<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 1, 1994 Commission file number 1-8827
------------- ------
THE ARA GROUP, INC.
- - --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2319139
- - --------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
The ARA Tower
1101 Market Street
Philadelphia, Pennsylvania 19107
- - --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(215) 238-3000
- - --------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Class A common stock outstanding at April 29, 1994: 2,142,596
Class B common stock outstanding at April 29, 1994: 25,377,676
- - --------------------------------------------------------------------------
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PART I - FINANCIAL INFORMATION
THE ARA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 1, 1994 AND OCTOBER 1, 1993
(Unaudited)
(In Thousands)
ASSETS
------
<TABLE>
<CAPTION>
April 1, October 1,
1994 1993
---------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 24,066 $ 27,801
Receivables 389,675 388,768
Inventories, at lower of cost or market 251,966 249,858
Prepayments and other current assets 124,519 63,381
---------- ----------
Total current assets 790,226 729,808
---------- ----------
Property and Equipment, net 656,207 648,379
Goodwill 441,682 446,261
Other Assets 206,126 216,193
---------- ----------
$2,094,241 $2,040,641
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term borrowings $ 12,056 $ 15,615
Accounts payable 292,125 329,129
Accrued expenses and other liabilities 384,220 340,722
---------- ----------
Total current liabilities 688,401 685,466
---------- ----------
Long-Term Borrowings 1,039,379 1,008,674
Deferred Income Taxes and Other Noncurrent Liabilities 180,710 182,693
Minority Interest 16,425 18,084
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement 22,572 21,651
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Class C preferred stock, redemption value $1,000 17,823 34,596
Class A common stock, par value $.01 21 21
Class B common stock, par value $.01 259 243
Capital surplus 13,417 -
Earnings retained for use in the business 133,431 104,827
Cumulative translation adjustment 4,375 6,037
Impact of potential repurchase feature of
common stock (22,572) (21,651)
---------- ----------
Total 146,754 124,073
---------- ----------
$2,094,241 $2,040,641
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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THE ARA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED
APRIL 1, 1994 AND APRIL 2, 1993
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
April 1, April 2, April 1, April 2,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $1,257,614 $1,188,456 $2,549,634 $2,403,338
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of services provided 1,156,230 1,090,870 2,335,956 2,200,981
Depreciation and amortization 34,845 32,468 69,226 64,582
Selling and general corporate expenses 17,069 16,044 33,472 31,718
Other expense (income) - (735) - (4,345)
---------- ---------- ---------- ----------
1,208,144 1,138,647 2,438,654 2,292,936
---------- ---------- ---------- ----------
Operating income 49,470 49,809 110,980 110,402
Interest Expense, net 28,275 31,244 57,756 64,062
---------- ---------- ---------- ----------
Income before income taxes 21,195 18,565 53,224 46,340
Provision for Income Taxes 7,750 6,556 20,890 17,752
Minority Interest 321 375 823 762
---------- ---------- ---------- ----------
Income before Cumulative Effect of Change
in Accounting for Income Taxes and
Extraordinary Item 13,124 11,634 31,511 27,826
Cumulative Effect of Change in Accounting
for Income Taxes - - 1,277 -
Extraordinary Item due to Early Extinguishment
of Debt (net of income taxes) 117 - 819 4,297
---------- ---------- ---------- ----------
Net income $ 13,007 $ 11,634 $ 29,415 $ 23,529
========== ========== ========== ==========
Earnings Per Share:
Income before cumulative effect of
change in accounting for income
taxes and extraordinary item $.25 $.23 $.61 $.55
Net income $.25 $.23 $.57 $.46
==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE> 4
THE ARA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
APRIL 1, 1994 AND APRIL 2, 1993
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 29,415 $ 23,529
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 69,226 64,582
Income taxes deferred (1,818) 262
Minority interest 823 762
Extraordinary item 819 4,297
Cumulative effect of accounting change 1,277 -
Changes in noncash working capital (63,465) (60,832)
Other operating activities (3,579) 1,911
-------- --------
Net cash used in operating activities 32,698 34,511
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (59,197) (60,719)
Disposals of property and equipment 6,190 5,676
Divestiture of certain businesses 5,223 -
Sale of investment 6,194 13,877
Acquisition of certain businesses (6,279) (12,267)
Other investing activities (2,048) (5,606)
-------- --------
Net cash used in investing activities (49,917) (59,039)
-------- --------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 52,863 49,058
Payment of long-term borrowings including premiums (27,082) (21,004)
Proceeds from issuance of common stock 10,584 8,440
Repurchase of stock (21,435) (12,926)
Other financing activities (1,446) (1,613)
-------- --------
Net cash provided by financing activities 13,484 21,955
-------- --------
Decrease in cash and cash equivalents (3,735) (2,573)
Cash and cash equivalents, beginning of period 27,801 23,785
-------- --------
Cash and cash equivalents, end of period $ 24,066 $ 21,212
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE> 5
THE ARA GROUP, INC. 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. 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 on
management's current assessment, the estimated remaining useful life
of goodwill is appropriate and the remaining balance is fully
recoverable.
(2) OTHER EXPENSE (INCOME):
-----------------------
During the first six months of fiscal 1993, the Company sold 768,000
shares of stock of Living Centers of America, Inc. for $13.9 million.
Other expense (income) in fiscal 1993 includes gains on the sale of
stock of $6.8 million and a $2.5 million addition to the claims and
litigation reserve in the second quarter.
(3) EARLY EXTINGUISHMENT OF DEBT:
-----------------------------
During the first six months of fiscal 1994, the Company redeemed $13.4
million of its 12.5% subordinated debentures for total cash premiums
of $1.2 million. During the first six months of fiscal 1993, the
Company repurchased $100 million of its 10.55% senior notes for a $7
million cash premium and issued $100 million of 8.25% senior notes.
For the first six months of fiscal 1994 and 1993, the redemption
premiums (net of applicable income tax benefits of $0.5 million and
$2.7 million, respectively), are reflected in the Condensed
Consolidated Statements of Income as an "Extraordinary Item".
(4) CAPITAL STOCK:
--------------
During the first six months of fiscal 1994, pursuant to the ARA
Ownership Program, employees purchased 2,371,195 shares or $14.5
million of Class B Common Stock for $10.6 million of cash plus $3.9
million of deferred payment obligations.
(5) SUPPLEMENTAL CASH FLOW INFORMATION:
-----------------------------------
The Company made interest payments of $54.5 million and $63.2 million
and income tax payments of $23.9 million and $18.8 million during the
first six months of fiscal 1994 and 1993, respectively. During the
first six months of fiscal 1994, the Company purchased $16.8 million
of its Preferred Stock and $5.3 million of its Common Stock, issuing
$1.0 million in subordinated installment notes as partial
consideration, and contributed $3.4 million of Class A Common Stock to
its employee benefit plans.
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<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(6) ARA SERVICES, INC. AND SUBSIDIARIES:
------------------------------------
The following financial information has been summarized from the
separate consolidated financial statements of ARA Services, Inc. (a
wholly owned subsidiary of The ARA Group, Inc.) and the subsidiaries
which it currently owns. ARA 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 The ARA Group,
Inc.
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------- -------------------------
April 1, April 2, April 1, April 2,
1994 1993 1994 1993
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $707.7 $675.0 $1,423.2 $1,348.4
Cost of services provided 665.5 635.1 1,335.5 1,263.1
Income before cumulative effect of
change in accounting for income
taxes and extraordinary item 2.8 2.5 8.2 9.2
Cumulative effect of change in
accounting for income taxes - - 0.3 -
Extraordinary item - - - 4.3
Net income 2.8 2.5 7.9 4.9
</TABLE>
April 1, October 1,
1994 1993
-------- ----------
(in thousands)
Current assets $ 342.8 $ 339.9
Noncurrent assets 1,289.6 1,221.2
Current liabilities 382.8 364.6
Noncurrent liabilities 1,174.6 1,126.1
Minority interest 16.4 18.1
<PAGE>
<PAGE> 7
THE ARA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
---------------------
Overview
--------
Revenues of $1.3 billion and $2.5 billion for the second quarter and
six months, respectively, were 6% higher than the comparable prior year
periods. Operating income for the second quarter of $49.5 million was
approximately the same as the prior year quarter. For the six month
period, operating income of $111.0 million was also approximately the same
as the prior year period. Excluding the fiscal 1993 other income of $0.7
million for the three months and $4.3 million for the six months,
operating income increased 1% and 5%, respectively, over the comparable
prior year periods. See note 2 to the condensed consolidated financial
statements. The Company's operating margin for the six months, excluding
the 1993 other income, was 4.4% for both periods.
Interest expense decreased 10% for the three and six month periods due
primarily to the favorable impact of refinancing certain of the Company's
long-term notes and subordinated debentures. Income before cumulative
effect of change in accounting for income taxes and extraordinary item for
the three and six months increased 13% versus 1993. Net income for the
six months includes a $1.3 million cumulative effect adjustment for a
change in method of accounting for income taxes. Extraordinary items for
the six month period in fiscal 1994 and 1993 equaled $0.8 million and $4.3
million, respectively. See note 3 to the condensed consolidated financial
statements.
Segment Results
---------------
Food, Leisure and Support Services segment revenues increased 5% for
the three and six month periods due to new domestic food service accounts,
new arena and convention center contracts and the September 1993
acquisition of a Spanish food service company partially offset by a 1%
revenue decline due to the unfavorable effect of currency exchange rates.
Uniform Services segment revenues increased 11% for the three and six
months reflecting increased volume from uniform rental operations and
WearGuard. Health and Education Services segment revenues increased 7%
and 8%, respectively, for the three and six month periods due primarily to
new contracts and higher base business volume at Spectrum Healthcare and
continued enrollment growth at Children's World. The Distributive
Services segment posted revenue increases of 2% and 3% for the three and
six month periods, respectively, due to volume increases in certain
geographical areas.
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<PAGE> 8
Food, Leisure and Support Services segment operating income increased
10% and 5% for the three and six month periods, respectively, compared to
the prior year due to higher revenues plus the positive effect of lower
off-season costs at certain recreational facilities. Uniform Services
segment operating income increased 8% and 10% for the respective three and
six month periods primarily due to increased sales volume partially offset
by somewhat higher operating costs at uniform rental operations. Health
and Education segment operating income increased 10% for the second
quarter and 7% for the six months due primarily to higher revenues.
Distributive Services segment operating income for the three months
approximated the prior year as the favorable impact of higher revenues was
offset by higher costs incurred as a result of the January, 1994
California earthquake. Operating income for this segment increased 6% for
the six months due to higher revenues combined with first quarter
operating efficiencies.
FINANCIAL CONDITION
-------------------
The Company's indebtedness increased $27 million during the first six
months of fiscal 1994 principally to finance capital expenditures,
seasonal working capital requirements and stock repurchases. Stock
repurchases of $21 million include $17 million of preferred stock
repurchases. The Company currently has approximately $240 million of
unused committed credit available under its $650 million revolving credit
facility.
<PAGE>
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PART II - OTHER INFORMATION
Item 1: Not Applicable.
-------
Item 2: The Restated Certificate of Incorporation was amended to
------- eliminate the requirement of a supermajority vote of directors
for certain Board actions and to provide for certain other
matters.
Item 3: Not Applicable.
-------
Item 4: (a) The Annual Meeting of Stockholders was held on January 11,
------- 1994.
(b) Not Applicable.
(c) A proposal to amend the Restated Certificate of
Incorporation to eliminate the requirement of a
supermajority vote of directors for certain Board actions
and to provide for certain other matters was voted upon and
approved at the meeting. There were 23,843,155 affirmative
votes and 205,917 negative or abstained votes cast with
respect to this matter.
(d) Not Applicable.
Item 5: Not Applicable.
-------
Item 6: Exhibits and Reports on Form 8-K
------- --------------------------------
(a)(1)Exhibit 3 - Restated Certificate of Incorporation
(2)Exhibit 11 - Computation of Fully Diluted Earnings Per
Share
(b)None
<PAGE>
<PAGE> 10
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ARA GROUP, INC.
s/Alan J. Griffith
---------------------------------
Alan J. Griffith
May 16, 1994 Controller and Chief Accounting
Officer
<PAGE>
<PAGE>
<PAGE> 11
EXHIBIT 3
RESTATED CERTIFICATE OF INCORPORATION
OF
THE ARA GROUP, INC.
(Originally Incorporated on September 7, 1984
under the name "ARA Acquiring Company")
FIRST: The name of the Corporation is The ARA Group, Inc.
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of the Corporation's registered agent at such
address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 185,000,000 shares,
consisting of (i) 10,000,000 shares of Series Preferred Stock, $1.00 par
value per share (the "Series Preferred Stock") , and (ii) 25,000,000
shares of Common Stock, Class A, $.01 par value per share (the "Class A
Common Stock") , and (iii) 150,000,000 shares of Common Stock, Class B,
$.01 par value per share (the "Class B Common Stock") . The Class A Common
Stock and the Class B Common Stock are referred to collectively as the
"Common Stock".
The Board of Directors shall have the full authority permitted by law
to fix full or limited, or no voting power, and such other designations,
powers, preferences, and relative, participating, optional, special or
other rights (including, as examples and not as a limitation, multiple
voting powers and conversion rights) , and qualifications, limitations or
restrictions of any series of the class of Series Preferred Stock that may
be desired.
4A. Common Stock
A statement of the designations, powers, preferences, and rights of
the Common Stock, and the qualifications, limitations and restrictions in
respect thereof, is as follows:
1. Classes.
The Common Stock shall be divided into two classes, the Class A
Common Stock and the Class B Common Stock. The Common Stock shall be
issuable only in whole shares. The powers, preferences and rights of the
Class A Common Stock and the Class B Common Stock, and the qualifications,
limitations and restrictions thereon, shall be in all respects identical,
except as otherwise provided in this Part 4A.
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<PAGE> 12
2. Dividends.
Subject to any provision in this Article FOURTH with respect to
any stock of the Corporation to the contrary, out of the assets of the
Corporation which are by law available for the payment of dividends,
dividends and other distributions may be, but shall not be required to be,
declared and paid upon shares of Common Stock, and the holders of shares
of Class A Common Stock and Class B Common Stock shall be entitled to
receive the same dividends and other distributions, ratably with the
holder of one share of Class A Common Stock entitled to receive ten times
what the holder of one share of Class B Common Stock is entitled to
receive; provided, however, that in the case of dividends or other
distributions payable in Common Stock, only shares of Class B Common Stock
shall be distributed with respect to Class B Common Stock and only shares
of Class A Common Stock shall be distributed with respect to Class A
Common Stock, and any such distribution shall be made ratably, with the
holder of one share of Class A Common Stock entitled to receive the same
number of shares of Class A Common Stock as the number of shares of Class
B Common Stock the holder of one share of Class B Common Stock shall be
entitled to receive; and provided further, that the Board of Directors,
may declare and pay dividends and other distributions with respect to the
Class A Common Stock without declaring or paying any dividend or other
distribution with respect to the Class B Common Stock.
3. Voting Rights.
(a) Subject to the special voting rights of the holders of
any other stock of the Corporation, the Common Stock (and any other stock
of the Corporation which may be entitled to vote with the holders of
Common Stock) , voting as a single class except where the Class A Common
Stock and the Class B Common Stock (and such other stock) are required by
law to vote as separate classes, shall possess all of the voting power of
the Corporation with respect to the election of directors and for all
other purposes.
(b) Each share of Common Stock, whether Class A Common Stock
or Class B Common Stock, shall be entitled to one vote on all matters
submitted to a vote of the Corporation's stockholders.
4. Liquidation.
Upon the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after provision for the
payment of creditors and after provision shall be made for holders of all
shares of stock of the Corporation having a preference upon liquidation,
dissolution or winding up, the remaining assets of the Corporation shall
be distributed among the holders of Common Stock, ratably, with the holder
of one share of Class A Common Stock entitled to receive ten times what
the holder of one share of Class B Common Stock is entitled to receive,
and, to the extent provided in this Article FOURTH, the holders of any
other stock of the Corporation which may be entitled to share in such
distribution.
5. Conversion of Class B Common Stock.
(a) Each share of Class B Common stock may at any time, but
only with the prior approval of the Board of Directors, be converted at
the election of the holder thereof into one-tenth of a fully paid and
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<PAGE> 13
nonassessable share of Class A Common Stock. Subject to the terms of any
such approval, the holder of shares of Class B Common Stock may elect to
convert any or all of such shares at one time or at various times in such
holder's discretion. Such right shall be exercised by the surrender of the
certificate representing each share of Class B Common Stock to be
converted to the agent for the registration of transfer of shares of Class
B Common Stock at its office, or to the Corporation at its principal
executive offices, accompanied by a written notice of the election by the
holder thereof to convert and (if so required by the transfer agent or by
the Corporation) by instruments of transfer, in form satisfactory to the
transfer agent and to the Corporation, duly executed by such holder or the
holder's duly authorized attorney.
(b) If a holder of Class B Common Stock ceases to be either
a director or full-time employee of the Corporation or any of its
Subsidiaries (a "Management Investor") or a Permitted Transferee of a
person who is then a Management Investor, then each share of Class B
Common Stock held by such holder shall thereupon be converted into
one-tenth of a share of Class A Common Stock effective immediately. No
share of Class B Common Stock may be issued other than to a Management
Investor or a person who would be a Permitted Transferee of a Management
Investor, and any such share issued to any other person shall ipso facto
be converted into one-tenth of a share of Class A Common Stock effective
at the time of the purported issuance.
(c) At any time when the Board of Directors authorizes and
directs the conversion of all the Class B Common Stock into Class A Common
Stock, then, at the time designated by the Board for the occurrence of
such event, each outstanding share of Class B Common Stock shall be
converted into one-tenth of a share of Class A Common Stock and no further
shares of Class B Common Stock may be issued thereafter.
(d) In the event of any such conversion pursuant to
paragraph (a) , (b) or (c) , the certificate or certificates representing
shares of Class B Common Stock held by such holder shall thereupon and
thereafter be deemed to represent the number of whole shares of Class A
Common Stock issuable upon such conversion and the right to receive cash
in lieu of fractional shares pursuant to paragraph (f) hereof. Upon the
surrender of any such certificate to the agent for the registration of
transfer of shares of Class B Common Stock at its office, or to the
Corporation at its principal executive offices, such certificate shall be
cancelled and a certificate for the number of whole shares of Class A
Common Stock to which he shall be entitled, together with a cash
adjustment for any fraction of a share if not evenly convertible pursuant
to paragraph (f) hereof, shall be issued and delivered to the holder
thereof as hereinafter provided.
(e) The issuance of a certificate for shares of Class A
Common Stock upon conversion of shares of Class B Common Stock shall be
made without charge for any stamp or other similar tax in respect of such
issuance. However, if any such certificate is to be issued in a name other
than that of the holder of the share or shares of Class B Common Stock
converted, the person or persons requesting issuance thereof shall pay to
the transfer agent or to the Corporation the amount of any tax which may
be payable in respect of any such transfer, or shall establish to the
satisfaction of the transfer agent or of the Corporation that such tax has
been paid. As promptly as practicable after the surrender for conversion
of a certificate representing shares of Class B Common Stock and the
<PAGE>
<PAGE> 14
payment of any tax as herein before provided, the Corporation will deliver
or cause to be delivered at the office of the transfer agent to, or upon
the written order of, the holder of such certificate, a certificate or
certificates representing the number of whole shares of Class A Common
Stock issuable upon such conversion, issued in such name or names as such
holder may direct together with a cash adjustment for any fraction of a
share as provided pursuant to paragraph (f) hereof, if not evenly
convertible. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of the surrender of the
certificate representing shares of Class B Common Stock (if on such date
the transfer books of the Corporation shall be closed, then immediately
prior to the close of business on the first date thereafter that said
books shall be open) or, in the case of a conversion under paragraph (b)
or (c) of this Section, immediately upon the event giving rise to the
conversion, and all rights of such holder arising from ownership of shares
of Class B Common Stock shall cease at such time, and the person or
persons in whose name or names the certificate representing shares of
Class A Common Stock are to be issued shall be treated for all purposes as
having become the record holder or holders of such shares of Class A
Common Stock at such time and shall have and may exercise all the rights
and powers appertaining thereto. No adjustments in respect of any past
dividends and other distributions shall be made upon the conversion of any
share of Class B Common Stock; provided, however, that if any share of
Class B Common Stock shall be converted subsequent to the record date for
the payment of a dividend or other distribution on shares of Class B
Common Stock but prior to such payment, the registered holder of such
shares at the close of business on such record date shall be entitled to
receive the dividend or other distribution payable to holders of Class B
Common Stock. The Corporation shall at all times reserve and keep
available, solely for the purpose of issue upon conversion of outstanding
shares of Class B Common Stock, such number of shares of Class A Common
Stock as may be issuable upon the conversion of all such outstanding
shares of Class B Common Stock, provided that the Corporation may deliver
shares of Class A Common Stock held in the treasury of the Corporation.
(f) No fractions of shares of Class A Common Stock are to be
issued upon conversion, but in lieu thereof the Corporation will pay
therefor in cash, a sum equal to the number of shares of Class B Common
Stock not evenly convertible multiplied by the per share fair market value
of the Class B Common Stock, as determined by an Appraiser according to
the most recent existing appraisal; provided, however, that such appraisal
shall be as of a date not more than six months prior to its use hereunder.
4B. Series C Stock
A statement of the powers, designations, preferences, rights,
qualifications, limitations and restrictions of 40,000 shares of Series
Preferred Stock is as follows:
1. Designation. There shall be a series of Series Preferred
Stock which shall consist of 40,000 shares and shall be designated as
Adjustable Rate Callable Nontransferable Series C Preferred Stock (the
"Series C Stock") . The number of authorized shares of Series C Stock may
be increased by resolution of the Board of Directors.
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<PAGE> 15
2. Rank.
(a) Rank of Series C Stock. To the extent and in the manner
provided in this Part 4B, the Series C Stock shall, with respect to
dividend rights and rights on liquidation, rank (i) junior to or on parity
with, as the case may be, any other stock of the Corporation, the terms of
which shall specifically provide that such stock shall rank senior to, or
on parity with, as the case may be, the Series C Stock with respect to
dividend rights or rights on liquidation or both, and (ii) senior to any
other stock of the Corporation.
(b) Certain Definitions. The following terms as used in
this Part 4B, shall be deemed to have the meanings set forth in this
section.
(i) The term "Participating Stock" shall mean the Class A
Common Stock and the Class B Common Stock and any other stock of the
Corporation of any class which has the right to participate in the
distribution of either earnings or assets of the Corporation without limit
as to the amount or percentage.
(ii) The term "Parity Stock" with respect to Series C
Stock shall mean the Series C Stock and all other stock of the Corporation
ranking equally therewith as to the payment of dividends or the
distribution of assets upon liquidation. The term "Dividend Parity Stock"
with respect to Series C Stock shall mean the Series C Stock and all other
stock of the Corporation ranking equally therewith as to the payment of
dividends. The term "Liquidation Parity Stock" with respect to Series C
Stock shall mean the Series C Stock and all other stock of the Corporation
ranking equally therewith as to distribution of assets upon liquidation.
(iii) The term "Junior Stock" with respect to Series C
Stock shall mean the Participating Stock and all other stock of the
Corporation ranking junior thereto as to the payment of dividends and the
distribution of assets upon liquidation. The term "Dividend Junior Stock"
with respect to Series C Stock shall mean the Participating Stock and all
other stock of the Corporation ranking junior thereto as to the payment of
dividends. The term "Liquidation Junior Stock" with respect to Series C
Stock shall mean the Participating Stock and all other stock of the
Corporation ranking junior thereto as to distribution of assets upon
liquidation.
(iv) The term "Senior Stock" with respect to Series C
Stock shall mean all stock of the Corporation ranking senior thereto as to
the payment of dividends or distribution of assets upon liquidation.
3. Dividends.
(a) Cumulative Dividends. The holders of record of Series C
Stock shall be entitled to receive, as and if declared by the Board of
Directors, cumulative cash dividends thereon at the per annum rate per
share equal to the Established Dividend Rate (as defined in paragraph
(c) ) , and no more, but only out of funds legally available for the payment
of such distributions under the General Corporation Law of the State of
Delaware. Dividends on the Series C Stock shall be payable semi-annually
on June 15 and December 15 in each year. Dividends shall accrue from the
date of original issuance. Accumulations of dividends shall not bear
interest.
<PAGE>
<PAGE> 16
(b) Limitations Upon Dividend Arrearage. Unless full
cumulative dividends upon the Series C Stock have been paid, no dividend
or other distribution (except in Junior Stock) shall be declared or paid
on Dividend Junior Stock and no amount shall be set aside for or applied
to the redemption, purchase or other acquisition of (i) any Dividend
Junior Stock or Liquidation Junior Stock other than by exchange therefor
of Junior Stock or out of the proceeds of a substantially concurrent sale
of shares of Junior Stock or (ii) any Parity Stock except in accordance
with a purchase or exchange offer made simultaneously by the Corporation
to all holders of record of Parity Stock which, considering the annual
dividend rates and the other relative rights and preferences of such
shares, in the opinion of the Board of Directors (whose determination
shall be conclusive) , will result in fair and equitable treatment among
all such shares. In the event that stated dividends on all Dividend
Parity Stock (including, by way of example and not as a limitation, full
cumulative dividends on the Series C Stock) are not paid in full, all
shares of Dividend Parity Stock shall participate ratably in the payment
of dividends, including accumulations, if any, in accordance with the sums
which would be payable thereon if all dividends thereon were declared and
paid in full.
(c) The "Established Dividend Rate" shall initially be
$60.00, and shall be reset as provided in this paragraph. On each
December 16, beginning December 16, 1993 and continuing so long as any
shares of Series C Stock shall be outstanding, the Established Dividend
Rate shall be reset at a rate equal to $1,000 multiplied by 80% of the
Prime Rate that shall have been in effect at the close of business on the
December 1 next preceding (or if such December 1 shall not have been a
business day, the business day next preceding such December 1) , rounded
up to the nearest $1.00; provided, however, that the Established Dividend
Rate shall in no event be less than $60.00 nor greater than $100.00. For
purposes of the preceding sentence, the "Prime Rate" shall mean the rate
of interest publicly announced from time to time by Chemical Bank at its
main office in New York City as its Prime Rate. The Corporation shall
file with the duly appointed transfer agent for the Series C Stock a
certificate stating the new Established Dividend Rate determined as
provided in this paragraph and showing the computation thereof, and will
cause a notice stating the new Established Dividend Rate and the
computation thereof to be mailed to the holders of shares of Series C
Stock.
4. Liquidation Rights.
(a) Liquidation Value. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of Series C Stock shall be entitled to receive from the assets of
the Corporation, payment in cash, of $1,000 per share, plus a further
amount equal to unpaid cumulative dividends on Series C Stock accrued to
the date when such payments shall be made available to the holders
thereof, and no more, before any amount shall be paid or set aside for, or
any distribution of assets shall be made to the holders of Liquidation
Junior Stock. If, upon such liquidation, dissolution or winding up, the
amounts available for distribution to the holders of all Liquidation
Parity Stock shall be insufficient to permit the payment in full to such
holders of the preferential amounts to which they are entitled, then such
amounts shall be paid ratably among the shares of Liquidation Parity Stock
in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto if paid in
full.
<PAGE>
<PAGE> 17
(b) Actions Not Considered Liquidation. None of the
following shall be considered a liquidation, dissolution or winding up of
the Corporation within the meaning of this section: (1) a consolidation or
merger of the Corporation with or into any other corporation; (2) a merger
of any other corporation into the Corporation; (3) a reorganization of the
Corporation; (4) the purchase or redemption of all or part of the
outstanding shares of any class or classes of the Corporation; (5) a sale
or transfer of all or any part of the assets of the Corporation; or (6) a
share exchange to which the Corporation is a party.
5. Redemption.
(a) Optional Redemption. The Series C Stock may be called
for redemption and redeemed at the option of the Corporation by resolution
of the Board of Directors, in whole at any time or in part at any time or
from time to time upon the notice hereinafter provided for in paragraph
(c) , by the payment therefor of the redemption price per share of $1,000
plus an amount equal to the accrued and unpaid cumulative dividends
thereon to the date fixed by the Board of Directors as the redemption
date. In addition, the Corporation may so call for redemption at any time
after January 1, 1994 all, but not less than all, of the shares of Series
C Stock held by any person, but only if such person is not also a holder
of shares of either Class A Common Stock or Class B Common Stock.
(b) No Mandatory Redemption. There is no mandatory sinking
fund for, or other required redemption of, the Series C Stock.
(c) Manner of Redemption.
(i) If less than all of the outstanding shares of Series
C Stock shall be called for redemption (and such redemption is not
pursuant to the second sentence of paragraph (a) ) , the particular shares
to be redeemed shall be selected by lot or by such other equitable manner
as may be prescribed by resolution of the Board of Directors.
(ii) Notice of redemption of any shares of Series C Stock
shall be given by the Corporation by first-class mail, not less than 30
nor more than 60 days prior to the date fixed by the Board of Directors of
the Corporation for redemption (the "redemption date") , to the holders of
record of the shares to be redeemed at their respective addresses then
appearing on the records of the Corporation. The notice of the redemption
shall state: (1) the redemption date; (2) the redemption price; (3) if
less than all outstanding shares of Series C Stock of the holder are to be
redeemed, the identification of the shares of Series C Stock to be
redeemed; (4) that dividends on the shares to be redeemed shall cease to
accrue on the redemption date; and (5) the place or places where such
shares of Series C Stock to be redeemed are to be surrendered for payment
of the redemption price.
(iii) Notice having been mailed as aforesaid, from and
after the redemption date (unless default shall be made by the Corporation
in providing money for the payment of the redemption price of the shares
called for redemption) , dividends on the shares of Series C Stock so
called for redemption shall cease to accrue, and from and after the
redemption date or such earlier date as funds shall be set aside for
payment of the redemption price (unless default shall be made by the
Corporation in providing money for the payment of the redemption price of
the shares called for redemption) said shares shall no longer be deemed to
<PAGE>
<PAGE> 18
be outstanding, and all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said
notice of the certificates for any shares so redeemed (properly endorsed
or assigned for transfer, if the Board of Directors of the Corporation
shall so require and the notice shall so state) , such shares shall be
redeemed by the Corporation at the redemption price aforesaid.
(iv) Shares of Series C Stock redeemed by the Corporation
shall be restored to the status of authorized and unissued shares of
Series Preferred Stock, undesignated as to series, and, except as
otherwise provided by the express terms of the series redeemed or of any
other outstanding series, may be reissued by the Corporation as shares of
one or more series of Series Preferred Stock other than Series C Stock.
6. Voting Rights.
(a) No Voting Rights Generally. Except as expressly
provided to the contrary in this resolution or as otherwise required by
law, the holders of Series C Stock shall have no right to vote at, or to
participate in, any meeting of stockholders of the Corporation, or to
receive any notice of such meeting.
(b) Rights Upon Dividend Arrearage.
(i) In the event that dividends upon the Series C Stock
shall be in arrears in an amount equal to four full semi-annual dividends
thereon, the number of directors constituting the full board shall be
increased by two, and the holders of the Series C Stock voting
noncumulatively and separately as a single class together with the holders
of any other shares of Series Preferred Stock having the right to elect
directors as a class under such circumstances, shall be entitled to elect
two members of the Board of Directors of the Corporation at the next
annual meeting of stockholders of the Corporation or at a special meeting
called as hereinafter provided in this section. Such voting rights of the
holders of Series C Stock shall continue until all accumulated and unpaid
dividends thereon shall have been paid in full, whereupon such special
voting rights of the holders of Series C Stock shall cease (and the
respective terms of the two additional directors shall thereupon expire
and the number of directors constituting the full board shall be decreased
by two) subject to being again revived from time to time upon the
recurrence of the conditions described in this section as giving rise
thereto.
(ii) At any time when such right of holders of Series C
Stock to elect two additional directors shall have so vested, the
Corporation may, and upon the written request of the holders of record of
not less than 10% of the Series C Stock then outstanding (or 10% of all
Series Preferred Stock having the right to vote for such directors in case
holders of shares of other series of Series Preferred Stock shall also
have the right to elect directors as a class in such circumstances) shall,
call a special meeting of holders of such Series C Stock (and other series
of Series Preferred Stock, if applicable) for the election of directors.
In the case of such a written request, such special meeting shall be held
within 60 days after the delivery of such request, and, in either case, at
the place and upon the notice provided by law and in the bylaws of the
Corporation; except that the Corporation shall not be required to call
such a special meeting if such request is received less than 120 days
before the date fixed for the next ensuing annual meeting of stockholders
of the Corporation.
<PAGE>
<PAGE> 19
(iii) Whenever the number of directors of the Corporation
shall have been increased by two as provided in this section, the number
as so increased may thereafter be further increased or decreased in such
manner as may be permitted by the bylaws of the Corporation and without
the vote of the holders of Series C Stock. No such action shall impair
the right of the holders of Series C Stock to elect and to be represented
by two directors as provided in this section.
(iv) The two directors elected as provided in this
section shall serve until the next annual meeting of stockholders of the
Corporation and until their respective successors shall be elected and
qualified or the earlier expiration of their terms as provided in this
section. No such director may be removed without the vote or consent of
holders of a majority of the shares of Series C Stock (or holders of a
majority of shares of Series Preferred Stock having the right to vote in
the election of such director in case holders of shares of other series of
Series Preferred Stock shall also have the right to elect such director as
a class) . If, prior to the expiration of the term of any such director, a
vacancy in the office of such director shall occur, such vacancy shall,
until the expiration of such term, in each case be filled by appointment
made by the remaining director elected as provided in this section.
7. Restrictions on Transfer. The shares of Series C Stock
shall not be transferable prior to February 1, 1997 (other than by will or
the laws of descent) , except that such shares may be transferred to the
Corporation pursuant to a redemption or purchase thereof. On and after
February 1, 1997, the shares of Series C Stock shall be freely
transferable at any time, at the option of the holder.
8. No Conversion Rights. The holders of shares of Series C
Stock shall not have the right to convert such shares into other
securities of the Corporation.
FIFTH: Subject to the rights of holders of Series Preferred Stock to
elect additional directors under certain circumstances, the Corporation
shall be governed in accordance with the following provisions:
5A. Number of Directors
The Board of Directors of the Corporation shall consist of not
less than nine and not more than 19 members and the Chief Executive
Officer of the Corporation shall always be one of the members. The exact
number of directors within such minimum and maximum shall be fixed by the
Board of Directors.
5B. Election
Directors need not be elected by written ballot.
SIXTH: The following terms shall have the accompanying defined
meanings:
1. "Appraiser" shall mean a firm headquartered in the United
States of nationally recognized standing in the business of appraisal or
valuation of securities which does not own any stock of the Corporation
and which has been selected by the Board of Directors to act as an
independent appraiser.
<PAGE>
<PAGE> 20
2. "Permitted Transferee" shall have the meaning as defined in
the Stockholders' Agreement.
3. "Stockholders' Agreement" shall mean the Amended and
Restated Stockholders' Agreement dated as of April 7, 1988, by and among
the Corporation and the persons named therein as the same may be amended
and a copy of which is on file with the Secretary of the Corporation.
4. "Subsidiary" shall mean any corporation or other entity of
which the Corporation shall, directly or indirectly, own 50% or more of
the equity, as determined by the Board of Directors and any other
corporation or other entity in which the Corporation shall directly or
indirectly have an equity investment and which the Board of Directors
shall in its sole discretion designate.
SEVENTH: The By-Laws of the Corporation may be made, altered,
amended, changed, added to or repealed by the Board of Directors of the
Corporation without the assent or vote of the stockholders.
EIGHTH: Each person who was or is made a party or is threatened to
be made a party to or is involuntarily involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
("proceeding") , by reason of the fact that he or a person of whom he is
the legal representative is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer or representative or in any other capacity while serving as a
director, officer or representative shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended,
against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by him in
connection therewith; provided, however, that the Corporation shall
indemnify any such person seeking indemnity in connection with an action,
suit or proceeding (or part thereof) initiated by such person only if
action, suit or proceeding (or part thereof) was authorized by the Board
of Directors. Such right shall be a contract right and shall include the
right to be paid by the Corporation expenses incurred in defending any
such proceeding in advance of its final disposition upon delivery to the
Corporation of an undertaking, by or on behalf of such person, to repay
all amounts so advanced if it should be determined ultimately that such
person is not entitled to be indemnified under this section or otherwise.
If a claim under this Article is not paid in full by the Corporation
within ninety days after a written claim has been received by the
Corporation, the claimant unpaid may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and if
successful in whole or in part, the claimant shall be entitled to be paid
also the expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition
where the required undertaking has been tendered to the Corporation) that
the claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law for the Corporation
<PAGE>
<PAGE> 21
to indemnify the claimant for the amount claim, but the burden of proving
such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper
in the circumstances because he has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant had not
met such applicable standard of conduct, shall be a defense to the action
or create a presumption that claimant had not met the applicable standard
of conduct.
The rights conferred by this Article shall not be exclusive of any
other right which such person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, By-Laws,
agreement, vote of stockholders or disinterested directors or otherwise.
The Corporation may maintain insurance, at its expense, to protect
itself and any such director, officer or representative against any such
expense, liability or loss, whether or not the Corporation would have the
power to indemnify him against such expense, liability or loss under the
Delaware General Corporation Law.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of
Incorporation in the manner now or hereafter prescribed by law, and all
rights and powers conferred herein on stockholders, directors and officers
are subject to this reserved power.
TENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any creditor or
stockholder thereof, or on the application of any receiver or receivers
appointed by the Corporation under the provisions of Section 291 of Title
8 of the Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for the Corporation under the
provisions of Section 279 of Title 8 of the Delaware Code order a meeting
of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be
summoned in such manner as the said Court directs. If a majority in number
representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of the Corporation as a consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the Court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all stockholders or class of stockholders of the
Corporation, as the case may be, and also on the Corporation.
ELEVENTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director
of this Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as
director.
<PAGE>
<PAGE> 22
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates and further amends the Corporation's Certificate
of Incorporation, as heretofore amended and restated, having been duly
adopted pursuant to the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware, has been duly executed this 8th
day of February, 1994.
THE ARA GROUP, INC.
Attest: /s/ Donald S. Morton By: /s/ Martin W. Spector
--------------------------- -----------------------------
Donald S. Morton Martin W. Spector
Assistant Secretary Executive Vice President
<PAGE>
<PAGE>
<PAGE> 23
EXHIBIT 11
THE ARA GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (1)
(Unaudited)
(In Thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- --------------------
April 1, April 2, April 1, April 2,
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Earnings:
Net Income $13,007 $11,634 $29,415 $23,529
Preferred stock dividends (301) - (811) -
------- ------- ------- -------
Earnings applicable to common stock $12,706 $11,634 $28,604 $23,529
======= ======= ======= =======
Shares:
Weighted average number of common
shares outstanding (2) 47,514 46,419 46,639 45,636
Impact of potential exercise opportunities
under the ARA Ownership Program 3,241 4,806 3,572 5,293
------- ------- ------- -------
Total common and common equivalent shares 50,755 51,225 50,211 50,929
======= ======= ======= =======
Fully diluted earnings per common and
common equivalent share $.25 $.23 $.57 $.46
==== ==== ==== ====
</TABLE>
(1) Primary and fully diluted earnings per share are approximately the
same.
(2) Includes Class B plus Class A Common Shares stated on a Class B Common
Share Equivalent Basis.
<PAGE>
