COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the period ended June 30, 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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Lumber Road, Roslyn, New York 11576
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (516) 484-2300
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ].
As of the close of business on August 2, 1999, Coinmach Laundry Corporation 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").
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
INDEX
PART I.
<TABLE>
<CAPTION>
Financial Information Page No.
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
June 30, 1999 (Unaudited) and March 31, 1999 3
Condensed Consolidated Statements of Operations (Unaudited) -
Three Months Ended June 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-13
PART II.
Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
Signature Page 16
</TABLE>
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
June 30, 1999 March 31, 19991
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 27,022 $ 26,515
Receivables, net 7,790 8,107
Inventories 16,920 16,328
Prepaid expenses 6,833 6,552
Advance location payments 79,377 79,705
Land, property and equipment, net of accumulated
depreciation of $136,742 and $123,337 226,869 223,610
Contract rights, net of accumulated amortization of
$78,534 and $70,602 405,231 413,014
Goodwill, net of accumulated amortization of $22,293
and $20,318 107,052 109,025
Other assets 18,314 18,440
--------- ----------
Total assets $895,408 $901,296
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable $ 20,677 $ 20,478
Accrued rental payments 27,675 26,888
Accrued interest 7,256 15,516
Other accrued expenses 12,658 13,366
Deferred income taxes 80,202 81,494
11 3/4% Senior Notes 296,655 296,655
Premium on 11 3/4% Senior Notes, net 7,715 8,023
Credit facility indebtedness 390,308 384,003
Other long-term debt 6,497 6,833
Stockholders' equity:
Common stock and capital in excess of par value 104,522 104,363
Receivables from management (219) (219)
Accumulated deficit (58,538) (56,104)
--------- ----------
Total stockholders' equity 45,765 48,040
--------- ----------
Total liabilities and stockholders' equity $895,408 $901,296
========= ==========
</TABLE>
See accompanying notes.
- ------
1. The March 31, 1999 balance sheet has been derived from the audited
consolidated financial statements as of that date.
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
1999 1998
----------------- ---------------
<S> <C> <C>
REVENUES $133,538 $117,934
COSTS AND EXPENSES:
Laundry operating expenses 87,211 77,568
General and administrative expenses 2,079 1,997
Depreciation and amortization 29,936 26,843
Stock-based compensation charge 159 221
-------- --------
119,385 106,629
-------- --------
OPERATING INCOME 14,153 11,305
INTEREST EXPENSE, NET 16,740 15,567
-------- --------
LOSS BEFORE INCOME TAXES (2,587) (4,262)
-------- --------
PROVISION (BENEFIT) FOR INCOME TAXES:
Currently payable 1,139 108
Deferred (1,292) (1,256)
-------- --------
(153) (1,148)
-------- --------
NET LOSS $ (2,434) $ (3,114)
-------- --------
BASIC AND DILUTED LOSS PER SHARE $ (.18) $ (.24)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Common Shares 13,167,783 13,167,783
See accompanying notes.
</TABLE>
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COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (2,434) $(3,114)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 13,464 12,133
Amortization of advance location payments 6,084 4,985
Amortization of intangibles 10,388 9,725
Deferred income taxes (1,292) (1,256)
Amortization of premium on 11 3/4% Senior Notes (308) (309)
Amortization of debt discount and deferred issue costs 455 376
Stock-based compensation 159 221
Change in operating assets and liabilities, net of businesses acquired:
Other assets (840) (504)
Receivables, net 317 (866)
Inventories and prepaid expenses (873) (294)
Accounts payable 200 (79)
Accrued interest, net (8,260) (8,388)
Other accrued expenses, net (689) 2,546
---------- ----------
Net cash provided by operating activities 16,371 15,176
---------- ----------
INVESTING ACTIVITIES:
Additions to property and equipment (16,201) (15,481)
Advance location payments to location owners (5,126) (5,276)
Additions to net assets related to acquisitions of businesses - (86,123)
---------- ----------
Net cash used in investing activities ( 21,327) (106,880)
---------- ----------
FINANCING ACTIVITIES:
Net proceeds from credit facility 6,305 93,294
Net repayments of bank and other borrowings (129) (226)
Principal payments on capitalized lease obligations (713) (565)
Deferred debt issue costs - (267)
---------- ----------
Net cash provided by financing activities 5,463 92,236
---------- ----------
Net increase in cash and cash equivalents 507 532
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 26,515 22,456
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $27,022 $22,988
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $24,855 $24,307
========== ==========
Income taxes paid $ 1,264 $ 119
========== ==========
NON-CASH FINANCING ACTIVITIES:
Acquisition of fixed assets through capital leases $ 631 $ 278
========== ==========
</TABLE>
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Description of Business
Coinmach Laundry Corporation ("Coinmach Laundry"), a Delaware
corporation, through its wholly-owned subsidiaries (collectively, the
"Company"), which include Coinmach Corporation ("Coinmach"), is the leading
supplier of outsourced laundry services for multi-family housing properties in
the United States. 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 owns and operates approximately 771,000 washers and dryers
(hereinafter referred to as "laundry machines" or "machines") in approximately
75,000 locations on routes located throughout the United States and in 165
retail laundromats located throughout Texas and Arizona. Super Laundry Equipment
Corp. ("Super Laundry"), a wholly-owned subsidiary of Coinmach, is a laundromat
equipment distribution company. The Company also leases laundry machines and
other household appliances to corporate relocation entities, property owners,
managers of multi-family housing properties and individuals.
2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of the Company have been prepared in conformity with generally accepted
accounting principles ("GAAP") for interim financial reporting and pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, such financial statements do not include all of the information and
footnotes required by GAAP for complete financial statements. GAAP requires the
Company's management to make estimates and assumptions that affect the amounts
reported in the financial statements. Actual results could differ from such
estimates. The interim results presented herein are not necessarily indicative
of the results to be expected for the entire year.
In the opinion of management of the Company, these unaudited condensed
consolidated financial statements contain all adjustments of a normal recurring
nature necessary for a fair presentation of the financial statements for the
interim periods presented.
These unaudited condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements included
in Coinmach Laundry's Annual Report on Form 10-K for the year ended March 31,
1999.
3. Loss per Share
Basic and diluted loss per share for each of the three months ended
June 30, 1999 and 1998 was calculated based upon the weighted average number of
common shares outstanding of 13,167,783. Conversion of common equivalent shares
(stock options) was not assumed since the results would have been antidilutive.
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
4. Debt
At June 30, 1999, the Company had outstanding debt consisting of (a)
approximately $296.7 million of 11 3/4% Senior Notes due 2005 (the "Senior
Notes"), (b) $271.0 million of term loans, and (c) approximately $119.3 million
of a revolving line of credit. The above mentioned term loans and revolving line
of credit represent indebtedness pursuant to the Company's existing credit
facility (as amended and restated, the "Amended and Restated Credit Facility"),
which 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
Company, as Collateral Agent, its interests in all of the issued and outstanding
shares of capital stock of Coinmach. In addition to certain terms and
provisions, events of default and customary representations, covenants and
agreements, the Amended and Restated Credit Facility contains certain
restrictive 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 transactions with affiliates. Also, the indenture
governing the Senior Notes and the Amended and Restated Credit Facility limit
Coinmach's ability to pay dividends. 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.
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, certain matters
discussed in this document are forward-looking statements based on the beliefs
of the Company's management and are subject to certain risks and uncertainties,
including the risks and uncertainties discussed below, as well as other risks
set forth in the Company's Annual Report on Form 10-K for the year ended March
31, 1999. Should these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, the Company's future performance and actual results
of operations may differ materially from those expected or intended.
General
The Company is principally engaged in the business of supplying
outsourced laundry services for multi-family housing properties. At June 30,
1999, the Company owned and operated approximately 771,000 washers and dryers in
approximately 75,000 locations on routes throughout the United States and in 165
retail laundromats located throughout Texas and Arizona. The Company, through
Super Laundry, its wholly-owned subsidiary, is also a laundromat equipment
distribution company. The Company also leases laundry machines and other
household appliances to corporate relocation entities, property owners, managers
of multi-family housing properties and individuals.
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 more than 85% of its revenue. The Company provides outsourced
laundry 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.
-8-
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
General (continued)
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 $3.1 million for the three months
ended June 30, 1999 and $2.4 million for the three months ended June 30, 1998);
(ii) operating, maintaining and servicing retail laundromats (approximately $5.4
million for the three months ended June 30, 1999 and $4.8 million for the three
months ended June 30, 1998); and (iii) constructing complete turnkey retail
laundromats, retrofitting retail laundromats, distributing exclusive lines of
commercial coin and non-coin operated machines and parts, and selling service
contracts (approximately $10.2 million for the three months ended June 30, 1999
and $6.5 million for the three months ended June 30, 1998).
Results of Operations
The following discussion should be read in conjunction with the
attached unaudited condensed consolidated financial statements and notes thereto
and with the Company's audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
March 31, 1999.
Comparison of the three-month periods ended June 30, 1999 and June 30, 1998
Revenues increased by approximately $15.6 million or 13% for the
three-month period ended June 30, 1999, as compared to the prior year's
corresponding period. 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 $9.7 million of its revenue
increase for the current three-month period is primarily due to the acquisition
of Cleanco, Inc. and certain of its affiliates in May 1998 and the acquisition
of all of the common stock of Gordon & Thomas Companies, Inc. in June 1998. In
addition, the Company's installed machine base increased by approximately 6,500
machines from internal growth for each of the three-month periods ended June 30,
1999 and 1998. 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 12% for the
three-month period ended June 30, 1999 as compared to the prior year's
corresponding period. This increase was due primarily to an increase in
commission expense related to the improvement in revenue. However, as a
percentage of revenues, laundry operating expenses were approximately 65.3% for
the three-month period ended June 30, 1999 as compared to approximately 65.8%
for the prior year's corresponding period. This change was primarily due to cost
efficiencies related to the consolidation of acquisitions noted above into the
Company's operations.
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
General and administrative expenses increased slightly for the three-
month period ended June 30, 1999, as compared to the prior year's corresponding
period. However, as a percentage of revenues, general and administrative
expenses were approximately 1.6% for the current period as compared to
approximately 1.7% for the prior year's corresponding period. This change was
primarily due to cost efficiencies related to the integration of the
acquisitions noted above into the Company's operations.
Depreciation and amortization increased by approximately 12% for the
three-month period ended June 30, 1999, as compared to the prior year's
corresponding period, due primarily to contract rights and goodwill associated
with the above-mentioned acquisitions, as well as an increase in capital
expenditures with respect to the Company's installed base of machines.
Operating income margins were approximately 10.6% for the three-month
period ended June 30, 1999, as compared to approximately 9.6% for the
three-month period ended June 30, 1998. This change was primarily due to cost
efficiencies related to the integration of the acquisitions noted above into the
Company's operations.
Interest expense, net, increased by approximately 8% for the
three-month period ended June 30, 1999, as compared to the prior year's
corresponding period, due primarily to increased borrowing levels under the
Amended and Restated Credit Facility in connection with certain acquisitions
mentioned above.
The effective tax benefit rate decreased to approximately 6% for the
current period from approximately 27% for the prior year's corresponding period.
The lower effective tax benefit rate is the result of the greater impact that
non-deductible amortization, which has remained constant, has when added back to
losses before income taxes, which are lower than in corresponding periods.
EBITDA (earnings before deductions for interest, income taxes,
depreciation and amortization) before deduction for the stock-based compensation
charges was approximately $44.2 million for the three months ended June 30,
1999, as compared to approximately $38.4 million for the corresponding period in
1998, representing an improvement of approximately 15%. EBITDA margins improved
to approximately 33.1% for the three months ended June 30, 1998, compared to
approximately 32.5% for the prior year's corresponding period. These increases
are primarily the result of increased revenues and operating margins, as
discussed above. EBITDA is used by 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 the 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 GAAP) as an indicator of operating
performance or (b) cash flows from operating, investing and financing activities
(as determined by GAAP) as a measure of liquidity. Given that EBITDA is not a
measurement determined in accordance with
-10-
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
GAAP and is thus susceptible to varying calculations, EBITDA as presented may
not be comparable to other similarly titled measures of other companies.
Liquidity and Capital Resources
The Company continues to have substantial indebtedness and debt service
requirements. At June 30, 1999, the Company had outstanding long-term debt
(excluding the unamortized premium of approximately $7.7 million) of
approximately $693.5 million and stockholders' equity of approximately $45.8
million.
The Company's level of indebtedness will have several important effects
on its future operations, including, but not limited to, the following: (a) a
significant portion of the Company's cash flow from operations will be required
to pay interest on its indebtedness; (b) 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; (c) 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 (d) the
Company's ability to adapt to changes in the outsourced laundry services
industry and to economic conditions in general will be limited.
As the Company has focused on increasing its cash flow from operating
activities, it has made significant capital investments primarily consisting of
capital expenditures related to acquisitions, renewal 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 three
months ended June 30, 1999 were approximately $21.3 million. Of such amount, the
Company spent approximately $5.4 million related to the net increase in the
installed base of machines of approximately 6,500 machines. The balance of
approximately $15.9 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. 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, Coinmach is required to make monthly cash interest payments as
required by the Amended and Restated Credit Facility and semi-annual cash
interest payments on the Senior Notes.
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COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
Management believes that the Company's future operating activities will
generate sufficient cash flow to repay indebtedness outstanding under the Senior
Notes and borrowings under the Amended and Restated Credit Facility or to permit
any necessary refinancings thereof. An inability of the Company, however, to
comply with covenants or other conditions under the Amended and Restated Credit
Facility or contained in the indenture governing the Senior Notes 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 indenture governing the Senior Notes.
The Company's depreciation and amortization expenses (aggregating
approximately $29.9 million for the three months ended June 30, 1999) have the
effect of reducing net income but not operating cash flow. In accordance with
GAAP, 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 15 years.
As part of its business strategy, the Company will continue to evaluate
opportunities to acquire local, regional and multi-regional route businesses.
There can be no assurance that the Company will find attractive acquisition
candidates or effectively manage the integration of acquired businesses into its
existing business. Additionally, the Company expects to utilize excess cash flow
from operations primarily to reduce debt.
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
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
Company's 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 operations, financial
condition or cash flows.
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.
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. 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 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 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)
3.3 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)
10.78 Coinmach Laundry Corporation 1998 Employee
Stock Purchase Plan.
10.79 Promissory Note, dated May 5, 1999, of
Mitchell Blatt in favor of Coinmach.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
-15-
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COINMACH LAUNDRY CORPORATION
Date: August 6, 1999 /s/ ROBERT M. DOYLE
-------------------------------
Robert M. Doyle
Senior Vice President and Chief
Financial Officer
(On behalf of registrant and as
Principal Financial Officer)
-16-
<PAGE>
COINMACH LAUNDRY CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company at a fixed price through voluntary payroll deductions
during the payroll deduction period. It is the intention of the Company to have
the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the
Internal Revenue Code of 1986, as amended. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the committee selected by the Board to
administer the Plan, each member of which shall be a "disinterested person"
within the meaning of Rule 16b-3 promulgated under the Exchange Act.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" shall mean the Class A Common Stock of the
Company, $0.01 par value per share.
(e) "Company" shall mean Coinmach Laundry Corporation, a Delaware
corporation.
(f) "Compensation" shall mean the total cash remuneration (whether
or not denominated in United States dollars) received by an Employee from the
Company or a Subsidiary as base salary or wages. For purposes of this Plan,
Compensation shall not include cash bonuses or other one-time cash incentive or
other payments made to an Employee by the Company from time to time, unless
specifically authorized by the Committee.
(g) "Designated Subsidiaries" shall mean Coinmach Corporation and
the other Subsidiaries which have been designated by the Board from time to time
in its sole discretion as eligible to participate in the Plan.
(h) "Eligible Employee" shall have the meaning given to such term in
Section 3(a).
(i) "Employee" shall mean any individual who is an employee of the
Company or any Designated Subsidiary for purposes of tax withholding under the
Code. For purposes of this Plan, if an Employee is sick or on a leave of
absence, such individual shall continue to be considered an Employee. Where the
period of leave exceeds 90 days and the individual's right to re-employment is
not guaranteed either by statute or by contract, such individual shall no longer
be considered an Employee as of the 91st day of such leave.
(j) "Enrollment Date" shall mean the first day of each Offering
Period.
<PAGE>
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Exercise Date" shall mean the last day of each Offering Period.
(m) "Fair Market Value" shall mean, as of any date for so long as
the Common Stock is listed on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"),
the value of Common Stock equal to the mean between the highest and lowest
quoted selling prices for the Common Stock (or the mean of the lowest bid and
highest asked prices, if no sales were reported), as quoted on such exchange (or
the exchange with the greatest volume of trading in Common Stock) or system on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Committee deems reliable; provided, however, that (1) if the
Common Stock is quoted on NASDAQ (but not on the National Market System thereof)
or is regularly quoted by a recognized securities dealer but selling prices are
not reported, its Fair Market Value shall be the mean of the closing bid and
asked prices for the Common Stock on the date of such determination, as reported
in The Wall Street Journal or such other source as the Committee deems reliable;
and (2) in the absence of an established market for the Common Stock, the Fair
Market Value thereof shall be determined in good faith by the Committee.
(n) "Insider" shall mean any person who is considered an "insider"
with respect to the Company under Section 16 of the Exchange Act.
(o) "Offering Period" shall mean a period of approximately three
months (with the exception of the first Offering Period of the Plan which shall
be such period of time as designated by the Committee), commencing on the first
Trading Day on or after the first day of each calendar quarter and terminating
on the last Trading Day on or prior to the last day of each calendar quarter.
(p) "Parent" shall mean a corporation which is a "parent
corporation" of the Company within the meaning of Section 424(e) of the Code.
(q) "Participant" shall mean any Eligible Employee who authorizes
payroll deductions in accordance with the provisions of Section 5.
(r) "Plan" shall mean this Coinmach Laundry Corporation 1998
Employee Stock Purchase Plan.
(s) "Purchase Price" shall mean an amount equal to the lesser of (i)
85% of the Fair Market Value of one share of Common Stock on the Enrollment
Date, or (ii) 85% of the Fair Market Value of one share of Common Stock on the
Exercise Date; provided, however, that the Committee may designate a higher
Purchase Price which is not more than the greater of (i) 100% of the Fair Market
Value of one share of Common Stock on the Enrollment Date, or (ii) 100% of the
Fair Market Value of one share of Common Stock on the Exercise Date; provided,
further, that in no case shall the Purchase Price be less than the par value of
the Common Stock.
(t) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
2
<PAGE>
(u) "Subsidiary" shall mean a corporation which is a "subsidiary
corporation" of the Company within the meaning of Section 424(f) of the Code.
(v) "Trading Day" shall mean a day on which national stock exchanges
and NASDAQ are open for trading.
3. Eligibility.
(a) Except as otherwise provided in Sections 3(b) and 3(c) below,
all Employees shall be eligible to participate in the Plan (each, an "Eligible
Employee").
(b) The Committee may, in its discretion, exclude the following
Employees from eligibility to participate in the Plan: (i) any Employee who has
been employed by the Company or its Designated Subsidiaries on the Enrollment
Date of such offering for less than two full years, (ii) any Employee whose
customary employment with the Company or Designated Subsidiary is twenty (20)
hours or less per week, (iii) any Employee whose customary employment with the
Company or Designated Subsidiary is for not more than five (5) months in any
calendar year, and (iv) Highly Compensated Employees (as defined in Section
414(q) of the Code). Notwithstanding any other provision herein, no Employee
whose participation in the Plan is prohibited by applicable law shall be
eligible to participate in the Plan.
(c) Notwithstanding any other provision herein, no Employee shall be
eligible to participate in the Plan (i) if, immediately after the grant of any
option under the Plan, such Employee would own stock (together with stock owned
by any other person or entity that would be attributed to such Employee pursuant
to Section 424(d) of the Code) of the Company (including, for this purpose, all
shares of stock subject to any outstanding options to purchase such stock,
whether or not currently exercisable and irrespective of whether such options
are subject to the favorable tax treatment of Section 421(a) of the Code)
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Parent or Subsidiary, or (ii)
which permits his or her rights to purchase stock under all employee stock
purchase plans (within the meaning of Section 423 of the Code) of the Company
and its Parents and Subsidiaries to accrue at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) worth of stock (determined at the Fair Market Value
of the stock at the time such option is granted) for each calendar year in which
such option is outstanding at any time. The limitation described in clause (ii)
of the preceding sentence shall be applied in a manner consistent with Section
423(b)(8) of the Code.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods commencing August 2, 1999, or such later date as chosen by the
Committee, and continuing thereafter until terminated in accordance with the
provisions of Section 19 hereof. The Committee shall have the power to change
the duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected thereafter.
3
<PAGE>
5. Participation.
(a) An Eligible Employee may become a Participant in the Plan as of
any Enrollment Date by completing a subscription agreement authorizing payroll
deductions in the form of Exhibit A to this Plan and filing it with the
Company's Employee Benefits Department at least fifteen (15) days prior to the
applicable Enrollment Date, unless a later time for filing the subscription
agreement is set by the Committee for all Eligible Employees with respect to a
given Offering Period. A Participant's subscription agreement shall remain in
effect for successive Offering Periods unless it is either superseded by a
replacement subscription agreement as provided in Section 6(c)(i) hereof, or
terminated as provided in Section 10 hereof.
(b) Payroll deductions for a Participant shall commence on the first
payroll date following the Enrollment Date and shall end on the last payroll
date in the Offering Period to which such authorization is applicable, unless
sooner terminated by the Participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time an Eligible Employee files a subscription agreement
for purposes of purchasing shares of Common Stock under the Plan, such Eligible
Employee shall, with respect to each payroll period during an Offering Period,
elect a percentage to be withheld from Compensation in an amount (expressed as a
whole number percentage) not exceeding ten percent (10%) of the Compensation
which such Eligible Employee receives on each payroll date during the Offering
Period; provided, however, that in no event may any Participant have payroll
deductions made for any Offering Period which would result in the aggregate
amount of such deductions for the calendar year containing such Offering Period
to exceed the maximum amount permitted under Section 3(c) of this Plan.
(b) A payroll deduction account shall be maintained for each
Participant.
All payroll deductions made for a Participant shall be credited to such
Participant's payroll deduction account under the Plan. A Participant may not
make any additional payments into such account. The amounts in each
Participant's payroll deduction account shall be held by the Company until such
amounts are used for the purchase of shares of Common Stock pursuant to Section
8 herein.
(c)
(i) Subject to Section 6(c)(ii) hereof, a Participant
may discontinue participation in the Plan, as provided in Section 10
hereof, at any time during the Offering Period prior to the Exercise
Date. Once an Offering Period has commenced, a Participant may not
increase or decrease the rate of payroll deductions for the existing
Offering Period, but may, during the existing Offering Period,
increase or decrease the rate of payroll deductions for the next
succeeding Offering Period by completing or filing with the Company
a replacement subscription agreement, at least fifteen (15) days
prior to the end of that Offering Period, authorizing a change in
such Participant's payroll deduction rate.
(ii) Notwithstanding Sections 6(c)(i) and 10 hereof, the
Committee may require that any election by an Insider to make
payroll deductions during an Offering Period, or to increase or
decrease the rate of such payroll deductions, shall be made pursuant
to an irrevocable election at least six months prior
4
<PAGE>
to the Exercise Date to which such election relates. For this
purpose, the Committee may allow Insiders to make standing elections
that will remain in effect for consecutive Offering Periods until
revoked or changed by the Insider pursuant to a subsequent six-month
advance irrevocable election.
(d) Notwithstanding the foregoing, a Participant's payroll
deductions may be decreased to 0% at any time, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(c) hereof. Payroll deductions
shall recommence at the rate provided in such Participant's subscription
agreement at the beginning of the first Offering Period in the succeeding
calendar year, unless terminated by the Participant as provided in Section 10
hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Common Stock issued under the Plan is disposed of,
the Participant must make adequate provisions for the Company's federal, state,
or other tax withholding obligations, if any, which arise upon the exercise of
the option or the disposition of the Common Stock. At any time, the Company may,
but will not be obligated to, withhold from the Participant's compensation the
amount necessary for the Company to meet applicable withholding obligations,
including any withholding required to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of Common Stock
by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each Eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date (at the applicable Purchase Price) up to
a number of shares of Common Stock determined by dividing such Employee's
payroll deductions accumulated during such Offering Period and retained in the
Participant's payroll deduction account as of the Exercise Date by the
applicable Purchase Price; provided, however, that such purchase shall be
subject to the limitations set forth in Sections 3(c) and 12 hereof; provided,
further, that the Committee may, in its sole discretion, prior to any Offering
Period determine a maximum number of shares subject to an option granted
hereunder for such Offering Period. Exercise of the option shall occur as
provided in Section 8 hereof, unless the Participant has withdrawn pursuant to
Section 10 hereof, and the option for a particular Offering Period shall expire
on the Exercise Date for such option.
8. Exercise of Option. Unless a Participant withdraws from the Plan as
provided in Section 10 hereof, such Participant's option for the purchase of
shares will be exercised automatically on the Exercise Date, and, subject to the
limitations set forth in Sections 3(c), 7 and 12 hereof, the maximum number of
full shares subject to the option shall be purchased for such Participant at the
applicable Purchase Price with the accumulated payroll deductions in such
Participant's payroll deduction account. Fractional shares may be purchased if
so determined by the Committee in its sole discretion. If the purchase of
fractional shares is not permitted by the Committee, any payroll deductions
accumulated in a Participant's account which are not sufficient to purchase a
full share shall be retained in the Participant's payroll deduction account for
the subsequent Offering Period, subject to earlier withdrawal by the Participant
as provided in Section 10 hereof. During the Participant's lifetime, a
Participant's option to purchase shares hereunder is exercisable only by the
Participant.
9. Issuance; Delivery; Restriction. The shares of Common Stock
purchased for a Participant on an Exercise Date shall be deemed to have been
issued by the Company for all purposes as of such Exercise Date. Prior to such
date, none of the rights and privileges of a stockholder of a Company shall
exist with respect to such shares of Common Stock. Certificates representing
shares of Common Stock acquired under the Plan shall be held by the Company and
5
<PAGE>
delivered to, or in accordance with the direction of Participants only upon (A)
the expiration (or earlier termination at the discretion of the Committee) of
the "Withholding Period" (as defined below), (B) the termination of the
employment of such Participant by the Company or any Designated Subsidiary or
(C) the written request of a Participant to deliver share certificates in
connection with an intended disposition or transfer of shares of Common Stock
represented thereby. Promptly following the occurrence of either of the events
described in clauses (A), (B) or (C) above, the Company shall issue and deliver,
or cause its transfer agent to so issue and deliver, to or for the account of
each acquiring Participant a certificate representing the shares of Common Stock
acquired by such Participant during such Offering Period; provided, however,
that the Company shall be permitted to condition its delivery of such
certificates upon the agreement of such Participant to allow certain federal
income tax withholdings as may be required to be made by the Company under
applicable law. For purposes of this Section 9, the "Withholding Period" shall
mean the period commencing on the Exercise Date and ending on the later to occur
of (i) the second anniversary of the Enrollment Date with respect to such
Exercise Date and (ii) the first anniversary of the Exercise Date.
10. Withdrawal; Termination of Employment.
(a) Subject to any limitations on Insiders imposed by the Committee
pursuant to Section 6(c)(ii) hereof, a Participant may withdraw all but not less
than all the payroll deductions credited to such Participant's payroll deduction
account and not yet used to exercise such Participant's option under the Plan at
any time prior to the Exercise Date of an Offering Period by giving written
notice to the Company in the form of Exhibit B to this Plan. All of the
Participant's payroll deductions credited to such Participant's payroll
deduction account will be paid to such Participant promptly after receipt of
notice of withdrawal and such Participant's rights or interest with regard to
the option for the Offering Period will be automatically terminated, and no
further payroll deductions for the purchase of shares will be made during the
Offering Period. Unless a Participant terminates participation before the
Exercise Date for an Offering Period, such Participant shall be conclusively
deemed, as of the close of business on that date, to have exercised his option
for the purchase of a number of shares of Common Stock equal to the lesser of
(i) the number of shares that can be purchased at the applicable Purchase Price
by the accumulated payroll deductions in such Participant's payroll deduction
account, or (ii) the maximum number of shares that may be purchased by such
Participant on such Exercise Date, taking into account any applicable
restriction thereon. If a Participant withdraws from the Plan during an Offering
Period, such Participant may resume participation for a subsequent Offering
Period by delivering to the Company a new subscription agreement at least
fifteen (15) days prior to the Enrollment Date for such Offering Period.
(b) Upon a Participant's ceasing to be an Eligible Employee, for any
reason, such Participant will be deemed to have elected to withdraw from the
Plan and the payroll deductions credited to such Participant's account during
the Offering Period but not yet used to exercise the option will be returned to
such Participant or, in the case of such Participant's death, to the person or
persons entitled thereto under Section 14 hereof, and such Participant's option
will be automatically terminated.
(c) A Participant's withdrawal from an Offering Period will not have
any effect upon such Participant's eligibility to participate in any similar
plan which may hereafter be adopted by the Company.
6
<PAGE>
11. Interest. No interest or other increment shall accrue or be payable
with respect to any of the payroll deductions of a Participant in the Plan.
12. Stock.
(a) Shares offered may be authorized but unissued shares of Common
Stock of the Company or previously issued shares acquired by the Company and
held in its treasury.
(b) The maximum number of shares of Common Stock which shall be
offered under the Plan shall be 1,000,000 shares, subject to adjustment upon
changes in capitalization of the Company as provided in Section 18 hereof. If on
a given Exercise Date the number of shares with respect to which options are to
be exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(c) No Participant will have an interest or voting right in shares
covered by such Participant's option until such option has been exercised.
(d) Shares to be delivered to a Participant under the Plan shall be
registered in the name of the Participant or in the name of the Participant and
such Participant's spouse, at the Participant's election.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan and such instructions
and limitations as the Board of Directors of the Company may establish from time
to time, the Committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine eligibility, to
fix the terms of each offering, to adjudicate all disputed claims filed under
the Plan and to make all other determinations necessary to the administration of
the Plan. Every finding, decision and determination made by the Committee shall,
to the fullest extent permitted by law, be final and binding upon all parties.
Members of the Committee shall not be permitted to participate in the Plan.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Exchange Act, or any successor provision, provides specific
requirements for the administrators of plans of this type, the Plan shall be
only administered by such a body and in such a manner as shall comply with the
applicable requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no
discretion concerning decisions regarding the Plan shall be afforded to any
committee or person that is not "disinterested" as that term is used in Rule
16b-3.
14. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary
who is to receive any shares of Common Stock and cash, if any, from the
Participant's account under the Plan in the event of such Participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such Participant of such shares or cash. In addition, a Participant
7
<PAGE>
may file a written designation of a beneficiary who is to receive any cash from
the Participant's payroll deduction account under the Plan in the event of such
Participant's death prior to exercise of the option.
(b) Such designation of beneficiary may be changed by the
Participant at any time by written notice. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the Participant.
15. Transferability. Neither payroll deductions credited to a
Participant's payroll deduction account nor any rights with regard to the
exercise of an option or to receive shares under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will,
the laws of descent and distribution or as provided in Section 14 hereof) by the
Participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds from an Offering Period in accordance with
Section 10 hereof.
16. Use of Funds. All payroll deductions held by the Company may be
used for any corporate purposes of the Company and the Company shall not be
obligated to segregate such payroll deductions unless the Committee specifically
provides, with respect to any Offering Period, that payroll deductions shall be
segregated from the general funds of the Company.
17. Reports. Individual payroll deduction accounts will be maintained
for each Participant in the Plan. Statements of payroll deduction accounts will
be given to all Participants at least annually, within such time as the
Committee may reasonably determine, which statements will set forth the Purchase
Price, the number of shares purchased and the remaining cash balance, if any, in
such Participant's payroll deduction account.
18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for an increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, distribution, recapitalization, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
determined by the Committee, in the Committee's sole discretion.
8
<PAGE>
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Committee
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Committee shortens
the Offering Period then in progress in lieu of assumption or substitution in
the event of a merger or sale of assets, the Committee shall notify each
Participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for such Participant's option has been
changed to the New Exercise Date and that such Participant's option will be
exercised automatically on the New Exercise Date, unless prior to such date such
Participant has withdrawn from the Offering Period as provided in Section 10
hereof. For purposes of this paragraph, an option granted under the Plan shall
be deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock held
on the effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Committee may, with the consent of the successor
corporation and the Participant, provide for the consideration to be received
upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the sale of assets or
merger.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination.
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 18 hereof, no such termination may
adversely affect options previously granted; provided, however, that an Offering
Period may be terminated by the Board on any Exercise Date if the Board
determines that the termination of the Plan is in the best interests of the
Company and its stockholders. Except as provided in Section 18 hereof, no
amendment may make any change in any option theretofore granted which materially
adversely affects the rights of any Participant without such Participant's prior
written consent. To the extent necessary to comply with Rule 16b-3 or Section
423 of the Code (or any successor rule or provision or any other applicable law
or regulation), the Company shall obtain stockholder's approval in such a manner
and to such a degree as required. In furtherance of the foregoing, no amendment
shall be made without stockholder approval which would (i) increase the total
number of shares to be offered under the Plan pursuant to Section 12 (other than
any increase due to changes in capitalization described in Section 18) or (ii)
provide for participation in the Plan by individuals who are not employed by the
Company or any Subsidiary.
9
<PAGE>
(b) Without stockholder consent and without regard to whether any
Participant's rights may be considered to have been "adversely affected," the
Committee shall be entitled to change the Offering Periods, limit the frequency
or number of changes in the amount withheld during an Offering Period, permit
payroll withholding in excess of the amount designated by a Participant in order
to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each Participant properly correspond
with amounts withheld from the Participant's Compensation, and establish such
other limitations or procedures as the Committee finds, in its sole discretion,
advisable and consistent with the Plan.
20. Notices. All notices or other communications by a Participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder and the requirements of any stock exchange upon which the
shares of Common Stock may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares of Common Stock are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.
22. Term of Plan. Subject to the approval of the stockholders of the
Company at the Company's 1998 annual meeting of its stockholders, the Plan shall
be effective as of a date determined by the Board on or after the Plan's
adoption by the Board; provided, however, that to the extent that rights are
granted under the Plan prior to its approval by stockholders of the Company at
the 1998 annual meeting, such grants shall be contingent upon approval of the
Plan by the stockholders of the Company. The Plan shall continue in effect for a
term of ten (10) years after its adoption, unless sooner terminated under
Section 19 hereof.
23. Additional Restrictions of Rule 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by Insiders shall
comply with the applicable provisions of Rule 16b-3. This Plan shall be deemed
to contain, and such options shall contain, and the shares issued upon exercise
thereof shall be subject to, such additional conditions and restrictions as may
be required by Rule 16b-3 to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
24. Liability and Indemnification of Committee. No member or authorized
delegate of the Committee shall be liable to any person for any action taken or
omitted in connection with the administration of the Plan unless attributable to
his own fraud or willful misconduct; nor shall the Company or any Subsidiary be
liable to any person for any such action unless attributable to fraud or willful
misconduct on the part of a director or employee of the Company, acting in such
10
<PAGE>
capacity, or any Subsidiary. The Committee, the individual members thereof, and
persons acting as the authorized delegates of the Committee under the Plan,
shall be indemnified by the Company, to the fullest extent permitted by law,
against any and all liabilities, losses, costs and expenses (including
reasonable legal fees and expenses) of whatsoever kind and nature which may be
imposed on, incurred by or asserted against the Committee or its members or
authorized delegates by reason of the performance of a Committee function if the
Committee or its members or authorized delegates did not act dishonestly or in
willful violation of the laws or regulations under which such liability, loss,
cost or expense arises. This indemnification shall not duplicate but may
supplement any coverage available under any applicable insurance.
25. No Right of Employment. Nothing contained herein shall confer upon
an Eligible Employee any right to be retained in the service of the Company or
its Designated Subsidiaries, nor shall it interfere with the right of the
Company or its Designated Subsidiaries to discharge or otherwise deal with an
Eligible Employee without regard to the existence of this Plan.
26. Construction. All section headings herein have been inserted for
convenience of reference only and in no way modify, restrict, or affect the
meaning or interpretation of any of the terms or provisions of this Plan.
Whenever used herein, and to the extent appropriate, the masculine, feminine or
neuter gender shall include the plural and the plural shall include the
singular.
27. No Strict Construction. No rule of strict construction shall be
applied against the Company, the Committee or any other person in the
interpretation of any of the terms of this Plan, or any rule or procedure
established by the Committee.
28. Choice of Law. This Plan and all documents contemplated hereby, and
all remedies in connection therewith and all questions or transactions relating
thereto, shall be construed in accordance with and governed by the internal laws
of the State of Delaware.
* * * * *
11
<PAGE>
EXHIBIT A - FORM OF SUBSCRIPTION AGREEMENT
COINMACH LAUNDRY CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date:_________________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary (ies)
1. I, __________________________________________, hereby elect to
participate in the Coinmach Laundry Corporation (the "Company") 1998
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribe to purchase shares of the Company's Common Stock in
accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in an amount
equal to ____% of my compensation on each payday (from 1% to 10%) (no
fractional percentages are permitted) during the Offering Period1/ in
accordance with the Employee Stock Purchase Plan. I understand that:
a. I may not make additional payments into my payroll
deduction account;
b. no interest will be credited on funds held in my
payroll deduction account at any time for any reason;
c. I may increase or decrease the payroll deductions
from my account by filing a new Subscription
Agreement with the Company, however, such increase or
decrease will take effect during the next succeeding
Offering Period provided it has been received by the
Company at least fifteen (15) days prior to the
beginning of the next succeeding Offering Period; and
d. a maximum of $25,000 in total payroll deductions will
be made in any one calendar year. All payroll
deductions will cease once $25,000 has been deducted
in any one calendar year, however, payroll deductions
will recommence at the beginning of the first
Offering Period in the succeeding calendar year
unless I submit a Notice of Withdrawal to the
Company.
3. I understand that my payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, my
- ----------
1/ Capitalized terms used herein and not defined in this Subscription
Agreement shall have the meaning ascribed to such terms in the Employee
Stock Purchase Plan.
----------------------------------------------
BE SURE TO SIGN AND DATE THIS AGREEMENT.
PLEASE KEEP A COPY FOR YOUR RECORDS.
<PAGE>
COINMACH LAUNDRY CORPORATION
accumulated payroll deductions will be used to automatically purchase
shares on the Exercise Date.
4. I understand that I may withdraw from the Plan at any time prior to the
last business day of an Offering Period by filing a Notice of
Withdrawal with the Company. If I withdraw from the Plan, I must
withdraw all the payroll deductions credited to my account and not yet
used to purchase shares under the Plan.
5. I have received a copy of the Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan.
6. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only):
_________________________________________________________
_________________________________________________________
7. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at
the time such shares were purchased by me over the price which I paid
for the shares. I hereby agree to notify the Company in writing within
30 days after the date of any disposition of my shares, and I will make
adequate provision for Federal, state or other tax withholding
obligations, if any, which arise upon the disposition of the Common
Stock. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation, including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by me. If I dispose of such shares at
any time after the expiration of the 2-year and 1-year holding periods,
I understand that I will be treated for federal income tax purposes as
having received income only at the time of such disposition, and that
such income will be taxed as ordinary income only to the extent of any
amount equal to the lesser of (1) the excess of the fair market value
of the shares at the time of such disposition over the Purchase Price
which I paid for the shares, or (2) the excess of the fair market value
of the shares on the first day of the Offering Period over the purchase
price which I paid for the shares. The remainder of the gain, if any,
recognized on such disposition will be taxed as capital gain.
8. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
9. In the event of my death, I hereby designate the following as my
beneficiary (ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
----------------------------------------------
BE SURE TO SIGN AND DATE THIS AGREEMENT.
PLEASE KEEP A COPY FOR YOUR RECORDS.
<PAGE>
COINMACH LAUNDRY CORPORATION
NAME OF BENEFICIARY FOR SHARES OF COMMON STOCK
(Please print)
- ------------------------------------------------ ----------------------------
First Middle Last Relationship
- -------------------------------------------------------------------------------
Address (street, city, state, zip)
- ------------------------------------------------
Social Security Number of Beneficiary
NAME OF BENEFICIARY FOR BALANCE OF PAYROLL DEDUCTION ACCOUNT
(If different from beneficiary for shares of Common Stock)
(Please print)
- ------------------------------------------------ ----------------------------
First Middle Last Relationship
- -------------------------------------------------------------------------------
Address (street, city, state, zip)
- ------------------------------------------------
Social Security Number of Beneficiary
- --------------------------------------------------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT
THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_____________________ ___________________________________________
Signature of Employee
___________________________________________
Social Security Number of Employee
___________________________________________
Spouse's Signature
(If beneficiary other than spouse)
Employee's Address: ___________________________________________
___________________________________________
Mail this Subscription Agreement to: Coinmach Laundry Corporation,
Employee Benefits Department, 10405-H Granite Street, Charlotte, NC 28273,
or fax it to the Employee Benefits Department at (704) 587-0723.
----------------------------------------------
BE SURE TO SIGN AND DATE THIS AGREEMENT.
PLEASE KEEP A COPY FOR YOUR RECORDS.
<PAGE>
EXHIBIT B - FORM OF NOTICE OF WITHDRAWAL
=================================
COINMACH LAUNDRY Coinmach Laundry Corporation
CORPORATION 1998 Employee Stock Purchase Plan
Notice of Withdrawal
=================================
The undersigned Participant in the Offering Period of the Coinmach
Laundry Corporation 1998 Employee Stock Purchase Plan (the "Plan") which began
on _______________________ (fill in date on which the Offering Period you are
withdrawing from began) (the "Enrollment Date") hereby notifies the Company that
he or she hereby withdraws from the Offering Period. The undersigned hereby
directs the Company to pay to the undersigned as promptly as practicable, all
the payroll deductions credited to his or her account with respect to such
Offering Period. The undersigned understands and agrees that his or her option
for such Offering Period will be automatically terminated. The undersigned
understands further, that no further payroll deductions will be made for the
purchase of shares in the current Offering Period, and the undersigned shall
thereafter be eligible to participate in succeeding Offering Periods only by
delivering to the Company a new Subscription Agreement at least fifteen (15)
days prior to the Enrollment Date for such succeeding Offering Periods.
Name and Address of Participant:
___________________________________________________________
___________________________________________________________
___________________________________________________________
Social Security Number of Participant:_____________________
Signature: _______________________________________________
Date: ____________________________________________________
B-1
<PAGE>
PROMISSORY NOTE
$250,000.00 May 5, 1999
For value received, Mitchell Blatt ("Maker") promises to pay to the
order of Coinmach Corporation, a Delaware corporation (the "Company"), at its
offices in Roslyn, New York, or such other place as designated in writing by the
holder hereof, the aggregate principal sum of $250,000.00. Maker will pay the
aggregate principal sum in one payment of $250,000.00 on or prior to the third
anniversary date of the date hereof (or, if such date is not a business day, the
next succeeding business day) and, on such date, Maker will pay interest accrued
through such date at the rate specified below.
Interest will accrue on the outstanding principal amount of this Note
at the rate of 8% per annum and shall be payable at such time as the principal
of this Note becomes due and payable.
The amounts due under this Note are secured by a pledge of all of the
Class A common stock, par value $.01 per share, held by Maker.
In the event Maker fails to pay any amounts due hereunder when due,
Maker shall pay to the holder hereof, in addition to such amounts due, all costs
of collection, including reasonable attorneys fees and disbursements.
Maker, or his successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
nonpayment of this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Note or release security for this Note, all without in
any way affecting the liability of the Maker hereunder.
This Note shall be governed by the internal laws, not the laws of
conflicts, of the State of New York.
Mitchell Blatt
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form
10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0001013021
<NAME> Coinmach Laundry Corp.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 27,022
<SECURITIES> 0
<RECEIVABLES> 7,790
<ALLOWANCES> 0
<INVENTORY> 16,920
<CURRENT-ASSETS> 0
<PP&E> 363,611
<DEPRECIATION> (136,742)
<TOTAL-ASSETS> 895,408 <F1>
<CURRENT-LIABILITIES> 0
<BONDS> 701,175 <F2>
104,522
0
<COMMON> 0
<OTHER-SE> (58,757)
<TOTAL-LIABILITY-AND-EQUITY> 895,408 <F3>
<SALES> 0
<TOTAL-REVENUES> 133,538
<CGS> 0
<TOTAL-COSTS> 87,211
<OTHER-EXPENSES> 32,174 <F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,740
<INCOME-PRETAX> (2,587)
<INCOME-TAX> (153) <F5>
<INCOME-CONTINUING> (2,434)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,434) <F6>
<EPS-BASIC> (.18)
<EPS-DILUTED> (.18)
<FN>
<F1> 1. Total Assets: Includes Advance Rental Payments of $79,377, Contract
Rights of $405,231, and Goodwill of $107,052, each net of accumulated
amortization, at June 30, 1999.
<F2> 2. Bonds: Includes $296,544 of 11-3/4% senior notes, as well as debt
outstanding under a credit facility of $390,308, at June 30, 1999.
<F3> 3. Total Liabilities: Includes Accrued Commissions of $27,675 and Accrued
Interest of $7,256, at June 30, 1999.
<F4> 4. Other Expenses: Other Expenses include stock based compensation charges
of $159 for the three months ended June 30, 1999.
<F5> 5. Income Taxes: The provision (benefit) for income taxes consists of
$1,139 currently payable and ($1,292) deferred for the three months ended
June 30, 1999.
<F6> 6. Net Income: In addition, EBITDA of $44,248 (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>
