<PAGE>
RULE 424(b)(5)
REGISTRATION NO. 33-52587
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 25, 1995
(ART)
$150,000,000
ARAMARK SERVICES, INC.
8.15% GUARANTEED NOTES DUE MAY 1, 2005
UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND
INTEREST BY
ARAMARK CORPORATION
-----------
The Notes are unconditionally guaranteed as to the payment of principal,
premium, if any, and interest by ARAMARK Corporation. The Notes may not be
redeemed prior to maturity. Interest on the Notes is payable on May 1 and
November 1 of each year, commencing November 1, 1995. The Notes will be issued
only in registered form in denominations of $1,000 and integral multiples
thereof. See "Description of Securities and Guarantee" in the Prospectus.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING ARAMARK SERVICES,
OFFERING PRICE(1) DISCOUNT(2) INC.(1)(3)
----------------- ------------ -----------------
<S> <C> <C> <C>
Per Note........................ 99.919% 0.750% 99.169%
Total........................... $149,878,500 $1,125,000 $148,753,500
</TABLE>
- -----
(1) Plus accrued interest from May 1, 1995.
(2) ARAMARK Services, Inc. and ARAMARK Corporation have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(3) Before deducting estimated expenses of $150,000 payable by ARAMARK
Services, Inc.
-----------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
delivery of the Notes will be made through the facilities of The Depository
Trust Company on or about May 2, 1995 against payment therefor in immediately
available funds.
GOLDMAN, SACHS & CO. J.P. MORGAN SECURITIES INC.
-----------
The date of this Prospectus Supplement is April 25, 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS IN THE NOTES WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF
THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
RECENT DEVELOPMENTS
Effective October 10, 1994, ARAMARK Corporation (ARAMARK) changed its
name from The ARA Group, Inc. to ARAMARK Corporation. Its subsidiary, ARA
Services, Inc., changed its name to ARAMARK Services, Inc. There was no change
in ownership or control of ARAMARK.
In December 1994, ARAMARK acquired Harry M. Stevens (HMS), a provider
of food and support services to stadiums and arenas. Baseball stadiums serviced
by HMS include Fenway Park in Massachusetts, the Astrodome in Texas, and Shea
Stadium in New York. Arenas serviced by HMS include Nassau Coliseum in New York
and Miami Arena in Florida. Other sports facilities serviced by HMS include the
Meadowlands Sports Complex in New Jersey and Churchill Downs in Kentucky.
ARAMARK has a definitive agreement, subject to third party approval,
to purchase the TW Recreational Services (TW) subsidiary of Flagstar Companies.
Management currently expects that the acquisition will be completed within the
next several weeks and the total consideration will be approximately $115
million. TW provides food, refreshment and recreational services at various
state and national parks. National park sites serviced by TW include
Yellowstone in Wyoming, Mount Rushmore in South Dakota, the North Rim of the
Grand Canyon in Arizona and Bryce and Zion in Utah.
On January 11, 1995, the National Hockey League entered into a new
labor accord. A shortened hockey season began on January 20, 1995. The Major
League Baseball strike which began on August 12, 1994 ended on April 2, 1995.
The announced plan is to have a shortened 1995 season with 144 games or 89% of
the normal schedule. Although the delay of the start of the season will have a
negative impact on ARAMARKs third quarter results, management does not believe
the planned abbreviated season will have a material adverse impact on its full
year 1995 operating results.
In April 1995, ARAMARK redeemed $125 million of its 12% subordinated
debentures and its $50 million 10.25% senior notes and also issued $100 million
of 8% seven year senior notes. Currently ARAMARK has approximately $325 million
of unused committed credit availability under its $1 billion credit facility.
USE OF PROCEEDS
The proceeds of the offering of the Notes will be used by ARAMARK
Services, Inc. ("Services") to repay borrowings under the Credit Agreement. See
Underwriting and "The Credit Agreement" in the Prospectus.
S-2
<PAGE>
CAPITALIZATION
The following table shows the consolidated capitalization of ARAMARK as of
December 30, 1994, the proforma impact of significant financing transactions
subsequent to December 30, 1994, and as adjusted for the issuance of $150
million of the Notes. The net proceeds from this transaction will be used to
repay borrowings under the Credit Agreement. See "The Credit Agreement" in the
Prospectus.
<TABLE>
<CAPTION>
December 30, 1994
--------------------------------------------
Actual Proforma As Adjusted
---------- ---------- -----------
(in thousands)
<S> <C> <C> <C>
Long-Term Borrowings (including current maturities:
Subsidiaries' Borrowings
Bank Loan (variable rate)(1)(2)(4)................. $ 484,500 $ 680,123 $ 531,369
Promissory notes(4)................................ 101,490 6,150 6,150
8.25% Term Note(4)................................. 100,000 80,000 80,000
10.625% Senior Notes Due 2000...................... 100,000 100,000 100,000
10.25% Senior Note Due 1998(4)..................... 50,000 - -
Other Senior Debt.................................. 42,216 42,216 42,216
Capital Lease Obligations.......................... 3,059 3,059 3,059
8% Senior Notes Due 2002(4)........................ - 100,000 100,000
The Notes.......................................... - - 150,000
ARAMARK's Borrowings
Subordinated Debentures Due 2000 (12%)(4).......... 125,000 - -
Subordinated Notes Due 2003 (8 1/2%)............... 100,000 100,000 100,000
Subordinated Notes Due 2000 (10%).................. 30,650 30,650 30,650
Subordinated Debentures Due 2000 (10%)............. 28,649 28,649 28,649
Other Subordinated Debt............................ 6,115 6,115 6,115
---------- ---------- ----------
Total Long-Term Borrowings....................... 1,171,679 1,176,962 1,178,208
---------- ---------- ----------
Common Stock Subject to Potential Repurchase(3)........ 21,612 21,612 21,612
---------- ---------- ----------
Shareholder's Equity:
Preferred Stock...................................... 16,666 16,666 16,666
Common Stock......................................... 265 265 265
Other Shareholders' Equity(5)........................ 203,354 196,654 196,654
Common Stock Subject to Potential Repurchase......... (21,612) (21,612) (21,612)
---------- ---------- ----------
Total Shareholders' Equity......................... 198,673 191,973 191,973
---------- ---------- ----------
Total Capitalization............................. $1,391,964 $1,390,547 $1,391,793
========== ========== ==========
</TABLE>
(1) There are in effect various interest rate hedging agreements which fix/cap
the rate on $325 million of variable rate debt at an average effective rate
of 6.7% for remaining periods ranging between 8 months and 36 months.
(2) After giving effect to the issuance of the Notes and the transactions
reflected in the Proforma column, approximately $475 million of unused
borrowings will be available under the Credit Agreement. See The Credit
Agreement in the Prospectus.
(3) See note 7 to the consolidated financial statements.
(4) The Proforma column reflects the following transactions which occurred
subsequent to December 30, 1994: a) call of the $125 million 12%
Subordinated Debentures due 2000; b) repayment of $95.3 million of
promissory notes; c) issuance of $100 million in new seven-year senior
notes; d) prepayment of the $50 million 10.25% Senior Note; and e) payment
of a $20 million scheduled maturity on the 8.25% Term Note.
(5) Proforma "Other Shareholders' Equity" reflects the extraordinary item loss
due to early extinguishment of debt discussed in note (4) above.
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<PAGE>
SELECTED FINANCIAL DATA
The following table presents summary historical consolidated financial data
for ARAMARK. For additional information see Financial Statements attached as
Schedule A hereto. In the opinion of management, such financial statements
contain all the adjustments necessary to present fairly the financial position
and the results of operations as of the dates and for the periods indicated
below. The following data should be read in conjunction with the consolidated
financial statements and the related notes thereto and the condensed
consolidated financial statements and the related notes thereto, and Managements
Discussion and Analysis of Results of Operations and Financial Condition each
included herein, in Schedule A attached to the accompanying Prospectus.
<TABLE>
<CAPTION>
ARAMARK Corporation and Subsidiaries
------------------------------------------------------------------------------
Fiscal Year Ended on or near
Three Months Ended September 30,
--------------------------- ----------------------------------------------
December 30, December 31,
1994 1993 1994 1993 1992(1) 1991 1990
------------ ------------ ------ ------ -------- ------ ------
(in millions, except per share amounts and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues...................................... $1,380.5 $1,292.0 $5,161.6 $4,890.7 $4,865.3 $4,774.4 $4,595.5
Earnings before depreciation and amortization,
interest, and income taxes................... 97.2 95.9 415.8 399.4 387.4 388.2 371.1
Depreciation and amortization................. 37.0 34.4 143.8 130.5 125.8 128.0 114.1
Earnings before interest and income taxes(2).. 60.2 61.5 272.0 268.9 261.6 260.2 257.0
Interest expense, net......................... 25.4 29.5 108.5 125.7 137.9 142.3 149.8
Income before extraordinary item and cumulative
effect of change in accounting for income
taxes(3)..................................... 20.8 18.4 95.0 84.3 70.7 64.2 51.8
Net income.................................... 20.8 16.4 86.1 77.1 67.4 64.2 51.8
Earnings per share:(4)
Income before extraordinary item and
cumulative effect of change in accounting
for income taxes(3)......................... $ .42 $ .36 $ 1.87 $ 1.64 $ 1.40 $ 1.23 $ .91
Net income................................... $ .42 $ .32 $ 1.69 $ 1.49 $ 1.33 $ 1.23 $ .91
Ratio of earnings to fixed charges(5)......... 1.9x 1.8x 2.1x 1.9x 1.7x 1.6x 1.5x
Balance Sheet Data (at period end):
Total assets.................................. $2,314.8 $2,115.6 $2,122.0 $2,040.6 $2,005.0 $2,002.6 $1,917.2
Long-term borrowings:(6)
Senior....................................... 870.7 578.1 691.5 533.8 629.5 722.1 728.7
Subordinated................................. 290.4 463.5 290.4 474.9 413.5 415.1 369.1
Common stock subject to potential
repurchase(7)................................ 21.6 22.5 20.8 21.7 20.4 17.7 17.5
Shareholders' equity.......................... 198.7 144.3 182.6 124.1 103.8 40.6 49.3
</TABLE>
(1) Fiscal 1992 is a fifty-three week period. See note 1 to the consolidated
financial statements.
(2) See note 2 to the consolidated financial statements.
(3) See notes 3 and 6 to the consolidated financial statements.
(4) Based on weighted average shares of common stock outstanding for all
periods. See note 1 to the consolidated financial statements.
(5) For the purposes of determining the ratio of earnings to fixed charges,
earnings include pre-tax income plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest on all indebtedness
(including capitalized interest) plus that portion of operating lease
rentals representative of the interest factor (deemed to be one-third of
operating lease rentals).
(6) See note 4 to the consolidated financial statements.
(7) See note 7 to the consolidated financial statements.
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<PAGE>
FINANCIAL REPORTING BY BUSINESS SEGMENTS
The following is a summary of financial information for each of ARAMARK's
business segments for each of the three fiscal years ended September 30, 1994.
For additional financial information concerning ARAMARK for the three fiscal
years ended September 30, 1994 and the fiscal period ended December 30, 1994,
see Financial Statements.
Revenues by segment are substantially comprised of services to unaffiliated
customers and clients. Operating income reflects expenses directly related to
individual segments plus an allocation of expenses applicable to more than one
segment. General corporate expenses include expenses not specifically
identifiable with an individual segment.
<TABLE>
<CAPTION>
REVENUES OPERATING INCOME
---------------------------------- ------------------------------
1994 1993 1992 1994 1993 1992
-------- -------- -------- ------ ------- -------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Food, Leisure &
Support Services $3,274.3 $3,149.6 $ 3,151.8 $ 138.4 $ 137.4 $ 133.2
Uniform Services 810.5 731.0 632.9 96.0 87.6 76.5
Health & Education 673.3 619.3 687.3(1) 37.2 33.7 53.0(1)
Distributive 403.5 390.8 393.3 26.5 24.8 27.1
-------- -------- --------- ------- ------- --------
Total $5,161.6 $4,890.7 $ 4,865.3 298.1 283.5 289.8
======== ======== =========
General Corporate and Other Expenses (30.8) (22.6) (28.2)
Gain on Sale of Remaining Living Centers Common Stock - 8.0(1) -
------- ------- --------
Operating Income 267.3 268.9 261.6
Gain on Issuance of Stock by an Affiliate 4.7 - -
Interest Expense, net (108.5) (125.7) (137.9)
------- ------- --------
Income Before Income Taxes, Minority Interest,
Extraordinary Item, and Accounting Change $ 163.5 $ 143.2 $ 123.7
======= ======= ========
</TABLE>
(1) Includes impact of Living Centers, a wholly-owned subsidiary to February,
1992, the date of divestiture. See notes 2 and 11 to the consolidated
financial statements for further information on the transaction and other
variations in segment results.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
FISCAL 1995 INTERIM PERIOD COMPARED TO 1994 INTERIM PERIOD
Overview. Revenues of $1.4 billion for the first quarter of fiscal 1995
were 7% higher than the prior year period. First quarter operating income of
$60.2 million was $1.3 million or 2% lower than the prior year period. The
decrease is primarily attributable to the National Hockey League and Major
League Baseball strikes in the United States and Canada, partially offset by
improved operating earnings in certain business segments as discussed below. In
addition, the Company incurred expenses in connection with the change in
corporate identity. It is estimated that had the strikes not occurred, the
Company's fiscal 1995 first quarter revenues, operating income and net income
would have been 1%, 3% and 6% higher, respectively.
The Company's operating income margin decreased to 4.4% in 1995 from 4.8%
in 1994. The decrease in margin is due primarily to the baseball and hockey
strikes and increased general corporate expenses referred to above.
S-5
<PAGE>
First quarter interest expense declined $4.0 million or 14% due primarily
to the favorable impact of refinancing certain of the Company's subordinated
debentures during 1994. Fiscal 1995 first quarter income before cumulative
effect and extraordinary item was $20.7 million or a 13% increase over the prior
year first quarter.
Segment Results. Food, Leisure and Support Services segment revenues
increased 4% due primarily to new accounts and increased volume at both domestic
and international food businesses, partially offset by the impact of the
National Hockey League and Major League Baseball strikes. Uniform Services
segment revenues increased 14% reflecting increased volume at uniform rental
operations and WearGuard. Health & Education segment revenues increased 12%
resulting from new contracts at Spectrum Healthcare Services and continued
enrollment and tuition increases at Children's World. Distributive segment
revenues increased 4% from increased unit volume and the effect of the first
quarter acquisition.
Food, Leisure and Support Services segment operating income increased 1% as
a result of increased revenues in the domestic food businesses, partially offset
by the impact of the hockey and baseball strikes and continuing start-up
problems of the Spanish food service business. Had the strikes not occurred, it
is estimated that Food, Leisure and Support Services segment fiscal 1995 first
quarter operating income would have been 8% higher. Uniform Services segment
operating income increased 7% due to the higher volume, partially offset by
increases in merchandise and other operating costs. Health & Education segment
operating income decreased 3%, due to new contract start-up costs and increased
operating costs at Spectrum Healthcare Services, partially offset by volume
related improvements in operating income at Children's World. Distributive
segment operating income decreased 11% due to higher operating expenses.
On January 11, 1995, the National Hockey League entered into a new labor
accord. A shortened hockey season began on January 20, 1995. The Major League
Baseball strike which began on August 12, 1994 ended on April 2, 1995. The
announced plan is to have a shortened 1995 season with 144 games or 89% of the
normal schedule. Although the delay of the start of the season will have a
negative impact on ARAMARK's third quarter results, management does not believe
the planned abbreviated season will have a material adverse impact on its full
year 1995 operating results.
Fiscal 1994 Compared to Fiscal 1993
Overview. Revenues for the fiscal year ended September 30, 1994 were $5.2
billion, a 6% increase over fiscal 1993. Earnings before interest and taxes of
$272 million increased 1% compared to the prior year. Each of ARAMARK's
business segments reflected improvements in operating earnings. However, the
1994 results were adversely impacted by the Major League Baseball strike in the
United States and Canada and costs associated with several corporate development
and strategic initiatives, including costs related to a change in corporate
identity. See note 11 to the consolidated financial statements. Earnings
before interest and taxes for both fiscal 1994 and fiscal 1993 include other
income of $5.8 million and $5.0 million, respectively, and in fiscal 1994 a gain
of $4.7 million on the issuance of stock by an affiliate. See note 2 to the
consolidated financial statements.
ARAMARK's operating income margin decreased to 5.2% from 5.5%. The
decrease in margin is due primarily to the baseball strike and increased general
corporate expenses referred to above.
Interest expense declined $17.2 million or 14%, due primarily to lower
borrowing levels and the impact of refinancing certain of ARAMARK's
indebtedness. Fiscal 1994 and 1993 net income include an extraordinary item for
the early extinguishment of debt of $7.7 million and $7.2 million, respectively,
as described in note 3 to the consolidated financial statements. Fiscal 1994
net income also includes a charge of $1.3 million related to the cumulative
effect of adopting Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. See note 6 to the consolidated financial
statements.
Segment Results. Food, leisure and support services segment revenues were
4% greater than prior year. Increases related to new accounts, primarily in the
U.S. business and education markets, and an acquisition of a company in Spain
were partially offset by the effects of a divestiture in late fiscal 1993 and
the baseball strike in fiscal 1994. See notes 2 and 11 to the consolidated
financial statements. Uniform Services segment revenues increased 11% as a
result of increased volume in both the uniform rental and direct marketing
businesses. Health and Education Services segment revenues increased 9% as a
result of new contracts at
S-6
<PAGE>
correctional institutions and hospitals and continued enrollment growth in the
child care services business. Revenues for the Distributive Services segment
increased 3% due to increased volume.
Operating income for the Food, Leisure and Support Services segment
increased 1% over the prior year. Increased earnings in the U.S. business
dining market and the gain from the sale of stock of an affiliate were offset by
the impact of the baseball strike, start-up costs on new contracts, and
continued sluggish economic conditions in selected European markets.
Depreciation and amortization in this segment increased by $9 million due to
acquisition related amortization and depreciation on recent capital projects.
Uniform Services operating income increased 9% as a result of the revenue
growth. Operating income for the Health and Education Services segment
increased 11% due to revenue growth plus improvements in operating efficiency
due to leveraging of overhead costs. Distributive Services operating income
increased 7%, primarily due to increased volume with costs remaining relatively
constant.
In fiscal 1994, management estimates that consolidated operating income and
income before extraordinary item would have been approximately 3% and 5% higher,
respectively, had the baseball strike not occurred. See note 11 to the
consolidated financial statements.
Fiscal 1993 Compared to Fiscal 1992
Overview. Revenues for the fiscal year ended October 1, 1993 were $4.9
billion. Operating income for fiscal 1993 was $269 million, an increase of $7
million or 3% over fiscal 1992. Excluding the unfavorable impact of currency
translation, revenues and operating income increased 2% and 4%, respectively,
over fiscal 1992. Operating results for fiscal 1993 and fiscal 1992 include
other income of $5.0 million and $4.2 million, respectively. See note 2 to the
consolidated financial statements.
ARAMARK's operating margin increased from 5.4% in fiscal 1992 to 5.5% in
fiscal 1993 reflecting declines in cost of services provided and selling and
general corporate expenses as a percentage of revenues. The declines are
primarily due to the favorable impact of effective controls of costs relative to
revenue growth plus the impact of unusual costs included in fiscal 1992 selling
and general corporate expenses in connection with a potential acquisition and
several special development programs.
Interest expense declined $12.2 million or 9% due primarily to lower
interest rates and the impact of refinancing ARAMARK's senior notes and
subordinated debentures. Fiscal 1993 and 1992 net income includes an
extraordinary item due to early extinguishments of debt of $7.2 million and $3.3
million, respectively. See note 3 to the consolidated financial statements for
a description of the debt refinancings and extraordinary item. Income before
the extraordinary item for fiscal 1993 was $84.3 million, which exceeded the
prior year by 19%.
Segment Results. Food, Leisure and Support Services segment revenues
approximated prior year. The impact of new accounts in international and
domestic markets for this segment was offset by the adverse effect of economic
conditions in the United States and Canada on selected business dining and other
accounts and a 2% revenue decline attributable to unfavorable currency exchange
rates. Uniform Services segment revenues increased 15% due to the acquisition
of WearGuard in fiscal 1992 and growth in volume at uniform rental operations
which accounted for 3% of the increase. Health and Education Services segment
revenues, excluding the revenues of Living Centers which was divested in fiscal
1992, increased 12% due primarily to new contracts at correctional institutions
and hospitals, continued enrollment growth at Children's World and a fiscal 1992
acquisition of a business providing management services to hospital emergency
departments. Revenues for the Distributive Services Segment declined slightly
due to the continued adverse effect of the economic slowdown on consumer
spending particularly in southern California.
Operating income for the Food, Leisure and Support Services segment
increased 3% over the prior year. The positive effects of new business,
operating efficiencies, and effective controls over product and overhead costs
plus a fiscal 1993 divestiture gain, described in note 2 to the consolidated
financial statements, contributed to the increase. This was partially offset by
the previously described impact of adverse economic conditions, start-up costs
at new accounts, a 2% decline in operating income attributable to unfavorable
currency exchange rates and the reserve established for potential adjustments
described in note 2 to the consolidated financial statements. Uniform Services
operating income increased 15% due to the acquisition of WearGuard in fiscal
1992 and revenue growth coupled with higher operating margins at uniform rental
operations which accounted for 6% of the increase. Depreciation and
amortization expense increased by $7.5 million for this segment due
S-7
<PAGE>
primarily to the acquisition of WearGuard in fiscal 1992. Excluding the fiscal
1992 operating results and divestiture gain related to Living Centers, operating
income for the Health and Education Services segment increased 4% as higher
revenues plus an increase in operating income due to the fiscal 1992 acquisition
described above were partially offset by higher operating costs. Distributive
Services operating income declined 8% reflecting lower operating margins as a
result of the impact of the economic slowdown coupled with an increase in
operating costs.
FINANCIAL CONDITION
The Company's indebtedness increased $180 million during the first quarter
of fiscal 1995, principally to finance acquisitions (see note 2 to the condensed
consolidated financial statements), capital expenditures and a seasonal increase
in working capital. During the first quarter, the Company increased its
borrowing limit under its credit facility to $1 billion (see note 4 to the
condensed consolidated financial statements and "The Credit Agreement" in the
Prospectus). After giving effect to the transactions described below, the
Company has approximately $325 million of unused committed credit availability
under this facility, which management believes, along with cash flows from
operations, is sufficient to fund operating requirements and the potential
acquisition of TW (see note 2 to the condensed consolidated financial
statements).
During fiscal 1994, ARAMARK redeemed $182.3 million of its 12-1/2%
subordinated debentures. See note 3 to the consolidated financial statements.
During fiscal 1994, ARAMARK repurchased $17.6 million of its Series C Preferred
Stock, repurchased $29.7 million of its Class B Common Stock and issued $13.2
million of subordinated installment notes as partial consideration. ARAMARK
also purchased $9.2 million of its Class A Common Stock. Additionally, ARAMARK
issued $12.4 million of Class B Common Stock to eligible employees, primarily
through the exercise of installment stock purchase opportunities. As of
September 30, 1994, ARAMARK has capital commitments of approximately $52 million
related to several long-term concession contracts at stadiums and arenas.
Subsequent to December 30, 1994, the Company paid off at scheduled maturity
$95.3 million of promissory notes, redeemed $125 million of its 12% subordinated
debentures and its $50 million 10.25% senior note for a premium, and made a $20
million scheduled term payment on its 8.25% term note. The payments were funded
through a combination of the Credit Agreement and the issuance of $100 million
of 8% seven year senior notes.
BUSINESS
ARAMARK is engaged in providing or managing services, including food,
leisure and support services, uniform services, health and education services
and distributive services. Services was organized in 1959. ARAMARK was formed
in September 1984 by the management of Services and acquired Services in
December 1984 through a merger.
ARAMARK provides most of its services in the United States. ARAMARK also
conducts operations, primarily the management of food services, in Belgium,
Canada, the Czech Republic, Germany, Hungary, Japan, Korea, Mexico, Spain and
the United Kingdom.
Financial information by business segment and geographic area appears in
note 11 to the consolidated financial statements. The businesses of ARAMARK
have been grouped into the segments described below.
FOOD, LEISURE & SUPPORT SERVICES
ARAMARK provides food, refreshment, specialized dietary and support
services (including maintenance and housekeeping) to business, educational,
governmental and medical institutions. These services (and to a lesser extent,
merchandise operations) are also provided at leisure and other public facilities
such as convention centers, stadiums, parks, arenas, race tracks and
recreational facilities.
Food, refreshment, specialized dietary and support services are operated at
customer locations generally under contracts of indefinite duration which may be
subject to termination by either party. However, food and related services at
leisure and other public facilities generally are for fixed contract terms well
in excess of one
S-8
<PAGE>
year. ARAMARK's food, leisure and support services are performed under various
financial arrangements including a management-fee basis and a profit-and-loss
basis. See note 2 to the consolidated financial statements.
In most instances, the equipment and facilities used in providing these
services are owned by the customer. Vending machines and related equipment,
however, are generally owned by ARAMARK.
There is a high level of competition in the food, leisure and support
services business from local, regional and national companies as well as from
businesses and institutions which operate their own services. This competition
takes a number of different forms, including pricing, maintaining high food and
service standards, and innovative approaches to marketing with a strong emphasis
on securing and retaining customer accounts. ARAMARK believes that it is a
significant provider of food, leisure and support services in the United States,
Spain, Germany, Belgium and Canada, but that its volume of such business is
small in relation to the total market. See note 10 to the consolidated financial
statements for information relating to the seasonal aspects of this business
segment.
In December 1994, ARAMARK acquired Harry M. Stevens, a provider of food and
support services to stadiums and arenas. See note 2 to the condensed
consolidated financial statements.
UNIFORM SERVICES
ARAMARK rents, cleans, maintains and delivers personalized work apparel and
other textile items for customers throughout the United States on a contract
basis. Also provided are walk-off mats, cleaning cloths, disposable towels, and
other environmental control items.
ARAMARK also operates one of the largest direct marketers of personalized
work clothing, uniforms, casual apparel and related accessories, primarily in
the United States.
Service contracts for the rental and laundering of work apparel and other
textile items are for well in excess of one year and typically for an initial
term of five years. Generally, the direct marketing business is conducted under
an invoice arrangement with customers.
The uniform rental services business is highly competitive in the areas in
which ARAMARK operates, with numerous competitors in each major operating area.
Although no one uniform rental services company is predominant in this industry,
ARAMARK believes that it is a significant competitor.
Competition in the sale of work clothing and related items is from numerous
retailers and other direct marketers at local, regional and national levels. In
this market, while ARAMARK is a significant competitor, ARAMARK's volume of
sales is small in relation to the total market.
The significant competitive factors in the uniform services business are
the quality of services provided to customers and the prices charged for such
services.
HEALTH & EDUCATION SERVICES
ARAMARK provides management services (including physician staffing and
other specialized services) to hospital emergency and other departments and to
military healthcare facilities and clinics as well as medical services to
correctional institutions. ARAMARK also provides child care services primarily
at Company-operated facilities, and to a lesser extent on customer sites and in
before and after school programs.
Revenues from emergency and primary care management services are received
generally from the hospitals and clinics at which the care is provided under
contracts generally with a term of one or more years and from third party
payors. Revenues from medical services to correctional institutions are
received directly from governmental authorities under contracts with terms of
one or more years.
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Child care services are provided to and are primarily paid for on a weekly
basis directly by individual families under short-term agreements. ARAMARK
leases a significant number of its child care facilities under long-term
arrangements.
ARAMARK believes it is a significant provider of emergency and primary care
management services, medical services to correctional institutions and child
care services in the United States.
Competition in all phases of this business segment is from both national
and local providers of health and education services as well as from private and
public institutions which provide for their own health and education services.
Significant competitive factors in ARAMARK's health and education services
businesses are the quality of care, reputation, physical appearance of
facilities, the types of programs offered to the users of these services and the
prices charged for such services.
DISTRIBUTIVE SERVICES
ARAMARK provides wholesale distribution of magazines, books and other
printed matter. These materials are purchased from national distributors and
publishers and are delivered to retail locations patronized by the general
public.
Distribution services are generally rendered under short-term agreements,
which ordinarily permit the return of unsold magazines and books with full
credit being given to the retailer and with ARAMARK in turn receiving full
credit from its suppliers.
Competition in the distribution of books and periodicals exists primarily
from magazine and book subscriptions, direct distribution by publishers to
retailers and from other wholesale distributors. While ARAMARK's volume of
business in the distribution of books and periodicals is small in relation to
the total market, ARAMARK believes the volume of its wholesale periodical and
book distribution units makes it a significant wholesale distributor.
In October 1994, ARAMARK acquired Ranier News, a wholesale magazine and
book distribution business serving the northwest area of Washington state. See
note 2 to the condensed consolidated financial statements.
EMPLOYEES
ARAMARK employs approximately 140,000 persons both full and part time,
including approximately 30,000 employees outside the United States.
Approximately 23,000 employees in the United States are represented by various
labor unions.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Guaranteed
Securities") supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Guaranteed Securities set
forth in the Prospectus, to which description reference is hereby made.
The Notes are to be issued under an Indenture, dated as of July 15, 1991
(the "Guaranteed lndenture"), among ARAMARK, as guarantor, Services, as issuer,
and The Bank of New York (Delaware), as trustee (the "Guaranteed Trustee").
The Notes are subject to defeasance as described under "Description of
Securities and Guarantee -- Defeasance" in the Prospectus.
The Notes when issued will rank on a parity with all other unsecured and
unsubordinated indebtedness of Services. ARAMARK will guarantee the punctual
payment of the principal of, premium, if any, and interest on the Notes, when
and as the same are due and payable. The Guarantee is absolute and
unconditional,
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irrespective of any circumstances that might otherwise constitute a legal or
equitable discharge of a surety or guarantor. The Guarantee will rank on a
parity with unsecured and unsubordinated indebtedness of ARAMARK.
The Notes will be issued only in fully registered form and only in
principal amounts of $1,000 or integral multiples thereof. (Section 302 of the
Guaranteed Indenture) The Notes initially will be limited to $150,000,000
aggregate principal amount.
The Notes will mature on May 1, 2005. The Notes will bear interest at
8.15% per annum, payable semi-annually in arrears on each May 1 and November 1,
commencing on November 1, 1995 and accruing from their date of issuance.
The Notes will not be redeemable by ARAMARK or Services prior to their
Stated Maturity, and will not have the benefit of any sinking fund.
CERTAIN COVENANTS APPLICABLE TO THE NOTES
The covenants described in the Prospectus under the captions Certain
Covenants Applicable to Subordinated Securities and Guaranteed Securities --
Mergers, Consolidations and Certain Sales and Purchases of Assets, -- Provision
of Financial Statements, -- Limitation on Restricted Payments, and --
Limitation on Certain Security Interests will not apply to the Notes and will be
replaced by the covenants described below. Capitalized terms used herein and not
otherwise defined shall have the meanings given to them in the Guaranteed
Indenture or the Board resolutions authorizing the Notes, as the case may be.
Limitations on Liens. ARAMARK covenants that it will not issue, incur,
create, assume, guarantee or suffer to exist, and will not permit any
Restricted Subsidiary to issue, incur, create, assume, guarantee or suffer to
exist, any debt for borrowed money secured by a mortgage, security interest,
pledge, lien, charge or other encumbrance (mortgages) upon any Principal
Property (as defined below) of ARAMARK or any Restricted Subsidiary or upon any
shares of stock or indebtedness of any Restricted Subsidiary (whether such
Principal Property, shares or indebtedness are now existing or owned or
hereafter created or acquired) without in any such case effectively providing
concurrently with the issuance, incurrence, creation, assumption or guarantee of
any such secured debt, or the grant of a mortgage with respect to any such
indebtedness, that the Notes (together with, if ARAMARK shall so determine, any
other indebtedness of or guarantee by ARAMARK ranking equally with the Guarantee
or any indebtedness of or guaranteed by any Restricted Subsidiary, as the case
may be) shall be secured equally and ratably with (or, at the option of ARAMARK,
prior to) such secured debt. The foregoing restriction, however, will not apply
to: (a) mortgages on property existing at the time of acquisition thereof by
ARAMARK or any Subsidiary, provided that such mortgages were in existence prior
to, and not incurred in contemplation of, such acquisition; (b) mortgages on
property, shares of stock or indebtedness or other assets of any corporation
existing at the time such corporation becomes a Restricted Subsidiary, provided
that such mortgages are not incurred in anticipation of such corporation
becoming a Restricted Subsidiary; (c) mortgages on property, shares of stock or
indebtedness to secure the payment of all or any part of the purchase price
thereof, or mortgages on property, shares of stock or indebtedness to secure any
indebtedness for borrowed money incurred prior to, at the time of, or within 270
days after, the latest of the acquisition thereof, or, in the case of property,
the completion of construction, the completion of improvements, or the
commencement of substantial commercial operation of such property, for the
purpose of financing all or any part of the purchase price thereof, such
construction, or the making of such improvements; (d) mortgages to secure
indebtedness owing to ARAMARK or to a Restricted Subsidiary; (e) mortgages
existing at the date of the issuance of the Notes; (f) mortgages on property of
a corporation existing at the time such corporation is merged into or
consolidated with ARAMARK or a Restricted Subsidiary or at the time of a sale,
lease or other disposition of the properties of a corporation as an entirety or
substantially as an entirety to ARAMARK or a Restricted Subsidiary, provided
that such mortgage was not incurred in anticipation of such merger or
consolidation or sale, lease or other disposition; (g) mortgages in favor of the
United States or any State, territory or possession thereof (or the District of
Columbia), or any department, agency, instrumentality or political subdivision
of the United States or any State, territory or possession thereof (or the
District of Columbia ), to secure partial, progress, advance or other payments
pursuant to any contract or statute or to secure any indebtedness incurred for
the purpose of financing all or any part of the purchase price or the cost of
constructing or improving the property subject to such mortgages; and (h)
extensions, renewals, refinancings or replacements of any mortgage referred to
in the foregoing clauses (a), (b), (c), (e) and (f); provided, however, that any
mortgages permitted by any of the foregoing clauses (a), (b), (c), (e) and (f)
shall not extend to or cover any property of ARAMARK or such
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Restricted Subsidiary, as the case may be, other than the property, if any,
specified in such clauses and improvements thereto.
Notwithstanding the restrictions outlined in the preceding paragraph,
ARAMARK or any Restricted Subsidiary will be permitted to issue, incur, create,
assume, guarantee or suffer to exist, debt secured by a mortgage which would
otherwise be subject to such restrictions, without equally and ratably securing
the Notes, provided that after giving effect thereto, the sum of (i) all debt so
secured by mortgages (not including mortgages permitted under clauses (a)
through (h) above) and (ii) all Attributable Debt (as defined below) with
respect to Sale and Lease-Back Transactions (as defined below) with respect to
any Principal Property, at the time of determination, does not exceed 10% of the
Consolidated Tangible Assets of ARAMARK.
Limitations on Sale and Lease-Back Transactions. ARAMARK covenants that it
will not, nor will it permit any Restricted Subsidiary to, enter into any Sale
and Lease-Back Transaction with respect to any Principal Property, other than
any such transaction involving a lease for a term of not more than three years
or any such transaction between ARAMARK and a Restricted Subsidiary or between
Restricted Subsidiaries, unless: (a) ARAMARK or such Restricted Subsidiary would
be entitled to incur indebtedness secured by a mortgage on the Principal
Property involved in such transaction at least equal in amount to the
Attributable Debt with respect to such Sale and Lease-Back Transaction, without
equally and ratably securing the Notes, pursuant to the limitation on liens in
the covenant described above; or (b) ARAMARK shall apply an amount equal to the
greater of the net proceeds of such sale or the Attributable Debt with respect
to such Sale and Lease-Back Transaction within 120 days of such sale to either
(or a combination of) the retirement (other than any mandatory retirement,
mandatory prepayment or sinking fund payment or by payment at maturity) of debt
for borrowed money of ARAMARK or a Restricted Subsidiary that matures more than
twelve months after the creation of such indebtedness or the purchase,
construction or development of other comparable property.
Certain Definitions Applicable to Covenants. The term Attributable Debt
when used in connection with a Sale and Lease-Back Transaction involving a
Principal Property shall mean, at the time of determination, the lesser of: (a)
the fair value of such property (as determined in good faith by the Board of
Directors of ARAMARK); or (b) the present value of the total net amount of rent
required to be paid under such lease during the remaining term thereof
(including any renewal term or period for which such lease has been extended),
discounted at the rate of interest set forth or implicit in the terms of such
lease or, if not practicable to determine such rate, the interest rate per annum
borne by the Notes compounded semi-annually. For purposes of the foregoing
definition, rent shall not include amounts required to be paid by the lessee,
whether or not designated as rent or additional rent, on account of or
contingent upon maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount shall be the lesser of the
net amount determined assuming termination upon the first date such lease may be
terminated (in which case the net amount shall also include the amount of the
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated) or the net
amount determined assuming no such termination.
The term Principal Property shall mean the land, land improvements,
buildings and fixtures (to the extent they constitute real property interests)
(including any leasehold interest therein) constituting the principal corporate
office or any distribution, operation or maintenance facility (whether now owned
or hereafter acquired) which: (a) is owned by ARAMARK or any Subsidiary; (b) has
not been determined in good faith by the Board of Directors of ARAMARK not to be
materially important to the total business conducted by ARAMARK and its
Subsidiaries taken as a whole; and (c) has a market value on the date as of
which the determination is being made in excess of 1.0% of Consolidated Tangible
Assets of ARAMARK as most recently determined on or prior to such date.
The term Restricted Subsidiary shall mean any Subsidiary that owns any
Principal Property or any shares or debt of another Restricted Subsidiary.
The Term Sale and Lease-Back Transaction shall mean any arrangement with
any person providing for the leasing by ARAMARK or any Restricted Subsidiary of
any Principal Property, which property has been or is to be sold or transferred
by ARAMARK or such Restricted Subsidiary to such person.
Consolidation, Merger and Sale of Assets. ARAMARK covenants that (i) it
will not consolidate with or merge into any other person or convey, transfer or
lease its properties and assets substantially as an entirety to
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any person, and ARAMARK shall not permit any person to consolidate with or merge
into ARAMARK and (ii) it will not permit Services to consolidate with or merge
into any other person or convey, transfer or lease its properties and assets
substantially as an entirety to any person, and shall not permit any person to
consolidate with or merge into Services, unless:
(1) in case ARAMARK or Services shall consolidate with or merge into
another person or convey, transfer or lease its properties and assets
substantially as an entirety to any person, the person formed by such
consolidation or into which ARAMARK or Services, as the case may be, is merged
or the person which acquires by conveyance or transfer, or which leases, the
properties and assets of ARAMARK or Services, as the case may be, substantially
as an entirety shall be a corporation, partnership or trust, shall be organized
and validly existing under the laws of the United States, any State thereof or
the District of Columbia and shall expressly assume, by a supplemental
Guaranteed Indenture executed and delivered to the Trustee, in form satisfactory
to the Trustee, (a) the due and punctual performance of the Guarantee and the
performance or observance of every covenant of the Guaranteed Indenture on the
part of ARAMARK, in the case of a transaction involving ARAMARK, or (b) the due
and punctual payment of the principal of and any premium and interest on the
Notes and the performance or observance of every covenant of the Guaranteed
Indenture on the part of Services, in the case of a transaction involving
Services;
(2) immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of ARAMARK or any Subsidiary as a
result of such transaction as having been incurred by ARAMARK or such Subsidiary
at the time of such transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
happened and be continuing; and
(3) if, as a result of any such consolidation or merger or such conveyance,
transfer or lease, properties or assets of ARAMARK or any Restricted Subsidiary
would become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by the Guaranteed Indenture, ARAMARK or
such successor person, as the case may be, shall take such steps as shall be
necessary effectively to secure the Notes equally and ratably with (or prior to)
all indebtedness secured thereby.
GLOBAL NOTES
The Notes will be issued in the form of one or more fully registered global
Notes which will be deposited with, or on behalf of, The Depository Trust
Company, as Depositary (the DEPOSITARY), LOCATED IN THE BOROUGH OF MANHATTAN,
THE CITY OF NEW YORK, AND WILL BE REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY.
Ownership of beneficial interests in a global Note will be limited to
participants and to persons that may hold interests through institutions that
have accounts with the Depositary (participants). Ownership of beneficial
interests by participants in a global Note will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depositary for such global Note. Ownership of beneficial interests in such
global Note by persons that hold through participants will be shown on, and the
transfer of that ownership interest within each participant will be effected
only through, records maintained by such participants.
Payment of principal of and interest on the Notes represented by any such
global Note will be made to the Depositary or its nominee, as the case may be,
as the sole registered owner and the sole Holder of the Notes represented
thereby for all purposes under the Guaranteed Indenture. None of the Company,
the Trustee or any agent of the Company or the Trustee will have any
responsibility or liability for any aspect of the Depositarys records relating
to, or payments made on account of, beneficial ownership interests in a global
Note representing any Notes or any other aspect of the relationship between the
Depositary and its participants or the relationship between such participants
and the owners of beneficial interests in a global Note owning through such
participants or for maintaining, supervising or reviewing any of the Depositarys
records relating to such beneficial ownership interests.
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The Company has been advised by the Depositary that upon receipt of any
payment of principal of or interest on any such global Note, the Depositary will
immediately credit, on its book-entry registration and transfer system, the
accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such global Note as
shown on the records of the Depositary. The accounts to be credited shall be
designated by the Underwriters. Payments by participants to owners of
beneficial interests in a global Note held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for customer accounts registered in street name, and will
be the sole responsibility of such participants.
No global Note may be transferred except as a whole by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor of the Depositary or a nominee of such successor.
A global Note representing Notes is exchangeable for definitive Notes in
registered form, only if (x) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for such global Note or if at any
time the Depositary ceases to be clearing agency registered under the Securities
Exchange Act of 1934 (the Exchange Act), (y) the Company in its sole discretion
determines that such global Note shall be exchangeable for definitive Notes in
registered form and notifies the Trustee thereof or (z) an Event of Default with
respect to the Notes represented by such global Note has occurred and is
continuing. Any global Note that is exchangeable pursuant to the preceding
sentence shall be exchangeable for definitive Notes issuable in authorized
denominations in registered form, aggregating a like amount. Such definitive
Notes shall be registered in the names of the owners of the beneficial interests
in such global Note as the Depositary shall direct.
Except as provided above, owners of beneficial interests in such a global
Note will not be entitled to receive physical delivery of Notes in definitive
form and will not be considered the Holders thereof for any purpose under the
Guaranteed Indenture, and no global Note representing Notes shall be
exchangeable. Accordingly, each person owning a beneficial interest in such a
global Note must rely on the procedures of the Depositary and, if such person is
not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a Holder under the Indenture
or such global Note. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to transfer beneficial
interests in a global Note.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, Services and ARAMARK have agreed to sell to each of the Underwriters
named below, and each of such Underwriters has severally agreed to purchase, the
principal amount of the Notes set forth opposite its name below:
PRINCIPAL
UNDERWRITER AMOUNT OF NOTES
----------- ---------------
Goldman, Sachs & Co............................ $ 75,000,000
J.P. Morgan Securities INC..................... $ 75,000,000
------------
Total......................................... $150,000,000
============
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes if any are
taken.
The Underwriters propose to offer the Notes in part directly to retail
purchasers at the initial public offering price set forth on the cover page of
this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of 0.45% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
0.25% of the principal amount of the Notes to certain brokers and dealers.
After the Notes are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Underwriters.
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The Notes are a new issue of securities with no established trading market.
Services and ARAMARK have been advised by the Underwriters that they intend to
make a market in the Notes but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes. There is no assurance that the
Notes will trade at their principal amount.
Services and ARAMARK have agreed to jointly and severally indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
The Underwriters and their affiliates maintain ongoing business
relationships with ARAMARK and in connection therewith may provide investment
banking, commercial banking and advisory services for which they receive
customary fees. Morgan Guaranty Trust Company of New York, an affiliate of J.P.
Morgan Securities Inc., is co-agent under the Credit Agreement and is expected
to receive up to $8,000,000 of the net proceeds from the offering of the
Notes. See Use of Proceeds
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DEBT SECURITIES
OF
ARAMARK CORPORATION
OR
ARAMARK SERVICES, INC.
_______________
ARAMARK Corporation ("ARAMARK") may offer from time to time subordinated
debt securities (the "Subordinated Securities") and ARAMARK Services, Inc.
("Services") may offer from time to time its debt securities (the "Guaranteed
Securities," and collectively with the Subordinated Securities, the
"Securities") with an aggregate principal amount or, if Securities are issued at
original issue discount, such higher principal amount as may be sold for an
initial public offering price of up to $300,000,000. The issuer, the specific
title, the aggregate principal amount, the purchase price, the maturity, the
rate and time of payment of any interest, any redemption provisions, any other
specific terms of the Securities, and the agents and dealers or underwriters in
connection with the sale of the Securities in respect of which this Prospectus
is being delivered are set forth in the accompanying supplement to this
Prospectus (the "Prospectus Supplement").
The Guaranteed Securities when issued will rank on a parity with all other
unsecured and unsubordinated indebtedness of Services and will be entitled to
the Guarantee of ARAMARK, which Guarantee will rank on a parity with all
unsecured and unsubordinated indebtedness of ARAMARK. The Subordinated
Securities are unsecured and subordinated to all present and future Senior
Indebtedness of ARAMARK and will rank on a parity with ARAMARK's outstanding
subordinated indebtedness. See "Description of Securities and Guarantee."
ARAMARK or Services may sell the Securities to or through underwriters, and
also may sell the Securities directly to other purchasers or through agents.
The accompanying Prospectus Supplement sets forth the names of any underwriters
or agents involved in the sale of the Securities in respect of which this
Prospectus is being delivered, the principal amounts, if any, to be purchased by
underwriters and the compensation, if any, of such underwriters or agents.
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_______________
GOLDMAN, SACHS & CO. J.P. MORGAN SECURITIES INC.
_______________
The date of this Prospectus is April 25, 1995.
<PAGE>
AVAILABLE INFORMATION
ARAMARK is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information concerning ARAMARK can be inspected and copied at the Commission's
office at 450 Fifth Street, N.W., Washington, D.C., and the Commission's
Regional Offices in New York (7 World Trade Center, New York, New York) and
Chicago (Northwest Atrium Center, 500 W. Madison, Suite 1400, Chicago,
Illinois), and copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, reports and other information concerning ARAMARK
may be inspected at the offices of the Philadelphia Stock Exchange, 1900 Market
Street, Philadelphia, Pennsylvania. This Prospectus does not contain all of the
information set forth in the Registration Statement which ARAMARK and Services
have filed with the Commission under the Securities Act of 1933 and to which
reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
ARAMARK and Services hereby incorporate by reference in this Prospectus the
following documents:
(a) ARAMARK's Annual Report on Form 10-K for the year ended
September 30, 1994, filed pursuant to Section 13 of the Exchange Act; and
(b) ARAMARK's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 30, 1994, filed pursuant to Section 13 of the Exchange Act.
All documents filed by ARAMARK or Services subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein or in
the accompanying Prospectus Supplement modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain without charge,
upon request, a copy of any of the documents incorporated by reference herein,
except for the exhibits to such documents. Written or telephone requests should
be directed to Donald S. Morton, ARAMARK, 1101 Market Street, Philadelphia,
Pennsylvania 19107 or (215) 238-3240 or to ARAMARK c/o Registration Department,
Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention:
Donald T. Hansen.
2
<PAGE>
ARAMARK CORPORATION
ARAMARK, through Services and its other subsidiaries, is engaged in
providing or managing services, including food, leisure and support services,
uniform services, health and education services and distributive services.
ARAMARK provides most of its services in the United States. ARAMARK also
conducts operations, primarily management of food services, in Belgium, Canada,
the Czech Republic, Germany, Hungary, Japan, Korea, Mexico, Spain and the United
Kingdom. See "Business."
Services provides the majority of the food services provided by ARAMARK's
operations to businesses, government, educational and health care institutions.
Through subsidiaries, Services also conducts the majority of ARAMARK's
operations outside the United States.
ARAMARKs management shareholders (approximately 1,000 individuals) and
their permitted transferees own approximately 55% of the outstanding common
stock on a common stock equivalent basis (representing approximately 92.4% of
the voting power) and ARAMARKs employee benefit plans own an additional
approximately 21% of the outstanding common stock on a common stock equivalent
basis.
ARAMARK and Services, each a Delaware corporation, have their principal
executive offices at ARAMARK Tower, 1101 Market Street, Philadelphia,
Pennsylvania 19107, and their telephone number is (215) 238-3000. Unless the
context otherwise requires, references to ARAMARK include ARAMARK and its
subsidiaries and references to Services include Services and its subsidiaries.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
proceeds of the offering of Securities will be used by ARAMARK or Services to
repay borrowings under the Credit Agreement. See "The Credit Agreement."
THE CREDIT AGREEMENT
ARAMARK, through its wholly-owned subsidiary Services, has a $1.0 billion
revolving credit facility with a group of banks (the "Credit Agreement").
Interest under the Credit Agreement is based on the Prime Rate plus a spread of
0% to 5/8% (as of April 1, 1995 - 0%), London Inter-Bank Offered Rate (LIBOR)
plus a spread of 1/8% to 1-1/8% (as of April 1, 1995 - 1/2%) or the Certificate
of Deposit Rate plus a spread of 1/4% to 1-1/4% (as of April 1, 1995 - 5/8%), at
the option of Services. The spread is based on certain financial ratios and
borrowing levels as defined. Services also pays a fee of 1/4 of 1% on the entire
credit facility. Morgan Guaranty Trust Company of New York, an affiliate of
J.P. Morgan Securities Inc., is a co-agent under the Credit Agreement.
Commitment Reductions. The Outstanding commitments of $1.0 billion under
the Credit Agreement are subject to quarterly reductions of $15.6 million
starting in December 1995 which increase annually thereafter. The final
maturity for the Credit Agreement is October 2001. In addition, certain asset
sales and other transactions would result in commitment reductions.
Covenants; Events of Default. The Credit Agreement contains restrictive
covenants which provide, among other things, limitations on (i) the incurrence
of debt, (ii) the creation of mortgages or security interests, (iii)
dispositions of material assets, (iv) the payment of dividends on, or redemption
of, certain classes of capital stock of ARAMARK and Services, and (v) certain
significant changes of control of ARAMARK. Under the Credit Agreement, ARAMARK
is required to maintain certain specified minimum ratios of cash flow to fixed
charges and to total borrowings and certain minimum levels of net worth.
The Credit Agreement contains various event of default provisions,
including default in payment of principal or interest, material
misrepresentations in the Credit Agreement, default in compliance with the other
terms of the Credit Agreement or the related Guarantees, bankruptcy, default on
other indebtedness, failure to satisfy or stay certain judgments or orders
entered against ARAMARK or any of its subsidiaries, failure to pay when due
certain amounts with respect to certain employee benefit plans, and other events
with respect to such plans.
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Guarantees. Borrowings under the Credit Agreement are Guaranteed by all of
ARAMARK's and Services' wholly-owned domestic subsidiaries and by ARAMARK.
DESCRIPTION OF SECURITIES AND GUARANTEE
Subordinated Securities may be issued from time to time in one or more
series under an Indenture (the "Subordinated Indenture") between ARAMARK and The
Bank of New York, as Trustee (the "Subordinated Trustee"). The Guaranteed
Securities may be issued from time to time in one or more series under an
Indenture (the "Guaranteed Indenture") among ARAMARK, Services and The Bank of
New York, as Trustee (the "Guaranteed Trustee"). The Subordinated Indenture and
the Guaranteed Indenture are sometimes referred to collectively as the
"lndentures," and the Subordinated Trustee and the Guaranteed Trustee are
sometimes referred to collectively as the "Trustee." The statements under this
caption are brief summaries of certain provisions contained in the lndentures,
do not purport to be complete and are qualified in their entirety by reference
to the lndentures, including the definitions therein of certain terms, copies of
which are filed as exhibits to the Registration Statement of which this
Prospectus is a part.
GENERAL
Each Indenture provides for the issuance of debt securities in one or more
series, and does not limit the principal amount of debt securities which may be
issued thereunder.
Reference is made to the Prospectus Supplement for the following terms of
the Securities being offered hereby: (1) the title of the Securities; (2)
whether the Securities are Subordinated Securities or Guaranteed Securities; (3)
the aggregate principal amount of the Securities; (4) the date on which the
principal of the Securities is payable; (5) the rate or rates or the method for
determining such rate or rates, if any, at which the Securities will bear
interest; (6) the times at which any such interest will be payable; (7) any
provisions relating to optional or mandatory redemption of the Securities; (8)
if other than denominations of $1,000 and any integral multiple thereof, the
denominations in which the Securities are authorized to be issued; (9) the place
or places at which ARAMARK or Services will make payments of principal (and
premium, if any) and interest, if any; (10) the person to whom any Security of
such series will be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest; (11) any additional
covenants (or modifications to covenants set forth herein); (12) if other than
the principal amount thereof, the portion of the principal amount of Securities
of the series which shall be payable upon declaration of acceleration of the
Maturity; (13) the Offer to Purchase Price, the Applicable Average Life, the
Applicable Stated Maturity and the Acquisition Average Life applicable to the
Securities of any series; and (14) any other specific terms of the Securities,
which terms shall not be inconsistent with such Indentures.
One or more series of the Securities may be issued as Original Issue
Discount Securities. An "Original Issue Discount Security" is a Security,
including any zero-coupon Security, which is issued at a price lower than the
amount payable at the Stated Maturity thereof or which provides that upon
redemption or acceleration of the Maturity thereof an amount less than the
amount payable upon the Stated Maturity thereof and determined in accordance
with the terms thereof shall become due and payable.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Securities may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by ARAMARK or
Services, as the case may be, for such purpose with respect to any series of
Securities and referred to in an applicable Prospectus Supplement, without
service charge and upon payment of any taxes and other governmental charges as
described in the relevant Indenture. Such transfer or exchange will be effected
upon the Security Registrar or such transfer agent, as the case may be, being
satisfied with the documents of title and identity of the person making the
request. ARAMARK and Services have appointed the Trustee as Security Registrar
with respect to the Securities.
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In the event of any redemption in part, ARAMARK or Services, as the case
may be, shall not be required to (i) issue, register the transfer of or exchange
any Security during a period beginning at the opening of business 15 days before
the mailing of a notice of redemption of Securities of like tenor and of the
series of which such Security is a part, and ending at the close of business on
the date of such mailing and (ii) register the transfer of or exchange any
Security so selected for redemption, in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and premium (if any) on any Security will be made only against
surrender to the Paying Agent of such Security. Unless otherwise indicated in an
applicable Prospectus Supplement, principal of and any premium, if any, and
interest on Securities will be payable, subject to any applicable laws and
regulations, at the office of such Paying Agent or Paying Agents as ARAMARK or
Services, as the case may be, may designate from time to time, except that at
the option of ARAMARK or Services, as the case may be, payment of any interest
may be made by check mailed to the address of the person entitled thereto as
such address shall appear in the Security Register with respect to such
Securities. Unless otherwise indicated in an applicable Prospectus Supplement,
payment of interest on a Security on any Interest Payment Date will be made to
the person in whose name such Security (or a Predecessor Security) is registered
at the close of business on the Regular Record Date for such interest. Unless
otherwise indicated in an applicable Prospectus Supplement, the corporate trust
office of The Bank of New York in The City of New York will be designated
ARAMARK's and Services' sole Paying Agent for payments with respect to
Securities of each series.
All moneys paid by ARAMARK or Services to a Paying Agent for the payment of
the principal of and premium, if any, or interest on any Security of any series
which remain unclaimed at the end of two years after such principal, premium, if
any, or interest shall have become due and payable will be repaid to ARAMARK and
Services, as the case may be, and the holder of such Security will thereafter
look only to ARAMARK or Services, as the case may be, for payment thereof.
CERTAIN COVENANTS APPLICABLE TO SUBORDINATED SECURITIES AND GUARANTEED
SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, the
following covenants are applicable to Subordinated Securities and Guaranteed
Securities.
Mergers, Consolidations and Certain Sales and Purchases of Assets. ARAMARK
(i) shall not consolidate with or merge with or into any Person who is not a
Subsidiary or permit any Person who is not a Subsidiary to consolidate with or
merge with or into ARAMARK or any Subsidiary; (ii) shall not directly or
indirectly transfer, convey, sell, lease or otherwise dispose of all or
substantially all of its assets as an entirety; and (iii) shall not, and shall
not permit any Subsidiary to, acquire Capital Stock of any other Person who is
not a Subsidiary such that such Person becomes a Subsidiary or directly or
indirectly purchase, lease or otherwise acquire all or substantially all of the
assets of any Person as an entirety or any existing business (whether existing
as a separate entity, subsidiary, division, unit or otherwise) of any Person,
unless (with respect to this clause (iii)) either (X) the amount of
consideration (including any Indebtedness assumed by or which becomes an
obligation of ARAMARK or such Subsidiary in connection therewith and the fair
market value of property other than cash, as determined in good faith by the
Board of Directors) paid for such Capital Stock or assets of any Person is less
than or equal to 1% of Consolidated Tangible Assets as of the most recently
available quarterly or annual consolidated balance sheet of ARAMARK or (Y) the
amount of consideration (including any Indebtedness assumed by or which becomes
an obligation of ARAMARK or such Subsidiary in connection therewith and the fair
market value of property other than cash, as determined in good faith by the
Board of Directors) paid for such Capital Stock or assets plus the aggregate
amount of consideration (including any Indebtedness assumed by or which becomes
an obligation of ARAMARK or such Subsidiary in connection therewith and the fair
market value of property other than cash, as determined in good faith by the
Board of Directors) paid by ARAMARK or its Subsidiaries for other such
acquisitions (excluding acquisitions referred to in clause (X) and excluding
acquisitions permitted below and excluding any acquisitions in respect of which
ARAMARK makes an Offer to Purchase in accordance with the provisions of the
following paragraph) consummated during the prior 12 months does not exceed 10%
of the Consolidated Tangible Assets of ARAMARK as of the most recently available
quarterly or annual consolidated balance sheet of ARAMARK. Notwithstanding the
above, any such transaction described above may occur if: (1) in the case
ARAMARK or Services shall consolidate with or merge with or into
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another Person or shall directly or indirectly transfer, convey, sell, lease or
otherwise dispose of all or substantially all of its assets as an entirety, the
successor company shall be a domestic corporation, partnership, or trust and
shall expressly assume the obligations of ARAMARK or Services, as the case may
be, under the Indenture; (2) immediately before and after giving effect to such
transaction and treating any Indebtedness which becomes an obligation of ARAMARK
or a Subsidiary as a result of such transaction as having been incurred by
ARAMARK or such Subsidiary at the time of the transaction, no default shall have
happened and be continuing; and (3) immediately after giving effect to such
transaction or, if applicable, the portion of such transaction that exceeds the
amount of consideration otherwise permitted under clause (iii) above, the
Consolidated Cash Flow Ratio of ARAMARK or, if applicable, a successor company
for the immediately preceding four full fiscal quarters, for which quarterly or
annual consolidated financial statements of ARAMARK are available on a pro forma
basis, as if such transaction had taken place at the beginning of such four full
fiscal quarters, is equal to or greater than 2.0 to 1 or such other ratios
specified in the applicable Prospectus Supplement.
No default in the performance, or breach, of the Mergers, Consolidations
and Certain Sales and Purchases of Assets covenant shall be deemed to have
occurred so as to result in an Event of Default with respect to the Securities
of any series by reason of any merger, consolidation, divestiture, sale,
disposition or acquisition described above, unless and until ARAMARK fails to
make an Offer to Purchase within five Business Days of any such merger,
consolidation, divestiture, sale, disposition or acquisition at a price equal to
the Offer to Purchase Price. (Section 801 of the Subordinated Indenture and
Section 801 of the Guaranteed Indenture)
Provision of Financial Statements. For so long as ARAMARK is subject to the
Exchange Act, ARAMARK shall file with the Commission the annual reports,
quarterly reports and other documents (the "Documents") on or prior to the
respective dates (the "Required Filing Dates") such Documents are required to be
so filed under the Exchange Act. If ARAMARK is not required to file Documents
under the Exchange Act, ARAMARK shall prepare quarterly and annual financial
statements including any notes thereto in accordance with generally accepted
accounting principles (and with respect to any annual financial statement,
obtain an auditors' report by a firm of established national reputation), and a
quarterly and annual "Management's Discussion and Analysis of Financial
Condition and Results of Operations," prepared substantially in accordance with
the requirements of the Exchange Act or any successor provision thereto
(collectively with the quarterly and annual financial statements, the
"Alternative Documents"). ARAMARK shall (X) within 30 days of each Required
Filing Date (i) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, without cost to such Holders, and (ii) file
with the Trustee copies of the Documents or the Alternative Documents and (Y) if
filing such Documents by ARAMARK with the Commission is not required under the
Exchange Act, promptly upon written request supply copies of Alternative
Documents to any legitimate prospective Holder. (Section 1008 of the
Subordinated Indenture and Section 1009 of the Guaranteed Indenture)
Limitation on Restricted Payments. As long as the Securities of any series
are outstanding ARAMARK (i) shall not, directly or indirectly, declare or pay
any dividend or make any distribution in cash or property, in respect of any
class of its Capital Stock, or to the holders of any class of its Capital Stock
(including pursuant to a merger or consolidation of ARAMARK, but excluding any
dividends or distributions payable solely in shares of its Capital Stock or in
options, warrants or other rights to acquire its Capital Stock), (ii) shall not,
and shall not permit any Subsidiary to, directly or indirectly, purchase, redeem
or otherwise acquire or retire for value (a) any Capital Stock of ARAMARK or (b)
any options, warrants or right to purchase or acquire shares of Capital Stock of
ARAMARK, (iii) shall not after the date of the Indentures make, or permit any
Subsidiary to make, any loan, advance, capital contribution to or investment in,
or payment on a Guarantee of any obligation of, any Affiliate, other than
ARAMARK, a Subsidiary or an Affiliate that becomes a Subsidiary by reason of any
such payment and (iv) shall not, and shall not permit any Subsidiary to,
directly or indirectly, declare or pay any dividend or make any distribution in
cash or property, in respect of any Minority Interest hereinafter created
(excluding any dividends or distributions payable solely in shares of Capital
Stock of such Subsidiary or in options, warrants or other right to acquire such
Capital Stock) (except as further excluded below, the transactions described in
clauses (i) through (iv), only to the extent they exceed in the aggregate in any
fiscal year 3% of Consolidated Tangible Assets as of the most recently available
annual consolidated balance sheet of ARAMARK, are referred to herein as
"Restricted Payments"), if at the time thereof: (1) a default, or an event that
with the lapse of time or the giving of notice, or both, would constitute a
default, shall have occurred and is continuing, or (2) such transaction
constitutes a Restricted Payment and upon giving effect to such Restricted
Payment, the aggregate of all Restricted Payments from May 15, 1989 exceeds the
sum of: (a) 50% of cumulative Consolidated Net Income (or, in the case
cumulative Consolidated Net Income shall be negative, minus 100% of such
deficit) for the period from September 30, 1988 to the end of the most recently
available quarterly or annual consolidated
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income statements of ARAMARK; provided, however, that the net income (loss) of
any Person acquired by ARAMARK in a pooling-of-interests transaction for any
period prior to the date of such transaction shall not be included in the
calculation of cumulative Consolidated Net Income; and (b) 100% of the aggregate
net proceeds, including the fair value of property other than cash, from the
issuance of Capital Stock of ARAMARK (and, in the event ARAMARK merges or
consolidates with another Person in a transaction in which the outstanding
common stock of ARAMARK prior to the transaction is canceled, the Consolidated
Net Worth of such other Person but not less than zero) and warrants, rights or
options on Capital Stock and the principal amount of Indebtedness of ARAMARK
that has been converted into Capital Stock of ARAMARK after the date of the
original issuance of securities of such series.
Restricted Payments shall not include the following: (i) the payment of any
dividend within 60 days after declaration thereof if at the declaration date
such payment would have complied with the foregoing provisions; (ii) any
purchase, repurchase, redemption, defeasance or other acquisition or retirement
of ARAMARK's Series Preferred Stock and dividends paid in respect thereof; or
(iii) payments in redemption of Capital Stock or options to purchase Capital
Stock but only to the extent that the cash payments (for either direct cash
payments or for cash principal payments on notes issued in connection with any
such redemption of Capital Stock or options), in respect of such Capital Stock
shall not exceed in any fiscal year 1% of Consolidated Tangible Assets as of the
most recently available quarterly or annual consolidated balance sheet of
ARAMARK.
No default in the performance, or breach, of this covenant shall be deemed
to have occurred so as to result in an Event of Default with respect to the
Securities of such series by reason of any Restricted Payment, (A) if the
Consolidated Cash Flow Ratio for the immediately preceding four full fiscal
quarters for which quarterly or annual consolidated financial statements of
ARAMARK are available, on a pro forma basis, as if such Restricted Payment (or
portion thereof) made after the end of such four full fiscal quarters had been
made at the beginning of such four full fiscal quarters is equal to or greater
than 2.0 to 1 or such other ratios specified in the applicable Prospectus
Supplement; or (B) unless and until ARAMARK fails to make an Offer to Purchase
the Securities within five Business Days of such Restricted Payment at a price
equal to the Offer to Purchase Price. (Section 1009 of the Subordinated
Indenture and Section 1010 of the Guaranteed Indenture)
Limitation on Certain Security Interests. The Indentures provide that
ARAMARK may not create, incur or permit to exist any security interest in shares
of Capital Stock of Services (except those security interests arising with
respect to Indebtedness of Services), without making effective provision whereby
the Securities will be secured equally and ratably with (or prior to) such
security interest; provided, however, that the foregoing shall not apply with
respect to a security interest arising with respect to indebtedness of any
Subsidiary. Compliance by ARAMARK with the foregoing may be waived by the
holders of not less than a majority of the principal amount of Securities of
each series at the time outstanding. The limitation on certain security
interests would automatically terminate in the event of a merger or
consolidation of ARAMARK and Services or the sale of substantially all of the
assets of Services or ARAMARK to the other. (Section 1006 of the Subordinated
Indenture and Section 1007 of the Guaranteed Indenture) See "The Credit
Agreement."
REDEMPTION
If the Securities of a series provide for mandatory redemption by ARAMARK
or Services, as the case may be, or redemption at the election of ARAMARK or
Services, as the case may be, unless otherwise provided in the applicable
Prospectus Supplement, such redemption shall be on not less than 30 nor more
than 60 days' notice and, in the event of redemption in part, the Securities to
be redeemed will be selected by the Trustee in such usual manner as it shall
deem fair and appropriate. Notice of such redemption will be mailed to holders
of Securities of such series to their last addresses as they appear on the
register of the Securities of such series.
DEFEASANCE
The Prospectus Supplement will state if any defeasance provision will apply
to the Securities of the Series offered thereby.
The Indentures provide, if such provision is made applicable to the
Securities of any series pursuant to Section 301 of the Indentures, that ARAMARK
or Services, as the case may be, may elect either (A) to defease and be
discharged from any and all obligations with respect to such Securities (except
for the obligations to register the transfer or exchange of such Securities, to
replace temporary or mutilated, destroyed, lost or stolen
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Securities, to maintain an office or agency in respect of the Securities and to
hold moneys for payment in trust) ("defeasance") or (B) to be released from its
obligations with respect to such Securities under Section 501(6) and 1007
through 1010 of the Guaranteed Indenture or Sections 1006 through 1010 of the
Subordinated Indenture (being the cross-default provision described in clause
(vi) under "Events of Default" and the restrictions described under "Certain
Covenants Applicable to Subordinated Securities and Guaranteed Securities" and,
in the case of Subordinated Securities, "Terms Applicable to the Subordinated
Securities --Certain Additional Covenants Applicable to Subordinated Securities"
(covenant defeasance")), upon the deposit with the Trustee (or other qualifying
trustee), in trust for such purpose, of money and/or U.S. Government Obligations
which through the payment of principal and interest in accordance with their
terms will provide money in an amount sufficient to pay the principal of (and
premium, if any) and interest on such Securities, and any mandatory sinking fund
or analogous payments thereon, on the scheduled due dates therefor. Such a trust
may be established only if, among other things, ARAMARK or Services, as the case
may be, has delivered to the Trustee an opinion of counsel (as specified in the
Indentures) to the effect that the Holders of such Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred. Such
opinion, in the case of defeasance under clause (A) above, must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
Federal income tax law occurring after the date of the Indentures. The
Prospectus Supplement may further describe the provisions, if any, permitting
such defeasance or covenant defeasance with respect to the Securities of a
particular series. (Article Thirteen of the Guaranteed Indenture and Article
Fourteen of the Subordinated Indenture)
SOLELY CORPORATE OBLIGATIONS
No recourse for payment of principal of or interest on any Security or for
any claim based on any Security or the lndentures shall be had against the
Trustee, the Paying Agent, the Security Registrar or any director, officer or
stockholder of ARAMARK or Services.
GOVERNING LAW
The Indentures and the Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
TERMS APPLICABLE TO THE SUBORDINATED SECURITIES
MODIFICATION OF THE SUBORDINATED INDENTURE
The Subordinated Indenture contains provisions permitting ARAMARK and the
Trustee, with the consent of holders of not less than 66 2/3% in principal
amount of the debt securities which are affected by the modification, to modify
the Subordinated Indenture or any supplemental indenture or the rights of the
holders of the debt securities issued under such Indenture; provided that no
such modification may, without the consent of the holder of each outstanding
debt security affected thereby, (a) change the Stated Maturity of the principal
of, or any installment of principal of or interest, if any, on, any Security,
(b) reduce the principal amount of, or premium or rate of interest, if any, on,
any Security, (c) reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the maturity thereof, (d) change the place
or currency of payment of principal of, or premium or interest, if any, on, any
Security, (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security, (f) reduce the percentage in
principal amount of Outstanding Securities of any series, the consent of whose
holders is required for modification or amendment of the Subordinated Indenture
or for waiver of compliance with certain provisions of the Subordinated
Indenture or for waiver of certain defaults, or (g) modify any of the provisions
enumerated under "Terms Applicable to the Subordinated Securities Modification
of the Subordinated Indenture," except to increase any such percentage or to
provide that certain other provisions of the Subordinated Indenture cannot be
modified or waived without the consent of the Holder of each Outstanding
Security affected thereby. (Section 902 of the Subordinated Indenture)
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SUBORDINATION
The indebtedness evidenced by the Subordinated Securities (including
principal and interest) will be subordinated in right of payment to all present
and future Senior Indebtedness. (Section 1301 of the Subordinated Indenture)
"Senior Indebtedness" is defined in the Subordinated Indenture to mean
"principal of, premium, if any, and interest on: (1) all indebtedness incurred
or Guaranteed by ARAMARK, either before or after the date hereof, which is
evidenced by an instrument of indebtedness or reflected on the accounting
records of ARAMARK as a payable (excluding ARAMARK's 8 1/2% Subordinated Notes
Due 2003, 10% Subordinated Notes Due 2000, 10% Subordinated Debentures Due 2000,
13% Subordinated Debentures Due 1997 and 12 1/2% Subordinated Convertible
Installment Notes due 2000, all of which shall rank pari passu with the
Subordinated Securities, and any other debt which by the terms of the instrument
creating or evidencing the same is not superior in right of payment to the
Subordinated Securities) including, without limitation, as Senior Indebtedness
(a) any amount payable with respect to any lease, conditional sale or
installment sale agreement or other financing instrument or agreement which in
accordance with generally accepted accounting principles is, at the date hereof
or at the time the lease, conditional sale or installment sale agreement or
other financing instrument or agreement is entered into, or assumed or
Guaranteed by, directly or indirectly, ARAMARK, required to be reflected as a
liability on the face of the balance sheet of ARAMARK and (b) any amounts
payable in respect to any interest rate exchange agreement, currency exchange
agreement or similar agreement and (c) any subordinated indebtedness of a
corporation merged with or into or acquired by ARAMARK and (2) any renewals or
extensions or refunding of any such Senior Indebtedness or evidences of
indebtedness issued in exchange for such Senior Indebtedness." (Section 101 of
the Subordinated Indenture)
The Subordinated Indenture provides that, in the event of dissolution,
winding up, liquidation or reorganization of ARAMARK, all Senior Indebtedness
must be paid in full, or provision made for such payment, before any payment or
distribution is made upon principal of or interest on Subordinated Securities.
(Section 1302 of the Subordinated Indenture) By reason of such subordination, in
the event of liquidation or insolvency, creditors of ARAMARK who are holders of
Senior Indebtedness, which, as indicated above, would include trade creditors
and other general creditors of ARAMARK, may recover more, ratably, than the
holders of the Subordinated Securities. In addition, such subordination will
prevent ARAMARK from making any payment with respect to the Subordinated
Securities in the event and during the continuation of any default with respect
to Senior Indebtedness that would permit or automatically effect acceleration of
the maturity thereof, or if a payment with respect to the Subordinated
Securities would result in any such event of default with respect to Senior
Indebtedness, or if any payment with respect to Senior Indebtedness is then due
and payable. (Section 1305 of the Subordinated Indenture) The Subordinated
Indenture does not limit the aggregate amount of Senior Indebtedness which may
be issued. See "Certain Additional Covenants Applicable to Subordinated
Securities" for certain other restrictions.
EVENTS OF DEFAULT
An "Event of Default" with respect to Subordinated Securities of any series
is defined in the Subordinated Indenture to mean, among other things: (i)
failure to pay principal of (and premium, if any, on) any Subordinated Security
of such series when due, including by reason of an Offer to Purchase that has
been mailed; (ii) failure to pay interest on any Subordinated Security of such
series when due and continuance of such failure for 30 days; (iii) failure by
ARAMARK to comply with the provisions described under "Certain Covenants
Applicable to Subordinated Securities and Guaranteed Securities -- Mergers,
Consolidations and Certain Sales and Purchases of Assets" and "-- Limitation on
Restricted Payments;" (iv) failure to make any sinking fund payment, if any,
applicable to the Securities of such series; (v) failure by ARAMARK to perform
any other covenant in the Subordinated Indenture and continuance of such failure
for 60 days after notice given to ARAMARK by the Trustee or to ARAMARK and the
Trustee by the Holders of at least 25% in principal amount of the Subordinated
Securities of such series at the time outstanding; (vi) a default under any
indebtedness for money borrowed by ARAMARK or any Subsidiary in excess of
$10,000,000, if such indebtedness is not discharged, or such acceleration is not
annulled, within 10 days after notice given to ARAMARK by the Trustee or to
ARAMARK and the Trustee by the Holders of at least 25% in principal amount of
the Subordinated Securities of such series; and (vii) certain events of
bankruptcy, insolvency or reorganization of ARAMARK or any Significant
Subsidiary. (Section 501 of the Subordinated Indenture)
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ARAMARK is required to furnish to the Trustee within 120 days after the end
of each fiscal year a statement of certain officers of ARAMARK as to whether
such officers have obtained knowledge of any default under the Subordinated
Indenture during such fiscal year. (Section 1004 of the Subordinated Indenture)
The Trustee or the Holders of 25% in principal amount of the outstanding
Subordinated Securities of any series may declare to be due and payable
immediately, by a notice in writing to ARAMARK (and to the Trustee if given by
Holders of Subordinated Securities), upon the happening of any Event of Default
with respect to the Subordinated Securities of such series, all unpaid principal
on the Subordinated Securities of such series outstanding at that time. (Section
502 of the Subordinated Indenture) Upon any such declaration, all such unpaid
principal will become immediately due and payable on all outstanding
Subordinated Securities of any series. (Section 502 of the Subordinated
Indenture) The Holders of not less than a majority in principal amount of the
outstanding Subordinated Securities of any series are authorized to waive any
past default and its consequences, except a default in the payment of principal
of (and premium, if any, on) or interest on any Subordinated Security, or a
default with respect to a covenant or provision which cannot be modified or
amended without the consent of the Holder of each outstanding Subordinated
Security of any series affected. (Section 513 of the Subordinated Indenture)
Subject to the provisions of the Indenture relating to the duties of the
Trustee, the Trustee is under no obligation to exercise any of its rights or
powers under the Subordinated Indenture at the request or direction of any of
the Holders of Subordinated Securities of any series unless such Holders have
offered to the Trustee reasonable indemnity. (Section 603(e) of the
Subordinated Indenture) Subject to all provisions of the Subordinated Indenture
and applicable law, the Holders of a majority in principal amount of the
Subordinated Securities of any series outstanding at that time have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. (Section 512 of the Subordinated Indenture)
CERTAIN ADDITIONAL COVENANTS APPLICABLE TO SUBORDINATED SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, the
following covenant, in addition to the covenants set forth under "Certain
Covenants Applicable to Subordinated Securities and Guaranteed Securities, "
shall be applicable to the Subordinated Securities of any series.
Limitation on Layered Indebtedness and Subsidiary Preferred Stock. ARAMARK
shall not (i) permit any Restricted Subsidiary to incur any Indebtedness that
would rank subordinate in right of payment to any other Indebtedness of such
Restricted Subsidiary or to issue any Preferred Stock or (ii) incur any
Indebtedness or, if ARAMARK and Services merge with or consolidate into each
other and such Successor Company becomes the primary obligor with respect to any
significant portion of the then existing consolidated indebtedness owing to a
bank or syndicate of banks, Incur any indebtedness which is subordinate in right
of payment to any other indebtedness for borrowed money of such Successor
Company, unless, in either case, such indebtedness is Pari Passu Debt or is
subordinate in right of payment to the Subordinated Securities of any series.
The foregoing limitation shall not apply to (A) distinctions between categories
of Indebtedness which exist by reason of any liens arising or created in respect
of some but not all Indebtedness or (B) any intercreditor agreements (to which
ARAMARK is not a party) among different classes of creditors of ARAMARK.
Notwithstanding the foregoing, ARAMARK (i) may Incur any subordinated
Indebtedness in connection with the funding of a payment in redemption of
Capital Stock as is permitted under the provisions described under "Certain
Covenants Applicable to Subordinated Securities and Guaranteed Securities --
Limitation on Restricted Payments" above; (ii) may Guarantee any Indebtedness of
any Subsidiary; (iii) may Incur any Indebtedness owed by ARAMARK to any
Subsidiary (provided that such Indebtedness is at all times held by the
Subsidiary of ARAMARK); provided, however, that for purposes of this covenant,
upon either (x) the transfer or other disposition by such Subsidiary of any
Indebtedness so permitted to a Person other than ARAMARK or another Subsidiary
of ARAMARK or (y) the issuance (other than directors' qualifying shares), sale,
lease, transfer or other disposition of shares of Capital Stock (including by
consolidation or merger) of such Subsidiary to a Person other than ARAMARK or
another such wholly-owned Subsidiary such that the Subsidiary is no longer a
Subsidiary, the provisions of the clause (iii) shall no longer be applicable to
such indebtedness and such indebtedness shall be deemed to have been Incurred at
the time of such transfer or other disposition; (iv) may, and may permit any
Restricted Subsidiary to, Incur any Indebtedness of a Person through the
acquisition of such Person, subject to the Mergers, Consolidations and Certain
Sales and Purchases of Assets covenant, so long as such Indebtedness was
incurred by such Person prior to the time (A) such Person became a Subsidiary,
(B) such Person merges with or consolidates with or into a Subsidiary or (C)
another Subsidiary merges with or into such Person (in a
10
<PAGE>
transaction in which such Person becomes a Subsidiary), and such Indebtedness
was not Incurred in anticipation of such acquisition and was outstanding prior
to such acquisition; (v) may, and may permit any Restricted Subsidiary to, Incur
subordinated Indebtedness in principal amount and issue Preferred Stock having a
liquidation value which in aggregate does not exceed 2% of Consolidated Tangible
Assets as of the most recently available quarterly or annual consolidated
balance sheet outstanding; and (vi) may Incur any Indebtedness in contemplation
of a refunding or refinancing of any existing Pari Passu Debt; provided,
however, that such new Indebtedness (A) is Pari Passu Debt or is subordinate in
right of payment to the Subordinated Securities, and (B) does not exceed the
principal amount of Indebtedness so refunded or refinanced. (Section 1010 of the
Subordinated Indenture)
TERMS APPLICABLE TO THE GUARANTEED SECURITIES
MODIFICATION OF THE GUARANTEED INDENTURE
The Guaranteed Indenture contains provisions permitting Services, ARAMARK
and the Guaranteed Trustee, with the consent of Holders of not less than 66 2/3%
in principal amount of the Guaranteed Securities which are affected by the
modification, to modify the Guaranteed Indenture or any supplemental indenture
or the rights of the holders of the debt securities issued under such Indenture;
provided that no such modification may, without the consent of the holder of
each outstanding debt security affected thereby, (a) change the stated maturity
date of the principal of, or any installment of principal of or interest, if
any, on, any Guaranteed Security, (b) reduce the principal amount of, or premium
or rate of interest, if any, on, any Security, (c) reduce the amount of
principal of an original issue discount Guaranteed Security payable upon
acceleration of the maturity thereof, (d) change the place or currency of
payment of principal of, or premium or interest, if any, on, any Guaranteed
Security, (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Guaranteed Security, (f) reduce the percentage
in principal amount of Outstanding Guaranteed Securities of any series the
consent of whose holders is required for modification or amendment of the
Guaranteed Indenture or for waiver of compliance with certain provisions of the
Guaranteed Indenture or for waiver of certain defaults, or (g) modify any of the
provisions enumerated under "Terms Applicable to the Guaranteed Securities --
Modification of the Guaranteed Indenture" except to increase any such percentage
or to provide that certain other provisions of the Guaranteed Indenture cannot
be modified or waived without the consent of the Holder of each Outstanding
Security affected thereby. (Section 902 of the Guaranteed Indenture)
EVENTS OF DEFAULT
An "Event of Default" with respect to any series of Guaranteed Securities
is defined in the Guaranteed Indenture to mean, among other things: (i) failure
to pay principal of (and premium, if any, on) any Guaranteed Security of such
series when due, including by reason of the Offer to Purchase that has been
mailed; (ii) failure to pay interest on any Guaranteed Security of such series
when due and continuance of such failure for 30 days; (iii) failure by ARAMARK
or Services to comply with the provisions described under "Certain Covenants
Applicable to Subordinated Securities and Guaranteed Securities -- Mergers,
Consolidations and Certain Sales and Purchases of Assets" and "Certain Covenants
Applicable to Subordinated Securities and Guaranteed Securities -- Limitation on
Restricted Payments;" (iv) failure to make any sinking fund payment applicable
to the Guaranteed Securities of such series; (v) failure by ARAMARK or Services
to perform any other covenant in the Guaranteed Indenture and continuance of
such failure for 60 days after notice given to ARAMARK and Services by the
Trustee or to Services and the Trustee by the Holders of at least 25% in
principal amount of the Guaranteed Securities of such series at the time
outstanding; (vi) a default under any indebtedness for money borrowed by
Services, ARAMARK or any Subsidiary of ARAMARK in excess of $10,000,000, if such
indebtedness is not discharged, or such acceleration is not annulled, within 10
days after notice given to Services by the Trustee or to Services and the
Trustee by the Holders of at least 25% in principal amount of the Guaranteed
Security of such series; and (vii) certain events of bankruptcy, insolvency or
reorganization of ARAMARK, Services or any Significant Subsidiary. (Section 501
of the Guaranteed Indenture)
ARAMARK and Services are required to furnish to the Trustee within 120 days
after the end of each fiscal year a statement of certain officers of ARAMARK and
Services as to whether such officers have obtained knowledge of any default
under the Indenture during such fiscal year. (Section 1004 and Section 1005 of
the Guaranteed Indenture)
11
<PAGE>
The Trustee or the Holders of 25% in principal amount of the outstanding
Guaranteed Securities of each series may declare to be due and payable
immediately, by a notice in writing to Services (and to the Guaranteed Trustee
if given by Holders), upon the happening of any Event of Default with respect to
the Guaranteed Securities of such series, all unpaid principal on the Guaranteed
Securities of such series outstanding at that time. (Section 50 2 of the
Guaranteed Indenture) Upon any such declaration, all such unpaid principal will
become immediately due and payable on all outstanding Guaranteed Securities of
such series. (Section 502 of the Guaranteed Indenture) The Holders of not less
than a majority in principal amount of the outstanding Guaranteed Securities of
such series are authorized to waive any past default and its consequences,
except a default in the payment of principal of (and premium, if any, on) or
interest on any Guaranteed Security, or a default with respect to a covenant or
provision which cannot be modified or amended without the consent of the Holder
of each outstanding Guaranteed Security affected. (Section 513 of the Guaranteed
Indenture) Subject to the provisions of the Guaranteed Indenture relating to the
duties of the Trustee, the Trustee is under no obligation to exercise any of its
rights or powers under the Guaranteed Indenture at the request or direction of
any of the Holders of the Guaranteed Securities of such series unless such
Holders have offered to the Trustee reasonable indemnity. (Section 603 of the
Guaranteed Indenture) Subject to all provisions of the Guaranteed Indenture and
applicable law, the Holders of a majority in principal amount of the Guaranteed
Securities of such series outstanding at that time have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee. (Section
512 of the Guaranteed Indenture)
GUARANTEE
ARAMARK will Guarantee the punctual payment of the principal of, premium,
if any, and interest on the Guaranteed Securities, when and as the same shall be
due and payable. The Guarantee is absolute and unconditional, irrespective of
any circumstance that might otherwise constitute a legal or equitable discharge
of a surety or guarantor. To evidence the Guarantee, a Guarantee, executed by
ARAMARK will be endorsed on each Guaranteed Security.
CERTAIN DEFINITIONS
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Affiliate shall
include, for purposes of the provisions described under "Certain Covenants
Applicable to Subordinated Securities and Guaranteed Securities -- Limitation on
Restricted Payments," without limitation, any Person owning (a) 5% or more of
ARAMARK's outstanding Common Stock, or (b) 5% or more of ARAMARK's Voting Stock.
"Consolidated Cash Flow Available for Fixed Charges" means with respect to
ARAMARK and its Subsidiaries for any period Consolidated Net Income for such
period plus the aggregate amounts deducted in determining Consolidated Net
Income for such period in respect of (i) income taxes, (ii) Consolidated
Interest Expense, (iii) depreciation, amortization and other similar non-cash
charges and (iv) minority interest as determined in accordance with generally
accepted accounting principles.
"Consolidated Cash Flow Ratio" means with respect to ARAMARK and its
Subsidiaries for any period the ratio of (i) Consolidated Cash Flow Available
for Fixed Charges for the period for which such calculation is made to (ii)
Consolidated Interest Expense for such period; provided, that in making such
computation, the Consolidated Interest Expense shall be reduced by the interest
expense attributable to any Indebtedness not outstanding at the end of the
period.
"Consolidated Interest Expense" means for any period the aggregate interest
expense (net of interest income) of ARAMARK and its Subsidiaries for such period
including, without limitation (i) the portion of any obligation in respect of
any Capital Lease Obligation allocable to interest expense in accordance with
generally accepted accounting principles and (ii) the portion of any debt
discount that shall be amortized in such period.
12
<PAGE>
"Consolidated Net Income means for any period the consolidated net income
(or loss) of ARAMARK and its Subsidiaries determined in accordance with
generally accepted accounting principles, excluding any unusual items of gain or
loss.
"Consolidated Net Worth" of a Person other than ARAMARK means the
consolidated shareholders' equity of such Person and its subsidiaries, as
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Consolidated Tangible Assets" of ARAMARK and its Subsidiaries means total
assets of ARAMARK and its Subsidiaries less goodwill, all determined in
accordance with generally accepted accounting principles.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, assume, Guarantee, incur or otherwise become liable in
respect of such Indebtedness or other obligation or the recording, as required
pursuant to generally accepted accounting principles, of any such Indebtedness
or other obligation on the consolidated balance sheet of any such Person (and
"lncurrence," "Incurred" and "Incurring" shall have meanings correlative to the
foregoing); provided, however, that a change in generally accepted accounting
principles that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness.
"Indebtedness" shall mean (without duplication), with respect to any
Person, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (iii) every obligation of such Person issued
or assumed as the deferred purchase price of property (but excluding trade
accounts payable or accrued liabilities arising in the ordinary course of
business which are not overdue by more than 90 days or which are being contested
in good faith), (iv) all Capital Lease Obligations of such Person and (v) every
obligation of the type referred to in clauses (i) through (iv) of another Person
and all dividends of another Person for the payment of which, in either case,
such Person has Guaranteed or is responsible or liable, directly or indirectly,
as obligor, guarantor or otherwise.
"Minority Interests" means Capital Stock of a Restricted Subsidiary not
owned by ARAMARK or another Subsidiary.
"Offer to Purchase" means with respect to any series of Securities, a
written notice (referred to as the "Notice") delivered to the Trustee and given
by ARAMARK or Services, as the case may be, via first-class mail, postage
prepaid, to each Holder of Securities of such series at his address appearing in
the Security Register, stating that the Holder may elect to have his Securities
purchased by ARAMARK or Services, as the case may be, either in whole or in part
in integral multiples of $1,000 of principal amount, at the applicable purchase
price. The Notice shall specify a purchase date not less than 30 days nor more
than 60 days after the date of such Notice (referred to as the "Purchase Date").
The Notice shall contain all instructions and materials necessary to enable such
Holder to tender Securities of such series pursuant to an Offer to Purchase. The
Notice, which shall govern the terms of an Offer to Purchase, shall state:
(1) the Section of the lndenture under which the Offer to Purchase
is being made;
(2) that the Offer to Purchase is for any and all Securities of
such series, the applicable purchase price and the Purchase Date;
(3) the name and address of the Paying Agent and that Securities
of such series called for purchase must be surrendered to the Paying Agent
to collect the purchase price;
(4) that interest on any Security of such series not tendered or
tendered but not purchased by ARAMARK or Services, as the case may be, will
continue to accrue;
(5) that any Security of such series accepted for payment pursuant
to an Offer to Purchase shall cease to accrue interest after the Purchase
Date;
13
<PAGE>
(6) that each Holder of Securities of such series electing to have
a Security of such series purchased pursuant to an Offer to Purchase will be
required to surrender such Security to the Paying Agent at the address
specified in the Notice prior to the close of business on the Purchase Date;
and
(7) that Holders of Securities of such series will be entitled to
withdraw their election if the Paying Agent receives, not later than the
close of business on the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security of such series the Holder delivered for purchase, the
certificate number of the Security the Holder delivered and a statement that
such Holder is withdrawing his election to have the Securities purchased.
"Offer to Purchase Price" with respect to the Securities of any series
means the price or prices specified in the applicable Prospectus Supplement as
the price or prices at which an Offer to Purchase will be made in accordance
with the covenants described under "Certain Covenants Applicable to Subordinated
Securities and Guaranteed Securities -- Mergers, Consolidations and Certain
Sales and Purchases of Assets" and "-- Limitation on Restricted Payments."
"Pari Passu Debt" means any Indebtedness of ARAMARK for money borrowed
whether outstanding at the date hereof or incurred thereafter, that ranks pari
passu with the Subordinated Securities.
"Restricted Subsidiary" means any domestic corporation of which more than
80 percent of the outstanding Voting Stock shall, at the time as of which any
determination is being made, be owned by ARAMARK either directly or through
subsidiaries.
"Significant Subsidiary" means each and any Subsidiary which (i) accounted
for more than 5% of the consolidated revenues of ARAMARK and its Subsidiaries
for the fiscal year ended on the date of the most recently available audited
consolidated balance sheet; (ii) accounted for more than 5% of the Consolidated
Net Income of ARAMARK and its Subsidiaries for the fiscal year ended on the date
of the most recently available audited consolidated balance sheet; or (iii) was
the owner of more than 5% of the consolidated assets of ARAMARK and its
Subsidiaries as of the date of the most recently available audited consolidated
balance sheet.
"Voting Stock" means, with respect to any Person, Capital Stock (however
designated) having general voting power for the election of a majority of the
members of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time Capital Stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency). (Section 101 of the Subordinated Indenture and Section 101 of the
Guaranteed Indenture)
VALIDITY OF SECURITIES AND GUARANTEE
The validity of the Securities and Guarantee will be passed upon for
ARAMARK and Services by Martin W. Spector, Executive Vice President, Secretary
and General Counsel of ARAMARK and for the underwriters by Sullivan & Cromwell,
New York, New York. Mr. Spector owns 782,012 shares of Class B Common Stock of
ARAMARK.
EXPERTS
The audited consolidated financial statements of ARAMARK Corporation and
subsidiaries included in this Prospectus and the Schedules included in ARAMARK's
Annual Report on Form 10-K for the year ended September 30, 1994 incorporated
herein by reference have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their reports also included and incorporated herein
by reference. In their reports, that firm states that with respect to amounts
included for Versa Services Ltd. (ARAMARK's Canadian subsidiary), its opinion is
based on the reports of other auditors, namely Ernst & Young, Chartered
Accountants, whose reports are also included and incorporated herein by
reference. The financial statements and schedules referred to above have been
included herein in reliance upon the reports of said firms and upon the
authority of said firms as experts in accounting and auditing. Subsequent
audited financial statements of ARAMARK and the reports thereon of ARAMARK's
independent public accountants, to the extent incorporated herein by reference,
have been so incorporated in reliance upon the reports of those accountants and
upon the authority of those accountants as experts in accounting and auditing to
the extent such accountants have audited those financial statements and
consented to the use in this Prospectus of their reports thereon.
14
<PAGE>
PLAN OF DISTRIBUTION
ARAMARK or Services may sell the Securities to or through underwriters, and
also may sell the Securities directly to other purchasers or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of the Securities, underwriters may receive
compensation from ARAMARK or Services or from purchasers of the Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell the Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of the Securities may be deemed to be underwriters, and any
discounts or commissions received by them from ARAMARK or Services and any
profit on the resale of the Securities by them may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933 (the "Act"). Any such
underwriter or agent will be identified, and any such compensation received from
ARAMARK or Services will be described, in the Prospectus Supplement.
Under agreements which may be entered into by ARAMARK or Services,
underwriters and agents who participate in the distribution of the Securities
may be entitled to indemnification by ARAMARK and Services against certain
liabilities, including liabilities under the Act.
If so indicated in the Prospectus Supplement, ARAMARK and Services will
authorize underwriters or other persons acting as ARAMARK's and Services' agents
to solicit offers by certain institutions to purchase the Securities from
ARAMARK or Services pursuant to contracts providing for payment and delivery on
a future date. Institutions with which such contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all cases
such institutions must be approved by ARAMARK and Services. The obligations of
any purchaser under any such contract will be subject to the condition that the
purchase of the Securities shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
15
<PAGE>
SCHEDULE A
INDEX TO FINANCIAL STATEMENTS
PAGE
----
ARAMARK CORPORATION AND SUBSIDIARIES
Report of Independent Public Accountants F-2
Report of Chartered Accountants F-3
Consolidated Balance Sheets -
As of September 30, 1994 and October 1, 1993 F-4
Consolidated Statements of Income -
Fiscal Years 1994, 1993 and 1992 F-6
Consolidated Statements of Cash Flows -
Fiscal Years 1994, 1993 and 1992 F-7
Consolidated Statements of Shareholders Equity -
Fiscal Years 1994, 1993 and 1992 F-8
Notes to Consolidated Financial Statements F-11
ARAMARK CORPORATION AND SUBSIDIARIES (UNAUDITED)
Condensed Consolidated Balance Sheets -
As of December 30, 1994 and September 30, 1994 F-26
Condensed Consolidated Statements of Income -
Three Months Ended December 30, 1994 and December 31, 1993 F-27
Condensed Consolidated Statements of Cash Flows -
Three Months Ended December 30, 1994 and December 31, 1993 F-28
Notes to Condensed Consolidated Financial Statements F-29
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ARAMARK Corporation:
We have audited the accompanying consolidated balance sheets of ARAMARK
Corporation (a Delaware corporation) (formerly The ARA Group, Inc.) and
subsidiaries as of September 30, 1994 and October 1, 1993, and the related
consolidated statements of income, shareholders equity and cash flows for each
of the three fiscal years in the period ended September 30, 1994. These
consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of Versa Services Ltd., the Companys Canadian subsidiary, which
statements reflect assets representing 3.6% of consolidated assets as of both
September 30, 1994 and October 1, 1993, and revenues representing 5.6%, 6.3% and
7.4% of consolidated revenues for the fiscal years 1994, 1993 and 1992,
respectively. Those statements were audited by other auditors whose report has
been furnished to us and our opinion, insofar as it relates to the amounts
included for Versa Services Ltd., is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of ARAMARK Corporation and subsidiaries as of September
30, 1994 and October 1, 1993, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended September 30, 1994,
in conformity with generally accepted accounting principles.
As discussed in Note 6 to the consolidated financial statements, ARAMARK
Corporation changed its method of accounting for income taxes in fiscal 1994.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
November 7, 1994
F-2
<PAGE>
REPORT OF CHARTERED ACCOUNTANTS
To The Directors of Versa Services Ltd.:
We have audited the consolidated balance sheets of Versa Services Ltd. as at
September 28, 1994 and September 29, 1993 and the consolidated statements of
income and retained earnings and cash flows for the fifty-two week period ended
September 28, 1994, the fifty-two week period ended September 29, 1993, and the
fifty-three week period ended September 30, 1992 (not presented separately
herein). These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at September 28,
1994 and September 29, 1993, and the results of its operations and the changes
in its financial position for the fifty-two week period ended September 28,
1994, the fifty-two week period ended September 29,1993 and the fifty-three week
period ended September 30, 1992 in accordance with accounting principles
generally accepted in Canada.
ERNST & YOUNG
Chartered Accountants
Mississauga, Canada
November 16, 1994
F-3
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 AND OCTOBER 1, 1993
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 27,426 $ 27,801
Short-term investments held by the
Canadian subsidiary 16,203 -
Receivables (less allowances: 1994,
$12,423; 1993, $10,242) 433,550 388,768
Inventories 256,950 249,858
Prepayments and other current assets 69,865 63,381
- ----------------------------------------------------------------------------
Total current assets 803,994 729,808
- ----------------------------------------------------------------------------
Property and Equipment, at Cost:
Land, buildings and improvements 379,671 355,744
Service equipment and fixtures 888,134 783,393
Leased property under capital leases 8,204 8,204
- ----------------------------------------------------------------------------
1,276,009 1,147,341
Less-Accumulated depreciation 594,102 498,962
- ----------------------------------------------------------------------------
681,907 648,379
- ----------------------------------------------------------------------------
Goodwill 438,725 446,261
- ----------------------------------------------------------------------------
Other Assets 197,324 216,193
- ----------------------------------------------------------------------------
$2,121,950 $2,040,641
============================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of
long-term borrowings $ 9,391 $ 15,615
Accounts payable 372,908 329,129
Accrued payroll and
related expenses 142,911 132,045
Other accrued expenses
and current liabilities 231,991 208,677
- --------------------------------------------------------------------------------
Total current liabilities 757,201 685,466
- --------------------------------------------------------------------------------
Long-Term Borrowings:
Senior 697,695 544,971
Subordinated 290,414 474,875
Obligations under capital leases 3,231 4,443
- --------------------------------------------------------------------------------
991,340 1,024,289
Less-current portion 9,391 15,615
- --------------------------------------------------------------------------------
Total long-term borrowings 981,949 1,008,674
- --------------------------------------------------------------------------------
Deferred Income Taxes and Other
Noncurrent Liabilities 168,638 182,693
Minority Interest 10,812 18,084
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement 20,791 21,651
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Series C preferred stock, redemption
value $1,000; authorized: 40,000
shares; issued: 1994 - 16,949 shares;
1993 - 34,596 shares 16,949 34,596
Class A common stock, par value $.01;
authorized: 25,000,000 shares; issued:
1994 - 2,074,251 shares;
1993 - 2,068,396 shares 21 21
Class B common stock, par value $.01;
authorized: 150,000,000 shares;
issued: 1994 - 24,338,494 shares;
1993 - 24,276,512 shares 243 243
Earnings retained for use in the business 178,587 104,827
Cumulative translation adjustment 7,550 6,037
Impact of potential repurchase feature
of common stock (20,791) (21,651)
- --------------------------------------------------------------------------------
Total 182,559 124,073
- --------------------------------------------------------------------------------
$2,121,950 $2,040,641
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ARAMARK CORPORATIONAND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994, OCTOBER 1, 1993 AND OCTOBER 2,
1992
(dollars in thousands, except per share amounts)
- --------------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Revenues $5,161,578 $4,890,738 $4,865,343
- --------------------------------------------------------------------------------
Costs and Expenses:
Cost of services provided 4,686,086 4,432,840 4,412,374
Depreciation and amortization 143,763 130,511 125,798
Selling and general
corporate expense 70,196 63,406 69,760
Other expense (income) (5,792) (4,955) (4,174)
- --------------------------------------------------------------------------------
4,894,253 4,621,802 4,603,758
- --------------------------------------------------------------------------------
Operating income 267,325 268,936 261,585
Gain on Issuance of Stock by an Affiliate 4,658 - -
- --------------------------------------------------------------------------------
Earnings before interest
and income taxes 271,983 268,936 261,585
Interest Expense, net 108,499 125,671 137,862
- --------------------------------------------------------------------------------
Income before income taxes 163,484 143,265 123,723
Provision For Income Taxes 67,119 57,526 51,507
Minority Interest 1,332 1,405 1,518
- --------------------------------------------------------------------------------
Income Before Extraordinary Item
and Cumulative Effect of Change
in Accounting for Income Taxes 95,033 84,334 70,698
Extraordinary Item Due to Early
Extinguishments of Debt (net of
income taxes of $5,118 in 1994,
$4,660 in 1993 and $1,943 in 1992) 7,677 7,202 3,317
Cumulative Effect of Change in Accounting
for Income Taxes 1,277 - -
- --------------------------------------------------------------------------------
Net Income $ 86,079 $ 77,132 $ 67,381
================================================================================
Earnings Per Share:
Income before extraordinary
item and cumulative effect
of change in accounting for
income taxes $1.87 $1.64 $1.40
Net income $1.69 $1.49 $1.33
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994, OCTOBER 1, 1993 AND
OCTOBER 2, 1992
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 86,079 $ 77,132 $ 67,381
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation and amortization 143,763 130,511 125,798
Income taxes deferred (2,174) 6,058 13,695
Minority interest 1,332 1,405 1,518
Cumulative effect of
accounting change 1,277 - -
Gain on issuance of
stock by affiliate (4,658) - -
Extraordinary item 7,677 7,202 3,317
Changes in noncash working capital:
Receivables (40,557) (933) (31,451)
Inventories (6,915) (6,425) (9,901)
Prepayments (15,675) 53,288 10,265
Accounts payable 36,956 (11,395) 18,855
Accrued expenses 36,926 (198) 8,814
Changes in noncurrent liabilities (1,368) 8,541 (14,940)
Changes in other assets (6,445) 4,106 4,338
Other (9,186) (5,604) (6,822)
- --------------------------------------------------------------------------------
Net cash provided by
operating activities 227,032 263,688 190,867
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (145,935) (142,121) (157,313)
Disposals of property and equipment 11,525 11,348 11,073
Sale of investments 13,543 15,945 -
Divestiture of certain businesses 7,297 11,928 180,765
Increase in short-term investments (16,203) - -
Purchase of subsidiary stock (17,623) - -
Acquisition of certain businesses:
Working capital other
than cash acquired (3,066) 8,697 (25,450)
Property and equipment (573) (4,544) (32,896)
Additions to intangibles (6,734) (45,547) (75,085)
Assumed borrowings - 2,885 1,994
Other 7,758 (5,368) (3,241)
- --------------------------------------------------------------------------------
Net cash used in investing
activities (150,011) (146,777) (100,153)
- --------------------------------------------------------------------------------
Cash flows from financing
activities:
Proceeds from additional
long-term borrowings 167,329 108,174 5,076
Payment of long-term
borrowings including
premiums (210,511) (157,407) (85,647)
Redemption of preferred stock (17,647) (137) -
Proceeds from issuance of
common stock 12,416 9,462 8,675
Repurchase of common stock (25,729) (45,795) (14,644)
Payment of special dividend - (24,157) -
Payment of preferred stock dividend (1,917) - -
Other (1,337) (3,035) (126)
- --------------------------------------------------------------------------------
Net cash used in financing
activities (77,396) (112,895) (86,666)
- --------------------------------------------------------------------------------
Increase (decrease) in
cash and cash equivalents (375) 4,016 4,048
Cash and cash equivalents,
beginning of year 27,801 23,785 19,737
- --------------------------------------------------------------------------------
Cash and cash equivalents,
end of year $ 27,426 $ 27,801 $ 23,785
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Impact of
Potential
Series C Class A Class B Cumulative Repurchase
Preferred Common Common Capital Retained Translation Feature of
Stock Stock Stock Surplus Earnings Adjustment Common Stock
--------- ------- ------- -------- -------- ----------- -------------
Balance, October 1, 1993 $ 34,596 $21 $243 $ - $104,827 $6,037 $(21,651)
Net income 86,079
Dividends on preferred
stock (1,337)
Issuance of Class A
common stock to
employee benefit plans 1 8,881
Issuance of Class B
common stock 25 18,910
Retirement of common
and preferred stock (17,647) (1) (25) (27,791) (10,982)
Change during the
period 1,513 860
------- --- ---- -------- -------- ------ --------
Balance,
September 30, 1994 $16,949 $21 $243 $ - $178,587 $7,550 $(20,791)
======= === ==== ======== ======== ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED OCTOBER 1, 1993
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Impact of
Potential
Series C Class A Class B Cumulative Repurchase
Preferred Common Common Capital Retained Translation Feature of
Stock Stock Stock Surplus Earnings Adjustment Common Stock
--------- ------- ------- -------- -------- ----------- -------------
Balance, October 2, 1992 $ - $ 6 $ 53 $ - $113,091 $11,070 $(20,437)
Net income 77,132
Special dividend 34,733 (59,514)
Dividends on preferred
stock (883)
Issuance of Class A
common stock to
employee benefit plans 10,688
Issuance of Class B
common stock 11 18,420
Retirement of common
and preferred stock (137) (1) (3) (29,108) (24,801)
Common stock split 16 182 (198)
Change during the
period (5,033) (1,214)
------- --- ---- -------- -------- ------- --------
Balance,
October 1, 1993 $34,596 $21 $243 $ - $104,827 $ 6,037 $(21,651)
======= === ==== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED OCTOBER 2, 1992
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Impact of
Potential
Class A Class B Cumulative Repurchase
Common Common Capital Retained Translation Feature of
Stock Stock Surplus Earnings Adjustment Common Stock
------- ------- -------- -------- ----------- -------------
Balance, September 27, 1991 $5 $56 $ - $ 46,134 $12,081 $(17,662)
Net income 67,381
Issuance of Class A common stock to
employee benefit plans 1 8,619
Issuance of common stock 4 12,648
Retirement of common stock (7) (21,267) (424)
Change during the period (1,011) (2,775)
-- --- -------- -------- ------- --------
Balance, October 2, 1992 $6 $53 $ - $113,091 $11,070 $(20,437)
== === ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Effective October 10, 1994 the Company changed its name from The ARA Group, Inc.
to ARAMARK Corporation.
FISCAL YEAR
The Company's fiscal year is the fifty-two or fifty-three week period which ends
on the Friday nearest September 30th. The years ended September 30, 1994,
October 1, 1993 and October 2, 1992 are fifty-two, fifty-two and fifty-three
week periods, respectively.
PRINCIPLES OF CONSOLIDATION, ETC.
The consolidated financial statements include the accounts of the Company and
all its subsidiaries. All significant intercompany balances and transactions
have been eliminated and net income is reduced by the portion of income
applicable to minority shareholders of less than wholly-owned subsidiaries.
Certain 1993 items have been reclassified to conform to the 1994 presentation.
In fiscal 1995, the Company is required to adopt the provisions of Statement of
Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for
Postemployment Benefits," and SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." Adoption of these standards will not have a
material impact on the consolidated financial statements.
CURRENCY TRANSLATION
Gains and losses resulting from the translation of financial statements of non-
U.S. subsidiaries are reflected as a currency translation adjustment in
shareholders' equity. Currency transaction gains and losses included in
operating results for fiscal 1994, 1993 and 1992 were not significant.
CURRENT ASSETS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. At September 30, 1994,
securities having maturities in excess of three months, all of which were owned
by the Company's Canadian subsidiary, are classified as short-term investments
and are recorded at cost which approximates market value.
Inventories are valued at the lower of cost (principally the first-in, first-out
method) or market. The LIFO (last-in, first-out) method of determining cost is
used to value directly marketed work clothing and casual apparel. The stated
value of inventories determined using the LIFO method is not significantly
different from replacement or current cost. Personalized work apparel and
linens in service are recorded at cost and are amortized over their estimated
useful lives, approximately two years. In accordance with industry practice,
magazines and books are sold to retailers with the right to return unsold items
for ultimate credit from the publishers.
The components of inventories as of the respective year-ends are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
---- ----
Food 24.9% 29.0%
Work apparel, casual apparel and linens 60.9% 55.7%
Magazines and books 5.6% 4.7%
Parts, supplies and novelties 8.6% 10.6%
----- -----
100.0% 100.0%
----- -----
</TABLE>
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over their
estimated useful lives on a straight-line basis. Gains and losses on
dispositions are included in operating results. Maintenance and repairs are
charged to operations currently, and replacements and significant improvements
are capitalized. The estimated useful lives for the major categories of
property and equipment are 10 to 40 years for buildings and improvements and 3
to 10 years for service equipment and fixtures.
GOODWILL
Goodwill, which represents the excess of cost over fair value of the net assets
of acquired businesses, is being amortized on a straight-line basis principally
over 40 years. The Company develops operating income projections for each of
its lines of business and evaluates the recoverability and amortization period
of goodwill using these projections. Based upon management's current
assessment, the estimated remaining amortization period of goodwill is
appropriate and the remaining balance is fully recoverable. Accumulated
amortization at September 30, 1994 and October 1, 1993 is $113.7 million and
$97.4 million, respectively.
OTHER ASSETS
Other assets consist primarily of investments in less than 50% owned entities,
contract rights, customer lists, long-term receivables and noncurrent marketable
equity securities. Investments in which the Company owns more than 20% but less
than a majority are accounted for using the equity method. Contract rights and
customer lists are being amortized on a straight-line basis over the expected
period of benefit, 5 to 20 years. Noncurrent marketable equity securities are
stated at the lower of aggregate cost or market. At September 30, 1994 and
October 1, 1993 the cost and market value of the Company's noncurrent marketable
equity securities approximated $2 million and $5 million, respectively.
OTHER LIABILITIES
Other noncurrent liabilities consist primarily of deferred compensation,
insurance accruals, deferred gains arising from sale and leaseback transactions
and subordinated installment notes arising from repurchases of common stock.
The Company is self-insured for a limited portion of the risk retained under its
general liability and workers' compensation insurance arrangements. Self-
insurance reserves are actuarially determined based on the estimated timing of
future insurance claim payments associated with the Company's retained risk.
The current and noncurrent portions of the self-insurance reserves for workers'
compensation insurance are accrued on a present value basis using a discount
rate which approximates a risk-free rate.
EARNINGS PER SHARE
Earnings per share is reported on a fully diluted Common Stock, Class B
equivalent basis (which reflects Common Stock, Class A shares converted to a
Class B basis; ten for one) and is based upon the weighted average number of
common shares outstanding during the respective periods, plus the common
equivalent shares, if dilutive, that would result from the exercise of stock
options. Fully diluted earnings per share approximates primary earnings per
share and is equivalent to fully diluted earnings per share under the "two-
class" method.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(in millions)
<S> <C> <C> <C>
Interest Paid $108.2 $113.5 $127.3
Income Taxes Paid $ 54.0 $ 41.0 $ 39.0
</TABLE>
Significant noncash investing and financing activities are as follows:
. During fiscal 1994, 1993, and 1992, the Company contributed $8.9 million,
$10.7 million, and $8.6 million, respectively, of Class A Common Stock to its
employee benefit plans to fund previously accrued obligations. In addition,
during fiscal 1994, 1993 and 1992 the Company contributed $1.8 million, $1.7
million and $1.7 million, respectively, of stock units to its stock unit
retirement plan in satisfaction of its accrued obligations. See Note 5 to the
consolidated financial statements.
. During the third quarter of fiscal 1993, the Company paid a special dividend
on its common stock which included $34.7 million of new Series C Preferred
Stock. See Note 7 to the consolidated financial statements.
. During fiscal 1994 and 1993, the Company received $4.0 million and $5.9
million, respectively, of employee notes under its Deferred Payment program as
partial consideration for the issuance of Common Stock Class B. Also, during
fiscal 1994, 1993, and 1992, the Company issued subordinated installment notes
of $13.2 million, $8.3 million and $7.1 million, respectively, as part
consideration for repurchases of Common Stock. See Note 7 to the consolidated
financial statements.
NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.:
During the fourth quarter of fiscal 1994, an affiliate, 33% owned by the
Company, sold common stock through a public offering. The Company sold
approximately 9% of its equity investment in connection with the public
offering, receiving net proceeds of $6.9 million and recorded a gain of $5.8
million, which is included in "Other expense (income)." At the time a
subsidiary/affiliate sells its stock to third parties, the Company recognizes
the resultant change in its net investment in the subsidiary/affiliate through
the income statement in accordance with the Securities and Exchange Commission
Staff Accounting Bulletin No. 51 (SAB No. 51). In accordance with SAB No. 51,
the Company recognized a pre-tax gain of $4.7 million, and recorded a related
tax provision of $1.9 million, representing the increase in book value of the
Company's remaining investment created by the sale of the incremental new shares
in the public offering. The Company's percentage ownership of the affiliate
after the transaction is 28%.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. ACQUISITIONS AND DIVESTITURES, ETC.: (CONTINUED)
In September 1993, the Company acquired an 80% interest in the contract food
service division of the HUSA Group ("HUSA"), a provider of food services to
hospitals, schools and governmental facilities located in Spain, for aggregate
consideration, including all costs, of approximately $30 million. The purchase
price of the HUSA acquisition was allocated principally to contract rights and
goodwill. The Company's unaudited pro forma results of operations for fiscal
1993 and 1992 would not be materially different assuming the acquisition
occurred as of the beginning of the respective periods.
During the fourth quarter of fiscal 1993, the Company sold Encore Service
Systems, Inc. for approximately $20 million resulting in a gain of approximately
$15 million. In addition, all of the Company's remaining shares of Living
Centers of America common stock were sold during fiscal 1993 for approximately
$16 million, resulting in a gain of approximately $8 million. These gains have
been included in "Other expense (income)" in the accompanying consolidated
statements of income. Also included in "Other expense (income)" is an amount of
$18 million to establish a reserve for potential adjustments related to certain
cost-based food service contracts. This resulted from a 1993 internal review of
billing procedures covering primarily insurance and employee fringe benefits.
The review revealed some past inconsistencies between the billings and the
literal contractual language.
During the second quarter of fiscal 1992, the Company acquired the assets of
WearGuard Corporation ("WearGuard"), a direct marketer of work clothing and
casual apparel and late in the third quarter acquired the business of
Coordinated Health Services, Inc. ("CHS"), a provider of physician staffing and
patient billing services for hospital emergency departments for aggregate
consideration of $124 million. Also in the second quarter of 1992, the Company
divested approximately 90% of its interest in Living Centers of America, Inc.
("Living Centers") in a sale of stock through a public offering. The net effect
of these transactions resulted in a reduction of the Company's indebtedness of
approximately $69 million. "Other expense (income)" of $4.2 million in fiscal
1992 represents a gain of $13 million on the Living Centers divestiture
transaction partially offset by charges for insurance and related matters.
The Company's fiscal 1992 financial statements reflect results of operations and
cash flows for WearGuard and CHS for seven months and four months, respectively.
The Company's unaudited pro forma results of operations for fiscal 1992 would
not be materially different assuming the acquisitions occurred as of the
beginning of the period.
Subsequent to fiscal yearend 1994, the Company has entered into definitive
agreements for the acquisition of three businesses (two are in the Food, Leisure
and Support business segment and one in the Distributive segment) for total
consideration, in the form of cash and preferred stock, of approximately $260
million. Revenues of these businesses would increase the Company's total
revenues by approximately 5.5%. The cash portion of the consideration will be
financed through the Company's existing Credit Agreement. The acquisitions,
subject to certain third party approvals, are presently expected to close by the
end of calendar year 1994.
In the fourth quarter of fiscal 1994, the Company initiated a tender offer for
the 30% minority interest of its Canadian subsidiary. The transaction is
expected to be completed by the end of calendar year 1994 for total
consideration of approximately $33 million, of which $17.6 million has been paid
as of September 30, 1994.
NOTE 3. EXTRAORDINARY ITEM:
The following items have been reflected as extraordinary items in the
consolidated financial statements.
During fiscal 1994, the Company redeemed the remaining $182.3 million of its 12-
1/2% subordinated debentures for a premium. The debt extinguishment was
financed through borrowings under the Company's revolving credit facility. The
resultant extraordinary charge was $7.7 million or $0.15 per share.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. EXTRAORDINARY ITEM: (CONTINUED)
During fiscal 1993, the Company repurchased the entire $100 million of its
10.55% senior notes for a premium and concurrently issued $100 million of 8-1/4%
senior notes. The Company also paid a premium to redeem $38.6 million of its
12-1/2% subordinated debentures.
During fiscal 1992, the Company exchanged $28.6 million of 10% subordinated
debentures plus a premium for $28.6 million of its 13% subordinated debentures
and paid a premium to redeem $1.5 million of its 12-1/2% subordinated
convertible notes.
NOTE 4. BORROWINGS:
Long-term borrowings at September 30, 1994 and October 1, 1993 are summarized in
the following table:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
SENIOR:
Credit facility borrowings $401,600 $ 260,700
10-1/4% note, due April 1998 50,000 50,000
8-1/4% notes, payable in installments through 1999 100,000 100,000
10-5/8% notes, due August 2000 100,000 100,000
Other, including mortgages and notes payable 46,095 34,271
-------- ----------
697,695 544,971
-------- ----------
SUBORDINATED:
8-1/2% subordinated notes, due June 2003 100,000 100,000
10% exchangeable debentures and notes, due August 2000 59,299 61,465
12% debentures, due April 2000 125,000 125,000
12-1/2% debentures, due July 2001 - 182,295
12-1/2% convertible notes, due February 2000 2,340 2,340
13% debentures, due January 1997 3,775 3,775
-------- ----------
290,414 474,875
-------- ----------
OBLIGATIONS UNDER CAPITAL LEASES 3,231 4,443
-------- ----------
991,340 1,024,289
Less-current portion 9,391 15,615
-------- ----------
$981,949 $1,008,674
======== ==========
</TABLE>
The $800 million revolving credit facility ("Credit Agreement") is provided by a
group of banks and matures in October 2001 with quarterly commitment reductions
of $12.5 million starting in December 1995 which increase annually thereafter.
Interest under the credit agreement is based on the Prime Rate plus a spread of
0% to 5/8% (as of September 30, 1994 - 0%), London Inter-Bank Offered Rate
(LIBOR) plus a spread of 1/8% to 1-1/8% (as of September 30, 1994 - 1/2%) or the
Certificate of Deposit Rate plus a spread of 1/4% to 1-1/4% (as of September 30,
1994 - 5/8%), at the option of the Company. The spread is based on certain
financial ratios and borrowing levels as defined. The Company pays a fee of 1/4
of 1% on the entire credit facility.
The 8-1/4% notes are payable in $20 million annual installments commencing March
1995 with a final maturity of March 1999. The $20 million installment due in
fiscal 1995 has been classified as non-current in the accompanying consolidated
balance sheet as the Company has the ability and intent to finance it through
additional borrowings under the Credit Agreement.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. BORROWINGS: (CONTINUED)
The 10-5/8% senior notes require a sinking fund payment of $50 million in August
1999 with a final maturity in August 2000.
The 8-1/2% subordinated notes may be redeemed at the Company's option, in whole
or in part, beginning June 1998 at a price equal to 104.25% of their principal
amount and thereafter at prices declining to par in 2002, together with accrued
interest.
The 10% subordinated exchangeable debentures and notes may be exchanged at any
time in whole or part, at the option of the holder, for 10-5/8% senior notes due
August 2000 at an exchange ratio of .93.
The 12% subordinated debentures may be redeemed at the Company's option, in
whole or in part, beginning April 1995 at a price equal to 105% of the principal
amount and thereafter at prices declining to par in April 1997, together with
accrued interest.
The 12-1/2% subordinated convertible notes are convertible at par, in whole, at
the option of the holder, into a series of the Company's 13% subordinated
debentures due January 1997. At any time on or after January 15, 1998, the
Company may, at its option, redeem the notes, in whole or in part, at a price
equal to 100% of their principal amount plus accrued interest.
The 13% subordinated debentures may be redeemed by the Company on or after
January 15, 1996, in whole or in part, at a price equal to 100% of their
principal amount plus accrued interest.
The fair value of the Company's aggregate senior and subordinated debt, based
primarily on quoted market prices, was $705 million and $291 million,
respectively at September 30, 1994 and $568 million and $511 million,
respectively, at October 1, 1993. Accrued interest on borrowings totaling $23.6
million in 1994 and $29.2 million in 1993 is included in current liabilities as
"Other accrued expenses."
At September 30, 1994, the Company has $200 million of interest rate exchange
agreements fixing the rate on a like amount of borrowings under the Credit
Agreement at an average effective rate of 5.7% for remaining periods ranging
between 1 and 34 months. The counterparties to the interest rate exchange
agreements are major international banks. The Company continually monitors its
positions and the credit ratings of its counterparties, and does not anticipate
nonperformance by the counterparties. All interest rate agreements are
accounted for as hedges and the related gains or losses are recognized in income
as a component of interest expense over the period being hedged. As of October
1, 1993 the Company had $202 million of interest rate exchange agreements fixing
the rate on a like amount of variable rate borrowings at an average effective
rate of 6.3%. During fiscal 1993, the Company entered into a $28 million
foreign currency swap agreement maturing in August 1996, which hedges the
currency exposure of its net investment in Spain. See Note 2.
The fair value of the Company's swap agreements as of September 30, 1994 is
approximately $5.5 million. At October 1, 1993, the fair value of the swap
agreements was not significant.
The Credit Agreement contains restrictive covenants which provide, among other
things, limitations on the incurrence of debt, dispositions of material assets,
payment of dividends and repurchases of capital stock. The terms of the Credit
Agreement also limit the transfer of funds to the Company by its subsidiaries
and require that the Company maintain certain specified minimum ratios of cash
flow to fixed charges and to total borrowings and certain minimum levels of net
worth (as defined). At September 30, 1994, the Company was in compliance with
all of these covenants.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. BORROWINGS: (CONTINUED)
Long-term borrowings maturing in the next five years, excluding capital lease
obligations, are as follows:
Amount
--------------
(in thousands)
1995 $ 8,701
1996 22,080
1997 25,571
1998 71,771
1999 85,015
NOTE 5. EMPLOYEE PENSION AND PROFIT SHARING PLANS:
The Company maintains contributory and non-contributory defined benefit pension
plans, primarily in Canada and the United Kingdom, providing retirement benefits
to eligible employees not covered by collective bargaining agreements. Total
pension expense under these plans for fiscal 1994, 1993 and 1992 was $1.4
million, $1.3 million and $1.1 million, respectively. The Company's policy is
to fund the minimum contribution required under the applicable law.
Defined benefit pension expense for 1994, 1993 and 1992 includes the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 1,791 $ 1,628 $ 1,758
Interest cost on projected benefit obligations 2,459 2,309 2,228
Change in market valuation and return on plan assets (37) (5,071) (675)
Net amortization and deferral (2,857) 2,456 (2,194)
------- ------- -------
$ 1,356 $ 1,322 $ 1,117
======= ======= =======
Assumptions:
Discount rate 8.4% 8.2% 8.2%
Compensation increase 5.3% 5.4% 5.4%
Rate of return on assets 8.4% 8.3% 8.4%
</TABLE>
The discount rates and rates of return on assets represent weighted averages
that reflect the combined assumptions of plans located primarily in Canada and
the United Kingdom.
The defined benefit pension plans' funded status at September 30, 1994 and
October 1, 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
Pension plan obligations:
Accumulated benefits (including vested benefits
of $26,805 and $24,047 in 1994 and 1993,
respectively) $26,983 $24,374
======= =======
Projected benefits $33,728 $31,050
Market value of assets (primarily listed
securities and government obligations) 35,179 32,665
------- -------
Funded status 1,451 1,615
Unrecognized net loss (gain) 96 (767)
Unrecognized net transition asset (2,905) (3,206)
Unrecognized prior service cost 1,565 1,658
------- -------
Prepaid (accrued) pension cost $ 207 $ (700)
======= =======
</TABLE>
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. EMPLOYEE PENSION AND PROFIT SHARING PLANS: (CONTINUED)
In the United States, the Company also maintains qualified contributory and non-
contributory retirement plans for eligible employees, with Company contributions
to the plans based on earnings performance or salary level. Qualified non-
contributory profit sharing plans are maintained by certain businesses, with
annual contributions determined by management. The Company has a non-qualified
stock unit retirement plan for certain employees. The total expense of the
above plans for fiscal 1994, 1993 and 1992 was $14.5 million, $14.1 million and
$13.6 million, respectively. During fiscal 1994, 1993 and 1992, the Company
contributed 59,919 shares, 86,184 shares and 75,684 shares, respectively, of
Common Stock, Class A to these plans to fund previously accrued obligations. In
addition, during fiscal 1994, 1993 and 1992, the Company contributed to the
stock unit retirement plan 143,125 stock units, 159,144 stock units and 175,596
stock units, respectively, which are convertible into Common Stock, Class B, in
satisfaction of its accrued obligations. The value of the stock units was
credited to capital surplus. The Company participates in various multi-employer
union administered pension plans. Contributions to these plans, which are
primarily defined benefit plans, result from contractual provisions of labor
contracts and were $11.9 million, $10.2 million and $10.3 million for fiscal
1994, 1993 and 1992, respectively.
NOTE 6. INCOME TAXES:
Effective October 2, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes." Prior to fiscal 1994, the Company followed the provisions of
Accounting Principles Board Opinion No. 11. SFAS No. 109 requires deferred tax
assets or liabilities to be recognized for the estimated future tax effects of
temporary differences between the financial reporting and tax bases of the
Company's assets and liabilities based on the enacted tax law and statutory tax
rates applicable to the periods in which the temporary differences are expected
to affect taxable income. The cumulative effect of this change in accounting
principle was a charge of $1.3 million, or $0.03 per share, in the first quarter
of fiscal 1994.
The components of income before income taxes by source of income are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- --------
(in thousands)
<S> <C> <C> <C>
United States $143,052 $121,818 $ 99,582
Non-U.S. 20,432 21,447 24,141
-------- -------- --------
$163,484 $143,265 $123,723
======== ======== ========
</TABLE>
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Current:
Federal $ 51,935 $ 34,345 $ 22,737
State and local 11,827 7,024 5,614
Non-U.S. 5,531 10,099 9,461
-------- -------- --------
69,293 51,468 37,812
-------- -------- --------
Deferred:
Federal (1,516) 5,230 11,034
State and local (351) 736 1,499
Non-U.S. (307) 92 1,162
-------- -------- --------
(2,174) 6,058 13,695
-------- -------- --------
$ 67,119 $ 57,526 $ 51,507
======== ======== ========
</TABLE>
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. INCOME TAXES: (CONTINUED)
The provision for income taxes varies from the amount determined by applying the
United States Federal statutory rate to pre-tax income as a result of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(% of pre-tax income)
<S> <C> <C> <C>
United States statutory income tax rate 35.0% 34.8% 34.0%
Increase (decrease) in taxes, resulting from:
State income taxes, net of Federal tax benefit 4.6 3.7 4.2
Permanent book/tax differences, primarily
resulting from purchase accounting 3.0 2.4 4.6
Tax credits (1.5) (1.5) (2.4)
Other, net (.1) .8 1.2
---- ---- ----
Effective income tax rate 41.0% 40.2% 41.6%
==== ==== ====
</TABLE>
As of September 30, 1994, the components of the net deferred tax asset are as
follows:
<TABLE>
<S> <C>
Deferred tax liabilities:
Property and equipment $64,718
Inventory 5,484
Other 4,725
-------
Gross deferred tax liability 74,927
-------
Deferred tax assets:
Insurance 17,797
Employee compensation and benefits 30,228
Accruals and allowances 20,648
Intangibles 9,954
Other 2,254
Valuation allowance (1,000)
-------
Net deferred tax asset 79,881
-------
Net deferred tax asset $ 4,954
=======
</TABLE>
The Company does not provide for U.S. or foreign taxes on the undistributed
earnings of non-U.S. subsidiaries that are considered to be permanently
reinvested. At September 30, 1994, undistributed earnings of these foreign
subsidiaries or affiliates totaled $38.7 million, which will not be subject to
U.S. tax until distributed as dividends. Foreign tax credits will be available
to reduce U.S. taxes on this income upon distribution. Determination of the
unrecognized deferred tax liability for temporary differences related to the
undistributed earnings is not practicable.
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. INCOME TAXES: (CONTINUED)
The components of deferred income taxes for years prior to the adoption of SFAS
No. 109 are as follows:
<TABLE>
<CAPTION>
1993 1992
-------- --------
(in thousands)
<S> <C> <C>
Excess of tax over book depreciation $ 1,905 $ 5,445
Accrued vacation 52 (3,272)
Provision for insurance costs (3,009) (1,668)
Tax vs. book basis of dispositions 5,598 12,755
Other 1,512 435
------- -------
$ 6,058 $13,695
======= =======
</TABLE>
NOTE 7. CAPITAL STOCK:
There are two classes of common stock authorized and outstanding, Common Stock,
Class A and Common Stock, Class B. Each Class A and Class B Share is entitled
to one vote on all matters submitted to stockholders, voting together as a
single class except where otherwise required by law. Each Class A Share is
entitled to ten times the dividends and other distributions payable on each
Class B Share. Class B Shares may be held only by employees, directors and
their family members, and upon termination of employment each Class B Share is
automatically converted into 1/10 of a Class A Share.
During the third quarter of fiscal 1993, the Company paid a special dividend of
$5 per Class B equivalent share on all shares of its Common Stock owned as of
April 19, 1993, with $2 per Class B equivalent share, or $24.2 million, paid in
cash and $3 per Class B equivalent share, or $34.7 million, in new Series C
Preferred Stock ("Preferred Stock"). Concurrent with the dividend, the Company
repurchased for cash 55,495 shares of its Class A Common Stock for $28.9
million.
Holders of the Preferred Stock are entitled to cumulative dividends payable
semi-annually; voting rights in the event of failure to pay dividends for four
consecutive periods (two years); and upon liquidation, $1,000 per share plus
accrued and unpaid dividends. The current dividend rate on the Preferred Stock
is $60 per share and is reset annually in December of each year at a rate equal
to $1,000 multiplied by 80% of Chemical Bank's announced prime rate of interest,
but not less than $60 per share nor greater than $100 per share. The Preferred
Stock may be repurchased, in whole or in part, at any time only at the Company's
option at a price equal to $1,000 per share plus accrued and unpaid dividends.
During fiscal 1994 the Company repurchased 17,647 preferred shares for $17.6
million.
On November 9, 1993, the Company's Board of Directors declared a four-for-one
split of the Class B and Class A Common Stock effected in the form of a stock
dividend to shareholders of record on November 10. The Company issued
18,158,097 shares of Common Stock, Class B and 1,544,868 shares of Common Stock,
Class A in connection with the stock split. The stated par value of $.01 per
share of Class B and Class A common stock was not changed.
As of September 30, 1994 the Company's stock option plans provided for the
issuance of up to 33,001,148 options to purchase shares of Common Stock, Class
B. The Company granted installment stock purchase opportunities under its stock
ownership program in fiscal 1994, 1993 and 1992 which provide for the purchase
of shares of Common Stock, Class B. Installment stock purchase opportunities
are exercisable in six annual installments with the exercise price of each
purchase opportunity equal to the current fair market value at the time the
purchase opportunity is granted. During fiscal 1994, the Company implemented a
program to extend non-qualified stock options to additional qualified employees.
Under the program, options vest after three years and may be exercised for a
period of three years after vesting. The exercise price of each option is equal
to the current fair market value at the date of grant. In 1993, the Company
implemented the Deferred Payment Program which enables holders of non-qualified
stock options and installment purchase opportunities to defer a portion of the
total amount required to exercise the options. Interest currently accrues on
deferred payments at 6% compounded annually and is payable when the deferred
payments are due. At September 30, 1994 and October 1, 1993 the receivables
from individuals under the Deferred Payment Program were $9.8 million and $5.9
million,
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. CAPITAL STOCK: (CONTINUED)
respectively, which are classified in the consolidated balance sheet as a
reduction of Shareholders' Equity. The Company holds as collateral all shares
purchased in which any portion of the purchase price is financed under the
Deferred Payment Program until the deferred payment is received from the
individual by the Company. Status of the options, including installment stock
purchase opportunities, under the various ownership programs follows:
<TABLE>
<CAPTION>
Number of Shares Average Option Price
------------------------------- -------------------------------
1994 1993 1992 1994 1993 1992
------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Options granted 4,314,635 2,776,296 3,716,400 $11.19 $9.14 $8.13
Options exercised 2,588,030 4,904,360 1,757,568 $ 6.33 $3.14 $4.95
Options outstanding 10,383,764 10,030,024 12,500,840 $ 8.05 $6.26 $4.88
</TABLE>
At September 30, 1994, 1,129,160 of the outstanding option shares were
exercisable at an average option price of $1.81. The Company has reserved
11,063,004 shares of Common Stock, Class B at September 30, 1994 for issuance of
stock pursuant to its employee ownership and benefit programs.
The Company and its shareholders are parties to an Amended and Restated
Shareholders' Agreement. Pursuant to this agreement, holders of common stock
who are individuals, upon their death, complete disability or normal retirement,
may cause the Company to repurchase up to 30% of their shares for cash at the
then appraised value, but only to the extent such repurchase by the Company is
permitted under the Credit Agreement. Under this Credit Agreement restriction,
repurchases of capital stock cannot exceed an aggregate limit, which amount was
$20.8 million at September 30, 1994 and $21.7 million at October 1, 1993.
Pursuant to interpretations of its rules related to "Redeemable Preferred
Stock," the Securities and Exchange Commission has requested that these amounts
representing the Company's potential repurchase of its Common Stock be presented
as a separate item and accordingly, the Company's Shareholders' Equity reflects
this reclassification in the consolidated financial statements. Also, the
Shareholders' Agreement provides that the Company may, at its option, repurchase
shares from individuals who are no longer employees. Such repurchased shares
may be resold to others including replacement personnel at prices equal to or
greater than the repurchase price. Generally, payment for shares repurchased
can be, at the Company's option, in cash or subordinated installment notes,
which are subordinated to all other indebtedness of the Company. Interest on
these notes is payable semi-annually and principal payments are made annually
over varying periods not to exceed ten years. The noncurrent portion of these
notes ($24.9 million as of September 30, 1994, $20.4 million as of October 1,
1993) is included in the consolidated balance sheets as "Other Noncurrent
Liabilities" and the current portion of these notes ($8.7 million as of
September 30, 1994 and $6.2 million as of October 1, 1993) is included in the
consolidated balance sheets as "Accounts Payable."
<TABLE>
<CAPTION>
NOTE 8. COMMITMENTS AND CONTINGENCIES:
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
Facilities under capital leases $8,204 $8,204
Less-accumulated amortization 5,590 4,891
------ ------
$2,614 $3,313
====== ======
</TABLE>
Rental expense for all operating leases was $121.2 million, $119.4 million and
$118.5 million for fiscal 1994, 1993 and 1992, respectively.
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Following is a schedule of the future minimum rental commitments under all
noncancelable leases as of September 30, 1994:
<TABLE>
<CAPTION>
Fiscal Year Operating Capital
- ----------- --------- -------
(in thousands)
<S> <C> <C>
1995 $115,003 $ 962
1996 71,781 778
1997 63,407 695
1998 58,555 551
1999 53,384 368
Subsequent years 218,265 743
-------- ------
Total minimum rental obligations $580,395 4,097
========
Less-amount representing interest 866
------
Present value of capital leases 3,231
Less-current portion 690
------
Noncurrent obligations under capital leases $2,541
======
</TABLE>
The Company has capital commitments of approximately $52 million at September
30, 1994 in connection with several long-term concession contracts at stadiums
and arenas. The Company is party to certain claims and litigation arising in
the ordinary course of business, including a dispute with a former insurance
carrier involving certain coverages relating to prior years. The Company
believes it has meritorious defenses to the insurance and other claims and is of
the opinion that adequate reserves have been provided for the ultimate
resolution of these matters.
NOTE 9. ARAMARK SERVICES, INC. AND SUBSIDIARIES:
The following financial information has been summarized from the separate
consolidated financial statements of ARAMARK Services, Inc. (a wholly owned
subsidiary of ARAMARK Corporation) and the subsidiaries which it currently owns.
ARAMARK Services, Inc. is the borrower under the Credit Agreement and certain
other senior debt described in Note 4 and incurs the interest expense
thereunder. This interest expense is only partially allocated to all of the
other subsidiaries of ARAMARK Corporation.
<TABLE>
<CAPTION>
1994 1993 1992
---------- ----------- ----------
(in thousands)
<S> <C> <C> <C>
Revenues $2,763,098 $2,607,630 $2,613,564
Cost of services provided 2,594,291 2,439,471 2,446,908
Net income (loss) 18,677 (357) 2,864
1994 1993
---------- ----------
(in thousands)
Current assets $ 355,841 $ 339,920
Noncurrent assets 1,223,750 1,221,164
Current liabilities 398,814 364,653
Noncurrent liabilities 1,093,563 1,126,087
Minority interest 10,812 18,084
</TABLE>
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. QUARTERLY RESULTS (UNAUDITED):
The following table summarizes quarterly financial data for fiscal 1994 and
1993.
<TABLE>
<CAPTION>
Fiscal Quarter
-------------------------------------------------------------
1994 First Second Third Fourth Year
- --------------------------------------------------------------------------------------------------------------
(in thousands, except earnings per share)
<S> <C> <C> <C> <C> <C>
Revenues $1,292,020 $1,257,614 $1,309,085 $1,302,859 $5,161,578
Cost of services provided 1,179,726 1,156,230 1,185,363 1,164,767 4,686,086
Income before extraordinary item
and cumulative effect of
accounting change 18,387 13,124 27,121 36,401 95,033
Extraordinary item (1) 702 117 2,518 4,340 7,677
Net income (2) 16,408 13,007 24,603 32,061 86,079
Earnings per share:
Income before extraordinary item
and cumulative effect of
accounting change $ .36 $ .25 $ .53 $ .73 $ 1.87
Net income $ .32 $ .25 $ .48 $ .64 $ 1.69
Fiscal Quarter
-------------------------------------------------------------
1993 First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------
(in thousands, except earnings per share)
<S> <C> <C> <C> <C> <C>
Revenues $1,214,882 $1,188,456 $1,242,155 $1,245,245 $4,890,738
Cost of services provided 1,110,111 1,090,870 1,124,615 1,107,244 4,432,840
Income before extraordinary item 16,192 11,634 22,280 34,228 84,334
Extraordinary item (1) 4,297 - 902 2,003 7,202
Net income 11,895 11,634 21,378 32,225 77,132
Earnings per share:
Income before extraordinary item $ .32 $ .23 $ .44 $ .68 $ 1.64
Net income $ .24 $ .23 $ .42 $ .64 $ 1.49
</TABLE>
(1) See Note 3.
(2) Includes cumulative effect of change in accounting for income taxes of
$1,277 in the fiscal 1994 first quarter. See Note 6.
In the first and second fiscal quarters, within the Food, Leisure and Support
Services segment there is a lower level of activity at the higher margin leisure
and recreational food service operations which is partly offset by increased
activity in the educational market. In addition, there is a seasonal increase
in volume of directly marketed work clothing and casual apparel during the first
quarter. Whereas in the third and fourth fiscal quarters, there is a
significant increase at leisure and recreational accounts which is partially
offset by the effect of summer closings in the educational market.
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. BUSINESS SEGMENTS:
The Company provides or manages services in the following business segments:
Food, Leisure and Support Services - Food, refreshment, specialized dietary and
- ----------------------------------
support services, including maintenance and housekeeping, provided to business,
educational, governmental and medical institutions and in recreational and other
facilities serving the general public. Fiscal 1994 operating income includes a
$5.8 million gain on the sale of stock of an affiliate and the 1993 operating
income includes a $15 million gain from a divestiture and a reserve of
approximately $18 million for potential adjustments as described in Note 2. The
1994 segment operating results have been adversely impacted by the U.S. Major
League Baseball strike which began on August 12. Had the strike not occurred,
it is estimated that segment revenues and operating income would have been
approximately 2% and 6% greater than the reported results, respectively. Also,
total Company operating income and income before extraordinary items would have
been approximately 3% and 5% higher, respectively.
Uniform Services - Rental of personalized work apparel and linens for business
- ----------------
and institutions on a contract basis and the direct marketing of work clothing,
casual apparel, and accessories.
Health and Education Services - General management of child care centers, and
- -----------------------------
specialized services to emergency rooms, and other hospital specialties, and
medical services to correctional institutions. As described in Note 2, the
Company divested Living Centers, the operator of nursing care facilities, in
February 1992 and sold its remaining Living Centers common stock during fiscal
1993. Revenues related to Living Centers for fiscal 1992 were $132.8 million.
The Health and Education Services segment operating income for fiscal 1992
includes a divestiture gain of $13 million, as described in Note 2.
Approximately 40% of the segment operating income for fiscal 1992 was related to
Living Centers, including the 1992 divestiture gain. The operating income of
this segment, excluding Living Centers results, was $32.5 million in 1992.
Distributive Services - Wholesale distribution of magazines and other published
- ---------------------
materials to retail locations patronized by the general public.
Revenues by segment are substantially comprised of services to unaffiliated
customers and clients. Operating income reflects expenses directly related to
individual segments plus an allocation of expenses applicable to more than one
segment. General corporate expenses include expenses not specifically
identifiable with an individual segment. Fiscal 1994 expenses include unusual
costs related to several corporate development and strategic initiatives,
including costs related to a change in corporate identity. In 1992 unusual
costs were incurred in connection with a potential acquisition and several
special development programs. Direct selling expenses are approximately 1% of
revenues for fiscal 1994, 1993 and 1992. Corporate assets consist principally
of goodwill not allocable to any individual segment and other noncurrent assets.
<TABLE>
<CAPTION>
Revenues Operating Income
---------------------------- ----------------------------
1994 1993 1992 1994 1993 1992
-------- -------- -------- -------- -------- --------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Food, Leisure & Support Services $3,274.3 $3,149.6 $3,151.8 $ 138.4 $ 137.4 $ 133.2
Uniform Services 810.5 731.0 632.9 96.0 87.6 76.5
Health & Education 673.3 619.3 687.3 37.2 33.7 53.0
Distributive 403.5 390.8 393.3 26.5 24.8 27.1
-------- -------- -------- ------- ------- -------
Total $5,161.6 $4,890.7 $4,865.3 298.1 283.5 289.8
======== ======== ========
General Corporate and Other Expenses (30.8) (22.6) (28.2)
Gain on Sale of Remaining Living Centers Common Stock - 8.0 -
-------- -------- -------
Operating Income 267.3 268.9 261.6
Gain on Issuance of Stock by an Affiliate 4.7 - -
Interest Expense, net (108.5) (125.7) (137.9)
------- ------- -------
Income Before Income Taxes, Minority Interest,
Extraordinary Item, and Accounting Change $ 163.5 $ 143.2 $ 123.7
======== ======= =======
</TABLE>
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. BUSINESS SEGMENTS: (CONTINUED)
Depreciation and Amortization, Capital Expenditures and Identifiable Assets
<TABLE>
<CAPTION>
Depreciation Capital
and Amortization Expenditures
--------------------------- ---------------------
1994 1993 1992 1994 1993 1992
-------- -------- -------- ------ ------ ------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Food, Leisure &
Support Services $ 85.5 $ 76.6 $ 75.9 $ 83.2 $ 82.4 $104.2
Uniform Services 36.3 33.9 26.4 39.9 37.9 67.1
Health & Education 16.5 15.1 18.5 18.4 22.5 15.6
Distributive 2.3 2.1 2.2 2.0 1.4 1.8
-------- -------- -------- ------ ------ ------
140.6 127.7 123.0 143.5 144.2 188.7
Corporate 3.2 2.8 2.8 3.0 2.5 1.5
-------- -------- -------- ------ ------ ------
$ 143.8 $ 130.5 $ 125.8 $146.5 $146.7 $190.2
======== ======== ======== ====== ====== ======
Identifiable Assets
---------------------------
1994 1993 1992
-------- -------- --------
(in millions)
Food, Leisure &
Support Services $1,085.7 $1,054.6 $1,046.5
Uniform Services 608.7 570.7 567.6
Health & Education 280.2 261.3 241.0
Distributive 74.2 65.6 69.1
-------- -------- --------
2,048.8 1,952.2 1,924.2
Corporate 73.2 88.4 80.8
-------- -------- --------
$2,122.0 $2,040.6 $2,005.0
======== ======== ========
</TABLE>
Most services are provided in the United States, with operations also being
conducted in Belgium, Canada, the Czech Republic, Germany, Hungary, Japan,
Korea, Mexico, Spain and the United Kingdom. The Company's non-U.S. operations
for each year contributed approximately 15% of total revenues and 9% of total
operating income, and identifiable assets for these operations were
approximately 11% of the total.
F-25
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
ASSETS
------
<TABLE>
<CAPTION>
December 30, September 30,
1994 1994
------------ -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 18,322 $ 27,426
Short-term investments held by the
Canadian subsidiary - 16,203
Receivables 441,342 433,550
Inventories, at lower of cost or
market 267,729 256,950
Prepayments and other current assets 129,781 69,865
---------- ----------
Total current assets 857,174 803,994
---------- ----------
Property and Equipment, net 688,052 681,907
Goodwill 447,600 438,725
Other Assets 321,930 197,324
---------- ----------
$2,314,756 $2,121,950
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term
borrowings $ 10,578 $ 9,391
Accounts payable 341,766 372,908
Accrued expenses and other
liabilities 409,657 374,902
---------- ----------
Total current liabilities 762,001 757,201
---------- ----------
Long-Term Borrowings 1,161,101 981,949
Deferred Income Taxes and Other
Noncurrent Liabilities 171,177 168,638
Minority Interest 192 10,812
Common Stock Subject to Potential
Repurchase Under Provisions of
Shareholders' Agreement 21,612 20,791
Shareholders' Equity Excluding Common
Stock
Subject to Repurchase:
Series C preferred stock, redemption
value $1,000 16,666 16,949
Class A common stock, par value $.01 21 21
Class B common stock, par value $.01 244 243
Capital surplus 47 -
Earnings retained for use in the
business 199,083 178,587
Cumulative translation adjustment 4,224 7,550
Impact of potential repurchase
feature of common stock (21,612) (20,791)
---------- ----------
Total 198,673 182,559
---------- ----------
$2,314,756 $2,121,950
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
F-26
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------
December 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Revenues $1,380,516 $1,292,020
---------- ----------
Costs and Expenses:
Cost of services provided 1,264,665 1,179,726
Depreciation and amortization 37,013 34,381
Selling and general corporate expenses 18,629 16,403
---------- ----------
1,320,307 1,230,510
---------- ----------
Operating income 60,209 61,510
Interest Expense, net 25,433 29,481
---------- ----------
Income before income taxes 34,776 32,029
Provision for Income Taxes 14,064 13,140
Minority Interest (41) 502
---------- ----------
Income before Cumulative Effect of Change
in Accounting for Income Taxes and
Extraordinary Item 20,753 18,387
Cumulative Effect of Change in Accounting
for Income Taxes - 1,277
Extraordinary Item Due to Early
Extinguishment of Debt
(net of income taxes of $468) - 702
---------- ----------
Net income $ 20,753 $ 16,408
========== ==========
Earnings Per Share:
Income before cumulative effect of
change in accounting for income
taxes and
extraordinary item $.42 $.36
Net income $.42 $.32
==== ====
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
F-27
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
---------------------------
December 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 20,753 $ 16,408
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 37,013 34,381
Income taxes deferred (1,233) (1,067)
Minority interest (41) 502
Extraordinary item - 702
Cumulative effect of accounting change - 1,277
Changes in noncash working capital (79,340) (62,261)
Other operating activities (5,367) (2,189)
--------- --------
Net cash used in operating activities (28,215) (12,247)
--------- --------
Cash flows from investing activities:
Purchases of property and equipment (38,624) (28,213)
Disposals of property and equipment 2,923 4,209
Sale of investments 16,203 6,194
Purchase of subsidiary stock (19,758) -
Acquisition of certain businesses (115,680) (3,472)
Other investing activities 2,306 (814)
--------- --------
Net cash used in investing activities (152,630) (22,096)
--------- --------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 179,541 49,163
Payment of long-term borrowings including
premiums (6,202) (20,666)
Other financing activities (1,598) (262)
--------- --------
Net cash provided by financing activities 171,741 28,235
--------- --------
Decrease in cash and cash equivalents (9,104) (6,108)
Cash and cash equivalents, beginning of
period 27,426 27,801
--------- --------
Cash and cash equivalents, end of period $ 18,322 $ 21,693
========= ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
F-28
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the
opinion of the Company, the statements include all adjustments (which
include only normal recurring adjustments) required for a fair statement of
financial position, results of operations and cash flows for such periods.
The results of operations for the interim periods are not necessarily
indicative of the results for a full year.
(2) ACQUISITIONS:
During the first quarter, the Company acquired Harry M. Stevens, a provider
of food and support services to stadiums and arenas, and Rainier News a
magazine distribution company, for approximately $130 million in cash,
notes and preferred stock. Due to the timing of the Harry M. Stevens
acquisition, an appraisal of the assets acquired is not yet completed and,
accordingly, the investment is included in the condensed consolidated
balance sheet as "Other Assets."
The Company has a definitive agreement to purchase the TW Recreational
Services subsidiary of Flagstar Companies, Inc. for approximately $130
million. The acquisition is subject to certain third party approval.
During the first quarter, the Company completed the buyback of the
remaining minority interest of its Canadian subsidiary for cash
consideration of $19.8 million.
(3) NEW ACCOUNTING PRONOUNCEMENTS:
During the first quarter of fiscal 1995, the Company adopted the provisions
of Statement of Financial Accounting Standards (SFAS) 112, "Employers
Accounting for Postemployment Benefits", SFAS 114, "Accounting by Creditors
for Impairment of a Loan", and SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities". The adoption of these
standards was not material to the Company's consolidated financial
statements.
(4) DEBT:
During the first quarter of fiscal 1995, the Company increased the
borrowing limits under its credit facility to $1 billion from $800 million.
The additional borrowing capacity is reduced on a pro-rata basis over the
existing quarterly commitment reduction schedule.
(5) CAPITAL STOCK:
During the first quarter of fiscal 1995, pursuant to the ARAMARK Ownership
Program, employees purchased 327,660 shares or $1.7 million of Class B
Common Stock for $0.8 million cash plus $0.9 million of deferred payment
obligations.
F-29
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(6) SUPPLEMENTAL CASH FLOW INFORMATION:
The Company made interest payments of $24.7 million and $20.6 million and
income tax payments of $14.3 million and $9.5 million during the first
quarter of fiscal 1995 and 1994, respectively. During the first quarter of
fiscal 1995, the Company purchased $2.8 million of its Class B Common
Stock, issuing $1.3 million in subordinated installment notes as partial
consideration, and contributed $1.3 million of Class A Common Stock to its
employee benefit plans. In connection with the acquisitions described in
Note 2, the Company issued promissory notes and preferred stock of a
subsidiary totaling $9 million.
(7) ARAMARK SERVICES, INC. AND SUBSIDIARIES:
The following financial information has been summarized from the separate
consolidated financial statements of ARAMARK Services, Inc. (a wholly owned
subsidiary of ARAMARK Corporation) and the subsidiaries which it currently
owns. ARAMARK Services, Inc. is the borrower under the revolving credit
facility and certain other senior debt agreements and incurs the interest
expense thereunder. This interest expense is only partially allocated to
all of the other subsidiaries of ARAMARK Corporation.
<TABLE>
<CAPTION>
For the Three Months Ended
---------------------------
December 30, December 31,
1994 1993
------------ -------------
<S> <C> <C>
(in millions)
Revenues $ 753.9 $ 715.5
Cost of services provided 705.1 670.0
Income before cumulative effect of
change in accounting for income
taxes 9.8 5.4
Cumulative effect of change in
accounting for income taxes - 0.3
Net income 9.8 5.1
December 30, September 30,
1994 1994
------------ -------------
(in millions)
Current assets $ 350.4 $ 355.8
Noncurrent assets 1,346.1 1,223.8
Current liabilities 444.0 398.8
Noncurrent liabilities 1,171.2 1,093.6
Minority interest 0.2 10.8
</TABLE>
F-30
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SE-
CURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
--------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Recent Developments........................................................ S-2
Use of Proceeds............................................................ S-2
Capitalization............................................................. S-3
Selected Financial Data.................................................... S-4
Financial Reporting by Business Segments................................... S-5
Management's Discussion and
Analysis of Results of Operations and Financial Condition ................ S-5
Business................................................................... S-8
Description of the Notes................................................... S-10
Underwriting............................................................... S-14
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
ARAMARK Corporation........................................................ 3
Use of Proceeds............................................................ 3
The Credit Agreement....................................................... 3
Description of Securities and Guarantee.................................... 4
Validity of Securities and Guarantee....................................... 14
Experts.................................................................... 14
Plan of Distribution....................................................... 15
Financial Statements....................................................... F-1
</TABLE>
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$150,000,000
ARAMARK SERVICES, INC.
8.15% GUARANTEED NOTES
DUE MAY 1, 2005
UNCONDITIONALLY GUARANTEED
AS TO
PAYMENT OF PRINCIPAL, PREMIUM,
IF ANY, AND INTEREST BY
ARAMARK CORPORATION
--------------
(ART)
--------------
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
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