<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 3
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
JANUARY 8, 1997
- --------------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
COINMACH CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its character)
DELAWARE 333-0062 53-0188589
-------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) number)
55 LUMBER ROAD, ROSLYN, NEW YORK 11576
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(516) 484-2300
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Exhibit Index is located on Page 27
Page 1 of 27
<PAGE>
Item 2. Acquisition or Disposition of Assets
- ---------------------------------------------
On January 8, 1997, pursuant to the terms and conditions of a Stock
Purchase Agreement, dated as of November 25, 1996 (the "Agreement"), Coinmach
Corporation (the "Company"), a wholly-owned subsidiary of Coinmach Laundry
Corporation ("CLC"), completed the acquisition of 100% of the outstanding voting
securities of each of KWL, Inc. ("KWL"), a Nevada corporation, and Kwik-Wash
Laundries, Inc. ("Kwik Wash"), a Nevada corporation, for $125 million in cash
and a $15 million promissory note issued by CLC (the "Kwik Wash Acquisition").
KWL and Kwik Wash are the sole partners of Kwik Wash Laundries, L.P. (the
"Partnership"), a Texas limited partnership. The Partnership, based in Dallas,
Texas, provides coin-operated laundry equipment services to multi-family
dwellings in Texas, Louisiana, Arkansas and Oklahoma and operates approximately
150 laundromat stores throughout Texas.
Simultaneously with the acquisition, KWL, Kwik Wash and the Partnership
merged with and into the Company.
Concurrently with the acquisition, the Company also entered into a new
senior financing arrangement providing up to $200 million with Bankers Trust
Company, First Union National Bank of North Carolina and Lehman Brothers, Inc.
The Company's new credit facilities, which were used in part to fund the
acquisition and will provide financing to support the Company's acquisition
strategy, replaced the Company's existing credit facility.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
- ---------------------------------------------------------------------------
(a) Financial Statements.
The audited combined financial statements of Kwik Wash Laundries, Inc.
and KWL, Inc. for the years ended December 31, 1996, 1995 and 1994,
together with auditors' report thereon, are attached hereto as
Attachment 7(a) and are incorporated herein by this reference.
(b) Pro forma financial information.
The unaudited pro forma combined financial statements of Coinmach
Corporation for the nine-month period ended December 27, 1996 and for
the twelve month period ended March 29, 1996 are attached hereto as
Attachment 7(b) and are incorporated herein by this reference.
Page 2 of 27
<PAGE>
(c) Exhibits.
27.1 Financial Data Schedule *
99.1 Press Release, dated January 9, 1997 **
99.2 Press Release, dated January 9, 1997 **
- ----------
* Previously filed as an identically numbered exhibit to the Company's
Amendment No. 2 on Form 8-K/A to Current Report on Form 8-K, dated
January 8, 1997, as filed with the Commission on March 24, 1997.
** Previously filed as an identically numbered exhibit to the Company's
Current Report on Form 8-K, dated January 8, 1997, as filed with the
Commission on January 14, 1997.
Page 3 of 27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: December 5, 1997
COINMACH CORPORATION
/s/ ROBERT M. DOYLE
By: ______________________________________
Robert M. Doyle
Senior Vice President
Page 4 of 27
<PAGE>
ATTACHMENT 7(a)
Combined Financial Statements
Kwik Wash Laundries, Inc. and KWL, Inc.
Years ended December 31, 1996, 1995, and 1994
with Report of Independent Auditors
Page 5 of 27
<PAGE>
Kwik Wash Laundries, Inc. and KWL, Inc.
Combined Financial Statements
Years ended December 31, 1996, 1995, and 1994
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................. 1
Audited Financial Statements
Combined Balance Sheets at December 31, 1996 and 1995...................... 2
Combined Statements of Income and Retained Earnings for the years ended
December 31, 1996, 1995, and 1994..................................... 4
Combined Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994..................................... 5
Notes to Combined Financial Statements..................................... 6
</TABLE>
Page 6 of 27
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP]
Report of Independent Auditors
Board of Directors and Stockholders
Kwik Wash Laundries, Inc. and KWL, Inc.
We have audited the accompanying combined balanced sheets of Kwik Wash
Laundries, INC. and KWL, Inc. (the Company), as of December 31, 1996 and 1995,
and the related combined statements of income and retained earnings and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Kwik Wash Laundries,
Inc. and KWL, Inc., at December 31, 1996 and 1995, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/S/ Ernst & Young LLP
March 3, 1997
Page 7 of 27
<PAGE>
Kwik wash Laundries, Inc. and KWL, Inc.
Combined Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
----------------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 278 $ 764
Trade receivables, less allowance of $10 in 1996
and $20 in 1995 86 97
Other receivables 249 360
Notes receivable (Note 2) 49 197
Inventory 597 753
Prepaid expenses 93 45
----------------
Total current assets 1,352 2,216
Fixed assets at cost:
Store equipment 11,519 11,370
Route equipment 29,668 28,907
vehicles 2,405 2,659
Other 7,023 7,639
----------------
50,615 50,575
Accumulated depreciation 40,550 39,184
----------------
Net fixed assets 10,065 11,391
Other assets:
Notes receivable, including approximately $1,882 from
related parties in 1995 (Note 2) 34 1,941
Prepaid location fees (Note 3) 12,673 11,417
Investment in equity investee (Note 4) - 1,042
Intangibles (net) and other assets (Note 5) 1,125 2,659
----------------
Total other assets 13,832 17,059
----------------
Total assets $25,249 $30,666
================
</TABLE>
Page 8 of 27
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
----------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 764 $ 660
Accrued salaries and wages 55 395
Accrued property taxes 329 261
Accrued laundry room commissions 1,459 1,314
Other accrued liabilities 509 704
Note payable (Note 9) 2,400 -
Income taxes payable (Note 7) 18 3
Deferred income taxes (Note 7) 37 57
----------------
Total current liabilities 5,571 3,394
Long-term liabilities:
Note payable (Notes 9) 3,700 6,200
Deferred income taxes (Note 7) 81 109
----------------
Total liabilities 9,352 9,703
Commitments and contingencies (Note 8)
STOCKHOLDERS' equity (Note 10):
Common stock:
Kwik wash Laundries, Inc. - $1 par value:
Authorized shares - 500,000
Issued and outstanding shares - 54,675 55 55
KWL Inc. - $.10 par value:
Authorized shares - 100,000
Issued and outstanding shares - 54,675 5 5
Paid-in capital 925 925
Retained earnings 14,912 19,978
----------------
Total stockholders' equity 15,897 20,963
----------------
Total liabilities and stockholders' equity $25,249 $30,666
================
</TABLE>
See accompanying notes.
Page 9 of 27
<PAGE>
Kwik wash Laundries, Inc. and KWL, Inc.
Combined Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
--------------------------------------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Laundry route receipts $43,481 $42,400 $40,569
Laundry store receipts 21,430 21,020 20,574
Miscellaneous 534 437 613
--------------------------------------
Total revenues 65,445 63,857 61,756
Operating costs and expenses:
Route commission expenses 17,554 17,255 16,603
Laundry operating expenses 20,919 21,160 21,161
Depreciation and amortization 8,856 8,841 8,822
Sales, general and administrative expenses 5,519 4,995 5,276
--------------------------------------
Total operating costs and expenses 52,848 52,251 51,862
--------------------------------------
Income from operations 12,597 11,606 9,894
Other income (expense):
Interest and finance charge income 388 161 253
Cain (loss) on sales of operating units and
investment 136 (229) (26)
Equity in losses of equity investee (970) (458)
Interest expense (1,042) (465) (510)
--------------------------------------
Total other income (expense) (1,488) (991) (283)
--------------------------------------
Income before income taxes 11,109 10,615 9,611
Income taxes (Note 7) 43 354 436
--------------------------------------
Net income 11,066 10,261 9,175
Retained earnings at beginning of period 19,978 19,055 29,844
Less cancelation of treasury shares (Note 10) - - 14,066
Less distributions to stockholders 16,132 9,338 5,898
--------------------------------------
Retained earnings at end of period $14,912 $19,978 $19,055
======================================
</TABLE>
See accompanying notes.
Page 10 of 27
<PAGE>
Kwik wash Laundries, Inc. and KWL, Inc.
Combined Statements of Cash Flows
<TABLE>
(CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
------------------------------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 11,066 $ 10,261 $ 9,175
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 5,213 5,134 5,009
Amortization of contracts and intangibles 3,643 3,707 3,813
Equity in losses of equity investee 970 458 -
Deferred income taxes (48) (62) (99)
Gains on sales of assets (68) (140) (168)
Changes in operating assets and liabilities:
Trade and other receivables 122 (174) 7
Inventory 156 4 (47)
Prepaid expenses and other assets (46) 603 (306)
Accounts payable and accrued liabilities (203) (576) 653
------------------------------
Net cash provided by operating activities 20,805 19,215 18,037
INVESTING ACTIVITIES
Purchases of fixed assets (4,073) (5,483) (4,737)
Prepaid location fees (3,368) (2,978) (2,907)
Net proceeds (issuances) on notes receivable 2,055 (1,659) 2,647
Investment in equity investee - (1,500) -
Purchases of assets from acquisition - (568) -
Proceeds from sales of assets 255 256 324
Payment for covenant not to compete- - - (1,250)
Proceeds from sale of investment in equity investee 72 - -
------------------------------
Net cash used in investing activities (5,059) (11,932) (5,923)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 24,600 17,300 14,100
Repayment of long-term debt (24,700) (16,600) (8,600)
Proceeds (payments) from issuance (purchase)
of common stock - 750 14,310)
Distributions to stockholders (16,132) (9,338) (5,898)
------------------------------
Net cash used in financing activities (16,232) (7,888) (14,708)
------------------------------
Net decrease in cash and cash equivalents (486) (605) (2,594)
Cash and cash equivalents at beginning of year 764 1,369 3,963
------------------------------
Cash and cash equivalents at end of year $ 278 $ 764 $ 1,369
==============================
</TABLE>
See accompanying notes.
Page 11 of 27
<PAGE>
Kwik Wash Laundries, Inc. and KWL, Inc.
Notes to Combined Financial Statements
December 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
During 1995, Kwik Wash Laundries, Inc. (Kwik Wash), and KWL, Inc., a
newly-formed corporation (KWL), formed Kwik Wash Laundries, L.P.R a limited
partnership (the Partnership), which became the successor in interest to
substantially all of Kwik Wash's assets and liabilities. Kwik Wash holds a 99%
limited partnership interest in the Partnership and KWL holds a 1% general
partnership interest. These three entities are collectively referred to as the
Company. The financial statements contain the combined accounts of Kwik Wash,
KWL, and their 100% interest in the Partnership. Intercompany accounts and
transactions have been eliminated in the combination.
On January 8, 1997, all of the issued and outstanding stock of Kwik Wash
Laundries, Inc. and KWL, Inc. and their related partnership interests in Kwik
Wash Laundries, L.P. was sold to Coinmach Corporation for approximately
$140,000,000.
DESCRIPTION OF OPERATIONS
The Company's principal business activity is the ownership and management of its
own coin-operated laundries located in stores and multifamily housing
communities primarily in Texas, Louisiana, Oklahoma, Arkansas and Mississippi.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
INVENTORY
The inventory of parts and supplies is stated at the lower of cost or market,
using the moving average cost method, which approximates actual cost, under the
first-in, first-out method.
Page 12 of 27
<PAGE>
Kwik Wash Laundries, Inc. and KWL, Inc.
Notes to Combined Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION
Depreciation is calculated on either the straight-line or declining balance
methods on all depreciable assets over their estimated useful lives of four to
ten years. The net book value of miscellaneous equipment disposed of is included
in depreciation expense.
INTANGIBLE ASSETS
Intangible assets are recorded at cost and are amortized using the straight-line
method over their estimated useful lives.
BAD DEBTS
The Company uses the reserve method in providing for bad debts.
FINANCE CHARGE INCOME
Deferred finance charges are recognized as income over the term of each note
receivable on the straight-line basis.
STATEMENT OF CASH FLOWS
The indirect method has been used in the preparation of the statement of cash
flows. The Company defines cash as cash-in-hand, cash in demand deposit accounts
and cash equivalents with original maturities of three months or less.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's notes receivable from purchasers of
operating units, notes receivable from affiliated entities and borrowings under
its long term note payable approximate their fair value.
RECLASSIFICATIONS
Certain 1995 and 1994 balances have been reclassified to conform with the 1996
presentation.
Page 13 of 27
<PAGE>
Kwik Wash Laundries, Inc. and KWL, Inc.
Notes to Combined Financial Statements (continued)
2. NOTES RECEIVABLE
Notes receivable represent installment obligations due from purchasers of
various operating units and extensions of credit to affiliated parties. The
trade notes are secured by equipment and are net of any add-on finance charges.
The notes with affiliated parties are secured by real estate.
Notes receivable at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------
(In Thousands)
<S> <C> <C>
Purchasers of operating units $ 135 $ 336
Affiliated parties - 1,882
Less add-on finance charges 32 80
Less allowance for uncollectible accounts 20 -
-------------------
Net amount due 83 2,138
Amount due in one year 49 197
-------------------
Net long-term $ 34 $1,941
===================
</TABLE>
3. PREPAID LOCATION FEES
Route location fees paid to secure apartment leases are capitalized and
amortized over the life of the related lease, usually over periods of 60 to 120
months. Amortization expense for location fees was $2,111,978, $1,980,996, and
$1,964,663 in 1996, 1995, and 1994, respectively.
4. INVESTMENT IN EQUITY INVESTEE
The investment in equity investee represents the COMPANY'S 30% equity interest
in TitleLink, L.C., a privately-owned developmental stage limited liability
corporation which developed a communications product for the real estate title
industry. The investment is accounted for at cost less the Company's equity in
TitleLink's loss since the date of acquisition. Under the investment agreement,
the Company is allocated substantially all of TitleLink's losses financed by the
Company's investment.
In December 1996, the Company sold its 30% equity interest to an affiliated
party for approximately $72,000. The proceeds have been netted against the
Company's equity in losses of investee in the statement of income and retained
earnings.
Page 14 of 27
<PAGE>
Kwik Wash Laundries, Inc. and KWL, Inc.
Notes to Combined Financial Statements (continued)
5. INTANGIBLE AND OTHER ASSETS
Intangible and other assets at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------
(In Thousands)
<S> <C> <C>
Laundry room contracts, net $ 411 $ 621
Covenants not to compete, net 654 1,969
Deposits and other assets 60 69
-------------------------
Total intangible and other assets $1,125 $2,659
=========================
</TABLE>
Intangibles are amortized over their estimated useful lives of two to five
years. Amortization expense was $1,530,420, $1,725,764, and $1,848,281 in 1996,
1995, and 1994, respectively.
During the year December 31, 1996, laundry route acquisitions were not
significant. During 1995, the Company acquired a laundry route that included
route equipment and intangible assets for cash in the aggregate amount of
$567,608. The purchase price of the 1995 route acquisition was allocated to
equipment ($249,968), laundry room contracts ($307,640) and covenants not to
compete ($10,000).
6. PROFIT SHARING PLAN
The Company maintains a profit sharing plan, which includes provisions meeting
the guidelines of Section 401(k) of the Internal Revenue Code. The plan covers
all employees meeting certain minimum entry requirements, as allowed by law. The
Company's contribution to the plan is voluntary. For the years ended December
31, 1996, 1995, and 1994, plan expenses charged to operations were $640,636,
$504,569, and $499,981, respectively.
7. INCOME TAXES
Kwik Wash and KWL are Subchapter S corporations. For federal income tax
purposes, the Company's income is taxed directly to the stockholders with the
exception of the corporate level built-in gains tax. During a ten year
recognition period, this corporate level tax is imposed on the sale or exchange
of assets that were held by Kwik Wash on the date of its Subchapter S election.
Page 15 of 27
<PAGE>
Kwik Wash Laundries, Inc. and KWL, Inc.
Notes to Combined Financial Statements (continued)
7. INCOME TAXES (CONTINUED)
The Company's deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The Company's
deferred tax liabilities relate to net built-in gains expected to be recognized
during the ten-year recognition period. Income tax expense primarily relates to
state income taxes for the years ended December 31, 1996, 1995, and 1994. The
Company had no deferred tax assets at December 31, 1996 and 1995.
Cash paid for income taxes was $84,746, $744,119, and $553,262 for 1996, 1995,
and 1994, respectively.
8. COMMITMENTS AND CONTINGENCIES
The Company's operations are conducted from leased premises, which include 10
offices/warehouses and approximately 150 laundry stores. Generally, these leases
are for various periods of from one to ten years and are renewable at the option
of the Company. Six of the offices/warehouses and 22 of the laundry stores are
leased from various partnerships whose partners include the majority
stockholders of the Company.
Total rent expense for 1996, 1995, and 1994 was $3,583,599, $3,576,919, and
$3,484,793, respectively, of which $900,612, $886,135, and $870,962,
respectively, was with related parties. Aggregate minimum rentals in the
succeeding years ended December 31 are as follows:
<TABLE>
<CAPTION>
RELATED
OTHERS PARTIES TOTAL
--------------------------------
(In Thousands)
<S> <C> <C> <C>
1997 $1,976 $ 834 $ 2,810
1998 1,668 871 2,539
1999 1,331 871 2,202
2000 933 799 1,732
2001 556 - 556
Thereafter 571 - 571
--------------------------------
Total $7,035 $3,375 $10,410
================================
</TABLE>
The Company is a party to various claims, legal actions and complaints arising
in the ordinary course of business. In the opinion of management, all such
matters are without merit or are of such nature, or involve such amounts, that
an unfavorable disposition would not have a material effect on the financial
position or results of operations of the Company.
Page 16 of 27
<PAGE>
Kwik Wash Laundries, Inc. and KWL, Inc.
Notes to Combined Financial Statements (continued)
9. NOTE PAYABLE
In November, 1995, the Company entered into a new $32,000,000 loan agreement
with a single bank that extends to September 30, 2000. This agreement replaced
an existing loan agreement, which was to mature on December 15, 2000. Under the
new loan agreement, the Company has an unsecured reducing line of credit of
$20,000,000 (Facility A Commitment), and an unsecured term loan of $120,000,000
(Facility B Commitment). The Company had aggregate advances under the Facility A
Commitment of $1,000,000 and $6,200,000 outstanding at December 31, 1996 and
1995, respectively. Aggregate advances outstanding under the Facility B
Commitment was $5,100,000 at December 31, 1996. There were no aggregate advances
under the Facility B Commitment outstanding at December 31, 1995. On each
quarterly date commencing December 30, 1997, the Facility A Commitment shall be
reduced by $1,000,000. On each quarterly date commencing June 30, 1996, the
Facility B Commitment shall be reduced by $600,000. No net repayments are due as
long as the amounts outstanding are below the current Facility A and Facility B
Commitments. Advances under both the Facility A and Facility B Commitments bear
interest at varying rates based (at the Company's option) on the Bank's prime
rate or the London Interbank Offering Rate. At December 31, 1996, the interest
rates on outstanding borrowings was 8.25% and at December 31, 1995, the interest
rates on outstanding borrowings ranged from 7.25% to 8.5%. The loan agreement
contains affirmative and negative covenants, including restrictions on future
borrowings, and requires that the Company meet certain financial ratios.
On January 3, 1996, the Company borrowed $12,000,000 on the Facility B
Commitment. This amount was distributed to the stockholders as a dividend.
Cash paid for interest was $1,048,655, $456,827, and $504,627 for 1996, 1995,
and 1994, respectively.
During 1996, the Company operated under an interest rate swap agreement with its
bank with an initial notional amount of $10,000,000. The interest rate swap
agreement was canceled on December 5, 1996 and did not significantly effect the
Company's effective interest rate on outstanding borrowings during 1996.
Page 17 of 27
<PAGE>
Kwik Wash Laundries, Inc. and KWL, Inc.
Notes to Combined Financial Statements (continued)
10. STOCK REDEMPTION AND STOCKHOLDER AGREEMENTS
On November 15, 1993, Kwik Wash exercised its Call Option pursuant to the terms
of a Put and Call Agreement entered into with a stockholder to purchase all of
the stockholder's common stock (56,923 shares) for $251.40 per share. On January
31, 1994, Kwik Wash purchased the 56,923 shares pursuant to the Put and Call
Agreement. Such treasury shares were subsequently canceled on February 1, 1994,
and returned to the status of authorized and unissued common stock. The
cancelation of the treasury shares was accounted for by reducing common stock by
$56,923, paid-in capital by $187,334, and retained earnings by $14,066,185.
Page 18 of 27
<PAGE>
ATTACHMENT 7(b)
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined balance sheet as of December 27,
1996 gives effect to the Kwik Wash Acquisition, as if such transaction occurred
as of December 27, 1996. The unaudited pro forma combined statements of
operations of the Company for the twelve month period ended March 29, 1996 and
the nine month period ended December 27, 1996 give effect to the Kwik Wash
Acquisition, which occurred on January 8, 1997, and the acquisition of Allied
Laundry Equipment Company ("Allied"), which occurred in April 1996 (the "Allied
Acquisition"), as if such transactions occurred at the beginning of the 1996
fiscal year.
The pro forma adjustments are based upon currently available information as
well as upon certain assumptions that management believes are reasonable. The
Kwik Wash Acquisition and the Allied Acquisition were accounted for as purchases
with assets recorded at their estimated fair market values. Management believes
that actual fair market value adjustments, if any, will not differ materially
from the preliminary allocation of the purchase price contained in the pro forma
adjustments reflected in the pro forma financial information.
The unaudited pro forma combined financial statements are not necessarily
indicative of either future results of operations or results that might have
been achieved if the foregoing transactions had been consummated as of the
indicated dates. The unaudited pro forma combined financial statements should
be read in conjunction with the historical consolidated financial statements of
the Company as previously filed on Form 10-K as of and for the six month
transition period ended March 29, 1996.
As used in the notes to the unaudited pro forma financial statements of the
Company included herein, "Solon" shall refer to Solon Automated Services, Inc.,
a Delaware corporation, and "TCC" shall refer to The Coinmach Corporation, a
Delaware corporation. On November 30, 1995, TCC merged with and into Solon
through an exchange of stock, whereupon the surviving corporation changed its
name to Coinmach Corporation. Both Solon and TCC were under common ownership
commencing April 5, 1995.
Page 19 of 27
<PAGE>
COINMACH CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 27, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Historical
Basis of
Kwik Wash
Coinmach Assets Pro Forma Pro Forma
Historical Acquired Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 7,485 $ 278 $ 1,444 (c) $ 9,207
Receivables, net 6,491 418 0 6,909
Inventories and prepaid expenses 9,309 690 0 9,999
Advance rental payments 23,633 12,673 0 36,306
Property and equipment, net 96,854 10,065 0 106,919
Contract rights, net 61,019 410 172,557 (a) 233,986
Goodwill, net 42,588 0 0 42,588
Other assets 9,446 715 500 (a) 10,561
(100) (b)
-------- ------- -------- --------
TOTAL ASSETS $256,825 $25,249 $174,401 $456,475
======== ======= ======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT):
Accounts payable and accrued liabilities $ 25,694 $ 3,134 $ 2,050 (a) $ 30,878
Due to Parent 5,176 0 15,000 (a) 20,176
Deferred income taxes 16,374 118 49,448 (a) 65,940
11-3/4% Senior Notes 196,655 0 0 196,655
12-3/4% Senior Notes 5,000 0 0 5,000
Term notes 0 0 130,000 (a) 130,000
Other long-term debt 2,327 6,100 (6,100) (a) 2,327
Shareholder's equity (deficit):
Common stock and capital in excess
of par value 29,658 985 (985) (a) 29,658
Notes receivable from management (254) 0 0 (254)
(100) (b)
Accumulated (deficit) earnings (23,805) 14,912 (14,912) (a) (23,905)
-------- ------- -------- --------
Total shareholder's equity (deficit) 5,599 15,897 (15,997) 5,499
-------- ------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY (DEFICIT) $256,825 $25,249 $174,401 $456,475
======== ======= ======== ========
</TABLE>
See "Notes to Unaudited Pro Forma Combined Balance Sheet"
Page 20 of 27
<PAGE>
COINMACH CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 27, 1996
(IN THOUSANDS OF DOLLARS)
(a) Reflects allocation of purchase price aggregating approximately $145,000 for
the acquisition of Kwik Wash. The Kwik Wash Acquisition was accounted for
as a purchase. Preliminary purchase price allocations to contract rights
are based on fair value using a methodology consistent with prior
acquisitions. Contract rights will be amortized over 15 years. Management
believes that actual fair market value adjustments, if any, will not differ
materially from such preliminary purchase price allocations. The Company
funded the Kwik Wash Acquisition with term notes under its new credit
facility in an aggregate principal amount of $130 million and by a $15
million promissory note issued by CLC.
(b) Reflects the retirement of remaining unamortized balance of Deferred Finance
Costs - Heller Revolving Credit.
(c) Reflects the additional amount financed by the Company in excess of the
purchase price in connection with the Kwik Wash Acquisition.
Page 21 of 27
<PAGE>
COINMACH CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
TWELVE MONTH PERIOD ENDED MARCH 29, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Coinmach Historical Pro Forma Adjustments
------------------------------- ---------------------------
April 5, 1995 Six Months (a) (b)
to Ended Acquired Acquired Purchase Pro Forma
Sept. 29, 1995 Mar. 29, 1996 Business Business Accounting Other Combined
--------------- -------------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ 89,719 $ 89,070 $10,568 $63,857 $ 0 $ 0 $ 253,214
COSTS AND EXPENSES
Operating, general and
administrative expenses 65,363 62,560 7,800 42,710 0 (850) (g) 171,283
(1,000) (g)
(500) (h)
(4,800) (i)
Depreciation and amortization 18,423 18,212 1,508 8,841 (2,341) (c) 0 56,828
11,997 (d)
188 (e)
Restructuring charges 2,200 0 0 0 0 (2,200) (f) 0
-------- -------- ------- ------- -------- -------- ---------
85,986 80,772 9,308 51,551 9,844 (9,350) 228,811
-------- -------- ------- ------- -------- -------- ---------
Operating income 3,733 8,298 1,260 12,306 (9,844) 9,350 25,103
Interest expense, net 11,541 11,830 517 304 0 11,949 (j) 36,141
Other nonoperating expenses 0 0 0 229 0 0 229
-------- -------- ------- ------- -------- -------- ---------
(Loss) income before income
taxes and extraordinary item (7,808) (3,532) 743 11,773 (9,844) (2,599) (11,267)
-------- -------- ------- ------- -------- -------- ---------
(Benefit) provision for income (1,862) (998) 290 354 (4,036) (k) 4,110 (k) (2,142)
taxes
-------- -------- ------- ------- -------- -------- ---------
(Loss) income before ($5,946) ($2,534) $ 453 $11,419 ($5,808) ($6,709) ($9,125)
extraordinary item
======== ======== ======= ======= ======== ======== =========
</TABLE>
See "Notes to Unaudited Pro Forma Combined Statements of Operations"
Page 22 of 27
<PAGE>
COINMACH CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
(a) Represents historical operating results of Allied for the year ended
December 31, 1995.
(b) Represents historical operating results of Kwik Wash for the year ended
December 31, 1995.
(c) Represents the difference in historical depreciation expense of $1,508 for
the fixed assets of Allied and the depreciation expense of $1,088 on the
purchase price allocated to property and equipment by the Company with
useful lives of 3 to 8 years, as well as the decrease in depreciation
expense of $1,921 for the fixed assets of Kwik Wash resulting from extending
the lives of laundry equipment and components from 5 to 8 years, consistent
with the Company's current accounting policies.
(d) Represents the amortization of contract rights acquired over 15 years,
related to Kwik Wash.
(e) Represents the amortization of covenants not to compete, which have terms
from 5 to 8 years, of $125 in connection with the Allied Acquisition, and
$63 in connection with the Kwik Wash Acquisition.
(f) Reflects the exclusion of restructuring costs of $2,200.
(g) On September 29, 1995, management implemented cost savings programs
affecting corporate financial and administrative functions and regional
operations which amounted to $2,000 and $1,700, respectively, on an annual
basis. The development of cost savings programs was a direct result of the
plan to combine Solon and Coinmach on November 30, 1995. The $2,000 cost
savings arise principally as personnel cost savings resulting from the
closing of Solon's corporate office in Philadelphia, Pennsylvania and
relocation to Roslyn, N.Y. The $1,700 cost savings are personnel cost
savings resulting from reduction and consolidation of regional operations.
One half of the cost savings were recognized during the six months ended
March 29, 1996.
(h) Reflects cost savings of $500 related to the Allied Acquisition, which
resulted from the consolidation of administrative functions in Roslyn, N.Y.
consisting primarily of personnel cost savings.
(i) Reflects anticipated cost savings of $4,800 directly related to the Kwik
Wash Acquisition. Prior to completing an acquisition, the Company formulates
a costs savings program affecting corporate financial and administrative
functions and regional operations which is implemented upon the completion
of each acquisition. The cost savings from the Kwik Wash Acquisition
represents certain identifiable personnel cost savings relating to the
elimination of 83 employees of Kwik Wash for $4,091 and certain identifiable
cost savings for facility and other costs for $709 resulting from the
reduction and consolidation of certain regional operations in Texas and
administrative functions in Roslyn, N.Y. pursuant to the cost savings
program. The above-mentioned pro forma personnel and facility costs savings
are derived from actual historical amounts reflected on Kwik Wash's
financial statements. Additionally, substantially all the employees have
been terminated and the expected cost savings have begun to be realized with
respect to all of the facilities for which costs savings have been recorded.
If the Company's integration plans had occurred on April 4, 1995, the
Company believes that there would have been no effect on revenues or
expenses other than as presented in the pro forma statements of operations.
Page 23 of 27
<PAGE>
(j) The following table presents a reconciliation of pro forma interest expense:
COINMACH CORPORATION
PRO FORMA INTEREST EXPENSE
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
TWELVE MONTH
PERIOD ENDED
MARCH 29, 1996
---------------
<S> <C>
HISTORICAL INTEREST EXPENSE $ 24,192
ADD:
Interest on 11.75% Senior Notes due 2005 23,107
Interest on $130 million term loans to finance purchase of Kwik Wash 10,400
Interest on $15 million CLC promissory note at 9.875% issued in connection with the
Kwik Wash Acquisition 1,481
Amortization of deferred finance costs on new debt:
11.75% Senior Notes due 2005 479
Revolving credit facility 26
DEDUCT:
Interest on retirement of 12.75% Senior Notes due 2001 and
13.75% Senior Subordinated Debentures due 2002 (10,742)
Interest on Solon revolving credit facility (126)
Interest on TCC revolving credit facility (3,121)
Interest on Heller revolving credit facility (76)
Interest on 11.75% Senior Notes from November 30, 1995 to March 29, 1996 (7,529)
Interest of acquired businesses (821)
Amortization of deferred finance costs on retired debt:
12.75% Senior Notes due 2001 and
13.75% Senior Subordinated Debentures due 2002 (409)
Original issue discount on 13.75% Senior Subordinated
Debentures due 2002 (125)
Solon revolving credit facility (28)
TCC revolving credit facility (383)
Heller revolving credit facility (25)
Amortization of deferred finance costs on the 11.75% Senior Notes from November
30, 1995 to March 29, 1996 (159)
--------
PRO FORMA ADJUSTMENT 10,949
--------
PRO FORMA INTEREST EXPENSE $ 36,141
--------
</TABLE>
(k) Represents the income tax impact of the pro forma adjustments and business
acquired.
Page 24 of 27
<PAGE>
COINMACH CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED DECEMBER 27, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------
(a)
Coinmach Acquired Purchase Pro Forma
Historical Business Accounting Other Combined
---------- -------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C>
REVENUES $143,205 $48,377 $ 0 $ 0 $191,582
COSTS AND EXPENSES
Operating, general and administrative expenses 99,713 31,932 0 (3,750) (g) 127,895
Depreciation and amortization 30,581 6,684 (384) (b) 0 45,556
8,628 (c)
47 (d)
Stock compensation expense 1,920 0 0 0 1,920
-------- ------- -------- -------- --------
132,214 38,616 8,291 (3,750) 175,371
-------- ------- -------- -------- --------
Operating income 10,991 9,761 (8,291) 3,750 16,211
Interest expense, net 18,536 551 0 8,092 (f) 27,179
Other nonoperating expenses 0 742 0 (742) 0
-------- ------- -------- -------- --------
(Loss) income before income taxes and
extraordinary item (7,545) 8,468 (8,291) (3,600) (10,968)
-------- ------- -------- -------- --------
(Benefit) provision for income taxes (2,300) 0 (3,399) (e) 3,614 (e) (2,085)
-------- ------- -------- -------- --------
(Loss) income before extraordinary item ($5,245) $ 8,468 ($4,892) ($7,214) ($8,883)
======== ======= ======== ======== ========
</TABLE>
See "Notes to Unaudited Pro Forma Combined Statements of Operations"
Page 25 of 27
<PAGE>
COINMACH CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
(a) Represents historical operating results of Kwik Wash for the nine month
period ended September 30, 1996.
(b) Represents the decrease in depreciation expense of $384 for the fixed assets
of Kwik Wash resulting from extending the lives of laundry equipment and
components from 5 to 8 years, consistent with the Company's current
accounting policies.
(c) Represents the amortization of contract rights acquired over 15 years,
related to Kwik Wash.
(d) Represents the amortization of covenants not to compete related to the Kwik
Wash Acquisition, which has a term of 8 years.
(e) Represents the income tax impact of the pro forma adjustments and business
acquired.
(f) The following table presents a reconciliation of pro forma interest expense:
<TABLE>
<CAPTION>
Nine Months Ended
December 27, 1996
------------------
<S> <C>
HISTORICAL INTEREST EXPENSE $19,087
ADD:
Interest on $130 million term loan to finance purchase of Kwik Wash 7,800
Interest on $15 million CLC promissory note at 9.875% issued in connection
with the Kwik Wash Acquisition 1,111
DEDUCT:
Interest on Heller revolving credit facility (249)
Interest of acquired business (551)
Amortization of deferred finance costs on retired debt:
Heller revolving credit facility (19)
-------
PRO FORMA ADJUSTMENT 8,092
-------
PRO FORMA INTEREST EXPENSE $27,179
=======
</TABLE>
(g) Reflects anticipated cost savings of $3,750 directly related to the Kwik
Wash Acquisition. Prior to completing an acquisition, the Company formulates
a costs savings program affecting corporate financial and administrative
functions and regional operations which is implemented upon the completion
of each acquisition. The cost savings from the Kwik Wash Acquisition
represents certain identifiable personnel cost savings relating to the
elimination of 83 employees of Kwik Wash for $3,350 and certain identifiable
cost savings for facility and other costs for $400 resulting from the
reduction and consolidation of certain regional operations in Texas and
administrative functions in Roslyn, N.Y. pursuant to the cost savings
program. The above-mentioned pro forma personnel and facility costs savings
are derived from actual historical amounts reflected on Kwik Wash's
financial statements. Additionally, substantially all the employees have
been terminated and the expected cost savings have begun to be realized with
respect to all of the facilities for which costs savings have been recorded.
If the Company's integration plans had occurred on April 4, 1995, the
Company believes that there would have been no effect on revenues or
expenses other than as presented in the pro forma statements of operations.
Page 26 of 27
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DOCUMENT NUMBER
- ------- -------- ------
<S> <C> <C>
27.1 Financial Data Schedule *
99.1 Press Release, dated January 9, 1997 **
99.2 Press Release, dated January 9, 1997 **
</TABLE>
- ----------
* Previously filed as an identically numbered exhibit to the Company's
Amendment No. 2 on Form 8-K/A to Current Report on Form 8-K, dated January
8, 1997, as filed with the Commission on March 24, 1997.
** Previously filed as an identically numbered exhibit to the Company's Current
Report on Form 8-K, dated January 8, 1997, as filed with the Commission on
January 14, 1997.
Page 27 of 27
