<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 5, 1997
REGISTRATION NO.: 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
COINMACH CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 7215 53-0188589
<S> <C> <C>
(STATE OR OTHER JURIS-
DICTION OF
INCORPORATION OR ORGAN- (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
IZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
55 LUMBER ROAD
ROSLYN, NEW YORK 11576
(516) 484-2300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT M. DOYLE
CHIEF FINANCIAL OFFICER
COINMACH CORPORATION
55 LUMBER ROAD
ROSLYN, NEW YORK 11576
(516) 484-2300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE
OF AGENT FOR SERVICE)
---------------
COPY TO:
RONALD S. BRODY, ESQ.
ANDERSON KILL & OLICK, P.C.
1251 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 278-1000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING PRICE AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE(1) (1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 3/4% Series D Senior Notes due 2005....... $296,655,000 100% $296,655,000 $87,513.23
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the amount of the
registration fee, pursuant to Rule 457 under the Securities Act of 1933.
---------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED DECEMBER 5, 1997
PROSPECTUS
LOGO COINMACH CORPORATION
OFFER TO EXCHANGE
UP TO $296,655,000 OF ITS
11 3/4% SERIES D SENIOR NOTES DUE 2005 FOR ANY AND
ALL OF ITS 11 3/4% SERIES C SENIOR NOTES DUE 2005
AND ITS SERIES B 11 3/4% SENIOR NOTES DUE 2005
-----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED.
Coinmach Corporation, a Delaware corporation ("Coinmach"), hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this prospectus (the "Prospectus") and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), to exchange $1,000 principal amount of its 11
3/4% Series D Senior Notes due 2005 (the "Exchange Notes"), which exchange has
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a registration statement of which this Prospectus is a part
(the "Registration Statement"), for each $1,000 principal amount of its
outstanding 11 3/4% Series C Senior Notes due 2005 (the "Private Notes"), of
which $100,000,000 in aggregate principal amount are outstanding as of the date
of this Prospectus and for each $1,000 principal amount of its outstanding
Series B 11 3/4% Senior Notes due 2005 (the "Series B Notes"), of which
$196,655,000 in aggregate principal amount are outstanding as of the date of
this Prospectus. The form and terms of the Exchange Notes, except for the total
outstanding principal amount thereof, are the same as the form and terms of the
Series B Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Private Notes, except for the total outstanding principal
amount thereof and except that (i) the Exchange Notes will have been registered
under the Securities Act, and, therefore, the Exchange Notes will not bear
legends restricting the transfer thereof, and (ii) holders of the Exchange
Notes will not be entitled to certain rights of holders of the Private Notes
under the Registration Rights Agreement (as defined), which rights will
terminate upon the consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Private Notes and the Series B Notes (each of
which they replace) and will be entitled to the benefits of an indenture (the
"Indenture"), dated as of October 8, 1997, by and between the Company and State
Street Bank and Trust Company, as trustee (the "Trustee"), governing the
Private Notes and the Exchange Notes. See "The Exchange Offer" and "Description
of Exchange Notes."
Coinmach will accept for exchange any and all Series B Notes and Private
Notes validly tendered and not withdrawn on or prior to 5:00 P.M., New York
City time, on , 1998, unless extended by Coinmach, in its sole
discretion (the "Expiration Date"). Tenders of Series B Notes and Private Notes
may be withdrawn at any time prior to 5:00 P.M., New York City time, on the
Expiration Date. The Exchange Notes will be issued and delivered promptly after
the Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Series B Notes and/or Private Notes being tendered for
exchange. See "The Exchange Offer." Series B Notes and Private Notes may be
tendered only in integral multiples of $1,000.
The Exchange Notes will bear interest at the same rate and on the same terms
as the Series B Notes and the Private Notes. Consequently, the Exchange Notes
will bear interest at the rate of 11 3/4% per annum and interest will be
payable semi-annually on each May 15 and November 15, commencing May 15, 1998.
The Exchange Notes will bear interest from and including November 15, 1997, the
date of the most recent interest payment made on the Series B Notes and the
Private Notes. Holders of Series B Notes and Private Notes (collectively,
"Holders") whose Series B Notes and/or Private Notes are accepted for exchange
will be deemed to have waived the right to receive any payment in respect of
interest on such Series B Notes or Private Notes accrued to, but not including,
the date of the issuance of the Exchange Notes. Such waiver will not result in
the loss of interest income to such Holders, since the Exchange Notes will bear
interest from November 15, 1997.
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, Coinmach believes that the Exchange Notes issued pursuant to this
Exchange Offer in exchange for Series B Notes and Private Notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than
(i) a broker-dealer who purchases such Exchange Notes directly from Coinmach to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an affiliate of Coinmach within the
meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery requirements of the Securities Act,
(cover page continues)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH INVESTORS SHOULD CONSIDER IN CONNECTION WITH THIS EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
(cover page continued)
provided that the holder is acquiring the Exchange Notes in the ordinary
course of its business and is not participating, and had no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes. Holders wishing to accept the Exchange Offer must represent to
Coinmach that such conditions have been met. Each broker-dealer that receives
the Exchange Notes for its own account in exchange for Series B Notes or
Private Notes, where such Series B Notes or Private Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter of Transmittal states that,
by so acknowledging and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Series B Notes or Private Notes where
such Series B Notes or Private Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. Coinmach has
indicated its intention to make this Prospectus, as it may be amended or
supplemented from time to time, available to any broker-dealer for use in
connection with any such resale for a period of up to 180 days after the
Expiration Date. See "Plan of Distribution." Based on the above-mentioned
interpretations by the staff of the Commission, Coinmach believes that broker-
dealers who acquired Series B Notes or Private Notes directly from Coinmach
and not as a result of market-making activities or other trading activities
cannot rely on such interpretations by the staff of the Commission and must,
in the absence of an exemption, comply with the registration and prospectus
delivery requirements of the Securities Act in connection with resales of the
Exchange Notes. Such broker-dealers may not use this Prospectus, as it may be
amended or supplemented from time to time, in connection with any resales of
the Exchange Notes.
Prior to this Exchange Offer, there has been no public market for either the
Series B Notes or the Private Notes. Coinmach does not intend to list the
Exchange Notes on any securities exchange or to seek approval for quotation
through any automated quotation system. There can be no assurance that an
active market for the Exchange Notes will develop. To the extent that a market
for the Exchange Notes does develop, the market value of the Exchange Notes
will depend on market conditions (such as yields on alternative investments),
general economic conditions, Coinmach's financial condition and other
conditions. Such conditions might cause the Exchange Notes, to the extent that
they are traded, to trade at a significant discount from face value. See "Risk
Factors--Absence of Public Market."
Coinmach will not receive any proceeds from this Exchange Offer. Coinmach
has agreed to bear the expenses of this Exchange Offer. No underwriter is
being used in connection with this Exchange Offer. Coinmach believes that none
of the registered Holders are affiliates (as such term is defined in Rule 405
under the Securities Act) of Coinmach.
The Exchange Notes are redeemable, in whole or in part, at the option of
Coinmach, at any time on or after November 15, 2000 at the redemption prices
set forth herein, plus accrued and unpaid interest, if any, to the redemption
date. In addition, on or prior to December 31, 1998, Coinmach may, at its
option, use the net cash proceeds from one or more Equity Offerings (as
defined) to redeem up to an aggregate of 35% of the Exchange Notes originally
issued at a redemption price equal to 111 3/4% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the redemption date;
provided, however, that at least 65% of the aggregate principal amount of the
Private Notes and Exchange Notes then outstanding are outstanding immediately
following any such redemption. Upon a Change of Control (as defined), each
holder of Exchange Notes has the right to require Coinmach to repurchase such
holder's Exchange Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the repurchase date.
Coinmach is obligated in certain instances to make offers to repurchase
Exchange Notes at a price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the repurchase date, with the net cash
proceeds of certain sales and other asset dispositions.
The Exchange Notes are senior unsecured obligations of Coinmach, ranking
senior in right of payment to all existing and future subordinated
indebtedness of Coinmach and pari passu with all senior indebtedness of
Coinmach; however, Coinmach's indebtedness under its Credit Facility (as
defined) is secured by substantially all of the assets of Coinmach, and
holders of such secured indebtedness, and any other secured indebtedness of
Coinmach, will have claims that effectively rank prior in right of payment to
those of holders of Exchange Notes with respect to the assets securing such
indebtedness. As of the date of this Prospectus, Coinmach does not have any
indebtedness outstanding which is either senior to or ranks pari passu with
the Exchange Notes. As of November 1, 1997, Coinmach had the ability, (i) to
borrow an additional $70.0 million under the Credit Facility and (ii) to incur
additional indebtedness ranking pari passu with the Exchange Notes, including
Additional Indebtedness (as defined) of up to $10 million at any one time
outstanding, Capital Lease Obligations (as defined) and purchase money
Indebtedness (as defined) incurred in the ordinary course of business in an
amount not to exceed $15 million at any one time outstanding. See "Description
of the Exchange Notes."
---------------
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL COINMACH ACCEPT TENDERS OF
SERIES B NOTES OR PRIVATE NOTES FOR EXCHANGE NOTES FROM, HOLDERS OF SERIES B
NOTES OR PRIVATE NOTES IN ANY JURISDICTION IN WHICH THE ACCEPTANCE THEREOF OR
THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY
LAWS OF SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
EXCHANGE MADE PURSUANT HERETO SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION SET
FORTH HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
NOTICE TO NEW HAMPSHIRE RESIDENTS: NEITHER THE FACT THAT A REGISTRATION
STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION.
IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE, PURCHASER,
CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS
PARAGRAPH.
<PAGE>
AVAILABLE INFORMATION
Coinmach is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at its Regional Offices located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material
may also be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
Coinmach has filed with the Commission a Registration Statement on Form S-4
(the "Registration Statement") under the Securities Act with respect to the
Exchange Notes offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to herein and filed as an exhibit to the
Registration Statement are not necessarily complete and in each instance,
reference is made to the copy of each contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. For further information with respect to Coinmach
and its subsidiaries and the Exchange Notes, reference is hereby made to the
Registration Statement and the exhibits thereto which may be obtained from the
Commission in the manner set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Coinmach's Annual Report on Form 10-K for the fiscal year ended March 28,
1997, Amendment No. 1 on Form 10-K/A to Annual Report on Form 10-K for the
fiscal year ended March 28, 1997, Quarterly Report on Form 10-Q for the fiscal
quarter ended June 27, 1997, Amendment No. 1 on Form 10-Q/A to Quarterly
Report on Form 10-Q for the fiscal quarter ended June 27, 1997, Quarterly
Report on Form 10-Q for the fiscal quarter ended September 26, 1997, Amendment
No. 1 on Form 10-Q/A to Quarterly Report on Form 10-Q for the fiscal quarter
ended September 26, 1997, Amendment No. 2 on Form 8-K/A to Current Report on
Form 8-K dated January 8, 1997, Amendment No. 3 on Form 8-K/A to Current
Report on Form 8-K dated January 8, 1997, Current Report on Form 8-K dated
October 8, 1997 and Amendment No. 1 on Form 8-K/A to Current Report on Form 8-
K dated October 8, 1997, each of which has been filed with the Commission, are
hereby incorporated by reference in and made a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. Coinmach will furnish without charge, to each
person to whom this Prospectus is delivered, upon written or oral request of
such person, including any beneficial owner, a copy of any and all of the
information that has been incorporated by reference into the Registration
Statement of which this Prospectus is a part but which has not been delivered
with this Prospectus (not including exhibits to the information that is
incorporated by reference unless such exhibits are specifically incorporated
by reference into the information that the Registration Statement incorporates
by reference); such requests should be directed to Coinmach Corporation, 55
Lumber Road, Roslyn, New York 11576, Attention: Robert M. Doyle. In order to
ensure timely delivery of the documents, any request should be made by
, 1998.
FISCAL YEARS
On November 30, 1995, The Coinmach Corporation ("TCC") merged with and into
Solon Automated Services, Inc. ("Solon"), whereupon Solon, the surviving
entity, was renamed Coinmach Corporation. TCC's fiscal year end was March 31.
TCC's predecessor had a fiscal year end of December 31, thus creating a three-
month transition period ended March 31, 1995. Therefore, for example, "fiscal
1996" refers to the fiscal year ended March 31, 1996. On January 31, 1995, TCC
was formed by certain of the current owners of Coinmach Laundry Corporation
("CLC" or "Coinmach Laundry") the owner of 100% of the outstanding common
stock of Coinmach. Solon's fiscal year end was the Friday closest to September
30. On April 5, 1995, the voting stock of Solon was acquired by certain of the
current owners of CLC (the "Solon Acquisition"), and accordingly, periods
prior to and after April 5, 1995 are reflected as predecessor and successor
periods, respectively, in their financial statements. On November 30, 1995,
TCC merged with and into Solon (the "Merger"). In connection with the Merger,
Coinmach changed its fiscal year end to the Friday closest to March 31.
1
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the consolidated financial statements and related notes thereto, presented
elsewhere in this Prospectus. As used in this Prospectus, unless the context
otherwise requires, all references to "Coinmach" herein refer to Coinmach
Corporation, all references to the "Company" herein refer to Coinmach and its
consolidated subsidiaries and their respective predecessors and subsidiaries,
in each case as applicable, and all references to "Coinmach Laundry" herein
refer to Coinmach Laundry Corporation, the holder of 100% of the outstanding
common stock of Coinmach. References to the "Exchange Offer" shall refer to the
offering of the Exchange Notes hereby.
THE COMPANY
GENERAL
The Company, established in 1947, is the leading supplier of outsourced coin-
operated laundry equipment services for multi-family housing properties in the
United States. The Company's business involves leasing laundry rooms from
building owners and property management companies, installing and servicing the
laundry equipment and collecting revenues generated from laundry machines. The
Company owns and operates approximately 420,000 coin-operated washers and
dryers in approximately 42,000 locations on routes throughout the United States
and in 151 retail laundromats located throughout Texas. The Company's principal
offices are located at 55 Lumber Road, Roslyn, New York 11576, telephone number
(516) 484-2300.
In January 1995, the Company initiated a strategy of controlled growth
through acquisitions. This strategy was designed to increase the installed
machine base in its then existing operating region as well as to provide the
Company with a strong market presence in new regions. Since January 1995, the
Company has completed six significant acquisitions adding revenues of
approximately $221 million and expanding its national presence from the
Northeast into the Mid-Atlantic, Southeast, South-Central, Midwest and Western
regions of the United States. Accordingly, the Company has grown its installed
base from approximately 54,000 machines to approximately 420,000 machines.
As a result of this strategy of growth, the Company's revenues and EBITDA
have grown from $72.9 million and $13.6 million, respectively, on a historical
basis for the twelve months ended March 31, 1995, to $306.9 million and $97.9
million (before deducting non-cash stock-based compensation charges),
respectively, for the twelve months ended March 28, 1997 (the "1997 fiscal
year"), on a pro forma basis, giving effect to the acquisitions consummated by
the Company since March 30, 1996.
INDUSTRY
The coin-operated laundry services industry is characterized by stable cash
flows generated by long-term, renewable lease contracts with multi-family
property owners and management companies. The industry is highly fragmented,
with many small, private and family-owned route businesses continuing to
operate throughout all major metropolitan areas. According to information
provided by the Multi-housing Laundry Association, the industry consists of
over 280 independent operators. Based upon industry estimates, management
believes there are approximately 3.5 million installed machines in multi-family
housing properties throughout the United States, approximately 2.5 million of
which have been outsourced to independent operators such as the Company and
approximately 1.0 million of which continue to be operated by the owners of
such locations.
BUSINESS STRATEGY
The Company's business strategy is to enhance its position as the largest
provider of outsourced coin-operated laundry equipment services in the United
States. Management intends to continue to grow the Company's installed machine
base both internally and through selective acquisitions to achieve benefits of
scale,
2
<PAGE>
increase its operating efficiencies and improve its financial performance.
Internal growth is comprised of: (i) adding new customers in existing regions
and securing contracts for additional locations from current customers; (ii)
converting owner-operated facilities to Company managed facilities; (iii)
improving the net contribution per machine through operating efficiencies and
selective price increases; and (iv) pursuing additional growth opportunities
presented by the Company's leading market position and access to approximately
four million individual housing units. The Company's acquisition strategy is to
continue to selectively acquire local, regional and multi-regional route
businesses from independent operators at attractive prices. The Company is
currently evaluating several acquisition opportunities, however, there can be
no assurance that, subsequent to ongoing negotiations and due diligence
reviews, the Company will complete any such acquisitions.
An important element of the Company's business strategy is to continue to
expand its geographic presence to gain additional regional and multi-regional
account opportunities with large multi-family housing property managers and
owners. Management believes that a significant portion of its customer base,
which manages multi-family housing and other residential properties, is
consolidating. Consequently, management believes that opportunities for
outsourcing coin-operated laundry equipment services to professionally managed,
multi-regional, well-capitalized independent operators such as the Company are
increasing.
The Company's business strategy also includes the continued development of
its management information systems (the "Integrated Computer Systems"), which
management believes are the most advanced in the industry. The Integrated
Computer Systems provide real-time operational and competitive data, which in
conjunction with the Company's multi-regional service capabilities, enhance the
Company's operating efficiencies throughout its regions and enable the Company
to deliver superior customer service. The Integrated Computer Systems also
provide the Company with the flexibility to integrate acquisitions on a timely
basis, including key functions such as sales, service, collections and
security. Finally, as the industry leader, the Company works closely with its
equipment vendors to assess ongoing technological changes and implements those
which the Company believes are beneficial to customer service, operating
efficiencies and financial performance.
FINANCIAL CHARACTERISTICS OF THE BUSINESS
The Company's business has the following financial characteristics:
Recurring Revenues. The Company derives a majority of its revenues from
outsourced coin-operated laundry equipment services typically performed under
long-term contracts with landlords, property management companies and owners of
rental apartment buildings, condominiums and cooperatives, university and
institutional housing and other multi-family housing properties. Management
estimates that approximately 90% of its locations are subject to long-term
contracts with initial terms of three to ten years, most of which have
automatic renewal or right of first refusal provisions. During the 1997 fiscal
year, the Company retained approximately 97% of its existing machine base. The
Company believes that its ability to retain its customers and machine base is
attributable to a number of factors, including the Company's national
reputation for superior service, the structure of its contracts and the
strength of its long-term customer relationships.
Diversified Customer Base. The Company provides outsourced coin-operated
laundry equipment services to over 42,000 laundry rooms in its operating
regions, and no one customer accounts for more than 2% of its revenues.
Management estimates that the Company's services are located in multi-family
housing properties containing over four million individual housing units.
Leverageable Cash Flows. Due to the stable, recurring nature of the Company's
revenues and its consistent EBITDA levels, the Company has been able to obtain
debt financing on favorable terms to support its acquisition strategy. This use
of debt financing to support growth is an important component of the Company's
financial strategy, and the Company believes that access to both the public and
private debt markets provides it with a competitive advantage.
3
<PAGE>
Benefits of Scale. By increasing its installed machine base, the Company has
benefited from economies of scale in both operating costs and purchasing power.
The Company is able to leverage its existing infrastructure, including its
sales, service, collections, security and corporate overhead, over a larger
installed machine base than its competition. As a result, the Company has been
able to improve its EBITDA margin as it has increased its size. For the twelve
months ended March 29, 1996, the 1997 fiscal year and the six months ended
September 26, 1997, the Company's EBITDA margins were 28.5%, 30.4% and 31.1%,
respectively. Furthermore, due to its purchasing power, management believes
that the Company is able to purchase equipment on terms more favorable for
costs lower than those available to smaller industry participants.
Significant Portion of Capital Investment Related to Growth. During the 1997
fiscal year, the Company spent approximately $213.0 million in capital
expenditures, of which $171.5 million, or approximately 80.6%, was used to
finance acquisitions as part of the Company's growth strategy. Of the remaining
capital investment, approximately $12.5 million, or approximately 5.8%, was
used for internally generated growth and approximately $29.1 million, or
approximately 13.6%, related to the renewal of the Company's existing machine
base.
4
<PAGE>
THE EXCHANGE OFFER
THE EXCHANGE OFFER.......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each
$1,000 principal amount of Series B Notes and
Private Notes that are properly tendered and
accepted. The objective of the Exchange Offer is
to create a single series of debt securities
having a total outstanding principal amount which
is larger than that of either the Private Notes
or the Series B Notes as separate series, thus
resulting in greater liquidity for the Exchange
Notes. However, see "Risk Factors--Dilution of
Interest." The Company will issue Exchange Notes
to Holders of Series B Notes and Private Notes
validly tendered and not withdrawn promptly
following the Expiration Date. See "Risk
Factors--Consequences of Failure to Exchange." As
of the date hereof, $196,655,000 aggregate
principal amount of Series B Notes and
$100,000,000 aggregate principal amount of
Private Notes are outstanding.
RESALES..................... Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes that the
Exchange Notes issued pursuant to this Exchange
Offer in exchange for Series B Notes and Private
Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (other
than (i) a broker-dealer who purchases such
Exchange Notes directly from the Company to
resell pursuant to Rule 144A or any other
available exemption under the Securities Act or
(ii) a person that is an affiliate of the Company
within the meaning of Rule 405 under the
Securities Act), without compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that the holder
is acquiring the Exchange Notes in the ordinary
course of its business and is not participating,
and has no arrangement or understanding with any
person to participate, in the distribution of the
Exchange Notes. Each broker-dealer that receives
the Exchange Notes for its own account in
exchange for Series B Notes and/or Private Notes,
where such Series B Notes and/or Private Notes
were acquired by such broker-dealer as a result
of market-making activities or other trading
activities, must acknowledge that it will deliver
a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
REGISTRATION RIGHTS AND
LIQUIDATED DAMAGES..........
This Exchange Offer is being made pursuant to the
Registration Rights Agreement, dated October 8,
1997 between the Company and Jefferies & Company,
Inc., Lazard Freres & Co., LLC, BT Alex. Brown
and First Union Capital Markets Corp., the
initial purchasers of the Private Notes
(collectively, the "Initial Purchasers") which,
among other things, requires the Company to cause
the Registration Statement of which this
Prospectus forms a part to become effective on or
prior to 120 days after the date of original
issuance of the Private Notes and the Exchange
Offer to be consummated on or prior to 165 days
after the date of original issuance of the
Private Notes. If such requirements are not met,
the interest rate on the
5
<PAGE>
Private Notes will become subject to increases
under certain circumstances as set forth therein.
See "The Exchange Offer--Failure to Consummate
Exchange Offer." Pursuant to the Registration
Rights Agreement, the rights of Holders of
Private Notes and Series B Notes to exchange such
Private Notes and Series B Notes for Exchange
Notes will expire upon consummation of the
Exchange Offer. Holders of Private Notes who do
not exchange their Private Notes for Exchange
Notes in the Exchange Offer will not be able to
reoffer, resell or otherwise dispose of their
Private Notes unless such Private Notes are
subsequently registered under the Securities Act
or unless an exemption from the registration
requirements of the Securities Act is available.
EXPIRATION DATE............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, unless the
Exchange Offer is extended by the Company in its
sole discretion, in which case the term
"Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
ACCRUED INTEREST ON THE
EXCHANGE NOTES, THE SERIES
B NOTES AND THE PRIVATE
NOTES.......................
The Exchange Notes will bear interest from and
including November 15, 1997, the last interest
payment date for the Series B Notes and the
Private Notes. Holders whose Series B Notes
and/or Private Notes are accepted for exchange
will be deemed to have waived the right to
receive any payment in respect of interest on
such Series B Notes and/or Private Notes accrued
to, but not including, the date of the issuance
of the Exchange Notes. Such waiver will not
result in the loss of interest income to such
Holders, since the Exchange Notes will bear
interest from the last interest payment date for
the Series B Notes and the Private Notes.
CONDITIONS TO THE EXCHANGE The Exchange Offer is subject to certain
OFFER....................... customary conditions. The conditions are limited
and relate in general to proceedings which have
been instituted or laws which have been adopted
that might impair the ability of the Company to
proceed with the Exchange Offer. As of the date
of this Prospectus, none of these events had
occurred, and the Company believes their
occurrence to be unlikely. If any such conditions
exist prior to the Expiration Date, the Company
may (i) refuse to accept any Series B Notes
and/or Private Notes and return all previously
tendered Series B Notes and/or Private Notes,
(ii) extend the Exchange Offer, or (iii) waive
such conditions. See "The Exchange Offer--
Conditions." The Exchange Offer is not
conditioned upon any minimum aggregate principal
amount of Series B Notes or Private Notes being
tendered for exchange.
PROCEDURES FOR TENDERING
SERIES B NOTES AND PRIVATE
NOTES.......................
Each Holder wishing to accept the Exchange Offer
must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
6
<PAGE>
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with such Private Notes and any other
required documentation to State Street Bank and
Trust Company (formerly, Shawmut Bank
Connecticut, National Association), as Exchange
Agent (the "Exchange Agent"), at the address set
forth herein and in the Letter of Transmittal. By
executing the Letter of Transmittal, the Holder
will represent to and agree with the Company
that, among other things, (i) the Exchange Notes
to be acquired by the Holder in connection with
the Exchange Offer are being acquired by the
Holder in the ordinary course of business of the
Holder, (ii) the Holder has no arrangement or
understanding with any person to participate in a
distribution of Exchange Notes, (iii) that, if
such Holder is a broker-dealer registered under
the Exchange Act or is participating in the
Exchange Offer for the purposes of distributing
the Exchange Notes, such Holder must comply with
the registration and prospectus delivery
requirements of the Securities Act in connection
with a secondary resale transaction of the
Exchange Notes acquired by such person and cannot
rely on the position of the staff of the
Commission set forth in no-action letters (see
"The Exchange Offer--Resale of Exchange Notes"),
(iv) such Holder understands that a secondary
resale transaction described in clause (iii)
above and any resales of Exchange Notes obtained
by such Holder in exchange for Series B Notes
and/or Private Notes acquired by such Holder
directly from the Company should be covered by an
effective registration statement containing the
selling securityholder information required by
Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission, and (v) the
Holder is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Company. If the
Holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange
for Series B Notes or Private Notes that were
acquired as a result of market-making activities
or other trading activities, the Holder is
required to acknowledge in the Letter of
Transmittal that it will deliver a prospectus in
connection with any resale of such Exchange
Notes; however, by so acknowledging and by
delivering a prospectus, the Holder will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. See
"The Exchange Offer--Procedures for Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS...........
Any beneficial owner whose Series B Notes or
Private Notes are registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender such
Series B Notes or Private Notes in the Exchange
Offer should contact such registered Holder
promptly and instruct such registered Holder to
tender on such beneficial owner's behalf. See
"The Exchange Offer--Procedures for Tendering."
If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering
7
<PAGE>
his Series B Notes or Private Notes, either make
appropriate arrangements to register ownership of
the Series B Notes or Private Notes in such
owner's name or obtain a properly completed bond
power from the registered Holder. The transfer of
registered ownership may take considerable time
and may not be able to be completed prior to the
Expiration Date.
GUARANTEED DELIVERY Holders who wish to tender their Series B Notes
PROCEDURES.................. or Private Notes and whose Series B Notes or
Private Notes are not immediately available or
who cannot deliver their Series B Notes or
Private Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, must tender their Private Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
ACCEPTANCE OF THE PRIVATE
NOTES AND DELIVERY OF THE
EXCHANGE NOTES..............
Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company
will accept for exchange any and all Series B
Notes and Private Notes which are properly
tendered in the Exchange Offer prior to the
Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered
on the earliest practicable date following the
Expiration Date. See "The Exchange Offer -Terms
of the Exchange Offer."
WITHDRAWAL RIGHTS........... Tenders of Series B Notes and Private Notes may
be withdrawn at any time prior to 5:00 p.m. New
York City time on the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders."
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS..............
For a discussion of certain federal income tax
considerations relating to the exchange of the
Exchange Notes for Series B Notes or Private
Notes, see "Certain Federal Income Tax
Considerations."
EXCHANGE AGENT.............. State Street Bank and Trust Company is serving as
the Exchange Agent in connection with the
Exchange Offer. The mailing address of the
Exchange Agent is State Street Bank and Trust
Company, 777 Main Street--MSN 224, Hartford,
Connecticut 06115, Attention: Corporation Trust
Operations. Deliveries by overnight courier
should be sent to the same address. By-hand
deliveries should be addressed to State Street
Bank and Trust Company, 14 Wall Street, 8th
Floor, Window 2, New York, New York 10005,
Attention: Corporate Trust Department. For
information with respect to the Exchange Offer,
call of the Exchange Agent at
(860) 986-2092 or communicate by facsimile at
(860) 986-7920.
USE OF PROCEEDS............. There will be no cash proceeds to the Company
from the issuance of the Exchange Notes pursuant
to the Exchange Offer.
8
<PAGE>
SUMMARY DESCRIPTION OF EXCHANGE NOTES
The Exchange Offer constitutes an offer to exchange up to $296,655,000
aggregate principal amount of the Exchange Notes for up to an equal aggregate
principal amount of Series B Notes and Private Notes. The form and terms of the
Exchange Notes are the same as the form and terms of the Series B Notes except
for the total outstanding principal amount thereof and are the same as the form
and terms of the Private Notes except for the total outstanding principal
amount thereof and except that (i) the Exchange Notes will have been registered
under the Securities Act and, therefore, the Exchange Notes will not bear
legends restricting their transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to certain rights of holders of Private Notes under
the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Series B Notes and Private Notes (each of which they
replace) and will be issued under, and be entitled to the benefits of, the
Indenture. See "Description of the Exchange Notes" for further information and
for definitions of certain capitalized terms used and not otherwise defined
below.
The Exchange Notes.......... Up to $296,655,000 aggregate face amount of 11
3/4% Series D Senior Notes due 2005 of Coinmach
Corporation.
Maturity Date............... November 15, 2005.
Interest Rate............... The Exchange Notes will bear interest at an
interest rate of 11 3/4% per annum.
Interest Payment Dates...... May 15 and November 15, commencing May 15, 1998.
Optional Redemption......... The Exchange Notes will be redeemable at the
option of the Company, in whole or in part, at
any time on or after November 15, 2000, at the
redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the redemption
date.
In addition, on or prior to December 31, 1998,
the Company may, at its option, use the net cash
proceeds from one or more Equity Offerings to
redeem up to an aggregate of 35% of the principal
amount of the Exchange Notes originally issued at
111 3/4% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the
redemption date; provided, however, that at least
65% of the aggregate principal amount of the
Private Notes and Exchange Notes then outstanding
are outstanding immediately after any such
redemption. See "Description of the Senior
Notes--Redemption."
Ranking..................... The Exchange Notes will be senior unsecured
obligations of the Company and will rank senior
in right of payment to all existing and future
subordinated indebtedness of the Company. The
Exchange Notes will rank pari passu in right of
payment with other senior indebtedness of the
Company. However, the Exchange Notes will be
effectively subordinated to all secured
indebtedness of the Company and its subsidiaries,
including indebtedness under the Credit Facility
(as defined), to the extent of the assets
securing such indebtedness.
Change of Control........... Upon the occurrence of a Change of Control (as
defined), each holder of Senior Notes will have
the right to require the Company to repurchase
such holder's Exchange Notes at a price equal to
9
<PAGE>
101% of the principal amount thereof plus accrued
and unpaid interest to the repurchase date.
Certain Covenants........... The Indenture, dated as of October 8, 1997,
between the Company and State Street Bank and
Trust Company, as Trustee, governing the Private
Notes and the Exchange Notes (the "Indenture")
contains certain covenants, including, but not
limited to, covenants with respect to the
following: (i) limitation on incurrence of
additional indebtedness; (ii) limitation on
restricted payments; (iii) limitation on asset
sales; (iv) limitation on dividend and other
payment restrictions affecting subsidiaries; (v)
limitation on preferred stock of restricted
subsidiaries; (vi) limitation on liens; (vii)
merger, consolidation and sale of assets; (viii)
limitations on transactions with affiliates; and
(ix) limitation on sale and leaseback
transactions. The foregoing covenants shall not
apply to Unrestricted Subsidiaries (as defined)
designated by the Company and funded in
accordance with the restrictions contained in the
"Limitation on Restricted Payments" covenant.
Use of Proceeds............. There will be no cash proceeds to the Company
from the issuance of the Exchange Notes pursuant
to the Exchange Offer.
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE EXCHANGE NOTES SHOULD CONSIDER ALL OF THE
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT IN THE
EXCHANGE NOTES. IN PARTICULAR, PURCHASERS SHOULD CONSIDER THE INVESTMENT
CONSIDERATIONS SET FORTH UNDER "RISK FACTORS" HEREIN.
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents summary historical consolidated financial data
of the Company for the year ended March 28, 1997 and for the twelve months
ended March 29, 1996, and the unaudited summary historical financial data for
the six months ended September 26, 1997, and for the six months ended September
27, 1996. The unaudited pro forma financial data for the year ended March 28,
1997 and for the six months ended September 26, 1997 give effect to the
issuance on October 8, 1997 of the Private Notes and also give effect to
certain acquisitions, including the Kwik Wash Acquisition, the Reliable
Acquisition, the Appliance Warehouse Acquisition and the National Coin
Acquisition (each as defined), as if such transactions occurred at the
beginning of the period (or in the case of Balance Sheet Data, as of the date
of such data). The unaudited pro forma combined financial data 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 financial data set forth below should be read in
conjunction with the Company's combined consolidated financial statements and
the related notes thereto incorporated by reference into this Prospectus and
under the headings "Unaudited Pro Forma Financial Data", "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." All financial data are in thousands,
except ratios and machine data.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------------ -------------------
COMBINED
TWELVE YEAR SIX SIX YEAR SIX
MONTHS ENDED MONTHS MONTHS ENDED MONTHS
ENDED MARCH ENDED ENDED MARCH ENDED
MARCH 28, SEPTEMBER SEPTEMBER 28, SEPTEMBER
29, 1996(1) 1997 27, 1996 26, 1997 1997 26, 1997
-------- -------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................ $178,789 $206,852 $ 94,446 $149,797 $306,913 $156,983
Operating, general and
administrative
expenses............... 127,923 143,966 65,688 103,196 209,141 107,605
Depreciation and
amortization........... 36,635 46,316 20,192 34,580 71,973 35,912
Stock based compensation
charge -- 1,768 1,460 462 1,768 462
Operating income........ 12,031 14,802 7,106 11,559 24,031 13,004
Interest expense,
net(2)................. 23,371 27,417 12,345 21,173 43,098 22,969
Net Loss before
extraordinary items.... (8,480) (10,308) (3,639) (7,709) (15,322) (8,072)
BALANCE SHEET DATA (AT
END OF PERIOD):
Property and equipment,
net.................... $ 82,699 $112,116 $ 93,819 $130,348 $124,562 $130,348
Contract rights, net.... 59,745 180,557 63,217 217,371 225,498 217,371
Total assets............ 248,167 467,550 251,929 559,187 556,437 563,562
FINANCIAL RATIOS AND
OTHER DATA (UNAUDITED):
EBITDA(3)............... $ 50,866 $ 62,886 $ 28,758 $ 46,601 $ 97,926 $ 49,378
EBITDA margin(4)........ 28.5% 30.4% 30.4% 31.1% 31.9% 31.5%
Operating margin(5)..... 6.7% 7.2% 7.5% 7.7% 7.8% 8.3%
Ratio of Earnings to
Fixed Charges(6)....... -- -- -- -- -- --
Number of machines
(rounded).............. 220,000 337,000 247,000 420,000 415,000 420,000
</TABLE>
- --------
(1) The combined historical audited financial data for the twelve months ended
March 29, 1996 consist of the six month transition period ended March 29,
1996 and the six months ended September 29, 1995.
(2) Interest expense is reflected net of interest income and includes an
allocation of interest expense on the $15.0 million promissory note issued
by the Company's parent holding company, Coinmach Laundry in connection
with Kwik Wash Acquisition (as defined) in January 1997, which is required
for reporting purposes under generally accepted accounting principles
("GAAP").
11
<PAGE>
(3) EBITDA represents earnings from continuing operations before deductions for
interest, income taxes, depreciation and amortization before stock based
compensation charge. EBITDA is used by management and certain investors as
an indicator of a company's historical ability to service debt. Management
believes that an increase in EBITDA is an indicator of the Company's
improved ability to service existing debt, to sustain potential future
increases in debt and to satisfy capital requirements. However, EBITDA is
not intended to represent cash flows for the period, nor has it been
presented as an alternative to either (i) operating income (as determined
by generally accepted accounting principles) as an indicator of operating
performance or (ii) cash flows from operating, investing and financing
activities (as determined by generally accepted accounting principles) as a
measure of liquidity. Given that EBITDA is not a measurement determined in
accordance with generally accepted accounting principles and is thus
susceptible to varying calculations, EBITDA as presented may not be
comparable to other similarly titled measures of other companies. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(4) EBITDA margin represents EBITDA as a percentage of revenues. Management
believes that EBITDA margin is a useful measure to evaluate the Company's
performance over various sales levels. EBITDA margin should not be
considered as an alternative for measurements determined in accordance with
GAAP.
(5) Operating margin represents operating income as a percentage of revenues.
(6) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" include income (loss) before other expense (income), income
taxes and extraordinary gain plus fixed charges. "Fixed charges" include
interest expense, amortization expense relating to issuance of any
indebtedness and such portion of operating lease rentals estimated to
represent the interest factor of such rentals. Earnings did not cover fixed
charges during these periods by the following amounts: combined twelve
months ended March 29, 1996 - $11,340, Year ended March 28, 1997 - $12,615,
Six months ended September 27, 1996 - $5,239, Six months ended September
26, 1997 - $9,614, Pro forma year ended March 28, 1997 - $19,067 and Pro
forma six months ended September 26, 1997 - $9,965.
12
<PAGE>
FORWARD LOOKING STATEMENTS
This Prospectus and other reports and statements filed by the Company from
time to time with the Commission (collectively, "Commission Filings") contain
or may contain certain forward looking statements and information that are
based on the beliefs of the Company's management as well as estimates and
assumptions made by, and information currently available to, the Company's
management. When used in Commission Filings, the words "anticipate,"
"believe," "estimate," "expect," "future," "intend," "plan" and similar
expressions, as they relate to the Company or the Company's management,
identify forward looking statements. Such statements reflect the current views
of the Company with respect to future events and are subject to certain risks,
uncertainties and assumptions relating to the Company's operations and results
of operations, competitive factors, shifts in market demand, and other risks
and uncertainties, including, in addition to any uncertainties specifically
identified in the text surrounding such statements, uncertainties with respect
to changes or developments in social, economic, business, industry, market,
legal and regulatory circumstances and conditions and actions taken or omitted
to be taken by third parties, including the Company's stockholder, customers,
suppliers, competitors, legislative, regulatory, judicial and other
governmental authorities. Should one or more of these risks or uncertainties
materialize, or should the underlying assumptions prove incorrect, actual
results may vary significantly from those anticipated, believed, estimated,
expected, intended or planned.
RISK FACTORS
In addition to other information contained in this Prospectus, Holders of
Private Notes and Series B Notes should carefully consider the following
factors before investing in the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Private Notes and Series B Notes who do not exchange their
Private Notes and Series B Notes for Exchange Notes in the Exchange Offer will
not be able to take advantage of the increased liquidity afforded by the
Exchange Notes which would have a total aggregate principal amount of
$296,655,000 as opposed to $196,655,000 for the Series B Notes and
$100,000,000 for the Private Notes.
In addition, holders of Private Notes who do not exchange their Private
Notes for Exchange Notes pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Private Notes as set forth in
the legend thereon as a consequence of the issuance of the Private Notes
pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, the Private Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Private Notes under the Securities Act. Based on interpretations
by the staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes and Series B Notes may be offered
for resale, resold or otherwise transferred by any holder thereof (other than
any such holder which is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery requirements of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement with any person to participate in the
distribution of such Exchange Notes. Notwithstanding the foregoing, each
broker-dealer that receives Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of Exchange Notes received in exchange for Private Notes
and/or Series B Notes where such Private Notes and/or Series B Notes were
acquired by such broker-dealer as a result of market-making activities or
other
13
<PAGE>
trading activities (other than Private Notes acquired directly from the
Company). The Company has agreed that, for a period of 180 days from the
Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
However, the ability of any holder to resell the Exchange Notes is subject to
applicable state securities laws as described in "Blue Sky Restriction on
Resale of Exchange Notes" below.
FAILURE TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer and to avoid the restrictions on
transfer of the Private Notes, Holders of Series B Notes and Private Notes
must transmit a properly completed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to the Exchange Agent at one
of the addresses set forth below under "Exchange Agent" on or prior to the
Expiration Date. In addition, either (i) certificates for such Series B Notes
or Private Notes must be received by the Exchange Agent along with the Letter
of Transmittal or (ii) a timely confirmation of a book-entry transfer of such
Series B Notes or Private Notes, if such procedure is available, into the
Exchange Agent's account at The Depository Trust Company pursuant to the
procedure for book-entry transfer described herein, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the Holder must comply
with the guaranteed delivery procedures described herein. See "The Exchange
Offer."
BLUE SKY RESTRICTIONS ON RESALE OF EXCHANGE NOTES
In order to comply with the securities laws of certain jurisdictions, the
Exchange Notes may not be offered or resold by any holder unless they have
been registered or qualified for sale in such jurisdictions or an exemption
from registration or qualification is available and the requirements of such
exemption have been satisfied. The Company does not currently intend to
register or qualify the resale of the Exchange Notes in any such
jurisdictions. However, an exemption is generally available for sales to
registered broker-dealers and certain institutional buyers. Other exemptions
under applicable state securities laws may also be available.
ABSENCE OF PUBLIC MARKET
The Exchange Notes will be new securities for which there currently is no
market. There can be no assurance as to the liquidity of any markets that may
develop for the Exchange Notes, the ability of holders of the Exchange Notes
to sell their Exchange Notes, or the price at which holders would be able to
sell their Exchange Notes. Future trading prices of the Exchange Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
The Initial Purchasers previously advised the Company that it intends to make
a market in the Exchange Notes. However, the Initial Purchaser is not
obligated to do so and any market making may be discontinued at any time
without notice. Therefore, there can be no assurance that any active market
for the Exchange Notes will develop. The Company does not intend to apply for
listing of the Exchange Notes on any securities exchange or for quotation
through the National Association of Securities Dealers Automated Quotation
System.
SUBSTANTIAL INDEBTEDNESS
The Company has substantial indebtedness and debt service requirements. In
addition to indebtedness outstanding under the Series B Notes and the Private
Notes, the Company is party to a credit agreement (the "Credit Agreement")
with Bankers Trust Company, First Union National Bank of North Carolina,
Lehman Commercial Paper, Inc. and certain other lending institutions named
therein providing for, among other things, a $190.0 million term loan facility
and a $70.0 million revolving credit facility (as amended, the "Credit
Facility"). As of September 26, 1997, on a pro forma basis after giving effect
to the issuance of the Private Notes on October 8, 1997, the Company's
indebtedness was approximately $397.6 million (excluding the premium on the
Private Notes) which included $98.5 million outstanding under the Credit
Facility, and its stockholder's equity was approximately $4.3 million.
14
<PAGE>
The Company's level of indebtedness will have several important effects on
its future operations, including, but not limited to, the following: (i) a
significant portion of the Company's cash flow from operations will be
required to pay interest on its indebtedness and will not be available for
other purposes; (ii) the financial covenants and other restrictions contained
in certain of the agreements governing the Company's indebtedness will require
the Company to meet certain financial tests and will limit its ability to
borrow additional funds or to dispose of assets; (iii) the Company's ability
to obtain additional financing in the future for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired; and
(iv) the Company's ability to adapt to changes in the coin-operated laundry
equipment services industry and to economic conditions in general could be
limited. The financial covenants contained in the agreements governing
Coinmach's indebtedness restrict Coinmach's ability to make dividends,
distributions or other payments to Coinmach Laundry. Additionally, the
Company's ability to meet its debt service obligations and to reduce its total
debt will be dependent upon its future performance, which will be subject to
general economic conditions and to financial, business and other factors
affecting the operations of the Company, many of which are beyond its control.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
An inability of the Company to comply with the financial covenants or other
conditions contained in the financing agreements governing the Company's
indebtedness could result in an acceleration of amounts due thereunder. If the
Company is unable to meet its debt service obligations, it could be required
to take certain actions such as reducing or delaying capital expenditures,
selling assets, refinancing or restructuring its indebtedness, selling
additional equity capital or other actions. There is no assurance that any of
such actions could be effected on commercially reasonable terms, if at all, or
on terms permitted under the applicable financing agreements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
HISTORICAL NET LOSSES
In the past, the Company has experienced net losses. The Company incurred a
loss before extraordinary items of approximately $10.3 million and $7.7
million for the year ended March 28, 1997 and the six months ended September
26, 1997, respectively. As of September 26, 1997, the Company had an
accumulated deficit of approximately $36.9 million. No assurance can be given
that net losses will not occur in future periods.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture contains certain covenants that, among other things, limit the
ability of the Company and its subsidiaries to make restricted payments, to
incur indebtedness, to create liens, to issue preferred or other capital stock
of subsidiaries, to sell assets, to permit restrictions on dividend and other
payments by subsidiaries to the Company, to consolidate, merge or sell all or
substantially all of its assets, to engage in transactions with affiliates or
to engage in unrelated businesses. In addition, the Credit Facility contains
other and more restrictive covenants and, under certain circumstances,
prohibits the Company from prepaying the Exchange Notes. The Credit Facility
also requires the Company to maintain specified financial ratios and satisfy
certain financial tests. The Company's ability to maintain or meet such
financial ratios and tests may be affected by events beyond its control, and
there can be no assurance that the Company will maintain or meet such ratios
and tests. A breach of any of these covenants could result in an event of
default under the Credit Facility, in which case, the lenders could elect to
declare all amounts borrowed under the Credit Facility, together with accrued
interest, to be immediately due and payable and to terminate all commitments
under the Credit Facility. If the Company were unable to repay all amounts
declared due and payable, the lenders could proceed against the collateral
granted to satisfy the indebtedness and other obligations due and payable.
Substantially all of the assets of the Company and its subsidiaries are
pledged as security under the Credit Facility. If the obligations under the
Credit Facility were to be accelerated, there could be no assurance that the
assets of the Company and its subsidiaries would be sufficient to repay in
full such indebtedness and the other indebtedness of the Company, including
the Exchange Notes. See "Description of the Exchange Notes--Certain
Covenants."
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DEPENDENCE UPON LEASE RENEWALS
The Company's business is highly dependent upon the renewal of its lease
contracts with property owners and management companies. The Company has
historically focused on obtaining long-term, renewable lease contracts and
management estimates that, approximately 90% of its locations are subject to
long-term leases with initial terms of three to ten years. There can be no
assurance that the Company will be able to renew its leases as they expire or
that its new leases will contain the same renewal and related material terms.
See "Business--Description of Operations--Location Leasing."
RISKS OF ACQUISITIONS AND INTEGRATION OF ACQUIRED BUSINESSES
As part of its business strategy, the Company will continue to evaluate
opportunities to acquire local, regional and multi-regional route businesses.
There can be no assurance that the Company will find attractive acquisition
candidates or effectively manage the integration of acquired businesses into
its existing business. If the expected operating efficiencies from such
transactions do not materialize, if the Company fails to integrate new
businesses into its existing business, or if the costs of such integration
exceed expectations, the Company's operating results and financial condition
could be adversely affected. Future acquisitions by the Company could result
in the incurrence of debt, the potentially dilutive issuance of equity
securities and the incurrence of contingent liabilities and amortization
expenses related to goodwill and other intangible assets, any of which could
adversely affect the Company's operating results and financial condition.
CAPITAL REQUIREMENTS
The Company operates in a capital intensive industry and must continue to
make capital expenditures to maintain its operating base, including
investments in equipment and contract maintenance. The Company spent
approximately $29.1 million on renewal capital expenditures for the 1997
fiscal year. While the Company estimates that it will generate sufficient cash
flow from operations to finance anticipated capital expenditures, there can be
no assurance that it will be able to do so.
MANAGEMENT OF GROWTH
The Company expects to grow through internal growth and acquisitions.
Management expects to expend significant time and effort in evaluating,
completing and integrating such acquisitions. There can be no assurance that
the Company's systems, procedures and controls will be adequate to support the
Company's operations as they expand. Any future growth will also impose
significant added responsibilities on members of senior management, including
the need to identify, recruit and integrate new senior level managers and
executives. There can be no assurance that such additional management will be
identified and retained by the Company. To the extent that the Company is
unable to manage its growth efficiently and effectively, or is unable to
attract and retain additional qualified management, the Company's financial
condition and results of operations could be materially adversely affected.
See "Business--Business Strategy."
REDUCED OCCUPANCY LEVELS
Extended periods of reduced occupancy can adversely affect the Company's
operations. In a period of occupancy decline, the Company could be faced with
reductions in revenues and cash flow from operations in certain areas. In past
periods of occupancy decline, management designed incentive programs that were
successful in maintaining stable profit margins by offering owners and
management companies financial incentives relating to increased occupancy
levels (and the use of laundry room facilities) in exchange for certain
guaranteed minimum periodic payments. Although the Company is geographically
diversified, there can be no assurance that the Company will maintain its
revenue levels or cash flow from operations in periods of low occupancy.
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DECLINE IN REVENUES
Due to previous capital constraints and debt service requirements, the
Company experienced declines in revenues from operations during certain
periods prior to the 1997 fiscal year. Growth in revenues is driven by a
number of factors, including market conditions, the size of the operating base
of machines, the number of installed machines, the ability to maintain and
expand the machine base through an appropriate level of capital expenditures
and actual revenue generated on a per-machine basis. The Company is
continually monitoring and maintaining its operating base by purchasing and
maintaining equipment and pursuing its business strategy of acquiring route
businesses to increase operating leverage. There can be no assurance that
revenues from operations will increase or maintain current levels in future
periods.
DEPENDENCE ON KEY PERSONNEL
The Company's continued success will depend largely on the efforts and
abilities of its executive officers and certain other key employees, all of
whom have employment agreements with the Company. The Company does not
maintain insurance policies with respect to such employees, and the Company's
operations could be affected adversely if, for any reason, such officers or
key employees do not remain with the Company. See "Management."
CONTROL BY PRINCIPAL STOCKHOLDER
Golder, Thoma, Cressey, Rauner Fund IV, LP ("GTCR") owns approximately 45.5%
of the outstanding shares of Coinmach Laundry's voting common stock ("Coinmach
Laundry Common Stock") and non-voting common stock (before giving effect to
shares of Coinmach Laundry Common Stock issuable upon exercise of options
which are currently vested and exercisable). GTCR and certain holders of
Coinmach Laundry Common Stock are parties to a Voting Agreement dated July 23,
1996 (the "Voting Agreement"), that gives GTCR the ability to designate for
election a majority of Coinmach Laundry's directors and therefore determine
the outcome of substantially all issues submitted to Coinmach Laundry's
stockholders, including mergers, sales of all or substantially all of the
Company's assets and similar fundamental corporate changes.
COMPETITION
The coin-operated laundry equipment services industry is highly competitive,
capital intensive and requires reliable, quality service. The industry is
fragmented nationally, with many small, private and family-owned businesses
operating throughout most major metropolitan areas. Notwithstanding the
fragmentation of the industry, there are currently three companies, including
the Company, with significant operations in multiple regions throughout the
United States. Some of the Company's competitors may possess greater financial
and other resources than the Company. Furthermore, current and potential
competitors may make acquisitions or may establish relationships among
themselves or with third parties to increase their ability to compete within
the industry. Accordingly, it is possible that new competitors may emerge and
rapidly acquire significant market share. If this were to occur, the business,
operating results, financial condition and cash flows of the Company could be
materially adversely affected.
SIGNIFICANT INTANGIBLE ASSETS
Adjusted for the issuance of the Private Notes, approximately $326.4 million
or 57.9% of the Company's total assets would have been intangible assets
consisting primarily of contract rights and goodwill as of September 26, 1997.
In the event of a sale or liquidation, there can be no assurance that the
value of the Company's intangible assets would be realized.
ENVIRONMENTAL REGULATION
The Company's business and operations are subject to federal, state and
local environmental laws and regulations that impose limitations on the
discharge of, and establish standards for the handling, generation,
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emission, release, discharge, treatment, storage and disposal of, certain
materials, substances and wastes. To the best of management's knowledge, there
are no existing or potential environmental claims against the Company, nor has
the Company received any notification of responsibility for, or any inquiry or
investigation regarding, any disposal, release or threatened release of any
hazardous material, substance or waste generated by the Company that is likely
to have a material adverse effect on the Company's business or financial
condition. However, the Company cannot predict with any certainty that it will
not in the future incur any liability under environmental laws and regulations
that could have a material adverse effect on the Company's business or
financial condition.
DILUTION OF INTEREST
If all Series B Notes and Private Notes are exchanged for Exchange Notes,
$296,655,000 aggregate principal amount of Exchange Notes will be outstanding
following consummation of the Exchange Offer, and the Exchange Notes will be
deemed to be a single series of notes outstanding under the Indenture. In such
case, any actions requiring the consent of each Holder or the Holders of a
majority in outstanding principal amount of notes under the Indenture will
therefore require the consent of each Holder of Exchange Notes or the Holders
of a majority in aggregate principal amount of such outstanding Exchange
Notes, as applicable, and the current individual voting interest of each
Holder of Series B Notes and Private Notes will accordingly be diluted.
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THE EXCHANGE OFFER
PURPOSES OF THE EXCHANGE OFFER
The Private Notes were sold by the Company to the Initial Purchasers
pursuant to the Purchase Agreement. The Initial Purchasers subsequently sold
the Private Notes in reliance on Rule 144A under the Securities Act. As a
condition to the sale of the Private Notes, the Company and the Initial
Purchasers entered into the Registration Rights Agreement on October 8, 1997
(the "Closing Date"). Pursuant to the Registration Rights Agreement, the
Company agreed that, unless the Exchange Offer is not permitted by applicable
law or Commission policy, it would (i) file with the Commission a registration
statement (an "Exchange Offer Registration Statement") under the Securities
Act relating to an offer to exchange the Private Notes and the Series B Notes
for Company debt securities of a single series with terms substantially
identical to those of the Private Notes and the Series B Notes (except that
the Exchange Notes will have a maximum aggregate principal amount of
$296,655,000 and will not contain terms with respect to transfer restrictions)
within 60 days after the Closing Date, (ii) use its good faith efforts to
cause such Exchange Offer Registration Statement to become effective under the
Securities Act within 120 days after the Closing Date and (iii) upon
effectiveness of the Exchange Offer Registration Statement, to commence the
Exchange Offer, maintain the effectiveness of the Registration Statement for
at least 20 business days (or a longer period if required by law) and deliver
to the Exchange Agent, Exchange Notes in the same aggregate principal amount
as the Series B Notes and Private Notes that were tendered by Holders thereof
pursuant to the Exchange Offer. The objectives of the Exchange Offer are (i)
to create a single series of debt securities having a total outstanding
principal amount which is larger than either the Private Notes or the Series B
Notes as separate series, thus resulting in greater liquidity for the Exchange
Notes, and (ii) to enable the Holders of Private Notes which contain certain
restrictions on transfer to receive debt securities of the Company with terms
which are substantially identical to those of the Private Notes but which do
not contain restrictions on transfer. The Registration Statement of which this
Prospectus is a part is intended to satisfy the Company's obligations under
the Registration Rights Agreement and the Purchase Agreement.
RESALE OF EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a Holder (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
any such Holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who exchanges Series B Notes or Private
Notes for Exchange Notes in the ordinary course of business and who is not
participating, does not intend to participate, and has no arrangement with any
person to participate, in a distribution of the Exchange Notes, will be
allowed to resell Exchange Notes to the public without further registration
under the Securities Act and without delivering to the purchasers of the
Exchange Notes a prospectus that satisfies the requirements of Section 10 of
the Securities Act. However, if any Holder acquires the Exchange Notes in the
Exchange Offer for the purpose of distributing or participating in the
distribution of the Exchange Notes or is a broker-dealer, such Holder cannot
rely on the position of the staff of the Commission enumerated in certain no-
action letters issued to third parties and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction, unless an exemption from registration is otherwise
available.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Series B Notes or Private Notes, where such Series B Notes or
Private Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus, in connection with any resale of such Exchange Notes. The Letter
of Transmittal states that, by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Notes received in exchange for
Series B Notes or Private Notes where such Series B Notes or Private Notes
were acquired by such broker-dealer as a result of market-making or other
trading activities. Pursuant to the Registration Rights Agreement, the Company
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has agreed to make this Prospectus, as it may be amended or supplemented form
time to time, available to broker-dealers for use in connection with any
resale for a period of up to 180 days after the Expiration Date (as defined
herein). See "Plan of Distribution."
FAILURE TO CONSUMMATE EXCHANGE OFFER
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company is not permitted
to effect the Exchange Offer, (ii) the Exchange Offer is not consummated
within 180 days after the Closing Date or (iii) under certain circumstances,
the Initial Purchasers so request, then the Company shall promptly deliver to
such holders and the Trustee written notice thereof, and the Company shall, at
the sole expense of the Company, (a) as promptly as reasonably practicable,
file a shelf registration statement covering resales of the Private Notes (the
"Shelf Registration Statement"), (b) use its good faith efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
and (c) use its good faith efforts to keep effective the Shelf Registration
Statement until the earlier of two years after its effective date and such
time as all of the applicable Private Notes have been sold thereunder. The
Company will, in the event of the Shelf Registration Statement, provide to
each holder of the Private Notes copies of the prospectus which is a part of
the Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement for the Private Notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
Private Notes. A holder of Private Notes who sells such Private Notes pursuant
to the Shelf Registration Statement will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification rights and obligations).
If the Company fails to comply with the above provisions or if an Exchange
Offer Registration Statement or, if applicable, a Shelf Registration Statement
fails to become effective, then, additional interest (the "Additional
Interest") shall become payable in respect of the Private Notes as follows:
(i) if neither an Exchange Offer Registration Statement nor, if
applicable, a Shelf Registration Statement has been filed in accordance
with the terms of the Registration Rights Agreement on or prior to the 60th
day after the Closing Date, then, commencing on the 61st day after the
Closing Date, Additional Interest shall accrue on the Private Notes over
and above the stated interest thereon at a rate of 0.50% per annum for the
first 90 days immediately following the 60th day after the Closing Date,
such Additional Interest rate increasing by an additional 0.50% per annum
at the beginning of each subsequent 90-day period;
(ii) if neither an Exchange Offer Registration Statement nor, if
applicable, a Shelf Registration Statement is declared effective by the
Commission on or prior to 120 days after the Closing Date, then, commencing
on the 121st day after the Closing Date, Additional Interest shall be
accrued on the Private Notes over and above the stated interest thereon at
a rate of 0.50% per annum for the first 90 days immediately following the
120th day after the Closing Date, such Additional Interest rate increasing
by an additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Company has not exchanged the Exchange Notes for all
Series B Notes and Private Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to the 165th day after the Closing
Date or (B) the Registration Statement of which this Prospectus forms a
part ceases to be effective at any time prior to the time that the Exchange
Offer is consummated or (C) if applicable, the Shelf Registration Statement
has been declared effective and such Shelf Registration Statement ceases to
be effective without being succeeded promptly (but in no event more than
five business days) by another effective Shelf Registration Statement at
any time prior to the earlier of the time that all of the applicable
Private Notes have been sold thereunder or the second anniversary of its
effective date, then Additional Interest shall accrue on the Private Notes
over and above the stated interest at a rate of 0.50% per annum for the
first 90 days commencing on (x) the 166th day after the Closing Date with
respect to the Private Notes validly tendered and not exchanged by the
Company, in the case of clause (A) above, or (y) the date the
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Registration Statement of which this Prospectus forms a part ceases to be
effective or usable for its intended purpose, in the case of clause (B)
above, or (z) the day the Shelf Registration Statement ceases to be
effective, in the case of clause (C) above, such Additional Interest rate
increasing by an additional 0.50% per annum at the beginning of each
subsequent 90-day period;
provided, however that the rate of Additional Interest on the Private Notes
may not exceed 1.0% per annum in the aggregate; provided, further, that (1)
upon the filing of an Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of an Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (ii) above), or (3) upon the
exchange of Exchange Notes for all Series B Notes and Private Notes tendered
(in the case of clause (iii)(A) above) or upon the effectiveness of an
Exchange Offer Registration Statement which has ceased to remain effective (in
the case of clause (iii)(B) above), or upon the effectiveness of a Shelf
Registration Statement which has ceased to remain effective (in the case of
clause (iii)(C) above), Additional Interest on the Private Notes as a result
of such clause (i), (ii) or (iii) above (or the relevant subclause thereof),
as the case may be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or (iii)
above will be payable in cash, on the same interest payment dates as the
Private Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Private Notes, multiplied by a fraction, the numerator of which is the
number of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months,
and, in the case of a partial month, the actual number of days elapsed), and
the denominator of which is 360.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement.
There is currently no public market for either the Series B Notes or the
Private Notes. To the extent Series B Notes and Private Notes are tendered and
accepted in the exchange, the principal amount of outstanding Series B Notes
and Private Notes will decrease with a resulting decrease in the liquidity in
the markets therefor. In addition, following the consummation of the Exchange
Offer, Holders of Private Notes who were eligible to participate in the
Exchange Offer but who did not tender their Private Notes will not have any
further registration rights and such Private Notes will continue to be subject
to certain restrictions on transfer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Series B
Notes and Private Notes validly tendered and not withdrawn prior to 5:00 p.m.
New York City time on the Expiration Date. The Company will issue $1,000
principal amount of Exchange Notes in exchange for each $1,000 principal
amount of outstanding Series B Notes and Private Notes surrendered pursuant to
the Exchange Offer. Series B Notes and Private Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Series B Notes except that the aggregate principal amount of the
Exchange Notes will be $296,655,000 and the form and terms of the Exchange
Notes are the same as the form and terms of the Private Notes except that the
aggregate principal amount of the Exchange Notes will be $296,655,000 and
except that (i) the Exchange Notes will be registered under the Securities Act
and hence the Exchange Notes will not bear legends restricting their transfer
and (ii) holders of the Exchange Notes will not be entitled any of the rights
of Holders under the Registration Rights Agreement, which rights will
terminate upon the consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Series B Notes and the Private Notes (each of
which they replace) and will be
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issued under, and be entitled to the benefits of, the Indenture, which also
authorized the issuance of the Private Notes, such that both series will be
treated as single class of debt securities under the Indenture.
Only a registered Holder of Private Notes (or such Holder's legal
representative or attorney-in-fact) as reflected on the records of the Trustee
under the Indenture and only a registered Holder of Series B Notes (or such
Holder's legal representative or attorney-in-fact) as reflected on the records
of State Street Bank and Trust Company, the trustee with respect to the Series
B Notes (the "Series B Trustee") may participate in the Exchange Offer. There
will be no fixed record date for determining registered Holders entitled to
participate in the Exchange Offer. The Company has fixed the close of business
on , 1997, however, as the record date for purposes of determining
the persons to whom this Prospectus, together with the Letter of Transmittal,
will initially be sent.
Holders do not have any appraisal or dissenters' rights under the Series B
Indenture (as defined) or the Indenture in connection with the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Series B Notes
and Private Notes when, as and if the Company has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering Holders for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Series B Notes and/or Private Notes in the Exchange Offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Series B Notes and/or Private Notes pursuant to the Exchange
Offer. The Company will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the Exchange Offer. See
"The Exchange Offer--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998 unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice and (ii) issue a
press release or other public announcement which shall include disclosure of
the approximate number of Series B Notes and Private Notes tendered to date,
in each case prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Without limiting the manner in
which the Company may choose to make a public announcement of any delay,
extension, amendment or termination of the Exchange Offer, the Company shall
have no obligation to publish, advertise, or otherwise communicate any such
public announcement, other than by making a timely release to an appropriate
news agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Series B Notes and/or Private Notes, (ii) to extend the Exchange
Offer or (iii) if any conditions set forth below under "The Exchange Offer--
Conditions" shall not have been satisfied, to terminate the Exchange Offer by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written
notice thereof to the registered Holders. If the Exchange Offer is amended in
a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered Holders, and the Company
will extend the Exchange Offer for a period of 5 to 10 business days,
depending upon the significance of the amendment and the manner of disclosure
to the registered Holders, if the Exchange Offer would otherwise expire during
such 5 to 10 business day period.
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INTEREST ON THE EXCHANGE NOTES
The Exchange Notes bear interest at a rate equal to 11 3/4% per annum.
Interest on the Exchange Notes is payable semi-annually on each November 15
and May 15, commencing on May 15, 1998. Holders of Exchange Notes will receive
interest on May 15, 1998 from the date of initial issuance of the Exchange
Notes, plus an amount equal to the accrued interest on the Series B Notes and
the Private Notes from November 15, 1997, the last date on which interest was
paid on the Series B Notes and the Private Notes, to the date of exchange of
such Series B Notes and Private Notes for Exchange Notes. Holders of Series B
Notes and/or Private Notes that are accepted for exchange will be deemed to
have waived the right to receive any interest accrued on such Series B Notes
and/or the Private Notes. Such waiver will not result in the loss of interest
income to such Holders, since the Exchange Notes will bear interest from
November 15, 1997.
PROCEDURES FOR TENDERING
Only a registered Holder of Series B Notes or Private Notes may tender such
Series B Notes or Private Notes in the Exchange Offer. To tender in the
Exchange Offer, a Holder must complete, sign and date the Letter of
Transmittal, or facsimile thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile to the Exchange Agent at the address
set forth below under "The Exchange Offer--Exchange Agent" for receipt prior
to the Expiration Date. In addition, either (i) certificates for such Series B
Notes or Private Notes must be received by the Exchange Agent along with the
Letter of Transmittal or (ii) a timely confirmation of a book-entry transfer
(a "Book-Entry Confirmation") of such Series B Notes or Private Notes, if such
procedure is available, into the Exchange Agent's account at The Depository
Trust Company (the "Depository") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
procedures described below.
The tender by a Holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such Holder and the Company in accordance
with the terms and subject to the conditions set forth in herein and in the
Letter of Transmittal.
THE METHOD OF DELIVERY OF SERIES B NOTES AND/OR PRIVATE NOTES AND THE LETTER
OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT
THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS
RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY
INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL,
SERIES B NOTES OR PRIVATE NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner(s) of Series B Notes or Private Notes whose Series B
Notes or Private Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and who wishes to tender
should contact the registered Holder promptly and instruct such registered
Holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on such owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal and delivering such owner's
Series B Notes or Private Notes, either make appropriate arrangements to
register ownership of the Series B Notes or Private Notes in such owner's name
or obtain a properly completed bond power from the registered Holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "The Exchange Offer--Withdrawal of Tenders"), as the case may be,
must be guaranteed by an Eligible Institution (as hereinafter defined) unless
the Series B Notes or Private Notes tendered pursuant thereto are tendered (i)
by a registered Holder who has not completed the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or
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(ii) for the account of an Eligible Institution. In the event that signatures
on a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be made by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of
one of the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder listed therein, such Series B Notes or Private Notes must be endorsed
or accompanied by a properly completed bond power, signed by such registered
Holder as such registered Holder's name appears on such Series B Notes or
Private Notes.
If the Letter of Transmittal or any Series B Notes or Private Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with the Letter of Transmittal.
The Exchange Agent and the Depository have confirmed that any financial
institution that is a participant in the Depository's system may utilize the
Depository's Automated Tender Offer Program to tender Series B Notes or
Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Series B Notes or Private
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Series B Notes and Private Notes not properly
tendered or any Series B Notes and Private Notes the Company's acceptance of
which would, in the opinion of the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of
tender as to particular Series B Notes and/or Private Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
the instructions in the Letter of Transmittal) will be final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Series B Notes and/or Private Notes must be cured within such time
as the Company shall determine. Although the Company intends to notify Holders
of defects or irregularities with respect to tenders of Series B Notes and
Private Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Series B Notes and/or Private Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived.
While the Company has no present plan to acquire any Series B Notes or
Private Notes which are not tendered in the Exchange Offer or to file a
registration statement to permit resales of any Private Notes which are not
tendered pursuant to the Exchange Offer, the Company reserves the right in its
sole discretion to purchase or make offers for any Series B Notes and Private
Notes that remain outstanding subsequent to the Expiration Date or, as set
forth below under "--Conditions," to terminate the Exchange Offer and, to the
extent permitted by applicable law, purchase Private Notes in the open market,
in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
By tendering, each Holder will represent to the Company that, among other
things, (i) the Exchange Notes to be acquired by the Holder in connection with
the Exchange Offer are being acquired by the Holder in the ordinary course of
business of the Holder, (ii) the Holder has no arrangement or understanding
with any person to participate in the distribution of Exchange Notes, (iii)
the Holder acknowledges and agrees that any person who is a broker-dealer
registered under the Exchange Act or is participating in the Exchange Offer
for the purposes of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (iv) the Holder understands that a
secondary resale transaction described in clause (ii) above and any resales of
Exchange Notes obtained by such Holder in exchange for Series B Notes or
Private Notes acquired by such Holder directly from the Company should be
covered by an effective registration statement containing
24
<PAGE>
the selling securityholder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission, and (v) the Holder is not an
"affiliate," as defined in Rule 405 of the Securities Act, of the Company. If
the Holder is a broker-dealer that will receive Exchange Notes for its own
account in exchange for Series B Notes or Private Notes that were acquired as
a result of market-making activities or other trading activities, the Holder
is required to acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such Exchange Notes; however, by
so acknowledging and by delivering a prospectus, the Holder will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
RETURN OF SERIES B NOTES AND PRIVATE NOTES
If any tendered Series B Notes or Private Notes are not accepted for any
reason set forth in the terms and conditions of the Exchange Offer or if
Series B Notes or Private Notes are withdrawn or are submitted for a greater
principal amount than the Holders desire to exchange, such unaccepted,
withdrawn or non-exchanged Series B Notes and Private Notes will be returned
without expense to the tendering Holder thereof (or, in the case of Series B
Notes and Private Notes tendered by book-entry transfer into the Exchange
Agent's account at the Depository pursuant to the book-entry transfer
procedures described below, such Series B Notes and Private Notes will be
credited to an account maintained with the Depository) as promptly as
practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish accounts with respect to
the Series B Notes and Private Notes at the Depository for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Depository's systems
may make book-entry delivery of Series B Notes and Private Notes by causing
the Depository to transfer such Series B Notes and Private Notes into the
Exchange Agent's account at the Depository in accordance with the Depository's
procedures for transfer. However, although delivery of Series B Notes and
Private Notes may be effected through book-entry transfer at the Depository,
the Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under
"The Exchange Offer--Exchange Agent" on or prior to the Expiration Date or
pursuant to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series B Notes and/or Private Notes and (i)
whose Series B Notes and/or Private Notes are not immediately available or
(ii) who cannot deliver their Series B Notes and/or Private Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder, the certificate number(s) of such Series B Notes
and/or Private Notes and the principal amount of Series B Notes and/or
Private Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or a facsimile thereof)
together with the certificate(s) representing the Series B Notes and/or
Private Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered Series B Notes
and/or Private Notes in proper form for transfer and all other
25
<PAGE>
documents required by the Letter of Transmittal are received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Series B Notes and/or Private Notes
according to the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series B Notes and/or
Private Notes may be withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Series B Notes and/or Private Notes in the Exchange
Offer, a written or facsimile transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Series B Notes and/or Private Notes to be
withdrawn (the "Depositor"), (ii) identify the Series B Notes and/or Private
Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Series B Notes and/or Private Notes) and (iii) be
signed by the Holder in the same manner as the original signature on the
Letter of Transmittal by which such Series B Notes and/or Private Notes were
tendered (including any required signature guarantees). All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company in its sole discretion, whose determination
shall be final and binding on all parties. Any Series B Notes and/or Private
Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Series B Notes and/or Private Notes so withdrawn
are validly retendered. Properly withdrawn Series B Notes and/or Private Notes
may be retendered by following one of the procedures described above under
"The Exchange Offer--Procedures for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept any Series B Notes and/or Private Notes for exchange,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Series B Notes and/or Private Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Company, or
any material adverse development has occurred in any existing action or
proceeding with respect to the Company or any of its subsidiaries;
or
(b) any change, or any development involving a prospective change, in the
business or financial affairs of the Company or any of its subsidiaries has
occurred which, in the reasonable judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company; or
(c) any law, statute, rule or regulation is proposed, adopted or enacted,
which, in the reasonable judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Company; or
(d) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Series
B Notes and/or Private Notes and return all tendered Series B Notes and/or
Private Notes to the tendering Holders, (ii) extend the Exchange Offer and
retain all Series B Notes and/or Private Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of Holders
to withdraw such Series B Notes and/or Private Notes (See "The Exchange
Offer--Withdrawal of Tenders") or
26
<PAGE>
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Series B Notes and/or Private Notes which have
not been withdrawn. If such waiver constitutes a material change to the
Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered Holders of
the Series B Notes and/or Private Notes, and the Company will extend the
Exchange Offer for a period of 5 to 10 business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
Holders, if the Exchange Offer would otherwise expire during such 5 to 10
business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of Holders of the Private Notes eligible to participate in this
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Company's continuing obligations (i) to indemnify the
Holders (including any broker-dealers) and certain parties related to the
Holders against certain liabilities (including any broker-dealers) and certain
parties related to the Holders against certain liabilities (including
liabilities under the Securities Act), (ii) to provide, upon the request of
any Holder of a transfer-restricted Private Note, the information required by
Rule 144(d)(4) under the Securities Act in order to permit resales of such
Private Notes pursuant to Rule 144A, (iii) to use its good faith efforts to
keep the Registration Statement effective to the extent necessary to ensure
that it is available for resales of transfer-restricted Private Notes by
broker-dealers for a period of up to 90 days from the Expiration Date and (iv)
to provide copies of the latest version of the Prospectus to broker-dealers
upon their request for a period of up to 180 days from the Expiration Date.
The Company has been advised that in the opinion of the Commission, the
indemnification by the Company against liabilities under the Securities Act is
against public policy and is, therefore, unenforceable.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent of
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
By Registered or Certified Mail or Overnight Delivery:
State Street Bank and Trust Company
Corporate Trust Operations Department
777 Main Street
MSN 224
Hartford, Connecticut 06115
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company and are estimated in the aggregate to be approximately
$504,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
27
<PAGE>
The Company will pay all transfer taxes, if any, applicable to the exchange
of Series B Notes and Private Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the exchange of
the Series B Notes and Private Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered Holder or
any other persons) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
Holders of Private Notes and/or Series B Notes who do not exchange their
Private Notes and Series B Notes for Exchange Notes in the Exchange Offer will
not be able to take advantage of the increased liquidity afforded by the
Exchange Notes which would have a total aggregate principal amount of
$296,655,000 as opposed to $196,655,000 for the Series B Notes and
$100,000,000 for the Private Notes. In addition, Private Notes which are not
exchanged for the Exchange Notes pursuant to the Exchange Offer will remain
restricted securities. Accordingly, such Private Notes may be resold only (i)
to a person whom the seller reasonably believes is a qualified institutional
buyer (as defined in Rule 144A under the Securities Act) in a transaction
meeting the requirements of Rule 144A, (ii) in a transaction meeting the
requirements of Rule 144 under the Securities Act, (iii) outside the United
States to a foreign person in a transaction meeting the requirements of Rule
904 under the Securities Act or (iv) in accordance with another exemption from
the registration requirements of the Securities Act (and based upon a written
opinion of counsel), (v) to the Company or (vi) pursuant to an effective
registration statement and, in each case, in accordance with any applicable
securities laws of any state of the United States or any other applicable
jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes the Exchange Notes will be recorded at the same
carrying value as the Series B Notes and the Private Notes, which is face
value as reflected on the Company's accounting records on the date of
exchange. Accordingly, the Company will recognize no gain or loss as a result
of the Exchange Offer. The expenses of the Exchange Offer will be amortized
over the term of the Exchange Notes.
28
<PAGE>
THE COMPANY
GENERAL
The Company, established in 1947, is the leading supplier of outsourced
coin-operated laundry equipment services for multi-family housing properties
in the United States. The Company's business involves leasing laundry rooms
from building owners and property management companies, installing and
servicing the laundry equipment and collecting revenues generated from laundry
machines. The Company owns and operates approximately 420,000 coin-operated
washers and dryers in approximately 42,000 locations on routes throughout the
United States and in 151 retail laundromats located throughout Texas.
The Company is a Delaware corporation with executive offices located at 55
Lumber Road, Roslyn, New York 11576, and its telephone number is (516) 484-
2300.
HISTORY
Coinmach Industries Co., L.P. ("Coinmach Industries") was established as a
private coin-operated laundry equipment services company in 1947. On October
20, 1989, CIC I Acquisition Corp ("CIC"), a non-operating holding company,
acquired, through a series of related transactions, a controlling general
partnership interest in Coinmach Industries and all of the issued and
outstanding capital stock of Super Laundry Equipment Corp. ("Super Laundry").
On January 31, 1995, TCC, a company formed by GTCR, members of the Company's
senior management and certain other investors acquired all of the partnership
interests of Coinmach Industries and Super Laundry Equipment Co., L.P. from
CIC. On April 5, 1995, GTCR and substantially all of the other stockholders of
TCC formed the Company to acquire all of the capital stock of Solon, a private
coin-operated laundry equipment services business established in 1948. On
November 30, 1995, TCC merged with Solon (the "Merger"), whereupon the
surviving corporation changed its name to "Coinmach Corporation", the
principal operating subsidiary of Coinmach Laundry.
ACQUISITIONS
In January 1995, the Company initiated a strategy of controlled growth
through acquisitions. This strategy was designed to increase the installed
machine base in its then existing operating region as well as to provide the
Company with a strong market presence in new regions. Since January 1995, the
Company has completed six significant acquisitions adding revenues of
approximately $221 million and expanding its national presence from the
Northeast into the Mid-Atlantic, Southeast, South-Central, Midwest and Western
regions of the United States. Accordingly, the Company has grown its installed
base from approximately 54,000 machines to approximately 420,000 machines.
The acquisitions described below have enabled the Company to increase its
installed machine base, improve its EBITDA margins and expand its geographic
presence through the acquisition of operations in new regions:
<TABLE>
<CAPTION>
APPROXIMATE
HISTORICAL
ANNUAL DESCRIPTION OF
DATE ACQUISITION TARGET REVENUES OPERATIONS
----------------- ------------------------- ----------- -----------------------
(IN
MILLIONS)
<C> <C> <C> <S>
November 30, 1995 Solon Automated $100 Multi-regional operator
Services, Inc. providing Mid-Atlantic,
South-Central and
Southeast presence.
April 1, 1996 Allied Laundry 9 Regional operator
Equipment Company providing Midwest
presence.
January 8, 1997 Kwik Wash Laundries, L.P. 63 Multi-regional operator
providing expanded
South-Central presence
and operations in
laundromat business.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
HISTORICAL
ANNUAL
DATE ACQUISITION TARGET REVENUES DESCRIPTION OF OPERATIONS
-------------- ---------------------- ----------- ----------------------------
(IN
MILLIONS)
<C> <C> <C> <S>
March 14, 1997 Atlanta Washer & 2 Regional operator providing
Dryer Leasing, Inc. expanded presence in
Southeast and operations in
the machine rental market
for individual housing
units.
April 23, 1997 Reliable Holding Corp. 31 Regional operator providing
Western presence (California
and northern Mexico).
July 17, 1997 National Coin Laundry 16 Regional operator providing
Holding, Inc. expanded Midwest presence.
</TABLE>
On November 30, 1995, the Company acquired (the "Solon Acquisition") the
capital stock of Solon, a multi-regional route operator for $141.5 million.
The Solon Acquisition gave the Company an immediate and significant operating
presence in the Mid-Atlantic, South-Central and Southeast regions.
On April 1, 1996, Coinmach acquired (the "Allied Acquisition") substantially
all of the assets of Allied Laundry Equipment Company ("Allied"), a regional
route operator located in St. Louis, Missouri for $15.5 million in cash. The
Allied Acquisition provided the Company with a larger market presence in the
Midwest region.
On January 8, 1997, Coinmach acquired (the "Kwik Wash Acquisition") 100% of
the outstanding voting securities of the partners of Kwik Wash Laundries, L.P.
("Kwik Wash") for $125 million in cash and a $15 million promissory note (the
"9 7/8% Promissory Note"). The Kwik Wash Acquisition increased the Company's
presence in the South-Central region by enabling the Company to provide coin-
operated laundry equipment services to multi-family housing properties in
Texas, Louisiana, Arkansas and Oklahoma and to operate 150 retail laundromats
throughout Texas.
On March 14, 1997, Coinmach acquired (the "Appliance Warehouse Acquisition")
substantially all of the assets of Atlanta Washer & Dryer Leasing, Inc.
("Appliance Warehouse"), for approximately $6.3 million in cash and promissory
notes aggregating $1.2 million. The Appliance Warehouse Acquisition increased
the Company's presence in the Southeast region and expanded the company's
operations into the related machine rental market for individual housing units
providing an additional growth opportunity in a complementary market.
On April 23, 1997, Coinmach completed the acquisition and merger (the
"Reliable Acquisition") of Reliable Holding Corp. ("Reliable") and its
subsidiaries, Reliable Laundry Service Inc., Girard-Hopkins Acquisition Corp.,
Marquilados Automaticas S.A. de C.V., and Automatica S.A. de C.V.
(collectively, the "Reliable Entities") with and into the Company, for $44
million in cash. The Reliable Acquisition provided the Company with a strong
foothold in the California market and an entry into the northern Mexican
market.
On July 17, 1997, Coinmach acquired 100% of the outstanding voting
securities of National Coin Laundry Holding, Inc. ("National Coin"), and
National Laundry Equipment Company, an Ohio corporation ("NLEC") and the
assets of Whitmer Vend-O-Mat Laundry Services, Inc. ("Whitmer"). National Coin
is the parent of National Coin Laundry, Inc., an Ohio corporation ("NCL").
Coinmach acquired (the "National Coin Acquisition") National Coin, NLEC, NCL
and Whitmer (collectively, the "NCL Entities") for an aggregate purchase price
of approximately $19.0 million in cash. The National Coin Acquisition enabled
the Company to further expand its operations in the Mid-Atlantic, Southeast,
South-Central and Midwest regions by providing coin-operated laundry equipment
services to multi-family housing properties in the states of Ohio, Indiana,
Kentucky, Michigan, West Virginia, Pennsylvania, Georgia, Tennessee, Illinois
and Florida, as well as distributing exclusive lines of commercial coin and
non-coin laundry machines and parts, and selling service contracts.
30
<PAGE>
As part of its growth strategy, the Company continues to evaluate additional
acquisition opportunities. There can be no assurance however that, subsequent
to ongoing negotiations and due diligence reviews, the Company will complete
any such acquisitions.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes in the
Exchange Offer.
31
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 26, 1997 (i) on an actual basis and (ii) as adjusted, to give effect
to the issuance of the Private Notes and the application of the net proceeds
therefrom. This table should be read in conjunction with the unaudited pro
forma financial data and the combined and consolidated financial statements of
the Company and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 26, 1997
---------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of long-
term debt............................................... -- --
Long-term debt:
11 3/4% Series B/C Notes due 2005...................... $196,655 $296,655
Premium on 11 3/4% Series C Notes due 2005............. -- 9,875
Credit Facility........................................ 203,250 98,500
Other long-term debt................................... 2,411 2,411
-------- --------
Total long-term debt................................. 402,316 407,441
Stockholder's equity:
Additional paid-in capital............................. 41,391 41,391
Accumulated deficit.................................... (36,873) (36,873)
Less management loans.................................. (254) (254)
-------- --------
Total stockholder's equity........................... 4,264 4,264
-------- --------
Total capitalization..................................... $406,580 $411,705
======== ========
</TABLE>
32
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined balance sheet of the Company as
of September 26, 1997, gives effect to the issuance of the Private Notes and
the application of the proceeds therefrom as if such transaction occurred as
of September 26, 1997. The unaudited pro forma combined statements of
operations of the Company for the year ended March 28, 1997 and for the six
month interim period ended September 26, 1997 give effect to the issuance of
the Private Notes and the application of the proceeds therefrom and certain
acquisitions, including the Kwik Wash Acquisition, the Reliable Acquisition,
the Appliance Warehouse Acquisition and the National Coin Acquisition, in each
case, as if such transactions occurred on March 30, 1996.
The pro forma adjustments are based upon currently available information as
well as upon certain assumptions that management believes are reasonable. Each
of the above-mentioned acquisitions were accounted for as a purchase 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 had the foregoing transactions been consummated as of the
indicated dates. The unaudited pro forma combined financial statements should
be read in conjunction with the notes thereto and the historical consolidated
financial statements of the Company, together with the related notes thereto,
presented elsewhere in this Prospectus.
33
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 26, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMPANY PRO FORMA COMBINED
HISTORICAL ADJUSTMENTS(A) PRO FORMA
---------- -------------- ---------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents.................. $ 16,349 $ -- $ 16,349
Receivables, net........................... 8,633 -- 8,633
Inventories and prepaid expenses........... 16,184 -- 16,184
Advance rental payments.................... 47,540 -- 47,540
Property and equipment, net................ 130,348 -- 130,348
Contract rights, net....................... 217,371 -- 217,371
Goodwill, net.............................. 109,027 -- 109,027
Other assets............................... 13,735 4,375 18,110
-------- --------- --------
Total assets............................. $559,187 $ 4,375 $563,562
======== ========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accounts payable and accrued liabilities... $ 73,804 $ (750) $ 73,054
Deferred income taxes...................... 78,803 -- 78,803
11 3/4% Series B/C Notes due 2005.......... 196,655 100,000 296,655
Premium on 11 3/4% Series C Notes due 2005. -- 9,875 9,875
Credit facility............................ 203,250 (104,750) 98,500
Other long-term debt....................... 2,411 -- 2,411
-------- --------- --------
554,923 4,375 559,298
-------- --------- --------
STOCKHOLDER'S EQUITY:
Common stock and capital in excess of par
value..................................... 41,391 -- 41,391
Notes receivable from management........... (254) -- (254)
Accumulated (deficit) earnings............. (36,873) -- (36,873)
Total stockholder's equity................. 4,264 -- 4,264
-------- --------- --------
Total liabilities and stockholder's equity. $559,187 $ 4,375 $563,562
======== ========= ========
</TABLE>
- --------
(a) Reflects issuance of the Private Notes and the application of the net
proceeds therefrom. The Private Notes were issued at a premium of $9.875
million. Reflects payment of consent fee, underwriter fees and accrual of
transaction expenses for professional fees.
34
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 28, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
-----------
COMPANY ACQUIRED PURCHASE PRO FORMA
HISTORICAL BUSINESSES(A) ACCOUNTING OTHER COMBINED
---------- ------------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES................ $206,852 $100,061 $ -- $ -- $306,913
COSTS AND EXPENSES
Operating, general and
administrative
expenses............... 143,966 70,429 -- (5,254)(b) 209,141
Depreciation and
amortization........... 46,316 15,824 (2,070)(c) 71,973
11,506 (d)
397 (e)
Stock based compensation
charge................. 1,768 -- -- -- 1,768
-------- -------- ------- ------- --------
192,050 86,253 9,833 (5,254) 282,882
-------- -------- ------- ------- --------
Operating income........ 14,802 13,808 (9,833) 5,254 24,031
Interest expense, net... 27,417 2,879 -- 12,802 (f) 43,098
Other nonoperating
expenses............... -- 472 (626) -- (154)
-------- -------- ------- ------- --------
(Loss) income before
income taxes........... (12,615) 10,457 (9,207) (7,548) (18,913)
-------- -------- ------- ------- --------
Provision (benefit) for
income taxes........... (2,307) 280 (1,749)(g) 183 (g) (3,593)
-------- -------- ------- ------- --------
(Loss) income before
extraordinary item..... $(10,308) $ 10,177 $(7,458) $(7,731) $(15,320)
======== ======== ======= ======= ========
EBITDA (before stock
based compensation
charge)................ $ 62,886 $ 29,160 $ 97,926
======== ======== ========
</TABLE>
35
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 28, 1997
(IN THOUSANDS OF DOLLARS)
(a) Represents historical operating results of: (i) Kwik Wash for the period
prior to the Kwik Wash Acquisition; (ii) Appliance Warehouse for the
period prior to the Appliance Warehouse Acquisition; (iii) Reliable for
the year ended June 30, 1996; and (iv) the NCL Entities.
(b) Reflects anticipated cost savings directly related to the Kwik Wash
Acquisition of $3,750, the Reliable Acquisition of $1,014 and the National
Coin Acquisition of $490. Prior to completing an acquisition, the Company
formulates a cost 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 cost savings from the Reliable
Acquisition represents certain identifiable personnel costs savings
relating to the elimination of 13 employees of Reliable for $881 and
certain other identifiable cost savings for $133 resulting from the
reductions and consolidation of certain regional operations in California
and administrative functions in Roslyn, N.Y. pursuant to the cost savings
program. The cost savings from the National Coin Acquisition represents
certain identifiable personnel cost savings relating to the elimination of
6 employees of the NCL Entities for $205 and certain identifiable cost
savings for facility, and other costs for $285 resulting from the
reduction and consolidation of certain regional operations in Ohio and
Indiana and administrative functions in Roslyn, N.Y. pursuant to the cost
savings program. Each of the above-mentioned pro forma personnel and
facility cost savings are derived from actual historical amounts reflected
on the acquired entities 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 cost
savings have been recorded. If the Company's integration plans had
occurred on March 30, 1996, 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.
(c) Includes the decrease in depreciation expense of $959 and $1,137 for the
fixed assets of the Kwik Wash and the Reliable Entities, respectively,
primarily resulting from extending the lives of laundry equipment and
components from 5 or 7 years to 8 years, to be consistent with the
Company's accounting policy.
(d) Represents the amortization of contract rights and goodwill over 15 years,
related to the Kwik Wash Acquisition, the Reliable Acquisition, the
National Coin Acquisition and the Appliance Warehouse Acquisition.
(e) Represents the amortization of the covenants not to compete over 5 years,
related to the Kwik Wash Acquisition, the National Coin Acquisition and
the Appliance Warehouse Acquisition.
(f) The following table presents a reconciliation of pro forma interest
expense:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 28, 1997
--------------
<S> <C>
Historical combined interest expense....................... $30,296
-------
Add:
Interest on $142.3 million loans to finance the Kwik
Wash Acquisition...................................... 8,350
Interest on $44 million term loan to finance the
Reliable Acquisition.................................. 3,388
Interest on $16 million revolving loan to finance the
National Coin Acquisition............................. 1,152
Interest on $100 million Private Notes at 11.75%....... 11,750
Amortization of deferred financing costs on new debt:
Credit Facility...................................... 129
Private Notes........................................ 547
Deduct:
Interest on acquired businesses........................ (2,879)
Interest on $104.750 million term loans repaid by
proceeds of the sale of the Private Notes............. (8,651)
Amortization of premium of $9.875 million recorded on
the issuance of the Private Notes on new debt (8
years)................................................ (984)
-------
Pro forma adjustment..................................... 12,802
-------
Pro forma interest expense............................... $43,098
=======
</TABLE>
(g) Represents the income tax impact on purchase accounting adjustments and
other pro forma adjustments.
36
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 26, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------- COMBINED
COMPANY ACQUIRED PURCHASE PRO
HISTORICAL BUSINESS(A) ACCOUNTING OTHER FORMA
---------- ----------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
REVENUES................ $149,797 $7,186 $ -- $ -- $156,983
COSTS AND EXPENSES
Operating, general and
administrative
expenses............... 103,196 5,571 -- (1,162)(b) 107,605
Depreciation and
amortization........... 34,580 823 489 (c) -- 35,912
84 (d)
(64)(e)
Stock based compensation
charge................. 462 -- -- -- 462
-------- ------ ---------- ----------- --------
138,238 6,394 509 (1,162) 143,979
-------- ------ ---------- ----------- --------
Operating income........ 11,559 792 (509) 1,162 13,004
Interest expense, net... 21,173 153 -- 1,643 (f) 22,969
-------- ------ ---------- ----------- --------
Net (loss) income before
income taxes........... (9,614) 639 (509) (481) (9,965)
Provision (benefit) for
income tax............. (1,905) 77 (97)(g) 32 (g) (1,893)
-------- ------ ---------- ----------- --------
Net (loss) income....... $ (7,709) $ 562 $ (412) $ (513) $ (8,072)
======== ====== ========== =========== ========
EBITDA (before stock
based compensation
charge)................ $ 46,601 $1,615 $ 49,378
======== ====== ========
</TABLE>
37
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED STATEMENTS OF OPERATIONS
SIX MONTH ENDED SEPTEMBER 26, 1997
(IN THOUSANDS OF DOLLARS)
(a) Represents historical combined operating results of (i) Reliable for the
period prior to the Reliable Acquisition and (ii) the NCL Entities for the
period prior to the National Coin Acquisition.
(b) Reflects anticipated cost savings directly related to the Kwik Wash
Acquisition of $500, the Reliable Acquisition of $508 and the National
Coin Acquisition of $154. Prior to completing an acquisition, the Company
formulates a cost 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 6 employees of Kwik Wash for $230 and
certain identifiable cost savings for facility and other costs for $270
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 cost savings from the Reliable
Acquisition represents certain identifiable personnel costs savings
relating to the elimination of 13 employees of Reliable for $441 and
certain other identifiable cost savings for $67 resulting from the
reductions and consolidation of certain regional operations in California
and administrative functions in Roslyn, N.Y. pursuant to the cost savings
program. The cost savings from the National Coin Acquisition represents
certain identifiable personnel cost savings relating to the elimination
of 6 employees of the NCL Entities for $85 and certain identifiable cost
savings for facility, and other costs for $69 resulting from the
reduction and consolidation of certain regional operations in Ohio and
Indiana and administrative functions in Roslyn, N.Y. pursuant to the cost
savings program. Each of the above-mentioned pro forma personnel and
facility cost savings are derived from actual historical amounts
reflected on the acquired entities 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 cost savings have been recorded. If the Company's
integration plans had occurred on March 29, 1997, 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.
(c) Represents the amortization of contract rights and goodwill over 15
years, related to the Reliable Acquisition and the National Coin
Acquisition.
(d) Represents the amortization of the covenant not to compete over 5 years
related to the National Coin Acquisition.
(e) Represents the decrease in depreciation expense for the fixed assets of
the Reliable Entities primarily resulting from extending the lives of
laundry equipment and components from 5 or 7 years to 8 years to be
consistent with the Company's accounting policy.
(f) The following table presents a reconciliation of pro forma interest
expense:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 26, 1997
------------------
<S> <C>
Historical combined interest expense................ $21,326
Add:
Interest on $44 million term loan to finance the
Reliable Acquisition........................... 150
Interest on $16 million revolving loan to
finance the National Coin Acquisition.......... 410
Interest on $100 million Private Notes at
11.75%......................................... 5,875
Amortization of Deferred finance costs on new
debt:
Private Notes................................. 273
Deduct:
Interest on acquired businesses................. (153)
Interest on $104.750 million loans repaid by
proceeds of the Offering....................... (4,295)
Amortization of premium of $9.875 million
recorded on the issuance of the Private
Notes on new debt (8 years)................... (617)
-------
Pro forma adjustment.............................. 1,643
-------
Pro forma interest expense........................ $22,969
=======
</TABLE>
(g)Represents income tax impact on pro forma adjustments
38
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table presents consolidated summary historical financial data
of the Company for the year ended March 28, 1997 ("1997 fiscal year") for the
six month transition period ended March 29, 1996, for the period from April 5,
1995 to September 29, 1995, for the period from October 1, 1994 to April 4,
1995, and for each of the fiscal years ended the Friday closest to September
30, 1994, 1993 and 1992, and the unaudited summary historical financial data
for the six months ended September 26, 1997 and for the six months ended
September 27, 1996. All financial data therein are in thousands.
<TABLE>
<CAPTION>
SUCCESSOR/1/ PREDECESSOR/1/
--------------------------------------------------------------- ----------------------------------------------
YEAR ENDED
----------
SIX MONTH
SIX SIX TRANSITION APRIL 5, OCTOBER 1,
MONTHS MONTHS YEAR PERIOD 1995 1994
ENDED ENDED ENDED ENDED TO TO
SEPTEMBER 26, SEPTEMBER 27, MARCH 28, MARCH 29, SEPTEMBER 29, APRIL 4, SEPTEMBER 30, OCTOBER 1, OCTOBER 2,
1997 1996 1997 1996 1995 1995 1994 1993 1992/2/
------------- ------------- --------- ---------- ------------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
DATA:
Revenues........ $ 149,797 $ 94,446 $206,852 $ 89,070 $89,719 $52,207 $104,553 $104,888 $104,311
Laundry
operating
expenses....... 100,310 63,596 139,446 60,536 62,905 33,165 66,418 67,420 67,138
General and ad-
ministrative
expenses....... 2,886 2,092 4,520 2,024 2,458 1,539 2,839 2,576 3,125
Depreciation and
amortization... 34,580 20,192 46,316 18,212 18,423 10,304 21,347 21,002 20,745
Stock based com-
pensation
charge......... 462 1,460 1,768 -- -- -- -- -- --
Restructuring
expenses....... -- -- -- -- 2,200 -- -- -- --
--------- -------- -------- -------- ------- ------- -------- -------- --------
Operating in-
come........... 11,559 7,106 14,802 8,298 3,733 7,199 13,949 13,890 13,303
Interest ex-
pense.......... 21,173 12,345 27,417 11,830 11,541 8,928 18,105 17,453 15,857
Income taxes
(benefits)..... (1,905) (1,600) (2,307) (998) (1,862) 50 2,762 (768) (416)
--------- -------- -------- -------- ------- ------- -------- -------- --------
Loss before ex-
traordinary
item........... (7,709) (3,639) (10,308) (2,534) (5,946) (1,779) (6,918) (2,795) (2,138)
Extraordinary
loss (net of
tax)/3/........ -- -- (296) (8,925) -- (848) -- -- (833)
--------- -------- -------- -------- ------- ------- -------- -------- --------
Net loss........ $ (7,709) $ (3,639) $(10,604) $(11,459) $(5,946) $(2,627) $ (6,918) $ (2,795) $ (2,971)
========= ======== ======== ======== ======= ======= ======== ======== ========
BALANCE SHEET
DATA (AT END OF
PERIOD):
Property and
equipment, net. $ 130,348 $ 93,819 $112,116 $ 82,699 $80,706 -- $ 48,727 $ 50,593 $ 50,679
Total assets.... 559,187 251,929 467,550 248,167 239,943 -- 143,589 150,402 155,827
Total debt...... 402,316 203,909 329,278 202,765 176,415 -- 128,487 128,299 128,737
Stockholder's
equity
(deficit)...... 4,264 (4,349) 11,973 (2,148) 13,783 -- (8,721) (1,636) 1,004
FINANCIAL INFOR-
MATION AND
OTHER DATA:
Cash flow from
operating
activities..... $ 22,358 $ 15,884 $ 34,305 $ 12,100 $12,639 $10,216 $ 17,914 $ 16,547 $ 11,842
Cash flow used
for investing
activities..... 91,900 35,050 196,698 14,162 13,114 6,537 16,763 18,500 16,168
Cash flow from
(used for)
financing
activities..... 75,781 (14,637) 152,780 12,503 (1,017) (1,068) (270) (636) 10,272
EBITDA/4/....... 46,601 28,758 62,886 26,510 24,356 17,503 35,296 34,892 34,048
Capital expendi-
tures/5/....... 25,600 17,427 41,588 14,219 13,119 6,944 16,779 18,556 16,563
Ratio of earn-
ings to fixed
charges/6/..... -- -- -- -- -- -- -- -- --
</TABLE>
- -------
(1) On November 30, 1995, Solon completed the Merger with TCC, which
transaction was accounted for in a manner similar to a pooling of
interests. As a result of the common investor group control over both
entities, the term "Successor" will refer to such common control periods;
that is, the period in time after the Solon Acquisition, and includes the
historical results of Solon which have been restated to include the
pooling of interests of TCC. The term "Predecessor" refers to the period
in time prior to the Solon Acquisition. Successor is presented on a
different basis of accounting and, therefore, is not comparable to the
Predecessor. Historical financial data for Solon (for period prior to
April 5, 1995) are contained in the financial statements and related notes
thereto presented elsewhere in this Prospectus.
(2) Fiscal year 1992 was a 53-week year. All other fiscal years were 52-week
years.
(3) Represents extraordinary loss on the early extinguishment of debt on
February 14, 1997 and November 30, 1995, on the change in control in the
Solon Acquisition on April 5, 1995, and on the early extinguishment of
debt in 1992.
(4) EBITDA represents earnings from continuing operations before deductions
for interest, income taxes, depreciation and amortization. EBITDA for the
period ending March 28, 1997 and the six months ended September 26, 1997
and September 27, 1996 is before the deduction for stock based
compensation charges, and EBITDA for the period ending September 29, 1995
is before the deduction for restructuring costs. EBITDA is used by
management and certain investors as an indication of a company's ability
to service existing debt, to sustain potential future increases in debt
and to satisfy capital requirements. However, EBITDA is not intended to
represent cash flows for the period, nor has it been presented as an
alternative to either (a) operating income (as determined by generally
accepted accounting principles) as an indicator of operating performance
or (b) cash flows from operating, investing and financing activities (as
determined by generally accepted accounting principles) as a measure of
liquidity. Given that EBITDA is not a measurement determined in accordance
with generally accepted accounting principles and is thus susceptible to
varying calculations, EBITDA as presented may not be comparable to other
similarly titled measures of other companies.
(5) Capital expenditures include additions to property and equipment and
advance rental payments to location owners.
(6) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" include income (loss) before other expense (income), income
taxes and extraordinary gain plus fixed charges. "Fixed charges" include
interest expense, amortization expense relating to the issuance of any
indebtedness and such portion of operating lease rentals estimated to
represent the interest factor of such rentals. Earnings did not cover
fixed charges during these periods by the following amounts: Six Months
ended September 26, 1997 - $9,614, Six Months ended September 27, 1996 -
$5,239, Year ended March 28, 1997 - $12,615, Six Month Transition Period
ended March 29, 1996 - $3,532, Period April 5, 1995 to September 29,
1995 - $7,808, October 1, 1994 to April 4, 1995 - $1,729, Year ended
September 30, 1994 - $4,156, Year ended October 1, 1993 - $3,563, Year
ended October 2, 1992 - $2,554.
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's primary financial objective is to increase its EBITDA, which
is a source of funds to service indebtedness and for investment in both
continued internal growth and acquisitions. In the 1997 fiscal year and the
six months ended September 26, 1997, the Company experienced net losses. Such
net losses are attributable in part to significant non-cash charges associated
with the Company's execution of its business strategy, namely, (i) high levels
of depreciation and contract rights amortization expenses related to the
addition of new machines and customers and (ii) increases in goodwill
amortization associated with acquisitions accounted for under the purchase
method of accounting.
The Company is principally engaged in the business of supplying outsourced
coin-operated laundry equipment services to multi-family housing properties.
The Company owns and operates approximately 420,000 coin-operated washers and
dryers in approximately 42,000 multi-family housing properties on routes
throughout the United States and 151 retail laundromats located throughout
Texas.
The Company provides outsourced, coin-operated laundry equipment services to
locations by leasing laundry rooms from building owners and property
management companies, typically on a long-term, renewable basis. In return for
the exclusive right to provide these services, most of the Company's contracts
provide for commission payments to the location owners. Commission expense
(also referred to as rent expense), the Company's single largest expense item,
is included in laundry operating expenses and represents payments to location
owners. Commissions may be fixed amounts or percentages of revenues and are
generally paid monthly. Also included in laundry operating expenses are the
costs of servicing and collections in the route business, including, payroll,
parts, vehicles and other related items, the cost of sales associated with
Super Laundry and certain expenses related to the operation of retail
laundromats.
In addition to commission payments, many of the Company's leases require the
Company to make advance rental payments to the location owners. These advance
payments are capitalized and amortized over the life of the applicable lease.
Other revenue sources for the Company include (i) leasing laundry equipment
and other household appliances and electronic items to corporate relocation
entities, property owners, managers of multi-family housing properties and
individuals (approximately $1.5 million for the six months ended September 26,
1997); (ii) operating, maintaining and servicing retail laundromats
(approximately $10.5 million for the six months ended September 26, 1997); and
(iii) constructing complete turnkey retail laundromats, retrofitting existing
retail laundromats, distributing exclusive lines of commercial coin and non-
coin operated machines and parts, and selling service contracts (approximately
$12.3 million for the six months ended September 26, 1997).
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statement of operations data and EBITDA margin of the Company:
<TABLE>
<CAPTION>
COMBINED
TWELVE MONTHS FISCAL YEAR SIX MONTHS ENDED
ENDED ENDED ---------------------------
MARCH 29, MARCH 28, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1996 1997
------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues................. 100.0% 100.0% 100.0% 100.0%
Laundry operating ex-
penses.................. 69.0 67.4 67.3 67.0
General and administra-
tive expenses........... 2.5 2.2 2.3 1.9
Depreciation and amorti-
zation.................. 20.5 22.4 21.4 23.1
Operating income......... 6.7 7.2 7.5 7.7
Interest expense, net.... 13.1 13.3 13.1 14.1
EBITDA margin............ 28.5 30.4 30.4 31.1
</TABLE>
40
<PAGE>
The following discussion and analysis should be read in conjunction with the
condensed consolidated financial statements and related notes thereto included
elsewhere in this Prospectus.
SIX MONTH PERIOD ENDED SEPTEMBER 26, 1997 COMPARED TO THE SIX MONTH PERIOD
ENDED SEPTEMBER 27, 1996
Revenues increased by approximately 59% for the six month period ended
September 26, 1997, as compared to the prior year's corresponding period. The
improvement in revenues for the six month period resulted primarily from the
Kwik Wash Acquisition, the Reliable Acquisition and the National Coin
Acquisition. The Company's acquisition strategy involves the complete
integration of its acquired companies. The Company estimates that
approximately $50.0 million of its revenue increase is the combined result of
the Kwik Wash Acquisition, the Reliable Acquisition and the National Coin
Acquisition based on the historical revenue of such acquired companies. In
addition, during such six month period, the Company's installed base increased
by approximately 9,400 machines from internal growth (excluding the machines
added from the Reliable Acquisition and the National Coin Acquisition) as
compared to an increase of approximately 4,200 machines during the prior
year's corresponding period.
Laundry operating expenses increased by approximately 58% for the six month
period ended September 26, 1997, as compared to the prior year's corresponding
periods. The increase was due primarily to an increase in laundry operating
expenses related to the Kwik Wash Acquisition, the Reliable Acquisition and
the National Coin Acquisition.
General and administrative expenses increased by approximately $0.8 million,
for the six month period ended September 26, 1997, as compared to the prior
year's corresponding period. The increase for the period was primarily due to
various expenses associated with (i) costs relating to the Company's
acquisition strategy, including legal and financial due diligence
investigations of potential targets and related costs, (ii) the development
and implementation of procedures for the management of investor relations, and
(iii) systems development and refinement relating to the integration of prior
acquisitions.
Depreciation and amortization increased by approximately 71% for the six
month period ended September 26, 1997, as compared to the prior year's
corresponding period, due primarily to the contract rights and goodwill
associated with the Kwik Wash Acquisition, the Reliable Acquisition and the
National Coin Acquisition as well as an increase in capital expenditures for
the installed base of machines. As a result of the Company's acquisition
activity since early 1995, the Company incurred approximately $18.9 million in
non-cash depreciation and amortization charges for the six months ended
September 26, 1997 as compared to $11.7 million for the prior year's
corresponding period.
In July 1996, Coinmach Laundry issued in privately negotiated transactions,
79,029 shares of its Class B common stock to certain members of management.
Coinmach Laundry recorded a stock-based compensation charge of approximately
$887,000 attributable to the issuance of such stock. In addition, in July 1996
approximately $83,000 of receivables relating to loans to management in
connection with prior purchases of Coinmach Laundry Common Stock were forgiven
and have been recorded as a stock-based compensation charge.
During July and September 1996, Coinmach Laundry granted nonqualified
options (the "Options") to purchase Coinmach Laundry Common Stock, to certain
members of management and certain other individuals, which enable such persons
to purchase shares of Coinmach Laundry Common Stock at a 15% discount to the
initial offering price of the Coinmach Laundry Common Stock. With respect to
the Options granted to its employees, the Company will record such discount as
a stock-based compensation charge over the applicable four year vesting
period.
In September 1997, Coinmach Laundry granted non-qualified options (the "1997
Options") to purchase an aggregate of 200,000 shares of Coinmach Laundry
Common Stock to certain members of management at an exercise price of $11.90
per share of Common Stock. The Company will record the difference between the
exercise price of the 1997 Options and the fair market value of the Coinmach
Laundry Common Stock on the date of grant as a stock-based compensation charge
over the applicable four year vesting period.
41
<PAGE>
For the six months ended September 26, 1997 and September 27, 1996, the
Company recorded a stock-based compensation charge of approximately $462,000
and $470,000 respectively, relating to the Options and the 1997 Options.
Operating income margins were approximately 8% for the six month period
ended September 26, 1997, as compared to approximately 7% for the six month
period ended September 27, 1996.
Interest expense, net increased by approximately 72% for the six month
period ended September 26, 1997, as compared to the prior year's corresponding
period, due primarily to increased interest payable under the Credit Facility
resulting from increased borrowings to fund acquisitions.
EBITDA (earnings before deductions for interest, income taxes, depreciation
and amortization), before deduction for stock-based compensation charges, was
approximately $46.6 million for the six months ended September 26, 1997, as
compared to approximately $28.8 million for the corresponding period in 1996,
representing an improvement of approximately 62%. EBITDA margin improved to
approximately 31.1% for the six months ended September 26, 1997, compared to
approximately 30.4% for the prior year's corresponding period.
The Company's effective income tax rate differs from the amount computed by
applying the U.S. federal statutory rate to loss before income taxes as a
result of state taxes and permanent book/tax difference (largely goodwill and
certain stock compensation expenses).
FISCAL YEAR ENDED MARCH 28, 1997 COMPARED TO THE TWELVE MONTH PERIOD ENDED
MARCH 29, 1996
The discussion below should be read in conjunction with the following table,
which presents a combined twelve month fiscal period, comprised of the six
month transition period ended March 29, 1996 and the period from April 5, 1995
to September 29, 1995 with the combined periods to be referred to as the prior
twelve month period (in thousands):
<TABLE>
<CAPTION>
YEAR SIX MONTH PERIOD
ENDED TRANSITION PERIOD APRIL 5, 1995 TO
MARCH ENDED MARCH 29, SEPTEMBER 29,
28, 1997 1996 1995 COMBINED
-------- ----------------- ---------------- --------
<S> <C> <C> <C> <C>
Revenues................ $206,852 $ 89,070 $89,719 $178,789
Laundry operating ex-
penses................. 139,446 60,536 62,905 123,441
General and administra-
tive expenses.......... 4,520 2,024 2,458 4,482
Depreciation and amorti-
zation................. 46,316 18,212 18,423 36,635
Stock-based compensation
charge................. 1,768 -- -- --
Restructuring expenses.. -- -- 2,200 2,200
-------- -------- ------- --------
Operating income........ 14,802 8,298 3,733 12,031
Interest expense, net... 27,417 11,830 11,541 23,371
-------- -------- ------- --------
Loss before extraordi-
nary items and income
taxes.................. (12,615) (3,532) (7,808) (11,340)
Income tax (benefit) ex-
pense.................. (2,307) (998) (1,862) (2,860)
-------- -------- ------- --------
Loss before extraordi-
nary items............. (10,308) (2,534) (5,946) (8,480)
Extraordinary items, net
of tax................. (296) (8,925) -- (8,925)
-------- -------- ------- --------
Net loss................ $(10,604) $(11,459) $(5,946) $(17,405)
======== ======== ======= ========
</TABLE>
Revenues increased by approximately 16% for the 1997 fiscal year as compared
to the prior fiscal year. The improvement in revenues was primarily
attributable to increased route revenues resulting from internal expansion,
the Allied Acquisition, the Kwik Wash Acquisition and an increase in revenues
from Super Laundry. The Company's acquisition strategy includes the complete
integration of its acquired companies. The Company
42
<PAGE>
estimates that approximately $24.0 million of its revenue increase is the
combined result of the Allied Acquisition and the Kwik Wash Acquisition based
on the historical revenue results of such acquired companies. During the 1997
Fiscal Year, the Company's installed base increased by approximately 7,500
machines from internal growth due primarily to the elimination of capital
constraints existing at Solon prior to the Merger, as compared to a reduction
of approximately 750 machines during the twelve months ended March 29, 1996.
Laundry operating expenses increased by approximately 13% for the 1997
fiscal year, as compared to the prior twelve month period. The increase was
due primarily to the Allied Acquisition and the Kwik Wash Acquisition as well
as to an increase in the cost of sales related to Super Laundry's increased
sales volume. Such increase in laundry operating expenses was partially offset
by the implementation of cost savings programs in the Company's field
operations and the consolidation of certain operating regions.
General and administrative expenses increased slightly for the 1997 fiscal
year as compared to the prior twelve month period. The increase for the period
was due to expenses associated with (i) costs relating to the Company's
acquisition strategy, including legal and financial due diligence
investigations of potential targets and related costs; (ii) the development
and implementation of procedures for the management of investor relations; and
(iii) systems development and refinement relating to the integration of prior
acquisitions. This increase includes a reduction of certain expenses resulting
from the consolidation of the Company's corporate staff into its existing
facility in Roslyn, New York on September 29, 1995.
Depreciation and amortization increased by approximately 27% for the 1997
fiscal year, as compared to the prior twelve month period, due primarily to
the Allied Acquisition and the Kwik Wash Acquisition, as well as an increase
in capital expenditures for the installed base of machines resulting from the
elimination of capital constraints existing at Solon prior to the Merger. As a
result of the Company's acquisition activity since early 1995, the Company
incurred approximately $26.8 million in non-cash purchase accounting related
depreciation and amortization charges for the 1997 fiscal year as compared to
$23.6 million for the prior twelve month period.
The Company incurred restructuring costs of approximately $2.2 million
during the twelve months ended March 29, 1996 to cover severance obligations
to certain personnel, costs to relocate certain corporate functions to Roslyn,
New York, systems integration costs, and expenses related to the consolidation
of certain of its regional offices, in each case, as a result of the Solon
Acquisition and the Merger.
The extraordinary items for the 1997 fiscal year consisted of costs related
to the extinguishment of debt in February 1997 and the termination of the then
existing revolving credit facility. The extraordinary items for the six month
period ending March 29, 1996 consisted of costs relating to the extinguishment
of debt in connection with a debt refinancing in November 1995 (the
"Refinancing").
In July 1996, Coinmach Laundry issued, in privately negotiated transactions,
79,029 shares of its Class B common stock to certain members of management.
The Company recorded a stock-based compensation charge of approximately
$887,000 attributable to the issuance of such stock. In addition,
approximately $83,000 of receivables relating to loans to management in
connection with prior purchases of Coinmach Laundry Common Stock were forgiven
and have been recorded as a stock-based compensation charge.
During July and September 1996, Coinmach Laundry granted Options to
management and certain other individuals, which enable such persons to
purchase shares of Coinmach Laundry Common Stock at a 15% discount to the
initial offering price of the Coinmach Laundry Common Stock. With respect to
the Options granted to its employees, the Company will record such discount as
a stock-based compensation charge over the applicable four year vesting
period. During the 1997 fiscal year, the Company recorded a stock-based
compensation charge of approximately $798,000 relating to such Options.
The Company's operating income margin, approximately 7% of revenues for the
1997 fiscal year, was equal to that for the twelve months ended March 29,
1996.
Interest expense, net, increased by approximately 17% for the 1997 fiscal
year as compared to the prior year due primarily to the Refinancing in
November 1995 as well as entering into the Credit Agreement in January 1997.
Partially offsetting this increase in interest expense was the decrease in the
effective interest rate applied against outstanding borrowings as the result
of the Refinancing, as well as interest income earned on excess cash balances
generated from operations.
43
<PAGE>
EBITDA was approximately $62.9 million (before deduction for stock-based
compensation charges) for the 1997 fiscal year as compared to approximately
$50.9 million (before deduction for restructuring costs) for the prior twelve
month period, representing an improvement of approximately 24%. EBITDA margin
improved to approximately 30% of revenues for the current year compared to
approximately 28% of revenues for the prior year.
SIX MONTH TRANSITION PERIOD ENDED MARCH 29, 1996 COMPARED TO THE PERIOD
OCTOBER 1, 1994 TO APRIL 4, 1995
Prior to the merger of Solon and TCC, Solon's fiscal year was the fifty-two
or fifty-three week period ended on the Friday nearest September 30. Effective
upon the Merger, the Company changed its fiscal year end to the Friday nearest
to March 31.
This discussion below should be read in conjunction with the following table
which combines the operating results of Solon and TCC for the period October
1, 1994 to April 4, 1995 (in thousands):
<TABLE>
<CAPTION>
PERIOD OCTOBER 1, 1994
TO
APRIL 4, 1995
--------------------------
SIX MONTH
TRANSITION
PERIOD ENDED
MARCH 29, 1996 (PREDECESSOR)(1),(2)
(SUCCESSOR)(1) TCC SOLON COMBINED
-------------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenues............................. $ 89,070 $35,789 $52,207 $87,996
Laundry operating expenses........... 60,536 28,253 33,165 61,418
General and administrative expenses.. 2,024 1,345 1,539 2,884
Depreciation and amortization........ 18,212 6,009 10.304 16,313
-------- ------- ------- -------
Operating income..................... 8,298 182 7,199 7,381
Interest expense, net................ 11,830 2,464 8,928 11,392
Other expense........................ -- 1,341 -- 1,341
-------- ------- ------- -------
Loss before extraordinary item and
income taxes........................ (3,532) (3,623) (1,729) (5,352)
Income tax (benefit) expense......... (998) 4 50 54
-------- ------- ------- -------
Loss before extraordinary item....... (2,534) (3,627) (1,779) (5,406)
Extraordinary item, net of tax....... (8,925) -- (848) (848)
-------- ------- ------- -------
Net loss............................. $(11,459) $(3,627) $(2,627) $(6,254)
======== ======= ======= =======
</TABLE>
- --------
(1) The term "Predecessor" refers to the period in time prior to the Solon
Acquisition. The term "Successor" refers to the period in time after the
Solon Acquisition and includes the historical results of Solon which have
been restated to include the pooling of interests of TCC. Successor is
presented on a different basis of accounting and therefore, is not
comparable to the Predecessor.
(2) Certain reclassifications have been made to conform to the 1996
presentation.
Revenues for the six month transition period ended March 29, 1996 were
approximately 1.2% higher than combined revenues for the period October 1,
1994 to April 4, 1995. The improvement in revenues consisted primarily of
increased revenues from Super Laundry of approximately $2.5 million. Such
improvement was partially offset by a decrease of approximately $1.4 million
in revenues from the route business. The average machine base for the six
month transition period ended March 29, 1996 was approximately 1.4% lower than
the prior period, primarily as the result of constraints on available capital
prior to the Merger. From September 30, 1995, through March 29, 1996, the
Company successfully implemented a program to maintain its base of installed
machines and eliminate any additional erosion. The effect of the decreased
number of machines was partially offset by increased revenue per machine from
price increases.
Laundry operating expenses decreased by approximately 1.4% primarily as the
result of decreased expenses of approximately $0.8 million related to
implementation of cost savings programs in the Company's field operations and
a decrease in commission expense of approximately 2.3%. These decreases were
partially offset by an increase in the cost of sales related to the increased
volume of Super Laundry.
44
<PAGE>
General and administrative expenses decreased by $.9 million or 29.8%,
primarily due to the consolidation of corporate staff by closing Solon's
Philadelphia, Pennsylvania office and combining its operations into the
Company's existing facility in Roslyn, New York on September 29, 1995.
Depreciation and amortization increased by approximately $1.9 million or
11.6% due primarily to purchase accounting adjustments resulting from the
Solon Acquisition.
Interest expense, net increased by approximately 3.8%. Approximately $1.8
million of such increase was due primarily to the increased debt level that
resulted from the Refinancing. Offsetting this increase is approximately $0.8
million in interest expense due to the decrease in the effective interest rate
as the result of the Refinancing. The increased debt resulted in an excess
cash balance, which excess is contemplated to be used for working capital
purposes and for future acquisition opportunities.
The extraordinary item for the six month transition period ending March 29,
1996, consisted of costs related to the extinguishment of debt in connection
with the Refinancing. The extraordinary item for the six months ended March
31, 1995, consist of costs related to the change in control in connection with
the Solon Acquisition.
PERIOD APRIL 5, 1995 TO SEPTEMBER 29, 1995 COMPARED TO SIX MONTHS ENDED
SEPTEMBER 30, 1994
The discussion below should be read in conjunction with the following table
which combines the operating results of Solon and TCC for the period April 5,
1995 to September 29, 1995 (in thousands):
<TABLE>
<CAPTION>
PERIOD
APRIL 5, 1995 TO SIX MONTHS ENDED
SEPTEMBER 29, 1995 SEPTEMBER 30, 1994
(SUCCESSOR)(1) --------------------------
------------------ (PREDECESSOR)(1),(2)
TCC SOLON COMBINED
------- ------- --------
<S> <C> <C> <C> <C>
Revenues......................... $89,719 $37,154 $51,577 $88,731
Laundry operating expenses....... 62,905 28,576 32,337 60,913
General and administrative ex-
penses.......................... 2,458 1,123 1,444 2,567
Depreciation and amortization.... 18,423 7,576 10,966 18,542
Restructuring costs.............. 2,200 -- -- --
------- ------- ------- -------
Operating income (loss).......... 3,733 (121) 6,830 6,709
Interest expense, net............ 11,541 2,214 9,053 11,267
------- ------- ------- -------
Loss before income taxes......... (7,808) (2,335) (2,223) (4,558)
Income tax (benefit) expense..... (1,862) 24 3,208 3,232
------- ------- ------- -------
Net Loss......................... $(5,946) $(2,359) $(5,431) $(7,790)
======= ======= ======= =======
</TABLE>
- --------
(1) The term "Predecessor" refers to the period in time prior to the Solon
Acquisition. The term "Successor" refers to the period in time after the
Solon Acquisition and includes the historical results of Solon which have
been restated to include the pooling of interests of TCC. Successor is
presented on a different basis of accounting and therefore, is not
comparable to the Predecessor.
(2) Certain reclassifications have been made to conform to the 1995
presentation.
Revenues for the period April 5, 1995 to September 29, 1995 were
approximately 1.1% higher than combined revenues for the prior year's
corresponding period. The improvement in revenues consisted primarily of
increased revenues from Super Laundry of approximately $1.3 million. Such
improvement was partially offset by a decrease of approximately $0.3 million
in revenues from routes, primarily due to a 2.0% decline in the average number
of laundry machines on location, due to constraints on capital prior to the
Merger. The effect of the decreased number of machines was partially offset by
increased revenue per machine of approximately 1.6% primarily due to price
increases.
Laundry operating expenses increased by approximately 3.3% due primarily to
a $1.0 million increase in the cost of sales related to the increase in Super
Laundry revenue. The remaining increase is primarily the result of the method
of accounting for installation costs applied in the Successor period. This
increase is the result of
45
<PAGE>
increased cost of sales related to the increased volume of Super Laundry. In
addition, the Company's commission expense decreased by approximately 1.0%.
General and administrative expenses decreased by approximately $0.1 million,
or 4.2% primarily due to a decrease in the corporate staff.
The Company provided for restructuring costs of approximately $2.2 million
to cover severance payments to certain of Solon's management, administrative
and regional personnel, costs to relocate Solon's financial and administrative
functions to Roslyn, New York, costs to integrate certain financial and
operating systems, and costs related to the consolidation of certain of
Solon's regional offices.
Interest expense, net increased by approximately 2.4% primarily due to an
increase in the interest rate on TCC's revolver, which was based on the prime
lending rate.
FISCAL YEAR ENDED SEPTEMBER 29, 1995 COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1994
The discussion should be read in conjunction with the following table which
combines the Predecessor and Successor periods for fiscal 1995 (in thousands).
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 29, 1995
-------------------------------------
APRIL 5, OCTOBER 1, FISCAL YEAR
1995 TO 1994 TO ENDED
SEPTEMBER 29, APRIL 4, SEPTEMBER 30,
1995 1995 TOTAL 1994
------------- -------------- -------- ------------------
SUCCESSOR(1) PREDECESSOR(1) PREDECESSOR(1),(2)
<S> <C> <C> <C> <C>
Revenues................ $89,719 $52,207 $141,926 $104,553
Laundry operating
expenses............... 62,905 33,165 96,070 66,527
Depreciation and
amortization........... 18,423 10,304 28,727 21,347
General and
administrative
expenses............... 2,458 1,539 3,997 2,839
Gain on sale of
equipment.............. -- -- -- (109)
Restructuring costs..... 2,200 -- 2,200 --
------- ------- -------- --------
Operating income........ 3,733 7,199 10,932 13,949
Interest expense, net... 11,541 8,928 20,469 18,105
------- ------- -------- --------
Loss before income taxes
and extraordinary
item................... (7,808) (1,729) (9,537) (4,156)
------- ------- -------- --------
Provision (benefit) for
income taxes:
Currently payable....... 420 270 690 200
Deferred................ (2,282) (220) (2,502) 2,562
------- ------- -------- --------
(1,862) 50 (1,812) 2,762
------- ------- -------- --------
Loss before
extraordinary item..... (5,946) (1,779) (7,725) (6,918)
Extraordinary item, net
of income taxes of $0.. -- 848 848 --
------- ------- -------- --------
Net loss................ $(5,946) $(2,627) $ (8,573) $ (6,918)
======= ======= ======== ========
</TABLE>
- --------
(1) The term "Predecessor" refers to the period in time prior to the Solon
Acquisition. The term "Successor" refers to the period in time after the
Solon Acquisition and includes the historical results of Solon which have
been restated to include the pooling of interests of TCC. Successor is
presented on a different basis of accounting and therefore, is not
comparable to the Predecessor.
(2) Certain reclassifications have been made to conform to the 1995
presentation.
Excluding revenues of TCC of $38.5 million for the Successor period,
revenues of $103.4 million for fiscal 1995 were $1.1 million or 1.1% lower
than revenues for fiscal 1994. A favorable change of approximately $1.8
million in revenues resulting from increases in revenue per machine was offset
by approximately $2.9 million in losses caused by a decline in the average
number of laundry machines on location. The decline in the average number of
laundry machines on location was primarily due to the lack of available
capital prior to the Merger. Revenue per machines rose slightly primarily
because of price increases and improved occupancy levels in the Southeast and
South-Central regions.
46
<PAGE>
Excluding laundry operating expenses of TCC of $29.8 million for the
Successor period, laundry operating expenses of $66.3 million for fiscal 1995
were $0.2 million or 0.3% lower than laundry operating expenses for fiscal
1994. Commissions expense decreased by approximately $1.0 million due to lower
revenues and a reduction in the average commissions rate from 44.7% of
revenues during fiscal 1994 to 44.1% of revenues during fiscal 1995. The
decrease in the commissions rate was primarily attributable to Solon's ongoing
commission control programs and a shift away from higher commission locations
primarily in the Washington, D.C. Metropolitan area. Laundry operating
expenses other than commissions expense rose by approximately $0.8 million in
fiscal 1995 compared to fiscal 1994 primarily due to inflationary increases.
Excluding depreciation and amortization expenses of TCC of $5.5 million for
the Successor period, depreciation and amortization increased by $1.9 million
or 8.6% for fiscal 1995, compared to the prior year. The increase was due
primarily to purchase accounting adjustments resulting from the Solon
Acquisition.
Excluding general and administrative expenses of TCC of $0.9 million for the
Successor period, general and administrative expenses of $3.1 million for
fiscal 1995 were $0.3 million or 10.7% higher than such expenses for fiscal
1994. General and administrative expenses include a charge of approximately
$0.3 million for the cost of a severance agreement with the former chief
executive officer of Solon.
Solon provided for one-time restructuring costs of approximately $2.2
million to cover severance payments to certain of Solon's management,
administrative and regional personnel, costs to relocate Solon's financial and
administrative functions to Roslyn, New York, costs to integrate certain
financial and operating systems, and costs related to the consolidation of
certain of Solon's regional offices.
Excluding interest expense of TCC of $2.7 million for the Successor period,
interest expense for fiscal 1995 decreased by $0.3 million or 1.7% compared to
the prior year primarily due to an increase in interest income, and to a
lesser extent, a decrease in interest caused by a repurchase and retirement of
$1.0 million of Solon's 12 3/4% Senior Notes due 2001 in November 1994.
Solon's income tax benefit was $1.8 million in fiscal 1995 compared to a tax
provision of $2.8 million for fiscal 1994. As further discussed in the
consolidated financial statements, the tax provision for fiscal 1994 included
a $3.7 million charge to establish a valuation allowance for previously
recorded deferred tax assets. The deferred tax asset of $2.0 million recorded
in the Successor period does not reflect a valuation allowance because the
loss can be utilized against the deferred tax liabilities in the carryforward
periods. In addition to this benefit, Solon's effective income tax rate
differs from the amount computed by applying the U.S. federal statutory rate
to loss before income taxes as a result of state taxes and permanent book/tax
differences.
Solon incurred costs aggregating $0.8 million in connection with the Solon
Acquisition, including a total of $0.4 million in lump sum payments made to
fourteen management employees pursuant to certain contractual arrangements
relating to the acquisition. The total costs have been reflected as an
extraordinary item in the financial statements.
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Effective March 30, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121"), which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. FAS 121 also addresses the accounting treatment for long-
lived assets that are expected to be disposed of. The effect of the Company's
adoption of FAS 121 did not have an effect on the Company's results of
operations or financial condition for the 1997 fiscal year.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"). FAS 123
establishes financial accounting and reporting standards for stock-based
employee compensation plans. FAS 123 is effective for transactions entered
into in fiscal years beginning after December 15, 1995. The Company has
elected to account for stock-based compensation awards pursuant to the
provisions of Accounting Principles Board Opinion No. 25, as permitted by FAS
123.
47
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to have substantial indebtedness and debt service
requirements. On September 26, 1997, the Company had outstanding long-term debt
of approximately $402.3 million and stockholder's equity of approximately $4.3
million. As of November 1, 1997, the Company had approximately $98.5 million
outstanding under the Credit Facility.
FINANCING ACTIVITIES
Coinmach Senior Notes. In November 1995, Coinmach issued 11 3/4% Senior Notes
due 2005 (the "Series A Notes") pursuant to the terms of an indenture, between
Coinmach and State Street Bank and Trust Company (formerly Shawmut Bank
Connecticut, National Association) (as amended, the "Series B Indenture") in an
aggregate principal amount of $196,655,000. On March 28, 1996, Coinmach
consummated a registered exchange offer, pursuant to which all issued and
outstanding Series A Notes were exchanged for Series B Notes.
On October 8, 1997, the Company completed the private placement of $100
million aggregate principal amount of the Private Notes on substantially
identical terms as the outstanding Series B Notes. The issue price for the
Private Notes was 109.875%, representing a 9.94% yield to maturity. The gross
proceeds from the sale of the Private Notes were $109.875 million, of which
$100.0 million represented the payment of principal and $9.875 million
represented the payment of a premium for the Private Notes. The Company used
approximately $105.5 million of the net proceeds from the sale of the Private
Notes to repay indebtedness outstanding under the Credit Facility, including
the repayment of all revolving loan and Tranche A term loan indebtedness.
Redemption of 12 3/4% Senior Notes due 2001. On February 18, 1997, Coinmach
redeemed its outstanding 12 3/4% Senior Notes due 2001 at a redemption price of
106.375% of the principal amount thereof, together with accrued interest from
January 15, 1997 to February 18, 1997, in an aggregate amount of approximately
$5.4 million.
Credit Facility. On January 8, 1997, the Company entered into the Credit
Agreement with Bankers Trust Company, First Union National Bank of North
Carolina, Lehman Commercial Paper, Inc. and other lending institutions named
therein (collectively, the "Banks"), which provides for the Credit Facility.
The Credit Facility replaced the Company's then existing credit facility. The
Credit Facility, as amended effective June 2, 1997, and prior to any principal
installment payments, consists of a $70 million revolving credit facility and a
$190 million term loan facility, which is comprised of a Tranche A term loan in
the amount of $30.0 million, payable quarterly commencing March 1997, and a
Tranche B term loan in the amount of $160.0 million, payable semi-annually
commencing June 1997. The Credit Facility also provides for up to $10 million
of letter of credit financings and short term borrowings under a swing line
facility of up to $5 million.
On November 1, 1997, $98.5 million was outstanding under the Credit Facility.
Subject to the terms and conditions of the Credit Agreement, the Company may,
at its option, convert Base Rate Loans (as defined in the Credit Agreement)
into Eurodollar Loans (as defined in the Credit Agreement). Interest on the
Company's borrowings under the Credit Agreement is payable at a rate per annum
no greater than the sum of the Applicable Base Rate Margin plus the Base Rate
or the sum of the Applicable Eurodollar Margin plus the Eurodollar Rate (in
each case, as defined in the Credit Agreement).
Indebtedness under the Credit Agreement is secured by all of the Company's
real and personal property. Coinmach Laundry has guaranteed the indebtedness
under the Credit Agreement and pledged to Bankers Trust Company, as Collateral
Agent, its interests in all of the issued and outstanding shares of capital
stock of Coinmach.
The Credit Agreement contains a number of restrictive covenants and
agreements, including covenants with respect to limitations on (i)
indebtedness; (ii) certain payments (in the form of the declaration or payment
of certain dividends or distributions on the capital stock of Coinmach Laundry
or its subsidiaries or the purchase,
48
<PAGE>
redemption or other acquisition of any capital stock of Coinmach Laundry or
its subsidiaries); (iii) voluntary prepayments of previously existing
indebtedness; (iv) Investments (as defined in the Credit Agreement); (v)
transactions with affiliates; (vi) liens; (vii) sales or purchases of assets;
(viii) conduct of business; (ix) dividends and other payment restrictions
affecting subsidiaries; (x) consolidations and mergers; (xi) capital
expenditures; (xii) issuances of certain equity securities of the Company; and
(xiii) creation of subsidiaries. The Credit Agreement also requires that the
Company satisfy certain financial ratios, including a maximum leverage ratio
and a minimum consolidated interest coverage ratio.
The Credit Agreement contains certain events of default, including the
following: (i) the failure of the Company to pay any of its obligations under
the Credit Agreement when due; (ii) certain failures by the Company to pay
principal or interest on indebtedness or certain breaches or defaults by the
Company in respect of certain indebtedness, in each case, after the expiration
of any applicable grace periods; (iii) certain defaults by the Company in the
performance or observance of the agreements or covenants under the Credit
Agreement or related agreements, beyond any applicable cure periods; (iv) the
falsity in any material respect of certain of the Company's representations or
warranties under the Credit Agreement; (v) certain judgments against the
Company; and (vi) certain events of bankruptcy or insolvency of the Company.
The Company intends to amend and restate its Credit Facility concurrently
with the completion by Coinmach Laundry of the offering and sale by Coinmach
Laundry of 2,500,000 shares of Coinmach Laundry Common Stock (the "CLC
Offering") which is currently expected to be completed in December, 1997. The
amended and restated Credit Facility is expected to provide $235 million of
financing consisting of (i) a $35 million working capital revolving credit
facility (undrawn at closing of the CLC Offering) bearing interest at an
annual rate of LIBOR plus 1.50%; (ii) a $125 million acquisition revolving
credit facility (undrawn at closing of the CLC Offering) bearing interest at
an annual rate of LIBOR plus 1.50%; and (iii) a $75 million term loan facility
(fully funded at closing of the CLC Offering) bearing interest at an annual
rate of LIBOR plus 2.00%. The working capital revolving credit facility and
the acquisition revolving credit facility are expected to mature in six years,
and the term loan facility is expected to mature in seven years. In addition
to certain terms and provisions, events of default, and customary restrictive
covenants and agreements, the Credit Facility is expected to contain certain
covenants including, but not limited to, a maximum leverage ratio, advances,
investments and loans, mergers and acquisitions, dividends, stock issuances,
transactions with affiliates and Coinmach's ability to pay dividends. Upon the
amendment and restatement of the Credit Facility, the Company expects that it
will be in full compliance with all presently proposed financial ratios and
covenants limiting the incurrence of indebtedness and, immediately following
the CLC Offering, will have the ability to utilize the full amount of the $35
million working capital revolving loan contained in the amended and restated
Credit Facility. There can be no assurances, however, that the Company will
amend and restate such Credit Facility.
9 7/8% Promissory Note. In connection with the Kwik Wash Acquisition,
Coinmach Laundry issued the 9 7/8% Promissory Note, a $15 million promissory
note in partial payment of the purchase price for the outstanding voting
securities acquired in such transaction. Interest accrues on the Kwik-Wash
Note at a rate of 9 7/8% per annum. Annual payments of principal under the
Kwik-Wash Note commence on January 15, 1998. The Kwik-Wash Note is payable in
full on June 15, 2004.
OPERATING ACTIVITIES
The Company's level of indebtedness will have several important effects on
its future operations including, but not limited to, the following: (i) a
significant portion of the Company's cash flow from operations will be
required to pay interest on its indebtedness and will not be available for
other purposes; (ii) the financial covenants contained in certain of the
agreements governing the Company's indebtedness will require the Company to
meet certain financial tests and will limit its ability to borrow additional
funds or to dispose of assets; (iii) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions or general corporate purposes may be impaired; and (iv) the
Company's ability to adapt to changes in the coin-operated laundry equipment
services industry and to economic conditions in general could be limited.
49
<PAGE>
The Company anticipates that it will continue to utilize cash flows from
operations to finance its capital expenditures and working capital needs,
including interest payments on its outstanding indebtedness. Capital
expenditures for the six months ended September 26, 1997 were approximately
$91.9 million. Of such amount, the Company spent approximately $66.3 million in
acquisition and related transaction costs, including the Reliable Acquisition
and the National Coin Acquisition, and approximately $8.0 million related to
the net increase in the installed base of machines. The balance was used to
maintain the existing machine base and for general corporate purposes. The full
impact on revenues and EBITDA generated from capital expended on acquisitions
and the net increase in the installed base are not expected to be reflected in
the Company's financial results until subsequent reporting periods, depending
on the timing of the capital expended.
Capital expenditures for the 1997 fiscal year were approximately $213.0
million (including approximately $16.2 million of promissory notes). Of such
amount, the Company spent approximately $171.5 million (including approximately
$16.2 million of promissory notes) in acquisition and related transaction
costs, including the Kwik Wash Acquisition and the Allied Acquisition, and
approximately $12.4 million related to a net increase in the installed base of
machines. The balance was used to maintain the existing base and for general
corporate purposes. The full impact on revenues and EBITDA generated from
capital expended on acquisitions and the net increase in the installed base are
not expected to be reflected in the Company's financial results until
subsequent reporting periods. The age of the Company's equipment is evenly
distributed over its machine base, and management estimates that no more than
approximately 12% of its machine base is likely to be replaced in any given
year. The Company anticipates that renewal capital expenditures, which exclude
acquisitions and capital expenditures for internal growth, will be
approximately $38.0 million for the twelve months ending March 31, 1998. While
the Company estimates that it will generate sufficient cash flows from
operations to finance anticipated capital expenditures, there can be no
assurances that it will be able to do so. The Company also relies upon
available credit under its Credit Facility as an additional source of revenue
for capital expenditures.
On a pro forma basis, after giving effect to all route acquisitions
consummated through July 1997 as if such transactions occurred at the beginning
of such period, the Company spent $290.2 million on capital expenditures for
the year ended March 28, 1997 (including approximately $233.9 million in
acquisition and related transaction costs).
The Company's working capital requirements are, and are expected to continue
to be, minimal since a significant portion of the Company's operating expenses
are not paid until after cash is collected from the installed machines. In
connection with certain of the financing agreements governing the Company's
indebtedness, Coinmach is required to make monthly cash interest payments under
the Credit Facility and semi-annual cash interest payments on the Series B
Notes and the Private Notes.
The Company's depreciation and amortization expenses (aggregating
approximately $34.6 million for the six months ended September 26, 1997) have
the effect of reducing net income but not operating cash flow. In accordance
with generally accepted accounting principles, a significant amount of the
purchase price of businesses acquired by the Company is allocated to "contract
rights and goodwill", which costs are amortized over periods of up to 15 years.
Management believes that the Company's future operating activities will
generate sufficient cash flow to repay borrowings under the Exchange Notes and
any Series B Notes, or Private Notes, the Credit Facility and the 9 7/8%
Promissory Note or to permit any necessary refinancings thereof. An inability
of the Company, however, to comply with covenants or other conditions contained
in the Series B Indenture, the Indenture or in the Credit Agreement could
result in an acceleration of all amounts due under the Series B Indenture, the
Indenture and the Credit Agreement. If the Company is unable to meet its debt
service obligations, it could be required to take certain actions such as
reducing or delaying capital expenditures, selling assets, refinancing or
restructuring its indebtedness, selling additional equity capital or other
actions. There is no assurance that any of such actions could be effected on
commercially reasonable terms, if at all, or on terms permitted under the
Credit Agreement, the Indenture or the Series B Indenture, respectively.
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The Company's ability to incur additional indebtedness to facilitate its
acquisition strategy is limited by the covenants and other restrictions imposed
by the Series B Indenture, the Indenture and the Credit Agreement, including,
without limitation, compliance with certain financial covenants and maintenance
tests and ratios, including debt to equity and fixed charge coverage ratios. As
of November 1, 1997, subject to compliance with the foregoing covenants, the
Company would have had approximately $98.5 million of availability under its
revolving credit facility. The amount of additional indebtedness the Company is
able to incur to further facilitate its acquisition strategy is dependent upon
a number of variables, including, without limitation, the pro forma effects of
the acquisition with respect to which such additional indebtedness is to be
incurred.
INFLATION AND SEASONALITY
In general, the Company's laundry operating expenses and general and
administrative expenses are affected by inflation, and the effects of inflation
may be experienced by the Company in future periods. Management believes that
such effects have not been nor will be material to the Company. The Company's
business generally is not seasonal.
FORWARD-LOOKING INFORMATION
This Prospectus contains or may contain certain forward looking statements
and information that are based on the beliefs of the Company's management as
well as estimates and assumptions made by, and information currently available
to, the Company's management. The words "anticipate," "believe," "estimate,"
"expect," "future," "intend," "plan" and similar expressions, as they relate to
the Company or the Company's management, identify forward looking statements.
Such statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions relating
to the Company's operations and results of operations, competitive factors,
shifts in market demand, and other risks and uncertainties, including, in
addition to any uncertainties specifically identified in the text surrounding
such statements, uncertainties with respect to changes or developments in
social, economic, business, industry, market, legal and regulatory
circumstances and conditions and actions taken or omitted to be taken by third
parties, including the Company's stockholders, customers, suppliers,
competitors, legislative, regulatory, judicial and other governmental
authorities. Should one or more of these risks or uncertainties materialize, or
should the underlying assumptions prove incorrect, actual results may vary
significantly from those anticipated, believed, estimated, expected, intended
or planned.
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BUSINESS
OVERVIEW
The Company, established in 1947, is the leading supplier of outsourced
coin-operated laundry equipment services for multi-family housing properties
in the United States. The Company's business involves leasing laundry rooms
from building owners and property management companies, installing and
servicing the laundry equipment and collecting revenues generated from laundry
machines. The Company owns and operates approximately 420,000 coin-operated
washers and dryers in approximately 42,000 locations on routes throughout the
United States and in 151 retail laundromats located throughout Texas.
In January 1995, the Company initiated a strategy of controlled growth
through acquisitions. This strategy was designed to increase the installed
machine base in its then existing operating region as well as to provide the
Company with a strong market presence in new regions. Since January 1995, the
Company has completed six significant acquisitions adding revenues of
approximately $221 million and expanding its national presence from the
Northeast into the Mid-Atlantic, Southeast, South-Central, Midwest and Western
regions of the United States. Accordingly, the Company has grown its installed
base from approximately 54,000 machines to approximately 420,000 machines.
As a result of this strategy of growth, the Company's revenues and EBITDA
have grown from $72.9 million and $13.6 million, respectively, on a historical
basis for the twelve months ended March 31, 1995, to $306.9 million and $97.9
million, respectively, for the 1997 fiscal year, on a pro forma basis, giving
effect to the acquisitions consummated by the Company since March 30, 1996.
BUSINESS STRATEGY
The Company's business strategy is to enhance its position as the largest
provider of outsourced coin-operated laundry equipment services in the United
States. Management intends to continue to grow the Company's installed machine
base both internally and through selective acquisitions to achieve benefits of
scale, increase its operating efficiencies and improve its financial
performance. Internal growth is comprised of: (i) adding new customers in
existing regions and securing contracts for additional locations from current
customers; (ii) converting owner-operated facilities to Company managed
facilities; (iii) improving the net contribution per machine through operating
efficiencies and selective price increases; and (iv) pursuing additional
growth opportunities presented by the Company's leading market position and
access to approximately four million individual housing units. The Company's
acquisition strategy is to continue to selectively acquire local, regional and
multi-regional route businesses from independent operators at attractive
prices. The Company is currently evaluating several acquisition opportunities,
however, there can be no assurance that subsequent to ongoing negotiations and
due diligence reviews, the Company will complete any such acquisitions.
An important element of the Company's business strategy is to continue to
expand its geographic presence to gain additional regional and multi-regional
account opportunities with large multi-family housing property managers and
owners. Management believes that a significant portion of its customer base,
which manages multi-family housing and other residential properties, is
consolidating. Consequently, management believes that opportunities for
outsourcing coin-operated laundry equipment services to professionally
managed, multi-regional, well-capitalized independent operators such as the
Company are increasing.
The Company's business strategy also includes the continued development of
the Integrated Computer Systems which management believes are the most
advanced in the industry. The Integrated Computer Systems provide real-time
operational and competitive data, which in conjunction with the Company's
multi-regional service capabilities, enhance the Company's operating
efficiencies throughout its regions and enable the Company to deliver superior
customer service. The Integrated Computer Systems also provide the Company
with the flexibility to integrate acquisitions on a timely basis, including
key functions such as sales, service, collections and security. Finally, as
the industry leader, the Company works closely with its equipment vendors
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to assess ongoing technological changes and implements those which the Company
believes are beneficial to operating efficiencies and financial performance.
GROWTH STRATEGY
The Company's growth strategy is to increase operating cash flow and
profitability through a combination of internal expansion and acquisitions.
Internal Expansion
Internal expansion is comprised of: (i) increasing the installed machine
base by adding new customers and increasing the number of locations with
existing customers; (ii) converting owner-operated facilities to Company
managed facilities; (iii) improving the net contribution per machine through
operating efficiencies and selective price increases; and (iv) pursuing
additional growth opportunities presented by its lead in market position and
access to approximately four million individual housing units.
New Customers and Locations. The Company's sales and marketing efforts
focus on two areas of expansion within its existing operating regions. The
Company's primary means of internal expansion is by marketing the Company's
products and services to building managers and property owners whose leases
with other laundry equipment services providers are near expiration. The
Company's Integrated Computer Systems track information on the lease
expirations of its competitors. The Company believes that its leading
market position and expanding geographic presence, primarily achieved
through acquisitions, enhances its ability to gain new customers and
additional locations from existing customers.
Conversions. Management believes that there are approximately 1.0 million
machines installed in locations which continue to be managed by owner-
operators. Building owners or managers can forgo significant cash outlays
by contracting with the Company to purchase, service and maintain laundry
equipment. Accordingly, the Company pursues building owners and managers
who will contract with the Company to provide their coin-operated laundry
facilities. The Company offers a full range of services from the design,
construction and installation of new laundry facilities to the
refurbishment of existing facilities. Management believes these services
provide a competitive advantage in securing new customers.
Operating Efficiencies and Price Increases. The Company focuses on
improving its net contribution per machine through achieving operating
efficiencies and selective price increases. Due to factors beyond the
Company's control, however, there can be no assurance that such efficiency
or price increases will occur.
Other Growth Opportunities. While management intends to continue its
focus on increasing its installed machine base, management believes that
its leading market position and its access to over four million housing
units provides the Company with additional growth and diversification
opportunities. These opportunities include laundry equipment rental as well
as other route based facilities management services. In addition, the
Company is discussing the formation of strategic alliances with vendors of
products complimentary to its customer base. See "- Other Operations."
Management believes that its strategy of growth within its existing
operating regions will result in additional economies of scale and operating
efficiencies associated with an expanded machine base. Such growth, however,
will be dependent upon a number of factors beyond the Company's control, such
as the Company's ability to secure new contracts from owner-operators on
commercially favorable terms and competitive forces that may reduce the number
of opportunities to secure new locations or to effect price increases.
Acquisitions
The Company intends to continue to capitalize on opportunities within the
fragmented coin-operated laundry services industry through selective
acquisitions of additional route businesses. It has been the Company's
experience that there are numerous private, family-owned businesses that often
lack the financial resources to
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provide advance rental payments, install new equipment, make laundry room
improvements or otherwise compete effectively with larger independent
operators such as the Company to secure new or existing contracts.
Consequently, such independent operators, especially those which are
undergoing generational ownership changes, represent potential acquisition
opportunities for the Company.
Management believes the Company is well positioned to capitalize on
acquisition opportunities due to its operating efficiencies, its access to
capital resources, and senior management's extensive experience and
relationships in the industry. The Company evaluates potential acquisitions
based on the size of the business (in terms of revenues and machine base), the
geographic concentration of the business, market penetration, service history,
customer relations, existing contract terms and potential operating
efficiencies and cost savings. The Company considers three types of
acquisition candidates: (i) small, local route operators; (ii) regional route
operators; and (iii) large, multi-regional route operators.
Local route operators. The purchase of small, local operators (businesses
operating within one of the Company's existing regions) results in
eliminating most of the target's existing cost structure through the
complete absorption of the machine base into the Company's operations. The
Company's experience has been that the acquisition of local route operators
has increased operating leverage within its operating regions. In many
instances, the Company is able to acquire routes adjacent to its existing
areas of operation without incurring significant incremental operating
costs.
Regional route operators. The Company's acquisition of regional route
operators provides opportunities to improve its cash flow by eliminating
duplicative corporate and administrative functions, reducing capital
expenditures through improved purchasing power and implementing the
Company's Integrated Computer Systems. Since April 1, 1996, the Company has
completed the Allied Acquisition, the Reliable Acquisition and the National
Coin Acquisition. The Allied Acquisition has been substantially integrated
and, in addition to improving the Company's cash flow, has allowed the
Company to establish a larger market presence in the Mid-West. Management
expects to integrate substantially all of the operations formerly conducted
by the Reliable Entities and the NCL Entities into the Company's operations
during 1997 and to achieve targeted cost savings as a result of such
integration.
Multi-regional route operators. Management believes that the acquisition
of a large, multi-regional route operator results in a number of operating
efficiencies, including significant cost savings through the elimination of
duplicative financial and administrative functions and related fixed costs.
In addition, the increased volume of equipment purchases usually results in
reduced per unit capital expenditures. As is the case with all
acquisitions, the Company's Integrated Computer Systems are utilized to
provide further operating efficiencies and related cost savings. Kwik Wash
is an example of a multi-regional acquisition which enabled the Company to
substantially increase its operating base, add several experienced regional
managers, penetrate new markets and, along with the aforementioned regional
acquisitions, become the largest industry participant.
As part of the Company's growth strategy, the Company continues to evaluate
acquisition opportunities. There can be no assurance however that, subsequent
to ongoing negotiations and due diligence reviews, the Company will complete
any such acquisitions.
FINANCIAL CHARACTERISTICS OF THE BUSINESS
The Company's business has the following financial characteristics:
Recurring Revenues. The Company derives a majority of its revenues from
outsourced coin-operated laundry equipment services typically performed
under long-term contracts with landlords, property management companies and
owners of rental apartment buildings, condominiums and cooperatives,
university and institutional housing and other multi-family housing
properties. Management estimates that approximately 90% of its locations
are subject to long-term contracts with initial terms of three to ten
years, most of which have automatic renewal or right of first refusal
provisions. During the 1997 fiscal year, the
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Company retained approximately 97% of its existing machine base. The
Company believes that its ability to retain its customers and machine base
is attributable to a number of factors, including the Company's national
reputation for superior service, the structure of its contracts and the
strength of its long-term customer relationships.
Diversified Customer Base. The Company provides outsourced coin-operated
laundry equipment services to over 42,000 laundry rooms in its operating
regions, and no one customer accounts for more than 2% of its revenues.
Management estimates that the Company's services are located in multi-
family housing properties containing over four million individual housing
units.
Leverageable Cash Flows. Due to the stable, recurring nature of the
Company's revenues and its consistent EBITDA levels, the Company has been
able to obtain debt financing on favorable terms to support its acquisition
strategy. This use of debt financing to support growth is an important
component of the Company's financial strategy, and the Company believes
that access to both the public and private debt markets provides it with a
competitive advantage.
Benefits of Scale. By increasing its installed machine base, the Company
has benefited from economies of scale in both operating costs and
purchasing power. The Company is able to leverage its existing
infrastructure, including its sales, service, collections, security and
corporate overhead, over a larger installed machine base than its
competition. As a result, the Company has been able to improve its EBITDA
margin as it has increased its size. For the twelve months ended March 29,
1996, the 1997 fiscal year and the six months ended September 26, 1997, the
Company's EBITDA margins were 28.5%, 30.4% and 31.1%, respectively.
Furthermore, due to its purchasing power, management believes that the
Company is able to purchase equipment on terms more favorable than those
available to smaller industry participants.
Significant Portion of Capital Investment Related to Growth. During the
1997 fiscal year, the Company spent $213.0 million in capital expenditures,
of which $ 171.5, or approximately 80.6% was used to finance acquisitions
as part of the Company's growth strategy. Of the remaining capital
investment, $12.5 million, or approximately 5.8%, was used for internally
generated growth and $29.1 million, or approximately 13.6%, related to the
renewal of the Company's existing machine base.
INDUSTRY
The coin-operated laundry equipment services industry is characterized by
stable cash flows generated by long-term renewable lease contracts with multi-
family housing property owners and management companies. The industry is
highly fragmented nationally with many small, private and family-owned route
businesses continuing to operate throughout all major metropolitan areas.
According to information provided by the Multi-housing Laundry Association,
the industry is comprised of over 280 independent operators. Based upon
industry estimates, management believes there are approximately 3.5 million
installed machines in multi-family properties throughout the United States,
approximately 2.5 million of which have been outsourced to independent
operators such as the Company and approximately 1.0 million of which continue
to be operated by the owners of such locations.
The industry is highly capital intensive, and customers require prompt and
reliable service. The majority of capital costs are incurred upon procurement
of new leases. Such initial costs include replacing or repairing existing
washers and dryers, refurbishing laundry rooms and making advance rental
payments to secure long-term, renewable leases. After the initial
expenditures, ongoing working capital requirements are minimal, since machines
operate for many years if serviced properly, and variable costs are paid out
of revenues collected from the machines.
Historically, the industry has been characterized by stable demand and has
proven to be resistant to changing market conditions and general economic
cycles. Management believes that the industry's consistent and predictable
revenue and cash flow from operations are primarily due to: (i) the long-term
nature of location leases; (ii) the stable demand for laundry services; and
(iii) minimal ongoing working capital requirements.
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DESCRIPTION OF OPERATIONS
The principal aspects of the Company's operations include: (i) sales and
marketing, (ii) location leasing; (iii) service; (iv) information management;
(v) remanufacturing; and (vi) collection security.
Sales and Marketing
The Company markets its products and services through a sales staff with an
average industry experience of over ten years. The principal responsibility of
the sales staff is to solicit and negotiate lease arrangements with building
owners and managers. All sales personnel are paid commissions that comprise
50% or more of their annual compensation. Selling commissions are based on a
percentage of a location's annualized earnings before interest and taxes.
Sales personnel must be proficient with the application of sophisticated
financial analyses to achieve their targeted goals in securing location
contracts and renewals. Management believes that its sales staff is among the
most competent and effective in the industry.
The Company's marketing strategy emphasizes service excellence offered by
its experienced, highly skilled personnel and its quality equipment that
maximizes efficiency and revenue and minimizes machine down-time.
Additionally, the Integrated Computer Systems monitor performance, repairs and
maintenance, as well as the profitability of locations on a daily basis. The
Company's sales staff targets potential new and renewal lease locations by
utilizing its Integrated Computer Systems' extensive database that provides
information on the Company's, as well as its competitors' locations. All sales
activity, from sale entries to data on service and installation is recorded
and monitored daily on a custom-designed, computerized sales planner.
No single customer represents more than 2% of the Company's revenues or
installed machine base. In addition, the Company's ten largest customers taken
together account for less than 10% of the Company's revenues.
LOCATION LEASING
The Company's leases provide the Company the exclusive right to operate and
service the laundry equipment, including repairs and maintenance. The Company
typically sets pricing for the use of the machines on location, and the
property owner or property manager maintains the premises and provides
utilities such as gas, electricity and water.
In return for the exclusive right to provide laundry equipment services,
most of the Company's leases provide for monthly commission payments to the
location owners. Under the majority of leases, these commissions are based on
a percentage of the cash collected from the laundry machines. Many of the
Company's leases require the Company to make advance rental payments to the
location owner in addition to commissions. The Company's leases typically
include provisions that allow for unrestricted price increases, a right of
first refusal (an opportunity to match competitive bids at the expiration of
the lease term) and termination rights if the Company does not receive minimum
net revenues from a lease. The Company has some flexibility in negotiating its
leases and, subject to regional competitive factors, may vary the terms and
conditions of a lease, including commission rates and advance rental payments.
The Company evaluates each lease opportunity through its Integrated Computer
Systems which are designed to achieve certain targeted levels of return on
investment.
Management estimates that approximately 90% of its locations are under long-
term leases with initial terms of three to ten years. Of the remaining
locations not subject to long term leases, the Company believes that it has
retained a majority of such customers through long-standing relationships and
intends to continue to service such customers. Approximately 42% of the
Company's leases renew automatically, and the Company has a right of first
refusal on termination in approximately 40% of its leases. The Company's
automatic renewal clause typically provides that, if the building owner fails
to take any action prior to the end of the original lease term or any renewal
term, the lease will automatically renew on substantially similar terms. As of
September 26, 1997,
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the Company's leases have an average remaining life to maturity of
approximately 50 months (without giving effect to automatic renewals).
SERVICE
The Company's employees deliver, install, service and collect from coin-
operated washers and dryers in laundry facilities at its leased locations.
The Company's fleet of 352 radio-equipped service vehicles allows the quick
dispatch of service technicians in response to both computer-generated (for
preventive maintenance) and customer-generated service calls. On a daily
basis, the Company receives and responds to approximately 2,200 service calls.
Management estimates that less than 1% of the Company's machines are out of
service on any given day. The ability to reduce machine down time, especially
during peak usage, serves to enhance revenue and improve the Company's
reputation with its customers.
In a business that emphasizes prompt and efficient service, management
believes that the Company's Integrated Computer Systems provide a significant
competitive advantage in terms of responding promptly to customer needs.
Computer-generated service calls for preventive maintenance are based on
previous service history, repeat service call analysis and monitoring of
service areas. These operations coordinate the Company's radio-equipped
service vehicles that allow the Company to address customer needs quickly and
efficiently.
Information Management
Management believes that the Company's Integrated Computer Systems serve
three major functions: (i) tracking the service cycle of equipment; (ii)
monitoring revenues and costs by location, customer and salesperson; and (iii)
providing information on competitor's lease renewal schedules.
The Integrated Computer systems provide speed and accuracy throughout the
entire service cycle by integrating the functions of service call entry,
dispatching service personnel, parts and equipment purchasing, installation,
distribution and collection. In addition to coordinating all aspects of the
service cycle, the Company's Integrated Computer Systems track contract
performance which indicate unreported machine failure or pilferage and provide
data to forecast future equipment failures.
Data on machine performance is used by the sales staff to forecast revenue
by location. Management is able to obtain daily, monthly, quarterly and annual
reports on location performance, coin collection, service and sales activity
by salesperson.
The Integrated Computer Systems also provide the sales staff with an
extensive database essential to the Company's marketing strategy to obtain new
business through competitive bidding or owner-operator conversion
opportunities.
Management also believes that the Integrated Computer Systems enhance the
Company's ability to successfully integrate acquired businesses into its
existing operations. It has been the experience of the Company's management
that regional or multi-regional acquisitions can be integrated within 90 to
120 days, while a local acquisition can be integrated almost immediately.
Remanufacturing
The Company's remanufacturing operations provide approximately one-third of
its anticipated annual machine installation requirements. The Company rebuilds
and reinstalls a portion of its machines at approximately one-third the cost
of acquiring new machines. Remanufactured machines are restored to virtually
new condition with the same estimated average life and service requirements as
new machines. Machines that can no longer be remanufactured are added to the
Company's inventory of spare parts.
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The Company maintains four regional remanufacturing facilities which provide
for consistent machine quality and efficient operations and are strategically
located to service each of its operating regions.
Collection Security
Management believes that it provides the highest level of collection
security control in the laundry equipment services industry. The Company
utilizes numerous precautionary procedures with respect to cash collection,
including frequent alteration of collection patterns, extensive monitoring of
collections and other control mechanisms. The Company enforces stringent
employee standards and screening procedures with prospective employees.
Employees responsible for or who have access to the collection of funds are
tested randomly and frequently. Additionally, the Company's security
department performs trend and variance analyses of daily collections by
location. Security personnel monitor locations, conduct investigations, and
implement additional security procedures as necessary.
COMPETITION
The coin-operated laundry equipment services industry is highly competitive,
capital intensive and requires reliable, quality service. Despite the overall
fragmentation of the industry, there are currently three companies including
the Company with significant operations in multiple regions throughout the
United States. The other large multiple region operators are Web Service
Company, Inc. and Macke Laundry Service, L.P.
OTHER OPERATIONS
In addition to supplying outsourced coin-operated laundry equipment
services, the Company has expanded its breadth of operations to other related
lines of business.
Individual Housing Units
Through the acquisition of Appliance Warehouse, Coinmach entered the
business of renting laundry equipment and other household appliances and
electronic items to individuals. With access to approximately four million
individual housing units, Coinmach believes its new business line represents
an opportunity for growth in a new market segment which is complimentary to
its core business.
Laundromat Construction
Super Laundry, a wholly-owned subsidiary of the Company, is a construction
and laundromat equipment distribution company. Super Laundry's business
consists of constructing complete turnkey laundromat retail stores,
retrofitting existing laundromat retail stores, distributing exclusive lines
of commercial coin and non-coin operated machines and parts, and selling
service contracts. Super Laundry's customers generally enter into sales
contracts pursuant to which Super Laundry constructs and equips a complete
laundromat operation, including location identification, construction,
plumbing, electrical wiring and all required permits.
Retail Laundromat Operations
The Company operates 151 retail laundromats located throughout Texas, 150 of
which were acquired in the Kwik Wash Acquisition. The operation of the retail
laundromats involves leasing store locations in desired geographic areas,
maintaining an appropriate mix of washers and dryers at each store location
and servicing such washers and dryers at such locations. The Company is also
responsible for maintaining the premises at each laundromat and paying for
utilities and related expenses.
FACILITIES
As of November 1, 1997, the Company leased 39 offices throughout its
operating regions serving various operational purposes, including sales and
service activities, collections and warehousing. The Company presently
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maintains its headquarters in Roslyn, New York, leasing approximately 40,000
square feet pursuant to a five year lease terminating April 30, 2001. The
Company's Roslyn facility is used for general corporate purposes, as well as
for remanufacturing and warehouse space for the Northeast operating region.
The Company has an option to purchase the Roslyn facility, which it presently
does not intend to exercise.
EMPLOYEES
As of November 1, 1997, the Company employed 1,450 full-time employees
(including 334 laundromat attendants in the Company's retail laundromats in
Texas). Approximately 140 hourly workers in the Northeast region are
represented by Local 966, affiliated with the International Brotherhood of
Teamsters (the "Union"). Management believes that the Company has maintained a
good relationship with the Union employees and has never experienced a work
stoppage since its inception.
LEGAL PROCEEDINGS
The Company and its predecessors have been named as defendants in a number
of legal actions arising in the ordinary course of its business. Although the
amount of any liability that could arise with respect to these actions can not
be accurately predicted, management believes that any such liability,
individually or in the aggregate, will not have a material adverse effect on
the Company.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and executive officers of Coinmach are:
<TABLE>
<CAPTION>
NAME TITLE AGE
---- ----- ---
<S> <C> <C>
Stephen R. Kerrigan..... Chairman of the Board and Chief Executive Officer, Director 44
Mitchell Blatt.......... President, Chief Operating Officer, Director 46
Robert M. Doyle......... Chief Financial Officer, Senior Vice President,
Treasurer, Secretary, Director 40
John E. Denson.......... Senior Vice President 60
Michael E. Stanky....... Senior Vice President 46
</TABLE>
BACKGROUND AND EXPERIENCE
Mr. Kerrigan has been Chief Executive Officer of Coinmach Laundry since
April 1996 and of Coinmach since November 1995. Mr. Kerrigan was President and
Treasurer of Solon and Coinmach Laundry from April 1995 until April 1996, and
Chief Executive Officer of TCC from January 1995 until November 1995. Mr.
Kerrigan has been a director and Chairman of the Board of Coinmach Laundry
since April 1995 and of Coinmach since November 1995. Mr. Kerrigan was a
director of TCC from January 1995 to November 1995 and a director of Solon
from April 1995 to November 1995. Mr. Kerrigan served as Vice President and
Chief Financial Officer of TCC's predecessor, Coinmach Industries Co., L.P.
from 1987 to 1994. Mr. Kerrigan was an executive officer of CIC, which filed a
voluntary petition for reorganization under Chapter 11 of the United States
Bankruptcy Code in 1993.
Mr. Blatt has been President and Chief Operating Officer of Coinmach Laundry
since April 1996 and of Coinmach since November 1995. Mr. Blatt was the
President and Chief Operating Officer of TCC from January 1995 to November
1995. Mr. Blatt has been a director of Coinmach Laundry and Coinmach since
November 1995. Mr. Blatt joined TCC as Vice President-General Manager in 1982
and was Vice President and Chief Operating Officer from January 1988 to
February 1994. Mr. Blatt was an executive officer of CIC, which filed a
voluntary petition for reorganization under Chapter 11 of the United States
Bankruptcy Code in 1993.
Mr. Doyle has been Chief Financial Officer, Senior Vice President, Treasurer
and Secretary of Coinmach Laundry since April 1996 and Coinmach since November
1995. Mr. Doyle has been a director of Coinmach since November 1995. Mr. Doyle
served as Vice President, Treasurer and Secretary of TCC from January 1995 to
November 1995. Mr. Doyle joined TCC in 1987 as Controller. In 1988, Mr. Doyle
became Director of Accounting, and was promoted in 1989 to Vice President and
Controller. Mr. Doyle was an executive officer of CIC, which filed a voluntary
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code in 1993.
Mr. Denson has been Senior Vice President of Coinmach Laundry since April
1996 and of Coinmach since November 1995. Mr. Denson was Senior Vice
President, Finance of Solon from June 1987 to November 1995. Mr. Denson has
served as an officer of Solon under various titles since 1973, and served as a
director and Co-Chief Executive Officer of Solon from November 1994 to April
1995.
Mr. Stanky has been Senior Vice President of Coinmach Laundry since April
1996 and of Coinmach since November 1995. Mr. Stanky was a Senior Vice
President of Solon from July 1995 to November 1995. Mr. Stanky served Solon in
various capacities since 1976, and in 1985 was promoted to Area Vice President
responsible for Solon's South-Central region. Mr. Stanky served as a Co-Chief
Executive Officer of Solon from November 1994 to April 1995.
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DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The following summary of certain provisions of the Exchange Notes and the
Indenture does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the Trust Indenture Act of 1939, as amended
(the "TIA"), and to all of the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part of the
Indenture by reference to the TIA as in effect on the date of the Indenture.
The definitions of certain capitalized terms used in the following summary are
set forth below under "--Certain Definitions."
The Exchange Notes rank pari passu in right of payment with all senior
Indebtedness of Coinmach, including borrowings under the Credit Facility.
However, the Exchange Notes are unsecured obligations of Coinmach and the
borrowings under the Credit Facility will be secured by Liens on substantially
all of the assets of Coinmach and its subsidiaries. As a result, the
Indebtedness under the Credit Facility will effectively rank senior to the
Exchange Notes to the extent of the security therefor.
The Exchange Notes are issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the Exchange Notes. The
Exchange Notes may be presented for registration or transfer and exchange at
the offices of the Registrar, which presently is the Trustee's corporate trust
office. Coinmach may change any Paying Agent and Registrar without notice to
holders of the Exchange Notes. Any Private Notes that remain outstanding after
the completion of the Exchange Offer, together with the Exchange Notes issued
in connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes are limited in aggregate principal amount to $296,655,000
and will mature on November 15, 2005. Interest on the Exchange Notes accrues
at the rate of 11 3/4% per annum and is payable semiannually in cash on each
May 15 and November 15 to the persons who are registered Holders at the close
of business on the May 1 and November 1 immediately preceding the applicable
interest payment date. Interest on the Exchange Notes accrues from and
including the most recent date to which interest has been paid or, if no
interest has been paid, from and including November 15, 1997. Interest is
computed on the basis of a 360-day year comprised of twelve 30-day months.
Coinmach will pay principal (and premium, if any) on the Senior Notes at the
Trustee's corporate office in New York, New York. At Coinmach's option,
interest may be paid at the Trustee's corporate trust office or by check
mailed to the registered address of Holders.
The Exchange Notes are not entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
Optional Redemption
The Exchange Notes are redeemable, at Coinmach's option, in whole or in part
at any time or from time to time, on and after November 15, 2000, upon not
less than 30 nor more than 60 days notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on November 15 of the year set forth below,
plus, in each case, accrued and unpaid interest thereon, if any, to the date
of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000.............................. 105.8750%
2001.............................. 102.9375%
2002 and thereafter............... 100.0000%
</TABLE>
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Notwithstanding the foregoing, at any time, or from time to time, on or prior
to December 31, 1998, Coinmach may, at its option, use the net cash proceeds
of one or more Equity Offerings (as defined below) to redeem up to 35% of the
outstanding Senior Notes at a redemption price equal to 11 3/4% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of redemption; provided that at least 65% of the aggregate principal amount of
all Exchange Notes and Private Notes then outstanding remain outstanding
immediately after any such redemption. In order to effect the foregoing
redemption with the proceeds of any Equity Offering, Coinmach shall make such
redemption not more than 120 days after the consummation of any such Equity
Offering.
As used in the preceding paragraph, "Equity Offering" means an offering of
Qualified Capital Stock of Coinmach pursuant to a registration statement filed
with the Commission in accordance with the Securities Act or pursuant to an
exemption from the registration requirements thereof.
Selection and Notice of Redemption
In the event that less than all of the Exchange Notes are to be redeemed at
any time, selection of such Exchange Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which such Exchange Notes are listed or, if
such Exchange Notes are not then listed on a national securities exchange, on
a pro rata basis, by lot or by such method as the Trustee in its discretion
shall deem fair and appropriate; provided, however, that no Exchange Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided,
further, that if a partial redemption is made with the proceeds of an Equity
Offering, selection of the Exchange Notes or portions thereof for redemption
shall be made by the Trustee only on a pro rata basis or on as nearly a pro
rata basis as is practicable (subject to procedures of the Depository), unless
such method is otherwise prohibited. Notice of redemption shall be mailed by
first-class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Exchange Notes to be redeemed at its registered
address. If any Exchange Note is to be redeemed in part only, the notice of
redemption that relates to such Exchange Note shall state the portion of the
principal amount thereof to be redeemed. A new Exchange Note in a principal
amount equal to the unredeemed portion thereof will be issued in the name of
the Holder thereof upon cancellation of the original Exchange Note. On and
after the redemption date, interest will cease to accrue on Exchange Notes or
portions thereof called for redemption as long as Coinmach has deposited with
the Paying Agent funds in satisfaction of the applicable redemption price
pursuant to the Indenture.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, each
holder of Exchange Notes will have the right to require that Coinmach purchase
all or a portion of such holder's Exchange Notes pursuant to the offer
described below (the "Change of Control Offer"), at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase.
Within 30 days following the date upon which the Change of Control occurred,
Coinmach must send, by first class mail, a notice to each Holder, with a copy
to the Trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice shall state, among other things, the purchase date, which
must be no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have an Exchange Note purchased pursuant
to a Change of Control Offer will be required to surrender the Exchange Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Exchange Note completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third business day prior to
the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that
Coinmach will have available funds sufficient to pay the Change of Control
purchase price for all of the Exchange Notes that might be delivered by
Holders seeking to accept the Change of Control Offer. In the event Coinmach
is required to purchase outstanding Exchange Notes pursuant to a Change of
Control Offer, Coinmach expects that it would seek third
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party financing to the extent it does not have available funds to meet its
purchase obligations. However, there can be no assurance that Coinmach would
be able to obtain such financing.
Neither the Board of Directors of Coinmach nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of Coinmach and
its Restricted Subsidiaries to incur additional Indebtedness, to grant liens
on its property, to make Restricted Payments and to make Asset Sales may also
make more difficult or discourage a takeover of Coinmach, whether favored or
opposed by the management of Coinmach. Consummation of any such transaction in
certain circumstances may require redemption or repurchase of the Exchange
Notes, and there can be no assurance that Coinmach or the acquiring party will
have sufficient financial resources to effect such redemption or repurchase.
Such restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout
of Coinmach or any of its Subsidiaries by the management of Coinmach. While
such restrictions cover a wide variety of arrangements which have
traditionally been used to effect highly leveraged transactions, the Indenture
may not afford the Holders of Exchange Notes protection in all circumstances
from the adverse aspects of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction.
If Coinmach becomes obligated to repurchase or pay the Exchange Notes other
than upon the scheduled maturity date, such event could constitute a default
under the Credit Facility (which would also cause an Event of Default under
the Indenture). Given that indebtedness outstanding under the Credit Facility
is secured by substantially all of the assets of Coinmach, in the event of the
occurrence of an Event of Default under the Indenture or a default under the
Credit Facility, holders of such secured indebtedness will have claims that
effectively rank prior in right of payment to those of holders of Exchange
Notes with respect to the assets securing such indebtedness.
Coinmach will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent
such laws and regulations are applicable in connection with the repurchase of
Exchange Notes pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Change of
Control" provisions of the Indenture, Coinmach shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness
Coinmach will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness (other
than Permitted Indebtedness); provided, however, that if no Default or Event
of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, Coinmach may incur
Indebtedness (including, without limitation, Acquired Indebtedness) if on the
date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of Coinmach
is greater than 2.10 to 1.0 for the first 24 months following the date on
which the Private Notes were originally issued and 2.25 to 1.0 on any such
date of incurrence thereafter.
Limitation on Restricted Payments
Coinmach will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or
make any distribution (other than dividends or distributions payable in
Qualified Capital Stock of Coinmach) on or in respect of shares of Coinmach's
Capital Stock to holders of such Capital Stock, (b) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of Coinmach or
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any warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock, (c) make any principal payment on, purchase, defease,
redeem, prepay, decrease or otherwise acquire or retire for value, prior to
any scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness of Coinmach that is subordinate or junior in right
of payment to the Senior Notes or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses
(a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and be continuing or
(ii) Coinmach is not able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant or (iii) the aggregate amount
of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the date on which the Series A Notes were originally issued (the
amount expended for such purposes, if other than in cash, being the fair
market value of such property as determined reasonably and in good faith by
the Board of Directors of Coinmach) shall exceed the sum of: (x) 50% of the
cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss) of Coinmach earned subsequent to the
date on which the Series A Notes were originally issued and ending on the last
day of Coinmach's last fiscal quarter ending prior to the date the Restricted
Payment occurs (the "Reference Date") (treating such period as a single
accounting period); plus (y) 100% of the aggregate net cash proceeds received
by Coinmach from any Person (other than a Subsidiary of Coinmach) from the
issuance and sale subsequent to the date on which the Series A Notes were
originally issued and on or prior to the Reference Date of Qualified Capital
Stock of Coinmach; plus (z) without duplication of any amounts included in
clause (iii)(y) above, 100% of the aggregate net cash proceeds of any equity
contribution received by Coinmach from a holder of Coinmach's Capital Stock
(excluding, in the case of clauses (iii)(y) and (z), any net cash proceeds
from (A) an Equity Offering to the extent used to redeem the Senior Notes and
(B) issuances and sales of Qualified Capital Stock of Coinmach financed
directly or indirectly using funds borrowed from Coinmach or any Subsidiary of
Coinmach, until and to the extent such borrowing is repaid).
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) if no Default or Event of
Default shall have occurred and be continuing, the acquisition of any shares
of Capital Stock of Coinmach, either (i) solely in exchange for shares of
Qualified Capital Stock of Coinmach or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of Coinmach) of shares of Qualified Capital Stock of Coinmach; (3)
if no Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of Coinmach that is subordinate or junior in
right of payment to the Exchange Notes either (i) solely in exchange for
shares of Qualified Capital Stock of Coinmach, or (ii) through the application
of net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of Coinmach) of (A) shares of Qualified Capital Stock of Coinmach
or (B) Refinancing Indebtedness; (4) if no Default or Event of Default shall
have occurred and be continuing, an Investment through the application of the
net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of Coinmach) of shares of Qualified Capital Stock of Coinmach; (5)
if no Default or Event of Default shall have occurred and be continuing,
Investments in an aggregate amount not to exceed $5,000,000; (6) the making of
payments by Coinmach to Coinmach Laundry in an amount not in excess of the
federal and state (in such states that permit consolidated or combined tax
returns) income tax liability that Coinmach and its Restricted Subsidiaries
would have been liable for if Coinmach and its Restricted Subsidiaries had
filed their tax returns on a stand-alone basis; provided that such payments
shall be made by Coinmach no earlier than five days prior to the date on which
Coinmach Laundry is required to make its payments to the Internal Revenue
Service or the applicable state taxing authority, as the case may be; (7) the
repayment on the date on which the Series A Notes were originally issued of
Indebtedness of Coinmach Laundry owing to FINOVA Capital Corporation not to
exceed $5.0 million in the aggregate; (8) if no Default or Event of Default
shall have occurred and be continuing, a distribution to Coinmach Laundry
solely to enable Coinmach Laundry to repurchase Coinmach Laundry Capital Stock
from members of Coinmach Laundry management in connection with certain
executive employment agreements in effect on the date on which the Series A
Notes were originally issued not to exceed $500,000 in the aggregate; (9) if
no Default or Event of Default shall have occurred and be continuing, the
payment to Coinmach Laundry for reasonable accounting fees and other support
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services provided to Coinmach not to exceed $250,000 in any fiscal year; and
(10) if no Default or Event of Default shall have occurred and be continuing,
a distribution to Coinmach Laundry solely to enable Coinmach Laundry to pay a
management fee to the Permitted Holders not to exceed $500,000 in any fiscal
year. In determining the aggregate amount of Restricted Payments made
subsequent to the date on which the Series A Notes were originally issued in
accordance with clause (iii) of the immediately preceding paragraph, amounts
expended pursuant to clauses (1), (2), (4), (5), (8), (9) and (10) shall be
included in such calculation.
Not later than the date of making any Restricted Payment, Coinmach shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations
may be based upon Coinmach's latest available internal quarterly financial
statements.
Limitation on Asset Sales
Coinmach will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless (i) Coinmach or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the time of such
Asset Sale at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by Coinmach's Board of
Directors), (ii) at least 75% of the consideration received by Coinmach or the
Restricted Subsidiary, as the case may be, from such Asset Sale shall be in
the form of cash or Cash Equivalents and is received at the time of such
disposition; and (iii) upon the consummation of an Asset Sale, Coinmach shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 180 days of receipt thereof either (A) to
repay any Indebtedness secured by the assets involved in such Asset Sale
together with a concomitant permanent reduction in the amount of such
Indebtedness (including a permanent reduction in the committed amounts
therefor in the case of any revolving credit facility so repaid), (B) to make
an investment in properties and assets that replace the properties and assets
that were the subject of such Asset Sale or in properties and assets that will
be used in the business of Coinmach and its Subsidiaries as existing on the
date on which the Series A Notes were originally issued or in businesses
reasonably related thereto ("Replacement Assets"), or (C) a combination of
repayment and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B); provided, however, that the 75% limitation set forth in clause (ii)
of this paragraph shall not apply to any proposed Asset Sale for which an
independent certified accounting firm shall certify to the Board of Directors
of Coinmach and the Trustee that the after-tax cash portion of the
consideration to be received by Coinmach or such Restricted Subsidiary in such
proposed Asset Sale is equal to or greater than what the net after-tax cash
proceeds would have been had such proposed Asset Sale complied with the 75%
limitation set forth in clause (ii) of this paragraph and provided, further,
that for purposes of this covenant, Cash Equivalents shall include any
unsubordinated Indebtedness of Coinmach or any Restricted Subsidiary (as shown
on Coinmach's or such Restricted Subsidiary's most recent balance sheet or in
the notes thereto) that are assumed by the transferee and for which Coinmach
or such Restricted Subsidiary is reasonably indemnified in connection with the
relevant Asset Sale. On the 181st day after an Asset Sale or such earlier
date, if any, as the Board of Directors of Coinmach or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such
Asset Sale as set forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate
amount of Net Cash Proceeds which have not been applied on or before such Net
Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and
(iii)(C) of the next preceding sentence (each a "Net Proceeds Offer Amount")
shall be applied by Coinmach or such Restricted Subsidiary to make an offer to
purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment
Date") not less than 30 nor more than 60 days following the applicable Net
Proceeds Offer Trigger Date, from all holders of Private Notes and Exchange
Notes on a pro rata basis that amount of Private Notes and Exchange Notes
equal to the Net Proceeds Offer Amount at a price equal to 100% of the
principal amount of the Private Notes and Exchange Notes to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase;
provided, however, that if at any time any non-cash consideration received by
Coinmach or any Restricted Subsidiary of Coinmach, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise disposed
of for cash (other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset
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Sale hereunder and the Net Cash Proceeds thereof shall be applied in
accordance with this covenant. Coinmach may defer the Net Proceeds Offer until
there is an aggregate unutilized Net Proceeds Offer Amount equal to or in
excess of $5,000,000 resulting from one or more Asset Sales (at which time,
the entire unutilized Net Proceeds Offer Amount, and not just the amount in
excess of $5,000,000, shall be applied as required pursuant to this
paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of Coinmach and its Restricted Subsidiaries as an entirety
to a Person in a transaction permitted under "- Merger, Consolidation and Sale
of Assets," the successor corporation shall be deemed to have sold the
properties and assets of Coinmach and its Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such properties and assets
of Coinmach or its Restricted Subsidiaries deemed to be sold shall be deemed
to be Net Cash Proceeds for purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, Coinmach and its
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraphs to the extent (i) at least 75% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; provided that any consideration not
constituting Replacement Assets received by Coinmach or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated
under this paragraph shall constitute Net Cash Proceeds subject to the
provisions of the two preceding paragraphs.
Each notice of a Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds
Offer Trigger Date, with a copy to the Trustee, and shall comply with the
procedures set forth in the Indenture. Upon receiving notice of the Net
Proceeds Offer, Holders may elect to tender their Exchange Notes in whole or
in part in integral multiples of $1,000 in exchange for cash. To the extent
Holders of Exchange Notes and Private Notes properly tender Exchange Notes and
Private Notes in an amount exceeding the Net Proceeds Offer Amount, Exchange
Notes and Private Notes of tendering Holders will be purchased on a pro rata
basis (based on amounts tendered). A Net Proceeds Offer shall remain open for
a period of 20 business days or such longer period as may be required by law.
Coinmach will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent
such laws and regulations are applicable in connection with the repurchase of
Exchange Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Limitation
on Asset Sales" provisions of the Indenture, Coinmach shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Limitation on Asset Sales" provisions of
the Indenture by virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
Coinmach will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit
to exist or become effective any encumbrance or restriction on the ability of
any Restricted Subsidiary of Coinmach to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to Coinmach or
any other Restricted Subsidiary of Coinmach; or (c) transfer any of its
property or assets to Coinmach or any other Restricted Subsidiary of Coinmach,
except for such encumbrances or restrictions existing under or by reason of:
(1) applicable law; (2) the Indenture or the Series B Indenture; (3) customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of any Restricted Subsidiary of Coinmach; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired; (5)
agreements existing on the date on which the Series A Notes were originally
issued to the extent and in the manner such agreements are in effect on the
date on which the Series A Notes were originally issued; or (6) an agreement
governing Indebtedness incurred to Refinance the Indebtedness issued, assumed
or incurred pursuant to an agreement referred to in clause (2), (4) or (5)
above; provided, however, that the provisions
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relating to such encumbrance or restriction contained in any such Indebtedness
are no less favorable to Coinmach in any material respect as determined by the
Board of Directors of Coinmach in their reasonable and good faith judgment
than the provisions relating to such encumbrance or restriction contained in
agreements referred to in such clause (2), (4) or (5).
Limitation on Preferred Stock of Restricted Subsidiaries
Coinmach will not permit any of its Restricted Subsidiaries to issue any
Preferred Stock (other than to Coinmach or to a Wholly-Owned Restricted
Subsidiary of Coinmach) or permit any Person (other than Coinmach or a Wholly-
Owned Restricted Subsidiary of Coinmach) to own any Preferred Stock of any
Restricted Subsidiary of Coinmach.
Limitation on Liens
Coinmach will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or assets
of Coinmach or any of its Restricted Subsidiaries whether owned on the date on
which the Series A Notes were originally issued or acquired after the date on
which the Series A Notes were originally issued, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Exchange Notes, the Exchange
Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Liens and (ii) in all other cases, the Exchange
Notes are equally and ratably secured, except for (A) Liens existing as of the
date on which the Series A Notes were originally issued to the extent and in
the manner such Liens are in effect on the date on which the Series A Notes
were originally issued; (B) Liens securing the Senior Notes; (C) Liens
securing borrowings under the Credit Agreement including any additional
Obligations thereunder (which Liens may extend to all property now owned or
hereafter acquired by Coinmach or any of its Subsidiaries); (D) Liens of
Coinmach or a Wholly-Owned Restricted Subsidiary of Coinmach on assets of any
Subsidiary of Coinmach; (E) Liens securing Refinancing Indebtedness which is
incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under this paragraph and which has been incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" provisions of the
Indenture; provided, however, that such Liens (x) are no less favorable to the
Holders and are not more favorable to the lienholders with respect to such
Liens than the Liens in respect of the Indebtedness being Refinanced and (y)
do not extend to or cover any property or assets of Coinmach or any of its
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (F)
Permitted Liens.
Merger, Consolidation and Sale of Assets
Coinmach will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of Coinmach to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of Coinmach's assets
(determined on a consolidated basis for Coinmach and Coinmach's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless: (i) either (1) Coinmach shall be the surviving or continuing
corporation or (2) the Person (if other than Coinmach) formed by such
consolidation or into which Coinmach is merged or the Person which acquires by
sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of Coinmach and of Coinmach's Restricted Subsidiaries
substantially as an entirety (the "Surviving Entity") (x) shall be a
corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly
assume, by supplemental indenture (in form and substance reasonably
satisfactory to the Trustee), executed and delivered to the Trustee, the due
and punctual payment of the principal of, and premium, if any, and interest on
all of the then outstanding Exchange Notes and Private Notes and the
performance of every covenant of the Exchange Notes, any outstanding Private
Notes, the Indenture and the Registration Rights Agreement on the part of
Coinmach to be performed or observed; (ii) immediately after giving effect to
such transaction and the
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assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), Coinmach or
such Surviving Entity, as the case may be, (1) shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of Coinmach
immediately prior to such transaction and (2) shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "- Limitation on Incurrence of Additional Indebtedness"
covenant; (iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred or be continuing; and (iv) Coinmach or the
Surviving Entity shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of the Indenture
and that all conditions precedent in the Indenture relating to such
transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of Coinmach the Capital Stock of which constitutes all or
substantially all of the properties and assets of Coinmach, shall be deemed to
be the transfer of all or substantially all of the properties and assets of
Coinmach.
The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of Coinmach in
accordance with the foregoing, in which Coinmach is not the continuing
corporation, the successor Person formed by such consolidation or into which
Coinmach is merged or to which such conveyance, lease or transfer is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture and the Exchange Notes and any
outstanding Private Notes with the same effect as if such surviving entity had
been named as such.
Limitations on Transactions with Affiliates
(a) Coinmach will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an
"Affiliate Transaction"), other than (x) Affiliate Transactions permitted
under paragraph (b) below and (y) Affiliate Transactions on terms that are no
less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person
that is not an Affiliate of Coinmach or such Restricted Subsidiary. All
Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $500,000 shall be
approved by a majority of the disinterested members of the Board of Directors
of Coinmach or such Restricted Subsidiary, as the case may be, such approval
to be evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If
Coinmach or any Restricted Subsidiary of Coinmach enters into an Affiliate
Transaction (or a series of related Affiliate Transactions related to a common
plan) that involves an aggregate fair market value of more than $2,500,000,
Coinmach or such Restricted Subsidiary, as the case may be, shall, prior to
the consummation thereof, obtain a favorable opinion as to the fairness of
such transaction or series of related transactions to Coinmach or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view,
from an Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of Coinmach or any Restricted
Subsidiary as determined in good faith by Coinmach's Board of Directors or
senior management; (ii) transactions exclusively between or among Coinmach and
any of its Wholly-Owned Restricted Subsidiaries or exclusively
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between or among such Wholly-Owned Restricted Subsidiaries, provided such
transactions are not otherwise prohibited by the Indenture; and (iii)
Restricted Payments permitted by the Indenture.
Limitation on Sale and Leaseback Transactions
Coinmach shall not, and shall not cause or permit any of its Restricted
Subsidiaries to, enter into any Sale and Leaseback Transaction.
Notwithstanding the foregoing, Coinmach and its Restricted Subsidiaries may
enter into a Sale and Leaseback Transaction involving only the sale or
transfer of assets acquired after the date on which the Series A Notes were
originally issued if: (i) after giving pro forma effect to any such Sale and
Leaseback Transaction, Coinmach or such Restricted Subsidiary, as the case may
be, shall be in compliance with "- Limitation on Incurrence of Additional
Indebtedness" above; (ii) Coinmach or such Restricted Subsidiary shall comply
with the provisions set forth under "- Limitation on Asset Sales" above, and
(iii) the aggregate amount of Capitalized Lease Obligations in respect of all
Sale and Leaseback Transactions consummated since the date on which the Series
A Notes were originally issued (including such proposed Sale and Leaseback
Transaction) would not exceed 10% of Consolidated Net Tangible Assets of
Coinmach.
Conduct of Business
Coinmach and its Restricted Subsidiaries will not engage in any businesses
which are not the same, similar or related to the businesses in which Coinmach
and its Restricted Subsidiaries were engaged on the date on which the Series A
Notes were originally issued.
Reports to Holders
The Indenture provides that Coinmach will deliver to the Trustee and mail to
each Holder within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents
and other reports, if any, which Coinmach is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture
further provides that, notwithstanding that Coinmach may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, Coinmach
will file with the Commission, to the extent permitted, and provide the
Trustee and Holders with such annual reports and such information, documents
and other reports specified in Sections 13 and 15(d) of the Exchange Act and
make such information available to securities analysts and prospective
investors upon request. Coinmach will also comply with the other provisions of
TIA (S) 314(a).
Limitation on Restrictive Covenants
Notwithstanding any other provisions of the Indenture, the restrictive
covenants set forth therein, including, without limitation, those described
under "--Limitation on Restricted Payments," "--Limitation on Transactions
with Affiliates," "--Limitation on Sale and Leaseback Transactions," "--
Limitation on Asset Sales," "--Limitation on Liens" and "--Merger,
Consolidation and Sale of Assets," shall be and shall be deemed limited to the
extent necessary so that the creation, existence and effectiveness of such
restrictive covenants shall not result in a breach of the covenant of the
Series B Indenture relating to "--Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries."
Events of Default
The following events are defined in the Indenture as "Events of Default":
(a) the failure to pay interest on any then outstanding Exchange Notes or
Private Notes, when the same becomes due and payable and the default
continues for a period of 30 days;
(b) the failure to pay the principal on any then outstanding Exchange
Notes or Private Notes, when such principal becomes due and payable, at
maturity, upon redemption or otherwise (including the failure to make a
payment to purchase any Exchange Notes or Private Notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer);
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(c) a default in the observance or performance of any of the covenants
described under "Limitation on Incurrence of Additional Indebtedness",
"Limitation on Restricted Payments", "Limitation on Dividend and Other
Payment Restrictions Affecting Subsidiaries", "Limitation on Preferred
Stock of Restricted Subsidiaries", "Limitation on Liens", "Merger,
Consolidation and Sale of Assets", "Limitation on Transactions with
Affiliates" and "Limitation on Sale and Leaseback Transactions" which
default continues for a period of 30 days after Coinmach receives written
notice specifying the default (and demanding that such default be remedied)
from the Trustee or the Holders of at least 25% of the then outstanding
principal amount of the Exchange Notes and Private Notes (except in the
case of a default with respect to the "Merger, Consolidation and Sale of
Assets" covenant, which will constitute an Event of Default with such
notice requirement but without such passage of time requirement);
(d) a default in the observance or performance of any other covenant or
agreement contained in the Indenture which default continues for a period
of 60 days after Coinmach receives written notice specifying the default
(and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the then
outstanding Exchange Notes and Private Notes;
(e) a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of Coinmach or of any Restricted Subsidiary of Coinmach (or
the payment of which is guaranteed by Coinmach or any Restricted Subsidiary
of Coinmach), whether such Indebtedness now exists or is created after the
Issue Date, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness after any applicable
grace period provided in such Indebtedness on the date of such default (a
"payment default") or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of
any such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the maturity
of which has been so accelerated, aggregates $3,500,000;
(f) one or more judgments in an aggregate amount in excess of $3,500,000
shall have been rendered against Coinmach or any of its Restricted
Subsidiaries and such judgments remain undischarged, unpaid or unstayed for
a period of 60 days after such judgment or judgments become final and non-
appealable; or
(g) certain events of bankruptcy affecting Coinmach or any of its
Significant Subsidiaries.
If an Event of Default (other than an Event of Default specified in clause
(g) above) shall occur and be continuing and has not been waived, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding
Exchange Notes and Private Notes may declare the principal of and accrued
interest on all the Exchange Notes and Private Notes to be due and payable by
notice in writing to Coinmach and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same shall become immediately due and payable. If an Event
of Default specified in clause (g) above occurs and is continuing, then all
unpaid principal of, and premium, if any, and accrued and unpaid interest on
all of the then outstanding Exchange Notes and Private Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the Exchange Notes and Private Notes as described in the
preceding paragraph, the Holders of a majority in principal amount of the then
outstanding Exchange Notes and Private Notes may rescind and cancel such
declaration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due
solely because of the acceleration and (iii) to the extent the payment of such
interest is lawful, if interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
The Holders of a majority in principal amount of the then outstanding
Exchange Notes and Private Notes may waive any existing Default or Event of
Default under the Indenture, and its consequences, except a default in the
payment of the principal of or interest on any Exchange Notes or Private
Notes.
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Holders of the Exchange Notes may not enforce the Indenture or the Exchange
Notes except as provided in the Indenture and under the TIA. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Holders, unless
such Holders have offered to the Trustee reasonable indemnity. Subject to all
provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the then outstanding Exchange Notes and Private
Notes have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee.
Under the Indenture, Coinmach is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining actual
knowledge of any Default or Event of Default (provided that such officers
shall provide such certification at least annually whether or not they know of
any Default or Event of Default) that has occurred and, if applicable,
describe such Default or Event of Default and the status thereof.
No past, present or future director, officer, employee, incorporator or
stockholder of Coinmach, as such, shall have any liability for any obligations
of Coinmach under the Exchange Notes or the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
holder by accepting an Exchange Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the
Exchange Notes.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Coinmach may, at its option and at any time, elect to have its obligations
discharged with respect to the outstanding Exchange Notes ("Legal
Defeasance"). Such Legal Defeasance means that Coinmach shall be deemed to
have paid and discharged the entire indebtedness represented by the
outstanding Exchange Notes, except for (i) the rights of Holders to receive
payments in respect of the principal of, premium, if any, and interest on the
Exchange Notes when such payments are due, (ii) Coinmach's obligations with
respect to the Exchange Notes concerning issuing temporary Exchange Notes,
registration of Exchange Notes, mutilated, destroyed, lost or stolen Exchange
Notes and the maintenance of an office or agency for payments, (iii) the
rights, powers, trust, duties and immunities of the Trustee and Coinmach's
obligations in connection therewith and (iv) the Legal Defeasance provisions
of the Indenture. In addition, Coinmach may, at its option and at any time,
elect to have the obligations of Coinmach released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Exchange Notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, reorganization and insolvency events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the Exchange Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
Coinmach must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable U.S. government obligations,
or a combination thereof, in such amounts and at such times as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, and interest on all then
outstanding Exchange Notes and Private Notes on the stated date for payment
thereof or on the applicable redemption date, as the case may be; (ii) in the
case of Legal Defeasance, Coinmach shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) Coinmach has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of counsel
shall confirm that, the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, Coinmach shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant
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Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at
any time in the period ending on the 91st day after the date of deposit; (v)
such deposit shall not result in a breach or violation of, or constitute a
default under the Indenture or any other material agreement or instrument to
which Coinmach or any of its Subsidiaries is a party or by which Coinmach or
any of its Subsidiaries is bound; (vi) Coinmach shall have delivered to the
Trustee an officers' certificate stating that the deposit was not made by
Coinmach with the intent of preferring the Holders over any other creditors of
Coinmach or with the intent of defeating, hindering, delaying or defrauding
any other creditors of Coinmach or others; (vii) Coinmach shall have delivered
to the Trustee an officers' certificate and an opinion of counsel, each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with; (viii) Coinmach
shall have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; and (ix) certain other
customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Exchange Notes, as expressly provided for in the Indenture) as to all
outstanding Exchange Notes when (i) either (a) all then outstanding Exchange
Notes and Private Notes theretofore authenticated and delivered (except lost,
stolen or destroyed Exchange Notes and Private Notes which have been replaced
or paid and Exchange Notes and Private Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by
Coinmach and thereafter repaid to Coinmach or discharged from such trust) have
been delivered to the Trustee for cancellation or (b) all then outstanding
Exchange Notes and Private Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and Coinmach has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Exchange Notes
and Private Notes not theretofore delivered to the Trustee for cancellation,
for principal of, premium, if any, and interest on such Exchange Notes and
Private Notes to the date of deposit together with irrevocable instructions
from Coinmach directing the Trustee to apply such funds to the payment thereof
at maturity or redemption, as the case may be; (ii) Coinmach has paid all
other sums payable under the Indenture by Coinmach; and (iii) Coinmach has
delivered to the Trustee an officers' certificate and an opinion of counsel
stating that all conditions precedent under the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, Coinmach and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such change does
not adversely affect the rights of any of the Holders in any material respect.
Other modifications and amendments of the Indenture may be made with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Exchange Notes and Private Notes issued under the Indenture,
except that, without the consent of each Holder affected thereby, no amendment
may: (i) reduce the amount of Exchange Notes and Private Notes whose Holders
must consent to an amendment, supplement or waiver of any provision of the
Indenture or such Exchange Notes and Private Notes; (ii) reduce the rate of or
change or have the effect of changing the time for payment of interest,
including defaulted interest, on any Exchange Notes or Private Notes; (iii)
reduce the principal of or change or have the effect of changing the fixed
maturity of any Exchange Notes or Private Notes, or change the date on which
any Exchange Notes or Private Notes may be subject to redemption or
repurchase, or reduce the redemption or repurchase price therefor; (iv) make
any Exchange Notes or Private Notes payable in money other than that stated in
the Exchange Notes or Private Notes; (v) make any change in provisions of the
Indenture protecting the right of each Holder to receive payment of principal
of and interest on such Exchange Note or Private Note on or after the due date
thereof or to bring suit to enforce such
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payment, or permitting Holders of a majority in principal amount of the then
outstanding Exchange Notes and Private Notes to waive Defaults or Events of
Default; or (vi) modify or change any provision of the Indenture or the
related definitions affecting the ranking of the then outstanding Exchange
Notes and Private Notes in a manner which adversely affects the Holders. In
addition, without the consent of the Holders of at least 75% of the then
outstanding Exchange Notes and Private Notes, no amendment may amend, change
or modify in any material respect the obligation of Coinmach to make or
consummate a Change of Control Offer in the event of a Change of Control or
make and consummate a Net Proceeds offer with respect to any Asset Sale that
has been consummated or modify any of the provisions or definitions with
respect thereto.
GOVERNING LAW
The Indenture provides that it and the Exchange Notes will be governed by,
and construed in accordance with, the laws of the State of New York but
without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be
required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture,
and use the same degree of care and skill in its exercise as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of Coinmach, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if
the Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
DELIVERY AND FORM; BOOK-ENTRY PROCEDURES
The Exchange Notes will initially be issued in the form of one or more
fully-registered global notes (collectively, the "Global Note") which will be
deposited on the date of the closing of the Exchange Offer with, or on behalf
of, The Depository Trust Company (the "Depository") and registered in the name
of Cede & Co., as nominee of the Depository (such nominee being referred to
herein as the "Global Note Registered Owner"). Except as set forth below, the
Global Note may be transferred, in whole and not in part, only to another
nominee of the Depository or to a successor of the Depository or its nominee.
Series B Notes and Private Notes that were originally issued or subsequently
transferred in the form of registered definitive certificates ("Certificated
Senior Notes") upon the exchange thereof in accordance with the Exchange
Offer, thereafter initially will be represented by an interest in the Global
Note representing the same principal amount of Exchange Notes as that of the
Series B Notes or Private Notes so exchanged.
The Depository has advised Coinmach that the Depository is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance settlement
of transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks,
trust companies, clearing corporations and certain other organizations. Access
to the Depository's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of the Depository only
through the Participants or the Indirect Participants. The ownership interest
and transfer
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of ownership interest of each actual purchaser of each security held by or on
behalf of the Depository are recorded on the records of the Participants and
Indirect Participants.
Coinmach expects that pursuant to the procedures established by the
Depository, (i) upon deposit of the Global Note, the Depository will credit
the accounts of Participants designated by the Trustee in its capacity as
Exchange Agent with portions of the principal amount of the Global Note and
(ii) ownership of such interests in the Global Note will be shown on, and the
transfer of ownership thereof will be effected only through, records
maintained by the Depository (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Note). The laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Exchange Notes will be limited
to that extent. For certain other restrictions on the transferability of the
Exchange Notes, see "Plan of Distribution."
So long as the Global Note Registered Owner is the registered owner of any
Exchange Notes, the Global Note Registered Owner will be considered the sole
owner of the Exchange Notes represented by such Global Note. Beneficial owners
of Exchange Notes evidenced by the Global Note will not be considered the
owners or holders thereof under the Indenture or Coinmach's articles of
incorporation for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee. As a result, the ability
of a person having a beneficial interest in the Exchange Notes represented by
a Global Note to pledge such interest to persons or entities that do not
participate in the Depository's system or to otherwise take actions in respect
of such interest may be affected by the lack of a physical certificate
evidencing such interest. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of Exchange Notes by the Depository, or for
maintaining, supervising or reviewing any records of the Depository relating
to such Exchange Notes.
Except as described below, owners of interests in the Global Note will not
have Exchange Notes registered in their names, will not receive physical
delivery of Exchange Notes in definitive form and will not be considered the
registered owners or holders thereof under the Indenture for any purpose.
Payments in respect of the principal of and premium, if any, and interest on
any Exchange Notes registered in the name of the Global Note Registered Owner
will be payable by the Trustee to the Global Note Registered Owner in its
capacity as the registered Holder under the Indenture. Under the terms of the
Indenture, Coinmach and the Trustee will treat the persons in whose names the
Exchange Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, neither Coinmach, the Trustee nor any agent
of Coinmach or the Trustee has or will have any responsibility or liability
for (i) any aspect of the Depository's records or any Participant's records
relating to or payments made on account of beneficial ownership interests in
the Global Note, or for maintaining, supervising or reviewing any of the
Depository's records or any Participant's records relating to the beneficial
ownership interest in the Global Note or (ii) any other matter relating to the
actions and practices of the Depository or any of its Participants.
The Depository has advised Coinmach that its current practice, upon receipt
of any payment in respect of securities such as the Exchange Notes (including
principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in principal amount of beneficial interests in the
relevant security as shown on the records of the Depository unless the
Depository has reason to believe it will not receive payment on such payment
date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Exchange Notes will be governed by standing instructions
and customary practices and will be the responsibility of the Participants or
the Indirect Participants and will not be the responsibility of the
Depository, the Trustee or Coinmach.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
any Global Note may, upon request to the Trustee, exchange such beneficial
interest for Exchange Notes in the form of Certificated Securities. Upon
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any such issuance, the Trustee is required to register such Certificated
Securities in the name of, and cause the same to be delivered to, such persons
(or the nominee of any thereof). In addition, if (i) the Depository notifies
Coinmach that it is unwilling or unable to continue as Depository for the
Global Note and Coinmach thereupon fails to appoint a successor Depository or
(ii) there shall have occurred and be continuing an Event of Default or any
event which after notice or lapse of time or both would be an Event of Default
with respect to the Exchange Notes or (iii) Coinmach, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Exchange Notes
in the form of Certificated Securities, then, upon surrender by the Global
Note Registered Owner of its Global Note, Exchange Notes in such form will be
issued to each person that the Global Notes Registered Owner and the
Depository identify as being the beneficial owner of the related Exchange
Notes.
Neither Coinmach nor the Trustee will be liable for any delay by the
Depository or any of its Participants in identifying the beneficial owners of
the Exchange Notes, and Coinmach and the Trustee may conclusively rely on and
will be protected in relying on instructions from the Global Note Registered
Owner for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Note (including principal, premium and interest) be
made by wire transfer of immediately available funds to the accounts specified
by the Global Note Registered Owner. With respect to Certificated Securities,
Coinmach will make all payments in respect of the Exchange Notes (including
principal, premium and interest) by mailing a check to each such Holder's
registered address. Secondary trading in long-term notes of corporate issuers
is generally settled in clearing-house or next-day funds. In contrast, the
Exchange Notes represented by the Global Note are expected to trade in the
Depository's Same-Day Funds Settlement System, and any permitted secondary
trading activity in such Exchange Notes will, therefore, be required by the
Depository to be settled in immediately available funds. Coinmach expects that
secondary trading in the Certificated Securities will also be settled in
immediately available funds.
The information in this section concerning the Depository and the
Depository's book-entry system has been obtained from sources that Coinmach
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of Coinmach or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary of
Coinmach or such acquisition, and which Indebtedness is without recourse to
Coinmach or any of its Subsidiaries or to any of their respective properties
or assets other than the Person or the assets to which such Indebtedness
related prior to the time such Person becomes a Restricted Subsidiary of
Coinmach or the time of such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Asset Acquisition" means (a) an Investment by Coinmach or any Restricted
Subsidiary of Coinmach in any other Person pursuant to which such Person shall
become a Restricted Subsidiary of Coinmach or any
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Restricted Subsidiary of Coinmach, or shall be merged with or into Coinmach or
any Restricted Subsidiary of Coinmach, or (b) the acquisition by Coinmach or
any Restricted Subsidiary of Coinmach of the assets of any Person (other than
a Restricted Subsidiary of Coinmach) which constitute all or substantially all
of the assets of such Person or comprise any division or line of business of
such Person or any other properties or assets of such Person other than in the
ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by Coinmach or any
of its Restricted Subsidiaries (including any Sale and Leaseback Transaction)
to any Person other than Coinmach or a Wholly-Owned Restricted Subsidiary of
Coinmach of (a) any Capital Stock of any Restricted Subsidiary of Coinmach; or
(b) any other property or assets of Coinmach or any Restricted Subsidiary of
Coinmach other than in the ordinary course of business; provided, however,
that Asset Sales shall not include (i) a transaction or series of related
transactions for which Coinmach or its Restricted Subsidiaries receive
aggregate consideration of less than $250,000 and (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of Coinmach as permitted under "Merger, Consolidation and Sale of
Assets."
"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to
any Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.; (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of
at least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's
Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptances
maturing within one year from the date of acquisition thereof issued by any
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $250,000,000; (v) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in
clause (iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any Person or "Group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act,
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except that a Person shall be deemed to have beneficial ownership of all
shares that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of a majority of the total outstanding Voting Stock of Coinmach
Laundry or Coinmach; provided that the Permitted Holders "beneficially own"
(as so defined) a lesser percentage of such Voting Stock than such other
Person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of Coinmach; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of Coinmach Laundry or Coinmach (together with any new directors
whose election to such Board of Directors, or whose nomination for election by
the stockholders of Coinmach Laundry or Coinmach, was approved by a vote of a
majority of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of such
Board of Directors then in office; provided, however, there shall be no Change
of Control pursuant to this clause (ii) if during such two-year period the
Permitted Holders continue to own, directly or indirectly, a majority of the
Voting Stock of Coinmach; or (iii) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or
substantially all of the assets of Coinmach Laundry or Coinmach to any Person
or Group, together with any Affiliates thereof (whether or not otherwise in
compliance with the provisions of the Indenture) that are not controlled,
directly or indirectly, by the Permitted Holders.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income plus (ii) to the
extent that any of the following shall have been taken into account in
determining Consolidated Net Income, (A) all income taxes of such Person and
its Restricted Subsidiaries paid or accrued in accordance with GAAP for such
period (other than income taxes attributable to extraordinary, unusual or
nonrecurring gains or losses or taxes attributable to sales or dispositions of
assets outside the ordinary course of business), (B) Consolidated Interest
Expense, amortization expense and depreciation expense, and (C) Consolidated
Non-cash Charges less other non-cash items increasing Consolidated Net Income
for such period, all as determined on a consolidated basis for such Person and
its Restricted Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction or event giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed
Charges of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Restricted Subsidiaries (and the application of the proceeds therefrom) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds therefrom), other than
the incurrence or repayment of Indebtedness in the ordinary course of business
for working capital purposes pursuant to working capital facilities, at any
time subsequent to the first day of the Four Quarter Period and on or prior to
the Transaction Date, as if such incurrence or repayment, as the case may be
(and the application of the proceeds thereof), occurred on the first day of
the Four Quarter Period, and (ii) any Asset Sales or Asset Acquisition
(including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of any such Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness at any time subsequent to the first day of
the Four Quarter Period and on or prior to the Transaction Date), as if such
Asset Sale or Asset Acquisition (including the incurrence, assumption or
liability for any such Indebtedness or Acquired Indebtedness and also
including any Consolidated EBITDA associated with such Asset
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Acquisition) occurred on the first day of the Four Quarter Period; provided
that the Consolidated EBITDA of any Person acquired shall be included only to
the extent includible pursuant to the definition of "Consolidated Net Income."
If such Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on Indebtedness determined on a fluctuating basis as of the
Transaction Date (including Indebtedness actually incurred on the Transaction
Date) and which will continue to be so determined thereafter shall be deemed
to have accrued at a fixed rate per annum equal to the rate of interest on
such Indebtedness in effect on the Transaction Date; and (2) notwithstanding
clause (1) above, interest on Indebtedness determined on a fluctuating basis,
to the extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(including amortization or write-off of deferred financing costs of such
Person and its consolidated Restricted Subsidiaries during such period and any
premium or penalty paid in connection with redeeming or retiring Indebtedness
of such Person and its consolidated Restricted Subsidiaries prior to the
stated maturity thereof pursuant to the agreements governing such
Indebtedness, other than (A) such amortization or write off of deferred
financing costs incurred by Coinmach or any of its Restricted Subsidiaries in
connection with the Merger or (B) any premium or penalty paid on the date on
which the Series A Notes were originally issued in connection with the
redemption of Coinmach's 12 3/4% Senior Notes due 2001 or Coinmach's 13 3/4%
Senior Subordinated Debenture due 2002), plus (ii) the product of (x) the
amount of all dividend payments on any series of Preferred Stock of such
Person (other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such
Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of the interest expense of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, as
determined in accordance with GAAP, and including, without duplication, (a)
all amortization of original issue discount; (b) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period; (c)
net cash costs under all Interest Swap Obligations (including amortization of
fees); (d) all capitalized interest; and (e) the interest portion of any
deferred payment obligations for such period.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
and losses from Asset Sales or abandonments or reserves relating thereto, (b)
after-tax items classified as extraordinary or nonrecurring gains, (c) the net
income of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it becomes a Restricted Subsidiary of the referent Person or
is merged or consolidated with the referent Person or any Restricted
Subsidiary of the referent Person, (d) the net income (but not loss) of any
Restricted Subsidiary of the referent Person to the extent that the
declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is restricted by a contract, operation of law or
otherwise, (e) the net income of any Person, other than a Restricted
Subsidiary of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Wholly-Owned Restricted
Subsidiary of the referent Person by such Person, (f) any restoration to
income of any material contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the date on which the Series A Notes were originally
issued, (g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued), (h) all gains and losses
realized on or because of the purchase or other acquisition by such Person
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or any of its Restricted Subsidiaries of any securities of such person or any
of its Restricted Subsidiaries, (i) relocation, severance and other employee
costs not to exceed $2,000,000 incurred in connection with the Merger, (j) any
other restructuring reserves or charges (provided, however, that any cash
payments actually made after the date on which the Series A Notes were
originally issued with respect to liabilities for which such restructuring
reserves or charges were created shall be deducted from Consolidated Net
Income in the period when made), in each case, incurred by Coinmach or any of
its Restricted Subsidiaries in connection with the Merger, (k) all non-cash
depreciation and amortization charges (excluding the amortization of goodwill)
resulting from purchase accounting adjustments with respect to transactions
prior to the date on which the Series A Notes were originally issued, and (l)
in the case of a successor to the referent Person by consolidation or merger
or as a transferee of the referent Person's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of
assets.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Net Tangible Assets" means, with respect to any Person, as at
any date, the total amount of assets of such Person and its Restricted
Subsidiaries and after deducting therefrom (i) all current liabilities, (ii)
appropriate adjustments on account of minority interests of other Persons
holding shares of Capital Stock of any Subsidiary of the referent Person and
(iii) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and all other like intangibles, all as set forth on the
most recent consolidated balance sheet of the referent Person and its
Restricted Subsidiaries and computed in accordance with GAAP; provided,
however, that route contracts shall be deemed to be tangible assets.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net
Income of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, as determined in accordance with GAAP (excluding any such
charges constituting an extraordinary item or loss or any such charge which
requires an accrual of or a reserve for cash charges for any future period).
"Credit Agreement" means the Credit Agreement, dated as of January 8, 1997,
between the Company and Bankers Trust Company, First Union National Bank of
North Carolina, Lehman Commercial Paper, Inc. and other lending institutions
named therein (which replaced the Credit Agreement dated as of the date on
which the Series A Notes were originally issued, between Coinmach and Heller
Financial, Inc., referred in the Series B Indenture), together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the "Limitation on Incurrence of
Additional Indebtedness" covenant above) or adding Subsidiaries of Coinmach as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the sole option of the holder thereof on or prior to the
final maturity date of the Senior Notes for cash.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
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"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of Coinmach acting
reasonably and in good faith and shall be evidenced by a Board Resolution of
the Board of Directors of Coinmach delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the date on which
the Series A Notes were originally issued.
"Holder" means the Person in whose name a Senior Note is registered on the
Registrar's books.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
Obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all Obligations under any title
retention agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business that are not overdue by
90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all Obligations of any other Person of
the type referred to in clauses (i) through (vi) which are secured by any lien
on any property or asset of such Person, the amount of such Obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the Obligation so secured, (viii) all Obligations under currency
agreements and interest swap agreements of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value shall be determined reasonably and in good faith
by the Board of Directors of the issuer of such Disqualified Capital Stock.
"Independent Financial Advisor" means an investment banking firm (i) which
does not, and whose directors, officers and employees or Affiliates do not,
have a direct or indirect financial interest in Coinmach and (ii) which, in
the judgment of the Board of Directors of Coinmach, is otherwise independent
and qualified to perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated
by applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of
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Indebtedness issued by, any Person. "Investment" shall exclude extensions of
trade credit by Coinmach and its Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of Coinmach or such
Restricted Subsidiary, as the case may be. For the purposes of the "Limitation
on Restricted Payments" covenant, (i) "Investment" shall include and be valued
at the fair market value of the net assets of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary
and shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments
by Coinmach or any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts received
in respect of such Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If Coinmach or any
Restricted Subsidiary of Coinmach sells or otherwise disposes of any Common
Stock of any direct or indirect Restricted Subsidiary of Coinmach such that,
after giving effect to any such sale or disposition, Coinmach no longer owns,
directly or indirectly, 100% of the outstanding Common Stock of such
Restricted Subsidiary, Coinmach shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Private Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).
"Merger" means the merger of the former The Coinmach Corporation into Solon
Automated Services, Inc., with Solon Automated Services, Inc. surviving and
changing its name to Coinmach Corporation.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by Coinmach or any of its Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking
into account any reduction in consolidated tax liability due to available tax
credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by Coinmach or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by Coinmach or
any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Permitted Holders" means Golder, Thoma, Cressey, Rauner, Inc. or any entity
controlled thereby.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Series B Notes, the Private Notes, the
Exchange Notes, the Series B Indenture and the Indenture;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $35
million (increased by Indebtedness described in any other clause of this
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definition of "Permitted Indebtedness"), reduced by any required permanent
repayments actually made (which are accompanied by a corresponding
permanent commitment reduction) thereunder;
(iii) other Indebtedness of Coinmach and its Restricted Subsidiaries
outstanding on the date on which the Series A Notes were originally issued
reduced by the amount of any scheduled amortization payments or mandatory
prepayments when actually paid or permanent reductions thereon;
(iv) Interest Swap Obligations of Coinmach covering Indebtedness of
Coinmach or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of Coinmach covering Indebtedness
of such Restricted Subsidiary; provided, however, that such Interest Swap
Obligations are entered into to protect Coinmach and its Restricted
Subsidiaries from fluctuations in interest rates on Indebtedness incurred
in accordance with the Indenture to the extent the notional principal
amount of such Interest Swap Obligation does not exceed the principal
amount of the Indebtedness to which such Interest Swap Obligation relates;
(v) Indebtedness of a Wholly-Owned Restricted Subsidiary of Coinmach to
Coinmach or to a Wholly- Owned Restricted Subsidiary of Coinmach for so
long as such Indebtedness is held by Coinmach or a Wholly-Owned Restricted
Subsidiary of Coinmach, in each case subject to no Lien held by a Person
other than Coinmach or a Wholly-Owned Restricted Subsidiary of Coinmach;
provided that if as of any date any Person other than Coinmach or a Wholly-
Owned Restricted Subsidiary of Coinmach owns or holds any such Indebtedness
or holds a Lien in respect of such Indebtedness, such date shall be deemed
the incurrence of Indebtedness not constituting Permitted Indebtedness by
the issuer of such Indebtedness;
(vi) Indebtedness of Coinmach to a Wholly-Owned Restricted Subsidiary of
Coinmach for so long as such Indebtedness is held by a Wholly-Owned
Restricted Subsidiary of Coinmach, in each case subject to no Lien;
provided that (a) any Indebtedness of Coinmach to any Wholly-Owned
Restricted Subsidiary of Coinmach is unsecured and subordinated, pursuant
to a written agreement, to Coinmach's obligations under the Indenture and
the Senior Notes and (b) if as of any date any Person other than a Wholly-
Owned Restricted Subsidiary of Coinmach owns or holds any such Indebtedness
or any Person holds a Lien in respect of such Indebtedness, such date shall
be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by Coinmach;
(vii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within two business days of incurrence;
(viii) Indebtedness of Coinmach or any of its Restricted Subsidiaries
represented by letters of credit for the account of Coinmach or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business;
(ix) Refinancing Indebtedness;
(x) Capital Lease Obligations and purchase money Indebtedness used to
finance the acquisition of property or assets of Coinmach or any Restricted
Subsidiary in the ordinary course of business in an aggregate principal
amount not to exceed $15 million at any one time outstanding; and
(xi) additional Indebtedness of Coinmach in an aggregate principal amount
not to exceed $10 million at any one time outstanding.
"Permitted Investments" means (i) Investments by Coinmach or any Restricted
Subsidiary of Coinmach in any Person that is or will become immediately after
such Investment a Wholly-Owned Restricted Subsidiary of Coinmach or that will
merge or consolidate into Coinmach or a Wholly-Owned Restricted Subsidiary,
(ii) Investments in Coinmach by any Restricted Subsidiary of Coinmach;
provided that any Indebtedness evidencing such Investment is unsecured and
subordinated, pursuant to a written agreement, to Coinmach's obligations
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<PAGE>
under the Exchange Notes, the Private Notes and the Indenture; (iii)
investments in cash and Cash Equivalents; (iv) loans and advances to employees
and officers of Coinmach and its Restricted Subsidiaries to assist with
relocation expenses incurred in connection with the Merger; (v) loans and
advances to employees and officers of Coinmach and its Restricted Subsidiaries
in the ordinary course of business for bona fide business purposes not in
excess of $500,000 at any one time outstanding; (v) Interest Swap Obligations
entered into in the ordinary course of Coinmach's or its Restricted
Subsidiaries' businesses and otherwise in compliance with the Indenture; (vi)
Investments in securities of trade creditors or customers received pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers; (vii) Investments in the
Series B Notes, the Private Notes or the Exchange Notes; and (viii)
Investments made by Coinmach or its Restricted Subsidiaries as a result of an
Asset Sale made in compliance with the "Limitation on Asset Sales" covenant.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which Coinmach or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of Coinmach or
any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of Coinmach or
any Restricted Subsidiary of Coinmach acquired in the ordinary course of
business; provided, however, that (A) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of Coinmach or any Restricted
Subsidiary of Coinmach other than the property and assets so acquired and
(B) the Lien securing such Indebtedness shall be created within 90 days of
such acquisition;
(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
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<PAGE>
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of Coinmach or
any of its Restricted Subsidiaries, including rights of offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture; and
(xii) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by Coinmach or
a Restricted Subsidiary of Coinmach and were not granted in connection
with, or in anticipation of, the incurrence of such Acquired Indebtedness
by Coinmach or a Restricted Subsidiary of Coinmach and (B) such Liens do
not extend to or cover any property or assets of Coinmach or of any of its
Restricted Subsidiaries other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of Coinmach or a Restricted Subsidiary of Coinmach and are no
more favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by
Coinmach or a Restricted Subsidiary of Coinmach.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by Coinmach or any
Restricted Subsidiary of Indebtedness incurred in accordance with the
"Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clause (ii), (iv), (v), (vi), (vii), (viii) or (x) of the
definition of Permitted Indebtedness), that does not (1) result in an increase
in the aggregate principal amount of Indebtedness of such Person as of the
date of such proposed Refinancing (plus the amount of any premium required to
be paid under the terms of the instrument governing such Indebtedness and plus
the amount of reasonable expenses incurred by Coinmach in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness of Coinmach, then such
Refinancing Indebtedness shall be Indebtedness solely of Coinmach and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Exchange
Notes and the Private Notes, then such Refinancing Indebtedness shall be
subordinate to the Exchange Notes and the Private Notes at least to the same
extent and in the same manner as the Indebtedness being Refinanced.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means one or more revolving credit facilities
under the Credit Agreement.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to Coinmach or a Restricted Subsidiary of any property, whether owned
by Coinmach or any Restricted Subsidiary at the date on which the Series A
Notes were originally issued or later acquired, which has been or is to be
sold or transferred by Coinmach or such Restricted Subsidiary to such Person
or to any other Person from whom funds have been or are to be advanced by such
Person on the security of such Property.
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"Series B Indenture" means the Indenture dated as of November 30, 1995, as
amended and supplemented, between the Company and State Street Bank and Trust
Company (formerly Shawmut Bank Connecticut, National Association), as Trustee,
providing for the issuance of the Series A Notes and the Series B Notes in the
aggregate principal amount of $196,655,000, as such may be amended and
supplemented from time to time.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(v) of
Regulation S-X under the Securities Act.
"Subsidiary", with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, Coinmach or any other Subsidiary of Coinmach that is not a
Subsidiary of the Subsidiary to be so designated; provided that (x) Coinmach
certifies to the Trustee that such designation complies with the "Limitation
on Restricted Payments" covenant and (y) each Subsidiary to be so designated
and each of its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to
which the lender has recourse to any of the assets of Coinmach or any of its
Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving
effect to such designation, Coinmach is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the "Limitation on Incurrence of Additional Indebtedness" covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an officers' certificate certifying that such
designation complied with the foregoing provisions.
"Voting Stock" means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holders thereof (whether
at all times or only so long as no senior class of stock has voting power by
reason of any contingency) to vote in the election of members of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly-Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities
(other than in the case of a foreign Restricted Subsidiary, directors'
qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned by such Person or any
Wholly-Owned Restricted Subsidiary of such Person.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion, which was prepared by Anderson Kill & Olick, P.C.,
counsel to the Company, summarizes the material U.S. federal income tax
consequences of the exchange of the Private Notes and the Series B Notes for
the Exchange Notes. The discussion is based on provisions of the Code, its
legislative history, judicial authority, current administrative rulings and
practice, and Treasury Regulations. Legislative, judicial or administrative
changes or interpretations after the date hereof could alter or modify the
validity of the statements and conclusions set forth below. Any such changes
or interpretations may be retroactive and could adversely affect a Holder of
the Series B Notes, the Private Notes or the Exchange Notes.
This discussion does not purport to deal with all aspects of U.S. federal
income taxation that might be relevant to particular Holders in light of their
personal investment or tax circumstances or status, nor does it discuss the
U.S. federal income tax consequences to certain types of Holders subject to
special treatment under the U.S. federal income tax laws, such as financial
institutions, insurance companies, dealers in securities or foreign currency,
tax-exempt organizations, foreign corporations or nonresident alien
individuals, or persons holding Private Notes or Exchange Notes that are a
hedge against, or that are hedged against, currency risk or that are part of a
straddle or conversion transaction, or persons whose functional currency is
not the U.S. dollar. Moreover, the effect of any applicable state, local or
foreign tax laws is not discussed.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. EACH HOLDER OF
EITHER A PRIVATE NOTE OR A SERIES B NOTE THAT IS PARTICIPATING IN THE EXCHANGE
OFFER IS STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISORS TO DETERMINE THE
IMPACT OF SUCH HOLDER'S PARTICULAR TAX SITUATION ON THE ANTICIPATED TAX
CONSEQUENCES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN OR
OTHER TAX LAWS, OF THE EXCHANGE OF THE PRIVATE NOTES OR THE SERIES B NOTES FOR
THE EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER.
EXCHANGE OFFER
The exchange of the Private Notes or the Series B Notes by any Holder for
the Exchange Notes pursuant to the Exchange Offer should not be treated as an
"exchange" for federal income tax purposes because the Exchange Notes should
not be considered to differ materially in kind or in extent from the Private
Notes or the Series B Notes. Rather, the Exchange Notes received by any Holder
should be treated as a continuation of the Private Notes or the Series B
Notes, as the case may be, in the hands of such Holder. As a result, there
should be no federal income tax consequences to Holders exchanging the Private
Notes or the Series B Notes for the Exchange Notes pursuant to the Exchange
Offer, and the federal income tax consequences of holding and disposing of the
Exchange Notes should be the same as the federal income tax consequences of
holding and disposing of the Private Notes or the Series B Notes. In addition,
a Holder's adjusted tax basis in the Exchange Notes or the Series B Notes will
be the same as its adjusted tax basis in the Private Notes or the Series B
Notes exchanged therefor and its holding period for the Private Notes or the
Series B Notes will be included in its holding period for the Exchange Notes.
Further, the determination of gain on a sale or other disposition of the
Exchange Notes will be the same as for the Private Notes or the Series B
Notes.
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<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in exchange for Series B Notes and
Private Notes may be offered for resale, resold and otherwise transferred by
any holder thereof (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement with any
person to participate in the distribution of such Exchange Notes. Each Holder
will be required to acknowledge in the Letter of Transmittal that it is not
engaged in, and does not intend to engage in, a distribution of the Exchange
Notes. Accordingly, any Holder using the Exchange Offer to participate in a
distribution of the Exchange Notes will not be able to rely on such no-action
letters. Notwithstanding the foregoing, each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer will be
required to acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with any resale of Exchange Notes
received in exchange for Series B Notes or Private Notes where such Series B
Notes or Private Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that, for a period of 180
days from the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale. However, based on the above-mentioned interpretations by the
staff of the Commission, the Company believes that broker-dealers who acquired
the Series B Notes or Private Notes directly from the Company and not as a
result of market-making activities or other trading activities cannot rely on
such interpretations by the staff of the Commission and must, in the absence
of an exemption, comply with the registration and prospectus delivery
requirements of the Securities Act in connection with secondary resales of the
Exchange Notes. Such broker-dealers may not use this Prospectus, as it may be
amended or supplemented from time to time, in connection with any such resales
of the Exchange Notes. In addition, until , 1998 (90 days from the
date of this Prospectus), all dealers effecting transactions in the Exchange
Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be resold from time to time in one
or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes
may be deemed to be an "underwriter" within the meaning of the Securities Act,
and any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states by
acknowledging that it will deliver, and by delivering, a prospectus as
required, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days from the Expiration Date the Company will send a
reasonable number of additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company will pay all the fees and
expenses incident to the Exchange Offer (which expenses shall include, among
others, registration fees, fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, but shall not include
the expenses of any Holder in connection with resales of the Exchange Notes).
As of the date hereof, the Company estimates that such fees and expenses shall
not exceed approximately $504,000.
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LEGAL MATTERS
Certain legal matters with respect to the validity of the Exchange Notes
exchanged hereby will be passed upon for the Company by Anderson Kill & Olick,
P.C.
EXPERTS
The consolidated financial statements of Coinmach and its subsidiaries
appearing in Coinmach's Annual Report on Form 10-K for the year ended March
28, 1997, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included herein and incorporated herein by
reference; the consolidated financial statements of Coinmach and subsidiaries
(formerly Solon, which was combined with TCC and subsidiaries, a company under
common control, beginning April 5, 1995) as of September 29, 1995, and for the
period from April 5, 1995 to September 29, 1995 and from October 1, 1994 to
April 4, 1995, appearing in Coinmach's Annual Report on Form 10-K for the year
ended March 28, 1997, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included herein and
incorporated herein by reference; and the combined financial statements of
Kwik Wash Laundries, Inc. and KWL, Inc. appearing in Coinmach's Amendment No.
1 on Form 8-K/A to its Current Report on Form 8-K dated January 8, 1997, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements referred to above are included or incorporated herein by
reference in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
The financial statements of Solon as of September 30, 1994, for the fiscal
year then ended included and incorporated by reference in this Prospectus and
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as stated in their report thereon which are included and
incorporated by reference herein and have been so included and incorporated in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing and the Registration Statement in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
88
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
COINMACH CORPORATION AND SUBSIDIARIES ----
<S> <C>
Consolidated Financial Statements--Consolidated balance sheets of
Coinmach Corporation and Subsidiaries as of March 28, 1997 and March 29
1996 and the related consolidated statements of operations,
stockholder's equity (deficit), and cash flows for the year ended March
28, 1997, the six-month transition period ended March 29, 1996, the
period from April 5, 1995 to September 29, 1995, the period from
October 1, 1994 to April 4, 1995 and the year ended September 30, 1994
with accompanying notes and Report of Independent Auditors thereof..... F-2
Unaudited Consolidated Financial Statements--Consolidated balance sheet
of Coinmach Corporation and Subsidiaries as of September 26, 1997, and
the related Consolidated statements of operations, and cash flows for
the six month periods ended September 26, 1997 and September 27, 1996
with accompanying notes................................................ F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Coinmach Corporation
We have audited the accompanying consolidated balance sheets of Coinmach
Corporation and Subsidiaries (the "Company") as of March 28, 1997 and March
29, 1996, and the related combined and consolidated statements of operations,
stockholder's equity (deficit), and cash flows for the year ending March 28,
1997, the six-month transition period ended March 29, 1996, and the period
from April 5, 1995 to September 29, 1995 ("Successor period") and the related
consolidated statements of operations, stockholder's equity (deficit) and cash
flows for the period from October 1, 1994 to April 4, 1995 ("Predecessor
period"). 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 consolidated financial position of Coinmach
Corporation and Subsidiaries at March 28, 1997 and March 29, 1996, and the
combined and consolidated results of their operations and their cash flows for
years ending March 28, 1997, the six-month transition period ended March 29,
1996 and for the Successor period from April 5, 1995 to September 29, 1995 and
the consolidated results of their operations and their cash flows for the
Predecessor period from October 1, 1994 to April 4, 1995, in conformity with
generally accepted accounting principles.
As more fully described in Note 2 to the combined and consolidated financial
statements, Coinmach Laundry Corporation purchased Solon Automated Services,
Inc. ("Solon") as of April 5, 1995 in a business combination accounted for as
a purchase. Subsequent thereto, on November 30, 1995, The Coinmach
Corporation, a company under common control with Solon, was merged into Solon,
who thereupon changed its name to Coinmach Corporation, in a business
combination accounted for as though it were a pooling of interests. As a
result, the combined and consolidated financial statements for the periods
subsequent to April 5, 1995 are presented on a different basis of accounting
than that of the Predecessor periods and, therefore, are not comparable.
ERNST & YOUNG LLP
Melville, NY
May 13, 1997, except for Note 7b., as
to which the date is June 2, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Solon Automated Services, Inc.:
We have audited the consolidated balance sheet of Solon Automated Services,
Inc. (a Delaware corporation) and subsidiaries as of September 30, 1994 and
the related consolidated statements of operations, shareholders' equity
(deficit) and cash flows for the fiscal year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Solon Automated Services,
Inc. and subsidiaries as of September 30, 1994, and the results of their
operations and their cash flows for the fiscal year then ended, in conformity
with generally accepted accounting principles.
As further discussed in Note 1 to the consolidated financial statements,
effective October 2, 1993, the Company implemented the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
December 19, 1994
F-3
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
MARCH 28, MARCH 29,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................. $ 10,110 $ 19,723
Receivables, less allowance of $555 and $454............... 6,894 5,260
Inventories................................................ 7,959 4,443
Prepaid expenses........................................... 3,170 2,641
Advance rental payments.................................... 38,472 20,320
Property and equipment:
Laundry equipment and fixtures............................ 135,656 89,394
Land, building and improvements........................... 14,266 10,965
Trucks and other vehicles................................. 4,211 1,849
-------- --------
Less accumulated depreciation............................. 154,133 102,208
Net property and equipment................................. (42,017) (19,509)
-------- --------
112,116 82,699
Contract rights, net of accumulated amortization of $19,815
and $8,925................................................ 180,557 59,745
Goodwill, net of accumulated amortization of $5,574 and
$2,386.................................................... 95,771 44,071
Other assets............................................... 12,501 9,265
-------- --------
Total assets............................................... $467,550 $248,167
======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
COMBINED AND CONSOLIDATED BALANCE SHEETS
(IN THOUSAND OF DOLLARS, EXCEPT PAR VALUE AND SHARE DATA)
<TABLE>
<CAPTION>
MARCH MARCH
28, 1997 29, 1996
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Accounts payable........................................... $ 8,946 $ 5,944
Accrued commissions........................................ 10,573 7,380
Accrued interest........................................... 9,712 7,745
Other accrued expenses..................................... 8,986 7,557
Due to parent.............................................. 22,432 --
Deferred income taxes...................................... 65,650 18,924
11 3/4% senior notes....................................... 196,655 196,655
Credit facility............................................ 130,000 --
12 3/4% senior notes....................................... -- 5,000
Other long-term debt....................................... 2,623 1,110
Stockholder's equity (deficit):
Common stock, par value $.01:
1,000 shares authorized, 100 shares issued at March 28,
1997 and March 29, 1996................................. -- --
Capital in excess of par value............................. 41,391 18,104
Accumulated deficit........................................ (29,164) (18,560)
-------- --------
12,227 (456)
Notes receivable from management........................... (254) (1,692)
-------- --------
Total stockholder's equity (deficit)....................... 11,973 (2,148)
-------- --------
Total liabilities and stockholder's equity (deficit)....... $467,550 $248,167
======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX-MONTH
TRANSITION APRIL 5, OCTOBER 1,
YEAR ENDED PERIOD ENDED 1995 TO 1994 TO YEAR ENDED
MARCH 28, MARCH 29, SEPTEMBER 29, APRIL 4, SEPTEMBER 30,
1997 1996 1995 1995 1994
---------- ------------ ------------- ----------- -------------
SUCCESSOR PREDECESSOR PREDECESSOR
<S> <C> <C> <C> <C> <C>
Revenues................ $206,852 $ 89,070 $89,719 $52,207 $104,553
Costs and expenses:
Laundry operating
expenses............. 139,446 60,536 62,905 33,165 66,527
General and
administrative....... 4,520 2,024 2,458 1,539 2,839
Depreciation and
amortization......... 46,316 18,212 18,423 10,304 21,347
Gain on sale of
equipment............ -- -- -- -- (109)
Stock based
compensation charge.. 1,768 -- -- -- --
Restructuring -- -- 2,200 -- --
expenses............. -------- -------- ------- ------- --------
192,050 80,772 85,986 45,008 90,604
-------- -------- ------- ------- --------
Operating income........ 14,802 8,298 3,733 7,199 13,949
Interest expense, net... 27,417 11,830 11,541 8,928 18,105
-------- -------- ------- ------- --------
Loss before income taxes
and extraordinary (12,615) (3,532) (7,808) (1,729) (4,156)
items.................. -------- -------- ------- ------- --------
Provision (benefit) for
income taxes:
Currently payable..... 200 50 420 270 200
Deferred.............. (2,507) (1,048) (2,282) (220) 2,562
-------- -------- ------- ------- --------
(2,307) (998) (1,862) 50 2,762
-------- -------- ------- ------- --------
Loss before
extraordinary items..... (10,308) (2,534) (5,946) (1,779) (6,918)
Extraordinary items, net
of income tax benefits
of $206 and $5,305 for
the year ended March
28, 1997 and for the
six-month transition
period ended (296) (8,925) -- 848 --
March 29, 1996......... -------- -------- ------- ------- --------
Net loss................ $(10,604) $(11,459) $(5,946) $(2,627) $ (6,918)
======== ======== ======= ======= ========
Loss per share:
Before extraordinary item................................... $ (.12) $ (.44)
Extraordinary item.......................................... (.05) --
------- --------
Net loss per share............................................ $ (.17) $ (.44)
======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
COMBINED AND CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE AND SHARES)
<TABLE>
<CAPTION>
CLASS A CAPITAL IN RECEIVABLES TOTAL
COMMON COMMON EXCESS OF ACCUMULATED FROM STOCKHOLDER'S
STOCK STOCK PAR VALUE DEFICIT MANAGEMENT EQUITY (DEFICIT)
------ ------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 1,
1993................... $ 124 $ 33 $14,386 $(16,179) $ -- $ (1,636)
Net loss............... -- -- -- (6,918) -- (6,918)
Repurchase of 270,000
shares of common
stock................. (3) -- (267) -- -- (270)
Contribution to
retirement savings
plan.................. 1 -- 102 -- -- 103
----- ---- ------- -------- ------- --------
Balance, September 30,
1994................... 122 33 14,221 (23,097) -- (8,721)
Net loss--Predecessor
period................ -- -- -- (2,627) -- (2,627)
Repurchase of 45,459
shares of common
stock................. -- -- (68) -- -- (68)
Purchase accounting
adjustments........... -- -- (2,308) 25,724 -- 23,416
Recapitalization of
common stock.......... (122) (33) 155 -- -- --
Merger of TCC.......... -- -- 11,222 (1,155) (338) 9,729
Advance to Coinmach
Laundry Corporation... -- -- -- -- (2,000) (2,000)
Net loss--Successor
period................ -- -- -- (5,946) -- (5,946)
----- ---- ------- -------- ------- --------
Balance, September 29,
1995................... -- -- 23,222 (7,101) (2,338) 13,783
Dividend to Coinmach
Laundry Corporation... -- -- (5,118) -- -- (5,118)
Repayment of
receivables from
stockholder........... -- -- -- -- 646 646
Net loss............... -- -- -- (11,459) -- (11,459)
----- ---- ------- -------- ------- --------
Balance, March 29, 1996. -- -- 18,104 (18,560) (1,692) (2,148)
Net loss............... -- -- -- (10,604) -- (10,604)
Investment by Coinmach
Laundry Corporation... -- -- 23,287 -- -- 23,287
Repayment of
receivables from
stockholder........... -- -- -- -- 1,355 1,355
Forgiveness of
stockholder's
receivables........... -- -- -- -- 83 83
----- ---- ------- -------- ------- --------
Balance, March 28, 1997. $ -- $-- $41,391 $(29,164) $ (254) $ 11,973
===== ==== ======= ======== ======= ========
</TABLE>
See accompanying notes.
F-7
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX-MONTH
TRANSITION APRIL 5, OCTOBER 1,
YEAR ENDED PERIOD ENDED 1995 TO 1994 TO YEAR ENDED
MARCH 28, MARCH 29, SEPTEMBER 29, APRIL 4, SEPTEMBER 30,
1997 1996 1995 1995 1994
---------- ------------ ------------- ----------- -------------
SUCCESSOR PREDECESSOR PREDECESSOR
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.............. $ (10,604) $(11,459) $ (5,946) $(2,627) $ (6,918)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation and
amortization......... 46,316 18,212 18,423 10,304 21,347
Deferred income taxes. (2,507) (1,048) (2,000) (220) 2,649
Amortization of debt
discount and deferred
issue costs.......... 533 414 735 440 878
Stock based
compensation......... 1,768 -- -- -- --
Extraordinary charges
for early
extinguishment of
debt, net of taxes... 296 8,925 -- -- --
Increase or decrease
in operating assets
and liabilities, net
of businesses
acquired:
(Increase) decrease
in other assets..... (2,462) 24 (717) 106 (233)
(Increase) decrease
in receivables, net. (1,100) (1,489) (73) 164 78
(Increase) decrease
in inventories and
prepayments......... (3,008) (1,100) 930 (676) 2,074
Increase (decrease)
in accounts payable. 2,144 (272) (668) 1,725 (2,173)
Increase (decrease)
in accrued interest. 1,956 3,193 (25) (81) (24)
Increase (decrease)
in other accrued
expenses, net....... 973 (3,300) 1,980 1,081 236
--------- -------- -------- ------- --------
Net cash provided by
operating activities... 34,305 12,100 12,639 10,216 17,914
--------- -------- -------- ------- --------
INVESTING ACTIVITIES
Additions to property
and equipment.......... (29,779) (10,757) (9,550) (4,815) (11,224)
Advance rental payments
to location owners..... (11,809) (3,462) (3,569) (2,129) (5,555)
Additions to net assets
related to acquisitions
of businesses.......... (155,247) -- -- -- --
Sales of property and
equipment.............. 137 57 5 407 16
--------- -------- -------- ------- --------
Net cash used in
investing activities... (196,698) (14,162) (13,114) (6,537) (16,763)
--------- -------- -------- ------- --------
</TABLE>
F-8
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX- MONTH
TRANSITION APRIL 5, OCTOBER 1,
YEAR ENDED PERIOD ENDED 1995 TO 1994 TO YEAR ENDED
MARCH 28, MARCH 29, SEPTEMBER 29, APRIL 4, SEPTEMBER 30,
1997 1996 1995 1995 1994
---------- ------------ ------------- ----------- -------------
SUCCESSOR PREDECESSOR PREDECESSOR
<S> <C> <C> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuance
of 11 3/4% senior
notes.................. $ -- $ 72,655 $ -- $ -- $ --
Proceeds from issuance
of term loans from
credit facility........ 130,000 -- -- -- --
Deferred debt issuance
costs.................. (178) (4,794) -- -- --
Debt extinguishment
costs.................. (319) (6,909) -- -- --
Net advances from (to)
parent................. 29,609 646 (2,000) -- --
Dividends to Coinmach
Laundry Corporation.... -- (5,118) -- -- --
Repurchase of 12 3/4%
senior notes........... (5,000) -- -- (1,000) --
Net (repayments)
borrowings of bank and
other borrowings....... (325) (43,715) 1,126 -- --
Principal payments of
capitalized lease
obligations............ (1,007) (262) (143) -- --
Repurchases of common
stock.................. -- -- -- (68) (270)
-------- -------- ------- ------- -------
Net cash provided by
(used in) financing
activities............. 152,780 12,503 (1,017) (1,068) (270)
-------- -------- ------- ------- -------
Net (decrease) increase
in cash................ (9,613) 10,441 (1,492) 2,611 881
Cash and cash
equivalents, beginning
of period.............. 19,723 9,282 10,774 7,241 6,360
-------- -------- ------- ------- -------
Cash and cash
equivalents, end of
period................. $ 10,110 $ 19,723 $ 9,282 $ 9,852 $ 7,241
======== ======== ======= ======= =======
Supplemental disclosure
of cash flow
information:
Interest paid......... $ 24,845 $ 8,500 $10,900 $ 8,500 $17,100
======== ======== ======= ======= =======
</TABLE>
See accompanying notes.
F-9
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
MARCH 28, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION AND CONSOLIDATION
The accompanying financial statements combine the consolidated accounts of
Coinmach Corporation and Subsidiaries, (formerly Solon Automated Services,
Inc. ("Solon")) with the consolidated accounts of The Coinmach Corporation
("TCC") (collectively, the "Company") for the periods under common control.
The Predecessor financial statements reflect the consolidated accounts of
Solon only. Solon was acquired on April 5, 1995 by Coinmach Laundry
Corporation ("CLC") (the "Solon Acquisition"), a company controlled by Golder
Thoma Cressey Rauner, Inc. ("GTCR"). TCC was formed in January 1995 by an
investor group, comprised principally of the same investors who formed CLC,
and acquired Coinmach Industries Co., L.P. ("Industries") and Super Laundry
Equipment Co., L.P. ("Super Laundry LP") on January 31, 1995 (the "TCC
Acquisition"). Both the Solon Acquisition and the TCC Acquisition were
accounted for as purchases and, accordingly, the acquired assets and
liabilities were recorded at their estimated fair values at the respective
acquisition dates.
As described in Note 2e, Solon completed a merger with TCC on November 30,
1995. This transaction was accounted for in a manner similar to a pooling of
interests. As a result of the common investor groups control over both Solon
and TCC, the accompanying financial statements have been prepared to reflect
the accounts of Solon and TCC and their wholly-owned subsidiaries on a
combined basis since the date of common control, April 5, 1995.
References to the Successor period refer to the Company during the common
control period, while references to the Predecessor period refer to Solon for
prior periods. The Predecessor period from October 1, 1994 to April 4, 1995 is
referred to as 1995P while the Successor period from April 5, 1995 to
September 29, 1995 is referred to as 1995S, the transition period for the six-
months ended March 29, 1996 is referred to as 1996T and the year ended March
28, 1997 is referred to as 1997. As a result of the acquisition of Solon by
CLC and the subsequent merger with TCC, the combined and consolidated
financial statements for the Successor are presented on a different basis of
accounting than that for the Predecessor and therefore, are not comparable.
The Company is primarily engaged in providing coin-operated laundry
equipment services to multi-family housing properties throughout the United
States. The Company owns and operates approximately 337,000 coin-operated
washers and dryers on routes in over 30,000 multi-family housing complexes in
30 states and the District of Columbia and in 150 retail laundromats
throughout Texas. The Company's wholly-owned subsidiary, Super Laundry
Equipment Corp. ("Super Laundry"), also is a construction and laundromat
equipment distribution company.
All material intercompany accounts and transactions have been eliminated in
consolidation and combination.
FISCAL YEAR
Prior to the merger with TCC, Solon's fiscal year was the fifty-two or
fifty-three week period which ended on the Friday nearest September 30th.
Effective with the merger of Solon and TCC, the Company has changed its fiscal
year end to the last Friday in March.
RECOGNITION OF LAUNDRY REVENUES
The Company has agreements with various property owners which provide for
the Company's installation and operation of laundry machines at various
locations in return for a commission. These agreements provide for both
contingent (percentage of revenues) and fixed commission payments. The Company
reports revenues from laundry machines on the accrual basis and has accrued
the cash computed to be in the machines at the end of the fiscal period.
F-10
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Super Laundry's customers generally sign sales contracts pursuant to which
Super Laundry constructs and equips complete laundromat operations, including
location identification, construction, plumbing, electrical wiring and all
required permits. Revenue is recognized on the completed contract method. A
contract is considered complete when all costs have been incurred and either
the installation is operating according to specifications or has been accepted
by the customer. The duration of such contracts is normally less than six
months. Sales of laundromats were approximately $18.8 million, $7.8 million
and $7.9 million for 1997, 1996T and 1995S, respectively.
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.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or market
and consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 28, MARCH 29,
1997 1996
--------- ---------
<S> <C> <C>
Laundry equipment................................... $6,198 $3,774
Machine repair parts................................ 1,761 669
------ ------
$7,959 $4,443
====== ======
</TABLE>
PROPERTY AND EQUIPMENT
Property, equipment and leasehold improvements are carried at cost and are
depreciated on a straight-line basis over the lesser of the estimated useful
lives or lease life:
<TABLE>
<S> <C>
Laundry equipment, installation costs and fixtures........ 3 to 10 years
Leasehold improvements and decorating costs............... 4 to 10 years
Trucks and other vehicles................................. 3 to 4 years
</TABLE>
Upon the sale or retirement of property and equipment, the cost and related
accumulated depreciation are eliminated from the respective accounts, and the
resulting gain or loss is included in income. Maintenance and repairs are
charged to operations currently, and replacements of laundry machines and
significant improvements are capitalized.
Depreciation expense was $22.6 million, $9.4 million, $9.5 million, $6.2
million, and $13.0 million for 1997, 1996T, 1995S, 1995P, and fiscal year
1994, respectively.
F-11
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
On April 5, 1995, TCC revised its estimate of the useful life of its laundry
equipment from 5 to 8 years. The effect of this change in estimate was to
decrease loss before extraordinary item and net loss for the Successor period
by approximately $470,000.
GOODWILL AND CONTRACT RIGHTS
Goodwill represents the excess of cost over fair value of net assets
acquired. Goodwill as of September 30, 1994 arose primarily as a result of the
purchase of Solon in 1987 by an investor group (not affiliated with the
Company) and which was amortized over 40 years for the predecessor periods.
Goodwill recorded as the result of the Solon Acquisition on April 5, 1995 (see
Note 2e) is being amortized on a straight-line basis over 20 years. Goodwill
recorded in acquisitions subsequent thereto is being amortized on a straight-
line basis over 15 years.
Contract rights represent amounts expended for location contracts arising
from the acquisition of laundry machines on location. These amounts, which
arose solely from purchase price allocations, are amortized on a straight-line
basis over the period of expected benefit of approximately 13 years for the
Predecessor, and ranging from 3 to 15 years for the Successor based on
independent appraisals or present valued future cash flows at prevailing
discount rates.
Management periodically evaluates the realizability of the goodwill and
contract rights balances based upon the Company's expectations of undiscounted
cash flows and operating income. Based upon present operations and strategic
plans, management believes that no impairment of goodwill nor contract rights
has occurred.
ADVANCE RENTAL PAYMENTS
Advance rental payments to location owners are amortized on a straight-line
basis over the contract term, which generally ranges from 5 to 10 years.
INTEREST EXPENSE
Interest expense is reported net of interest income of approximately
$966,000, $277,000, $148,000, $112,000, and $75,000 for 1997, 1996T, 1995S,
1995P, and fiscal year 1994, respectively.
RECLASSIFICATION
Certain 1996T balances have been reclassified to conform with the 1997
presentation.
LOSS PER SHARE
In the 1995P period and in fiscal year 1994, loss per share for the
Predecessor company was calculated based upon the weighted average number of
common shares and Class A common shares outstanding. Weighted average shares
outstanding were 15,455,000 for 1995P, and 15,559,000 for fiscal 1994. Loss
per share data is not presented for the Successor as the Company is a wholly-
owned subsidiary of CLC.
TRANSACTIONS WITH AFFILIATES
During 1995S, the Company reimbursed CLC $114,000 for certain restructuring
costs, incurred by CLC relating to the restructuring of Solon.
F-12
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
INCOME TAXES
Effective October 2, 1993, Solon implemented the provisions of Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109") "Accounting for Income
Taxes." The accounting change had an immaterial effect on the consolidated
financial statements. SFAS No. 109 requires the asset and liability method of
accounting for income taxes pursuant to which deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. SFAS No. 109 requires
that any tax benefits recognized for net operating loss carryforwards and
other items be reduced by a valuation allowance where it is more likely than
not that the benefits may not be realized. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.
IMPAIRMENT OF LONG-LIVED ASSETS
Effective March 30, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," SFAS No. 121 requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. SFAS No. 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The adoption of
SFAS No. 121 did not have an effect on the results of operations or financial
condition of the Company.
2. BUSINESS COMBINATIONS
A. THE KWIK WASH ACQUISITION
On January 8, 1997, pursuant to the terms and conditions of a Stock Purchase
Agreement, dated as of November 25, 1996, the Company 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 (excluding transaction expenses)
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
"Kwik Wash Partnership"), a Texas limited partnership. The Kwik Wash
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 retail laundromats located throughout Texas.
Simultaneously with the acquisition, KWL, Kwik Wash and the Kwik Wash
Partnership merged with and into the Company.
Concurrently with the Kwik Wash Acquisition, the Company entered into a new
senior financing arrangement providing up to $200 million (the "New Credit
Facility") (see Note 7). The New Credit Facility, proceeds of which were used
in part to fund the Kwik Wash Acquisition, replaced the Company's then
existing credit facility and will provide financing to support the Company's
acquisition strategy.
The Kwik Wash Acquisition has been accounted for as a purchase and
accordingly, assets and liabilities were recorded at fair value at the date of
acquisition and the results of operations are included subsequent to that
date. The excess cost over net tangible assets acquired was allocated to
contract rights of approximately $123.3 million, goodwill of $49.4 million and
deferred taxes payable of approximately $49.4 million.
F-13
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. BUSINESS COMBINATIONS--(CONTINUED)
The following table reflects unaudited pro forma combined results of
operations of the Company and Kwik Wash as if such acquisition had taken place
at the beginning of the fiscal year for each of the periods presented (in
thousands except per share data):
<TABLE>
<CAPTION>
SIX-MONTH
YEAR ENDED TRANSITION PERIOD
MARCH 28, ENDED MARCH 29,
1997 1996
---------- -----------------
<S> <C> <C>
Revenues.................................. $255,605 $121,687
Loss from operation before extraordinary
items.................................... (11,148) (3,190)
Net loss.................................. (11,444) (12,115)
</TABLE>
These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments, such as increased interest
expense on the related acquisition debt and additional amortization expense of
intangible assets, offset by the capitalization of installation and decorating
costs to conform to the accounting policy of the Company.
In management's opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have occurred
had the acquisition been consummated at the beginning of each period or of the
results of future operations of the combined companies under the ownership and
management of the Company.
B. OTHER ACQUISITIONS
During the 1997 fiscal year, the Company made acquisitions of certain small
route businesses or assets of businesses, with purchase prices aggregating
approximately $26.3 million, of which the Company paid approximately $25.2
million in cash and $1.2 million in promissory notes issued by CLC.
C. THE SOLON ACQUISITION
Solon entered into a Stock Purchase Agreement, dated as of March 7, 1995,
with Ford Coin Laundries, Inc. ("Ford"), and certain other parties named
therein, whereby Ford purchased all of Solon's outstanding Common Stock (the
"Common Stock") and substantially all of Solon's Class A Common Stock (the
"Class A Common Stock") (collectively, the "Shares"). The purchase price for
the Shares was $11.5 million. The foregoing transaction closed on April 5,
1995. The source of funds used by Ford for the Shares was the cash proceeds
from the sales by Ford to CLC of (i) the Ford's non-voting Class A common
stock (the "Ford Non-Voting Common Stock") pursuant to a Stock Purchase
Agreement, dated April 4, 1995, and (ii) an option to purchase Ford's voting
Common Stock (the "Ford Voting Common Stock") pursuant to a Letter Agreement
dated April 4, 1995. As of April 5, 1995, Ford beneficially owned, and had the
sole power to dispose of, the Shares. The Shares beneficially owned by Ford
represented 100% of the outstanding Common Stock and approximately 97% of the
outstanding Class A Common Stock.
Pursuant to the Stock Purchase Agreement with Ford, CLC purchased from Ford
all of the outstanding shares of Ford Non-Voting Common Stock. The purchase
price for the Ford Non-Voting Common Stock was
F-14
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. BUSINESS COMBINATIONS--(CONTINUED)
$11.4 million. The sources of the funds used by CLC for the Ford Non-Voting
Common Stock were certain shareholders of TCC, including GTCR. As of April 5,
1995, CLC beneficially owned, and had the sole power to dispose of, 1,000
shares of Ford Non-Voting Common Stock.
Pursuant to the Letter Agreement dated April 4, 1995, Ford granted to CLC,
among other things, an option (the "Option") to purchase, subject to the terms
and conditions contained therein, all of the Ford Voting Common Stock for an
aggregate purchase price of $100,000. On April 28, 1995, CLC exercised the
Option. The sources of funds used by CLC to exercise the Option were
substantially the same sources used to purchase the Ford Non-Voting Common
Stock. As of April 28, 1995, CLC beneficially owned, and had the sole power to
vote and dispose of, ten shares of Ford Voting Common Stock.
The then current shareholders of TCC and their respective affiliates were
entitled to participate in the equity of CLC (formerly SAS Acquisitions Inc.,
and the parent of Solon) on a pro rata basis, generally in accordance with
their respective equity interests in TCC.
Solon incurred costs aggregating $848,000 in connection with the foregoing
transactions (collectively, the "Change of Control"), including a total of
$387,000 in lump sum payments made to fourteen management employees pursuant
to certain contractual arrangements relating to the Change of Control. The
total costs have been reflected as an extraordinary item in the accompanying
financial statements.
The Stock Purchase Agreement was accounted for as a purchase and, according
to a practice known as "push-down" accounting, as of April 5, 1995, Solon
adjusted its consolidated assets and liabilities to their estimated fair
values, based on independent appraisals, evaluations, estimations and other
studies. Reflected below is a summary of these adjustments (in thousands):
<TABLE>
<S> <C>
Increase in property and equipment............................ $ 9,065
Increase in contract rights................................... 34,063
Increase in goodwill.......................................... 1,268
Increase in deferred income taxes............................. (19,465)
Other......................................................... (1,515)
--------
Increase in shareholders' equity.............................. $ 23,416
========
</TABLE>
D. THE TCC ACQUISITION
TCC was incorporated in January 1995 and was capitalized primarily through
an equity investment by an investor group led by the majority shareholder,
GTCR, and senior management and bank financing.
TCC was a holding company formed to acquire partnership interests in
Industries and Super Laundry LP. On January 31, 1995, TCC acquired the
partnership interests in Industries and Super Laundry L.P. from CIC I
Acquisition Corp. ("CIC I"). The transaction resulted in TCC owning 100% of
all the partnership interests in Industries and Super Laundry L.P. The
aggregate purchase price for these interests was $8.57 million, paid in cash.
The acquisition was accounted for using the purchase method of accounting. The
fair value of assets acquired (based on an independent appraisal for certain
assets) less liabilities assumed exceeded the purchase price by approximately
$7.7 million. The excess was allocated to property, equipment and intangible
assets ratably based on their respective fair values.
F-15
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. BUSINESS COMBINATIONS--(CONTINUED)
E. THE MERGER WITH TCC
On November 30, 1995, Solon completed a merger ("Merger") with TCC through
an exchange of stock pursuant to which TCC merged with and into Solon. Shares
of common stock of CLC were issued in exchange for all of the issued and
outstanding shares of common stock of TCC. CLC then contributed its stock of
TCC to Solon. Solon became the surviving corporation after the merger,
whereupon it changed its name to Coinmach Corporation. Details of the results
of operations of TCC and Solon for the period prior to the merger are as
follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 APRIL 5, 1995
TO NOVEMBER 29, TO SEPTEMBER 29,
1995 1995
------------------ ----------------
<S> <C> <C>
REVENUES
Solon............................. $17,909 $51,256
TCC............................... 13,018 38,463
------- -------
Combined.......................... $30,927 $89,719
======= =======
NET (LOSS) INCOME
Solon............................. $ (525) $(5,496)
TCC............................... 49 (450)
------- -------
Combined.......................... $ (476) $(5,946)
======= =======
</TABLE>
The combined financial results presented above include an adjustment to
decrease TCC's net loss by approximately $185,000 in 1995 and $70,000 for the
period from September 30, 1995 to November 29, 1995, to conform its accounting
policy for the capitalization of machine installation costs to that of Solon.
Intercompany transactions between the two companies for the period presented
were not material.
3. TRANSITION PERIOD COMPARATIVE FINANCIAL INFORMATION
Presented below is comparative financial information for the six-month
transition period ended March 29, 1996 compared to the six-month transition
period ended March 31, 1995:
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED
--------------------------
MARCH 29, MARCH 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
Revenues................................... $ 89,070 $ 87,996
Laundry operating expenses................. 60,536 61,418
----------- ----------
28,534 26,578
----------- ----------
Income taxes (benefit) expense............. (998) 54
----------- ----------
Loss before extraordinary item............. (2,534) (5,406)
Extraordinary item, net of tax............. (8,925) (848)
----------- ----------
Net loss................................... $ (11,459) $ (6,254)
=========== ==========
</TABLE>
F-16
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. RECEIVABLES
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 28, MARCH 29,
1997 1996
--------- ---------
<S> <C> <C>
Trade receivables................................... $5,551 $3,113
Notes receivable.................................... 1,225 1,811
Finance lease receivables........................... 380 625
Other............................................... 293 165
------ ------
7,449 5,714
Allowance for doubtful accounts..................... 555 454
------ ------
$6,894 $5,260
====== ======
</TABLE>
Notes receivable, which arise from the sale of laundromats, bear interest at
a weighted average rate of approximately 10% per annum and mature through
1998. The notes are collateralized by the underlying laundry equipment. The
Company periodically sells notes receivable arising from the sale of
laundromats to third party finance companies. Included in other receivables
are finance reserves, which arise when the Company sells notes and a portion
of the proceeds are retained by the finance company. As the notes are
collected, the finance companies remit a portion of the collections to the
Company. Many of the notes receivable are sold with recourse to the Company
(see Note 14). Control of the notes sold with recourse is surrendered by the
Company on the date of transfer. The Company generally sells its receivables
with recourse at cost; recognizing no gain or loss.
5. SALE OF EQUIPMENT
Effective September 30, 1994, Solon sold approximately 600 machines for a
total of $407,000 resulting in a pretax gain of $109,000 and a related tax of
$84,000. Prior to the sale, these machines contributed revenues of $343,000
and operating income of $78,000 for fiscal year 1994.
6. RESTRUCTURING COSTS
Restructuring charges for 1995S consist of costs aggregating approximately
$2.2 million, which included approximately $1.3 million of severance payments
for 55 of Solon's management, administrative and regional personnel,
approximately $300,000 of costs to relocate Solon's financial and
administrative functions to Roslyn, New York, approximately $100,000 of costs
to integrate certain financial and operating systems, and approximately
$500,000 of costs related to the consolidation of certain of Solon's regional
offices. Of the total restructuring costs of $2.2 million, approximately
$300,000 was paid during the period ended September 29, 1995, approximately
$1.3 million was paid during the six months ended March 29, 1996, and the
remaining portion of approximately $600,000 was paid during the fiscal year
ended March 28, 1997. The 55 employee terminations include 5 management
employees, 17 corporate staff financial and administrative employees and 33
regional laundry operational employees. Notifications to employees were made
on various dates through September 1995.
F-17
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 28, MARCH 29,
1997 1996
--------- ----------
TRANSITION
<S> <C> <C>
11 3/4% Senior Notes due 2005..................... $196,655 $196,655
12 3/4% Senior Notes due 2001..................... -- 5,000
Credit facility................................... 130,000 --
Obligations under capital leases.................. 1,711 686
Other long-term debt with varying terms and
maturities....................................... 912 424
-------- --------
$329,278 $202,765
======== ========
</TABLE>
A. SENIOR NOTES
On November 30, 1995, the Company completed an exchange offer with
substantially all the holders of certain 12 3/4% Senior Notes due 2001 (the
"Senior Notes") and certain 13 3/4% Senior Subordinated Debentures due 2002
(the "Subordinated Debentures"). Through December 14, 1995, the Company issued
a total of $196.7 million of 11 3/4% Senior Notes due 2005 (the "Notes") which
enabled it to complete this exchange offer, consummate the merger with TCC,
retire its remaining debt, and provide additional working capital. The Company
incurred costs of approximately $4.0 million, net of income taxes, related to
a 5.5% premium paid to retire its Senior Notes and Subordinated Debentures,
wrote-off the unamortized balance of the related original issue discount and
deferred finance costs of approximately $1.3 million and $1.8 million, net of
income taxes, respectively, and also incurred costs related to the retirement
of a revolving credit facility of TCC of approximately $1.8 million, net of
income taxes. The aggregate of the foregoing items totaling $8.9 million, net
of income taxes, is shown as an extraordinary item in 1996T.
Interest on the Notes is payable semi-annually on May 15 and November 15.
The Notes are redeemable at the option of the Company at any time after
November 15, 2000 at a price equal to 105 7/8% declining to par if redeemed
after November 15, 2002. The Notes contain certain financial covenants and
were exchanged for identical notes in a registered exchange offer in April
1996. Additionally, the Notes restrict the payment of cash dividends and
certain other distributions from the Company to CLC.
In February 1997, the Company redeemed all of its outstanding Senior Notes
at a redemption price of 106.375% of the principal amount thereof, together
with accrued interest from January 15, 1997 to February 18, 1997, in an
aggregate amount of approximately $5.4 million. As part of the premium paid to
redeem the Senior Notes, together with the writeoff of all unamortized
financing costs associated with these Senior Notes, the Company recognized an
extraordinary charge of $502,000 (net of a tax benefit of $206,000).
B. CREDIT FACILITY
On November 30, 1995, the Company entered into a revolving credit facility,
("Credit Facility"), which provided up to a maximum of $35 million and which
replaced certain credit facilities of both Solon and TCC. Availability under
the Credit Facility was limited by an amount equal to one semi-annual interest
payment on the Notes. Interest on the borrowings was payable monthly at a rate
per annum no greater than the sum of LIBOR plus 2.50%. The Company was
obligated to pay an unused line fee in an amount equal to 0.5% of the unused
F-18
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. DEBT--(CONTINUED)
availability payable monthly in arrears. Borrowings under the Credit Facility
were secured by real and personal property of the Company and also required
the Company, among other things, to maintain certain financial ratios and
restrict additional investments and indebtedness.
On January 8, 1997, the Company entered into a senior financing arrangement
under the New Credit Facility, with Bankers Trust Company, First Union
National Bank of North Carolina, Lehman Commercial Paper, Inc. and other
certain lending institutions named therein (collectively, the "Banks"),
replacing the Company's then existing credit facility. The New Credit
Facility, as amended effective June 2, 1997 and prior to giving effect to
payment of principal installments, consists of a $70 million revolving credit
facility and a $190 million term loan facility, which is comprised of a
Tranche A term loan in the amount of $30 million and a Tranche B term loan in
the amount of $160 million. The Tranche B term loan was increased by $60
million effective June 2, 1997. The New Credit Facility also provides for up
to $10 million of letter of credit financing and short term borrowings under a
swing line facility of up to $5 million.
Interest on the Company's borrowings under the New Credit Facility is
payable quarterly in arrears with respect to Base Rate Loans and the last day
of each applicable interest period with respect to Eurodollar Loans and at a
rate per annum no greater than the sum of the Applicable Base Rate Margin plus
the Base Rate or the sum of the Applicable Eurodollar Margin plus the
Eurodollar Rate (in each case, as defined in the New Credit Facility).
Indebtedness under the New Credit Facility is secured by all of the
Company's real and personal property. CLC has guaranteed the indebtedness
under the New Credit Facility and pledged to Bankers Trust Company, as
Collateral Agent, its interests in all of the issued and outstanding shares of
capital stock of the Company. In addition to certain terms and provisions,
events of default, as defined, and customary restrictive covenants and
agreements, the New Credit Facility contains certain covenants including, but
not limited to, a maximum leverage ratio, a minimum consolidated interest
coverage ratio, and limitations on indebtedness, capital expenditures,
advances, investments and loans, mergers and acquisitions, dividends, stock
issuances and transactions with affiliates.
Debt outstanding under the New Credit Facility as of March 28, 1997,
consisted of the following (in thousands):
<TABLE>
<S> <C>
Term loan A, quarterly payments of $750 commencing March 31,
1997, and increasing to $1,000 March 31, 1998, $1,250 March
31, 1999, and $2,000 March 31, 2002. (Interest rate of
7.6875% at March 28, 1997)................................... $ 30,000
Term loan B, semi-annual payments of $500 commencing June 30,
1997 with the final three payments of $31,333 on June 30,
2003, December 31, 2003 and June 30, 2004. (Interest rate of
8.125% at March 28, 1997).................................... 100,000
Revolving line of credit...................................... --
--------
$130,000
========
</TABLE>
8. RETIREMENT SAVINGS PLAN
Coinmach maintains several defined contribution plans (including the
"Coinmach Plan," "Solon Plan" and "Kwik Wash Plan," collectively, the "Plans")
meeting the guidelines of Section 401(k) of the Internal Revenue Code. All of
the Plans require employees meeting certain age, employment status and minimum
entry requirements as allowed by law.
F-19
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. RETIREMENT SAVINGS PLAN--(CONTINUED)
Contributions to the plans for 1997, 1996T, 1995S and 1995P amounted to
approximately $140,000, $43,000, $43,000, and $0, respectively. Contributions
to the Solon Plan during fiscal 1994, which under the terms of the Solon Plan
is matched at a percentage determined annually by the Solon Board of
Directors, amounted to $103,000. Solon issued $103,000 of its common stock to
satisfy its accrued obligation to the Plan.
The Company does not provide for any other postretirement benefits.
9. STOCK OPTION PLAN
Solon had adopted a stock option plan (the "Option Plan") in September 1987.
The Option Plan authorized the granting of incentive stock options,
nonqualified options, or a combination of the foregoing, to certain key
employees and directors.
Under the terms of the Option Plan, 1,250,000 common shares were reserved
for issuance upon exercise of options. Shares for options that had expired or
had been surrendered or canceled without having been exercised may again have
been optioned under the Option Plan.
Each option granted was exercisable into one common share of Solon. In
general, 50% of stock options granted became exercisable five years after the
date of grant, with 12 1/2% of the options becoming exercisable in each of the
subsequent four years.
As of September 29, 1995 and September 30, 1994, there was a total of
212,000 and 970,000, stock options outstanding, respectively, exercisable at
prices between $.98 and $1.23 per common share. No options had been exercised
since Solon adopted the Option Plan. As a result of the merger with TCC, the
Option Plan was canceled; participants in the Option Plan received in
aggregate consideration of approximately $34,000.
10. INCOME TAXES
The components of the Company's net deferred tax liabilities were as follows
(in thousands):
<TABLE>
<CAPTION>
MARCH 28, 1997 MARCH 29, 1996
-------------- --------------
<S> <C> <C>
Deferred tax liabilities:
Accelerated tax depreciation and
contract rights....................... $73,809 $26,537
Other, net............................. 1,516 1,449
------- -------
75,325 27,986
------- -------
Deferred tax assets:
Net operating loss carryforwards....... 9,544 8,549
Stock compensation expense............. 476 --
Other.................................. 115 973
Valuation allowance for deferred tax
assets................................ (460) (460)
------- -------
9,675 9,062
------- -------
Net deferred tax liabilities........... $65,650 $18,924
======= =======
</TABLE>
Deferred taxes arise primarily from timing differences resulting from using
accelerated depreciation for tax purposes and straight-line depreciation for
financial reporting purposes and contract rights acquired which are not
deductible for tax purposes.
F-20
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES--(CONTINUED)
As of April 5, 1995, the deferred tax asset and related valuation allowance
relating to Solon were netted and reduced to $2.6 million to reflect the net
operating loss available pursuant to limitations imposed under provisions of
the Internal Revenue Code regarding changes in ownership. In addition, as of
April 5, 1995, TCC had recorded a deferred tax asset of $460,000 with a
valuation allowance of the same amount. The deferred tax asset recorded
subsequently do not reflect a valuation allowance because the loss can be
utilized against the deferred tax liabilities in the carryforward period. The
net operating loss carryforwards, which expire between fiscal years 2001
through 2008, consist of approximately $7 million (after the limitation)
relating to the Predecessor company and approximately $16.3 million relating
to the Company.
During the fourth quarter of fiscal 1994, Solon evaluated the realizability
of previously recorded deferred tax assets and concluded that due to certain
transactions which have occurred subsequent to October 1, 1993, it was more
likely than not that such assets would not be fully realizable. Accordingly,
Solon established a $3.7 million valuation allowance as of September 30, 1994.
The charge for this valuation allowance is included in the deferred tax
provision in the accompanying Combined and Consolidated Statement of
Operations.
The (benefit) provision for income taxes consists of (in thousands):
<TABLE>
<CAPTION>
SIX-MONTH
TRANSITION
YEAR PERIOD APRIL 5, OCTOBER 1, YEAR
ENDED ENDED 1995 TO 1994 TO ENDED
MARCH 28, MARCH 29, SEPTEMBER 29, APRIL 4, SEPTEMBER 30,
1997 1996 1995 1995 1994
--------- ---------- ------------- ----------- -------------
SUCCESSOR PREDECESSOR PREDECESSOR
<S> <C> <C> <C> <C> <C>
Federal........... $(2,039) $(5,215) $(1,760) $ -- $2,517
State............. (474) (1,088) (102) 50 245
------- ------- ------- ----- ------
$(2,513) $(6,303) $(1,862) $ 50 $2,762
======= ======= ======= ===== ======
</TABLE>
The effective income tax rate differs from the amount computed by applying
the U.S. federal statutory rate to loss before taxes as a result of state
taxes and permanent book/tax differences as follows (in thousands):
<TABLE>
<CAPTION>
SIX-MONTH
TRANSITION
YEAR PERIOD APRIL 5, OCTOBER 1, YEAR
ENDED ENDED 1995 TO 1994 TO ENDED
MARCH 28, MARCH 29, SEPTEMBER 29, APRIL 4, SEPTEMBER 30,
1997 1996 1995 1995 1994
--------- ---------- ------------- ----------- -------------
SUCCESSOR PREDECESSOR PREDECESSOR
<S> <C> <C> <C> <C> <C>
Expected tax benefit.... $(4,563) $(1,201) $(2,655) $(588) $(1,413)
State tax benefit, net
of federal taxes....... (308) (170) (320) (69) (55)
Permanent book/tax
differences:
Goodwill.............. 1,100 373 1,000 394 530
Stock compensation
expense.............. 311 -- -- -- --
Other................. 947 -- 113 -- --
Valuation allowance... -- -- -- 313 3,700
------- ------- ------- ----- -------
Tax (benefit)/provision. $(2,513) $ (998) $(1,862) $ 50 $ 2,762
======= ======= ======= ===== =======
</TABLE>
The Company made cash payments for income taxes of approximately $204,000,
$36,000, $194,000, and $29,000 for 1997 1996T, 1995S and fiscal year 1994,
respectively. There were no income tax payments made in 1995P.
F-21
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. COMMON STOCK
Solon and its stockholders had entered into a Stockholders' Agreement dated
as of September 28, 1987. Pursuant to this Agreement, Solon was required to
purchase shares of its common stock from selling management stockholders or
their estates in the event of death, disability, termination of employment,
and certain other circumstances. Pursuant to the terms of the Stockholders'
Agreement, such purchases were made based on the higher of the stockholders'
cost or by an earnings related formula defined in the Agreement. During fiscal
1994, Solon acquired 270,000 shares, pursuant to this Agreement at a total
cost of $270,000, from management stockholders. Such shares have been retired
and canceled. The Stockholders' Agreement was terminated effective July 12,
1994.
On November 30, 1995, the Company effected a recapitalization, whereby it
reduced its authorized $.01 par value common stock to 1,000 shares and issued
100 of such shares to CLC. All references in the Successor periods reflect
this recapitalization.
As of September 29, 1995, receivables from stockholders reflect advances to
CLC of $2,000,000 and notes receivable from management stockholders of CLC of
$338,000. During the year ended March 28, 1997 and the six-month transition
period ending March 29, 1996, approximately $1.4 million and $.6 million,
respectively, was repaid by CLC. Such amounts have been reflected as
reductions of stockholder's equity (deficit) in the accompanying Successor
periods balance sheets.
12. INITIAL PUBLIC OFFERING OF COINMACH LAUNDRY CORP.
During July and August 1996, CLC completed its initial public offering (the
"Offering") (including an over-allotment option) of 4,183,642 shares of its
Class A common stock, par value $.01 per share (the "CLC Common Stock") at an
initial public offering price of $14.00 per share.
Proceeds from the Offering and over allotment option were approximately
$54.5 million, after underwriting discounts and commissions and before
expenses. Proceeds from the Offering were approximately $35.3 million, before
expenses. Part of the proceeds from the Offering were invested in the Company.
13. RELATED PARTY TRANSACTIONS
Prior to the Offering, CLC issued, in privately negotiated transactions,
79,029 shares of its Class B common stock to certain members of management of
the Company. The Company recorded a stock based compensation charge in an
amount of approximately $887,000 attributable to the issuance of such stock in
1997. In addition, approximately $83,000 of outstanding receivables relating
to loans to management in connection with prior purchases of common stock of
CLC were forgiven and have been accounted for as a stock-based compensation
charge in 1997.
During July and September 1996, in connection with the Offering, CLC granted
certain nonqualified options (the "Options") to certain members of management
(collectively, the "Option Holders") to purchase up to 739,437 shares of CLC
Common Stock at 85% of the initial offering price of the CLC Common Stock. The
Options vest in equal annual installments (20% vest on the date of grant and
the remainder over a four year period) commencing on July 23, 1996, the
effective date of the Offering. With respect to Options granted to employees
of the Company, the Company will record the difference between the exercise
price and the initial offering price of CLC Common Stock as a stock-based
compensation charge over the applicable vesting period.
For the year ended March 28, 1997, the Company has recorded a stock-based
compensation charge of approximately $798,000 relating to the Options.
F-22
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. RELATED PARTY TRANSACTIONS--(CONTINUED)
To finance certain acquisitions and provide working capital, CLC advanced to
the Company approximately $23.8 million net, during 1997. Such advances are
noninterest bearing and have no repayment terms.
14. COMMITMENTS AND CONTINGENCIES
Rental expense for all operating leases, which principally cover office
facilities, laundromats and vehicles, was approximately $2,307, $1,235,
$1,139, $807, and $1,577 for 1997, 1996T, 1995S, 1995P, and fiscal year 1994,
respectively (in thousands).
Future minimum rental commitments under all noncancelable operating leases
as of March 28, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................... $ 4,140
1999........................................................... 3,668
2000........................................................... 3,056
2001........................................................... 2,287
2002........................................................... 1,218
2003 and future periods........................................ 1,096
-------
$15,465
=======
</TABLE>
The Company is contingently liable on receivables sold with recourse to
finance companies. The total amount of such receivables outstanding as of
March 28, 1997 is approximately $1.6 million.
The Company is party to various legal proceedings incidental to its
business. Although the ultimate disposition of these proceedings is not
presently determinable, management does not believe that adverse
determinations in any or all such proceedings would have a material adverse
effect upon the financial condition or results of operations of the Company.
In connection with insurance coverages, which include workers compensation,
general liability and other coverages, annual premiums are subject to limited
retroactive adjustment based on actual loss experience.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
Under the provision of SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments," the Company is required to disclose fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate the value. In cases
where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques.
The carrying amounts of cash equivalents, receivables, the New Credit
Facility, and other long-term debt approximates their fair value at March 28,
1997. The carrying amount and related estimated fair value for the Company's
Senior Notes at March 28, 1997 (the carrying amount approximated the estimated
fair market at March 29, 1996) are as follows (in thousands):
<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
11 3/4% Senior Notes................................ $196,655 $216,320
</TABLE>
The fair value of the Senior Notes has been determined through information
obtained from quoted market prices.
F-23
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. OTHER ASSETS
In connection with the Company's establishment of a corporate development
office in Charlotte, North Carolina and the relocation of an executive officer
of the Company to such office in September 1996, the Company extended a loan
to such officer in the principal amount of $500,000 payable in five equal
annual installments commencing in July 1997, with interest accruing at a rate
of 7.5% per annum. The amount of such a loan is included in other assets as of
March 28, 1997.
17. SUBSEQUENT EVENTS
Through May 1997, the Company completed certain acquisitions of businesses
or assets of businesses, with purchase prices aggregating $46.0 million,
utilizing funds available under the New Credit Facility.
F-24
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 26, 1997
------------------
(UNAUDITED)
<S> <C>
ASSETS:
Cash and cash equivalents................................. $ 16,349
Receivables, net.......................................... 8,633
Inventories............................................... 12,456
Prepaid expenses.......................................... 3,728
Advance rental payments................................... 47,540
Property and equipment, less accumulated depreciation of
$56,565 and $42,017...................................... 130,348
Contract rights, less accumulated amortization of $29,358
and $19,815.............................................. 217,371
Goodwill, less accumulated amortization of $8,956 and
$5,574................................................... 109,027
Other assets.............................................. 13,735
--------
Total assets.............................................. $559,187
========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accounts payable.......................................... $ 9,971
Accrued commissions....................................... 13,065
Accrued interest.......................................... 10,871
Other accrued expenses.................................... 12,822
Due to Coinmach Laundry Corporation....................... 27,075
Deferred income taxes..................................... 78,803
11 3/4% Senior Notes...................................... 196,655
Credit facility........................................... 203,250
Other long-term debt...................................... 2,411
Stockholder's equity:
Common stock and capital in excess of par value.......... 41,391
Notes receivable from management......................... (254)
Accumulated deficit...................................... (36,873)
--------
Total stockholder's equity............................... 4,264
--------
Total liabilities and stockholder's equity............... $559,187
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
SEPTEMBER 26, SEPTEMBER 27,
1997 1996
------------- -------------
<S> <C> <C>
REVENUES............................................ $149,797 $94,446
COSTS AND EXPENSES:
Laundry operating expenses......................... 100,310 63,596
General and administrative expenses................ 2,886 2,092
Depreciation and amortization...................... 34,580 20,192
Stock-based compensation charge.................... 462 1,460
-------- -------
138,238 87,340
-------- -------
OPERATING INCOME.................................... 11,559 7,106
INTEREST EXPENSE, NET............................... 21,173 12,345
-------- -------
LOSS BEFORE INCOME TAXES............................ (9,614) (5,239)
-------- -------
PROVISION (BENEFIT) FOR INCOME TAXES:
Currently payable.................................. 150 150
Deferred........................................... (2,055) (1,750)
-------- -------
(1,905) (1,600)
-------- -------
NET LOSS............................................ $ (7,709) $(3,639)
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
SEPTEMBER 26, SEPTEMBER 27,
1997 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.......................................... $ (7,709) $ (3,639)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization.................... 34,580 20,192
Deferred income taxes............................ (2,055) (1,750)
Stock-based compensation charge.................. 462 1,460
Amortization of debt discount and debt issuance.. 305 261
Increase or decrease in operating assets and
liabilities, net of business acquired:
Increase in other assets......................... (1,182) (690)
Decrease (increase) in receivables, net.......... 88 (63)
Increase in inventories and prepayments.......... (2,204) (1,177)
Decrease in accounts payable..................... (1,498) (394)
Increase in accrued interest..................... 1,159 996
Increase in accrued expenses, net................ 412 688
-------- --------
Net cash provided by operating activities......... 22,358 15,884
-------- --------
INVESTING ACTIVITIES:
Additions to property and equipment.............. (18,940) (12,555)
Advance rental payments to location owners....... (6,660) (4,872)
Additions to net assets from acquired businesses. (66,300) (17,623)
-------- --------
Net cash used for investing activities........... (91,900) (35,050)
-------- --------
FINANCING ACTIVITIES:
Net repayments of bank and other borrowings...... (262) (136)
Net advances from parent......................... 4,181 4,984
Proceeds from credit facility, net of repayments. 73,250 --
Deferred debt issuance costs..................... (900) (90)
Principal payments on capitalized lease
obligations..................................... (488) (229)
-------- --------
Net cash provided by financing activities........ 75,781 4,529
-------- --------
Net increase (decrease) in cash and cash
equivalents..................................... 6,239 (14,637)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..... 10,110 19,723
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD........... $ 16,349 $ 5,086
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid.................................... $ 19,628 $ 11,131
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION OF BUSINESS
Coinmach Corporation (the "Company"), a Delaware corporation, is the leading
supplier of out-sourced coin-operated laundry equipment services to multi-
family housing properties in the United States. The Company's business
involves leasing laundry rooms from building owners and property management
companies, installing and servicing the laundry equipment and collecting
revenues generated from laundry machines. On September 26, 1997 the Company
owned and operated approximately 417,000 coin-operated washers and dryers in
approximately 42,000 multi-family housing properties on routes throughout the
United States and 151 retail laundromats located throughout Texas. Coinmach
Corporation is a wholly-owned subsidiary of Coinmach Laundry Corporation, a
Delaware corporation ("Coinmach Laundry").
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
the Company have been prepared in conformity with generally accepted
accounting principles ("GAAP") for interim financial reporting and pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, such financial statements do not include all of the information
and footnotes required by GAAP for complete financial statements. GAAP
requires the Company's management to make estimates and assumptions that
affect the amounts reported therein. Actual results could vary from such
estimates. The interim results presented herein are not necessarily indicative
of the results to be expected for the entire year.
In the opinion of management of the Company, these unaudited condensed
consolidated financial statements contain all adjustments of a normal
recurring nature necessary for a fair presentation of the financial statements
for the interim periods presented.
These unaudited condensed consolidated financial statements should be read
in conjunction with the audited consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended March 28, 1997.
3. LONG-TERM DEBT
On September 26, 1997, the Company had outstanding long-term debt consisting
of (a) approximately $196.7 million of 11 3/4% Senior Notes due 2005 (the
"Senior Notes"), (b) $187.3 million of term loans, and (c) $16.0 million of
revolving loans. The outstanding term loans and revolving loans were made
pursuant to a senior financing arrangement obtained by the Company in January,
1997 consisting of a $190 million term loan facility and a $70 million
revolving credit facility (the "Credit Facility").
On October 8, 1997, the Company completed the private placement (the "Bond
Offering") of $100 million aggregate principal amount of its 11 3/4% Series C
Notes due 2005 (the "Series C Notes") on substantially identical terms as its
outstanding Senior Notes. The gross proceeds from the Bond Offering were
$109.875 million, of which $100.0 million represented the payment of principal
and $9.875 million represented the payment of a premium for the Series C
Notes. The Company used approximately $105.4 million of the net proceeds from
the Bond Offering to repay indebtedness outstanding under the Credit Facility.
After giving effect to such repayment of indebtedness, the aggregate
outstanding indebtedness under the Credit Facility is $97.9 million as of
November 10, 1997. See Note 7--"Subsequent Events."
Indebtedness under the Credit Facility is secured by all of the Company's
real and personal property. Coinmach Laundry has guaranteed the indebtedness
under the Credit Facility and pledged to Bankers Trust Company, as Collateral
Agent, its interests in all of the issued and outstanding shares of capital
stock of the Company. In addition to certain terms and provisions, events of
default, and customary restrictive covenants and
F-28
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. LONG-TERM DEBT (CONTINUED)
agreements, the Credit Facility contains covenants including, but not limited
to, a maximum leverage ratio, a minimum consolidated interest coverage ratio,
and limitations on indebtedness, capital expenditures, advances, investments
and loans, mergers and acquisitions, dividends, stock issuances and
transactions with affiliates. Also, the Senior Notes and the Credit Facility
limit the Company's ability to pay dividends.
4. INITIAL PUBLIC OFFERING OF COINMACH LAUNDRY
During July and August 1996, Coinmach Laundry completed its initial public
offering (the "Offering") of 4,183,642 shares of its Class A Common Stock, par
value $.01 per share (the "CLC Common Stock") at a price of $14.00 per share.
Proceeds from the Offering and over-allotment option were approximately
$54.5 million, after underwriting discounts and commissions and before
expenses. After giving effect to the redemption of shares of Coinmach Laundry
Series A preferred stock, proceeds from the Offering were approximately $35.3
million, before expenses. Part of the proceeds from the Offering were invested
in the Company.
5. RELATED PARTY TRANSACTIONS
Prior to the Offering, Coinmach Laundry issued, in privately negotiated
transactions, 79,029 shares of its Class B common stock to certain members of
management of the Company. The Company recorded a stock based compensation
charge in an amount of approximately $887,000 attributable to the issuance of
such stock in July 1996. In addition, in July 1996 approximately $83,000 of
outstanding receivables relating to loans to management in connection with
prior purchases of common stock of Coinmach Laundry were forgiven and had been
accounted for as a stock-based compensation charge.
During July and September 1996, in connection with the Offering, Coinmach
Laundry granted certain nonqualified options (the "Options") to certain
members of management (collectively, the "Option Holders") to purchase up to
739,437 shares of CLC Common Stock at 85% of the initial offering price of the
CLC Common Stock. The Options vest in equal annual installments (20% vest on
the date of grant and the remainder vest over a four year period) commencing
on July 23, 1996, the effective date of the Offering. With respect to Options
granted to employees of the Company, the Company will record the difference
between the exercise price and the initial offering price of CLC Common Stock
as a stock-based compensation charge over the applicable vesting period.
On September 17, 1996, Coinmach Laundry granted to certain of its directors,
each of whom was appointed by the Board of Directors of Coinmach Laundry on
such date to serve as independent directors, options entitling each such
director to purchase up to 60,000 shares of CLC Common Stock (the "Independent
Director Options"). The Independent Director Options vest in equal annual
installments (25% vest immediately on the date of grant and the remainder vest
over a three year period), commencing on September 17, 1996, and entitle each
such director to purchase shares of CLC Common Stock at the initial public
offering price of the CLC Common Stock. The Company will record the difference
between the exercise price of the Independent Director Options and the fair
market value of the CLC Common Stock on September 17, 1996 as a stock-based
compensation charge over the applicable three year vesting period.
On September 5, 1997, Coinmach Laundry granted certain non-qualified options
(the "1997 Options") to certain members of management to purchase up to
200,000 shares of CLC Common Stock at an exercise price of $11.90 per share of
CLC Common Stock. The 1997 Options vest in equal annual installments (20% vest
immediately on the date of grant and the remainder over a four year period)
commencing on September 5, 1997. The Company will record the difference
between the exercise price of the 1997 Options and the fair market value
F-29
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
of CLC Common Stock on September 5, 1997 as a stock-based compensation charge
over the applicable four year vesting period.
For the six months ended September 26, 1997, the Company recorded a stock-
based compensation charge of approximately $462,000 and $470,000, respectively
related to the Options, the Independent Director Options and the 1997 Options.
See Note 7 - "Subsequent Events" for a discussion of Coinmach Laundry's
proposed offering of 2,500,000 shares of CLC Common Stock.
6. ACQUISITIONS
On January 8, 1997, the Company acquired (the "Kwik Wash Acquisition") 100%
of the outstanding voting securities of the partners of Kwik Wash Laundries,
L.P. ("Kwik Wash") for $125 million in cash and a $15.0 million promissory
note issued by Coinmach Laundry. The Kwik Wash Acquisition enabled the Company
to provide coin-operated laundry equipment services to multi-family housing
properties in Texas, Louisiana, Arkansas and Oklahoma and to operate 150
retail laundromats throughout Texas.
On April 23, 1997, the Company completed the acquisition and merger (the
"Reliable Acquisition") of Reliable Holding Corp. ("Reliable") and its
subsidiaries, Reliable Laundry Service Inc., Girard-Hopkins Acquisition Corp.,
Maquilados Automaticas S.A. de C.V., and Automatica S.A. de C.V. with and into
the Company for $44 million in cash. The Reliable Acquisition provided the
Company with a strong foothold in the California market and an entry into the
northern Mexican market.
On July 17, 1997, the Company acquired 100% of the outstanding voting
securities of National Coin Laundry Holding, Inc., an Ohio Corporation
("NCLH") and National Laundry Equipment Company, an Ohio corporation ("NLEC")
which is the parent of National Coin Laundry, Inc., an Ohio corporation
("NCL") and substantially all of the assets of Whitmer Vend-O-Mat Laundry
Services, Inc., an Indiana corporation ("Whitmer"). The Company acquired (the
"National Coin Acquisition") NCLH, NLEC, NCL and Whitmer for an aggregate
purchase price of approximately $19.0 million in cash. The National Coin
Acquisition enabled the Company to further expand its operations by providing
coin-operated laundry equipment services to multi-family housing properties in
the states of Ohio, Indiana, Kentucky, Michigan, West Virginia, Pennsylvania,
Georgia, Tennessee, Illinois and Florida, as well as by distributing exclusive
lines of commercial coin and non-coin laundry machines and parts, and by
selling service contracts. Subsequent to the National Coin Acquisition, NCLH,
NLEC and NCL were merged with and into the Company.
The Kwik Wash Acquisition, the Reliable Acquisition and the National Coin
Acquisition have been accounted for as purchases. The Company has made
preliminary allocations to fair value of the assets and liabilities assumed in
such transactions as of their respective acquisition dates.
7. SUBSEQUENT EVENT
On October 8, 1997, the Company consummated the Bond Offering. The issue
price was 109.875%, representing a 9.94% yield to maturity. The gross proceeds
from the Bond Offering were $109.875 million, of which $100.0 million
represented the payment of principal and $9.875 million represented the
payment of a premium for the Series C Notes. The Company used approximately
$105.4 million of the net proceeds from the Bond Offering to repay
indebtedness outstanding under the Credit Facility. After giving effect to
such repayment of indebtedness, the aggregate outstanding indebtedness under
the Credit Facility is $97.9 million as of November 10, 1997.
F-30
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THE PROSPECTUS NOR ANY SALE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 1
Incorporation of Certain Documents by Reference........................... 1
Fiscal Years.............................................................. 1
Prospectus Summary........................................................ 2
Forward Looking Statements................................................ 13
Risk Factors.............................................................. 13
The Exchange Offer........................................................ 19
The Company............................................................... 29
Use of Proceeds........................................................... 31
Capitalization............................................................ 32
Unaudited Pro Forma Combined Financial Data............................... 33
Unaudited Pro Forma Combined Statements of Operations..................... 35
Selected Historical Consolidated Financial Data........................... 39
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 40
Business.................................................................. 52
Management................................................................ 60
Description of the Exchange Notes......................................... 61
Certain Federal Income Tax Considerations................................. 86
Plan of Distribution...................................................... 87
Legal Matters............................................................. 88
Experts................................................................... 88
Index to Financial Statements............................................. F-1
</TABLE>
-----------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES,
WHETHER OR NOT PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COINMACH CORPORATION
OFFER TO EXCHANGE UP TO
$296,655,000 OF ITS
11 3/4% SERIES D SENIOR NOTES
DUE 2005 WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, FOR ANY AND ALL OF ITS
OUTSTANDING SERIES B 11 3/4%
SENIOR NOTES DUE 2005 AND
11 3/4% SERIES C SENIOR NOTES DUE 2005
-----------------
PROSPECTUS
-----------------
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws (the "Bylaws") provide that the Company shall indemnify
and hold harmless, to the fullest extent which it is empowered to do so unless
prohibited from doing so by the Delaware General Corporation Law, as it exists
or may hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to provide
prior to such amendment), any person who was or is a party or is threatened to
be made a party to any action, suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a director or
officer of the Company, or is or was serving at the request of the Company as
a director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against all expense,
liability and loss (including attorneys' fees actually and reasonably incurred
by such person in connection with such action, suit, or proceeding) and that
such indemnification shall inure to the benefit of such person's heirs,
executors and administrators; and that the Company may, by action of its board
of directors, provide indemnification to employees and agents of the Company
with the same scope and effect as indemnification of directors and officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interest of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful; and
further that a corporation may indemnify such person against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper. To the extent that a
director, officer, employee or agent of a corporation has been successful on
the merits or otherwise in defense of any such action, suit or proceeding, or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith.
The Bylaws further provide that the Company shall indemnify any such person
seeking indemnification in connection with a proceeding initiated by such
person only if such proceeding was authorized by the board of directors of the
Company, except that it shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the Company) that the claimant has not met the
standards of conduct (as set forth above) which make it permissible under the
Delaware General Corporation Law for the Company to indemnify the claimant for
the amount claimed, but the burden of such defense shall be on the Company.
The Bylaws further provide that the right to indemnification shall be a
contract right and shall include the right to be paid by the Company for the
expenses incurred in defending any such proceeding in advance of its
II-1
<PAGE>
final disposition unless otherwise determined by the board of directors of the
Company in the specific case upon receipt of an undertaking by or on behalf of
the director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Company;
and that such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors of the
Company deems appropriate. The rights conferred in the Bylaws to
indemnification and the payment of expenses incurred in defending a proceeding
in advance of its final disposition are not exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 102 of the Delaware General Corporation Law allows a corporation to
eliminate or limit the personal liability of a director of a corporation to
the corporation or to any of its stockholders for monetary damage for a breach
of fiduciary duty as a director, except in the case where the director (i)
breaches his duty of loyalty to the corporation or its stockholders, (ii)
fails to act in good faith, engages in intentional misconduct or knowingly
violates a law, (iii) authorizes the payment of a dividend or approves a stock
purchase or redemption in violation of Section 174 of the Delaware General
Corporation Law or (iv) obtains an improper personal benefit. Article Eighth
of the Company's Certificate of Incorporation includes a provision which
eliminates directors' personal liability to the fullest extent permitted under
the Delaware General Corporation Law. The Company has purchased director and
officer liability insurance for its directors and officers.
ITEM 22. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement, dated as of October 1, 1997, among Coinmach,
Jefferies & Company, Inc., Lazard Freres & Co. LLC ("Lazard"), BT
Alex. Brown Incorporated and First Union Capital Markets (incorporated
by reference from exhibit number 10.1 to Coinmach's Form 8-K/A
Amendment No. 1, dated October 8, 1997, file number 0-7694)
4.1 Indenture, dated as of October 8, 1997, by and between Coinmach, as
Issuer, and State Street Bank and Trust Company, as Trustee
(incorporated by reference from exhibit number 4.1 to Coinmach's Form
8-K/A Amendment No. 1, dated October 8, 1997, file number 0-7694)
4.2 Form of Global Note (included as an exhibit to Exhibit 4.1 hereto)
4.3 Form of Physical Note (included as an exhibit to Exhibit 4.1 hereto)
4.4 Registration Rights Agreement, dated October 8, 1997, among Coinmach,
Jefferies & Company, Inc., Lazard, BT Alex. Brown Incorporated and
First Union Capital Markets (incorporated by reference from exhibit
number 10.2 to Coinmach's Form 8-K/A Amendment No. 1, dated October 8,
1997, file number 0-7694)
4.5 Indenture, dated as of November 30, 1995, by and between Coinmach, as
Issuer, and State Street Bank and Trust Company (formerly, Shawmut
Bank Connecticut, National Association), as Trustee (incorporated by
reference from exhibit number 4.1 to Coinmach's Registration Statement
on Form S-1, registration number 333-00620)
4.6 First Supplemental Indenture, dated as of December 11, 1995, by and
between Coinmach, as Issuer, and State Street Bank and Trust Company
(formerly, Shawmut Bank Connecticut, National Association), as Trustee
(incorporated by reference from exhibit number 4.2 to Coinmach's
Registration Statement on Form S-1, registration number 333-00620)
4.7 Second Supplemental Indenture, dated as of October 7, 1997, by and
between Coinmach, as Issuer, and State Street Bank and Trust Company,
as Trustee (incorporated by reference from exhibit number 10.3 to
Coinmach's Form 8-K/A Amendment No. 1, dated October 8, 1997, file
number 0-7694)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.8 Registration Rights Agreement, dated as of November 30, 1995, by and
between Coinmach and Lazard, as Initial Purchaser (incorporated by
reference from exhibit number 4.6 to Coinmach's Registration Statement
on Form S-1, registration number 333-00620)
4.9 Addendum to Registration Rights Agreement, dated December 14, 1995, by
and between Coinmach and Lazard, as Initial Purchaser (incorporated by
reference from exhibit number 4.8 to Coinmach's Registration Statement
on Form S-1, registration number 333-00620)
4.10 Form of Global Note (included as an exhibit to Exhibit 4.5 hereto)
(incorporated by reference from exhibit number 4.4 to Coinmach's
Registration Statement on Form S-1, registration number 333-00620)
4.11 Form of Physical Note (included as an exhibit to Exhibit 4.5 hereto)
(incorporated by reference from exhibit number 4.5 to Coinmach's
Registration Statement on Form S-1, registration number 333-00620)
5.1* Opinion of Anderson Kill & Olick, P.C. regarding the legality of the
Exchange Notes
10.1 Purchase Agreement, dated as of January 31, 1995, by and among The
Coinmach Corporation ("TCC"), CIC I Acquisition Corp. ("CIC"), the
stockholders of CIC and Coinmach Holding Corp. (incorporated by
reference from exhibit number 10.1 to Coinmach's Registration
Statement on Form S-1, registration number 333-00620)
10.2 Equity Purchase Agreement, dated as of January 31, 1995, by and
between TCC and Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR
Fund IV"), subsequently amended by the Omnibus Agreement (as
hereinafter defined) (incorporated by reference from exhibit number
10.2 to Coinmach's Registration Statement on Form S-1, registration
number 333-00620)
10.3 Investor Purchase Agreement, dated as January 31, 1995, by and between
TCC, GTCR Fund IV and President and Fellows of Harvard College
("Harvard"), subsequently amended by the Omnibus Agreement (as
hereinafter defined) (incorporated by reference from exhibit number
10.3 to Coinmach's Registration Statement on Form S-1, registration
number 333-00620)
10.4 Investor Purchase Agreement, dated as January 31, 1995, by and between
TCC, GTCR Fund IV, MCS Capital Management, Inc. and Stephen R.
Kerrigan, subsequently amended by the Omnibus Agreement (as
hereinafter defined) (incorporated by reference from exhibit number
10.4 to Coinmach's Registration Statement on Form S-1, registration
number 333-00620)
10.5 Stock Pledge Agreement, dated as of January 31, 1995, by and between
TCC and MCS Capital, Inc. (incorporated by reference from exhibit
number 10.5 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.6 Stock Pledge Agreement, dated as of January 31, 1995, by and between
TCC and Mitchell Blatt (incorporated by reference from exhibit number
10.6 to Coinmach's Registration Statement on Form S-1, registration
number 333-00620)
10.7 Promissory Note, dated January 31, 1995, of MCS Capital, Inc. in favor
of TCC, subsequently amended by the Omnibus Agreement (as hereinafter
defined) (incorporated by reference from exhibit number 10.7 to
Coinmach's Registration Statement on Form S-1, registration number
333-00620)
10.8 Promissory Note, dated January 31, 1995, of Mitchell Blatt in favor of
TCC, subsequently amended by the Omnibus Agreement (as hereinafter
defined) (incorporated by reference from exhibit number 10.8 to
Coinmach's Registration Statement on Form S-1, registration number
333-00620)
10.9 Senior Management Agreement, dated as of January 31, 1995, by and
between TCC, Stephen R. Kerrigan, MCS Capital, Inc. and GTCR Fund IV,
subsequently amended by the Omnibus Agreement (as hereinafter defined)
(incorporated by reference from exhibit number 10.10 to Coinmach's
Registration Statement on Form S-1, registration number 333-00620)
</TABLE>
- --------
* To be filed by Amendment
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.10 Senior Management Agreement, dated as of January 31, 1995, by and
between TCC, Coinmach Industries Co., L.P., Mitchell Blatt and GTCR
Fund IV, subsequently amended by the Omnibus Agreement (as hereinafter
defined) (incorporated by reference from exhibit number 10.11 to
Coinmach's Registration Statement on Form S-1, registration number
333-00620)
10.11 Senior Management Agreement, dated January 31, 1995, by and between
TCC, Coinmach Industries Co., L.P., Robert M. Doyle and GTCR Fund IV,
subsequently amended by the Omnibus Agreement (as hereinafter defined)
(incorporated by reference from exhibit number 10.12 to Coinmach's
Registration Statement on Form S-1, registration number 333-00620)
10.12 Employment Agreement, dated as of August 4, 1995, by and between Solon
Automated Services Inc. ("Solon") and John E. Denson (incorporated by
reference from exhibit number 10.13 to Coinmach's Registration
Statement on Form S-1, registration number 333-00620)
10.13 Employment Agreement, dated as of July 1, 1995, by and between Solon,
Michael E. Stanky and GTCR Fund IV (incorporated by reference from
exhibit number 10.14 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.14 Stock Purchase Agreement, dated as of March 7, 1995, by and among Ford
Coin Laundries, Inc., Kwik Wash Laundries, Inc., Solon and the Sellers
(incorporated by reference from exhibit number 10.15 to Coinmach's
Registration Statement on Form S-1, registration number 333-00620)
10.15 Supply Agreement, dated July 26, 1995, by and among SAS Acquisition,
Inc. ("SAS"), Solon and Speed Queen Company (incorporated by reference
from exhibit number 10.16 to Coinmach's Registration Statement on Form
S-1, registration number 333-00620)
10.16 Dealer Manager Agreement, dated October 20, 1995, by and among TCC,
Solon, Lazard and Fieldstone Private Capital Group, L.P. (incorporated
by reference from exhibit number 10.17 to Coinmach's Registration
Statement on Form S-1, registration number 333-00620)
10.17 Purchase Agreement, dated November 15, 1995, by and among TCC, Solon
and Lazard (incorporated by reference from exhibit number 10.18 to
Coinmach's Registration Statement on Form S-1, registration number
333-00620)
10.18 Addendum to Purchase Agreement, dated December 11, 1995, by and
between Coinmach and Lazard (incorporated by reference from exhibit
number 10.19 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.19 Omnibus Agreement, dated as of November 30, 1995, among SAS, Solon,
TCC and each of the other parties executing a signature page thereto
(the "Omnibus Agreement") (incorporated by reference from exhibit
number 10.20 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.20 Credit Agreement, dated as of November 30, 1995, by and between
Coinmach, as Borrower and Heller Financial, Inc. ("Heller")
(incorporated by reference from exhibit number 10.21 to Coinmach's
Registration Statement on Form S-1, registration number 333-00620)
10.21 First Amendment to Credit Agreement, dated as of December 9, 1995, by
and among Coinmach, Heller, SAS, and Super Laundry Equipment Corp.
("SLEC") (incorporated by reference from exhibit number 10.22 to
Coinmach's Registration Statement on Form S-1, registration number
333-00620)
10.22 Form of Note, dated November 30, 1995, of Coinmach in favor of Heller
(included as an exhibit to Exhibit 10.26 hereto) (incorporated by
reference from exhibit number 10.23 to Coinmach's Registration
Statement on Form S-1, registration number 333-00620)
10.23 Pledge Agreement, dated as of November 30, 1995, by and between
Coinmach and Heller (incorporated by reference from exhibit number
10.24 to Coinmach's Registration Statement on Form S-1, registration
number 333-00620)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.24 Guaranty, dated as of January 31, 1995, by Super Laundry Management
Corp. in favor of Heller (incorporated by reference from exhibit
number 10.25 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.25 Guaranty, dated as of November 30, 1995, by SLEC in favor of Heller
(incorporated by reference from exhibit number 10.26 to Coinmach's
Registration Statement on Form S-1, registration number 333-00620)
10.26 Security Agreement, dated as of November 30, 1995, by and between
Coinmach and Heller (incorporated by reference from exhibit number
10.27 to Coinmach's Registration Statement on Form S-1, registration
number 333-00620)
10.27 Security Agreement, dated as of November 30, 1995, by and between SLEC
and Heller (incorporated by reference from exhibit number 10.28 to
Coinmach's Registration Statement on Form S-1, registration number
333-00620)
10.28 Collateral Assignment of Leases of Coinmach to Heller, dated as of
November 30, 1995 (incorporated by reference from exhibit number 10.29
to Coinmach's Registration Statement on Form S-1, registration number
333-00620)
10.29 Collateral Assignment of Leases of SLEC to Heller, dated as of
November 30, 1995 (incorporated by reference from exhibit number 10.30
to Coinmach's Registration Statement on Form S-1, registration number
333-00620)
10.30 Commitment Letter, dated November 22, 1996, from Bankers Trust Company
("Bankers Trust"), First Union Bank of North Carolina ("First Union")
and Lehman Commercial Paper, Inc. ("Lehman"), addressed to Coinmach
Laundry Corporation ("CLC") (incorporated by reference from exhibit
number 10.1 to Coinmach's Form 10-Q for the quarterly period ended
December 27, 1996, file number 0-7694)
10.31 Stock Purchase Agreement, dated November 25, 1996, by and among Tamara
Lynn Ford, Robert Kyle Ford, Traci Lea Ford, Tucker F. Enthoven,
Richard F. Enthoven, Richard Franklin Ford, Jr., Trustee u/d/t
February 4, 1994, KWL, Inc., Kwik-Wash Laundries, Inc., Kwik Wash
Laundries, L.P. and Coinmach (the "Stock Purchase Agreement")
(incorporated by reference from exhibit number 10.2 to Coinmach's Form
10-Q for the quarterly period ended December 27, 1996, file number 0-
7694)
10.32 First Amendment to Stock Purchase Agreement, dated as of January 8,
1997 (incorporated by reference from exhibit number 10.3 to Coinmach's
Form 10-Q for the quarterly period ended December 27, 1996, file
number 0-7694)
10.33 Registration Rights Agreement, dated as of March 14, 1997, between
Coinmach and Atlanta Washer & Dryer Leasing, Inc. (incorporated by
reference from exhibit number 10.33 to Coinmach's 10-K for the fiscal
year ended March 27, 1997, file number 0-7694)
10.34 Amended and Restated Employment Agreement, dated as of June 1, 1996,
by and between Coinmach and John E. Denson (incorporated by reference
from exhibit number 10.34 to Coinmach's 10-K for the fiscal year ended
March 27, 1997, file number 0-7694)
10.35 Promissory Note, dated February 11, 1997, of Stephen R. Kerrigan in
favor of Coinmach (incorporated by reference from exhibit number 10.35
to Coinmach's 10-K for the fiscal year ended March 27, 1997, file
number 0-7694)
10.36 Underwriting Agreement, dated July 17, 1996, by and among CLC and
Lehman Brothers, Inc., Dillon, Read & Co., Inc., Lazard and Fieldstone
FPCG Services, L.P. (collectively, the "Representatives")
(incorporated by reference from exhibit number 10.36 to Coinmach's 10-
K for the fiscal year ended March 27, 1997, file number 0-7694)
10.37 Lock-Up Agreements, dated July 23, 1996, among CLC and the
Representatives (incorporated by reference from exhibit number 10.37
to Coinmach's 10-K for the fiscal year ended March 27, 1997, file
number 0-7694)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.38 Promissory Note, dated January 8, 1997, of CLC in favor of Richard F.
Enthoven, as agent for Tamara Lynn Ford, Richard Kyle Ford, Traci Lea
Ford, Tucker F. Enthoven, Richard F. Enthoven, and Richard Franklin
Ford, Jr., Trustee u/d/t February 4, 1994 (incorporated by reference
from exhibit number 10.38 to Coinmach's 10-K for the fiscal year ended
March 27, 1997, file number 0-7694)
10.39 Tax Cooperation Agreement, dated as of January 8, 1997, by and among
Kwik Wash Laundries, L.P., KWL, Inc., Kwik-Wash Laundries, Inc.,
Coinmach and the Sellers (as defined therein) (incorporated by
reference from exhibit number 10.39 to Coinmach's 10-K for the fiscal
year ended March 27, 1997, file number 0-7694)
10.40 Consulting Services Agreement, dated as of January 8, 1997, by and
between Richard F. Enthoven and Coinmach (incorporated by reference
from exhibit number 10.40 to Coinmach's 10-K for the fiscal year ended
March 27, 1997, file number 0-7694)
10.41 Credit Agreement dated January 8, 1997, among Coinmach, the Lending
Institutions listed therein, Bankers Trust, First Union and Lehman
(incorporated by reference from exhibit number 10.41 to Coinmach's 10-
K for the fiscal year ended March 27, 1997, file number 0-7694)
10.42 Tranche A Term Notes, each dated January 8, 1997, by Coinmach in favor
of each of Bankers Trust, First Union, Lehman, Heller, The Nippon
Credit Bank, Ltd., Credit Lyonnais New York Branch, Bank of Scotland
and Bank of Boston (incorporated by reference from exhibit number
10.42 to Coinmach's 10-K for the fiscal year ended March 27, 1997,
file number 0-7694)
10.43 Tranche B Term Notes, each dated January 8, 1997, by Coinmach in favor
of each of Bankers Trust, First Union, Lehman, Fleet National Bank,
Heller, The Nippon Credit Bank, Ltd., Bank of Scotland, Bank of
Boston, Massachusetts Mutual Life Insurance Company, Pilgrim America
Prime Rate Trust, Prime Income Trust, The Ing Capital Senior Secured
High Income Fund, L.P., and Merrill Lynch Senior Floating Rate Fund,
Inc. (incorporated by reference from exhibit number 10.43 to
Coinmach's 10-K for the fiscal year ended March 27, 1997, file number
0-7694)
10.44 Revolving Notes, each dated January 8, 1997, by Coinmach in favor of
each of Bank of Boston, Bankers Trust, First Union, Lehman, Fleet
National Bank, Heller, The Nippon Credit Bank, Ltd., Credit Lyonnais
New York Branch, and Bank of Scotland (incorporated by reference from
exhibit number 10.44 to Coinmach's 10-K for the fiscal year ended
March 27, 1997, file number 0-7694)
10.45 Swing Line Note, dated January 8, 1997, in the principal amount of
$5,000,000 in favor of Bankers Trust (incorporated by reference from
exhibit number 10.45 to Coinmach's 10-K for the fiscal year ended
March 27, 1997, file number 0-7694)
10.46 Holdings Pledge Agreement, dated January 8, 1997, made by CLC to
Bankers Trust and Richard F. Enthoven, as Seller Agent (incorporated
by reference from exhibit number 10.46 to Coinmach's 10-K for the
fiscal year ended March 27, 1997, file number 0-7694)
10.47 Borrower Pledge Agreement, dated January 8, 1997, made by Coinmach to
Bankers Trust (incorporated by reference from exhibit number 10.47 to
Coinmach's 10-K for the fiscal year ended March 27, 1997, file number
0-7694)
10.48 Security Agreement, dated January 8, 1997, between Coinmach and
Bankers Trust and the Assignment of Security Interest in United States
Trademarks and Patents (incorporated by reference from exhibit number
10.48 to Coinmach's 10-K for the fiscal year ended March 27, 1997,
file number 0-7694)
10.49 Collateral Assignment of Leases, dated January 8, 1997, by Coinmach in
favor of Bankers Trust (incorporated by reference from exhibit number
10.49 to Coinmach's 10-K for the fiscal year ended March 27, 1997,
file number 0-7694)
10.50 Collateral Assignment of Location Leases, dated January 8, 1997, by
Coinmach in favor of Bankers Trust (incorporated by reference from
exhibit number 10.50 to Coinmach's 10-K for the fiscal year ended
March 27, 1997, file number 0-7694)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.51 Amendment to Investor Purchase Agreements, dated January 8, 1997, by
and among CLC, GTCR Fund IV, Coinmach, Heller, Jackson National Life
Insurance Company, individually and as successor by merger with
Jackson National Life Insurance Company of Michigan (collectively,
"JNL"), Harvard, James N. Chapman and Michael E. Marrus (incorporated
by reference from exhibit number 10.51 to Coinmach's 10-K for the
fiscal year ended March 27, 1997, file number 0-7694)
10.52 Amendment to Investor Purchase Agreement, dated January 8, 1997, by
and among CLC, GTCR Fund IV, Heller, JNL, Harvard, MCS Capital, Inc.,
James N. Chapman, Michael E. Marrus, Mitchell Blatt and Michael Stanky
(incorporated by reference from exhibit number 10.52 to Coinmach's 10-
K for the fiscal year ended March 27, 1997, file number 0-7694)
10.53 Promissory Note, dated March 24, 1997, of John E. Denson in favor of
Coinmach (incorporated by reference from exhibit number 10.53 to
Coinmach's 10-K for the fiscal year ended March 27, 1997, file number
0-7694)
10.54 Deed of Trust, Security Agreement, Assignment of Leases, Rents and
Profits, Financing Statement and Fixture Filing, made by Coinmach to
Bankers Trust, as executed on March 27, 1997 and recorded with the
County Clerk of Dallas County, Texas on April 7, 1997 (incorporated by
reference from exhibit number 10.54 to Coinmach's 10-K for the fiscal
year ended March 27, 1997, file number 0-7694)
10.55 Second Amendment and Waiver dated as of October 7, 1997 to the Credit
Agreement dated as of January 8, 1997, as amended, among Coinmach,
CLC, the Banks parties thereby, Bankers Trust, as Administrative
Agent, First Union, as Syndication Agent and Lehman, as Documentation
Agent (incorporated by reference from exhibit number 10.4 to
Coinmach's Form 8-K/A Amendment No. 1, dated October 8, 1997, file
number 0-7694)
10.56 Stock Purchase Agreement, dated July 17, 1997, by and among the
Sellers as set forth on Exhibit A attached thereto, National Coin
Laundry Holding, Inc., National Coin Laundry, Inc., National Laundry
Equipment Company and Coinmach (incorporated by reference from exhibit
number 10.56 to Coinmach's 10-Q for the quarterly period ended
September 26, 1997, file number 0-7694)
10.57 Asset Purchase Agreement, dated July 17, 1997, by and among Whitmer
Vend-O-Mat Laundry Services, Inc., Stephen P. Close, Kimberly A.
Close, Ruth D. Close, Kimberly A. Close, Ruth D. Close and Stephen P.
Close, as trustees of the Alvin D. Close Trust, SPC Management, Inc.
and Coinmach (incorporated by reference from exhibit number 10.57 to
Coinmach's 10-Q for the quarterly period ended September 26, 1997,
file number 0-7694)
16.1 Letter, dated June 29, 1995, from Arthur Andersen LLP to the
Securities and Exchange Commission regarding change in certifying
accountants (incorporated by reference from exhibit number 16.1 to
Coinmach's Registration Statement on Form S-1, registration number
333-00620)
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Ernst & Young LLP
23.3* Consent of Ernst & Young LLP
23.4* Consent of Ernst & Young LLP
23.5* Consent of Anderson Kill & Olick, P.C. (included in their opinion
filed as Exhibit 5.1)
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of State Street Bank and Trust Company
27.1 Financial Data Schedule
99.1* Letter of Transmittal
99.2* Notice of Guaranteed Delivery
</TABLE>
- --------
* To Be Filed By Amendment
II-7
<PAGE>
(B) FINANCIAL STATEMENTS SCHEDULES
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
(C) NOT APPLICABLE
ITEM 23. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Act");
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(2)(ii) above do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration
II-8
<PAGE>
statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(d) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication at such issue.
(e) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the Trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act (the "TIA") in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the TIA.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequently to the effective date of the registration statement through
the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROSLYN, STATE OF NEW
YORK ON DECEMBER 5, 1997.
COINMACH CORPORATION
/s/ Stephen R. Kerrigan
By:__________________________________
STEPHEN R. KERRIGAN
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON DECEMBER 5, 1997.
TITLE
SIGNATURE
/s/ Stephen R. Kerrigan
- ------------------------------------- Chairman of the Board of Directors
STEPHEN R. KERRIGAN and Chief
Executive Officer
/s/ Mitchell Blatt
- ------------------------------------- President, Chief Operating Officer
MITCHELL BLATT and Director
/s/ Robert M. Doyle
- ------------------------------------- Chief Financial Officer, Senior Vice
ROBERT M. DOYLE President and Director
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
1.1 Purchase Agreement, dated as of October 1, 1997, among
Coinmach, Jefferies & Company, Inc., Lazard Freres & Co.
LLC ("Lazard"), BT Alex. Brown Incorporated and First
Union Capital Markets (incorporated by reference from
exhibit number 10.1 to Coinmach's Form 8-K/A Amendment
No. 1, dated October 8, 1997, file number 0-7694)
4.1 Indenture, dated as of October 8, 1997, by and between
Coinmach, as Issuer, and State Street Bank and Trust
Company, as Trustee (incorporated by reference from
exhibit number 4.1 to Coinmach's Form 8-K/A Amendment No.
1, dated October 8, 1997, file number 0-7694)
4.2 Form of Global Note (included as an exhibit to Exhibit
4.1 hereto)
4.3 Form of Physical Note (included as an exhibit to Exhibit
4.1 hereto)
4.4 Registration Rights Agreement, dated October 8, 1997,
among Coinmach, Jefferies & Company, Inc., Lazard, BT
Alex. Brown Incorporated and First Union Capital Markets
(incorporated by reference from exhibit number 10.2 to
Coinmach's Form 8-K/A Amendment No. 1, dated October 8,
1997, file number 0-7694)
4.5 Indenture, dated as of November 30, 1995, by and between
Coinmach, as Issuer, and State Street Bank and Trust
Company (formerly, Shawmut Bank Connecticut, National
Association), as Trustee (incorporated by reference from
exhibit number 4.1 to Coinmach's Registration Statement
on Form S-1, registration number 333-00620)
4.6 First Supplemental Indenture, dated as of December 11,
1995, by and between Coinmach, as Issuer, and State
Street Bank and Trust Company (formerly, Shawmut Bank
Connecticut, National Association), as Trustee
(incorporated by reference from exhibit number 4.2 to
Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
4.7 Second Supplemental Indenture, dated as of October 7,
1997, by and between Coinmach, as Issuer, and State
Street Bank and Trust Company, as Trustee (incorporated
by reference from exhibit number 10.3 to Coinmach's Form
8-K/A Amendment No. 1, dated October 8, 1997, file number
0-7694)
4.8 Registration Rights Agreement, dated as of November 30,
1995, by and between Coinmach and Lazard, as Initial
Purchaser (incorporated by reference from exhibit number
4.6 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
4.9 Addendum to Registration Rights Agreement, dated December
14, 1995, by and between Coinmach and Lazard, as Initial
Purchaser (incorporated by reference from exhibit number
4.8 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
4.10 Form of Global Note (included as an exhibit to Exhibit
4.5 hereto) (incorporated by reference from exhibit
number 4.4 to Coinmach's Registration Statement on Form
S-1, registration number 333-00620)
4.11 Form of Physical Note (included as an exhibit to Exhibit
4.5 hereto) (incorporated by reference from exhibit
number 4.5 to Coinmach's Registration Statement on Form
S-1, registration number 333-00620)
5.1* Opinion of Anderson Kill & Olick, P.C. regarding the
legality of the Exchange Notes
10.1 Purchase Agreement, dated as of January 31, 1995, by and
among The Coinmach Corporation ("TCC"), CIC I Acquisition
Corp. ("CIC"), the stockholders of CIC and Coinmach
Holding Corp. (incorporated by reference from exhibit
number 10.1 to Coinmach's Registration Statement on Form
S-1, registration number 333-00620)
</TABLE>
- -------
* To be filed by Amendment
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
10.2 Equity Purchase Agreement, dated as of January 31, 1995,
by and between TCC and Golder, Thoma, Cressey, Rauner
Fund IV, L.P. ("GTCR Fund IV"), subsequently amended by
the Omnibus Agreement (as hereinafter defined)
(incorporated by reference from exhibit number 10.2 to
Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.3 Investor Purchase Agreement, dated as January 31, 1995,
by and between TCC, GTCR Fund IV and President and
Fellows of Harvard College ("Harvard"), subsequently
amended by the Omnibus Agreement (as hereinafter defined)
(incorporated by reference from exhibit number 10.3 to
Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.4 Investor Purchase Agreement, dated as January 31, 1995,
by and between TCC, GTCR Fund IV, MCS Capital Management,
Inc. and Stephen R. Kerrigan, subsequently amended by the
Omnibus Agreement (as hereinafter defined) (incorporated
by reference from exhibit number 10.4 to Coinmach's
Registration Statement on Form S-1, registration number
333-00620)
10.5 Stock Pledge Agreement, dated as of January 31, 1995, by
and between TCC and MCS Capital, Inc. (incorporated by
reference from exhibit number 10.5 to Coinmach's
Registration Statement on Form S-1, registration number
333-00620)
10.6 Stock Pledge Agreement, dated as of January 31, 1995, by
and between TCC and Mitchell Blatt (incorporated by
reference from exhibit number 10.6 to Coinmach's
Registration Statement on Form S-1, registration number
333-00620)
10.7 Promissory Note, dated January 31, 1995, of MCS Capital,
Inc. in favor of TCC, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by
reference from exhibit number 10.7 to Coinmach's
Registration Statement on Form S-1, registration number
333-00620)
10.8 Promissory Note, dated January 31, 1995, of Mitchell
Blatt in favor of TCC, subsequently amended by the
Omnibus Agreement (as hereinafter defined) (incorporated
by reference from exhibit number 10.8 to Coinmach's
Registration Statement on Form S-1, registration number
333-00620)
10.9 Senior Management Agreement, dated as of January 31,
1995, by and between TCC, Stephen R. Kerrigan, MCS
Capital, Inc. and GTCR Fund IV, subsequently amended by
the Omnibus Agreement (as hereinafter defined)
(incorporated by reference from exhibit number 10.10 to
Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.10 Senior Management Agreement, dated as of January 31,
1995, by and between TCC, Coinmach Industries Co., L.P.,
Mitchell Blatt and GTCR Fund IV, subsequently amended by
the Omnibus Agreement (as hereinafter defined)
(incorporated by reference from exhibit number 10.11 to
Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.11 Senior Management Agreement, dated January 31, 1995, by
and between TCC, Coinmach Industries Co., L.P., Robert M.
Doyle and GTCR Fund IV, subsequently amended by the
Omnibus Agreement (as hereinafter defined) (incorporated
by reference from exhibit number 10.12 to Coinmach's
Registration Statement on Form S-1, registration number
333-00620)
10.12 Employment Agreement, dated as of August 4, 1995, by and
between Solon Automated Services, Inc. ("Solon") and John
E. Denson (incorporated by reference from exhibit number
10.13 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.13 Employment Agreement, dated as of July 1, 1995, by and
between Solon, Michael E. Stanky and GTCR Fund IV
(incorporated by reference from exhibit number 10.14 to
Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.14 Stock Purchase Agreement, dated as of March 7, 1995, by
and among Ford Coin Laundries, Inc., Kwik Wash Laundries,
Inc., Solon and the Sellers (incorporated by reference
from exhibit number 10.15 to Coinmach's Registration
Statement on Form S-1, registration number 333-00620)
10.15 Supply Agreement, dated July 26, 1995, by and among SAS
Acquisitions Inc. ("SAS"), Solon and Speed Queen Company
(incorporated by reference from exhibit number 10.16 to
Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
10.16 Dealer Manager Agreement, dated October 20, 1995, by and
among TCC, Solon, Lazard and Fieldstone Private Capital
Group, L.P. (incorporated by reference from exhibit
number 10.17 to Coinmach's Registration Statement on Form
S-1, registration number 333-00620)
10.17 Purchase Agreement, dated November 15, 1995, by and among
TCC, Solon and Lazard (incorporated by reference from
exhibit number 10.18 to Coinmach's Registration Statement
on Form S-1, registration number 333-00620)
10.18 Addendum to Purchase Agreement, dated December 11, 1995,
by and between Coinmach and Lazard (incorporated by
reference from exhibit number 10.19 to Coinmach's
Registration Statement on Form S-1, registration number
333-00620)
10.19 Omnibus Agreement, dated as of November 30, 1995, among
SAS, Solon, TCC and each of the other parties executing a
signature page thereto (the "Omnibus Agreement")
(incorporated by reference from exhibit number 10.20 to
Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.20 Credit Agreement, dated as of November 30, 1995, by and
between Coinmach, as Borrower and Heller Financial, Inc.
("Heller") (incorporated by reference from exhibit number
10.21 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.21 First Amendment to Credit Agreement, dated as of December
9, 1995, by and among Coinmach, Heller, SAS, and Super
Laundry Equipment Corp. ("SLEC") (incorporated by
reference from exhibit number 10.22 to Coinmach's
Registration Statement on Form S-1, registration number
333-00620)
10.22 Form of Note, dated November 30, 1995, of Coinmach in
favor of Heller (included as an exhibit to Exhibit 10.26
hereto) (incorporated by reference from exhibit number
10.23 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.23 Pledge Agreement, dated as of November 30, 1995, by and
between Coinmach and Heller (incorporated by reference
from exhibit number 10.24 to Coinmach's Registration
Statement on Form S-1, registration number 333-00620)
10.24 Guaranty, dated as of January 31, 1995, by Super Laundry
Management Corp. in favor of Heller (incorporated by
reference from exhibit number 10.25 to Coinmach's
Registration Statement on Form S-1, registration number
333-00620)
10.25 Guaranty, dated as of November 30, 1995, by SLEC in favor
of Heller (incorporated by reference from exhibit number
10.26 to Coinmach's Registration Statement on Form S-1,
registration number 333-00620)
10.26 Security Agreement, dated as of November 30, 1995, by and
between Coinmach and Heller (incorporated by reference
from exhibit number 10.27 to Coinmach's Registration
Statement on Form S-1, registration number 333-00620)
10.27 Security Agreement, dated as of November 30, 1995, by and
between SLEC and Heller (incorporated by reference from
exhibit number 10.28 to Coinmach's Registration Statement
on Form S-1, registration number 333-00620)
10.28 Collateral Assignment of Leases of Coinmach to Heller,
dated as of November 30, 1995 (incorporated by reference
from exhibit number 10.29 to Coinmach's Registration
Statement on Form S-1, registration number 333-00620)
10.29 Collateral Assignment of Leases of SLEC to Heller, dated
as of November 30, 1995 (incorporated by reference from
exhibit number 10.30 to Coinmach's Registration Statement
on Form S-1, registration number 333-00620)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
10.30 Commitment Letter, dated November 22, 1996, from Bankers
Trust Company ("Bankers Trust"), First Union Bank of
North Carolina ("First Union") and Lehman Commercial
Paper, Inc. ("Lehman"), addressed to Coinmach Laundry
Corporation ("CLC") (incorporated by reference from
exhibit number 10.1 to Coinmach's Form 10-Q for the
quarterly period ended December 27, 1996, file number 0-
7694)
10.31 Stock Purchase Agreement, dated November 25, 1996, by and
among Tamara Lynn Ford, Robert Kyle Ford, Traci Lea Ford,
Tucker F. Enthoven, Richard F. Enthoven, Richard Franklin
Ford, Jr., Trustee u/d/t February 4, 1994, KWL, Inc.,
Kwik-Wash Laundries, Inc., Kwik Wash Laundries, L.P. and
Coinmach (the "Stock Purchase Agreement") (incorporated
by reference from exhibit number 10.2 to Coinmach's Form
10-Q for the quarterly period ended December 27, 1996,
file number
0-7694)
10.32 First Amendment to Stock Purchase Agreement, dated as of
January 8, 1997 (incorporated by reference from exhibit
number 10.3 to Coinmach's Form 10-Q for the quarterly
period ended December 27, 1996, file number 0-7694)
10.33 Registration Rights Agreement, dated as of March 14,
1997, between Coinmach and Atlanta Washer & Dryer
Leasing, Inc. (incorporated by reference from exhibit
number 10.33 to Coinmach's 10-K for the fiscal year ended
March 27, 1997, file number 0-7694)
10.34 Amended and Restated Employment Agreement, dated as of
June 1, 1996, by and between Coinmach and John E. Denson
(incorporated by reference from exhibit number 10.34 to
Coinmach's 10-K for the fiscal year ended March 27, 1997,
file number 0-7694)
10.35 Promissory Note, dated February 11, 1997, of Stephen R.
Kerrigan in favor of Coinmach (incorporated by reference
from exhibit number 10.35 to Coinmach's 10-K for the
fiscal year ended March 27, 1997, file number 0-7694)
10.36 Underwriting Agreement, dated July 17, 1996, by and among
CLC and Lehman Brothers, Inc., Dillon, Read & Co., Inc.,
Lazard and Fieldstone FPCG Services, L.P. (collectively,
the "Representatives") (incorporated by reference from
exhibit number 10.36 to Coinmach's 10-K for the fiscal
year ended March 27, 1997, file number 0-7694)
10.37 Lock-Up Agreements, dated July 23, 1996, among CLC and
the Representatives (incorporated by reference from
exhibit number 10.37 to Coinmach's 10-K for the fiscal
year ended March 27, 1997, file number 0-7694)
10.38 Promissory Note, dated January 8, 1997, of CLC in favor
of Richard F. Enthoven, as agent for Tamara Lynn Ford,
Richard Kyle Ford, Traci Lea Ford, Tucker F. Enthoven,
Richard F. Enthoven, and Richard Franklin Ford, Jr.,
Trustee u/d/t February 4, 1994 (incorporated by reference
from exhibit number 10.38 to Coinmach's 10-K for the
fiscal year ended March 27, 1997, file number
0-7694)
10.39 Tax Cooperation Agreement, dated as of January 8, 1997,
by and among Kwik Wash Laundries, L.P., KWL, Inc., Kwik-
Wash Laundries, Inc., Coinmach and the Sellers (as
defined therein) (incorporated by reference from exhibit
number 10.39 to Coinmach's 10-K for the fiscal year ended
March 27, 1997, file number 0-7694)
10.40 Consulting Services Agreement, dated as of January 8,
1997, by and between Richard F. Enthoven and Coinmach
(incorporated by reference from exhibit number 10.40 to
Coinmach's 10-K for the fiscal year ended March 27, 1997,
file number 0-7694)
10.41 Credit Agreement dated January 8, 1997, among Coinmach,
the Lending Institutions listed therein, Bankers Trust,
First Union and Lehman (incorporated by reference from
exhibit number 10.41 to Coinmach's 10-K for the fiscal
year ended March 27, 1997, file number 0-7694)
10.42 Tranche A Term Notes, each dated January 8, 1997, by
Coinmach in favor of each of Bankers Trust, First Union,
Lehman, Heller, The Nippon Credit Bank, Ltd., Credit
Lyonnais New York Branch, Bank of Scotland and Bank of
Boston (incorporated by reference from exhibit number
10.42 to Coinmach's 10-K for the fiscal year ended March
27, 1997, file number 0-7694)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
10.43 Tranche B Term Notes, each dated January 8, 1997, by
Coinmach in favor of each of Bankers Trust, First Union,
Lehman, Fleet National Bank, Heller, The Nippon Credit
Bank, Ltd., Bank of Scotland, Bank of Boston,
Massachusetts Mutual Life Insurance Company, Pilgrim
America Prime Rate Trust, Prime Income Trust, The Ing
Capital Senior Secured High Income Fund, L.P., and
Merrill Lynch Senior Floating Rate Fund, Inc.
(incorporated by reference from exhibit number 10.43 to
Coinmach's 10-K for the fiscal year ended March 27, 1997,
file number 0-7694)
10.44 Revolving Notes, each dated January 8, 1997, by Coinmach
in favor of each of Bank of Boston, Bankers Trust, First
Union, Lehman, Fleet National Bank, Heller, The Nippon
Credit Bank, Ltd., Credit Lyonnais New York Branch, and
Bank of Scotland (incorporated by reference from exhibit
number 10.44 to Coinmach's 10-K for the fiscal year ended
March 27, 1997, file number 0-7694)
10.45 Swing Line Note, dated January 8, 1997, in the principal
amount of $5,000,000 in favor of Bankers Trust
(incorporated by reference from exhibit number 10.45 to
Coinmach's 10-K for the fiscal year ended March 27, 1997,
file number 0-7694)
10.46 Holdings Pledge Agreement, dated January 8, 1997, made by
CLC to Bankers Trust and Richard F. Enthoven, as Seller
Agent (incorporated by reference from exhibit number
10.46 to Coinmach's 10-K for the fiscal year ended March
27, 1997, file number 0-7694)
10.47 Borrower Pledge Agreement, dated January 8, 1997, made by
Coinmach to Bankers Trust (incorporated by reference from
exhibit number 10.47 to Coinmach's 10-K for the fiscal
year ended March 27, 1997, file number 0-7694)
10.48 Security Agreement, dated January 8, 1997, between
Coinmach and Bankers Trust and the Assignment of Security
Interest in United States Trademarks and Patents
(incorporated by reference from exhibit number 10.48 to
Coinmach's 10-K for the fiscal year ended March 27, 1997,
file number 0-7694)
10.49 Collateral Assignment of Leases, dated January 8, 1997,
by Coinmach in favor of Bankers Trust (incorporated by
reference from exhibit number 10.49 to Coinmach's 10-K
for the fiscal year ended March 27, 1997, file number 0-
7694)
10.50 Collateral Assignment of Location Leases, dated January
8, 1997, by Coinmach in favor of Bankers Trust
(incorporated by reference from exhibit number 10.50 to
Coinmach's 10-K for the fiscal year ended March 27, 1997,
file number 0-7694)
10.51 Amendment to Investor Purchase Agreements, dated January
8, 1997, by and among CLC, GTCR Fund IV, Coinmach,
Heller, Jackson National Life Insurance Company,
individually and as successor by merger with Jackson
National Life Insurance Company of Michigan
(collectively, "JNL"), Harvard, James N. Chapman and
Michael E. Marrus (incorporated by reference from exhibit
number 10.51 to Coinmach's 10-K for the fiscal year ended
March 27, 1997, file number 0-7694)
10.52 Amendment to Investor Purchase Agreement, dated January
8, 1997, by and among CLC, GTCR Fund IV, Heller, JNL,
Harvard, MCS Capital, Inc., James N. Chapman, Michael E.
Marrus, Mitchell Blatt and Michael Stanky (incorporated
by reference from exhibit number 10.52 to Coinmach's 10-K
for the fiscal year ended March 27, 1997, file number 0-
7694)
10.53 Promissory Note, dated March 24, 1997, of John E. Denson
in favor of Coinmach (incorporated by reference from
exhibit number 10.53 to Coinmach's 10-K for the fiscal
year ended March 27, 1997, file number 0-7694)
10.54 Deed of Trust, Security Agreement, Assignment of Leases,
Rents and Profits, Financing Statement and Fixture
Filing, made by Coinmach to Bankers Trust, as executed on
March 27, 1997 and recorded with the County Clerk of
Dallas County, Texas on April 7, 1997 (incorporated by
reference from exhibit number 10.54 to Coinmach's 10-K
for the fiscal year ended March 27, 1997, file number 0-
7694)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
10.55 Second Amendment and Waiver, dated as of October 7, 1997,
to the Credit Agreement dated as of January 8, 1997, as
amended, among Coinmach, CLC, the Banks parties thereby,
Bankers Trust, as Administrative Agent, First Union, as
Syndication Agent and Lehman, as Documentation Agent
(incorporated by reference from exhibit number 10.4 to
Coinmach's Form 8-K/A Amendment No. 1, dated October 8,
1997, file number 0-7694)
10.56 Stock Purchase Agreement, dated July 17, 1997, by and
among the Sellers as set forth on Exhibit A attached
thereto, National Coin Laundry Holding, Inc., National
Coin Laundry, Inc., National Laundry Equipment Company
and Coinmach (incorporated by reference from exhibit
number 10.56 to Coinmach's 10-Q for the quarterly period
ended September 26, 1997, file number 0-7694)
10.57 Asset Purchase Agreement, dated July 17, 1997, by and
among Whitmer Vend-O-Mat Laundry Services, Inc., Stephen
P. Close, Kimberly A. Close, Ruth D. Close, Kimberly A.
Close, Ruth D. Close and Stephen P. Close, as trustees of
the Alvin D. Close Trust, SPC Management, Inc. and
Coinmach (incorporated by reference from exhibit number
10.57 to Coinmach's 10-Q for the quarterly period ended
September 26, 1997, file number 0-7694)
16.1 Letter, dated June 29, 1995, from Arthur Andersen LLP to
the Securities and Exchange Commission regarding change
in certifying accountants (incorporated by reference from
exhibit number 16.1 to Coinmach's Registration Statement
on Form S-1, registration number 333-00620)
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Ernst & Young LLP
23.3* Consent of Ernst & Young LLP
23.4* Consent of Ernst & Young LLP
23.5* Consent of Anderson Kill & Olick, P.C. (included in their
opinion filed as Exhibit 5.1)
25.1 Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939 of State Street Bank and
Trust Company
27.1 Financial Data Schedule
99.1* Letter of Transmittal
99.2* Notice of Guaranteed Delivery
</TABLE>
- -------
* To Be Filed By Amendment
<PAGE>
ARTHUR ANDERSEN LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated December 19, 1994 and to all references to our firm included in or made a
part of this Form S-4 Registration Statement.
/s/ Arthur Andersen LLP
Philadelphia, PA
December 4, 1997
<PAGE>
EXHIBIT 25.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
----------------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) [_]
----------------
STATE STREET BANK AND TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-1867445
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL IDENTIFICATION NO.)
BANK)
02110
225 FRANKLIN STREET, BOSTON, (ZIP CODE)
MASSACHUSETTS
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
JOHN R. TOWERS, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
225 FRANKLIN STREET,
BOSTON, MASSACHUSETTS 02110
(617) 654-3253
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------
COINMACH CORPORATION
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 53-0188589
(STATE OR OTHER JURISDICTION OF (I.R.S EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
55 LUMBER ROAD
ROSLYN, NY 11576
11 3/4% SERIES C/D SENIOR NOTES DUE 2005
(TITLE OF INDENTURE SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GENERAL
ITEM 1.GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
ITEM 2.AFFILIATIONS WITH OBLIGOR.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16.LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No. 1
to the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise corporate
trust power is on file with the Securities and Exchange Commission
as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and
is incorporated herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Eastern Edison Company
(File No. 33-37823) and is incorporated herein by reference
thereto.
2
<PAGE>
5. A copy of each indenture referred to in Item 4, if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a part
hereof.
NOTES
In answering any item of this Statement of Eligibility, which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2 of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, State Street Bank and Trust Company, a corporation organized and
existing under the laws of The Commonwealth of Massachusetts, has duly caused
this statement of eligibility to be signed on its behalf by the Undersigned,
thereunto duly authorized, all in the City of Boston and The Commonwealth of
Massachusetts, on December 5, 1997.
State Street Bank and Trust Company
/s/ Steven Cimalore
By: _________________________________
Name: Steven Cimalore
Title:
Vice President
3
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1930, as amended, in connection with the proposed issuance by Coinmach
Corporation, of its 11 3/4% Series D Senior Notes due 2005, we hereby consent
that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefore.
State Street Bank and Trust Company
/s/ Steven Cimalore
By:__________________________________
Name: Steven Cimalore
Title:Vice President
Dated: December 5, 1997
4
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this
Commonwealth and a member of the Federal Reserve System, at the close of
business March 31, 1997, published in accordance with a call made by the
Federal Reserve Bank of this District pursuant to the provisions of the
Federal Reserve Act and in accordance with a call made by the Commissioner of
Banks under General Laws, Chapter 172, Section 22(a).
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................ 1,665,142
Interest-bearing balances ......................................... 8,193,292
Securities ......................................................... 10,238,113
Federal funds sold and securities purchased under agreements to
resell in
domestic offices of the bank and its Edge subsidiary............... 5,853,144
Loans and lease financing receivables:
</TABLE>
<TABLE>
<S> <C>
Loans and leases, net of unearned income ........................... 4,936,454
Allowance for loan and lease losses ................................ 70,307
Allocated transfer risk reserve .................................... 0
</TABLE>
<TABLE>
<S> <C>
Loans and leases, net of unearned income and allowances............ 4,866,147
Assets held in trading accounts .................................... 957,478
Premises and fixed assets .......................................... 380,117
Other real estate owned ............................................ 884
Investments in unconsolidated subsidiaries ......................... 25,835
Customers' liability to this bank on acceptances outstanding ....... 45,548
Intangible assets .................................................. 158,080
Other assets ....................................................... 1,066,957
----------
Total assets ....................................................... 33,450,737
==========
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices ............................................... 8,270,845
</TABLE>
<TABLE>
<S> <C>
Noninterest-bearing ................................................. 6,318,360
Interest-bearing .................................................. 1,952,485
</TABLE>
<TABLE>
<S> <C>
In foreign offices and Edge subsidiary ............................ 12,760,086
</TABLE>
<TABLE>
<S> <C>
Noninterest-bearing .............................................. 53,052
Interest-bearing.................................................. 12,707,034
</TABLE>
<TABLE>
<S> <C>
Federal funds purchased and securities sold under agreements to re-
purchase
in domestic offices of the bank and of its Edge subsidiary ....... 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities .. 926,821
Other borrowed money .............................................. 671,164
Subordinated notes and debentures ................................. 0
Bank's liability on acceptances executed and outstanding .......... 46,137
Other liabilities ................................................. 745,529
----------
Total liabilities ................................................. 31,637,223
==========
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus ..................... 0
Common stock ...................................................... 29,931
Surplus ........................................................... 360,717
Undivided profits and capital reserves/Net unrealized holding gains
(losses) ......................................................... 1,426,881
Cumulative foreign currency translation adjustments ............... (4,015)
Total equity capital .............................................. 1,813,514
----------
Total liabilities and equity capital .............................. 33,450,737
==========
</TABLE>
5
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM S-4
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-27-1998
<PERIOD-START> MAR-29-1997
<PERIOD-END> SEP-26-1997
<CASH> 16,349
<SECURITIES> 0
<RECEIVABLES> 8,633
<ALLOWANCES> 0
<INVENTORY> 16,184
<CURRENT-ASSETS> 0
<PP&E> 186,913
<DEPRECIATION> 56,565
<TOTAL-ASSETS> 563,562<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 395,155<F2>
0
0
<COMMON> 41,391
<OTHER-SE> (32,863)
<TOTAL-LIABILITY-AND-EQUITY> 563,562<F3>
<SALES> 0
<TOTAL-REVENUES> 156,983
<CGS> 0
<TOTAL-COSTS> 107,605
<OTHER-EXPENSES> 35,912<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,969
<INCOME-PRETAX> (9,965)
<INCOME-TAX> (1,893)
<INCOME-CONTINUING> (8,072)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,072)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
Data presented is on a proforma basis giving effect to the Bond Offering and
certain aquisitions.
<F1>Includes Advance Rental Payments of $47,540, Contract Rights of $217,371,
and Goodwill of $109,027, each net of accumulated amortization, as of
September 26, 1997.
<F2>Includes $296,655 of 11 3/4% senior notes, as well as debt outstanding under
a credit facility of $98,500 as of September 26, 1997.
<F3>Includes Accrued Commissions of $13,065 and Accrued Interest of $10,871, as
of September 26, 1997.
<F4>Other Expenses include stock based compensation charges of $462 for the six
months ended September 26, 1997.
</FN>
</TABLE>
