UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
December 8, 1998
Date of Report (Date of earliest event reported)
CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-26954 22-3350958
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
380 Allwood Road, Clifton, New Jersey 07012
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (973) 471-1005
NOT APPLICABLE
(Former name or former address, if changed since last report.)
<PAGE>
This 8-K/A filing amends an 8-K filed on December 22, 1998. Item 7 is
hereby amended to state as follows:
ITEM 7. Financial Statements and Exhibits
a. Financial Statements of Businesses Acquired .
Audited financial statements for Manteca Enterprises, Inc., First
Choice Courier and Distribution Systems, Inc., Regional Express
II, Inc., and Regional Express III, Inc, (the "Manteca
Companies").
1. Manteca Enterprises, Inc. Balance Sheets as of May 31, 1998
and 1997 and the related Statements of Income and Retained
Earnings and Cash Flows for the years ended May 31, 1998 and
1997.
2. First Choice Courier and Distribution Systems, Inc. Balance
Sheets as of December 8, 1998 and December 31, 1997 and 1996
and the related Statements of Income and Retained Earnings
and Cash Flows for the period from January 1, 1998 through
December 8, 1998 and the years ended December 31, 1997 and
1996.
3. Regional Express II, Inc. Balance Sheets as of August 31,
1998, 1997 and 1996 and the related Statements of Income
and Retained Earnings and Cash Flows for the years ended
August 31, 1998, 1997 and 1996.
4. Regional Express III, Inc. Balance Sheets as of September
30, 1998, 1997 and 1996 and the related Statements of Income
and Retained Earnings and Cash Flows for the years ended
September 30, 1998, 1997 and 1996.
Unaudited interim financial statements:
5. Manteca Enterprises, Inc. Balance Sheet as of November 30,
1998 and May 31, 1998 and the related Statements of Income
and Retained Earnings and Cash Flows for the six month
periods ended November 30, 1998 and 1997.
6. Regional Express II, Inc. Balance Sheet as of November 30,
1998 and August 31, 1998 and the related Statements of
Income and Retained Earnings and Cash Flows for the three
month periods ended November 30, 1998 and 1997.
b. Pro Forma Financial Information.
Consolidated Delivery & Logistics, Inc. ("CDL") and the Manteca
Companies Pro Forma Condensed Combined Financial Statements
(Unaudited).
Pro Forma Condensed Combined Balance Sheet as of September 30,
1998 and Pro Forma Condensed Combined Statements of Continuing
Operations for the year ended December 31, 1997 and the nine
month period ended September 30, 1998.
c. Exhibits
10.1* Stock Purchase Agreement dated December 8, 1998 by and
among Consolidated Delivery & Logistics, Inc., National,
First Choice, RE II, RE III, Manteca, Terry Bozzay,
Randy Cooper and Charles Walch.
10.2* 7% Subordinated Convertible Notes Due 2001 of
Consolidated Delivery & Logistics, Inc.
99.1* Press Release issued December 9, 1998 regarding
acquisition of First Choice, RE II, RE III, and Manteca
* filed previously
<PAGE>
MANTECA ENTERPRISES, INC.
FINANCIAL STATEMENTS WITH
SUPPLEMENTARY INFORMATION AND
INDEPENDENT AUDITOR'S REPORT
MAY 31, 1998 AND 1997
<PAGE>
TABLE OF CONTENTS
PAGE
Independent Auditor's Report 1
Balance Sheets
May 31, 1998 and 1997 2
Statements of Income and Retained Earnings
For the Years Ended May 31, 1998 and 1997 3
Statements of Cash Flows
For the Years Ended May 31, 1998 and 1997 4 - 5
Notes to Financial Statements 6 - 9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Manteca Enterprises, Inc.
Saint Louis, Missouri
We have audited the accompanying balance sheets of Manteca Enterprises, Inc., as
of May 31, 1998 and 1997, and the related statements of income, retained
earnings and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Manteca
Enterprises, Inc. as of May 31, 1998 and 1997 and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Larson, Allen, Weishair & Co., LLP
LARSON, ALLEN, WEISHAIR & CO., LLP
St. Louis, Missouri
July 24, 1998
<PAGE>
MANTECA ENTERPRISES, INC.
BALANCE SHEETS
MAY 31, 1998 AND 1997
1998 1997
ASSETS
CURRENT ASSETS
Cash $ - $ 979
Accounts Receivable - Trade 24,891 52,726
Due From Affiliate - 3,000
Prepaid Expenses 19,606 14,961
Deferred Tax Benefit 702 -
------ ------
Total Current Assets $45,199 $71,666
------ ------
PROPERTY AND EQUIPMENT (At Cost)
Equipment 256,076 296,555
Less: Accumulated Depreciation (166,886) (168,806)
-------- --------
Total Property and Equipment (At Dependent Cost) 89,190 127,749
------ -------
DEPOSITS 1,200 1,200
------- -------
Total Assets $135,589 $200,615
======= =======
See accompanying Notes to Financial Statements
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
CURRENT LIABILITIES
Checks Written in Excess of Cash in Bank $ 1,302 $ -
Current Maturities of Long-Term Debt 33,591 45,993
Accounts Payable - Trade 18,509 16,236
Accrued Wages and Payroll Taxes 17,433 2,844
Deferred Income Taxes - 9,681
------ ------
Total Current Liabilities $70,835 $74,754
------ ------
LONG TERM DEBT
Notes Payable 73,988 118,234
Less: Current Maturities 33,591 45,993
Long-Term Debt (Net of Current Maturities ------ -------
Shown Above) 40,397 72,241
------ -------
STOCKHOLDERS' EQUITY
Common Stock, $1 Par Value
Authorized - 30,000 Shares
Issued and Outstanding - 100 Shares $ 100 $ 100
Retained Earnings 24,257 53,520
------ -------
Total Stockholders' Equity $ 24,357 $ 53,620
------ -------
Total Liabilities amd Stockholders' Equity $135,589 $200,615
======= =======
<PAGE>
MANTECA ENTERPRISES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED MAY 31, 1998 AND 1997
1998 1997
REVENUES
Management Fee Income $ 553,254 $ 346,990
Lease Income 71,003 27,481
-------- --------
Total Revenues $ 624,257 $ 374,471
-------- --------
OPERATING EXPENSES $ 659,359 $ 566,262
-------- --------
LOSS FROM OPERATIONS $ (35,102) $ (191,791)
--------- ---------
OTHER INCOME (EXPENSE)
Interest Expense $ (9,451) $ (5,773)
Gain on Sale of Fixed Assets 9,335 -
-------- ----------
Total Other Income (Expense) $ (116) $ (5,773)
-------- ----------
LOSS BEFORE PROVISION FOR INCOME TAX BENEFIT $ (35,218) $ (197,564)
PROVISION FOR INCOME TAX BENEFIT 5,955 68,579
-------- ----------
NET LOSS $ (29,263) $ (128,985)
Retained Earnings - Beginning 53,520 182,505
-------- ----------
RETAINED EARNINGS - ENDING $ 24,257 $ 53,520
====== ========
See accompanying Notes to Financial Statements
<PAGE>
MANTECA ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 1998 AND 1998
1998 1997
CASH FLOWS FROM OPERATIMG ACTIVITIES
Cash Received from Customers $ 650,765 $ 582,812
------- -------
Cash Paid to Suppliers and Employees $ 594,139 $ 531,662
Cash Paid for Interest 9,451 5,773
------- -------
Total Cash Paid $ 603,590 $ 537,435
------- -------
Net Cash Provided by Operating Activities $ 47,175 45,377
------- $ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of Equipment $ 27,253 $ -
Purchases of Equipment (32,463) (76,370)
-------- --------
Net Cash (Used) by Investing Activities $ 5,210 $ (76,370)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Notes Payable $ - $ 57,652
Payments on Notes Payable (44,246) (27,053)
Proceeds from Checks Written in
Excess of Cash in Bank 1,302 -
------- -------
Net Cash Provided by Financing Activities $ (42,944) $ 30,599
------- -------
NET INCREASE IN CASH $ (979) $ (394)
Cash - Beginning $ 979 $ 1,373
------- -------
CASH - ENDING $ - $ 979
======== ========
NON-CASH TRANSACTIONS
During the year ended May 31, 1998 a vehicle was trade in on another vehicle.
This new vehicle purchase consummated in no cash changing hands, and
accordingly, had no effect on this statement.
See accompanying Notes to Financial Statements.
<PAGE>
MANTECA ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 1998 AND 1997
1998 1997
RECONCILIATIONS OF NET LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
NET LOSS $(29,263) $(128,985)
--------- ---------
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation $ 53,104 $ 54,876
Amortization - 140
Gain on Sale of Fixed Assets (9,335) -
Decrease (Increase) in:
Accounts Receivable - Trade 27,835 182,756
Due From Affiliate 3,000 25,585
Prepaid Expenses (4,645) (7,443)
Deposits - (1,200)
Deferred Tax Benefit (702) -
Increase (Decrease) in:
Accounts Payable - Trade 2,273 7,011
Due to Affiliated Companies - (4,142)
Accrued Wages and Payroll Taxes 14,589 (4,383)
Income Taxes Payable - (5,488)
Due to Officer - (2,500)
Deferred Income Taxes (9,681) (70,850)
------- --------
Net Cash Provided By Operating Activities $ 47,175 $ 45,377
======= ========
See accompanying Note to Financial Statements.
<PAGE>
MANTECA ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 AND 1997
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Manteca Enterprises, Inc. (The Company), incorporated on
June 4,1992, operates as a management company for three
affiliated local delivery companies in the Midwest.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Property and Equipment Depreciation
Property and equipment is reflected at cost. When retired or
otherwise disposed of, the original cost and accumulated
depreciation are removed from the respective accounts and
the net difference less any amount realized from disposition
is reflected in operations. Depreciation is computed using
accelerated methods.
Revenue Recognition
The Company recognizes revenues form the delivery services
upon the completion of each assigned delivery and courier
job.
Advertising
Advertising costs are generally charged to operations in the
year incurred.
NOTE 2 RELATED PARTY TRANSACTIONS
The Company's sole shareholder also owns Regional Express
II, Inc., Regional Express III, Inc., and 50% of First
Choice Courier and Distribution Systems, Inc. Management
fees were charged to these affiliates in the amount of
$553,254 and $346,990 for the years ended May 31, 1998 and
1997. Management fees are recorded as accounts payable on
the affiliates' books and accounts receivable on the
Company's books. Accounts receivable from the affiliates was
$24,891 and $52,726 at May 31, 1998 and 1997.
NOTE 3 LEASE INCOME
The Company maintains a central computer system for the
related courier companies. The Company is responsible for
all maintenance, upgrades and communications associated with
the computer system. At the beginning of each calendar year,
the Company estimates the cost of the computer lease, along
with the related services, to each of the affiliates. Lease
income recorded was $71,003 and $27,481 for the years ended
May 31, 1998 and 1997, respectively.
<PAGE>
MANTECA ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 AND 1997
NOTE 4 Operating Leases
The Company has multiple lease agreements with Datatrac
Corporation for Mobile Data Units. This wireless data
service agreement, dated December 11, 1997, is for a period
of thirty-six months. The lease agreement is based upon a
total of 150 units being used at seventy-five dollars per
unit, per month, with an aggregate monthly service fee of
$11,250. The service fee includes both maintenance and
airtime. Additionally, Datatrac charges a $150 monthly
connection fee.
The Company leases the mobile data units to affiliates on a
monthly as needed basis. Future minimum lease payments to
Datatrac Corporation are as follows:
Years Ending May 31, Amount
1999 $ 136,800
2000 136,800
2001 79,800
----- ---------
Total $ 353,400
========
NOTE 5 INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which requires the use of the
"asset and liability" method of accounting for income taxes.
Accordingly, deferred tax assets and liabilities are
computed annually for differences between the financial
statement and tax basis of assets and liabilities that will
result in taxable or deductible amounts in the future based
on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be
realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities.
<PAGE>
MANTECA ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 AND 1997
NOTE 5 INCOME TAXES (CONTINUED)
The provision for income taxes (benefits) was computed as
follows:
1998 1997
Currently Payable
Federal $ 3,196 $ 1,893
State 1,232 378
------- --------
Total Current Income Tax $ 4,428 $ 2,271
------- --------
Change in Deferred:
Federal $ (8,653) $(59,042)
State (1,730) (11,808)
-------- --------
Total (Decrease) in Deferred $(10,383) $ 70,850)
Income Tax (Benefit) -------- --------
Provision for Income Tax (Benefit) $ (5,955) $(68,579)
========= ========
Components - Deferred
The deferred tax asset (liability) in the accompanying balance sheets
included the following and was caused by the differences between the
cash basis and accrual basis of accounting conversions at May 31:
1998 1997
Deferred Income Tax Asset $ 702 $ -
Deferred Income Tax (Liability)- Current - (9,681)
----- -------
Total Deferred Tax Asset (Liability) $ 702 $ (9,681)
===== =======
The following is a reconciliation of income tax computed at the
applicable statutory rates to the provison for taxes:
1998 1997
Statutory Federal Tax Rate
State Taxes (Net of Federal Benefit (15)% (34)%
Other Non-Deductible Expenses (6) (6)
Effective Tax Rate 4 5
---- ----
17% (35)%
==== ====
NOTE 6 NOTES PAYABLE
Nation's Bank
The Company purchased a vehicle with a note dated August 1,
1997, at 8.5% per annum, payable in monthly installments of
principal and interest, in the amount of $748 each month,
starting September 1, 1997. The entire balance and all accrued
interest is due on August 1, 2000. The balance was $17,713 at
May 31, 1998.
The Company acquired another vehicle with a note dated April
9, 1996, at 8.24% per annum, payable in monthly installments
of principal and interest in the amount of $490 each, starting
April 9, 1996. The entire outstanding balance and all accrued
interest is due on April 9, 2001. The balance was $14,575 and
$19,971 at May 31, 1998 and 1997.
<PAGE>
MANTECA ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 AND 1997
NOTE 6 NOTES PAYABLE (CONTINUED)
Another note, dated December 7, 1995 was payable in monthly
installments of $545, including principal and interest at 9.2%
per annum. The payments began on January 7, 1996. The balance
was $19,697 at May 31, 1997 and was paid in full during the
year ended May 31, 1998.
Citizen's National Bank
Computer equipment was purchased with a note dated April 17,
1997, payable in 35 monthly principal installments of $1,813,
plus interest, commencing on May 18, 1997. All outstanding
principal plus accrued interest shall be payable on April 18,
2000. Interest is payable at one-percent above the commercial
base rate. (9.5% at May 31, 1998 and 1997). The balance was
$41,700 and $63,457 at May 31, 1998 and 1997.
The five-year maturities of notes payable are as follows:
Years Ending May 31, Amount
1999 $ 33,593
2000 33,259
2001 7,136
---- ------
Total $ 73,988
======
NOTE 7 SALE OF COMPANY
The Company has had the financial statements audited for the pending
sale of the stock along with corporate assets to Consolidated Delivery
& Logistics, Inc. a publicly traded company.
<PAGE>
FIRST CHOICE COURIER AND DISTRIBUTION SYSTEMS, INC.
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITOR'S REPORT
DECEMBER 8, 1998 AND DECEMBER 31, 1997 AND 1996
<PAGE>
TABLE OF CONTENTS
PAGE
Independent Auditor's Report 1
Balance Sheets
December 8, 1998, and December 31, 1997 and 1996 2
Statements of Income and Retained Earnings
For the Period January 1 through December 8, 1998 and
For the Years Ended December 31, 1997 and 1996 3
Statements of Cash Flows
For the Period January 1 through December 8, 1998 and
For the Years Ended December 31, 1997 and 1996 4 - 5
Notes to Financial Statements 6 - 9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
First Choice Courier and Distribution Systems, Inc.
Saint Louis, Missouri
We have audited the accompanying balance sheets of First Choice Courier and
Distribution Systems, Inc., as of December 8, 1998 and December 31, 1997 and
1996, and the related statements of income, retained earnings and cash flows for
the period and years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of First Choice
Courier and Distribution Systems, Inc. as of December 8, 1998 and December 31,
1997 and 1996 and the results of its operations and its cash flows for the
period and years then ended in conformity with generally accepted accounting
principles.
/s/ Larson, Allen,
Weishair & Co., LLP
LARSON, ALLEN, WEISHAIR & CO., LLP
St. Louis, Missouri
January 16, 1999
<PAGE>
<TABLE>
<CAPTION>
FIRST CHOICE COURIER AND DISTRIBUTION SYSTEMS, INC.
BALANCE SHEETS
DECEMBER 8, 1998 and DECEMBER 31, 1997 and 1996
1998 1997 1996
---------------- --------------- -----------------
ASSETS
CURRENT ASSETS
<S> <C> <C> <C>
Cash $59,315 $146,043 $26,244
Accounts Receivable - Trade 401,940 382,765 230,779
Accounts Receivable - Other 18,482 3,544 38,355
Prepaid Expenses 538 8,347 13,795
---------------- --------------- -------------
Total Current Assets 480,275 540,699 309,173
---------------- --------------- -------------
PROPERTY AND EQUIPTMENT (at Cost)
Equipment and Software 236,441 182,079 116,642
Leasehold Improvements 26,449 16,814 -
---------------- --------------- -------------
Total 262,890 198,893 116,642
Less: Accumulated Depreciation 80,502 44,717 17,841
---------------- --------------- -------------
Total Property and Equipment
(at Depreciated Cost) 182,388 154,176 98,801
---------------- --------------- -------------
OTHER ASSETS
Deposits 5,000 - -
Customer List (Net of Accumulated
Amortization) 82,472 83,184 64,399
Noncompete Agreement (Net of Accumulated
Amortization) 113,594 121,355 -
Organization Costs (Net of Accumulated
Amortization) 2,805 4,040 5,386
---------------- --------------- ------------
Total Other Assets 203,871 208,579 69,785
---------------- --------------- ------------
Total Assets $866,534 $903,454 $477,759
================ =============== ============
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C> <C>
Current Maturities of Long-Term Debt $212,792 $99,419 $55,788
Accounts Payable - Trade 21,552 72,611 18,500
Accounts Payable - Related Party 2,836 2,406 990
Accrued Wages and Payroll Taxes 21,152 35,070 27,312
Accrued Income Taxes 18,540 14,400 -
Deferred Income Taxes 164,540 107,600 25,300
Due to Regional Express II, Inc. - Related Party 2,277 - -
-------- -------- -------
Total current liabilities 443,689 331,506 127,890
-------- --------- -------
LONG-TERM DEBT
Notes Payable to Financial Institutions 203,816 230,947 97,867
Notes Payable to Stockholders 87,824 172,724 218,540
-------- -------- -------
Total 291,640 403,671 316,407
Less: Current Maturities 212,792 99,419 55,788
--------- -------- -------
Long-Term Debt (Net of Current Maturities
Shown Above) 78,848 304,252 260,619
--------- -------- -------
DEFERRED INCOME TAXES - 11,600 -
--------- -------
TOTAL LIABILITIES 522,537 647,358 388,509
--------- -------- -------
STOCKHOLDERS' EQUITY
Common Stock, $.01 Par Value, Authorized -
30,000 Shares, Issued and Outstanding -
10,000 Shares 100 100 100
Additional Paid in Capital 19,900 19,900 19,900
Retained Earnings 323,997 236,096 69,250
--------- -------- -------
Total Stockholders' Equity 343,997 256,096 89,250
--------- -------- -------
Total Liabilities and Stockholders' Equity $866,535 $903,454 $477,759
========= ======== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST CHOICE COURIER AND DISTRIBUTION SYSTEMS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE PERIOD JANUARY 1 THROUGH DECEMBER 8, 1998 AND
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1998 1997 1996
----------------- ---------------- ----------------
SALES $3,846,010 $3,501,596 $2,403,977
----------------- ---------------- ----------------
DIRECT OPERATING EXPENSES
<S> <C> <C> <C>
Subcontracted Couriers 2,212,774 1,941,239 1,246,264
Direct Labor 140,865 165,613 157,874
Payroll Taxes 11,788 13,937 15,251
Workmen's Compensation
Insurance 12,311 13,673 13,073
Agent's Expense 36,361 26,174 8,850
Vehicle Reimbursements 1,384 2,712 6,276
----------------- ---------------- --------------
Total Direct Operating Expenses 2,415,484 2,163,348 1,447,588
----------------- ---------------- --------------
GROSS PROFIT 1,430,526 1,338,248 956,389
INDIRECT EXPENSES
Indirect Operating Expenses 661,840 551,685 425,600
Selling Expenses 170,555 142,494 126,906
General and Administrative
Expenses 403,753 332,817 279,813
----------------- ---------------- --------------
Total Indirect Expenses 1,236,148 1,026,996 832,319
----------------- ---------------- --------------
INCOME FROM OPERATIONS 194,378 311,252 124,070
----------------- ---------------- --------------
OTHER INCOME (EXPENSE)
Loss on Sale of Fixed Assets (6,802) - -
Interest Income 1,139 - -
Miscellaneous Income 1,111 - -
Interest Expense (27,645) (36,106) (29,520)
---------------- ---------------- --------------
Total Other Income (Expense) (32,197) (36,106) (29,520)
---------------- ---------------- ---------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 162,181 275,146 94,550
PROVISION FOR INCOME TAXES 74,280 108,300 25,300
--------------- ---------------- ---------------
NET INCOME 87,901 166,846 69,250
Retained Earnings - Beginning 236,096 69,250 -
--------------- ---------------- ---------------
Retained Earnings, Ending $323,997 $236,096 $69,250
=============== ================ ===============
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST CHOICE COURIER AND DISTRIBUTION SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED DECEMBER 8, 1998 AND
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1998 1997 1996
----------------- ---------------- ----------------
CASH FLOWS FROM OPERATING
ACTIVITIES
<S> <C> <C> <C>
Cash Received from Customers $3,819,837 $3,384,421 $2,134,843
Interest Collected 1,139 - -
----------------- ---------------- ---------------
Total Cash Collected 3,820,976 3,384,421 2,134,843
----------------- ---------------- ---------------
Cash Paid to Suppliers and
Employees 3,683,783 3,080,781 2,223,113
Interest Paid 27,645 36,106 29,520
----------------- ---------------- ---------------
Total Cash Paid 3,711,428 3,116,887 2,252,633
----------------- ---------------- ---------------
Net Cash Provided (Used) by
Operating Activities 109,548 267,534 (117,790)
----------------- ---------------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of Intangible Assets (5,000) (151,473) (75,731)
Increase in Deposit (5,000) - -
Proceeds from Sale of Fixed Assets 7,000 - -
Purchases of Property and
Equipment (81,245) (83,526) (116,242)
----------------- ---------------- ---------------
Net Cash (Used) by Investing
Activities (84,245) (234,999) (191,973)
----------------- ---------------- ---------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from Notes Payable - 281,185 150,025
Payments on Notes Payable to
Stockholder (84,900) (45,816) 169,366
Payments on Notes Payable (27,131) (148,105) (3,384)
Proceeds from Stock Issuance - - 20,000
----------------- ---------------- ---------------
Net Cash Provided (Used) by
Financing Activites (112,031) 87,264 336,007
----------------- ---------------- ---------------
NET INCREASE (DECREASE) IN
CASH (86,728) 119,799 26,244
Cash - Beginning 146,043 26,244 -
----------------- ---------------- ---------------
Cash - Ending $59,315 $146,043 $26,244
================= ================ ===============
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST CHOICE COURIER AND DISTRIBUTION SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED DECEMBER 8, 1998 AND
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1998 1997 1996
---------------- ---------------- -------------
RECONCILIATIONS OF NET
INCOME TO NET CASH
PROVIDED (USED) BY
OPERATING ACTIVITIES
<S> <C> <C> <C>
NET INCOME $87,901 $166,846 $69,250
---------------- ---------------- --------------
ADJUSTMENTS TO RECONCILE
NET INCOME TO NET CASH
PROVIDED (USED) BY
OPERATING ACTIVITES
Depreciation 39,231 28,151 17,841
Amortization 14,708 12,679 5,946
Loss on Sale of Fixed Asset 6,802 - -
(Increase) Decrease in:
Accounts Receivable - Trade (19,175) (151,986) (230,779)
Accounts Receivable - Other (14,938) 34,811 (38,355)
Prepaid Expenses 7,809 5,448 (13,795)
Increase (Decrease) in:
Accounts Payable - Trade (50,629) 55,527 19,490
Accrued Wages and Payroll Taxes (13,918) 7,758 27,312
Accrued Income Taxes 4,140 14,400 -
Deferred Income Taxes - Current 56,940 82,300 25,300
Deferred Income Taxes - Long Term (11,600) 11,600 -
Due to Regional Express II, Inc. -
Related Party 2,277 - -
---------------- ---------------- --------------
Net Cash Provided (Used) By
Operating Activities $109,548 $267,534 $(117,790)
================ ================ ===============
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
FIRST CHOICE COURIER AND DISTRIBUTION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 8, 1998 AND DECEMBER 31, 1997 AND 1996
NOTE 1 Summary of Significant Accounting Policies
Nature of Business
First Choice Courier and Distribution Systems, Inc. (The
Company), incorporated on September 30, 1995, operates as a
full-service local delivery company with customary credit terms
given to entities located in the Saint Louis metropolitan area.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Property and Equipment Depreciation
Property and equipment are valued at cost. Maintenance and repair
costs are charged to expense as incurred. Gains and losses on
disposition of property and equipment are reflected in income.
Depreciation is computed on the accelerated methods for financial
accounting purposes, based on the estimated useful lives of the
assets.
Customer List, Noncompete Agreement and Organization Costs
Intangibles are capitalized and amortized on a straight-line
basis. The customer list and noncompete agreements are amortized
over the term of the related contract and organizational costs
are amortized over 5 years.
Revenue Recognition
The Company recognizes revenues from the delivery services upon
the completion of each assigned delivery and courier job.
Advertising
Advertising costs are generally charged to operations in the year
incurred.
Concentration of Credit Risk
The Company occasionally maintains deposits in excess of
federally insured limits.
NOTE 2 RELATED PARTY TRANSACTIONS
The Company is owned 50% by the only shareholder of Manteca
Enterprises, Inc., which charged management fees of $136,288,
$117,550 and $112,679 for the years ended December 8, 1998, and
December 31, 1997 and 1996. Management fees are recorded as
accounts payable on the Company's books and accounts receivable
on Manteca Enterprises, Inc.'s books. Accounts Payable to the
related party was $2,836, $2,406 and $990 at December 8, 1998,
and December 31, 1997 and 1996.
The Company has operating leases with Manteca Enterprises, Inc.
for automobiles. These leases expired at December 31, 1997.
<PAGE>
FIRST CHOICE COURIER AND DISTRIBUTION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 8, 1998 AND DECEMBER 31, 1997 AND 1996
NOTE 3 Operating Leases
The Company has a month-to-month building lease with a
stockholder for $2,592 per month. The building consists of 3,500
square feet of finished office space, 3,500 square feet of
unfinished office space (used for storage), and 7,000 square feet
of dock and warehouse space. The Company currently sublets a
portion of the lot and warehouse space to an unrelated third
party. First Choice is responsible for all maintenance and
improvements.
The Company has a central computer lease with Manteca
Enterprises, Inc. (related party) for $1,426 per month plus a
prorated portion of annual maintenance. The price is adjustable
based on the number of users that the Company has on the system
at one time.
NOTE 4 INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No.109, "Accounting
for Income Taxes," which requires the use of the "asset and
liability" method of accounting for income taxes
Accordingly, deferred tax assets and liabilities are computed
annually for differences between the financial statement and tax
basis of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
The provision for income taxes were computed as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ---------- ---------
Current income tax:
<S> <C> <C> <C>
Federal $26,459 $10,800 $ -
State 2,481 3,600 -
---------- ---------- --------
Total Current Income Tax 28,940 14,400 -
---------- ---------- --------
Change in Deferred:
Federal 39,446 78,250 19,800
State 5,894 15,650 5,500
---------- ---------- --------
Total Increase in Deferred Income
Tax 45,340 93,900 25,300
---------- ---------- ---------
Provision for Income Tax $74,280 $108,300 $25,300
========== ========== =========
</TABLE>
<PAGE>
FIRST CHOICE COURIER AND DISTRIBUTION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 8, 1998 AND DECEMBER 31, 1997 AND 1996
NOTE 4 INCOME TAXES (CONTINUED)
COMPONENTS - Deferred
The deferred tax liability in the accompanying balance
sheets included the following components and was caused by
the differences between the cash basis and accrual basis of
accounting conversions at December 8, 1998 and December 31,
1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- ------------ -----------
<S> <C> <C> <C>
Deferred Income Taxes - Current $164,540 $107,600 $25,300
Deferred Income Taxes - Long-Term - 11,600 -
-------------- ------------ -----------
Total Deferred Tax Liability $164,540 $119,200 $25,300
============== ============ ===========
</TABLE>
The following is a reconciliation of income tax computed at
the applicable Statutory rates to the provision for taxes:
<TABLE>
<CAPTION>
1998 1997 1996
------------- -------------- ------------
<S> <C> <C> <C>
Statutory Federal Tax Rate 35% 35% 35%
State Taxes (Net of Federal Benefit) 6 6 6
Surtax Exemption - - (20)
Other Non-Deductible Expenses 5 (2) 6
============= ============== ===========
Effective Tax Rate 46% 39% 27%
============= ============== ===========
</TABLE>
NOTE 5 NOTES PAYABLE - FINANCIAL INSTITUTIONS
Line of Credit
On May 2, 1997 the Company secured a $260,000 line of credit. The
principal is payable in thirty-five monthly installments of
$7,225, commencing on June 2, 1997 and continuing until May 2,
2000, the final maturity date when all outstanding principal plus
accrued interest shall be due. Interest is calculated at the
commercial base rate plus one percent on the unpaid principal
balance. (9.5% per annum at December 31, 1997 and 1996) The note
is secured by all corporate assets and the personal guarantees of
the stockholders.
The Company also has a $23,510 note payable, dated July 1, 1997,
payable in thirty-six monthly payments of $742, including
principal and interest at 8.5% per annum.
Another note for $18,500, dated November 17, 1997 is payable in
thirty-six monthly payments of $586, including principal and
interest at 8.73% per annum.
The Company had a note payable with LeMay Bank & Trust Co. for a
1999 Mitsubishi, the note was dated November 16, 1998 with
forty-eight monthly payments of $1,091 including principal and
interest calculated at 7.68% per annum.
<PAGE>
NOTE 6 NOTES PAYABLE - STOCKHOLDERS
The Company had notes payable to stockholders, dated January 1,
1996, in the amount of $142,107 to Terry Bozzay and $77,687 to
Charles Walch with a maturity date of December 9, 1998. Interest
is payable at 10% per annum until the notes are fully paid. The
total balance was $87,824, $172,724 and $218,540 at December 8,
1998, and December 31, 1997 and 1996, respectively.
NOTE 7 NOTES PAYABLE - FINANCIAL INSTITUTIONS - MATURITIES
The five-year maturities of the Citizens's and LeMay along with
the notes payable to stockholders are as follows:
Years Ending December 31, Amount
------------------------------------- ---------------
1999 $164,540
2000 54,208
2001 12,092
2002 12,548
---------------
Total $291,640
===============
NOTE 8 EMPLOYEE BENEFITS
The Company had a Section 125 Cafeteria Plan, which was terminated
December 31, 1997, and this plan was held at no contributing cost to
the Company.
NOTE 9 CONCENTRATIONS OF REVENUES
Approximately 10% of revenues are derived from W. W. Grainger, Inc.
NOTE 10 SALE OF COMPANY
Effective December 9, 1998, the Company sold it's stock along with
corporate assets to Consolidated Delivery & Logistics, Inc., a
publicly traded company.
<PAGE>
REGIONAL EXPRESS II, INC.
FINANCIAL STATEMENTS WITH
SUPPLEMENTARY INFORMATION AND
INDEPENDENT AUDITOR'S REPORT
AUGUST 31, 1998, 1997 AND 1996
<PAGE>
TABLE OF CONTENTS
PAGE
Independent Auditor's Report 1
Balance Sheets
August 31, 1998, 1997 and 1996 2
Statements of Income and Retained Earnings
For the Years Ended August 31, 1998, 1997 and 1996 3
Statements of Cash Flows
For the Years Ended August 31, 1998, 1997 and 1996 4 - 5
Notes to Financial Statements 6 - 8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Regional Express II, Inc.
Saint Louis, Missouri
We have audited the accompanying balance sheets of Regional Express II, Inc., as
of August 31, 1998, 1997 and 1996, and the related statements of income,
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Regional
Express II, Inc. as of August 31, 1998, 1997 and 1996 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/S/ Larson, Allen Weishair & Co., LLP
LARSON, ALLEN, WEISHAIR & CO., LLP
St. Louis, Missouri
September 28, 1998
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EXPRESS II, INC.
BALANCE SHEETS
AUGUST 31, 1998, 1997 AND 1996
1998 1997 1996
ASSETS
CURRENT ASSETS
<S> <C> <C> <C>
Cash $ 3,307 $ 2,466 $ 5,367
Accounts Receivable - Trade 198,223 173,351 205,547
Other Receivable 2,000 - -
Prepaid Expenses 16,653 14,704 17,050
Refundable Taxes 12,706 - -
------- ------- -------
Total Current Assets $ 232,889 $ 190,521 $ 227,964
------- ------- -------
PROPERTY AND EQUIPMENT (at Cost)
Equipment $ 100,090 $ 65,056 $ 65,056
Leasehold Improvements 10,474 7,804 7,804
------- ------- ------
Total $ 110,564 $ 72,860 $ 72,860
Less: Accumulated Depreciation 51,811 39,644 28,225
Total Property and Equipment ------- ------- -------
(At Depreciated Cost) $ 58,753 $ 33,216 $ 44,635
------- ------- --------
OTHER ASSETS
Customer List (Net of Accumulated Amortization $ 3,066 $ 3,333 $ 3,600
Noncompete Agreement (Net of
Accumulated Amortization) 19,932 21,666 23,400
Organization Costs (Net of
Accumulated Amortization) - 119 404
Deposits 780 780 780
------- -------- -------
Total Other Assets $ 23,778 $ 25,898 $ 28,184
------- ------- -------
Total Assets $ 315,420 $ 249,635 $ 300,783
======= ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C> <C>
Current Maturities of Long-Term Debt $ 7,851 $ 6,679 $ 6,139
Accounts Payable - Trade 49,453 57,257 135,878
Due to Affiliated Companies 5,095 - 61,246
Accrued Wages and Payroll Taxes 7,905 6,069 5,428
Accrued Commissions 4,413 - -
Income Taxes Payable - 12,328 -
Deferred Income Taxes 50,886 30,906 30,455
------- ------- -------
Total Current Liabilities $ 125,603 $ 113,239 $239,146
------- ------- -------
LONG TERM DEBT
Notes Payable $ 31,361 $ 9,034 $ 15,176
Less: Current Maturities 7,851 6,679 6,139
Long-term Debt (Net of Current ------- ------ ------
Maturities Shown Above) $ 23,510 $ 2,355 $ 9,037
------- ------ ------
STOCKHOLDERS' EQUITY
Common Stock, $1 Par Value
Authorized - 30,000 Shares
Issued and Outstanding - 1,000 Shares $ 1,000 $ 1,000 $ 1,000
Retained Earnings 165,307 133,041 51,600
------- ------- ------
Total Stockholders' Equity $ 166,307 $ 134,041 $ 52,600
------- ------- ------
Total Liabilities and Stockholders' Equity $ 315,420 $ 249,635 $300,783
======== ======== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EXPRESS II, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED AUGUST 31, 1998, 1997 AND 1996
1998 1997 1996
SALES $1,875,709 1,532,608 1,766,223
DIRECT OPERATING EXPENSES
<S> <C> <C> <C>
Drivers' Commissions and Salaries $1,139,166 $896,306 $1,133,253
Gas & Oil 4,055 4,264 6,841
Outside Delivery Services 34,278 73,800 25,447
Vehicle Reimbursements 57 83 5,975
--------- ------- ---------
Total Direct Operating Expenses $1,177,556 $974,453 $1,171,516
--------- ------- ---------
GROSS PROFIT $ 698,153 $558,155 $ 594,707
------- ------- -------
INDIRECT EXPENSES
Indirect Operating Expenses $ 355,346 $319,697 $ 359,328
Selling Expenses 121,624 107,864 76,256
General and Administrative Expenses 205,418 64,919 218,954
------- ------- -------
Total Indirect Expenses $ 682,388 $492,480 $ 654,538
------- ------- -------
INCOME (LOSS) FROM OPERATIONS $ 15,765 $ 65,675 $ (59,831)
------- ------ -------
OTHER INCOME (EXPENSE)
Beeper Lease $ 6,784 $ 5,683 $ 6,819
Radio Lease 26,644 23,337 28,766
Vehicle Lease 4,619 - -
Interest Expense (1,897) (1,141) (2,473)
Miscellaneous Income 833 1,916 6,274
------- ------- -------
Total Other Income (Expense) $ 36,983 $ 29,795 $ 39,386
------- ------- ------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES (BENEFIT) $ 52,748 $ 95,470 $ (20,445)
PROVISION FOR INCOME TAXES (BENEFIT) 20,482 14,029 (2,684)
------- ------- -------
NET INCOME (LOSS) $ 32,266 $ 81,441 $ (17,761)
Retained Earnings - Beginning 133,041 51,600 69,361
------- ------- ------
RETAINED EARNINGS - ENDING $ 165,307 $133,041 $ 51,600
======= ======= ======
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EXPRESS II, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 1998, 1997 AND 1996
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers $ 1,850,837 $ 1,564,544 $ 1,719,825
Other Receipts 37,023 23,986 39,386
--------- --------- ---------
Total Cash Collected $ 1,887,860 $ 1,588,530 $ 1,759,211
--------- --------- ---------
Cash Paid to Suppliers and Employees $ 1,869,745 $ 1,584,149 $ 1,722,718
Cash Paid for Interest 1,897 1,141 2,473
--------- --------- ---------
Total Cash Paid $ 1,871,642 $ 1,585,290 $ 1,725,191
--------- --------- ---------
Net Cash Provided by Operating Activities $ 16,218 $ 3,240 $ 34,020
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Equipment $ (6,195) $ - $ (21,909)
------- ------ --------
Net Cash (Used) by Investing Activities $ (6,195) $ - $ (21,909)
------- ------ --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Notes Payable $ (9,182) $ (6,141) $ (12,840)
------- ------- --------
Net Cash (Used) by Financial Activities $ (9,182) $ (6,141) $ (12,840)
NET INCREASE (DECREASE) IN CASH $ 841 $ (2,901) $ (729)
Cash - Beginning 2,466 5,367 $ 6,096
----- ----- -----
CASH - ENDING $ 3,307 $ 2,466 $ $ 5,367
===== ===== ======
</TABLE>
See accompanying Notes to Financial Statements
SUPPLEMENTAL NON-CASH DISCLOSURES
The company acquired a new automobile in February, 1998 for $35,034. The was
acquired with a $3,525 downpayment, reflected above, and the assumption of a
note in the amount of $31,509.
The acquisition of the automobile and assumption of the note has not been
reflected within the Statement of Cash Flows.
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EXPRESS II, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 1998, 1997 AND 1996
1998 1997 1996
RECONCILIATION OF NET INCOME (LOSS) TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
<S> <C> <C> <C>
NET INCOME (LOSS) $ 32,266 $ 81,441 $ (17,761)
------ ------ --------
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Gain on Sale of Assets $ - $ - $ (3,990)
Depreciation 12,167 11,419 12,827
Amortization 2,120 2,285 2,285
Decrease (increase) in:
Accounts receivable - trade (24,872) 36,277 (41,312)
Other Receivable (2,000) - -
Advances - - 16
Prepaid Expenses (709) - (5,070)
Refundable Taxes (13,946) 2,346 -
Due From Affiliates - (4,081) -
Increase (Decrease) in:
Accounts Payable - Trade (7,804) (78,621) 96,352
Due to Affiliated Companies 5,095 (61,246) 30,921
Accrued Wages and Payroll Taxes 1,836 641 (35,482)
Accrued Commissions 4,413 - -
Income Taxes Payable 12,328) 12,328 (2,318)
Deferred Income Taxes 19,980 451 (2,448)
------ ------- -------
Net Cash Provided by Operating Activities $ 16,218 $ 3,240 $ 34,020
====== ====== =======
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
REGIONAL EXPRESS II, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998, 1997, AND 1996
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Regional Express II, Inc. (The Company), was incorporated on January
21, 1993 and operates as a full-service local delivery company in the
Kansas City metropolitan area.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Property and Equipment Depreciation
Property and equipment are valued at cost. Maintenance and repair costs
are charged to expense as incurred. Gains and losses on disposition of
property and equipment are reflected in income. Depreciation is
computed on accelerated methods for financial accounting purposes,
based on the estimated useful lives of the assets.
Revenue Recognition
The Company recognized revenues from the delivery services upon the
completion of each assigned delivery and courier job.
Advertising
Advertising costs are generally charged to operations in the year
incurred.
Customer List, Noncompete Agreement and Organization Costs
Intangibles are capitalized and amortized on a straight-line basis. The
customer list, noncompete agreements, and organizational costs are
amortized over 5 years.
NOTE 2 RELATED PARTY TRANSACTIONS
The Company is wholly owned by the shareholder of Manteca Enterprises,
Inc., which charged management fees of $179,086, $43,117 and $190,131
for the years ended August 31, 1998, 1997 and 1996. Management fees are
recorded as trade accounts payable on the Company's books and accounts
receivable on Manteca Enterprises, Inc.'s books. Accounts Payable to
the related party was $11,782, $29,645 and $101,021 at August 31, 1998,
1997 and 1996.
Manteca Enterprises, Inc. has provided open advances to the Company,
which at August 31, 1996 totaled $61,246 and no interest provisions
were accrued by either Company. At August 31, 1997, the advances were
paid in full.
<PAGE>
REGIONAL EXPRESS II, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998, 1997, AND 1996
NOTE 3 Operating Leases
The Company has a building lease, which was extended August 14, 1998.
The lease was extended for a three-year term, at $1,097 per month with
additional common area maintenance costs, as applicable, beginning
December 1, 1998 and expiring November 30, 2000. The original lease
was dated September 21, 1994 and required monthly payments of $900.
Future minimum lease payments for the years ended August 31 are as
follows:
Year Ending August 31, Amount
1999 $ 13,164
2000 13,164
2001 3,291
------
Total $ 29,619
=======
NOTE 4 LEASE INCOME
The Company leases mobile data units, radios, pagers, automobile, and
uniforms to the subcontractors (drivers). The rates and terms are set
forth in a signed lease agreement.
NOTE 5 INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
which requires the use of the "asset and liability" method of
accounting for income taxes.
Accordingly, deferred tax assets and liabilities are computed annually
for differences between the financial statement and tax basis of
assets and liabilities, primarily accounts receivable, prepaid
expenses, and accrued expenses, that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax
assets and liabilities.
Components - Deferred
The deferred tax liability in the accompanying balance sheets included
the following and was caused by the differences between the cash basis
and accrual basis of accounting conversions at August 31:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- -------------- --------------
<S> <C> <C> <C>
Deferred Income Taxes - Current $50,886 $ 30,906 $ 30,455
=============== ============== ==============
</TABLE>
<PAGE>
REGIONAL EXPRESS II, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998, 1997, AND 1996
NOTE 5 INCOME TAXES (continued)
The provision for income taxes (benefit) was computed as follows:
<TABLE>
<CAPTION>
1998 1997 1996
Currently Payable:
<S> <C> <C> <C>
Federal $ 78 $ 10,334 $ -
State 424 3,244 (236)
------ ------ ------
Total Current Income Taxes $ 502 $ 13,578 $ (236)
Change in Deferred:
Federal $ 16,867 $ (1,277) $ (2,040)
State 3,113 1,728 (408)
------ ------- -------
Total Increase (Decrease)
in Deferred
Income Taxes $ 19,980 $ 451 $ (2,448)
Provision for Income ------ ------ ------
Taxes (Benefit) $ 20,482 $ 14,029 $ (2,684)
====== ====== =======
</TABLE>
The following is a reconciliation of income tax computed at the
applicable statutory rates to the provision for taxes:
1998 1997 1996
Statutory Federal Tax Rate 25% 25% (15)%
State Taxes (Net of Federal Benefit) 6 6 (6)
Other Non-Deductible Expenses 8 (16) 8
--- --- ---
Effective Tax Rate 39% 15% 13%
=== === ===
NOTE 6 LONG-TERM DEBT
The 8.45% payable to NationsBank, dated December 22, 1995 requires
monthly payments of $599 and matures December 22, 1998. The note is
collateralized by a 1995 Jeep.
The 9.00% payable to Citizens National Bank, dated February 18, 1998
requires monthly payments of $655 and matures February 20, 2003. The
note is collateralized by a 1998 Mitsubishi.
The following is a combined schedule of current maturities of long
term debt:
1999 $ 7,851
2000 5,981
2001 6,543
2002 7,159
2003 3,827
------
Total $ 31,361
=======
NOTE 7 CLASSIFICATIONS
Certain items in the 1997 and 1996 reports have been reclassified to
conform to current year classifications. Such reclassifications had no
effect on previously reported net income.
NOTE 8 SALE OF COMPANY
The Company has had the financial statements audited for the pending
sale of the stock along with corporate assets to Consolidated Delivery
& Logistics, Inc., a publicly traded company.
<PAGE>
REGIONAL EXPRESS III, INC.
FINANCIAL STATEMENTS WITH
SUPPLEMENTARY INFORMATION AND
INDEPENDENT AUDITOR'S REPORT
SEPTEMBER 30, 1998, 1997 AND 1996
<PAGE>
TABLE OF CONTENTS
PAGE
Independent Auditor's Report 1
Balance Sheets
September 30, 1998, 1997, and 1996 2
Statements of Income and Retained Earnings
For the Years Ended September 30, 1998, 1997, and 1996 3
Statements of Cash Flows
For the Years Ended September 30, 1998, 1997, and 1996 4 - 5
Notes to Financial Statements 6 - 8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Regional Express III, Inc.
Saint Louis, Missouri
We have audited the accompanying balance sheets of Regional Express III, Inc.,
as of September 30, 1998, 1997, and 1996, and the related statements of income,
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Regional
Express III, Inc. as of September 30, 1998, 1997, and 1996 and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/S/ Larson, Allen, Weishair & Co., LLP
LARSON, ALLEN, WEISHAIR & CO., LLP
St. Louis, Missouri
October 16, 1998
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EXPRESS III, INC.
BALANCE SHEETS
SEPTEMBER 30, 1998, 1997 AND 1996
1998 1997 1996
ASSETS
CURRENT ASSETS
<S> <C> <C> <C>
Cash $ 43,988 $ 916 $ 4,992
Accounts Receivable - Trade 208,520 294,084 246,042
Prepaid Expenses 32,486 14,186 14,118
------- ------- -------
Total Current Assets $ 284,994 309,186 $ 265,152
------- ------- -------
PROPERTY AND EQUIPMENT (At Cost)
Equipment $ 155,154 $ 155,154 $ 152,311
Leasehold Improvements 2,000 2,000 2,000
------- ------- --------
Total $ 157,154 $ 157,154 $ 154,311
Less: Accumulated Depreciation 122,627 107,160 81,255
------- ------- -------
Total Property and Equipment
(At Depreciated Cost) $ 34,527 $ 49,994 $ 73,056
------- ------- --------
OTHER ASSETS
Customer List (Net of Accumulated Amortization) $ 60,045 $ 64,577 $ 70,831
Noncomplete Agreement (Net of
Accumulated Amortization 35,000 39,194 41,667
Organization Costs (Net of
Accumulated Amortization) 777 2,330 3,882
Deposits 2,720 2,720 2,720
Interstate and Intrastate Authority Licenses
(Net of Accumulated Amortization) 5,250 5,750 6,250
------- ------- -------
Total Other Assets $103,792 $114,571 $125,350
------- ------- -------
Total Assets $423,313 $473,751 $463,558
======= ======= =======
</TABLE>
See accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current Maturities of Long-term Debt $ 4,939 $ 6,925 $ 6,433
Accounts Payable - Trade 49,565 38,516 43,154
Due to Regional Express II, Inc. 5,599 - -
Due to Manteca Enterprises, Inc. - - 93,190
Accrued Expenses 8,618 21,131 14,012
Income Taxes Payable - 27,859 25,534
Note Payable to Stockholder - - 26,890
Deferred Income Taxes 75,191 98,114 66,897
------- ------- -------
Total Current Liabilities $143,912 $ 192,545 $276,830
------- -------- -------
LONG-TERM DEBT
Note Payable $ 4,939 $ 12,465 $ 18,898
Less: Current Maturities 4,939 6,925 6,433
------- -------- --------
Total Long-Term Debt (Net of Current
Maturities as shown above) $ - $ 5,540 $ 12,465
------- -------- --------
STOCKHOLDERS' EQUITY
Common Stock, $1 Par Value
Authorized - 30,000 Shares
Issued and Outstanding - 100 Shares $ 100 $ 100 $ 100
Retained Earnings 279,301 275,566 174,163
------- ------- -------
Total Stockholders' Equity $279,401 $ 275,666 $174,263
------- ------- -------
Total Liabilities and
Stockholders' Equity $423,313 $ 473,751 $463,558
======= ======= =======
</TABLE>
See accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EXPRESS III, INC.
STATEMEBTS OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 1998, 1997 AND 1996
1998 1997 1996
<S> <C> <C> <C>
SALES $2,170,565 $2,293,696 $2,258,189
---------- -------- --------
DIRECT OPERATING EXPENSES
Driver's Commissions $1,304,166 $1,419,278 $ 1,402,261
Gas and Oil 2,762 2,800 1,734
Outside Delivery Services 49,070 14,680 29,946
--------- --------- ---------
Total Direct Operating Expenses $1,355,998 $1,436,758 $ 1,433,941
--------- --------- ---------
GROSS PROFIT $ 814,567 $ 856,938 $ 824,248
--------- --------- ---------
INDIRECT EXPENSES
Indirect Operating Expenses $ 516,023 $ 468,004 $ 406,462
Selling Expenses 33,399 66,031 90,260
General and Administrative Expenses 278,870 158,614 267,880
---------- -------- --------
Total Indirect Expenses $ 828,292 $ 692,649 $ 764,602
---------- -------- --------
INCOME (LOSS) FROM OPERATIONS $ (13,725) $ 164,289 $ 59,646
---------- -------- --------
OTHER INCOME (EXPENSE)
Beeper Lease $ 5,986 $ 8,486 $ 9,810
Radio Lease 19,170 15,429 19,132
Interest Expense (817) (1,742) (8,316)
Penalties and Late Fees (127) (1,866) (397)
Miscellaneous Income 1,028 1,443 1,458
Gain on Sale of Equipment - - 7,899
---------- -------- --------
Total Other Income (Expense) $ 25,240 $ 21,750 $ 29,586
---------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 11,515 186,039 89,232
PROVISION FOR INCOME TAXES 7,780 84,636 30,512
---------- -------- --------
NET INCOME $ 3,735 $ 101,403 $ 58,720
Retained Earnings - Beginning 275,566 174,163 115,443
---------- -------- --------
RETAINED EARNINGS - ENDING $ 279,301 $ 275,566 $ 174,163
========== ======== ========
See accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EXPRESS III, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Cash Received from Customers $ 2,256,129 $ 2,251,197 $ 2,254,372
Others Receipts 26,184 25,359 30,401
--------- --------- ---------
Total Cash Collected $ 2,282,313 $ 2,276,556 $ 2,284,773
--------- --------- ---------
Cash Paid to Suppliers and Employees $ 2,230,898 $ 2,242,723 $ 2,075,717
Cash Paid for Interest 817 1,742 8,317
--------- --------- ---------
Total Cash Paid $ 2,231,715 $ 2,244,465 $ 2,084,034
--------- --------- ---------
Net Cash Provided by Operating Activities $ 50,598 $ 32,091 $ 200,739
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Equipment $ - $ (2,843) $ (11,049)
--------- --------- ---------
Net Cash (Used) by Investing Activities $ - $ (2,843) $ (11,049)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Notes Payable $ (7,526) $ (33,324) $ (187,483)
--------- --------- ---------
Net Cash (Used) by Financing Activities $ (7,526) $ (33,324) $ (187,483)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH $ 43,072 $ (4,076) $ 2,207
Cash - Beginning 916 4,992 2,785
--------- --------- ---------
CASH - ENDING $ 43,988 $ 916 $ 4,992
========= ========= =========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EXPRESS III, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
1998 1997 1996
RECONCILIATIONS OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
<S> <C> <C> <C>
NET INCOME $ 3,735 $ 101,403 $ 58,720
------- -------- -------
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Gain on Sale of Equipment $ - $ - $ (7,899)
Depreciation 15,467 25,905 37,890
Amortization 10,779 10,780 10,779
Decrease (Increase) in:
Accounts Receivable - Trade 85,564 (48,042) (21,170)
Prepaid Expenses (18,300) (68) 280
Increase (Decrease) in:
Accounts Payable - Trade 11,049 (4,638) 7,041
Due to Manteca Enterprises, Inc. - (93,910) 78,126
Due to Regional Express II, Inc. 5,599 - -
Accrued Expenses (12,513) 7,119 6,460
Income Taxes Payable (27,859) 2,325 25,534
Deferred Income Taxes (22,923) 31,217 4,978
-------- ------ -------
Net Cash Provided By Operating Activities $ 50,598 $ 32,091 $200,739
======= ====== =======
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
REGIONAL EXPRESS III, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Regional Express III, Inc. (The Company), was incorporated on
March 15, 1994 and operates as a full-service local delivery
company with customary credit terms given to entities located in
the Indianapolis, Indiana metropolitan area.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Property and Equipment Depreciation
Property and equipment are valued at cost. Maintenance and repair
costs are charged to expense as incurred. Gains and losses on
disposition of property and equipment are reflected in income.
Depreciation is computed on the accelerated methods for financial
accounting purposes, based on the estimated useful lives of the
assets.
Revenue Recognition
The Company recognized revenues from the delivery services upon
the completion of each assigned delivery and courier job.
Advertising
Advertising costs are generally charged to operations in the year
incurred.
Customer Lists, Noncompete Agreement, Organization Costs and
Authority Licenses.
Intangibles are capitalized and amortized on a straight-line
basis. The customer list, Noncompete Agreements and
Authority Licenses are amortized over 15 years.
NOTE 2 RELATED PARTY TRANSACTIONS
The Company is wholly owned by the shareholder of Manteca
Enterprises, Inc., which charged management fees of $247,637,
$137,090 and $247,587 for the years September 30, 1998, 1997 and
1996. Management fees are recorded as accounts payable on the
Company's books and accounts receivable on Manteca Enterprises,
Inc.'s books. Accounts Payable to the related party was $2,242,
$2,691 and $4,370 at September 30, 1998, 1997 and 1996.
Manteca Enterprises, Inc. has provided open advances to the
Company, which at September 30, 1996 totaled $93,910 and no
interest provisions were made by either Company. At September 30,
1997 and 1998, the advances were paid in full.
The Company is wholly owned by the shareholder of Regional
Express II, Inc. which has provided open advances to the Company,
which at September 30, 1998 totaled $5,599 and no interest
provisions were made by either company.
<PAGE>
REGIONAL EXPRESS III, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 3 LEASE INCOME
Regional Express III, Inc. leases mobile data units, radios,
pagers, and uniforms to the subcontractors (drivers). The rates
and terms are set forth in signed lease agreements.
NOTE 4 OPERATING LEASES
The Company has a three-year building lease, dated March 4, 1998,
with monthly rental payments of $2,333 per month, beginning May
31, 1998 and expiring on the 36th full month thereafter. In
addition, the Company pays an annual common area maintenance
charge under the lease. The original lease was dated September
21, 1994. Future minimum lease payments for the years ended
September 30 are as follows:
Years Ending September 30, Amount
1999 27,996
2000 18,664
------
Total $46,660
======
NOTE 5 INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," which requires the use of the "asset and
liability" method of accounting for income taxes
Accordingly, deferred tax assets and liabilities are computed
annually for differences between the financial statement and tax
basis of assets and liabilities, primarily accounts receivable,
prepaid expenses, and accrued expenses, that will result in
taxable or deductible amounts in the future based on enacted tax
laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
<PAGE>
REGIONAL EXPRESS III, INC.
REGIONAL EXPRESS III, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE 5 INCOME TAXES (continued)
The provision for income taxes was computed as follows:
<TABLE>
<CAPTION>
1998 1997 1996
Currently Payable
<S> <C> <C> <C>
Federal $ 22,624 $ 42,868 $ 19,763
State 8,079 10,551 5,771
------ ------ ------
Total Current Income Tax $ 30,703 $ 53,419 $ 25,534
------ ------ ------
Change in Deferred:
Federal $(20,329) $ 27,264 $ 4,148
State (2,594) 3,953 830
-------- ------ -----
Total Increase in Deferred Income Tax $(22,923) $ 31,217 $ 4,978
-------- ------ ------
Provision for Income Tax $ 7,780 $ 84,636 $ 30,512
======= ====== ======
</TABLE>
Components - Deferred
The deferred tax liability in the accompanying balance sheets
included the following and was caused by the differences between
the cash basis and accrual basis of accounting conversions at
September 30:
<TABLE>
<CAPTION>
1998 1997 1996
-------- ---- ----
<S> <C> <C> <C>
Deferred Income Taxes - Current $75,191 $ 98,114 $ 66,897
======== ======= ========
</TABLE>
The following is a reconciliation of income tax computed at the
applicable statutory rates to the provision for taxes:
1998 1997 1996
Statutory Federal Tax Rate 15% 39% 27%
State Taxes (Net of Federal Benefit 6 6 6
Other Non-Deductible Expenses 46 - -
--- --- ---
Effective Tax Rate 67% 45% 34%
=== === ===
NOTE 6 LONG-TERM DEBT
The 7.74% note payable to NationsBank, dated June 11, 1997
requires monthly payments of $638 and matures June 11, 1999. The
note is collateralized by a 1997 Dodge Intrepid.
NOTE 7 RECLASSIFICATIONS
Certain items in the 1997 and 1996 reports have been reclassified
to conform to current year classifications. Such
reclassifications had no effect on previously reported net
income.
NOTE 8 SALE OF COMPANY
The company has had the financial statements audited pending sale
of the stock along with corporate assets to Consolidated Delivery
& Logistics, Inc., a publicly traded company.
<PAGE>
<TABLE>
<CAPTION>
MANTECA ENTERPRISES, INC.
CONDENSED BALANCE SHEETS
November 30 May 31,
1998 1998
(Unaudited) (Audited)
Note 1
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $6,243 $ -
Accounts receivable, net - 24,891
Prepaid expenses and other current assets 8,677 19,606
Deferred tax asset 18,538 702
--------- ------------
Total current assets 33,458 45,199
Equipment and leasehold improvements, net 25,876 89,190
Other assets 1,200 1,200
--------- --------------
Total assets $60,534 $135,589
========= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $19,733 $33,591
Accounts payable and accrued liabilities 62,012 37,244
----------- -------------
Total current liabilities 81,745 70,835
LONG-TERM DEBT 11,089 40,397
------------- -------------
Total liabilities 92,834 111,232
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, $1 par value 100 100
Retained Earnings (accumulated deficit) (32,400) 24,257
-------------- -------------
Total stockholders' equity (deficit) (32,300) 24,357
-------------- -------------
Total liabilities and stockholders'
equity (deficit) $60,534 $135,589
============= =============
</TABLE>
See notes to unaudited condensed interim financial statements.
<PAGE>
<TABLE>
<CAPTION>
MANTECA ENTERPRISES, INC.
CONDENSED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (ACCUMULATED DEFICIT)
(Unaudited)
For the Six Months Ended November 30,
--------------------------------------
1998 1997
--------------- -------------
<S> <C> <C>
Revenue $420,254 $266,652
Cost of Revenue 235,212 190,482
--------------- -----------------
Gross Profit 185,042 76,170
Selling, general, and administrative
expenses 236,315 88,413
-------------- -----------------
Loss from operations (51,273) (12,243)
Other (Income) Expense:
Other expense, net 11,913 -
Interest expense 2,806 5,364
--------------- ------------------
14,719 5,364
--------------- ------------------
Loss before benefit from income taxes (65,992) (17,607)
Income tax benefit (14,836) (7,043)
--------------- -----------------
Net loss (51,156) (10,564)
Retained earnings, beginning of period 24,257 53,520
Dividend to stockholders (5,501) -
--------------- -----------------
Retained arnings (accumulated deficit),
end of period $(32,400) $42,956
=============== ==================
</TABLE>
See notes to unaudited condensed interim financial statements.
<PAGE>
MANTECA ENTERPRISES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
------------------------------------
Ended November 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(51,156) $(10,564)
Adjustments to reconcile net loss to net cash provided by operating
activities -
Depreciation and amortization 24,432 21,750
Loss on sale of equipment 11,957 -
Deferred income taxes (17,836) -
Changes in operating assets and liabilities
(Increase) decrease in -
Accounts receivable, net 24,891 24,806
Prepaid expenses and other current assets 10,929 5,548
Increase (decrease) in -
Accounts payable and accrued liabilities 24,768 (9,658)
------ -------
Net cash provided by operating activities 27,985 31,882
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 27,500 -
Purchase of equipment and leasehold improvements (575) (7,545)
------- -------
Net cash provided by (used in) investing activities 26,925 (7,545)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (43,166) (25,316)
Dividend to stockholders (5,501) -
------- ---------
Net cash used in financing activities (48,667) (25,316)
-------- ---------
Net increase (decrease) in cash and cash equivalents 6,243 (979)
CASH AND CASH EQUIVALENTS, beginning of period - 979
-------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 6,243 $ -
======== =========
</TABLE>
See notes to unaudited condensed interim financial statements.
<PAGE>
MANTECA ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed interim 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 balance sheet at May 31, 1998, 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 six months ended November 30, 1998, are not necessarily
indicative of the results that may be expected for any other interim period or
for the year ending May 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EXPRESS II, INC.
CONDENSED BALANCE SHEETS
November 30, August 31,
1998 1998
----------------- --------------
(Unaudited) (Audited)
ASSETS Note 1
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 9,693 $ 3,307
Accounts receivable, net 190,603 198,223
Prepaid expenses and other current assets 21,825 31,359
------- -------
Total current assets 222,121 232,889
Equipment and leasehold improvements, net 45,813 58,753
Intangible assets, net 22,390 22,998
Other assets 780 780
=========== ==========
Total assets $291,104 $315,420
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 4,277 $ 7,851
Accounts payable and accrued liabilities 47,767 66,866
Deferred income taxes 65,494 50,886
--------- -------
Total current liabilities 117,538 125,603
LONG-TERM DEBT 22,784 23,510
--------- -------
Total liabilities 140,322 149,113
--------- -------
STOCKHOLDERS' EQUITY
Common Stock 1,000 1,000
Retained Earnings 149,782 165,307
--------- -------
Total stockholders' equity 150,782 166,307
--------- -------
Total liabilities and stockholders' equity $ 291,104 $315,420
========= =======
</TABLE>
See notes to unaudited condensed interim financial statements.
<PAGE>
<TABLE>
<CAPTION>
REGIONAL EXPRESS II, INC.
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
For the Three Months Ended November 30,
---------------------------------------
1998 1997
--------------- ------------
<S> <C> <C>
Revenue $499,031 $ 409,244
Cost of revenue 314,139 261,283
---------- --------
Gross profit 184,892 147,961
Selling, general, and administrative expenses 188,112 129,973
---------- --------
Income (loss) from operations (3,220) 17,988
Other (income) expense
Other income, net (4,945) (8,419)
Interest expense 641 197
---------- ---------
(4,304) (8,222)
---------- --------
Income before provision for income taxes 1,084 26,210
Provision for income taxes 16,608 10,484
---------- --------
Net income (loss) (15,524) 15,726
Retained earnings, beginning of period 165,307 133,041
---------- --------
Retained earnings, end of period $ 149,783 $ 148,767
========== ========
</TABLE>
See notes to unaudited condensed interim financial statements.
<PAGE>
REGIONAL EXPRESS II, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended November 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) income $(15,524) $15,726
Adjustments to reconcile net (loss) income to net cash
provided by operating activities -
Depreciation and amortization 6,115 3,426
Loss on sale of equipment 3,933 -
Deferred income tax 14,608 -
Changes in operating assets and liabilities
(Increase) decrease in -
Accounts receivable, net 7,620 3,767
Prepaid expenses and other current assets 9,534 6,229
Increase (decrease) in -
Accounts payable and accrued liabilities (19,100) (20,991)
-------- --------
Net cash provided by operating activities 7,186 8,157
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 3,500 -
----- -------
Net cash provided by investing activities 3,500 -
----- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (4,300) (2,149)
------- -------
Net cash used in financing activities (4,300) (2,149)
------- -------
Net increase in cash and cash equivalents 6,386 6,008
CASH AND CASH EQUIVALENTS, beginning of period 3,307 2,465
----- -----
CASH AND CASH EQUIVALENTS, end of period $9,693 $8,473
===== =====
See notes to unaudited condensed interim financial statements.
</TABLE>
<PAGE>
REGIONAL EXPRESS II, INC.
NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed interim 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 balance sheet at August 31, 1998, 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 months ended November 30,
1998, are not necessarily indicative of the results that may be
expected for any other interim period or for the year ending August
31, 1999.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL DATA
The accompanying unaudited pro forma condensed combined financial data of CDL
and the MANTECA COMPANIES has been prepared to present the effect of the
acquisition of all of the capital stock of the MANTECA COMPANIES by CDL. The
unaudited pro forma condensed combined balance sheet as of September 30, 1998
was prepared as if the acquisition had occurred on September 30, 1998. The
unaudited pro forma condensed combined statement of continuing operations for
the year ended December 31, 1997 and for the nine months ended September 30,
1998 combines the historical statements of operations for CDL and the MANTECA
COMPANIES as if the acquisitions occurred on January 1, 1997. The unaudited pro
forma condensed combined statement of continuing operations combines historical
statements of operations of CDL for the year ended December 31, 1997, with
Manteca Enterprises, Inc., First Choice Courier and Distribution Systems, Inc.
and Regional Express II, Inc. for the year ended December 31, 1997 and Regional
Express III, Inc. for the year ended September 30, 1997.
The detailed assumptions used to prepare the unaudited pro forma condensed
combined financial information are contained herein. The pro forma adjustments
are described in the accompanying notes and are based upon available information
and certain assumptions that the Company believes are reasonable. The unaudited
pro forma condensed combined financial information reflects the use of the
purchase method of accounting for the acquisition. The purchase price allocation
used in the preparation of the pro forma financial information is preliminary
and subject to change based upon the final evaluation being performed.
The following unaudited pro forma financial data does not purport to be
indicative of the results of operations or financial position of the Company
that would have actually been obtained had the transaction been completed as of
the assumed dates and for the periods presented, or which may be obtained in the
future. This information and accompanying notes should be read in conjunction
with CDL's Annual Report on Form 10-K for the year ended December 31, 1997, its
Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and
September 30, 1998 and the MANTECA COMPANIES financial statements included
elsewhere in this report on Form 8-K/A.
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
September 30, 1998
(In thousands except share information)
<TABLE>
<CAPTION>
Historical
MANTECA Pro Forma Pro Forma
CDL COMPANIES Adjustments Combined
ASSETS
CURRENT ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 823 $ 118 $ - $ 941
Accounts receivable, net 22,478 888 - 23,366
Note receivable - stockholder - 10 - 10
Prepaid expenses and other
current assets 3,301 111 - 3,412
----------- ------- ------- ------
Total current assets 26,602 1,127 - 27,729
EQUIPMENT AND LEASE-
HOLD IMPROVEMENTS, net 6,795 326 - 7,121
INTANGIBLE ASSETS, net 13,002 316 4,744 (b) 18,062
OTHER ASSETS - 19 - 19
========== ======= ======== ======
Total assets $ 46,399 $ 1,788 $ 4,744 $52,931
========== ======= ======== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 9,822 $ - $2,807 (a) $12,629
Current maturities of long-term
debt 1,747 245 - 1,992
Accounts payable and accrued
liabilities 16,790 515 150 (a) 17,455
Net liabilities of discontinued
operations 100 - - 100
---------- ------ ----------- --------
Total current liabilities 28,459 760 2,957 32,176
LONG-TERM DEBT 6,616 117 2,053 (a) 8,786
OTHER LONG-TERM
LIABILITIES 1,559 - - 1,559
---------- ------ ---------- -----
Total liabilities 36,634 877 5,010 42,521
---------- ------- ---------- ------
STOCKHOLDERS' EQUITY
Preferred stock - - - -
Common stock 7 1 (1) (b) 7
Additional paid-in capital 9,026 20 625 (a) 9,671
Treasury stock (162) - (162)
Retained earnings 894 890 (890) (b) 894
----------- ------- --------- --------
Total stockholders' equity 9,765 911 (266) 10,410
----------- ------- --------- --------
Total liabilities and
stockholders' equity $46,399 $ 1,788 $ 4,744 $ 52,931
======== ======= ========= =======
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF CONTINUING OPERATIONS
For the Year Ended December 31, 1997
(Unaudited)
(In thousands except share information)
Historical
MANTECA Pro Forma Pro Forma
CDL COMPANIES Adjustments Combined
-------- --------- ------------ ----------
<S> <C> <C> <C> <C>
Revenue $171,502 $7,697 $ - $ 179,199
Cost of revenue 130,577 4,991 - 135,568
-------- --------- --------- --------
Gross profit 40,925 2,706 - 43,631
Selling, general and
administrative expenses 38,223 2,404 17 (c) 40,644
-------- --------- --------- --------
Operating income 2,702 302 (17) 2,987
Other (income) expense:
Gain on sale of subsidiary (816) - (816)
Other income, net (171) (65) (236)
Interest expense 1,144 48 396 (c) 1,588
-------- --------- ------- -------
Income from continuing
operations before provision for
income taxes 2,545 319 (413) 2,451
Provision for income taxes 888 136 (166) (c) 858
-------- --------- --------- -------
Income from continuing
operations $ 1,657 $ 183 $ (247) $ 1,593
======= ======== ======== ========
Basic income per share:
Continuing operations $ .25 - - $ .23
======= ======== ======== =======
Weighted average shares
outstanding 6,672 - 206 6,878
======= ======== ======== =======
Diluted income per share:
Continuing operations $ .25 - - $ .23
======= ======== ======== ========
Weighted average shares
outstanding 6,675 - 206 6,881
======= ======== ======== ========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1998
(Unaudited)
(In thousands except share information)
Historical Pro Forma Pro Forma
-------------------------------
MANTECA
CDL COMPANIES Adjustments Combined
------- ------------ ----------------- ---------------
<S> <C> <C> <C> <C>
Revenue $ 135,507 $ 6,960 $ - $ 142,467
Cost of revenue 104,812 4,384 - 109,196
------- ------- --------- -------
Gross profit 30,695 2,576 - 33,271
Selling, general and
administrative expenses 27,951 2,367 (51) (c) 30,267
------ ------- --------- ------
Operating income (loss) 2,744 209 51 3,004
Other (income) expense:
Other income, net (215) (48) (263)
Interest expense 839 32 297 (c) 1,168
Income (loss) before provision for
income taxes 2,120 225 (246) 2,099
Provision for income taxes 807 90 (98) (c) 799
------ ------- -------- ------
Net Income (loss) $ 1,313 135 $ (148) $ 1,300
====== ======= ======== ======
Basic income per share:
Net income per share $ .20 - - $ .19
====== ======= ======== ======
Weighted average shares
outstanding 6,652 - 206 6,858
====== ======== ======== ======
Diluted income per share:
Net income per share $ .19 - - $.19
====== ======== ======== ======
Weighted average shares
outstanding 6,820 - 206 7,026
====== ======== ======== ======
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
(a) The following pro forma adjustments reflect CDL's purchase of the MANTECA
COMPANIES. Pro forma adjustments include estimated direct costs of
acquisition of $150,000.
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Cash payment from short-term borrowings $2,807
7% Subordinated convertible notes payable 1,400
Contingent earn out payable 653
Common stock issued (206,185 shares) 645
Accrued expenses 150
------
Total estimated purchase price $5,655
=======
</TABLE>
(b) The following pro forma adjustments reflect the excess of the purchase
price over book value, which is attributed to goodwill. The book value of
the MANTECA COMPANIES's net assets approximate the estimated fair value.
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Total estimated purchase price $5,655
Elimination of the MANTECA COMPANIES's
stockholders' equity (911)
------
Goodwill $4,744
======
</TABLE>
<PAGE>
c) The following pro forma adjustments are incorporated in the pro forma
condensed combined statements of operations (in thousands):
<TABLE>
<CAPTION>
Nine months
Year ended Ended
December 31, September 30,
1997 1998
------------------ ------------------
<S> <C> <C> <C>
1. Increase in interest expense on 7% convertible
note payable. (98) (74)
2. Increase in interest expense on contingent earn out
payable. (46) (34)
3. Increase in interest expense on short-term
borrowings for cash portion of purchase price. (252) (189)
4. Increase in amortization expense resulting from
the acquired goodwill using a 40 year life. (119) (90)
5. Decrease in expenses for certain non-continuing
contractual items. 102 141
6. Decrease in income taxes associated with the above
adjustments and from the application of CDL's
historical effective tax rate for the periods
presented to the pretax income in the accompanying
pro forma condensed combined statements of
operations. 166 98
------ ----
$(247) $(148)
===== =====
</TABLE>
(d) The holder of the $1.4 million 7% Subordinated Convertible Note Payable
(the "Note") has the right to convert the Note into fully paid shares of
CDL's common stock at any time after the acquisition of the MANTECA
COMPANIES by CDL through December 8, 2001. The pro forma adjustments do not
include an adjustment for the conversion of the Note since the conversion
price is $7.00 per common share, which exceeds the average market price of
CDL's common stock for the periods presented. Diluted earnings per share is
not affected by the Note since the conversion of the Note into common stock
was antidilutive for the periods presented.
<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: February 22, 1999 CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Registrant)
By: /s/ Albert W. Van Ness, Jr.
Albert W. Van Ness, Jr.
Chairman of the Board, Chief Executive
Officer and Chief Financial Officer
