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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, 2000
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 offices) (Zip Code)
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 28, 2000, the registrant had outstanding 13,184,419 shares of
Class A common stock, par value $.01 per share (the "Common Stock"), and no
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 28, 2000 was approximately $53,963,845, 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.
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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, 2000.
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, 2000, the
Company owned and operated approximately 790,000 washers and dryers (sometimes
hereinafter referred to as "laundry machine" or "machines") in approximately
79,000 locations on routes located throughout the United States and in 184
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 core business involves leasing laundry rooms from building owners and
property management companies, installing and servicing the laundry equipment
and collecting revenues generated from laundry machines. The Company typically
sets pricing for the use of laundry machines on location, and the owner or
property manager maintains the premises and provides utilities such as gas,
electricity and water.
The Company's existing customer base for its core business is comprised
of landlords, property management companies, and owners of rental apartment
buildings, condominiums and cooperatives, university and institutional housing
and other multi-family housing properties. Management believes, based on its
knowledge of the industry, that the Company is the largest supplier of
outsourced laundry equipment services for multi-family housing properties
throughout the United States.
As a result of its strategy to acquire route operators that contribute
to the Company's core operations, the Company has selectively acquired certain
related businesses which expand and diversify the types of services provided by
the Company. The Company operates 184 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
Commencing with Golder, Thoma, Cressey, Rauner Fund IV L.P.'s ("GTCR
Fund IV") acquisition of an interest in the Company in January 1995, an integral
component of the Company's business strategy had been growth through a
combination of internal growth and selective acquisitions designed to increase
the Company's machine base and to achieve economies of scale, increase its
operating efficiencies and improve its financial performance. From
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January 1995 to June 1998, the Company pursued a strategy of rapid growth
through acquisitions of local route operators, regional route operators and
multi-regional route operators. The Company continued to expand its geographic
presence to gain additional regional and multi-regional account opportunities
with large multi-family housing property managers and owners. As a result, the
Company has become the largest provider of outsourced laundry equipment services
in the United States. At the present time, however, the number of significant
acquisition opportunities is limited due in part to the Company's successful
execution of its acquisition strategy over the past several years. Against this
background of limited opportunities for significant acquisitions, and in an
effort to preserve capital and reduce its level of indebtedness, the Company has
determined to slow its rate of growth by acquisitions; however, the Company may
pursue opportunities to acquire additional route businesses within the
fragmented outsourced laundry equipment services industry. The Company believes
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, continue to represent potential acquisition
opportunities for the Company. 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. There can be no assurance, however, that the
Company will be able to take advantage of these opportunities on commercially
reasonable terms, if at all.
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.
GROWTH STRATEGY
The Company's growth strategy has been focused on increasing operating
cash flow and profitability through a combination of internal expansion and
selective acquisitions. For information about the Company's growth through
acquisitions, see "Business, Business Strategy" above.
INTERNAL EXPANSION
Internal growth is comprised of: (i) adding new customers in existing
regions and securing contracts for additional locations from current customers;
(ii) converting owner-operated facilities to Company managed facilities; (iii)
improving the net contribution per machine through operating efficiencies and
selective price increases; and (iv) pursuing additional growth opportunities
presented by the Company's leading market position and access to approximately
six million individual housing units.
New Customers and Locations. The Company's sales and marketing efforts
focus on two areas of expansion within its existing operating regions.
The Company's primary means of internal expansion is by marketing the
Company's products and services to building managers and property owners
whose leases with other laundry equipment services providers are near
expiration. The Company's Integrated Computer Systems track information
on the lease expirations of its competitors. The Company believes that
its leading market position and expanding geographic presence, primarily
achieved through acquisitions, enhances its ability to gain new
customers and additional locations from its existing customers.
Conversions. Management believes that there are approximately one
million machines installed in locations which continue to be managed by
owner-operators. Building owners or managers can forgo significant cash
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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. There can be no assurance, however,
that the Company will be able to take advantage of these opportunities
on commercially reasonable terms, 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. 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.
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. 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
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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 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, 2000, the
Company's leases have an average remaining life to maturity of approximately 47
months (without giving effect to automatic renewals).
Service
The Company's employees deliver, install, service and collect revenue
from washers and dryers in laundry facilities at its leased locations.
The Company's Integrated Computer Systems allow 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.
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In a business that emphasizes prompt and efficient service, management
believes that the Company's Integrated Computer Systems provide a significant
competitive advantage in terms of responding promptly to customer needs.
Computer-generated service calls for preventive maintenance are based on
previous service history, repeat service call analysis and monitoring of service
areas. These operations coordinate the Company's radio-equipped service vehicles
and allow the Company to address customer needs quickly and efficiently.
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.
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.
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.
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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
("Coinmach"), 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 184 retail laundromats located throughout Texas and
Arizona. The operation of the retail laundromats involves leasing store
locations in desired 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, 2000, the Company employed 2,226 employees (including
355 laundromat attendants in the Company's retail laundromats in Texas and
Arizona). In the Northeast region, 129 hourly workers are represented by Local
966, affiliated with the International Brotherhood of Teamsters (the "Union").
Management believes that the Company has maintained a good relationship with the
Union employees and has never experienced a work stoppage since its inception.
GENERAL DEVELOPMENT OF BUSINESS
Coinmach Laundry Corporation was incorporated on March 31, 1995 under
the name SAS Acquisitions Inc. in the State of Delaware and is the sole
shareholder of all of the common stock of Coinmach, its primary operating
subsidiary. In November 1995, The Coinmach Corporation ("TCC"), a Delaware
corporation and predecessor to Coinmach Corporation merged (the "Solon Merger")
with and into Solon Automated Services, Inc. ("Solon"). In connection with the
Solon Merger, SAS Acquisitions Inc. changed its name to Coinmach Laundry
Corporation, and Solon, the surviving corporation in the Solon Merger, changed
its name to Coinmach Corporation.
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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
The Company's credit facility (of which Bankers Trust Company and First
Union National Bank of North Carolina are the primary lending institutions)
provides for an aggregate of $435 million of secured financing consisting of:
(i) a 160 million revolving credit facility bearing interest at an annual rate
of LIBOR plus 1.75%; (ii) a $75 million Tranche A term loan facility bearing
interest at an annual rate of LIBOR plus 2.25% and (iii) a $200 million Tranche
B term loan facility 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 - SENIOR
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."
RECENT DEVELOPMENTS
On May 12, 2000, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with CLC Acquisition Corporation ("CLC
Acquisition"), a newly formed Delaware corporation formed by Bruce V. Rauner, a
director of the Company and a principal of the indirect general partner of
Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR Fund IV"), the largest
stockholder of the Company. Pursuant to the Merger Agreement, CLC Acquisition
agreed to acquire all of the Company's outstanding Common Stock and Non-Voting
Common Stock (collectively, the "Shares") for $14.25 per Share in a two-step
transaction consisting of a tender offer (the "Offer") followed by a merger
transaction (the "Merger") of CLC Acquisition with and into Coinmach Laundry.
The Offer is conditioned upon, among other things, there being validly tendered
and not withdrawn, prior to expiration date of the Offer, that number of Shares
which, when combined with the Shares owned by CLC Acquisition, result in CLC
Acquisition owning at least 51% of the outstanding Shares on the date of
purchase. Upon consummation of the Merger, each Share not tendered in the Offer
will be canceled and converted into the right to receive $14.25 net per Share in
cash, without interest thereon.
On May 26, 2000, CLC Acquisition announced its offer to purchase any and
all Shares of the Company (except for certain Shares held by some members of
management of the Company and GTCR Fund IV). The Offer period during which
Shares may be tendered is scheduled to expire on July 3, 2000 (the "Expiration
Date"), unless the Offer is extended. Assuming the conditions to the Offer are
satisfied or waived, CLC Acquisition has determined to provide for a subsequent
offering period commencing on July 5, 2000 and expiring on July 7, 2000, unless
extended.
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The Company's board of directors ("Board of Directors" or "Board"), at a
meeting held on May 12, 2000, by unanimous vote of all of the directors, based
upon, among other things, the recommendation of its special committee
(consisting of two independent or disinterested directors and their own
financial and legal advisors), (i) determined that the merger is advisable and
that the terms of the Offer and the Merger are fair to, and in the best
interests of, the Company and its stockholders, (ii) approved the Offer and the
Merger and approved and adopted the Merger Agreement, and (iii) recommended that
the stockholders of the Company accept the Offer.
For more information concerning the Offer and the Merger, refer to the
Company's Solicitation/Recommendation Statement in Schedule 14D-9 and CLC
Acquisition's Tender Offer Statement on Schedule TO, in each case, as amended
and initially filed with the Securities and Exchange Commission on May 26, 2000.
ITEM 2. PROPERTIES
As of March 31, 2000, the Company leased 59 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
The Company and its predecessors have been named as defendants in a
number of legal actions arising in the ordinary course of business. Although the
amount of any liability that could arise with respect to these actions cannot be
accurately predicted, management believes that such liabilities, individually or
in the aggregate, will not have a material adverse effect on the financial
condition, results of operations or cash flows of the Company.
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 Common Stock
during the period August 6, 1997 to September 29, 1998. The complaint in the
Federal Securities Action alleges that the defendants violated various federal
securities laws and seeks damages in unspecified amounts. On March 10, 2000, the
Company filed a motion to dismiss the complaint and denied all of the
allegations of wrongdoing asserted against it in the complaint. On April 10,
2000, the plaintiff filed a response to the Company's motion to dismiss. On May
16, 2000, the Company replied to the plaintiff's response. On June 1, 2000, the
court dismissed the complaint in its entirety on grounds that the applicable
statute of limitations had passed prior to the date on which the complaint was
filed.
On November 18, 1999, K. Reed Hinrichs v. Stephen R. Kerrigan, et al.,
a purported class action lawsuit, was filed in the Delaware Court of Chancery,
Newcastle County naming the Company, GTCR Fund IV, GTCR Golder Rauner, L.L.C.
and certain of its executive officers as defendants. Plaintiffs allege that the
defendants' proposal to acquire between 80% and 90% of the Common Stock for
$13.00 per share was inadequate and that the defendants breached their fiduciary
duty to the Company's public shareholders. The defendants' time to respond to
the complaint has been adjourned indefinitely by mutual agreement of the
parties.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Coinmach Laundry completed an initial public offering of its Common
Stock on July 23, 1996 at an initial public offering price of $14.00 per share.
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.
1999 FISCAL QUARTER ENDED HIGH LOW
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June 30, 1998.................................... $28.00 $20.000
September 30, 1998............................... $23.50 $8.750
December 31, 1998................................ $19.25 $5.500
March 31, 1999................................... $16.875 $9.375
2000 FISCAL QUARTER ENDED HIGH LOW
------------------------- ---- ---
June 30, 1999.................................... $13.625 $9.125
September 30, 1999............................... $12.625 $9.563
December 31, 1999................................ $11.813 $8.750
March 31, 2000................................... $10.375 $7.563
As of June 28, 2000, Coinmach Laundry had outstanding 13,184,419 shares
of Common Stock and no shares of Non-Voting Common Stock. As of June 28, 2000,
there were 33 stockholders of record of the Common Stock and no Stockholder of
record of the Non-Voting Common Stock. The Company has not declared or paid any
cash dividends on the Common Stock or the Non-Voting Common Stock and does not
intend to pay cash dividends on the Common Stock or the Non-Voting Common Stock
in the foreseeable future. At the present time, the Senior Credit Facility (as
defined) prohibits the payment of cash dividends and certain other
distributions.
-9-
<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. Such tables include the consolidated financial
information of the Company for the years ended March 31, 2000 (the "2000 Fiscal
Year"), March 31, 1999 (the "1999 Fiscal Year"), March 31, 1998 (the "1998
Fiscal Year"), 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 1997 Fiscal Year, 1998 Fiscal Year,
1999 Fiscal Year and 2000 Fiscal Year. 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.
<TABLE>
<CAPTION>
PERIOD
SIX MONTH FROM
THE COMPANY COMBINED TRANSITION APRIL 5,
PERIOD PERIOD 1995
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED ENDED TO
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 29, MARCH 29, SEPTEMBER
2000 2000 2000 2000 1996 1996 29, 1995
----------- ----------- ----------- ----------- ---------- ---------- ---------
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ 527,079 $505,323 $324,887 $206,852 $178,789 $ 89,070 $89,719
Operating, general and
administrative expenses............ 358,366 339,664 223,527 144,059 127,636 62,380 65,256
Depreciation and amortization......... 123,002 113,448 75,453 46,316 36,635 18,212 18,423
Operating income...................... 44,928 50,942 24,461 14,325 12,318 8,478 3,840
Interest expense, net................. 67,326 65,995 44,662 26,859 23,817 11,999 11,818
Loss before extraordinary item........ (16,589) (11,974) (14,867) (10,227) (8,639) (2,523) (6,116)
Net loss.............................. (16,589) (11,974) (14,867) (10,523) (17,564) (11,448) (6,116)
Basic and diluted net loss per share.. (1.26) $ (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............. $ 23,174 $ 26,515 $ 22,456 $ 14,729 $ 19,858 $10,311
Property and equipment, net........... 237,160 223,610 194,328 112,116 82,699 80,706
Goodwill, net......................... 101,253 109,025 110,424 95,771 44,071 45,071
Advance location payments............. 77,212 79,705 74,026 38,472 20,320 19,772
Contract rights, net.................. 384,680 413,014 366,762 180,557 59,745 63,801
Total assets.......................... 876,173 901,296 816,948 472,921 249,148 241,433
Total debt (1)........................ 685,069 687,491 602,158 345,486 202,765 176,415
Stockholders' equity (deficit)........ 32,321 48,040 58,745 23,563 (1,308) 10,140
FINANCIAL RATIOS AND OTHER DATA
Cash flow provided by operating
activities.......................... $ 90,258 $102,951 $ 58,550 $ 34,732 $ 24,403 $ 12,337 $12,066
Cash flow used in investing activities (88,404) (181,665) (350,875) (196,698) (39,201) (14,162) (25,039)
Cash flow (used in) provided by (5,195) 82,773 300,052 156,837 23,882 11,372 12,510
financing activities..................
EBITDA(2)............................. 168,713 165,659 101,360 62,793 51,153 26,690 24,463
EBITDA margin(3)...................... 32.0% 32.8% 31.2% 30.4% 28.6% 30.0% 27.3%
Capital expenditures(4)
Growth capital expenditures........... $ 25,272 $ 24,096 $ 21,119 $ 12,563 -- -- --
Renewal capital expenditures.......... 63,132 60,038 37,609 29,025 $ 27,338 $ 14,219 $13,119
Acquisition capital expenditure(5) -- 97,531 294,996 171,455 11,925 -- 11,925
--------- -------- -------- -------- -------- -------- -------
Total Capital Expenditures............... $ 88,404 $181,665 $353,724 $213,043 $ 39,263 $ 14,219 $25,044
========= ======== ======== ======== ======== ======== =======
</TABLE>
-10-
<PAGE>
---------------------------
(1) Total debt at March 31, 2000, March 31, 1999 and March 31, 1998 does not
include the premium, net, of $6,789, $8,023 and $9,258, respectively,
recorded as a result of the issuance by Coinmach Corporation of $100
million aggregate principal amount of 11 3/4% Series C Senior Notes due
2005 in October 1997.
(2) EBITDA represents earnings from continuing operations before deductions for
interest, income taxes, depreciation and amortization. EBITDA for the
fiscal years ended March 31, 2000, 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.
(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,
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.
(5) Acquisition capital expenditures 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.
-11-
<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 2000 Fiscal Year, the
1999 Fiscal Year and the 1998 Fiscal Year and should be read in conjunction with
the consolidated financial statements and related notes thereto included in Item
8 and the Selected Historical Consolidated Financial Data included in Item 6 of
this Form 10-K.
GENERAL
The Company is principally engaged in the business of supplying
outsourced laundry equipment services to multi-family housing properties. At
March 31, 2000, the Company owned and operated approximately 790,000 washers and
dryers in approximately 79,000 multi-family housing properties on routes
throughout the United States and in 184 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 85% 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 percentage of
revenues and are generally paid monthly. Also included in laundry operating
expenses are the costs of servicing and revenue collection in the route
business, including payroll, parts, vehicles and other related items, 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 $13.9 million for the 2000 Fiscal Year
and $11.1 million for the 1999 Fiscal Year); (ii) operating, maintaining and
servicing retail laundromats (approximately $20.6 million for the 2000 Fiscal
Year and $20.2 million for the 1999 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 $46.3 million for the 2000 Fiscal
Year and $38.6 million for the 1999 Fiscal Year).
-12-
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, selected
statement of operations data and EBITDA margin for the Company:
Year Ended March 31,
--------------------------
2000 1999 1998
---- ---- ----
Revenues........................................ 100% 100% 100%
Laundry operating expenses...................... 66.4 65.6 66.9
General and administrative expenses............. 1.6 1.6 1.9
Depreciation and amortization................... 23.3 22.5 23.2
Operating income................................ 8.5 10.1 7.5
Interest expense, net........................... 12.8 13.1 13.7
EBITDA margin................................... 32.0 32.8 31.2
FISCAL YEAR ENDED MARCH 31, 2000 COMPARED TO THE FISCAL
YEAR ENDED MARCH 31, 1999
Revenues increased by approximately 4% for the 2000 Fiscal Year as
compared to the 1999 Fiscal Year. The improvement in revenues is attributable
primarily to (i) increased route and retail laundromat business resulting from
internal expansion of approximately $11 million, despite an estimated $2 million
reduction in revenues in the South Central region due to excessive vandalism and
increased retail laundromat competition in Texas; (ii) increased revenues
generated from the distribution business of approximately $8 million; and (iii)
increased revenues generated from the rental business of approximately $3
million.
Laundry operating expenses increased by approximately 6% for the 2000
Fiscal Year as compared to the 1999 Fiscal Year. This increase was primarily the
result of an increase in commission and operating expenses related to an
improvement in route revenue as well as an increase in cost of sales related to
higher volume in the distribution business and an increase in expenses
associated with the expansion into new markets in the rental, retail laundromat
and distribution businesses. As a percentage of revenues, laundry operating
expenses have remained relatively constant at approximately 66% for the 2000
Fiscal Year and the 1999 Fiscal Year.
General and administrative expenses increased nominally for the 2000
Fiscal Year as compared to the 1999 Fiscal Year. However, as a percentage of
revenues, general and administrative expenses remained constant at approximately
1.6% for the 2000 Fiscal Year and the 1999 Fiscal Year.
Depreciation and amortization expense increased by approximately 8% for
the 2000 Fiscal Year as compared to the 1999 Fiscal Year, due in part to an
increase in capital expenditures with respect to the Company's installed base of
machines. The increase for the 2000 Fiscal Year was also attributable to
contract rights and goodwill associated with acquisitions during the 1999 Fiscal
Year.
Interest expense, net, increased by approximately 2% for the 2000 Fiscal
Year as compared to the 1999 Fiscal Year due primarily to increased borrowing
levels under the Senior Credit Facility in connection with certain acquisitions
made during the prior year.
-13-
<PAGE>
EBITDA1(1) (earnings before deductions for interest, income taxes,
depreciation and amortization) before deduction for stock-based compensation
charges was approximately $168.7 million for the 2000 Fiscal Year as compared to
approximately $165.7 million for the 1999 Fiscal Year, representing an
improvement of approximately $3.0 million or 2%. The major sources of this
EBITDA improvement were increases of approximately $2 million in route and
retail laundromat business, and the remainder from the distribution business and
the rental business. As mentioned above, the route and retail laundromat
business was negatively impacted during the 2000 Fiscal Year by excessive
vandalism in the South Central region and increased competition in the retail
laundromat business in Texas. In addition, during the 2000 Fiscal Year, a new
distribution office was opened in Southern California and the rental business
was expanded into four new markets, which contributed to increased costs in the
2000 Fiscal Year.
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 acquisition of National Laundry Equipment Company, Whitmer Vend-O-Mat
Laundry Service, Inc. and certain other related parties on July 17, 1997, the
acquisition of Apartment Laundries, Inc. on January 15, 1998, the acquisition of
Macke Laundry Services L.P. and substantially all of the assets of certain
related entities on March 2, 1998, the acquisition of Cleanco, Inc. and certain
of its affiliates on May 19, 1998 and the acquisition of Gordon & Thomas
Companies, Inc. on June 5, 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 period 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.
--------
(1) 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 expenditure 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 GAAP and is thus susceptible to varying calculations, EBITDA as
presented may not be comparable to other similarly titled measures of other
companies.
-14-
<PAGE>
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 Senior 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."
EBITDA1(1) 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to have substantial indebtedness and debt service
requirements. At March 31, 2000, the Company had outstanding long-term debt of
approximately $685.1 million (excluding the premium, net, of approximately $6.8
million) and stockholders' equity of approximately $32.3 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 for the Series C Notes. Coinmach used approximately $105.4 million of
the net proceeds from the Bond Offering to repay indebtedness outstanding under
its senior financing arrangement.
On December 23, 1997, Coinmach commenced an offer to exchange (the
"Exchange Offer") up to $296.7 million (excluding the premium on the Series C
Notes discussed above) of its 11 3/4% 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 Company's 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
--------
(1) 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 expenditure 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 GAAP and is thus susceptible to varying calculations, EBITDA as
presented may not be comparable to other similarly titled measures of other
companies.
-15-
<PAGE>
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.
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.
Senior 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 "Senior Credit
Facility"), provides for an aggregate of $435 million of secured financing
consisting of: (i) a $160 million revolving credit facility bearing interest at
an annual rate of LIBOR plus 1.75%; (ii) a $75 million Tranche A term loan
facility bearing interest at an annual rate of LIBOR plus 2.25% and (iii) a $200
million Tranche B term loan facility bearing interest at an annual rate of LIBOR
plus 2.50%. The Senior Credit Facility also provides for up to $10 million of
letter of credit financings and short term borrowings under a swing line
facility of up to $5 million.
On January 12, 2000, the Senior Credit Facility was amended to provide
among other things, that the $35 million working capital revolving credit
facility and the $125 million acquisition revolving credit facility be combined
into a single revolving credit facility without increasing the total aggregate
amount of such revolving credit facility ($160 million), which revolving credit
facility is available for general corporate purposes, including acquisitions.
Interest on the Company's borrowings under the Senior 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 Senior Credit Facility).
At March 31, 2000, the monthly variable LIBOR interest rate was
approximately 6.13%.
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 Senior 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 Senior 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 Senior Credit Facility at
5.75%. On September 15, 1998, the Company amended the March Swap Agreement to
-16-
<PAGE>
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 Senior Credit Facility is secured by all of the
Company's real and personal property. Coinmach Laundry has guaranteed the
indebtedness under the Senior Credit Facility and pledged to Bankers Trust, as
Collateral Agent, its interests in all of the issued and outstanding shares of
capital stock of Coinmach.
The Senior 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 Senior 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 Senior Credit Facility
also requires that the Company satisfy certain financial ratios, including a
maximum leverage ratio and a minimum consolidated interest coverage ratio.
The Senior Credit Facility contains certain events of default, including
the following: (i) the failure of the Company to pay any of its obligations
under the Senior 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 Senior 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 Senior 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 2000
Fiscal Year were approximately $91.3 million (including approximately $2.9
million relating to capital lease obligations). Of such amount, the Company
spent approximately $25.3 million related to the net increase in the installed
base of machines of 28,400 machines. The balance of approximately $63.1 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 $65 million for the
twelve months ending March 31, 2001. 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.
-17-
<PAGE>
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 Senior 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 Senior 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 Senior 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
Senior Credit Facility or the indentures governing the 11 3/4% Senior Notes.
Certain Accounting Treatment
The Company's depreciation and amortization expenses, aggregating
approximately $123.0 million for the 2000 Fiscal Year, have the effect of
reducing net income but not operating cash flow. In accordance with generally
accepted accounting principles generally accepted in the United States, 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.
OPTION GRANTS
During July and September 1996, the Company granted non-qualified
options to (i) certain members of management and certain other individuals (the
"1996 Options") to purchase Common Stock at a 15% discount to the initial
offering price of the Common Stock and (ii) two of its disinterested directors
(the "Independent Director Options") to purchase an aggregate of 120,000 shares
of Common Stock at the initial offering price of the Common Stock. In September,
1997, the Company granted non-qualified options (the "1997 Options") to purchase
an aggregate of 200,000 shares of Common Stock to certain members of management
at an exercise price of $11.90. During May and July, 1998, the Company granted
248,500 non-qualified options to certain employees pursuant to the Stock Option
Plan and 31,244 non-qualified stock options to a director of the Company
(collectively, the "1998 Options") at exercise prices ranting from approximately
$22.31 to $23.05 per share. On May 5, 1999, the Company repriced certain of the
1997 Options and 1998 Options. See "Executive Compensation - Report on Repricing
of Options." During May and July, 1999, the Company granted 258,744
non-qualified options (the "1999 Options" and together with the 1996 Options,
the Independent Director Options, the 1997 Options and the 1998 Options, the
"Options") to certain directors and officers of the Company at prices ranging
from approximately $10.56 to $11.69 per share. The Company records the
difference between the exercise price of such Options (other than the
Independent Director Options) and the fair market value of the Common Stock on
the date of grant as a stock-based compensation charge over the applicable
vesting period. For the 2000 Fiscal Year, the Company recorded a stock-based
compensation charge of approximately $700,000 relating to the Options.
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
that may be experienced by the Company in future periods. Management believes
that such effects have not been nor will be material to the Company. The
Company's business generally is not seasonal.
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<PAGE>
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, 2000, the Company had
approximately $57.0 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 $1.1 million, assuming the amount outstanding was $57.0 million,
the balance as of March 31, 2000. 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 Senior 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 Senior 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 Senior Credit Facility at 5.75%. 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 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.
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<PAGE>
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-32 hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC and the Nasdaq National Market. Officers, directors and ten percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Except as disclosed below, the Company believes, based solely on its
review of copies of such Section 16(a) forms received by it and based on written
representations from certain persons, that no other reports were required to be
filed by such person, that, during the Company's most recently completed fiscal
year, all filing requirements applicable to its officers, directors, and ten
percent stockholders were complied with.
A report reflecting changes in beneficial ownership required to be
filed on Form 4 was not timely filed under Section 16(a) on behalf of Mr.
Chapman with respect to the purchase of certain shares of Common Stock, which
report was subsequently filed.
ELECTION OF DIRECTORS
The Board is divided into three classes of directors. Each class of
directors is elected to serve for a term of three years, so that the terms of
office of approximately one-third of the directors will expire each year. At the
next annual meeting of Coinmach Laundry's stockholders (the "2000 Annual
Meeting"), two directors are to be elected in Class III to hold office until the
2002 annual meeting of stockholders or until their successors are elected and
qualified. The persons designated as nominees for election as directors in Class
III are Mitchell Blatt and Bruce V. Rauner. Each of such nominees is currently a
director of the Company.
The Board of Directors has not set the date, place or time of the 2000
Annual Meeting in light of the pending offer commenced on May 26, 2000 by CLC
Acquisition to acquire all of the Common Stock. The Offer, unless extended or a
subsequent offering period is commenced, is scheduled to expire July 3, 2000. If
the Offer and Merger are consummated in accordance with their terms, Coinmach
Laundry intends to deregister the Common Stock under the Securities and Exchange
Act of 1934, as amended, in which case, Coinmach Laundry will not disseminate
proxy materials for the purpose of soliciting proxies for the election of Class
III directors to its stockholders in respect of the 2000 Annual Meeting. If the
Offer and Merger are not consummated following the scheduled expiration date of
the tender offer period, or any extensions thereof, the Board will set a date,
place and time for the 2000 Annual Meeting and cause proxy materials, including
a notice of meeting, to be disseminated to Coinmach Laundry's stockholders
promptly thereafter.
Should any one or more of the nominees for election as directors become
unable to serve for any reason, or will not serve, the Board may, unless the
Board by resolution provides for a lesser number of directors, designate
substitute nominees, in which event the persons named in the Company's proxy
statement will vote proxies that would otherwise be voted for all named nominees
for the election of such substitute nominee or nominees.
Certain information with respect to each of the nominees and directors
relating to principal occupations and directorships, and the approximate number
of shares of Common Stock beneficially owned by them, directly or indirectly,
has been furnished to the Company by such nominees and directors.
The following table set forth the names and positions with the Company
of the executive officers and directors of the Company.
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<PAGE>
<TABLE>
<CAPTION>
DIRECTORS:
NAME, PRINCIPAL OCCUPATION FOR THE PAST DIRECTOR
FIVE YEARS, DIRECTORSHIPS AGE SINCE
----------------------------------------- ---------- --------
CLASS III DIRECTOR NOMINEES FOR
TERM EXPIRING IN 2002
<S> <C> <C>
MITCHELL BLATT. Mr. Blatt has been President and Chief Operating 48 1995
Officer of the Company since April 1996 and of Coinmach Corporation,
a wholly-owned subsidiary of the Company ("Coinmach"), since
November 1995. Mr. Blatt was the President and Chief Operating
Officer of The Coinmach Corporation ("TCC") from January 1995 to
November 1995.(1) Mr. Blatt has been a director of the Company and
Coinmach since November 1995. Mr. Blatt joined TCC's predecessor,
Coinmach Industries Co., L.P. , as Vice President-General Manager in
1982 and was Vice President and Chief Operating Officer from 1988 to
1994.
BRUCE V. RAUNER. Mr. Rauner has been a director of the Company 44 1995
since April 1995. Mr. Rauner was a director of Coinmach from
November 1995 to November 1996 and a director of TCC from January
1995 to November 1995. Mr. Rauner has been a Principal and General
Partner with GTCR since 1984, where he is responsible for originating
and making new investments, monitoring portfolio companies and
recruiting and training associates.
INCUMBENT CLASS I DIRECTORS WHOSE
TERMS EXPIRE IN 2000
STEPHEN R. KERRIGAN. Mr. Kerrigan has been Chief Executive Officer 46 1995
of the Company since April 1996 and of Coinmach since November
1995. Mr. Kerrigan was President and Treasurer of Solon Automated
Services, Inc. ("Solon") and the Company from April 1995 until April
1996, and Chief Executive Officer of TCC from January 1995 until
November 1995. Mr. Kerrigan has been a director and Chairman of the
Board of the Company since April 1995 and of Coinmach since
November 1995. Mr. Kerrigan was a director of TCC from January
1995 to November 1995 and a director of Solon from April 1995 to
November 1995. Mr. Kerrigan served as Vice President and Chief
Financial Officer of TCC's predecessor, Coinmach Industries Co., L.P.,
from 1987 to 1994.
DAVID A. DONNINI. Mr. Donnini has been a director of the Company 35 1995
since April 1995. Mr. Donnini was a director of Coinmach from
November 1995 to November 1996 and a director of TCC from January
1995 to November 1995. Mr. Donnini has been a Principal of GTCR
since 1993.
</TABLE>
--------
(1) On November 30, 1995, TCC merged with and into Solon (the "Solon Merger")
and entered into a series of refinancing transactions, whereupon the
surviving corporation changed its name to "Coinmach Corporation." Coinmach
Corporation is the principal operating subsidiary of the Company.
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<PAGE>
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION FOR THE PAST DIRECTOR
FIVE YEARS, DIRECTORSHIPS AGE SINCE
----------------------------------------- ---------- --------
INCUMBENT CLASS III DIRECTORS
WHOSE TERMS EXPIRE IN 2001
<S> <C> <C>
DR. ARTHUR B. LAFFER. Dr. Laffer has been a director of the Company 59 1996
since September 1996.
STEPHEN G. CERRI. Mr. Cerri has been a director of the Company since 64 1996
September 1996.
JAMES N. CHAPMAN. Mr. Chapman has been a director of the Company 38 1995
since April 1995. Mr. Chapman was a director of Coinmach from
November 1995 to November 1996 and a director of TCC from January
1995 to November 1995.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
executive officers of the Company:
</TABLE>
<TABLE>
<CAPTION>
NAME AGE TITLE
---- ---- -----
<S> <C> <C>
Stephen R. Kerrigan 46 Chairman of the Board and Chief Executive Officer, Director
Mitchell Blatt 48 President, Chief Operating Officer, Director
Robert M. Doyle 43 Chief Financial Officer, Senior Vice President, Treasurer, Secretary
John E. Denson 62 Senior Vice President--Corporate Development
Michael E. Stanky 48 Senior Vice President
</TABLE>
For additional information regarding Messrs. Kerrigan and Blatt, see
"ELECTION OF DIRECTORS" above.
MR. DOYLE has been Chief Financial Officer, Senior Vice President,
Treasurer and Secretary of the Company since April 1996 and of Coinmach since
November 1995. Mr. Doyle has been a director of Coinmach since November 1995.
Mr. Doyle served as Vice President, Treasurer and Secretary of TCC from January
1995 to November 1995. Mr. Doyle joined TCC's predecessor in 1987 as Controller.
In 1988, Mr. Doyle became Director of Accounting, and was promoted in 1989 to
Vice President and Controller.
MR. DENSON has been Senior Vice President of the Company since April
1996 and of Coinmach since November 1995. Mr. Denson was Senior Vice President,
Finance of Solon from June 1987 until November 1995. Mr. Denson has served as an
officer of Solon under various titles since 1973, and served as a director and
Co-Chief Executive Officer of Solon from November 1994 to April 1995.
MR. STANKY has been Senior Vice President of the Company since April
1996 and of Coinmach since November 1995. Mr. Stanky was a Senior Vice President
of Solon from July 1995 to November 1995. Mr. Stanky served Solon in various
capacities since 1976, and in 1985 was promoted to Area Vice President
responsible for Solon's South-Central Region. Mr. Stanky served as a Co-Chief
Executive Officer of Solon from November 1994 to April 1995.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer and the next four most highly compensated
executive officers of the Company (collectively, the "Named Executive Officers")
who had annual compensation in excess of $100,000 for all services rendered in
all capacities for the fiscal years ended March 31, 1998, March 31, 1999 and
March 31, 2000.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------------------------------------------- ------------------------------
COMMON STOCK
OTHER ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
------------------------------------- ------ ------- -------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen R. Kerrigan 2000 350,000 400,000 115,956(1) 50,000 2,972(12)
Chief Executive Officer 1999 350,000 400,000 121,740(2) 50,000 2,121(12)
1998 350,000 400,000 83,870(3) -- 1,929(12)
Mitchell Blatt 2000 300,000 250,000 66,281(4) 30,000 2,553(12)
President, Chief Operating Officer 1999 300,773 150,000 65,575(5) 30,000 1,957(12)
1998 268,530 280,000 62,680(6) 100,000 2,073(12)
Robert M. Doyle 2000 193,942 125,000 12,052(7) 20,000 2,124(12)
Chief Financial Officer 1999 175,000 87,500 -- 20,000 1,190(12)
1998 169,438 175,000 -- 100,000 2,030(12)
John E. Denson 2000 125,000 32,500 26,863(8) 10,000 1,456(12)
Senior Vice President 1999 125,500 25,000 47,868(9) 5,000 1,359(12)
1998 125,000 30,000 74,828(10) -- 1,586(12)
Michael E. Stanky 2000 175,000 87,500 3,526(11) 10,000 2,009(12)
Senior Vice President 1999 175,000 87,500 -- 10,000 1,928(12)
1998 164,793 175,000 -- 153,521 2,145(12)
</TABLE>
---------------------------
(1) Includes $98,118 in forgiven indebtedness; $3,750 in interest, calculated
at a rate of 7.5% per annum on a loan made by the Company to Mr. Kerrigan;
$12,660 in club membership fees; and $1,428 in life insurance premiums paid
by the Company on behalf of Mr. Kerrigan.
(2) Includes $98,118 in forgiven indebtedness; $3,750 in interest, calculated
at a rate of 7.5% per annum on a loan made by the Company to Mr. Kerrigan;
$4,265 in automobile allowance; $14,500 in club membership fees; and $1,107
in life insurance premiums paid by the Company on behalf of Mr. Kerrigan.
(3) Includes $45,393 in forgiven indebtedness; $3,750 in interest, calculated
at a rate of 7.5% per annum on a loan made by the Company to Mr. Kerrigan;
$26,593 for reimbursement of certain out-of-pocket relocation expenses;
$3,643 in automobile allowances; $3,335 in club membership fees; and $1,156
in life insurance premiums paid by the Company on behalf of Mr. Kerrigan.
(4) Includes $48,118 in forgiven indebtedness; $2,813 in automobile allowances;
$14,050 in club membership fees; and $1,300 in life insurance premiums paid
by the Company on behalf of Mr. Blatt.
(5) Includes $48,118 in forgiven indebtedness; $3,312 in automobile allowances;
$13,300 in club membership fees; and $845 in life insurance premiums paid
by the Company on behalf of Mr. Blatt.
(6) Includes $45,393 in forgiven indebtedness; $3,687 in automobile allowances;
$12,700 in club membership fees; and $900 in life insurance premiums paid
by the Company on behalf of Mr. Blatt.
(7) Includes $10,259 in forgiven indebtedness; $1,213 in automobile allowances;
and $580 in life insurance premiums paid by the Company on behalf of Mr.
Doyle.
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<PAGE>
(8) Includes $20,000 in forgiven indebtedness; $3,800 in interest, calculated
at a rate of 9.5% per annum on a loan made by the Company to Mr. Denson;
$1,463 in automobile allowance; and $1,600 in life insurance premiums paid
by the Company on behalf of Mr. Denson.
(9) Includes $20,000 in forgiven indebtedness; $5,700 in interest, calculated
at a rate of 9.5% per annum on a loan made by the Company to Mr. Denson;
$19,577 for reimbursement of certain out-of-pocket relocation expenses;
$1,525 in automobile allowances; and $1,066 in life insurance premiums paid
by the Company on behalf of Mr. Denson.
(10) Includes $7,600 in imputed interest, calculated at a rate of 9.5% per
annum, on an interest free loan made by the Company to Mr. Denson; $48,691
for reimbursement of certain out-of-pocket relocation expenses; $796 in
automobile allowances; $984 in life insurance premiums paid by the Company
on behalf of Mr. Denson; and $16,757 in net proceeds from the exercise of
options and sale of 2,457 underlying shares of Common Stock in the
Secondary Offering in December 1997 (equal to the difference between the
applicable exercise price of such options and the sale price of the
underlying shares of Common Stock, net of commissions).
(11) Includes $2,455 in forgiven indebtedness; $243 in automobile allowance; and
$828 in life insurance premiums paid by the Company on behalf of Mr.
Stanky.
(12) Represents matching contributions made by the Company to the 401(k) Plan.
EMPLOYMENT CONTRACTS
Employment Agreements of Stephen R. Kerrigan, Mitchell Blatt and Robert
M. Doyle. On January 31, 1995, TCC and each of Stephen R. Kerrigan, Mitchell
Blatt and Robert M. Doyle (each, a "Senior Manager"), entered into Senior
Management Agreements (collectively, the "Senior Management Agreements"). In
connection with the Solon Merger, the obligations of TCC under the Senior
Management Agreements were assumed by Coinmach and certain amendments to such
agreements were effected pursuant to the Omnibus Agreement, dated as of November
30, 1995 (the "Omnibus Agreement"). The Senior Management Agreements (after
giving effect to base salary increases thereunder) provides for annual base
salaries of $350,000, $300,000 and $200,000 for each of Messrs. Kerrigan, Blatt
and Doyle, respectively, which amounts are reviewed annually by the Board.
During the fiscal year ended March 31, 2000, the Compensation Committee approved
annual base salaries for each of Messrs. Kerrigan, Blatt and Doyle of $350,000,
$300,000 and $200,000, respectively. The Board, in its sole discretion, may
grant each Senior Manager an annual bonus. Each Senior Management Agreement is
terminable at the will of the Senior Managers or at the discretion of the Board.
Senior Managers are entitled to severance pay upon termination of their
employment. If employment is terminated by the Company without Cause (as defined
in the Senior Management Agreements) and no event of default has occurred under
any bank credit facility to which the Company is a party, Senior Managers are
entitled to receive severance pay in an amount equal to 1.5 times their
respective annual base salaries then in effect, payable in 18 equal monthly
installments. If employment is terminated by the Company and an event of default
has occurred and is continuing under any bank credit facility to which the
Company is a party, Senior Managers are entitled to receive severance pay in an
amount equal to their respective annual base salaries then in effect, payable in
12 equal monthly installments. Under limited circumstances, Senior Managers are
entitled to receive half of the severance pay to which they are otherwise
entitled if employment with the Company is terminated by them.
EMPLOYMENT AGREEMENT OF JOHN E. DENSON. The Company entered into an
employment agreement with Mr. Denson, dated as of September 5, 1996, for a term
of one year which is automatically renewable each year for successive one-year
terms. Such agreement provided for an annual base salary of $110,000, commencing
January 1, 1997, which amount is to be reviewed each December by the Board.
During the fiscal year ended March 31, 2000, the Compensation Committee approved
an annual base salary for Mr. Denson of $125,000. The Board may, in its
discretion, grant Mr. Denson a performance-based annual bonus. The agreement is
terminable at the will of Mr. Denson or at the discretion of the Board. Under
the terms of such employment agreement, Mr. Denson is entitled to receive
severance pay upon termination of employment by the Company without Cause (as
defined in such agreement) in an amount equal to the greater of $110,000 or his
annual base salary then in effect.
EMPLOYMENT AGREEMENT OF MICHAEL E. STANKY. On July 1, 1995, the Company
entered into an employment agreement with Mr. Stanky which provided for an
annual base salary of $150,000. The terms and conditions of Mr. Stanky's
employment agreement are substantially similar to those contained in the Senior
Management Agreements. During the fiscal year ended March 31, 2000, the
Compensation Committee approved an annual base salary for Mr. Stanky of
$175,000.
-25-
<PAGE>
CHANGE IN CONTROL ARRANGEMENTS - Stock Options. In the event of a
"change of control" of the Company, all outstanding stock options granted to
MCS, a corporation controlled by Mr. Kerrigan, and Messrs. Doyle and Blatt will
become exercisable in full. Pursuant to the applicable stock option agreements,
a "change in control" shall occur when (i) the Company at any time ceases to own
directly 100% of the capital stock of Coinmach, (ii) any "person" or "group" (as
such terms are used in Section 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended), excluding Golder, Thoma, Cressey, Rauner Inc. or any entity
controlled thereby ("GTCR"), is or becomes the "beneficial owner" (as defined in
Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of a
greater percentage of Common Stock than is owned by GTCR at such time, (iii) the
Board ceases to consist of a majority of the directors of the Company on January
8, 1997 and such other directors (collectively, the "Continuing Directors")
whose nomination for election to the Board is recommended by the then Continuing
Directors, or (iv) the Company or Coinmach (or any successor of the Company or
Coinmach by merger or other business combination) at any time sells all or
substantially all of its assets.
401(K) SAVINGS PLAN
The Company offers a 401(k) savings plan (the "401(k) Plan") to all
current eligible employees of the Company who have completed three months of
service. Pursuant to the 401(k) Plan, eligible employees may defer from 2% up to
15% of their salaries up to a maximum level imposed by applicable federal law
($10,500 in 2000). The percentage of compensation contributed to the plan is
deducted from each eligible employee's salary and considered tax-deferred
savings under applicable federal income tax law. Pursuant to the 401(k) Plan,
the Company contributes matching contribution amounts (subject to the Internal
Revenue Code limitation on compensation taken into account for such purpose) of
25% of the amount contributed to the 401(k) Plan by the respective eligible
employee. Eligible employees become vested with respect to matching
contributions made by the Company pursuant to a vesting schedule based upon an
eligible employee's years of service. After two years of service, an eligible
employee is 20% vested in all matching contributions made to the 401(k) Plan.
Such employee becomes vested in equal increments thereafter through the sixth
year of service, at which time such employee becomes 100% vested. Eligible
participants are always 100% vested in their own contributions, including
investment earnings on such amounts.
The Company made the following matching contributions during its fiscal
year ended March 31, 2000 to the Named Executive Officers appearing in the
Summary Compensation Table above: Mr. Kerrigan $2,972; Mr. Blatt $2,553; Mr.
Doyle $2,124; Mr. Denson $1,456; and Mr. Stanky $2,009.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options approved by the Plan Administration and Compensation Committee and
made during the fiscal year ended March 31, 2000 to each of the Named Executive
Officers.
<TABLE>
<CAPTION>
PERCENTAGE POTENTIAL-REALIZABLE VALUE AT
OF TOTAL ASSUMED ANNUAL RATES OF SHARE
OPTIONS MARKET PRICE APPRECIATION FOR OPTION
GRANTED TO PRICE PER TERMS ($)(2)
NUMBER OF EMPLOYEES EXERCISE SHARE ON --------------------------------
OPTIONS IN FISCAL PRICE PER DATE OF EXPIRATION
NAME GRANTED YEAR(1) SHARE ($) GRANT ($) DATE 0% 5% 10%
-------------------------- --------- ---------- --------- -------- ---------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen R. Kerrigan 50,000(3) 19.3% 10.56 13.0 5/05/03 122,000 301,583 518,832
Chief Executive Officer
Mitchell Blatt 30,000(4) 11.6% 10.56 13.0 5/05/03 73,200 107,750 311,299
President, Chief
Operating Officer
Robert M. Doyle 20,000(5) 7.1% 10.56 13.0 5/05/03 48,800 71,833 207,533
Chief Financial Officer
Michael E. Stanky 10,000(6) 3.9% 10.56 13.0 5/05/03 24,400 35,917 103,766
Senior Vice President
John E. Denson 10,000(7) 3.9% 10.56 13.0 5/05/03 24,400 35,917 103,766
Senior Vice President
</TABLE>
---------------------------
(1) A total of 258,744 options were granted to employees of the Company during
the fiscal year ended March 31, 2000.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent upon the future
market performance of Common Stock and the date on which the options are
exercised. The values represented in this table may not necessarily be
achieved.
(3) 10,000 shares underlying the options are immediately exercisable, and the
remaining shares become exercisable in four equal annual installments
commencing on May 5, 2000.
(4) 6,000 shares underlying the options are immediately exercisable, and the
remaining shares become exercisable in four equal annual installments
commencing on May 5, 2000.
(5) 4,000 shares underlying the options are immediately exercisable, and the
remaining shares become exercisable in four equal annual installments
commencing on May 5, 2000.
(6) 2,000 shares underlying the options are immediately exercisable, and the
remaining shares become exercisable in four equal annual installments
commencing on May 5, 2000.
(7) 2,000 shares underlying the options are immediately exercisable, and the
remaining shares become exercisable in four equal annual installments
commencing on May 5, 2000.
-27-
<PAGE>
FISCAL YEAR-END OPTIONS AND OPTION VALUES
The following table presents certain information relating to the number
and value of unexercised stock options beneficially owned by each Named
Executive Officer as of March 31, 2000. None of the Named Executive Officers who
owned options to purchase Common Stock during the 2000 Fiscal Year exercised any
of such options during such period.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
(#) ($)(1)
--------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Stephen R. Kerrigan 246,479(2) 61,619(2) 0 0
Chief Executive Officer 20,000(3) 30,000(3) 0 0
20,000(4) 30,000(4) 0 0
Mitchell Blatt 12,000(3) 18,000(3) 0 0
President, Chief Operating 60,000(5) 40,000(5) 0 0
Officer 80,000(6) 20,000(6) 0 0
12,000(4) 18,000(4) 0 0
Robert M. Doyle 57,512(2) 14,378(2) 0 0
Chief Financial Officer 8,000(3) 12,000(3) 0 0
60,000(5) 40,000(5) 0 0
8,000(4) 12,000(4) 0 0
John E. Denson 23,005(2) 5,751(2) 0 0
Senior Vice President 3,000(7) 2,000(7) 0 0
4,000(4) 6,000(4) 0 0
Michael E. Stanky 82,817(2) 20,704(2) 0 0
Senior Vice President 40,000(6) 10,000(6) 0 0
6,000(8) 4,000(8) 0 0
4,000(4) 6,000(4) 0 0
</TABLE>
-----------
(1) The value of unexercised in-the-money options, whether or not exercisable,
equals the difference between the fair market value of such options at
fiscal year-end and the exercise price of such options. The closing price
per share of Common Stock as reported on the Nasdaq National Market on
March 31, 2000 was $10.25. The exercise price per share of options granted
on July 23, 1996 and options granted on September 5, 1997 is $11.90. The
exercise price per share of options granted on August 8, 1996 is $14.00.
The exercise price range per share of options granted on May 4, 1998 is
$14.00 - $22.31. The exercise price per share of options granted on July
14, 1998 is $23.05. The exercise price per share of options granted May 5,
1999 is approximately $10.56. Accordingly, as of March 31, 2000, none of
the unexercised options held by the Named Executive Officers were
in-the-money.
(2) These options were granted on July 23, 1996 and are exercisable at an
exercise price of $11.90 per share.
(3) These options were granted on July 14, 1998 and are exercisable at an
exercise price of approximately $23.05 per share.
(4) These options were granted on May 5, 1999 and are exercisable at an
exercise price of approximately $10.56 per share.
(5) These options were granted on September 5, 1997 and are exercisable at an
exercise price of $11.90 per share.
(6) These options were granted on August 8, 1996 and are exercisable at an
exercise price of $14.00 per share.
(7) These options were granted on May 4, 1998 and are exercisable at an
exercise price of approximately $14.00 per share.
(8) These options were granted on May 4, 1998 and are exercisable at an
exercise price of approximately $22.31 per share.
-28-
<PAGE>
REPORT ON REPRICING OF OPTIONS
On May 5, 1999, consistent with the compensation policies originally
adopted by the Company, the Company resolved to reprice certain outstanding
stock options under the Plan (the "Repricing"). Eligible options were repriced
to $14.00 per share. The repriced exercise price was at a premium over the
market price of the Company's stock on the date of the Repricing. On the date of
the Repricing, the Company's Common Stock closed at $13.00 per share. The
Repricing did not change any other term of the eligible options, including
vesting. The Repricing was not offered to executive officers in the program but
was offered to a broad base of the Company's non-executive officers and other
employees holding options under the Plan. As part of the repricing, the exercise
price of the options was reduced to $14.00, an amount slightly above the then
fair market value of the Company's stock on the date of the Repricing, as
measured by the closing price of the Common Stock on such date on NASDAQ.
Management believes it is important to provide key employees with
appropriate incentives in recognition of continued service and valuable
contributions. Management believes that the receipt of options generally
increases employee morale and leads to retention by the Company of its key
employees. At the time of the Repricing, the trading range of the Common Stock
had declined significantly in comparison to the exercise prices of the repriced
options due primarily to a downturn in general market conditions. Management
believes that the Repricing restored the incentive value of the repriced options
to the holders of such options and that, as such, the Repricing was in the best
interest of the Company's stockholders.
Management believes that compensation for the Company's executive
officers and key employees should be determined in a manner that attracts and
retains highly qualified employees while building value for the Company's
stockholders. While the Compensation Committee may rely upon quantitative
measures or other measurable objective criteria, such as earnings or other
indicia of financial performance, in reaching compensation determinations, the
Compensation Committee evaluates an individual's performance and reaches
compensation decisions based upon a subjective and careful analysis of each
individual's specific contributions to the Company as well as the
recommendations of the Company's chief executive officer. It is the Compensation
Committee's belief that the substantial voluntary stock ownership position of
the Company's executive officers and key employees is an extremely strong
indication of the alignment of the Company's employees' interest with that of
the Company's stockholders. Other than the Repricing that occurred on May 5,
1999, the Company has not repriced any options held by its employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended March 31, 2000, the Compensation Committee
was comprised of Dr. Laffer and Messrs. Cerri and Donnini. None of Dr. Laffer or
Messrs. Cerri and Donnini have been an employee or officer of the Company or any
of its subsidiaries. Mr. Donnini is principal of Golder, Thoma, Cressey, Rauner,
Inc., the general partner of GTCR IV.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, none of the
members of which is employed by the Company, reviews, evaluates and approves the
structure and implementation of the Company's compensation system for executive
officers. The Compensation Committee also determines the form and amount of
compensation for the chief executive officer and other executive officers. Dr.
Laffer and Messrs. Cerri and Kerrigan served on the Compensation Committee until
November 1, 1996, at which time the Compensation Committee was reconstituted at
the direction of the Board of Directors and is presently comprised of Dr. Laffer
and Messrs. Cerri and Donnini. The Board also maintains a Plan Administration
and Compensation Committee consisting of Messrs. Donnini and Rauner, each of
whom qualify as an "outside director" for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended, which is authorized to take action
with respect to stock option grants under the Option Plan and the 1998 Employee
Stock Purchase Plan.
-29-
<PAGE>
The Executive Compensation Program
The executive compensation program is a performance and rewards
compensation system consisting of base salaries and incentives (annual and
long-term) that pay executives for the achievement of levels of performance
designed to increase the stockholder value of the Company. The system also
enables the Company to hire, retain and motivate high-quality executives who
meet the immediate business challenges and improve the performance of the
Company and is designed to pay base salaries and provide total compensation
opportunities which reward each executive for such executive's contributions to
the Company's successes.
While the Compensation Committee may rely upon quantitative measures or
other measurable objective criteria, such as earnings or other indicia of
financial performance, in reaching compensation determinations, the Compensation
Committee evaluates executive performance and reaches compensation decisions
based upon a subjective and careful analysis of each executive's specific
contributions to the Company as well as the recommendations of the Company's
chief executive officer.
The Company does not require its officers to own any amount of Common
Stock, nor does the Company maintain a stock retention policy for officers.
However, it is the Compensation Committee's belief that the substantial
voluntary stock ownership position of the Company's executive officers is an
extremely strong indication of the alignment of the Company's officers' interest
with that of the Company's stockholders.
Base Salaries
In determining the base salaries of executive officers, the Compensation
Committee takes into consideration the level of responsibility and experience of
each executive officer and the knowledge and skill required. Each year, the
executive's performance is evaluated and any base salary adjustment is based on
an evaluation of the individual's performance and contribution. Each year, the
chief executive officer makes recommendations with respect to salary adjustments
for all executive officers, which recommendations are reviewed, modified where
appropriate and approved or rejected by the Compensation Committee. During the
fiscal year ended March 31, 2000, the Compensation Committee approved annual
base salaries for each of Messrs. Blatt, Doyle, Stanky and Denson of $300,000,
$200,000, $175,000 and $125,000, respectively.
Annual Incentives
The Compensation Committee grants bonuses to executive officers in
recognition of their efforts to position the Company to achieve future growth.
After reviewing individual performances, the chief executive officer makes
recommendations with respect to bonuses and other incentive awards. These
recommendations are reviewed and, to the extent determined appropriate, approved
by the Compensation Committee. Annual incentive awards in respect of performance
during the past fiscal year have not yet been determined by the Compensation
Committee.
Long-Term Incentives
Stock option grants under the Option Plan are made to provide
performance-based incentives that reward executives as stockholder value
increases. This long-term incentive opportunity is also intended to promote a
sense of ownership on the part of executives and key employees and to establish
alignment with stockholders. During the fiscal year ended March 31, 2000, the
Compensation Committee approved stock option grants to Messrs. Kerrigan, Blatt
and Doyle, Denson and Stanky of 50,000, 30,000 , 20,000, 10,000 and 10,000
options, respectively, at an exercise price of approximately $10.563, which
options vest in five equal annual installments commencing on the date of grant.
Compensation Arrangements
From time to time, the Company enters into employment contracts or other
compensation arrangements with executives. Currently, the Company has employment
agreements with Messrs. Kerrigan, Blatt, Doyle, Stanky and
-30-
<PAGE>
Denson and certain other key employees. The terms of all such agreements are
summarized under the heading "EXECUTIVE COMPENSATION-Employment Contracts."
Compensation of the Chief Executive Officer
Total compensation (consisting of base salary, annual incentive and
long-term incentives) for Stephen R. Kerrigan, the chairman and chief executive
officer of the Company, is based on a variety of factors discussed below. A
significant factor taken into account by the Compensation Committee in
determining Mr. Kerrigan's compensation was Mr. Kerrigan's performance as chief
executive officer and his contribution to the Company and its stockholders.
Mr. Kerrigan's compensation remained constant during the past fiscal
year. In May 1999, the Compensation Committee determined to award Mr. Kerrigan
annual incentive compensation in the form of a bonus of $400,000 based on Mr.
Kerrigan's effective leadership and significant strategic accomplishments and on
its assessment of Mr. Kerrigan's individual performance and contribution during
the fiscal year ended March 31, 1999. The Compensation Committee has not yet
determined the amount of any change in base salary, annual bonus or long term
incentive compensation to be paid to Mr. Kerrigan for his performance and
contributions during the current fiscal year.
Impact of Section 162(m) of the Code
The Committee notes that Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") limits, in certain circumstances, the
deductibility of certain compensation, including stock-based compensation, in
excess of $1 million paid to top executives by public companies. None of the
compensation paid to the executive officers named in the Summary Compensation
Table exceeded the threshold for deductibility under Section 162(m). See
"EXECUTIVE COMPENSATION - Summary Compensation Table" above. The Compensation
Committee reviews the potential effect of Section 162(m) periodically and
evaluates its effect on compensation paid to the Company's executive officers.
The Compensation Committee
David A. Donnini
Dr. Arthur B. Laffer
Mr. Stephen G. Cerri
-31-
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return of the
Company from July 23, 1996 through March 31, 2000 (the last day that the Nasdaq
National Market was open during the Company's 2000 fiscal year) with the
cumulative total return of the NASDAQ Composite Index and the Russell 2000 Index
for the same periods. The graph assumes the investment of $100 in shares of
Common Stock, the NASDAQ Composite Index and the Russell 2000 Index on July 23,
1996, the date of the initial public offering of the Company, and the
reinvestment of all distributions and dividends.
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN OF COINMACH LAUNDRY
CORPORATION, NASDAQ COMPOSITE INDEX AND RUSSELL 2000 INDEX
[GRAPHIC OMMITTED]
JULY SEPT. DEC. MAR. JUNE SEPT. DEC. MAR. JUNE SEPT. DEC. MAR. MAR.
23, 30, 31, 27, 27, 26, 26, 31, 30, 30, 31, 31, 31,
1996 1996 1996 1997 1997 1997 1997 1998 1998 1998 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coinmach Laundry $100 $144 $124 $121 $184 $176 $175 $151 $173 $71 $93 $73 $71
Corporation
NASDAQ Composite Index $100 $111 $116 $114 $130 $152 $141 $165 $171 $153 $198 $222 $412
Russell 2000 Index $100 $107 $112 $108 $123 $141 $135 $149 $142 $113 $131 $123 $167
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
VOTING ARRANGEMENTS
The Company and each of Golder, Thoma, Cressey, Rauner Fund IV, L.P.
("GTCR"), the holder of 3,008,402 shares of Common Stock (or approximately 22.8%
of the outstanding Common Stock entitled to vote at the Annual Meeting), MCS
Capital, Inc., a corporation controlled by Mr. Kerrigan ("MCS"), the holder of
329,369 shares of Common Stock (or approximately 2.5% of the outstanding Common
Stock entitled to vote at the Annual Meeting), Mitchell Blatt, the holder of
298,845 shares of Common Stock (or approximately 2.3% of the outstanding Common
Stock entitled to vote at the Annual Meeting), President and Fellows of Harvard
College ("Harvard"), the holder of 70,273 shares of Common Stock (or
approximately 0.5% of the outstanding Common Stock entitled to vote at the
Annual Meeting), and Robert M. Doyle, Michael E. Stanky, Charles Prato, James N.
Chapman, Michael Marrus, David Tulkop, Russell Harrison, Sash A. and Mary
Spencer, the holders of an aggregate of 175,298 shares of Common Stock (or
approximately 1.3% of the outstanding Common Stock entitled to vote at the
Annual Meeting), are parties to a Voting Agreement, dated July 23, 1996 (the
"Voting Agreement"), pursuant to which such stockholders agreed to vote their
shares of Common Stock so that the Board of Directors will consist of (i) two
persons designated by GTCR (currently Messrs. Rauner and Donnini), (ii) two
persons who are officers, employees or members of management of the Company and
are designated by the holders of a majority of Common Stock held by executive
officers of the Company (currently Messrs. Kerrigan and Blatt), (iii) two
persons jointly designated by GTCR and Mr. Kerrigan (currently Mr. Chapman and
Dr. Laffer), and (iv) one person designated by GTCR and approved by Mr. Kerrigan
(currently Mr. Cerri).
-32-
<PAGE>
The following table sets forth certain information regarding the Common
Stock beneficially owned as of June 28, 2000 for (i) each stockholder known by
the Company to be the beneficial owner of five percent (5%) or more of the
outstanding Common Stock; (ii) each of the Company's directors and (iii) each
Named Executive officer.
Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class(1)
---------------- -------------------- -------------------
Golder, Thoma, Cressey, Rauner, 3,008,402 22.8%
Fund IV, L.P.
6100 Sears Tower
Chicago, IL 60606
Strong Capital Management, Inc. 1,927,425(2) 14.6%
100 Heritage Reserve
Menomonee Falls, WI 53051
Prudential Insurance Company of 1,100,800(3) 8.4%
America
751 Broad Street
Newark, NJ 07102-3777
Robert Fleming, Inc. 1,014,805(4) 7.7%
320 Park Avenue, 11th Floor
New York, NY 10022
Capital Guardian Trust Company 615,300(5) 4.7%
333 South Hope Street, 52nd Flr.
Los Angeles, CA 90071
Dimensional Fund Advisors, Inc. 778,600(6) 5.9%
OFFICERS AND DIRECTORS
----------------------
Stephen R. Kerrigan 687,467(7) 5.21%
Mitchell Blatt 508,845(8) 3.86%
Robert M. Doyle 247,790(9) 1.88%
Michael E. Stanky 187,846(10) 1.42%
John E. Denson 33,854(11) *
Bruce V. Rauner 3,008,402(12) 22.8%
David A. Donnini 3,008,402(13) 22.8%
James N. Chapman 52,565(14) *
Arthur B. Laffer 74,000(15) *
Stephen G. Cerri 79,500(16) *
------------- -----
All Officers and Directors as a 4,893,269(17) 35.1%
group (10 persons)
-33-
<PAGE>
----------------
* Percentage of shares beneficially owned does not exceed 1% of Common Stock
outstanding.
1 Share percentage ownership is rounded to nearest tenth of 1% and reflects
the effect of dilution as a result of outstanding options to the extent
such options are, or within 60 days from March 31, 2000 will become,
exercisable. Shares underlying any option which was exercisable on March
31, 2000 or becomes exercisable within the 60 day period thereafter are
deemed outstanding only for purposes of computing the share ownership and
share ownership percentage of the holder of such option.
2 Based on a report on Schedule 13G filed by Strong Capital Management, Inc.
("Strong") with the SEC on May 10, 2000. Strong has sole voting power as to
1,501,600 shares and sole investment power as to 1,927,425 shares.
3 Based on a report on Schedule 13G/A filed by Prudential Insurance Company
of America ("Prudential") with the SEC on January 31, 2000. Prudential has
sole voting power as to 284,400 shares and shared voting power as to
816,400 shares. Prudential has sole investment power as to 284,400 shares
and shared investment power as to 816,400 shares.
4 Based on a report on Schedule 13G filed by Robert Fleming Inc. with the SEC
on February 7, 2000. 5 Based on a report on Schedule 13G filed by Capital
Guardian Trust Company ("Capital") with the SEC as of December 31, 1999.
Capital has sole voting power as to 494,100 shares and sole investment
power as to 615,300 shares. Capital has disclaimed beneficial ownership of
all shares pursuant to Rule 13d-4 of the Securities Exchange Act of 1934,
as amended.
6 Based on a report on Schedule 13G filed by Dimensional Fund ("Dimensional")
Advisors, Inc. with the SEC on February 4, 2000. Dimensional has sole
voting power as to 778,600 shares and sole investment power as to 778,600
shares. Dimensional disclaims beneficial ownership of all such shares.
7 Includes shares beneficially owned by MCS Capital, Inc. ("MCS"), a
corporation controlled by Mr. Kerrigan. Includes shares underlying options
held by MCS to purchase an aggregate of 308,098 shares of Common Stock at
an exercise price of $11.90 per share, all of which options are currently
exercisable. Includes shares underlying options held by Mr. Kerrigan to
purchase an aggregate of (i) 30,000 shares of Common Stock at an exercise
price of approximately $23.05 per share and (ii) 20,000 shares of Common
Stock at an exercise price of approximately $10.56 per share, all of which
options are currently exercisable. Does not include shares underlying
options held by Mr. Kerrigan to purchase an aggregate of (i) 20,000 shares
of Common Stock at an exercise price of approximately $23.05 per share and
(ii) 30,000 shares of Common Stock at an exercise price of approximately
$10.56 per share, none of which options are currently exercisable nor
become exercisable within the next 60 days.
8 Includes shares underlying options to purchase an aggregate of (i) 100,000
shares of Common Stock at an exercise price of $11.90 per share, (ii)
60,000 shares of Common Stock at an exercise price of $14.00 per share,
(iii) 18,000 shares of Common Stock at an exercise price of approximately
$23.05 per share and (iv) 12,000 shares of Common Stock at an exercise
price of approximately $10.56 per share, all of which options are currently
exercisable. Does not include shares underlying options to purchase an
aggregate of (i) 40,000 shares of Common Stock at an exercise price of
$14.00 per share, (ii) 12,000 shares of Common Stock at an exercise price
of approximately $23.05 per share and (iii) 18,000 shares of Common Stock
at an exercise price of $10.56 per share, none of which options are
currently exercisable nor become exercisable within the next 60 days.
9 Includes shares underlying options to purchase an aggregate of (i) 151,890
shares of Common Stock at an exercise price of $11.90 per share, (ii)
12,000 shares of Common Stock at an exercise price of approximately $23.05
per share and (iii) 8,000 shares of Common Stock at an exercise price of
$10.56 per share, all of which options are currently exercisable. Does not
include shares underlying options to purchase an aggregate of (i) 20,000
shares of Common Stock at an exercise price of $11.90 per share, (ii) 8,000
shares of Common Stock at an exercise price of approximately $23.05 per
share and (iii) 12,000 shares of Common Stock at an exercise price of
$10.56 per share, all of which options are not currently exercisable nor
become exercisable within the next 60 days.
10 Includes shares underlying options to purchase an aggregate of (i) 103,521
shares of Common Stock at an exercise price of $11.90 per share, (ii)
50,000 shares of Common Stock at an exercise price of $14.00 per share,
(iii) 6,000 shares of Common Stock at an exercise price of approximately
$22.31 per share and (iv) 4,000 shares of Common Stock at an exercise
price of $10.56 per share, all of which options are currently exercisable.
Does not include shares underlying options to purchase an aggregate of (i)
4,000 shares of Common Stock at an exercise price of approximately $22.31
per share and (ii) 6,000 shares of Common Stock at an exercise price of
$10.56 per share, none of which options are currently exercisable nor
become exercisable within the next 60 days.
11 Includes shares underlying options to purchase an aggregate of (i) 26,299
shares of Common Stock at an exercise price of $11.90 per share, (ii) 3,000
shares of Common Stock at an exercise price of approximately $23.31 per
share and (iii) 4,000 shares of Common Stock at an exercise price of $10.56
per share, all of which options are currently exercisable. Does not include
shares underlying options to purchase an aggregate of (i) 2,000 shares of
Common Stock at an exercise price of approximately $23.31 per share and
(ii) 6,000 shares of Common Stock at an exercise price of $10.56 per share,
none of which options are currently exercisable nor become exercisable
within the next 60 days.
12 All such shares are held by GTCR Fund IV, of which GTCR IV, L.P. ("GTCR
IV"), is the general partner. Mr. Rauner is a principal of Golder, Thoma,
Cressey, Rauner, Inc., the general partner of GTCR IV. Mr. Rauner disclaims
beneficial ownership of such shares. 13 All such shares are held by GTCR
Fund IV, of which GTCR IV is the general partner. Mr. Donnini is a
principal of Golder, Thoma, Cressey, Rauner, Inc., the general partner of
GTCR IV. Mr. Donnini disclaims beneficial ownership of such shares. 14
Includes shares underlying options to purchase an aggregate of (i) 28,756
shares of Common Stock at an exercise price of $11.90 per share, and (ii)
13,248 shares of Common Stock at an exercise price of approximately $11.69
per share, all of which options are currently exercisable. Does not include
shares underlying options to purchase an aggregate of 52,996 shares of
Common Stock at an exercise price of approximately $11.69 per share, none
of which options are currently exercisable nor become exercisable within
the next 60 days.
15 Includes shares underlying options to purchase an aggregate of (i) 60,000
shares of Common Stock at an exercise price of $14.00 per share, and (ii)
14,000 shares of Common Stock at an exercise price of approximately $11.69
per share, all of which options are currently exercisable. Does not include
shares underlying options to purchase an aggregate of 21,000 shares of
Common Stock at an exercise price of $11.69 per share, none of which
options are currently exercisable nor become exercisable within the next 60
days.
16 Represents shares underlying options to purchase an aggregate of (i)
60,000 shares of Common Stock at an exercise price of $14.00 per share,
and (ii) 14,000 shares of Common Stock at an exercise price of
approximately $11.69 per share, all of which options are currently
exercisable. Does not include shares underlying options to purchase an
aggregate of 21,000 shares of Common Stock at an exercise price of $11.69
per share and, none of which options are currently exercisable nor become
exercisable within the next 60 days.
17 In calculating the shares beneficially owned by executive officers and
directors as a group, 3,008,402 shares of Common Stock owned by GTCR Fund
IV and included in the beneficial ownership amounts of each of Messrs.
Rauner and Donnini are included only once. In calculating the percentage of
shares beneficially owned by executive officers and directors as a group,
the shares of Common Stock underlying all options which are currently
exercisable or become exercisable within the next 60 days are deemed
outstanding.
-34-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AND CONSULTING SERVICES
During the last fiscal year, the Company paid Mr. Chapman, a director of
the Company, $180,000 for general financial advisory and investment banking
services.
REGISTRATION RIGHTS AGREEMENT
The Company and GTCR, MCS and Messrs. Blatt, Doyle, Stanky and Chapman
are parties to a registration rights agreement, dated July 26, 1995 (the
"Company Registration Agreement"), pursuant to which the Company granted such
parties certain rights with respect to the registration under the Securities
Act, for resale to the public, of their respective Registrable Securities (as
defined in the Company Registration Agreement). The Company Registration
Agreement provides that, among other things, GTCR has the right to "demand"
registrations under the Securities Act with respect to all or a portion of
GTCR's Registrable Securities. The Company Registration Agreement also provides
for customary provisions regarding the priority among holders of securities with
respect to the number of shares to be registered pursuant to any demand or
piggyback registration and indemnification by the Company of the holders of
Registrable Securities.
CERTAIN LOANS TO MEMBERS OF MANAGEMENT
As of June 28, 2000, Mr. Kerrigan (directly and indirectly through MCS,
an entity controlled by Mr. Kerrigan) and Mr. Blatt owed the Company $395,257
and $275,257, respectively, plus interest accrued thereon. During the last
fiscal year, the largest aggregate amount owed to the Company by Mr. Kerrigan
(directly and indirectly through MCS) and Mr. Blatt equaled $489,528 and
$339,528, respectively, plus interest accrued thereon. The indebtedness of each
of MCS and Mr. Blatt is evidenced by (i) two promissory notes dated January 31,
1995 in the original principal amount of $140,000; (ii) two promissory notes
dated July 26, 1995 in the original amount of $52,370; and (iii) two promissory
notes dated May 3, 1996 in the original amount of $21,797. Each such note
accrues interest at a rate of 8% per annum and was delivered to the Company in
connection with the purchase of the Company's securities by MCS and Mr. Blatt.
The promissory notes dated January 31, 1995 are payable in four equal annual
installments commencing on January 31, 1996. The promissory notes dated July 26,
1995 and May 3, 1996 are payable in eight equal annual installments commencing
on July 26, 1996 and May 3, 1996, respectively. During the 2000 Fiscal Year, the
Company forgave the repayment of approximately (i) $45,393 by each of MCS and
Mr. Blatt, which amounts represent the aggregate amount of the fourth
installment of principal and interest owed by MCS and Mr. Blatt under the notes
dated January 31, 1995 and July 26, 1995, and (ii) $2,725 by each of MCS and Mr.
Blatt, which amounts represent the aggregate amount of the second installment of
principal and interest owed by MCS and Mr. Blatt under the notes dated May 3,
1996. On May 5, 1999, the Company agreed to extend a loan of $250,000 to Mr.
Blatt, which loan is evidenced by a promissory note providing, among other
things, that such loan (i) be repaid in a single payment on the third
anniversary of such loan and (ii) accrue interest at a rate of 8% per annum. A
payment of $20,000 in principal was made by Mr. Blatt on June 7, 1999. Such loan
is also secured by a pledge of all the Common Stock held by Mr. Blatt.
Relocation Loans
In connection with the Company's establishment of a corporate
development office in Charlotte, North Carolina and the relocation of Messrs.
Kerrigan and Denson to such office in September 1996 and March 1997,
respectively, Coinmach extended loans to each of Messrs. Kerrigan and Denson in
the principal amounts of $500,000 ($350,000 of which is reflected in the
$395,257 owed by Mr. Kerrigan to the Company as of June 28, 2000) and $80,000,
respectively. The loan to Mr. Denson (the "Denson Loan") is an interest free
demand loan. The Company forgave an aggregate of $40,000 on the Denson Loan,
$20,000 of which was forgiven during the 2000 Fiscal Year and $20,000 of which
was forgiven during the 1999 Fiscal Year. The loan to Mr. Kerrigan (the
"Kerrigan Loan") provides for the repayment of
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principal and interest in five equal annual installments commencing in July 1997
(each payment date, a "Payment Date") and accrual of interest at a rate of 7.5%
per annum. During the fiscal year ended March 31, 1998, the Board determined to
extend the Kerrigan loan an additional five years providing for repayment of
outstanding principal and interest in equal annual installments ending July
2006. The Kerrigan Loan provides that payments of principal and interest will be
forgiven on each Payment Date provided that Mr. Kerrigan is employed by Coinmach
on such Payment Date. If Mr. Kerrigan ceases to be employed by Coinmach for a
reason other than (i) a change in control of Coinmach, (ii) the death or
disability of Mr. Kerrigan while employed by Coinmach, or (iii) cause (as
defined in the Kerrigan Loan) (each, a "Termination Event"), then all
outstanding amounts due under the Kerrigan Loan will be forgiven as of the date
of the Termination Event. If Mr. Kerrigan's employment is terminated upon the
occurrence of any event that is not a Termination Event, then all outstanding
amounts due under the Kerrigan Loan will become due and payable within 30
business days following the termination of Mr. Kerrigan's employment.
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:
EXHIBIT
NUMBER(1) DESCRIPTION
--------- ----------------------------------------------------
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)
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EXHIBIT
NUMBER(1) DESCRIPTION
--------- ----------------------------------------------------
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)
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)
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<PAGE>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- ----------------------------------------------------
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)
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)
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<PAGE>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- ----------------------------------------------------
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)
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)
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<PAGE>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- ----------------------------------------------------
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)
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)
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<PAGE>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- ----------------------------------------------------
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)
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)
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<PAGE>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- ----------------------------------------------------
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)
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<PAGE>
EXHIBIT
NUMBER(1) DESCRIPTION
--------- -----------------------------------------------------
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)
10.76 Agreement and Plan of Merger, dated as of May 12,
2000, between CLC Acquisition Corporation and
Coinmach Laundry Corporation (incorporated by
reference from exhibit number 1 to Coinmach Laundry's
Schedule 14D-9 dated May 26, 2000, 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
----------------
(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 year ended March 31, 2000, the Company did not file any
reports on Form 8-K.
(c) Exhibits -- See (a)(2) above.
(d) None.
-43-
<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 28, 2000.
COINMACH LAUNDRY CORPORATION
By: /s/ STEPHEN R. KERRIGAN
-------------------------------
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.
Date: June 28, 2000 By: /s/ STEPHEN R. KERRIGAN
-------------------------------------------
Stephen R. Kerrigan
Chairman of the Board of Directors and
Chief Executive Officer (Principal Executive Officer)
Date: June 28, 2000 By: /s/ MITCHELL BLATT
------------------------------------------
Mitchell Blatt
Director, President and Chief Operating Officer
Date: June 28, 2000 By: /s/ ROBERT M. DOYLE
--------------------------------------------
Robert M. Doyle
Chief Financial Officer, Senior Vice President
Secretary and Treasurer
(Principal Financial and Accounting Officer)
Date: June 28, 2000 By: /s/ JOHN E. DENSON
--------------------------------------------
John E. Denson
Senior Vice President - Corporate Development
Date: June 28, 2000 By: /s/ MICHAEL STANKY
--------------------------------------------
Michael Stanky
Senior Vice President
Date: June 28, 2000 By: /s/ DAVID A. DONNINI
--------------------------------------------
David A. Donnini
Director
-44-
<PAGE>
Date: June 28, 2000 By: /s/ JAMES N. CHAPMAN
--------------------------------------------
James N. Chapman
Director
Date: June 28, 2000 By: /s/ BRUCE V. RAUNER
--------------------------------------------
Bruce V. Rauner
Director
Date: June 28, 2000 By: /s/ STEPHEN G. CERRI
--------------------------------------------
Stephen G. Cerri
Director
Date: June 28, 2000 By: /s/ ARTHUR B. LAFFER
--------------------------------------------
Arthur B. Laffer
Director
-45-
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Index to Consolidated Financial Statements
Report of Independent Auditors.......................................... F-1
As of March 31, 2000 and March 31, 1999:
Consolidated Balance Sheets.......................................... F-2
For the Years Ended March 31, 2000, 1999 and 1998:
Consolidated Statements of Operations................................ F-3
Consolidated Statements of Stockholders' Equity...................... F-4
Consolidated Statements of Cash Flows................................ F-6
Notes to Consolidated Financial Statements.............................. F-8
<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, 2000 and 1999, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended March 31, 2000. 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 auditing standards generally accepted
in the United States. 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, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended March 31, 2000, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Melville, New York
May 17, 2000, except for paragraph 2 of Note 12,
as to which the date is May 26, 2000
F-1
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands of dollars)
<TABLE>
<CAPTION>
March 31
2000 1999
----------------- ----------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 23,174 $ 26,515
Receivables, less allowance of $638 and $618 10,206 8,107
Inventories 17,770 16,328
Prepaid expenses 6,977 6,552
Advance location payments 77,212 79,705
Land, property and equipment:
Laundry equipment and fixtures 361,291 301,894
Land, building and improvements 41,693 34,830
Trucks and other vehicles 13,819 10,223
----------------- ----------------
416,803 346,947
Less accumulated depreciation and amortization (179,643) (123,337)
----------------- ----------------
Net property and equipment 237,160 223,610
Contract rights, net of accumulated amortization of $102,307
and $70,602 384,680 413,014
Goodwill, net of accumulated amortization of $28,248 and $20,318 101,253 109,025
Other assets 17,741 18,440
----------------- ----------------
Total assets $ 876,173 $ 901,296
================= ================
Liabilities and Stockholders' Equity
Accounts payable $ 20,769 $ 20,478
Accrued rental payments 28,445 26,888
Accrued interest 15,786 15,516
Other accrued expenses 12,972 13,366
Deferred income taxes 74,022 81,494
11-3/4% Senior Notes 296,655 296,655
Premium on 11-3/4% Senior Notes, net 6,789 8,023
Credit facility indebtedness 382,020 384,003
Other long-term debt 6,394 6,833
Stockholders' equity:
Common stock 132 132
Capital in excess of par value 105,026 104,231
Accumulated deficit (72,693) (56,104)
----------------- ----------------
32,465 48,259
Treasury stock (8) -
Receivables from stockholders (136) (219)
----------------- ----------------
Total stockholders' equity 32,321 48,040
----------------- ----------------
Total liabilities and stockholders' equity $ 876,173 $ 901,296
================= ================
</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 March 31
2000 1999 1998
------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 527,079 $ 505,323 $ 324,887
Costs and expenses:
Laundry operating expenses 349,925 331,647 217,333
General and administrative expenses 8,441 8,017 6,194
Depreciation and amortization 123,002 113,448 75,453
Stock based compensation charge 783 1,269 1,446
------------------------------------------------------
482,151 454,381 300,426
------------------------------------------------------
Operating income 44,928 50,942 24,461
Interest expense, net 67,326 65,995 44,662
------------------------------------------------------
Loss before income taxes (22,398) (15,053) (20,201)
------------------------------------------------------
Provision (benefit) for income taxes:
Current 1,743 1,264 299
Deferred (7,552) (4,343) (5,633)
------------------------------------------------------
(5,809) (3,079) (5,334)
------------------------------------------------------
Net loss $ (16,589) $ (11,974) $ (14,867)
======================================================
Basic and diluted net loss per share $ (1.26) $ (0.91) $ (1.32)
======================================================
Weighted average common
shares outstanding 13,171,868 13,167,783 11,242,006
======================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
(In thousands of dollars, except par value and shares)
<TABLE>
<CAPTION>
Balance Issuance Net Activity Balance
March 28, of Common Stock Based in Loans to March 31,
1997 Net Loss Stock Compensation Stockholders 1998 Net Loss
-------------- ----------- ------------ -------------- -------------- ------------- ----------
<S> <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--12,687,135, $ 100 $ - $ 27 $ - $ - $ 127 $ -
12,927,459 and 12,939,391
Non-voting Class B common
stock, par value $.01:
authorized shares--1,000,000;
issued shares end of
period--480,648, 240,324 and 5 - - - - 5 -
240,324
Capital in excess par value 53,160 - 48,576 1,342 - 103,078 -
Accumulated deficit (29,263) (14,867) - - - (44,130) (11,974)
-------------- ----------- ------------ -------------- -------------- ------------- ----------
24,002 (14,867) 48,603 1,342 - 59,080 (11,974)
Receivables from stockholders (439) - - - 104 (335) -
-------------- ----------- ------------ -------------- -------------- ------------- ----------
$23,563 $(14,867) $48,603 $1,342 $104 $58,745 $(11,974)
============== =========== ============ ============== ============== ============= ==========
Net
Activity in Balance
Stock Based Loans to Conversion March 31,
Compensation stockholders of Stock 1999
------------- ------------- ----------- -------------
<C> <C> <C> <C>
$ - $ - $ 2 $ 129
- - (2) 3
1,153 - - 104,231
- - - (56,104)
------------- ------------- ----------- -------------
1,153 - - 48,259
- 116 - (219)
------------- ------------- ----------- -------------
$1,153 $ 116 $ - $48,040
============= ============= =========== =============
</TABLE>
See accompanying notes.
F-4
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity (continued)
(In thousands of dollars, except par value and shares)
<TABLE>
<CAPTION>
Balance Net
March 31, 1999 Issuance of Activity in Balance
Brought Common Stock Based Treasury Loans to March 31,
Forward Net Loss Stock Compensation Stock Stockholders 2000
--------------- ----------- ------------ ------------- -------- ------------- ---------
<S> <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--12,687,135,
12,927,459 and 12,939,391 $ 129 $ - $ - $ - $ - $ - $ 129
Non-voting Class B common stock,
par value $.01: Authorized
shares--1,000,000; issued shares
end of period--480,648,
240,324 and 240,324 3 - - - - - 3
Capital in excess par value 104,231 - 95 700 - - 105,026
Accumulated deficit (56,104) (16,589) - - - - (72,693)
---------- ----------- ------ ------ -------- ---- ---------
48,259 (16,589) 95 700 - - 32,465
Purchase of Class A common stock - - - - (64) - (64)
Issuance of Class A common stock - - - - 56 - 56
Receivables from stockholders (219) - - - - 83 (136)
---------- ----------- ------ ------ -------- ---- ---------
$ 48,040 $ (16,589) $ 95 $ 700 $ (8) $ 83 $ 32,321
========= ========== ===== ====== ======== ==== =========
</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 March 31
2000 1999 1998
-------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $ (16,589) $ (11,974) $ (14,867)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 56,601 52,135 30,649
Amortization of advance location payments 24,622 20,339 11,280
Amortization of intangibles 41,779 40,974 33,524
Deferred income taxes (7,552) (4,343) (5,633)
Amortization of debt discount and deferred issue costs
1,775 1,824 1,091
Amortization of premium on 11-3/4% Senior Notes
(1,234) (1,235) (617)
Stock based compensation 783 1,269 1,446
Change in operating assets and liabilities, net of
businesses acquired:
Other assets (2,732) (1,462) (3,027)
Receivables, net (2,099) 469 1,406
Inventories and prepaid expenses (1,588) (1,596) (2,898)
Accounts payable 292 3,327 719
Accrued interest, net 270 1,052 4,281
Other accrued expenses, net (4,070) 2,172 1,196
--------------- ----------------- --------------
Net cash provided by operating activities 90,258 102,951 58,550
--------------- ----------------- --------------
Investing activities
Additions to property and equipment (69,317) (62,082) (42,468)
Advance location payments to location owners (19,087) (22,052) (13,330)
Additions to net assets related to acquisitions of
businesses (net of promissory notes of
$2,250 in 1998) - (97,531) (295,676)
Sale of property and equipment - - 599
--------------- ----------------- --------------
Net cash used in investing activities (88,404) (181,665) (350,875)
--------------- ----------------- --------------
</TABLE>
F-6
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(In thousands of dollars)
<TABLE>
<CAPTION>
Year ended March 31
2000 1999 1998
-----------------------------------------------
<S> <C> <C> <C>
Financing activities
Debt transactions:
Net (repayments) proceeds from credit facility $ (1,983) $ 87,736 $ 166,267
Net (repayments) borrowings of bank and other borrowings
(398) (1,639) 396
Principal payments on capitalized lease obligations
(2,902) (2,894) (1,173)
Deferred debt issuance costs - (430) (9,015)
Proceeds from issuance of 11-3/4% senior notes - - 109,875
Repayment of 9-7/8% promissory note - (15,000)
Equity transactions:
Net proceeds from public offering of common stock
- - 48,702
Proceeds from issuance of common stock 96 - -
Purchase of treasury stock (8) - -
--------------- ----------------- --------------
Net cash (used in) provided by financing activities (5,195) 82,773 300,052
--------------- ----------------- --------------
Net (decrease) increase in cash and cash equivalents (3,341) 4,059 7,727
Cash and cash equivalents, beginning of year 26,515 22,456 14,729
--------------- ----------------- --------------
Cash and cash equivalents, end of year $ 23,174 $ 26,515 $ 22,456
=============== ================= ==============
Supplemental disclosure of cash flow information
Interest paid $ 66,543 $ 64,418 $ 38,385
=============== ================= ==============
Income taxes paid $ 2,829 $ 477 $ 358
=============== ================= ==============
Noncash financing activities
Acquisition of fixed assets through capital leases $ 3,361 $ 2,307 $ 1,111
=============== ================= ==============
</TABLE>
See accompanying notes.
F-7
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2000
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, 2000, the Company owned and operated
approximately 790,000 washers and dryers in approximately 79,000 locations on
routes throughout the United States and in 184 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
estimated to be in the machines at the end of each fiscal year.
F-8
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
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 $29.1 million, $25.3 million and
$21.8 million in 2000, 1999 and 1998, 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 when purchased to be cash equivalents.
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market and
consist of the following (in thousands):
March 31
2000 1999
------------ ------------
Laundry equipment $ 13,273 $ 11,785
Machine repair parts 4,497 4,543
------------ ------------
$ 17,770 $ 16,328
============ ============
F-9
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
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.
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
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 evaluates 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.
F-10
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Advance Location Payments
Advance location payments to location owners are amortized on a straight-line
basis over the contract term, which generally ranges from 5 to 10 years.
Loss Per Share
Basic and diluted loss per share for 2000, 1999 and 1998 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.
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 7d).
F-11
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Comprehensive Income
SFAS No. 130, Reporting Comprehensive Income, establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity, (net assets)
during a period from non-owner sources. To date, the Company has not had any
transactions that are required to be reported in comprehensive income.
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 when 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.
Advertising
The Company expenses advertising costs as incurred. Advertising expense was $1.8
million, $1.3 million and $1.2 million, for 2000, 1999 and 1998, respectively.
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 evaluates the
requirement 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. Company management believes that no impairment to its
long-lived assets has occurred.
F-12
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
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 quarter
filing of the year ending March 31, 2001.
Recently Issued Pronouncement
In March 2000, the FASB issued Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation, an interpretation of APB Opinion No.
25. Interpretation No. 44 provides additional guidance on the recognition of
compensation expense, the definition of an employee, stock option repricings,
and the impact of other modifications related to stock options. Interpretation
No. 44 is effective July 1, 2000 and should generally be applied prospectively
to grants of options after July 1, 2000. The Company has adopted Interpretation
No. 44 and such adoption had no effect on operations or the financial condition
of the Company.
F-13
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (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 years
ended March 31, 1998, 1999 and 2000 are referred to as "1998", "1999" and
"2000", 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.
F-14
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Business Combinations (continued)
c. 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 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.
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 1999 and 1998 acquired businesses described above as if
the acquisitions had taken place at the beginning of 1998 (in thousands, except
per share data):
Year ended March 31,
1999 1998
------------ -------------
Revenues $ 516,898 $ 500,489
Net loss (12,248) (18,615)
Basic and diluted net loss per common share (.93) (1.66)
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.
F-15
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Business Combinations (continued)
In management's opinion, the unaudited pro forma combined results of operations
are not indicative of the actual results that would have occurred had the
acquisitions described above been consummated at the beginning of 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):
March 31,
2000 1999
------------ ------------
Trade receivables $ 9,725 $ 7,220
Notes receivable 257 469
Other 862 1,036
------------ ------------
10,844 8,725
Allowance for doubtful accounts 638 618
------------ ------------
$ 10,206 $ 8,107
============ ============
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.
F-16
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Debt
Debt consists of the following (in thousands):
March 31,
2000 1999
------------- ---------------
11-3/4% Senior Notes due 2005 $ 296,655 $ 296,655
Premium on 11-3/4% Senior Notes, net 6,789 8,023
Credit facility indebtedness 382,020 384,003
Obligations under capital leases 4,748 4,291
Other long-term debt with varying
terms and maturities 1,646 2,542
------------ -------------
$ 691,858 $ 695,514
============ =============
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.
F-17
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Debt (continued)
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 "Amended and Restated Credit
Facility"), provides for an aggregate of $435 million of secured financing
consisting of: (i) a $160 million revolving credit facility currently bearing
interest at an annual rate of LIBOR plus 1.75%; (ii) a $75 million Tranche A
term loan facility currently bearing interest at an annual rate of LIBOR plus
2.25% and (iii) 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.
On January 12, 2000, the Amended and Restated Credit Facility was further
amended to provide, among other things, that the working capital revolving
credit facility and the acquisition revolving credit facility be combined into a
single revolving credit facility without increasing the total aggregate amount
of such revolving credit facility ($160 million) which revolving credit facility
is available for general corporate purposes, including acquisitions.
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.
F-18
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Debt (continued)
At March 31, 2000, the monthly variable LIBOR interest rate was approximately
6.13%.
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, 2000, as estimated by a dealer, was approximately
$328,000 unfavorable and at March 31, 1999 it was approximately $584,000
unfavorable.
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.
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, 2000, as estimated by
a dealer, was approximately $5.1 million favorable and at March 31, 1999 it 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, 2000, as estimated by a dealer,
was approximately $308,000 unfavorable and at March 31, 1999 it 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 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.
F-19
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Debt (continued)
Debt outstanding under the Amended and Restated Credit Facility consisted of the
following (in thousands):
March 31,
2000 1999
----------- ---------------
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
8.38% at March 31, 2000) $ 72,750 $ 73,750
Term loan B, quarterly payments of $500
with the final payment of $186,000 on
June 30, 2005 (Interest rate of
approximately 8.63% at March 31, 2000) 196,000 198,000
Acquisition revolving line of credit - 94,646
Working capital revolving line of credit 113,270 17,607
------------ ------------
$ 382,020 $ 384,003
============ ============
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 2000, 1999 and 1998 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. 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 2000, 1999 and 1998 amounted to approximately
$395,000, $339,000 and $281,000, respectively.
The Company does not provide any other post-retirement benefits.
F-20
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes
The components of the Company's deferred tax liabilities and assets are as
follows (in thousands):
March 31,
2000 1999
----------- -----------
Deferred tax liabilities:
Accelerated depreciation and
contract rights $ 92,493 $ 95,882
Other, net 2,624 3,057
---------- -----------
95,117 98,939
---------- -----------
Deferred tax assets:
Net operating loss carryforwards 16,328 14,032
Stock compensation expense 1,760 1,460
AMT credit 2,499 1,156
Covenant not to compete 508 797
----------- -----------
21,095 17,445
----------- -----------
Net deferred tax liability $ 74,022 $ 81,494
=========== ===========
The net operating loss carryforwards of approximately $40 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 2020. 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):
Year ended March 31
2000 1999 1998
-------------------------------------------------------
Federal $ (4,841) $ (2,561) $ (4,265)
State (968) (518) (1,069)
-------------------------------------------------------
$ (5,809) $ (3,079) $ (5,334)
=======================================================
F-21
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes (continued)
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 March 31
2000 1999 1998
----------------------------------------------------------
<S> <C> <C> <C>
Expected tax benefit $ (7,839) $ (5,269) $ (7,070)
State tax benefit, net of federal taxes (629) (314) (690)
Permanent book/tax differences:
Goodwill 2,600 2,552 2,289
Other 59 (48) 137
----------------------------------------------------------
Tax provision/(benefit) $ (5,809) $ (3,079) $ (5,334)
==========================================================
</TABLE>
7. Stockholders' Equity
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.
b. Stock Based Compensation
Prior to its public 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
F-22
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stockholders' Equity (continued)
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 2000, 1999 and 1998.
c. Convertible Stock
At March 31, 1997, the Company had 480,648 shares of not-voting Class B common
stock ("Class B stock") outstanding. During fiscal 1999 a holder of 240,324
shares of Class B stock exercised the conversion option to convert those shares
into 240,324 shares of voting Class A common stock. Subsequent to March 31,
2000, the holders of the remaining 240,324 shares of Class B stock exercised
their option to convert those shares into 240,324 shares of voting Class A
common stock (see Note 12).
d. Stock Option Plan
Prior to its public 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.
During July and September 1996, in connection with its public 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 Company's public
offering.
F-23
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stockholders' Equity (continued)
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, Coinmach Laundry 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).
On May 5, 1999, the Company repriced 197,000 nonqualified options previously
granted to employees under the Plan such that the exercise price per share was
changed from $22.31 to $14.00 per share. The repriced options otherwise remain
governed in accordance with the terms and conditions set forth in the agreements
pursuant to which such options were granted.
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.
F-24
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stockholders' Equity (continued)
For 2000, 1999 and 1998, the Company recorded stock-based compensation charges
of approximately $700, $1,153 and $1,342, respectively (in thousands), relating
to the options mentioned above.
The Company has elected to comply with APB No. 25 and related interpretations in
accounting for its employee stock options because the alternate fair value
accounting provided for under SFAS No. 123 requires use of option valuation
models which were not developed for use in valuing such employee stock options.
Under APB No. 25, compensation expense is recognized only when the exercise
price of the Company's employee stock options is less than the market price of
the underlying stock on the date of grant.
In accordance with SFAS No. 123, pro forma information regarding net loss and
loss per common share has been determined as if the Company had accounted for
its employee stock options under the fair value method required by SFAS No. 123.
The fair value for these options was estimated at the date of each grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 2000, 1999 and 1998: risk-free interest rate of 5.9%, 5.2% and,
5.9 %: 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.
F-25
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stockholders' Equity (continued)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting periods. The Company's pro
forma net loss and net loss per share are as follows:
<TABLE>
<CAPTION>
Year ended March 31
2000 1999 1998
----------------------------------------------------
<S> <C> <C> <C>
Pro forma net loss (in thousands) $(18,327) $(12,897) $(15,890)
Pro forma basic and diluted net loss per share $(1.39) $(.98) $(1.41)
</TABLE>
Information with respect to options for 2000, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Weighted Weighted Average
Average Fair Value of
Exercise Price Options Granted
Options
--------------- --------------- -------------------
<S> <C> <C> <C>
Options outstanding at March 29, 1997 1,040,687 $ 12.51 $ 6.17
Options granted:
Nonqualified options issued at market price 72,500 14.00 2.92
Nonqualified options issued at below market price 200,000 11.90 12.53
Options exercised (17,857) 11.90 -
---------------
Options outstanding at March 28, 1998 1,295,330 12.51 6.98
Options granted:
Nonqualified options issued at below market price 279,744 18.61 5.97
---------------
Options outstanding at March 31, 1999 1,575,074 13.59 6.80
Options granted:
Nonqualified options issued at market price 138,744 11.67 3.98
Nonqualified options issued at below market price 120,000 10.56 5.59
Options forfeited from terminated employees (18,000) 14.00 4.02
---------------
Options outstanding at March 31, 2000 1,815,818 13.24 6.53
===============
Options exercisable at March 28, 1998 464,918 12.56 6.71
Options exercisable at March 31, 1999 789,507 12.98 6.76
Options exercisable at March 31, 2000 1,156,639 13.06 6.71
</TABLE>
F-26
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stockholders' Equity (continued)
Exercise prices for options outstanding and for options exercisable as of March
31, 2000 were as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Weighted Number of Exercise Price
Options Currently Average Options Currently of Options
Outstanding Exercise Exercisable Currently Range of
Price Exercisable Exercise Prices
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,180,324 $11.74 745,441 $11.85 $10.56--$11.90
489,250 14.00 352,700 14.00 14.00
146,244 22.81 58,498 22.81 22.31--23.05
--------------------- -------------------
1,815,818 1,156,639
===================== ===================
</TABLE>
The weighted average remaining contractual life of those options is
approximately 7.2 years.
Shares of Common Stock reserved for future issuance as of March 31, 2000 are as
follows:
Number of Shares
---------------------
Stock options 1,923,227
Employee Stock Purchase Plan 982,336
Conversion shares 240,324
---------------------
3,145,887
=====================
e. Employee Stock Purchase Plan
In July 1999, the Company implemented an Employee Stock Purchase Plan as part of
its voluntary defined contribution plan for all employees meeting certain
eligibility criteria. Under the plan, employees may elect to purchase 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 issuance under
this plan.
F-27
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stockholders' Equity (continued)
Under such plan, shares of Common Stock are purchased by participants on the
last day of each calendar quarter at the lesser of 85% of the fair market value
on the first day of the quarter, or 85% of the fair market value on the last day
of the quarter. For the quarters ended September 30, 1999, December 31, 1999 and
March 31, 2000, participants purchased 4,410, 7,522 and 5,732 shares,
respectively, at a share price of $8.23, $7.81 and $8.53, respectively.
On June 9, 2000, the Employee Stock Purchase Plan was terminated. For the period
April 1, 2000 through June 9, 2000, participants purchased 5,472 shares of
Common Stock at a share price of $8.58.
8. Commitments and Contingencies
Rental expense for all operating leases, which principally cover office and
warehouse facilities, laundromats and vehicles, was approximately $8,163, $7,227
and $4,483 for 2000, 1999 and 1998, respectively (in thousands).
Future minimum rental commitments under all capital leases and noncancellable
operating leases as of March 31, 2000, are as follows (in thousands):
Capital Operating
-------------- ---------------
2001 $ 2,657 $ 6,675
2002 1,739 5,409
2003 945 4,544
2004 41 3,200
2005 8 2,179
Thereafter - 5,312
-------------- --------------
Total minimum lease payments 5,390 $ 27,319
=============
Less amounts representing interest 642
--------------
$ 4,748
==============
The Company is contingently liable on receivables sold with recourse to finance
companies. The total amount of such receivables outstanding as of March 31, 2000
is approximately $800,000.
F-28
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Commitments and Contingencies (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, 2000 and 1999 were approximately $3.4 million and
$4.9 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 alleges that the defendants violated
various securities laws and seeks damages in unspecified amounts. On June 1,
2000, the court dismissed the complaint in its entirety on grounds that the
applicable statute of limitations had passed prior to the date on which the
complaint was filed.
On November 18, 1999, K. Reed Hinrichs v. Stephen R. Kerrigan, et al., a
purported class action lawsuit, was filed in the Delaware Court of Chancery,
Newcastle County naming the Company, GTCR Fund IV, GTCR Golder Rauner, L.L.C.
and certain of its executive officers as defendants. Plaintiffs allege that the
defendants proposal to acquire between 80% and 90% of the Common Stock for
$13.00 per share was inadequate and that the defendants breached their fiduciary
duty to the Company's public shareholders. The defendants' time to respond to
the complaint has been adjourned indefinitely by mutual agreement of the parties
(see Note 12).
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.
F-29
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Commitments and Contingencies (continued)
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, 2000.
The carrying amount, and related estimated fair value for the Company's 11-3/4%
Senior Notes are as follows (in thousands):
Carrying Estimated
Amount Fair Value
----------- -------------
11-3/4% Senior Notes at March 31, 2000
(including premium of $6,789) $303,444 $292,205
11-3/4% Senior Notes at March 31, 1999
(including premium of $8,023) $304,678 $326,706
The fair value of the 11-3/4% Senior Notes is based on quoted market prices.
F-30
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
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 $350,000 and $400,000 is included in other assets as of
March 31, 2000 and 1999, 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. The balance of such loan of $230,000 is included in other assets as of
March 31, 2000.
11. Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
June 30, September 30, December 31, March 31,
For the Quarter Ended 1999 1999 1999 2000
-----------------------------------------------------------------------------------------------------------------
(In thousands of dollars, except per share amounts)
<S> <C> <C> <C> <C>
Revenues $ 133,538 $ 130,060 $ 130,713 $ 132,768
Operating income $ 14,153 $ 10,894 $ 10,111 $ 9,770
Loss before income taxes $ (2,587) $ (5,955) $ (6,934) $ (6,922)
Net loss $ (2,434) $ (4,833) $ (4,960) $ (4,362)
Basic and diluted net loss per share $ (0.18) $ (0.37) $ (0.38) $ (0.33)
Weighted average shares outstanding 13,167,783 13,167,831 13,172,274 13,179,706
</TABLE>
<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 $ (0.24) $ (0.27) $ (0.20) $ (0.19)
Weighted average shares outstanding 13,167,783 13,167,783 13,167,783 13,167,783
</TABLE>
F-31
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Subsequent Events
On May 12, 2000, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") with CLC Acquisition Corporation ("CLC Acquisition"), a
newly formed Delaware corporation formed by Bruce V. Rauner, a director of the
Company and a principal of the indirect general partner of Golder, Thoma,
Cresscy, Rauner Fund IV, L.P. ("GTCR Fund IV"), the largest stockholder of the
Company. Pursuant to the Merger Agreement, CLC Acquisition agreed to acquire all
of the Company's outstanding Common Stock and Non-Voting Common Stock
(collectively, the "Shares") for $14.25 per Share in a two-step transaction
consisting of a tender offer (the "Offer") followed by a merger transaction (the
"Merger") of CLC Acquisition with and into Coinmach Laundry. The Offer is
conditioned upon, among other things, there being validly tendered and not
withdrawn, prior to expiration date of Offer, that number of Shares which, when
combined with the Shares owned by CLC Acquisition, result in CLC Acquisition
owning at least 51% of the outstanding Shares on the date of purchase. Upon
consummation of the Merger, each Share not tendered in the offer will be
canceled and converted into the right to receive an amount per Share equal to
$14.25.
On May 26, 2000, CLC Acquisition announced its offer to purchase any and all
Shares (except for certain Shares held by some members of management of the
Company and GTCR Fund IV). The Offer period during which shares may be tendered
is scheduled to expire on July 3, 2000 (the "Expiration Date"), unless extended.
Assuming the conditions to the offer are satisfied or waived, the Company will
provide for a subsequent offering period commencing on July 5, 2000 and expiring
on July 7, 2000, unless extended. The Company reserves the right to extend the
subsequent offering period for up to an additional 17 business days.
F-32
<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
