<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 26, 2000 COMMISSION FILE
NUMBER: 333-42407
UNICCO SERVICE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2872501
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
FOUR COPLEY PLACE, BOSTON, MASSACHUSETTS 02116
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(617) 859 - 9100
(REGISTRANT'S TELEPHONE NUMBER)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
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<PAGE> 2
UNICCO SERVICE COMPANY
FORM 10-Q
QUARTER ENDED MARCH 26, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. Financial Information
ITEM 1. Financial Statements:
Condensed Consolidated Statements of Operations for the three months and nine 3
months ended March 26, 2000 and March 28, 1999 (unaudited)
Condensed Consolidated Balance Sheets at March 26, 2000 (unaudited) and June 4
27, 1999
Condensed Consolidated Statements of Cash Flows for the nine months ended March 5
26, 2000 and March 28, 1999 (unaudited)
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II. Other Information 17
Signatures 18
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNICCO SERVICE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- --------------------------
MARCH 26, MARCH 28, MARCH 26, MARCH 28,
2000 1999 2000 1999
-------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Service revenues ............................ $ 140,459 $ 132,991 $ 417,556 $ 385,863
Cost of service revenues .................... 125,686 118,255 370,138 340,785
--------- --------- --------- ---------
Gross profit ............................. 14,773 14,736 47,418 45,078
Selling, general and administrative
expenses ................................... 10,346 10,308 31,908 30,004
Amortization of intangible assets ........... 951 1,066 2,993 3,234
--------- --------- --------- ---------
Operating income ......................... 3,476 3,362 12,517 11,840
Interest income ............................. 139 231 872 438
Interest expense ............................ (2,138) (2,891) (7,981) (8,783)
--------- --------- --------- ---------
Income from continuing operations before
income taxes ............................ 1,477 702 5,408 3,495
Provision for income taxes .................. 207 222 877 773
--------- --------- --------- ---------
Income from continuing operations ........... 1,270 480 4,531 2,722
Discontinued operations :
Income from discontinued operations, net of
tax of $(12) ............................... -- -- -- 1,143
Gain on sale of discontinued operations,
net of tax of $0 ........................... -- 4,082 -- 4,082
--------- --------- --------- ---------
Net income before extraordinary item ........ 1,270 4,562 4,531 7,947
Extraordinary loss, net of tax benefit of
$52 and $36 ................................ (1,285) -- (897) --
--------- --------- --------- ---------
Net income (loss) ........................... $ (15) $ 4,562 $ 3,634 $ 7,947
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE> 4
UNICCO SERVICE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 26,
2000 JUNE 27,
(UNAUDITED) 1999
----------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 3,150 $ 24,938
Accounts receivable, less reserves of $3,112 and $2,467.. 50,155 48,781
Unbilled receivables..................................... 25,005 25,158
Current notes receivable from officer.................... 1,100 --
Other current assets..................................... 3,780 5,139
-------- --------
Total current assets................................. 83,190 104,016
-------- --------
Property and equipment, at cost............................ 17,833 17,021
Less - accumulated depreciation and amortization......... 12,261 11,607
-------- --------
5,572 5,414
-------- --------
Notes receivable and accrued interest from officers........ 648 1,210
Intangible assets, net of amortization..................... 37,193 43,596
Other assets............................................... 3,735 5,648
-------- --------
41,576 50,454
-------- --------
$130,338 $159,884
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft........................................... 3,584 --
Accounts payable......................................... 8,883 8,372
Accrued payroll and payroll-related expenses............. 19,902 18,840
Deferred income taxes.................................... 2,214 2,214
Other accrued expenses................................... 7,779 6,947
-------- --------
Total current liabilities............................ 42,362 36,373
-------- --------
Long-term liabilities:
Line of credit........................................... 20,096 --
Long-term debt........................................... 51,243 109,592
Other long-term liabilities.............................. 592 160
-------- --------
Total long-term liabilities.......................... 71,931 109,752
-------- --------
Commitments and Contingencies
Shareholders' equity:
Common shares............................................ 378 378
Retained earnings........................................ 16,294 14,121
Accumulated other comprehensive income................... (53) (166)
-------- --------
16,619 14,333
Less:
Treasury shares at cost.................................... (502) (502)
Notes receivable from stock sales.......................... (72) (72)
-------- --------
Total shareholders' equity............................ 16,045 13,759
-------- --------
$130,338 $159,884
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE> 5
UNICCO SERVICE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------
MARCH 26, MARCH 28,
2000 1999
---------------- --------------
<S> <C> <C>
Cash flows relating to operating activities:
Net income....................................... $ 3,634 $ 7,947
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization of intangible assets............ 2,993 3,533
Amortization of debt issue costs and
discount .................................. 232 376
Depreciation and amortization................ 1,624 1,662
Gain on sale of contracts.................... (25) --
Gain on disposals............................ (101) (7)
Extraordinary loss, net of tax............... 897 --
Gain on sale of discontinued operations...... -- (4,082)
Deferred compensation ....................... 75 --
Other........................................ (69) 65
Changes in assets and liabilities:
Accounts receivable.......................... (1,276) 4,261
Unbilled receivables......................... 152 2,060
Other current assets......................... 1,338 (504)
Other long-term assets....................... (308) (135)
Accounts payable............................. 533 2,116
Accrued expenses and other current
liabilities ............................... 2,924 5,555
Other long-term liabilities.................. 432 (194)
-------- --------
Net cash provided by operating activities.... 13,055 22,653
-------- --------
Cash flows relating to investing activities:
Purchases of property and equipment, net......... (1,931) (1,613)
Proceeds from sale of contracts.................. 4,050 --
Proceeds from sale of discontinued operations.... -- 12,000
Proceeds from sale of property and equipment..... 144 62
Increase in notes receivable from officers....... (539) --
Acquisition...................................... -- (4,437)
-------- --------
Net cash provided by investing activities.... 1,724 6,012
-------- --------
Cash flows relating to financing activities:
Cash overdraft................................... 3,584 --
Proceeds from line of credit..................... 20,096 --
Debt prepayment plus accrued interest thereon.... (58,794) --
Distributions to shareholders.................... (1,461) (3,152)
Payments received for notes receivable from
stock ......................................... -- 10
-------- --------
Net cash used in financing activities........ (36,575) (3,142)
-------- --------
Effect of exchange rate changes on cash and cash 8 (8)
-------- --------
Net (decrease) increase in cash and cash
equivalents. ...................................... (21,788) 25,515
Cash and cash equivalents, beginning of period....... 24,938 9,151
-------- --------
Cash and cash equivalents, end of period............. $ 3,150 $ 34,666
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE> 6
UNICCO SERVICE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 26, 2000
(1) INTERIM FINANCIAL STATEMENTS
These condensed consolidated financial statements include the accounts of UNICCO
Service Company ("UNICCO" or the "Company") and its wholly-owned subsidiaries.
All significant intercompany transactions have been eliminated.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of the financial position
of the Company and its subsidiaries at March 26, 2000 and the results of their
operations and their cash flows for the three and nine month periods ended March
26, 2000 and March 28, 1999, respectively.
Certain information and footnote disclosures normally included in financial
statements, prepared in accordance with generally accepted accounting
principles, have been condensed or omitted as allowed by Regulation S-X, Article
10. Results for any interim period are not necessarily indicative of results to
be anticipated for a full year. The accompanying unaudited condensed
consolidated financial statements should be read in conjunction with the
Company's consolidated financial statements for the year ended June 27, 1999 in
its Annual Report on Form 10-K as filed with the Securities and Exchange
Commission.
(2) RETIREMENT OF DEBT
During the three month period ended March 26, 2000, the Company repurchased,
through a series of open market and privately-negotiated transactions, $49.3
million face amount of its Senior Subordinated Notes (the "Notes"). This amount
included $8.8 million (face amount) of Notes repurchased with the remaining net
proceeds from the December 1998 sale of the Company's security business as
required by the terms of the Indenture governing the Notes. The remaining notes
were repurchased in order to reduce future interest expense. The $50.1 million
in cash used for the repurchase of the Notes and payment of accrued interest
through the date of the repurchase was funded from cash on hand and proceeds
from the Company's revolving credit facility. The Company recorded an
extraordinary loss of approximately $1.3 million, net of tax. The loss resulted
from the write-off of the related unamortized deferred financing costs and bond
discount offset by the difference between the face amount of such notes and the
repurchase price. The Company also made a $0.25 million optional principal
payment on the Company's other subordinated indebtedness.
(3) SALE OF CERTAIN CONTRACTS
Effective December 31, 1999, the Company sold certain contracts, primarily in
the Midwest, for $4.05 million in cash with an additional contingent purchase
price of $450,000. The Company recorded an immaterial gain in connection with
this sale. The gain recorded was the net of proceeds received, less severance
liabilities and the write-off of fixed assets and certain intangible assets.
The disposition of these contracts is not considered material to the Company's
ongoing operations.
(4) COMPREHENSIVE INCOME
The components of comprehensive income for the three-month and nine-month
periods ended March 26, 2000 and March 28, 1999 are set forth below:
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
IN THOUSANDS IN THOUSANDS
--------------------------------------------------------------------
FOR THE THREE FOR THE THREE FOR THE NINE FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
MARCH 26, 2000 MARCH 28, 1999 MARCH 26, 2000 MARCH 28, 1999
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $(15) $4,562 $3,634 $7,947
Other comprehensive income-
Foreign currency translation
adjustment 48 74 38 (238)
Unrealized gain on marketable
securities 32 -- 75 --
---- ------ ------ ------
Comprehensive income $ 65 $4,636 $3,747 $7,709
==== ====== ====== ======
</TABLE>
6
<PAGE> 7
(5) CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF GUARANTOR SUBSIDIARIES
The Company's Senior Subordinated Notes due 2007 (the "Notes") are guaranteed,
fully, unconditionally and jointly and severally, by certain of UNICCO's
directly and indirectly wholly owned domestic subsidiaries. UNICCO's
wholly-owned Canadian subsidiary ("UFSCC") is not a guarantor of this debt.
Separate financial statements of the guarantor subsidiaries and of UNICCO
Finance Corp., a wholly-owned restricted-purpose subsidiary which is the
co-issuer of the Notes, are not presented because management has determined that
they would not be material to investors. The following presents condensed
consolidating financial information for (i) UNICCO only, (ii) the guarantor
subsidiaries on a combined basis, (iii) the nonguarantor subsidiary - UFSCC -
and (iv) the Company on a consolidated basis.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS - (IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 26, 2000 (UNAUDITED)
------------------------------------------------------------------------------
NONGUARANTOR
GUARANTOR SUBSIDIARY CONSOLIDATED
UNICCO SUBSIDIARIES UFSCC ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Service revenues................................ $ 118,213 $ 9,253 $ 12,993 $ -- $ 140,459
Cost of service revenues........................ 105,282 8,481 11,923 -- 125,686
--------- --------- --------- --------- ---------
Gross profit.................................. 12,931 772 1,070 -- 14,773
Selling, general and administrative expenses.... 9,062 421 863 -- 10,346
Amortization of intangible assets............... 776 97 78 -- 951
--------- --------- --------- --------- ---------
Operating income.............................. 3,093 254 129 -- 3,476
Interest income................................. 123 -- 16 -- 139
Interest expense................................ (1,846) (137) (155) -- (2,138)
--------- --------- --------- --------- ---------
Income before provision for income taxes........ 1,370 117 (10) -- 1,477
Provision for income taxes...................... 60 60 87 -- 207
--------- --------- --------- --------- ---------
Income before equity in net earnings of
subsidiaries and extraordinary item............. 1,310 57 (97) -- 1,270
Equity in net earnings of subsidiaries.......... (40) (20) -- 60 --
--------- --------- --------- --------- ---------
Net income (loss) before extraordinary item..... 1,270 37 (97) 60 1,270
Extraordinary loss, net of tax benefit of $52... (1,285) -- -- -- (1,285)
--------- --------- --------- --------- ---------
Net income (loss)............................... $ (15) $ 37 $ (97) $ 60 $ (15)
========= ========= ========= ========= =========
FOR THE THREE MONTHS ENDED MARCH 28, 1999 (UNAUDITED)
----------------------------------------------------------------------------
NONGUARANTOR
GUARANTOR SUBSIDIARY CONSOLIDATED
UNICCO SUBSIDIARIES UFSCC ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
Service revenues.............................. $ 110,270 $ 9,285 $ 13,436 $ -- $ 132,991
Cost of service revenues...................... 98,277 7,957 12,021 -- 118,255
--------- --------- --------- --------- ---------
Gross profit................................ 11,993 1,328 1,415 -- 14,736
Selling, general and administrative expenses.. 8,924 471 913 -- 10,308
Amortization of intangible assets............. 865 128 73 -- 1,066
--------- --------- --------- --------- ---------
Operating income............................ 2,204 729 429 -- 3,362
Interest income............................... 223 -- 8 -- 231
Interest expense.............................. (2,567) (183) (141) -- (2,891)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes.......................... (140) 546 296 -- 702
Provision (benefit) for income taxes.......... (16) 37 201 -- 222
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before equity in net earnings of
subsidiaries................................. (124) 509 95 -- 480
Equity in net earnings of subsidiaries........ 4,687 20 -- (4,707) --
--------- --------- --------- --------- ---------
Income from continuing operations............. 4,563 529 95 (4,707) 480
Gain on sale of discontinued operations,
net of tax of $0............................. -- 4,082 -- -- 4,082
--------- --------- --------- --------- ---------
Net income.................................... $ 4,563 $ 4,611 $ 95 $ (4,707) $ 4,562
========= ========= ========= ========= =========
</TABLE>
7
<PAGE> 8
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS - (IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED MARCH 26, 2000 (UNAUDITED)
-----------------------------------------------------------------------------
NONGUARANTOR
GUARANTOR SUBSIDIARY CONSOLIDATED
UNICCO SUBSIDIARIES UFSCC ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Service revenues............................... $ 351,424 $ 27,681 $ 38,451 $ -- $ 417,556
Cost of service revenues....................... 310,458 24,942 34,738 -- 370,138
--------- --------- --------- --------- ---------
Gross profit................................. 40,966 2,739 3,713 -- 47,418
Selling, general and administrative expenses... 28,529 1,031 2,348 -- 31,908
Amortization of intangible assets.............. 2,472 291 230 -- 2,993
--------- --------- --------- --------- ---------
Operating income............................. 9,965 1,417 1,135 -- 12,517
Interest income................................ 822 -- 50 -- 872
Interest expense............................... (7,109) (411) (461) -- (7,981)
--------- --------- --------- --------- ---------
Income before provision for income taxes....... 3,678 1,006 724 -- 5,408
Provision for income taxes..................... 179 130 568 -- 877
--------- --------- --------- --------- ---------
Income before equity in net earnings of
subsidiaries and extraordinary item............ 3,499 876 156 -- 4,531
Equity in net earnings of subsidiaries......... 1,032 33 -- (1,065) --
--------- --------- --------- --------- ---------
Net income before extraordinary item........... 4,531 909 156 (1,065) 4,531
Extraordinary loss, net of tax benefit of $36.. (897) -- -- -- (897)
--------- --------- --------- --------- ---------
Net income..................................... $ 3,634 $ 909 $ 156 $ (1,065) $ 3,634
========= ========= ========= ========= =========
FOR THE NINE MONTHS ENDED MARCH 28, 1999 (UNAUDITED)
----------------------------------------------------------------------------
NONGUARANTOR
GUARANTOR SUBSIDIARY CONSOLIDATED
UNICCO SUBSIDIARIES UFSCC ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
Service revenues.............................. $ 320,330 $ 30,523 $ 35,010 $ -- $ 385,863
Cost of service revenues...................... 283,893 25,704 31,188 -- 340,785
--------- --------- --------- --------- ---------
Gross profit................................ 36,437 4,819 3,822 -- 45,078
Selling, general and administrative expenses.. 26,358 1,375 2,271 -- 30,004
Amortization of intangible assets............. 2,661 384 189 -- 3,234
--------- --------- --------- --------- ---------
Operating income............................ 7,418 3,060 1,362 -- 11,840
Interest income............................... 410 2 26 -- 438
Interest expense.............................. (8,010) (388) (385) -- (8,783)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes.......................... (182) 2,674 1,003 -- 3,495
Provision for income taxes.................... 5 132 636 -- 773
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before equity in net earnings of
subsidiaries................................. (187) 2,542 367 -- 2,722
Equity in net earnings of subsidiaries........ 8,134 77 -- (8,211) --
--------- --------- --------- --------- ---------
Income from continuing operations............. 7,947 2,619 367 (8,211) 2,722
Discontinued operations:
Income from discontinued operations, net
of tax of $(12).............................. -- 1,143 -- -- 1,143
Gain on sale of discontinued operations,
net of tax of $0............................. -- 4,082 -- -- 4,082
--------- --------- --------- --------- ---------
Net income.................................... $ 7,947 $ 7,844 $ 367 $ (8,211) $ 7,947
========= ========= ========= ========= =========
</TABLE>
8
<PAGE> 9
CONDENSED CONSOLIDATING BALANCE SHEET - (IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 26, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
NONGUARANTOR
GUARANTOR SUBSIDIARY CONSOLIDATED
UNICCO SUBSIDIARIES UFSCC ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents......................... $ 2,432 $ 13 $ 705 $ -- $ 3,150
Accounts receivable, less reserve of $3,112....... 39,872 4,305 5,978 -- 50,155
Unbilled receivables.............................. 22,204 2,265 536 -- 25,005
Intercompany receivable (payable)................. 2,344 3,852 (6,196) -- --
Current notes receivable from officer............. 1,100 -- -- -- 1,100
Other current assets.............................. 3,173 3 604 -- 3,780
--------- --------- --------- --------- ---------
Total current assets..................... 71,125 10,438 1,627 -- 83,190
--------- --------- --------- --------- ---------
Property and equipment, at cost................... 14,252 989 2,592 -- 17,833
Less -accumulated depreciation and amortization... 10,391 857 1,013 -- 12,261
--------- --------- --------- --------- ---------
Net property and equipment.................... 3,861 132 1,579 -- 5,572
--------- --------- --------- --------- ---------
Due from (to) affiliates.......................... 14,509 (620) -- (13,889) --
Investment in subsidiary.......................... 15,820 702 -- (16,522) --
Notes receivable and accrued interest from
Officers......................................... 648 -- -- -- 648
Intangible assets, net of amortization............ 29,384 3,911 3,898 -- 37,193
Other assets...................................... 3,712 -- 23 -- 3,735
--------- --------- --------- --------- ---------
64,073 3,993 3,921 (30,411) 41,576
--------- --------- --------- --------- ---------
$ 139,059 $ 14,563 $ 7,127 $ (30,411) $ 130,338
========= ========= ========= ========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Cash overdraft.................................... $ 3,188 $ 396 $ -- $ -- $ 3,584
Accounts payable.................................. 6,509 943 1,431 -- 8,883
Accrued payroll and payroll-related expenses...... 17,039 781 2,082 -- 19,902
Deferred income taxes............................. 2,059 155 -- -- 2,214
Other accrued expenses............................ 7,304 76 399 -- 7,779
--------- --------- --------- --------- ---------
Total current liabilities................ 36,099 2,351 3,912 -- 42,362
--------- --------- --------- --------- ---------
Long-term liabilities:
Line of credit.................................... 20,096 20,096
Long-term debt, less current portion.............. 51,243 -- -- -- 51,243
Other long-term liabilities....................... 592 -- -- -- 592
--------- --------- --------- --------- ---------
Total long-term liabilities.............. 71,931 -- -- -- 71,931
--------- --------- --------- --------- ---------
Commitments and Contingencies
Shareholders' equity.............................. 31,603 12,212 3,215 (30,411) 16,619
Less:
Treasury shares at cost........................... (502) -- -- -- (502)
Notes receivable from stock sales................. (72) -- -- -- (72)
--------- --------- --------- --------- ---------
Total shareholders' equity............... 31,029 12,212 3,215 (30,411) 16,045
--------- --------- --------- --------- ---------
$ 139,059 $ 14,563 $ 7,127 $ (30,411) $ 130,338
========= ========= ========= ========= =========
</TABLE>
9
<PAGE> 10
CONDENSED CONSOLIDATING BALANCE SHEET - (IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 27, 1999
------------------------------------------------------------------------------
NONGUARANTOR
GUARANTOR SUBSIDIARY CONSOLIDATED
UNICCO SUBSIDIARIES UFSCC ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents ......................... $ 24,002 $ 13 $ 1,205 $ (282) $ 24,938
Accounts receivable, less reserve of $2,467........ 39,294 3,777 5,710 -- 48,781
Unbilled receivables............................... 23,253 1,783 122 -- 25,158
Intercompany receivable (payable).................. 2,694 3,483 (6,177) -- --
Other current assets............................... 4,252 61 826 -- 5,139
--------- --------- --------- --------- ---------
Total current assets...................... 93,495 9,117 1,686 (282) 104,016
--------- --------- --------- --------- ---------
Property and equipment, at cost.................... 14,224 278 2,519 -- 17,021
Less -accumulated depreciation and amortization.... 10,714 180 713 -- 11,607
--------- --------- --------- --------- ---------
Net property and equipment.................... 3,510 98 1,806 -- 5,414
--------- --------- --------- --------- ---------
Due from (to) affiliates........................... 14,509 (620) -- (13,889) --
Investment in subsidiary........................... 14,788 669 -- (15,457) --
Notes receivable and accrued interest from
officers.......................................... 1,210 -- -- -- 1,210
Intangible assets, net of amortization............. 35,311 4,202 4,083 -- 43,596
Other assets....................................... 5,608 -- 40 -- 5,648
--------- --------- --------- --------- ---------
71,426 4,251 4,123 (29,346) 50,454
--------- --------- --------- --------- ---------
$ 168,431 $ 13,466 $ 7,615 $ (29,628) $ 159,884
========= ========= ========= ========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Cash overdraft..................................... $ -- $ 282 $ -- $ (282) $ --
Accounts payable................................... 5,886 1,060 1,426 -- 8,372
Accrued payroll and payroll-related expenses...... 15,936 579 2,325 -- 18,840
Deferred income taxes.............................. 2,059 155 -- -- 2,214
Other accrued expenses............................. 6,016 87 844 -- 6,947
--------- --------- --------- --------- ---------
Total current liabilities................. 29,897 2,163 4,595 (282) 36,373
--------- --------- --------- --------- ---------
Long-term liabilities:
Long-term debt..................................... 109,592 -- -- -- 109,592
Other long-term liabilities........................ 160 -- -- -- 160
--------- --------- --------- --------- ---------
Total long-term liabilities............... 109,752 -- -- -- 109,752
--------- --------- --------- --------- ---------
Commitments and Contingencies
Shareholders' equity............................... 29,356 11,303 3,020 (29,346) 14,333
Less:
Treasury shares at cost............................ (502) -- -- -- (502)
Notes receivable from stock sales.................. (72) -- -- -- (72)
--------- --------- --------- --------- ---------
Total shareholders' equity................ 28,782 11,303 3,020 (29,346) 13,759
--------- --------- --------- --------- ---------
$ 168,431 $ 13,466 $ 7,615 $ (29,628) $ 159,884
========= ========= ========= ========= =========
</TABLE>
10
<PAGE> 11
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS - (IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 26, 2000 (UNAUDITED)
---------------------------------------------------------------------------
NONGUARANTOR
GUARANTOR SUBSIDIARY- CONSOLIDATED
UNICCO SUBSIDIARIES UFSCC ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows relating to operating activities:
Net income......................................... $ 3,634 $ 909 $ 156 $ (1,065) $ 3,634
Net earnings from equity investment................ (1,032) (33) -- 1,065 --
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization of intangible assets............... 2,472 291 230 -- 2,993
Amortization of debt issue costs and discount... 232 -- -- -- 232
Depreciation and amortization................... 1,276 65 283 -- 1,624
Gain on sale of contracts....................... (25) -- -- -- (25)
Gain on disposals............................... (94) (7) -- -- (101)
Extraordinary loss, net of tax.................. 897 -- -- -- 897
Deferred compensation plan...................... 75 -- -- -- 75
Other........................................... 1 (1) -- (69) (69)
Changes in assets and liabilities:
Accounts receivable........................... (579) (528) (169) -- (1,276)
Unbilled receivables.......................... 1,049 (482) (415) -- 152
Intercompany receivable (payable)............. 351 (369) (51) 69 --
Other current assets.......................... 1,079 58 201 -- 1,338
Other long-term assets........................ (325) -- 17 -- (308)
Accounts payable.............................. 624 (116) 25 -- 533
Accrued expenses and other current
liabilities................................. 3,473 192 (741) -- 2,924
Other long-term liabilities................... 432 -- -- -- 432
-------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities........................ 13,540 (21) (464) -- 13,055
-------- -------- -------- -------- --------
Cash relating to investing activities:
Proceeds from sale of contracts.................... 4,050 -- -- -- 4,050
Purchase of property and equipment, net............ (1,787) (100) (44) -- (1,931)
Proceeds from sale of property and equipment....... 137 7 -- -- 144
Increase in notes receivables from officers........ (539) -- -- -- (539)
-------- -------- -------- -------- --------
Net cash provided by (used in) investing
activities.................................... 1,861 (93) (44) -- 1,724
-------- -------- -------- -------- --------
Cash flows relating to financing activities:
Cash overdraft..................................... 3,188 114 -- 282 3,584
Proceeds from line of credit....................... 20,096 -- -- -- 20,096
Debt prepayment plus accrued interest thereon...... (58,794) -- -- -- (58,794)
Distributions to shareholders...................... (1,461) -- -- -- (1,461)
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities.......................... (36,971) 114 -- 282 (36,575)
-------- -------- -------- -------- --------
Effect of exchange rate changes on cash and
cash equivalents.................................... -- -- 8 -- 8
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents.. (21,570) -- (500) 282 (21,788)
Cash and cash equivalents, beginning of period........ 24,002 13 1,205 (282) 24,938
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period.............. $ 2,432 $ 13 $ 705 $ -- $ 3,150
======== ======== ======== ======== ========
</TABLE>
11
<PAGE> 12
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS - (IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 28, 1999 (UNAUDITED)
---------------------------------------------------------------------------
NONGUARANTOR
GUARANTOR SUBSIDIARY- CONSOLIDATED
UNICCO SUBSIDIARIES UFSCC ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows relating to operating activities:
Net income........................................... $ 7,947 $ 7,844 $ 367 $ (8,211) $ 7,947
Net earnings from equity investment.................. (8,134) (77) -- 8,211 --
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization of intangible assets................. 2,661 683 189 -- 3,533
Amortization of debt issue costs and discount..... 376 -- -- -- 376
Depreciation and amortization..................... 1,227 164 271 -- 1,662
Gain on disposals................................. (7) -- -- -- (7)
Gain on sale of discontinued operations........... -- (4,082) -- -- (4,082)
Other............................................. 7 (7) -- 65 65
Changes in assets and liabilities:
Accounts receivable............................. 3,711 1,904 (1,354) -- 4,261
Unbilled receivables............................ 2,585 99 (624) -- 2,060
Intercompany receivable (payable)............... 1,693 (6,264) 4,636 (65) --
Other current assets............................ (149) (20) (335) -- (504)
Other long-term assets.......................... (196) 59 2 -- (135)
Cash overdraft.................................. (671) (310) -- 981 --
Accounts payable................................ 1,915 (180) 381 -- 2,116
Accrued expenses and other current
liabilities................................... 3,706 223 1,626 -- 5,555
Other long-term liabilities..................... (194) -- -- -- (194)
-------- -------- -------- -------- --------
Net cash provided by operating activities......... 16,477 36 5,159 981 22,653
-------- -------- -------- -------- --------
Cash relating to investing activities:
Proceeds from sale of discontinued operations........ 12,000 -- -- -- 12,000
Acquisition.......................................... 104 (15) (4,526) -- (4,437)
Purchases of property and equipment, net............. (1,446) (52) (115) -- (1,613)
Proceeds from sale of property and equipment......... 62 -- -- -- 62
-------- -------- -------- -------- --------
Net cash provided by (used in) investing
activities...................................... 10,720 (67) (4,641) -- 6,012
-------- -------- -------- -------- --------
Cash flows relating to financing activities:
Distributions to shareholders........................ (3,152) -- -- -- (3,152)
Payments received for notes receivable from
stock sales......................................... 10 -- -- -- 10
-------- -------- -------- -------- --------
Net cash used in financing activities............. (3,142) -- -- -- (3,142)
-------- -------- -------- -------- --------
Effect of exchange rate changes on cash and
cash equivalents..................................... -- -- (8) -- (8)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents... 24,055 (31) 510 981 25,515
Cash and cash equivalents, beginning of period......... 9,089 300 1,007 (1,245) 9,151
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period............... $ 33,144 $ 269 $ 1,517 $ (264) $ 34,666
======== ======== ======== ======== ========
</TABLE>
12
<PAGE> 13
(6) LITIGATION
In the ordinary course of business, the Company is party to various types of
litigation. The Company believes that, in the aggregate, the litigation matters
currently pending will not have a material adverse effect on the Company's
financial position, results of operations or its cash flows, taken as a whole.
(7) NOTES RECEIVABLE FROM OFFICER
In March 2000, the Company loaned a total of $1.1 million to an officer of
the Company. These officer notes bear interest at the applicable federal rate
and is payable on demand.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF THREE MONTH PERIODS ENDED MARCH 26, 2000 AND MARCH 28, 1999
Beginning in January 2000, the Company refined the manner in which the
regional results are reported and analyzed. The regional operating results are
divided into two groups: Commercial and Industrial.
REVENUES Revenues for the third quarter of fiscal 2000, which ended March
26, 2000, were $140.5 million compared to $133.0 million for the third quarter
of fiscal 1999, which ended March 28, 1999, an increase of $7.5 million or 5.6%.
This increase is attributable to revenue increases in the Company's Industrial
and Commercial groups of $6.1 million and $1.4 million, respectively. The
revenue increases in the Industrial and Commercial groups were primarily the
result of additional services performed under new and existing contracts. These
increases were partially offset by a decrease in revenue that was the result of
the sale of certain contracts attributable to the Commercial group effective
December 31, 1999. (See Note 3 to the Company's Condensed Consolidated Financial
Statements).
COST OF REVENUES Cost of revenues for the third quarter of fiscal 2000 were
$125.7 million, or 89.5% of revenues, compared to $118.3 million, or 88.9% of
revenues, for the third quarter of fiscal 1999. The increase as a percentage of
revenue, was primarily due to start-up costs incurred for services to be
performed under new contracts.
GROSS PROFIT As a result of the foregoing, gross profit for the third
quarter of fiscal 2000 was $14.8 million, or 10.5% of revenues, compared to
$14.7 million, or 11.1% of revenues, for the comparable period in fiscal 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses for the third quarter of fiscal 2000 were $10.3 million,
or 7.4% of revenues, compared to $10.3 million, or 7.8% of revenues, for the
third quarter of fiscal 1999. The Company experienced an increase of $0.3
million in payroll and payroll-related expenses which were the result of annual
salary increases effective July 1, 1999 and an increase in the bonus and
commission accruals, partially offset by a reduction in headcount as a result of
workforce reductions of the administrative personnel related to certain
contracts sold effective December 31, 1999. (See Note 3). The increase in
payroll was offset by a $0.2 million decrease in expenses related to the
Company's Year 2000 remediation work performed in the third quarter of fiscal
1999 and a decrease of $0.1 million related to equipment leases. The Company's
principle executive offices will be moved on May 30, 2000. After the move, the
Company expects higher administrative costs due to an increase in rental expense
associated with the new facility.
AMORTIZATION OF INTANGIBLE ASSETS Amortization expense was $1.0 million and
$1.1 million in the third quarter of fiscal 2000 and fiscal 1999, respectively.
The change in expense was the result of the write-off of intangible assets
attributable to certain contracts sold effective December 31, 1999. (See Note 3
to the Company's Condensed Consolidated Financial Statements)
OPERATING INCOME As a result of the foregoing, income from operations for
the third quarter of fiscal 2000 was $3.5 million, or 2.5% of revenues, compared
to $3.4 million, or 2.5% of revenues for the third quarter of fiscal 1999.
EBITDA As a result of the foregoing, EBITDA for the third quarter of
fiscal 2000 was $5.0 million, or 3.5% of revenues, compared to $5.0 million, or
3.8% of revenues, for the third quarter of fiscal 1999. EBITDA is defined as
income from continuing operations before provision for income taxes, interest
expense, interest income and depreciation and amortization. EBITDA as presented
may not be comparable to similarly titled measures used by other companies,
depending upon the non-cash charges
13
<PAGE> 14
included. When evaluating EBITDA, investors should consider that EBITDA (i)
should not be considered in isolation but together with other factors which may
influence operating and investing activities, such as changes in operating
assets and liabilities and purchases of property and equipment; (ii) is not a
measure of performance calculated in accordance with generally accepted
accounting principles; (iii) should not be construed as an alternative or
substitute for income from operations, net income or cash flows from operating
activities in analyzing the Company's operating performance, financial position
or cash flows; and (iv) should not be used as an indicator of the Company's
operating performance or as a measure of its liquidity.
INTEREST EXPENSE Interest expense for the third quarter of fiscal 2000 was
$2.1 million, or 1.5% of revenues, compared to $2.9 million, or 2.2% of
revenues, for the third quarter of fiscal 1999. The reduction in interest
expense is the result of the retirement during the second and third quarter of
fiscal 2000 of $57.8 million (face amount) of the Company's Notes. (See Note 2
to the Company's Condensed Consolidated Financial Statements)
INCOME TAXES Provision for income taxes for the third quarter of fiscal
2000 was $0.2 million, or 14.0% of income before provision for income taxes,
compared to $0.2 million, or 31.6% of income before provision for income taxes,
for the third quarter of fiscal 1999. The lower effective tax rate in the third
quarter of fiscal 2000 resulted primarily from a decrease in taxable income of
the Company's Canadian subsidiary, which is taxed at the full Canadian statutory
rate.
EXTRAORDINARY LOSS During the third quarter of fiscal 2000, the Company
recorded an extraordinary loss of $1.3 million, net of state tax benefit. The
extraordinary loss was attributable to the repurchase and retirement of $49.3
million of Notes during the third quarter. The extraordinary loss resulted from
the write-off of unamortized deferred financing costs and bond discount
associated with the Notes offset by the gain recorded by repurchasing a portion
of the Notes at prices below par.
NET INCOME (LOSS) As a result of the foregoing, net loss for the third
quarter of fiscal 2000 was $(.02) million compared to net income, including the
gain of $4.1 million on the sale of the Company's discontinued security
business, of $4.6 million, or 3.4% of revenues, for the third quarter of fiscal
1999.
COMPARISON OF NINE MONTH PERIODS ENDED MARCH 26, 2000 AND MARCH 28, 1999
REVENUES Revenues for the nine months ended March 26, 2000 were $417.6
million compared to $385.9 million for the comparable period of fiscal 1999, an
increase of $31.7 million or 8.2%. This increase is attributable to revenue
increases in the Company's Industrial and Commercial groups of $17.1 million and
$14.6 million, respectively. The revenue increase in the Industrial group was
primarily the result of additional services performed under new and existing
contracts. The revenue increase in the Commercial group was primarily the result
of the following: (i) additional services performed under new and existing
contracts and (ii) a revenue increase in the Company's Canadian operations as a
result of a full nine months of revenue following the September 1998 acquisition
of Empire Maintenance Industries, Inc. The increase in the Commercial group was
partially offset by a decrease in revenue that was the result of the sale of
certain contracts attributable to the Commercial group effective December 31,
1999. (See Note 3 to the Company's Condensed Consolidated Financial Statements).
COST OF REVENUES Cost of revenues for the nine months ended March 2000
were $370.1 million, or 88.6% of revenues, compared to $340.8 million, or 88.3%
of revenues, for the comparable period of fiscal 1999. The increase in cost of
revenues as a percentage of revenues resulted primarily from increases in
payroll and payroll related expenses due to annual salary increases effective
July 1, 1999 and costs incurred in the start-up of new contracts.
GROSS PROFIT As a result of the foregoing, gross profit for the nine
months ended March 2000 was $47.4 million, or 11.4% of revenues, compared to
$45.1 million, or 11.7% of revenues, for the comparable period in fiscal 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses for the nine months ended March 2000 were $31.9 million,
or 7.6% of revenues, compared to $30.0 million, or 7.8% of revenues, for the
comparable period of fiscal 1999. The increase of $1.9 million was primarily due
to the following factors: (i) an increase of $1.6 million related to payroll and
payroll-related expenses which were the result of annual salary increases
effective July 1, 1999, the impact of the Empire acquisition and an increase in
the bonus and commission accruals partially offset by a reduction in headcount
as a result of workforce reductions of the administrative personnel related to
certain contracts sold effective December 31, 1999, (ii) travel and
transportation expenses increased $0.7 million primarily due to incremental
lease and maintenance-related expenses for certain transportation equipment and
as a result of the impact of new business opportunities and servicing a growing,
geographically disbursed customer
14
<PAGE> 15
base, and (iii) advertising expenses increased $0.2 million. These increases
were offset primarily by a decrease in Year 2000 remediation costs of $0.6
million.
AMORTIZATION OF INTANGIBLE ASSETS Amortization expense was $3.0 million and
$3.2 million in the nine month periods of fiscal 2000 and fiscal 1999,
respectively. The change in expense was the result of the write-off of
intangible assets attributable to certain contracts sold effective December 31,
1999. (See Note 3 to the Company's Condensed Consolidated Financial Statements)
OPERATING INCOME As a result of the foregoing, income from operations for
the nine-month period ended March 2000 was $12.5 million, or 3.0% of revenues,
compared to $11.8 million, or 3.1% of revenues for the comparable period.
EBITDA As a result of the foregoing, EBITDA for the nine months ended
March 26, 2000 was $17.1 million, or 4.1% of revenues, compared to $16.7
million, or 4.3% of revenues, for the comparable period. EBITDA is defined as
income from continuing operations before provision for income taxes, interest
expense, interest income and depreciation and amortization.
INTEREST EXPENSE Interest expense for the nine months ended March 2000 was
$8.0 million, or 1.9% of revenues, compared to $8.8 million, or 2.3% of
revenues, for the comparable period. The reduction in interest expense was the
result of the retirement during the second and third quarter of fiscal 2000 of
$57.8 million (face amount) of the Company's Notes. (See Note 2 to the Company's
Condensed Consolidated Financial Statements)
INCOME TAXES Provision for income taxes for the nine months ended March 2000
was $0.9 million, or 16.2% of income before provision for income taxes, compared
to $0.8 million, or 22.1% of income before provision for income taxes, for the
comparable period. The lower effective tax rate for fiscal 2000 resulted from
the fact that a higher percentage of income before income taxes was generated in
the United States, which has a lower effective rate than the Canadian
subsidiary.
EXTRAORDINARY LOSS During the first nine months of fiscal 2000, the Company
recorded an extraordinary loss of $0.9 million, net of state tax benefit. The
extraordinary loss was attributable to the repurchase and retirement of $57.8
million of Notes. The extraordinary loss resulted from the write-off of
unamortized deferred financing costs and bond discount associated with the Notes
offset by the gain recorded for repurchasing a portion of the Notes at prices
below par.
NET INCOME As a result of the foregoing, net income for the nine months
ended March 2000 was $3.6 million, or 0.9% of revenues, compared to a net
income, including $5.2 million (net of tax) from the operations and sale of the
Company's discontinued security business, of $7.9 million, or 2.1% of revenues,
for the comparable period.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended March 26, 2000, the Company's cash decreased by
$21.8 million. Cash activity included $36.6 million of net cash used for
financing activities partially offset by $13.1 million and $1.7 million of net
cash provided by operating and investing activities, respectively.
Net cash provided by investing activities resulted from the receipt of $4.05
million for the sale of certain contracts. (See Note 3 of the Company's
Condensed Consolidated Financial Statements). This inflow was offset by capital
expenditures of $1.9 million and increases in notes receivable from officers of
$0.5 million. Net cash used in financing activities included payments of $58.8
million which was comprised of $58.1 million used to retire and pay the related
accrued interest on $57.8 million (face amount) of Notes and $0.7 million of
optional principal payments on the Company's other subordinated indebtedness.
Cash used in financing activities also included $1.5 million of shareholder
distributions. This use of cash for financing activities was partially offset by
$20.1 million in cash drawn from the Company's revolving credit facility to
partially fund the Notes retirement and an increase of $3.6 million in the cash
overdraft.
For the nine months ended March 28, 1999, the Company's cash increased by
$25.5 million. Net cash provided by operating activities of $22.7 million
included net income of $7.9 million and a decrease in accounts receivable of
$6.3 million. The net income included a $4.1 million gain on the sale of
discontinued security operations. The decrease in accounts receivable was
primarily due to the collection of receivables associated with the discontinued
security operations as well as management's efforts to expedite the
15
<PAGE> 16
collection of receivables. Net cash provided by investing activities was $6.0
million. Investing activities included cash used of $4.4 million for the Empire
acquisition in September 1998 and cash provided of $12.0 million from the sale
of the discontinued security operations. Net cash used in financing activities
was $3.1 million, representing distributions to shareholders.
Capital expenditures were $1.9 million and $1.6 million, respectively, for
the nine month periods ended March 2000 and l999. The Company's operations do
not generally require material investment in capital assets. The Company expects
that its capital expenditure requirements will not increase materially during
the fourth quarter of fiscal 2000.
The Company is party to an amended revolving credit facility (the "Credit
Facility") under which the Company may borrow up to $45.0 million for working
capital and general corporate purposes, subject to certain conditions. There
were cash borrowings of $20.1 million under the Credit Facility as of March 26,
2000. The Credit Facility, the Indenture governing the Company's Senior
Subordinated Notes due 2007 and the terms of the Company's other subordinated
indebtedness include certain financial and operating covenants which, among
other things, restrict the ability of the Company to incur additional
indebtedness, make investments and take other actions. The ability of the
Company to meet its debt service obligations will be dependent upon the future
performance of the Company, which will be impacted by general economic
conditions and other factors.
The Company's principal capital requirements are to service the Company's
indebtedness, for working capital and, to a lesser extent, to fund capital
expenditures. The Company believes that its cash flow from operations, together
with cash on hand and its borrowing capacity under the Credit Facility, will be
sufficient to meet such requirements as they now exist.
YEAR 2000 COMPLIANCE
The Company has not experienced any material adverse effects on its
financial condition or results of operations due to Year 2000 issues. Subsequent
to the date change, the Company has experienced no problems with either
information or non-information technology systems. At this point in time the
Company has not experienced, nor is aware, of any problems with Year 2000
compliance issues that have affected its customers, suppliers or other third
parties.
GENERAL
Certain statements contained in this report are forward-looking and
represent the Company's expectations or beliefs concerning future events.
Without limiting the foregoing, the words "believes," "anticipates," "expects,"
"will" and similar expressions are intended to identify forward-looking
statements. The Company cautions that these and similar statements involve
risks, uncertainties and assumptions that could cause actual results or events
to differ materially from those described in such forward-looking statements.
Factors which could cause such differences include the Company's degree of
leverage, restrictions in the Company's debt agreements, dependence on key
personnel, the short-term nature of the Company's contracts, potential
environmental or other liabilities, competitive factors and pricing pressures,
assimilation of past or future acquisitions, general economic conditions and the
acts of third parties, as well as other factors which are described in the
Company's Registration Statement on Form S-4 (File No. 333-42407), and periodic
reports filed from time to time with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information provided below updates that which was previously presented
in Item 7A, "Quantitative and Qualitative Disclosures About Market Risk", in the
Company's Form 10-K for the fiscal year ended June 27,1999.
The Company had $20.1 million in cash borrowings under the Credit Facility
as of March 26, 2000. These funds were borrowed under the following two rates:
(i) $18.0 million was borrowed at LIBOR plus 2.25% (8.19% as of March 26, 2000)
and (ii) the remaining outstanding balance was borrowed at prime plus 0.75%
which was 9.75% as of March 26, 2000. At March 26, 2000, the Company had
additional outstanding indebtedness that consisted of $47.2 million of Senior
Subordinated Notes and $4.25 million under a Subordinated Promissory Note with
fixed interest rates of 9.875% and 14%, respectively.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any pending legal
proceedings other than those arising in the ordinary
course of the Company's business. Management believes that
the resolution of these matters will not materially affect
the Company's financial position or results of operations,
taken as a whole (see Note 6 to the accompanying Condensed
Consolidated Financial Statements).
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
See the information regarding repurchases of the Company's
Senior Subordinated Notes in Note 2 to the accompanying
Condensed Consolidated Financial Statements and under
"Management's Discussion and Analysis of Financial
Condition and Results of Operations." Also, see the
information regarding disposition activity in Note 3 to
the accompanying Condensed Consolidated Financial
Statements.
Effective May 30, 2000, the Company's principal executive
offices will be moved to the following location:
275 Grove Street
Suite 3-2000
Auburndale, MA 02466
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27.1 Financial Data Schedule
b. Reports on Form 8-K:
Not applicable.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNICCO SERVICE COMPANY
----------------------------------------------
Registrant
May 10, 2000 By: /s/ Steven C. Kletjian
-----------------------------------------
Steven C. Kletjian, President,
Chief Executive Officer
(Principal Executive Officer)
May 10, 2000 By: /s/ George A. Keches
-----------------------------------------
George A. Keches, Vice President -
Finance, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited Consolidated Financial Statements included in this report, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-25-2000
<PERIOD-END> MAR-26-2000
<CASH> 3,150
<SECURITIES> 0
<RECEIVABLES> 78,272
<ALLOWANCES> 3,112
<INVENTORY> 0
<CURRENT-ASSETS> 83,190
<PP&E> 17,833
<DEPRECIATION> 12,261
<TOTAL-ASSETS> 130,338
<CURRENT-LIABILITIES> 42,362
<BONDS> 51,243
0
0
<COMMON> 378
<OTHER-SE> 15,667
<TOTAL-LIABILITY-AND-EQUITY> 130,338
<SALES> 417,556
<TOTAL-REVENUES> 417,556
<CGS> 370,138
<TOTAL-COSTS> 370,138
<OTHER-EXPENSES> 34,901
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,109
<INCOME-PRETAX> 5,408
<INCOME-TAX> 877
<INCOME-CONTINUING> 4,531
<DISCONTINUED> 0
<EXTRAORDINARY> (897)
<CHANGES> 0
<NET-INCOME> 3,634
<EPS-BASIC> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>The Company's equity is not publicly traded.
</FN>
</TABLE>
