<PAGE>
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 March 31, 2000 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the transition period
from_______________to____________
Commission File Number: 0-26954
CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-3350958
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
80 Wesley Street 07606
South Hackensack, New Jersey (Zip Code)
(Address of principal executive offices)
(201) 487-7740
(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 May 5, 2000 was 7,353,458.
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information (unaudited)
Item 1 - Financial Statements
Consolidated Delivery & Logistics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets as of March 31, 2000, and
December 31, 1999 3
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations 9
Part II - Other Information
Item 1 - Legal Proceedings 12
Item 6 - Exhibits and Reports on Form 8-K 13
Signature 14
</TABLE>
2
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share information)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $602 $339
Accounts receivable, net 28,066 27,560
Prepaid expenses and other current assets 3,029 4,321
------- -------
Total current assets 31,697 32,220
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net 6,140 6,624
INTANGIBLE ASSETS, net 27,515 27,932
OTHER ASSETS 2,103 2,010
------- -------
Total assets $67,455 $68,786
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $8,605 $7,188
Current maturities of long-term debt 2,088 2,513
Accounts payable and accrued liabilities 15,773 16,530
------- -------
Total current liabilities 26,466 26,231
LONG-TERM DEBT 22,760 22,885
OTHER LONG-TERM LIABILITIES 1,970 2,301
------- -------
Total liabilities 51,196 51,417
------- -------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; 2,000,000 shares
authorized; no shares issued and outstanding - -
Common stock, $.001 par value; 30,000,000 shares
authorized; 7,382,825 shares issued and 7,353,458 shares
outstanding at March 31, 2000 and December 31, 1999. 7 7
Additional paid-in capital 12,721 12,721
Treasury stock, 29,367 shares at cost (162) (162)
Retained earnings 3,693 4,803
------- -------
Total stockholders' equity 16,259 17,369
------- -------
Total liabilities and stockholders' equity $67,455 $68,786
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
2000 1999
-------- -------
<S> <C> <C>
Revenue $60,002 $51,307
Cost of revenue 46,860 39,554
------- -------
Gross profit 13,142 11,753
Selling, general, and administrative expenses 13,019 9,755
Depreciation and amortization 1,135 1,019
------- -------
Operating income (loss) (1,012) 979
Other (income) expense:
Interest expense 884 647
Other income, net (46) (234)
------- -------
Income (loss) before provision for income taxes (1,850) 566
Provision for (reduction in) income taxes (740) 224
------- -------
Net income (loss) $(1,110) $342
======= =======
Net income (loss) per share:
Basic $ (.15) $.05
======= =======
Diluted $ (.15) $.05
======= =======
Basic weighted average common shares outstanding 7,353 6,939
======= =======
Diluted weighted average common shares outstanding 7,353 7,447
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,110) $342
Adjustments to reconcile net income (loss) to net cash provided by
operating activities -
Gain on disposal of equipment and leasehold improvements (8) (31)
Depreciation and amortization 1,135 1,019
Changes in operating assets and liabilities
(Increase) decrease in -
Accounts receivable, net (506) 1,124
Prepaid expenses and other current assets 1,292 (2,653)
Other assets (29) (216)
Increase (decrease) in -
Accounts payable and accrued liabilities (757) 3,537
Other long-term liabilities (331) (77)
------- -------
Net cash provided by (used in) operating activities (314) 3,045
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment and leasehold improvements 28 166
Purchase of business, net of cash acquired - (3,180)
Additions to equipment and leasehold improvements (318) (707)
------- -------
Net cash used in investing activities (290) (3,721)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings (repayments), net 1,417 (12,325)
Borrowing (repayments) of long-term debt, net (550) 13,886
Issuance of stock warrants in connection with long-term financing - 885
Deferred financing costs - (1,002)
------- -------
Net cash provided by financing activities 867 1,444
------- -------
Net increase in cash and cash equivalents 263 768
CASH AND CASH EQUIVALENTS, beginning of period 339 295
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 602 $ 1,063
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<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, 1999 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 month period ended March 31,
2000 are not necessarily indicative of the results that may be expected
for any other interim period or for the year ending December 31, 2000.
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, 1999.
(2) LONG-TERM DEBT:
On January 29, 1999, the Company completed a $15 million private
placement of senior subordinated notes and warrants with three
financial institutions. The notes bear interest at 12% per annum and
are subordinate to all senior debt including the Company's credit
facility with First Union Commercial Corporation. Under the terms of
the notes, the Company is required to maintain certain financial ratios
and comply with other financial conditions for which the Company is in
compliance as of March 31, 2000. The notes mature on January 29, 2006
and may be prepaid by the Company under certain circumstances. The
warrants expire January 19, 2009 and are exercisable at any time prior
to expiration at a price of $.001 per equivalent share of common stock
for an aggregate of 506,250 shares of the Company's stock, subject to
additional adjustments. The Company has recorded the fair value of the
warrants as a credit to additional paid-in-capital and a debt discount
on the senior subordinated notes. The Company used the proceeds to
finance acquisitions and for general working capital purposes.
(3) REPORTABLE SEGMENTS:
CDL has two reportable segments: Air and Ground. Separate management of
each segment is required because each business unit is subject to
different cost and delivery parameters. Segment information for the
three months ending March 31, 2000 and 1999 is as follows (in
thousands).
<TABLE>
<CAPTION>
Air Ground Total
------- ------- -------
<S> <C> <C> <C> <C>
Revenue from external customers
2000 $17,058 $42,944 $60,002
1999 $15,023 $36,284 $51,307
Intersegment revenue
2000 118 662 780
1999 13 348 361
Interest Expense
2000 251 633 884
1999 189 458 647
Depreciation and Amortization
2000 210 925 1,135
1999 205 814 1,019
Segment profit
2000 16 (1,126) (1,110)
1999 48 294 342
Segment Assets
March 31, 2000 20,381 47,074 67,455
December 31, 1999 19,893 48,893 68,786
Expenditures for segment assets
2000 156 162 318
1999 423 284 707
</TABLE>
6
<PAGE>
(4) LITIGATION:
In February 1996, Liberty Mutual Insurance Company ("Liberty Mutual")
filed an action against Securities Courier Corporation ("Securities"),
a subsidiary of the Company, Mr. Vincent Brana and certain other
parties in the United States District Court for the Southern District
of New York alleging, among other things, that Securities Courier had
fraudulently obtained automobile liability insurance from Liberty
Mutual in the late 1980s and early 1990s at below market rates. This
suit, which claims common law fraud, fraudulent inducement, unjust
enrichment and violations of the civil provisions of the Federal RICO
statute, among other things, seeks an unspecified amount of
compensatory and punitive damages from the defendants, as well as
attorneys' fees and other expenses. Three additional defendants were
added by way of a second amended complaint on April 9, 1998. Securities
and Mr. Brana have filed cross claims against each of these additional
defendants and certain original defendants who had acted as insurance
brokers for certain of the policies at issue. Under the terms of its
acquisition of Securities, the Company has certain rights to
indemnification from Mr. Brana. In connection with the indemnification,
Mr. Brana has entered into a Settlement Agreement and executed a
Promissory Note in the amount of up to $500,000 or such greater amount
as may be due for any defense costs or award arising out of this suit.
Mr. Brana originally delivered 100,000 shares of CDL common stock to
the Company as collateral for the note that was due on December 1,
2000. Because of the increased costs in defending the suit Mr. Brana
delivered an additional 50,000 shares of CDL common stock to the
Company and the Company agreed to extend the due date until December 1,
2002. In April 1999 a motion for summary judgement was filed and denied
by the Court in December 1999. The plaintiff subsequently filed a Third
Amended Complaint for breach of contract and additional claims for
quantum meruit. The parties are presently participating in
court-ordered non-binding mediation in an attempt to resolve this
litigation which extends the time to respond to the Third Amended
Complaint until thirty days after completion of the final mediation
session, subject to the Court's approval. Mediation efforts continue at
this time. Due to the continuing legal costs in defending this suit,
Mr. Brana has agreed to deliver 200,000 additional shares of CDL common
stock to the Company on or before May 31, 2000. The Company does not
believe that an adverse determination in this matter would result in a
material adverse effect on the consolidated financial position or
results of operations of the Company.
The Company is, from time to time, a party to litigation arising in the
normal course of its business, most of which involves claims for
personal injury and property damage incurred in connection with its
same-day ground and air delivery operations. Management believes that
none of these actions, including the action described above, will have
a material adverse effect on the consolidated financial position or
results of operations of the Company.
7
<PAGE>
(5) INCOME (LOSS) PER SHARE:
Basic earnings per share includes no dilution and is computed by
dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution if certain
securities are converted and also includes certain shares that are
contingently issuable, however, because of the Company's net loss for
the three months ended March 31, 2000, shares represented by 118,463
Stock Options, 506,094 Warrants and 5,744 Employee Stock Purchase Plan
shares would be anti-dilutive and therefore are not presented for the
current period.
A reconciliation of weighted average common shares outstanding to
weighted average common shares outstanding assuming dilution follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
--------- ---------
<S> <C> <C>
Basic weighted average common
shares oustanding 7,353,458 6,939,258
Effect of dilutive securities:
Stock options - 157,376
Warrants - 348,651
ESPP - 1,833
--------- ---------
Diluted weighted average common
shares outstanding 7,353,458 7,447,118
========= =========
</TABLE>
The following common stock equivalents were excluded from the
computation of diluted earnings per share because the exercise or
conversion price was greater than the average market price of common
shares:
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Stock options 667,813 563,125
Subordinated convertible debentures 145,750 161,818
Seller financed convertible notes 593,332 685,470
</TABLE>
8
<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 which appear elsewhere in this report.
Disclosure Regarding Forward-Looking Statements
The Company is provided a "safe harbor" for forward-looking statements
contained in this report by the Private Securities Litigation Reform
Act of 1995. The Company may discuss forward-looking information in
this report such as its expectations for future business development,
cost reduction programs, product-based operating structures, revenue
growth, fuel, insurance and labor cost controls, and software and
website/internet development, as well as, its liquidity and capital
needs and its future prospects. These forward-looking statements
involve certain risks and uncertainties that may cause the actual
events or results to differ materially from those indicated by such
forward-looking statements. Potential risks and uncertainties include
without limitation the risk that the Company will be unable to continue
growing revenue internally, or that the Company's cost reduction
programs will fail to prevent further erosion of its profit margins or
cause loss of key personnel, or that the Company's industry-based
strategic re-positioning will fail to generate revenue growth,
profitability, operating efficiencies or improved service levels, or
that the Company will be unable to reduce its fuel, labor and
insurance costs, or that the Company will be unable to develop in an
economic manner commercially accepted software and website capabilities
for its customers, or that the Company will be unable to achieve the
other cost savings or additional profits for the second and forward
quarters contemplated by the Company's business management strategy or
other risks specified in the Company's SEC filings.
RESULTS OF OPERATIONS
Income and Expense as a Percentage of Revenue
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
2000 1999
------ ------
<S> <C> <C>
Revenue 100.0% 100.0%
Gross profit 21.9% 22.9%
Selling, general, and administrative expenses 21.7% 19.0%
Depreciation and amortization 1.9% 2.0%
Operating income (loss) (1.7)% 1.9%
Net income (loss) (1.9)% .7%
</TABLE>
9
<PAGE>
Three Months Ended March 31, 2000 Compared to the Three Months Ended
March 31, 1999.
Revenue increased 16.9% from $51.3 million for the first quarter of
1999 to $60.0 million for the first quarter of 2000. Ground delivery
revenue grew by 18.3% to $42.9 million and air courier revenue grew
13.7% to $17.1 million for the first quarter of 2000 compared to the
same period in 1999. Revenue from acquisitions contributed $2.3 million
and $2.6 million to the ground and air courier revenue increases,
respectively.
Cost of revenue increased by $7.3 million, or 18.5%, to $46.9 million
for the first quarter of 2000 as compared to the same 1999 period.
Stated as a percentage of revenue, cost of revenue increased by 1.0%
for the first quarter ended March 31, 2000 to 78.1% as compared to
77.1% for the same period in 1999. The variance is due to increased
labor and vehicle operating costs, partially offset by a
reclassification of $0.5 million in certain salaries to selling,
general, and administration ("SG&A") expense. The increased labor cost
is attributable to the tight labor market for reliable employees and
sub-contractors.
SG&A expense increased by $3.2 million, or 33.5%, to $13.0 million for
the three months ended March 31, 2000 as compared to the same period in
1999. Stated as a percentage of revenue, SG&A increased to 21.7% for
the three months ended March 31, 2000 as compared to 19.0% for the same
period in 1999. In addition to the $0.5 reclassification from cost of
revenue, the variance is primarily attributable to increased staffing
and related expenses, the administrative expenses of the companies
acquired in 1999, bad debt expense recorded as a result of a previous
customer filing for bankruptcy protection, and increased consulting
expenses.
Depreciation and amortization increased $116,000 to $1.1 million for
the first quarter of 2000 compared to $1.0 million for the first
quarter of 1999, primarily reflecting an increase in goodwill
amortization expense as a result of the Company's acquisitions in 1999.
As a result of the factors discussed above, operating income decreased
by $2.0 million to a loss of $1.0 million for the three months ended
March 31, 2000 as compared to income of $1.0 million for the same
period in 1999.
Net other income decreased by $188,000 to $46,000 for the first quarter
of 2000. The first quarter 1999 included $150,000 in other income
related to the previous sale of a business. Interest expense increased
by $237,000 for the first quarter of 2000 due primarily to increased
borrowings.
Net income after tax decreased by $1,452,000 to a loss of $1,110,000
for the three months ended March 31, 2000 as compared to income of
$342,000 for the same period in 1999 for the reasons discussed above.
Liquidity and Capital Resources
Working capital decreased from $6.0 million as December 31, 1999 to
$5.2 million as of March 31, 2000, a decrease of $0.8 million
reflecting a general decrease in the Company's prepaid expenses and
other current assets. Cash and cash equivalents increased from $0.3
million to $0.6 million. Cash was provided from financing activities
(an increase in the Company's borrowings on its line of credit offset
by repayments of long-term debt) and used in operations (primarily as a
result of the net loss for the period) as well as to finance
acquisitions of equipment and leasehold improvements. Capital
expenditures amounted to $0.3 million and $0.7 million for the first
quarter of 2000 and 1999, respectively. These expenditures primarily
upgraded Company computer system capability and maintained Company
facilities in the ordinary course of business. As of March 31, 2000 the
Company had available $7.3 million under is revolving credit facility.
10
<PAGE>
Management believes that cash flows generated from operations, together
with its borrowing capacity, are sufficient to support the Company's
operations and general business and liquidity requirements for the
foreseeable future.
Inflation
Other than the described effects of fuel increases and labor costs,
inflation has not had a material impact on the Company's results of
operations for the past three years.
Quantitative and Qualitative Disclosures About Market Risk.
CDL's major "market risk" exposure is the effect of changing interest
rates. CDL manages its interest expense by using a combination of
fixed and variable rate debt. At March 31, 2000, the Company's debt
consisted of approximately $24.8 million of fixed rate debt with a
weighted average interest rate of 10.4% and $8.6 million of variable
rate debt with a weighted average interest rate of 9.3% The amount of
variable rate debt fluctuates during the year based on CDL's cash
requirements. If interest rates on such variable rate debt were to
increase by 85 basis points (one-tenth of the rate at March 31, 2000),
the net impact to the Company's results of operations and cash flows
would be a decrease of approximately $67,000.
11
<PAGE>
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings.
In February 1996, Liberty Mutual Insurance Company ("Liberty Mutual")
filed an action against Securities Courier Corporation ("Securities"),
a subsidiary of the Company, Mr. Vincent Brana and certain other
parties in the United States District Court for the Southern District
of New York alleging, among other things, that Securities Courier had
fraudulently obtained automobile liability insurance from Liberty
Mutual in the late 1980s and early 1990s at below market rates. This
suit, which claims common law fraud, fraudulent inducement, unjust
enrichment and violations of the civil provisions of the Federal RICO
statute, among other things, seeks an unspecified amount of
compensatory and punitive damages from the defendants, as well as
attorneys' fees and other expenses. Three additional defendants were
added by way of a second amended complaint on April 9, 1998. Securities
and Mr. Brana have filed cross claims against each of these additional
defendants and certain original defendants who had acted as insurance
brokers for certain of the policies at issue. Under the terms of its
acquisition of Securities, the Company has certain rights to
indemnification from Mr. Brana. In connection with the indemnification,
Mr. Brana has entered into a Settlement Agreement and executed a
Promissory Note in the amount of up to $500,000 or such greater amount
as may be due for any defense costs or award arising out of this suit.
Mr. Brana originally delivered 100,000 shares of CDL common stock to
the Company as collateral for the note that was due on December 1,
2000. Because of the increased costs in defending the suit Mr. Brana
delivered an additional 50,000 shares of CDL common stock to the
Company and the Company agreed to extend the due date until December 1,
2002. In April 1999 a motion for summary judgement was filed and denied
by the Court in December 1999. The plaintiff subsequently filed a Third
Amended Complaint for breach of contract and additional claims for
quantum meruit. The parties are presently participating in
court-ordered non-binding mediation in an attempt to resolve this
litigation which extends the time to respond to the Third Amended
Complaint until thirty days after completion of the final mediation
session, subject to the Court's approval. Mediation continues at this
time. Due to the continuing legal costs in defending this suit, Mr.
Brana has agreed to deliver 200,000 additional shares of CDL common
stock to the Company on or before May 31, 2000. The Company does not
believe that an adverse determination in this matter would result in a
material adverse effect on the consolidated financial position or
results of operations of the Company.
The Company is, from time to time, a party to litigation arising in the
normal course of its business, most of which involves claims for
personal injury and property damage incurred in connection with its
same-day ground and air delivery operations. Management believes that
none of these actions, including the action described above, will have
a material adverse effect on the consolidated financial position or
results of operations of the Company.
12
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit
27.1 Financial Data Schedule (for electronic submission only)
13
<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: May 15, 2000 CONSOLIDATED DELIVERY & LOGISTICS, INC.
By: \s\ Russell J. Reardon
-------------------------
Russell J. Reardon
Vice President and
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 602
<SECURITIES> 0
<RECEIVABLES> 31,437
<ALLOWANCES> 3,371
<INVENTORY> 0
<CURRENT-ASSETS> 31,697
<PP&E> 17,767
<DEPRECIATION> 11,627
<TOTAL-ASSETS> 67,455
<CURRENT-LIABILITIES> 26,469
<BONDS> 729
0
0
<COMMON> 7
<OTHER-SE> 16,249
<TOTAL-LIABILITY-AND-EQUITY> 67,455
<SALES> 0
<TOTAL-REVENUES> 60,002
<CGS> 0
<TOTAL-COSTS> 46,860
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 886
<INTEREST-EXPENSE> 884
<INCOME-PRETAX> (1,850)
<INCOME-TAX> (740)
<INCOME-CONTINUING> (1,110)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,110)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
