= ======== ========
(1) Reference is made to Note 1 of the consolidated financial statements
concerning the Company's depreciation policies.
S-33
48
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED OCTOBER 1, 1993
Balance, as of Charged Retirements, Balance, as of
October 2, to Including October 1,
Classification 1992 Income(1) Divestitures Other (2) 1993
- -------------- --------------- -------- ------------- ---------- -------------
(in thousands)
Buildings and improvements $ 97,822 $ 15,547 $ 7,282 $(2,199) $103,888
Service equipment and fixtures 315,128 82,987 10,131 2,199 390,183
Leased property under capital leases 4,772 441 322 -- 4,891
--------- -------- --------- ------- --------
Total $417,722 $ 98,975 $ 17,735 $ -- $498,962
======== ======== ========= ======= ========
(1) Reference is made to Note 1 of the consolidated financial statements
concerning the Company's depreciation policies.
(2) Reflects reclassification between categories.
S-34
49
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
FOR THE FISCAL YEAR ENDED OCTOBER 2, 1992
Balance, as of Charged Retirements, Balance, as of
September 27, to Including October 2,
Classification 1991 Income(1) Divestitures 1992
- -------------- -------------- --------- ------------ --------------
(in thousands)
Buildings and improvements $ 93,368 $ 18,014 $ 13,560 $ 97,822
Service equipment and fixtures 254,575 79,740 19,187 315,128
Leased property under capital leases 4,309 1,367 904 4,772
--------- --------- ---------- ---------
Total $352,252 $ 99,121 $ 33,651 $417,722
========= ========= ========== ========
(1) Reference is made to Note 1 of the consolidated financial statements
concerning the Company's depreciation policies.
S-35
50
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994,
OCTOBER 1, 1993 AND OCTOBER 2, 1992
Additions Reductions
---------------------- ------------------------
Balance, Acquisition Divestiture Deductions Balance,
Beginning of of Charged to of from End of
Description Fiscal Year Businesses Income Businesses Reserves (1) Fiscal Year
- ----------- ------------- ------------ ---------- ----------- ------------ -----------
(in thousands)
Fiscal Year 1994
Reserve for doubtful accounts,
advances & current notes receivable $10,242 $ 1,288 $ 6,141 $ -- $ 5,248 $12,423
======= ======= ======= ======= ======= ========
Fiscal Year 1993
Reserve for doubtful accounts,
advances & current notes receivable $ 9,881 $ 37 $ 7,425 $ 19 $ 7,082 $10,242
======= ======= ======= ======== ======= ========
Fiscal Year 1992
Reserve for doubtful accounts,
advances & current notes receivable $13,178 $ 730 $ 7,136 $ 2,939 $ 8,224 $ 9,881
======= ======= ======= ======== ======= ========
(1) Allowances granted and amounts determined not to be collectible.
S-36
51
ARAMARK CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994,
OCTOBER 1, 1993 AND OCTOBER 2, 1992
(in thousands)
1994 1993 1992
-------- -------- -------
Maintenance and repairs $ 47,190 $ 42,104 $ 46,241
Depreciation and amortization of intangible assets 143,763 130,511 125,798
Rents 121,176 119,372 118,475
Taxes, other than payroll and income taxes (1) -- -- --
Royalties (1) -- -- --
Advertising Costs (1) -- -- --
(1) Not presented because each amount was less than one percent of revenues.
S-37
52
INDEX TO EXHIBITS
3.1 Restated Certificate of Incorporation.
3.2 Corporate By-laws, as amended, are incorporated by reference to the
Company's Registration Statement of Form S-8 (No. 33-14365).
4.1 Amended and Restated Stockholders' Agreement.
4.2 Amended and Restated Registration Rights Agreement is incorporated by reference to the
Company's quarterly report on Form 10-Q for the fiscal quarter ended April 1, 1988.
Long-term debt instruments authorizing debt which does not exceed 10% of
the total consolidated assets of the Company are not filed herewithin but will
be furnished on request of the Commission.
10.1 Agreement relating to employment and post-employment competition dated December 21, 1983 with
Richard H. Vent is incorporated by reference to the Company's Annual Report on
Form 10K for the fiscal year ended October 2, 1987.
10.2 Summary Employment, Consulting and Retirement Agreement dated October 16, 1984 with
Davre J. Davidson is incorporated by reference to ARAMARK's Annual Report on Form
10K for the fiscal year ended September 28, 1984.
10.3 Agreement relating to employment and post-employment competition dated May 6, 1986 with
James E. Ksansnak is incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended September 29, 1989.
10.4 Agreement relating to employment and post-employment competition dated October 4, 1991 with
William Leonard is incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended October 1, 1993.
10.5 Restated Employment Agreement dated November 13, 1991 with Joseph Neubauer is incorporated
by reference to the Company's Annual Report on Form 10-K for the fiscal year ended
September 27, 1991.
10.6 Agreement relating to employment and post-employment competition dated October 1, 1991
with Julian L. Carr, Jr.
10.7 Amended and Restated Credit and Guaranty Agreement dated as of March 12, 1993.
11 Computation of Earnings Per Share.
12 Ratio of Earnings to Fixed Charges.
21 Subsidiaries of Registrant.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.2 Consent of Ernst & Young, Chartered Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.