<PAGE>
UNITED STATES
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 June 30, 1995 Commission file number 1-8827
------------- ------
ARAMARK CORPORATION
-----------------------------------------------------
(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)
ARAMARK 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 July 28, 1995: 2,123,913
Class B common stock outstanding at July 28, 1995: 23,650,169
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -------
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
------
June 30, September 30,
1995 1994
------------ --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 19,438 $ 27,426
Short-term investments held by the
Canadian subsidiary - 16,203
Receivables 458,035 433,550
Inventories, at lower of cost or market 280,279 256,950
Prepayments and other current assets 78,383 69,865
---------- ----------
Total current assets 836,135 803,994
---------- ----------
Property and Equipment, net 721,327 681,907
Goodwill 502,824 438,725
Other Assets 264,205 197,324
---------- ----------
$2,324,491 $2,121,950
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term borrowings $ 9,254 $ 9,391
Accounts payable 354,383 372,908
Accrued expenses and other liabilities 409,187 374,902
---------- ----------
Total current liabilities 772,824 757,201
---------- ----------
Long-Term Borrowings 1,126,319 981,949
Deferred Income Taxes and Other Noncurrent Liabilities 186,802 168,638
Minority Interest 340 10,812
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement 17,504 20,791
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Class C preferred stock, redemption value $1,000 15,155 16,949
Class A common stock, par value $.01 22 21
Class B common stock, par value $.01 237 243
Earnings retained for use in the business 214,644 178,587
Cumulative translation adjustment 8,148 7,550
Impact of potential repurchase feature of
common stock (17,504) (20,791)
---------- ----------
Total 220,702 182,559
---------- ----------
$2,324,491 $2,121,950
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
----------------------------- -----------------------------
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
--------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues $ 1,423,824 $ 1,309,085 $ 4,168,858 $ 3,858,719
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of services provided 1,290,258 1,185,363 3,810,530 3,521,319
Depreciation and amortization 40,365 34,362 116,412 103,588
Selling and general corporate expenses 18,535 15,947 55,595 49,419
----------- ----------- ----------- -----------
1,349,158 1,235,672 3,982,537 3,674,326
----------- ----------- ----------- -----------
Operating income 74,666 73,413 186,321 184,393
Interest Expense, net 27,309 26,352 82,184 84,108
----------- ----------- ----------- -----------
Income before income taxes 47,357 47,061 104,137 100,285
Provision for Income Taxes 19,282 19,572 41,894 40,462
Minority Interest 18 368 83 1,191
----------- ----------- ----------- -----------
Income before Cumulative Effect of Change
in Accounting for Income Taxes and
Extraordinary Item 28,057 27,121 62,160 58,632
Cumulative Effect of Change in Accounting
for Income Taxes -- -- -- 1,277
Extraordinary Item due to Early Extinguishment
of Debt (net of income taxes) 6,686 2,518 6,686 3,337
----------- ----------- ----------- -----------
Net income $ 21,371 $ 24,603 $ 55,474 $ 54,018
=========== =========== =========== ===========
Earnings Per Share:
Income before cumulative effect of
change in accounting for income
taxes and extraordinary item $.56 $.53 $1.24 $1.15
Net income $.43 $.48 $1.10 $1.05
==== ==== ===== =====
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended
--------------------------------------
June 30, July 1,
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 55,474 $ 54,018
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 116,412 103,588
Income taxes deferred (2,399) (4,099)
Minority interest 83 1,191
Cumulative effect of accounting change -- 1,277
Extraordinary item 6,686 3,337
Changes in noncash working capital (36,813) (41,417)
Other operating activities (3,673) (6,759)
------------ ------------
Net cash provided by operating activities 135,770 111,136
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (125,854) (93,931)
Disposals of property and equipment 16,538 7,705
Divestiture of certain businesses 2,483 6,887
Sale of investments 16,203 6,194
Purchase of subsidiary stock (20,386) --
Acquisition of certain businesses (144,503) (9,839)
Other investing activities (44) (755)
------------ ------------
Net cash used in investing activities (255,563) (83,739)
------------ ------------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 337,983 87,168
Payment of long-term borrowings including premiums (209,085) (84,393)
Proceeds from issuance of common stock 9,162 12,060
Repurchase of stock (21,618) (29,305)
Other financing activities (4,637) (1,978)
------------ ------------
Net cash provided by (used in) financing activities 111,805 (16,448)
------------ ------------
Increase (decrease) in cash and cash equivalents (7,988) 10,949
Cash and cash equivalents, beginning of period 27,426 27,801
------------ ------------
Cash and cash equivalents, end of period $ 19,438 $ 38,750
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<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 fiscal 1995, the Company acquired Harry M. Stevens, a provider of
food and support services to stadiums and arenas, and Rainier News and
Meader Distributing, magazine and book distribution companies, for
approximately $153 million in cash, notes and preferred stock.
Additionally, during the first quarter, the Company completed the buyback
of the remaining minority interest of its Canadian subsidiary for cash
consideration of $20.3 million.
The acquisitions have been accounted for by the purchase method. The
costs of the acquisitions were allocated to the assets acquired and
liabilities assumed based upon a preliminary estimate of their respective
fair values and will be finalized during calendar 1995. Amounts allocated
to goodwill are being amortized on a straight-line basis over 40 years.
(3) EARLY EXTINGUISHMENT OF DEBT:
----------------------------
During the fiscal 1995 third quarter, the Company redeemed its $125
million 12% subordinated debentures due 2000 and its $50 million 10.25%
senior note due 1998 and issued $150 million of 8.15% senior notes due
2005 and $100 million of 8% senior notes due 2002. The premium related to
the early extinguishment of the debt, $6.7 million (net of tax benefit of
$4.4 million), is reflected in the Condensed Consolidated Statements of
Income as an "Extraordinary Item".
Through the first nine months of fiscal 1994, the Company redeemed $65.8
million of its 12.5% subordinated debentures ($52.4 million in the fiscal
third quarter). As a result of cash premiums paid in connection with the
redemption, the Company recorded an extraordinary item of $3.3 million
and $2.5 million (net of tax benefit of $2.2 million and $1.7 million)
for the nine month and three month periods ended July 1, 1994,
respectively.
(4) CAPITAL STOCK:
-------------
During the first nine months of fiscal 1995, pursuant to the ARAMARK
Ownership Program, employees purchased 2,839,894 shares or $17.1 million
of Class B Common Stock for $9.1 million of cash and $8.0 million of
deferred payment obligations.
(5) SUPPLEMENTAL CASH FLOW INFORMATION:
----------------------------------
The Company made interest payments of $76.8 million and $76.1 million and
income tax payments of $40.7 million and $38.4 million during the first
nine months of fiscal 1995 and 1994, respectively. During the first nine
months of fiscal 1995, the Company purchased $1.8 million of its
Preferred Stock, $5 million of Class A Common Stock from its benefit
plans and $31.3 million of its Class B Common Stock, issuing $16.5
million in subordinated installment notes as partial consideration, and
contributed $1.5 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 $8 million.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(6) 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 For the Nine Months Ended
--------------------------------- -----------------------------------
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
----------- ------------ -------------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $739.8 $681.8 $2,272.7 $2,105.0
Cost of services provided 694.8 642.8 2,130.8 1,978.3
Income before cumulative effect of
change in accounting for income
taxes and extraordinary item 5.6 2.1 22.1 10.3
Cumulative effect of change in
accounting for income taxes - - - 0.3
Extraordinary item 2.1 - 2.1 -
Net income 3.5 2.1 20.0 10.0
June 30, September 30,
1995 1994
----------- ------------
(in thousands)
Current assets $ 331.0 $ 355.8
Noncurrent assets 1,422.6 1,223.8
Current liabilities 426.1 398.8
Noncurrent liabilities 1,223.9 1,093.6
Minority interest 0.3 10.8
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- ------- FINANCIAL CONDITION
RESULTS OF OPERATIONS
- ---------------------
Overview
- --------
Revenues of $1.4 billion for the third quarter and $4.2 billion for the nine
month period increased 9% and 8%, respectively, over the comparable prior year
periods. Third quarter operating income of $74.7 million was $1.3 million or 2%
higher than the prior year period. The increase in operating income is due to
improved earnings in the business segments and the impact of the Harry M.
Stevens (Stevens) acquisition (see note 2 to the condensed consolidated
financial statements), partially offset by increased costs related to the change
in corporate identity and the impact of the Major League Baseball strike and the
decline in attendance discussed below. Operating income for the nine month
period of $186.3 million was 1% higher than the prior year, with improvements in
business segment earnings being offset by the impact of the National Hockey
League strike and Major League Baseball situation in the United States and
Canada, and the corporate identity costs noted above. Excluding the impact of
hockey and baseball and the Stevens acquisition, it is estimated that operating
income would have been approximately 7% and 5% higher for the third quarter and
nine month period, respectively, and consolidated net income (before
extraordinary items) would have been approximately 14% higher for the nine month
period.
The Company's operating income margin for the nine month period decreased to
4.5% in fiscal 1995 from 4.8% in fiscal 1994. The decrease in margin is due
primarily to hockey and baseball and increased corporate expenses
referred to above.
Third quarter interest expense increased $1.0 million, or 4%, from the
comparable prior year period due to increased debt levels to finance
acquisitions and increases in short-term interest rates, partially offset by the
favorable impact of refinancing certain of the Company's subordinated debentures
during fiscal 1994 and 1995 (see notes 2 and 3 to the condensed consolidated
financial statements). Interest expense for the nine month period decreased $1.9
million compared to the prior year period, primarily due to the refinancing
described above offset by the increase in interest expense related to the
acquisitions.
Segment Results
- ---------------
Food, Leisure and Support Services segment revenues increased 8% and 7%,
respectively, for the three and nine month periods due to new accounts and
increased volume at both domestic and international food businesses and due to
the Stevens acquisition, partially offset by the impact of the National Hockey
League strike and the Major League Baseball situation. Uniform Services segment
revenues increased 8% and 11%, respectively, for the three and nine month
periods, reflecting increased volume at both uniform rental operations and at
WearGuard. Health & Education segment revenues increased 11% and 12%,
respectively, for the three and nine month periods resulting from new contracts
at Spectrum Healthcare Services and continued enrollment and tuition increases
at Children's World. Distributive segment revenues for the three and nine month
periods increased 11% and 7%, respectively, due to increased unit volume and the
acquisitions described in note 2 to the condensed consolidated financial
statements.
Food, Leisure and Support Services segment operating income for the fiscal third
quarter increased 2% compared to the prior year period due to increased revenues
in the domestic food business and the Stevens acquisition, partially offset by
the impact of the baseball strike, and a decrease in average attendance since
the resumption of the season in late April. Food, Leisure and Support Services
segment operating income for the nine month period increased 5% over the prior
year comparable period with volume related increases in the domestic food
business being partially offset by the impact of hockey and baseball. Excluding
the effects of hockey and baseball and the Stevens acquisition, it is estimated
that segment operating income would have been 13% and 11% higher for the third
quarter and nine month period, respectively. Uniform Services operating income
increased 6% and 5% for the three and nine month periods, respectively, due to
the increased volume, partially offset by increases in merchandise and other
operating costs. Health & Education segment operating income increased 5% and 4%
for the three and nine month periods, respectively, with volume related
improvements in operating income at Children's World being partially offset by
increased operating costs at Spectrum Healthcare Services. Distributive segment
third quarter operating income increased 7% over the prior year period, due to
the revenue related increases discussed above. Distributive segment operating
income for the nine month period decreased 1% compared to the prior year period,
with revenue related increases being offset by higher operating expenses and the
impact of current year acquisitions.
<PAGE>
FINANCIAL CONDITION
- -------------------
The Company's indebtedness increased $144 million during the first nine months
of fiscal 1995, principally to finance acquisitions (see note 2 to the condensed
consolidated financial statements) and capital expenditures.
During the third quarter, the Company redeemed its $125 million 12% subordinated
debentures due 2000 and its $50 million 10.25% senior note due 1998 and issued
$150 million of 8.15% senior notes due 2005 and $100 million of 8% senior notes
due 2002. The premium related to the early extinguishment of the debt, $6.7
million after tax, is reflected as an extraordinary item in the fiscal 1995
third quarter financial statements. Remaining proceeds from the note offering
were used to reduce outstanding borrowings on the credit facility. The financing
transactions extended overall maturities and decreased the Company's average
borrowing rate. Additionally, during the third quarter, the Company established
a C$75 million credit facility at its Canadian subsidiary for general operating
purposes and to refinance borrowings related to the purchase of the remaining
minority interest described above.
The Company currently has approximately $500 million of unused committed credit
availability under its $1 billion revolving credit facility, which management
believes, along with cash flows from operations, is sufficient to fund operating
requirements.
<PAGE>
PART II - OTHER INFORMATION
Items 1 through 5 are not applicable.
- -------------------------------------
Item 6: Exhibits.
- ------ --------
(a) (1) Exhibit 11 - Computation of Fully Diluted Earnings Per Share
(2) Exhibit 27 - Financial Data Schedule
(b) None
<PAGE>
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.
ARAMARK CORPORATION
s/Alan J. Griffith
----------------------------
Alan J. Griffith
August 14, 1995 Vice President & Controller and Chief
Accounting Officer
<PAGE>
EXHIBIT 11
ARAMARK CORPORATION AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (1)
(Unaudited)
(In Thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ---------------------------
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Earnings:
Net Income $21,371 $24,603 $55,474 $54,018
Preferred stock dividends (261) (266) (791) (1,077)
------- ------- -------- -------
Earnings applicable to common stock $21,110 $24,337 $54,683 $52,941
======= ======= ======= =======
Shares:
Weighted average number of common
shares outstanding (2) 46,928 47,444 46,667 46,727
Impact of potential exercise opportunities
under the ARAMARK Ownership Program 2,486 3,131 2,931 3,476
------- ------- ------- -------
Total common and common equivalent shares 49,414 50,575 49,598 50,203
======= ====== ======= =======
Fully diluted earnings per common and
common equivalent share $.43 $.48 $1.10 $1.05
==== ==== ===== =====
</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.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<LEGEND>
<NAME> ARAMARK Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 9-MOS
<EXCHANGE-RATE> 1
<CASH> $19,438
<SECURITIES> 0
<RECEIVABLES> 458,035
<ALLOWANCES> 14,315
<INVENTORY> 280,279
<CURRENT-ASSETS> 836,135
<PP&E> 1,383,095
<DEPRECIATION> 661,768
<TOTAL-ASSETS> 2,324,491
<CURRENT-LIABILITIES> 772,824
<BONDS> 1,126,319
<COMMON> 259
0
15,155
<OTHER-SE> 205,288
<TOTAL-LIABILITY-AND-EQUITY> 2,324,491
<SALES> 0
<TOTAL-REVENUES> 4,168,858
<CGS> 0
<TOTAL-COSTS> 3,810,530
<OTHER-EXPENSES> 116,412
<LOSS-PROVISION> 5,074
<INTEREST-EXPENSE> 82,184
<INCOME-PRETAX> 104,137
<INCOME-TAX> 41,894
<INCOME-CONTINUING> 62,160
<DISCONTINUED> 0
<EXTRAORDINARY> (6,686)
<CHANGES> 0
<NET-INCOME> 55,474
<EPS-PRIMARY> 0
<EPS-DILUTED> $1.10
</TABLE>
