================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended December 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-29754
TARGET LOGISTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-3309110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
112 East 25th Street
Baltimore, Maryland 21218
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 338-0127
Inapplicable
(Former name, former address and former fiscal year
if changed from last report.)
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
At February 12, 1999, the number of shares outstanding of the registrant's
common stock was 8,261,068.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Part I - Financial Information Page
----
Item 1. Financial Statements:
Consolidated Balance Sheets,
December 31, 1998 (unaudited) and
June 30, 1998 (audited) 3
Consolidated Statements of Operations
for the Three Months Ended
December 31, 1998 and 1997 (unaudited) 4
Consolidated Statements of Operations
for the Six Months Ended
December 31, 1998 and 1997 (unaudited) 5
Consolidated Statements of Shareholders'
Equity for the Year Ended June 30, 1998 (audited)
and the Six Months Ended December 31, 1998 (unaudited) 6
Consolidated Statements of Cash Flows
for the Six Months Ended December 31,
1998 and 1997 (unaudited) 7
Notes to Unaudited Consolidated Financial
Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
Part II - Other Information
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
<TABLE>
<CAPTION>
TARGET LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 June 30, 1998
----------------- -------------
ASSETS (unaudited)
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash of
$2,000,000 and $0, respectively $ 8,523,776 $ 879,797
Accounts receivable, net of allowance for doubtful
accounts of $677,856 and $514,542, respectively 7,518,637 14,555,151
Deferred income taxes 355,667 7,705,092
Prepaid expenses and other current assets 156,575 604,588
------------ ------------
Total current assets 16,554,655 23,744,628
PROPERTY AND EQUIPMENT, net 397,804 755,822
OTHER ASSETS 295,427 238,904
DEFERRED INCOME TAXES 184,895 184,895
GOODWILL, net of accumulated amortization of
$1,629,570 and $1,305,445, respectively 13,325,453 13,622,579
------------ ------------
Total assets $ 30,758,234 $ 38,546,828
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,967,518 $ 8,542,850
Accrued expenses 2,377,607 1,990,880
Accrued transportation expenses 3,819,274 3,880,195
Taxes payable 613,198 110,000
Reserve for restructuring 141,362 264,143
Note payable to bank 218,724 6,745,853
Note payable to affiliate -- 905,913
Notes payable to creditors -- 53,835
Current portion of long-term debt due to affiliate -- 3,332,126
Current portion of long-term debt 35,500 50,000
Dividends payable 178,669 117,524
Lease obligation-current portion 97,339 91,735
------------ ------------
Total current liabilities 10,449,191 26,085,054
LONG-TERM DEBT DUE TO AFFILIATE -- 4,000,000
LONG TERM DEBT -- 10,500
LEASE OBLIGATION--LONG-TERM 77,352 127,506
------------ ------------
Total liabilities $ 10,526,543 $ 30,223,060
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock, $10 par value; 2,500,000 shares authorized,
457,207 and 621,387 shares issued and outstanding respectively 4,572,070 6,213,870
Common stock, $.01 par value; 15,000,000 shares authorized,
7,965,693 and 8,419,094 shares issued and outstanding,
respectively 79,656 84,190
Paid-in capital 22,605,731 22,546,331
Accumulated deficit (6,586,763) (20,509,373)
Less: Treasury stock, 619,705 shares held at cost (439,003) (11,250)
------------ ------------
Total shareholders' equity 20,231,691 8,323,768
------------ ------------
Total liabilities and shareholders' equity $ 30,758,234 $ 38,546,828
============ ============
The accompanying notes are an integral part of this consolidated balance sheet.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
TARGET LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended December 31,
-------------------------------
1998 1997
---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Operating revenues - Target subsidiary $10,534,009 $11,859,599
Operating revenues - CAS subsidiary (16,491) 13,595,903
------------ ----------
Operating revenues 10,517,518 25,455,502
Cost of transportation:
Cost of transportation - Target subsidiary 7,957,159 9,324,639
Cost of transportation - CAS subsidiary 36,377 10,743,018
----------- ----------
Cost of transportation 7,993,536 20,067,657
Gross profit:
Gross profit - Target subsidiary 2,576,850 2,534,960
Gross profit - CAS subsidiary (52,868) 2,852,885
----------- ----------
Gross profit 2,523,982 5,387,845
Selling, general and administrative expenses:
Selling, general and administrative expenses - Target subsidiary 3,129,254 2,844,334
Selling, general and administrative expenses - CAS subsidiary 59,599 1,560,352
Selling, general and administrative expenses - Corporate 217,333 242,562
Depreciation and amortization 210,487 214,369
----------- ----------
Selling, general and administrative expenses 3,616,673 4,861,617
Other income (expense):
Interest income (expense) 106,362 (372,727)
Other income (expense) (1,635) 190,256
Gain on sale of subsidiary -- --
Income before income taxes (987,964) 343,757
Provision (benefit) for income taxes (355,667) 30,000
------------ ----------
Net income $ (632,297) $ 313,757
=========== ===========
Net income per share:
Basic ($0.10) $0.03
====== =====
Diluted(1) --- $0.02
====== =====
Weighted average shares outstanding:
Basic 8,247,844 8,077,896
=========== ==========
Diluted(1) --- 12,689,220
=========== ==========
<FN>
(1)Diluted loss per share for the three months ended December 31, 1998 is
anti-dilutive.
</FN>
The accompanying notes are an integral part of this
consolidated statement.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
TARGET LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Six months ended December 31,
-----------------------------
1998 1997
---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Operating revenues - Target subsidiary $20,184,947 $24,211,439
Operating revenues - CAS subsidiary 1,569,285 25,962,715
----------- ----------
Operating revenues 21,754,232 50,174,154
Cost of transportation:
Cost of transportation - Target subsidiary 14,960,541 18,707,475
Cost of transportation - CAS subsidiary 1,356,107 20,336,365
----------- ----------
Cost of transportation 16,316,648 39,043,840
Gross profit:
Gross profit - Target subsidiary 5,224,406 5,503,964
Gross profit - CAS subsidiary 213,178 5,626,350
----------- ----------
Gross profit 5,437,584 11,130,314
Selling, general and administrative expenses:
Selling, general and administrative expenses - Target subsidiary 5,834,063 6,006,661
Selling, general and administrative expenses - CAS subsidiary 514,113 3,097,753
Selling, general and administrative expenses - Corporate 1,031,642 425,189
Depreciation and amortization 405,962 443,918
----------- ----------
Selling, general and administrative expenses 7,785,780 9,973,521
Other income (expense):
Interest income (expense) 151,880 (737,096)
Other income (expense) 119,291 189,065
Gain on sale of subsidiary 24,832,353 --
----------- ----------
Income before income taxes 22,755,328 608,762
Provision for income taxes 8,599,905 65,000
----------- ----------
Net income $14,155,423 $ 543,762
=========== ==========
Net income per share:
Basic $1.67 $0.06
===== =====
Diluted $0.98 0.03
===== =====
Weighted average shares outstanding:
Basic 8,353,360 7,511,169
========== ==========
Diluted 14,203,298 12,283,941
========== ==========
The accompanying notes are an integral part of this
consolidated statement.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
TARGET LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1998 AND THE
SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
Additional
Preferred Stock Common Stock Paid-in Treasury Stock Accumulated
Shares Amount Shares Amount Capital Shares Amount Deficit Total
------ ------ ------ ------ ------- ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 498,000 $4,980,000 6,826,504 $68,265 $20,972,256 106,304 ($11,250) ($27,439,695) ($1,430,424)
Additional costs associated with
the Private Placement - - - - - - - (34,908) (34,908)
Common stock issued in connection
with the conversion of Class A
Preferred Stock (110,250)(1,102,500) 1,102,500 11,025 1,091,475 - - - 0
Stock options exercised - - 52,590 525 (525) - - - 0
Preferred stock issued for repayment
of secured long-term debt of
Amertranz Worldwide, Inc. 100,000 1,000,000 - - - - - - 1,000,000
Preferred stock issued for the purchase
of $1,581,800 of trade debt of
Amertranz Worldwide, Inc. 158,180 1,581,800 - - - - - - 1,581,800
Common stock issued in connection
with the conversion of Class B
Preferred Stock (20,000) (200,000) 200,000 2,000 198,000 - - - 0
Common stock issued in connection
with the conversion of Class C
Preferred Stock (23,750) (237,500) 237,500 2,375 235,125 - - - 0
Preferred stock dividends associated
with the Class A Preferred Stock 12,696 126,960 (126,960) 0
Preferred Stock dividends associated
with the Class D Preferred Stock 6,511 65,110 (65,110) 0
Cash dividends associated with the
Class C Preferred Stock - - - - - - - (246,343) (246,343)
Warrants issued in connection with
the sale of the assets of CAS - - - - 50,000 - - - 50,000
Net Profit - - - - - - - 7,403,643 7,403,643
------ --------- -------- ------ --------- ------- -------- ---------- ----------
Balance, June 30, 1998 621,387 $6,213,870 8,419,094 $84,190 $22,546,331 106,304 ($11,250)($20,509,373) $8,323,768
======= ========== ========= ======= =========== ======= ======== ============ ==========
Common stock issued in connection
with the conversion of Class C
Preferred Stock (6,000) (60,000) 60,000 600 59,400 - - - 0
Cash dividends associated with the
Class A, C and D Preferred Stock - - - - - - - (232,813) (232,813)
Redemption of Class E
Preferred Stock (158,180)(1,581,800) - - - - - - (1,581,800)
Purchase of Treasury Stock - - (513,401) (5,134) - 513,401 (427,753) - (432,887)
Net income - - - - - - - 14,155,423 14,155,423
------ --------- -------- ------ --------- ------- ------ ---------- ----------
Balance, December 31, 1998 457,207 $4,572,070 7,965,693 $79,656 $22,605,731 619,705 ($439,003)($6,586,763) $20,231,691
======= ========== ========= ======= =========== ======= ========= =========== ===========
The accompanying notes are an integral part of this
consolidated statement.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
TARGET LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended December 31,
1998 1997
---- ----
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $14,155,423 $ 543,762
Bad debt expense 163,314 39,965
Depreciation and amortization 405,962 443,918
Gain on CAS sale (24,832,353) --
Deferred income tax benefit 7,349,425 --
Adjustments to reconcile net income to net cash used in operating activities-
Decrease (increase) in accounts receivable 6,873,200 (4,294,223)
Decrease in prepaid expenses and other current assets 241,760 137,925
(Increase) decrease in other assets (131,007) 45,064
(Decrease) increase in accounts payable and accrued expenses (6,385,810) 1,483,733
------------ -----------
Net cash used in operating activities (2,160,086) (1,599,856)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (400,126) (370,190)
Purchase of treasury stock (432,887) --
Proceeds from CAS sale, net of closing costs 25,762,397 --
------------ -----------
Net cash provided by (used in) investing activities 24,929,384 (370,190)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional costs relating to the Private Placement -- (34,907)
Dividends paid (290,601) (65,090)
Net (repayment) borrowing from note payable to bank (6,527,129) 1,050,445
(Repayment) proceeds of short-term debt (3,332,126) 293,594
Repayment of long-term debt (4,025,000) (25,000)
Repayment of revolving loan due to affiliate (905,913) --
Payment of lease obligations (44,550) --
------------ -----------
Net cash (used in) provided by financing activities: (15,125,319) 1,219,042
------------ -----------
Net increase (decrease) in cash and cash equivalents $ 7,643,979 ($751,004)
CASH AND CASH EQUIVALENTS, beginning of the period 879,797 1,382,243
------------ -----------
CASH AND CASH EQUIVALENTS, end of the period $ 8,523,776 $ 631,239
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for:
Interest 59,728 424,821
Income taxes 860,989 50,579
The accompanying notes are an integral part of this
consolidated statement.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
TARGET LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Six Months Ended December 31,
1998 1997
---- ----
<S> <C> <C>
Redemption of 158,180 Class E Preferred Shares $ (1,581,800) -
Conversion of 6,000 Class C Preferred Shares $ (60,000) -
Issuance of Common Stock for Conversion of 6,000
Class C Preferred Shares $ 60 -
TIA, Inc. conversion of 110,250 Class A Preferred Shares - $(1,102,500)
Issuance of Common Stock for TIA, Inc. conversion of
110,250 Class A Preferred Shares $ - $ 11,025
Issuance of Common Stock for Stock Options exercised $ - $ 525
The accompanying notes are an integral part of this
consolidated statement.
</TABLE>
8
<PAGE>
TARGET LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Notes to Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions for Form 10-Q and Regulation S-X related to
interim period financial statements and, therefore, do not include all
information and footnotes required by generally accepted accounting principles.
However, in the opinion of management, all adjustments (consisting of normal
recurring adjustments and accruals) considered necessary for a fair presentation
of the consolidated financial position of the Company and its subsidiaries at
December 31, 1998 and their consolidated results of operations and cash flows
for the three and six months ended December 31, 1998 have been included. The
results of operations for the interim periods are not necessarily indicative of
the results that may be expected for the entire year. Reference should be made
to the annual financial statements, including footnotes thereto, included in the
Target Logistics, Inc. (formerly, Amertranz Worldwide Holding Corp.) (the
"Company") Form 10-K for the year ended June 30, 1998.
Note 2 - Disposition of Assets
On July 13, 1998, the Company's Caribbean Air Services, Inc. ("CAS") subsidiary
sold substantially all of the operating assets of CAS to Geologistics Air
Services, Inc., an indirect wholly-owned subsidiary of Geologistics Corporation
("Geologistics"), for $27 million in cash (the "CAS Sale"), in accordance with
the terms of the Asset Purchase Agreement among the parties dated June 15, 1998
(the "Asset Purchase Agreement").
Under the terms of the Asset Purchase Agreement CAS retained its accounts
receivable. CAS realized $2.3 million from these accounts receivable after
payment of liabilities during the six months ended December 31, 1998, and the
Company expects that CAS will realize an additional $0.8 million from these
accounts receivable after payment of the balance of its liabilities.
The Company realized a $24,832,353 pre-tax gain from the CAS Sale. This gain
resulted from sale proceeds of $27,000,000, reduced by (i) the sale of the CAS
assets at a book value of $930,044, and (ii) closing costs of $1,237,603.
Other than with respect to certain obligations pursuant to leases and other
agreements included in the assigned assets, Geologistics did not assume any
obligations of the Company or CAS.
For the fiscal year ended June 30, 1998 revenues from the operations of CAS
contributed approximately $54 million to the Company's total revenues, and
income from the operations of CAS contributed approximately $4.5 to the
Company's operating income.
Note 3 - Earnings Per Share
In accordance with the requirements of SFAS No. 128, net earnings per common
share amounts ("basic EPS") were computed by dividing net earnings after
deducting preferred stock dividend requirements, by the weighted average number
of common shares outstanding and contingently issuable shares (which satisfy
certain conditions) and excluding any potential dilution. Net earnings per
common share amounts - assuming dilution ("diluted EPS") were computed by
reflecting potential dilution from the exercise of stock options. SFAS No. 128
requires the presentation of both basic EPS and diluted EPS on the face of the
income statement. Earnings per share amounts for the same prior-year periods
have been restated to conform with the provisions of SFAS No. 128.
9
<PAGE>
<TABLE>
<CAPTION>
TARGET LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation between the numerators and denominators of the basic and
diluted EPS computations for net earnings for the three and six months ended
December 31, 1998 and 1997 is as follows:
Three Months Ended Six Months Ended
December 31, 1998 December 31, 1998
---------------------------------- ----------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
----------- ------------- ------- ----------- ------------- -------
<S> <C> <C>
Net earnings ($632,297) $14,155,423
Preferred stock dividends (173,077) (232,813)
-------- --------
BASIC EPS
Net earnings attributable to
common stock ($805,374) 8,247,844 ($0.10) $13,922,610 8,353,360 $1.67
======= =====
EFFECT OF DILUTIVE SECURITIES(1)
Convertible Preferred Stock 4,620,149 5,668,129
Stock options 181,809 181,809
Stock warrants 0 0
------- -------
DILUTED EPS(1)
Net earnings attributable to common
stock and assumed preferred
conversions and option exercises ($805,374) 8,247,844 ($0.10) $13,922,610 14,203,298 $0.98
========= ========= ====== =========== ========== =====
Three Months Ended Six Months Ended
December 31, 1997 December 31, 1997
---------------------------------- ----------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amounts (Numerator) (Denominator) Amounts
----------- ------------- ------- ----------- ------------- -------
Net earnings $313,757 $543,762
Preferred stock dividends (63,729) (128,819)
------- --------
BASIC EPS
Net earnings attributable to
common stock $250,028 8,077,896 $0.03 $414,943 7,511,169 $0.06
===== =====
EFFECT OF DILUTIVE SECURITIES
Convertible Preferred Stock 4,422,420 4,572,155
Stock options 188,904 200,617
Stock warrants 0 0
------- -------
DILUTED EPS
Net earnings attributable to common
stock and assumed preferred
conversions and option exercises $250,028 12,689,220 $0.02 $414,943 12,283,941 $0.03
======== ========== ===== ======== ========== =====
Options to purchase 75,000 shares of common stock were not included in the
computation of diluted EPS because the exercise price of those options were
greater than the average market price of the common shares.
<FN>
(1)No diluted EPS is presented for the three months ended December 31, 1998, as
the effect of dilutive securities would be anti-dilutive on loss per common
share.
</FN>
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain forward-looking
statements reflecting the Company's current expectations with respect to its
operations, performance, financial condition, and other developments. Such
statements are necessarily estimates reflecting the Company's best judgement
based upon current information and involve a number of risks and uncertainties.
While it is impossible to identify all such factors, factors which could cause
actual results to differ materially from expectations are: (i) the Company's
historical operating losses and ability to sustain recent profitability
following the CAS Sale, (ii) the Company's ability to increase operating
revenue, improve gross profit margins and reduce selling, general and
administrative costs, (iii) competitive practices in the industries in which the
Company competes, (iv) the Company's dependence on current management, (v) the
impact of current and future laws and governmental regulations affecting the
transportation industry in general and the Company's operations in particular,
(vi) general economic conditions, and (vii) other factors which may be
identified from time to time in the Company's Securities and Exchange Commission
filings and other public announcements. There can be no assurance that these and
other factors will not affect the accuracy of such forward-looking statements.
Forward-looking statements are preceded by an asterisk (*).
OVERVIEW
The Company was incorporated in January 1996 as "Amertranz Worldwide
Holding Corp." to continue the freight forwarding business of TIA, Inc. ("TIA")
and Caribbean Freight System, Inc. and acquire Amertranz Worldwide, Inc.
("Amertranz"). On November 30, 1998, the Company changed its name to "Target
Logistics, Inc." The Company generated operating revenues of $97.8 million,
$75.4 million, and $27.4 million, and had a net profit of $7.4 million, and net
losses of $10.5 million, and $6.4 million, for the fiscal years ended June 30,
1998 and 1997 and the six months ended June 30, 1996, respectively. The fiscal
year 1998 profit includes a $7.6 million net income tax benefit arising from the
CAS Sale which closed on July 13, 1998, and the fiscal year 1997 loss included a
charge of $3.4 million attributed to restructuring costs in connection with the
closing of the Company's Amertranz subsidiary. The Company had consolidated
earnings (losses) before interest, taxes, depreciation and amortization (EBITDA)
of approximately $2.6 million, ($8.3 million), and ($2.0 million), for the
fiscal years ended June 30, 1998 and 1997 and the six months ended June 30,
1996, respectively.
Because of continuing losses in the Company's Amertranz subsidiary for
each of its operating periods, on June 23, 1997 the Company's Amertranz
subsidiary ceased operations and transferred its customer accounts to the
Company's Target subsidiary for fair consideration.
* Following the closing of the Amertranz subsidiary, the Company
determined that it would be in the best interests of the Company and its
shareholders to deleverage the Company's balance sheet and create the cash
resources needed to grow the Company's freight forwarding and logistics
business. While the Company's CAS subsidiary has been historically profitable,
management determined that this strategy can best be accomplished by the sale of
the operations of its CAS subsidiary. On July 13, 1998, the Company's CAS
subsidiary sold substantially all of its operating assets to a subsidiary of
Geologistics Corporation for $27 million in cash pursuant to the terms of an
Asset Purchase Agreement dated June 15, 1998. As a result of the CAS Sale, the
Company deleveraged its balance sheet by repaying approximately $15 million in
outstanding liabilities and obtained required working capital to take advantage
of growth opportunities available to the Company's Target subsidiary. These
opportunities include improved vendor pricing and attracting quality personnel
and agents on a world-wide basis, which the Company believes will drive its
future profitability. In addition, the Company may consider strategic
acquisitions. There can be no assurance that this strategy to increase
profitability will be successful.
* Management believes that the results of the Company's operations for
the six months ended December 31, 1998 (all but 12 days of which were following
the CAS Sale) indicate management's concentrated focus on Target's business
together with the Company's available resources following the CAS Sale will
enable the Company to achieve the intended growth. While Target's gross freight
revenues were down in the current three and six month periods from the
corresponding 1997 three and six month periods, the reduction was mostly due to
the elimination of unprofitable sources of revenues. For the three and six
months ended December 31, 1998, Target's gross profit
11
<PAGE>
margin (i.e., gross freight revenues less cost of transportation expressed as a
percentage of gross freight revenue) improved to 24.5% and 25.9% from 21.4% and
22.7%, respectively, from the corresponding periods of 1997, a 14.5% and 14.1%
improvement, respectively. This increased margin accounts for approximately
$323,000 and $642,000 of Target's gross profit for the three and six months
ending December 31, 1998, respectively. Management intends to continue to work
on improving Target's gross profit margins while focusing on increasing
operating revenue by adding quality sales personnel and independent agents and
reducing fixed selling, general and administrative costs to improve the
Company's net income.
RESULTS OF OPERATIONS
The following discussion relates to the combined results of operation
of the Company for the three and six month periods ended December 31, 1998,
compared to results of operation for the three and six month periods ended
December 31, 1997.
Three Months ended December 31, 1998 and 1997
Operating Revenue. Operating revenue decreased to $10.5 million for the
three months ended December 31, 1998 from $25.5 million for the three months
ended December 31, 1997, a 58.7% decrease. Of this decrease, 91% resulted from
the inclusion of CAS's operating revenue for the full 1997 period while there
are no CAS operating revenues in the corresponding 1998 period due to the CAS
Sale on July 13, 1998. The balance of this decrease occurred within the
operations of the Company's Target Logistic Services, Inc. ("Target") subsidiary
where operating revenue decreased to $10,534,009 for the three months ended
December 31, 1998 from $11,859,699 for the corresponding 1997 period, a 11.2%
decrease. This decrease in Target's operating revenue is primarily the result of
the elimination of unprofitable sources of revenue in order to improve Target's
operating results.
Cost of Transportation. Cost of transportation was 76.0% of operating
revenue for the three months ended December 31, 1998, and 78.8% of operating
revenue for the three months ended December 31, 1997. This decrease is due to
(i) a reduction in Target's cost of transportation as a percentage of sales
(75.5% for the 1998 period, from 78.6% for the 1997 period), and (ii) the
historically higher cost of transportation for the Company's CAS subsidiary than
the Company's Target subsidiary.
Gross Profit. As a result of the factors described in the previous
paragraph, gross profit for the three months ended December 31, 1998 increased
to 24.0% of operating revenue from 21.2% of operating revenue for the three
months ended December 31, 1997.
Within the Company's Target subsidiary, gross profit margin increased
to 24.5% from 21.4% for the three months ended December 31, 1998 and 1997,
respectively. This increase in gross profit margin accounts for approximately
$323,000 of Target's gross profit for the three months ended December 31, 1998.
Target's actual gross profit increased by $41,890, to $2,576,850 for the three
months ended December 31, 1998 from $2,534,960 for the three months ended
December 31, 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were 34.4% of operating revenue for the three months
ended December 31, 1998, and 19.1% of operating revenue for the three months
ended December 31, 1997. This increase was primarily due to (i) the historically
lower selling, general and administrative expenses as a percentage of sales for
the CAS subsidiary than the Target subsidiary; and (ii) non-recurring expenses
of $59,599 incurred in the 1998 period to wind down the Company's CAS subsidiary
(primarily, the collection of accounts receivable and payment of accounts
payable).
Within the Company's Target subsidiary, selling, general and
administrative expenses were 29.7% of operating revenue for the three months
ended December 31, 1998 and 24.0% for the period ended December 31, 1997. This
increase is primarily due to a constant level of fixed costs despite a reduction
in operating revenue and a corresponding reduction in variable selling, general
and administrative expenses.
Net Income. The Company realized a net loss of ($632,297) for the three
months ended December 31, 1998, compared to a net income of $313,757 for the
three months ended December 31, 1997. This decrease is primarily
12
<PAGE>
the result of the inclusion of the CAS operating results for the six months
ended December 31, 1997 period while, as a result of the CAS sale on July 13,
1998, the CAS operations for the six months ended December 31, 1998 only include
costs and expenses necessary to wind down the CAS subsidiary.
Six Months ended December 31, 1998 and 1997
Operating Revenue. Operating revenue decreased to $21.8 million for the
six months ended December 31, 1998 from $50.2 million for the six months ended
December 31, 1997, a 56.7% decrease. Of this decrease, 86% resulted from the
inclusion of CAS's operating revenue for the full 1997 period but only for 12
days of the 1998 period due to the CAS Sale on July 13, 1998. The balance of
this decrease occurred within the operations of the Company's Target subsidiary
where operating revenue decreased to $20,184,947 for the six months ended
December 31, 1998 from $24,211,539 for the corresponding 1997 period, a 16.6%
decrease. This decrease in Target's operating revenue is primarily the result of
the elimination of unprofitable sources of revenue in order to improve Target's
operating results.
Cost of Transportation. Cost of transportation was 75.0% of operating
revenue for the six months ended December 31, 1998, and 77.8% of operating
revenue for the six months ended December 31, 1997. This decrease is due to (i)
a reduction in Target's cost of transportation as a percentage of sales (74.1%
for the 1998 period, from 77.3% for the 1997 period), and (ii) the historically
higher cost of transportation for the Company's CAS subsidiary than the
Company's Target subsidiary.
Gross Profit. As a result of the factors described in the previous
paragraph, gross profit for the six months ended December 31, 1998 increased to
25.0% of operating revenue from 22.2% of operating revenue for the six months
ended December 31, 1997.
Within the Company's Target subsidiary, gross profit margin increased
to 25.9% from 22.7% for the six months ended December 31, 1998 and 1997,
respectively. This increase in gross profit margin accounts for approximately
$646,000 of Target's gross profit for the six months ended December 31, 1998.
Target's actual gross profit decreased by $279,558, to $5,224,406 for the six
months ended December 31, 1998 from $5,503,964 for the six months ended December
31, 1997. This decrease is a function of lower operating revenue as explained
above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were 35.8% of operating revenue (32.4% excluding
non-recurring expenses explained in (ii) and (iii), below) for the six months
ended December 31, 1998, and 19.9% of operating revenue for the six months ended
December 31, 1997. This increase was primarily due to (i) the historically lower
selling, general and administrative expenses as a percentage of sales for the
CAS subsidiary than the Target subsidiary; (ii) non-recurring expenses of
$163,718 incurred in the 1998 period to wind down the Company's CAS subsidiary
(primarily, the collection of accounts receivable and payment of accounts
payable); and (iii) the non-recurring accrual in the 1998 period (reflected
within "Selling, general and administrative expenses - Corporate") of executive
bonus compensation of $579,491 primarily a result of the CAS Sale.
Within the Company's Target subsidiary, selling, general and
administrative expenses were 28.9% for the six months ended December 31, 1998
and 24.8% for the period ended December 31, 1997. This increase is primarily due
to a constant level of fixed costs despite a reduction in operating revenue and
a corresponding reduction in variable selling, general and administrative
expenses.
Net Income. The Company realized net income of $14,155,423 for the six
months ended December 31, 1998, compared to a net income of $543,762 for the six
months ended December 31, 1997. This increase was due to the CAS Sale.
LIQUIDITY AND CAPITAL RESOURCES
General. During the three months ended December 31, 1998, net cash used
in operating activities was $2,160,000. Cash provided by investing activities
was $24,929,000, which consisted of net proceeds in connection with the CAS Sale
totaling $25,762,000, less capital expenditures of $400,000 and the purchase of
513,401 shares
13
<PAGE>
of the Company's common stock, now Treasury stock, for $432,887. Cash used in
financing activities was $15,125,000, which primarily consisted of the repayment
of long and short term debt and the purchase of subsidiaries' long and short
term debt.
Following the closing of the Company's Amertranz subsidiary, the
Company entered into an Extension and Composition Agreement dated as of November
7, 1997 with certain general unsecured creditors of the Company's Amertranz
subsidiary, whereby $1,581,799 of trade debt of the Amertranz subsidiary was
acquired by the Company in exchange for the issuance of 158,180 shares of the
Company's Class E Preferred Stock. On September 24, 1998 the Company announced
the redemption of the Class E Preferred Shares. The Company reserved $1,581,799
for this redemption. As of December 31, 1998, approximately $1,085,000 has been
redeemed.
Currently, approximately $1.7 million of the Company's outstanding
accounts payable represent unsecured trade payables of the Company's closed
Amertranz subsidiary.
Capital expenditures. Capital expenditures for the six months ended
December 31, 1998 were $400,126.
* Working Capital Requirements. Cash needs of the Company are currently
met by funds generated from operations, the Company's accounts receivable
financing facility, and funds remaining from the CAS Sale. As of December 31,
1998, the Company had $2,339,000 available under its $10 million accounts
receivable financing facility and approximately $8,524,000 from operations and
remaining proceeds from the CAS Sale. The Company believes that its current
financial resources will be sufficient to finance its operations and obligations
for the long and short term. However, the Company's actual working capital needs
for the long and short terms will depend upon numerous factors, including the
Company's operating results, the cost of increasing the Company's sales and
marketing activities, and competition, none of which can be predicted with
certainty.
YEAR 2000
The Company is on schedule with a project that addresses the Year 2000
(Y2K) issue of computer systems and other equipment with embedded chips or
processors not being able to properly recognize and process date-sensitive
information after December 31, 1999. Many systems use only two digits rather
than four to define the year, and these systems will not be able to distinguish
between the year 1900 and the year 2000. This may lead to disruptions in the
operations of business and governmental entities resulting from miscalculations
or system failures. The Company's Y2K project is designed to ensure the
compliance of all of the Company's applications, operating system and hardware
platforms, and to address the compliance of key business partners. Key business
partners are those customers and vendors that have a material impact on the
Company's operations. All phases of the project should be completed by mid 1999
thus minimizing the impact of the Y2K problem on the Company's operations. The
total estimated cost of the required modifications to become Y2K compliant
should not be material to the Company's financial position. Failure to make all
internal business systems Y2K compliant could result in an interruption in, or a
failure of, some of the Company's business activities or operations. Y2K
disruptions in the operations of key vendors could impact the Company's ability
to obtain transportation services necessary for the Company's operations. If one
or more of these situations occur, the Company's results of operations,
liquidity and financial condition could be materially and adversely affected.
The Company is unable to determine the readiness of its key business partners at
this time and is therefore unable to determine whether the consequences of Y2K
failures will have a material impact on the Company's results of operations,
liquidity or financial condition. The Y2K project is expected to significantly
reduce the Company's level of uncertainty about the Y2K problem and reduce the
possibility of significant interruptions of normal business operations.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has previously reported in its Annual Report on Form 10-K
for the fiscal year ended June 30, 1998, that on June 15, 1998, the Company was
served with a complaint filed in the United States District Court for the
Eastern District of New York (case number CV 98 3777), by Martin Hoffenberg, a
former consultant to the Company. The Company, its Amertranz, Target, and CAS
subsidiaries, Stuart Hettleman (president and a director of the Company),
Richard A. Faieta (a former officer and director of the Company), and two
principal shareholders of the Company, are named defendants in the lawsuit. The
complaint is based on events occurring prior to February 1996, when Mr.
Hoffenberg controlled the Amertranz subsidiary as its president and chairman,
and on events occurring subsequent thereto, when Mr. Hoffenberg served as a
consultant to the Company. The complaint alleges breach of contract, violations
of the federal anti-racketeering laws, fraud, and failure to pay wages and
benefits. The complaint seeks economic damages in excess of $5.6 million, and
punitive damages of $7.5 million. The Company intends to vigorously defend the
action. The Company believes that the complaint is without merit and that any
material recovery by Mr. Hoffenberg is unlikely. No material developments have
occurred in this litigation since first reported.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 30, 1998, the Company held its Annual Meeting of
Shareholders. The only matters submitted to the shareholders for a vote were (i)
the election of directors and (ii) the amendment to the Company's Certificate of
Incorporation to change the Company's name from "Amertranz Worldwide Holding
Corp." to "Target Logistics, Inc.".
The nominees submitted for election as directors were Michael Barsa,
Christopher A. Coppersmith, Brian K. Coventry, Philip J. Dubato, and Stuart
Hettleman. At least 7,138,672 shares were voted in favor of each director, and
no more than 26,545 shares were voted to withhold approval of any director. As a
result, Messrs. Barsa, Coppersmith, Coventry, Dubato, and Hettleman were elected
to serve as directors until the next annual meeting of shareholders of the
Company and until their successors are duly elected and qualified.
The Company's shareholders approved the amendment to the Company's
Certificate of Incorporation to change the Company's name. At least 7,100,849
shares were voted in favor of the amendment, and no more than 23,080 shares were
voted to withhold approval of the amendment, with 41,298 shares abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No.
3.1 Certificate of Incorporation of Registrant, as amended (incorporated by
reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K
dated November 30, 1998, File No. 0-29754)
3.2 By-Laws of Registrant, as amended
4.1 Warrant Agent Agreement (incorporated by reference to Exhibit 4.3 to
the Registrant's Registration Statement on Form S-1, Registration No.
333-03613)
4.2 Form of Amendment No. 1 to Warrant Agent Agreement dated June 13, 1997
(incorporated by reference to Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1, Registration No. 333-30351)
4.3 Certificate of Designations with respect to the Registrant's Class A
Preferred Stock (contained in Exhibit 3.1)
4.4 Certificate of Designations with respect to the Registrant's Class B
Preferred Stock (contained in Exhibit 3.1)
15
<PAGE>
4.5 Certificate of Designations with respect to the Registrant's Class C
Preferred Stock (contained in Exhibit 3.1)
4.6 Certificate of Designations with respect to the Registrant's Class D
Preferred Stock (contained in Exhibit 3.1)
4.7 Certificate of Designations with respect to the Registrant's Class E
Preferred Stock (contained in Exhibit 3.1)
10.1 1996 Stock Option Plan (incorporated by reference to Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
December 31, 1997, File No. 0-29754)
10.2 Accounts Receivable Management and Security Agreement, dated January
16, 1997 by and between BNY Financial Corp., as Lender, and Amertranz
Worldwide, Inc., Caribbean Air Services, Inc., and Consolidated Air
Services, Inc., as Borrowers, and guaranteed by Amertranz Worldwide
Holding Corp. ("BNY Facility Agreement") (incorporated by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 1997, File No. 0-29754)
10.3 Letter Amendment to BNY Facility Agreement, dated April 16, 1997 ("BNY
Letter Amendment") (incorporated by reference to Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended March
31, 1997, File No. 0-29754)
10.4 Shadow Warrant entered into in connection with the BNY Letter Amendment
(incorporated by reference to Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1997,
File No. 0-29754)
10.5 Letter Amendment to BNY Facility Agreement, dated September 25, 1997
(incorporated by reference to Exhibit 10.5 to the Registrant's Annual
Report on Form 10-K for the Year Ended June 30, 1997, File No.
0-29754)
10.6 Employment Agreement dated June 24, 1996 between Amertranz Worldwide
Holding Corp. and Stuart Hettleman (incorporated by reference to
Exhibit 10.13 to the Registrant's Annual Report on Form 10-K for the
Fiscal Year Ended June 30, 1996, File No. 0-29754)
10.7(P) Lease Agreement for Los Angeles Facility (incorporated by reference to
Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the
Year Ended June 30, 1997, File No. 0-29754)
27 Financial Data Schedule
(b) Reports on Form 8-K:
On December 21, 1998, the Registrant filed a Current Report on
Form 8-K, dated November 30, 1998, reporting the change of the
Company's name from "Amertranz Worldwide Holding Corp." to "Target
Logistics, Inc.".
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 12, 1999 TARGET LOGISTICS, INC.
Registrant
/s/ Stuart Hettleman
---------------------------------------
President, Chief Executive Officer
/s/ Philip J. Dubato
---------------------------------------
Vice President, Chief Financial Officer
C76412B.198
17
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
TARGET LOGISTICS, INC.
(AS AMENDED THROUGH FEBRUARY 5, 1999)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. - The registered office shall be
established and maintained at c/o the corporation, 112 East 25th Street,
Baltimore, Maryland 21218, and the corporation shall be the registered agent of
this corporation in charge thereof.
SECTION 2. OTHER OFFICES. - The corporation may have other
offices, either within or without the State of Delaware, at such place or places
as the Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. - Annual meetings of stockholders
for the election of directors and for such other business as may be stated in
the notice of the meeting, shall be held at such place, either within or without
the State of Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of meeting. In the
event the Board of Directors fails to so determine the time, date and place of
meeting, the annual meeting of stockholders shall be held at the registered
office of the corporation in Delaware.
If the date of the annual meeting shall fall upon a legal
holiday, the meeting shall be held on the next succeeding business day. At each
annual meeting, the stockholders entitled to vote shall elect a Board of
Directors and they may transact such other corporate business as shall be stated
in the notice of the meeting.
SECTION 2. OTHER MEETINGS. - Meetings of stockholders for any
purpose other than the election of directors may be held at such time and place,
within or without the State of Delaware, as shall be stated in the notice of the
meeting.
SECTION 3. VOTING. - Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation and in accordance
with the provisions of these By-Laws shall be entitled to one vote, in person or
by proxy, for each share of stock entitled to vote held by such stockholder, but
no proxy shall be voted after three years from its date unless such proxy
provides for a longer period. Upon the demand of any stockholder, the vote for
directors and the vote upon any question before the meeting, shall be by ballot.
All elections for directors shall be decided by plurality vote; all other
questions shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the
ensuing election, arranged in alphabetical order, with the address of each, and
the number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
1
<PAGE>
SECTION 4. QUORUM . - Except as otherwise required by law, by
the Certificate of Incorporation or by these By-Laws, the presence, in person or
by proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote the meeting.
SECTION 5. SPECIAL MEETINGS. - Special meetings of the
stockholders for any purpose or purposes may be called by the President or
Secretary, or by resolution of the directors. Stockholders holding at least 10%
of the outstanding shares entitled to vote at a stockholders' meeting shall also
have the right to call special meetings of the stockholders.
SECTION 6. NOTICE OF MEETINGS. - Written notice, stating the
place, date and time of the meeting, and the general nature of the business to
be considered, shall be given to each stockholder entitled to vote thereat at
his address as it appears on the records of the corporation, not less than ten
nor more than sixty days before the date of the meeting. No business other than
that stated in the notice shall be transacted at any meeting without the
unanimous consent of all the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING. - Unless otherwise provided
by the Certificate of Incorporation, any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. - The number of directors shall be
as designated from time to time by resolution of the Board of Directors. The
directors shall be elected at the annual meeting of the stockholders and each
director shall be elected to serve until his successor shall be elected and
shall qualify. A director need not be a stockholder.
SECTION 2. RESIGNATIONS. - Any director, member of a committee
or other officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES - If the office of any director, member
of a committee or other officer becomes vacant, the remaining directors in
office, though less than a quorum by a majority vote, may appoint any qualified
person to fill such vacancy, who shall hold office for the unexpired term and
until his successor shall be duly chosen.
SECTION 4. REMOVAL. - Any director or directors may be removed
either for or without cause at any time by the affirmative vote of the holders
of a majority of all the shares of stock outstanding and
2
<PAGE>
entitled to vote, at a special meeting of the stockholders called for the
purpose and the vacancies thus created may be filled, at the meeting held for
the purpose of removal, by the affirmative vote of a majority in interest of the
stockholders entitled to vote.
SECTION 5. FILLING OF VACANCIES. - In the case of any vacancy
in the Board of Directors through death, resignation, disqualification, removal
or other cause, the remaining directors, by affirmative vote of the majority
thereof, may elect a successor to hold office for the unexpired portion of the
term of a director whose place shall be vacant, and until the election of his
successor, or until he shall be removed, prior thereto in accordance with these
By-Laws. In the event of the number of directors being increased as provided in
these By-Laws, the additional directors so provided for shall be elected by the
directors already in office, and shall hold office until the next annual meeting
of stockholders and thereafter until his or their successors shall be elected.
SECTION 6. POWERS. - The Board of Directors shall exercise all
of the powers of the corporation except such as are by law, or by the
Certificate of Incorporation of the corporation or by these By-Laws conferred
upon or reserved to the stockholders.
SECTION 7. COMMITTEES. - The Board of Directors may, by
resolution or resolutions passed by a majority of the whole board, designate one
or more committees, each committee to consist of two or more of the directors of
the corporation. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of any member
or such committee or committees, the member or members thereof present at any
such meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
Any such committee, to the extent provided in the resolution
of the Board of Directors, or in these By-Laws, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power of authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the By-Laws of the corporation; and unless the resolution, these
By-Laws, or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
SECTION 8. MEETINGS. - The newly elected Board of Directors
may hold their first meeting for the purpose of organization and the transaction
of business, if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent, in
writing, of all the directors.
Unless restricted by the incorporation document or elsewhere
in these By-laws, members of the Board of Directors or any committee designated
by such Board may participate in a meeting of such Board or committee by means
of conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at such meeting.
Regular meetings of the Board of Directors may be scheduled by
a resolution adopted by the Board. The Chairman of the Board or the President or
Secretary may call, and if requested by any two directors, must call special
meeting of the Board and give five days' notice by mail, or two days' notice
personally or by telegraph or cable to each director. The Board of Directors may
hold an annual meeting, without notice, immediately after the annual meeting of
shareholders.
SECTION 9. QUORUM. - A majority of the directors shall
constitute a quorum for the transaction of business. If at any meeting of the
board there shall be less than a quorum present, a majority of those
3
<PAGE>
present may adjourn the meeting from time to time until a quorum is obtained,
and no further notice thereof need be given other than by announcement at the
meeting which shall be so adjourned.
SECTION 10. COMPENSATION. - Directors shall not receive any
stated salary for their services as directors or as members of committees, but
by resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 11. ACTION WITHOUT MEETING. - Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if prior to such action a
written consent thereto is signed by all members of the board, or of such
committee as the case may be, and such written consent is filed with the minutes
of proceedings of the board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. - The officers of the corporation shall
be a President, a Treasurer, and a Secretary, all of whom shall be elected by
the Board of Directors and who shall hold office until their successors are
elected and qualified. In addition, the Board of Directors may elect a Chairman,
one or more Vice-Presidents and such Assistant Secretaries and Assistant
Treasurers as they may deem proper. None of the officers of the corporation need
be directors. The officers shall be elected at the first meeting of the Board of
Directors after each annual meeting. More than two offices may be held by the
same person.
SECTION 2. OTHER OFFICERS AND AGENTS. - The Board of Directors
may appoint such other officers and agents as it may deem advisable, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. - The Chairman of the Board of Directors,
if one be elected, shall preside at all meetings of the Board of Directors and
he shall have and perform such other duties as from time to time may be assigned
to him by the Board of Directors.
SECTION 4. PRESIDENT. - The President shall be the chief
executive officer of the corporation and shall have the general powers and
duties of supervision and management usually vested in the office of President
of a corporation. He shall preside at all meetings of the stockholders if
present thereat, and in the absence or non-election of the Chairman of the Board
of Directors, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the corporation . Except
as the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts in behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. - Each Vice-President shall have
such powers and shall perform such duties as shall be assigned to him by the
directors.
SECTION 6. TREASURER. - The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate account
of receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as
may be ordered by the Board of Directors, or the President, taking proper
vouchers for such disbursements. He shall render to the President and Board of
Directors at the regular meetings of the Board of Directors, or whenever they
may request it, an account of all his transactions as Treasurer and of the
financial condition of the corporation. If required by the Board of Directors,
4
<PAGE>
he shall give the corporation a bond for the faithful discharge of his duties in
such amount and with such surety as the board shall prescribe.
SECTION 7. SECRETARY. - The Secretary shall give, or cause to
be given, notice of all meetings of stockholders and directors, and all other
notices required by the law or by these By-Laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders, upon
whose requisition the meeting is called as provided in these By-Laws. He shall
record all the proceedings of the meetings of the corporation and of the
directors in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the directors or the President. He shall
have the custody of the seal of the corporation and shall affix the same to all
instruments requiring it, when authorized by the directors or the President, and
attest the same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. -
Assistant Treasurers and Assistant Secretaries, if any, shall be elected and
shall have such powers and shall perform such duties as shall be assigned to
them, respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. - A certificate of stock,
signed by the Chairman or Vice-Chairman of the Board of Directors, if they be
elected, President or Vice-President, and the Treasurer or an Assistant
Treasurer, or Secretary or Assistant Secretary, shall be issued to each
stockholder certifying the number of shares owned by him in the corporation.
When such certificates are countersigned (1) by a transfer agent other than the
corporation or its employee, or, (2) by a registrar other than the corporation
or its employee, the signatures of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. - A new certificate of stock may
be issued in the place of any certificate theretofore issued by the corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
any such certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES. - The shares of stock of the
corporation shall be transferrable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificate shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom they
shall be cancelled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. - In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any date, which shall not be more than sixty nor less than
ten days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjournment meeting.
SECTION 5. DIVIDENDS. - Subject to the provisions of the
Certificate of Incorporation, the Board of Directors may, out of funds legally
available therefor at any regular or special meeting, declare dividends upon the
capital stock of the corporation as and when they deem expedient. Before
declaring any dividend there may
5
<PAGE>
be set apart out of any funds of the corporation available for dividends, such
sum or sums as the directors from time to time in their discretion deem proper
for working capital or as a reserve fund to meet contingencies or for equalizing
dividends or for such other purposes as the directors shall deem conducive to
the interests of the corporation.
SECTION 6. SEAL. - The corporate seal shall be circular in
form and shall contain the name of the corporation, the year of its creation and
the words "Corporate Seal, Delaware, 1996". Said seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. - The fiscal year of the corporation
shall be determined By resolution of the Board of Directors.
SECTION 8. CHECKS. - All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers, agent or
agents of the corporation, and in such manner as shall be determined from time
to time by resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. - Whenever any notice
is required by these By-Laws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage, prepaid,
addressed to the person entitled thereto at his address as it appears on the
records of the corporation, and such notice shall be deemed to have been given
on the day of such mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
Statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the corporation of these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be
made at any annual meeting of the stockholders or at any special meeting thereof
if notice of the proposed alteration or repeal of By-Law or By-Laws to be made
be contained in the notice of such special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice of the proposed alteration or repeal of By-Law or By-Laws
to be made, be contained in the notice of such special meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 1. INDEMNIFICATION. - The corporation shall indemnify,
to the full extent that it shall have power under applicable law to do so and in
a manner permitted by such law, any person made or threatened to be made a party
to any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (hereinafter, a "Proceeding"),
by reason of the fact that such person is or was a director or officer of the
corporation,or is or was serving at the request of corporation as a director or
officer of another corporation, partnership, joint venture, trust, or other
enterprise. The corporation may indemnify, to the full extent that it shall have
power under applicable law to do so and in a manner permitted by such law, any
person made or threatened to be made party to any Proceeding, by reason of the
fact that such person is or was an employee
6
<PAGE>
or agent of the corporation, or is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise.
SECTION 2. ADVANCEMENT OF EXPENSES. - With respect to any
person made or threatened to be made a party to any threatened, pending, or
completed Proceeding, by reason of the fact that such person is or was a
director or officer of the corporation, the corporation shall pay the expenses
(including attorneys' fees) incurred by such person in defending any such
Proceeding in advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that the payment of expenses (including
attorneys' fees) incurred by such person in advance of the final disposition of
such Proceeding shall be made only upon receipt of an undertaking (hereinafter
an "undertaking") by such person to repay all amounts advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such person is
not entitled to be indemnified for such expenses under this Article VII or
otherwise; and further provided that with respect to a Proceeding initiated
against the corporation by a director or officer of the corporation (including a
person serving at the request of the corporation as a director or officer shall
be entitled under this Section to the payment of expenses (including attorneys'
fees) incurred by such person in defending any counterclaim, cross-claim,
affirmative defense, or like claim of the corporation in connection with such
Proceeding in advance of the final disposition of such proceeding only if such
proceeding was authorized by the Board of Directors of the corporation. With
respect to any person made or threatened to be made a party to any Proceeding,
by reason of the fact that such person is or was an employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, the corporation may, in its discretion and
upon such terms and conditions, if any, as the corporation deems appropriate,
pay the expense (including attorneys' fees) incurred by such person in defending
any such Proceeding in advance of its final disposition.
SECTION 3. CLAIMS. - With respect to any person made or
threatened to be made a party to any Proceeding, by reason of the fact that such
person is or was a director or officer of the corporation, or is or was serving
at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust, or other enterprise, the rights
to indemnification and to the advancement of expenses conferred in Sections 1
and 2 of this Article VII shall be contract rights. If a claim under Section 1
or 2 of this Article VII with respect to such rights is not paid in full by the
corporation within sixty days after a written demand has been received by the
corporation, except in the case of a claim for an advancement of expenses by an
officer or director of the corporation, in which case the applicable period
shall be twenty days, the person seeking to enforce a right to indemnification
or an advancement of expenses hereunder may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim. If successful
in whole or in part in any such suit, or in a suit brought by the corporation to
recover an advancement of expenses hereunder may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the claim. if
successful in whole or in part in any such suit, or in a suit brought by the
corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the person seeking to enforce a right to indemnification or an
advancement of expenses hereunder or the person from whom the corporation seeks
to recover an advancement of expenses shall also be entitled to be paid the
expenses (including attorneys' fees) of prosecuting or defending such suit. In
any suit brought by a person seeking to enforce a right to indemnification
hereunder (but not in a suit brought by a person seeking to enforce a right to
an advancement of expenses hereunder) it shall be a defense that the person
seeking to enforce a right to indemnification has not met any applicable
standard for indemnification under applicable law. In any suit brought by the
corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the corporation shall be entitled to recover such expenses upon a
final adjudication that the person from whom the corporation seeks to recover an
advancement of expenses has not met any applicable standard for indemnification
under applicable law. With respect to any suit brought by a person seeking to
enforce a right to indemnification hereunder (including any suit seeking to
enforce a right to the advancement of expenses hereunder) or any suit brought by
the corporation to recover an advancement of expenses pursuant to the terms of
an undertaking, neither the failure of the corporation to have made a
determination prior to commencement of such suit that indemnification of such
person is proper in the circumstances because such person has met the applicable
standards of conduct under applicable law, nor an actual determination by the
corporation that such person has not met such applicable standards of conduct,
shall create a presumption that such person has not met the applicable standards
of conduct or, in a case brought by such person seeking to enforce a right to
indemnification or to an advancement of expenses or the person from whom the
7
<PAGE>
corporation seeks to recover an advancement of expenses is not entitled to be
indemnified, or to such an advancement of expenses, under this Article VII or
otherwise shall be on the corporation.
SECTION 4. NON-EXCLUSIVE RIGHTS. - The indemnification and
advancement of expenses provided in this Article VII shall not be deemed
exclusive of any other rights to which any person indemnified may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office, and shall continue as to a person
who has ceased to be such director, officer, employee, or agent and shall inure
to the benefit of the heirs, executors, and administrators of such person.
SECTION 5. INSURANCE. - The corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such liability
under the provisions of this Article VII or otherwise.
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements as of and for the period ended December 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001009480
<NAME> TARGET LOGISTICS, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 8,524
<SECURITIES> 0
<RECEIVABLES> 8,196
<ALLOWANCES> 678
<INVENTORY> 0
<CURRENT-ASSETS> 16,555
<PP&E> 1,319
<DEPRECIATION> 922
<TOTAL-ASSETS> 30,758
<CURRENT-LIABILITIES> 10,449
<BONDS> 0
0
4,572
<COMMON> 80
<OTHER-SE> 15,580
<TOTAL-LIABILITY-AND-EQUITY> 30,758
<SALES> 21,754
<TOTAL-REVENUES> 21,754
<CGS> 16,317
<TOTAL-COSTS> 24,102
<OTHER-EXPENSES> (24,951)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (152)
<INCOME-PRETAX> 22,755
<INCOME-TAX> 8,600
<INCOME-CONTINUING> 14,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,155
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 0.98
</TABLE>
