UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the quarterly period
ended September 30, 1997 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: 0-26954
CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-3350958
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
380 Allwood Road 07012
Clifton, New Jersey (Zip Code)
(Address of principal executive offices)
(973) 471-1005
(Registrant's telephone number, including area code)
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___
The number of shares of common stock of the Registrant, par value $.001 per
share, outstanding as of October 11, 1997, was 6,666,884.
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<S> <C>
Page
Part I - Financial Information (unaudited)
Item 1 - Financial Statements
Consolidated Delivery & Logistics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets as of December 31, 1996 and
September 30, 1997 3
Condensed Consolidated Statements of Income for the Three and Nine Months
Ended September 30, 1996 and 1997 4
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1996 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Part II - Other Information
Item 1 - Legal Proceedings 14
Item 6 - Exhibits and Reports on Form 8-K 14
Signature 15
</TABLE>
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share information)
<TABLE>
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December September
31, 1996 30, 1997
------------------ ------------------
(Note 1) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,757 $1,270
Accounts receivable, net 21,018 22,348
Prepaid expenses and other current assets 2,330 2,819
Net assets of discontinued operations 1,801 1,989
------------------ ------------------
Total current assets 26,906 28,426
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net 3,857 5,949
OTHER ASSETS 4,238 4,000
================== ==================
Total assets $35,001 $38,375
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $7,200 $6,893
Current maturities of long-term debt 1,152 3,071
Accounts payable and accrued liabilities 12,546 14,977
------------------ ------------------
Total current liabilities 20,898 24,941
LONG-TERM DEBT 3,415 2,871
OTHER LONG-TERM LIABILITIES 1,958 2,051
------------------ ------------------
Total liabilities 26,271 29,863
------------------ ------------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; 2,000,000 shares
authorized; no shares issued and outstanding 0 0
Common stock, $.001 par value; 30,000,000 shares
authorized; 6,795,790 and 6,658,551 shares issued
and outstanding at December 31, 1996 and
September 30, 1997, respectively 7 7
Additional paid-in capital 9,601 9,001
Accumulated deficit (878) (496)
------------------ ------------------
Total Stockholders' Equity 8,730 8,512
================== ==================
Total Liabilities and Stockholders' Equity $35,001 $38,375
================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
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For The Three Months Ended For The Nine Months Ended
September 30, September 30,
------------------------------------ ------------------------------------
1996 1997 1996 1997
---------------- ---------------- ---------------- ----------------
REVENUES $42,911 $44,259 $120,493 $126,368
Cost of Revenues 31,420 33,810 89,168 96,758
---------------- ---------------- ---------------- ----------------
GROSS PROFIT 11,491 10,449 31,325 29,610
Selling, General, &
Administrative Expenses 10,645 9,435 29,615 28,409
---------------- ---------------- ---------------- ----------------
OPERATING INCOME 846 1,014 1,710 1,201
OTHER (INCOME) EXPENSE:
Gain on Sale of Subsidiary, net - - - (816)
Other expense (income), net (17) 5 (254) (209)
Interest expense 190 318 597 836
---------------- ---------------- ---------------- ----------------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 673 691 1,367 1,390
Provision for Income Taxes 285 277 581 556
---------------- ---------------- ---------------- ----------------
INCOME FROM CONTINUING
OPERATIONS 388 414 786 834
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS,
NET OF TAX 61 (361) 218 (452)
---------------- ---------------- ---------------- ----------------
NET INCOME $449 $53 $1,004 $382
================ ================ ================ ================
INCOME (LOSS) PER SHARE
Continuing operations $0.06 $0.06 $0.12 $0.13
Discontinued operations 0.01 (0.05) 0.03 (0.07)
---------------- ---------------- ---------------- ----------------
Net income per share $0.07 $0.01 $0.15 $0.06
================ ================ ================ ================
AVERAGE SHARES OUTSTANDING USED TO
CALCULATE INCOME (LOSS) PER SHARE
6,680 6,659 6,649 6,674
================ ================ ================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Nine Months Nine Months Ended
Ended September September 30, 1997
30, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
- ----------------------------------------------------------------------------
Net income $1,004 $382
- ----------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities -
- ----------------------------------------------------------------------------
Gain on disposal of equipment and leasehold improvements (5) (14)
- ----------------------------------------------------------------------------
Gain on sale of subsidiary - (816)
- ----------------------------------------------------------------------------
Depreciation and amortization 1,078 1,550
- ----------------------------------------------------------------------------
Changes in operating assets and liabilities
- ----------------------------------------------------------------------------
(Increase) decrease in -
- ----------------------------------------------------------------------------
Accounts receivable, net (1,735) (1,961)
- ----------------------------------------------------------------------------
Prepaid expenses and other current assets (1,595) (587)
- ----------------------------------------------------------------------------
Other assets 387 (249)
- ----------------------------------------------------------------------------
Increase (decrease) in -
- ----------------------------------------------------------------------------
Accounts payable and accrued liabilities (2,521) 3,429
- ----------------------------------------------------------------------------
Other long-term liabilities 122 93
- ---------------------------------------------------------------------------- --------------- ------------------
Net cash provided by (used in) continuing operations (3,265) 1,827
- ----------------------------------------------------------------------------
Net cash used by discontinued operations (477) (188)
- ---------------------------------------------------------------------------- --------------- ------------------
Net cash provided by (used in) operating activities (3,742) 1,639
- ---------------------------------------------------------------------------- --------------- ------------------
- ----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ----------------------------------------------------------------------------
Additions to equipment and leasehold improvements (1,039) (808)
- ----------------------------------------------------------------------------
Proceeds from sale of equipment and leasehold improvements 61 30
- ----------------------------------------------------------------------------
Purchases of businesses (1,616) -
- ---------------------------------------------------------------------------- --------------- ------------------
Net cash used in investing activities (2,594) (778)
- ---------------------------------------------------------------------------- --------------- ------------------
- ----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ----------------------------------------------------------------------------
Short-term borrowings (repayments), net 3,683 (307)
- ----------------------------------------------------------------------------
Proceeds from long-term debt 555 -
- ----------------------------------------------------------------------------
Repayments of long-term debt (2,978) (916)
- ----------------------------------------------------------------------------
Issuance of common stock in connection with
- --------------------------------------------------------------------------- 603 -
purchases of businesses
- ----------------------------------------------------------------------------
Deferred financing costs (145) (125)
- ---------------------------------------------------------------------------- --------------- ------------------
Net cash provided by (used in) financing activities 1,718 (1,348)
- ---------------------------------------------------------------------------- --------------- ------------------
- ----------------------------------------------------------------------------
Net decrease in cash and cash equivalents (4,618) (487)
- ----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, beginning of period 7,160 1,757
- ---------------------------------------------------------------------------- --------------- ------------------
CASH AND CASH EQUIVALENTS, end of period $2,542 $1,270
- ---------------------------------------------------------------------------- =============== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. The condensed consolidated balance sheet at
December 31, 1996, has been derived from the audited financial
statements at that date. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. Operating results for the three
and nine months ended September 30, 1997, are not necessarily
indicative of the results that may be expected for any other interim
period or for the year ending December 31, 1997. Certain
reclassifications have been made to prior year amounts to conform with
the current presentation, including the reclassification of the
Company's fulfillment and direct mail business as a discontinued
operation (see Note 5). For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Form 10-K for the year ended December 31, 1996.
(2) REVOLVING CREDIT FACILITY:
On July 14, 1997, the Company entered into a Loan and Security
Agreement (the "First Union Agreement") with First Union Commercial
Corporation ("First Union") to establish a revolving credit facility.
Credit availability is based on certain criteria, up to a maximum
amount of $15.0 million and is secured by substantially all of the
assets, including accounts receivable, of the Company and its
subsidiaries. Interest rates on borrowings are based on margins over
First Union's lending rates or the London interbank borrowing rate
(Libor). The First Union Agreement contains certain restrictive
covenants for which the Company is in compliance as of September 30,
1997. The First Union Agreement expires on July 30, 1999.
(3) LITIGATION:
On March 19, 1997, a purported class action complaint,
captioned Gapszewicz v. Consolidated Delivery & Logistics, Inc., et al.
(97 Civ. 1939), was filed in the United States District Court for the
Southern District of New York against the Company, certain of the
Company's present and former executive officers, and the co-managing
underwriters (the "Underwriters") of the Company's initial public
offering (the "Offering"). The gravamen of the complaint is that the
Company's registration statement for the Offering contained
misstatements and omissions of material fact in violation of the
federal securities laws and that the Company's financial statements
included in the registration statement were false and misleading and
did not fairly reflect the Company's true financial condition. The
complaint seeks the certification of a class of purchasers of the
Company's Common Stock from November 21, 1995 through February 27,
1997, rescission of the Offering, attorneys' fees and other damages.
Several additional purported class actions against the same defendants
containing allegations substantially similar to those made in the
Gapszewicz action were also filed. All these cases have been
consolidated and a motion to dismiss was filed by the Company and the
Underwriters on June 16, 1997.
An amended complaint in the Gapszewicz action was served on
the Company on October 20, 1997. The amended complaint restates many of
the allegations in the original complaint and contains additional
alleged omissions of material fact in both the Company's registration
statement for the Offering and in the Company's 1996 quarterly and
annual filings with the Securities and Exchange Commission. The Company
believes that the allegations contained in the amended complaint are
without merit and the Company intends to file a new motion to dismiss
the amended complaint.
The Company and its subsidiaries are from time to time parties
to litigation arising in the normal course of their business, most of
which involves claims for personal injury and property damage incurred
in connection with their operations. Management believes that none of
these actions, including the above actions, will have a material
adverse effect on the financial position or results of operations of
the Company and its subsidiaries.
(4) EARNINGS PER SHARE:
The computation of net income per share for the three and nine
months ended September 30, 1997 and 1996, is based upon 6,659,000,
6,680,000, 6,674,000, and 6,649,000 shares, respectively, of Common
Stock outstanding. The conversion of stock options and debentures
outstanding are not included in the computations as the effect would be
antidilutive.
The Financial Accounting Standards Board has issued a new
standard, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"). SFAS 128 establishes standards for
computing and presenting earnings per share. SFAS 128 simplifies the
standards for computing earnings per share previously found in APB
Opinion No. 15, "Earnings Per Share," and makes them comparable to
international earnings per share standards. It replaces the
presentation of primary earnings per share with a presentation of basic
earnings per share. It also requires dual presentation of basic and
diluted earnings per share on the face of the income statement for all
entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic earnings per share
computation to the numerator and denominator of the diluted earnings
per share computation. The Company is required to adopt this standard
as of December 15, 1997 and early adoption is not permitted. SFAS 128
requires restatement of all prior period earnings per share
calculations presented. The Company intends to adopt this standard when
required and has determined that adoption of SFAS 128 will have no
effect on earnings per share.
(5) DISCONTINUED OPERATIONS:
On October 27, 1997, the Company announced its intention to
pursue a plan to dispose of its fulfillment and direct mail business.
The condensed consolidated financial statements have been restated to
reflect the fulfillment and direct mail business as a discontinued
operation.
Results from discontinued fulfillment and direct mail operations were
as follows:
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<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
9/30/96 9/30/97 9/30/96 9/30/97
----------- ---------- ---------- ---------
Revenues $2,186 $1,526 $6,298 $4,860
=========== ========== ========== =========
Income (loss) from discontinued
operations (net of income tax provision
(benefit) of $40 and $146 in 1996 and ($241)
and ($301) in 1997) $ 61 ($361) $ 218 ($452)
=========== ========== ========== =========
</TABLE>
The net assets of the discontinued operations are reflected in
"Net Assets of Discontinued Operations" in the Condensed Consolidated
Balance Sheets. The components are as follows:
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December 31, September 30,
1996 1997
------------------ ------------------
Current assets $4,124 $5,247
Current liabilities (2,859) (3,983)
------------------ ------------------
Net current assets 1,265 1,264
Equipment and leasehold improvements 459 592
Other non-current assets 77 133
------------------ ------------------
Net Assets of Discontinued Operations $1,801 $1,989
================== ==================
</TABLE>
(6) NEW ACCOUNTING PRONOUNCEMENTS:
The Financial Accounting Standards Board has issued two new
statements, Statements of Financial Accounting Standards Numbers 130,
"Reporting Comprehensive Income" (SFAS 130"), and 131, "Disclosures
About Segments of an Enterprise and Related Information" (SFAS 131").
SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a full set of general
purpose financial statements. The objective of SFAS 130 is to report a
measure of all changes in equity of an enterprise that result from
transactions and other economic events of the period other than
transactions with owners ("comprehensive income"). Comprehensive income
is the total of net income and all other nonowner changes in equity.
SFAS 130 is effective for fiscal years beginning after December 15,
1997, with earlier application allowed but not required. Upon adoption,
reclassification of comparative financial statements provided for prior
periods is required. The Company intends to adopt this standard when
required and is in the process of determining the effect of SFAS 130 on
the Company's financial statement presentation.
SFAS 131 introduces a new model for segment reporting, called
the "management approach." The management approach is based on the way
that the chief operating decision maker organizes segments within a
company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography,
legal structure, management structure - any manner in which management
disaggregates a company. The management approach replaces the notion of
industry and geographic segments in current FASB standards. SFAS 131 is
effective for fiscal years beginning after December 15, 1997 and early
adoption is encouraged. However, SFAS 131 need not be applied to
interim statements in the initial year of application. SFAS 131
requires restatement of all prior period information reported. The
Company intends to adopt this standard when required and is in the
process of determining the effect of SFAS 131 on the Company's
financial statements.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The following discussion of the Company's results of operations and of
its liquidity and capital resources should be read in conjunction with the
Condensed Consolidated Financial Statements of the Company and the related Notes
thereto appearing elsewhere herein.
Disclosure Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. Certain information contained in this
Form 10-Q includes information that is forward looking, such as the Company's
expectations for future performance, its growth and acquisition strategies, its
anticipated liquidity and capital needs and its future prospects. The matters
referred to in such forward looking statements could be affected by the risks
and uncertainties related to the Company's business. Actual results may vary
from these forward-looking statements due to many factors including but not
limited to: the timing and terms of any sale of the discontinued operation,
unexpected expenses that may be incurred therewith; lack of satisfactory
acquisition candidates and/or an inability to conclude acquisitions on
satisfactory terms; acquisition limitations under the terms of the existing
credit facility; the effect of economic and market conditions, the Company's
limited operating history, the ability of the Company to execute its strategic
plan, the impact of competition and the Company's reported results varying
materially from management's current expectations. Investors are further
cautioned that CDLI's financial results can vary from quarter to quarter, and
the financial results reported for the third quarter may not necessarily be
indicative of future results. For more information about CDLI, please review the
Company's most recent Form 10-K filed with the Securities and Exchange
Commission.
Results of Operations For The Nine Months Ended September 30, 1997 Compared
to The Nine Months Ended September 30, 1996
Revenues of $126.4 million for the nine months ended September 30, 1997
represent a 4.9% increase from $120.5 million for the same period in 1996.
Several factors affected the Company's revenues for the nine months of 1997,
among which was the company's sale of it's contract logistics subsidiary in
January 1997, which had accounted for $3.8 million in revenues for the first
nine months of 1996 but only $400,000 in 1997. Additionally, the Company
announced on October 27, 1997 that it intends to dispose of its fulfillment and
direct mail business. As a result of this decision, the revenues, costs and
expenses, assets and liabilities, and cash flows relating to this particular
business have been reclassified as discontinued operations in the accompanying
financial statements.
Air courier revenues increased $3.8 million (10.0%), ground delivery
revenues increased $7.0 million (9.3%) and continuing logistics revenues,
representing ground based distribution services declined $4.9 million (66.1%)
for the first nine months of 1997 when compared to the first nine months of
1996. Of the decline in continuing logistics revenues of $4.9 million, $3.4
million represented the sale of the Company's contract logistics subsidiary.
Air courier revenues increased from the first three quarters of 1996 to
1997 primarily due to internal growth from existing accounts. Ground delivery
revenues increased due to the addition of time service and facilities management
revenues through previously disclosed acquisitions adding $4.5 million of the
revenue increase for nine months of 1997 over 1996 as well as the addition of
several new contract distribution routes in the pharmaceutical, electronic
repair and office product industries. This increase was offset by a decrease of
$1.8 million in the Company's banking division. Due to the consolidation taking
place in the banking industry, two of the Company's largest customers in the
banking division merged, thereby decreasing the branch network and number of
stops required.
Cost of revenues increased by $7.6 million or 8.5% for the first
nine months of 1997 when compared to the same period in 1996. The largest
component of the increase occurred in the air courier business and results from
a change in business mix. Broadcast production material is now principally
distributed electronically through new technology developed for this purpose,
resulting in less consolidation of air freight in the Company's major markets.
The Company is in effect shipping more packages at a higher cost per package.
Cost of revenues for ground delivery increased primarily due to start-up costs
for long-term contracts entered into for newly established contract distribution
business as well as cost increases necessary to support an increase in general
revenues. Cost of revenues were positively impacted by approximately $2.6
million as a result of the sale of the Company's contract logistics subsidiary.
Excluding the results of the Company's contract logistics subsidiary, cost of
revenues would have increased $10.2 million (11.8%) from $86.3 million for the
first three quarters of 1996 to $96.5 million for the first three quarters of
1997.
As a result of the matters discussed above, gross profit declined by
$1.7 million (5.4%) from $31.3 million for the nine months ended September 30,
1996 and $29.6 million for the same period in 1997.
Selling, general and administrative expenses decreased by $1.2 million
from $29.6 million for the nine months ended September 30, 1996 to $28.4 million
for the comparable period in 1997. This represents a 4.1% decrease in selling,
general and administrative expenses and results from the Company's continuing
policy of consolidation and cost reduction. When expressed as a percentage of
revenues, selling, general and administrative expenses decreased from 24.6% for
the first three quarters of 1996 to 22.5% for the first three quarters of 1997.
The Company sold its contract logistics subsidiary on January 31, 1997
and recognized a gain of $816,000 before applicable taxes.
Interest expense increased by $239,000 from $597,000 for the first nine
months of 1996 to $836,000 for the first nine months of 1997. The increase is
primarily due to increased borrowing levels for the comparable periods and to a
lesser extent, to interest rate increases during the period when the Company was
subject to a Forbearance Agreement with its previous lenders prior to the
establishment of its current credit facility (see Note 2 to the accompanying
financial statements).
Results of Operations for the Three Months Ended September 30, 1997 Compared to
Three Months Ended September 30, 1996
Sales for the quarter ended September 30, 1997 increased by $1.4
million (3.3%) to $44.3 million from $42.9 million for the comparable period of
1996. For the three months ended September 30, 1997, air revenues increased $1.3
million (9.8%) ground delivery revenues increased $2.5 million (9.3%) and
continuing logistics revenues declined by $2.4 million (80.0%) when compared to
the three months ended September 30, 1996.
The increase in air revenues resulted from the internal growth of
existing accounts, ground delivery revenues were impacted positively by the
increased levels of ground distribution business resulting from additional
long-term contracts and logistics revenues were negatively impacted by the
January, 1997 sale of the Company's contract logistics subsidiary which had
revenues of $1.8 million for the three months ended September 30, 1996.
Cost of revenues increased $2.4 million (7.6%) from $31.4 million for
the three months ended September 30, 1996 to $33.8 million for the same period
ended September 30, 1997. The increase was caused primarily by increased
business activity as well as the start up costs incurred to begin multi-year
contracts in the office product and other distribution businesses. As a result,
gross profit declined by $1.0 million (8.7%) from $11.5 million for the third
quarter of 1996 to $10.5 million for the third quarter of 1997.
Selling, general and administrative expenses declined for the third
quarter of 1997 by $1.2 million (11.3%) from $10.6 for the quarter ended
September 30, 1996. This decrease reflects the Company's ongoing consolidation
and expense reduction policies.
Interest expense increased due to increased levels of borrowing for the
third quarter of 1997 when compared to the third quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased by $2.5 million from $6.0 million at December
31, 1996 to $3.5 million at September 30, 1997. The decrease results primarily
from the reclassification of the Company's $2 million of Convertible
Subordinated Debt to current rather than long-term because the debenture
contains an option for the holders to "put" their debentures to the Company as
of August, 1998. Cash and cash equivalents decreased by $500,000 from $1.8
million as of December 31, 1996 to $1.3 million as of September 30, 1997. The
decrease results primarily from the use of cash for additions to equipment and
leasehold improvements of $800,000 and the repayment of Company debt of $1.2
million, offset by net cash provided by operations of $1.6 million.
The Company recorded a capital obligation of $2.5 million during 1997
in connection with an agreement to acquire 175 delivery vehicles. This
transaction is excluded from the statement of cash flows in 1997 as a noncash
transaction.
Management believes that cash flows from operations, together with its
borrowing capacity (see Note 2 of the accompanying financial statements) are
sufficient to support the Company's operations and general business and capital
liquidity requirements for the foreseeable future.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (the "FASB") has issued three new
standards, Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128") Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), and Statement of Financial
Accounting Standards No. 131, Disclosures About Segments of an Enterprise and
Related Information ("SFAS 131").
SFAS 128 establishes standards for computing and presenting earnings
per share, simplifies the standards for computing earnings per share previously
found in APB Opinion No. 15, "Earnings Per Share," and makes them comparable to
international earnings per share standards. It replaces the presentation of
primary earnings per share with presentation of basic earnings per share. It
also requires dual presentation of basic and diluted earnings per share on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic
earnings per share computation to the numerator and denominator of the diluted
earnings per share computation. The Company is required to adopt this standard
as of December 15, 1997 and early adoption is not permitted. SFAS 128 requires
restatement of all prior period earnings per share calculations presented. The
Company intends to adopt this standard when required and has determined that
adoption of SFAS 128 will have no effect on earnings per share.
SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a full set of general purpose
financial statements. The objective of SFAS 130 is to report a measure of all
changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners
("comprehensive income"). Comprehensive income is the total of net income and
all other non-owner changes in equity. SFAS 130 is effective for fiscal years
beginning after December 15, 1997, with earlier application allowed, but not
required. Upon adoption, reclassification of comparative financial statements
provided for prior periods is required. The Company intends to adopt this
standard when required and is in the process of determining the effect of SFAS
130 on the Company's financial statement presentation.
SFAS 131 introduces a new model for segment reporting, called the
"management approach." The management approach is based on the way that the
chief operating decision maker organizes segments within a company for making
operating decisions and assessing performance. Reportable segments are based on
products and services, geography, legal structure, management structure - any
manner in which management disaggregates a company. The management approach
replaces the notion of industry and geographic segments in current FASB
standards. SFAS 131 is effective for fiscal years beginning after December 15,
1997 and early adoption is encouraged. However, SFAS 131 need not be applied to
interim statements in the initial year of application. SFAS 131 requires
restatement of all prior period information reported. The Company intends to
adopt this standard when required and is in the process of determining the
effect of SFAS 131 on the Company's financial statements.
INFLATION
Inflation has not had a material impact on the Company's results of
operations.
<PAGE>
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings.
On March 19, 1997, a purported class action complaint,
captioned Gapszewicz v. Consolidated Delivery & Logistics, Inc., et al.
(97 Civ. 1939), was filed in the United States District Court for the
Southern District of New York against the Company, certain of the
Company's present and former executive officers, and the co-managing
underwriters (the "Underwriters") of the Company's initial public
offering (the "Offering"). The gravamen of the complaint is that the
Company's registration statement for the Offering contained
misstatements and omissions of material fact in violation of the
federal securities laws and that the Company's financial statements
included in the registration statement were false and misleading and
did not fairly reflect the Company's true financial condition. The
complaint seeks the certification of a class consisting of purchasers
of the Company's Common Stock from November 21, 1995 through February
27, 1997, rescission of the Offering, attorneys' fees and other
damages. Several additional purported class actions against the same
defendants containing allegations substantially similar to those made
in the Gapszewicz action were also filed. All these cases have been
consolidated and a motion to dismiss was filed by the Company and the
Underwriters on June 16, 1997.
An amended complaint in the Gapszewicz action was served on
the Company on October 20, 1997. The amended complaint restates many of
the allegations in the original complaint and contains additional
alleged omissions of material fact in both the Company's registration
statement for the Offering and in the Company's 1996 quarterly and
annual filings with the Securities and Exchange Commission. The Company
believes that the allegations contained in the amended complaint are
without merit and the Company intends to file a new motion to dismiss
the amended complaint.
The Company and its subsidiaries are from time to time,
parties to litigation arising in the normal course of their business,
most of which involves claims for personal injury and property damage
incurred in connection with their operations. Management believes that
none of these actions, including the above actions, will have a
material adverse effect on the financial position or results of
operations of the Company and its subsidiaries.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment to the Loan and Security Agreement, Dated
September 30, 1997 By And Between First Union Commercial
Corporation and Consolidated Delivery & Logistics, Inc.
And Subsidiaries.
27.1 Financial Data Schedule (for electronic submission only)
(b) The Company has not filed any reports on Form 8-K during the
relevant period.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 13, 1997 CONSOLIDATED DELIVERY & LOGISTICS, INC.
By:___________________________
Albert W. Van Ness, Jr.
Chairman of the Board, Chief
Executive Officer, and Director
By:___________________________
William T. Brannan
President, Chief Operating
Officer and Director
By:___________________________
Joseph G. Wojak
Executive Vice President, Chief
Financial Officer, Treasurer
and Secretary
(Principal Financial and
Accounting Officer)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 13, 1997 CONSOLIDATED DELIVERY & LOGISTICS, INC.
By: /s/ Albert W. Van Ness, Jr.
Albert W. Van Ness, Jr.
Chairman of the Board, Chief
Executive Officer, and Director
By: /s/ William T. Brannan
William T. Brannan
President, Chief Operating
Officer and Director
By: /s/ Joseph G. Wojak
Joseph G. Wojak
Executive Vice President, Chief
Financial Officer, Treasurer
and Secretary
(Principal Financial and
Accounting Officer)
<PAGE>
EXHIBIT INDEX
10.1 Amendment to Loan and Security Agreement, Dated September 30,
1997 By And Between First Union Commercial Corporation and
Consolidated Delivery & Logistics, Inc. And Subsidiaries.
27.1 Financial Data Schedule (for electronic submission only)
<PAGE>
EXIBIT 10.1
As of September 30, 1997
Consolidated Delivery and Logistics, Inc.
and Subsidiaries
380 Allwood Road
Clifton, New Jersey 07012
Re: Loan and Security Agreement dated July 14, 1997 (the "Loan Agreement")
Gentlemen:
This is to confirm our approval of your request for the
following modifications to the Loan Agreement:
A. The first sentence of paragraph 2.1 (A) of the Loan
Agreement is modified to read as follows:
2.1 REVOLVING CREDIT FACILITY
(A) Facility. So long as no Default nor Event of Default
exists, Lender shall, from time to time hereafter, through the Expiration Date,
lend to Borrower such amounts as the Borrower may from time to time request,
based upon the Eligible Loan Value of Eligible Accounts Receivable as may exist
from time to time, but not to exceed the Borrowing Base, and as may be reported
by Borrower to Lender on a borrowing base report in the form of Exhibit 2.1
which is to be submitted by Borrower to Lender by Thursday of each week and as
of the close of business of the preceding Friday.
B. Subparagraph 7.2(C) of the Loan Agreement is hereby
modified to read as follows:
7.2 (C) Capital Expenditures. Borrower, on a consolidated basis, will not (i) in
the fiscal year ending December 31, 1997 make Capital Expenditures in excess of
Four Million Two Hundred Thousand Dollars ($4,200,000.00), and (ii) in each
fiscal year ending December 31, 1998 and thereafter make Capital Expenditures in
excess of Three Million Two Hundred Thousand Dollars ($3,200,000.00) in the
aggregate per annum.
Our approval shall not constitute a waiver of any Events of
Default, if any so exist, or any future violation of any provisions of the Loan
Agreement or any other Loan Documents.
By your execution hereof Borrower agrees to pay all costs and
expenses, including reasonable attorneys fees and disbursements, incurred by
Lender in connection with the preparation of this letter agreement. Capitalized
terms not defined herein but defined in the Loan Agreement shall have the same
meaning ascribed to such terms in the Loan Agreement. Your execution shall also
act as your representation that the execution of this letter agreement has been
authorized by all required corporate action, that this letter agreement
constitutes the valid and binding obligation of the Borrower, is enforceable in
accordance with its terms, that no Default or Event of Default exists and that
no Material Adverse Change of the Borrower has occurred and the Borrower's
reaffirmation of its grant to Lender of a Lien on the Collateral.
Except as herein set forth, the Loan Agreement and all other
Loan Documents shall remain in full force and effect. Our agreement as aforesaid
is subject to your written agreement with the terms hereof by signing and
returning a copy hereof where so indicated below.
First Union Commercial Corporation
By:_______________________________
name:
title:
Agreed to:
Consolidated Delivery & Logistics, Inc.
and other Borrowers under the Loan Agreement
By:___________________________________
name:
title:
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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Financial Data Schedule for the Third Quarter 1997
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