UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 29, 1995 Commission file number 1-8827
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ARAMARK CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 23-2319139
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
The ARAMARK Tower
1101 Market Street
Philadelphia, Pennsylvania 19107
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(Address of principal executive offices) (Zip Code)
(215) 238-3000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class A common stock outstanding at January 26, 1996: 2,088,027
Class B common stock outstanding at January 26, 1996: 23,883,861
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
ASSETS
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December 29, September 29,
1995 1995
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Current Assets:
Cash and cash equivalents $ 20,128 $ 23,082
Receivables 528,662 488,920
Inventories, at lower of cost or market 305,263 285,510
Prepayments and other current assets 137,979 64,772
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Total current assets 992,032 862,284
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Property and Equipment, net 772,611 756,082
Goodwill 644,041 506,193
Other Assets 280,272 475,127
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$2,688,956 $2,599,686
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities:
Current maturities of long-term borrowings $ 10,995 $ 8,384
Accounts payable 411,547 440,761
Accrued expenses and other liabilities 472,260 399,458
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Total current liabilities 894,802 848,603
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Long-Term Borrowings 1,287,074 1,274,771
Deferred Income Taxes and Other Noncurrent Liabilities 232,837 204,968
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement 19,364 19,060
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Series C preferred stock, redemption value $1,000 14,649 14,965
Class A common stock, par value $.01 21 21
Class B common stock, par value $.01 227 235
Earnings retained for use in the business 252,392 247,805
Cumulative translation adjustment 6,954 8,318
Impact of potential repurchase feature of
common stock (19,364) (19,060)
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Total 254,879 252,284
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$2,688,956 $2,599,686
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Amounts)
For the Three Months Ended
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December 29, December 30,
1995 1994
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Revenues $1,549,374 $1,380,516
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Costs and Expenses:
Cost of services provided 1,413,632 1,264,665
Depreciation and amortization 44,693 37,013
Selling and general corporate expenses 22,025 18,629
Other income (2,850) --
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1,477,500 1,320,307
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Operating income 71,874 60,209
Interest Expense, net 30,252 25,433
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Income before income taxes 41,622 34,776
Provision for Income Taxes 16,633 14,023
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Net income $ 24,989 $ 20,753
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Earnings Per Share $.52 $.42
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
For the Three Months Ended
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December 29, December 30,
1995 1994
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Cash flows from operating activities:
Net income $ 24,989 $ 20,753
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 44,693 37,013
Income taxes deferred (5,961) (1,233)
Changes in noncash working capital (75,890) (79,340)
Other operating activities (671) (5,408)
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Net cash used in operating activities (12,840) (28,215)
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Cash flows from investing activities:
Purchases of property and equipment (32,658) (38,624)
Disposals of property and equipment 3,522 2,923
Sale of investments -- 16,203
Divestiture of certain businesses 50,823 1,579
Purchase of subsidiary stock -- (19,758)
Acquisition of certain businesses (5,471) (115,680)
Other investing activities (2,649) 727
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Net cash provided by (used in) investing activities 13,567 (152,630)
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Cash flows from financing activities:
Proceeds from additional long-term borrowings 16,125 179,541
Payment of long-term borrowings including premiums (1,483) (6,202)
Repurchase of stock (18,350) (1,842)
Other financing activities 27 244
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Net cash provided by (used in) financing activities (3,681) 171,741
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Decrease in cash and cash equivalents (2,954) (9,104)
Cash and cash equivalents, beginning of period 23,082 27,426
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Cash and cash equivalents, end of period $ 20,128 $ 18,322
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
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The condensed consolidated financial statements included herein have
been prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of the Company, the statements include all
adjustments (which include only normal recurring adjustments) required
for a fair statement of financial position, results of operations and
cash flows for such periods. The results of operations for the interim
periods are not necessarily indicative of the results for a full year.
(2) OTHER INCOME:
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During the first quarter of fiscal 1996, the Company sold a division of
its direct marketing business. The division was a provider of casual
mens' apparel and the net selling price was $51 million, primarily in
cash. The transaction resulted in a pre-tax gain of $37 million, which
was offset by other charges related to asset realization ($20 million)
and insurance, legal and other matters ($14 million) and is reflected
as "other income" in the accompanying consolidated statement of income.
The divested operations were not material to the Company's revenues or
operating income.
(3) CAPITAL STOCK:
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During the first quarter of fiscal 1996, pursuant to the ARAMARK
Ownership Program, employees purchased 140,347 shares or $1.1 million
of Class B Common Stock for $.7 million cash plus $.4 million of
deferred payment obligations.
(4) SUPPLEMENTAL CASH FLOW INFORMATION:
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The Company made interest payments of $28.8 million and $24.7 million
and income tax payments of $8.0 million and $14.3 million during the
first quarter of fiscal 1996 and 1995, respectively. During the first
quarter of fiscal 1996, the Company purchased $9.7 million of its Class
B Common Stock, issuing $4.7 million in subordinated installment notes
as partial consideration, and contributed $1.5 million of Class A
Common Stock to its employee benefit plans.
(5) SUBSEQUENT EVENT:
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In January 1996, the Company redeemed its $80 million 8-1/4% senior
note for a premium and will record an extraordinary item for debt
extinguishment of $1.6 million (net of tax benefit of $1.0 million) in
the fiscal 1996 second quarter.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(6) ARAMARK SERVICES, INC. AND SUBSIDIARIES:
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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 revolving credit facility and certain other senior debt agreements
and incurs the interest expense thereunder. This interest expense is
only partially allocated to all of the other subsidiaries of ARAMARK
Corporation.
For the Three Months Ended
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December 29, December 30,
1995 1994
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(in millions)
Revenues $833.3 $753.9
Cost of services provided 785.7 705.1
Net income 2.2 9.8
December 29, September 29,
1995 1995
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(in millions)
Current assets $ 406.4 $ 366.4
Noncurrent assets 1,605.7 1,545.5
Current liabilities 514.6 435.3
Noncurrent liabilities 1,398.5 1,377.8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- ------- FINANCIAL CONDITION
RESULTS OF OPERATIONS
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Overview
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Revenues of $1.5 billion for the first quarter of fiscal 1996 were 12% higher
than the prior year period. First quarter operating income of $71.9 million was
$11.7 million higher than the prior year period. Fiscal 1996 operating income
includes other income of $2.9 million as described in note 2 to the condensed
consolidated financial statements. Excluding the other income, operating income
increased by 15% due to improved earnings in each business segment, including
the positive impact in fiscal 1996 from the return of baseball and hockey. As a
result, the Company's operating income margin, before other income, increased to
4.5% in fiscal 1996 from 4.4% in fiscal 1995. First quarter interest expense
increased $4.8 million, or 19%, from the comparable prior year period due
primarily to increased debt levels to finance acquisitions.
Segment Results
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Revenues - Food, Leisure and Support Services segment revenues increased 12% due
to new accounts and increased volume at both domestic and international food
businesses, acquisitions, and the return of baseball and hockey. Uniform
Services segment revenues increased 18% due to increased volume in uniform
rental operations plus the impact of recent acquisitions, partially offset by
the divestiture discussed in note 2. Health & Education segment revenues
increased 2% due primarily to enrollment growth and pricing at Children's World.
Distributive segment revenues increased 21% due primarily to recent
acquisitions.
Operating Income, Before Other Income - Food, Leisure and Support Services
segment operating income increased 30% due to increased revenues in the food
business and the return of baseball and hockey. Uniform Services segment
operating income was about equal to last year due to several factors. Income
related to higher revenue was offset by costs associated with the acquisition in
the uniform rental business and higher operating and marketing costs in the
direct marketing business. The impact on operating income from the acquisition
of the direct marketer of public safety clothing and equipment was offset by the
divestiture described in note 2. Health & Education segment operating income
increased 32% due to revenue related increases at Children's World and cost
improvements at Spectrum Healthcare Services. Distributive segment operating
income increased 8% due to acquisitions, partially offset by increased operating
expenses.
FINANCIAL CONDITION
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The Company's indebtedness increased $15 million in the first three months of
fiscal 1996, principally to finance seasonal working capital needs which was
partially offset by the proceeds from the sale of a division (see note 2 to the
condensed consolidated financial statements).
In January 1996, the Company redeemed its $80 million 8-1/4% senior note and
issued a $125 million 6.79% note due January 2003, with annual principal
repayments of $25 million beginning January 1999 (see note 5 to the condensed
consolidated financial statements).
The Company currently has approximately $350 million of unused credit
availability under its $1 billion revolving credit facility, which management
believes, along with cash flows from operations, is sufficient to fund operating
requirements.
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARAMARK CORPORATION
February 12, 1996 /s/ Alan J. Griffith
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Alan J. Griffith
Vice President, Controller
and Chief Accounting Officer
PART II - OTHER INFORMATION
Items 1 through 4 are not applicable.
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Item 5: None
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Item 6: Exhibits and Reports on Form 8-K
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(a) (1) Exhibit 3 - Restated Articles of Incorporation
(2) Exhibit 11 - Computation of Fully Diluted Earnings Per Share
(3) Exhibit 27 - Financial Data Schedule
(b) None