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 28, 2001
Commission file number 001-16807
ARAMARK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-3086414
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ARAMARK Tower
1101 Market Street
Philadelphia, Pennsylvania 19107
-------------------------- -----
(Address of principal executive offices) (Zip Code)
(215) 238-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class A common stock outstanding at January 25, 2002: 156,805,466
Class B common stock outstanding at January 25, 2002: 34,735,145
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
ASSETS
------
December 28, September 28,
2001 2001
----------- -----------
Current Assets:
Cash and cash equivalents $ 27,137 $ 24,799
Receivables 569,263 503,291
Inventories, at lower of cost or market 416,747 415,798
Prepayments and other current assets 160,835 76,310
----------- -----------
Total current assets 1,173,982 1,020,198
----------- -----------
Property and Equipment, net 1,143,848 1,087,833
Goodwill and Other Intangible Assets 1,573,919 817,542
Other Assets 276,753 290,821
----------- -----------
$ 4,168,502 $ 3,216,394
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term borrowings $ 46,622 $ 34,710
Accounts payable 362,242 459,249
Accrued expenses and other liabilities 690,655 590,192
----------- -----------
Total current liabilities 1,099,519 1,084,151
----------- -----------
Long-Term Borrowings 1,827,964 1,635,867
Deferred Income Taxes and Other Noncurrent Liabilities 260,852 229,484
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement -- 20,000
Shareholders'Equity Excluding Common Stock
Subject to Repurchase:
Class A common stock, par value $.01 1,673 1,672
Class B common stock, par value $.01 345 --
Capital surplus 743,803 1,065
Earnings retained for use in the business 334,568 283,125
Accumulated other comprehensive income (loss) (24,858) (18,970)
Treasury stock (75,364) --
Impact of potential repurchase feature of
common stock -- (20,000)
----------- -----------
Total 980,167 246,892
----------- -----------
$ 4,168,502 $ 3,216,394
=========== ===========
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
--------------------------
December 28, December 29,
2001 2000
---------- ----------
Sales $2,109,688 $1,947,278
---------- ----------
Costs and Expenses:
Cost of services provided 1,903,989 1,751,969
Depreciation and amortization 60,353 58,629
Selling and general corporate expenses 27,398 24,814
---------- ----------
1,991,740 1,835,412
---------- ----------
Operating income 117,948 111,866
Interest and Other Financing Costs, net 35,498 40,597
---------- ----------
Income before income taxes 82,450 71,269
Provision for Income Taxes 31,007 27,841
---------- ----------
Net income $ 51,443 $ 43,428
========== ==========
Earnings Per Share:
Basic $ .29 $ .26
========== ==========
Diluted $ .27 $ .24
========== ==========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
2
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
For the Three Months Ended
-------------------------------------
December 28, December 29,
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 51,443 $ 43,428
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 60,353 58,629
Income taxes deferred 5,144 1,002
Changes in noncash working capital (195,470) (171,372)
Net proceeds from sale of receivables 41,105 --
Other operating activities (5,201) (10,359)
--------- ---------
Net cash used in operating activities (42,626) (78,672)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (40,516) (45,101)
Disposals of property and equipment 3,034 6,039
Sale of investments -- 8,240
Acquisition of certain businesses (793,910) (22,207)
Other investing activities 13,705 4,245
--------- ---------
Net cash used in investing activities (817,687) (48,784)
--------- ---------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 623,808 150,014
Payment of long-term borrowings (421,899) (2,380)
Proceeds from issuance of common stock 743,095 1,448
Repurchase of stock (80,128) (16,481)
Other financing activities (2,225) --
--------- ---------
Net cash provided by financing activities 862,651 132,601
--------- ---------
Increase in cash and cash equivalents 2,338 5,145
Cash and cash equivalents, beginning of period 24,799 24,592
--------- ---------
Cash and cash equivalents, end of period $ 27,137 $ 29,737
========= =========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion
of the Company, the statements include all adjustments (which include only
normal recurring adjustments) required for a fair statement of financial
position, results of operations and cash flows for such periods. The results
of operations for interim periods are not necessarily indicative of the
results for a full year.
(2) CAPITAL STOCK:
On December 14, 2001, the Company completed an initial public offering of
34,500,000 shares of its Class B common stock at a price of $23.00 per
share, raising approximately $742.9 million, net of issuance costs. Just
prior to the completion of the initial public offering, old ARAMARK
Corporation merged with its wholly owned subsidiary, ARAMARK Worldwide
Corporation. Each outstanding ARAMARK old Class B and old Class A common
share was exchanged for two shares and twenty shares, respectively, of the
surviving corporation's Class A common stock and had the effect of a
two-for-one stock split. ARAMARK Worldwide's name was changed to ARAMARK
Corporation, and it succeeded to all the assets, liabilities, rights and
obligations of old ARAMARK. Shareholders' equity, share and per share
amounts have been restated to give effect to the two-for-one merger exchange
ratio and the change in capital stock of the Company. The restatement had no
effect on other amounts, including net income previously reported by
ARAMARK. Upon completion of the merger, the Amended and Restated
Stockholders' Agreement was terminated and the Company's limited obligation
to repurchase shares was eliminated.
Although the Class B shares contain the same economic interests in the
Company as the Class A shares, the Class A shares entitle holders to ten
votes per share while the Class B shareowners are entitled to one vote per
share. After the completion of the initial public offering, but prior to the
stock buybacks discussed below, Class A shares constituted about 83% of our
total outstanding stock and about 98% of our total voting power, while the
Class B shares constituted about 17% of our total outstanding shares and
about 2% of our total voting power.
On December 14, 2001, the Company purchased 3,276,700 Class A shares owned
by employee benefit plans for $23.00 per share, resulting in a cash
expenditure of $75.4 million. These shares, which are reflected as treasury
shares, represented 10% of all Class A shares owned by these benefit plans.
On December 17, 2001, the Company announced an offer to purchase up to 10%
of its Class A common stock, excluding shares owned by benefit plans, for
$23.00 per share. On January 25, 2002, the Company completed the tender
offer for its Class A common stock and purchased 13.6 million shares for
approximately $314 million. The remaining proceeds from the initial public
offering were used to repay a portion of the bridge loan discussed in
Note 9.
On December 10, 2001, shareholders approved the ARAMARK 2001 Equity
Incentive Plan, which provides for the initial issuance of up to 30,000,000
shares of either Class A or Class B common stock, with an additional 3% of
the Company's common stock outstanding as of the end of the prior calendar
year becoming available under the plan on each January 1 following the
adoption of the plan. Concurrent with the initial public offering, the
company granted 3.7 million options to purchase Class A common stock under
the plan. The options vest ratably over four years, with an exercise price
equal to the initial public offering price. No future stock option grants
will be made under the ARAMARK Ownership Plan.
Additionally, during the first quarter of fiscal 2002, pursuant to the
ARAMARK Ownership Program, employees purchased 481,170 shares or $2.5
million of Class A Common Stock for $.2 million cash plus $2.3 million of
deferred payment obligations.
4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(3) GOODWILL:
At the beginning of the first quarter of fiscal 2002, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and
Other Intangible Assets" in accordance with the early adoption provisions of
the standard. With the adoption of SFAS No. 142, goodwill is no longer
subject to amortization, rather it is subject to at least an annual
assessment for impairment by applying a fair value based test. The Company
is currently conducting the transitional goodwill impairment tests required
by SFAS No. 142, which must be completed within six months of adoption.
The elimination of goodwill amortization would have increased net income by
$5.3 million for the three months ended December 29, 2000, or $.03 per basic
and diluted share. Adjusted net income, basic and diluted earnings per share
for the three months then ended are $48.7 million, $0.29 per share and $0.27
per share, respectively.
Goodwill as of December 28, 2001 as allocated by segment is as follows:
September 28, 2001 Acquisitions Translation and Other December 28, 2001
------------------ ------------ --------------------- -----------------
(in thousands)
Food and Support
Services - United
States $340,562 $ 487,347 -- $ 827,909
Food and Support
Services -
International 41,852 -- $ (607) 41,245
Uniform and Career
Apparel - Rental 147,800 124 -- 147,924
Uniform and Career
Apparel - Direct Marketing 104,066 -- -- 104,066
Educational Resources 70,736 -- -- 70,736
-------- ---------- ---------- ----------
Consolidated $705,016 $ 487,471 $ (607) $1,191,880
======== ========== ========== ==========
The increase in goodwill is primarily due to the preliminary allocation of
goodwill related to the acquisition of ServiceMaster Management Services
(see Note 9), which is subject to revision based on final determination of
the purchase price allocation.
Intangible assets as of December 28, 2001 are as follows:
Gross Accumulated
Amount Amortization
------ ------------
(in thousands)
Customer relationship assets $ 465,367 $ 105,495
Other 38,616 16,449
--------- ---------
Total $ 503,983 $ 121,944
--------- ---------
All intangible assets are amortizable and consist primarily of contract
rights, customer lists and non-compete agreements. Net intangible assets
increased $269.5 million during fiscal 2002, primarily due to the
acquisition of ServiceMaster Management Services (see Note 9), which is
subject to revision based on final determination of the purchase price
allocation.
Amortization expense related to intangible assets for the three months ended
December 28, 2001 was $10.7 million.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(4) SUPPLEMENTAL CASH FLOW INFORMATION:
The Company made interest payments of $33.6 million and $36.5 million and
income tax payments of $37.2 million and $24.5 million during the first
quarter of fiscal 2002 and 2001, respectively.
(5) EARNINGS PER SHARE:
The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share." Prior year earnings per
share amounts have been restated to reflect the merger discussed in Note 2
above. Pro forma net income and earnings per share information are shown as
if the provisions of SFAS No. 142 were in effect for fiscal 2001 (see Note
3). Earnings applicable to common stock and common shares utilized in the
calculation of basic and diluted earnings per share are as follows:
Three Months Ended Pro Forma
----------------------------- ------------
December 28, December 29, December 29,
2001 2000 2000
------------ ------------ ------------
(in thousands, except per share data)
Earnings:
Net income $ 51,443 $ 43,428 $ 48,713
======== ======== ========
Shares:
Weighted average number of common
shares outstanding used in basic
earnings per share calculation 175,984 169,946 169,946
Impact of potential exercise opportunities
under the ARAMARK Ownership and
Equity Incentive Plans 11,733 11,159 11,159
-------- -------- --------
Total common shares used in diluted
earnings per share calculation 187,717 181,105 181,105
======== ======== ========
Basic earnings per common share $ .29 $ .26 $ .29
======== ======== ========
Diluted earnings per common share $ .27 $ .24 $ .27
======== ======== ========
(6) COMPREHENSIVE INCOME:
Pursuant to the provisions of SFAS No. 130, "Reporting Comprehensive
Income", comprehensive income includes all changes in shareholders' equity
during a period, except those resulting from investment by and distributions
to shareholders. Components of comprehensive income include net income,
changes in foreign currency translation adjustments and changes in the fair
value of cash flow hedges (net of tax). Total comprehensive income was $45.6
million and $52.7 million for the three months ended December 28, 2001 and
December 29, 2000, respectively.
(7) ACCOUNTING FOR DERIVATIVE INSTRUMENTS:
The Company utilizes derivative financial instruments, such as interest rate
swaps and forward exchange contract agreements to manage changes in market
conditions related to debt obligations and foreign currency exposures. As of
December 28, 2001, the Company has $200 million of interest rate swap
agreements fixing the rate on a like amount of variable rate borrowings.
There were no forward exchange contract agreements outstanding as of
December 28, 2001.
The Company recognizes all derivatives on the balance sheet at fair value at
the end of each quarter. Changes in the fair value of a derivative that is
designated as and meets all the required criteria for a cash flow hedge are
recorded in accumulated other comprehensive income and reclassified into
earnings as the underlying hedged item affects earnings. Amounts
reclassified into earnings related to interest rate swap agreements are
included in interest expense. During the quarter ended
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(7) ACCOUNTING FOR DERIVATIVE INSTRUMENTS: (Continued)
December 28, 2001, unrealized net gains of approximately $1.1 million (net
of tax) related to interest rate swaps were recorded in Other Comprehensive
Income. As of December 28, 2001, approximately $5.3 million of net
unrealized losses related to interest rate swaps was included in Accumulated
Other Comprehensive Income, approximately $4.3 million of which is expected
to be reclassified into earnings during the next twelve months. The hedge
ineffectiveness for existing derivative instruments for the quarter ending
December 28, 2001 was not material.
(8) SEGMENT INFORMATION:
Sales and operating income by segment are as follows:
Three Months Ended
----------------------------
December 28, December 29,
Sales 2001 2000
----- ---------- ----------
(in thousands)
Food and Support Services - United States $1,313,217 $1,186,334
Food and Support Services - International 304,167 265,339
Uniform and Career Apparel - Rental 250,596 250,383
Uniform and Career Apparel - Direct Marketing 128,540 132,055
Educational Resources 113,168 113,167
---------- ----------
$2,109,688 $1,947,278
========== ==========
Three Months Ended Pro Forma
----------------------------- ------------
December 28, December 29, December 29,
Operating Income 2001 2000 2000
---------------- ------------ ------------ ------------
(in thousands)
Food and Support Services - United States $ 66,952 $ 60,345 $ 62,999
Food and Support Services - International 11,527 9,940 10,227
Uniform and Career Apparel - Rental 30,301 32,007 33,298
Uniform and Career Apparel - Direct Marketing 9,767 8,747 9,520
Educational Resources 7,243 6,538 7,309
-------- -------- --------
125,790 117,577 123,353
Corporate and Other (7,842) (5,711) (5,390)
-------- -------- --------
Operating Income 117,948 111,866 117,963
Interest Expense, Net (35,498) (40,597) (40,597)
-------- -------- --------
Income Before Income Taxes $ 82,450 $ 71,269 $ 77,366
======== ======== ========
Pro forma segment information is shown as if the provisions of SFAS No. 142
were in effect for fiscal 2001 (see Note 3).
Included in "Corporate and Other" in the first quarter of fiscal 2001 is a
gain of $6.6 million resulting from the redemption of preferred stock by an
entity which the Company divested in fiscal 1997. Also included in
"Corporate and Other" in fiscal 2001 are charges related to certain
litigation pertaining to a previously divested entity ($1.5 million), merger
and acquisition related costs ($0.5 million), and the immaterial cumulative
effect ($2.6 million) of a change by the Educational Resources business in
accounting for non-refundable registration fees pursuant to Securities and
Exchange Commission Staff Accounting Bulletin No. 101. Certain prior year
amounts have been reclassified to conform to current year presentation.
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(9) ACQUISITIONS:
On November 30, 2001 the Company completed the acquisition of the management
services division of The ServiceMaster Company (ServiceMaster Management
Services). The aggregate consideration for the transaction was approximately
$790 million in cash, subject to post closing adjustments, plus costs of the
acquisition.
ServiceMaster Management Services is a leader in the provision of facility
management services in the United States, providing a complete range of
facility management services to the healthcare, education and business and
industry client sectors. The facility management services provided include
custodial services, plant operations and management, groundskeeping,
technical support and food services. ServiceMaster Management Services also
has operations in Canada and maintains licensing arrangements with local
service providers in approximately 25 other countries.
The Company believes that the acquisition of ServiceMaster Management
Services will further enhance its position as a leading provider of
outsourced services. The Company believes the acquisition will enable it to
strengthen its portfolio of services by broadening its facility services
base in the United States and internationally. In addition, the Company
believes the acquisition will provide ARAMARK with additional strategic
benefits, including opportunities to cross-sell food and support services
and other outsourced services to ServiceMaster Management Services' existing
clients.
The Company has financed the acquisition of ServiceMaster Management
Services and related expenses in an aggregate of approximately $800 million
by borrowing approximately an additional $200 million under the Company's
senior revolving credit facility and $600 million under a new bridge
financing facility with a group of banks. A portion of the bridge financing
was repaid with proceeds from the initial public offering of Class B common
stock discussed in Note 2. The bridge financing facility is unsecured and
matures in November 2002. The bridge loan is included in long-term
borrowings in the December 28, 2001 consolidated balance sheet as the
Company has the ability to refinance it through the revolving credit
facility. The Company and certain other subsidiaries are the guarantors of
the obligations in the same manner as the Company's senior revolving credit
facility. Interest under the bridge financing facility is based on, at the
Company's option, LIBOR plus a spread ranging from 1.125% to 1.875% per
annum and an initial spread of 1.375% (with the spread increasing by 0.25%
after May 30, 2002 and by an additional 0.25% after August 30, 2002 or the
higher of the prime rate or 0.5% per annum over the federal funds rate. The
bridge financing facility has restrictive covenants, financial covenants and
events of default substantially similar to those included in the Company's
senior revolving credit facility.
The results of ServiceMaster Management Services have been included in the
accompanying condensed consolidated financial statements since the date of
acquisition and are included in the Food and Support Services - United
States segment. The cost of the acquisition was allocated to the assets
acquired and liabilities assumed based on a preliminary estimate of their
respective fair values. The Company is in the process of obtaining
independent appraisals and other information supporting the fair value of
the individual assets acquired and liabilities assumed in order to complete
the allocation of the purchase price. The initial purchase price allocation
may be revised in the future based on such additional information. The
preliminary allocation of the purchase price to intangible assets is as
follows:
Allocated Amortization
Amount Period
------ ------
(in thousands)
Customer relationship assets $ 265,000 10 years
Service mark rights 10,000 3 years
Non-compete agreements 5,000 4 years
Had the acquisition of ServiceMaster Management Services occurred at the
beginning of the respective fiscal periods, pro forma sales, net income and
diluted earnings per share for the three month periods ended would have been
approximately $2.3 billion, $51.8 million and $.28 per share for fiscal 2002
and $2.2 billion, $41.9 million and $.23 per share for fiscal 2001.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(9) ACQUISITIONS: (Continued)
These pro forma disclosures are unaudited and are based on historical
results, adjusted for the impact of certain acquisition related items, such
as: amortization of intangibles, increased interest expense on acquisition
debt and the related income tax effects. Pro forma results do not reflect
any synergies that might be achieved from the combined operations, and
therefore, in management's opinion, are not indicative of what actual
results would have been if the acquisition had occurred at the beginning of
the respective periods. Pro forma results are not intended to be a
projection of future results.
During the first quarter of fiscal 2001, the Company acquired the UK food
and support services business of the Campbell Bewley Group Limited, issuing
stock (8% interest) of a subsidiary as consideration. Additionally, the
Company acquired a 45% interest in the Campbell Bewley Group Limited's food
and support services business in Ireland for approximately $19 million in
cash.
(10) NEW ACCOUNTING PRONOUNCEMENTS:
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. In August
2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. The
Company is required to adopt these standards no later than the beginning of
fiscal 2003, and is currently evaluating the impact of both.
(11) SUBSEQUENT EVENT:
In January 2002, the Company entered into an agreement to sell its
interests in the Boston Red Sox Baseball Club and a related entity, which
controls rights to broadcast Red Sox games. Upon completion of the
transaction, which is expected to occur in the second quarter of fiscal
2002, the Company expects to record a pre-tax gain of approximately $40
million with after-tax cash proceeds of approximately $50 million. The
completion of this transaction is conditioned on the concurrent sale by the
majority partner of its interest in the Red Sox entities.
(12) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF ARAMARK CORPORATION AND
SUBSIDIARIES:
The following condensed consolidating financial statements of ARAMARK
Corporation and subsidiaries have been prepared pursuant to Rule 3-10 of
Regulation S-X.
These condensed consolidating financial statements have been prepared from
the Company's financial information on the same basis of accounting as the
condensed consolidated financial statements. ARAMARK Services, Inc. is the
borrower under the Credit Agreement and certain other senior debt and
incurs interest expense thereunder. The interest expense and certain
administrative costs are only partially allocated to all of the other
subsidiaries of the Company. The Company has fully and unconditionally
guaranteed certain debt obligations of ARAMARK Services, Inc., its
wholly-owned subsidiary, which totaled $1.9 billion as of December 28, 2001
(or approximately $2.2 billion pro forma to reflect the tender offer). The
other subsidiaries do not guarantee any registered securities of the
Company or ARAMARK Services, Inc., although certain other subsidiaries
guarantee, along with the Company, certain other unregistered debt.
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 28, 2001
(In Millions)
ASSETS
------
ARAMARK
Services, Inc.
and Other ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------ ------------ ----------- ------------ ------------
Current Assets:
Cash and cash equivalents $ 16.4 $ 10.3 $ 0.4 $ -- $ 27.1
Receivables 370.8 197.7 0.8 -- 569.3
Inventories, at lower of cost or market 96.0 320.8 -- -- 416.8
Prepayments and other current assets 122.4 37.1 1.3 -- 160.8
---------- ---------- ---------- ---------- ----------
Total current assets 605.6 565.9 2.5 -- 1,174.0
---------- ---------- ---------- ---------- ----------
Property and Equipment, net 310.6 830.9 2.3 -- 1,143.8
Goodwill and Other Intangible Assets 993.6 580.3 -- -- 1,573.9
Intercompany Receivable 1,593.1 105.6 -- (1,698.7) --
Investment in Subsidiaries -- -- 1,755.0 (1,755.0) --
Other Assets 147.7 125.5 3.6 -- 276.8
---------- ---------- ---------- ---------- ----------
$ 3,650.6 $ 2,208.2 $ 1,763.4 $ (3,453.7) $ 4,168.5
========== ========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term borrowings $ 46.3 $ 0.3 $ -- $ -- $ 46.6
Accounts payable 238.2 78.4 45.6 -- 362.2
Accrued expenses and otherliabilities 497.9 180.3 12.4 -- 690.6
---------- ---------- ---------- ---------- ----------
Total current liabilities 782.4 259.0 58.0 -- 1,099.4
---------- ---------- ---------- ---------- ----------
Long-Term Borrowings 1,822.7 5.3 -- -- 1,828.0
Deferred Income Taxes and Other Noncurrent Liabilities 114.8 104.6 41.5 -- 260.9
Intercompany Payable 737.0 278.0 683.7 (1,698.7) --
Shareholders' Equity 193.7 1,561.3 980.2 (1,755.0) 980.2
---------- ---------- ---------- ---------- ----------
$ 3,650.6 $ 2,208.2 $ 1,763.4 $ (3,453.7) $ 4,168.5
========== ========== ========== ========== ==========
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
September 28, 2001
(In Millions)
ASSETS
------
ARAMARK
Services, Inc.
and Other ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------ ------------ ----------- ------------ ------------
Current Assets:
Cash and cash equivalents $ 17.3 $ 7.1 $ 0.4 $ -- $ 24.8
Receivables 310.8 191.6 0.9 -- 503.3
Inventories, at lower of cost or market 93.3 322.5 -- -- 415.8
Prepayments and other current assets 34.0 39.9 2.4 -- 76.3
---------- ---------- ---------- ---------- ----------
Total current assets 455.4 561.1 3.7 -- 1,020.2
---------- ---------- ---------- ---------- ----------
Property and Equipment, net 249.1 836.4 2.3 -- 1,087.8
Goodwill and Other Intangible Assets 233.0 584.5 -- -- 817.5
Intercompany Receivable 2,243.5 105.6 -- (2,349.1) --
Investment in Subsidiaries -- -- 1,709.5 (1,709.5) --
Other Assets 163.4 124.0 3.5 -- 290.9
---------- ---------- ---------- ---------- ----------
$ 3,344.4 $ 2,211.6 $ 1,719.0 $ (4,058.6) $ 3,216.4
========== ========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term borrowings $ 34.3 $ 0.4 $ -- $ -- $ 34.7
Accounts payable 293.6 117.0 48.6 -- 459.2
Accrued expenses and other liabilities 348.4 224.1 17.7 -- 590.2
---------- ---------- ---------- ---------- ----------
Total current liabilities 676.3 341.5 66.3 -- 1,084.1
---------- ---------- ---------- ---------- ----------
Long-Term Borrowings 1,629.4 6.5 -- -- 1,635.9
Deferred Income Taxes and Other Noncurrent
Liabilities 74.1 103.7 51.7 -- 229.5
Intercompany Payable 773.4 241.6 1,334.1 (2,349.1) --
Common Stock Subject to Potential Repurchase
Under Provisions of Shareholders' Agreement -- -- 20.0 -- 20.0
Shareholders' Equity Excluding Common Stock
Subject to Repurchase 191.2 1,518.3 246.9 (1,709.5) 246.9
---------- ---------- ---------- ---------- ----------
$ 3,344.4 $ 2,211.6 $ 1,719.0 $ (4,058.6) $ 3,216.4
========== ========== ========== ========== ==========
11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the three months ended December 28, 2001
(In Millions)
ARAMARK
Services, Inc.
and Other ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------ ------------ ----------- ------------ ------------
Sales $ 1,404.9 $ 704.8 $-- $ -- $ 2,109.7
Equity in Net Income of Subsidiaries -- -- 51.4 (51.4) --
Management Fee Income -- -- 8.4 (8.4) --
---------- -------- ------- ---------- ----------
1,404.9 704.8 59.8 (59.8) 2,109.7
Costs and Expenses:
Cost of services provided 1,308.4 602.9 -- (7.3) 1,904.0
Depreciation and amortization 28.1 32.2 -- 0.1 60.4
Selling and general corporate expenses 13.3 6.9 7.3 (0.1) 27.4
---------- -------- ------- ---------- ----------
1,349.8 642.0 7.3 (7.3) 1,991.8
---------- -------- ------- ---------- ----------
Operating Income 55.1 62.8 52.5 (52.5) 117.9
Interest and Other Financing Costs, net:
Interest expense, net 34.2 0.2 1.1 -- 35.5
Intercompany interest, net (25.9) 27.0 -- (1.1) --
---------- -------- ------- ---------- ----------
Interest and Other Financing Costs, net 8.3 27.2 1.1 (1.1) 35.5
---------- -------- ------- ---------- ----------
Income before income taxes 46.8 35.6 51.4 (51.4) 82.4
Provision for Income Taxes 18.6 12.4 -- -- 31.0
---------- -------- ------- ---------- ----------
Net Income $ 28.2 $ 23.2 $ 51.4 $ (51.4) $ 51.4
========== ======== ======= ========== ==========
12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the three months ended December 29, 2000
(In Millions)
ARAMARK
Services, Inc.
and Other ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------ ------------ ----------- ------------ ------------
Sales $ 1,231.2 $ 716.1 $-- $ -- $ 1,947.3
Equity in Net Income of Subsidiaries -- -- 43.4 (43.4) --
Management Fee Income -- -- 10.0 (10.0) --
---------- -------- ------- ---------- ----------
1,231.2 716.1 53.4 (53.4) 1,947.3
Costs and Expenses:
Cost of services provided 1,149.2 611.6 -- (8.8) 1,752.0
Depreciation and amortization 23.4 35.2 -- 0.1 58.7
Selling and general corporate expenses 9.5 6.6 8.7 -- 24.8
---------- -------- ------- ---------- ----------
1,182.1 653.4 8.7 (8.7) 1,835.5
---------- -------- ------- ---------- ----------
Operating Income 49.1 62.7 44.7 (44.7) 111.8
Interest, net:
Interest expense, net 39.3 -- 1.3 -- 40.6
Intercompany interest, net (5.3) 6.6 -- (1.3) --
---------- -------- ------- ---------- ----------
Interest Expense, net 34.0 6.6 1.3 (1.3) 40.6
---------- -------- ------- ---------- ----------
Income before income taxes 15.1 56.1 43.4 (43.4) 71.2
Provision for Income Taxes 9.9 17.9 -- -- 27.8
---------- -------- ------- ---------- ----------
Net Income $ 5.2 $ 38.2 $ 43.4 $ (43.4) $ 43.4
========== ======== ======= ========== ==========
13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the three months ended December 28, 2001
(In Millions)
ARAMARK
Services, Inc.
and Other ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------ ------------ ----------- ------------ ------------
Net cash provided by (used in) operating activities $ 1.4 $ (30.0) $ (14.1) $-- $ (42.7)
Cash flows from investing activities:
Purchases of property and equipment (18.6) (21.9) -- -- (40.5)
Disposals of property and equipment 2.5 0.5 -- -- 3.0
Acquisition of certain businesses (793.2) (0.7) -- -- (793.9)
Other investing activities 13.0 0.7 -- -- 13.7
-------- ------- -------- --- --------
Net cash used in investing activities (796.3) (21.4) -- -- (817.7)
-------- ------- -------- --- --------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 623.8 -- -- -- 623.8
Payment of long-term borrowings (420.6) (1.3) -- -- (421.9)
Repurchase of stock -- -- (80.1) -- (80.1)
Proceeds from issuance of common stock -- -- 743.1 -- 743.1
Change in intercompany, net 593.0 55.9 (648.9) -- --
Other financing activities (2.2) -- -- -- (2.2)
-------- ------- -------- --- --------
Net cash provided by financing activities 794.0 54.6 14.1 -- 862.7
-------- ------- -------- --- --------
Increase (decrease) in cash and cash equivalents (0.9) 3.2 -- -- 2.3
Cash and cash equivalents, beginning of period 17.3 7.1 0.4 -- 24.8
-------- ------- -------- --- --------
Cash and cash equivalents, end of period $ 16.4 $ 10.3 $ 0.4 $-- $ 27.1
======== ======= ======== === ========
14
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the three months ended December 29, 2000
(In Millions)
ARAMARK
Services, Inc.
and Other ARAMARK
Subsidiaries Subsidiaries Corporation Eliminations Consolidated
------------ ------------ ----------- ------------ ------------
Net cash used in operating activities $ (28.6) $ (34.5) $ (15.5) $-- $ (78.6)
Cash flows from investing activities:
Purchases of property and equipment (27.4) (17.7) -- -- (45.1)
Disposals of property and equipment 0.9 5.1 -- -- 6.0
Sale of investments -- 8.2 -- -- 8.2
Acquisition of certain businesses (19.6) (2.6) -- -- (22.2)
Other investing activities (0.6) 4.9 -- -- 4.3
-------- ------- ------- --- --------
Net cash used in investing activities (46.7) (2.1) -- -- (48.8)
-------- ------- ------- --- --------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 150.0 -- -- -- 150.0
Payment of long-term borrowings (1.2) (1.2) -- -- (2.4)
Repurchase of stock -- -- (16.5) -- (16.5)
Proceeds from issuance of common stock -- -- 1.4 -- 1.4
Change in intercompany, net (75.4) 44.8 30.6 -- --
-------- ------- ------- --- --------
Net cash provided by financing activities 73.4 43.6 15.5 -- 132.5
-------- ------- ------- --- --------
Increase (decrease) in cash and cash equivalents (1.9) 7.0 -- -- 5.1
Cash and cash equivalents, beginning of period 19.5 4.8 0.3 -- 24.6
-------- ------- ------- --- --------
Cash and cash equivalents, end of period $ 17.6 $ 11.8 $ 0.3 $-- $ 29.7
======== ======= ======= === ========
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following tables present our sales and operating income, and related
percentages attributable to each operating segment for the three months ended
December 28, 2001 and December 29, 2000. As discussed in Note 3 to the condensed
consolidated financial statements, the Company adopted the provisions of SFAS
No. 142, Goodwill and Other Intangible Assets, as of the beginning of fiscal
2002. As prescribed by SFAS No. 142, goodwill is no longer amortized, but must
be reviewed periodically for impairment. Accordingly, no goodwill amortization
is reflected in the fiscal 2002 results shown below. To facilitate
comparability, the Pro Forma fiscal 2001 amounts shown below have been adjusted
to eliminate goodwill amortization from the fiscal 2001 as reported results. The
following discussion of results compares fiscal 2002 operating results to the
Pro Forma fiscal 2001 results.
Three Months Ended
---------------------------------------
December 28, 2001 December 29, 2000
------------------- -------------------
Sales $ % $ %
----- ------------------- -------------------
(dollars in millions)
Food & Support Services - United States $1,313.2 62% $1,186.3 61%
Food & Support Services - International 304.2 15% 265.3 13%
Uniform and Career Apparel - Rental 250.6 12% 250.4 13%
Uniform and Career Apparel - Direct Marketing 128.5 6% 132.1 7%
Educational Resources 113.2 5% 113.2 6%
----------------- ----------------
$2,109.7 100% $1,947.3 100%
================= ================
Three Months Ended
---------------------------------------------
Pro Forma
December 28, December 29, December 29,
2001 2000 2000
------------- -------------- --------------
Operating Income $ % $ % $ %
---------------- ------------- -------------- --------------
(dollars in millions)
Food & Support Services - United States $ 67.0 57% $ 60.4 54% $ 63.0 53%
Food & Support Services - International 11.5 10% 9.9 9% 10.2 9%
Uniform and Career Apparel - Rental 30.3 26% 32.0 28% 33.3 28%
Uniform and Career Apparel - Direct Marketing 9.8 8% 8.8 8% 9.6 8%
Educational Resources 7.2 6% 6.5 6% 7.3 6%
------------- ------------- -------------
125.8 107% 117.6 105% 123.4 104%
Corporate and Other (7.8) -7% (5.7) -5% (5.4) -4%
------------- ------------- -------------
$118.0 100% $111.9 100% $118.0 100%
============= ============= =============
Consolidated Overview
Sales for the first quarter of fiscal 2002 were $2.1 billion, an increase of 8%
over fiscal 2001, driven by double-digit sales growth in the Food and Support
Services segments, while sales in the Uniform and Career Apparel segments and
the Educational Resources segment were essentially equal to the prior year.
Excluding the impact of acquisitions and foreign currency translation, sales for
first quarter of fiscal 2002 increased 2% over the prior year period. Operating
income for the first quarter of fiscal 2002 of $118 million was equal to the
prior year pro forma operating income. Excluding the impact of acquisitions, an
unusual net gain in the first quarter of fiscal 2001 (see Note 8 to the
condensed consolidated financial statements), and foreign currency translation,
consolidated operating income decreased 2% compared to the prior year period.
Higher unemployment levels in the United States, particularly in the
manufacturing and automotive sectors, the general economic slowdown in the
United States and the continuing effects of the September 11, 2001 terrorist
attacks, continued to adversely impact the 2002 first quarter results. Had the
terrorist attacks of September 11th not occurred, management estimates that
consolidated operating income, net income and diluted earnings per share would
have been approximately 3%, 4% and 4% higher than reported, respectively.
16
Interest and other financing costs, net for the first quarter of fiscal 2002
decreased $5.1 million or 13% compared to the prior year due primarily to lower
interest rates. The effective tax rate for the first quarter of fiscal 2002 was
37.6% compared to 39.1% in the prior year first quarter, with the decrease due
primarily to the change in accounting for goodwill amortization. On a Pro Forma
basis adjusting to eliminate goodwill amortization in the fiscal 2001 period,
the effective tax rate was 37%.
Net income for the first quarter of $51.4 million, was 6% higher than the same
quarter last year, adjusted for the goodwill accounting change. This resulted in
first quarter 2002 diluted earnings per share of $.27, based on a weighted
average share count for the quarter of 188 million shares. In the first quarter
of 2001 our diluted EPS, adjusted for goodwill, was also $.27 per share on a
lower base of 181 million shares.
Segment Results
Three Months Ended
---------------------------------------------
December Change
----------------------- -----------------
Sales by Segment 2001 2000 $ %
---- ---- ---- ---
(dollars in millions)
Food & Support Services - United States $ 1,313.2 $ 1,186.3 $126.9 11%
Food & Support Services - International 304.2 265.3 38.9 15%
Uniform and Career Apparel - Rental 250.6 250.4 0.2 -%
Uniform and Career Apparel - Direct Marketing 128.5 132.1 (3.6) -3%
Educational Resources 113.2 113.2 0.0 -%
--------- --------- ------ ---
Consolidated Sales $ 2,109.7 $ 1,947.3 $162.4 8%
--------- --------- ------ ---
Food and Support Services - United States segment sales increased 11% over the
prior year due to acquisitions, primarily ServiceMaster Management Services,
(approximately 8%) and net new accounts (approximately 3%). Sales growth was
strong in the Education, Healthcare and Correctional sectors, while sales in the
business and sports & entertainment sectors decreased versus the prior year due
to continued softness in the economy, particularly depressed employment levels
in the manufacturing and automotive sectors, and the continuing impact of the
September 11th terrorist attacks. Had the terrorist attacks not occurred,
management estimates that segment sales for the first quarter of fiscal 2002
would have been approximately 1% higher than reported. Sales in the Food and
Support Services - International segment increased 15% over the prior year
period due to net new accounts (approximately 5%), increased volume
(approximately 3%) and the impact of acquisitions (approximately 7%), with
continued double digit growth in the United Kingdom and strong single digit
growth in the European markets. Sales in the Uniform and Career Apparel -Rental
segment were level with the prior year, with the impact of price increases
(approximately 1%) being offset by lower volume. Sales growth in this segment
continues to be constrained by softness in the manufacturing, automotive and
airline sectors. Uniform and Career Apparel - Direct Marketing segment sales
decreased 3% compared to the prior year. The decrease was due primarily to lower
volume in work clothing products, partially offset by increased sales of safety
products. Again, the general softening of the economy, a decrease in business
spending and the mild winter weather have adversely impacted first quarter 2002
sales in this segment. Educational Resources segment sales were flat compared to
the prior year with increases due to pricing and new locations (approximately 2%
and 3%, respectively) being offset by the impact of lower enrollment at existing
locations and closed centers (approximately 3% and 2%, respectively).
Three Months Ended December Change vs. Change vs.
------------------------------- Reported Pro Forma
Pro Forma -----------------------
Operating Income by Segment 2001 2000 2000 $ % $ %
- --------------------------- ------------------------------- -------- ----------
(dollars in millions)
Food & Support Services - United States $ 67.0 $ 60.4 $ 63.0 $6.6 11% $4.0 6%
Food & Support Services - International 11.5 9.9 10.2 1.6 16% 1.3 13%
Uniform and Career Apparel - Rental 30.3 32.0 33.3 (1.7) -5% (3.0) -9%
Uniform and Career Apparel - Direct Marketing 9.8 8.8 9.6 1.0 12% 0.2 3%
Educational Resources 7.2 6.5 7.3 0.7 11% (0.1) -1%
Corporate and Other (7.8) (5.7) (5.4) (2.1) 37% (2.4) 45%
------------------------------- -------------------------
Consolidated Operating Income $118.0 $111.9 $118.0 $6.1 5% $0.0 0%
=============================== =========================
17
Food and Support Services - United States segment operating income increased 6%.
Excluding the impact of acquisitions, operating income increased 1%. Strong
earnings growth in the Education and Healthcare sectors was largely offset by
lower earnings in the business and sports and entertainment sectors compared to
the prior year period. Reduced employment levels and continuing soft economic
conditions (including the ongoing effects of the September 11th terrorist
attacks) adversely impacted the first quarter results. Management estimates
that had the September 11th terrorist attacks not occurred, first quarter fiscal
2002 operating income in this segment would have been approximately 5% higher
than reported. Operating income in the Food and Support Services - International
segment increased 13%. Excluding the impact of acquisitions and foreign currency
translation, segment operating income increased 6% over the prior year period
due to the sales increases noted above, partially offset by increased
infrastructure costs and costs related to new account acquisitions. Uniform and
Career Apparel - Rental segment operating income decreased 9% versus the prior
year. The slowdown in the United States economy has constrained both volume and
pricing growth, negatively impacting operating income. Operating income in the
Uniform and Career Apparel - Direct Marketing segment increased 3% over the
prior year due to reduced product cost and administrative expenses, partially
offset by the impact of lower sales. Educational Resources segment operating
income decreased 1%. Operating results in this segment continue to be adversely
affected by reduced enrollment at mature centers, partially offset by the impact
of cost control initiatives to reduce overhead costs. Excluding the unusual $1.6
million net gain included in the prior year first quarter (see Note 8 to the
condensed consolidated financial statements), Corporate and Other costs
increased 12% due primarily to indirect costs related to the public offering
process.
As discussed above, the continuing impact of the events of September 11, 2001
and the economic slowdown in the United States have negatively affected fiscal
2002 first quarter operating results, and we anticipate such conditions will
continue into the second quarter of fiscal 2002.
Financial Condition and Liquidity
Reference to the condensed consolidated statements of cash flows will facilitate
understanding of the discussion that follows.
Cash used in operating activities in the first quarter was $42 million in fiscal
2002. Excluding the impact of the accounts receivable sale, cash used in
operating activities was $84 million, comparable to the $79 million in fiscal
2001. Debt increased by $204 million, primarily due to the ServiceMaster
Management Services acquisition, the repurchase of stock from employee benefit
plans discussed below, and seasonal working capital requirements, partially
offset by the proceeds from our initial public stock offering.
As discussed further in Note 9 to the condensed consolidated financial
statements, on November 30, 2001, the Company completed the acquisition of the
management services division of The ServiceMaster Company (the ServiceMaster
Management Services business) for approximately $800 million. The acquisition
financing consisted of $200 million from the Company's revolving credit facility
and $600 million under a bridge financing facility with a group of banks. The
bridge facility is unsecured and matures on November 30, 2002. In December 2001,
$150 million of the bridge facility was repaid with a portion of the proceeds
from the initial public offering. An additional $200 million was repaid in
January 2002 and the Company currently intends to refinance the remainder of the
bridge financing in the second or third quarter of fiscal 2002.
As discussed further in Note 2 to the condensed consolidated financial
statements, on December 14, 2001, the Company completed an initial public
offering (IPO) of 34.5 million shares of its Class B common stock at a price of
$23.00 per share, raising approximately $743 million, net of issuance costs. The
proceeds from the IPO were used to complete a tender offer for up to 10% of the
outstanding Class A shares and to repay indebtedness under the bridge facility
and the revolving credit facility. Specifically, on December 14, 2001, the
Company purchased from its employee benefit plans approximately 3.3 million
Class A shares for $75.4 million, and on January 25, 2002 the Company completed
the tender offer for its class A common stock and purchased 13.6 million shares
for approximately $314 million.
18
Also, during the first quarter of fiscal 2002, pursuant to the ARAMARK Ownership
Program, employees purchased 481,170 shares or $2.5 million of Class A Common
Stock for $0.2 million cash plus $2.3 million of deferred payment obligations.
Additionally, on January 15, 2002, the Company completed the annual stock option
exercise period, resulting in the issuance of an additional 6.6 million shares.
There is approximately $360 million of unused committed credit availability
under our senior revolving credit facility. The Company currently expects to
fund acquisitions, capital expenditures and other liquidity needs from cash
provided from operating activities, normal disposals of property and equipment,
and borrowings available under our credit facilities or note issuances. As of
December 28, 2001, there were approximately $101 million outstanding in foreign
currency borrowings.
New Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. In August 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" which addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. The Company is required to adopt these standards no later than the
beginning of fiscal 2003, and is currently evaluating the impact of both.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor from
civil litigation for forward-looking statements that reflect our current views
as to future events and financial performance with respect to our operations.
These statements can be identified by the fact that they do not relate strictly
to historical or current facts. They use words such as "aim," anticipate,"
"estimate," "expect," "will be," "will continue," will likely result,"
"project," "intend," "plan," "believe" and other words and terms of similar
meaning in conjunction with a discussion of future operating or financial
performance.
These statements are subject to risks and uncertainties that could cause actual
results to differ materially from those expressed or implied in the
forward-looking statements. Factors that might cause such a difference include:
unfavorable economic conditions, including ramifications of the September 11th
terrorist attacks, increased operating costs, shortages of qualified personnel,
costly compliance with governmental regulations, currency risks and other risks
associated with international markets, risks associated with acquisitions, our
ability to integrate and derive the expected benefits from our acquisition of
ServiceMaster Management Services, competition, decline in attendance at client
facilities, unpredictability of sales and expenses due to contract terms, high
leverage, claims relating to the provision of food services, liability
associated with noncompliance with governmental regulations, including
regulations pertaining to food services, the environment and childcare service,
seasonality and adverse publicity concerning incidents at childcare centers.
In this quarterly report on Form 10-Q we have estimated the impact that
unfavorable economic conditions, including ramifications of the September 11th
terrorist attacks have had, and may have, on our sales and results of
operations. The actual impact may vary from those estimates stated in this Form
10-Q.
Forward-looking statements speak only as of the date made. We undertake no
obligation to update any forward-looking statements to reflect the events or
circumstances arising after the date as of which they are made. As a result of
these risks and uncertainties, readers are cautioned not to place undue reliance
on the forward-looking statements included in this Form 10-Q or that may be made
in other filings with the Securities and Exchange Commission or elsewhere from
time to time by, or on behalf of, us.
19
PART II - OTHER INFORMATION
Item 1 is not applicable.
Items 2(a) - 2(c) are not applicable.
Item 2(d) - On December 14, 2001, the Company completed an initial public
offering (IPO) of 34.5 million shares of its Class B common stock at a price of
$23.00 per share, raising approximately $743 million, net of issuance costs.
The proceeds from the IPO were used to complete a tender offer for up to 10% of
the outstanding Class A shares and to repay indebtedness under the bridge
facility and the revolving credit facility. Specifically, on December 14, 2001,
the Company purchased from its employee benefit plans approximately 3.3 million
Class A shares for $75.4 million, and on January 25, 2002 the Company completed
the tender offer for its Class A common stock and purchased 13.6 million shares
for approximately $314 million. The balance of the other IPO proceeds were used
to repay indebtedness as described above.
Items 3 through 5 are not applicable.
Item 6(a) is not applicable.
Item 6(b) On December 10, 2001, ARAMARK Corporation filed a Report on Form 8-K
regarding the completion of the acquisition of the management services division
of The ServiceMaster Company on November 30, 2001. Included in this report, were
the financial statements of ServiceMaster Management Services as required
pursuant to Rule 3-05 of Regulation S-X and the pro forma financial information
required pursuant to Article 11 of Regulation S-X. Also included as exhibits to
the Form 8-K were the Purchase Agreement, the First Amendment to the Purchase
Agreement and the Press Release announcing the completion of this acquisition.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARAMARK CORPORATION
February 11, 2002 /s/ John M. Lafferty
----------------------------
John M. Lafferty
Senior Vice President, Controller
and Chief Accounting Officer
20