<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 March 31, 2000 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 19107-2988
- ---------------------------------------- ----------
(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 28, 2000: 2,461,792
Class B common stock outstanding at April 28, 2000: 61,876,660
- -------------------------------------------------------------------------
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARAMARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
ASSETS
------
<TABLE>
<CAPTION>
March 31, October 1,
2000 1999
---------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 26,473 $ 27,690
Receivables 547,303 578,393
Inventories, at lower of cost or market 384,443 369,791
Prepayments and other current assets 102,747 68,492
---------- ----------
Total current assets 1,060,966 1,044,366
---------- ----------
Property and Equipment, net 957,438 933,715
Goodwill 606,619 603,017
Other Assets 320,209 289,445
---------- ----------
$2,945,232 $2,870,543
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term borrowings $ 19,959 $ 24,761
Accounts payable 383,148 387,127
Accrued expenses and other liabilities 501,386 513,865
---------- ----------
Total current liabilities 904,493 925,753
---------- ----------
Long-Term Borrowings 1,719,569 1,609,659
Deferred Income Taxes and Other Noncurrent Liabilities 225,700 188,560
Common Stock Subject to Potential Repurchase Under
Provisions of Shareholders' Agreement 20,000 20,000
Shareholders' Equity Excluding Common Stock
Subject to Repurchase:
Class A common stock, par value $.01 25 27
Class B common stock, par value $.01 628 656
Capital surplus 5,221 57,356
Earnings retained for use in the business 94,422 93,376
Accumulated other comprehensive income (loss) (4,826) (4,844)
Impact of potential repurchase feature of
common stock (20,000) (20,000)
---------- ----------
Total 75,470 126,571
---------- ----------
$2,945,232 $2,870,543
========== ==========
</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 Six Months Ended
------------------------------ --------------------------------
March 31, April 2, March 31, April 2,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $1,740,401 $1,658,845 $3,501,137 $3,307,310
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of services provided 1,591,681 1,521,102 3,183,360 3,019,449
Depreciation and amortization 52,737 48,709 104,401 94,530
Selling and general corporate expenses 21,826 22,846 44,359 42,331
---------- ---------- ---------- ----------
1,666,244 1,592,657 3,332,120 3,156,310
---------- ---------- ---------- ----------
Operating income 74,157 66,188 169,017 151,000
Interest Expense, net 36,734 34,929 70,518 69,465
---------- ---------- ---------- ----------
Income before income taxes 37,423 31,259 98,499 81,535
Provision for Income Taxes 14,607 11,832 38,413 32,025
---------- ---------- ---------- ----------
Net income $ 22,816 $ 19,427 $ 60,086 $ 49,510
========== ========== ========== ==========
Earnings Per Share:
Basic $.25 $.20 $.66 $.53
Diluted $.24 $.19 $.62 $.49
</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 Six Months Ended
----------------------------
March 31, April 2,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 60,086 $ 49,510
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 104,401 94,530
Income taxes deferred 1,865 2,414
Changes in noncash working capital (34,458) (17,939)
Other operating activities (11,940) (10,571)
--------- ---------
Net cash provided by operating activities 119,954 117,944
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (96,114) (74,754)
Disposals of property and equipment 7,718 6,466
Sale of investments - 40,722
Divestiture of certain businesses - 8,380
Acquisition of certain businesses (32,487) (60,614)
Other investing activities (30,042) (10,109)
--------- ---------
Net cash used in investing activities (150,925) (89,909)
--------- ---------
Cash flows from financing activities:
Proceeds from additional long-term borrowings 182,542 5,897
Payment of long-term borrowings (82,434) (34,641)
Proceeds from issuance of common stock 31,893 13,492
Repurchase of stock (102,247) (11,309)
Other financing activities - (31)
--------- ---------
Net cash provided by (used in) financing activities 29,754 (26,592)
--------- ---------
Increase (decrease) in cash and cash equivalents (1,217) 1,443
Cash and cash equivalents, beginning of period 27,690 20,614
--------- ---------
Cash and cash equivalents, end of period $ 26,473 $ 22,057
========= =========
</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) CAPITAL STOCK:
-------------
During the first six months of fiscal 2000, pursuant to the ARAMARK
Ownership Program, employees purchased 6,093,330 shares of Class B Common
Stock for total consideration of $35.6 million consisting of $31.9 million
in cash plus $3.7 million of deferred payment obligations.
(3) SUPPLEMENTAL CASH FLOW INFORMATION:
----------------------------------
The Company made interest payments of $67.8 million and $66.6 million and
income tax payments of $42.4 million and $46.0 million during the first six
months of fiscal 2000 and 1999, respectively. During the first six months of
fiscal 2000, the Company purchased $14.3 million of its Class A Common Stock
and $151.7 million of its Class B Common Stock, issuing $63.8 million in
installment notes as partial consideration, and contributed $7.1 million of
Class A Common Stock to its employee benefit plan.
(4) COMPREHENSIVE INCOME:
--------------------
Pursuant to the provisions of SFAS No. 130, "Reporting Comprehensive
Income", comprehensive income includes all changes in shareholders' equity
during a period, except those resulting from investment by and distributions
to shareholders. Components of comprehensive income include net income,
changes in foreign currency translation adjustments and unrealized holding
gains/losses in marketable equity securities. Total comprehensive income was
$20.6 million and $60.1 million for the three and six months ended March 31,
2000, respectively; and $15.8 million and $48.0 million for the three and
six months ended April 2, 1999, respectively.
(5) ACQUISITIONS:
------------
On March 29, 2000, the Company entered into a definitive agreement to
acquire substantially all of the food and beverage concessions and venue
businesses of Ogden Corporation for $236 million in cash. The acquisition
will be financed through the Company's existing revolving credit facility
and is expected to close during the fiscal third quarter.
During the second quarter of fiscal 1999, the Company acquired Restaura,
Inc. a provider of food and support services, and Dyna Corporation, a
leading distributor of emergency medical supplies for approximately $46
million and $13 million in cash, respectively.
<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 Six Months Ended
-------------------------- --------------------------
March 31, April 2, March 31, April 2,
2000 1999 2000 1999
----------- ----------- -------------- ---------
(in millions)
<S> <C> <C> <C> <C>
Sales $1,161.7 $1,119.0 $2,324.5 $2,202.7
Cost of services provided 1,095.7 1,053.3 2,188.8 2,066.8
Net income 7.8 10.0 18.4 23.9
</TABLE>
<TABLE>
<CAPTION>
March 31, October 1,
2000 1999
------------ --------
(in millions)
<S> <C> <C>
Current assets $ 535.7 $ 519.4
Noncurrent assets 2,102.7 1,977.9
Current liabilities 579.2 574.0
Noncurrent liabilities 1,854.9 1,737.3
</TABLE>
(7) EARNINGS PER SHARE:
-------------------
The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share." Earnings per share is
reported on a Common Stock, Class B equivalent basis (which reflects Common
Stock, Class A shares converted to a Class B basis, ten for one). Earnings
applicable to common stock and common shares utilized in the calculation of
basic and diluted earnings per share are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, April 2, March 31, April 2,
2000 1999 2000 1999
------------ ---------- ------------ -------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Earnings:
Net income $22,816 $19,427 $60,086 $49,510
======= ======= ======= =======
Shares:
Weighted average number of common
shares outstanding used in basic
earnings per share calculation 90,510 95,158 91,315 92,865
Impact of potential exercise opportunities
under the ARAMARK Ownership Plan 5,487 6,952 6,339 7,770
------- ------- ------- -------
Total common shares used in diluted
earnings per share calculation 95,997 102,110 97,654 100,635
======= ======= ======= =======
Basic earnings per common share $.25 $.20 $.66 $.53
==== ==== ==== ====
Diluted earnings per common share $.24 $.19 $.62 $.49
==== ==== ==== ====
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(8) SEGMENT INFORMATION:
--------------------
Sales and operating income by segment are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- --------------------------
March 31, April 2, March 31, April 2,
Sales 2000 1999 2000 1999
-------------------------------------------- ------------- ---------- ------------ -----------
(in thousands)
<S> <C> <C> <C> <C>
Food and Support Services - United States $1,021,828 $975,905 $2,067,747 $1,919,796
Food and Support Services - International 257,674 249,531 511,327 500,332
Uniform and Career Apparel - Rental 240,780 224,948 479,439 450,053
Uniform and Career Apparel - Direct Marketing 109,065 106,742 229,330 240,997
Educational Resources 111,054 101,719 213,294 196,132
---------- ---------- ---------- ----------
$1,740,401 $1,658,845 $3,501,137 $3,307,310
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- --------------------------
March 31, April 2, March 31, April 2,
Operating Income 2000 1999 2000 1999
-------------------------------------------- ------------ ----------- ------------ --------
(in thousands)
<S> <C> <C> <C> <C>
Food and Support Services - United States $ 32,415 $ 29,723 $ 76,276 $ 70,923
Food and Support Services - International 11,242 11,771 24,041 21,371
Uniform and Career Apparel - Rental 24,232 21,004 55,308 47,795
Uniform and Career Apparel - Direct Marketing 2,001 (368) 7,495 4,635
Educational Resources 10,776 11,379 18,604 18,653
-------- -------- -------- --------
80,666 73,509 181,724 163,377
Corporate and Other (6,509) (7,321) (12,707) (12,377)
-------- -------- -------- --------
Operating Income 74,157 66,188 169,017 151,000
Interest Expense, Net (36,734) (34,929) (70,518) (69,465)
-------- -------- -------- --------
Income Before Income Taxes $ 37,423 $ 31,259 $ 98,499 $ 81,535
======== ======== ======== ========
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
- ---------------------
In fiscal 1999, the Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
Prior year segment results have been restated to conform with the current year
segment presentation. See note 8 to the condensed consolidated financial
statements for the segment operating results.
Overview
- --------
Sales of $1.7 billion for the second quarter and $3.5 billion for the six-month
period increased 5% and 6%, respectively, over the prior year periods. Sales
increased in all operating segments in the second quarter. For the six month
period, sales increases in the Food and Support Services, Uniform and Career
Apparel - Rental, and Educational Resources segments were partially offset by a
decline in sales in the Uniform and Career Apparel - Direct Marketing segment.
Operating income of $74.2 million for the second quarter and $169 million for
the six month period increased 12% over the respective prior year periods,
primarily due to strong performances in the Food and Support Services - United
States segment and the Uniform and Career Apparel segments. The Company's
operating margin for the six months increased to 4.8% from 4.6% due primarily to
the leveraging of fixed costs and effective cost controls. Interest expense, net
for the three and six-month periods increased 5% and 2%, respectively, over the
prior year periods due primarily to increased borrowing levels.
Segment Results
- ---------------
Sales - Food and Support Services - United States segment sales for the three
and six month periods increased 5% and 8% versus the comparable prior year
periods due to new accounts (2% and 1%, respectively), increased volume (2% and
4%, respectively), and the impact of acquisitions (1% and 3%, respectively).
Sales in the Food and Support Services - International segment increased 3% and
2% for the three and six month periods due to new accounts (5%) and increased
volume (3%), partially reduced by the unfavorable impact of foreign currency
translation (4%) and the impact of a divestiture (1% and 2%, respectively).
Uniform and Career Apparel - Rental segment sales for both the three and six
month periods increased 7% over the prior year due primarily to increased
volume. Uniform and Career Apparel - Direct Marketing segment sales increased 2%
for the second quarter and decreased 5% for the six months versus the respective
prior year periods. Segment sales performance reflects a decrease in sales of
uniforms and career apparel for the three and six month periods, primarily as a
result of a planned reduction of catalog circulation (approximately 2% and 8%,
respectively), and an increase in sales of safety equipment and related
accessories for the three and six month periods due to increased volume and the
acquisition of Dyna Corporation in the second quarter of fiscal 1999
(approximately 4% and 3%, respectively). Educational Resources segment sales
increased 9% from the prior year for both the three and six month periods due to
pricing and new locations, partially offset by a decrease in enrollment at
existing locations.
Operating Income - Food and Support Services - United States segment operating
income increased 9% and 8% for the three and six month periods due to the sales
increases noted above and the impact of the NBA labor dispute in the prior year,
which were partially offset by increased operating costs, including a provision
in the first quarter for a receivable from a customer that filed for bankruptcy.
Food and Support Services - International segment operating income for the three
and six month periods decreased 4% and increased 12%, respectively from the
prior year periods. Excluding the impact of asset sale gains from both years and
foreign currency translation, operating income for the three and six month
periods increased 8% and 2%, respectively, due to the sales increases noted
above, partially offset by increased operating costs. Uniform and Career Apparel
- - Rental segment operating income for the three and six month periods increased
15% and 16% versus the respective prior year periods due to the sales increases
noted above and leveraging of fixed costs, partially offset by costs related to
the startup of certain manufacturing operations. Operating income in the Uniform
and Career Apparel - Direct Marketing segment for the second quarter of fiscal
2000 was $2 million versus a loss of $368 thousand in the prior year period. The
improved earnings are due to the sales increases noted above, increased margins
and reduced catalog and other costs, partially offset by continuing start-up
costs related to a new distribution center. Operating income for the six month
period increased 62% over the prior year period due to increased margins and
reduced catalog and other costs, partially offset by the distribution center
startup costs noted above and lower sales. Educational Resources segment
operating income for the three month period decreased 5% and was equal with
prior year for the six month period. Operating results have been adversely
impacted by increased labor and other operating costs resulting from tight labor
markets.
<PAGE>
FINANCIAL CONDITION
- -------------------
The Company's indebtedness increased $105 million in the first six months of
fiscal 2000, principally to finance seasonal working capital needs, common stock
repurchases and capital additions. The Company currently has approximately $500
million of unused committed credit availability under its revolving credit
facilities, which management believes, along with cash flows from operations, is
sufficient to fund operating requirements.
On March 29, 2000, the Company entered into a definitive agreement to acquire
substantially all of the food and beverage concessions and venue businesses of
Ogden Corporation for $236 million in cash. The acquisition will be financed
through the Company's existing revolving credit facility and is expected to
close during the fiscal third quarter.
<PAGE>
PART II - OTHER INFORMATION
Item 1: Not Applicable.
- -------
Item 2: Not Applicable.
- -------
Item 3: Not Applicable.
- -------
Item 4: Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
(a) The Annual Meeting of Stockholders was held on
February 8, 2000.
(b) Not Applicable.
(c) There were 56,032,677 affirmative votes and 146,979 votes
withheld or abstained with respect to the uncontested
election of directors.
(d) Not Applicable.
Item 5: Not Applicable.
- -------
Item 6: Exhibits
- ------- --------
(a) Exhibit 27 - Financial Data Schedule
(b) Not Applicable.
<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
May 15, 2000 s/Alan J. Griffith
------------------
Alan J. Griffith
Vice President, Controller
and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet and Condensed Consolidated
Statement of Income filed as part of Form 10-Q and is qualified in its
entirety by reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-29-2000
<PERIOD-START> OCT-02-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 26,473
<SECURITIES> 0
<RECEIVABLES> 547,303
<ALLOWANCES> 25,627
<INVENTORY> 384,443
<CURRENT-ASSETS> 1,060,966
<PP&E> 1,964,412
<DEPRECIATION> 1,006,974
<TOTAL-ASSETS> 2,945,232
<CURRENT-LIABILITIES> 904,493
<BONDS> 1,719,569
0
0
<COMMON> 653
<OTHER-SE> 74,817
<TOTAL-LIABILITY-AND-EQUITY> 2,945,232
<SALES> 0
<TOTAL-REVENUES> 3,501,137
<CGS> 0
<TOTAL-COSTS> 3,183,360
<OTHER-EXPENSES> 104,401
<LOSS-PROVISION> 6,170
<INTEREST-EXPENSE> 70,518
<INCOME-PRETAX> 98,499
<INCOME-TAX> 38,413
<INCOME-CONTINUING> 60,086
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,086
<EPS-BASIC> $.66
<EPS-DILUTED> $.62
</TABLE>
