EXHIBIT 99
SODEXHO MARRIOTT SERVICES, INC.
FORWARD-LOOKING STATEMENTS
SUMMARY OF IMPORTANT FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
As indicated previously, this report contains forward-looking statements that
are subject to a number of risks and uncertainties. Sodexho Marriott Services,
Inc. (the "Company") cautions readers that the following important factors,
among others, in some cases have affected, and in the future could affect, the
Company's actual results of operations. The factors set forth below do not
constitute all factors which investors should consider prior to making an
investment decision with respect to the Company's securities. Further, investors
should not assume that the information contained below is complete or accurate
in all respects following the date of this filing. The Company assumes no
obligation to update any forward-looking statements or any of the factors
discussed below.
CHANGES IN OPERATIONS. On March 27, 1998, the Company, formerly named
Marriott International, Inc. (as formerly named, "Old Marriott"), consummated a
series of transactions (the "Transactions") that, among other things, resulted
in: (i) a spin-off to Old Marriott's stockholders of all businesses of Old
Marriott other than its food service and facilities management business through
a special dividend of stock in a new company which now uses the name "Marriott
International, Inc." ("New Marriott"); (ii) the acquisition through a merger of
the North American operations of Sodexho Alliance, S.A. ("Sodexho"); and (iii)
the refinancing of certain outstanding indebtedness. Following the Transactions,
the Company was renamed Sodexho Marriott Services, Inc. As a result of the
Transactions, the Company's operations were significantly changed. The
distribution of the lodging business narrowed the Company's operations to its
food service and facilities management business (as expanded by the addition of
the North American operations of Sodexho), and caused the Company's debt
obligations, as a percentage of its assets, to increase significantly. The
Company's business strategy is based on the belief that it will be able to
expand its business, and reduce its debt over a reasonable period of time, and
be able to attract, hire, train and retain competent employees. There can be no
assurance, however, that the Company's efforts to execute all elements of this
strategy will be successful, or that a failure to do so will not have a material
adverse effect on the Company's business, results of operations, and financial
condition. In addition, because the Company is less diversified than it was
prior to the Transactions, the results of operations of the Company will be more
susceptible to competitive and market factors specific to its core businesses.
LIMITED HISTORY. The Company has been operating less than three years as an
independent, publicly owned, food service and facilities management company. The
Company's management has limited experience in operating and managing a public
company with indebtedness that exceeds its assets, or in integrating an
acquisition the size of Sodexho North America. The Company also must take steps
to assure that certain corporate services now being provided to the Company for
limited periods of time by New Marriott eventually will be adequately performed
by the Company or third-party contractors. Any or all of these factors could
have a material adverse effect on the Company's business, results of operations,
and financial condition.
SUBSTANTIAL INDEBTEDNESS. The Company's indebtedness under its credit
facility agreements is currently about $1 billion and bears interest at rates
that float with certain indices. The size of the Company's indebtedness and the
restrictive covenants, events of default and other restrictions on the Company's
activities contained in its credit facility agreements may limit the Company's
ability to respond to market conditions, satisfy capital expenditure
requirements, meet contractual or financial obligations, incur additional debt,
invest in information technology infrastructure or engage in other activities.
As a result, significant losses or lower profits by the Company or certain
activities by it could cause the Company to violate the terms of its credit
facility agreements and thereby impair the Company's liquidity and limit its
ability to raise additional capital. Moreover, a failure by the Company to make
required debt payments could result in an acceleration of the Company's
indebtedness, in which case the lenders thereunder would be entitled to exercise
their remedies, including foreclosing on collateral. In view of the Company's
substantial leverage, any new financings and refinancings by the Company of the
Company's indebtedness, if available at all, may be at higher interest rates and
may contain terms significantly less advantageous than would have been available
to the Company absent the Transactions. In addition, a rise in interest rates
would cause the Company's payment obligations to increase, even though the
Company has hedged a significant portion of its interest rate risk. The
occurrence of any of these events could restrict the Company's ability to
finance its future operations, meet capital needs or engage in other business
activities that may be in the interest of the Company. There can be no assurance
that the Company will be able to obtain additional capital, if needed, on
acceptable terms, or that the occurrence of any of the foregoing events would
not have a material adverse effect on the Company's business, results of
operations and financial condition.
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CONTRACTUAL ARRANGEMENTS. The Company's ability to continue the growth of
its food service and facilities management business depends on whether it can
continue to obtain new contracts, or renewals of existing contracts, on
satisfactory terms. The majority of the food service and facilities management
contracts of the Company are either based on fixed-price terms or terminable by
clients on short notice (generally from 30 to 120 days), or both. Therefore, the
Company's results of operations are dependent to a significant extent on its
ability to estimate and control costs associated with the provision of services
under these contracts. The Company's costs are subject to increases as a result
of rising labor and supply costs, many of which are outside its control. In
addition, the terms of the Company's operating contracts, distribution
agreements, franchise agreements and leases are influenced by contract terms
offered by the Company's competitors, general economic conditions, and other
factors. There can be no assurance that some or all of these factors will not
adversely affect the Company's operating margins or its ability to enter into
satisfactory future contracts, or that these factors would not have a material
adverse effect on the Company's business, results of operations, and financial
condition.
COMPETITION. The food service and facilities management industries are
highly competitive. The Company competes in these industries with numerous other
vendors of varying sizes, many of which have significant financial resources.
The continued success of the Company will be dependent, in large part, upon its
ability to compete in such areas as the quality of food and facilities
management services, the nature and scope of specialized services, and upon the
Company's ability to contain costs.
ECONOMIC CONDITIONS. A decline in international, national or regional
economic conditions could result in reduced demand for the outsourcing of food
and facilities management services and create pressure on the Company to enter
into contractual arrangements less favorable than those currently in effect or
under consideration. Accordingly, such a decline could have a material adverse
effect on the Company's business, results of operations, and financial
condition. Also, low levels of unemployment, or other factors, could cause labor
costs to increase and could cause the Company to have unfilled positions that
could impair its service levels. This could result in increased costs incurred
by the Company, some of which may not be recoverable from clients and could
impair the retention of existing clients.
LIMITED GEOGRAPHIC FOCUS. The Company is not currently expected to expand
its international presence beyond Canada. The Company's licensing arrangements
with New Marriott and Sodexho to use the names "Marriott" and "Sodexho" cover
only the U.S. and Canada. As a practical matter, since the Company will be
allowed to use its corporate name only in the U.S. and Canada, and since Sodexho
controls or has significant interests in companies competing in other countries
in the food service and facilities management sector, it is unlikely that the
Company will engage in significant operations outside the U.S. and Canada. As a
result, the Company will be more susceptible to a downturn in the U.S. and
Canadian economies than a company that is actively engaged in various other
markets.
RELATIONSHIP WITH SODEXHO. As part of the Transactions, the Company and
Sodexho entered into certain arrangements under which Sodexho provides the
Company with a variety of consulting and advisory services and other assistance
and has guaranteed a portion of the Company's indebtedness. Sodexho also has
licensed to the Company the use of the name "Sodexho." These arrangements may
have the effect of causing the Company to be reliant to a substantial degree on
its relationship with Sodexho. Thereto, any issues which may adversely impact
Sodexho's image could negatively impact the Company as well. In addition, each
of these arrangements has a finite term, and the failure to renew any such
arrangements on comparable terms could have a material adverse effect on the
Company's business, results of operations, and financial condition. This
relationship may also require the Company's management to focus on issues
arising from cultural and geographic differences, rather than on the strategic
initiatives specifically designated for the North American marketplace. Adverse
effects might also result in the event Sodexho were to encounter financial or
other difficulties that could prevent it from providing such services or
assistance to the Company.
SEASONAL NATURE OF THE COMPANY'S BUSINESS. The food service and facilities
management business has been characterized historically by seasonal fluctuations
in overall demand for services, particularly in the education sector where sales
are stronger during the academic year. There can be no assurance that these
fluctuations will not have a material adverse effect on the Company's business,
results of operations, and financial condition.
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CERTAIN ANTI-TAKEOVER EFFECTS. As of September 1, 2000, Sodexho, the
Company's largest stockholder, beneficially owned approximately 48% of the
outstanding shares of the Company's common stock. Sodexho has agreed pursuant to
a tax sharing and indemnification agreement entered into among the Company, New
Marriott and Sodexho not to acquire 50% or more of the Company's common stock
for three years after the Transactions or through March 27, 2001. The
certificate of incorporation of the Company generally provides that no person
may acquire 50% or more of the Company's common stock until the end of such
period. Consequently, no change in control of the Company is expected to occur
before March 27, 2001. In addition, because Sodexho owns a large percentage of
the Company's common stock it may be able to exercise significant influence over
many matters requiring stockholder approval. Pursuant to a stockholder agreement
with the Company, Sodexho also has the right to nominate three members of the
Company's Board. As a result, Sodexho's relationship with the Company may have
the effect of, among other things, preventing a change in control of the Company
at any time without the agreement of Sodexho.
USE OF TRADENAMES. New Marriott has licensed the "Marriott" name to the
Company in certain limited respects for a period of four years after the
Transactions, or through March 27, 2002. The Company will not have the right to
use the "Marriott" name after the expiration of the four-year period. In
addition, Sodexho has licensed the "Sodexho" name to the Company under a royalty
agreement having a ten-year term. The "Sodexho" name, which has been used in the
food service and facilities management business in North America for the four
years prior to the Transactions, is not as well known in that market as the
"Marriott" name. The Company may have to make additional expenditures to
position its new name in the marketplace and cannot predict with certainty the
extent to which the substitution of a new name may adversely affect its
retention and acquisition of clients. Further, to the extent that the Company
fails to perform its obligations under its license agreements with New Marriott
or Sodexho, each of New Marriott and Sodexho could successfully prevent the
Company from using their respective names, which could adversely affect the
Company's retention and acquisition of clients and its financial performance.
DIVIDEND POLICY. Prior to the Transactions, the Company paid regular
quarterly dividends. On October 13, 1999, the Company's Board of Directors
declared a dividend for fiscal year 1999 of $0.08 per common share, paid on
December 10, 1999 to shareholders of record on November 22, 1999. In the future,
the Company may pay dividends, subject to the restrictive covenants contained in
the Company's credit facility agreements and other relevant considerations. In
general, the restrictive covenants do not permit the Company to pay dividends to
stockholders in an amount greater than 40 percent of the Company's net income,
or 45 percent when the ratio of the Company's consolidated debt to EBITDA (as
defined in the documentation for the credit facility agreements) is less than 4
but not less than 3. This restriction will no longer apply when such ratio is
less than 3. The payment and amount of cash dividends on the Company's common
stock will be subject to the sole discretion of the Company's Board, which will
review the Company's dividend policy at such times as may be deemed appropriate.
Payment of dividends on the Company's common stock will depend upon the
Company's financial position, capital requirements, profitability and such other
factors as the Company's Board deems relevant.
FLUCTUATING PRICES OF THE COMPANY'S COMMON STOCK. The Company's common
stock is listed and traded on the New York Stock Exchange and certain other U.S.
exchanges. Prices at which the Company's common stock trades fluctuate
significantly and could be influenced by many factors, including, among others,
the continuing depth and liquidity of the market for the Company's common stock,
investor perception of the Company, the Company's dividend policy and general
economic and market conditions.
