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.
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 Marriott International 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 $1.0 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 merger in March 1998. 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 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 Marriott International 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 merger in March 1998, 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. Therefore, 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 December 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,
Marriott International and Sodexho not to acquire 50% or more of the Company's
common stock for three years after the merger in March 1998, 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. Marriott International has licensed the "Marriott" name
to the Company in certain limited respects for a period of four years after the
merger in March 1998, 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 merger in March 1998, 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
Marriott International or Sodexho, each of Marriott International 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 merger in March 1998, 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.
