SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
FORM 10-K/A
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee Required) for the fiscal year ended June 30, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required) for the transition period from to .
Commission file number: 333-3613
AMERTRANZ WORLDWIDE HOLDING CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 11-3309110
- - --------------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2001 Marcus Avenue, Lake Success, New York 11042
- - ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 326-9000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Each Exchange on Which Registered
None None
---- ----
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
Common Stock, $.01 par value
Redeemable Common Stock Purchase Warrants
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 17, 1996 was $16,776,095.
The number of shares of common stock outstanding as of September 17, 1996 was
5,926,504.
DOCUMENTS INCORPORATED BY REFERENCE
<PAGE>
To the extent specified, Part III of this Form 10-K incorporates information by
reference to the Registrant's definitive proxy statement for its 1996 Annual
Meeting of Shareholders (to be filed).
The Registrant hereby amends the following items, financial statements,
exhibits, or other portions of its Annual Report on Form 10-K for the fiscal
year ended June 30, 1996, which was filed with the Commission on September 27,
1996, as amended by Amendment No. 1, filed January 2, 1997:
Part II, Item 7 of the Annual Report on Form 10-K is amended in its
entirety as attached hereto.
Part IV, Item 14 (a)(1) and (2) of the Annual Report on Form 10-K is
amended in its entirety as attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereto duly authorized.
AMERTRANZ WORLDWIDE HOLDING CORP.
Date: August 12, 1997 By: /s/Stuart Hettleman
---------------------------------
Stuart Hettleman
President
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Overview
- - --------
The Company was incorporated in January 1996 to continue the freight
forwarding business of TIA and CFS and acquire Amertranz. The Company generated
operating revenues of $27.4 million and had net losses before taxes of $6.4
million for the period January 1, 1996 through June 30, 1996. The loss included
a one time charge of $3.3 million for debt placement expense in connection with
financings prior to the Company's initial public offering which closed on July
3, 1996. The freight forwarding business of TIA and CFS generated operating
revenues of $38.6 million and $38.2 million and had net income before taxes of
$2.7 million and $2.4 million for the years ended December 31, 1994 and 1995,
respectively.
Historically, the CAS business has derived substantial operating
revenues from companies engaging in business in Puerto Rico who were taking
advantage of significant United States income tax benefits available to such
companies. In 1993, Congress reduced the tax benefits available to companies
doing business in Puerto Rico, and legislation enacted into law in August 1996
contains a 10-year phaseout of these tax benefits. This legislation, or in the
event that there is any further modification to these tax benefits available to
United States companies doing business in Puerto Rico, could result in these
companies reducing the level of the business they have been doing in Puerto
Rico, which could have a material adverse effect on the Company's operating
results.
While the freight forwarding business of TIA and CFS has been
historically profitable, Amertranz has incurred losses in the last two years.
Since the formation of the Company in February, 1996, in the combination of
Amertranz and the freight forwarding business of TIA and CFS, management has
attracted and hired additional experienced sales personnel for the domestic
freight forwarding operation and thereby increased its sales team by more than
30%. In addition, management has begun maximizing the synergies created by the
combination of its Amertranz and CAS businesses by (i) exploiting cross-selling
opportunities, and (ii) taking advantage of underutilized operations
infrastructure and purchased freight space.
Results of Operations
- - ---------------------
Six Months Ended June 30, 1995 and 1996
The Company began its existence as the holding company for the combined
operations of Amertranz and the freight forwarding business of TIA and CFS on
February 8, 1996. From and after February 8, 1996, the freight forwarding
business of TIA and CFS was operated through the Company's CAS subsidiary. Prior
to such date, the operations of Amertranz and the freight forwarding business of
TIA and CFS were independent of each other. The following discussion relates to
the combined results of the Company for the period February 8, 1996 through June
30, 1996 and only the operations of the freight forwarding business of TIA and
CFS for the period January 1, 1996 through February 7, 1996, and the results of
the freight forwarding business of TIA and CFS for the period January 1, 1995
through June 30, 1995.
Six Months Ended
----------------
June 30, 1996 June 30, 1995
------------- -------------
(Pro forma/Unaudited)
Operating revenue $27,445,583 $17,733,971
Cost of transportation 20,961,019 14,432,953
Gross profit 6,484,564 3,301,018
Selling, general and
adminstrative expenses 8,772,226 2,260,057
--------- ---------
Net income (loss) before taxes ($6,396,524) $ 287,450
=========== ==========
2
<PAGE>
Operating Revenue. Operating revenue increased by $9.7 million, or
54.8%, from $17.7 million for the period January 1, 1995 through June 30, 1995,
to $27.4 million for the period January 1, 1996 through June 30, 1996. This
increase resuled almost entirely from the Company's acquisition of its Amertranz
subsidiary on February 8, 1996.
Cost of Transportation. Cost of transportation decreased to 76.4% of
operating revenues for the period January 1, 1996 through June 30, 1996, from
81.4% of operating revenues for the period January 1, 1995 through June 30,
1995. Of this 5.0% change in cost of transportation as a percentage of operating
revenues between the periods, approximately 1% resulted from an improvement in
the operations of the Company's CAS subsidiary. The balance of the improvement
resulted from the Company's Amertranz subsidiary's historically lower cost of
transportation as a percentage of sales which were included in the 1996 period
but not in the 1995 period.
Gross Profit. As a result of the factors described in the two previous
paragraphs, gross profit for the period January 1, 1996 through June 30, 1996,
increased to 23.6% of operating revenues from 18.6% of operating revenue for the
period January 1, 1995 through June 30, 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to 32.0% of operating revenues for the period
January 1, 1996 through June 30, 1996, from 12.7% of operating revenues for the
period January 1, 1995 through June 30, 1995. This increase is almost entirely
attributable to the Company's acquisition of its Amertranz subsidiary on
February 8, 1996 and that subsidiary's historically higher selling, general and
administrative expenses as a percentage of its sales.
Years Ended December 31, 1994 and 1995
Operating Revenue. Operating revenue decreased 1.0% to $38.2 million in
1995 from $38.6 million in 1994. While TIA and CFS experienced volume increases
from most major customers, there were several major accounts that had
significant decreases in revenue in 1995 compared to 1994 revenue. Sales to two
major customers decreased by an aggregate of approximately $2.0 million in 1995
compared to 1994, which offset the gain in revenue by other accounts.
Furthermore, several major accounts had large volume increases in 1994 due to
unusual situations which did not recur in 1995. As an example, a major
pharmaceutical firm instituted a recall which necessitated substantial
additional air freight needs over normal business operations. Also, due to
market conditions, several major retail suppliers had to use air freight in
substantially greater volume than those used in normal market conditions.
Operating revenue in 1995 show an annual compounded growth rate of 8% per year
for the two years of 1994 and 1995.
Cost of Transportation. Cost of transportation increased to 79.3% of
1995 operating revenue from 78.4% of 1994 operating revenue.
Gross Profit. As a result of the factors described in the preceding
paragraphs, gross profit for the year ended December 31, 1995 decreased to 20.7%
from 21.6% of operating revenue in the comparable period of 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased slightly to 11.8% of operating revenue in the
year ended December 31, 1995 from 12.0% of operating revenue in the comparable
period in 1994.
Years Ended December 31, 1993 and 1994
Operating Revenue. Operating revenue increased 18.1% to $38.6 million
in 1994 from $32.7 million in 1993. Most major customers had volume increases in
1994, including several major accounts that had unusually large volume increases
in 1994 due to non-recurring situations.
3
<PAGE>
Cost of Transportation. Cost of transportation increased to 78.4% of
1994 operating revenue from 74.2% of 1993 operating revenue. This increase
occurred because TIA and CFS chartered a fully-staffed and maintained aircraft
during the last ten months of 1994, while TIA operated a leased aircraft during
1993. This increase is more than offset by the corresponding decrease in
selling, general and administrative expense.
Gross Profit. As a result of the factors described in the preceding
paragraphs, gross profit for the year ended December 31, 1994 decreased to 21.6%
from 25.8% of operating revenue for the comparable period in 1993.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to 12.0% of operating revenue in the year
ended December 31, 1994 from 19.9% of operating revenue in the comparable period
in 1993. This decrease resulted from the cessation of TIA's operation of its
leased aircraft and the elimination of the expenses associated therewith.
Liquidity and Capital Resources
- - -------------------------------
The Company used approximately $6.6 million of cash in operating
activities for the period January 1, 1996 through June 30, 1996. This cash was
provided primarily by cash on hand of approximately $4.9 million and an increase
in accounts payable and accrued expenses of approximately $1.1 million. The cash
used in operating activities was primarily attributable to increases in the
Company's accounts receivable of approximately $3.6 million, the net loss
incurred by the Company of approximately $6.4 million during such period, and an
increase in other assets of $1.2 million. The increase in accounts receivable is
due principally to an increase in the trade receivables of the CAS operations
from a zero balance at the beginning of the period to approximately $4.5 million
at the end of the period. Cash used in investing activities was $400,000
primarily attributable to a cash advance evidenced by a note receiable. Cash
provided by financing activities was $2.5 million consisting principally of $5.2
million proceeds from short-term borrowings and $4.0 million from a revolving
loan from an affilitate, offset by $4.0 million in repayments of short-term
borrowings and $2.6 million distributed to TIA.
Prior to the combination with the freight forwarding business of TIA
and CFS on February 7, 1996 and the initial public offering of the Company's
securities on June 28, 1996 ("IPO"), Amertranz' internally generated cash flow
was not sufficient to finance trade receivables and business expansion or to
support operations. Amertranz met its capital requirements prior to that time
primarily through: (i) the private sales of $350,000 of equity and debt
securities between November, 1995 and January, 1996 ("Interim Financings"); (ii)
the private sales of $3.975 million of equity and debt securities in February
and May, 1996 ("Bridge Financings"); (iii) borrowings of $800,000 from TIA (see
below); (iv) borrowings under an accounts receivable financing facility (see
below); and (v) other private financings which were converted into equity as
part of the February 7, 1996 combination. In addition CAS has a credit facility
of up to $4 million from TIA and CFS under a revolving credit loan (see below).
Of the $12,414,000 net proceeds to the Company on its initial public
offering on June 28, 1996 (which closed on July 3, 1996), the Company applied
$4,137,000 to repay the outstanding principal and interest balance on the Bridge
Financings, $373,000 to repay the outstanding principal and interest balance on
the Interim Financing, and $2 million as partial payment on the Exchange Note
(see below). The $5,904,000 balance of proceeds from the IPO was retained by the
Company for working capital and general corporate purposes.
Fidelity Facility. In March 1995, Amertranz entered into an accounts
receivable Purchase and Sale Agreement ("Fidelity Facility") with Fidelity
Funding of California, Inc. ("Fidelity"), as amended July 5, 1995, October 25,
1995, and February 7, 1996. The Fidelity Facility expires in March 1997. Under
the agreement, as amended, the Company can borrow the lesser of $3.125 million
or 75% of eligible accounts receivable. Amertranz's borrowings under the
Fidelity Facility are secured by a first lien on all of Amertranz's assets and
are guaranteed by the Company. At June 30, 1996, the Company had outstanding
borrowings of approximately $1,641,347 under the Fidelity Facility which
represented the full amount available thereunder.
4
<PAGE>
TIA Loan. In October 1995, Amertranz obtained a $500,000 subordinated
secured loan from TIA, which was increased to $800,000 in January 1996 ("TIA
Loan"). The TIA Loan bears interest at the rate of 12% per annum and is
repayable in 12 equal, consecutive monthly payments of principal and interest
commencing August 2, 1996. However, TIA has agreed to defer repayment of the TIA
Loan as described below. The TIA Loan is secured by a lien on all of the assets
of Amertranz subordinated only to the lien granted to Fidelity in connection
with the Fidelity Facility.
Revolver Note. As part of the combination of Amertranz and the freight
forwarding business of TIA and CFS, TIA and CFS agreed to advance to CAS, on a
revolving loan basis, the net collections of the accounts receivable of TIA and
CFS as of February 7, 1996 and additional amounts in the discretion of TIA and
CFS, up to an aggregate maximum of $4,000,000 outstanding at any time, pursuant
to the terms of a Revolving Credit Promissory Note ("Revolver Note"). Funds
advanced under the Revolver Note with respect to the TIA and CFS accounts
receivable do not bear interest prior to maturity. Discretionary advances under
the Revolver Note bear interest at the greater of (i) 1% per month, or (ii) a
fluctuating rate equal to the prime rate of interest as published in The Wall
Street Journal, plus 4%. Advances under the Revolver Note may be used only for
ordinary, current operating expenses of CAS unless TIA and CFS consent to
another use of such funds. The Revolver Note matured on July 6, 1996; however,
TIA and CFS have agreed to defer payment of the Revolver Note as described
below. All obligations under the Revolver Note are guaranteed by the Company and
Amertranz. All obligations under the Revolver Note and the guarantees thereof
are secured by a first priority lien on all of the issued and outstanding shares
of CAS, a first priority lien on all of the assets of the Company and CAS, and a
lien on the accounts receivable of Amertranz, subordinate only to the first
priority lien granted to Fidelity in connection with the Fidelity Facility and
the second position lien granted to TIA in connection with the TIA Loan. As of
June 30, 1996, the Company had outstanding borrowings of approximately
$3,954,989 under the Revolver Note.
Exchange Note. As part of the combination of Amertranz and the freight
forwarding business of TIA and CFS, the Company issued to TIA and CFS a
promissory note in the original principal amount of $10,000,000, which bears
interest at the rate of 8% per annum ("Exchange Note"). The Exchange Note is
payable in five consecutive monthly payments of principal and interest in the
amount of $80,000 each, commencing March 1, 1996, and, thereafter, monthly
payments of principal and interest in the amount of $166,667 each until the
Exchange Note has been paid in full. Prior to the IPO, TIA and CFS exchanged
$2,000,000 principal amount of the Exchange Note for 200,000 shares of the
Company's Class A Preferred Stock, and of the proceeds of the IPO, $2,000,000
was used to repay a portion of the Exchange Note. As of June 30, 1996, the
outstanding principal balance under the Exchange Note was $8 million. TIA and
CFS have agreed to defer the balance of payments on the Exchange Note as
described below.
Forbearance by TIA and CFS. Under the terms of the respective
obligations described above, payments on the TIA Loan would have commenced on
July 28, 1996, payments on the Exchange Note were due monthly commencing on
March 1, 1996, and the full outstanding balance of the Revolver Note was due on
July 6, 1996. TIA and CFS have agreed to defer each payment on the TIA Loan and
the Exchange Note to the extent the aggregate of the payments thereon then due
exceeds 80% of the Company's earnings before interest, taxes, depreciation and
amortization ('EBITDA') for the month in respect of which such aggregate
payments are due. During any deferral period, interest will continue to accrue
on these obligations in accordance with their respective terms. Such deferral
will continue until the earlier of (i) the date after which the Company's EBITDA
exceeds the sum of $600,000 for any consecutive two-month period, or (ii)
November 1, 1996. Furthermore, TIA and CFS have agreed that they will defer
collection of amounts due under the Revolver Note until the earlier of (i)
refinancing of Amertranz's and CAS's accounts receivable working capital
facilities, or (ii) December 31, 1996. TIA and CFS have further agreed that they
will not take any action to foreclose on their security interests in the assets
of the Company, Amertranz or CAS until June 27, 1997 unless any other secured
creditor of the Company, Amertranz or CAS takes action to foreclose on its
security interest or any creditor obtains a final judgement against the Company,
Amertranz or CAS in an amount of $50,000 or more which judgment is not stayed.
5
<PAGE>
Working Capital Requirements. The Company believes that funds raised in
the IPO, cash flows generated from operations and available funds under its
existing loan facilities will be sufficient to finance its operations and
obligations for the foreseeable future.
Inflation
- - ---------
The Company does not believe that the relatively moderate rates of
inflation in the United States in recent years have had a significant effect on
its operations.
6
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 - K
-----------------------------------------------------------------
(a) 1. Financial Statements
--------------------
<TABLE>
<CAPTION>
AMERTRANZ WORLDWIDE HOLDING CORP. PAGE
<S> <C> <C> <C> <C> <C> <C>
----
Report of Independent Public Accountants F-1
Consolidated Balance Sheet as of June 30, 1996 F-2
Consolidated Statement of Operations for the Six Months Ended June 30, 1996 F-3
Consolidated Statement of Stockholders' Deficit for the Six Month Period Ended June 30, 1996 F-4
Consolidated Statement of Cash Flows for the Six Months Ended June 30, 1996 F-5
Notes to Consolidated Financial Statements F-6
AMERTRANZ WORLDWIDE HOLDING CORP. (FORMERLY THE FREIGHT FORWARDING
BUSINESS OF TIA AND CFS)
Independent Auditors' Report F-12
Balance Sheets as of December 31, 1994 and 1995 F-13
Statements of Operations and Changes in Accumulated Deficit for the Years
December 31, 1993, 1994 and 1995 F-14
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995 F-15
Notes to Financial Statements F-16
(a) 2. Financial Statement Schedules
-----------------------------
Report of Independent Public Accountants on Schedule S-1
Schedule II - Schedule of Valuation and Qualifying Accounts S-2
</TABLE>
All other schedules are omitted because they are not applicable, are not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amertranz Worldwide Holding Corp.:
We have audited the accompanying consolidated balance sheet of
Amertranz Worldwide Holding Corp., a Delaware corporation, as of June 30, 1996
and the related consolidated statement of operations, shareholders' deficit and
cash flows for the six month period 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Amertranz Worldwide
Holding Corp. as of June 30, 1996 and the results of its operations and cash
flows for the six month period then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
August 28, 1996
F-1
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1996
------------- -------------
PROFORMA
ASSETS (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 377,490 $ 6,280,562
Accounts receivable, net of allowance for doubtful accounts of $371,322 7,598,390 7,598,390
Prepaid expenses and other current assets 557,192 557,192
----------------- ----------------
Total current assets 8,533,072 14,436,144
PROPERTY AND EQUIPMENT, net (Note 3) 829,442 829,442
DEBT ISSUANCE COST, net of accumulated amortization of $3,264,232 103,466 -
OTHER ASSETS 1,373,314 304,233
GOODWILL, net of accumulated amortization of $191,460 (Notes 2 and 4) 11,900,735 11,900,735
----------------- --------------
Total assets $ 22,740,029 $ 27,470,554
================= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 7,699,721 $ 7,699,721
Accrued expenses 2,028,274 1,842,229
Note payable to affiliate 3,954,989 3,954,989
Current portion of long-term debt (Note 5) 8,766,347 3,961,347
Lease obligation--current portion (Note 7) 21,034 21,034
----------------- ----------------
Total current liabilities 22,470,365 17,479,320
LONG-TERM DEBT (Note 5) 8,000,000 4,480,000
LEASE OBLIGATION--LONG-TERM (Note 7) 18,315 18,315
----------------- ----------------
Total liabilities 30,488,680 21,977,635
----------------- ----------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock, $10 par value; 2,500,000 shares authorized, 200,000 shares issued
and outstanding - 2,000,000
Common stock, $.01 par value; 15,000,000 shares authorized, 3,626,504 shares
issued and outstanding 36,265 59,265
Paid-in capital 8,567,675 19,889,712
Accumulated deficit (16,341,341) (16,444,808)
Less: Treasury stock, 106,304 shares held at cost (11,250) (11,250)
----------------- ----------------
Total stockholders' equity (deficit) (7,748,651) 5,492,919
----------------- ----------------
Total liabilities and stockholders' equity (deficit) $ 22,740,029 $ 27,470,554
================= ================
</TABLE>
The accompanying notes are an integral part of this
consolidated balance sheet.
F-2
<PAGE>
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
Six Months
Ended
June 30, 1996
-------------
OPERATING REVENUE $ 27,445,583
DIRECT COSTS 20,961,019
------------
Gross profit 6,484,564
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 8,772,226
Operating (loss) (2,287,662)
OTHER INCOME (EXPENSE):
Interest expense (4,057,864)
Other income (expense), net (50,998)
Net loss $ (6,396,524)
Net loss per common share $ (1.84)
------------
Weighted average number of common shares 3,482,504
------------
The accompanying notes are an integral part of this
consolidated statement.
F-3
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996
Additional
<TABLE>
<CAPTION>
Common Stock Paid-in Treasury Stock Accumulated
Shares Amount Capital Shares Amount (Deficit) Total
------ ------ ------- ------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1996 2,100,000 $21,000 $ - - $ - $( 4,932,989) $(4,911,989)
Liabilities in excess of assets
distributed to TIA/CFS - - - - - 4,988,172 4,988,172
Exchange Note issued to TIA/
CFS in connection with asset
exchange - - - - - (10,000,000) (10,000,000)
Common Stock issued in
connection with assigned
notes 280,888 2,809 1,376,301 - - - 1,379,110
Common Stock issued in
connection with Bridge
and Interim financings 727,560 7,276 2,781,787 - - - 2,789,063
Common Stock issued to
former stockholders of
Amertranz Worldwide 518,056 5,180 4,409,587 - - - 4,414,767
Purchase of treasury
stock - - - 106,304 (11,250) - (11,250)
Net loss - - - - - ( 6,396,524) (6,396,524)
--------- ------- ---------- ------- --------- ------------ ------------
Balance, June 30, 1996 3,626,504 $36,265 $8,567,675 106,304 $(11,250) $(16,341,341) $(7,748,651)
========= ======= ========== ======= ======== ============ ===========
</TABLE>
The accompanying notes are an integral part of this
consolidated statement.
F-4
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(6,396,524)
Bad debt expense (13,187)
Depreciation and amortization 361,467
Decrease in debt issuance costs 3,208,809
Adjustments to reconcile net income to net cash used in operating activities-
Increase in accounts receivable (3,628,728)
Increase in prepaid expenses and other current assets (22,301)
Increase in other assets (1,214,586)
Increase in accounts payable and accrued expenses 1,130,878
Increase in due to affiliates 1,414
Net cash used in operating activities (6,572,758)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (123,068)
Cash advances under notes receivable (300,000)
Net cash used in investing activities (423,068)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from loan payable (56,515)
Proceeds from short-term debt 5,190,064
Repayment of long-term debt (3,990,064)
Proceeds from revolving loan due to affiliate 3,954,989
Payment of lease obligations (8,139)
Purchase of treasury stock (11,250)
Cash portion of assets distributed to TIA (2,590,031)
-----------
Net cash provided by financing activities 2,489,054
-----------
Net decrease in cash and cash equivalents (4,506,772)
-----------
CASH AND CASH EQUIVALENTS, beginning of the year 4,884,262
-----------
CASH AND CASH EQUIVALENTS, end of the year $ 377,490
===========
CASH PAYMENTS FOR:
Interest $ 825,563
Income taxes 434,199
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTMENT & FINANCING ACTIVITIES
On February 7, 1996 Holdings purchased the capital stock of Amertranz
for shares valued at $4,415,000. In conjunction with the acquisition, the
resulting goodwill is as follows:
Net liabilities assumed $ 7,685,000
Purchase price 4,415,000
-----------
Goodwill 12,100,000
Net liabilities retained by TIA/CFS 4,988,172
Cash portion of assets distributed to TIA (2,590,031)
-----------
Net liabilities distributed $ 2,398,141
===========
</TABLE>
The accompanying notes are an integral part of this
consolidated statement.
F-5
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND
In January 1996, Amertranz Worldwide Holding Corp. ("Holding" or the
"Company") was incorporated in the state of Delaware. Effective February 7,
1996, Holding concluded an Asset Exchange Agreement (the "Agreement") with TIA,
Inc. ("TIA"), Caribbean Freight System, Inc. ("CFS"), Amertranz Worldwide, Inc.
("Amertranz") and the stockholders and convertible note holders of Amertranz. As
part of this transaction, Holding received (i) all of the issued and outstanding
stock of Amertranz, (ii) $1,379,110 in convertible notes of Amertranz, and (iii)
the air freight forwarding business of TIA and CFS. Holding then contributed the
air freight forwarding business of TIA and CFS to Caribbean Air Services, Inc.
("CAS") in return for all of the issued and outstanding shares of CAS. TIA and
CFS received 2,100,000 shares of common stock of the Company and a $10,000,000
promissory note, as discussed in Note 4, in addition to stock in the Company.
The transactions described above have been accounted for as a
recapitalization of TIA and CFS, whereby the historical data for their freight
forwarding operations are being presented as that of Holdings for all periods
presented. The issuance of the $10,000,000 Promissory Note has been reflected as
a charge to retained earnings and the distribution of assets and liabilities to
TIA and CFS has been reflected as a net adjustment to equity, at book value
(which approximates fair value). The transaction with Amertranz has been
accounted for as an acquisition under purchase accounting.
On July 3, 1996, the Company completed an initial public offering
("IPO") of 2,300,000 shares of common stock and redeemable common stock purchase
warrants at an initial offering price of $6.10 per share. Prior to the IPO,
there was no public market for the Company's capital stock. The net proceeds to
the Company of $12,414,117 were used to pay down existing debt of $6,503,000 and
the balance is available for working capital purposes. Additionally, the Company
issued 200,000 shares of Class A, non-voting, cumulative, convertible preferred
stock with a par value of $10.00 in exchange for payment of $2,000,000 of its
promissory note with TIA and CFS.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Company, as summarized below,
are in conformity with generally accepted accounting principles. 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.
Principles of Consolidation
The consolidated financial statements include the accounts of Holding,
CAS and Amertranz since February 7, 1996. The accompanying consolidated
statements of operations and changes in retained earnings (deficit) include the
accounts of the former air freight business of TIA (a wholly-owned subsidiary of
Wrexham Aviation Corporation) and CFS, which was not a separate legal or
historical reporting entity for the period January 1, 1996 through February 7,
1996. All significant intercompany accounts and transactions have been
eliminated.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
under the straight-line method over estimated useful lives ranging from 3 to 8
years. Assets under capital leases are depreciated over the shorter of the
estimated useful life of the asset or the lease term. The Company utilizes a
half-year convention for assets in the year of acquisition and disposal.
Goodwill
Goodwill represents the excess of cost over the net assets acquired and
is amortized on a straight-line basis over 25 years. Management periodically
assesses whether there has been an impairment in the carrying value of the
excess of cost over the net assets acquired, by comparing current and projected
annual undiscounted cash flows with the carrying amount. In the event there is
an impairment of goodwill, management would reduce the carrying value to an
amount equal to the projected discounted cash flow of the underlying assets.
F-6
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Stock Options
The Company grants stock options to certain officers and related
parties. Compensation expense is recognized based upon the aggregate difference
between the fair market value of the Company's stock at date of grant and the
option price. Compensation expense is recognized equally over the vesting
period.
Proforma Data
The unaudited proforma balance sheet gives effect to the IPO discussed
in Note 1 as if it had closed on June 30, 1996.
Revenue Recognition
Revenue from freight forwarding is recognized upon delivery of goods
and direct expenses associated with the cost of transportation are accrued
concurrently. Monthly provision is made for doubtful receivables, discounts,
returns and allowances.
Cash and Cash Equivalents
Cash at June 30, 1996 includes $297,000 of overnight repurchase
agreements.
Per Share Data
Earnings per share is computed using the weighted average number of
common shares outstanding and, where applicable, common equivalent shares
issuable upon exercise of stock options and warrants redeemable under the
treasury stock method to the extent that they are dilutive.
Fair Value of Financial Instruments
Cash equivalents are reflected at cost which approximate their fair
values. The carrying amounts of the accounts receivable and debt approximate
their fair value.
3. PROPERTY AND EQUIPMENT, NET
Property and Equipment consists of the following:
Furniture and fixtures $ 303,502
Computer equipment 421,946
Computer software 219,701
Leasehold improvements 63,658
Logos and trademarks 22,349
Vehicle 8,499
--------------
1,039,655
Less: Accumulated depreciation and amortization 210,213
--------------
$ 829,442
==============
4. ACQUISITION
Holding acquired all of the issued and outstanding stock of Amertranz
and the former stockholders of Amertranz received 870,254 shares (which consist
of the investment in Amertranz Worldwide of 518,056 shares, assigned notes of
280,888 shares and 71,310 shares associated with the Interim Financing) of
Holding's common stock and options to purchase 224,399 shares of Holding's
common stock valued at $4,415,000 or approximately $4.25 per share and option.
The Amertranz transaction has been accounted for as a purchase and resulted in
goodwill of approximately $12.1 million which represents the excess of the cost
over the fair value of the assets acquired.
F-7
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
5. DEBT
As of June 30, 1996, long-term and short-term debt consisted of the
following:
Promissory note to TIA and CFS (a) $ 10,000,000
Revolving loan to TIA and CFS (b) 3,954,989
February Bridge notes (c) 2,775,000
May bridge notes (d) 1,200,000
Asset-based financing (e) 1,641,347
Notes payable to TIA (f) 800,000
Interim financing (g) 350,000
--------------
Total debt 20,721,336
Less: Current portion (12,721,336)
--------------
Long-term debt $ 8,000,000
==============
(a) On February 7, 1996, as part of the Agreement, Holding issued to
TIA and CFS a $10,000,000 promissory note which bears interest at the rate of
8.0% per annum. The note is payable in five consecutive monthly payments of
principal and interest in the amount of $80,000 each, commencing March 1, 1996,
and thereafter monthly payments of principal and interest in the amount of
$166,667 each until the note is paid in full. On July 3, 1996, Holding repaid
$2,000,000 of this debt from the proceeds of the IPO and converted $2,000,000 of
the note into Class A, non-voting, cumulative, convertible preferred stock.
(b) As part of the Agreement, TIA and CFS have agreed to lend to CAS on
a revolving loan basis, an amount up to the net cash collections of TIA and
CFS's accounts receivable as of February 7, 1996 and additional amounts at the
discretion of TIA and CFS, up to an aggregate maximum of $4,000,000 outstanding
at any time, pursuant to the terms of a Revolving Credit Promissory Note. Only
funds advanced at the discretion of TIA and CFS bear interest, at the greater of
(i) 1% per month or (ii) at a rate of 4% over prime. The note is due July 6,
1996. The note is secured by all of the assets of CAS and is guaranteed by
Holding and Amertranz. As of June 30, 1996, $3,954,989 was outstanding under
this facility.
(c) On February 7, 1996, Holding consummated a private placement with a
group of investors whereby Holding borrowed $2,775,000 and issued promissory
notes. The notes are due at the earlier of (i) the consummation of the IPO by
Holding or (ii) February 7, 1998 or (iii) the sale or merger of Holding. The
investors also received 416,250 shares of common stock of Holding, as well as
832,500 warrants to purchase shares of common stock of Holding for five years at
$5.00 per share. These warrants convert into warrants upon the completion of the
IPO by Holding and will be exercisable at the IPO price. The notes accrue
interest at 10% per annum until April 30, 1996 and thereafter at 15% per annum.
The notes are secured by a junior lien on all of the assets of the Company. The
Company has recorded debt issuance costs of approximately $2,143,000 in
connection with such bridge financing and will amortize the amount over the life
of the debt. Upon repayment of the debt, the related unamortized debt issuance
cost would be expensed. The effective annual rate of interest on the notes after
giving effect to the debt issuance cost of $2,143,000 is 200%. The fair value of
the shares of common stock at the time of issuance was $4.25 per share. This
debt was repaid on July 3, 1996 with the proceeds of the IPO.
(d) On May 10, 1996, Holding consummated a private placement with a
group of investors whereby Holding borrowed $1,200,000 and issued promissory
notes. The notes are due at the earlier of (i) the closing of the IPO by Holding
or (ii) February 7, 1998 or (iii) the sale or merger of Holding. The investors
also received 240,000 shares of common stock of Holding, as well as 480,000
warrants to purchase shares of common stock of Holding for five years at $5.00
per share. These warrants convert into IPO warrants upon the completion of the
IPO by Holding and will be exercisable at the IPO price. The notes accrue
interest at 15% per annum. The notes are secured by a lien on all of the assets
of the Company. The Company has recorded debt issuance costs of approximately
$1,020,000 in connection with such bridge financing and will amortize the amount
over the life of the debt. Upon repayment of the debt, the related unamortized
debt issuance cost would be expensed. The effective annual rate of interest on
the notes after giving effect to the debt issuance cost of $1,020,000 is 525%.
The fair
F-8
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
value of the shares of common stock at the time of issuance was $4.25 per share.
This debt was repaid on July 3, 1996 with the proceeds of the IPO.
(e) Amertranz entered into a Purchase and Sale Agreement with a lender
whereby it receives advances of up to 75% of the net amounts of eligible
accounts receivable outstanding to a maximum amount of $3,125,000. The loan is
subject to interest at a rate of 4% per annum over the prevailing prime rate
(8.25% as of June 30, 1996). At June 30, 1996, the outstanding balance on the
credit line was $1,641,347, which represented the full amount available
thereunder. The lender has a security interest in all present and future
accounts receivable, machinery and equipment and other assets of Amertranz and
the loan is guaranteed by Holding.
(f) In October 1995, Amertranz obtained a $500,000 subordinated secured
loan from TIA, which was increased to $800,000 in January 1996 ("TIA Loan"). The
original TIA Loan bears interest at the rate of 12% per annum and is repayable
in 12 equal, consecutive monthly payments of principal and interest commencing
30 days after the closing of the IPO.
(g) Between November 1995 and January 1996, Amertranz obtained
financing of $350,000 ("Interim Financing") and issued $350,000 in aggregate
principal amount of promissory notes. Repayment of the principal amount due
under these notes, together with interest at the rate of 12% per annum is due
upon the earlier of (i) the closing of the IPO by Holding or (ii) February 7,
1998 or (iii) the sale or merger of Holding. The holders of these notes also
received shares of Amertranz common stock that were converted into 71,310 shares
of Holding common stock. The Company has recorded a debt issuance cost of
$150,000 in connection with the issuance of the stock and will amortize the
amount over the life of the debt. Upon repayment of the debt, the related
unamortized debt issuance cost would be expensed. The effective annual rate of
interest on the notes after giving effect to the debt issuance cost of $150,000
is 98%. The fair value of the shares of common stock at the time of issuance was
$2.22 per share. This debt was repaid on July 3, 1996 with the proceeds of the
IPO.
Between June 1995 and November 1995, Amertranz borrowed $1,379,110 in
aggregate principal amount from persons affiliated with Amertranz and other
non-affiliated lenders and issued convertible notes therefor. All of these notes
were assigned by the holders thereof to Holding as part of the Combination and
are included in additional paid-in capital.
TIA and CFS have agreed that, upon consummation of the IPO, they will
defer each payment on the TIA Loan and the Exchange Note to the extent the
aggregate of the payments thereon then due exceeds 80% of the Company's earnings
before interest, taxes, depreciation and amortization ("EBITDA") for the month
in respect of which such aggregate payments are due. During any deferral period,
interest will continue to accrue on these obligations in accordance with their
respective terms. Such deferral will continue until the earlier of (i) the date
after which the Company's EBITDA exceeds the sum of $600,000 for any consecutive
two-month period, or (ii) November 1, 1996. Furthermore, TIA and CFS have agreed
that, upon consummation of the IPO, they will defer collection of amounts due
under the Revolver Note until the earlier of (i) refinancing of Amertranz's and
CAS's accounts receivable working capital facilities, or (ii) December 31, 1996.
6. STOCKHOLDERS' EQUITY (DEFICIT)
Stock Options and Warrants
As of June 30, 1996, the Company had options outstanding to purchase a
total of 523,399 shares of common stock at exercise prices ranging from $.16 to
$6.00, of which 237,673 options are exercisable. No options were exercised as of
June 30, 1996. 224,399 of these options replaced outstanding options of
Amertranz and were included in the computation of the consideration received by
the former Amertranz stockholders. The Company also had warrants outstanding to
purchase 1,386,783 shares of common stock at an exercise price equal to the
exercise price of the warrants issued in connection with the Company's February
and May bridge financings.
In connection with the IPO, the Company issued 2,300,000 shares of
common stock and 2,300,000 warrants. Each warrant entitles the holder thereof to
purchase one share of common stock for $6.00 during the four-year period
commencing one year from the date of this Prospectus. The Company may redeem the
warrants at a price of $.01 per warrant at any time
F-9
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
after they become exercisable upon not less than 30 days' prior written notice
if the last sale price of the common stock has been at least $10.00 for each of
the 20 consecutive trading days ending on the third day prior to the date on
which the notice of redemption is given.
Preferred Stock
As of June 30, 1996, the Company does not have any preferred stock
authorized or issued. However, the Board of Directors is authorized without
further action by the stockholders, to issue series of preferred stock. On July
3, 1996, the Company issued 200,000 shares of Class A, non-voting, cumulative,
convertible preferred stock with a par value of $10.00 in exchange for a paydown
of $2,000,000 on the $10,000,000 promissory note.
The Preferred Stock will pay cumulative cash dividends at an annual
rate of $1.00 per share. The Company is prohibited from paying any dividends on
common stock unless all required preferred dividends have been paid. Each share
of Preferred Stock may be converted at the option of the holder into common
stock at a conversion price of the lower of (i) the IPO price per share of
common stock or (ii) 80% of the average of the closing price per share of common
stock on the day prior to the conversion date. Preferred Stock holders are
entitled to a liquidation preference of $10.00 per share plus all accrued and
unpaid dividends.
7. COMMITMENTS AND CONTINGENCIES
Leases
Future minimum lease payments for capital leases and operating leases
relating to equipment and rental premises are as follows:
YEAR ENDING CAPITAL LEASES OPERATING LEASES
----------- -------------- ----------------
1997 $24,053 $ 803,097
1998 13,234 537,365
1999 6,456 193,626
2000 -- 129,084
2001 -- --
------- ----------
Total minimum lease payments 43,743 $1,663,172
==========
Less--Amount representing interest (4,394)
-------
$39,349
=======
Employment Agreements
Amertranz has employment agreements with certain employees expiring at
various times through July 2000. Such agreements provide for minimum salary
levels and for incentive bonuses which are payable if specified management goals
are attained. The aggregate commitment for future salaries at June 30, 1996,
excluding bonuses, was approximately $1,534,000.
Litigation
Amertranz is a defendant in a lawsuit initiated by the trustee in
bankruptcy of Aeronautics Express, Inc. ("AEI"), a company with whom Amertranz
engaged in discussions concerning a prospective business combination during the
early spring of 1994. The complaint was filed in the United States Bankruptcy
Court for the Southern District of New York in December 1995, and alleges that
Amertranz improperly obtained control over the assets of AEI, committed fraud in
connection with the business discussion, breached an agreement not to solicit
the business or customers of AEI, induced AEI to convey property to Amertranz
for less than fair value and failed to pay AEI compensation for services
rendered by AEI to Amertranz. The
F-10
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
complaint seeks damages in excess of $11 million. The Company has reached an
agreement with the trustee in bankruptcy to settle the litigation for $50,000.
This settlement is conditioned upon the approval of the United States Bankruptcy
Court.
8. INCOME TAXES
At February 7, 1996, the Company had a tax net operating loss
carryforward of approximately $7,757,000, available within statutory limits, to
offset future regular federal taxable income. In accordance with certain
provisions of the Tax Reform Act of 1986, a change in ownership of a corporation
of greater than 50 percentage points within a three-year period places an annual
limitation on the corporation's ability to utilize its existing net operating
loss carryforwards. Such a change in ownership was deemed to have occurred in
connection with the Asset Exchange Agreement in which Amertranz became part of
Holding, at which time the Company's net operating loss carryforwards amounted
to approximately $7,757,000. The annual limitation of the utilization of such
tax attributes over the fifteen year carryforward amounts to approximately
$206,000. To the extent the annual limitation is not utilized, it may be carried
forward for utilization in future years. This limitation could affect the
Company's future provisions for or payment of federal income tax should the
Company's operations produce increased amounts of taxable income in the future.
Deferred tax benefits at June 30, 1996, which are fully offset by a
valuation allowance, primarily represent the estimated future tax effects of
federal net operating losses aggregating approximately $3,548,022.
9. RELATED PARTY TRANSACTIONS
Under the terms of a cargo aircraft charter agreement with Tradewinds
Airlines, Inc. ("Tradewinds Air"), a subsidiary of Tradewinds Acquisition
Corporation, of which TIA owns approximately 30% of the outstanding common
stock, CAS has exclusive rights until June 30, 1998 to the use of a leased
L-1011 freighter aircraft. While CAS is guaranteed the use of the L-1011
aircraft as needed, it pays only for actual use of the aircraft at market rates.
CAS had sales to Amertranz of approximately $242,000, and related
accounts receivable of approximately $213,000 as of and for the six month period
ended June 30, 1996.
At June 30, 1996, Amertranz owes approximately $213,000 to TIA for air
freight forwarding services.
10. SIGNIFICANT CUSTOMERS
During the six month period ended June 30,1996, no single customer
accounted for sales of 10% or more of the Company's revenue.
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TIA, Inc.:
We have audited the accompanying balance sheets of Amertranz Worldwide
Holding Corp. (formerly The Freight Forwarding Business of TIA and CFS) (note 1)
as of December 31, 1994 and 1995 and the related statements of operations and
changes in accumulated deficit and cash flows for each of the years in the
three-year period ended December 31, 1995. These statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 audit 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 above present
fairly, in all material respects, the financial position of Amertranz Worldwide
Holding Corp. (formerly The Freight Forwarding Business of TIA and CFS) as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Greensboro, North Carolina
March 8, 1996, except with respect to
the last paragraph in Note 2 for which
the date is May 1, 1996
F-12
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31, 1994 AND 1995
1994 1995
---- ----
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,141,047 $ 2,463,336
Accounts receivable, net of allowance for doubtful accounts
of $131,229 in 1995 and $228,424 in 1994 (Note 7) 5,196,113 5,379,903
Income taxes receivable -- 65,000
Prepaid expenses and deposits 111,878 84,917
----------- -----------
Total current assets 7,449,038 7,993,156
----------- -----------
Property and equipment, at cost:
Ground support equipment 1,211,507 1,259,942
Furniture, fixtures and leasehold improvements 374,751 429,145
----------- -----------
1,586,258 1,689,087
Less accumulated depreciation and amortization 762,229 1,129,340
----------- -----------
Net property and equipment 824,029 559,747
Notes receivable (Note 3) -- 500,000
Other assets 54,077 54,077
----------- -----------
$ 8,327,144 $ 9,106,980
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Note payable to affiliate (Note 4) $ 3,387,808 $ 2,187,808
Current installments of note payable (Note 4) 25,000 25,000
Accounts payable (Note 7) 1,614,424 1,605,257
Accrued liabilities (Note 4) 1,479,493 1,235,568
Income taxes payable 108,201 --
----------- -----------
Total current liabilities 6,614,926 5,053,633
----------- -----------
Note payable (Note 4) 50,000 25,000
Note payable to Parent (Note 4) 8,940,336 8,940,336
----------- -----------
Total liabilities 15,605,262 14,018,969
----------- ----------
Stockholders' equity (deficit):
Common stock, $.01 par value; 15,000,000 shares
authorized, 2,100,000 shares issued
and outstanding 21,000 21,000
Accumulated deficit (7,299,118) (4,932,989)
----------- -----------
Total stockholders' equity (deficit) (7,278,118) (4,911,989)
Commitments and contingencies (Notes 6 and 9)
$ 8,327,144 $ 9,106,980
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AND
CHANGES IN ACCUMULATED DEFICIT
Years Ended December 31, 1993, 1994 and 1995
DECEMBER 31,
----------------------------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating revenue $32,670,727 $38,576,285 $38,211,306
Cost of transportation (Note 7) 24,231,379 30,254,733 30,300,476
------------- ------------ ------------
Gross profit 8,439,348 8,321,552 7,910,830
Selling, general and administrative expenses 6,504,897 4,633,676 4,513,154
------------- ------------ ---------
Operating income 1,934,451 3,687,876 3,397,676
Other income (expense):
Interest expense (Note 4) (1,107,520) (1,143,787) (1,155,215)
Other, net 41,928 117,214 123,668
------------- ------------ ------------
Total other expense (1,065,592) (1,026,573) (1,031,547)
------------- ------------ ------------
Income before income taxes 868,859 2,661,303 2,366,129
Income taxes (Note 5) -- 108,201 --
------------- ------------ ------------
Net income 868,859 2,553,102 2,366,129
Accumulated deficit:
Balance at beginning of year (10,721,079) (9,852,220) (7,299,118)
------------- ------------ ------------
Balance at end of year $ (9,852,220) $ (7,299,118) $ (4,932,989)
============= ============ ============
</TABLE>
See accompanying notes to the financial statements.
F-14
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993, 1994 and 1995
DECEMBER 31,
--------------------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 868,859 $ 2,553,102 $ 2,366,129
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 416,830 377,569 367,111
Net disposals of property and equipment -- 46,978 --
Bad debt expense 153,574 70,000 41,000
Changes in assets and liabilities:
Increase in accounts receivable (771,087) (949,027) (224,790)
Increase in income taxes receivable -- -- (65,000)
Increase in inventory (11,309) -- --
(Increase) decrease in prepaid expenses (140,608) 581,376 26,961
Increase (decrease) in accounts payable 487,518 (274,010) (9,167)
Decrease in accrued liabilities (706,398) (165,264) (243,925)
Increase (decrease) in income taxes payable -- 68,201 (108,201)
--------- ----------- -----------
Total adjustments (571,480) (244,177) (216,011)
--------- ----------- -----------
Net cash provided by operating activities 297,379 2,308,925 2,150,118
Cash flows from investing activities:
Cash advances under notes receivable -- -- (500,000)
Purchases of furniture, fixtures and equipment (95,567) (42,280) (102,829)
Increase in other assets (7,393) (9,405) --
--------- ----------- -----------
Net cash used in investing activities (102,960) (51,685) (602,829)
Cash flows from financing activities:
Proceeds from Parent cash advance 400,000 -- --
Repayments on Parent cash advance (161,199) (238,801) --
Payments on note payable to affiliate -- -- (1,200,000)
Repayments on notes payable (274,162) (231,264) (25,000)
--------- ----------- -----------
Net cash used in financing activities (35,361) (470,065) (1,225,000)
--------- ----------- -----------
Net increase in cash and cash equivalents 159,058 1,787,175 322,289
Cash and cash equivalents at beginning of year 194,814 353,872 2,141,047
--------- ----------- -----------
Cash and cash equivalents at end of year 353,872 2,141,047 2,463,336
========= =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest 586,056 1,666,950 946,155
========= =========== ===========
Cash paid during the year for income taxes $ -- $ -- $ 173,201
========= =========== ===========
</TABLE>
See accompanying notes to the financial statements.
F-15
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS
December 31, 1993, 1994 and 1995
(1) Significant Accounting Policies
Company Background
In January 1996, Amertranz Worldwide Holding Corp. ('Holding') was
incorporated in the state of Delaware. Effective February 7, 1996, Holding
concluded an asset exchange agreement with TIA, Inc. ('TIA'), its 51% owned
subsidiary, Caribbean Freight System, Inc. ('CFS'), Amertranz Worldwide, Inc.
('Amertranz') and the stockholders and convertible note holders of Amertranz. As
part of this transaction, Holding received (i) all of the issued and outstanding
stock of Amertranz, (ii) $1,379,110 in convertible notes of Amertranz, and (iii)
the freight forwarding business of TIA and CFS. Holding then contributed the
freight forwarding business of TIA and CFS to Caribbean Air Services, Inc.
('CAS') in return for all of the issued and outstanding shares of CAS. TIA and
CFS received a $10,000,000 promissory note in addition to 2,100,000 shares of
common stock in Holding, as discussed in Note 2.
Basis of Financial Statement Presentation
The accompanying balance sheets and statements of operations and
changes in accumulated deficit and cash flows include the accounts of the former
air freight business of TIA (a wholly owned subsidiary of Wrexham Aviation
Corporation) and CFS, which have been combined for reporting purposes as The
Freight Forwarding Business of TIA and CFS (the 'Business'), which is not a
separate legal or historical reporting entity. The Business of TIA and CFS is
treated as the predecessor since TIA and CFS represent the majority and
controlling shareholders of Holding, accordingly the issuance of 2,100,000
shares of stock by Holding for the freight forwarding business of TIA and CFS
has been accounted for as a recapitalization of the Business. Although the
Business is not a separate legal entity, since the Business is treated as the
predecessor the effect of the issuance of the 2,100,000 shares of common stock
of Holding in February 1996 has been reflected in the financial statements as if
it had occurred as of the beginning of the earliest year presented. Since the
Business was combined in February 1996 with Holding the accompanying financial
statements include the accounts of TIA and CFS related to their air freight
businesses and exclude accounts related to the minority interest in CFS.
At December 31, 1995, CFS has a 51% ownership interest in Caribbean Air
Services Dominicana, Inc. (CASD); however, the accompanying financial statements
do not include the accounts of CASD since CASD was not combined with Holding.
All significant intrabusiness balances and transactions have been
eliminated in the financial statements.
Description of Business
The Business operates an air freight forwarding business primarily
serving the eastern half of the United States, Puerto Rico and the Dominican
Republic.
Revenue Recognition
The Business is involved in brokering air cargo services for freight
flown between the United States, Puerto Rico and the Dominican Republic.
Revenues, and related direct costs, are recognized when the shipments of cargo
are completed. Monthly provision is made for doubtful receivables, discounts,
returns and allowances.
Cash and Cash Equivalents
Cash at December 31, 1995 includes $2,290,000 of overnight repurchase
agreements.
F-16
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(1) Significant Accounting Policies - (Continued)
Property and Equipment
Property and equipment are depreciated using the straight-line method
over the estimated useful lives of the assets of five years for ground support
equipment and 5 to 10 years for furniture, fixtures and leasehold improvements.
Income Taxes
The operations of the Business are included in the federal and state
income tax returns of TIA and CFS. Income taxes allocated to the Business are
based on the actual income taxes of TIA and CFS for the periods presented.
Deferred tax assets and liabilities are recognized under the asset and
liability method for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Financial Instruments
The carrying amounts of accounts receivable, notes receivable, note
payable to affiliate, accounts payable and accrued liabilities approximate fair
value because of the short maturity of these financial instruments. The carrying
amount of the note payable to the Parent approximates fair value because it
bears interest at an adjustable rate.
Earnings per Share
Earnings per share information has not been presented since it would
not be representative of future earnings per share information due to the
combination of the Business with Holding and Amertranz on February 7, 1996 and
the related changes in stockholders' equity which took place at that time.
Reclassification
Certain amounts in the 1993 and 1994 financial statements have been
reclassified to conform with the 1995 presentation.
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.
F-17
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(2) Asset Exchange Agreement
In anticipation of a public offering of securities ("Offering"), in
February 1996 TIA and CFS entered into an asset exchange agreement discussed in
note 1 in which the air freight business of TIA and CFS was combined with
Holding, which contributed the business to a wholly owned subsidiary.
The air freight business is defined by the agreement to include
customer lists and related business and marketing records; CFS's rights under a
freight handling agreement with CASD; the use of the names "Caribbean Air
Services" and "Tradewinds International Airlines;" the operating leases for the
Puerto Rico, Greensboro, North Carolina, and Hartford, Connecticut business
facilities; furniture and fixtures of $86,830 as of December 31, 1995 and
$83,525 as of February 7, 1996; and all assignable customer and sales
representative contracts of TIA and CFS in connection with their air freight
businesses. The air freight business does not include any other assets of TIA
and CFS, including cash, accounts receivable, notes receivable, securities,
equipment, aircraft, parts or tools, nor any liabilities of TIA or CFS.
In exchange for the transfer of the air freight operating assets
described above, TIA and CFS received a promissory note of $10,000,000 and
2,100,000 shares of Holding (allocated to TIA and CFS as notes receivable of
$8,000,000 and $2,000,000, respectively, and 1,680,000 and 420,000 shares,
respectively). The promissory note bears interest at 8%, and is due from March
1, 1996 through July 1, 1996 in monthly payments of $80,000 and from August 1,
1996 in monthly payments of $166,667. In addition, Holding intends to apply
$2,000,000 of the net proceeds from the proposed public offering of securities
discussed in the first paragraph above against the promissory note.
Pursuant to the asset exchange agreement, TIA and CFS agreed to advance
to the aforementioned subsidiary of Holding, on a revolving loan basis, the net
collections of TIA's and CFS's accounts receivable as of February 7, 1996 and
additional amounts in the discretion of TIA and CFS, up to an aggregate maximum
of $4,000,000 outstanding at any time. Funds advanced under the revolving loan
with respect to TIA's and CFS's accounts receivable do not bear interest and
discretionary advances bear interest at the greater of 1% per month or the prime
rate plus 4%. The revolving loan matures on July 6, 1996.
The promissory note and revolving loan are secured by a first priority
lien on all of the issued and outstanding shares of the aforementioned
subsidiary of Holding, a first priority lien on all of the assets of Holding and
the subsidiary of Holding, and a second lien on the accounts receivable of
another subsidiary of Holding.
TIA and CFS have agreed that upon consummation of the public offering
of securities discussed above, they will defer repayment of the promissory note,
revolving loan and notes receivable discussed in note 3 if, among other things,
Holding does not meet certain financial thresholds or obtain additional
financing. TIA and CFS have further agreed that except upon the occurrence of
certain events they will not take any action to foreclose on their security
interests in the assets of Holding or its subsidiaries for one year.
(3) Notes Receivable
In anticipation of entering into the asset exchange agreement discussed
in note 2, TIA and CFS made advances to a subsidiary of Holding totaling
$500,000 in 1995 and $300,000 subsequent to December 31, 1995. The notes are
secured by a subordinated lien on all of the assets of a subsidiary of Holding,
bear interest at a rate of 12%, and are repayable in 12 monthly payments of
principal and interest commencing 30 days after the closing of the Offering.
However, TIA and CFS have agreed that, upon consummation of the Offering,
repayment of the notes will be deferred as discussed in note 2.
F-18
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(4) Notes Payable
Substantially all of TIA's and CFS's activities in 1993, 1994 and 1995
are related to their air freight business and, accordingly, all of the
historical interest expense related to the interest-bearing debt of TIA and CFS
has been included in the accompanying financial statements.
Interest expense relates primarily to two notes payable as follows:
A note payable to Harborview Corporation Ltd. No. 1, a company
affiliated through common ownership to TIA has a balance outstanding at December
31, 1994 and 1995 of $3,387,808 and $2,187,808, respectively, bears interest at
a rate of 10%, is secured by a senior lien on all of the assets of TIA and is
due on demand. Interest expense on this note amounted to approximately $327,000,
$343,000 and $252,000 in 1993, 1994 and 1995, respectively.
A note payable to Wrexham Aviation Corporation, Parent of TIA has a
balance outstanding at both December 31, 1994 and 1995 of $8,940,336, bears
interest at prime plus 1% (9.5% at December 31, 1995), is secured by a second
lien on all assets of TIA and is due on June 16, 1997. Interest expense on this
note amounted to approximately $740,000, $783,000 and $903,000 in 1993, 1994 and
1995, respectively. Interest in the amount of approximately $11,000 and $202,000
is included in accrued liabilities at December 31, 1994 and 1995, respectively.
In addition to the above notes, a non-interest bearing note payable of
$50,000 is outstanding at December 31, 1995 and is due in payments of $25,000 in
1996 and 1997.
F-19
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(5) Income Taxes
The operations of the Business are included in the federal and state
income tax returns of TIA and CFS. Income taxes allocated to the Business are
based on the actual income taxes of TIA and CFS for the periods presented.
Income tax expense for 1993, 1994 and 1995 consists of:
1993
-----------------------------------------------
CURRENT DEFERRED TOTAL
------- -------- -----
Federal $ -- $ -- $ --
State -- -- --
-----------------------------------------------
$ -- $ -- $ --
========= ========= ========
1994
-----------------------------------------------
CURRENT DEFERRED TOTAL
------- -------- -----
Federal $ 79,494 $ -- $ 79,494
State 28,707 -- 28,707
--------- --------- --------
$ 108,201 $ -- $108,201
========= ========= ========
1995
-----------------------------------------------
CURRENT DEFERRED TOTAL
------- -------- -----
Federal $ -- $ -- $ --
State -- -- --
-----------------------------------------------
$ -- $ -- $ --
========= ========= ========
Income tax expense for 1993, 1994 and 1995 differed from the "expected"
amount for those years (computed by applying the federal corporate rate of 34%
to income before income taxes) for the following reasons:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax expense $ 295,412 $ 904,843 $804,484
State income taxes, net of federal benefit -- 18,947 --
Change in valuation allowance for deferred tax
assets allocated to income tax expense (295,412) (861,672) (817,928)
Other -- 46,083 13,444
---------- --------- ---------
$ -- $ 108,201 $ --
========== ========= =========
</TABLE>
F-20
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(5) Income Taxes--(Continued)
The temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December 31, 1994 and 1995
are presented below:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C> <C> <C> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts receivable $ 88,172 $ 50,664
Alternative minimum tax credit carry forward 79,494 79,494
Reserves and accruals, not deductible until paid for tax
purposes 51,606 40,656
Net operating loss carry forwards 4,034,683 3,562,667
----------- -----------
Total gross deferred tax assets 4,253,955 3,733,481
Less valuation allowance (2,709,088) (1,891,160)
----------- ----------
Net deferred tax assets 1,544,867 1,842,321
Deferred tax liabilities:
Fixed assets, primarily excess tax over financial statement
depreciation (1,544,867) (1,842,321)
----------- ----------
Total gross deferred tax liabilities (1,544,867) (1,842,321)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
The changes in the valuation allowance for 1993, 1994 and 1995 result
from the utilization of net operating loss carryforwards allocated to the
Business. Subsequently recognized tax benefits relating to the valuation
allowance for deferred tax assets as of December 31, 1995 will be recorded as an
income tax benefit in the statement of operations.
At December 31, 1995, TIA had federal and state net operating loss
carryforwards of approximately $9,227,000. The carryforwards expire in 2005
through 2008 for federal income tax purposes and 1996 through 1997 for state
income tax purposes. Due to the statutory limitation on net operating loss
carryforwards following an ownership change, the availability of approximately
$2,456,000 at December 31, 1995 of these net operating loss carry forwards to
reduce future taxable income is substantially limited.
The excess of alternative minimum tax over regular tax is a credit
which can be carried forward to reduce regular tax liabilities in future years.
At December 31, 1995, TIA and CFS have approximately $79,000 available for
carryforward.
F-21
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(6) Leases
The Business leases certain equipment under various noncancellable
operating leases expiring at various dates through 1997. Future minimum lease
payments are as follows:
1996 $43,332
1997 $20,865
Rent expense for cancelable and noncancellable operating leases for the
years ended December 31, 1993, 1994 and 1995 was approximately $2,012,000,
$675,000 and $330,000, respectively.
(7) Related Party Transactions
During the years ended December 31, 1993, 1994 and 1995, the Business
incurred purchased transportation costs of approximately $541,000, $848,000 and
$1,622,000, respectively, from companies partially owned by minority
stockholders of CASD. Included in accounts payable at December 31, 1994 and 1995
was approximately $31,000 and $8,000, respectively, due to these companies.
During the year ended December 31, 1995, the Business had sales to a
subsidiary of Holding that amounted to approximately $350,500 and at December
31, 1995 related accounts receivable of $150,500, recorded in the accompanying
balance sheet.
Under the terms of a cargo aircraft charter agreement with Tradewinds
Airlines, Inc. ('Tradewinds Air'), a subsidiary of Tradewinds Acquisition
Corporation, of which TIA owns approximately 30% of the outstanding common
stock, TIA has exclusive rights until June 30, 1998 to the use of a leased
L-1011 freighter aircraft. While TIA is guaranteed the use of the L-1011
aircraft as needed, it pays only for actual use of the aircraft at market rates.
The investment in, and related activities of, Tradewinds Air are not
reflected in the accompanying financial statements as they were not included in
the Business combined with Holding, see Basis of Financial Statement
Presentation in note 1 and Asset Exchange Agreement in note 2.
TIA currently holds the United States Department of Transportation
licenses and certificates required for the operation of the L-1011 and is
operating the L-1011 aircraft on behalf of Tradewinds Air under an interim
operating agreement. Upon approval by the United States Department of
Transportation of the transfer of the licenses and certificates, TIA intends to
assign the aircraft lease to Tradewinds Air.
The leased L-1011, along with assignment of the aforementioned cargo
aircraft charter agreement and interim operating agreement, was acquired in late
November 1995 by Tradewinds Air from Florida West Airlines, Inc. (FWA) upon
confirmation by the Bankruptcy Court of FWA's plan of reorganization. FWA had
acquired the leased L-1011 from and entered into the aforementioned cargo
aircraft charter agreement and interim operating agreement with TIA in March
1994. Prior to March 1994, TIA had operated the L-1011. Accordingly, the
accompanying financial statements for the year ended December 31, 1993 and for
the first two months of 1994 include the operations of the aircraft.
F-22
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
(FORMERLY THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1993, 1994 and 1995
(7) Related Party Transactions (Continued)
Total transportation costs purchased from Tradewinds Air and FWA
related to these agreements amounted to approximately $14,959,000 and
$16,691,000 in 1994 and 1995, respectively. At December 31, 1994 and 1995, the
Business owed $913,000 and $760,000, respectively, for such services which are
included in accounts payable.
TIA provides accounting services to Tradewinds Air for $5,720 per
month.
(8) Supplier and Credit Concentration
The Business charters the flight operations of an L-1011 from one
supplier. Although there are a limited number of companies that charter or lease
L-1011 aircraft, management believes that other suppliers could provide similar
services on comparable terms. A change in suppliers, however, could cause a
delay in the air cargo operations and a possible loss of sales, which would
affect operating results adversely.
The air cargo industry is impacted by the general economy. Changes in
the marketplace of this industry may significantly affect management's estimates
and the Business's performance.
Most of the Business's customers are located primarily in the eastern
half of the United States, Puerto Rico, and the Dominican Republic. No single
customer accounted for more than 10% of the sales of the Business in 1993, 1994
and 1995. The Business estimates an allowance for doubtful accounts based on the
credit worthiness of its customers as well as general economic conditions.
Consequently, an adverse change in those factors could affect the Business's
estimate of its bad debts.
(9) Contingencies
TIA is responsible for the clean-up of contaminated soil associated
with the removal of an underground storage tank in Greensboro, North Carolina.
TIA removed the waste oil tank during 1994 and has performed a substantial
portion of the remediation procedures on the site. TIA, along with Tradewinds
Air, is responsible for any remaining soil clean-up required and the State of
North Carolina has a trust fund available to reimburse companies for voluntary
remediation expenses in excess of certain deductibles. Accordingly, management
believes that any remaining remediation costs will not have a material effect on
the financial statements.
F-23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Amertranz Worldwide Holding Corp.:
We have audited, in accordance with generally accepted auditing
standards, the financial statements of Amertranz Worldwide Holding Corp.
included in this annual report on Form 10-K and have issued our report thereon
dated August 28, 1996. Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. This schedule is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Melville, New York
August 28, 1996
S-1
<PAGE>
SCHEDULE II
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Charged to
Beginning Costs and Other Balance at
of Year Expenses Accounts Deductions End of Year
------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
For the fiscal year ended June 30, 1996
Allowance for doubtful accounts $ 401 $ 48 $ -- $(83) $ 371
===== ======= ====== ==== =======
Accumulated depreciation and amortization
of property and equipment $ 106 $ 108 $ -- $ (4) $ 210
===== ======= ====== ==== =======
Accumulated amortization of debt
issuance cost $ -- $ 3,264 $ -- $ -- $ 3,264
===== ======= ====== ==== =======
Accumulated amortization of goodwill $ -- $ 191 $ -- $ -- $ 191
===== ======= ====== ==== =======
</TABLE>
S-2
