SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the period ended June 30, 1999
or
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to ____________________.
Commission File Number 0-7694
Coinmach Corporation
(Exact name of registrant as specified in its charter)
Delaware 53-0188589
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
55 Lumber Road, Roslyn, New York 11576
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (516) 484-2300
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __.
As of the close of business on August 2, 1999, Coinmach Corporation had
outstanding 100 shares of common stock, par value $.01 per share (the "Common
Stock"), all of which shares were held by Coinmach Laundry Corporation.
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
INDEX
PART I.
Financial Information Page No.
- --------------------- --------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
June 30, 1999 (Unaudited) and March 31, 1999 3
Condensed Consolidated Statements of Operations (Unaudited) -
Three Months Ended June 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-13
PART II.
Other Information
- -----------------
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
Signature Page 16
- --------------
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<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
- ------- ---------------------
ITEM 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands of dollars)
<TABLE>
<CAPTION>
June 30, 1999 March 31, 19991<F1>
------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 27,022 $ 26,515
Receivables, net 7,790 8,107
Inventories 16,920 16,328
Prepaid expenses 6,731 6,480
Advance location payments 79,377 79,705
Land, property and equipment, net of accumulated
depreciation of $136,742 and $123,337 226,869 223,610
Contract rights, net of accumulated amortization of
$78,534 and $70,602 405,231 413,014
Goodwill, net of accumulated amortization of $22,293
and $20,318 107,052 109,025
Other assets 17,773 17,876
-------- --------
Total assets $894,765 $900,660
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accounts payable $ 20,677 $ 20,478
Accrued rental payments 27,675 26,888
Accrued interest 7,256 15,516
Other accrued expenses 12,764 13,366
Due to parent 63,132 63,282
Deferred income taxes 80,202 81,494
11 3/4% Senior Notes 296,655 296,655
Premium on 11 3/4% Senior Notes, net 7,715 8,023
Credit facility indebtedness 390,308 384,003
Other long-term debt 4,872 5,083
Stockholder's equity:
Common stock and capital in excess of par value 41,391 41,391
Receivables from management (85) (85)
Accumulated deficit (57,797) (55,434)
-------- -------
Total stockholder's equity (16,491) (14,128)
--------- --------
Total liabilities and stockholder's equity $894,765 $900,660
======== ========
See accompanying notes.
<FN>
- -------
<F1> The March 31, 1999 balance sheet has been derived from the audited
consolidated financial statements as of that date.
</FN>
</TABLE>
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<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(UNAUDITED)
-----------
(In thousands of dollars, except per share data)
Three Months Ended
------------------
June 30, June 30,
1999 1998
----------- -----------
REVENUES $133,538 $117,934
COSTS AND EXPENSES:
Laundry operating expenses 87,211 77,568
General and administrative expenses 2,043 1,971
Depreciation and amortization 29,936 26,843
Stock-based compensation charge 147 203
-------- --------
119,337 106,585
-------- --------
OPERATING INCOME 14,201 11,349
INTEREST EXPENSE, NET 16,717 15,543
-------- --------
LOSS BEFORE INCOME TAXES (2,516) (4,194)
-------- --------
PROVISION (BENEFIT) FOR INCOME TAXES:
Currently payable 1,139 108
Deferred (1,292) (1,256)
-------- --------
(153) (1,148)
-------- --------
NET LOSS $ (2,363) $(3,046)
-------- --------
See accompanying notes.
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<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended
------------------
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (2,363) $(3,046)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 13,464 12,133
Amortization of advance location payments 6,084 4,985
Amortization of intangibles 10,388 9,725
Deferred income taxes (1,292) (1,256)
Amortization of premium on 11 3/4% Senior Notes (308) (309)
Amortization of debt discount and deferred issue costs 432 352
Stock-based compensation 147 203
Change in operating assets and liabilities, net of businesses acquired:
Other assets (840) (504)
Receivables, net 317 (866)
Inventories and prepaid expenses (843) (309)
Accounts payable 200 (79)
Accrued interest, net (8,260) (8,388)
Other accrued expenses, net (583) 2,546
--------- ---------
Net cash provided by operating activities 16,543 15,187
--------- ---------
INVESTING ACTIVITIES:
Additions to property and equipment (16,201) (15,481)
Advance location payments to location owners (5,126) (5,276)
Additions to net assets related to acquisitions of businesses - (86,123)
--------- ---------
Net cash used in investing activities (21,327) (106,880)
-------- --------
FINANCING ACTIVITIES:
Net proceeds from credit facility 6,305 93,294
Net repayments to parent (172) (11)
Net repayments of bank and other borrowings (129) (226)
Principal payments on capitalized lease obligations (713) (565)
Deferred debt issue costs - (267)
------- -------
Net cash provided by financing activities 5,291 92,225
------- -------
Net increase in cash and cash equivalents 507 532
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 26,515 22,451
------- ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $27,022 $22,983
====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $24,855 $24,307
====== ======
Income taxes paid $ 1,264 $ 119
====== =====
NON-CASH FINANCING ACTIVITIES:
Acquisition of fixed assets through capital leases $ 631 $ 278
====== ======
</TABLE>
-5-
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
1. Description of Business
Coinmach Corporation, a Delaware corporation (the "Company"), is the
leading supplier of outsourced laundry services for multi-family housing
properties in the United States. The Company's core 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 771,000 washers
and dryers (hereinafter referred to as "laundry machines" or "machines") in
approximately 75,000 locations on routes located throughout the United States
and in 165 retail laundromats located throughout Texas and Arizona. The Company,
through its wholly-owned subsidiary, Super Laundry Equipment Corp. ("Super
Laundry"), is a laundromat equipment distribution company. The Company also
leases laundry machines and other household appliances to corporate relocation
entities, property owners, managers of multi-family housing properties and
individuals. The Company is a wholly-owned subsidiary of Coinmach Laundry
Corporation, a Delaware Corporation ("Coinmach Laundry"). Unless otherwise
specified herein, references to the Company shall mean Coinmach Corporation and
its subsidiaries.
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 in the financial statements. Actual results could differ 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 31, 1999.
3. Debt
At June 30, 1999, the Company had outstanding debt consisting of (a)
approximately $296.7 million of 11 3/4% Senior Notes due 2005 (the "Senior
Notes"), (b) $271.0 million of term loans, and (c) approximately $119.3 million
of a revolving line of credit. The above mentioned term loans and revolving line
of credit represent indebtedness pursuant to the Company's existing credit
facility (as amended and restated, the "Amended and Restated Credit Facility"),
which is secured by all of the Company's real and personal property. Under the
Amended and Restated Credit Facility, the
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<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
(continued)
3. Debt (continued)
Company has pledged to Bankers Trust Company, as Collateral Agent, its interests
in all of the issued and outstanding shares of capital stock of Coinmach. In
addition to certain terms and provisions, events of default and customary
representations, covenants and agreements, the Amended and Restated Credit
Facility contains certain restrictive 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 indenture governing the Senior Notes and the Amended
and Restated Credit Facility limit Coinmach's ability to pay dividends. In May
1999, the lenders under the Amended and Restated Credit Facility gave their
consent to permit the Company to borrow, on or prior to May 28, 1999, up to
$12.5 million under the existing acquisition revolver for working capital
purposes.
-7-
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, certain matters
discussed in this document are forward-looking statements based on the beliefs
of the Company's management and are subject to certain risks and uncertainties,
including the risks and uncertainties discussed below, as well as other risks
set forth in the Company's Annual Report on Form 10-K for the year ended March
31, 1999. Should these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, the Company's future performance and actual results
of operations may differ materially from those expected or intended.
General
- -------
The Company is principally engaged in the business of supplying
outsourced laundry services for multi-family housing properties. At June 30,
1999, the Company owned and operated approximately 771,000 washers and dryers in
approximately 75,000 locations on routes throughout the United States and in 165
retail laundromats located throughout Texas and Arizona. The Company, through
Super Laundry, its wholly-owned subsidiary, is also a laundromat equipment
distribution company. The Company also leases laundry machines and other
household appliances to corporate relocation entities, property owners, managers
of multi-family housing properties and individuals.
The Company's primary financial objective is to increase its cash flow
from operations. Cash flow from operations represents a source of funds
available to service indebtedness and for investment in both internal growth and
growth through acquisitions. The Company has experienced net losses during the
past three fiscal years. Such net losses are attributable in part to significant
non-cash charges associated with the Company's execution of its growth strategy,
namely, high levels of amortization of contract rights and goodwill related to
the addition of new machines and customers through acquisitions accounted for
under the purchase method of accounting.
The Company's most significant revenue source is its route business,
accounting for more than 85% of its revenue. The Company provides outsourced
laundry 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 machine maintenance and revenue collection in the route business,
including payroll, parts, insurance and other related expenses, the costs of
sales associated with the equipment distribution business 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
location payments to the location owners. These advance payments are capitalized
and amortized over the life of the applicable lease.
-8-
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
General (continued)
- -------
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 $3.1 million for the three months
ended June 30, 1999 and $2.4 million for the three months ended June 30, 1998);
(ii) operating, maintaining and servicing retail laundromats (approximately $5.4
million for the three months ended June 30, 1999 and $4.8 million for the three
months ended June 30, 1998); and (iii) constructing complete turnkey retail
laundromats, retrofitting retail laundromats, distributing exclusive lines of
commercial coin and non-coin operated machines and parts, and selling service
contracts (approximately $10.2 million for the three months ended June 30, 1999
and $6.5 million for the three months ended June 30, 1998).
Results of Operations
- ---------------------
The following discussion should be read in conjunction with the
attached unaudited condensed consolidated financial statements and notes thereto
and with the Company's audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
March 31, 1999.
Comparison of the three-month periods ended June 30, 1999 and June 30, 1998
Revenues increased by approximately $15.6 million or 13% for the
three-month period ended June 30, 1999, as compared to the prior year's
corresponding period. This improvement in revenues resulted primarily from the
Company's execution of its acquisition strategy and increased route revenues
resulting from internal expansion. Based on the historical revenues of acquired
businesses, the Company estimates that approximately $9.7 million of its revenue
increase for the current three-month period is primarily due to the acquisition
of Cleanco, Inc. and certain of its affiliates in May 1998 and the acquisition
of all of the common stock of Gordon & Thomas Companies, Inc. in June 1998. In
addition, the Company's installed machine base increased by approximately 6,500
machines from internal growth for each of the three-month periods ended June 30,
1999 and 1998. Included in internal growth are acquisitions of small, local
route operators and new customers secured by the Company's sales force.
Laundry operating expenses increased by approximately 12% for the
three-month period ended June 30, 1999 as compared to the prior year's
corresponding period. This increase was due primarily to an increase in
commission expense related to the improvement in revenue. However, as a
percentage of revenues, laundry operating expenses were approximately 65.3% for
the three-month period ended June 30, 1999 as compared to approximately 65.8%
for the prior year's corresponding period. This change was primarily due to cost
efficiencies related to the integration of the acquisitions noted above into the
Company's operations.
-9-
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
- ---------------------
General and administrative expenses increased slightly for the
three-month period ended June 30, 1999, as compared to the prior year's
corresponding period. However, as a percentage of revenues, general and
administrative expenses were approximately 1.5% for the current period as
compared to approximately 1.7% for the prior year's corresponding period. This
change was primarily due to cost efficiencies related to the integration of the
acquisitions noted above into the Company's operations.
Depreciation and amortization increased by approximately 12% for the
three-month period ended June 30, 1999, as compared to the prior year's
corresponding period, due primarily to contract rights and goodwill associated
with the above-mentioned acquisitions, as well as an increase in capital
expenditures with respect to the Company's installed base of machines.
Operating income margins were approximately 10.6% for the three-month
period ended June 30, 1999, as compared to approximately 9.6% for the
three-month period ended June 30, 1998. This change was primarily due to cost
efficiencies related to the integration of the acquisitions noted above into the
Company's operations.
Interest expense, net, increased by approximately 8% for the
three-month period ended June 30, 1999, as compared to the prior year's
corresponding period, due primarily to increased borrowing levels under the
Amended and Restated Credit Facility in connection with certain acquisitions
mentioned above.
The effective tax benefit rate decreased to approximately 6% for the
current period from approximately 27% for the prior year's corresponding period.
The lower effective tax benefit rate is the result of the greater impact that
non-deductible amortization, which has remained constant, has when added back to
losses before income taxes, which are lower than in corresponding periods.
EBITDA (earnings before deductions for interest, income taxes,
depreciation and amortization) before deduction for the stock-based compensation
charges was approximately $44.3 million for the three months ended June 30,
1999, as compared to approximately $38.4 million for the corresponding period in
1998, representing an improvement of approximately 15%. EBITDA margins improved
to approximately 33.2% for the three months ended June 30, 1999, compared to
approximately 32.6% for the prior year's corresponding period. These increases
are primarily the result of increased revenues and operating margins, as
discussed above. EBITDA is used by certain investors as an indicator of a
company's historical ability to service debt. Management believes that an
increase in EBITDA is an indication 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 (a)
operating income (as determined by GAAP) as an indicator of operating
performance or (b) cash flows from operating, investing and financing activities
(as determined by GAAP) as a measure of liquidity. Given that EBITDA is not a
measurement determined in accordance with
-10-
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
- ---------------------
GAAP and is thus susceptible to varying calculations, EBITDA as presented may
not be comparable to other similarly titled measures of other companies.
Liquidity and Capital Resources
- -------------------------------
The Company continues to have substantial indebtedness and debt service
requirements. At June 30, 1999, the Company had outstanding long-term debt
(excluding the unamortized premium of approximately $7.7 million) of
approximately $691.8 million and stockholder's deficit of approximately $16.5
million.
The Company's level of indebtedness will have several important effects
on its future operations, including, but not limited to, the following: (a) a
significant portion of the Company's cash flow from operations will be required
to pay interest on its indebtedness; (b) the financial covenants contained in
certain of the agreements governing the Company's indebtedness will require the
Company to meet certain financial tests and may limit its ability to borrow
additional funds or to dispose of assets; (c) 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 (d) the
Company's ability to adapt to changes in the outsourced laundry services
industry and to economic conditions in general will be limited.
As the Company has focused on increasing its cash flow from operating
activities, it has made significant capital investments primarily consisting of
capital expenditures related to acquisitions, renewal and growth. 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 three
months ended June 30, 1999 were approximately $21.3 million. Of such amount, the
Company spent approximately $5.4 million related to the net increase in the
installed base of machines of approximately 6,500 machines. The balance of
approximately $15.9 million (which consists of machine expenditures, advance
location payments and laundry room improvements) was used to maintain the
existing machine base in current locations and through replacement of
discontinued locations and for general corporate purposes. The full impact on
revenues and cash flow 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
certain factors, including the timing of the capital expended. 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'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 as
required by the Amended and Restated Credit Facility and semi-annual cash
interest payments on the Senior Notes.
-11-
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
- -------------------------------
Management believes that the Company's future operating activities will
generate sufficient cash flow to repay indebtedness outstanding under the Senior
Notes and borrowings under the Amended and Restated Credit Facility or to permit
any necessary refinancings thereof. An inability of the Company, however, to
comply with covenants or other conditions under the Amended and Restated Credit
Facility or contained in the indenture governing the Senior Notes could result
in an acceleration of all 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 or on terms permitted under the Amended and
Restated Credit Facility or the indenture governing the Senior Notes.
The Company's depreciation and amortization expenses (aggregating
approximately $29.9 million for the three months ended June 30, 1999) have the
effect of reducing net income but not operating cash flow. In accordance with
GAAP, a significant amount of the purchase price of businesses acquired by the
Company is allocated to "contract rights," which costs are amortized over
periods of 15 years.
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. Additionally, the Company expects to utilize excess cash
flows from operations primarily to reduce debt.
-12-
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Year 2000 Compliance
- --------------------
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. The Company's comprehensive year 2000
initiative is being managed by a team of internal staff and outside consultants.
The team's activities are designed to ensure that there is no adverse effect on
the Company's core business operations and that transactions with customers,
suppliers and financial institutions are fully supported.
During the 1999 Fiscal Year, the Company assessed the year 2000
readiness of its information technology ("IT") and non-IT systems. The Company
determined that it needed to modify significant portions of its IT systems so
that such systems will function properly with respect to dates in the year 2000
and beyond. The Company has substantially completed its IT systems
transformation and is currently verifying the year 2000 compliance of these
systems.
In addition, as part of its year 2000 initiative, the Company has
contacted its significant suppliers, customers and financial institutions to
ensure that those parties have appropriate plans to remediate year 2000 issues
where their systems interface with the Company's systems or otherwise impact its
operations. The Company is continuing to assess the extent to which its
operations are vulnerable should those organizations fail to properly address
their year 2000 readiness. Based on this review, the Company does not expect the
computer systems of those operations to have a material adverse effect on the
Company's operations.
While the Company believes its planning efforts are adequate to address
the year 2000 issue, there can be no guarantee that its computer systems or the
computer systems of other companies on which the Company's systems and
operations rely will be converted on a timely basis and will not have a material
effect on the operations of the Company. The cost of the year 2000 initiative is
not expected to be material to the Company's results of operations, financial
condition or cash flows.
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 will not be material to the Company. The Company's business
generally is not seasonal.
-13-
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
On April 8, 1999, Sand v. Coinmach Laundry Corporation, et. al, a
purported class action securities fraud lawsuit, was filed in the Federal
District Court for the Eastern District of New York (the "Federal Securities
Action") naming the Company and certain of its executive officers as defendants.
The Federal Securities Action was purportedly brought on behalf of all
shareholders of the Company who purchased or otherwise acquired the Company's
Common Stock during the period August 6, 1997 to September 29, 1998. The
complaint in the Federal Securities Action alleges violations of various federal
securities laws, including misrepresentations of certain information about the
Company. The complaint in the Federal Securities Action seeks damages in
unspecified amounts. Although the outcome of this proceeding cannot be
predicted, based on the allegations contained in the complaint, management
believes that the Federal Securities Action will not have a material adverse
effect on the financial condition, results of operations or cash flows of the
Company.
The Company is also party to various legal proceedings arising in the
ordinary course of business. Although the ultimate disposition of such
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, results of operations or cash flows
of the Company.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
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<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation of the
Company (incorporated by reference from
Exhibit 3.1 to the Company's Form 10-K for
the transition period from September 30,
1995 to March 29, 1996, file number 0-7694)
3.2 Bylaws of the Company (incorporated by
reference from Exhibit 3.2 to the Company's
Form 10-K for the transition period from
September 30, 1995 to March 29, 1996, file
number 0-7694)
10.58 Promissory Note, dated May 5, 1999, of
Mitchell Blatt in favor of Coinmach
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
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<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COINMACH CORPORATION
Date: August 13, 1999 /s/ ROBERT M. DOYLE
-------------------------------
Robert M. Doyle
Senior Vice President and Chief Financial Officer
(On behalf of registrant and as Principal
Financial Officer)
-16-
PROMISSORY NOTE
$250,000.00 May 5, 1999
For value received, Mitchell Blatt ("Maker") promises to pay to the
order of Coinmach Corporation, a Delaware corporation (the "Company"), at its
offices in Roslyn, New York, or such other place as designated in writing by the
holder hereof, the aggregate principal sum of $250,000.00. Maker will pay the
aggregate principal sum in one payment of $250,000.00 on or prior to the third
anniversary date of the date hereof (or, if such date is not a business day, the
next succeeding business day) and, on such date, Maker will pay interest accrued
through such date at the rate specified below.
Interest will accrue on the outstanding principal amount of this Note
at the rate of 8% per annum and shall be payable at such time as the principal
of this Note becomes due and payable.
The amounts due under this Note are secured by a pledge of all of the
Class A common stock, par value $.01 per share, held by Maker.
In the event Maker fails to pay any amounts due hereunder when due,
Maker shall pay to the holder hereof, in addition to such amounts due, all costs
of collection, including reasonable attorneys fees and disbursements.
Maker, or his successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
nonpayment of this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Note or release security for this Note, all without in
any way affecting the liability of the Maker hereunder.
This Note shall be governed by the internal laws, not the laws of
conflicts, of the State of New York.
Mitchell Blatt
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<CIK> 000091693
<NAME> COINMACH CORP.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 27,022
<SECURITIES> 0
<RECEIVABLES> 7,790
<ALLOWANCES> 0
<INVENTORY> 16,920
<CURRENT-ASSETS> 0
<PP&E> 363,611
<DEPRECIATION> (136,742)
<TOTAL-ASSETS> 894,765 <F1>
<CURRENT-LIABILITIES> 0
<BONDS> 699,550 <F2>
0
0
<COMMON> 41,391
<OTHER-SE> (57,882)
<TOTAL-LIABILITY-AND-EQUITY> 894,765 <F3>
<SALES> 0
<TOTAL-REVENUES> 133,538
<CGS> 0
<TOTAL-COSTS> 87,211
<OTHER-EXPENSES> 32,126 <F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,717
<INCOME-PRETAX> (2,516)
<INCOME-TAX> (153) <F5>
<INCOME-CONTINUING> (2,363)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,363) <F6>
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> 1. Total Assets: Includes Advance Rental Payments of $79,377, Contract
Rights of $405,231, and Goodwill of $107,052, each net of accumulated
amortization, at June 30, 1999.
<F2> 2. Bonds: Includes $296,655 of 11-3/4% senior notes, as well as debt
outstanding under a credit facility of $390,308, at June 30, 1999.
<F3> 3. Total Liabilities: Includes Accrued Commissions of $27,675 and Accrued
Interest of $7,256, at June 30, 1999.
<F4> 4. Other Expenses: Other Expenses include stock based compensation charges
of $147 for the three months ended June 30, 1999.
<F5> 5. Income Tax: The provision (benefit) for income taxes consists of $1,139
currently payable and ($1,292) deferred, for the three months ended June
30, 1999.
<F6> 6. Net Income: In addition, EBITDA of $44,284 (earnings before interest,
income taxes, depreciation and amortization), before the deduction for the
stock-based compensation charge was generated for the report period. EBITDA
is a meaningful measure of a company's ability to service debt.
</FN>
</TABLE>
