COINMACH CORPORATION AND SUBSIDIARIES
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, 2000
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 10, 2000, 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, 2000 (Unaudited) and March 31, 2000 3
Condensed Consolidated Statements of Operations (Unaudited) -
Three Months Ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended June 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-12
PART II
Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
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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)
June 30, 2000 March 31, 2000(1)
------------- --------------
(Unaudited)
ASSETS:
Cash and cash equivalents $ 24,577 $ 23,174
Receivables, net 11,742 10,206
Inventories 16,812 17,770
Prepaid expenses 6,947 6,899
Advance location payments 77,805 77,212
Land, property and equipment, net of accumulated
depreciation of $194,844 and 179,643 241,551 237,160
Contract rights, net of accumulated amortization of
$117,444 and $102,307 376,792 384,680
Goodwill, net of accumulated amortization of $29,546
and $28,248 99,208 101,253
Other assets 17,831 17,271
--------- ---------
Total assets $ 873,265 $ 875,625
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accounts payable $ 23,497 $ 20,769
Accrued rental payments 30,019 28,445
Accrued interest 6,785 15,786
Other accrued expenses 12,473 13,165
Due to parent 62,868 62,973
Deferred income taxes 72,149 74,022
11 3/4% Senior Notes 296,655 296,655
Premium on 11 3/4% Senior Notes, net 6,480 6,789
Credit facility indebtedness 391,171 382,020
Other long-term debt 5,947 5,144
Stockholder's equity:
Common stock and capital in excess of par value 41,391 41,391
Receivables from management -- (21)
Accumulated deficit (76,170) (71,513)
--------- ---------
Total stockholder's equity (34,779) (30,143)
--------- ---------
Total liabilities and stockholder's equity $ 873,265 $ 875,625
========= =========
See accompanying notes.
------
1. The March 31, 2000 balance sheet has been derived from the audited
consolidated financial statements as of that date.
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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,
2000 1999
-------------- ----------
REVENUES $ 134,225 $ 133,538
COSTS AND EXPENSES:
Laundry operating expenses 89,844 87,211
General and administrative expenses 2,056 2,043
Depreciation and amortization 31,557 29,936
Stock-based compensation charge 88 147
--------- ---------
123,545 119,337
--------- ---------
OPERATING INCOME 10,680 14,201
INTEREST EXPENSE, NET 16,661 16,717
--------- ---------
LOSS BEFORE INCOME TAXES (5,981) (2,516)
--------- ---------
PROVISION (BENEFIT) FOR INCOME TAXES:
Currently payable 544 1,139
Deferred (1,873) (1,292)
--------- ---------
(1,329) (153)
--------- ---------
NET LOSS $ (4,652) $ (2,363)
========= =========
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,
2000 1999
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (4,652) $ (2,363)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 15,214 13,464
Amortization of advance location payments 6,122 6,084
Amortization of intangibles 10,221 10,388
Deferred income taxes (1,873) (1,292)
Amortization of premium on 11 3/4% Senior Notes (309) (308)
Amortization of debt discount and deferred issue costs 431 432
Stock-based compensation 88 147
Change in operating assets and liabilities, net of businesses acquired:
Other assets (1,295) (840)
Receivables, net (1,536) 317
Inventories and prepaid expenses 910 (843)
Accounts payable 2,728 200
Accrued interest, net (9,001) (8,260)
Other accrued expenses, net 359 (583)
-------- --------
Net cash provided by operating activities 17,407 16,543
-------- --------
INVESTING ACTIVITIES:
Additions to property and equipment (18,063) (16,201)
Advance location payments to location owners (6,210) (5,126)
-------- --------
Net cash used in investing activities (24,273) (21,327)
-------- --------
FINANCING ACTIVITIES:
Net proceeds from credit facility 9,151 6,305
Net repayments to parent (47) (172)
Net repayments of bank and other borrowings (4) (129)
Principal payments on capitalized lease obligations (831) (713)
-------- --------
Net cash provided by financing activities 8,269 5,291
-------- --------
Net increase in cash and cash equivalents 1,403 507
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 23,174 26,515
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 24,577 $ 27,022
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $ 25,772 $ 24,855
======== ========
Income taxes paid $ 629 $ 1,264
======== ========
NONCASH FINANCING ACTIVITIES:
Acquisition of fixed assets through capital leases $ 1,534 $ 631
======== ========
</TABLE>
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<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 also leases laundry machines and other household
appliances to corporate relocation entities, property owners, managers of
multi-family housing properties and individuals. The Company owns and operates
approximately 802,000 washers and dryers (hereinafter referred to as "laundry
machines" or "machines") in approximately 79,000 locations on routes located
throughout the United States and in 182 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 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, 2000.
3. Debt
At June 30, 2000, the Company had outstanding debt consisting of (a)
approximately $296.7 million of 11 3/4% Senior Notes due 2005 (the "Senior
Notes"), (b) $268.0 million of term loans, and (c) approximately $123.2 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 "Senior Credit Facility"), which is
secured by all of the Company's real and personal property. Under the Senior
Credit Facility, the 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,
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COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
3. Debt (continued)
covenants and agreements, the Senior 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 Senior Credit Facility limit Coinmach's
ability to pay dividends.
4. Subsequent Events
On May 12, 2000, the Company's parent, Coinmach Laundry, entered into
an Agreement and Plan of Merger (the "Merger Agreement") with CLC Acquisition
Corporation ("CLC Acquisition"), a newly formed Delaware corporation formed by
Bruce V. Rauner, a director of Coinmach Laundry and a principal of the indirect
general partner of Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR Fund
IV"), the largest stockholder of Coinmach Laundry. Pursuant to the Merger
Agreement, CLC Acquisition agreed to acquire all of Coinmach Laundry's
outstanding Common Stock and Non-Voting Common Stock, (collectively, the
"Shares") for $14.25 per Share in a two-step transaction consisting of a tender
offer (the "Offer") followed by a merger transaction (the "Merger) of CLC
Acquisition with and into Coinmach Laundry.
The period during which Shares could be tendered in the Offer expired
on July 7, 2000. Approximately 99% of the outstanding Shares were either
tendered in the Offer and not withdrawn or contributed to CLC Acquisition by
certain members of management of the Company and GTCR Fund IV. Effective July
13, 2000, CLC Acquisition was merged with and into Coinmach Laundry pursuant to
the terms of the Merger Agreement. Each Share not tendered in the Offer was
canceled and converted into the right to receive an amount equal to $14.25 per
Share in cash, without interest thereon.
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<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, 2000. 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. The Company
also leases laundry machines and other household appliances to corporate
relocation entities, property owners, managers of multi-family housing
properties and individuals. Unless otherwise specified herein, references to the
Company shall mean Coinmach Corporation and its subsidiaries. At June 30, 2000,
the Company owned and operated approximately 802,000 washers and dryers in
approximately 79,000 locations on routes throughout the United States and in 182
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'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 84% 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.
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 $4.2 million for the three months
ended June 30, 2000 and $3.1 million for the three months ended June 30, 1999);
(ii) operating, maintaining and
-8-
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
General (continued)
-------
servicing retail laundromats (approximately $5.1 million for the three
months ended June 30, 2000 and $5.4 million for the three months ended June 30,
1999); 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 $12.2 million for the three months ended June 30, 2000 and $12.0
million for the three months ended June 30, 1999).
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, 2000.
Comparison of the three-month periods ended June 30, 2000 and June 30, 1999
Revenues increased by approximately 1% for the three-month period ended
June 30, 2000, as compared to the prior year's corresponding period. This
improvement in revenues was due primarily to increased revenues generated from
the Company's rental and distribution businesses, partially offset by a
reduction in revenues from the retail laundromat business caused by increased
competition in Texas.
Laundry operating expenses increased by approximately 3% for the
three-month period ended June 30, 2000 as compared to the prior year's
corresponding period. This increase was due primarily to increases in cost of
sales related to higher volume in the distribution business as well as costs
associated with the expansion into new markets in the rental and retail
laundromat businesses. As a percentage of revenues, laundry operating expenses
were approximately 66.9% for the three-month period ended June 30, 2000 as
compared to approximately 65.3% for the prior year's corresponding period.
General and administrative expenses increased less than 1% for the
three-month period ended June 30, 2000, as compared to the prior year's
corresponding period. As a percentage of revenues, general and administrative
expenses remained constant at approximately 1.5%.
Depreciation and amortization increased by approximately 5% for the
three-month period ended June 30, 2000, as compared to the prior year's
corresponding period, due primarily to an increase in capital expenditures with
respect to the Company's installed base of machines.
Operating income margins were approximately 8% for the three-month
period ended June 30, 2000, as compared to approximately 11% for the three-month
period ended June 30, 1999. The decrease in operating income margin was due
primarily to increases in depreciation expense, as noted above.
Interest expense, net, declined slightly for the three-month period
ended June 30, 2000, as compared to the prior year's corresponding period,
primarily because the borrowing levels under the Senior Credit Facility and
other long-term debt remained approximately the same.
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<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
---------------------
EBITDA (earnings before deductions for interest, income taxes,
depreciation and amortization) before deduction for the stock-based compensation
charges was approximately $42.3 million for the three months ended June 30,
2000, as compared to approximately $44.3 million for the corresponding period in
1999, representing a decrease of approximately 4.5%. EBITDA margins declined to
approximately 31.5% for the three months ended June 30, 2000, compared to
approximately 33.2% for the prior year's corresponding period. These decreases
are primarily the result of increased operating expenses, 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 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, 2000, the Company had outstanding long-term debt
(excluding the unamortized premium of approximately $6.5 million) of
approximately $693.8 million and stockholder's deficit of approximately $34.8
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 could 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, 2000 of approximately $24.3 million (which consists
primarily of machine expenditures, advance location payments and laundry room
improvements) were used to maintain the existing machine base in current
locations and through replacement of discontinued locations, growth in the
installed base of machines and for general corporate
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<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)
-------------------------------
purposes. The full impact on revenues and cash flow generated from capital
expended on the net increase in the installed machine 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, the Company is required to make monthly cash interest payments as
required by the Senior Credit Facility and semi-annual cash interest payments as
required by the 11 3/4% Senior Notes.
Management believes that the Company's future operating activities will
generate sufficient cash flow to repay indebtedness outstanding under the 11
3/4% Senior Notes and borrowings under the Senior Credit Facility or to permit
any necessary refinancings thereof. An inability of the Company, however, to
comply with covenants or other conditions contained in the indentures governing
the 11 3/4% Senior Notes or in the credit agreement evidencing the Senior Credit
Facility 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
Senior Credit Facility or the indenture governing the 11 3/4% Senior Notes.
The Company's depreciation and amortization expenses (aggregating
approximately $31.6 million for the three months ended June 30, 2000) 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.
An integral component of the Company's business strategy has been
growth through a combination of internal growth and selective acquisitions
designed to increase the Company's machine base and to achieve economies of
scale, increase its operating efficiencies and improve its financial
performance. While the Company continues to expand its machine base, at the
present time, the Companye believes that the number of significant acquisition
opportunities is limited due in part to the Company's successful execution of
its acquisition strategy over the past several years. Against this background of
limited opportunities for significant acquisitions, and in an effort to preserve
capital and reduce its level of indebtedness, the Company has determined to slow
its rate of growth by acquisitions; however, the Company may pursue
opportunities to acquire additional route businesses within the fragmented
outsourced laundry equipment services industry. There can be no assurance,
however, that the Company will be able to take advantage of these opportunities
on commercially reasonable terms, if at all.
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<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
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.
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<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 Coinmach
Laundry'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 alleges that
the defendants violated various federal securities laws and seeks damages in
unspecified amounts. On March 10, 2000, the Company filed a motion to dismiss
the complaint and denied all of the allegations of wrongdoing asserted against
it in the complaint. On April 10, 2000, the plaintiff filed a response to the
Company's motion to dismiss. On May 16, 2000, the Company replied to the
plaintiff's response. On June 1, 2000, the court dismissed the complaint in its
entirety on grounds that the applicable statute of limitations had passed prior
to the date on which the complaint was filed.
On November 18, 1999, K. Reed Hinrichs v. Stephen R. Kerrigan, et al.,
a purported class action lawsuit, was filed in the Delaware Court of Chancery,
Newcastle County naming Coinmach Laundry, Golder, Thoma, Cressey, Rauner Fund
IV, L.P. ("GTCR Fund IV"), GTCR Golder Rauner, L.L.C. and certain of its
executive officers as defendants. Plaintiffs allege that the defendants'
proposal to acquire between 80% and 90% of Coinmach Laundry's Common Stock for
$13.00 per share was inadequate and that the defendants breached their fiduciary
duty to Coinmach Laundry's public shareholders. The defendant's time to respond
to the complaint has been adjourned indefinitely by agreement of the parties.
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
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<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 5. Other Information
On May 12, 2000, the Company's parent, Coinmach Laundry, entered into
an Agreement and Plan of Merger (the "Merger Agreement") with CLC Acquisition
Corporation ("CLC Acquisition"), a newly formed Delaware corporation formed by
Bruce V. Rauner, a director of Coinmach Laundry and a principal of the indirect
general partner of Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR Fund
IV"), the largest stockholder of Coinmach Laundry. Pursuant to the Merger
Agreement, CLC Acquisition agreed to acquire all of Coinmach Laundry's
outstanding Common Stock and Non-Voting Common Stock (collectively, the
"Shares") for $14.25 per Share in a two-step transaction consisting of a tender
offer (the"Offer") followed by a merger transaction (the "Merger") of CLC
Acquisition with and into Coinmach Laundry.
The period during which Shares could be tendered in the Offer expired
on July 7, 2000. Approximately 99% of the outstanding Shares were either
tendered in the Offer and not withdrawn or contributed to CLC Acquisition by
certain members of management of the Company and GTCR Fund IV. Effective July
13, 2000, CLC Acquisition was merged with and into Coinmach Laundry pursuant to
the terms of the Merger Agreement. Each share not tendered in the Offer was
cancelled and converted into the right to receive an amount equal to $14.25 per
share in cash, without interest thereon.
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)
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 14, 2000 /s/ ROBERT M. DOYLE
-------------------------------
Robert M. Doyle
Senior Vice President and Chief Financial Officer
(On behalf of registrant and as Principal
Financial Officer)
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