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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, 1999
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 June 10, 1999, the registrant had outstanding 12,927,459 shares of
Class A common stock, par value $.01 per share (the "Common Stock"), and
240,324 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 June
10, 1999 was approximately $43,102,654, 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, 1999 (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, 1999.
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, 1999,
the Company owned and operated approximately 765,000 washers and dryers
(sometimes hereinafter referred to as "laundry machine" or "machines") in
approximately 75,000 locations on routes located throughout the United States
and in 163 retail laundromats located throughout Texas and Arizona. 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 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. 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.
As a result of its strategy to acquire route operators that contribute to
the Company's core operations, the Company has selectively acquired certain
related businesses which expand and diversify the types of services provided
by the Company. The Company operates 163 retail laundromats throughout Texas
and Arizona and provides laundromat services at all such locations. The
Company also leases laundry equipment and other household appliances to
corporate relocation entities, property owners, managers of multi-family
housing properties and individuals. The Company believes that these non-core
businesses, although not material to the Company's operations, provide a
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 machine base
both internally and through selective acquisitions to achieve economies of
scale, increase its operating efficiencies and improve its financial
performance. Internal growth or expansion 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
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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.
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, enhances
the Company's operating efficiencies throughout its operating regions and
enables 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 ten significant
acquisitions, adding annualized revenue of approximately $395 million and
increasing its installed base from approximately 55,000 machines to
approximately 765,000 machines as of March 31, 1999. Revenues have grown from
approximately $72.9 million for the year ended March 31, 1995, to
approximately $505.3 million for the year ended March 31, 1999, while
EBITDA(/1/) has grown from approximately $13.6 million for the year ended
March 31, 1995, to approximately $165.7 million (before deducting non-cash
stock-based compensation charges) for the year ended March 31, 1999. These
acquisitions have enabled the Company to improve its operating margins and to
expand internally by competing more aggressively for new business.
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
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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, 1999 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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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 adding new customers and increasing the number of locations from
existing customers 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 one 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 provide the Company with additional growth and diversification
opportunities. These opportunities include laundry equipment rental as well
as other route-based facilities management services. The Company regularly
explores 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
While the pace of acquisitions has slowed during the last fiscal year, the
Company intends to continue to pursue opportunities to acquire additional
route businesses within the fragmented outsourced laundry equipment services
industry. 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
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.
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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 acquisitions of two regional route operators, Cleanco
and G&T (each, as defined). Both of these acquisitions have been fully
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.
The number of multi-regional route acquisition opportunities is limited,
however, due to the Company's successful execution of its acquisition
strategy over the past several years. Accordingly, there can be no
assurance that the Company will complete any such acquisition in the near
future, if at all.
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
remains highly fragmented, with many small, private and family-owned route
businesses operating 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 one million of which continue to be operated by the
owners of such locations.
The industry is highly capital intensive, with the most significant capital
costs incurred upon procurement of new leases and the renewal of existing
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, which consist mainly of providing service and
revenue collection, are minimal, since machines typically operate throughout
the term of the contract under which they are installed, and variable costs
are paid out of revenues collected from the machines.
Historically, the industry has been characterized by stable demand and has
been 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) revenue collection and security.
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Sales and Marketing
The Company markets its products and services through a sales staff with
average industry experience of over ten years. The principal responsibility of
the sales staff is to solicit customers 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 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 excellent service offered by its
experienced, highly skilled personnel and quality equipment that maximizes
efficiency and revenue and minimizes machine down-time. The Company's sales
staff targets potential new and renewal lease locations by utilizing the
Integrated Computer Systems' extensive database to provide information on the
Company's, as well as its competitors', locations. Additionally, the
Integrated Computer Systems monitor performance, repairs and maintenance, as
well as the profitability of locations on a daily basis. All sales, service
and installation data 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 installed laundry machines, 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 to achieve a desired level 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
expects 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 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, 1999, 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.
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The Company's fleet of radio-equipped service vehicles allows for 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, enhances revenue and improves 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 systems coordinate the Company's radio-equipped service
vehicles and allow the Company to address customer needs quickly and
efficiently.
Remanufacturing
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,
strategically located to service each of its operating regions, which provide
for consistent machine quality and efficient operations.
Revenue Collection and Security
Management believes that it provides the highest level of revenue 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' and the Company's 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 Company's Integrated Computer Systems track contract
performance, which indicates potential machine problems or pilferage and
provides 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.
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Management also believes that the Integrated Computer Systems enhance the
Company's ability to successfully integrate acquired businesses into its
existing operations. Regional or certain multi-regional acquisitions have
typically been substantially 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
The Company is involved in the business of renting laundry equipment and
other household appliances and electronic items to corporate relocation
entities, property owners, managers of multi-family housing properties and
individuals. With access to approximately six million individual housing
units, the Company believes this 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 retail laundromats, retrofitting existing
retail laundromats, 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 163 retail laundromats located throughout Texas and
Arizona. The operation of the retail laundromats involves leasing store
locations in desirable geographic areas, maintaining an appropriate 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 retail 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
multi-regional route operators, including the Company, with significant
operations 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, 1999, the Company employed 2,045 employees (including 359
laundromat attendants in the Company's retail laundromats in Texas and
Arizona). Approximately 136 hourly workers in the Northeast 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.
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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, SAS
Acquisitions Inc. changed its name to Coinmach Laundry 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. The Company also maintains a
corporate office in Charlotte, North Carolina.
Initial Public Offering and Secondary Offering
In July 1996, Coinmach Laundry completed an 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 (the "Secondary Offering"), 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
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
In March 1998, 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 $435 million of
secured financing consisting of: (i) a $35 million working capital revolving
credit facility currently bearing interest at an annual rate of LIBOR plus
1.75%; (ii) a $125 million acquisition revolving credit facility currently
bearing interest at an annual rate of LIBOR plus 1.75%; (iii) a $75 million
Tranche A term loan facility currently bearing interest at an annual rate of
LIBOR plus 2.25% and (iv) a $200 million Tranche B term loan facility
currently bearing interest at an annual rate of LIBOR plus 2.50%. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Financing Activities--Amended and
Restated Credit Facility."
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 commenced 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
(the "11 3/4% Senior Notes"). 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."
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, which was repaid in December 1997. 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
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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 at the time of the
acquisition.
On March 14, 1997, Coinmach acquired substantially all of the assets of
Atlanta Washer & Dryer Leasing, Inc. (d/b/a Appliance Warehouse) (the
"Appliance Warehouse Acquisition") for approximately $6.3 million in cash and
promissory notes (the "AW Notes") issued by Coinmach Laundry aggregating $1.2
million, excluding transaction expenses. 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 AW Notes were fully repaid as of March 31, 1999.
On April 23, 1997, Coinmach completed the 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 (the "Reliable Acquisition") 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 of Macke Laundry
Service, L.P. and substantially all of the assets of certain related entities
(collectively, "Macke") (the "Macke Acquisition") 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."
On May 19, 1998, Coinmach completed the acquisition of Cleanco, Inc. and
certain of its affiliates (collectively, "Cleanco") (the "Cleanco
Acquisition") for a cash purchase price of approximately $23.0 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. The Cleanco Acquisition added approximately 21,000 machines
to the Company's installed base.
10
<PAGE>
On June 5, 1998, Coinmach completed the acquisition of Gordon & Thomas
Companies, Inc. ("G&T") (the "G&T Acquisition") for a cash purchase price of
approximately $58.0 million, excluding transaction expenses and the assumption
of certain liabilities. The G&T Acquisition 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. The G&T Acquisition strengthened the
Company's presence in the northeastern United States by adding approximately
36,000 machines to the Company's installed base.
Recent Developments
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.
On December 8, 1998, a holder of 240,324 shares of Non-Voting Common Stock,
exercised the conversion option to convert those shares into 240,324 shares of
Common Stock.
ITEM 2. PROPERTIES
As of March 31, 1999, the Company leased 64 offices throughout its operating
regions serving various operational purposes, including sales and service
activities, revenue collection 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 does not presently 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
terminating September 30, 2001.
ITEM 3. LEGAL PROCEEDINGS
On April 8, 1999, Sand v. Coinmach Laundry Corporation, et. al, a purported
class action securities fraud lawsuit, was filed in the Federal District Court
for the Eastern District of New York (the "Federal Securities Action") naming
the Company and certain of its executive officers as defendants. The Federal
Securities Action was purportedly brought on behalf of all shareholders of the
Company who purchased or otherwise acquired the Company's common stock during
the period August 6, 1997 to September 29, 1998. The complaint in the Federal
Securities Action alleges violations of various federal securities laws,
including misrepresentations of certain information about the Company. The
complaint in the Federal Securities Action seeks damages in unspecified
amounts. Although the outcome of this proceeding cannot be predicted, based on
the allegations contained in the complaint, management believes that the
Federal Securities Action will not have a material adverse effect on the
financial condition, results of operations or cash flows of the Company.
The Company is also party to various legal proceedings arising in the
ordinary course of business. Although the ultimate disposition of such
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, results of operations or cash
flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Coinmach Laundry's Common Stock is traded on the Nasdaq National Market
under the symbol "WDRY". There is no established public trading market for
Coinmach Laundry's Non-Voting Common Stock. 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>
1999 Fiscal Quarter Ended High Low
------------------------- ------- ------
<S> <C> <C>
June 30, 1998.......................................... $ 28.00 $20.00
September 30, 1998..................................... $ 23.50 $ 8.75
December 31, 1998...................................... $ 19.25 $ 5.50
March 31, 1999......................................... $16.875 $9.375
<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
</TABLE>
As of June 10, 1999, Coinmach Laundry had outstanding 12,927,459 shares of
Common Stock and 240,324 shares of Non-Voting Common Stock. As of June 10,
1999, there were 31 stockholders of record of the Common Stock and one
stockholder 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 years ended March
31, 1999 (the "1999 Fiscal Year"), March 31, 1998 (the "1998 Fiscal Year") and
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 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 subsequent fiscal year. Such tables display summary
historical consolidated financial information of (i) TCC and its predecessor
for the two month period ended March 31, 1995, the one month period ended
January 31, 1995, and fiscal year ended December 31, 1994 and (ii) Solon for
the six month period from October 1, 1994 to April 4, 1995, and fiscal year
ended September 30, 1994. 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 Period from
Combined Transition April 5, 1995
Year Ended Year Ended Year Ended Period Ended Period Ended to
March 31, March 31, March 28, March 29, March 29, September 29,
1999 1998 1997 1996 1996 1995
---------- ---------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenues............... $505,323 $324,887 $206,852 $178,789 $89,070 $89,719
Operating, general and
administrative
expenses.............. 339,664 223,527 144,059 127,636 62,380 65,256
Depreciation and
amortization.......... 113,448 75,453 46,316 36,635 18,212 18,423
Operating income....... 50,942 24,461 14,325 12,318 8,478 3,840
Interest expense, net.. 65,995 44,662 26,859 23,817 11,999 11,818
Loss before
extraordinary item.... (11,974) (14,867) (10,227) (8,639) (2,523) (6,116)
Net loss............... (11,974) (14,867) (10,523) (17,564) (11,448) (6,116)
Basic and diluted net
loss per share........ $ (0.91) $ (1.32) $ (1.14) -- -- --
Pro Forma basic and
diluted net loss per
share................. -- -- -- $ (2.32) $ (1.51) $ (0.81)
Balance Sheet Data (at
end of period):
Cash and cash
equivalents........... $ 26,515 $ 22,456 $ 14,729 $19,858 $10,311
Property and equipment,
net................... 223,610 194,328 112,116 82,699 80,706
Goodwill, net.......... 109,025 110,424 95,771 44,071 45,071
Advance location
payments.............. 79,705 74,026 38,472 20,320 19,772
Contract rights, net... 413,014 366,762 180,557 59,745 63,801
Total assets........... 901,296 816,948 472,921 249,148 241,433
Total debt(5).......... 687,491 602,158 345,486 202,765 176,415
Stockholders' equity
(deficit)............. 48,040 58,745 23,563 (1,308) 10,140
Financial Ratios and
Other Data
Cash flow from
operating activities.. $102,951 $ 58,550 $ 34,732 $ 24,403 $12,337 $12,066
Cash flow used for
investing activities.. (181,665) (350,875) (196,698) (39,201) (14,162) (25,039)
Cash flow from
financing activities.. 82,773 300,052 156,837 23,882 11,372 12,510
EBITDA(1).............. 165,659 101,360 62,793 51,153 26,690 24,463
EBITDA margin(2)....... 32.8% 31.2% 30.4% 28.6% 30.0% 27.3%
Capital expenditures(3)
Growth capital
expenditures.......... $ 24,096 $ 21,119 $ 12,563 -- -- --
Renewal capital
expenditures.......... 60,038 37,609 29,025 $ 27,338 $14,219 $13,199
Acquisition capital
expenditures(4)....... 97,531 294,996 171,455 11,925 -- 11,925
-------- -------- -------- -------- ------- -------
Total Capital
Expenditures......... $181,665 $353,724 $213,043 $ 39,263 $14,219 $25,044
======== ======== ======== ======== ======= =======
</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
fiscal years ended March 31, 1999, 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, 1999 and March 31, 1998 does not include the
premium, net, of $8,023 and $9,258, respectively, 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 Ended Year Ended
Ended March 31, January 31, December 31,
1995 1995 1994
--------------- ----------------- ---------------
<S> <C> <C> <C>
Operating Data:
Revenues.............. $11,515 $ 5,879 $ 73,857
Operating, general and
administrative
expenses............. 9,750 4,679 59,675
Depreciation and
amortization......... 2,144 980 14,504
Operating income
(loss)............... (379) 220 (322)
Interest expense,
net.................. 774 395 4,012
Loss before
extraordinary item... (1,155) (175) (5,702)
Net (loss) income..... (1,155) (175) 14,718
Balance Sheet Data (at
end of period):
Cash and cash
equivalents.......... $ 922 $ 1,162 $ 987
Property and
equipment, net....... 24,330 16,120 16,285
Contract rights, net.. 19,327 -- --
Total assets.......... 61,035 36,069 36,924
Total debt............ 42,351 41,800 42,184
Stockholders' equity
(deficit)............ 9,729 (13,591) (13,416)
Financial Ratios and
Other Data (Unaudited):
Cash flow from
operating
activities........... $ 73 $ 1,197 $ 8,724
Cash flow used for
investing
activities........... (990) (611) (6,577)
Cash flow used for
financing
activities........... (327) (411) (2,547)
EBITDA(2)............. 1,765 1,200 14,182
EBITDA margin(3)...... 15.3% 20.4% 19.2%
Capital
expenditures(4)
Growth capital
expenditures....... -- -- --
Renewal capital
expenditures....... $ 990 $ 611 $ 6,577
Acquisition capital
expenditures....... -- -- --
------- ---------------- ---------------
Total Capital
Expenditures..... $ 990 $ 611 $ 6,577
======= ================ ===============
</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.
Periods prior to and after April 5, 1995 are reflected as the predecessor
periods.
<TABLE>
<CAPTION>
Solon(1)
--------------------------
Predecessor(2)
--------------------------
October 1, 1994 Year Ended
to April 4, September,
1995 1994
--------------- ----------
<S> <C> <C>
Operating Data:
Revenues........................................... $52,207 $104,553
Operating, general and administrative expenses..... 34,704 69,257
Depreciation and amortization...................... 10,304 21,347
Operating income................................... 7,199 13,949
Interest expense, net.............................. 8,928 18,105
Loss before extraordinary item..................... (1,779) (6,918)
Net loss........................................... (2,627) (6,918)
Balance Sheet Data (at end of period):
Cash and cash equivalents.......................... -- $ 7,241
Property and equipment, net........................ -- 48,727
Contract rights, net............................... -- 15,432
Total assets....................................... -- 143,589
Total debt......................................... -- 128,487
Stockholders' deficit.............................. -- (8,721)
Financial Ratios and Other Data (Unaudited):
Cash flow from operating activities................ $10,216 $ 17,914
Cash flow used for investing activities............ (6,537) (16,763)
Cash flow used for financing activities............ (1,068) (270)
EBITDA(3).......................................... 17,503 35,296
EBITDA margin(4)................................... 33.5% 33.7%
Capital expenditures(5)
Growth capital expenditures...................... -- --
Renewal capital expenditures..................... $ 6,944 $ 16,779
Acquisition capital expenditures................. -- --
------- --------
Total Capital Expenditures..................... $ 6,944 $ 16,779
======= ========
</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 1999 Fiscal Year, the 1998
Fiscal Year and the 1997 Fiscal Year and should be read in conjunction with
the consolidated financial statements and related notes thereto included in
Item 8.
General
The Company is principally engaged in the business of supplying outsourced
laundry equipment services to multi-family housing properties. At March 31,
1999, the Company owned and operated approximately 765,000 washers and dryers
in approximately 75,000 multi-family housing properties on routes throughout
the United States and in 163 retail laundromats located throughout Texas and
Arizona. 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. The Company has experienced net losses during the past
three fiscal years. 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 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,
accounting for approximately 86% of its revenue. 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 costs of machine maintenance
and revenue collection in the route business, including payroll, parts,
insurance and other related expenses, the costs of sales associated with the
equipment distribution business 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, property owners, managers of multi-family housing properties and
individuals (approximately $11.1 million for the 1999 Fiscal Year and $2.9
million for the 1998 Fiscal Year); (ii) operating, maintaining and servicing
retail laundromats (approximately $20.2 million for the 1999 Fiscal Year and
$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 $33.3 million for the 1999
Fiscal Year and $26.6 million for the 1998 Fiscal Year).
17
<PAGE>
Results of Operations
The following table sets forth for the periods indicated, selected statement
of operations data and EBITDA margin, as percentages of revenue:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 31, 1999 March 31, 1998 March 28, 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues......................... 100% 100% 100%
Laundry operating expenses....... 65.6 66.9 67.4
General and administrative
expenses........................ 1.6 1.9 2.2
Depreciation and amortization.... 22.5 23.2 22.4
Operating income................. 10.1 7.5 6.9
Interest expense, net............ 13.1 13.7 13.0
EBITDA margin.................... 32.8 31.2 30.4
</TABLE>
Fiscal Year Ended March 31, 1999 Compared to Fiscal Year Ended March 31, 1998
Revenues increased by approximately 56% for the 1999 Fiscal Year as compared
to the 1998 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 $162.0
million or 90% of its revenue increase for the 1999 Fiscal Year is primarily
due to the National Coin Acquisition (July 1997), the ALI Acquisition (January
1998), the Macke Acquisition (March 1998), the Cleanco Acquisition (May 1998)
and the G&T Acquisition (June 1998). In addition, during the 1999 Fiscal Year,
the Company's installed machine base increased by approximately 23,300
machines from internal growth (excluding the machines added from the above-
mentioned acquisitions during such period) as compared to an increase of
approximately 19,500 machines from internal growth 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 53% for the 1999
Fiscal Year, as compared to the 1998 Fiscal Year. This increase was due
primarily to an increase in commission expense, related to the acquisitions
mentioned above. However, as a percentage of revenues, laundry operating
expenses were approximately 65.6% for the 1999 Fiscal Year as compared to
66.9% for the 1998 Fiscal Year. This change was primarily due to cost
efficiencies related to the consolidation of the acquisitions noted above into
the Company's operations.
General and administrative expenses increased by approximately $1.8 million
or 29% for the 1999 Fiscal Year as compared to the 1998 Fiscal Year. The
increase for the year was due to various costs and expenses related to (i) the
Company's acquisition strategy, including systems development and refinement
relating to the integration of prior acquisitions and (ii) accounting,
management information systems and other administrative functions associated
with the Company's growth. However, as a percentage of revenues, general and
administrative expenses were 1.6% for the 1999 Fiscal Year as compared to 1.9%
for the 1998 Fiscal Year. This change was primarily due to cost efficiencies
related to the consolidation of the acquisitions noted above into the
Company's operations.
Depreciation and amortization increased by approximately 50% for the 1999
Fiscal Year, as compared to the 1998 Fiscal Year, due primarily to contract
rights and goodwill associated with the acquisitions mentioned above, as well
as an increase in capital expenditures with respect to the Company's installed
base of machines.
Interest expense, net, increased by approximately 48% for the 1999 Fiscal
Year, as compared to the 1998 Fiscal 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 expense due to
the Bond Offering (as defined herein). See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations--Liquidity and
Capital Resources--Financing Activities--Senior Note Offering and Exchange
Offer."
18
<PAGE>
EBITDA(/2/) before deduction for stock-based compensation charges was
approximately $165.7 million for the 1999 Fiscal Year as compared to
approximately $101.4 million for the 1998 Fiscal Year, representing an
improvement of approximately 63%. EBITDA margins improved to approximately
32.8% of revenues for the current year compared to approximately 31.2% of
revenues for the prior year. These increases were primarily due to the effect
of cost efficiencies related to the consolidation of the above mentioned
acquisitions into the Company's operations, as well as internal growth.
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 the 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
was 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
from internal growth 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
primarily to an increase in 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 year 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.
- --------
(/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>
Interest expense, net, increased by approximately 66% for the 1998 Fiscal
Year, as compared to the 1997 Fiscal 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. 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."
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 increase
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.
Liquidity and Capital Resources
The Company continues to have substantial indebtedness and debt service
requirements. At March 31, 1999, the Company had outstanding long-term debt of
approximately $687.5 million (excluding the premium, net, of approximately
$8.0 million) and stockholders' equity of approximately $48.0 million.
Financing Activities
Senior 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. 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% 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 11 3/4%
Senior Notes.
The 11 3/4% 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 that certain indenture, dated as of November 30, 1995, by
and between Coinmach Corporation and Fleet National Bank of Connecticut
(formerly, Shawmut Bank Connecticut, National Association), as Trustee (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
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 11 3/4% Senior
Notes may declare all unpaid principal and accrued interest on all of the 11
3/4% Senior Notes to be immediately due and payable.
20
<PAGE>
Upon the occurrence of a Change of Control (as defined in the Indenture),
each holder of 11 3/4% Senior Notes will have the right to require that the
Company purchase all or a portion of such holder's 11 3/4% 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
The Company's existing credit facility with Bankers Trust Company ("Banker's
Trust"), First Union National Bank of North Carolina ("First Union") and
certain other lending institutions, as amended (the "Amended and Restated
Credit Facility"), provides for an aggregate of $435 million of secured
financing consisting of: (i) a $35 million working capital revolving credit
facility currently bearing interest at an annual rate of LIBOR plus 1.75%;
(ii) a $125 million acquisition revolving credit facility currently bearing
interest at an annual rate of LIBOR plus 1.75%; (iii) a $75 million Tranche A
term loan facility currently bearing interest at an annual rate of LIBOR plus
2.25% and (iv) a $200 million Tranche B term loan facility currently bearing
interest at an annual rate of LIBOR plus 2.50%. The Amended and Restated
Credit Facility also provides for up to $10 million of letter of credit
financings. These interest rates are subject to change from time to time and
may increase by 25 basis points or decrease up to 75 basis points based on
certain financial ratios set forth in the Amended and Restated Credit
Facility. Under the Amended and Restated Credit Facility, the working capital
revolver and the acquisition revolver mature on December 31, 2003, the Tranche
A term loan matures on December 31, 2004 and the Tranche B term loan matures
on June 30, 2005. In May 1999, the lenders under the Amended and Restated
Credit Facility gave their consent to permit the Company to borrow on or prior
to May 28, 1999 up to $12.5 million under the existing acquisition revolver
for working capital purposes.
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).
At March 31, 1999, the monthly variable LIBOR interest rate was
approximately 4.94%.
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 to
fix the monthly 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 to fix
the monthly LIBOR interest rate under a portion of the Amended and Restated
Credit Facility at 5.83% (the "March Swap Agreement"). On April 7, 1998, the
Company entered into a 31 month, $75 million notional amount interest rate
swap transaction with Bankers Trust to fix the monthly LIBOR interest rate
under a portion of the Amended and Restated Credit Facility at 5.75%. On
September 15, 1998, the Company amended the March Swap Agreement to increase
the notional amount to $175 million and to reduce the fixed monthly LIBOR
interest rate to 5.515%. The new expiration date is November 15, 2002. 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. Under the Amended and
Restated Credit Facility, the Company has pledged to Bankers Trust, 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
21
<PAGE>
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.
As the Company has focused on increasing its cash flow from operating
activities, it has made significant capital investments, consisting primarily
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 1999 Fiscal Year were approximately $184.6 million
(including approximately $2.9 million relating to capital lease obligations).
Of such amount, the Company spent approximately $97.5 million in acquisition
and related transaction costs, primarily due to the G&T Acquisition and the
Cleanco Acquisition, and approximately $24.1 million related to the net
increase in the installed base of machines of 23,300 machines. The balance of
approximately $60.0 million (which consists of machine expenditures, advance
location payments and laundry room improvements) was used to maintain the
existing machine base in current locations and through 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 base are not expected to be reflected in the
Company's financial results until subsequent reporting periods, depending on
certain factors, including the timing of the capital expended. The Company
anticipates that capital expenditures, excluding acquisitions and internal
growth, will be approximately $64.0 million for the twelve months ending March
31, 2000. Such increase relative to the 1999 Fiscal Year is attributable
primarily to the Company's recent acquisition
22
<PAGE>
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 11 3/4% Senior Notes.
Management believes that the Company's future operating activities will
generate sufficient cash flow to repay indebtedness outstanding under the 11
3/4% 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 11 3/4% Senior Notes or in the credit agreement
evidencing the Amended and Restated Credit Facility could result in an
acceleration of all amounts due thereunder. 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 11 3/4% Senior Notes.
Certain Accounting Treatment
The Company's depreciation and amortization expenses, aggregating
approximately $113.4 million for the 1999 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. Computer programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. The Company's comprehensive year 2000
initiative is being managed by a team of internal staff and outside
consultants. 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.
During the 1999 Fiscal Year, the Company assessed the year 2000 readiness of
its information technology ("IT") and non-IT systems. The Company determined
that it needed to modify significant portions of its IT systems so that such
systems will function properly with respect to dates in the year 2000 and
beyond. The Company has substantially completed its IT systems transformation
and is currently verifying the year 2000 compliance of these systems.
In addition, as part of its year 2000 initiative, the Company has contacted
its significant suppliers, customers and financial institutions to ensure that
those parties have appropriate plans to remediate year 2000 issues where their
systems interface with the Company's systems or otherwise impact its
operations. The Company is continuing to assess the extent to which its
operations are vulnerable should those organizations fail to properly address
their year 2000 readiness. Based on this review, the Company does not expect
the computer systems of those operations to have a material adverse effect on
the Companies operations.
While the Company believes its planning efforts are adequate to address the
year 2000 issue, 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, financial condition or the cash flows.
23
<PAGE>
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 will not 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's principal exposure to market risk relates to changes in
interest rates on its borrowings. The Company's cash flow would be adversely
affected by an increase in interest rates. As of March 31, 1999, the Company
had $59.0 million outstanding relating to its variable rate debt portfolio.
The Company's future earnings, cash flow and fair values relevant to
financial instruments are dependent upon prevalent market rates. Market risk
is the risk of loss from adverse changes in market prices and interest rates.
If market rates of interest on the Company's variable rate debt increased by
2.0% (or 200 basis points), the Company's annual interest expense would change
by approximately $1.2 million, assuming the amount outstanding was $59.0
million, the balance as of March 31, 1999. The Company utilizes interest rate
swap agreements to manage its exposure to these risks.
On February 23, 1998, the Company entered into a 33-month $75 million
notional amount interest rate swap transaction with Bankers Trust to fix the
monthly 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 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 to
fix the monthly LIBOR interest rate under a portion of the Amended and
Restated Credit Facility at 5.75%. On September 15, 1998, the Company
24
<PAGE>
amended the March 2, 1998 swap agreement with First Union to increase the
notional amount to $175 million and to reduce the fixed monthly LIBOR interest
rate to 5.515%. The new expiration date is November 15, 2002.
The Company's fixed debt instruments are not generally affected by a change
in the market rates of interest, and therefore, such instruments generally do
not have an impact on future earnings. However, as fixed rate debt matures,
future earnings and cash flows may be impacted by changes in interest rates
related to debt acquired to fund repayments under maturing facilities.
The Company does not use derivative financial instruments for trading
purposes and is not exposed to foreign currency exchange risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Audited consolidated financial statements and the notes thereto are
contained in pages F-1 through F-22 hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
25
<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 1999 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.
26
<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 Fourth Amended and Restated Certificate of Incorporation of Coinmach
Laundry (incorporated by reference from exhibit 3.5 to Coinmach
Laundry's Form 10-Q for the quarterly period ended June 30, 1998,
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.
27
<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.
28
<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.
29
<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.
30
<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.
31
<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, 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.
32
<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 Agent, 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)
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) (incorporated by reference from exhibit 10.75
to Coinmach Laundry's Form 10-K for the fiscal year ended March 31,
1998, file number 1-11907)
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 number 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, 1999, the Company did not
file any reports on Form 8-K.
(c) Exhibits--See (a)(2) above.
(d) None.
33
<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 25, 1999.
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 25, 1999
- ------------------------------------- of Directors and
Stephen R. Kerrigan Chief Executive
Officer (Principal
Executive Officer)
/s/ Mitchell Blatt Director, President June 25, 1999
- ------------------------------------- and Chief Operating
Mitchell Blatt Officer
/s/ Robert M. Doyle Chief Financial June 25, 1999
- ------------------------------------- Officer, Senior
Robert M. Doyle Vice President
Secretary and
Treasurer
(Principal
Financial and
Accounting Officer)
/s/ John E. Denson Senior Vice June 25, 1999
- ------------------------------------- President--
John E. Denson Corporate
Development
/s/ Michael Stanky Senior Vice June 25, 1999
- ------------------------------------- President
Michael Stanky
/s/ David A. Donnini Director June 25, 1999
- -------------------------------------
David A. Donnini
/s/ James N. Chapman Director June 25, 1999
- -------------------------------------
James N. Chapman
/s/ Bruce V. Rauner Director June 25, 1999
- -------------------------------------
Bruce V. Rauner
/s/ Stephen G. Cerri Director June 25, 1999
- -------------------------------------
Stephen G. Cerri
/s/ Arthur B. Laffer Director June 25, 1999
- -------------------------------------
Arthur B. Laffer
34
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report................................................ F-1
As of March 31, 1999 and March 31, 1998:
Consolidated Balance Sheets............................................... F-2
For the Years Ended March 31, 1999, March 31, 1998 and March 28, 1997:
Consolidated Statements of Operations..................................... F-3
Consolidated Statements of Stockholders' Equity (Deficit)................. F-4
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements.................................. F-8
</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, 1999 and
1998, and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for each of the three years in the period
ended March 31, 1999. 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, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1999, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Melville, New York
May 11, 1999
F-1
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
<TABLE>
<CAPTION>
March 31
-------------------
1999 1998
--------- --------
<S> <C> <C>
Assets
Cash and cash equivalents................................ $ 26,515 $ 22,456
Receivables, less allowance of $618 and $325............. 8,107 7,750
Inventories.............................................. 16,328 13,430
Prepaid expenses......................................... 6,552 6,308
Advance location payments................................ 79,705 74,026
Land, property and equipment:
Laundry equipment and fixtures......................... 301,894 233,080
Land, building and improvements........................ 34,830 25,467
Trucks and other vehicles.............................. 10,223 8,015
--------- --------
346,947 266,562
Less accumulated depreciation.......................... (123,337) (72,234)
--------- --------
Net property and equipment............................... 223,610 194,328
Contract rights, net of accumulated amortization of
$70,602 and $39,923..................................... 413,014 366,762
Goodwill, net of accumulated amortization of $20,318 and
$12,530................................................. 109,025 110,424
Other assets............................................. 18,440 21,464
--------- --------
Total assets............................................. $ 901,296 $816,948
========= ========
Liabilities and Stockholders' Equity
Accounts payable......................................... $ 20,478 $ 17,128
Accrued rental payments.................................. 26,888 20,977
Accrued interest......................................... 15,516 13,993
Other accrued expenses................................... 13,366 15,178
Deferred income taxes.................................... 81,494 79,511
11 3/4% Senior Notes..................................... 296,655 296,655
Premium on 11 3/4% Senior Notes, net..................... 8,023 9,258
Credit facility indebtedness............................. 384,003 296,267
Other long-term debt..................................... 6,833 9,236
Stockholders' equity:
Common stock........................................... 132 132
Capital in excess of par value......................... 104,231 103,078
Accumulated deficit.................................... (56,104) (44,130)
--------- --------
48,259 59,080
Receivables from stockholders.......................... (219) (335)
--------- --------
Total stockholders' equity............................... 48,040 58,745
--------- --------
Total liabilities and stockholders' equity............... $ 901,296 $816,948
========= ========
</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>
Year Ended Year Ended Year Ended
March 31, March 31, March 28,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues................................... $ 505,323 $ 324,887 $ 206,852
Costs and expenses:
Laundry operating expenses............... 331,647 217,333 139,446
General and administrative expenses...... 8,017 6,194 4,613
Depreciation and amortization............ 113,448 75,453 46,316
Stock based compensation charge.......... 1,269 1,446 2,152
---------- ---------- ---------
454,381 300,426 192,527
---------- ---------- ---------
Operating income........................... 50,942 24,461 14,325
Interest expense, net...................... 65,995 44,662 26,859
---------- ---------- ---------
Loss before income taxes and extraordinary
item...................................... (15,053) (20,201) (12,534)
---------- ---------- ---------
Provision (benefit) for income taxes:
Current payable.......................... 1,264 299 200
Deferred................................. (4,343) (5,633) (2,507)
---------- ---------- ---------
(3,079) (5,334) (2,307)
---------- ---------- ---------
Loss before extraordinary item............. (11,974) (14,867) (10,227)
Extraordinary item, net of income tax
benefit of $206 in 1997................... -- -- 296
---------- ---------- ---------
Net loss................................... $ (11,974) $ (14,867) $ (10,523)
========== ========== =========
Basic and diluted loss per share:
Before extraordinary item................ $ (0.91) $ (1.32) $ (1.11)
Extraordinary item....................... -- -- (.03)
---------- ---------- ---------
Basic and diluted net loss per share....... $ (0.91) $ (1.32) $ (1.14)
========== ========== =========
Weighted average shares outstanding:
Common shares............................ 13,167,783 11,242,006 9,232,530
========== ========== =========
</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
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--
35,000,000;
issued shares
end of period--
0, 10,004,278,
12,687,135 and
12,927,459...... $ -- $ -- $ 57 $ -- $ -- $ 43 $ -- $ --
Non-voting Class
B common stock,
par value $.01:
Authorized
shares--
1,000,000;
issued shares
end of period--
0, 480,648,
480,648 and
240,324......... -- -- 5 -- -- -- -- --
Class A common
stock, par value
$.01:
Authorized
shares--
1,959,021;
issued shares
end of period--
1,783,584, 0, 0
and 0........... 18 -- (18) -- -- -- -- --
Class B common
stock, par value
$.01:
Authorized
shares--345,710;
issued shares
end of each
period--265,044,
0, 0 and 0...... 3 -- (3) -- -- -- -- --
Class C common
stock, par value
$.01:
Authorized
shares--305,212;
issued shares
end of period--
305,212, 0, 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--
175,436, 0, 0
and 0........... 2 -- (2) -- -- -- -- --
Class F common
stock, par value
$.01:
Authorized
shares--
3,086,045;
issued shares
end of period--
3,086,045, 0, 0
and 0........... 30 -- (30) -- -- -- -- --
Class G common
stock, par value
$.01:
Authorized
shares--618,428;
issued shares
end of period--
578,509, 0, 0
and 0........... 6 -- (6) -- -- -- -- --
Series A
Preferred stock,
par value $.01:
20,000,000
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--
35,000,000;
issued shares
end of period--
0, 10,004,278,
12,687,135 and
12,927,459...... $-- $ 100
Non-voting Class
B common stock,
par value $.01:
Authorized
shares--
1,000,000;
issued shares
end of period--
0, 480,648,
480,648 and
240,324......... -- 5
Class A common
stock, par value
$.01:
Authorized
shares--
1,959,021;
issued shares
end of period--
1,783,584, 0, 0
and 0........... -- --
Class B common
stock, par value
$.01:
Authorized
shares--345,710;
issued shares
end of each
period--265,044,
0, 0 and 0...... -- --
Class C common
stock, par value
$.01:
Authorized
shares--305,212;
issued shares
end of period--
305,212, 0, 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--
175,436, 0, 0
and 0........... -- --
Class F common
stock, par value
$.01:
Authorized
shares--
3,086,045;
issued shares
end of period--
3,086,045, 0, 0
and 0........... -- --
Class G common
stock, par value
$.01:
Authorized
shares--618,428;
issued shares
end of period--
578,509, 0, 0
and 0........... -- --
Series A
Preferred stock,
par value $.01:
20,000,000
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>
See accompanying notes.
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 Issuance Net
March 28, 1997 of Net Activity Balance Stock Activity
Brought Common Stock Based in Loans to March 31, Based in Loans to
Forward Net Loss Stock Compensation Stockholders 1998 Net Loss Compensation Stockholders
-------------- -------- -------- ------------ ------------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Voting Class A
common stock,
par value $.01:
Authorized
shares--
35,000,000;
issued shares
end of period--
0, 10,004,278,
12,687,135 and
12,927,459...... $ 100 $ -- $ 27 $ -- $-- $ 127 $ -- $ -- $--
Non-voting Class
B common stock,
par value $.01:
Authorized
shares--
1,000,000;
issued shares
end of period--
0, 480,648,
480,648 and
240,324......... 5 -- -- -- -- 5 -- -- --
Class A common
stock, par value
$.01:
Authorized
shares--
1,959,021;
issued shares
end of period--
1,783,584, 0, 0
and 0........... -- -- -- -- -- -- -- -- --
Class B common
stock, par value
$.01:
Authorized
shares--345,710;
issued shares
end of each
period--265,044,
0, 0 and 0...... -- -- -- -- -- -- -- -- --
Class C common
stock, par value
$.01:
Authorized
shares--305,212;
issued shares
end of period--
305,212, 0, 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--
175,436, 0, 0
and 0........... -- -- -- -- -- -- -- -- --
Class F common
stock, par value
$.01:
Authorized
shares--
3,086,045;
issued shares
end of period--
3,086,045, 0, 0
and 0........... -- -- -- -- -- -- -- -- --
Class G common
stock, par value
$.01:
Authorized
shares--618,428;
issued shares
end of period--
578,509, 0, 0
and 0........... -- -- -- -- -- -- -- -- --
Series A
Preferred stock,
par value $.01:
20,000,000
authorized;
issued shares
end of each
period--0....... -- -- -- -- -- -- -- -- --
Capital in
excess par
value........... 53,160 -- 48,576 1,342 -- 103,078 -- 1,153 --
Accumulated
deficit......... (29,263) (14,867) -- -- -- (44,130) (11,974) -- --
-------- -------- ------- ------ ---- -------- -------- ------ ----
24,002 (14,867) 48,603 1,342 -- 59,080 (11,974) 1,153 --
Receivables from
stockholders.... (439) -- -- -- 104 (335) -- -- 116
-------- -------- ------- ------ ---- -------- -------- ------ ----
Total
stockholders'
equity
(deficit)....... $ 23,563 $(14,867) $48,603 $1,342 $104 $ 58,745 $(11,974) $1,153 $116
======== ======== ======= ====== ==== ======== ======== ====== ====
<CAPTION>
Conversion Balance
of March 31,
Stock 1999
---------- ----------
<S> <C> <C>
Voting Class A
common stock,
par value $.01:
Authorized
shares--
35,000,000;
issued shares
end of period--
0, 10,004,278,
12,687,135 and
12,927,459...... $ 2 $ 129
Non-voting Class
B common stock,
par value $.01:
Authorized
shares--
1,000,000;
issued shares
end of period--
0, 480,648,
480,648 and
240,324......... (2) 3
Class A common
stock, par value
$.01:
Authorized
shares--
1,959,021;
issued shares
end of period--
1,783,584, 0, 0
and 0........... -- --
Class B common
stock, par value
$.01:
Authorized
shares--345,710;
issued shares
end of each
period--265,044,
0, 0 and 0...... -- --
Class C common
stock, par value
$.01:
Authorized
shares--305,212;
issued shares
end of period--
305,212, 0, 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--
175,436, 0, 0
and 0........... -- --
Class F common
stock, par value
$.01:
Authorized
shares--
3,086,045;
issued shares
end of period--
3,086,045, 0, 0
and 0........... -- --
Class G common
stock, par value
$.01:
Authorized
shares--618,428;
issued shares
end of period--
578,509, 0, 0
and 0........... -- --
Series A
Preferred stock,
par value $.01:
20,000,000
authorized;
issued shares
end of each
period--0....... -- --
Capital in
excess par
value........... -- 104,231
Accumulated
deficit......... -- (56,104)
---------- ----------
-- 48,259
Receivables from
stockholders.... -- (219)
---------- ----------
Total
stockholders'
equity
(deficit)....... $-- $ 48,040
========== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 31, March 31, March 28,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities
Net loss...................................... $(11,974) $(14,867) $(10,523)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation................................ 52,135 30,649 22,587
Amortization of advance location payments... 20,339 11,280 7,682
Amortization of intangibles................. 40,974 33,524 16,047
Deferred income taxes....................... (4,343) (5,633) (2,507)
Amortization of debt discount and deferred
issue costs................................ 1,824 1,091 627
Amortization of premium on 11 3/4% Senior
Notes...................................... (1,235) (617) --
Stock based compensation.................... 1,269 1,446 2,152
Extraordinary charge for early
extinguishment of debt, net of taxes....... -- -- 296
Change in operating assets and liabilities,
net of businesses acquired:
Other assets.............................. (1,462) (3,027) (2,462)
Receivables, net.......................... 469 1,406 (1,100)
Inventories and prepaid expenses.......... (1,596) (2,898) (3,008)
Accounts payable.......................... 3,327 719 2,002
Accrued interest, net..................... 1,052 4,281 1,956
Other accrued expenses, net............... 2,172 1,196 983
-------- -------- --------
Net cash provided by operating activities..... 102,951 58,550 34,732
-------- -------- --------
Investing activities
Additions to property and equipment........... (62,082) (42,468) (29,779)
Advance location payments to location owners.. (22,052) (13,330) (11,809)
Additions to net assets related to
acquisitions of businesses (net of promissory
notes of $2,250 and $16,208 in 1998 and 1997,
respectively)................................ (97,531) (295,676) (155,247)
Sale of property and equipment................ -- 599 137
-------- -------- --------
Net cash used in investing activities......... (181,665) (350,875) (196,698)
-------- -------- --------
</TABLE>
F-6
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(In thousands of dollars)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 31, March 31, March 28,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Financing activities
Debt transactions:
Net proceeds from credit facility........... $87,736 $166,267 $130,000
Net (repayments) borrowings of bank and
other borrowings........................... (1,639) 396 (325)
Principal payments on capitalized lease
obligations................................ (2,894) (1,173) (1,007)
Deferred debt issuance costs................ (430) (9,015) (178)
Proceeds from issuance of 11 3/4% senior
notes...................................... -- 109,875 --
Repayment of 12 3/4% senior notes........... -- -- (5,000)
Repayment of 9 7/8% promissory note......... -- (15,000) --
Debt extinguishment costs................... -- -- (319)
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)
------- -------- --------
Net cash provided by financing activities..... 82,773 300,052 156,837
------- -------- --------
Net increase (decrease) in cash and cash
equivalents.................................. 4,059 7,727 (5,129)
Cash and cash equivalents, beginning of year.. 22,456 14,729 19,858
------- -------- --------
Cash and cash equivalents, end of year........ $26,515 $ 22,456 $ 14,729
======= ======== ========
Supplemental disclosure of cash flow
information
Interest paid................................. $64,418 $ 38,385 $ 24,845
======= ======== ========
Income taxes paid............................. $ 477 $ 358 $ 204
======= ======== ========
Noncash financing activities
Acquisition of fixed assets through capital
leases....................................... $ 2,307 $ 1,111 $ 1,249
======= ======== ========
</TABLE>
See accompanying notes.
F-7
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
1. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Coinmach Laundry Corporation, a Delaware corporation ("Coinmach Laundry"), and
its wholly-owned subsidiaries (collectively the "Company") which includes
Coinmach Corporation ("Coinmach"). 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. At March 31, 1999, the Company owned and
operated approximately 765,000 washers and dryers in approximately 75,000
locations on routes throughout the United States and in 163 retail laundromats
located throughout Texas and Arizona. The Company provides laundromat services
at all such retail locations. Super Laundry Equipment Corp. ("Super Laundry"),
a wholly-owned subsidiary of Coinmach, is a laundromat equipment distribution
company. The Company also leases laundry equipment and other household
appliances to corporate relocation entities, individuals, property owners and
managers of multi-family housing properties.
All material intercompany accounts and transactions have been eliminated in
consolidation.
Recognition of Revenues
The Company has agreements with various property owners that 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 each fiscal year.
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 $25.3 million, $21.8
million and $18.8 million in 1999, 1998 and 1997, respectively.
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 from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
F-8
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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,
---------------
1999 1998
------- -------
<S> <C> <C>
Laundry equipment.......................................... $11,785 $ 9,524
Machine repair parts....................................... 4,543 3,906
------- -------
$16,328 $13,430
======= =======
</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 and is being amortized on a straight-line basis
over periods ranging from 15 to 20 years.
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 will evaluate the realizability of the goodwill and contract
rights balances (if there are indicators of impairment) based upon the
Company's forecasted 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.
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.
Loss Per Share
Basic and diluted loss per share for 1999, 1998 and 1997 was calculated
based upon the weighted average number of common shares outstanding.
Conversion of common equivalent shares (stock options) was not assumed since
the results would have been antidilutive.
F-9
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Employee Stock Options
Financial Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," 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 permitted to continue to
account for such transactions under Accounting Principles Board Opinion No.
25, "Accounting for Stock-Based Compensation" ("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
7f).
Income Taxes
The Company accounts for income taxes pursuant to the liability method
whereby 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. Any deferred tax assets recognized for net operating loss carryforwards
and other items are 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. 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
In accordance with SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" the Company is
required to recognize impairment losses 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.
Derivative Instruments and Hedging Activities
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is required to be adopted for all
fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No.
133 will require the Company to recognize all derivatives on the balance sheet
at fair value.
If the derivative is a hedge that is eligible for special accounting,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings.
Currently, the Company's only exposure to derivatives is interest rate swap
transactions (see Note 4b) and, therefore, the Company does not believe SFAS
No. 133 will have a significant impact on the earnings and financial position
of the Company. The Company will adopt the Statement as required for its first
quarterly filing of the year ending March 31, 2001.
F-10
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fiscal Year
On March 6, 1998, the Company changed its fiscal year end to the twelve
consecutive months ending March 31. The Company's fiscal year had been the 52
or 53 week period ending on the last Friday in March. The impact of this
change in 1998 was not material to the financial statements taken as a whole.
The year ended March 28, 1997, is referred to as "1997," and the years ended
March 31, 1998 and 1999 are referred to as "1998" and "1999," respectively.
2. Business Combinations
a. The G&T Acquisition--1999
On June 5, 1998, the Company completed the acquisition (the "G&T
Acquisition") of Gordon & Thomas Company, Inc. ("G&T") for a cash purchase
price of approximately $58 million, excluding transaction expenses, and the
assumption of certain liabilities. G&T operated approximately 36,000 washers
and dryers, and provided outsourced laundry equipment services to multi-family
properties throughout New York and New Jersey. The excess of cost over net
tangible assets acquired of approximately $50.2 million has been allocated to
contract rights.
b. The Macke Acquisition--1998
On March 2, 1998, Coinmach completed the acquisition of Macke Laundry
Service Limited Partnership 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. The excess of cost over the net tangible assets
acquired of approximately $135.9 million has been allocated to contract
rights.
c. The Kwik Wash Acquisition--1997
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") which was repaid in 1998. KWL and Kwik Wash were 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,
provided coin-operated laundry equipment services to multi-family dwellings in
Texas, Louisiana, Arkansas and Oklahoma and operated approximately 150 retail
laundromats located throughout Texas at the time of acquisition. The excess of
cost over the net tangible assets acquired was allocated to contract rights of
approximately $123.3 million, goodwill of approximately $49.4 million and
deferred taxes payable of approximately $49.4 million. Simultaneously with the
acquisition, KWL, Kwik Wash and the Kwik Wash Partnership merged with and into
Coinmach.
d. Other Acquisitions
During the 1999 fiscal year, the Company made acquisitions of several small
route businesses for cash purchase prices aggregating approximately $39.5
million. The excess of cost over the net assets acquired amounted to
approximately $33.1 million of which approximately $26.7 million has been
allocated to contract rights and approximately $6.4 million has been allocated
to goodwill.
During the 1998 fiscal year, the Company made acquisitions of several small
route businesses or assets of businesses with purchase prices aggregating
approximately $84 million, of which the Company paid
F-11
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
of cost over the net assets acquired amounted to approximately $63.6 million
of which approximately $47.1 million has been allocated to contract rights and
approximately $16.5 million has been allocated to goodwill.
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 were repaid during 1999. The excess of cost over the net assets acquired
amounted to approximately $12 million of which approximately $7.9 million has
been allocated to contract rights and approximately $4.1 million has been
allocated to goodwill.
All acquisitions have been accounted for as purchases and, accordingly,
assets and liabilities have been recorded at their estimated fair values at
the dates of acquisition and the results of operations are included subsequent
to that date.
The following table reflects unaudited pro forma combined results of
operations of the Company, and the 1998 and 1999 acquired businesses described
above as if the acquisitions had taken place at the beginning of 1998 (in
thousands except per share data):
<TABLE>
<CAPTION>
Year ended March 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues........................................... $ 516,898 $ 500,489
Net loss........................................... (12,248) (18,615)
Basic and diluted net loss per common share........ (.93) (1.66)
</TABLE>
These unaudited pro forma 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.
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 1998
or of the results of future operations of the combined companies under the
ownership and management of the Company.
3. Receivables
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31,
-------------
1999 1998
------ ------
<S> <C> <C>
Trade receivables........................................... $7,220 $6,215
Notes receivable............................................ 469 759
Other....................................................... 1,036 1,101
------ ------
8,725 8,075
Allowance for doubtful accounts............................. 618 325
------ ------
$8,107 $7,750
====== ======
</TABLE>
F-12
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Notes receivable, which arise from the construction of laundromats, bear
interest at a weighted average rate of approximately 10% per annum and mature
through 2004. 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 8). Control of the notes sold with recourse is surrendered by the
Company on the date of transfer. The Company generally sells its notes
receivables with recourse at cost, recognizing no gain or loss.
4. Debt
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31,
-----------------
1999 1998
-------- --------
<S> <C> <C>
11 3/4% Senior Notes due 2005.......................... $296,655 $296,655
Premium on 11 3/4% Senior Notes, net................... 8,023 9,258
Credit facility indebtedness........................... 384,003 296,267
Obligations under capital leases....................... 4,291 4,475
Other long-term debt with varying terms and maturi-
ties.................................................. 2,542 4,761
-------- --------
$695,514 $611,416
======== ========
</TABLE>
a. 11 3/4% Senior Notes
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 11 3/4% Senior Notes due 2005 (the "Series B
Notes"). The gross proceeds from the Bond Offering were $109.875 million, of
which $100 million represented the principal amount outstanding and $9.875
million represented the payment of a premium for the Series C Notes. The
premium is being amortized as a reduction of interest expense through November
2005. 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 of its registered 11 3/4% Senior
Notes due 2005 (the "11 3/4% 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 11 3/4% Senior Notes is payable semi-annually on May 15 and
November 15. The 11 3/4% 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 11 3/4% Senior Notes contain
certain financial covenants and restrict the payment of certain dividends,
distributions or other payments from Coinmach to Coinmach Laundry.
In February 1997, Coinmach redeemed all of its outstanding 12 3/4% Senior
Notes. In connection therewith, Coinmach recognized an extraordinary charge of
$296,000 in 1997 (net of a tax benefit of $206,000).
b. Credit Facility
The Company's existing credit facility with Bankers Trust Company ("Banker's
Trust"), First Union National Bank of North Carolina ("First Union") and
certain other lending institutions, as amended (the
F-13
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
"Amended and Restated Credit Facility"), provides for an aggregate of $435
million of secured financing consisting of: (i) a $35 million working capital
revolver currently bearing interest at an annual rate of LIBOR plus 1.75%;
(ii) a $125 million acquisition revolver currently bearing interest at an
annual rate of LIBOR plus 1.75%; (iii) a $75 million Tranche A term loan
facility currently bearing interest at an annual rate of LIBOR plus 2.25% and
(iv) a $200 million Tranche B term loan facility currently bearing interest at
an annual rate of LIBOR plus 2.50%. The Amended and Restated Credit Facility
also provides for up to $10 million of letter of credit financings. These
interest rates are subject to change from time to time and may increase by 25
basis points or decrease up to 75 basis points based on certain financial
ratios set forth in the Amended and Restated Credit Facility. Under the
Amended and Restated Credit Facility, the working capital revolver and the
acquisition revolver 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.
In May 1999, the lenders under the Amended and Restated Credit Facility gave
their consent to permit the Company to borrow on or prior to May 28, 1999 up
to $12.5 million under the existing acquisition revolver for working capital
purposes.
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.
At March 31, 1999, the monthly variable LIBOR interest rate was
approximately 4.94%.
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 transaction at March 31, 1999, as estimated by a
dealer, was approximately $584,000 unfavorable and at March 31, 1998 it was
approximately $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 Restated Credit
Facility. The fair value of this swap transaction at March 31, 1998, as
estimated by a dealer was approximately $47,000 favorable. On September 15,
1998, the Company amended the March 2, 1998 swap agreement with First Union to
increase the notional amount to $175 million and to reduce the fixed monthly
LIBOR rate to 5.515%. The new expiration date is November 15, 2002. The fair
value of this swap transaction at March 31, 1999, as estimated by a dealer,
was approximately $203,000 unfavorable.
On April 7, 1998, the Company entered into a 31 month, $75 million notional
amount interest rate swap transaction with Bankers Trust, to fix the monthly
LIBOR interest rate at 5.75% on the Amended and Restated Credit Facility. The
fair value of this swap transaction at March 31, 1999, as estimated by a
dealer, was approximately $633,000 unfavorable.
Indebtedness under the Amended and Restated Credit Facility is secured by
all of the Company's real and personal property. Under the Amended and
Restated Credit Facility, the Company has pledged to Bankers Trust, 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
issuances and
F-14
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
transactions with affiliates. Also, the indenture governing the 11 3/4% Senior
Notes and the Amended and Restated Credit Facility limit Coinmach's ability to
pay dividends.
Debt outstanding under the Amended and Restated Credit Facility as of March
31, 1999, consisted of the following (in thousands):
<TABLE>
<S> <C>
Term loan A, quarterly payments of $250 increasing to $5,000 on
March 31, 2003 and $12,500 on March 31, 2004 (Interest rate of
approximately 7.19% at March 31, 1999).......................... $ 73,750
Term loan B, quarterly payments of $500 with the final payment of
$186,000 on June 30, 2005 (Interest rate of approximately 7.44%
at March 31, 1999).............................................. 198,000
Acquisition revolving line of credit............................. 94,646
Working capital revolving line of credit......................... 17,607
--------
$384,003
========
</TABLE>
5. Retirement Savings Plans
Coinmach maintains several defined contribution 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.
The Company made contributions for 1999, 1998 and 1997 to pension plans that
cover its union employees. These plans provide defined benefits based on union
members' earnings and period of coverage under the respective plans. However,
in the event these plans terminate, or if the Company discontinues its
participation in these plans, the Company may be liable for a portion of the
plans' unfunded vested benefits, the amounts of which, if any, have not been
determined.
Contributions to all the plans for 1999, 1998 and 1997 amounted to
approximately $339,000, $281,000 and $140,000, respectively.
The Company does not provide any other post-retirement benefits.
6. Income Taxes
The components of the Company's net deferred tax liabilities are as follows
(in thousands):
<TABLE>
<CAPTION>
March 31,
---------------
1999 1998
------- -------
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation and contract rights.............. $95,882 $90,273
Other, net................................................ 3,057 1,086
------- -------
98,939 91,359
------- -------
Deferred tax assets:
Net operating loss carryforwards.......................... 14,032 10,357
Stock compensation expense................................ 1,460 982
AMT credit................................................ 1,156 --
Covenant not to compete................................... 797 509
------- -------
17,445 11,848
------- -------
$81,494 $79,511
======= =======
</TABLE>
F-15
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. These temporary
differences arise primarily from the use of 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 $34 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 2019. 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 Year Ended
March 31, March 31, March 28,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Federal..................................... $(2,561) $(4,265) $(2,039)
State....................................... (518) (1,069) (474)
------- ------- -------
$(3,079) $(5,334) $(2,513)
======= ======= =======
</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 Year Ended
March 31, March 31, March 28,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Expected tax benefit....................... $(5,269) $(7,070) $(4,563)
State tax benefit, net of federal taxes.... (314) (690) (308)
Permanent book/tax differences:
Goodwill................................. 2,552 2,289 1,100
Stock compensation expense............... -- -- 311
Other.................................... (48) 137 947
------- ------- -------
Tax provision/(benefit).................... $(3,079) $(5,334) $(2,513)
======= ======= =======
</TABLE>
7. Stockholders' Equity
At March 31, 1999, Coinmach Laundry has authorized Common Stock of
35,000,000 shares and authorized Series A Preferred Stock of 20,000,000
shares.
a. Secondary Offering
On December 19, 1997, Coinmach Laundry completed a secondary offering (the
"Secondary 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 Secondary 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 Secondary Offering were approximately $49.9
million, after underwriting discounts and commissions and before expenses.
F-16
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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. This forgiveness and subsequent forgivenesses have
been accounted for as a stock-based compensation charge in 1999, 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 (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. Conversion of Stock
On December 8, 1998, a holder of 240,324 shares of non-voting Class B Common
Stock exercised the conversion option to convert those shares into 240,324
shares of Common Stock.
F-17
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
f. 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 stock 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 at an exercise price
per share not less than 100% of the fair market value of the Common Stock at
the date of grant and stock options at an exercise price per share not less
than the average closing price of the Common Stock for the thirty consecutive
trading days immediately preceding the date of grant. All stock 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.
Through March 31, 1999, the Company had granted 502,250 options to various
employees of the Company pursuant to the Stock Option Plan, of which 248,500
were granted during 1999.
During July and September 1996, in connection with the Offering, the Company
granted certain nonqualified stock options (the "1996 Options") to certain
members of management (collectively, the "Option Holders") to purchase up to
739,437 shares of Common Stock at 85% of the initial offering price of the
Common Stock. The 1996 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.
On September 17, 1996, the Company granted to two of its disinterested
directors, each of whom was appointed by the Board of Directors of the Company
on such date to serve as independent directors, stock 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.
On September 5, 1997, the Company granted to certain members of management
certain non-qualified options (the "1997 Options") 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.
During May and July 1998, the Company granted to certain employees 248,500
non-qualified stock options pursuant to the Stock Option Plan and 31,244 non-
qualified stock options (collectively, the "1998 Options") to a director of
the Company at exercise prices ranging from $22.31 to $23.05 per share. Such
options vest in equal annual installments (20% vest immediately on the date of
grant and the remainder vest over a four year period).
The Company records the difference between the exercise price of all options
granted and the respective initial offering price or the fair market value of
the Common Stock on the date of grant as a stock-based compensation charge
over the applicable vesting period.
For 1999, 1998 and 1997, the Company recorded stock-based compensation
charges of approximately $1,153, $1,342 and $1,161, respectively (in
thousands), relating to the 1996 Options, the 1997 Options, the 1998 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.
F-18
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 1999, 1998 and 1997: risk-free interest rate of 5.2%,
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 Year ended Year ended
March 31, March 31, March 28,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Pro forma basic and diluted net loss (in
thousands).............................. $(12,897) $(15,890) $(10,603)
Pro forma basic and diluted net loss per
share................................... $ (.98) $ (1.41) $ (1.15)
</TABLE>
Information with respect to options for 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average Fair
Exercise Value of Options
Options 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
Nonqualified 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 granted:
Nonqualified options issued at
market price....................... 279,744 22.58 9.20
--------- ------ ------
Options outstanding at March 31,
1999................................. 1,575,074 14.64 7.58
========= ====== ======
Options exercisable at March 28,
1997................................. 214,151 $12.55 $ 6.26
========= ====== ======
Options exercisable at March 31,
1998................................. 464,918 $12.80 $ 6.85
========= ====== ======
Options exercisable at March 31,
1999................................. 789,507 $13.54 $ 7.16
========= ====== ======
</TABLE>
F-19
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Exercise prices for options outstanding and for options exercisable as of
March 31, 1999 were as follows:
<TABLE>
<CAPTION>
Number of
Options Range of
Number of Exercisable Exercise Prices
Options ----------- ---------------
<S> <C> <C>
1,222,830 704,555 $11.90--$14.00
5,000 2,000 $17.75
347,244 82,952 $21.25--$24.50
--------- -------
1,575,074 789,507
========= =======
</TABLE>
The weighted average remaining contractual life of those options is
approximately 7.87 years.
Shares of Common Stock reserved for future issuance as of March 31, 1999 are
as follows:
<TABLE>
<CAPTION>
Number of
Shares
---------
<S> <C>
Stock options.................................................... 2,181,971
Employee Stock Purchase Plan..................................... 1,000,000
Conversion shares................................................ 240,324
---------
3,422,295
=========
</TABLE>
g. Employee Stock Purchase Plan
In July 1999, the Company is planning to implement an Employee Stock Purchase
Plan that has been established as part of its voluntary defined contribution
plan for all employees meeting certain eligibility criteria. Under the plan,
employees may elect to purchase full shares of Common Stock through payroll
deductions not to exceed 10% of their base salary. The Company has reserved
1,000,000 shares of Common Stock for future issuance.
8. Commitments and Contingencies
Rental expense for all operating leases, which principally cover office
facilities, laundromats and vehicles, was approximately $7,227, $4,483 and
$2,307 for 1999, 1998 and 1997, respectively (in thousands).
Future minimum rental commitments under all capital leases and noncancellable
operating leases as of March 31, 1999, are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
------- ---------
<S> <C> <C>
2000..................................................... $2,224 $ 6,141
2001..................................................... 1,334 4,956
2002..................................................... 612 3,576
2003..................................................... 121 2,701
2004..................................................... -- 2,085
Thereafter............................................... -- 5,529
------ -------
Total.................................................... $4,291 $24,988
====== =======
</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, 1999 is approximately $1.5 million.
F-20
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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, 1999 and 1998 were approximately
$4.9 million and $5.3 million, respectively.
On April 8, 1999, Sand v. Coinmach Laundry Corporation, et. al, a purported
class action securities fraud lawsuit, was filed in the Federal District Court
for the Eastern District of New York (the "Federal Securities Action") naming
the Company and certain of its executive officers as defendants. The Federal
Securities Action was purportedly brought on behalf of all shareholders of the
Company who purchased or otherwise acquired the Company's common stock during
the period August 6, 1997 to September 29, 1998. The complaint in the Federal
Securities Action alleges violations of various federal securities laws,
including misrepresentations of certain information about the Company. The
complaint in the Federal Securities Action seeks damages in unspecified
amounts. Although the outcome of this proceeding cannot be predicted, based on
the allegations contained in the complaint, management believes that the
Federal Securities Action will not have a material adverse effect on the
financial condition, results of operations or cash flows of the Company.
The Company is also party to various legal proceedings arising in the
ordinary course of business. Although the ultimate disposition of such
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, results of operations or cash
flows 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.
9. 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, 1999.
The carrying amount, and related estimated fair value for the Company's 11
3/4% Senior Notes at March 31, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
-------- ----------
<S> <C> <C>
11 3/4% Senior Notes (including premium of $8,023)... $304,678 $326,706
</TABLE>
The fair value of the 11 3/4% Senior Notes is based on quoted market prices.
10. 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 $400,000 and $450,000 is included in other assets
as of March 31, 1999 and 1998, respectively.
On May 5, 1999, the Company extended a loan to an executive officer of the
Company in the principal amount of $250,000 to be repaid in a single payment
on the third anniversary of such loan with interest accruing at a rate of 8%
per annum.
F-21
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
June 30, September 30, December 31, March 31,
For the Quarter Ended 1998 1998 1998 1999
--------------------- ------------ --------------- -------------- ------------
(In thousands of dollars, except per share amounts)
<S> <C> <C> <C> <C>
Revenues................ $ 117,934 $ 124,975 $ 130,736 $ 131,678
Operating income........ $ 11,305 $ 12,189 $ 13,776 $ 13,672
Loss before income
taxes.................. $ (4,262) $ (4,678) $ (3,126) $ (2,987)
Net loss................ $ (3,114) $ (3,595) $ (2,698) $ (2,567)
Basic and diluted net
loss per share......... $ (.24) $ (.27) $ (.20) $ (.19)
Weighted average shares
outstanding............ 13,167,783 13,167,783 13,167,783 13,167,783
</TABLE>
<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
taxes.................. $ (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>
F-22
<PAGE>
Exhibit 21.1
Coinmach Laundry Corporation and Subsidiaries
List of Subsidiaries
Name Jurisdiction
---- ------------
Coinmach Corporation. ........................................ Delaware
Grand Wash & Dry Launderette, Inc. ........................... New York
Super Laundry Equipment Corp. ................................ New York
Coinmach Laundromat GP Corp. ................................. New York
Coinmach Laundromat LP Corp. ................................. New York
Coinmach Laundromat Holding, LP. ............................. New York
Maquilados Automaticos SA de CV. ............................. Mexico
Automatica SA de CV. ......................................... Mexico
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 26,515
<SECURITIES> 0
<RECEIVABLES> 8,107
<ALLOWANCES> 0
<INVENTORY> 16,328
<CURRENT-ASSETS> 0
<PP&E> 346,947
<DEPRECIATION> (123,337)
<TOTAL-ASSETS> 901,296<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 695,514<F2>
0
0
<COMMON> 104,231
<OTHER-SE> (56,323)
<TOTAL-LIABILITY-AND-EQUITY> 901,296<F3>
<SALES> 0
<TOTAL-REVENUES> 505,323
<CGS> 0
<TOTAL-COSTS> 331,647
<OTHER-EXPENSES> 122,734<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,995
<INCOME-PRETAX> (15,053)
<INCOME-TAX> (3,079)<F5>
<INCOME-CONTINUING> (11,974)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,974)<F6>
<EPS-BASIC> (.91)
<EPS-DILUTED> (.91)
<FN>
<F1>
1. Total Assets:
Includes Advance Location Payments of $79,705, Contract Rights of $413,014
and Goodwill of $109,025, each net of accumulated amortization at March
31, 1999.
<F2> 2. Bonds:
Includes $296,655 of 11 3/4 senior notes, as well as debt outstanding under
a credit facility of $384,003 at March 31, 1999.
<F3>3. Total Assets:
Includes Accrued Rental Payments of $26,888 and Accrued Interest of
$15,516 at March 31, 1999.
<F4> Other Expenses:
Includes stock based compensation charges of $1,269 for the year ended
March 31, 1999.
<F5> 5. Income Tax
The provision (benefit) for income taxes consists of $1,264 currently
payable and ($4,343) deferred, for the year ended March 31, 1999.
<F6> 6. Net Income:
In addition, EBITDA of $165,659 (earnings before interest, income taxes,
depreciation and amortization) before the deduction for the stock-based
compensation charge was generated for the reported period. EBITDA is
a meaningful measure of a company's ability to service debt.
</FN>
</TABLE>
