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UNITED STATES
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 March 31, 1998
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 1-11907
COINMACH LAUNDRY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-3258015
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
55 LUMBER ROAD, ROSLYN, NEW YORK 11576
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (516) 484-2300
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
CLASS A COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS)
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 twelve 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. [_]
As of May 29, 1998, the registrant had outstanding 12,687,135 shares of
Class A common stock, par value $.01 per share (the "Common Stock"), and
480,648 shares of non-voting Class B common stock, par value $.01 per share
(the "Non-Voting Common Stock").
The aggregate market value of Common Stock held by non-affiliates as of May
29, 1998 was approximately $91,848,461, based upon the closing price per share
of the Common Stock as reported on The Nasdaq National Market on the close of
business on such date. Shares of Common Stock held by each executive officer,
director, beneficial owner of more than 5% of the outstanding Common Stock and
each stockholder party to that certain Voting Agreement, dated July 23, 1996,
have been excluded in that such persons may under certain circumstances be
deemed to be affiliates. This determination is made only for purposes of this
report and does not represent an admission by either the registrant or any
such person as to the status of such person.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the annual
meeting of stockholders to be held on July 28, 1998 (the "Proxy Statement")
are incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
Unless otherwise expressly indicated herein, the descriptions of the Company
contained herein are as of March 31, 1998 and do not give effect to the
acquisitions of all of the common stock of (i) Cleanco, Inc. and of its
affiliates completed in May 1998 or (ii) Gordon & Thomas Companies, Inc.
completed in June 1998. For a description of such acquisitions, see
"Business--General Development of Business--Recent Developments".
DESCRIPTION OF THE BUSINESS
GENERAL
Coinmach Laundry Corporation, a Delaware corporation ("Coinmach Laundry" or
the "Registrant"), through its wholly-owned subsidiaries (collectively, the
"Company"), is the leading supplier of outsourced laundry equipment services
for multi-family housing properties in the United States. At March 31, 1998,
the Company owned and operated approximately 680,000 washers and dryers
(sometimes hereinafter referred to as "machines") in approximately 70,000
locations on routes located throughout the United States and in 150 retail
laundromats located throughout Texas. The Company, through its wholly-owned
subsidiary, Super Laundry Equipment Corp. ("Super Laundry"), is also a
laundromat equipment distribution company.
OVERVIEW
The outsourced laundry equipment services industry provides washer and dryer
services to individuals living in multi-family housing properties. The
Company's core business involves leasing laundry rooms from building owners
and property management companies, installing and servicing the laundry
equipment and collecting revenues generated from laundry machines. The Company
typically sets pricing for the use of laundry machines on location, and the
owner or property manager maintains the premises and provides utilities such
as gas, electricity and water.
The Company's existing customer base for its core business is comprised of
landlords, property management companies, and owners of rental apartment
buildings, condominiums and cooperatives, university and institutional housing
and other multi-family housing properties. Management believes, based on its
knowledge of the industry, that the Company is the largest supplier of
outsourced laundry equipment services for multi-family housing properties
throughout the United States.
As a result of its strategy to acquire route operators that contribute to
the Company's core operations, the Company has also selectively acquired
certain related businesses which expand and diversify the types of services
provided by the Company. As a result of the Kwik-Wash Acquisition (as
defined), the Company operates 150 retail laundromats throughout Texas and
provides laundromat services at all such locations. In connection with the
Appliance Warehouse Acquisition and the Macke Acquisition, the Company also
leases laundry equipment and other household appliances to corporate
relocation entities, individuals, property owners and managers of multi-family
housing properties. The Company believes that these non-core businesses,
although not material to the Company's operations, provide a significant
platform for expansion and diversification of the Company's services. See
"Business--Description of Business--Complementary Operations".
The Company maintains its headquarters in Roslyn, New York, a corporate
office in Charlotte, North Carolina and regional offices throughout the United
States through which it conducts operating activities, including sales,
service and collections.
BUSINESS STRATEGY
The Company's business strategy is to enhance its position as the largest
provider of outsourced laundry equipment services in the United States.
Management intends to continue to grow the Company's installed
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machine base both internally and through selective acquisitions to achieve
economies of scale, increase its operating efficiencies and improve its
financial performance. Internal growth is comprised of: (i) adding new
customers in existing regions and securing contracts for additional locations
from current customers; (ii) converting owner-operated facilities to Company
managed facilities; (iii) improving the net contribution per machine through
operating efficiencies and selective price increases; and (iv) pursuing
additional growth opportunities presented by the Company's leading market
position and access to approximately six million individual housing units. The
Company's acquisition strategy is to continue to selectively acquire local,
regional and multi-regional route businesses from independent operators at
attractive prices. The Company is currently evaluating several acquisition
opportunities; however, there can be no assurance that, subsequent to ongoing
negotiations and due diligence reviews, the Company will complete any such
acquisitions.
An important element of the Company's business strategy is to continue to
expand its geographic presence to gain additional regional and multi-regional
account opportunities with large multi-family housing property managers and
owners. Management believes that a significant portion of its customer base,
which manages multi-family housing and other residential properties, is
consolidating. Consequently, management believes that opportunities for
outsourcing laundry equipment services to professionally managed, multi-
regional, well-capitalized independent operators such as the Company are
increasing.
The Company's business strategy also includes the continued development of
its management information systems (the "Integrated Computer Systems"), which
management believes are the most advanced in the industry. The Integrated
Computer Systems provide real-time operational and competitive data which, in
conjunction with the Company's multi-regional service capabilities, enhance
the Company's operating efficiencies throughout its regions and enable the
Company to deliver superior customer service. The Integrated Computer Systems
also provide the Company with the flexibility to integrate acquisitions on a
timely basis, including key functions such as sales, service, collections and
security. Finally, as the industry leader, the Company works closely with its
equipment vendors to assess ongoing technological changes and implements those
which the Company believes are beneficial to its customers and to the
Company's operating efficiencies and financial performance.
In January 1995, management, with its equity sponsor, Golder, Thoma,
Cressey, Rauner Fund IV, L.P., acquired the Company and initiated a strategy
of growth through acquisitions. This strategy was designed to increase the
installed machine base in its existing operating regions and to provide the
Company with a strong market presence in new regions. Since January 1995, the
Company has enhanced its national presence by completing eight significant
acquisitions, adding annualized revenue of approximately $353 million and
increasing its installed base from approximately 55,000 machines to
approximately 680,000 machines as of March 31, 1998. Revenues and EBITDA(/1/)
have grown from approximately $72.9 million and approximately $13.6 million,
respectively, for the year ended March 31, 1995, to approximately $324.9
million and approximately $101.4 million (before deducting non-cash stock
based compensation charges), respectively, for the year ended March 31, 1998.
These acquisitions have enabled the Company to improve its operating margins
and to expand internally by competing more aggressively for new business.
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(/1/) EBITDA represents earnings from continuing operations before deductions
for interest, income taxes, depreciation and amortization. EBITDA for the
period ending March 31, 1998 is before the deduction for stock based
compensation charges. EBITDA is used by management and certain investors
as an indicator of a company's historical ability to service debt.
Management believes that an increase in EBITDA is an indication of a
company's improved ability to service existing debt, to sustain potential
future increases in debt and to satisfy capital requirements. However,
EBITDA is not intended to represent cash flows for the period, nor has it
been presented as an alternative to either (a) operating income (as
determined by generally accepted accounting principles) as an indicator of
operating performance or (b) cash flows from operating, investing and
financing activities (as determined by generally accepted accounting
principles) as a measure of liquidity. Given that EBITDA is not a
measurement determined in accordance with generally accepted accounting
principles and is thus susceptible to varying calculations, EBITDA as
presented may not be comparable to other similarly titled measures of
other companies.
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GROWTH STRATEGY
The Company's growth strategy is to increase operating cash flow and
profitability through a combination of internal expansion and acquisitions.
Internal Expansion. Internal expansion is comprised of: (i) increasing the
installed machine base by adding new customers (including the acquisition of
certain small, local route operations) and increasing the number of locations
with existing customers; (ii) converting owner-operated facilities to Company
managed facilities, (iii) improving the net contribution per machine through
operating efficiencies and selective price increases; and (iv) pursuing
additional growth opportunities presented by its leading market position and
access to approximately six million individual housing units.
New Customers and Locations. The Company's sales and marketing efforts
focus on two areas of expansion within its existing operating regions. The
Company's primary means of internal expansion is by marketing the Company's
products and services to building managers and property owners whose leases
with other laundry equipment services providers are near expiration. The
Company's Integrated Computer Systems track information on the lease
expirations of its competitors. The Company believes that its leading
market position and expanding geographic presence, primarily achieved
through acquisitions, enhances its ability to gain new customers and
additional locations from its existing customers.
Conversions. Management believes that there are approximately 1.0 million
machines installed in locations which continue to be managed by owner-
operators. Building owners or managers can forgo significant cash outlays
and servicing costs by contracting with the Company to purchase, service
and maintain laundry equipment. Accordingly, the Company pursues building
owners and managers to outsource their laundry facilities. The Company
offers a full range of services from the design, construction and
installation of new laundry facilities to the refurbishment of existing
facilities. Management believes these services provide a competitive
advantage in securing new customers.
Operating Efficiencies and Price Increases. The Company focuses on
improving its net contribution per machine through achieving operating
efficiencies and selective price increases. Due to local competition and
other factors beyond the Company's control, however, there can be no
assurance that such efficiencies or price increases will occur.
Other Growth Opportunities. While management intends to continue its
focus on increasing its installed machine base, management believes that
its leading market position and its access to over six million housing
units provides the Company with additional growth and diversification
opportunities. These opportunities include laundry equipment rental as well
as other route-based facilities management services. In addition, the
Company is discussing the formation of certain strategic alliances with
vendors of products complementary to its customer base.
Management believes that its strategy of growth within its existing
operating regions will result in additional economies of scale and operating
efficiencies associated with an expanded machine base. Such growth, however,
will be dependent upon a number of factors beyond the Company's control, such
as the Company's ability to secure new contracts from owner-operators on
commercially favorable terms and competitive forces that may reduce the number
of opportunities to secure new locations or to effect price increases.
Acquisitions. The Company intends to continue to capitalize on opportunities
within the fragmented outsourced laundry equipment services industry through
selective acquisitions of additional route businesses. It has been the
Company's experience that there are numerous private, family-owned businesses
that often lack the financial resources to provide advance location payments,
install new equipment, make laundry room improvements or otherwise compete
effectively with larger independent operators such as the Company to secure
new or existing contracts. Consequently, such independent operators,
especially those which are undergoing generational ownership changes,
represent potential acquisition opportunities for the Company.
Management believes the Company is well positioned to capitalize on
acquisition opportunities due to its operating efficiencies, its access to
capital resources and senior management's extensive experience and
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relationships in the industry. The Company evaluates potential acquisitions
based on the size of the business (in terms of revenues, cash flow and machine
base), the geographic concentration of the business, market penetration,
service history, customer relations, existing contract terms and potential
operating efficiencies and cost savings. The Company considers three types of
acquisition candidates: (i) local route operators; (ii) regional route
operators; and (iii) multi-regional route operators.
Local route operators. The purchase of local operators (businesses
operating within one of the Company's existing operating regions) results
in eliminating most of the target's existing cost structure through the
absorption of its machine base into the Company's operations. The Company's
experience has been that the acquisition of local route operators has
increased operating leverage within its operating regions. Moreover, the
Company is able in many instances to acquire routes adjacent to its
existing areas of operation without incurring significant incremental
operating costs.
Regional route operators. The Company's acquisition of regional route
operators provides opportunities to improve its cash flow by eliminating
duplicative corporate and administrative functions, reducing capital
expenditures through improved purchasing power and implementing the
Company's Integrated Computer Systems. During the past fiscal year, the
Company completed the ALI Acquisition, the Reliable Acquisition and the
National Coin Acquisition (each, as defined). All three of these
acquisitions have been substantially integrated into the Company's
operations.
Multi-regional route operators. Management believes that the acquisition
of large, multi-regional route operators results in a number of operating
efficiencies, including significant cost savings through the elimination of
duplicative financial and administrative functions and related fixed costs.
In addition, the increased volume of equipment purchases usually results in
reduced per unit capital expenditures. As is the case with all
acquisitions, the Company's Integrated Computer Systems are utilized to
provide further operating efficiencies and related cost savings. The Kwik
Wash Acquisition (as defined) and the Macke Acquisition (as defined) are
examples of multi-regional acquisitions which enabled the Company to
substantially increase its operating base, add several experienced regional
managers, penetrate new markets and, along with the aforementioned regional
acquisitions, become the largest industry participant. Based on its
experience in recent acquisitions, management expects to integrate
substantially all of the operations formerly conducted by Macke (as
defined) into the Company's operations during the first half of the year
ending March 31, 1999 and to achieve targeted cost savings as a result of
such integration. However, such integration and cost savings are dependent
on a number of factors beyond the Company's control, and, accordingly, no
assurance can be given that the Company will effect such integration and
targeted cost savings within such time period.
INDUSTRY
The outsourced laundry equipment services industry is characterized by
stable cash flows generated by long-term, renewable lease contracts with
multi-family housing property owners and management companies. The industry is
highly fragmented, with many small, private and family-owned route businesses
continuing to operate throughout all major metropolitan areas. According to
information provided by the Multi-housing Laundry Association, the industry
consists of over 280 independent operators. Based upon industry estimates,
management believes there are approximately 3.5 million installed machines in
multi-family properties throughout the United States, approximately 2.5
million of which have been outsourced to independent operators such as the
Company and approximately 1.0 million of which continue to be operated by the
owners of such locations.
The industry is highly capital intensive, and customers require prompt and
reliable service. The majority of capital costs are incurred upon procurement
of new leases. Initial costs may include replacing or repairing existing
washers and dryers, refurbishing laundry rooms and making advance location
payments to secure long-term, renewable leases. After the initial
expenditures, ongoing working capital requirements are minimal, since machines
operate throughout the term of the contract under which they are installed if
serviced properly, and variable costs are paid out of revenues collected from
the machines.
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Historically, the industry has been characterized by stable demand and has
proven to be resistant to changing market conditions and general economic
cycles. Management believes that the industry's consistent and predictable
revenue and cash flow from operations are primarily due to: (i) the long-term
nature of location leases; (ii) the stable demand for laundry services; and
(iii) minimal ongoing working capital requirements.
DESCRIPTION OF PRINCIPAL OPERATIONS
The principal aspects of the Company's operations include: (i) sales and
marketing; (ii) location leases; (iii) service; (iv) information management;
(v) remanufacturing and (vi) collection security.
Sales and Marketing. The Company markets its products and services through a
sales staff with an average industry experience of over ten years. The
principal responsibility of the sales staff is to solicit and negotiate lease
arrangements with building owners and managers. All sales personnel are paid
commissions that comprise 50% or more of their annual compensation. Selling
commissions are based on a percentage of a location's annualized earnings
before interest and taxes. Sales personnel must be proficient with the
application of sophisticated financial analyses which calculate minimum
returns on investments to achieve the Company's targeted goals in securing
location contracts and renewals. Management believes that its sales staff is
among the most competent and effective in the industry.
The Company's marketing strategy emphasizes service excellence offered by
its experienced, highly skilled personnel and its quality equipment that
maximizes efficiency and revenue and minimizes machine down-time.
Additionally, the Integrated Computer Systems monitor performance, repairs and
maintenance, as well as the profitability of locations on a daily basis. The
Company's sales staff targets potential new and renewal lease locations by
utilizing its Integrated Computer Systems' extensive database that provides
information on the Company's, as well as its competitors', locations. All
sales activity, from sale entries to data on service and installation, is
recorded and monitored daily on a custom-designed, computerized sales planner.
No single customer represents more than 2% of the Company's revenues or
installed machine base. In addition, the Company's ten largest customers taken
together account for less than 10% of the Company's revenue.
Location Leasing. The Company's leases provide the Company the exclusive
right to operate and service the laundry equipment, including repairs, revenue
collection and maintenance. The Company typically sets pricing for the use of
the machines on location, and the property owner or property manager maintains
the premises and provides utilities such as gas, electricity and water.
In return for the exclusive right to provide laundry equipment services,
most of the Company's leases provide for monthly commission payments to the
location owners. Under the majority of leases, these commissions are based on
a percentage of the cash collected from the laundry machines. Many of the
Company's leases require the Company to make advance location payments to the
location owner in addition to commissions. The Company's leases typically
include provisions that allow for unrestricted price increases, a right of
first refusal (an opportunity to match competitive bids at the expiration of
the lease term) and termination rights if the Company does not receive minimum
net revenues from a lease. The Company has some flexibility in negotiating its
leases and, subject to local and regional competitive factors, may vary the
terms and conditions of a lease, including commission rates and advance
location payments. The Company evaluates each lease opportunity through its
Integrated Computer Systems, which are designed to achieve certain targeted
levels of return on investments.
Management estimates that approximately 90% of its locations are under long-
term leases with initial terms of five to ten years. Of the remaining
locations not subject to long term leases, the Company believes that it has
retained a majority of such customers through long-standing relationships and
intends to continue to service such customers. A majority of the Company's
leases renew automatically, and the Company has a right of first refusal on
termination on approximately 40% of its leases. The Company's automatic
renewal clause typically provides
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that, if the building owner fails to take any action prior to the end of the
original lease term or any renewal term, the lease will automatically renew on
substantially similar terms. As of March 31, 1998, the Company's leases have
an average remaining life to maturity of approximately 48 months (without
giving effect to automatic renewals).
Service
The Company's employees deliver, install, service and collect revenue from
washers and dryers in laundry facilities at its leased locations.
The Company's fleet of 554 radio-equipped service vehicles allows the quick
dispatch of service technicians in response to both computer-generated (for
preventive maintenance) and customer-generated service calls. On a daily
basis, the Company receives and responds to approximately 3,000 service calls.
Management estimates that less than 1% of the Company's machines are out of
service on any given day. The ability to reduce machine down time, especially
during peak usage, serves to enhance revenue and improve the Company's
reputation with its customers.
In a business that emphasizes prompt and efficient service, management
believes that the Company's Integrated Computer Systems provide a significant
competitive advantage in terms of responding promptly to customer needs.
Computer-generated service calls for preventive maintenance are based on
previous service history, repeat service call analysis and monitoring of
service areas. These operations coordinate the Company's radio-equipped
service vehicles that allow the Company to address customer needs quickly and
efficiently.
Remanufacturing
The Company's remanufacturing operations provide approximately one-third of
its anticipated annual machine installation requirements. The Company rebuilds
and reinstalls a portion of its machines at approximately one-third the cost
of acquiring new machines, providing significant cost savings. Remanufactured
machines are restored to virtually new condition with the same estimated
average life and service requirements as new machines. Machines that can no
longer be remanufactured are added to the Company's inventory of spare parts.
The Company maintains four regional remanufacturing facilities which provide
for consistent machine quality and efficient operations and are strategically
located to service each of its operating regions.
Collection/Security
Management believes that it provides the highest level of collection
security control in the outsourced laundry equipment services industry. The
Company utilizes numerous precautionary procedures with respect to cash
collection, including frequent alteration of collection patterns, extensive
monitoring of collections and other control mechanisms. The Company enforces
stringent employee standards and screening procedures for prospective
employees. Employees responsible for or who have access to the collection of
funds are tested randomly and frequently. Additionally, the Company's security
department performs trend and variance analyses of daily collections by
location. Security personnel monitor locations, conduct investigations, and
implement additional security procedures as necessary.
Information Management. The Company's Integrated Computer Systems serve
three major functions: (i) tracing the service cycle of equipment; (ii)
monitoring revenues and costs by location, customer and salesperson; and (iii)
providing information on competitors' lease renewal schedules.
The Integrated Computer Systems provide speed and accuracy throughout the
entire service cycle by integrating the functions of service call entry,
dispatching service personnel, parts and equipment purchasing, installation,
distribution and collection. In addition to coordinating all aspects of the
service cycle, the
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Company's Integrated Computer Systems track contract performance, which
indicate potential machine problems or pilferage and provide data to forecast
future equipment servicing requirements.
Data on machine performance is used by the sales staff to forecast revenue
by location. Management is able to obtain daily, monthly, quarterly and annual
reports on location performance, coin collection, service and sales activity
by salesperson.
The Integrated Computer Systems also provide the sales staff with an
extensive database essential to the Company's marketing strategy to obtain new
business through competitive bidding or owner-operator conversion
opportunities.
Management also believes that the Integrated Computer Systems enhance the
Company's ability to successfully integrate acquired businesses into its
existing operations. Regional or multi-regional acquisitions have typically
been integrated within 90 to 120 days, while a local acquisition can be
integrated almost immediately.
COMPLEMENTARY OPERATIONS
In addition to supplying outsourced laundry equipment services, the Company
has expanded its breadth of operations to related, complementary lines of
businesses:
Individual Multi-Housing Units. Through the recent Macke Acquisition and the
Appliance Warehouse Acquisition (each, as defined), the Company entered the
business of renting laundry equipment and other household appliances and
electronic items to corporate relocation entities, individuals, property
owners and managers of multi-family housing properties. With access to
approximately six million individual housing units, the Company believes its
new business line represents an opportunity for growth in a new market segment
which is complementary to its core business.
Laundromat Equipment Distribution. Super Laundry, a wholly-owned subsidiary
of Coinmach Corporation, is a laundromat equipment distribution company. Super
Laundry's business consists of constructing complete turnkey laundromat retail
stores, retrofitting existing laundromat retail stores, distributing exclusive
lines of commercial coin and non-coin operated machines and parts, and selling
service contracts. Super Laundry's customers generally enter into sales
contracts pursuant to which Super Laundry constructs and equips a complete
laundromat operation, including location identification, construction,
plumbing, electrical wiring and all required permits.
Retail Laundromat Operations. The Company operates 150 retail laundromats
located throughout Texas, which were acquired in the Kwik Wash Acquisition.
The operation of the retail laundromats involves leasing store locations in
desired geographic areas, maintaining an approximate mix of washers and dryers
at each store location and servicing the washers and dryers at such locations.
The Company is also responsible for maintaining the premises at each
laundromat and paying for utilities and related expenses.
COMPETITION
The outsourced laundry equipment services industry is highly competitive,
capital intensive and requires reliable, quality service. Despite the overall
fragmentation of the industry, the Company believes there are currently three
companies including the Company with significant operations in multiple
regions throughout the United States. The two other major multi-regional
competitors are Web Service Company, Inc. and Mac-Gray Corp.
EMPLOYEES
As of March 31, 1998, the Company employed 1,850 full time employees
(including 315 laundromat attendants in the Company's retail laundromats in
Texas). Approximately 140 hourly workers in the Northeast
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region are represented by Local 966, affiliated with the International
Brotherhood of Teamsters (the "Union"). Management believes that the Company
has maintained a good relationship with the Union employees and has never
experienced a work stoppage since its inception.
GENERAL DEVELOPMENT OF BUSINESS
Coinmach Laundry Corporation was incorporated on March 31, 1995 under the
name SAS Acquisitions Inc. in the State of Delaware and is the sole
shareholder of all of the common stock of Coinmach Corporation ("Coinmach"),
its primary operating subsidiary. In November 1995, The Coinmach Corporation
("TCC"), a Delaware corporation, merged (the "Merger") with and into Solon
Automated Services, Inc. ("Solon"). In connection with the Merger, Coinmach
Laundry changed its name from SAS Acquisitions Inc. and Solon, the surviving
corporation in the Merger, changed its name to Coinmach Corporation.
The Company's headquarters are located at 55 Lumber Road, Roslyn, New York
11576, and its telephone number is (516) 484-2300. The Company's mailing
address is the same as that of its headquarters. In September 1996, the
Company opened a corporate office in Charlotte, North Carolina.
INITIAL PUBLIC OFFERING AND SECONDARY OFFERING
In July 1996, Coinmach Laundry completed its initial public offering of
4,120,000 shares of its Common Stock at an initial public offering price of
$14.00 per share. In August 1996, the underwriters in the public offering
exercised an over-allotment option with respect to the purchase of an
additional 63,642 shares of Common Stock. In December 1997, Coinmach Laundry
completed a secondary offering of 4,600,000 shares of its Common Stock at a
price of $19.75 per share, including the issuance of 600,000 shares in
connection with the exercise of an underwriters' over-allotment option granted
in connection therewith. In connection with such secondary offering, 2,665,000
shares of Common Stock were sold by Coinmach Laundry and 1,935,000 shares of
Common Stock were sold by certain stockholders of the Company.
CREDIT FACILITY AND SENIOR NOTES
During the past fiscal year, the Company's credit facility (of which Bankers
Trust Company and First Union National Bank of North Carolina are the primary
lending institutions) was amended to provide for an aggregate of $235 million
of secured financing consisting of: (i) a $35 million working capital
revolving credit facility bearing interest at an annual rate of LIBOR plus
1.50%; (ii) a $125 million acquisition revolving credit facility bearing
interest at an annual rate of LIBOR plus 1.50%; and (iii) a $75 million
Tranche A term loan facility bearing interest at an annual rate of LIBOR plus
2.00%. In March 1998, in connection with the Macke Acquisition, the Company's
credit facility was again amended to provide for approximately $200 million of
additional financing. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--
Financing Activities--Amended and Restated Credit Facility".
In December 1995, the Company issued 11 3/4% Senior Notes due 2005 pursuant
to the terms of an indenture, between the Company and Fleet Bank of
Connecticut (formerly Shawmut Bank Connecticut, National Association) in an
aggregate principal amount of $196,655,000. On March 28, 1996, Coinmach
consummated a registered exchange offer, pursuant to which all issued and
outstanding 11 3/4% Senior Notes due 2005 were exchanged for Coinmach's Series
B 11 3/4% Senior Notes due 2005 (the "Series B Notes"). On October 8, 1997,
Coinmach completed a private placement of $100 million aggregate principal
amount of its 11 3/4% Series C Senior Notes due 2005 (the "Series C Notes") on
substantially identical terms as its Series B Notes. On December 23, 1997,
Coinmach consummated a registered exchange offer pursuant to which all issued
and outstanding Series B Notes and Series C Notes were exchanged for
Coinmach's 11 3/4% Series D Senior Notes due 2005. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources--Financing Activities--Senior Note Offering
and Exchange Offer".
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SELECTED HISTORICAL ACQUISITIONS
On January 8, 1997, Coinmach completed the acquisition of Kwik Wash
Laundries, L.P. and certain related parties (the "Kwik Wash Acquisition") for
a purchase price consisting of approximately $125 million in cash, excluding
transaction expenses, and a $15 million promissory note (the "Kwik Wash Note")
issued by Coinmach Laundry. The Kwik Wash Acquisition increased the Company's
presence in the South-Central region by adding approximately 74,000 machines
to the Company's base and enabled the Company to provide outsourced laundry
equipment services to multi-family housing properties in Texas, Louisiana,
Arkansas and Oklahoma and to operate 150 retail laundromats throughout Texas.
On March 14, 1997, Coinmach acquired substantially all of the assets of
Atlanta Washer & Dryer Leasing, Inc. (d/b/a Appliance Warehouse) for
approximately $6.3 million in cash and promissory notes (the "AW Notes")
issued by Coinmach Laundry aggregating $1.2 million (the "Appliance Warehouse
Acquisition"). The Appliance Warehouse Acquisition increased the Company's
presence in the South by adding approximately 14,000 machines to the Company's
base and expanding the Company's core operations into the related machine
rental market, creating valuable operating synergies for the Company. The
holders of the AW Notes are able to convert the AW Notes into a specified
number of shares of Common Stock at any time after March 14, 1998, subject to
the terms and conditions of the AW Notes. As of May 29, 1998, none of the AW
Notes had been converted into shares of Common Stock.
On April 23, 1997, Coinmach completed the acquisition (the "Reliable
Acquisition") of Reliable Holding Corp., Reliable Laundry Service Inc.,
Girard-Hopkins Acquisition Corp., Maquilados Automaticas S.A. de C.V. and
Automatica S.A. de C.V. and certain other related parties for a cash purchase
price of approximately $44 million, excluding transaction expenses. The
Reliable Acquisition was financed through borrowings under the Company's then
existing credit facility. The Reliable Acquisition provided the Company with a
strong foothold in the California market and added approximately 49,000
machines to the Company's machine base.
On July 17, 1997, Coinmach completed the acquisition of National Laundry
Equipment Company, Whitmer Vend-O-Mat Laundry Services, Inc. and certain other
related parties (the "National Coin Acquisition") for an aggregate purchase
price of approximately $19 million, excluding transaction expenses. The
National Coin Acquisition, which was financed through borrowings under the
Company's then existing credit facility, enabled the Company to further expand
its operations by providing laundry equipment services to multi-family housing
properties in the states of Ohio, Indiana, Kentucky, Michigan, West Virginia,
Pennsylvania, Georgia, Tennessee, Illinois and Florida, as well as by
distributing exclusive lines of commercial coin and non-coin laundry machines
and parts.
On January 15, 1998, Coinmach completed the acquisition of the route
business of Apartment Laundries, Inc., ("ALI") (the "ALI Acquisition")
pursuant to which Coinmach acquired substantially all the assets of ALI for a
cash purchase price of $16.2 million, excluding transaction expenses, and
financed through working capital and borrowings under the Company's then
existing credit facility. ALI provided outsourced laundry equipment services
for multi-family housing units in Oklahoma, Texas, Kansas and Arkansas.
On March 2, 1998, Coinmach completed the acquisition (the "Macke
Acquisition") of Macke Laundry Service, L.P. and substantially all of the
assets of certain related entities (collectively, "Macke") for a cash purchase
price of approximately $213 million, excluding transaction expenses. The Macke
Acquisition was financed with cash and borrowings under the Amended and
Restated Credit Facility (as defined) which was amended and restated in
connection with such acquisition to provide for additional borrowing capacity
on substantially similar terms as its then existing credit facility. The Macke
Acquisition enabled the Company to further expand its route operations by
providing outsourced laundry equipment services to multi-family housing
properties throughout the United States and added approximately 236,000
machines to the Company's base. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources--Financing Activities--Amended and Restated Credit Facility".
10
<PAGE>
RECENT DEVELOPMENTS
On May 19, 1998, Coinmach completed the acquisition (the "Cleanco
Acquisition") of Cleanco, Inc. and certain of its affiliates ("Cleanco") for a
cash purchase price of approximately $21.0 million (excluding transaction
expenses), financed with cash and borrowings under the Amended and Restated
Credit Facility. Cleanco, headquartered in Miami, Florida, was a leading
provider of coin-operated laundry equipment services in southern Florida,
generating approximately $10.0 million in revenues and $3.6 million in EBITDA,
as adjusted for certain non-recurring items, for its fiscal year ended
December 31, 1997. The Cleanco Acquisition added approximately 21,000 machines
to the Company's installed base.
On June 5, 1998, Coinmach acquired all of the common stock of Gordon &
Thomas Companies, Inc. ("G&T") for a cash purchase price of approximately $58
million (excluding transaction expenses) and the assumption of certain
liabilities. This transaction was financed with cash and borrowings under the
Amended and Restated Credit Facility. G&T, headquartered in New Jersey, was a
leading provider of outsourced laundry equipment services in the New York
metropolitan area, generating approximately $40 million in revenues and $10.3
million in EBITDA, as adjusted for certain non-recurring items, for its fiscal
year ended September 30, 1997. This transaction is expected to strengthen the
Company's presence in the northeastern United States by adding approximately
36,000 machines to the Company's installed base.
At a Special Meeting of Stockholders of Coinmach Laundry Corporation (the
"Special Meeting") held on June 9, 1998, the Company approved proposals to
amend the Company's Third Amended and Restated Certificate of Incorporation to
increase the number of Coinmach Laundry Corporation's authorized Common Stock
from 15,000,000 to 35,000,000 shares and to increase the number of Coinmach
Laundry Corporation's authorized Series Preferred Stock from 1,000,000 to
20,000,000 shares. Both proposals were approved by the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock entitled to
vote at the Special Meeting. The record date for purposes of determining
stockholders of the Company entitled to receive notice of and vote at the
Special Meeting was May 19, 1998.
ITEM 2. PROPERTIES
As of March 31, 1998, the Company leases 59 offices throughout its operating
regions serving various operational purposes, including sales and service
activities, collections and warehousing.
The Company presently maintains its headquarters in Roslyn, New York,
leasing approximately 40,000 square feet pursuant to a five year lease
terminating April 30, 2001. The Company's Roslyn facility is used for general
and administrative purposes and is the operational headquarters for the
Northeast regional branch. The Company has an option to purchase the Roslyn
facility, which it presently does not intend to exercise.
The Company also maintains a corporate office in Charlotte, North Carolina,
leasing approximately 3,000 square feet pursuant to a five year lease.
ITEM 3. LEGAL PROCEEDINGS
The Company and its predecessors have been named as defendants in a number
of legal actions arising in the ordinary course of business. Although the
amount of any liability that could arise with respect to these actions cannot
be accurately predicted, management believes that any such liabilities,
individually or in the aggregate, will not have a material adverse effect on
the financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Coinmach Laundry completed an initial public offering of its Common Stock on
July 23, 1996 at a price of $14.00 per share. Coinmach Laundry's Common Stock
is traded on the Nasdaq National Market under the symbol "WDRY". The table
below sets forth, for the periods indicated, the high and low closing sales
prices for the Common Stock as reported on the Nasdaq National Market. The
prices shown below do not include retail markups, markdowns or commissions.
<TABLE>
<CAPTION>
1998 FISCAL QUARTER ENDED HIGH LOW
------------------------- ------ ------
<S> <C> <C>
June 27, 1997.......................................... $22.50 $14.75
September 26, 1997..................................... $24.00 $20.75
December 26, 1997...................................... $24.63 $19.75
March 31, 1998......................................... $31.50 $19.50
<CAPTION>
1997 FISCAL QUARTER ENDED HIGH LOW
------------------------- ------ ------
<S> <C> <C>
September 27, 1996..................................... $20.125 $13.00
December 27, 1996...................................... $22.75 $17.25
March 28, 1997......................................... $20.25 $17.00
</TABLE>
As of May 29, 1998, Coinmach Laundry had outstanding 12,687,135 shares of
Common Stock and 480,648 shares of Non-Voting Common Stock. As of May 29,
1998, there were 42 stockholders of record of the Common Stock and two
stockholders of record of the Non-Voting Common Stock. The Company has not
declared or paid any cash dividends on the Common Stock and does not intend to
pay cash dividends on the Common Stock in the foreseeable future. At the
present time, the Amended and Restated Credit Facility (as defined) prohibits
the payment of cash dividends and certain other distributions.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
The following tables present summary historical consolidated financial
information of the Company and its subsidiaries. Such tables include the
consolidated financial information of the Company for the year ended March 31,
1998 (the "1998 Fiscal Year"), the year ended March 28, 1997 (the "1997 Fiscal
Year"), for the six month transition period ended March 29, 1996, and the
period from April 5, 1995 to September 29, 1995 giving effect to the
combination of Solon and The Coinmach Corporation ("TCC") on November 30,
1995. The six month transition period ended March 29, 1996 and the period from
April 5, 1995 to September 29, 1995 have been combined to facilitate
comparison of such combined period with the 1997 Fiscal Year and 1998 Fiscal
Year. Also included in such tables is summary historical consolidated
financial information of (i) TCC and its predecessor, including the two month
period ended March 31, 1995, the one month period ended January 31, 1995, and
fiscal years ended December 31, 1994 and 1993 and (ii) Solon, including the
six month period from October 1, 1994 to April 4, 1995, and fiscal years ended
September 30, 1994 and 1993. The earnings per share amounts prior to 1997 have
been restated as required to comply with Statement of Financial Accounting
Standards No. 128, "Earnings per Share" and related interpretations under
Staff Accounting Bulletin No. 98. For further discussions on earnings per
share and the impact of Statement No. 128, see the notes to the consolidated
financial statements beginning on page F-9. The financial data set forth below
should be read in conjunction with the Company's audited historical
consolidated financial statements and the related notes thereto presented in
Item 8 "Financial Statements and Supplementary Data" and with the information
presented in Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of this Form 10-K.
THE COMPANY
<TABLE>
<CAPTION>
SIX MONTH
TRANSITION PERIOD PERIOD FROM COMBINED
YEAR ENDED YEAR ENDED ENDED APRIL 5, 1995 TO PERIOD ENDED
MARCH 31, MARCH 28, MARCH 29, SEPTEMBER 29, MARCH 29,
1998 1997 1996 1995 1996
---------- ---------- ----------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues............................................. $ 324,887 $ 206,852 $ 89,070 $ 89,719 $178,789
Operating, general and administrative expenses....... 223,527 144,059 62,380 65,256 127,636
Depreciation and amortization........................ 75,453 46,316 18,212 18,423 36,635
Operating income..................................... 24,461 14,325 8,478 3,840 12,318
Interest expense, net................................ 44,662 26,859 11,999 11,818 23,817
Loss before extraordinary item....................... (14,867) (10,227) (2,523) (6,116) (8,639)
Net loss............................................. (14,867) (10,523) (11,448) (6,116) (17,564)
Basic and diluted net loss per share................. $ (1.32) $ (1.14) -- -- --
Pro Forma basic and diluted net loss per share....... -- -- $ (1.51) $ (0.81) $ (2.32)
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents............................ $ 22,456 $ 14,729 $ 19,858 $ 10,311
Property and equipment, net.......................... 194,328 112,116 82,699 80,706
Contract rights, net................................. 366,762 180,557 59,745 63,801
Total assets......................................... 816,948 472,921 249,148 241,433
Total debt(5)........................................ 602,158 345,486 202,765 176,415
Stockholders' equity (deficit)....................... 58,745 23,563 (1,308) 10,140
FINANCIAL RATIOS AND OTHER DATA
Cash flow from operating activities.................. $ 58,550 $ 34,732 $ 12,337 $ 12,066 $ 24,403
Cash flow used for investing activities.............. (350,875) (196,698) (14,162) (25,039) (39,201)
Cash flow from financing activities.................. 300,052 156,837 11,372 12,510 23,882
EBITDA(1)............................................ 101,360 62,793 26,690 24,463 51,153
EBITDA margin(2)..................................... 31.2% 30.4% 30.0% 27.3% 28.6%
Capital expenditures(3)
Growth capital expenditures.......................... $ 21,119 $ 12,563 -- -- --
Renewal capital expenditures......................... 37,609 29,025 $ 14,219 $ 13,119 $ 27,338
Acquisition capital expenditures(4).................. 294,996 171,455 -- 11,925 11,925
--------- --------- -------- -------- --------
Total Capital Expenditures.......................... $ 353,724 $ 213,043 $ 14,219 $ 25,044 $ 39,263
- --------------------------------------------------
========= ========= ======== ======== ========
</TABLE>
(footnotes on following page)
13
<PAGE>
- --------
(1) EBITDA represents earnings from continuing operations before deductions
for interest, income taxes, depreciation and amortization. EBITDA for the
periods ended March 31, 1998 and March 28, 1997 is before the deduction
for stock based compensation charges, and EBITDA for the period ended
September 29, 1995 is before the deduction for restructuring costs. EBITDA
is used by management and certain investors as an indication of a
company's ability to service existing debt, to sustain potential future
increases in debt and to satisfy capital requirements. However, EBITDA is
not intended to represent cash flows for the period, nor has it been
presented as an alternative to either (a) operating income (as determined
by generally accepted accounting principles) as an indicator of operating
performance or (b) cash flows from operating, investing and financing
activities (as determined by generally accepted accounting principles) as
a measure of liquidity. Given that EBITDA is not a measurement determined
in accordance with generally accepted accounting principles and is thus
susceptible to varying calculations, EBITDA as presented may not be
comparable to other similarly titled measures of other companies.
(2) EBITDA margin represents EBITDA as a percentage of revenues. Management
believes that EBITDA margin is a useful measure to evaluate the Company's
performance over various sales levels. EBITDA margin should not be
considered as an alternative for measurements determined in accordance
with generally accepted accounting principles.
(3) Capital expenditures represent amounts expended for property and
equipment, for advance location payments to location owners and for
acquisitions. Acquisition capital expenditures represent the amounts
expended to acquire local, regional and multi-regional route operators, as
well as complementary businesses. Growth capital expenditures represent
the amount of capital expended that reflects a net increase in the
installed base of machines, excluding acquisitions. Renewal capital
expenditures represent the amount of capital expended assuming no net
increase in the installed base of machines.
(4) For the years ended March 31, 1998 and March 28, 1997, includes
approximately $2.3 million and $16.2 million, respectively, of promissory
notes issued by Coinmach Laundry related to certain acquisitions.
(5) Total debt at March 31, 1998 does not include the premium, net, of $9,258
recorded as a result of the issuance by Coinmach of $100 million aggregate
principal amount of 11 3/4% Series C Senior Notes due 2005 in October
1997.
14
<PAGE>
TCC's fiscal year end was March 31, and TCC's predecessor's fiscal year end
was December 31, thus creating a three-month transition period. On January 31,
1995, TCC was formed by certain of the Company's current owners, and,
accordingly, periods prior to and after January 31, 1995 are reflected as
predecessor and successor periods, respectively.
<TABLE>
<CAPTION>
THE COINMACH CORPORATION ("TCC")
------------------------------------
SUCCESSOR(1) PREDECESSOR(1)
------------ ------------------------------------
TWO MONTHS ONE MONTH YEARS ENDED
ENDED ENDED DECEMBER 31,
MARCH 31, JANUARY 31, ----------------------
1995 1995 1994 1993
------------ ------------------------ ----------
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues.................... $11,515 $ 5,879 $ 73,857 $ 71,859
Operating, general and
administrative expenses.... 9,750 4,679 59,675 58,375
Depreciation and
amortization............... 2,144 980 14,504 15,256
Operating income (loss)..... (379) 220 (322) (1,772)
Interest expense, net....... 774 395 4,012 10,509
Loss before extraordinary
item....................... (1,155) (175) (5,702) (12,298)
Net (loss) income........... (1,155) (175) 14,718 (12,298)
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents... $ 922 $ 1,162 $ 987 $ 1,387
Property and equipment,
net........................ 24,330 16,120 16,285 17,293
Contract rights, net........ 19,327 -- -- 3,443
Total assets................ 61,035 36,069 36,924 47,443
Total debt.................. 42,351 41,800 42,184 75,827
Stockholders' equity
(deficit).................. 9,729 (13,591) (13,416) (68,003)
FINANCIAL RATIOS AND OTHER
DATA (UNAUDITED):
Cash flow from operating
activities................. $ 73 $ 1,197 $ 8,724 $ 7,736
Cash flow used for investing
activities................. (990) (611) (6,577) (6,119)
Cash flow used for financing
activities................. (327) (411) (2,547) (1,405)
EBITDA(2)................... 1,765 1,200 14,182 13,484
EBITDA margin(3)............ 15.3% 20.4% 19.2% 18.8%
Capital expenditures(4)
Growth capital
expenditures............ -- -- -- --
Renewal capital
expenditures............ $ 990 $ 611 $ 6,577 $ 6,119
Acquisition capital
expenditures............ -- -- -- --
------- ---------- ---------- ----------
Total Capital
Expenditures.......... $ 990 $ 611 $ 6,577 $ 6,119
======= ========== ========== ==========
</TABLE>
- --------
(1) The term "Predecessor" refers to the period in time prior to the Coinmach
Acquisition and consists of CIC and TCC. The term "Successor" refers to
the period in time after the Coinmach Acquisition. Successor is presented
on a different basis of accounting and therefore, is not comparable to the
Predecessor. The Successor period reflects the effects of purchase
accounting, whereby assets and liabilities were adjusted to their
estimated fair values at the date of the Coinmach Acquisition.
(2) EBITDA represents earnings from continuing operations before deductions
for interest, income taxes, depreciation and amortization. EBITDA is used
by management and certain investors as an indication of a company's
ability to service existing debt, to sustain potential future increases in
debt and to satisfy capital requirements. However, EBITDA is not intended
to represent cash flows for the period, nor has it been presented as an
alternative to either (a) operating income (as determined by generally
accepted accounting principles) as an indicator of operating performance
or (b) cash flows from operating, investing and financing activities (as
determined by generally accepted accounting principles) as a measure of
liquidity. Given that EBITDA is not a measurement determined in accordance
with generally accepted accounting principles and is thus susceptible to
varying calculations, EBITDA as presented may not be comparable to other
similarly titled measures of other companies.
(3) EBITDA margin represents EBITDA as a percentage of revenues. Management
believes that EBITDA margin is a useful measure to evaluate the Company's
performance over various sales levels. EBITDA margin should not be
considered as an alternative for measurements determined in accordance
with generally accepted accounting principles.
(4) Capital expenditures represent amounts expended for property and equipment
and advance location payments to location owners. Renewal capital
expenditures represent the amount of capital expended assuming no net
increase in the installed base of machines.
15
<PAGE>
The fiscal year end of Solon was the Friday closest to September 30. On
April 5, 1995, the voting stock of Solon was acquired by Coinmach Laundry, and
accordingly, periods prior to and after April 5, 1995 are reflected as
predecessor and successor periods, respectively.
<TABLE>
<CAPTION>
SOLON(1)
----------------------------------
PREDECESSOR(2)
----------------------------------
YEAR ENDED
OCTOBER 1, 1994 SEPTEMBER,
TO APRIL 4, ------------------
1995 1994 1993
--------------- -------- --------
<S> <C> <C> <C>
OPERATING DATA:
Revenues................................. $52,207 $104,553 $104,888
Operating, general and administrative
expenses................................ 34,704 69,257 69,996
Depreciation and amortization............ 10,304 21,347 21,002
Operating income......................... 7,199 13,949 13,890
Interest expense, net.................... 8,928 18,105 17,453
Loss before extraordinary item........... (1,779) (6,918) (2,795)
Net loss................................. (2,627) (6,918) (2,795)
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents................ -- $ 7,241 $ 6,360
Property and equipment, net.............. -- 48,727 50,593
Contract rights, net..................... -- 15,432 17,473
Total assets............................. -- 143,589 150,402
Total debt............................... -- 128,487 128,299
Stockholders' deficit.................... -- (8,721) (1,636)
FINANCIAL RATIOS AND OTHER DATA
(UNAUDITED):
Cash flow from operating activities...... $10,216 $ 17,914 $ 16,547
Cash flow used for investing activities.. (6,537) (16,763) (18,500)
Cash flow used for financing activities.. (1,068) (270) (636)
EBITDA(3)................................ 17,503 35,296 34,892
EBITDA margin(4)......................... 33.5% 33.7% 33.3%
Capital expenditures(5)
Growth capital expenditures............ -- -- --
Renewal capital expenditures........... $ 6,944 $ 16,779 $ 18,556
Acquisition capital expenditures....... -- -- --
------- -------- --------
Total Capital Expenditures........... $ 6,944 $ 16,779 $ 18,556
======= ======== ========
</TABLE>
- --------
(1) Certain amounts have been reclassified to conform the presentation above
with TCC.
(2) The term "Predecessor" refers to the period in time prior to the
acquisition of Solon Automated Services, Inc. on April 5, 1997 (the "Solon
Acquisition").
(3) EBITDA represents earnings from continuing operations before deductions
for interest, income taxes, depreciation and amortization. EBITDA is used
by management and certain investors as an indication of a company's
ability to service existing debt, to sustain potential future increases in
debt and to satisfy capital requirements. However, EBITDA is not intended
to represent cash flows for the period, nor has it been presented as an
alternative to either (a) operating income (as determined by generally
accepted accounting principles) as an indicator of operating performance
or (b) cash flows from operating, investing and financing activities (as
determined by generally accepted accounting principles) as a measure of
liquidity. Given that EBITDA is not a measurement determined in accordance
with generally accepted accounting principles and is thus susceptible to
varying calculations, EBITDA as presented may not be comparable to other
similarly titled measures of other companies.
(4) EBITDA margin represents EBITDA as a percentage of revenues. Management
believes that EBITDA margin is useful measure to evaluate the Company's
performance over various sales levels. EBITDA margin should not be
considered as an alternative for measurements determined in accordance
with generally accepted accounting principles.
(5) Capital expenditures represent amounts expended for property and equipment
and advance location payments to location owners. Renewal capital
expenditures represent the amount of capital expended assuming no net
increase in the installed base of machines.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis pertains to the results of operations
and financial position of the Company for the 1998 Fiscal Year, the 1997
Fiscal Year and the twelve month period ended March 29, 1996 and should be
read in conjunction with the consolidated financial statements and related
notes thereto included in Item 8 and the Selected Historical Consolidated
Financial Data included in Item 6 of this Form 10-K.
GENERAL
The Company is principally engaged in the business of supplying outsourced
laundry equipment services to multi-family housing properties. At March 31,
1998, the Company owned and operated approximately 680,000 washers and dryers
in approximately 70,000 multi-family housing properties on routes throughout
the United States and in 150 retail laundromats located throughout Texas. The
Company, through Super Laundry, its wholly-owned subsidiary, is also a
laundromat equipment distribution company.
Sources of Revenue
The Company's primary financial objective is to increase its cash flow from
operations. Cash flow from operations represents a source of funds available
to service indebtedness and for investment in both internal growth and growth
through acquisitions. During the 1998 Fiscal Year and 1997 Fiscal Year, the
Company experienced net losses. Such net losses are attributable in part to
significant non-cash charges associated with the Company's execution of its
growth strategy, namely, high levels of depreciation and amortization of
contract rights and goodwill related to the addition of new machines and
customers through acquisitions accounted for under the purchase method of
accounting.
The Company's most significant revenue source is its route business. The
Company provides outsourced laundry equipment services to locations by leasing
laundry rooms from building owners and property management companies,
typically on a long-term, renewable basis. In return for the exclusive right
to provide these services, most of the Company's contracts provide for
commission payments to the location owners. Commission expense (also referred
to as rent expense), the Company's single largest expense item, is included in
laundry operating expenses and represents payments to location owners.
Commissions may be fixed amounts or percentages of revenues and are generally
paid monthly. Also included in laundry operating expenses are the cost of
servicing and collections in the route business, including, payroll, parts,
vehicles and other related items, the costs of sales associated with Super
Laundry and certain expenses related to the operation of retail laundromats.
In addition to commission payments, many of the Company's leases require the
Company to make advance location payments to the location owners. These
advance payments are capitalized and amortized over the life of the applicable
lease.
Other revenue sources for the Company include: (i) leasing laundry equipment
and other household appliances and electronic items to corporate relocation
entities, individuals, property owners and managers of multi-family housing
properties (approximately $2.9 million for the 1998 Fiscal Year); (ii)
operating, maintaining and servicing retail laundromats (approximately $21.0
million for the 1998 Fiscal Year); and (iii) constructing complete turnkey
retail laundromats, retrofitting existing retail laundromats, distributing
exclusive lines of commercial coin and non-coin machines and parts, and
selling service contracts (approximately $26.6 million for the 1998 Fiscal
Year).
17
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the periods indicated, selected statement of
operations data and EBITDA margin for the Company:
<TABLE>
<CAPTION>
SIX MONTH
TRANSITION
PERIOD PERIOD FROM
YEAR ENDED YEAR ENDED ENDED APRIL 5, 1995 TO
MARCH 31, MARCH 28, MARCH 29, SEPTEMBER 29,
1998 1997 1996 1995 COMBINED
---------- ---------- ---------- ---------------- --------
<S> <C> <C> <C> <C> <C>
Revenues................ 100% 100% 100% 100% 100%
Laundry operating
expenses............... 66.9 67.4 68.0 70.1 69.0
General and
administrative
expenses............... 1.9 2.2 2.1 2.6 2.4
Depreciation and
amortization........... 23.2 22.4 20.4 20.5 20.5
Operating income........ 7.5 6.9 9.5 4.3 6.9
Interest expense, net... 13.7 13.0 13.5 13.2 13.4
EBITDA margin........... 31.2 30.4 30.0 27.3 28.7
</TABLE>
FISCAL YEAR ENDED MARCH 31, 1998 COMPARED TO FISCAL YEAR ENDED MARCH 28, 1997
Revenues increased by approximately 57% for the 1998 Fiscal Year as compared
to 1997 Fiscal Year. This improvement in revenues resulted primarily from the
Company's execution of its acquisition strategy and increased route revenues
resulting from internal expansion. Based on the historical revenues of
acquired businesses, the Company estimates that approximately $103.0 million
of its revenue increase for the 1998 Fiscal Year is primarily due to the Kwik
Wash Acquisition (January 1997), the Reliable Acquisition (April 1997), and
the National Coin Acquisition (July 1997). The ALI Acquisition (January 1998)
and the Macke Acquisition (March 1998) also contributed to the revenue
increase, but had minimal impact due to the timing of these transactions. In
addition, during the 1998 Fiscal Year, the Company's installed machine base
increased by approximately 19,500 machines from internal growth (excluding the
machines added from the Macke Acquisition, the Reliable Acquisition, the ALI
Acquisition and the National Coin Acquisition during such period) as compared
to an increase of approximately 7,500 machines during the prior year's
corresponding period. Included in internal growth are acquisitions of small,
local route operators and new customers secured by the Company's sales force.
Laundry operating expenses increased by approximately 56% for the 1998
Fiscal Year, as compared to the 1997 Fiscal Year. This increase was due
basically to an increase in laundry operating expenses, primarily commission
expense, related to the Macke Acquisition, the Kwik Wash Acquisition, the
Reliable Acquisition, the ALI Acquisition and the National Coin Acquisition.
General and administrative expenses increased by approximately $1.6 million
or 34% for the 1998 Fiscal Year as compared to the 1997 Fiscal Year. The
increase for the period was due to various expenses associated with (i) costs
and expenses relating to the Company's acquisition strategy, including systems
development and refinement relating to the integration of prior acquisitions,
and (ii) additional expenses, such as accounting, management information
systems and other administrative functions related to the Company's growth.
However, as a percentage of revenues, general and administrative expenses were
1.9% for the 1998 Fiscal Year as compared to 2.2% for the 1997 Fiscal Year.
Depreciation and amortization increased by approximately 63% for the 1998
Fiscal Year, as compared to the 1997 Fiscal Year, due primarily to contract
rights and goodwill associated with the Macke Acquisition, the Kwik Wash
Acquisition, the Reliable Acquisition, the ALI Acquisition and the National
Coin Acquisition, as well as an increase in capital expenditures in respect of
the Company's installed base of machines.
The extraordinary items for the 1997 Fiscal Year consisted of costs related
to the extinguishment of debt in February 1997 and the termination of the then
existing revolving credit facility.
18
<PAGE>
In July 1996, Coinmach Laundry issued, in privately negotiated transactions,
79,029 shares of its Class B common stock to certain members of management.
The Company recorded a stock-based compensation charge of approximately
$887,000 attributable to the issuance of such stock during the 1997 Fiscal
Year. In addition, for the 1998 Fiscal Year and the 1997 Fiscal Year,
approximately $104,000 of receivables relating to loans to management in
connection with prior purchases of Coinmach Laundry's common stock were
forgiven and have been recorded as a stock-based compensation charge.
During July and September 1996, the Company granted to certain members of
management and certain other individuals non-qualified options (the "1996
Options") to purchase Common Stock at a 15% discount to the initial offering
price of the Common Stock. With respect to the 1996 Options granted to its
employees, the Company records such discount as a stock-based compensation
charge over the applicable four year vesting period. The Company also granted
options to two of its disinterested directors (the "Independent Director
Options") which enable such persons to purchase an aggregate of 120,000 shares
of Common Stock at the initial offering price of the Common Stock. The Company
records the difference between the exercise price of Independent Director
Options and the fair market value of the Common Stock on the date of grant as
a stock-based compensation charge over the applicable three year vesting
period.
In September 1997, the Company granted non-qualified options (the "1997
Options") to purchase an aggregate of 200,000 shares of Common Stock to
certain members of management at an exercise price of $11.90. The Company
records the difference between the exercise price of the 1997 Options and the
fair market value of the Common Stock on the date of grant as a stock-based
compensation charge over the applicable four year vesting period. For the 1998
Fiscal Year and 1997 Fiscal Year, the Company recorded a stock-based
compensation charge of approximately $1,344,000 and $1,162,000, respectively,
relating to the 1997 Options, the 1996 Options and the Independent Director
Options.
Interest expense, net, increased by approximately 66% for the 1998 Fiscal
Year, as compared to the prior year, due primarily to increased borrowing
levels under the Amended and Restated Credit Facility in connection with
certain acquisitions, as well as the increased interest due to the Bond
Offering by the Company of $100 million aggregate principal amount of the
Series C Notes on October 8, 1997. (See financing activities).
EBITDA/2/ before deduction for stock-based compensation charges was
approximately $101.4 million for the 1998 Fiscal Year as compared to
approximately $62.8 million for the 1997 Fiscal Year, representing an
improvement of approximately 61%. EBITDA margins improved to approximately
31.2% of revenues for the current year compared to approximately 30.4% of
revenues for the prior year.
- --------
/2/ EBITDA represents earnings from continuing operations before deductions
for interest, income taxes, depreciation and amortization. EBITDA is used by
management and certain investors as an indicator of a company's historical
ability to service debt. Management believes that an increase in EBITDA is an
indication of a company's improved ability to service existing debt, to
sustain potential future increases in debt and to satisfy capital
requirements. However, EBITDA is not intended to represent cash flows for the
period, nor has it been presented as an alternative to either (a) operating
income (as determined by generally accepted accounting principles) as an
indicator of operating performance or (b) cash flows from operating,
investing and financing activities (as determined by generally accepted
accounting principles) as a measure of liquidity. Given that EBITDA is not a
measurement determined in accordance with generally accepted accounting
principles and is thus susceptible to varying calculations, EBITDA as
presented may not be comparable to other similarly titled measures of other
companies.
19
<PAGE>
FISCAL YEAR ENDED MARCH 28, 1997 COMPARED TO THE TWELVE MONTH PERIOD ENDED
MARCH 29, 1996
The discussion below should be read in conjunction with the following table,
which combines the six month transition period ended March 29, 1996 and the
period from April 5, 1995 to September 29, 1995 and the combined periods to be
referred to as the prior fiscal year (in thousands):
<TABLE>
<CAPTION>
SIX MONTH PERIOD
YEAR ENDED TRANSITION PERIOD APRIL 5, 1995 TO
MARCH 28, ENDED MARCH 29, SEPTEMBER 29,
1997 1996 1995 COMBINED
---------- ----------------- ---------------- --------
<S> <C> <C> <C> <C>
Revenues................ $206,852 $ 89,070 $89,719 $178,789
Laundry operating
expenses............... 139,446 60,536 62,905 123,441
General and
administrative
expenses............... 4,613 1,844 2,351 4,195
Depreciation and
amortization........... 46,316 18,212 18,423 36,635
Stock based compensation
charge................. 2,152 -- -- --
Restructuring expenses.. -- -- 2,200 2,200
-------- -------- ------- --------
Operating income
(loss)................. 14,325 8,478 3,840 12,318
Interest expense, net... 26,859 11,999 11,818 23,817
-------- -------- ------- --------
Loss before
extraordinary items and
income taxes........... (12,534) (3,521) (7,978) (11,499)
Income tax (benefit)
expense................ (2,307) (998) (1,862) (2,860)
-------- -------- ------- --------
Loss before
extraordinary items.... (10,227) (2,523) (6,116) (8,639)
Extraordinary items, net
of tax................. (296) (8,925) -- (8,925)
-------- -------- ------- --------
Net loss................ $(10,523) $(11,448) $(6,116) $(17,564)
======== ======== ======= ========
</TABLE>
Revenues increased by approximately 16% for the 1997 Fiscal Year as compared
to the prior fiscal year. The improvement in revenues was primarily
attributable to increased route revenues resulting from internal expansion,
the acquisition of a regional route operator located in St. Louis, Missouri on
April 1, 1996 (the "Allied Acquisition"), the Kwik Wash Acquisition and an
increase in revenues from Super Laundry. The Company estimates that
approximately $24.0 million of its revenue increase for the 1997 Fiscal Year
is the combined result of the Kwik Wash Acquisition and the Allied Acquisition
based on the historical revenue of such acquired businesses. In addition,
during the 1997 Fiscal Year, the Company's installed base increased by
approximately 7,500 machines from internal growth (excluding the machines
added from the Kwik Wash Acquisition and the Allied Acquisition during such
period) due primarily to the elimination of capital constraints existing at
Solon prior to the Merger, as compared to a reduction of approximately 750
machines during the twelve months ended March 29, 1996.
Laundry operating expenses increased by approximately 13% for the 1997
Fiscal Year, as compared to the prior fiscal year. This increase was due
primarily to the Allied Acquisition and the Kwik Wash Acquisition as well as
an increase in the cost of sales related to Super Laundry's increased sales
volume. Such increase in laundry operating expenses was offset by the
implementation of cost savings programs in the Company's field operations and
the consolidation of certain operating regions.
General and administrative expenses increased by approximately $0.4 million
or 10% for the 1997 Fiscal Year as compared to the prior fiscal year. The
increase for the period was due to expenses associated with (i) the
implementation of the Company's acquisition strategy, including legal and
financial due diligence investigations of potential targets and related costs,
(ii) the development and implementation of procedures for the management of
investor relations, and (iii) systems development, refinement and integration.
This increase includes a reduction of certain expenses resulting from the
consolidation of the Company's corporate staff into its existing facility in
Roslyn, New York on September 29, 1995.
Depreciation and amortization increased by approximately 27% for the 1997
Fiscal Year, as compared to the prior fiscal year, due primarily to the Allied
Acquisition and the Kwik Wash Acquisition, as well as an
20
<PAGE>
increase in capital expenditures for the installed base of machines resulting
from the elimination of capital constraints existing at Solon prior to the
Merger.
The Company incurred restructuring costs of approximately $2.2 million
during the twelve months ended March 29, 1996 to cover severance obligations
to certain personnel, costs to relocate certain corporate functions to Roslyn,
New York, systems integration costs, and expenses related to the consolidation
of certain of its regional offices, in each case, as a result of the Solon
Acquisition and the Merger.
The extraordinary items for the 1997 Fiscal Year consisted of costs related
to the extinguishment of debt in February, 1997 and the termination of the
then existing revolving credit facility. The extraordinary items for the six
month period ended March 29, 1996 consisted of costs related to the
extinguishment of debt in connection with the Company's refinancing in
November 1995.
Prior to the Offering, Coinmach Laundry issued, in privately negotiated
transactions, 79,029 shares of its Class B common stock to certain members of
management. The Company recorded a stock-based compensation charge of
approximately $887,000 attributable to the issuance of such stock. In
addition, approximately $103,000 of receivables relating to loans to
management in connection with prior purchases of Coinmach Laundry's common
stock were forgiven and have been recorded as a stock-based compensation
charge.
During the 1997 Fiscal Year, Coinmach Laundry recorded a stock-based
compensation charge of approximately $1,162,000 relating to the 1996 Options
and the Independent Director Options.
Interest expense, net, increased by approximately 13% for the 1997 Fiscal
Year as compared to the prior year due primarily to the Company's refinancing
in November 1995 as well as entering into a credit facility with Bankers Trust
Company, First Union National Bank of North Carolina and Lehman Commercial
Paper, Inc. in January 1997. Partially offsetting this increase in interest
expense was the decrease in the effective interest rate applied against
outstanding borrowings as the result of such refinancing, as well as interest
income earned on excess cash balances generated from operations.
EBITDA/3/ was approximately $62.8 million (before deduction for stock-based
compensation charges) for the 1997 Fiscal Year as compared to approximately
$51.2 million (before deduction for restructuring costs) for the prior fiscal
year, representing an improvement of approximately 23%. EBITDA margins
improved to approximately 30% of revenues for the current year compared to
approximately 29% of revenues for the prior year.
SIX MONTH TRANSITION PERIOD ENDED MARCH 29, 1996 COMPARED TO THE PERIOD
OCTOBER 1, 1994 TO APRIL 4, 1995
Prior to the merger of Solon and TCC, Solon's fiscal year was the fifty-two
or fifty-three week period ended on the Friday nearest September 30. Effective
upon the Merger, the Company changed its fiscal year end to the Friday nearest
to March 31.
- --------
/3/ EBITDA represents earnings from continuing operations before deductions
for interest, income taxes, depreciation and amortization. EBITDA is used by
management and certain investors as an indicator of a company's historical
ability to service debt. Management believes that an increase in EBITDA is an
indication of a company's improved ability to service existing debt, to
sustain potential future increases in debt and to satisfy capital
requirements. However, EBITDA is not intended to represent cash flows for the
period, nor has it been presented as an alternative to either (a) operating
income (as determined by generally accepted accounting principles) as an
indicator of operating performance or (b) cash flows from operating,
investing and financing activities (as determined by generally accepted
accounting principles) as a measure of liquidity. Given that EBITDA is not a
measurement determined in accordance with generally accepted accounting
principles and is thus susceptible to varying calculations, EBITDA as
presented may not be comparable to other similarly titled measures of other
companies.
21
<PAGE>
The discussion below should be read in conjunction with the following table
which combines the operating results of Solon and TCC for the period October
1, 1994 to April 4, 1995 (the predecessor period) (in thousands). The
operating results of TCC are reflected in order to present comparable data.
<TABLE>
<CAPTION>
SIX MONTH
TRANSITION PERIOD
ENDED
MARCH 29, 1996 PERIOD FROM OCTOBER 1, 1994 TO APRIL 4, 1995
----------------- -------------------------------------------------
(SUCCESSOR)(1) (PREDECESSOR)(1)(2)
----------------- -------------------------------------------------
TCC SOLON COMBINED
-------------- -------------- -----------------
<S> <C> <C> <C> <C>
Revenues................ $ 89,070 $ 35,789 $ 52,207 $ 87,996
Laundry operating ex-
penses................. 60,536 28,253 33,165 61,418
General and administra-
tive expenses.......... 1,844 1,345 1,539 2,884
Depreciation and amorti-
zation................. 18,212 6,009 10,304 16,313
-------- -------------- -------------- --------------
Operating income........ 8,478 182 7,199 7,381
Interest expense, net... 11,999 2,464 8,928 11,392
Other expense........... -- 1,341 -- 1,341
-------- -------------- -------------- --------------
Loss before extraordi-
nary item and income
taxes.................. (3,521) (3,623) (1,729) (5,352)
Income tax (benefit) ex-
pense.................. (998) 4 50 54
-------- -------------- -------------- --------------
Loss before extraordi-
nary item.............. (2,523) (3,627) (1,779) (5,406)
Extraordinary item, net
of tax................. (8,925) -- (848) (848)
-------- -------------- -------------- --------------
Net loss................ $(11,448) $ (3,627) $ (2,627) $ (6,254)
======== ============== ============== ==============
</TABLE>
- --------
(1) The term "Predecessor" refers to the period in time prior to the Solon
Acquisition. The term "Successor" refers to the period in time after the
Solon Acquisition and includes the historical results of Solon which have
been restated to include the pooling of interests of TCC. Successor is
presented on a different basis of accounting and, therefore, is not
comparable to the Predecessor.
(2) Certain reclassifications have been made to conform to the 1996
presentation.
Revenues for the six month transition period ended March 29, 1996 were
approximately 1.2% higher than combined revenues for the prior period. The
improvement in revenues consisted primarily of increased revenues from Super
Laundry of approximately $2.5 million. Such improvement was partially offset
by a decrease of approximately $1.4 million in revenues from the route
business. The average machine base for the six month transition period ended
March 29, 1996 was approximately 1.4% lower than the prior period primarily as
the result of constraints on available capital prior to the Merger. From
September 30, 1995, through March 29, 1996, the Company successfully
implemented a program to maintain its base of installed machines and eliminate
any additional erosion. The effect of the decreased number of machines was
partially offset by increased revenue per machine from price increases.
Laundry operating expenses decreased by approximately 1.4% primarily as the
result of decreased expenses of approximately $0.8 million related to
implementation of cost savings programs in the Company's field operations and
a decrease in commission expense of approximately 2.3%. These decreases were
partially offset by an increase in the cost of sales related to the increased
volume of Super Laundry.
General and administrative expenses decreased by approximately $1.0 million,
or 36.1%, primarily due to the consolidation of corporate staff by closing
Solon's Philadelphia, Pennsylvania office and combining its operations into
the Company's existing facility in Roslyn, New York on September 29, 1995.
Depreciation and amortization increased by approximately $1.9 million or
11.6% due primarily to purchase accounting adjustments resulting from the
Solon Acquisition.
Interest expense, net, increased by approximately 5.3%. Approximately $1.8
million of such increase was due primarily to the increased debt level that
resulted from the Company's refinancing in November 1995.
22
<PAGE>
Offsetting this increase is approximately $0.8 million due to the decrease in
the effective interest rate as the result of such refinancing. The increased
debt resulted in an excess cash balance, which was contemplated to be used for
working capital purposes and for future acquisition opportunities.
The extraordinary item for the six month transition period ended March 29,
1996, consisted of costs related to the extinguishment of debt in connection
with the Company's refinancing in late 1995. The extraordinary item for the
period ended April 4, 1995, consisted of costs related to the change in control
in connection with the Solon Acquisition.
PERIOD APRIL 4, 1995 TO SEPTEMBER 29, 1995 COMPARED TO THE SIX MONTHS ENDED
SEPTEMBER 30, 1994
The discussion below should be read in conjunction with the following table
which combines the Predecessor period for the six months ended September 30,
1994 (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1994
--------------------------
PERIOD APRIL 5, 1995 TO
SEPTEMBER 29, 1995 (PREDECESSOR)(1),(2)
----------------------- --------------------------
(SUCCESSOR)(1) TCC SOLON COMBINED
----------------------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenues................... $89,719 $37,154 $51,577 $88,731
Laundry operating
expenses.................. 62,905 28,576 32,337 60,913
General and administrative
expenses.................. 2,351 1,123 1,444 2,567
Depreciation and
amortization.............. 18,423 7,576 10,966 18,542
Restructuring costs........ 2,200 -- -- --
------- ------- ------- -------
Operating income (loss).... 3,840 (121) 6,830 6,709
Interest expense, net...... 11,818 2,214 9,053 11,267
------- ------- ------- -------
Loss before income taxes... (7,978) (2,335) (2,223) (4,558)
Income tax (benefit)
expense................... (1,862) 24 3,208 3,232
------- ------- ------- -------
Net loss................... $(6,116) $(2,359) $(5,431) $(7,790)
======= ======= ======= =======
</TABLE>
- --------
(1) The term "Predecessor" refers to the period in time prior to the Solon
Acquisition. The term "Successor" refers to the period in time after the
Solon Acquisition and includes the historical results of Solon which have
been restated to include the pooling of interests of TCC. Successor is
presented on a different basis of accounting and therefore, is not
comparable to the Predecessor.
(2) Certain reclassifications have been made to conform to the 1995
presentation.
Revenues for the period April 5, 1995 to September 29, 1995 were
approximately 1.1% higher than combined revenues for the prior period. The
improvement in revenues consisted primarily of increased revenues from Super
Laundry of approximately $1.3 million. Such improvement was partially offset by
a decrease of approximately $0.3 million in revenues from routes, primarily due
to a 2.0% decline in the average number of laundry machines on location, due to
constraints on capital prior to the Merger. The effect of the decreased number
of machines was partially offset by increased revenue per machine of
approximately 1.6% primarily due to price increases.
Laundry operating expenses increased by approximately 3.3%, primarily due to
an increase of $1.0 million in the cost of sales related to the increase in
Super Laundry revenue. The remaining increase is primarily the result of the
method of accounting for installation costs applied in the Successor period.
This increase is the result of increased cost of sales related to the increased
volume of Super Laundry. In addition, the Company's commission expense
decreased by approximately 1.0%.
General and administrative expenses decreased by approximately $0.2 million,
or 8.4% primarily due to a decrease in the corporate staff.
23
<PAGE>
The Company provided for restructuring costs of approximately $2.2 million
to cover severance payments to certain of Solon's management, administrative
and regional personnel, costs to relocate Solon's financial and administrative
functions to Roslyn, New York, costs to integrate certain financial and
operating systems, and costs related to the consolidation of certain of
Solon's regional offices.
Interest expense, net, increased to approximately 4.9% primarily due to an
increase in the interest rate on TCC's revolver, which was based on the prime
lending rate.
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In 1997, the FASB issued SFAS 130 "Reporting Comprehensive Income," and SFAS
131 "Disclosures About Segments of an Enterprise and Related Information."
These statements are effective for fiscal years commencing after December 15,
1997. The Company will be required to comply with the provisions of these
statements in its year ending March 31, 1999. The Company is currently
evaluating what operating segments of its business may trigger disclosure
requirements under SFAS 131 and believes the required disclosure will be made,
if applicable, at the end of fiscal 1999. The Company does not believe that
adoption of SFAS 130 will have a significant effect on the Company's
consolidated financial statements and related disclosures.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to have substantial indebtedness and debt service
requirements. At March 31, 1998, the Company had outstanding long-term debt of
approximately $602.2 million (excluding the premium, net, of approximately
$9.3 million on the Series C Notes) and stockholders' equity of approximately
$58.7 million.
FINANCING ACTIVITIES
Senior Note Offering and Exchange Offer
In December 1995, the Company issued 11 3/4% Senior Notes due 2005 pursuant
to the terms of an indenture, between the Company and Fleet Bank of
Connecticut (formerly Shawmut Bank Connecticut, National Association) (as
amended, the "Indenture") in an aggregate principal amount of $196,655,000. On
March 28, 1996, Coinmach consummated a registered exchange offer, pursuant to
which all issued and outstanding 11 3/4% Senior Notes due 2005 were exchanged
for the Series B Notes.
On October 8, 1997, Coinmach completed a private placement (the "Bond
Offering") of $100 million aggregate principal amount of Series C Notes on
substantially identical terms as its Series B Notes. The gross proceeds from
the Bond Offering were $109.875 million, of which $100.0 million represented
the principal amount outstanding and $9.875 million represented the payment of
a premium for the Series C Notes. Coinmach used approximately $105.4 million
of the net proceeds from the Bond Offering to repay indebtedness outstanding
under its senior financing arrangement.
On December 23, 1997, Coinmach commenced an offer to exchange (the "Exchange
Offer") up to $296.7 million (excluding the premium on the Series C Notes
discussed above) of its 11 3/4% Series D Senior Notes due 2005 (the "Series D
Notes" or "Senior Notes") for any and all of its Series B Notes and its Series
C Notes. The Exchange Offer expired on February 6, 1998, and, as of such date,
the holders of 100% of the outstanding Series B Notes and Series C Notes
tendered such notes in the Exchange Offer for Series D Notes.
The Senior Notes, which mature on November 15, 2005, are unsecured senior
obligations of Coinmach and are redeemable, at the Company's option, in whole
or in part at any time or from time to time, on and after November 15, 2000,
upon not less than 30 nor more than 60 days notice, at the redemption prices
set forth in the Indenture, plus, in each case, accrued and unpaid interest
thereon, if any, to the date of redemption.
The Indenture contains a number of restrictive covenants and agreements,
including covenants with respect to the following matters: (i) limitation on
indebtedness; (ii) limitation on certain payments (in the form of the
24
<PAGE>
declaration or payment of certain dividends or distributions on the capital
stock of Coinmach Corporation or its subsidiaries, the purchase, redemption or
other acquisition of any capital stock of Coinmach Corporation, the voluntary
prepayment of subordinated indebtedness, or an Investment (as defined in the
Indenture) in any other person or entity); (iii) limitation on transactions
with affiliates; (iv) limitation on liens; (v) limitation on sales of assets;
(vi) limitation on sale and leaseback transactions; (vii) limitation on
conduct of business; (viii) limitation on dividends and other payment
restrictions affecting subsidiaries; and (ix) limitation on consolidations,
mergers and sales of substantially all of the assets of Coinmach Corporation.
The events of default under the Indenture include provisions that are
typical of senior unsecured debt financings. Upon the occurrence and
continuance of certain events of default, the trustee or the holders of not
less than 25% in aggregate principal amount of outstanding Senior Notes may
declare all unpaid principal and accrued interest on all of the Senior Notes
to be immediately due and payable.
Upon the occurrence of a Change of Control (as defined in the Indenture),
each holder of Senior Notes will have the right to require that the Company
purchase all or a portion of such holder's Senior Notes pursuant to the offer
described in the Indenture, at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
repurchase.
Amended and Restated Credit Facility
On June 2, 1997, the Company's existing credit facility with Bankers Trust
Company, First Union National Bank of North Carolina, Lehman Commercial Paper,
Inc. and certain other lending institutions providing for, among other things,
a $130 million term loan facility and a $70 million revolving credit facility,
was amended to, among other things, increase the existing term loan facility
by $60.0 million, of which $50.0 million was used to repay outstanding
revolver borrowings under such facility. The credit facility, as amended,
consisted of a $70 million revolving credit facility and a $190 million term
loan facility, which was comprised of a Tranche A term loan in the amount of
$30.0 million and a Tranche B term loan in the amount of $160.0 million. Such
amended credit facility also provided for up to $10 million of letter of
credit financings and short term borrowings under a swing line facility of up
to $5 million.
In December 1997, the Company's credit facility was amended to provide for
an aggregate of $235 million of secured financing consisting of: (i) a $35
million working capital revolving credit facility bearing interest at an
annual rate of LIBOR plus 1.50%; (ii) a $125 million acquisition revolving
credit facility bearing interest at an annual rate of LIBOR plus 1.50%; and
(iii) a $75 million Tranche A term loan facility bearing interest at an annual
rate of LIBOR plus 2.00%.
In March 1998, concurrently with the Macke Acquisition, the Company once
again amended and restated its senior financing agreement (as amended and
restated, the "Amended and Restated Credit Facility"), on substantially
similar terms, providing for approximately $200 million of additional
financing consisting of a Tranche B term loan bearing interest at an annual
rate of LIBOR plus 2.25%. Under the Amended and Restated Credit Facility, the
working capital revolving credit facility and the acquisition revolving credit
facility are expected to mature on December 31, 2003, the Tranche A term loan
facility is expected to mature on December 31, 2004, and the Tranche B term
loan facility is expected to mature on June 30, 2005.
Interest on the Company's borrowings under the Amended and Restated Credit
Facility is payable quarterly in arrears with respect to Base Rate Loans and
the last day of each applicable interest period with respect to Eurodollar
Loans and at a rate per annum no greater than the sum of the Applicable Base
Rate Margin plus the Base Rate or the sum of the Applicable Eurodollar Margin
plus the Eurodollar Rate (in each case, as defined in the Amended and Restated
Credit Facility).
To manage its exposure to fluctuations in interest rates, the Company
entered into interest rate swap agreements, relating to its variable rate debt
portfolio. On February 23, 1998, the Company entered into a 33 month $75
million notional amount interest rate swap transaction with Bankers Trust
Company to fix the monthly
25
<PAGE>
LIBOR interest rate under the Amended and Restated Credit Facility at 5.71%.
On March 2, 1998, the Company entered into a 32 month, $100 million notional
amount interest rate swap transaction with First Union National Bank of North
Carolina to fix the monthly LIBOR interest rate under a portion of the Amended
and Restated Credit Facility at 5.83%. On April 7, 1998, the Company entered
into a 31 month, $75 million notional amount interest rate swap transaction
with Bankers Trust Company to fix the monthly LIBOR interest rate under a
portion of the Amended and Restated Credit Facility at 5.75%. At March 31,
1998, the monthly variable LIBOR interest rate was 5.6875%. The Company does
not use derivative financial instruments for trading purposes.
Indebtedness under the Amended and Restated Credit Facility is secured by
all of the Company's real and personal property. The Company has guaranteed
the indebtedness under the Amended and Restated Credit Facility and pledged to
Bankers Trust Company, as Collateral agent, its interests in all of the issued
and outstanding shares of capital stock of the Company.
Subject to the terms and conditions of the Amended and Restated Credit
Facility, the Company may, at its option, convert Base Rate Loans (as defined
in the Amended and Restated Credit Facility) into Eurodollar Loans (as defined
in the Amended and Restated Credit Facility). Interest on the Company's
borrowings under the Amended and Restated Credit Facility is payable at a rate
per annum no greater than the sum of the Applicable Base Rate Margin plus the
Base Rate or the sum of the Applicable Eurodollar Margin plus the Eurodollar
Rate (in each case, as defined in the Amended and Restated Credit Facility).
The Amended and Restated Credit Facility contains a number of restrictive
covenants and agreements, including covenants with respect to limitations on
(i) indebtedness; (ii) certain payments (in the form of the declaration or
payment of certain dividends or distributions on the capital stock of Coinmach
Laundry or its subsidiaries or the purchase, redemption or other acquisition
of any capital stock of Coinmach Laundry or its subsidiaries); (iii) voluntary
prepayments of previously existing indebtedness; (iv) Investments (as defined
in the Amended and Restated Credit Facility); (v) transactions with
affiliates; (vi) liens; (vii) sales or purchases of assets; (viii) conduct of
business; (ix) dividends and other payment restrictions affecting
subsidiaries; (x) consolidations and mergers; (xi) capital expenditures; (xii)
issuances of certain equity securities of the Company; and (xiii) creation of
subsidiaries. The Amended and Restated Credit Facility also requires that the
Company satisfy certain financial ratios, including a maximum leverage ratio
and a minimum consolidated interest coverage ratio.
The Amended and Restated Credit Facility contains certain events of default,
including the following: (i) the failure of the Company to pay any of its
obligations under the Amended and Restated Credit Facility when due; (ii)
certain failures by the Company to pay principal or interest on indebtedness
or certain breaches or defaults by the Company in respect of certain
indebtedness, in each case, after the expiration of any applicable grace
periods; (iii) certain defaults by the Company in the performance or
observance of the agreements or covenants under the Amended and Restated
Credit Facility or related agreements, beyond any applicable cure periods;
(iv) the falsity in any material respect of certain of the Company's
representations or warranties under the Amended and Restated Credit Facility;
(v) certain judgments against the Company; and (vi) certain events of
bankruptcy or insolvency of the Company.
Operating and Investing Activities
The Company's level of indebtedness will have several important effects on
its future operations including, but not limited to, the following: (i) a
significant portion of the Company's cash flow from operations will be
required to pay interest on its indebtedness; (ii) the financial covenants
contained in certain of the agreements governing the Company's indebtedness
will require the Company to meet certain financial tests and may limit its
ability to borrow additional funds or to dispose of assets; (iii) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or general corporate purposes may
be impaired; and (iv) the Company's ability to adapt to changes in the
outsourced laundry equipment services industry and to economic conditions in
general could be limited.
26
<PAGE>
As the Company has focused on increasing its cash flow from operating
activities, it has made significant capital investments, primarily consisting
of capital expenditures related to acquisitions, renewals and growth. The
Company anticipates that it will continue to utilize cash flows from
operations to finance its capital expenditures and working capital needs,
including interest payments on its outstanding indebtedness. Capital
expenditures for the 1998 Fiscal Year were approximately $353.7 million
(including approximately $2.3 million promissory note in connection with the
acquisition of a small route operator and approximately $1.2 million relating
to capital lease obligations). Of such amount, the Company spent approximately
$295.0 million in acquisition and related transaction costs, primarily the
Macke Acquisition, the Reliable Acquisition, the ALI Acquisition and the
National Coin Acquisition, and approximately $21.1 million related to the net
increase in the installed base of machines of 19,500 machines. The balance of
approximately $37.6 million was used to maintain the existing machine base
(which consist of machine expenditures, advance location payments and laundry
room improvements) in current locations and the replacement of discontinued
locations and for general corporate purposes. The full impact on revenues and
cash flow generated from capital expended on acquisitions and the net increase
in the installed based are not expected to be reflected in the Company's
financial results until subsequent reporting periods, depending on the timing
of the capital expended. The Company anticipates that capital expenditures,
excluding acquisitions and internal growth, will be approximately $62.0
million for the twelve months ending March 31, 1999. Such increase relative to
fiscal 1998 is primarily attributable to the Company's recent acquisition
activities. While the Company estimates that it will generate sufficient cash
flows from operations to finance anticipated capital expenditures, there can
be no assurances that it will be able to do so.
The Company's working capital requirements are, and are expected to continue
to be, minimal since a significant portion of the Company's operating expenses
are not paid until after cash is collected from the installed machines. In
connection with certain of the financing agreements governing the Company's
indebtedness, the Company is required to make monthly cash interest payments
as required by the Amended and Restated Credit Facility and semi-annual cash
interest payments as required by the Senior Notes.
Management believes that the Company's future operating activities will
generate sufficient cash flow to repay indebtedness outstanding under the
Senior Notes and borrowings under the Amended and Restated Credit Facility or
to permit any necessary refinancings thereof. An inability of the Company,
however, to comply with covenants or other conditions contained in the
indentures governing the Senior Notes or in the credit agreement evidencing
the Amended and Restated Credit Facility could result in an acceleration of
all amounts due under such indentures and the Amended and Restated Credit
Facility. If the Company is unable to meet its debt service obligations, it
could be required to take certain actions such as reducing or delaying capital
expenditures, selling assets, refinancing or restructuring its indebtedness,
selling additional equity capital or other actions. There is no assurance that
any of such actions could be effected on commercially reasonable terms or on
terms permitted under the Amended and Restated Credit Facility, or the
indentures governing the Senior Notes.
Certain Accounting Treatment
The Company's depreciation and amortization expenses, aggregating
approximately $75.5 million for the 1998 Fiscal Year, have the effect of
reducing net income but not operating cash flow. In accordance with generally
accepted accounting principles, a significant amount of the purchase price of
businesses acquired by the Company is allocated to "contract rights", which
costs are amortized over periods of up to 15 years.
YEAR 2000 COMPLIANCE
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. During the 1998
Fiscal Year, the Company determined that it needed to modify significant
portions of its software so that its information systems will function
properly with respect to dates in the year 2000 and beyond. The Company also
has initiated discussions with its significant suppliers, customers, and
financial institutions to ensure that those parties have
27
<PAGE>
appropriate plans to remediate year 2000 issues where their systems interface
with the Company's systems or otherwise impact its operations. The Company is
assessing the extent to which its operations are vulnerable should those
organizations fail to properly remediate their computer systems.
The Company's comprehensive year 2000 initiative is being managed by a team
of internal and external staff. The team's activities are designed to ensure
that there is no adverse effect on the Company's core business operations and
that transactions with customers, suppliers, and financial institutions are
fully supported. The Company anticipates its information systems
transformation for year 2000 compliance will be completed in the fall of 1999.
While the Company believes its planning efforts are adequate to address its
year 2000 concerns, there can be no guarantee that its computer systems or the
computer systems of other companies on which the Company's systems and
operations rely will be converted on a timely basis and will not have a
material effect on the operations of the Company. The cost of the year 2000
initiative is not expected to be material to the Company's results of
operation or financial condition.
INFLATION AND SEASONALITY
In general, the Company's laundry operating expenses and general and
administrative expenses are affected by inflation, and the effects of
inflation may be experienced by the Company in future periods. Management
believes that such effects have not been nor will be material to the Company.
The Company's business generally is not seasonal.
FORWARD LOOKING STATEMENTS
Certain statements and information contained in this Form 10-K and other
reports and statements filed by the Company from time to time with the
Securities and Exchange Commission (collectively, "SEC Filings") contain or
may contain certain forward looking statements and information that are based
on the beliefs of the Company's management as well as estimates and
assumptions made by, and information currently available to, the Company's
management. Forward looking statements are those that are not historical
facts. When used in SEC Filings, the words "anticipate," "project," "believe,"
"estimate," "expect," "future," "intend," "plan" and similar expressions, as
they relate to the Company or the Company's management, identify forward
looking statements. Such statements reflect the current views of the Company
with respect to future events and are subject to certain risks, uncertainties
and assumptions relating to the Company's operations and results of
operations, competitive factors, shifts in market demand, and other risks and
uncertainties that may be beyond the Company's control. Such risks and
uncertainties, together with any risks and uncertainties specifically
identified in the text surrounding such forward looking statements, include,
but are not limited to, the Company's ability to satisfy its debt service
requirements, the costs of integration of acquired businesses and realization
of anticipated synergies, increased competition, availability of capital to
finance capital expenditures necessary to increase and maintain the Company's
operating machine base, the rate of growth in general and administrative
expenses due to the Company's business expansion, the Company's dependence
upon lease renewals, risks of extended periods of reduced occupancy levels,
and the ability of the Company to implement its business strategy, including
the acquisition and successful integration and operation of acquired
businesses. Other risks and uncertainties also include changes or developments
in social, economic, business, industry, market, legal and regulatory
circumstances and conditions and actions taken or omitted to be taken by third
parties, including the Company's stockholders, customers, suppliers,
competitors, legislative, regulatory, judicial and other governmental
authorities. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, the Company's future
performance and actual results of operations may vary significantly from those
anticipated, projected, believed, estimated, expected, intended or planned.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not required to disclose information pursuant to this item
until its fiscal year ended March 31, 1999.
28
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Audited consolidated financial statements and the notes thereto are contained
in pages F-1 through F-26 hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
29
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Information concerning the directors and executive officers of the Company
is set forth in the Proxy Statement to be provided to stockholders in
connection with the Company's 1998 Annual Meeting of Stockholders under the
caption "Security Ownership of the Company--Section 16(a) Beneficial Ownership
Reporting Compliance" and each of the headings "Election of Directors" and
"Executive Officers," which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is set forth in the Proxy
Statement under the heading "Executive Compensation," which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is set forth in the Proxy Statement under the heading "Security
Ownership of the Company," which information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is set
forth in the Proxy Statement under the heading "Certain Relationships and
Related Transactions," which information is incorporated herein by reference.
30
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements--see Index to Financial Statements appearing on
Page F-1.
(2) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- -----------
<C> <S>
3.1 Third Amended and Restated Certificate of Incorporation of Coinmach
Laundry (incorporated by reference from exhibit 3.1 to Coinmach
Laundry's Form 10-Q for the quarterly period ended September 27,
1996, file number 1-11907)
3.2 Certificate of Powers, Designations, Preferences and Relative
Participating, Optional and other Special Rights of Series A
Preferred Stock and Qualifications, Limitations and Restrictions
Thereof (incorporated by reference from exhibit 3.2 to Coinmach
Laundry's Form 10-Q for the quarterly period ended June 28, 1996,
file number 1-11907)
3.3 Third Amended and Restated Bylaws of Coinmach Laundry (incorporated
by reference from exhibit 3.1 to Coinmach Laundry's Form 10-Q for
the quarterly period ended September 27, 1996, file number 1-11907)
10.1 Indenture, dated as of November 30, 1995, by and between Coinmach
Corporation ("Coinmach"), as Issuer, and Fleet National Bank of
Connecticut (formerly, Shawmut Bank Connecticut, National
Association), as Trustee (incorporated by reference from exhibit
number 4.1 to Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.2 First Supplemental Indenture, dated as of December 11, 1995, by and
between Coinmach, as Issuer, and Fleet National Bank of Connecticut
(formerly, Shawmut Bank Connecticut, National Association), as
Trustee (incorporated by reference from exhibit number 4.2 to
Coinmach's Registration Statement on Form S-1, file number 333-
00620)
10.3 First Supplemental Indenture, dated as of November 28, 1995, by and
between Solon Automated Services, Inc. ("Solon") and U.S. Trust
Company of New York, as Trustee (incorporated by reference from
exhibit number 4.3 to Coinmach's Registration Statement on Form S-1,
file number 333-00620)
10.4 Registration Rights Agreement, dated as of November 30, 1995, by and
between Coinmach and Lazard Freres & Co. LLC ("Lazard"), as Initial
Purchaser (incorporated by reference from exhibit number 4.6 to
Coinmach's Registration Statement on Form S-1, file number 333-
00620)
10.5 Addendum to Registration Rights Agreement, dated December 14, 1995,
by and between Coinmach and Lazard, as Initial Purchaser
(incorporated by reference from exhibit number 4.8 to Coinmach's
Registration Statement on Form S-1, file number 333-00620)
10.6 Employment Agreement, dated as of August 4, 1995, by and between
Solon and John E. Denson (incorporated by reference from exhibit
number 10.13 to Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.7 Employment Agreement, dated as of July 1, 1995, by and between
Solon, Michael E. Stanky and Golder Thoma Cressey Rauner Fund IV,
L.P. ("GTCR Fund IV") (incorporated by reference from exhibit number
10.14 to Coinmach's Registration Statement on Form S-1, file number
333-00620)
10.8 Equity Purchase Agreement, dated as of July 26, 1995, between GTCR
Fund IV and SAS Acquisitions Inc. ("SAS"), subsequently amended by
the Omnibus Agreement (as hereinafter defined) (incorporated by
reference from exhibit number 10.21 to Coinmach Laundry's
Registration Statement on Form S-1, file number 333-03587)
</TABLE>
- --------
(1) Exhibit numbers are referenced to Item 601 of Regulation S-K under the
Securities Exchange Act of 1934, as amended.
31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- -----------
<C> <S>
10.9 Investor Purchase Agreement, dated as of July 26, 1995, among SAS,
GTCR Fund IV, Heller Financial, Inc. ("Heller"), Jackson National
Life Insurance Company, Jackson National Life Insurance Company of
Michigan, James N. Chapman, Michael E. Marrus, President and Fellows
of Harvard College ("Harvard"), MCS Capital, Inc., Mitchell Blatt,
and Michael Stanky, subsequently amended by the Omnibus Agreement
(as hereinafter defined) (incorporated by reference from exhibit
number 10.22 to Coinmach Laundry's Registration Statement on Form S-
1, file number 333-03587)
10.10 Executive Stock Agreement, dated as of July 26, 1995, among SAS,
GTCR Fund IV, MCS Capital, Inc., Mitchell Blatt, Robert M. Doyle and
Michael Stanky (with spousal consents), subsequently amended by the
Omnibus Agreement (as hereinafter defined) (incorporated by
reference from exhibit number 10.23 to Coinmach Laundry's
Registration Statement on Form S-1, file number 333-03587)
10.11 Registration Agreement, dated as of July 26, 1995, among SAS and
each of the SAS Stockholders, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference from
exhibit number 10.25 to Coinmach Laundry's Registration Statement on
Form S-1, file number 333-03587)
10.12 Dealer Manager Agreement, dated October 20, 1995, by and among The
Coinmach Corporation ("TCC"), Solon, Lazard and Fieldstone Private
Capital Group, L.P. (incorporated by reference from exhibit number
10.17 to Coinmach's Registration Statement on Form S-1, file number
333-00620)
10.13 Purchase Agreement, dated November 15, 1995, by and among TCC, Solon
and Lazard (incorporated by reference from exhibit number 10.18 to
Coinmach's Registration Statement on Form S-1, file number 333-
00620)
10.14 Addendum to Purchase Agreement, dated December 11, 1995, by and
between Coinmach and Lazard (incorporated by reference from exhibit
number 10.19 to Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.15 Omnibus Agreement, dated as of November 30, 1995, among SAS, Solon,
TCC and each of the other parties executing a signature page thereto
(the "Omnibus Agreement") (incorporated by reference from exhibit
number 10.20 to Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.16 Amended and Restated Management and Consulting Services Agreement,
dated as of November 30, 1995, by and between GTCR Fund IV and SAS
(incorporated by reference from exhibit number 10.42 to Coinmach
Laundry's Registration Statement on Form S-1, file number 333-03587)
10.17 Amended and Restated Stockholders Agreement, dated as of November
30, 1995, among SAS and the signatories thereto (incorporated by
reference from exhibit number 10.43 to Coinmach Laundry's
Registration Statement on Form S-1, file number 333-03587)
10.18 Second Amended and Restated 1996 Employee Stock Option Plan of
Coinmach Laundry (incorporated by reference from exhibit 10.1 to
Coinmach Laundry's Form 10-Q for the quarterly period ended
September 27, 1996 file number 1-11907)
10.19 Reclassification Agreement among Coinmach Laundry and the
signatories thereto, dated July 17, 1996 (incorporated by reference
from exhibit 10.45 to Coinmach Laundry's Form 10-Q for the quarterly
period ended June 28, 1996, file number 1-11907)
10.20 Option Agreement between Coinmach Laundry and MCS Capital, Inc.,
dated July 23, 1996 (incorporated by reference from exhibit 10.46 to
Coinmach Laundry's Form 10-Q for the quarterly period ended June 28,
1996, file number 1-11907)
10.21 Option Agreement between Coinmach Laundry and Ronald S. Brody, dated
July 23, 1996 (incorporated by reference from exhibit 10.47 to
Coinmach Laundry's Form 10-Q for the quarterly period ended June 28,
1996, file number 1-11907)
</TABLE>
- --------
(1) Exhibit numbers are referenced to Item 601 of Regulation S-K under the
Securities Exchange Act of 1934, as amended.
32
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- -----------
<C> <S>
10.22 Option Agreement between Coinmach Laundry and James N. Chapman,
dated July 23, 1996 (incorporated by reference from exhibit 10.48 to
Coinmach Laundry's Form 10-Q for the quarterly period ended June 28,
1996, file number 1-11907)
10.23 Option Agreement between Coinmach Laundry and Robert M. Doyle, dated
July 23, 1996 (incorporated by reference from exhibit 10.49 to
Coinmach Laundry's Form 10-Q for the quarterly period ended June 28,
1996, file number 1-11907)
10.24 Option Agreement between Coinmach Laundry and Michael E. Stanky,
dated July 23, 1996 (incorporated by reference from exhibit 10.50 to
Coinmach Laundry's Form 10-Q for the quarterly period ended June 28,
1996, file number 1-11907)
10.25 Option Agreement between Coinmach Laundry and David A. Siegel, dated
July 23, 1996 (incorporated by reference from exhibit 10.51 to
Coinmach Laundry's Form 10-Q for the quarterly period ended June 28,
1996, file number 1-11907)
10.26 Option Agreement between Coinmach Laundry and R. Daniel Osborne,
dated July 23, 1996 (incorporated by reference from exhibit 10.52 to
Coinmach Laundry's Form 10-Q for the quarterly period ended June 28,
1996, file number 1-11907)
10.27 Option Agreement between Coinmach Laundry and John E. Denson, dated
July 23, 1996 (incorporated by reference from exhibit 10.53 to
Coinmach Laundry's Form 10-Q for the quarterly period ended June 28,
1996, file number 1-11907)
10.28 Form of Option Agreement Relating to the Second Amended and Restated
1996 Employee Stock Option Plan (incorporated by reference from
exhibit 10.2 to Coinmach Laundry's Form 10-Q for the quarterly
period ended September 27, 1996, file number 1-11907)
10.29 Omnibus Amendment to Option Agreements, dated as of September 17,
1996, by and among Coinmach Laundry, MCS Capital, Inc., Ronald S.
Brody, James N. Chapman, Robert M. Doyle, Michael E. Stanky, David
E. Siegel, R. Daniel Osborne, John E. Denson, James McDonnell,
Russell Harrison, Charles Prato and Michael E. Marrus (incorporated
by reference from exhibit 10.3 to Coinmach Laundry's Form 10-Q for
the quarterly period ended September 27, 1996, file number 1-11907)
10.30 Option Agreement, dated as of September 17, 1996, by and between
Coinmach Laundry and Arthur B. Laffer (incorporated by reference
from exhibit 10.4 to Coinmach Laundry's Form 10-Q for the quarterly
period ended September 27, 1996, file number 1-11907)
10.31 Option Agreement, dated as of September 17, 1996, by and among
Coinmach Laundry and Stephen G. Cerri (incorporated by reference
from exhibit 10.5 to Coinmach Laundry's Form 10-Q for the quarterly
period ended September 27, 1996, file number 1-11907)
10.32 Waiver of Registration Rights, dated May 8, 1996 among Coinmach
Laundry and the signatories thereto (incorporated by reference from
exhibit number 10.54 to Coinmach Laundry's Registration Statement on
Form S-1, file number 333-03587)
10.33 Voting Agreement among Coinmach Laundry and the signatories thereto,
dated July 23, 1996 (incorporated by reference from exhibit 10.55 to
Coinmach Laundry's Form 10-Q for the quarterly period ended June 28,
1996, file number 1-11907)
10.34 Termination Agreement, dated as of July 23, 1996, by and between
GTCR Fund IV and Coinmach Laundry (incorporated by reference from
exhibit 10.56 to Coinmach Laundry's Form 10-Q for the quarterly
period ended June 28, 1996, file number 1-11907)
10.35 Commitment Letter, dated November 22, 1996, from Bankers Trust
Company ("Bankers Trust"), First Union Bank of North Carolina
("First Union") and Lehman Commercial Paper, Inc. ("Lehman"),
addressed to Coinmach Laundry (incorporated by reference from
exhibit 10.1 to Coinmach Laundry's Form 10-Q for the quarterly
period ended December 27, 1996, file number 1-11907)
</TABLE>
- --------
(1) Exhibit numbers are referenced to Item 601 of Regulation S-K under the
Securities Exchange Act of 1934, as amended.
33
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- -----------
<C> <S>
10.36 Stock Purchase Agreement, dated November 25, 1996, by and among
Tamara Lynn Ford, Robert Kyle Ford, Traci Lea Ford, Tucker F.
Enthoven, Richard F. Enthoven, Richard Franklin Ford, Jr., Trustee
u/d/t February 4, 1994, KWL, Inc., Kwik-Wash Laundries, Inc., Kwik
Wash Laundries, L.P. and Coinmach (the "Stock Purchase Agreement")
(incorporated by reference from exhibit 10.2 to Coinmach Laundry's
Form 10-Q for the quarterly period ended December 27, 1996, file
number 1-11907)
10.37 First Amendment to Stock Purchase Agreement, dated as of January 8,
1997 (incorporated by reference from exhibit 10.3 to Coinmach
Laundry's Form 10-Q for the quarterly period ended December 27,
1996, file number 1-11907)
10.38 Registration Rights Agreement, dated as of March 14, 1997, between
Coinmach and Atlanta Washer & Dryer Leasing, Inc. (incorporated by
reference from exhibit 10.51 to Coinmach Laundry's Form 10-K for the
fiscal year ended March 28, 1997, file number 1-11907)
10.39 Amended and Restated Employment Agreement, dated as of June 1, 1996,
by and between Coinmach and John E. Denson (incorporated by
reference from exhibit 10.56 to Coinmach Laundry's Registration
Statement on Form S-1, file number 333-03587)
10.40 Promissory Note, dated February 11, 1997, of Stephen R. Kerrigan in
favor of Coinmach (incorporated by reference from exhibit 10.53 to
Coinmach Laundry's Form 10-K for the fiscal year ended March 28,
1997, file number 1-11907)
10.41 Underwriting Agreement, dated July 17, 1996, by and among Coinmach
Laundry and Lehman Brothers, Inc., Dillon, Read & Co., Inc., Lazard
and Fieldstone FPCG Services, L.P. (collectively, the
"Representatives") (incorporated by reference from exhibit 10.54 to
Coinmach Laundry's Form 10-K for the fiscal year ended March 28,
1997, file number 1-11907)
10.42 Lock-Up Agreements, dated July 23, 1996, among Coinmach Laundry and
the Representatives (incorporated by reference from exhibit 10.55 to
Coinmach Laundry's Form 10-K for the fiscal year ended March 28,
1997, file number 1-11907)
10.43 Promissory Note, dated January 8, 1997, of Coinmach Laundry in favor
of Richard F. Enthoven, as agent for Tamara Lynn Ford, Richard Kyle
Ford, Traci Lea Ford, Tucker F. Enthoven, Richard F. Enthoven, and
Richard Franklin Ford, Jr., Trustee u/d/t February 4, 1994
(incorporated by reference from exhibit 10.56 to Coinmach Laundry's
Form 10-K for the fiscal year ended March 28, 1997, file number 1-
11907)
10.44 Tax Cooperation Agreement, dated as of January 8, 1997, by and among
Kwik Wash Laundries, L.P., KWL, Inc., Kwik-Wash Laundries, Inc.,
Coinmach and the Sellers (incorporated by reference from exhibit
10.57 to Coinmach Laundry's Form 10-K for the fiscal year ended
March 28, 1997, file number 1-11907)
10.45 Consulting Services Agreement, dated as of January 8, 1997, by and
between Richard F. Enthoven and Coinmach (incorporated by reference
from exhibit 10.58 to Coinmach Laundry's Form 10-K for the fiscal
year ended March 28, 1997, file number 1-11907)
10.46 Credit Agreement dated January 8, 1997, among Coinmach, the Lending
Institutions listed therein, Bankers Trust, First Union and Lehman
(incorporated by reference from exhibit 10.59 to Coinmach Laundry's
Form 10-K for the fiscal year ended March 28, 1997, file number 1-
11907)
10.47 Tranche A Term Notes, each dated January 8, 1997, by Coinmach in
favor of each of Bankers Trust, First Union, Lehman, Heller, The
Nippon Credit Bank, Ltd., Credit Lyonnais New York Branch, Bank of
Scotland and Bank of Boston (incorporated by reference from exhibit
10.60 to Coinmach Laundry's Form 10-K for the fiscal year ended
March 28, 1997, file number 1-11907)
</TABLE>
- --------
(1) Exhibit numbers are referenced to Item 601 of Regulation S-K under the
Securities Exchange Act of 1934, as amended.
34
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- -----------
<C> <S>
10.48 Tranche B Term Notes, each dated January 8, 1997, by Coinmach in
favor of each of Bankers Trust, First Union, Lehman, Fleet National
Bank, Heller, The Nippon Credit Bank, Ltd., Bank of Scotland, Bank
of Boston, Massachusetts Mutual Life Insurance Company, Pilgrim
America Prime Rate Trust, Prime Income Trust, The Ing Capital Senior
Secured High Income Fund, L.P., and Merrill Lynch Senior Floating
Rate Fund, Inc. (incorporated by reference from exhibit 10.61 to
Coinmach Laundry's Form 10-K for the fiscal year ended March 28,
1997, file number 1-11907)
10.49 Revolving Notes, each dated January 8, 1997, by Coinmach in favor of
each of Bank of Boston, Bankers Trust, First Union, Lehman, Fleet
National Bank, Heller, The Nippon Credit Bank, Ltd., Credit Lyonnais
New York Branch, and Bank of Scotland (incorporated by reference
from exhibit 10.62 to Coinmach Laundry's Form 10-K for the fiscal
year ended March 28, 1997, file number 1-11907)
10.50 Swing Line Note, dated January 8, 1997, in the principal amount of
$5,000,000 in favor of Bankers Trust (incorporated by reference from
exhibit 10.63 to Coinmach Laundry's Form 10-K for the fiscal year
ended March 28, 1997, file number 1-11907)
10.51 Holders Pledge Agreement, dated January 8, 1997, made by Coinmach
Laundry to Bankers Trust and Richard F. Enthoven, as Seller Agent
(incorporated by reference from exhibit 10.64 to Coinmach Laundry's
Form 10-K for the fiscal year ended March 28, 1997, file number 1-
11907)
10.52 Borrower Pledge Agreement, dated January 8, 1997, made by Coinmach
to Bankers Trust (incorporated by reference from exhibit 10.65 to
Coinmach Laundry's Form 10-K for the fiscal year ended March 28,
1997, file number 1-11907)
10.53 Security Agreement, dated January 8, 1997, between Coinmach and
Bankers Trust and the Assignment of Security Interest in United
States Trademarks and Patents (incorporated by reference from
exhibit 10.66 to Coinmach Laundry's Form 10-K for the fiscal year
ended March 28, 1997, file number 1-11907)
10.54 Collateral Assignment of Leases, dated January 8, 1997, by Coinmach
in favor of Bankers Trust (incorporated by reference from exhibit
10.67 to Coinmach Laundry's Form 10-K for the fiscal year ended
March 28, 1997, file number 1-11907)
10.55 Collateral Assignment of Location Leases, dated January 8, 1997, by
Coinmach in favor of Bankers Trust (incorporated by reference from
exhibit 10.68 to Coinmach Laundry's Form 10-K for the fiscal year
ended March 28, 1997, file number 1-11907)
10.56 Amendment to Investor Purchase Agreements, dated January 8, 1997, by
and among Coinmach Laundry, GTCR Fund IV, Coinmach, Heller, Jackson
National Life Insurance Company, individually and as successor by
merger with Jackson National Life Insurance Company of Michigan
(collectively, "JNL"), Harvard, James N. Chapman and Michael E.
Marrus (incorporated by reference from exhibit 10.69 to Coinmach
Laundry's Form 10-K for the fiscal year ended March 28, 1997, file
number 1-11907)
10.57 Amendment to Investor Purchase Agreement, dated January 8, 1997, by
and among Coinmach Laundry, GTCR Fund IV, Heller, JNL, Harvard, MCS
Capital, Inc., James N. Chapman, Michael E. Marrus, Mitchell Blatt
and Michael Stanky (incorporated by reference from exhibit 10.70 to
Coinmach Laundry's Form 10-K for the fiscal year ended March 28,
1997, file number 1-11907)
10.58 Promissory Note, dated March 24, 1997, of John E. Denson in favor of
Coinmach (incorporated by reference from exhibit 10.71 to Coinmach
Laundry's Form 10-K for the fiscal year ended March 28, 1997, file
number 1-11907)
10.59 Deed of Trust, Security Agreement, Assignment of Leases, Rents and
Profits, Financing Statement and Fixture Filing, made by Coinmach to
Bankers Trust, as executed on March 27, 1997 and recorded with the
County Clerk of Dallas County, Texas on April 7, 1997 (incorporated
by reference from exhibit 10.72 to Coinmach Laundry's Form 10-K for
the fiscal year ended March 28, 1997, file number 1-11907)
</TABLE>
- --------
(1) Exhibit numbers are referenced to Item 601 of Regulation S-K under the
Securities Exchange Act of 1934, as amended.
35
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- -----------
<C> <S>
10.60 Asset Purchase Agreement, dated July 17, 1997, by and among Whitmer
Vend-O-Mat Laundry Services, Inc., Stephen P. Close, Kimberly A.
Close, Ruth D. Close, 5:06 am Kimberly A. Close, Ruth D. Close and
Stephen P. Close, as trustees of the Alvin D. Close Trust, SPC
Management, Inc. and Coinmach (incorporated by reference from
exhibit number 10.57 to Coinmach's Form 10-Q for the quarterly
period ended September 26, 1997, file number 1-11907)
10.61 Stock Purchase Agreement, dated July 17, 1997, by and among Kimberly
A. Close, Stephen P. Close, Ruth D. Close, Kimberly A. Close, Ruth
D. Close and Stephen P. Close, as trustees of the Alvin D. Close
Trust, National Coin Laundry Holding, Inc, National Coin Laundry,
Inc., National Laundry Equipment Company and Coinmach (incorporated
by reference from exhibit number 10.56 to Coinmach's Form 10-Q for
the quarterly period ended September 26, 1997, file number 1-11907)
10.62 Amendment No. One and Waiver, dated as of June 2, 1997, to the
Credit Agreement dated as of January 8, 1997, among Coinmach,
Coinmach Laundry, the lending institutions named therein, Bankers
Trust, First Union and Lehman (incorporated by reference from
exhibit number 10.73 to Coinmach Laundry's Form 10-Q for the
quarterly period ended June 27, 1997, file number 1-11907)
10.63 Amendment No. Two and Waiver, dated as of October 7, 1997, to the
Credit Agreement, dated as of January 8, 1997, as amended by
Amendment No. 1 dated as of June 2, 1997, among Coinmach, Coinmach
Laundry, the lending institutions from time to time a party thereto,
Bankers Trust, First Union and Lehman (incorporated by reference
from exhibit number 10.4 to Coinmach Laundry's Form 8-K/A Amendment
No. 1 dated October 8, 1997, file number 1-11907)
10.64 Indenture, dated as of October 8, 1997, by and between Coinmach and
State Street ("State Street") (incorporated by reference from
exhibit number 4.1 to Coinmach Laundry's Form 8-K dated October 8,
1997, file number 1-11907)
10.65 Purchase Agreement, dated as of October 1, 1997, by and among
Coinmach, Jefferies and Company, Inc. ("Jefferies"), Lazard, BT
Alex. Brown Incorporated ("BT Alex. Brown") and First Union Capital
Markets Corp. (incorporated by reference from exhibit 10.1 to
Coinmach Laundry's Form 8-K dated October 8, 1998, file number 1-
11907)
10.66 Registration Rights Agreement, dated October 8, 1997, by and among
Coinmach, Jefferies, Lazard, BT Alex. Brown and First Union Capital
Markets Corp. (incorporated by reference from exhibit 10.2 to
Coinmach Laundry's Form 8-K dated October 8, 1998, file number 1-
11907)
10.67 Second Supplement Indenture, dated as of October 8, 1997 (Supplement
to Indenture dated as of November 11, 1995) from Coinmach to State
Street Bank (incorporated by reference from exhibit 10.3 to Coinmach
Laundry's Form 8-K dated October 8, 1998, file number 1-11907)
10.68 Amended and Restated Employment Agreement, dated September 5, 1996,
by and between John E. Denson and Coinmach (incorporated by
reference from exhibit 10.4 to Coinmach Laundry's Registration
Statement on Form S-3, file number 333-37881)
10.69 Form of Underwriting Agreement, dated as of November, 1997, by and
among Coinmach Laundry, BT Alex. Brown, Lehman Brothers, Inc.,
Raymond James & Associates, Inc., Wheat, First Securities, Inc. and
Jefferies (incorporated by reference from exhibit 1.1 to Coinmach
Laundry's Registration Statement on Form S-3, file number 333-37881)
10.70 Purchase Agreement, dated as of January 20, 1998, by and among
Coinmach, Matthew A. Spagat, Jerome P. Seiden, Macke Laundry Service
Midwest Limited Partnership, JPS Laundry, Inc., Macke Laundry
Service, Inc., Coin Controlled Washers, Inc., Macke Laundry Service-
Central Limited Partnership, Macke Services-Texas, Inc., Superior
Coin, Inc., Superior Coin II, Inc., and Advance/Macke Domestic
Machines, Inc. (incorporated by reference from exhibit 10.59 to
Coinmach Laundry's Form 8-K dated March 2, 1998, file number 1-
11907)
</TABLE>
- --------
(1) Exhibit numbers are referenced to Item 601 of Regulation S-K under the
Securities Exchange Act of 1934, as amended.
36
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- -----------
<C> <S>
10.71 Amendment No. 1, dated as of March 2, 1998, to Purchase Agreement,
dated as of January 20, 1998, by and among Coinmach, Matthew A.
Spagat, Jerome P. Seiden, Macke Laundry Service Midwest Limited
Partnership, JPS Laundry, Inc., Macke Laundry Service, Inc., Coin
Controlled Washers, Inc., Macke Laundry Service-Central Limited
Partnership, Macke Services-Texas, Inc., Superior Coin, Inc.,
Superior Coin II, Inc., and Advance/Macke Domestic Machines, Inc.
(incorporated by reference from exhibit 10.60 to Coinmach Laundry's
Form 8-K dated March 2, 1998, file number 1-11907)
10.72 Second Amended and Restated Credit Agreement, dated as of March 2,
1998, among Coinmach, Coinmach Laundry, First Union, as Syndication
Agent, Bankers Trust, as Administrative Agent, and the Banks party
thereto (incorporated by reference from exhibit 10.61 to Coinmach
Laundry's Form 8-K dated March 2, 1998, file number 1-11907)
10.73 First Amendment to the Second Amended and Restated Credit Agreement,
dated as of March 2, 1998, among Coinmach, Coinmach Laundry, First
Union, as Syndication gent, Bankers Trust, as Administrative Agent,
and the Banks party thereto (incorporated by reference from exhibit
10.62 to Coinmach Laundry's Form 8-K dated March 2, 1998, file
number 1-11907)
10.74 Supply Agreement, dated as of May 13, 1997, by and among Coinmach,
SLEC and Raytheon Appliances, Inc. (incorporated by reference from
exhibit 10.58 to Coinmach Laundry's Form 10-Q for the quarterly
period ended December 26, 1997, file number 1-11907) (superceded by
exhibit 10.75 of this report)
10.75 Supply Agreement, dated as of May 1, 1998, by and among Coinmach,
SLEC and Raytheon Commercial Laundries, LLC (certain portions of
this exhibit were omitted pursuant to the grant of a request for
confidential treatment)
16.1 Letter, dated June 29, 1995, from Arthur Andersen LLP to the
Securities and Exchange Commission regarding change in certifying
accountants (incorporated by reference from exhibit 16.1 to
Coinmach's Registration Statement on Form S-1, file number 333-
00620)
21.1 Subsidiaries of Coinmach Laundry
27.1 Financial Data Schedule
</TABLE>
- --------
(1) Exhibit numbers are referenced to Item 601 of Regulation S-K under the
Securities Exchange Act of 1934, as amended.
(b) Reports on Form 8-K.
During the twelve month period ended March 31, 1998, the Company filed the
following reports:
(1) Amendment No. 3 on Form 8-K/A to Current Report on Form 8-K,
dated January 8, 1997, reporting in Items 2 and 7 thereof, the
completion of the acquisition of 100% of the outstanding voting
securities of each of KWL, Inc. and Kwik-Wash Laundries, Inc. by
Coinmach Corporation for $125 million in cash and a $15 million
promissory note issued by the Company, together with the audited
combined financial statements of Kwik Wash Laundries, Inc. and KWL,
Inc. for the years ended December 31, 1996, 1995 and 1994, and the
unaudited pro forma combined financial statements of Coinmach Laundry
Corporation for the nine-month period ended December 27, 1996 and for
the year ended March 29, 1996;
(2) Current Report on Form 8-K, dated October 8, 1997, reporting in
Items 5 and 7 thereof, the consummation of a private placement of
$100,000,000 aggregate principal amount of 11 3/4% Series C Senior
Notes due 2005 of Coinmach Corporation;
(3) Amendment No. 1 on Form 8-K/A to Current Report on Form 8-K,
dated October 8, 1997, reporting in Items 5 and 7 thereof, the
consummation of a private placement of $100,000,000 aggregate principal
amount of the Company's 11 3/4 Series C Senior Notes due 2005, together
with the audited combined financial statements of Kwik Wash Laundries,
Inc. and KWL, Inc. for the years ended December 31, 1996, 1995 and
1994, and the unaudited pro forma combined financial statements of
37
<PAGE>
Coinmach Laundry Corporation for the nine-month period ended December
27, 1996 and for the year ended March 29, 1996; and
(4) Current Report on Form 8-K, dated October 14, 1997, reporting in
Item 5 thereof, the filing of a registration statement with the
Securities and Exchange Commission relating to a proposed offering of
4,312,500 shares of the Company's Class A Common Stock, par value $.01
per share.
(5) Current Report on Form 8-K, dated March 2, 1998, reporting in
Items 2, 7 and 8 thereof, (A) the completion of the acquisition (the
"Macke Acquisition") of (i) 100% of the outstanding partnership
interests of Macke Laundry Service Limited Partnership held by Macke
Laundry Service Midwest Limited Partnership, MAS Laundry Inc., JPS
Laundry, Inc. and Macke Laundry Service, Inc. and (ii) substantially
all of the assets of Coin Controlled Washers, Inc., Macke Laundry
Service-Central Limited Partnership, Macke Laundry Services-Texas,
Inc., Superior Coin, Inc., Superior Coin II, Inc. and Advance/Macke
Domestic Machines, Inc. (collectively, the "Macke Entities") by
Coinmach Corporation for an aggregate purchase price of approximately
$213 million and (B) a change in the Company's fiscal year from the 52
or 53 week period ending on the last Friday of March to the twelve
consecutive months ending March 31;
(6) Amendment No. 1 on Form 8-K/A to Current Report on Form 8-K,
dated March 2, 1998, reporting in Items 2 and 7 thereof, the completion
of the Macke Acquisition, together with the audited combined financial
statements for the Macke Entities for the years ended June 30, 1997,
1996 and 1995, and the unaudited pro forma combined financial
statements of Coinmach Laundry Corporation for the nine-month period
December 26, 1997 and for the year ended March 28, 1997.
(c) Exhibits--See (a)(2) above.
(d) None.
38
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ROSLYN, STATE OF NEW YORK ON JUNE 12, 1998.
Coinmach Laundry Corporation
/s/ Stephen R. Kerrigan
By: _________________________________
STEPHEN R. KERRIGAN
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Stephen R. Kerrigan Chairman of the Board June 12, 1998
- ------------------------------------- of Directors and
STEPHEN R. KERRIGAN Chief Executive
Officer (Principal
Executive Officer)
/s/ Mitchell Blatt Director, President June 12, 1998
- ------------------------------------- and Chief Operating
MITCHELL BLATT Officer
/s/ Robert M. Doyle Chief Financial June 12, 1998
- ------------------------------------- Officer, Senior
ROBERT M. DOYLE Vice President
Secretary and
Treasurer
(Principal
Financial and
Accounting Officer)
/s/ John E. Denson Senior Vice June 12, 1998
- ------------------------------------- President--
JOHN E. DENSON Corporate
Development
/s/ Michael Stanky Senior Vice June 12, 1998
- ------------------------------------- President
MICHAEL STANKY
/s/ David A. Donnini Director June 12, 1998
- -------------------------------------
DAVID A. DONNINI
/s/ James N. Chapman Director June 12, 1998
- -------------------------------------
JAMES N. CHAPMAN
/s/ Bruce V. Rauner Director June 12, 1998
- -------------------------------------
BRUCE V. RAUNER
/s/ Stephen G. Cerri Director June 12, 1998
- -------------------------------------
STEPHEN G. CERRI
/s/ Arthur B. Laffer Director June 12, 1998
- -------------------------------------
ARTHUR B. LAFFER
39
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report.............................................. F-1
As of March 31, 1998 and March 28, 1997:
Consolidated Balance Sheets............................................. F-2
For the Years Ended March 31, 1998 and March 28, 1997, the Six Month
Transition Period Ended March 29, 1996 and the Period from April 5, 1995
to September 29, 1995:
Consolidated Statements of Operations................................... F-3
Consolidated Statements of Stockholders' Equity (Deficit)............... F-4
Consolidated Statements of Cash Flows................................... F-7
Notes to Consolidated Financial Statements................................ F-9
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of Coinmach Laundry Corporation
We have audited the accompanying consolidated balance sheets of Coinmach
Laundry Corporation and Subsidiaries (the "Company") as of March 31, 1998 and
March 28, 1997, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the years ended March 31,
1998 and March 28, 1997, the six-month transition period ended March 29, 1996
and the period from April 5, 1995 to September 29, 1995. 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 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 provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Coinmach
Laundry Corporation and Subsidiaries at March 31, 1998 and March 28, 1997, and
the consolidated results of their operations and their cash flows for the
years ended March 31, 1998 and March 28, 1997, the six-month transition period
ended March 29, 1996, and for the period from April 5, 1995 to September 29,
1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Melville, New York May 8, 1998,
except for Note 12, as to which the
date is June 5, 1998
F-1
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 28,
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................ $ 22,456 $ 14,729
Receivables, less allowance of $325 and $555............. 7,750 6,894
Inventories.............................................. 13,430 7,959
Prepaid expenses......................................... 6,308 3,170
Advance location payments................................ 74,026 38,472
Land, property and equipment:
Laundry equipment and fixtures......................... 233,080 135,656
Land, building and improvements........................ 25,467 14,266
Trucks and other vehicles.............................. 8,015 4,211
-------- --------
266,562 154,133
Less accumulated depreciation.......................... (72,234) (42,017)
-------- --------
Net property and equipment............................... 194,328 112,116
Contract rights, net of accumulated amortization of
$39,923 and $19,815..................................... 366,762 180,557
Goodwill, net of accumulated amortization of $12,530 and
$5,574.................................................. 110,424 95,771
Other assets............................................. 21,464 13,253
-------- --------
Total assets............................................. $816,948 $472,921
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable......................................... $ 17,128 $ 8,941
Accrued rental payments.................................. 20,977 10,573
Accrued interest......................................... 13,993 9,712
Other accrued expenses................................... 15,178 8,996
Deferred income taxes.................................... 79,511 65,650
11 3/4% Senior Notes..................................... 296,655 196,655
Premium on 11 3/4% Senior Notes, net..................... 9,258 --
Credit facility indebtedness............................. 296,267 130,000
9 7/8% promissory note................................... -- 15,000
Other long-term debt..................................... 9,236 3,831
Stockholders' equity:
Common stock........................................... 132 105
Capital in excess of par value......................... 103,078 53,160
Accumulated deficit.................................... (44,130) (29,263)
-------- --------
59,080 24,002
Receivables from stockholders.......................... (335) (439)
-------- --------
Total stockholders' equity............................... 58,745 23,563
-------- --------
Total liabilities and stockholders' equity............... $816,948 $472,921
======== ========
</TABLE>
See accompanying notes.
F-2
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX-MONTH
YEAR ENDED YEAR ENDED TRANSITION APRIL 5, 1995
MARCH 31, MARCH 28, PERIOD ENDED TO SEPTEMBER
1998 1997 MARCH 29, 1996 29, 1995
---------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues................... $ 324,887 $ 206,852 $ 89,070 $ 89,719
Costs and expenses:
Laundry operating
expenses................ 217,333 139,446 60,536 62,905
General and
administrative
expenses................ 6,194 4,613 1,844 2,351
Depreciation and
amortization............ 75,453 46,316 18,212 18,423
Stock based compensation
charge.................. 1,446 2,152 -- --
Restructuring expenses... -- -- -- 2,200
---------- --------- --------- ---------
300,426 192,527 80,592 85,879
---------- --------- --------- ---------
Operating income........... 24,461 14,325 8,478 3,840
Interest expense, net...... 44,662 26,859 11,999 11,818
---------- --------- --------- ---------
Loss before income taxes
and extraordinary items... (20,201) (12,534) (3,521) (7,978)
---------- --------- --------- ---------
Provision (benefit) for
income taxes:
Current payable.......... 299 200 50 420
Deferred................. (5,633) (2,507) (1,048) (2,282)
---------- --------- --------- ---------
(5,334) (2,307) (998) (1,862)
---------- --------- --------- ---------
Loss before extraordinary
items..................... (14,867) (10,227) (2,523) (6,116)
Extraordinary items, net of
income tax benefit of $206
for the year ended March
28, 1997 and $5,305 for
the six-month transition
period ended March 29,
1996...................... -- (296) (8,925) --
---------- --------- --------- ---------
Net loss................... $ (14,867) $ (10,523) $ (11,448) $ (6,116)
========== ========= ========= =========
Basic and diluted loss per
share:
Before extraordinary
items................... $ (1.32) $ (1.11) -- --
Extraordinary items...... -- (.03) -- --
---------- ---------
Basic and diluted net loss
per share................. $ (1.32) $ (1.14) -- --
========== =========
Pro forma basic and diluted
loss per share:
Before extraordinary
items................... $ (.33) $ (.81)
Extraordinary items...... (1.18) --
--------- ---------
Pro forma basic and diluted
net loss per share........ $ (1.51) $ (.81)
========= =========
Weighted average shares
outstanding:
Common shares............ 11,242,006 9,232,530 7,588,662 7,588,662
========== ========= ========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE AND SHARES)
<TABLE>
<CAPTION>
BALANCE BALANCE RECAPITALIZATION BALANCE
APRIL 5, SEPTEMBER 29, OF COMMON MARCH 29,
1995 NET LOSS 1995 NET LOSS STOCK 1996
-------- -------- ------------- -------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Voting Class A common
stock, par value $.01:
Authorized shares--
15,000,000 issued
shares,
end of period--0, 0,
10,004,278 and
12,687,135............. $ -- $ -- $ -- $ -- $-- $ --
Non-voting Class B
common stock, par value
$.01: Authorized
shares--1,000,000
issued shares,
end of period--0, 0,
480,648 and 480,648.... -- -- -- -- -- --
Class A common stock,
par value $.01:
Authorized shares--
1,959,021 issued
shares,
end of period--
1,959,021, 1,783,584, 0
and 0.................. 19 -- 19 -- (1) 18
Class B common stock,
par value $.01:
Authorized shares--
345,710 issued shares,
end of each period--
265,044, 265,044, 0 and
0...................... 3 -- 3 -- -- 3
Class C common stock,
par value $.01:
Authorized shares--
305,212 issued shares,
end of period 0,
305,212, 0 and 0....... -- -- -- -- 3 3
Class D common stock,
par value $.01:
Authorized shares--
305,212 issued shares,
end of each period--0.. -- -- -- -- -- --
Class E common stock,
par value $.01:
Authorized shares--
175,436 issued shares,
end of period--0,
175,436, 0 and 0....... -- -- -- -- 2 2
Class F common stock,
par value $.01:
Authorized shares--
3,086,045 issued
shares,
end of period--0,
3,086,045, 0 and 0..... -- -- -- -- 30 30
Class G common stock,
par value $.01:
Authorized shares--
618,428 issued shares,
end of period--0,
578,509, 0 and 0....... -- -- -- -- 6 6
Series A Preferred
stock, par value $.01:
10,000 authorized,
issued shares,
end of each period--0.. -- -- -- -- -- --
Capital in excess par
value.................. 17,881 -- 17,881 -- (40) 17,841
Accumulated deficit..... (1,155) (6,116) (7,271) (11,448) -- (18,719)
------- ------- ------- -------- ---- --------
16,748 (6,116) 10,632 (11,448) -- (816)
Receivables from
stockholders........... (492) -- (492) -- -- (492)
------- ------- ------- -------- ---- --------
Total stockholders'
equity (deficit)....... $16,256 $(6,116) $10,140 $(11,448) $-- $ (1,308)
======= ======= ======= ======== ==== ========
</TABLE>
F-4
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE AND SHARES)
<TABLE>
<CAPTION>
BALANCE
MARCH 29, 1996 RECLASSIFICATION ISSUANCE OF REDEMPTION ISSUANCE OF
BROUGHT OF COMMON PREFERRRED OF PREFERRED COMMON STOCK STOCK BASED
FORWARD NET LOSS STOCK STOCK STOCK STOCK DIVIDEND COMPENSATION
-------------- -------- ---------------- ----------- ------------ ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Voting Class A
common stock,
par value $.01:
Authorized
shares--
15,000,000
issued shares,
end of period--
0, 0, 10,004,278
and 12,687,135.. $ -- $ -- $ 57 $ -- $ -- $ 43 $ -- $ --
Non-voting Class
B common stock,
par value $.01:
Authorized
shares--
1,000,000 issued
shares,
end of period--
0, 0, 480,648
and 480,648..... -- -- 5 -- -- -- -- --
Class A common
stock, par value
$.01:
Authorized
shares--
1,959,021 issued
shares,
end of period--
1,959,021,
1,783,584, 0 and
0............... 18 -- (18) -- -- -- -- --
Class B common
stock, par value
$.01:
Authorized
shares--345,710
issued shares,
end of each
period--265,044,
265,044, 0 and
0............... 3 -- (3) -- -- -- -- --
Class C common
stock, par value
$.01:
Authorized
shares--305,212
issued shares,
end of period 0,
305,212, 0 and
0............... 3 -- (3) -- -- -- -- --
Class D common
stock, par value
$.01:
Authorized
shares--305,212
issued shares,
end of each
period--0....... -- -- -- -- -- -- -- --
Class E common
stock, par value
$.01:
Authorized
shares--175,436
issued shares,
end of period--
0, 175,436, 0
and 0........... 2 -- (2) -- -- -- -- --
Class F common
stock, par value
$.01:
Authorized
shares--
3,086,045 issued
shares,
end of period--
0, 3,086,045, 0
and 0........... 30 -- (30) -- -- -- -- --
Class G common
stock, par value
$.01:
Authorized
shares--618,428
issued shares,
end of period--
0, 578,509, 0
and 0........... 6 -- (6) -- -- -- -- --
Series A
Preferred stock,
par value $.01:
10,000
authorized,
issued shares,
end of each
period--0....... -- -- -- 19,207 (19,207) -- -- --
Capital in
excess par
value........... 17,841 -- -- (19,207) -- 53,764 (398) 1,160
Accumulated
deficit......... (18,719) (10,523) -- -- -- -- (21) --
-------- -------- ---- -------- -------- ------- ----- ------
(816) (10,523) -- -- (19,207) 53,807 (419) 1,160
Receivables from
stockholders.... (492) -- -- -- -- -- -- --
-------- -------- ---- -------- -------- ------- ----- ------
Total
stockholders'
equity
(deficit)....... $ (1,308) $(10,523) $-- $ -- $(19,207) $53,807 $(419) $1,160
======== ======== ==== ======== ======== ======= ===== ======
<CAPTION>
NET ACTIVITY BALANCE
IN LOANS TO MARCH 28,
STOCKHOLDERS 1997
------------ ----------
<S> <C> <C>
Voting Class A
common stock,
par value $.01:
Authorized
shares--
15,000,000
issued shares,
end of period--
0, 0, 10,004,278
and 12,687,135.. $-- $ 100
Non-voting Class
B common stock,
par value $.01:
Authorized
shares--
1,000,000 issued
shares,
end of period--
0, 0, 480,648
and 480,648..... -- 5
Class A common
stock, par value
$.01:
Authorized
shares--
1,959,021 issued
shares,
end of period--
1,959,021,
1,783,584, 0 and
0............... -- --
Class B common
stock, par value
$.01:
Authorized
shares--345,710
issued shares,
end of each
period--265,044,
265,044, 0 and
0............... -- --
Class C common
stock, par value
$.01:
Authorized
shares--305,212
issued shares,
end of period 0,
305,212, 0 and
0............... -- --
Class D common
stock, par value
$.01:
Authorized
shares--305,212
issued shares,
end of each
period--0....... -- --
Class E common
stock, par value
$.01:
Authorized
shares--175,436
issued shares,
end of period--
0, 175,436, 0
and 0........... -- --
Class F common
stock, par value
$.01:
Authorized
shares--
3,086,045 issued
shares,
end of period--
0, 3,086,045, 0
and 0........... -- --
Class G common
stock, par value
$.01:
Authorized
shares--618,428
issued shares,
end of period--
0, 578,509, 0
and 0........... -- --
Series A
Preferred stock,
par value $.01:
10,000
authorized,
issued shares,
end of each
period--0....... -- --
Capital in
excess par
value........... -- 53,160
Accumulated
deficit......... -- (29,263)
------------ ----------
-- 24,002
Receivables from
stockholders.... 53 (439)
------------ ----------
Total
stockholders'
equity
(deficit)....... $ 53 $ 23,563
============ ==========
</TABLE>
F-5
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE AND SHARES)
<TABLE>
<CAPTION>
BALANCE
MARCH 28, 1997 ISSUANCE OF NET ACTIVITY BALANCE
BROUGHT COMMON STOCK BASED IN LOANS TO MARCH 31,
FORWARD NET LOSS STOCK COMPENSATION STOCKHOLDERS 1998
-------------- -------- ----------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Voting Class A common
stock, par value $.01:
Authorized shares--
15,000,000 issued
shares,
end of period--0, 0,
10,004,278 and
12,687,135............. $ 100 $ -- $ 27 $ -- $-- $ 127
Non-voting Class B
common stock, par value
$.01:
Authorized shares--
1,000,000 issued
shares,
end of period--0, 0,
480,648 and 480,648.... 5 -- -- -- -- 5
Class A common stock,
par value $.01:
Authorized shares--
1,959,021 issued
shares,
end of period--
1,959,021, 1,783,584, 0
and 0.................. -- -- -- -- -- --
Class B common stock,
par value $.01:
Authorized shares--
345,710 issued shares,
end of each period--
265,044, 265,044, 0 and
0...................... -- -- -- -- -- --
Class C common stock,
par value $.01:
Authorized shares--
305,212 issued shares,
end of period 0,
305,212, 0 and 0....... -- -- -- -- -- --
Class D common stock,
par value $.01:
Authorized shares--
305,212 issued shares,
end of each period--0.. -- -- -- -- -- --
Class E common stock,
par value $.01:
Authorized shares--
175,436 issued shares,
end of period--0,
175,436, 0 and 0....... -- -- -- -- -- --
Class F common stock,
par value $.01:
Authorized shares--
3,086,045 issued
shares,
end of period--0,
3,086,045, 0 and 0..... -- -- -- -- -- --
Class G common stock,
par value $.01:
Authorized shares--
618,428 issued shares,
end of period--0,
578,509, 0 and 0....... -- -- -- -- -- --
Series A Preferred
stock, par value $.01:
10,000 authorized,
issued shares,
end of each period--0.. -- -- -- -- -- --
Capital in excess par
value.................. 53,160 -- 48,576 1,342 -- 103,078
Accumulated deficit..... (29,263) (14,867) -- -- (44,130)
-------- -------- ------- ------ ---- --------
24,002 (14,867) 48,603 1,342 -- 59,080
Receivables from
stockholders........... (439) -- -- -- 104 (335)
-------- -------- ------- ------ ---- --------
Total stockholders'
equity (deficit)....... $ 23,563 $(14,867) $48,603 $1,342 $104 $ 58,745
======== ======== ======= ====== ==== ========
</TABLE>
F-6
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTH
YEAR ENDED YEAR ENDED TRANSITION APRIL 5, 1995 TO
MARCH 31, MARCH 28, PERIOD ENDED SEPTEMBER 29,
1998 1997 MARCH 29, 1996 1995
---------- ---------- -------------- ----------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................ $ (14,867) $ (10,523) $(11,448) $ (6,116)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation.......... 30,649 22,587 9,374 9,571
Amortization of
advance location
payments............. 11,280 7,682 2,913 2,772
Amortization of
intangibles.......... 33,524 16,047 5,925 6,080
Deferred income
taxes................ (5,633) (2,507) (1,048) (2,000)
Amortization of debt
discount and deferred
issue costs.......... 1,091 627 508 735
Amortization of
premium on 11 3/4%
Senior Notes......... (617) -- -- --
Stock based
compensation......... 1,446 2,152 -- --
Extraordinary charges
for early
extinguishment of
debt, net of taxes... -- 296 8,925 --
Change in operating
assets and
liabilities, net of
businesses acquired:
Other assets........ (3,027) (2,462) 24 (1,054)
Receivables, net.... 1,406 (1,100) (1,489) (197)
Inventories and
prepaid expenses... (2,898) (3,008) (1,100) 930
Accounts payable.... 719 2,002 (6) (610)
Accrued interest,
net................ 4,281 1,956 3,193 (25)
Other accrued
expenses, net...... 1,196 983 (3,434) 1,980
--------- --------- -------- --------
Net cash provided by
operating activities... 58,550 34,732 12,337 12,066
--------- --------- -------- --------
INVESTING ACTIVITIES
Additions to property
and equipment.......... (42,468) (29,779) (10,757) (9,550)
Advance location
payments to location
owners................. (13,330) (11,809) (3,462) (3,569)
Additions to net assets
related to acquisitions
of businesses (net of
promissory notes of
$2,250 and $16,208 in
1998 and 1997,
respectively).......... (295,676) (155,247) -- (11,925)
Sale of property and
equipment.............. 599 137 57 5
--------- --------- -------- --------
Net cash used in
investing activities... (350,875) (196,698) (14,162) (25,039)
--------- --------- -------- --------
</TABLE>
F-7
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTH
YEAR ENDED YEAR ENDED TRANSITION APRIL 5, 1995 TO
MARCH 31, MARCH 28, PERIOD ENDED SEPTEMBER 29,
1998 1997 MARCH 29, 1996 1995
---------- ---------- -------------- ----------------
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES
Debt transactions:
Proceeds from issuance
of 11 3/4% senior
notes................. $109,875 $ -- $ 72,655 $ --
Net proceeds from
credit facility....... 166,267 130,000 -- --
Net borrowings
(repayments) of bank
and other borrowings.. 396 (325) (48,715) 6,126
Repayment of 12 3/4%
senior notes.......... -- (5,000) -- --
Repayment of 9 7/8%
promissory note....... (15,000) -- -- --
Principal repayments on
capitalized lease
obligations........... (1,173) (1,007) (262) (143)
Deferred debt issuance
costs................. (9,015) (178) (5,397) --
Debt extinguishment
costs................. -- (319) (6,909) --
Equity transactions:
Net proceeds from
public offering of
common stock.......... 48,702 52,894 -- --
Redemption of preferred
stock................. -- (19,207) -- --
Dividend paid--
preferred stock....... -- (21) -- --
Loans to stockholders.. -- -- -- (154)
Sale of common stock... -- -- -- 6,681
-------- -------- -------- -------
Net cash provided by
financing activities.... 300,052 156,837 11,372 12,510
-------- -------- -------- -------
Net increase (decrease)
in cash and cash
equivalents............. 7,727 (5,129) 9,547 (463)
Cash and cash
equivalents, beginning
of period............... 14,729 19,858 10,311 10,774
-------- -------- -------- -------
Cash and cash
equivalents, end of
period.................. $ 22,456 $ 14,729 $ 19,858 $10,311
======== ======== ======== =======
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Interest paid............ $ 38,385 $ 24,845 $ 8,500 $10,900
======== ======== ======== =======
</TABLE>
See accompanying notes.
F-8
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements of Coinmach Laundry
Corporation, a Delaware corporation ("Coinmach Laundry"), and Subsidiaries
(the "Company") include the accounts of its wholly-owned subsidiary, Coinmach
Corporation ("Coinmach") (formerly Solon Automated Services, Inc. ("Solon")
and the consolidated accounts of The Coinmach Corporation ("TCC")). The
Company was formed on April 5, 1995, at which time it acquired Solon (the
"Solon Acquisition"), and was controlled by Golder Thoma Cressey Rauner, Inc.
("GTCR"). TCC was formed in January 1995 by an investor group, comprised
principally of the same investors who formed the Company, and acquired
Coinmach Industries Co. ("Industries") and Super Laundry Equipment Co. L.P.
("Super Laundry LP") on January 31, 1995 (the "TCC Acquisition"). Both the
Solon Acquisition and the TCC Acquisition were accounted for as purchases and,
accordingly, the acquired assets and liabilities were recorded at their
estimated fair values at the respective acquisition dates.
As described in Note 2, Solon completed a merger with TCC on November 30,
1995. This transaction was accounted for in a manner similar to a pooling of
interests. As a result of the common investor group's control over both Solon
and TCC, the accompanying consolidated financial statements have been prepared
to reflect the accounts of the Company, Solon and TCC and their wholly-owned
subsidiaries on a consolidated basis since the date of common control, April
5, 1995.
The Company's business involves leasing laundry rooms from building owners
and property management companies, installing and servicing the laundry
equipment and collecting revenues generated from laundry machines. At March
31, 1998, the Company owned and operated approximately 680,000 washers and
dryers in approximately 70,000 locations on routes throughout the United
States and in 150 retail laundromats located throughout Texas. The Company's
wholly-owned subsidiary, Super Laundry Equipment Corp. ("Super Laundry"), also
is a laundromat equipment distribution company.
All material intercompany accounts and transactions have been eliminated in
consolidation.
RECOGNITION OF LAUNDRY REVENUES
The Company has agreements with various property owners which provide for
the Company's installation and operation of laundry machines at various
locations in return for a commission. These agreements provide for both
contingent (percentage of revenues) and fixed commission payments. The Company
reports revenues from laundry machines on the accrual basis and has accrued
the cash computed to be in the machines at the end of the fiscal period.
Super Laundry's customers generally sign sales contracts pursuant to which
Super Laundry constructs and equips complete laundromat operations, including
location identification, construction, plumbing, electrical wiring and all
required permits. Revenue is recognized on the completed contract method. A
contract is considered complete when all costs have been incurred and either
the installation is operating according to specifications or has been accepted
by the customer. The duration of such contracts is normally less than six
months. Sales of laundromats amounted to approximately $21.8 million, $18.8
million, $7.8 million and $7.9 million in 1998, 1997, 1996T, and 1995,
respectively.
F-9
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ form those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or market
and consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 28,
1998 1997
--------- ---------
<S> <C> <C>
Laundry equipment...................................... $ 9,524 $6,198
Machine repair parts................................... 3,906 1,761
------- ------
$13,430 $7,959
======= ======
</TABLE>
LAND, PROPERTY AND EQUIPMENT
Property, equipment and leasehold improvements are carried at cost and are
depreciated or amortized on a straight-line basis over the lesser of the
estimated useful lives or lease life, whichever is shorter.
<TABLE>
<S> <C>
Laundry equipment, installation costs and fixtures.......... 5 to 8 years
Leasehold improvements and decorating costs................. 5 to 8 years
Trucks and other vehicles................................... 3 to 4 years
</TABLE>
Upon the sale or retirement of property and equipment, the cost and related
accumulated depreciation are eliminated from the respective accounts, and the
resulting gain or loss is included in income. Maintenance and repairs are
charged to operations currently, and replacements of laundry machines and
significant improvements are capitalized.
GOODWILL AND CONTRACT RIGHTS
Goodwill, under purchase accounting, represents the excess of cost over fair
value of net assets acquired. Goodwill recorded as a result of the Solon
Acquisition on April 5, 1995 is being amortized on a straight-line basis over
20 years. Goodwill recorded on acquisitions subsequent thereto is being
amortized over 15 years on a straight-line basis.
Contract rights represent amounts expended for location contracts arising
from the acquisition of laundry machines on location. These amounts, which
arose solely from purchase price allocations, are amortized on a straight-line
basis over the period of expected benefit of 15 years and are based on
independent appraisals or present valued future cash flows at prevailing
discount rates.
Management periodically evaluates the realizability of the goodwill and
contract rights balances based upon the Company's expectations of undiscounted
cash flows and operating income. Based upon present operations and strategic
plans, management believes that no impairment of goodwill or contract rights
has occurred.
F-10
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ADVANCE LOCATION PAYMENTS
Advance location payments to location owners are amortized on a straight-
line basis over the contract term, which generally ranges from 5 to 10 years.
INTEREST EXPENSE
Interest expense is reported net of interest income of approximately $0.3
million, $1.0 million, $0.3 million and $0.1 million for 1998, 1997, 1996T and
1995, respectively.
RECLASSIFICATIONS
Certain prior year's balances have been reclassified to conform with the
1998 presentation.
LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS No. 128"). SFAS No. 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. SFAS No.
128 is effective for periods ending after December 15, 1997. The Company
adopted SFAS No. 128 for its interim reporting period ended December 26, 1997
and year ended March 31, 1998. Such adoption had no impact on loss per share
for fiscal year 1998 and fiscal year 1997. In February 1998, the SEC issued
Staff Accounting Bulletin ("SAB") No. 98 which revises the treatment of cheap
stock issued in connection with an initial public offering. SAB No. 98
requires companies to reflect the revised guidance retroactively. Pro forma
basic and diluted net loss per share for 1996 and 1995 have been restated to
comply with SAB No. 98.
Basic and diluted loss per share for 1998 and 1997 was calculated based upon
the weighted average number of common shares outstanding of 11,242,006 and
9,232,530, respectively. Conversion of common equivalent shares (stock
options) was not assumed since the results would have been antidulutive. Pro
forma loss per share for 1996T and 1995 was calculated based upon the weighted
average number of common shares of 7,588,662, which amount gives effect to the
transactions discussed below, but, in accordance with SAB No. 98, excluding
the effects of the stock issued and options granted discussed further in Note
8b.
The Company's historical capitalization differs significantly from its
capitalization effective with its July 23, 1996 initial public offering of
stock (see Note 8b). Accordingly, historical net loss per common share for the
six month transition period ended March 29, 1996 and the period from April 5,
1995 to September 29, 1995 is not considered meaningful and has not been
presented herein; rather, pro forma net loss per share is presented for these
periods in the accompanying statements of operations. The calculation of the
shares used in computing pro forma net loss per share includes the redemption
of preferred stock, as more fully described in Note 8d.
EMPLOYEE STOCK OPTIONS
The Company has stock option programs which are more fully described in Note
8e. The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees."
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 defines a fair value method of accounting for the
issuance of stock options and other equity instruments. Under the fair value
method, compensation cost is measured at the grant date based on the fair
value of the award and is recognized over the service period, which is usually
the vesting period. Pursuant to SFAS No. 123, companies are encouraged, but
are not required, to adopt the fair value method of accounting for employee
F-11
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
stock-based transactions. Companies are also permitted to continue to account
for such transactions under APB No. 25, but are required to disclose in the
financial statement footnotes, pro forma net (loss) income and per share
amounts as if the Company had applied the new method of accounting for all
grants made during 1996 and thereafter. SFAS No. 123 also requires increased
disclosures for stock-based compensation arrangements. The Company has elected
to continue to follow APB No. 25 in accounting for stock options and has
adopted the disclosure requirements of SFAS No. 123 (see Note 8e).
INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, "Accounting for
Income Taxes." SFAS No. 109 requires the liability method of accounting for
income taxes. Under the liability method of SFAS No. 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. SFAS No. 109 requires
that any tax benefits recognized for net operating loss carryforwards and
other items be reduced by a valuation allowance where it is more likely than
not that the benefits may not be realized. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.
IMPAIRMENT OF LONG-LIVED ASSETS
Effective March 30, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS No. 121 requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. SFAS No. 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The adoption of
SFAS No. 121 did not have an effect on the results of operations or financial
condition of the Company.
SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which is effective for years beginning
after December 15, 1997. SFAS No. 131 establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and
services, geographic areas, and major customers. Since SFAS No. 131 is not
required to be applied to interim financial statements in the initial year of
adoption, the Company is not required to disclose segment information in
accordance with SFAS No. 131 until the fiscal year ended March 31, 1999, if
applicable. In the Company's first quarter of fiscal 2000 report, and in
subsequent quarters, it would present the interim disclosures required by SFAS
No. 131 for both fiscal 2000 and 1999, if applicable.
The Company is currently evaluating what operating segments of its business
may trigger the disclosure requirements under SFAS No. 131.
COMPREHENSIVE INCOME STATEMENT
In 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement is effective for fiscal years commencing after December 15,
1997. The Company will be required to comply with the
F-12
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
provisions of this statement in its year ending March 31, 1999. The Company
does not believe that the adoption of this statement will have a significant
effect on its consolidated financial statements and related disclosures.
FISCAL YEAR
On March 6, 1998, the Company changed its fiscal year end to the twelve
consecutive months ending March 31. The impact of this change in the current
year is not material to the financial statements taken as a whole. The
Company's fiscal year had been the 52 or 53 week period ending on the last
Friday in March since the merger of Solon and TCC (see Note 2). Prior to the
merger of Solon and TCC, the Company's fiscal year was the fifty-two or fifty-
three week period which ended on the Friday nearest September 30. The period
from April 5, 1995 to September 29, 1995 is referred to as "1995", the period
from September 30, 1995 to March 29, 1996 is referred to as "1996T", the year
ended March 28, 1997, is referred to as "1997", and the year ended March 31,
1998 is referred to as "1998."
2. BUSINESS COMBINATIONS
A. THE MACKE ACQUISITION
On March 2, 1998, Coinmach completed the acquisition of Macke Laundry
Service Limited Partnership ("MLSLP") and substantially all of the assets of
certain related entities (collectively "Macke") for an aggregate purchase
price of approximately $213 million (the "Macke Acquisition"), excluding
transaction expenses. Macke operated approximately 236,000 washers and dryers,
and provided outsourced laundry equipment services to multi-family properties
throughout the United States.
Immediately following the Macke Acquisition, MLSLP was dissolved, the
partnership interests were liquidated and all of MLSLP's assets were
distributed to Coinmach.
Concurrently with the Macke Acquisition, the Company also entered into an
amended and restated senior financing agreement with its existing lenders,
providing for approximately $200 million of additional financing used to fund
the Macke Acquisition (the "Amended and Restated Credit Facility") (see Note
5).
The Macke Acquisition has been accounted for as a purchase and, accordingly,
assets and liabilities were recorded at their estimated fair value at the date
of acquisition and the results of operations are included subsequent to that
date. The purchase price allocations have been made on a preliminary basis,
which included a preliminary allocation of the excess of cost over the net
tangible assets acquired to contract rights of approximately $135.9 million.
B. THE KWIK WASH ACQUISITION
On January 8, 1997, Coinmach completed the acquisition of 100% of the
outstanding voting securities of each of KWL, Inc. ("KWL"), a Nevada
corporation, and Kwik-Wash Laundries, Inc. ("Kwik Wash"), a Nevada
corporation, for approximately $125 million in cash (excluding transaction
expenses) and a $15 million promissory note issued by Coinmach Laundry (the
"Kwik Wash Acquisition"). KWL and Kwik Wash are the sole partners of Kwik Wash
Laundries, L.P. (the "Kwik Wash Partnership"), a Texas limited partnership.
The Kwik Wash Partnership, based in Dallas, Texas, provides coin-operated
laundry equipment services to multi family dwellings in Texas, Louisiana,
Arkansas and Oklahoma and operates approximately 150 retail laundromats
located throughout Texas. Simultaneously with the acquisition, KWL, Kwik Wash
and the Kwik Wash Partnership merged with and into Coinmach.
F-13
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Concurrently with the Kwik Wash Acquisition, Coinmach entered into a new
credit facility providing financing of up to $200 million (the "New Credit
Facility") (see Note 5). The New Credit Facility, proceeds of which were used
in part to fund the Kwik Wash Acquisition, replaced the Company's then
existing credit facility.
The Kwik Wash Acquisition had been accounted for as a purchase and
accordingly, assets and liabilities were recorded at fair value at the date of
acquisition and the results of operations were included subsequent to that
date. The excess of cost over the net tangible assets acquired was allocated
to contract rights of approximately $123.3 million, goodwill of $49.4 million
and deferred taxes payable of approximately $49.4 million.
C. OTHER ACQUISITIONS
During the 1998 fiscal year, the Company made acquisitions of several small
route businesses or assets of businesses with purchase prices aggregating
approximately $84.0 million, of which the Company paid approximately $81.8
million in cash and $2.3 million in promissory notes issued by the Company,
which are included in other long-term debt. The excess cost over the net
assets acquired amounted to approximately $63.6 million and has been allocated
to contracts rights of approximately $47.1 million and to goodwill of
approximately $16.5 million.
During the 1997 fiscal year, the Company made acquisitions of several small
route businesses or assets of businesses with purchase prices aggregating
approximately $26.3 million, of which the Company paid approximately $25.2
million in cash and $1.2 million in promissory notes issued by the Company,
which are included in other long-term debt. Such promissory notes have a
conversion option which allows the holder of the option to convert these
promissory notes, after the one-year anniversary of the issue date, into
shares of the Company's Class A Common Stock at the principal amount then
outstanding at a conversion price equal to 115% of the average daily closing
price per share of Common Stock over the twenty business day period
immediately preceding the issue date. To date none of the above mentioned
promissory notes have been converted into shares of Common Stock. The excess
cost over the net assets acquired amounted to approximately $12 million of
which $7.9 million has been allocated to contract rights and $4.1 million has
been allocated to goodwill.
The following table reflects unaudited pro forma combined results of
operations of the Company, and all acquired businesses described above for the
years ended March 31, 1998 and March 28, 1997, as if the acquisitions
described above had taken place at the beginning of each of the periods
presented (in thousands except per share data):
<TABLE>
<CAPTION>
YEAR ENDED
--------------------
MARCH 31, MARCH 28,
1998 1997
--------- ---------
<S> <C> <C>
Revenues.......................................... $454,053 $439,723
Loss before extraordinary items................... (18,198) (14,657)
Net loss.......................................... (18,198) (14,953)
Basic and diluted loss before extraordinary items
per common share................................. (1.62) (1.59)
Basic and diluted net loss per common share....... (1.62) (1.62)
</TABLE>
These unaudited pro form results have been presented for comparative
purposes only and include certain adjustments, such as increased interest
expense on the related acquisition debt and additional amortization expense of
intangible assets, offset by the capitalization of installation and decorating
costs to conform to the accounting policy of the Company.
F-14
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In management's opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have occurred
had the acquisitions described above been consummated at the beginning of each
period or of the results of future operations of the combined companies under
the ownership and management of the Company.
D. THE SOLON ACQUISITION
Solon entered into a Stock Purchase Agreement, dated as of March 7, 1995,
with Ford Coin Laundries, Inc. ("Ford"), and certain other parties named
therein, whereby Ford purchased all of Solon's outstanding Common Stock (the
"Common Stock") and substantially all of Solon's Class A Common Stock (the
"Class A Common Stock") (collectively, the "Shares"). The purchase price for
the Shares was $11.5 million. The foregoing transaction closed on April 5,
1995. The source of funds used by Ford for the Shares was the cash proceeds
from the sales by Ford to the Company of (i) Ford's nonvoting Class A Common
Stock (the "Ford Non-voting Common Stock") pursuant to a Stock Purchase
Agreement, dated April 4, 1995, and (ii) an option to purchase Ford's voting
common stock (the "Ford Voting Common Stock") pursuant to a Letter Agreement
dated April 4, 1995. As of April 5, 1995, Ford beneficially owned, and had the
sole power to dispose of, the Shares. The Shares beneficially owned by Ford
represented 100% of the outstanding Common Stock and approximately 97% of the
outstanding Class A Common Stock.
Pursuant to the Stock Purchase Agreement with Ford, the Company purchased
from Ford all of the outstanding shares of Ford Non-voting Common Stock. The
purchase price for the Ford Non-voting Common Stock was of $11.4 million. The
sources of the funds used by the Company for the Ford Non-voting Common Stock
were certain shareholders of TCC, including GTCR. As of April 5, 1995, the
Company beneficially owned, and had the sole power to dispose of, 1,000 shares
of Ford Non-voting Common Stock.
Pursuant to the Letter Agreement dated April 4, 1995, Ford granted to the
Company, among other things, an option (the "Option") to purchase, subject to
the terms and conditions contained therein, all of the Ford Voting Common
Stock, for an aggregate purchase price of $100,000. On April 28, 1995, the
Company exercised the Option. The sources of funds used by the Company to
exercise the Option were substantially the same sources used to purchase Ford
Non-voting Common Stock. As of April 28, 1995, the Company beneficially owned,
and had the sole power to vote and dispose of, ten shares of Ford Voting
Common Stock.
E. THE TCC ACQUISITION
TCC was incorporated in January 1995 and was capitalized primarily through
an equity investment by an investor group led by the majority shareholder,
GTCR, and senior management and bank financing.
TCC was a holding company which was formed to acquire partnership interests
in Coinmach Industries Co. and Super Laundry LP. On January 31, 1995, TCC
acquired its partnership interests in Coinmach Industries Co. and Super
Laundry from CIC I Acquisition Corp. ("CIC I"). The transaction resulted in
TCC owning 100% interests in both Industries and Super Laundry LP. The
aggregate purchase price for these interests was $8.57 million, paid in cash.
The acquisition was accounted for using the purchase method of accounting. The
fair value of assets acquired less liabilities assumed exceeded the purchase
price by approximately $7.7 million. The excess was allocated to property,
equipment and intangible assets ratably based on their respective fair values.
F. THE MERGER WITH TCC
On November 30, 1995, Solon completed a merger ("Merger") with TCC through
an exchange of stock. Shares of common stock of the Company were issued in
exchange for all of the issued and outstanding shares of common stock of TCC.
The Company then contributed its stock of TCC to Solon. Solon became the
surviving
F-15
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
corporation after the merger, whereupon it changed its name to Coinmach
Corporation. Details of the results of operations of TCC and Solon for the
periods prior to the Merger are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER
APRIL 5, 1995 30, 1995 TO
TO SEPTEMBER NOVEMBER
29, 1995 29, 1995
------------- -----------
<S> <C> <C>
REVENUES
Solon............................................ $51,256 $17,909
TCC.............................................. 38,463 13,018
------- -------
Combined....................................... $89,719 $30,927
======= =======
NET (LOSS) INCOME
Solon............................................ $(5,496) $ (525)
TCC.............................................. (450) 49
------- -------
Combined....................................... $(5,946) $ (476)
======= =======
</TABLE>
The combined financial results presented above include an adjustment to
decrease TCC's net loss by approximately $180,000 in 1995 and $70,000 for the
period from September 30, 1995 to November 29, 1995, to conform its accounting
policy for the capitalization of machine installation costs to that of Solon.
Intercompany transactions between the two companies for the periods presented
were not material.
3. RECEIVABLES
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 28,
1998 1997
--------- ---------
<S> <C> <C>
Trade receivables...................................... $6,215 $5,551
Notes receivable....................................... 759 1,225
Other.................................................. 1,101 673
------ ------
8,075 7,449
Allowance for doubtful accounts........................ 325 555
------ ------
$7,750 $6,894
====== ======
</TABLE>
Notes receivable, which arise from the construction of laundromats, bear
interest at a weighted average rate of approximately 10% per annum and mature
through 1999. The notes are collateralized by the underlying laundry
equipment. The Company periodically sells notes receivable arising from the
sale of laundromats to third party finance companies. Included in other
receivables are finance reserves, which arise when the Company sells notes and
a portion of the proceeds are retained by the finance company. As the notes
are collected, the finance companies remit a portion of the collections to the
Company. Many of the notes receivable are sold with recourse to the Company
(see Note 9). Control of the notes sold with recourse is surrendered by the
Company on the date of transfer. The Company generally sells its receivables
with recourse at cost, recognizing no gain or loss.
4. RESTRUCTURING COSTS
Restructuring charges for 1995 consist of costs aggregating approximately
$2.2 million, which includes approximately $1.3 million of severance payments
for 55 of Solon's management, administrative and regional personnel,
approximately $300,000 of costs to relocate Solon's financial and
administrative functions to Roslyn,
F-16
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
New York, approximately $100,000 of costs to integrate certain financial and
operating systems, and approximately $500,000 of costs related to the
consolidation of certain of Solon's regional offices. Of the total
restructuring costs of $2.2 million, approximately $300,000 was paid during
1995, approximately $1.3 million was paid during 1996T, and the remaining
portion of approximately $600,000 was paid during 1997. The 55 employee
terminations included 5 management employees, 17 corporate staff financial and
administrative employees and 33 regional laundry operational employees.
Notifications to employees were made on various dates through September 1995.
5. DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 28,
1998 1997
--------- ---------
<S> <C> <C>
11 3/4% Senior Notes due
2005................... $296,655 $196,655
Premium on 11 3/4% Se-
nior Notes, net........ 9,258 --
Credit facility indebt-
edness................. 296,267 130,000
9 7/8% promissory note.. -- 15,000
Obligations under capi-
tal leases............. 4,475 1,711
Other long-term debt
with varying terms and
maturities............. 4,761 2,120
-------- --------
$611,416 $345,486
======== ========
</TABLE>
A. SENIOR NOTES
On November 30, 1995, Coinmach completed an exchange offer with
substantially all the holders of certain 12 3/4% Senior Notes due 2001 (the
"12 3/4% Notes") and certain 13 3/4% Senior Subordinated Debentures due 2002
(the "Subordinated Debentures"). Through December 14, 1995, Coinmach issued a
total of $196.7 million of Series B 11 3/4% Senior Notes due 2005 (the "Series
B Notes") which enabled it to complete this exchange offer, consummate the
merger with TCC, retire its remaining debt, and provide additional working
capital. Coinmach incurred costs of approximately $4.0 million, net of income
taxes, related to a 5.5% premium paid to retire its 12 3/4% Notes and
Subordinated Debentures, wrote-off the unamortized balance of the related
original issue discount and deferred finance costs of approximately $1.3
million and $1.8 million, net of income taxes, respectively, and also incurred
costs related to the retirement of a revolving credit facility of TCC of
approximately $1.8 million, net of income taxes. The aggregate of the
foregoing items totaling $8.9 million, net of income taxes, is shown as an
extraordinary item in 1996T.
In February 1997, Coinmach redeemed all of its outstanding 12 3/4% Notes at
a redemption price of 106.375% of the principal amount thereof, together with
accrued interest from January 15, 1997 to February 18, 1997, in an aggregate
amount of approximately $5.4 million. As part of the premium paid to redeem
the 12 3/4% Notes, together with the write-off of all unamortized financing
costs associated with the 12 3/4% Notes, Coinmach recognized an extraordinary
charge of $296,000 in 1997 (net of a tax benefit of $206,000).
On October 8, 1997, Coinmach completed a private placement (the "Bond
Offering") of $100 million aggregate principal amount of its 11 3/4% Series C
Senior Notes due 2005 (the "Series C Notes") on substantially identical terms
as its outstanding Series B Notes. The gross proceeds from the Bond Offering
were $109.875 million, of which $100.0 million represented the principal
amount outstanding and $9.875 million represented the payment of a premium for
the Series C Notes. Coinmach used approximately $105.4 million of the net
proceeds from the Bond Offering to repay indebtedness outstanding under its
senior financing arrangement. On December 23, 1997, Coinmach commenced an
offer to exchange (the "Exchange Offer") up to $296.7 million
F-17
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of its registered 11 3/4% Series D Senior Notes due 2005 (the "Series D Senior
Notes") for any and all of its Series C Notes and its Series B Notes. The
Exchange Offer expired on February 6, 1998, and as of such date the holders of
100% of the outstanding Series B Notes and Series C Notes tendered such notes
in the Exchange Offer.
Interest on the Series D Senior Notes is payable semi-annually on May 15 and
November 15. The Series D Senior Notes are redeemable at the option of
Coinmach at any time after November 15, 2000 at a price equal to 105 7/8%
declining to par if redeemed after November 15, 2002. The Series D Senior
Notes contain certain financial covenants and restrict the payment of certain
dividends, distributions or other payments from Coinmach to Coinmach Laundry.
B. CREDIT FACILITY
On January 8, 1997, the Company entered into a senior financing arrangement
under a New Credit Facility with Bankers Trust Company ("Bankers Trust"),
First Union National Bank of North Carolina ("First Union"), Lehman Commercial
Paper, Inc. and certain other lending institutions named therein
(collectively, the "Banks"), replacing the Company's then existing credit
facility. The New Credit Facility, as amended effective June 2, 1997,
consisted of a $70 million revolving credit facility and a $190 million term
loan facility, which was comprised of a Tranche A term loan in the amount of
$30 million and a Tranche B term loan in the amount of $160 million. The
Tranche B term loan was increased by $60 million effective June 2, 1997.
In December 1997, the New Credit Facility was amended to provide for $235
million of secured financing consisting of: (i) a $35 million working capital
revolving credit facility bearing interest at an annual rate of LIBOR plus
1.50%; (ii) a $125 million acquisition revolving credit facility bearing
interest at an annual rate of LIBOR plus 1.50%; and (iii) a $75 million
Tranche term loan facility bearing interest at an annual rate of LIBOR plus
2.00%.
In March 1998, concurrent with the Macke Acquisition, the Company entered
into the Amended and Restated Credit Facility on substantially similar terms
with its existing lenders which provided for additional financing in the form
of a $200 million Tranche B term loan bearing interest at an annual rate of
LIBOR plus 2.25%. The Amended and Restated Credit Facility, the working
capital revolving credit facility and the acquisition revolving credit
facility mature on December 31, 2003, the Tranche A term loan facility matures
on December 31, 2004 and the Tranche B term loan facility matures on June 30,
2005.
Interest on the Company's borrowings under the Amended and Restated Credit
Facility is payable quarterly in arrears with respect to Base Rate Loans and
the last day of each applicable interest period with respect to Eurodollar
Loans and at a rate per annum no greater than the sum of the Applicable Base
Rate Margin plus the Base Rate or the sum of the Applicable Eurodollar Margin
plus the Eurodollar Rate (in each case, as defined in the Amended and Restated
Credit Facility). Subject to the terms and conditions of the Amended and
Restated Credit Facility, the Company may, at its option convert Base Rate
Loans into Eurodollar loans.
The Company entered into swap agreements to reduce its exposure to
fluctuations in interest rates relating to its variable rate debt portfolio.
On February 23, 1998, Coinmach entered into a 33 month $75 million notional
amount interest rate swap transaction with Bankers Trust, to fix the monthly
LIBOR interest rate at 5.71% on the Amended and Restated Credit Facility. The
fair value of this swap agreement at March 31, 1998, as estimated by a dealer
based on quoted market prices, was $217,000 favorable.
On March 2, 1998, Coinmach entered into a 32 month, $100 million notional
amount interest rate swap transaction with First Union, to fix the monthly
LIBOR interest rate at 5.83% on a portion of the Amended and
F-18
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Restated Credit Facility. The fair value of this swap agreement at March 31,
1998, as estimated by a dealer based on quoted market prices, was $47,000
favorable. At March 31, 1998, the monthly variable LIBOR interest rate was
5.6875%.
Indebtedness under the Amended and Restated Credit Facility is secured by
all of the Company's real and personal property. The Company has guaranteed
the indebtedness under the Amended and Restated Credit Facility and pledged to
Bankers Trust Company, as Collateral Agent, its interests in all of the issued
and outstanding shares of capital stock of Coinmach. In addition to certain
terms and provisions, events of default, as defined, and customary restrictive
covenants and agreements, the Amended and Restated Credit Facility contains
certain covenants including, but not limited to, a maximum leverage ratio, a
minimum consolidated interest coverage ratio, and limitations on indebtedness,
capital expenditures, advances, investments and loans, mergers and
acquisitions, dividends, stock issuance's and transactions with affiliates.
Debt outstanding under the Amended and Restated Credit Facility as of March
31, 1998, consisted of the following (in thousands):
<TABLE>
<S> <C>
Term loan A, quarterly payments of $250 commencing March 31, 1998,
and increasing to $5,000 on March 31, 2003 and $12,500 on March
31, 2004 (Interest rate of 7.69% at March 31, 1998).............. $ 74,750
Term loan B, quarterly payments of $500 commencing June 30, 1998
with the final payment of $186,000 on June 30, 2005 (Interest
rate of 7.94% at March 31, 1998)................................. 200,000
Revolving line of credit.......................................... 21,517
--------
$296,267
========
</TABLE>
C. PROMISSORY NOTE
Pursuant to the Kwik Wash Acquisition, Coinmach Laundry issued a $15.0
million 9 7/8% promissory note due June 15, 2004. In December 1997, the
Company utilized certain of the net proceeds from the 1997 Stock Offering, as
defined below, to repay such promissory note plus accrued interest.
D. LETTERS OF CREDIT
The Company utilizes third party letters of credit to guarantee certain
business transactions, primarily certain insurance activities. The total
amount of the letters of credit at March 31, 1998 and March 28, 1997 were
approximately $5.3 million and $2.9 million, respectively.
6. RETIREMENT SAVINGS PLANS
Coinmach maintains several defined contribution plans (including the
Coinmach Plan, Solon Plan, Kwik Wash Plan, Reliable Plan and Macke Plan
(collectively, the "Plans")) meeting the guidelines of Section 401(k) of the
Internal Revenue Code. All of the Plans require employees to meet certain age,
employment status and minimum entry requirements as allowed by law.
Contributions to the Plans for 1998, 1997, 1996T and 1995 amounted to
approximately $281,000, $140,000, $43,000 and $43,000, respectively.
The Company does not provide any other post-retirement benefits.
F-19
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES
The components of the Company's net deferred tax liabilities were as follows
(in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 28,
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation and contract rights........... $90,273 $73,809
Other, net............................................. 1,349 1,516
------- -------
91,622 75,325
------- -------
Deferred tax assets:
Net operating loss carryforwards....................... 10,357 9,084
Stock compensation expense............................. 982 476
Covenant not to compete................................ 509 115
Other.................................................. 263 --
------- -------
12,111 9,675
------- -------
$79,511 $65,650
======= =======
</TABLE>
Deferred taxes arise primarily from timing differences resulting from using
accelerated depreciation for tax purposes and straight-line depreciation for
financial reporting purposes, and contract rights acquired which are not
deductible for tax purposes.
The net operating loss carryforwards of approximately $25 million, after a
reduction to reflect the limitation imposed under the provisions of the
Internal Revenue Code regarding change of ownership, expire between fiscal
years 2001 through 2013. In addition, the net operating losses are subject to
annual limitations imposed under the provisions of the Internal Revenue Code
regarding changes in ownership.
The benefit for income taxes consists of (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED APRIL 5, 1995 TO
MARCH 31, MARCH 28, MARCH 29, SEPTEMBER 29,
1998 1997 1996 1995
---------- ---------- ------------ ----------------
<S> <C> <C> <C> <C>
Federal.................. $(4,265) $(2,039) $(5,215) $(1,760)
State.................... (1,069) (474) (1,088) (102)
------- ------- ------- -------
$(5,334) $(2,513) $(6,303) $(1,862)
======= ======= ======= =======
</TABLE>
The effective income tax rate differs from the amount computed by applying
the U.S. federal statutory rate to loss before taxes as a result of state
taxes and permanent book/tax differences as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED APRIL 5, 1995 TO
MARCH 31, MARCH 28, MARCH 29, SEPTEMBER 29,
1998 1997 1996 1995
---------- ---------- ------------ ----------------
<S> <C> <C> <C> <C>
Expected tax benefit.... $(7,070) $(4,563) $(1,201) $(2,655)
State tax benefit, net
of federal taxes....... (690) (308) (170) (320)
Permanent book/tax
differences:
Goodwill.............. 2,289 1,100 373 1,000
Stock compensation
expense.............. -- 311 -- --
Other................. 137 947 -- 113
------- ------- ------- -------
Tax
provision/(benefit).... $(5,334) $(2,513) $ (998) $(1,862)
======= ======= ======= =======
</TABLE>
F-20
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company made cash payments for income taxes of approximately $358,000,
$204,000 and $36,000 for 1998, 1997 and 1996T, respectively.
8. STOCKHOLDERS' EQUITY
A. 1997 PUBLIC OFFERING
On December 19, 1997, Coinmach Laundry completed an offering (the "1997
Stock Offering") of 4,600,000 shares of Common Stock at a price of $19.75 per
share (including the issuance of 600,000 shares in connection with the
exercise of an underwriters' over-allotment option granted in connection
therewith). In connection with the 1997 Stock Offering, 2,665,000 shares were
sold by Coinmach Laundry and 1,935,000 shares were sold by certain
stockholders of the Company. The Company did not receive any proceeds from the
sale of shares by selling stockholders.
Proceeds generated from the 1997 Stock Offering were approximately $49.9
million, after underwriting discounts and commissions and before expenses.
B. INITIAL PUBLIC OFFERING
On July 23, 1996, the Company completed its initial public offering (the
"Offering") of 4,120,000 shares of its Common Stock at an initial public
offering price of $14.00 per share.
In connection with the Offering, the underwriters were granted a 30-day
option to purchase up to an aggregate of 618,000 additional shares of Common
Stock to cover over-allotments (the "Over-Allotment Option"), which Over-
Allotment Option was exercised on August 16, 1996 with respect to the purchase
of an additional 63,642 shares of Common Stock.
Proceeds from the Offering were approximately $54.5 million (after giving
effect to the exercise of the Over-Allotment Option), after underwriting
discounts and commissions and before expenses. After giving effect to the
redemption of the Preferred Stock (as described below), proceeds from the
Offering were approximately $35.3 million, before expenses.
Prior to the Offering, the Company issued, in privately negotiated
transactions, 79,029 shares of its Class B common stock to certain members of
management. The Company recorded a stock based compensation charge in an
amount of approximately $887,000 attributable to the issuance of such stock in
1997. In addition, approximately $104,000 of outstanding receivables relating
to loans to management in connection with prior purchases of the Company's
common stock were forgiven and have been accounted for as a stock-based
compensation charge in 1998 and 1997.
C. RECLASSIFICATION AND STOCK SPLIT
In connection with the Offering, the Company approved a reclassification
(the "Reclassification") of all of its capital stock pursuant to which all
seven classes of the previously issued and outstanding capital stock of the
Company prior to the Offering were converted into a class of preferred stock,
a class of voting common stock and a class of non-voting common stock. As part
of the Reclassification, holders of the Company's Class A common stock, Class
E common stock and Class F common stock immediately prior to the Offering
(collectively, the "Preference Shares") also received a distribution
consisting of shares of Common Stock and shares of Series A preferred stock,
par value $.01 per share (the "Preferred Stock"), representing an amount equal
to the sum of: (a) preferred dividends on such Preference Shares in an amount
equal to the accrued yield
F-21
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(at a rate of 8% per annum, compounded quarterly) on the original investment
in such Preference Shares through July 23, 1996; and (b) an amount equal to
the original investment in such Preference Shares. Holders of Preference
Shares who are members of the Company's management received an aggregate of
28,425 shares of Common Stock, and holders of the Preference Shares who were
not members of the Company's management received an aggregate of 1,000 shares
of Preferred Stock. In connection with the Reclassification, the Company also
approved an approximate 23-to-1 stock split (the "Stock Split") payable to
shareholders of record of the Company on July 12, 1996.
D. REDEMPTION OF PREFERRED STOCK
Immediately following the Offering, approximately $19.2 million of the
proceeds of the Offering were used by the Company to retire all of the issued
and outstanding shares of Preferred Stock.
E. STOCK OPTION PLAN
Prior to the Offering, the Company adopted the 1996 Employee Stock Option
Plan (as amended and restated, the "Stock Option Plan") which provides that
the Company may grant options for the purchase of up to 1,109,147 shares of
common stock to key employees of the Company over a period not to exceed ten
years. The Company may grant incentive stock options or options which do not
qualify as incentive stock options at an exercise price per share not less
than 100% of the fair market value of the Common Stock at the date of grant.
All options granted under the Stock Option Plan vest over four years in five
equal installments (20% immediately) and expire ten years from the date of
grant.
The Company has granted 253,750 options to various employees of the Company
pursuant to the Stock Option Plan, through March 31, 1998.
On July 23, 1996, in connection with the Offering, the Company granted
certain nonqualified options (the "1996 Options") to certain members of
management (collectively, the "Option Holders") to purchase up to 735,618
shares of Common Stock at 85% of the initial offering price of the Common
Stock. On September 17, 1996, for the purpose of preserving the Option
Holders' percentage interest of Common Stock represented by the 1996 Options
(which percentage interest was decreased as a result of the exercise of the
Over-Allotment Option), the Company granted to the Option Holders additional
nonqualified stock options to purchase up to 3,819 shares of Common Stock (the
"Additional Options"). The 1996 Options and Additional Options vest in equal
annual installments (20% vested immediately on the date of grant and the
remainder over a four year period) commencing on July 23, 1996, the effective
date of the Offering. With respect to 1996 Options and Additional Options
granted to employees. The Company records the difference between the exercise
price and the initial offering price of Common Stock as a stock-based
compensation charge over the applicable four year vesting period.
On September 17, 1996, the Company granted to certain directors each of whom
was appointed by the Board of Directors of the Company on such date to serve
as independent directors, options entitling each such director to purchase up
to 60,000 shares of Common Stock (the "Independent Director Options"). The
Independent Director Options vest in equal annual installments (25% vest
immediately on the date of grant and the remainder over a three year period),
commencing on September 17, 1996, and entitle each such director to purchase
shares of Common Stock at the initial public offering price of the Common
Stock. The Company records the difference between the exercise price of the
Independent Director Options and the fair market value of the Common Stock on
September 17, 1996 as a stock-based compensation charge over the applicable
three year vesting period.
F-22
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On September 5, 1997, Coinmach Laundry granted certain non-qualified options
(the "1997 Options") to certain members of management to purchase up to
200,000 shares of Common Stock at an exercise price of $11.90 per share of
Common Stock. The 1997 Options vest in equal annual installments (20% vest
immediately on the date of grant and the remainder vest over a four year
period) commencing on September 5, 1997. The Company will record the
difference between the exercise price of the 1997 Options and the fair market
value of Common Stock on September 5, 1997 as a stock-based compensation
charge over the applicable four year vesting period.
For the years ended March 31, 1998 and March 28, 1997, the Company has
recorded stock-based compensation charges of approximately $1,342,000 and
$1,161,000, respectively relating to the 1996 Options, the 1997 Options, the
Additional Options and the Independent Director Options.
The Company has elected to comply with APB No. 25 and related
interpretations in accounting for its employee stock options because the
alternate fair value accounting provided for under SFAS No. 123 requires use
of option valuation models which were not developed for use in valuing such
employee stock options. Under APB No. 25, compensation expense is recognized
only when the exercise price of the Company's employee stock options is less
than the market price of the underlying stock on the date of grant.
In accordance with SFAS No. 123, pro forma information regarding net loss
and loss per common share has been determined as if the Company had accounted
for its employee stock options under the fair value method required by SFAS
No. 123. The fair value for these options was estimated at the date of each
grant using a Black-Scholes option pricing model with the following weighted
average assumptions for 1998 and 1997 risk-free interest rate of 5.9% and
6.6%; dividend yields of 0%, volatility factor of the expected market price of
the Company's common stock of 24.5% and a weighted-average expected life of
the options of five years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
In management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options due to
changes in subjective input assumptions which may materially affect the fair
value estimate, and because the Company's employee stock options have
characteristics significantly different from those of traded options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The
Company's pro forma net loss and net loss per share are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
MARCH 31, MARCH 28,
1998 1997
------------ ------------
<S> <C> <C>
Pro forma basic and diluted net loss......... $(15,890,000) $(10,307,000)
Pro forma basic and diluted net loss per
share....................................... $(1.41) $(1.12)
</TABLE>
SFAS No. 123 is applicable only to options granted subsequent to March 30,
1996 (no options were granted in fiscal 1996).
F-23
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Information with respect to options for the years ended March 31, 1998 and
March 28, 1997 is as follows:
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE FAIR
AVERAGE VALUE OF OPTIONS
OPTIONS EXERCISE PRICE GRANTED
--------- -------------- ----------------
<S> <C> <C> <C>
Options outstanding at March 29,
1996........................... $ -- $ --
Options granted:
Nonqualified options issued at
market price................. 181,250 14.00 4.87
Directors' options issued at
below market price........... 120,000 14.00 9.36
Nonqualified options issued at
below market price........... 739,437 11.90 6.00
--------- ------ -----
Options outstanding at March 28,
1997........................... 1,040,687 12.51 6.17
Options granted:
Nonqualified options issued at
market price................. 72,500 21.62 6.94
Nonqualified options issued at
below market price........... 200,000 11.90 12.53
Options exercised............. (17,857) 11.90 --
--------- ------ -----
Options outstanding at March
31, 1998..................... 1,295,330 $12.93 $7.23
========= ====== =====
Options exercisable at March
28, 1997..................... 214,151 $12.55 $6.26
========= ====== =====
Options exercisable at March
31, 1998..................... 464,918 $12.80 $6.85
========= ====== =====
</TABLE>
Exercise prices for options outstanding and for options exercisable as of
March 31, 1998 were as follows:
<TABLE>
<CAPTION>
NUMBER OF RANGE OF
NUMBER OF OPTIONS OPTIONS EXERCISABLE EXERCISE PRICES
----------------- ------------------- ---------------
<S> <C> <C>
1,222,830 450,418 $11.90--$14.00
5,000 1,000 $17.75
67,500 13,500 $21.25--$24.50
--------- -------
1,295,330 464,918
========= =======
</TABLE>
The weighted average remaining contractual life of those options is
approximately 8.6 years.
Shares of Common Stock reserved for future issuance as of March 31, 1998 are
as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C>
Stock options.................................................. 1,541,580
Conversion shares.............................................. 480,648
Convertible notes.............................................. 56,466
---------
2,078,694
=========
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
Rental expense for all operating leases, which principally cover office
facilities, laundromats and vehicles, was approximately $4,483, $2,307, $1,235
and $1,139 for 1998, 1997, 1996T and 1995, respectively (in thousands).
F-24
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum rental commitments under all noncancellable operating leases
as of March 31, 1998, are as follows (in thousands):
<TABLE>
<S> <C>
1999............................................................ $ 7,637
2000............................................................ 6,122
2001............................................................ 4,371
2002............................................................ 2,402
2003............................................................ 1,499
2004 and future periods......................................... 3,639
-------
$25,670
=======
</TABLE>
The Company is contingently liable on receivables sold with recourse to
finance companies. The total amount of such receivables outstanding as of
March 31, 1998 is approximately $2.3 million.
The Company is party to various legal proceedings incidental to its
business. Although the ultimate disposition of these proceedings is not
presently determinable, management does not believe that adverse
determinations in any or all such proceedings would have a material adverse
effect upon the financial condition or results of operations of the Company.
In connection with insurance coverages, which include workers compensation,
general liability and other coverages, annual premiums are subject to limited
retroactive adjustment based on actual loss experience.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Under the provisions of SFAS No. 107, "Disclosures About Fair Value of
Financial Instruments," the Company is required to disclose fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate the value. In cases
where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques.
The carrying amounts of cash and cash equivalents, receivables, the Amended
and Restated Credit Facility, and other long-term debt approximates their fair
market value at March 31, 1998. The carrying amount and related estimated fair
value for the Company's Series D Senior Notes at March 31, 1998 are as follows
(in thousands):
<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
11 3/4% Senior Notes................................. $296,655 $330,770
</TABLE>
The fair value of the Series D Senior Notes has been determined through
information obtained from quoted market prices.
11. OTHER ASSETS
In connection with the Company's establishment of a corporate office in
Charlotte, North Carolina, and the relocation of an executive officer of the
Company to such office in September 1996, the Company extended a loan to such
officer in the principal amount of $500,000 payable in ten equal annual
installments commencing in July 1997 (each payment date, a "Payment Date"),
with interest accruing at a rate of 7.5% per annum. The Company has authorized
that payment of principal and interest will be forgiven on each Payment Date.
The balance of such loan of $450,000 and $500,000 is included in other assets
as of March 31, 1998 and March 28, 1997, respectively.
F-25
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUBSEQUENT EVENTS
Through May 1998, the Company completed certain acquisitions of businesses or
assets of businesses, with purchase prices aggregating approximately $21
million, utilizing funds available under the Amended and Restated Credit
Facility.
On June 5, 1998, the Company completed the acquisition of the stock of Gordon
& Thomas Cos. Inc. for a cash purchase price of approximately $58 million and
the assumption of certain liabilities. This transaction was financed with cash
and borrowings under the Amended and Restated Credit Facility.
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The 1997 and 1998 quarterly earnings per share amounts have been restated to
comply with SFAS No. 128 and related interpretations.
<TABLE>
<CAPTION>
JUNE 27, SEPTEMBER 26, DECEMBER 26, MARCH 31,
FOR THE QUARTER ENDED 1997 1997 1997 1998
--------------------- ------------ --------------- -------------- ------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................ $ 72,095 $ 77,702 $ 80,618 $ 94,472
Operating income........ $ 5,750 $ 5,695 $ 6,821 $ 6,195
Loss before income tax-
es..................... $ (4,313) $ (5,371) $ (4,480) $ (6,037)
Net loss................ $ (3,513) $ (4,266) $ (3,785) $ (3,303)
Basic and diluted net
loss per share......... $ (0.33) $ (0.40) $ (0.34) $ (0.25)
Weighted average shares
outstanding............ 10,484,926 10,484,926 10,872,450 13,167,783
</TABLE>
<TABLE>
<CAPTION>
JUNE 26, SEPTEMBER 27, DECEMBER 27, MARCH 28,
FOR THE QUARTER ENDED 1996 1996 1996 1997
--------------------- ------------ --------------- -------------- -------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................ $ 47,940 $ 46,506 $ 48,759 $ 63,647
Operating income........ $ 4,509 $ 2,566 $ 3,877 $ 3,373
Loss before
extraordinary items and
income taxes........... $ (1,632) $ (3,435) $ (2,127) $ (5,340)
Loss before extraordi-
nary items............. $ (1,232) $ (2,235) $ (1,427) $ (5,333)
Net loss................ $ (1,232) $ (2,235) $ (1,427) $ (5,629)
Pro forma basic and di-
luted net loss per
share.................. $ (0.16)
Basic and diluted net
loss per share:
Before extraordinary
items................ $ (0.23) $ (0.14) $ (0.51)
Extraordinary items... $ -- $ -- $ (0.03)
Basic and diluted net
loss per share....... $ (0.23) $ (0.14) $ (0.54)
Weighted average shares
outstanding............ 7,588,662 9,742,573 10,453,105 10,484,926
</TABLE>
F-26
<PAGE>
EXHIBIT 10.75
SUPPLY AGREEMENT
----------------
This Supply Agreement ("Agreement") is made and entered Into by and
among Coinmach Corporation ("Coinmach") and Super Laundry Equipment Corporation
("Super Laundry") (Coinmach and Super Laundry being collectively referred to
herein as "Buyer"), and Raytheon Commercial Laundry LLC, a Delaware limited
liability company ("RCL"). This Agreement is executed this 1st day of May,
1998, and shall become effective immediately upon the consummation of the
Acquisition (as hereafter defined) (but in no event later than May 7, 1998), at
which time Alliance Laundry Systems LLC, a Delaware limited liability company
("Seller") shall acquire and succeed to the business operations of RCL Seller
hereby joins in this Agreement as an original party hereto.
WITNESSETH
----------
WHEREAS, Buyer is in the business of providing vended and non-vended
laundry equipment services for multi-family housing units, owning and operating
their own coin laundries, and is also a distributor of coin laundry and on-
premise laundry equipment and turnkey laundromat stores, and
WHEREAS, Buyer wishes to assure itself of an ongoing business
relationship with Seller, in a manner comparable to the business relationship
Buyer has enjoyed with RCL, which is beneficial to Buyer in terms of assuring
that Buyer has access in sufficient quantities to the Seller's latest products
and Technology in the Buyer's business, and other complementary benefits; and
WHEREAS, Buyer previously entered into a Supply Agreement with
Raytheon Appliances, Inc. (a predecessor-in-interest to RCL), dated as of May
13, 1997 (the "Existing Supply Agreement"); and
WHEREAS, RCL, together with its sole equity owner, the Raytheon
Company ("Parent"), have entered into an agreement with Bain/RCL L.L.C., a
Delaware limited liability company, RCL Acquisitions L.L.C., a Delaware limited
liability company, and certain members of the management of RCL, pursuant to
which such persons are to acquire from Parent controlling interests in RCL (the
"Acquisition"), which Acquisition is anticipated to take place on or about May
5, 1998; and
WHEREAS, Buyer and RCL now desire to enter into this Agreement, and
Seller desires to join in this Agreement and be bound by the terms hereof,
pursuant to which Buyer will, following the consummation of the Acquisition,
purchase certain of its
- --------------------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
<PAGE>
requirements of the Products (as defined herein) from Seller, in replacement of
the Existing Supply Agreement, in order to extend the term of the relationship
between Buyer and RCL to encompass Seller and to include the period following
consummation of the Acquisition, to acknowledge Buyer's awareness of the
Acquisition, to put into effect, as of the date of this Agreement, the current
pricing structure as reflected on Exhibit A attached hereto (taking into account
the present volume requirements, and reflecting appropriate current volume
discounts, applicable to Buyer's current operations), and to include certain
existing affiliates of Coinmach Corporation directly as Buyer under this
Agreement
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. REQUIREMENTS CONTRACT - For the term hereof (as defined in
---------------------
Section 10), so long as Seller is a manufacturer of the Products defined in
Section 2 herein and so long as Buyer leases and/or operates premises on which
one or more coin-operated or card-operated washing machines and/or dryers are
located; and/or is an authorized distributor for Seller's Products in one or
more territories, Seller agrees to sell to Buyer, and Buyer agrees to purchase
from Seller, Buyer's requirements of Products on the terms and conditions
contained herein. In the event Buyer wishes to lease Products, Buyer further
agrees to specify to the lessor that such Products must be purchased from
Seller.
2. DEFINITION OF PRODUCTS - For purposes of this Agreement, the
----------------------
parties agree that the following are the defined "Products" referenced in this
Agreement;
a. All coin-operated or card-operated washing machines and front
load washers;
b. All coin-operated or card-operated dryers, stacked dryers, and
tumbler dryers; and
c. All new replacement and new repair parts for any and all of
Seller's coin-operated or card-operated washing machines, dryers, front load
washers, stacked dryers and tumbler dryers owned by, leased to or serviced by
Buyer.
3. PRICE - The prices to be charged Buyer will be **OMITTED PURSUANT
-----
TO CONFIDENTIAL TREATMENT REQUEST**.
All prices are stated on an FOB shipping point basis, except Seller
will prepay freight on orders of 42 or more units of
- --------------------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
2
<PAGE>
Seller's washers and dryers (21 or more for stacked dryers) for shipments within
the continental United States and, for shipments into Mexico, will prepay
freight to a destination point selected by Buyer on the U.S.-Mexican border.
The current prices to be charged Buyer for replacement and repair
parts are those set forth in Seller's published parts price lists, stated as
either a net price or a suggested list price; however, if such price is listed
as a suggested list price, Buyer shall be charged suggested list price less a
**OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST** discount.
Seller reserves the right to select the carrier and shipping point for
Products. Payment terms shall be ninety (90) days from date of invoice;
provided, however, that Seller retains the right to adjust payment terms in the
event that Buyer fails to maintain its timeliness of payment in all material
respects.
4. RIGHTS WITH RESPECT TO FUTURE PRICES - Seller shall have the
------------------------------------
right to change the prices charged Buyer for Products upon sixty (60) days prior
written notice. The percentage increases in prices by Seller shall not exceed
the percentage price increases which are implemented with respect to Seller's
other route customers as documented by Seller's published manufacturer's list
prices. **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
5. COMPETITIVE PRODUCT - In consideration of Seller's agreement to
-------------------
provide significant volume-based discount pricing, Buyer agrees to purchase at
least **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST** of its needed
Products from Seller during the term of the Agreement. In addition, if Seller
is unable to deliver Products which Buyer has ordered within forty-five (45)
days of the date such Products would be shipped in the ordinary course of
Seller's business, Buyer has the right to instead purchase a like number of
pieces of equipment of comparable grade and quality from Seller's competitors.
In the event Buyer requires certain items of laundry equipment with respect to
which none of the Products manufactured by Seller substantially conform to the
specifications of such equipment as required by Buyer, then, notwithstanding the
provisions contained in the first sentence of this Section 5, Buyer shall be
free to purchase such equipment from any other person.
6. TECHNICAL SUPPORT - Seller will commit resources to work directly
-----------------
with Buyer on projects mutually beneficial to both parties, including but not
limited to audit control, electronic display, card-actuated washers and dryers
and stacked frontload wash/dryer combinations. This is required by Buyer to
ensure timely response to competitive new product developments and to
- --------------------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
3
<PAGE>
allow Buyer to be more competitive by offering more efficient customer friendly
laundry equipment services.
7. PRODUCT RELIABILITY - Buyer will share with Seller service
-------------------
history and product reliability data which is readily available to Buyer
concerning the performance of Seller's products.
8. WARRANTY - All Products sold to Buyer shall be sold to Buyer with
--------
Seller's standard commercial limited parts warranties, unless otherwise
specified by Seller and mutually agreed to in writing by Buyer in advance of any
sales; except, however, the Speed Queen branded Washers, Dryer and Stack Dryers
shipped by Seller to Buyer on or after January 27, 1997 shall be sold to Buyer
without warranty, provided, however, that Seller shall reimburse Buyer for any
cost of material (but not labor) incurred by Buyer which is attributable to
Seller's verified "Epidemic Failure" of component parts. An "Epidemic Failure"
of a component part occurs when there is in excess of a 10% failure rate for the
preceding twelve (12) months for that component.
9. DEFAULT AND ARBITRATION - Each of the following shall constitute
-----------------------
an Event of Default under this Agreement:
A. Default in the payment when due of any amount owed to either
Party by the other under this Agreement, if such failure continues for a period
of thirty (30) days after payment was due;
B. Default in the obligation to obtain all Products from Seller in
the manner set forth in Sections 1, 2 and 5, if such failure continues for a
period of thirty (30) days after notice by Seller of such default; and
C. Default in any of Seller's obligations to Buyer hereunder.
Upon the occurrence and continuation of an Event of Default hereunder,
Seller, in the case of an Event of Default under clause A or B of this Section
9, and Buyer, in the case of an Event of Default under clause A or C of this
Section 9, shall have the non-exclusive right to commence appropriate
proceedings in any state court located in New York, New York, or in the federal
courts for the Southern District of New York, Buyer hereby agreeing that it
irrevocably submits to the jurisdiction of such courts and waives, to the
fullest extent such party may effectively do so, the defense of an inconvenient
forum to the maintenance of any such action or proceeding. The foregoing
notwithstanding, if there is a dispute arising out of any of the other terms of
this Agreement, such dispute shall be immediately submitted to arbitration in
New York, New York, by a retired judge provided by the Judicial
- --------------------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
4
<PAGE>
Arbitration and Mediation Service in accordance of the commercial rules then in
effect of the American Arbitration Association, and any award of such
arbitration shall be final and binding upon the parties.
10. TERM - (a) The initial term of this Agreement shall be **OMITTED
----
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**, commencing on the date hereof and
ending on **OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**.
(b) Buyer shall have the right to terminate this Agreement upon the
occurrence of a "Change of Control" (as hereafter defined) affecting Buyer and
the giving of written notice to Seller specifying a termination date of not less
than 120 days following the later of the date upon which such "Change of
Control" occurred or the date of such notice. For purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred upon the earliest of the
following events: (i) upon the sale, transfer or other disposition, on a
cumulative basis subsequent to the date of this Agreement, of equity securities
in a party representing interests sufficient to elect a majority of the board of
directors or other persons responsible for the management or governance of Buyer
or of Coinmach Laundry Corporation, a Delaware corporation ("CLC"), the sole
shareholder of Buyer; (ii) upon any other occurrence after the date of this
Agreement resulting in the ability of any person or group of persons not
presently in control of Buyer or CLC to, directly or indirectly, exercise actual
control over the direction and management of Buyer or CLC; or (iii) the sale or
other disposition of all or substantially all of the assets of Buyer; provided,
--------
however, that no Change of Control hereunder shall be deemed to have occurred
- -------
following the sale or issuance by Buyer or CLC of any class of equity securities
if such securities are sold in a transaction pursuant to a registration
statement which has been declared effective by the U.S. Securities and Exchange
Commission.
11. NOTICE - Except as otherwise provided herein, any notice required
------
hereunder shall be in writing and shall be deemed to have been validly served,
given, or delivered upon (a) deposit in the United States certified or
registered mails, with proper postage prepaid, (b) deposit with a reputable
overnight courier with all charges prepaid, or (c) delivery, if hand-delivered
by messenger, all of which must be properly addressed to the party to be
notified as follows:
If to Seller at: Attn: Chief Executive Officer
Alliance Laundry Systems LLC
Shepard Street
P.O. Box 990
- --------------------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
5
<PAGE>
Ripon, WI 54971-0990
with a copy to: Attn: Senior Vice President Sales and Marketing
Alliance Laundry Systems LLC
Shepard Street
P.O. Box 990
Ripon, WI 54971-0990
If to Buyer at: Coinmach Laundry Corporation
55 Lumber Road
Roslyn, New York 11576
Attn: Mr. Robert M. Doyle
with a copy to: Anderson Kill & Olick, P.C.
1251 Avenue of the Americas
New York, New York 10020-1182
Attn: Ronald S. Brody, Esq.
or to such other address as each party may designate for itself by
like notice.
12. CHOICE OF LAW - This Agreement shall be governed by the laws of
-------------
the State of New York.
13. SUCCESSORS AND ASSIGNS - This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors,
legal representatives, and assigns. Buyer acknowledges that Seller is an
original party hereto, with rights, privileges, duties, and obligations
hereunder commencing immediately upon the effective date of this Agreement.
This Agreement may not be assigned, transferred or otherwise conveyed by Seller
without Buyer's prior written consent, which consent shall not be unreasonably
withheld or conditioned, or unduly delayed.
14. COUNTERPARTS CLAUSE; TELECOPY EXECUTION - This Agreement may be
---------------------------------------
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument. Delivery of an executed
counterpart of this counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile shall also deliver a
manually executed counterpart of this Agreement, but the failure to deliver a
manually executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
15. FUTURE ACQUISITIONS - Buyer may, in the future, acquire other
-------------------
route businesses from independent operators and operate such either under a new
wholly-owned subsidiary (if, for example, such acquisition is structured as a
stock purchase with
- --------------------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
6
<PAGE>
the acquired corporation not thereafter being merged into one of the entities
comprising Buyer) or under one of Buyer's existing operating entities (if, for
example, such acquisition is structured as an asset purchase). In the event
that Buyer consummates any such future acquisitions, Buyer or its applicable
subsidiary shall remain entitled to the same benefits hereunder as if such
person were a party, as an additional "Buyer," to this Agreement, and in the
event any such acquisition results in a new wholly-owned or controlled
subsidiary of Buyer, Buyer shall cause such new subsidiary to execute an
agreement, in form and substance satisfactory to Seller, adopting the terms of
this Agreement as a "Buyer" hereunder and agreeing to be bound by all the terms
and provisions hereof; provided, however, that the foregoing shall not require
Buyer or any such new subsidiary to take any action that is prohibited by, or
would otherwise result in a default under or breach of, any agreement or
instrument to which Buyer or such new subsidiary is a party and, provided
further that, until such time as any such new subsidiary has adopted this
Agreement, Buyer shall cause such new subsidiary to abide and be bound by the
terms hereof in the same manner as if such new subsidiary were a party hereto.
However, in the event Buyer's new subsidiary is already a party to a non-
cancellable supply agreement (exclusive of a supply agreement which was entered
into by such new subsidiary in contemplation of Buyer's acquisition or formation
of such new subsidiary), Buyer is not bound to cause such new subsidiary to
execute an agreement adopting the terms of this Agreement or to abide and be
bound by the terms hereof in any manner. Notwithstanding the foregoing
provisions, Buyer shall use reasonable efforts to obtain the cancellation or
termination of any provision preventing a new subsidiary from becoming a party
to this Agreement, provided that Buyer shall not be obligated to expend funds or
take any other action adverse to Buyer's interests in order to obtain such
cancellation or termination, and further provided that upon the expiration of
any such restrictive provision, Buyer shall cause such new subsidiary to join in
and become a party to this Agreement.
16. COMPLETE AGREEMENT - This Agreement those documents expressly
------------------
referred to herein and other documents of even date herewith (i) embody the
complete agreement and understanding among the parties, and (ii) supersede and
preempt any prior agreements (including the Existing Supply Agreement),
summaries of terms and conditions, understandings, or representations by or
among the parties, written or oral, which may have related to the subject matter
hereof in any way.
[SIGNATURE PAGE TO FOLLOW]
- --------------------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
BUYER: RCL:
COINMACH CORPORATION, a Delaware RAYTHEON COMMERCIAL LAUNDRY LLC,
corporation a Delaware limited liability
company
/s/ STEPHEN R. KERRIGAN /s/ JEFF BROTHERS
By: ____________________________ By:_____________________________
Title: CEO Title: Senior Vice President
Sales and Marketing
SUPER LAUNDRY EQUIPMENT SELLER:
CORPORATION, a New York
Corporation ALLIANCE LAUNDRY SYSTEMS LLC,
a Delaware limited liability
company
/s/ STEPHEN R. KERRIGAN /s/ JEFF BROTHERS
By: ____________________________ By: ____________________________
Title: CEO Title: Senior VicePresident
Sales and Marketing
- --------------------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
8
<PAGE>
EXHIBIT A
**OMITTED PURSUANT TO CONFIDENTIAL TREATMENT REQUEST**
- --------------------------
** Multiple asterisks indicate that the portion of this document so marked has
been omitted as a confidential portion of this document and has been filed
separately with the Commission.
9
<PAGE>
EXHIBIT 21.1
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
NAME JURISDICTION
---- ------------
<S> <C>
Coinmach Corporation............................................... Delaware
Super Laundry Equipment Corp. ..................................... New York
Maquilados Automaticos SA de CV.................................... Mexico
Automatica SA de CV................................................ Mexico
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-28-1997
<PERIOD-START> MAR-29-1997 MAR-30-1996
<PERIOD-END> MAR-31-1998 MAR-28-1997
<CASH> 22,456 14,729
<SECURITIES> 0 0
<RECEIVABLES> 7,750 6,894
<ALLOWANCES> 0 0
<INVENTORY> 13,430 7,959
<CURRENT-ASSETS> 0 0
<PP&E> 266,562 154,133
<DEPRECIATION> (72,234) (42,017)
<TOTAL-ASSETS> 816,948 472,921<F1>
<CURRENT-LIABILITIES> 0 0
<BONDS> 602,180 341,655<F2>
<COMMON> 103,210 53,265
0 0
0 0
<OTHER-SE> (44,465) (29,702)
<TOTAL-LIABILITY-AND-EQUITY> 816,948 472,921<F3>
<SALES> 0 0
<TOTAL-REVENUES> 324,887 206,852
<CGS> 0 0
<TOTAL-COSTS> 217,333 139,446
<OTHER-EXPENSES> 83,093 53,081<F4>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 44,662 26,859
<INCOME-PRETAX> (20,201) (12,534)
<INCOME-TAX> (5,334) (2,307)<F5>
<INCOME-CONTINUING> (14,867) (10,227)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (296)
<CHANGES> 0 0
<NET-INCOME> (14,867) (10,523)<F6>
<EPS-PRIMARY> (1.32) (1.14)
<EPS-DILUTED> (1.32) (1.14)
<FN>
<F1> Includes Advance Location Payments of $74,026 and $38,472, contract Rights
of $366,762 and $180,557 and Goodwill of $110,424 and $95,771, each net of
accumulated amortization, for the years ended March 31, 1998 and March 28, 1997,
respectively.
<F2> Includes $296,655 and $196,655 of 11 3/4 senior notes, as well as debt
outstanding under a credit facility of $296,267 and $130,000 for the years ended
March 31, 1998 and March 28, 1997, respectively.
<F3> Includes Accrued Rental Payments of $20,977 and $10,573 and Accrued
Interest of $13,993 and $9,712 for the years ended March 31, 1998 and March 28,
1997, respectively.
<F4> Include stock based compensation charges of $1,446 and $2,152 for the years
ended March 31, 1998 and March 28, 1997, respectively.
<F5> The provision (benefit) for income taxes consists of $299 and $200
currently payable and ($5,633) and ($2,507) deferred, for the years ended March
31, 1998 and March 28, 1997, respectively.
<F6> In addition, EBITDA of $101,360 and $62,793, (earnings before interest,
income taxes, depreciation and amortization) before the deduction for the stock-
based compensation charge was generated for the reported periods. EBITDA is a
meaningful measure of a company's ability to service debt.
</FN>
</TABLE>
