Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SUPER WASH, INC.
(Exact name of registrant as specified in its
charter)
ILLINOIS 1542
36-3170180
(State or other jurisdiction of
(Primary Standard Industrial (IRS Employer
incorporation or organization)
Classification Code Number) Identification No.)
707 WEST LINCOLNWAY, P.O. BOX 188
MORRISON, ILLINOIS 61270
(815) 772-2111
(Address, including ZIP Code, and telephone
number,
including area code, of registrant's principal executive offices)
MARY K. BLACK
CHAIRMAN OF THE BOARD AND SECRETARY
SUPER WASH, INC.
707 WEST LINCOLNWAY, P.O. BOX 188
MORRISON, ILLINOIS 61270
(815) 772-2111
(Name, address, including ZIP Code, and telephone number,
including area code, of agent for service)
copy to:
HAL M. BROWN
RUDNICK & WOLFE
203 N. LASALLE STREET, SUITE 1800
CHICAGO, ILLINOIS 60601
(312) 368-4000
(312) 236-7516 (TELECOPIER)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box.
If this Form is being filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. <u"> ______
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. <u"> ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. <u">
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each class of Amount to
Proposed Proposed Amount of
securities to be be
Maximum Maximum
Registration
registered Registered
Offering Aggregate Fee
Price Offering
Per Price(1)
Share(1)
<S> <C> <C>
Class A Common Stock, par value $0.01 per share 450,000
$10.00 $4,500,000 $1,552
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee on
the basis of the maximum estimated initial public offering price.
________
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
SUPER WASH, INC.
CROSS-REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
ITEM LOCATION IN PROSPECTUS
<S> <C> <C>
................Inside Front and Outside Back Cover
Outside Front Pages of Prospectus
Cover Page
............... Summary Information, Risk Factors
Inside Front and and Ratio of Earnings to Fixed Charges
Outside Back
Cover Pages;
Additional
Information
................................. Use of Proceeds
Outside Front
Cover Page;
Prospectus
Summary; Risk
Factors
Use of Proceeds ..................... Determination of Offering Price
Outside Front ..................... Dilution
Cover Page; Plan
of Distribution
Dilution ..................... Selling Security Holders
Not Applicable ..................... Plan of Distribution
Plan of ..................... Description of Securities to be
Distribution Registered
Description of . Interests of Named Experts and Counsel
Capital Stock
Experts . Information with Respect to the Registrant
Prospectus . Disclosure of Commission Position on Indemnification
for Securities
Summary; The Act Liabilities
Company;
Business;
Management;
Certain
Relationships and
Related Party
Transactions
Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 27, 1996
PROSPECTUS
450,000 SHARES
SUPER WASH, INC.
CLASS A COMMON STOCK
All of the 450,000 shares of Class A common stock, par value $0.01 per
share (the "Class A Common Stock"), offered hereby (the "Offering") are being
sold by Super Wash, Inc. (the "Company"). Prior to the Offering, there has
been no public market for the Class A Common Stock of the Company. The
initial public offering price will be $10.00 per share. A subscriber is
required to purchase a minimum of 100 shares of Class A Common Stock (the
"Purchase Minimum") in order to subscribe to the Offering. The initial public
offering price for the Class A Common Stock has been determined unilaterally
by the Company and is not the result of arm's-length negotiations. See "Plan
of Distribution."
Each share of Class A Common Stock entitles its holder to one vote.
The Company also has authorized outstanding shares of Class B common stock,
par value $.01 per share (the "Class B Common Stock"), which are held by Black
Family Members (as hereinafter defined), the founders of the Company. Each
share of Class B Common Stock entitles the holder to ten votes. The Class A
and Class B Common Stock are collectively referred to herein as the "Common
Stock." After consummation of the Offering, Black Family Members will
beneficially own shares representing approximately 92.5% of the Company's
outstanding Common Stock, assuming 450,000 shares are sold. Each share of
Class B Common Stock will automatically convert into one share of Class A
Common Stock upon the transfer of such shares to any person other than a Black
Family Member. All of the Class B Common Stock will automatically convert
into Class A Common Stock if the total number of shares of Class B Common
Stock outstanding falls below 20% of the aggregate number of shares of Common
Stock outstanding. Except for voting and conversion rights, the Class A
Common Stock and Class B Common Stock are identical.
There are no underwriters involved in this Offering. The Class A
Common Stock will be sold by the Company on a "best efforts" basis, through
one or more officers and directors of the Company who will not receive
compensation in connection with any offers or sales of the Class A Common
Stock. The Company may also retain licensed broker-dealers ("Agents") to sell
the Class A Common Stock on a "best efforts" basis. The Company reserves the
right to withdraw, cancel or modify the Offering hereby and to reject
subscriptions, in whole or in part, for any reason. See "Plan of
Distribution."
Unless the Company is able to sell at least 250,000 shares of Class A
Common Stock offered hereby, the Company will cancel the Offering, promptly
return all monies collected from subscribers, and pay to each subscriber the
interest earned by the Company, if any, on such subscriber's escrowed
subscription payment. See "Risk Factors" and "Plan of Distribution."
An agreement to purchase shares of the Class A Common Stock offered
hereby (the "Subscription Agreement") accompanies this Prospectus. Subject to
availability and the Company's right to reject subscriptions, in whole or in
part, for any reason, shares of Class A Common Stock may be subscribed for by
completing, executing and returning the Subscription Agreement, together with
payment for all shares subscribed for, to the Company in the manner described
under "Plan of Distribution" herein. The subscription payments will be
deposited into an escrow account by the Company subject to a closing (the
"Closing") on or prior to February 14, 1997 (subject to the right of the
Company to extend the Offering for an additional 30 days) if the Company has
accepted subscriptions for at least 250,000 shares. In the Subscription
Agreement, each subscriber represents and warrants to the Company that the
subscriber (i) has received this Prospectus and in making a subscription is
only relying on the representations set forth in this Prospectus and (ii) has
indicated his or her true state of legal residence. A subscriber does not
waive any rights under the federal securities laws by executing the
Subscription Agreement. See "Plan of Distribution" for additional information
regarding the offering and the procedures for subscribing for shares of Class
A Common Stock offered hereby.
SEE "RISK FACTORS" BEGINNING ON PAGE ___ FOR A DISCUSSION OF CERTAIN
FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A
COMMON STOCK OFFERED HEREBY.
______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO
AGENT'S DISCOUNT(1) PROCEEDS TO
COMPANY(1)(2)
PUBLIC
<S> <C> <C> <C>
Per Share $10.00 $1.00 $9.00
Total $4,500,000.00 $450,000.00 $4,050,000.00
</TABLE>
<PAGE>
() The Class A Common Stock offered hereby is being sold directly by the
Company on a "best efforts" basis. However, if the Company retains Agents
to sell the Class A Common Stock offered hereby, the Company will pay such
Agents a selling commission of up to 10% of the gross offering proceeds
attributable to Class A Common Stock sold by such Agents. Such potential
payments to Agents are reflected in this table, but are not otherwise
reflected in this Prospectus. See "Plan of Distribution."
() Before deducting expenses payable by the Company estimated at $100,000.
See "Use of Proceeds."
__________________
___________, 1996
<PAGE>
SUPER WASH, INC.
As of June 30, 1996, there were 397 Super Wash facilities,
including 17 facilities under construction.
[insert map]
<TABLE>
<CAPTION>
Arizona -2 Indiana - 23 Ohio - 28 Texas - 7
<S> <C> <C> <C>
Colorado - 2 Minnesota - 6 Oregon - 1 Utah - 42
Iowa - 38 Missouri - 9 Pennsylvania - 3 Washington - 4
Idaho - 10 Montana - 2 South Dakota - 12 Wisconsin - 45
Illinois - 147 Nebraska - 14 Tennessee - 2
</TABLE>
__________
THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING AUDITED FINANCIAL STATEMENTS WITH A REPORT THEREON BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS.
__________
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS HAS BEEN ADJUSTED TO GIVE EFFECT TO AN AMENDMENT AND RESTATEMENT OF
THE COMPANY'S ARTICLES OF INCORPORATION TO (I) CREATE TWO CLASSES OF STOCK,
(II) EFFECT A 55,500-FOR-1 STOCK SPLIT AND (III) INCREASE THE AUTHORIZED
COMMON STOCK, ALL TO BE EFFECTIVE IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE
OFFERING.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."
THE COMPANY
The Company is engaged in the sale and licensing of "turn key" Super
Wash reg-trade-mark facilities and provides ongoing support to its licensees
through its parts, service, research and advertising departments. The Company
is also available to its licensees for consultation regarding various business
aspects of operating their Super Washreg-trade-mark facility. In addition,
the Company owns and operates Super Washreg-trade-mark facilities and
provides management services for licensees who choose not to manage their
facilities on a day-to-day basis. Under its "turn-key" package, the Company
acquires the site, handles all zoning and permitting issues, performs as the
general contractor during construction of the Super Washreg-trade-mark
facility, sells and installs its Super Washreg-trade-mark equipment which is
designed by the Company and manufactured to its specifications, trains the
licensees and their employees, conducts the grand opening, and provides
consultation and management services thereafter. As of June 30, 1996, the
Company had constructed and sold over 436 Super Washreg-trade-mark
facilities and had 17 facilities under construction. Starting in 1996, the
business plan of the Company is to retain, own and operate a number of the
facilities constructed by it each year with the goal of owning and operating
in excess of 100 Super Washreg-trade-mark facilities by the end of the year
2001.
During the last 7 fiscal periods (including the 10-month period ended
December 31, 1995), the number of Super Washreg-trade-mark facilities
constructed each period has ranged between 27 and 69. Additionally, during
the last 5 fiscal periods the Company expanded existing Super
Washreg-trade-mark facilities and added in total 6 self-service bays and 17
Supermaticreg-trade-mark bays. As of June 30, 1996, there were 380 Super
Washreg-trade-mark> facilities operating in 19 states. The Company plans to
add approximately 50 Super Washreg-trade-mark facilities during each of the
years 1996 and 1997 and continue at or above that level in future years. As of
June 30, 1996, 19 of the 380 facilities are owned and operated by the Company,
4 of which are for long-term ownership, and 15 of which are held in inventory
for sale to approved licensees. A total of 55 Super Washreg-trade-mark
facilities are managed by the Company for its licensees, including 26 which
are owned by officers of the Company or entities owned by such persons. As of
June 30, 1996, 56 facilities constructed by the Company were delicensed and
not operating as Super Washreg-trade-mark facilities. See "Business --
Licensing Program."
The Company believes Super Washreg-trade-mark facilities are state of
the art and the highest quality. The Company's service department can access
each licensed Super Washreg-trade-mark facility via computer and modem
located at each facility and by using its proprietary computer diagnostic
software to pinpoint mechanical problems in order to keep each facility
operational and downtime to a minimum. The Company's software also possesses
auditing capabilities which allows an absentee owner/manager to monitor cash
receipts off-site. Each Super Washreg-trade-mark facility is constructed in
accordance with a standard set of proprietary plans which have been developed
by the Company. This approach provides a nationally consistent image, savings
in cost of construction and also allows the Company's service technicians to
solve over 99% of all mechanical problems via telephone contact with the on-
site attendant. A federally registered trademark has been granted to the
Company for its automatic bay car washing process
("Supermaticreg-trade-mark") which the Company displays above the automatic
bay(s) at each Super Washreg-trade-mark facility. Each Super
Washreg-trade-mark facility includes at least one Supermaticreg-trade-mark
bay and several self-serve bays. A substantial number of facilities have two
Supermaticreg-trade-mark bays and three to four self-serve bays. The
Company has constructed individual facilities consisting of as many as three
Supermaticreg-trade-mark bays and six self-serve bays.
The Company believes that it has developed expertise in site selection and
layout of the facility. The Company also believes it is widely recognized for
its commitment to its customers. The Company has developed a detailed system
of operating a Super Washreg-trade-mark facility. The training provided by
the Company to its licensees and their employees includes instruction on the
implementation and maintenance of the Super Washreg-trade-mark operating
system, including audit procedures, banking, personnel, promotion, equipment
operation and maintenance and creating positive customer relationships.
Robert D. Black and his wife, Mary K. Black (collectively, the "Blacks"),
are the founders of the Company. The Blacks built their first car wash in
1976. They have recently been honored with the 1995 SBA Illinois and Region V
(Midwest) Entrepreneurial Success Awards. In 1992, the Company received the
U.S. Chamber of Commerce Blue Chip Enterprise Award, and was listed in "INC.
Magazine" in each of the years 1989, 1990, and 1991 as one of the fastest
growing private companies in the country based on that year's sales growth
over an average of the prior five years. The Blacks also received Ernst &
Young's Entrepreneur of the Year Award in the service category for Illinois
and Missouri in 1989. The Company believes that its success is the direct
result of the work of the Blacks, its licensees, and the many individuals
associated with the Company.
The Company was incorporated in Illinois in 1982 as an outgrowth of a
business started in 1976 by the Blacks. The Company's executive offices are
located at 707 West Lincolnway, P.O. Box 188, Morrison, Illinois 61270, and
its telephone number is (815) 772-2111.
<PAGE>
THE OFFERING
Class A Common Stock offered by the
Company up to 450,000 shares, subject to a minimum of
250,000(1)
Common Stock to be outstanding
after the Offering:
Class A Common Stock a minimum of 250,000 and a maximum of 450,000
shares(1)
Class B Common Stock 5,550,000 shares(2)
Estimated proceeds(1) The Company estimates the net proceeds from
the Offering prior to deducting any
commissions paid to Agents, to be a minimum of
$2.4 million and up to a maximum of $4.4
million. There can be no assurance that the
Company will receive net proceeds in excess of
the minimum less any Agents' commissions.
Use of proceeds(1) The Company intends to use the estimated net
proceeds to fund a portion of the S
Corporation Distribution (as defined in "S
Corporation Distribution") to stockholders of
record immediately prior to the consummation
of the Offering. See "Use of Proceeds."
(1) Unless the Company is able to sell at least 250,000 shares of the Class A
Common Stock offered hereby, the Company will cancel the Offering,
promptly return all monies collected from subscribers, and pay to each
subscriber the interest earned by the Company, if any, on such
subscriber's escrowed subscription payment. See "Risk Factors and "Plan
of Distribution."
(2) Each share of Class B Common Stock is convertible into one share of Class
A Common Stock and will convert automatically into Class A Common Stock
upon a transfer to anyone other than a Black Family Member or on the
record date of any meeting of stockholders if the total number of shares
of Class B Common Stock outstanding is less than 20% of the aggregate
number of shares of Common Stock outstanding. See "Certain Relationships
and Related Transactions" and "Description of Capital Stock."
SUBSCRIPTION PROCEDURES
A Subscription Agreement accompanies this Prospectus. Subject to the
Purchase Minimum, availability and the Company's right to reject
subscriptions, in whole or in part, for any reason, shares of Class A Common
Stock may be subscribed for by completing, executing and returning the
Subscription Agreement, together with payment for all shares subscribed for,
to the Company. All checks should be made payable to the Super Wash Offering
Escrow. The Company's acceptance of a subscription shall be evidenced solely
by the delivery to the subscriber of a written confirmation of sale. Receipt
by the Company of a Subscription Agreement and/or deposit by the Company of
payment for the subscribed shares as described below shall not constitute
acceptance of a subscription. The subscription payments will be deposited
into an escrow account by the Company subject to the Closing on such escrowed
funds if the Company has accepted subscriptions for at least 250,000 shares.
Unless the Company is able to sell at least 250,000 shares of the Class A
Common Stock offered hereby, the Company will cancel the Offering, promptly
return all monies collected from subscribers, and pay to each subscriber the
interest earned by the Company, if any, on such subscriber's escrowed
subscription payment. Likewise, the Company will promptly refund any monies
collected and attributed to a subscription, or portion thereof, rejected by
the Company and pay to each rejected subscriber all interest earned by the
Company, if any, on such subscriber's rejected escrowed subscription payment,
or portion thereof. However, if the Company accepts a subscription, in whole
or in part, subscribers will have no right to a return of their accepted
subscription payment held in the escrow account and all interest earned on the
accepted escrowed proceeds will belong to the Company.
The Company reserves the right to withdraw, cancel or modify the Offering
hereby and to reject subscriptions, in whole or in part, for any reason.
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
TEN MONTHS
ENDED SIX MONTHS
DECEM- ENDED
<TABLE>
<CAPTION>
YEARS ENDED FEBRUARY 28, BER 31, JUNE 30,
1992 1993 1994 1995 1995 1995 1996
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $13,148 $13,865 $17,846 $23,071 $23,586 $ 8,456
$13,509
Cost of sales 10,817 11,338 14,578 18,734 18,392 6,858
11,062
Gross profit 2,331 2,527 3,268 4,337 5,194 1,598
2,447
Selling, general, and administrative
expenses 1,107 1,337 1,750 1,893 1,483 794
813
Income from operations 1,224 1,190 1,518 2,444 3,711 804 1,634
Other income (expense), net 147 224 228 192 98 143 (20)
Income before income taxes 1,371 1,414 1,746
2,636 3,809 947 1,614
Pro forma provision for income taxes (1) 515 532 683 1,037 1,485 370 629
Pro forma net income (1) $856 $882 $ 1,063 $ 1,599 $ 2,324 $577 $985
Pro forma net income per share (1)(2) $ .40 $ .10 $ .17
Weighted average shares
outstanding (2) 5,820,000
SELECTED OPERATING DATA:
Super Washreg-trade-mark facilities constructed 27 27 31 46 48 14 23
Self-serve bays 78 81 93 151 151 43 80
Supermaticreg-trade-mark bays 32 38 43 70 76 21 27
Super Washreg-trade-mark facilities sold 27 25 32 38 41 15 20
Self-serve bays 78 73 95 127 132 39 56
Supermaticreg-trade-mark bays 32 37 44 59 67 21 20
Ratios:
Current ratio 8.79 8.50 10.64 5.90 4.38 3.45 2.05
Debt to equity .40 .31 .13 .22 .26 .40 .79
</TABLE>
______________________
(1) The Company elected S Corporation (as defined in "S Corporation
Distribution") status for federal and state income tax purposes effective
March 1, 1995. The Company's election to be taxed as an S Corporation will
terminate upon consummation of the Offering, and the Company will be subject
to federal and state income taxes from that date forward. The pro forma
provision for income taxes, pro forma net income, and pro forma net income
per share reflect the pro forma effect of income taxes as if the Company had
been taxed as a C corporation for all periods presented.
(2) Pro forma net income per share information assumes that 270,000 of the
shares of Class A Common Stock being offered by the Company hereby were
outstanding during the periods indicated. The 270,000 shares represent the
approximate number of shares (of the maximum of 450,000 shares being
offered) which are being sold by the Company (at the initial public Offering
price set forth on the cover page of this Prospectus) to fund the payment of
a dividend equal to the amount of the Company's taxable earnings and profits
from March 1, 1995 through June 30, 1996, not yet distributed to existing
stockholders of approximately $2.7 million ("June 30 E&P Dividend").
<PAGE>
<TABLE>
<CAPTION>
FEBRUARY 28, DECEMBER 31, JUNE 30, 1996
As Ad-
1992 1993 1994 1995 1995 ACTUAL JUSTED(3)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $ 3,542 $ 4,244 $ 5,734 $ 7,375 $ 9,754 $ 8,682 $
10,225
Total assets 6,308 7,030 7,274 9,805 14,866 19,214 19,214
Long term debt 1,357 1,086 238 206 176 157 0
Stockholders' equity 4,497 5,379 6,441 8,069 11,791 10,742 12,307
</TABLE>
______________________
(3) Adjusted to give effect to the conversion of the Company to a
C corporation, the sale of the maximum number of shares of Class A Common
Stock offered by the Company hereby (at the initial public Offering price
set forth on the cover page of this Prospectus net of estimated Offering
expenses) and the application of such proceeds therefrom as of June 30,
1996. See "Use of Proceeds" and Note 13 to the Company's financial
statements. Gives effect to the payment of the June 30 E&P Dividend, but
does not give effect to the anticipated distribution of an additional $4.0
million in estimated S Corporation earnings for the period from July 1, 1996
to the consummation of the Offering.
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN
INVESTMENT IN THE CLASS A COMMON STOCK OFFERED HEREBY.
CAR WASH BUSINESS RISKS GENERALLY. The Company is subject to all of the
risks generally associated with the car wash business, including, without
limitation, adverse developments in the national and local economies, changes
in consumer preferences, fluctuations in the availability and cost of supplies
and materials, and the ability to obtain and retain qualified employees at
affordable wages.
COMPETITION. The Company may be in competition with other persons and
entities having similar or greater experience and financial resources.
Although the Company believes in the economic viability of the business of the
Company, there can be no assurance that its operations will continue to be
profitable. In addition, the Super Washreg-trade-mark facilities owned by
the Company may face competition from existing and future car washes,
including self-service and full service washes, some of which may have similar
equipment. Customers may also elect to wash their cars at home without going
to a car wash.
CONSTRUCTION BUSINESS. The construction business is inherently risky and
subject to, among other risks, the risk of cost overruns, labor strikes,
adverse weather conditions, material delays and quality problems.
AVAILABILITY OF SITES AND FINANCING. The goal of the Company to retain,
own and operate in excess of 100 Super Washreg-trade-mark facilities by the
end of the year 2001 may be affected by the ability of the Company to locate
suitable sites for the Super Washreg-trade-mark facilities. Additionally,
the Company will be required to raise additional capital in the future to meet
its current expansion plan through 2001. Such capital may be raised by the
issuance of additional equity or the incurrence of indebtedness. In addition,
in appropriate situations, the Company may seek financing from other sources.
There can be no assurance that any required financing will be available or
that the Company can accomplish its goal in a timely or profitable manner.
DEPENDENCE OF A LIMITED NUMBER OF SUPPLIERS. The Company currently relies
on approximately twelve major suppliers for its supply of products and
equipment required to construct and operate Super Washreg-trade-mark
facilities. In turn, many of such suppliers also rely on a limited number of
suppliers. The products and equipment of such suppliers are essential to the
Company's business and any disruption in the supply of such products or
equipment could adversely affect the Company's Super Washreg-trade-mark
facility construction and its operating results. There can be no assurance
that all of the Company's suppliers will continue to meet its current product
and equipment requirements or meet these requirements at current prices.
SALE OF SUPER WASHreg-trade-mark FACILITIES. Approximately 79% of the
Company's revenues for the six months ended June 30, 1996, are attributable to
the construction and sale of Super Washreg-trade-mark facilities. To the
extent a Super Washreg-trade-mark facility has not been presold or
designated as a Company-owned facility, after the completion of a Super
Washreg-trade-mark facility the Company will hold and operate such facility
until it is sold. There is no assurance that in the future the Company can
sell all of the Super Washreg-trade-mark facilities it constructs or that
such facilities will be sold or operated at a profit.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company experiences
quarterly variation in net revenues and operating income as a result of many
factors. The primary factor is the effect of weather and the seasons on
construction in certain areas of the country and the resulting effect on sales
of Super Washreg-trade-mark facilities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation - Seasonality and
Quarterly Financial Information." The quarterly variations in net revenues and
operating incomes could continue as a result of these many factors.
NEW BUSINESS PLAN. The Company has modified its business plan and
presently intends to retain, own and operate a number of the Super
Washreg-trade-mark facilities constructed by it in each year with the goal
of owning and operating in excess of 100 Super Washreg-trade-mark facilities
by the end of the year 2001. The Company currently operates 4 facilities for
long-term ownership. Consequently, if the new plan is implemented as proposed
in the future a greater proportion of the Company's revenues will be
attributable to the operation of Super Washreg-trade-mark facilities. There
is no assurance that the Company will be able to build for its own account the
desired number of facilities or operate such facilities in a profitable
manner.
WEATHER. The operation of the Company's Super Washreg-trade-mark
facilities may be affected by adverse weather conditions (the weather that
differs significantly from the norm in a particular season in a particular
region of the country). In addition, the operations of car washes may be
limited in areas experiencing severe drought conditions. To minimize the
effect on the Company's overall profitability from operating facilities due to
adverse weather conditions in any one region of the United States, the Company
intends to build Super Washreg-trade-mark facilities in geographical regions
offering a variety of weather patterns.
POTENTIAL CHANGE IN LICENSE AGREEMENT. Current licensees have entered
into an operations agreement (the "Operations Agreement") with the Company.
Under the Operations Agreement which grants licensees the right to use the
Company's trademarks, Company licensees do not pay a license fee but are
required to meet certain quality standards. The Company is considering
whether to strengthen its Operations Agreement to have more substantial
control over certain aspects of its licensees' operations or to convert the
relationship between future licensees and the Company from a license without
fees or substantial control to a franchise relationship with fees and more
comprehensive controls. The Company's existing license agreements do not
contain a specific term. If the Company desires to cause its current
licensees to enter into a new license agreement or become franchisees, there
is no assurance the Company will be able to accomplish such result. If the
Company decides to become a franchisor, it will be required to register as a
franchisor in those states that require registration and in which the Company
intends to offer Super Washreg-trade-mark franchises. There is no assurance
that the Company can meet all such states' requirements. Furthermore, certain
state regulatory agencies may raise the issue of why the Company was not
previously registered as a franchisor. The Company believes that its current
license arrangement does not constitute a franchise, although there is no
assurance that the resolution of such issue, if raised, will be favorable to
the Company. All of the foregoing may have a material adverse effect on the
Company.
TERMINATION OF LICENSES. Each Super Washreg-trade-mark licensee has a
right to terminate his relationship as a licensee at will and the Company has
the right to terminate each license in the event of the breach of its terms.
Through June 30, 1996, 56 Super Washreg-trade-mark facilities have been
delicensed. The delicensing of a substantial number of Super
Washreg-trade-mark facilities may have a material adverse effect on the
Company.
BEST EFFORTS OFFERING; MINIMUM NUMBER OF SHARES TO BE SOLD. The Company
is offering the Class A Common Stock on a "best efforts" basis. There is
therefore no assurance that all of the 450,000 shares of Class A Common Stock
offered hereby will be sold and if all of the shares offered hereby are not
sold the estimated net proceeds will be reduced to reflect the number of
shares actually sold. If the Company is unable to sell at least 250,000
shares of the Class A Common Stock offered hereby, the Company will cancel the
Offering and promptly return all monies collected from subscribers held in
escrow. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition - Liquidity and Capital Resources" and "Plan of
Distribution."
S CORPORATION DISTRIBUTION. The net proceeds of the Offering will not be
sufficient to fund the entire S Corporation Distribution. To fund the portion
of the S Corporation Distribution not covered by the proceeds of the Offering
the Company will be required to obtain funds from alternate sources, including
borrowing under the Company's lines of credit. To the extent less than the
maximum number of shares offered hereby are sold, the Company will be required
to increase the amount of funds acquired from alternative sources to fund the
S Corporation Distribution. The use of funds other than the proceeds of this
Offering may adversely affect the Company's ability to execute its business
plan and its liquidity and capital resources. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition - Liquidity and
Capital Resources."
NO DIVIDENDS ON COMMON STOCK. Upon consummation of the Offering the
Company does not anticipate declaring any cash dividends in the foreseeable
future and intends to retain any future earnings for the further development
and growth of its business. See "Dividend Policy."
NO PRIOR MARKET; ABSENCE OF PUBLIC MARKET; OFFERING PRICE DETERMINED
ARBITRARILY BY THE COMPANY. There has been no public market for the Class A
Common Stock prior to the Offering. The price to the public has been
arbitrarily determined by the Company and may not be indicative of the market
price for the Common Stock after this Offering. The Company makes no
representations as to any objectively determinable value of the Common Stock.
There can be no assurance that any market will develop for the Class A Common
Stock or that holders of Class A Common Stock will be able to sell their
securities at any price. Additionally, the Company has not applied to list
its Common Stock on a national securities exchange, quotations system or over-
the-counter market and does not presently intend to do so. The Company is not
seeking securities brokers/dealers to be market makers for the Class A Common
Stock offered hereby. Consequently, the liquidity of the Common Stock will be
impaired, not only in the number of shares of Class A Common Stock which can
be bought and sold, but also through delays in the timing of transactions,
reductions in security analysts' and news media coverage, if any, of the Class
A Common Stock, and lower prices for the Class A Common Stock than might
otherwise prevail. Furthermore, the lack of a market maker could result in
persons being unable to buy or sell shares of the Class A Common Stock offered
hereby on any secondary market.
DILUTION. Investors in the Offering will experience immediate and
substantial dilution of $7.95 per share (assuming the sale of all 450,000
shares) or $8.22 per share (assuming the sale of 250,000 shares) in the net
tangible book value of their shares of Class A Common Stock, and current
stockholders will receive an increase in the book value of their shares of
Class B Common Stock. See "Dilution."
DEPENDENCE UPON OTHER SUPER WASHreg-trade-mark FACILITIES. Although the
Company will have no ownership interest in any Super Washreg-trade-mark
facilities that are sold, the success of the Company's Super
Washreg-trade-mark facilities may depend in part upon the good will
associated with Super Washreg-trade-mark facilities owned and operated by
licensees.
DEPENDENCE ON KEY EMPLOYEES. The Company's success is dependent on the
active participation of Mary K. Black, Chairman of the Board, and Robert D.
Black, a Director, President and Chief Executive Officer. The Company is
dependent for its future success on the continued services of its executive
officers, including the Blacks, and other key employees. The Company believes
that the unexpected loss of the services of a key employee could have a
material adverse effect on the Company. The Company does not maintain key
person life insurance on the life of either Mary K. or Robert D. Black. The
Company has not entered into employment Agreements with any of its executive
officers.
GOVERNMENTAL REGULATION. The Company's business will be subject to the
jurisdiction of a variety of regulatory authorities, including, without
limitation, federal, state, county and city agencies administering laws and
regulations relating to zoning, environmental, health, labor and taxation.
Although it is the policy of the Company to obtain a Phase I Environmental
Study on sites it acquires which it believes have a potential environmental
risk, there is no assurance that such studies will identify all environmental
risks, including any underground storage tanks.
CONTROL BY CURRENT STOCKHOLDERS AND ANTI-TAKEOVER EFFECT OF DUAL CLASSES
OF STOCK. Holders of the Company's Class A Common Stock are entitled to one
vote per share and holders of the Company's Class B Common Stock are entitled
to ten votes per share. Each share of Class B Common Stock is convertible at
any time into one share of Class A Common Stock. Following the completion of
the Offering, and assuming the maximum number of shares are sold, Black Family
Members will beneficially own or control, directly or indirectly, all of the
outstanding shares of the Company's Class B Common Stock which in the
aggregate will represent approximately 92.5% of the outstanding shares of
Common Stock and 99.2% of the combined voting power of such stock. The Black
Family Members will, therefore, initially have the ability to elect all of the
directors of the Company and to control the outcome of all issues submitted to
a vote of the stockholders of the Company. See "Principal Stockholders."
Voting control by Black Family Members may discourage certain types of
transactions involving an actual or potential change of control of the
Company, including transactions in which the holders of Class A Common Stock
might receive a premium for their shares over prevailing market prices.
RELATED PARTY TRANSACTIONS. As described herein, the Company has entered
into a number of transactions with its directors, executive officers and
principal stockholders (collectively, the "Related Party Transactions"). See
"Certain Relationships and Related Party Transactions." The terms of the
Related Party Transactions were established by the Blacks and management and
are not the result of arm's-length negotiations. Certain Related Party
Transactions between the Black Family Members and the Company are on terms
more favorable to the Black Family Members than those which could have been
obtained in arm's-length transactions. Following the Closing of the Offering,
the Company intends to submit any proposed transactions not described herein
between the Company and its directors, executive officers and their affiliates
or the Black Family Members to a committee of disinterested directors for
review. Transactions not described herein between the Company and Black
Family Members will require approval by a majority of the disinterested
directors. See "Certain Relationships and Related Party Transactions."
POTENTIAL CONFLICTS OF INTEREST. Mrs. Black, the Chairman of the Board of
the Company, Mr. Black, the President and Chief Executive Officer of the
Company and certain other executive officers of the Company are engaged in,
and after the Offering will continue to be engaged in, activities other than
those related to the Company. Such persons own and operate Super
Washreg-trade-mark facilities. Accordingly, such facilities may compete
with the Company for the management time of the Blacks and the other executive
officers.
PREFERRED STOCK. The Company's Articles authorize the issuance of
2.5 million shares of "blank check" preferred stock with such designation,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights that could materially adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to
issue any shares of its preferred stock, there can be no assurance that the
Company will not do so in the future. The application of any such provisions
or the issuance of preferred stock could prevent stockholders from realizing a
premium upon the sale of their shares of Class A Common Stock. See
"Description of Capital Stock."
EFFECT OF CERTAIN STATUTORY PROVISIONS. The Company is subject to
provisions of the Illinois Business Corporation Act that prohibit a publicly-
held Illinois corporation from engaging in a broad range of business
combinations with a person who, together with affiliates and associates, owns
15% or more of the corporation's common stock (an "interested stockholder")
for three years after the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. Those provisions
could discourage or make more difficult a merger, tender offer or similar
transaction, even if favorable to the Company's stockholders. See
"Description of Capital Stock -- Certain Provisions of the Illinois Business
Corporation Act."
<PAGE>
THE COMPANY
The Company is engaged in the sale and licensing of "turn key" Super
Washreg-trade-mark facilities and provides ongoing support to its licensees
through its parts, service, research and advertising departments. The Company
is also available to its licensees for consultation regarding various business
aspects of operating their Super Washreg-trade-mark facilities. In
addition, the Company owns and operates Super Washreg-trade-mark facilities
and provides management services for licensees who choose not to manage their
facilities on a day-to-day basis. Under its "turn key" package, the Company
acquires the Super Washreg-trade-mark facility site, handles all zoning and
permitting issues, performs as the general contractor during construction of
the Super Washreg-trade-mark facility, installs its Super
Washreg-trade-mark equipment which is designed by the Company and
manufactured to its specifications, trains the licensees and their employees,
conducts the grand opening and provides consultation and management services
thereafter. As of June 30, 1996, the Company had constructed and sold over
436 Super Washreg-trade-mark facilities and had 17 facilities under
construction.
The vision of the Company as embodied in its goals and philosophy is:
. To obtain and maintain a position of unquestionable respectability
and credibility in the business world.
. To create an investment opportunity which will leave a positive
lifelong effect on the many right-hearted quality people we serve.
. To construct facilities which are profitable and successful for
everyone involved.
. To provide our customers with the best car wash service available at
a reasonable price.
. To create a position of employment for as many needful, right-hearted
people as possible.
. To have the Company become "all it is suppose to be" while at the
same time never taking advantage of anyone along the way.
. To create a business environment which will allow all staff members
and affiliates to be true to their own highest conviction while daily
utilizing all of their God-given talents.
The Blacks consider the goals and philosophies to be the driving force
behind the continued success of the Company. The Company's vision is fostered
by Mr. Black, the Company's primary "vision keeper."
The Company is an Illinois corporation incorporated in 1982 as an
outgrowth of a business begun in 1976 by Robert D. Black and his wife, Mary K.
Black. The Company's principal executive office and operation headquarters
are located at 707 West Lincolnway, P.O. Box 188, Morrison, Illinois 61270 and
its phone number is (815) 772-2111.
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be $2.4
million if the minimum of 250,000 shares of Class A Common Stock offered
hereby are sold, and are estimated to be $4.4 million if the maximum of
450,000 shares of Class A Common Stock offered hereby are sold, at an initial
public offering price of $10.00 per share, after deducting estimated offering
expenses payable by the Company, and prior to deducting any commissions paid
to Agents.
The Company intends to use these proceeds to fund a portion of the S
Corporation Distribution to stockholders of record immediately prior to
consummation of the Offering. See "S Corporation Distribution" and "Risk
Factors."
S CORPORATION DISTRIBUTION
Since March 1, 1995, the Company has been an S corporation (an "S
Corporation") under the Internal Revenue Code of 1986, as amended (the
"Code"). As a result, the income of the Company subsequent to March 1, 1995,
has been taxed, for federal and certain state and local income tax purposes,
directly to the Company's stockholders, rather than to the Company. The
Company's status as an S Corporation will terminate upon consummation of the
Offering (the "Termination Date") and, as a result, the Company will be
subject to federal and state corporate income taxation for that portion of the
year ended December 31, 1997 after the Termination Date. Upon termination of
the Company's status as an S Corporation, the Company will recognize a
deferred tax liability of approximately $135,000.
The Company's existing stockholders have included or will include in their
taxable incomes a total of approximately $9.3 million, the estimated amount of
the Company's taxable earnings and profits from March 1, 1995 through the
Termination Date. The Company has or intends to distribute all of the
estimated $9.3 million of such earnings and profits to the persons who are
stockholders of record prior to the consummation of the Offering ("S
Corporation Distribution."). Approximately $4.0 million of the estimated $9.3
million of earnings are for the period from July 1, 1996 through the
Termination Date and have not yet been recognized by the Company for financial
reporting purposes.
Of the total $9.3 million estimated S Corporation Distribution, the
Company has distributed approximately $2.7 million as of June 30, 1996, and
expects to distribute approximately an additional $1.2 million between July 1,
1996, and the consummation of the Offering. The estimated balance of
approximately $5.4 million will be distributed to the persons who are
stockholders of record immediately prior to the consummation of the Offering.
To the extent the Offering proceeds are not sufficient to pay the portion of
the S Corporation Distribution which has not been paid as of the consummation
of the Offering, the Company intends to pay the remaining portion of the S
Corporation Distribution within one year of the Termination Date with cash
flow, borrowings or any other funds available for that purpose. Purchasers of
Class A Common Stock in this Offering are not entitled to and will not receive
any portion of the S Corporation Distribution. See "Capitalization" and Notes
to Financial Statements.
Prior to the closing of the Offering, the Company will enter into a tax
indemnification agreement with the Company's existing stockholders, pursuant
to which the existing stockholders will agree to indemnify the Company and the
Company will agree to indemnify the existing stockholders against certain
possible income tax consequences. See "Certain Relationships and Related
Party Transactions."
DIVIDEND POLICY
Since its inception and prior to March 1, 1995, the Company did not pay
any cash dividends. Since March 1, 1995, the Company's dividend policy has
been based primarily on considerations relating to its S Corporation status,
including the desirability of paying dividends to stockholders in amounts at
least sufficient to fund their individual income tax liability resulting from
the taxation of corporate income at the stockholder level. As of June 30,
1996, the Company had paid total cash dividends of approximately $2.7 million.
The Company expects to pay cash dividends of approximately $1.2 million
between July 1, 1996 and the consummation of the Offering. The Company
intends to pay the remainder of the S Corporation Distribution as a cash
dividend to its stockholders of record immediately prior to the consummation
of the Offering. Purchasers of Class A Common Stock in this Offering are not
entitled to and will not receive any portion of the S Corporation
Distribution. See "Capitalization" and Notes to Financial Statements. See
"S Corporation Distribution."
Upon consummation of the Offering, the Company's status as an S
Corporation will be terminated and the Company intends to retain its earnings
to support operations and finance its growth. Consequently, after making the
S Corporation Distribution, the Company does not anticipate declaring or
paying cash dividends in the foreseeable future. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and Notes to Financial Statements.
<PAGE>
DILUTION
The net tangible book value of the Company as of June 30, 1996 was
approximately $10.7 million, or $1.94 per share of Common Stock. Net tangible
book value per share represents the amount of the Company's stockholders'
equity, less intangible assets, divided by the number of shares of Common
Stock outstanding. Dilution per share to new investors represents the
difference between the amount per share paid by purchasers of shares of Class
A Common Stock in the Offering made hereby and the pro forma net tangible book
value per share of Class A Common Stock immediately after completion of the
Offering.
Assuming the sale by the Company of the minimum of 250,000 shares of the
450,000 shares of Class A Common Stock offered hereby at an initial public
offering price per share of $10.00, and after (i) deducting estimated Offering
expenses payable by the Company, (ii) giving effect to the June 30 E&P
Dividend of approximately $2.7 million, and (iii) recording the deferred taxes
of approximately $135,000, the pro forma net tangible book value of the
Company as of June 30, 1996, would have been approximately $10.3 million, or
$1.78 per share. This represents an immediate increase in net tangible book
value to existing stockholders attributable to new investors of $0.35 per
share and an immediate dilution in net tangible book value of $8.22 per share
to new investors purchasing Class A Common Stock in the Offering, as
illustrated in the following table:
IF MINIMUM OF 250,000 SHARES SOLD:
<TABLE>
<CAPTION>
Initial public Offering price per share of Class A Common $10.00
Stock
<S> <C> <C>
Net tangible book value per share of Common Stock at June $1.94
30, 1996(1)
Decrease per share attributable to June 30 E&P Dividend (0.49)
Decrease per share attributable to conversion to C (0.02)
corporation and resulting deferred tax liability
Increase per share of Common Stock attributable to new 0.35
stockholders
Net tangible book value per share of Common Stock after the 1.78
Offering
Net tangible book value per share dilution to new $8.22
stockholders
</TABLE>
(1) There are no outstanding options to consider in calculating the shares
outstanding.
<PAGE>
Assuming the sale by the Company of all of the 450,000 shares of Class A
Common Stock offered hereby at an initial public offering price per share of
$10.00, and after (i) deducting estimated Offering expenses payable the
Company, (ii) giving effect to the June 30 E&P Dividend of approximately $2.7
million, and (iii) recording deferred taxes of approximately $135,000, the pro
forma net tangible book value of the Company as of June 30, 1996, would have
been approximately $12.3 million, or $2.05 per share. This represents an
immediate increase in net tangible book value to existing stockholders
attributable to new investors of $0.62 per share and an immediate dilution in
net tangible book value of $7.95 per share to new investors purchasing Class A
Common Stock in the Offering, as illustrated in the following table:
IF MAXIMUM OF 450,000 SHARES SOLD:
<TABLE>
<CAPTION>
Initial public Offering price per share of Class A Common $10.00
Stock
<S> <C> <C>
Net tangible book value per share of Common Stock at June $1.94
30, 1996(1)
Decrease per share attributable to June 30 E&P Dividend (0.49)
Decrease per share attributable to conversion to C (0.02)
corporation and resulting deferred tax liability
Increase per share of Common Stock attributable to new 0.62
stockholders
Net tangible book value per share of Common Stock after the 2.05
Offering
Net tangible book value per share dilution to new $7.95
stockholders
</TABLE>
(1) There are no outstanding options to consider in calculating the shares
outstanding.
<PAGE>
The following tables summarize on a pro forma basis as of June 30, 1996
the differences between the existing stockholders and the investors purchasing
shares of Class A Common Stock in the Offering (at an initial public Offering
price of $10.00 per share) with respect to the number of shares purchased from
the Company, the total consideration paid and the average price paid per
share. The first table below reflects the sale by the Company of the minimum
of 250,000 shares of the 450,000 shares of Class A Common Stock offered hereby
and the second table reflects the sale by the Company of all of the 450,000
shares of Class A Common Stock offered hereby:
IF MINIMUM OF 250,000 SHARES SOLD:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
NUMBER PERCENT AMOUNT PERCENT PRICE
PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders(1) 5,550,000 95.7% $1,000 -% -
New investors 250,000 4.3 2,500,000 100.0 $10.00
Total 5,800,000 100.0% $2,501,000 100.0%
</TABLE>
IF MAXIMUM OF 450,000 SHARES SOLD:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
NUMBER PERCENT AMOUNT PERCENT PRICE
PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders(1) 5,550,000 92.5% $1,000 -% -
New investors 450,000 7.5 4,500,000 100.0 $10.00
Total 6,000,000 100.0% $4,501,000 100.0%
</TABLE>
(1) As of the date of this Prospectus, there are no shares of Class A
Common Stock outstanding and 5,550,000 shares of Class B Common Stock
outstanding. All of the outstanding Class B Common Stock is held of
record by Black Family Members. Shares of Class B Common Stock are
convertible at any time into Class A Common Stock and convert
automatically into Class A Common Stock upon a transfer to anyone other
than a Black Family Member. All of the shares of Class B Common Stock
will automatically convert into Class A Common Stock if the total number
of shares of Class B Common Stock outstanding falls below 20% of the
aggregate number of shares of Common Stock outstanding.
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and the total
capitalization of the Company at June 30, 1996, (i) on a historical basis and
(ii) on an adjusted basis to reflect the issuance and sale by the Company of
the minimum of 250,000 shares of the 450,000 shares of Class A Common Stock
offered hereby at an initial public Offering price of $10.00 per share, net of
estimated Offering expenses, the recognition of a deferred tax liability of
$135,000 resulting from termination of S Corporation status, the application
of the estimated net proceeds of the Offering to pay the June 30 E&P Dividend
of approximately $2.7 million, and the additional borrowing required to fund
the June 30 E&P Dividend. This table should be read in conjunction with
"Management Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Financial Statements and Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
ACTUAL AS ADJUSTED
<S> <C> <C>
(IN THOUSANDS)
SHORT-TERM DEBT:
Borrowings under revolving credit facility $5,450 $5,450
Long-term debt, current portion 37 37
Total short-term debt $5,487 $5,487
LONG-TERM DEBT NET OF CURRENT PORTION: $ 157 $ 457
STOCKHOLDERS' EQUITY:
Preferred Stock, no par value per share; 2,500,000
shares authorized; no shares issued and outstanding;
no shares issued and outstanding as adjusted 0 0
Class A Common Stock, $0.01 par value per share;
25,000,000 shares authorized; no shares issued and
outstanding; 250,000 shares issued and outstanding as
adjusted _ 3
Class B Common Stock, $0.01 par value per share,
25,000,000 shares authorized; 5,550,000 shares issued
and outstanding; 5,550,000 shares issued and
outstanding as adjusted 1 1
Additional paid-in capital _ 2,397
Unrealized gain on equity securities 89 89
Retained earnings 10,652 7,817
Total stockholders' equity 10,742 10,307
Total $ 10,899$ 10,764
Capitalization
</TABLE>
<PAGE>
The following table sets forth the short-term debt and the total
capitalization of the Company at June 30, 1996, (i) on a historical basis and
(ii) on an adjusted basis to reflect the issuance and sale by the Company of
all of the 450,000 shares of Class A Common Stock offered hereby at an initial
public Offering price of $10.00 per share, net of estimated Offering expenses,
and the recognition of a deferred tax liability of $135,000 resulting from
termination of S Corporation status, the application of a portion of the
estimated net proceeds of the Offering to the payment of the June 30 E&P
Dividend of approximately $2.7 million, the repayment of long-term debt, and a
reduction in borrowings under the revolving credit facility. This table should
be read in conjunction with "Management Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Financial Statements
and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
ACTUAL AS ADJUSTED
<S> <C> <C>
(IN THOUSANDS)
SHORT-TERM DEBT:
Borrowings under revolving credit facility $5,450 $3,944
Long-term debt, current portion 37 0
Total short-term debt $5,487 $3,944
LONG-TERM DEBT NET OF CURRENT PORTION: $ 157 $ 0
STOCKHOLDERS' EQUITY:
Preferred Stock, no par value per share; 2,500,000
shares authorized; no shares issued and outstanding;
no shares issued and outstanding as adjusted 0 0
Class A Common Stock, $0.01 par value per share;
25,000,000 shares authorized; no shares issued and
outstanding; 450,000 shares issued and outstanding as
adjusted 0 5
Class B Common Stock, $0.01 par value per share,
25,000,000 shares authorized; 5,550,000 shares issued
and outstanding; 5,550,000 shares issued and
outstanding as adjusted 1 1
Additional paid-in capital _ 4,395
Unrealized gain on equity securities 89 89
Retained earnings 10,652 7,817
Total stockholders' equity 10,742 12,307
Total $ 10,899$ 12,307
Capitalization
</TABLE>
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following consolidated statements of operations and balance sheet data
as of and for the years ended February 28, 1992, through February 28, 1995,
and as of and for the ten months ended December 31, 1995, has been derived
from the Company's audited consolidated financial statements. The statement of
operations data for the years ended February 28, 1994 and 1995, and the ten
months ended December 31, 1995, and the balance sheet data at February 28,
1994 and at December 31, 1995, are derived from the consolidated financial
statements audited by Arthur Andersen LLP, independent auditors and which are
contained elsewhere in this Prospectus. Selected consolidated financial data
as of June 30, 1996, and for the six months ended June 30, 1995 and 1996, has
been derived from the unaudited consolidated financial statements of the
Company and, in the opinion of the Company's management, includes all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the Company's results of operations for the periods then ended
and the financial position of the Company as of such dates. The results for
the six months ended June 30, 1996, may not be indicative of the results to be
achieved for the entire fiscal year. The information set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Consolidated Financial
Statements and related notes incorporated by reference or included elsewhere
in this Prospectus.
<PAGE>
TEN MONTHS
ENDED SIX MONTHS
DECEM- ENDED
<TABLE>
<CAPTION>
YEARS ENDED FEBRUARY 28, BER 31, JUNE 30,
1992 1993 1994 1995 1995 1995 1996
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C. <C.
Statement of Operations Data:
Net sales $13,148 $13,865 $17,846 $23,071 $23,586 $ 8,456
$13,509
Cost of sales 10,817 11,338 14,578 18,734 18,392 6,858
11,062
Gross profit 2,331 2,527 3,268 4,337 5,194 1,598
2,447
Selling, general, and administrative
expenses 1,107 1,337 1,750 1,893 1,483 794
813
Income from operations 1,224 1,190 1,518 2,444 3,711 804 1,634
Other income (expense), net 147 224 228 192 98 143 (20)
Income before income taxes 1,371 1,414 1,746 2,636 3,809 947 1,614
Pro forma provision for income taxes (1) 515 532 683 1,037 1,485 370 629
Pro forma net income (1) $ 856 $ 882 $1,063 $1,599 $2,324 $577 $985
Pro forma net income per share (1)(2) $ .40 $ .10 $ .17
Weighted average shares
outstanding (2) 5,820,000
SELECTED OPERATING DATA:
Super Washreg-trade-mark facilities constructed 27 27 31 46 48 14 23
Self-serve bays 78 81 93 151 151 43 80
Supermaticreg-trade-mark bays 32 38 43 70 76 21 27
Super Washreg-trade-mark facilities sold 27 25 32 38 41 15 20
Self-serve bays 78 73 95 127 132 39 56
Supermaticreg-trade-mark bays 32 37 44 59 67 21 20
Ratios:
Current ratio 8.79 8.50 10.64 5.90 4.38 3.45 2.05
Debt to equity .40 .31 .13 .22 .26 .40 .79
</TABLE>
______________________
(1) The Company elected S Corporation (as defined in "S Corporation
Distribution") status for federal and state income tax purposes effective
March 1, 1995. The Company's election to be taxed as an S Corporation will
terminate upon consummation of the Offering, and the Company will be subject
to federal and state income taxes from that date forward. The pro forma
provision for income taxes, pro forma net income, and pro forma net income
per share reflect the pro forma effect of income taxes as if the Company had
been taxed as a C corporation for all periods presented.
(2) Pro forma net income per share information assumes that 270,000 of the
shares of Class A Common Stock being offered by the Company hereby were
outstanding during the periods indicated. The 270,000 shares represent the
approximate number of shares (of the maximum of 450,000 shares being
offered), which are being sold by the Company (at the initial public
Offering price set forth on the cover page of this Prospectus) to fund the
payment of a dividend equal to the amount of the Company's taxable earnings
and profits from March 1, 1995 through June 30, 1996, not yet distributed to
existing stockholders of approximately $2.7 million ("June 30 E&P
Dividend").
<PAGE>
<TABLE>
<CAPTION>
FEBRUARY 28, DECEMBER 31, JUNE 30, 1996
As Ad-
1992 1993 1994 1995 1995 ACTUAL JUSTED(3)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $ 3,542 $ 4,244 $ 5,734 $ 7,375 $ 9,754 $ 8,682 $
10,225
Total assets 6,308 7,030 7,274 9,805 14,866 19,214 19,214
Long term debt 1,357 1,086 238 206 176 157 0
Stockholders' equity 4,497 5,379 6,441 8,069 11,791 10,742 12,307
</TABLE>
______________________
(3) Adjusted to give effect to the conversion of the Company to a
C corporation, the sale of the maximum number of shares of Class A Common
Stock offered by the Company hereby (at the initial public Offering price
set forth on the cover page of this Prospectus net of estimated Offering
expenses) and the application of such proceeds therefrom as of June 30,
1996. See "Use of Proceeds" and Note 13 to the Company's financial
statements. Gives effect to the payment of the June 30 E&P Dividend, but
does not give effect to the anticipated distribution of an additional $4.0
million in estimated S Corporation earnings for the period from July 1, 1996
to the consummation of the Offering.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Financial Data and the Financial Statements and Notes thereto included in this
Prospectus.
OVERVIEW
The Company is engaged in the sale and licensing of "turn key" Super
Washreg-trade-mark facilities and provides ongoing support to its licensees
through its parts, service, research and advertising departments. The Company
is also available to its licensees for consultation regarding various business
aspects of operating their Super Washreg-trade-mark facilities. This
includes licensee questions regarding recordkeeping, financial and statistical
analysis, personnel issues, promotion ideas, property tax assessments,
financing, insurance claims, etc.
The Company also owns and operates Super Washreg-trade-mark facilities
and provides management services for licensees who choose not to manage their
facilities on a day-to-day basis. The Company believes it is the only Company
in the car wash industry that provides licensees a "turn-key" package whereby
the Company acquires the site, handles all zoning and permitting issues,
performs as the general contractor, sells and installs the equipment, trains
the licensees and their employees, conducts the grand opening, and provides
consultation and management services thereafter.
At June 30, 1996, there were 380 Super Washreg-trade-mark facilities
operating in 19 states. These facilities are primarily located in the
Midwest, with 78% located in Illinois, Wisconsin, Iowa, South Dakota,
Nebraska, Indiana and Ohio. As of June 30, 1996, 56 facilities constructed by
the Company were delicensed and not operating as Super Washreg-trade-mark
facilities.
The Company's sales and profits are derived from the construction and sale
of "turn key" Super Washreg-trade-mark facilities, the sale of parts and
supplies to operating Super Washreg-trade-mark facilities, the sales results
during the period the Company operates a Super Washreg-trade-mark facility
until the facility is sold, if applicable, and management fees from managing
certain Super Washreg-trade-mark facilities. The majority of sales and
profits have been from the construction and sale of "turn key" Super
Washreg-trade-mark facilities. The Company is beginning to generate sales
from retaining Super Washreg-trade-mark facilities and operating them long-
term. As the Company retains and operates more Super Washreg-trade-mark
facilities, its sales and profits will primarily be derived from both
operating Super Washreg-trade-mark facilities (to the extent operated
profitably) and the construction and sale of "turn key" Super
Washreg-trade-mark facilities to licensees.
<PAGE>
RESULTS OF OPERATION
The following table sets forth, for the periods indicated, certain
information derived from the Company's Statement of Operations expressed as a
percentage of net sales.
Fiscal Year Ten Months Six Months
<TABLE>
<CAPTION>
ENDED ENDED ENDED February 28, February 28,December 31, June 30,June 30,
1994 1995 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Sales
Super Washreg-trade-mark facilities 81.3% 83.8% 84.1% 74.9% 79.2%
Parts, supplies & service 15.2 14.0 12.0 19.7 14.8
Operations & fees 3.5 2.2 3.9 5.4 6.0
Total sales 100.0 100.0 100.0 100.0 100.0
Cost of sales
Super Washreg-trade-mark facilities 65.8 66.6 64.9 59.9 63.8
Parts, supplies & service 12.4 12.0 9.4 16.2 12.9
Operations & fees 3.5 2.6 3.7 5.0 5.2
Total cost of sales 81.7 81.2 78.0 81.1 81.9
Gross profit 18.3 18.8 22.0 18.9 18.1
Selling, general &
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
administrative expenses 9.8 8.2 6.3 9.4 6.0 Operating income 8.5
10.6
15.7
9.5
12.1
Other income (expense) net 1.3 .8 .4 1.7 (.1)
Income before pro forma
income taxes 9.8 11.4 16.1 11.2 12.0
Pro forma income taxes (1) 3.8 4.5 6.3 4.4 4.7
Pro forma net income 6.0% 6.9% 9.8% 6.8% 7.3%
</TABLE>
________________________
(1) For the fiscal years ended February 28, 1995 and 1994, the Company
operated as a C corporation. The income taxes above reflect the income tax
provision for those years. Beginning March 1, 1995, the Company operated as
an S Corporation and was not subject to federal income taxes and most state
and local income taxes. For the ten months ended December 31, 1995, and the
six-month periods shown, pro forma income taxes are based upon estimated
income tax rates that would have applied if the Company had been operating
as a C-corporation.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
NET SALES for the six-month period ended June 30, 1996, increased 59.8%
to $13,509,000 from $8,456,000 for the comparable period ended June 30, 1995.
This net sales increase was primarily due to increased sale of Super
Washreg-trade-mark facilities. This increase was the direct result of the
company's strategy of constructing washes in southern climates during winter
months. Sales of Super Washreg-trade-mark facilities increased 68.8% to
$10,695,000; while sales of parts, and supplies and service increased 20.0% to
$2,004,000. Other sales including management fees and gross revenues from
Company-owned Super Washreg-trade-mark facilities increased 79.9% to
$810,000 as a result of an increase in the number of Super
Washreg-trade-mark facilities operating while held in inventory for sale to
approved licensees.
GROSS PROFIT for the six-month period ended June 30, 1996, increased
53.2% to $2,447,000 from $1,597,000 for the comparable period ended June 30,
1995. As a percentage of net sales, gross profit margin for the six-month
period ended June 30, 1996, was 18.1% compared to 18.9% for the comparable
period ended June 30, 1995. The decrease is the result of additional
construction overhead during the first quarter of 1996 to initiate the
construction of Super Washreg-trade-mark facilities in southern climates.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES for the six-month period
ended June 30, 1996, increased 2.5% to $813,000 from $794,000 for the
comparable period ended June 30, 1995. As a percentage of net sales, these
expenses were 6.0% and 9.4% for the six-month periods ended June 30, 1996 and
1995, respectively. This percentage reduction is primarily the result of the
increase in net sales and the Company's ability to control such expenses while
net sales are increasing.
OTHER INCOME (EXPENSE) NET for the six-month period ended June 30, 1996,
was a net expense of $20,000, while for the comparable period ended June 30,
1995, was a net income of $143,000. The difference of $163,000 is primarily
the result of increased borrowing and interest expense to initiate
construction of Super Washreg-trade-mark facilities in southern climates as
discussed earlier, the distribution of approximately $2.7 million of cash
dividends to stockholders, which was borrowed under the credit facility, and
increased borrowing under the credit facility to finance the Super
Washreg-trade-mark facilities held for sale.
PRO FORMA INCOME TAXES for the six-month periods ended June 30, 1996 and
1995, were calculated at a rate of 39%. The Company was taxed as a C
corporation through February 28, 1995, and as an S Corporation thereafter.
Upon consummation of the Offering, the Company will again be taxed as a C
corporation.
TEN MONTHS ENDED DECEMBER 31, 1995, AND FISCAL YEARS ENDED FEBRUARY 28, 1995
AND 1994
NET SALES were $23,586,000 in the ten months ended December 31, 1995,
compared to $23,071,000 and $17,846,000 in the fiscal years ended February 28,
1995 and 1994, respectively. Net sales increases during these periods were
primarily attributed to increased sales of Super Washreg-trade-mark
facilities. A comparison of sales of "turn key" Super Washreg-trade-mark
facilities self-serve bays and Supermaticreg-trade-mark bays, for the
periods presented is as follows:
Fiscal Year Fiscal Year Ten Months
Ended Ended Ended
February 28, February 28, December 31,
SALES 1994 1995 1995
"Turn key" Super Washreg-trade-mark facilities 32 38 41
Self-serve bays 95 127 132
Supermaticreg-trade-mark bays 44 59 67
GROSS PROFIT was $5,194,000 for the ten months ended December 31, 1995,
compared to $4,337,000 and $3,268,000 for the fiscal years ended February 28,
1995 and 1994 respectively. As a percentage of net sales, gross profit was
22% for the ten months ended December 31, 1995; 18.8% for the year ended
February 28, 1995; and 18.3% for the year ended February 28, 1994. The
increase in gross profit margin from the fiscal years ended February 28, 1995
and 1994 to the ten months ended December 31, 1995, is largely explained by
the increased number of Super Washreg-trade-mark facilities constructed on
private sites. For the ten months ended December 31, 1995, 19 of the 41 "turn
key" Super Washreg-trade-mark facilities sold were on sites owned prior to
construction by the licensee. For the fiscal years ended February 28, 1995
and 1994, sales of "turn key" Super Washreg-trade-mark facilities on sites
owned by the licensee were 11 of 38, and 14 of 32, respectively. As real
estate prices have increased, the gross profit recognized by the Company on
the site portion of a "turn key" Super Washreg-trade-mark facility has
decreased. With a private site, "turn key" sales are only recognized for
construction and equipment and the resulting gross profit as a percentage of
net sales is higher.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES were $1,483,000 in the ten
months ended December 31, 1995, compared to $1,893,000 and $1,750,000 in the
fiscal years ended February 28, 1995 and 1994, respectively. As a percentage
of net sales, selling, general, and administrative expenses decreased from
9.8% to 8.2% in comparing the fiscal year ended February 28, 1994, to the
fiscal year ended February 28, 1995, and finally to 6.3% for the ten months
ended December 31, 1995. For the fiscal years ended February 28, 1995 and
1994, the compensation to the two officer-stockholders as a percentage of
sales was 4.6% and 4.8% respectively. For the ten months ended
December 31, 1995, it was 2.0%, which is the principal reason for the
decrease.
OTHER INCOME (EXPENSE) NET was $98,000 for the ten months ended
December 31, 1995, compared to $192,000 and $228,000 for the fiscal years
ended February 28, 1995 and 1994, respectively. The decrease during these
periods is the result of increased borrowing and interest expense as the
Company increased Super Washreg-trade-mark facilities under construction and
its inventory of Super Washreg-trade-mark facilities operating and held for
sale.
PRO FORMA INCOME TAXES as indicated in the footnote are the actual income
tax provisions for the fiscal years ended February 28, 1995 and 1994. For the
ten months ended December 31, 1995, the income taxes are based upon estimated
income tax rates that would have applied if the Company had been operating as
a C corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date primarily from operating
cash flow, although such funds have also been supplemented by borrowings under
lines of credit and term notes as needed. As of June 30, 1996, the Company
had working capital of $8,682,000 including cash and cash equivalents of
$915,000 and marketable securities of $1,898,000. Working capital was
$9,754,000 at December 31, 1995; $7,375,000 at February 28, 1995; and
$5,734,000 at February 28, 1994. The Company's principal uses of cash
historically have been to pay operating expenses and make capital
expenditures. For the periods after March 1, 1995, when the Company elected
to be taxed as an S Corporation, cash has been used for distributions to its S
Corporation stockholders as well.
As of June 30, 1996, the Company has available lines of credit of
approximately $6,500,000 for working capital and $12,000,000 for the financing
of Super Washreg-trade-mark facility construction. As of June 30, 1996, the
Company had borrowings of $5,450,000 outstanding on the working capital lines
of credit. These lines of credit had expiration dates ranging from September
1, 1996 through February 28, 1998. Interest rates on borrowings outstanding
as of June 30, 1996 ranged from 8.25% to 9.25%. Borrowings are secured by
substantially all of the Company's assets. The agreements require the Company
to meet certain restrictive covenants including, among other things, certain
financial statement ratios. As of June 30, 1996, the Company was in
compliance with all applicable covenants.
Beginning with the year ended February 28, 1995, the Company decided to
increase the number of Super Washreg-trade-mark facilities held for sale.
The increase in the cost of Super Washreg-trade-mark facilities operating
pending sale for the fiscal year ended February 28, 1995, was $1,784,000. For
the ten months ended December 31, 1995, the increase was $2,205,000. At
December 31, 1995, the cost of Super Washreg-trade-mark facilities operating
pending sale was $4,014,000, while at June 30, 1996, it was $4,253,000. The
Company expects that Super Washreg-trade-mark facilities operating pending
sale will be maintained at the June 30, 1996 level.
The Company's capital expenditures for property and equipment were
$1,344,000 for the ten months ended December 31, 1995, including $912,000 for
the long-term ownership and operation of Super Washreg-trade-mark
facilities. The capital expenditures for property and equipment for the
fiscal years ended February 28, 1995 and 1994, were $401,000 and $96,000,
respectively.
The Company intends to pay within one year from the Termination Date the
portion of the S Corporation Distribution not funded by the proceeds of the
Offering from alternative sources, including borrowings under the Company's
lines of credit.
The Company believes that its internally generated funds from operations
and existing working capital lines of credit will together be sufficient to
meet the Company's working capital and normal capital expenditure requirements
for the foreseeable future. Expected significant expenditures for the long-
term ownership and operation of Super Washreg-trade-mark facilities will be
funded by the lines of credit available for the financing of Super
Washreg-trade-mark facilities.
EFFECTS OF INFLATION
Although increases in costs for sites, building materials, sub-
contractors, and labor could adversely affect the Company's operations, the
Company generally has been able to maintain cost increases at or below the
level of inflation. Selling price increases have kept pace with cost
increases and gross profit percentages have remained relatively stable.
SEASONALITY AND QUARTERLY FINANCIAL INFORMATION
Historically, the Company had its highest net sales and profits in the
third calendar quarter and the fourth calendar quarter. This fluctuation has
been due to the Company constructing its Super Washreg-trade-mark facilities
predominantly in the climate of the Midwest. Normally the construction season
began by the end of the first calendar quarter with facilities available for
sale in the second calendar quarter. The construction season ended by the end
of the fourth calendar quarter.
As the Company constructs a greater percentage of Super
Washreg-trade-mark facilities in Southern climates, in addition to the
Midwest (six facilities were completed during the first six months in 1996 in
Texas and Arizona), the Company believes net sales and profits from the sale
of Super Washreg-trade-mark facilities should be less seasonal.
Starting in 1996, the business plan of the Company is to retain, own and
operate a number of the Super Washreg-trade-mark facilities constructed by
it each year with the goal of owning and operating in excess of 100 Super
Washreg-trade-mark facilities by the end of the year 2001. The Company
currently operates 4 facilities for long-term ownership. To minimize the
effect on the Company's overall profitability from operating facilities due to
adverse weather conditions in any one region of the United States, the Company
intends to build Super Washreg-trade-mark facilities in geographical regions
offering a variety of weather patterns.
The following is an unaudited summary of the Company's quarterly results
of operations for the calendar years 1994 and 1995, and the first six months
of 1996.
QUARTERLY DATA
(CALENDAR YEAR IN THOUSANDS)
FIRST SECOND THIRD FOURTH CALENDAR
QUARTER QUARTER QUARTER QUARTER YEAR
Net Sales
94 $ 2,033 100.0% $ 5,546 100.0% $ 7,361 100.0% $ 7,666 100.0% $22,606
100.0%
95 4,573 100.0 3,883 100.0 11,465 100.0 5,851 100.0 25,772 100.0
96 4,644 100.0 8,865 100.0
Gross Profit
94 $ 219 10.8% $ 1,079 19.5% $ 1,725 23.4% $ 1,375 17.9% $ 4,398
19.4%
95 780 17.1 818 21.1 2,755 24.0 1,048 17.9 5,401 21.0
96 539 11.6 1,909 21.5
Pro-Forma
Net Income
(Loss)
94 $ (27 ) (1.3)% $ 407 7.3% $ 717 9.7% $ 426 5.6% $ 1,523
6.7%
95 295 6.4 283 7.3 1,443 12.6 336 5.7 2,357 9.1
96 115 2.5 869 9.8
ENVIRONMENTAL REGULATION
The Company is subject to various federal, state, and local environmental
laws and regulations. The Company believes that its operations currently
comply in all material respects with applicable environmental laws and
regulations. The Company believes that the trend in environmental regulation
is toward stricter standards, and that these stricter standards may result in
higher costs for the Company and its competitors. Those costs and required
capital expenditures are not expected to be material to the Company.
<PAGE>
BUSINESS
GENERAL
The Company is engaged in the sale and licensing of "turn key" Super
Washreg-trade-mark facilities and provides ongoing support to its licensees
through its parts, service, research and advertising departments. The Company
is also available to its licensees for consultation regarding various business
aspects of operating their Super Washreg-trade-mark facilities. This
includes licensee questions regarding recordkeeping, financial and statistical
analysis, personnel issues, promotion ideas, property tax assessments,
financing, insurance claims, etc.
The Company also owns and operates Super Washreg-trade-mark facilities
and provides management services for licensees who choose not to manage their
facilities on a day-to-day basis. The Company believes it is the only Company
in the car wash industry that provides licensees a "turn-key" package whereby
the Company acquires the site, handles all zoning and permitting issues,
performs as the general contractor, sells and installs the equipment, trains
the licensees and their employees, conducts the grand opening, and provides
consultation and management services thereafter.
As of June 30, 1996, there were 380 Super Washreg-trade-mark facilities
operating in 19 states. These facilities are primarily located in the
Midwest, with 78% located in Illinois, Wisconsin, Iowa, South Dakota,
Nebraska, Indiana and Ohio. Of the 380 Super Washreg-trade-mark facilities
operating as of June 30, 1996, employees of the Company owned or had an
interest in 68 facilities, including 28 facilities in which non-officer
employees had an interest, 31 facilities in which executive officers had an
interest and 9 facilities in which non-officer employees and executive
officers had an interest.
Historically, the Company strategy has been to sell all of the Super
Washreg-trade-mark facilities it constructs to approved licensees. For the
last five reporting periods, fiscal years ending February 28, 1992 through
February 28, 1995, and the ten months ended December 31, 1995, gross sales
from the sale of Super Washreg-trade-mark facilities ranged from 81% to 84%
of total gross sales.
The percentage of new Super Washreg-trade-mark facilities sold during
these reporting periods to licensees who already owned one or more Super
Washreg-trade-mark facilities ranged from 33% to 48% of the total facilities
sold. The remainder of the Super Washreg-trade-mark facilities sold during
these periods were sold to new Super Washreg-trade-mark licensees.
During the last five reporting periods, the number of Super
Washreg-trade-mark facilities developed by the Company on sites owned by
Super Washreg-trade-mark licensees ranged from 25% to 43% of the total Super
Washreg-trade-mark facilities developed by the Company during those periods.
As the Company implements its business plan of retaining, owning, and
operating a number of the Super Washreg-trade-mark facilities it constructs
each year, the majority of the real estate the Company acquires for facilities
will be for this purpose. In general the construction and sale of Super
Washreg-trade-mark facilities for licensees will be on real estate owned or
leased by the licensee.
The Company has purchased a number of existing Super Washreg-trade-mark
facilities as well as other existing car wash facilities which it retrofitted
into Super Washreg-trade-mark facilities which it sold or is operating
pending sale. During the last five reporting periods, 6 such facilities were
acquired. In addition, the Company has expanded a number of Super
Washreg-trade-mark facilities to add additional bays. During the last five
reporting periods, the Company added in total 6 self-service bays and 17
Supermaticreg-trade-mark bays to these facilities.
INDUSTRY
There are numerous companies in the United States that assemble and
distribute car wash equipment and supplies. According to the International
Car Wash Association ("ICA"), there are approximately 22,000 car washes in the
United States. Car washes are generally classified as either automatic car
washes or self-service car washes. Automatic car washes include full service
conveyor washes (in which the vehicle is moved by a conveyor or other means
through various wash processes and may include extensive hand work to wipe
down the vehicle's exterior and clean the vehicle's interior), exterior only
conveyor washes and exterior only non-conveyor washes (in which the vehicle
remains stationary in the washing area, or bay, while the various wash
processes are applied). Generally, only full service conveyor car washes
include interior cleaning. Most automatic car washes utilize a combination of
a friction cleaning process (in which brushes, pads or other abrasive
processes touch the vehicle) and a high-pressure spray cleaning process.
Self-service car washes use a foaming brush and/or a high-pressure spray
cleaning process which is applied by the customer by means of a hand-held
spray wand. In addition to the basic wash, most car washes offer customers
optional car care products and services.
SUPER WASHreg-trade-mark FACILITIES
A Super Washreg-trade-mark facility generally contains several self-
service car wash bays and one or two Supermaticreg-trade-mark friction-free,
non-conveyor bays. The "typical" Super Washreg-trade-mark facility has
three self-service bays, one Supermaticreg-trade-mark bay and an equipment
room. A Super Washreg-trade-mark facility is generally located on a site
containing approximately 10,000 square feet of hard surface that will
accommodate four or more waiting vehicles per bay. Located in front of each
of the self-service bays is a coin-operated vacuum cleaner. The average price
paid by a self-service wash customer at a Super Washreg-trade-mark facility
is approximately $1.25 for four minutes. The average self-service wash
customer utilizes two four minute cycles to complete the washing process. The
average price paid by a Supermaticreg-trade-mark wash customer, including
polish, is approximately $4.00. Self-service bays may also be used to clean
motorcycles, boats, trailers, lawn tractors, off-road recreational vehicles
and various types of yard and garden equipment.
Super Washreg-trade-mark facilities utilize a high-pressure, friction-
free cleaning process. This process minimizes the possibility of damaging the
car's surface because it does not involve brushes, pads or other abrasive
devices.
The self-service washing process is activated in-bay by the customer
depositing quarters into a coin receptacle mechanism. Customers are offered a
five step process that includes a presoak step, a high-pressure soap step, a
high-pressure rinse step, a high-pressure polish step and a final spot free
rinse step. If selected, the polish step is available for use after the high-
pressure rinse step and before the spot free rinse step. Super
Washreg-trade-mark facilities use a water-based polish instead of an oil-
based product which typically leaves a film build-up upon the car's surface
and smears its windows. The Company believes its polish is the only water-
based polish used in the car wash industry.
The presoak cycle utilizes "SW 3000 Super Soap," a product blended
exclusively for the Company. It is applied under low pressure and is
formulated to emulsify common dirt, bugs, road film and pollutants. The high-
pressure soap step removes the dirt and grime loosened by the SW 3000 Super
Soap and is followed by the high-pressure rinse step which rinses away dirt
and soap residue. The final step is the spot free rinse step in which the
vehicle is rinsed with water purified by a reverse osmosis system. This
system substantially removes all of the minerals, particles and chemicals that
cause spotting and streaking on glass, chrome and paint. After the spot free
rinse is applied, the customer drives away and lets the air dry the vehicle,
thereby avoiding the need for blower-dryers or drying curtains, towels or
chamois which may damage the vehicle's finish.
The Supermaticreg-trade-mark bay offers a friction-free washing process
which takes place while the customer remains in the vehicle. Outside the
Supermaticreg-trade-mark bay is an automatic car wash actuator ("ACW"). To
activate the Supermaticreg-trade-mark bay, the customer, prior to driving
into the bay, chooses one of four options offered at the ACW and pays for the
wash with either cash or pre-purchased specially encoded coupons ("token
notes") which are inserted into the ACW. All options include (i) an
undercarriage flush which is particularly beneficial during the winter months
when salt, snow and other harmful residue can build up underneath the vehicle,
(ii) a pre-soak step in which "SW 3000 Super Soap" is applied to the vehicle's
surface under low pressure, (iii) an initial high-pressure rinse step which is
followed by, (iv) a second high-pressure rinse step and (v) a final spot-free
rinse step. If the customer chooses option two, polish is applied with the
second high-pressure rinse step. If option three is selected, a third high-
pressure rinse step is added, but polish is not included. Option four
includes two SW 3000 Super Soap steps, three high-pressure steps and a spot-
free rinse step and polish is added to the second high-pressure rinse step.
After inserting either cash, token notes or a combination of cash and token
notes into the ACW, a lighted signal, which is located at the front of the bay
in view of the customer, flashes green and the customer drives forward and
automatically trips a switch at the entrance of the bay which activates the
undercarriage flush. As the customer continues to drive forward, the
undercarriage of the vehicle is washed by a high-pressure flush. When the
vehicle drives over a stop plate, the red light of the signal is activated and
stays on until the washing process is completed. The signal also has a light
to indicate when the polish (if selected) and spot-free rinse steps are being
applied. Each car wash step is automatically applied by means of a spray arch
which travels around the vehicle on a fixed overhead track. Following the
spot-free rinse step, the exit door automatically opens and the lighted signal
flashes green to inform the driver to drive forward and exit the bay. A
Supermaticreg-trade-mark wash takes from two minutes and fifty-three seconds
to three minutes and forty-five seconds to complete, depending on the option
selected. Typically, the cash price charged for a Supermaticreg-trade-mark
wash ranges from $3.50 to $6.00, depending on the option selected. Token
notes are generally sold at a discount which the Company believes encourages
customers to wash more frequently.
Most Super Washreg-trade-mark facilities are open twenty-four hours a
day and are lighted for safety, security and night use. Each facility
generally employs 1.5 full-time equivalent employees for the day-time shift
(compared with exterior only and full-service conveyor car washes which,
according to a 1995 survey published in Professional Car Washing & Detailing
Magazine, employ an average of 8.5 and 19.5 full-time equivalent employees,
respectively). The attendant at a Super Washreg-trade-mark facility meets
and greets customers, sells discount Supermaticreg-trade-mark car wash
tokens and maintains the equipment and the Super Washreg-trade-mark facility
premises. The Company has a mission statement for attendants "to meet and
greet the customer with a glad heart and make a positive difference in their
day." The Company believes the execution of this mission statement has a
positive effect on Super Washreg-trade-mark customers and a positive
influence on repeat business.
The following table sets forth the location by state of licensed and
Company-owned operating Super Washreg-trade-mark facilities as of June 30,
1996.
STATE NUMBER OF CAR WASHES
Arizona 1
Colorado 2
Idaho 10
Illinois 144
Indiana 21
Iowa 38
Missouri 8
Minnesota 4
Montana 2
Nebraska 13
Ohio 24
Oregon 1
Pennsylvania 2
South Dakota 12
Tennessee 2
Texas 5
Utah 42
Washington 4
Wisconsin 45
Total 380
LICENSING PROGRAM
Typically, prospective licensees have a strong desire to own their own
business and have discovered the Company either as a customer of an existing
Super Washreg-trade-mark facility or through discussions with another Super
Washreg-trade-mark licensee. The Company has never advertised for new
licensees or for the sale of its Super Washreg-trade-mark facilities.
Each prospective licensee is required to visit the Company headquarters in
Morrison, Illinois. A significant portion of that visit involves a meeting
with senior management personnel. The purpose of the meeting is to (i)
discuss the prospective licensee's future goals and determine where ownership
of a Super Washreg-trade-mark facility fits, (ii) gain insight into the
Company's philosophy of doing business, and (iii) gain a deeper understanding
of the relationship between the Company and its licensees.
If, after this initial meeting, the prospective licensee decides to
continue to pursue the ownership of a Super Washreg-trade-mark facility, the
Company evaluates the information it has been furnished by the prospective
licensee and what it learned from the meeting with the prospective licensee
and either approves or disapproves the prospective licensee as a potential
Super Washreg-trade-mark facility owner.
If approved, the prospective licensee is then required to demonstrate to
the Company that he or she has the financial ability to acquire a Super
Washreg-trade-mark facility. Once the Company is satisfied that the
prospective licensee has the financial ability to acquire a Super
Washreg-trade-mark facility, his or her name is added to the list of
individuals / ownership groups who want to acquire a Super
Washreg-trade-mark facility. Each prospective licensee that is added to the
list must provide the Company with the geographic location and the size of the
Super Washreg-trade-mark facility (number of bays: self-serve and
Supermaticreg-trade-mark bays) he or she is willing to consider acquiring.
As the Company develops Super Washreg-trade-mark facilities which meet their
criteria, prospective licensees are provided information about their locations
and given an opportunity to purchase the facility.
Currently, licensees who purchase Super Washreg-trade-mark facilities
from the Company enter into an Operations Agreement with the Company pursuant
to which the Company grants the licensee the right to use the Super
Washreg-trade-mark name, symbol, logo and colors and the licensee agrees (i)
to use only supplies and products which are sold by or have been approved by
the Company, (ii) to operate and maintain his or her facility in conformity
with the Super Washreg-trade-mark standards, (iii) not to add to or delete
from the original Super Washreg-trade-mark equipment installed in the Super
Washreg-trade-mark facility without the approval of the Company and (iv) not
to compete with the Company. Pursuant to the Operations Agreement the Company
has the right to inspect any Super Washreg-trade-mark facility without
notice and cause the licensee to refrain from using the Super
Washreg-trade-mark name, symbol, logo or colors if the licensee has not
operated or maintained his or her facility in conformity with the Super
Washreg-trade-mark standards, a process that the Company refers to as
"delicensing" a licensee. As of June 30, 1996, 56 facilities constructed by
the Company were delicensed and not operating as Super Washreg-trade-mark
facilities for failure to comply with the Operations Agreement.
Licensees who purchase Super Washreg-trade-mark facilities are also
eligible to participate in the Super Washreg-trade-mark Insurance Package.
The Company initiated this package in September 1990 to provide licensees,
from state to state, with quality coverage at an affordable price. The
package, which includes property, liability, workmen compensation, and
extended coverage, is designed, and only available for Super
Washreg-trade-mark licensees. The package is provided and administered
through an independent insurance agency and underwritten by a national
insurance company. The Company receives no remuneration for licensee
participation.
The Company is considering whether to strengthen its Operations Agreement
to have more substantial control over certain aspects of its licensees'
operations or to convert the relationship between future licensees and the
Company from a license without fees or substantial control to a franchise
relationship with fees and more comprehensive controls. The Company's
existing license agreements do not contain a specific term. If the Company
decides to cause its current licensees to enter into a new license agreement
or become franchisees, there is no assurance the Company will be able to
accomplish such result. If the Company decides to enter into a new license
agreement or become a franchisor, it will be required to register as a
franchisor in those states that require registration and in which the Company
intends to offer Super Washreg-trade-mark franchises. There is no assurance
that the Company can meet all such states' requirements. Furthermore, certain
state regulatory agencies may raise the issue of why the Company was not
previously registered as a franchisor. The Company believes that its current
license arrangement does not constitute a franchise, although there is no
assurance that the resolution of such issue, if raised, will be favorable to
the Company.
REAL ESTATE ACQUISITION AND DEVELOPMENT
The Company has a real estate acquisition and development department
comprised of two site selectors, a zoning and permits supervisor and
assistant, a department head and an assistant to the department head. Robert
D. Black also participates in the approval process for every site. Mr. Black,
over his twenty year career in the car wash industry, has reviewed and been
instrumental in submitting real estate purchase offers on over 3000 potential
car wash sites. Mr. Black has ultimate approval authority with respect to each
site together with the orientation of the Super Washreg-trade-mark facility
on such site. In order for a site to be considered for a Super
Washreg-trade-mark facility, the site must meet the requirements of the
Company, including those relating to location, lot size, traffic count,
traffic speed, population, available utilities, competition, the local
economic climate, zoning and other pertinent demographic data. The Company
also works to obtain appropriate permits required by the various state and
municipal authorities who have jurisdiction over the site.
In addition to locating and acquiring sites for development as a Super
Washreg-trade-mark facility, the Company's real estate acquisition and
development department also provides extensive assistance to prospective
licensees and existing licensees who wish to acquire their own site to develop
a Super Washreg-trade-mark facility. All such sites must meet the Company's
site criteria and standards and must be approved by the Company's real estate
department's acquisition committee.
The Company often purchases sites before it has a licensee to whom to sell
the site. A number of Super Washreg-trade-mark facilities have been built
on real estate owned by licensees. A limited number of Super
Washreg-trade-mark facilities have been built on real estate leased by
either the Company or the licensee.
CONSTRUCTION
The Company construction personnel supervise and perform certain phases of
the construction of each Super Washreg-trade-mark facility. The Company has
34 full time employees in its construction department, including
13 construction supervisors. This department is responsible for building each
Super Washreg-trade-mark facility to the standards and specifications of the
Company. The Super Washreg-trade-mark facility, except for plumbing and
electrical work, is constructed by the Company personnel and by certain
subcontractors. Many of these subcontractors work for the Company in
different geographic areas. The Super Washreg-trade-mark equipment is
installed and tested by Company equipment technicians. Generally, excavation,
plumbing, electrical and paving work is performed by subcontractors whose
business is located in the community where the Super Washreg-trade-mark site
is located. The Company believes a standard set of proprietary plans enables
the Company to realize savings in the cost of construction of each Super
Washreg-trade-mark facility.
PARTS AND SERVICE
The Company furnishes support to each Super Washreg-trade-mark licensee
after the Super Washreg-trade-mark facility opens. Licensees can call the
Company parts and service department about any maintenance or repair problem
and receive free consultation no matter how long it takes to work through the
problem; a charge is only made in the event an on-site service call is
required. The Company staffs its service phones Monday through Friday from
8:00 AM to 5:00 PM and on Saturday from 9:00 AM to 2:00 PM. Service
technicians then monitor the Company's telephone answering service at
specified times for the remainder of Saturday afternoon, on Sundays, and on
holidays, and respond to any licensee service requests received during these
time periods. The Company generally maintains a complete inventory of parts
and supplies required to keep a Super Washreg-trade-mark facility
operational.
ADVERTISING
The Company employs a full time advertising coordinator to supervise the
advertising program at Super Washreg-trade-mark facilities managed by the
Company, to administer Company advertising campaigns where all licensees are
eligible to participate, and to consult with licensees regarding advertising
plans at their Super Washesreg-trade-mark. The Company maintains an
extensive library of Super Washreg-trade-mark advertising materials for
various media. Sample advertising materials and advertising assistance is
provided at no cost to licensees.
MANAGEMENT
The Company's Super Washreg-trade-mark facility management department
was established in 1986 to manage Super Washreg-trade-mark facilities for
licensees who do not want to be operators. The Company generally charges
licensees a percentage of gross revenue (ranging from 8 to 9%) for this
service (See "Certain Relationships and Related Party Transactions.") As of
June 30, 1996, the Company managed 55 Super Washreg-trade-mark facilities
pursuant to management agreements with licensees and 19 Super
Washreg-trade-mark facilities owned by the Company, 4 of which are held for
long-term ownership, and 15 of which are held in inventory for sale to
approved licensees. The Company is responsible for the day-to-day operation
of the Super Washreg-trade-mark facility, including but not limited to the
handling of all personnel matters, overseeing all ordering of parts and
service, implementing all advertising and promotions, accounting for all
receipts, performing all bill paying and bookkeeping functions, preparing all
payroll and sales tax returns, and preparing periodic financial statements.
The Company management department has nine field staff personnel whose primary
duty is to insure that the managers and attendants at each Super
Washreg-trade-mark facility managed by the Company conform to Company
standards and procedures and that the building and equipment are being
maintained according to Company standards. This is accomplished through
frequent telephone contact, written communication and monthly or more frequent
visits to the facility. Throughout the month, field personnel also work
closely with the attendants at each facility handling any special situations
which may arise as well as assisting them in the implementation of new
programs and the evaluation of the performance of such programs.
In addition, for a fee Company personnel are available to staff a
licensee's facility for a limited period of time to provide temporary
management assistance. The Company is also available, for a fee, to hire
personnel at a licensee's facility, to provide additional training to
attendants and to inspect the facility for whatever repairs and improvements
need to be made.
RESEARCH AND DEVELOPMENT
The Company employs one employee to investigate and test new car wash
equipment and supplies. The Company has introduced many innovations in the
car wash industry, including the first self-service car wash to use low
pressure "SW 3000 Super Soap" presoak and one of the first self-service car
washes to use the reverse osmosis "spot free" rinse. The Company has also
developed a system whereby it can, through the use of a modem and a computer
located at its Morrison, Illinois Service Center, dial into the computer
controlling the operations of the Supermaticreg-trade-mark bay at any Super
Washreg-trade-mark facility and determine the reason for operating problems
and then implement or suggest corrective action. In the event that a computer
program operating the computer at a Super Washreg-trade-mark facility fails
for any reason, the parts and service department is able to download a new
program via the modem and thereby limit the down time of the
Supermaticreg-trade-mark bay to approximately ten minutes. As part of the
same computer system and through the use of proprietary software it developed
and owns, the Company is able to independently access the volume and cash
receipts information at any Super Washreg-trade-mark facility it owns and/or
manages. The Company believes this system provides internal control with
respect to car wash volume and cash receipts. The Company makes this system
available to its licensees.
QUALITY ASSURANCE PROGRAM
The Company's Quality Assurance Program provides its licensees with
feedback regarding the general conditions and operations of a licensee's Super
Washreg-trade-mark facility. Generally, each licensee's Super
Washreg-trade-mark facility is inspected by a Company Quality Assurance
Inspector once a year. The Company uses these inspections to monitor
licensees compliance with the operating terms and conditions of the Operations
Agreement. Facilities which are in violation of the Operations Agreement will
receive a letter from the Company that describes the violations. The licensee
then has 60 days to correct the violations. If any violations remain
uncorrected at the termination of the 60 day period, the Company will commence
actions to delicense the facility. As of June 30, 1996, the Company had
delicensed approximately 56 facilities for failure to comply with the
Operations Agreement.
COMPETITION
Super Washreg-trade-mark facilities are in competition with other self-
service exterior and automatic car washes as well as automatic full service
washes which, unlike Super Washreg-trade-mark facilities also clean the
interior of the car, although usually at a higher price per wash. Although
the Company believes that its network of licensed Super Washreg-trade-mark
facilities is the largest car wash network in the United States, there may be
other larger networks, or persons and entities having similar or greater
experience and financial resources than the Super Washreg-trade-mark
network. In addition, the car washes owned by the Company may face
competition from existing and future car washes, including self-service and
full service washes, some of which may have similar equipment. Customers also
may elect to wash their cars without using a car wash facility.
EMPLOYEES
As of June 30, 1996, the Company employed 184 persons, none of whom is
covered by a collective bargaining agreement. The Company provides medical
insurance and other benefits for eligible employees. The Company generally
considers its relationships with its employees to be good.
INTELLECTUAL PROPERTY RIGHTS
The Company has obtained the registration of the trademarks Super
Washreg-trade-mark and Supermaticreg-trade-mark. Such trademarks are
registered on the Principal Register of the U.S. and Trademark Office. Such
trademarks are believed by the Company to be well-recognized by consumers and
therefore important in the business of the Company. The Company grants to
each licensee the right to use such trademarks in connection with such
licensee's facility.
PROPERTIES
The Company leases its executive offices and operating headquarters from
Robert D. and Mary K. Black. The executive offices and headquarters are
located in Morrison, Illinois and consist of a parts and service building, an
administrative office building, a warehouse building, a secured open storage
area and vacant ground for expansion of the Company's facilities. The parts
and service building was constructed in 1988 and both the administrative
office and the warehouse buildings were constructed in 1995 and occupied in
early January, 1996. The Company has entered into an agreement with the
Blacks to lease a training facility to be constructed by them on the vacant
ground to be used for expansion of the Company's facilities. This facility is
expected to be completed in early 1997.
The parts and service building contains approximately 8,430 square feet
and the administrative office and warehouse buildings contain approximately
8,320 square feet and 1,800 square feet, respectively. Each property is
leased by the Company under the terms of a triple net lease agreement.
Beginning in 1996, annual lease payments to be paid to Robert D. and Mary K.
Black will amount to approximately $156,600. See "Certain Relationships and
Related Party Transactions."
ENVIRONMENTAL PROCEEDINGS
The Company is subject to various federal, state and local environmental
laws and regulations. The Company believes that its operations currently
comply in all material respects with applicable environmental laws and
regulations. The Company obtains a Phase I environmental study on sites it
acquires which it believes have a potential environmental risk.
LEGAL PROCEEDINGS
In the opinion of the Company's management, there are no legal proceedings
pending to which the Company is a party or to which any of its properties is
subject, other than ordinary routine litigation incidental to the business,
which is not expected to have a material adverse effect on the results of
operations, financial condition or cash flows of the Company.
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
As of June 30, 1996, the directors and executive officers of the Company,
their ages and their present positions with the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES HELD
<S> <C> <C>
Mary K. Black 45 Chairman of the Board
of Directors and Secretary
Robert D. Black 47 Director, President,
Treasurer and Chief Executive
Officer
Joseph B. Hermes 55 Senior Vice President
Donald B. Vogel 42 Vice President and
Chief Financial Officer
Michael C. Fliss 39 Vice President and Chief
Operating Officer
Barry J. Black 45 Vice President
</TABLE>
All directors hold office until the next annual meeting of stockholders of
the Company, and until their successors have been elected and qualified. The
Company's officers are elected annually by and serve at the discretion of the
Board of Directors. Robert Black and Mary Black are husband and wife. Barry
Black is Robert Black's brother.
Within 90 days of the consummation of the Offering, the Company
anticipates naming Mr. Hermes, Mr. Vogel, Mr. Fliss, Mr. Barry Black and the
following three additional persons, who are not affiliated with the Company,
as directors: ________.
MARY K. BLACK. Mary K. Black has served as Chairman of the Board of
Directors since September 10, 1996, and an executive officer and Director of
the Company since its inception in March 1982. Mrs. Black has been
responsible for the development of many departments at the Company, including
the accounting, advertising and customer relations departments. Additionally,
Mrs. Black has been directly responsible for developing the Parts and Service
Department, which has grown from $1,519,000 in gross sales in 1989 to
$3,241,000 in 1995. Mrs. Black is a co-founder of the Company, along with her
husband, Robert.
ROBERT D. BLACK. Robert D. Black has served as the Chief Executive
Officer, President, Treasurer and a Director of the Company since its
inception in March 1982. His primary responsibility is acting as the
Company's primary "vision keeper," whereby he cultivates the Company's growth
while upholding and monitoring its goals and philosophy. Mr. Black has been
and remains the Company's only sales representative and is a member of the
real estate site selection committee. Mr. Black is a co-founder of the
Company, along with his wife, Mary.
JOSEPH B. HERMES. Joseph B. Hermes has served as Senior Vice President of
the Company since December 1995 and will direct the new Company strategy.
Mr. Hermes joined the Company in February 1989 as a Vice President and Chief
Financial and Operating Officer. Prior to joining the Company, Mr. Hermes
served as President and Chief Executive Officer of Whiteside County Bank,
Morrison, Illinois. Mr. Hermes became associated with Bob and Mary Black, the
co-founders of the Company, in 1976, when they obtained their first car wash
loan from the bank. As the bank officer in charge of the Super Wash
relationship, Mr. Hermes was a close advisor to the Company during its
development. Prior to joining the bank in September 1974, Mr. Hermes was a
partner in the accounting firm of Clifton, Gunderson & Co. Mr. Hermes
graduated from Loras College, Dubuque, Iowa in June 1962. Following
graduation, he was employed by Arthur Andersen LLP. Mr. Hermes received his
Certified Public Accountant Certificate in September 1971.
DONALD B. VOGEL. Donald B. Vogel has served as a Vice President and Chief
Financial Officer of the Company since July 1994. From 1987 to June 1994,
Mr. Vogel was a partner with Clifton, Gunderson & Co., a certified public
accounting firm, in the Sterling, Illinois office. Clifton, Gunderson & Co.
provided audit, tax and management advisory services to the Company from 1982
to June 1994. Mr. Vogel served as the partner-in-charge of these engagements
until he joined the Company in July 1994. Mr. Vogel is a Certified Public
Accountant and has a Bachelor in Business Administration from Western Illinois
University.
MICHAEL C. FLISS. Michael C. Fliss has served as a Vice President and
Chief Operating Officer of the Company since December 1995. Prior to joining
the Company, Mr. Fliss served as a Director and the President/Chief Operating
Officer of AMCORE Bank N.A., Rock River Valley ("Amcore") from January 1993.
Amcore is one of the Company's primary lenders and, as President, Mr. Fliss
supervised the Bank's relationship with the Company. From April 1990 to
January 1993, Mr. Fliss served as the Executive Vice President/Chief Lending
Officer of Amcore-Sterling. From June 1982 to March, 1989, he was employed by
MBank Dallas, N.A. ("MBank"), Dallas, Texas, as a commercial lending officer
in the National and Middle Market sectors. MBank was acquired by Banc One
Corporation in 1989, and Mr. Fliss served as a First Vice President-Bank
Acquisitions of Banc One N.A., Dallas and served on the Executive Loan
Committee and Credit Committee. Mr. Fliss has a Bachelor of Business
Administration degree in finance and financial economics from the University
of Iowa.
BARRY J. BLACK. Barry J. Black has served as a Vice President since June
1996. In 1985, Mr. Black became the Construction and Installation Department
Head. In his role as department head, Mr. Black has been instrumental in the
development of the department and in the development of the building design
and equipment layout. From 1981 to 1985, Mr. Black worked as an independent
contractor exclusively for Super Wash, Inc. Mr. Black has a Bachelor of Arts
degree from Upper Iowa University.
[INSERT BIOGRAPHIES OF OUTSIDE DIRECTORS TO BE ELECTED.]
COMMITTEES OF THE BOARD OF DIRECTORS
After the consummation of the Offering and the election of
_____________________, the Company intends to form an Audit Committee
comprised of a minimum of two of the outside directors.
DIRECTOR COMPENSATION
Non-employee directors will receive $1,000 per meeting attended, in
person, or by telephone and the Company will reimburse their out-of-pocket
expenses related to attending meetings of the Board of Directors or the
committees thereof.
EXECUTIVE COMPENSATION
Robert D. Black, Chief Executive Officer, and Mary K. Black are the only
executive officers of the Company whose 1995 calendar year salary and bonus
exceeded $100,000. Mr. Black's 1995 annual compensation was a salary of
$348,637 and a bonus of $3,363. Mrs. Black's 1995 annual compensation was a
salary of $148,637 and a bonus of $3,363. There were no other forms of
compensation besides salary and bonus.
STOCK OPTION PLAN
The Company intends to adopt a stock option plan for key employees. Upon
consummation of the Offering the Company intends to grant stock options to
certain executive officers and other key employees, none of which are Named
Executive Officers, relating to 360,000 shares of Class A Common Stock at $10
per share.
Under the Company's stock option plan for key employees (the "Stock Option
Plan"), as proposed, key employees of the Company will be granted options to
purchase shares of Class A Common Stock. The Stock Option Plan will allow for
the sale of up to 600,000 shares of Class A Common Stock. The exercise price
of options granted under the Stock Option Plan will be determined by the Board
of Directors of the Company and will be required to be not less than 100% of
the fair market value of the shares on the date of grant. The options granted
under the Stock Option Plan may be "incentive stock options" under Section 422
of the Code or non-statutory options. The aggregate fair market value of
shares with respect to which incentive options become exercisable for the
first time by any optionee during any calendar year cannot exceed $100,000.
The Board of Directors of the Company will have the authority in its
discretion to prescribe in any option agreement the terms under which options
are exercised, provided that such options must be exercised within ten years
of the date of grant.
Upon the termination of employment of an optionee, the optionee will be
able to, within three months after such termination, exercise options to the
extent the options were exercisable on the date of such termination. Upon the
retirement of an optionee, the optionee will be able to, within three months
after such retirement, exercise options whether or not such options were
exercisable upon the date of the retirement. Upon the permanent disability or
death of an optionee while employed by the Company, the optionee or the
executor or administrator of his or her estate will be able to, within 12
months after such event, exercise options whether or not such options were
exercisable at the time of permanent disability or death. Upon the death of an
optionee within three months following termination of such optionee's
employment, the executor or administrator of the optionee's estate will be
able to, within 12 months of such optionee's death, exercise options to the
extent the options were exercisable on the date of such optionee's termination
of employment. Provided, however, in no event may an option be exercised
after its expiration date.
In the event of a merger, consolidation, reorganization or dissolution of
the Company, or the sale or exchange of substantially all of the Company's
assets, the rights under outstanding options will terminate, except to the
extent and subject to such adjustments as may be provided by the Board of
Directors of the Company or by the terms of the plan or agreement of merger,
consolidation, reorganization, dissolution or sale or exchange or such assets.
Options granted pursuant to the Stock Option Plan will not be transferable
other than by will and by the laws of descent and distribution and will be
exercisable during the optionee's lifetime only by the optionee.
The Stock Option Plan will not, without the approval of the stockholders,
be amended in any manner that would (i) materially increase the benefits
accruing to participants thereunder, (ii) materially increase the number of
shares which may be issued thereunder or (iii) materially modify the
requirements as to eligibility for participation thereunder.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
FAMILY RELATIONSHIPS
As used in this Prospectus, the term "Black Family Member" includes the
following persons: (i) Mary K. Black, Robert D. Black and their estates,
guardians, conservators, committees or attorneys-in-fact; (ii) each lineal
descendant of Mary K. Black and Robert D. Black (a "Black Descendant") and
their respective guardians, conservators, committees or attorneys-in-fact;
(iii) each "Family Controlled Entity" (as defined below); and (iv) the
trustee, in their respective capacities, as such, of each "Family Controlled
Trust" (as defined below). The term "Family Controlled Entity" means (i) any
partnership if at least 80% of the value of its partnership interests are
owned by Black Family Members; and (ii) any limited liability or similar
company if at least 80% of the value of the company is owned by Black Family
Members. The term "Family Controlled Trust" includes certain trusts existing
on the date hereof and trusts, the primary beneficiaries of which are
Mr. Black, Mrs. Black and Black Descendants.
RELATED PARTY TRANSACTIONS
The terms of the Related Party Transactions were established by the Blacks
and management and are not the result of arm's-length negotiations. Certain
Related Party transactions between the Black Family Members and the Company
are on terms more favorable to the Black Family Members than those which could
have been obtained in arm's-length transactions. Following the Closing of the
Offering, the Company intends to submit any proposed transactions not
described herein between the Company and its directors, executive officers and
their affiliates or the Black Family Members to a committee of disinterested
directors for review. Transactions not described herein between the Company
and Black Family Members will require approval by a majority of the
disinterested directors. Transactions between the Company and other officer
and directors or entities owned by such persons will continue to be at prices
available to an unaffiliated licensee.
PAYMENTS FOR PARTS AND SUPPLIES
The following table sets forth certain payments made to the Company by
officers, directors and entities owned by officers and directors.
<TABLE>
<CAPTION>
TEN MONTHS ENDED Six Months Ended
DECEMBER 31, 1995 JUNE 30, 1996
<S> <C> <C>
Town's Edge Car Wash, Inc.(1) $162,579 $46,581
Edge Town Car Wash, Inc.(1) 9,165 6,150
Super Wash Limited Partnership(2) 79,545 41,000
Joseph B. Hermes (Senior Vice President) 31,533 16,984
Donald B. Vogel (Vice President) 8,805 6,243
Harmik Wash, Inc.(3) - 63
LDB, Inc.(4) 9,811 4,632
</TABLE>
(1) The sole stockholders of such entity are Robert and Mary Black. Such
entities purchase, and will continue to purchase after the Offering,
all parts and supplies from the Company at cost plus 10%.
(2) Robert and Mary Black and Joseph B. Hermes are limited partners
holding an aggregate of 33.18% of the limited partnership interest in
such partnership. The general partner of such partnership is
Lincolnway, Inc., which is owned 75% by the Company and 25% by the
Blacks. Under the terms of the limited partnership agreement of the
Super Wash Limited Partnership, the general partner is obligated to
attempt to sell the Super Washreg-trade-mark facilities owned by
the partnership after each facility has been owned and operated by
the partnership for a period of five years and before the facility is
seven years old. Four of the eight facilities owned by the
partnership were acquired in 1991, two were acquired in 1992 and one
facility was acquired in each of 1994 and 1995. The Company has
considered the possibility of acquiring the facilities owned by the
Super Wash Limited Partnership but no final decision has been made as
of the date of this Prospectus. If the facilities are acquired by
the Company, the acquisition price will be the fair market value of
such facilities.
(3) Michael C. Fliss, a Vice President of the Company, is the beneficial
owner of all of the capital stock of such entity.
(4) Barry Black, a Vice President of the Company, is a 50% stockholder in
such entity.
PAYMENTS FOR MANAGEMENT FEES
<TABLE>
<CAPTION>
TEN MONTHS Six Months
ENDED Ended
DECEMBER 31, 1995 JUNE 30, 1996
<S> <C> <C>
Super Wash Limited Partnership $70,554 $42,503
Joseph B. Hermes, Senior Vice President 13,342 8,856
</TABLE>
As of June 30, 1996, the Company managed an aggregate of 25 Super
Washreg-trade-mark facilities owned by Town's Edge Car Wash, Inc. ("Town's
Edge") and Edge Town Car Wash, Inc. ("Edge Town") without charging such
entities a management fee. After the consummation of the Offering the Company
will continue to manage such Super Washreg-trade-mark facilities owned by
Town's Edge and Edge Town for a management fee per facility of (i) 5% of the
gross revenue of such facility per year for facilities which are less than two
years old, and (ii) $3,000 per year for facilities which are two years or
older.
SALES OF SUPER WASHreg-trade-mark FACILITIES
<TABLE>
<CAPTION>
TEN MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
<S> <C> <C>
TOWN'S EDGE CAR WASH, INC.
Berne, IN $325,000*
Rocks Falls, IL - Dixon Ave. 267,000*
EDGE TOWN CAR WASH, INC.
Urbana, OH - Main St. $370,000*
MICHAEL C. FLISS
Hebron, IN 474,586**
SUPER WASH LIMITED PARTNERSHIP
Olney, IL 244,956**
</TABLE>
* Cost plus $10,000.
** Standard price.
An Entity owned by certain employees of the Company owns one Super
Washreg-trade-mark facility. Management of the Company has considered the
possibility of exchanging shares of its Class A Common Stock for such
facility. As of the date of this Prospectus, no final decision has been made
regarding any proposed exchange. If the facility is acquired by the Company,
the acquisition price will be the fair market value of such facility.
Joseph B. Hermes, a Senior Vice President of the Company, is in the
process of acquiring real estate on which to build a Super
Washreg-trade-mark facility. If the property passes through the approval
process, it is anticipated that construction will begin on this facility
during 1996. The price for such facility will be the price available to an
unaffiliated licensee.
On July 8, 1996, a company owned by the daughters of Robert and Mary Black
purchased from the Company a Super Washreg-trade-mark facility previously
owned by a licensee and repurchased by the Company at the cost to the Company
of the repurchase and renovations, plus $10,000.
Following consummation of the Offering, entities owned by Robert (a
Director, the President and Chief Executive Officer of the Company) and Mary
(the Chairman of the Board of the Company) Black anticipate purchasing between
three and five Super Washreg-trade-mark facilities each year.
LEASE PAYMENTS
The Company made lease payments to Robert and Mary Black in the amount of
$50,000 for the ten month period ending December 31, 1995 and $60,000 for the
year ending February 28, 1995 to lease the parts and service building. 1996
lease payments will total approximately $156,600 for the parts and service
building, the administrative office building and the warehouse building, which
the Company believes is the fair market value of such buildings. The Company
is planning to lease a building being constructed by the Blacks for a training
facility. The facility is expected to be completed in early 1997. No rent
has been established; however, the rent is expected to be at fair market
value.
During 1995 the administrative office building and warehouse building,
which are owned by, and leased by the Company from, Robert and Mary Black,
were constructed. Throughout the construction period, the Company paid the
bills on behalf of the Blacks. Total construction costs amounted to $554,877.
As of March 31, 1996, Robert and Mary had reimbursed the Company $464,562 and
owed a balance of $90,315, which has been repaid as of July 31, 1996, without
interest.
TAX INDEMNIFICATION AGREEMENTS. Prior to the closing of this Offering,
the Company and its existing stockholders will enter into an indemnification
agreement relating to certain federal, state and local income tax liabilities
of the Company and the existing stockholders, for the tax years during which
the Company had elected to be treated as an S Corporation. This agreement
will generally provide that the Company will indemnify the existing
stockholders, and the existing stockholders will indemnify the Company,
against any increase in the indemnified party's income tax benefits or
liabilities (including interest and penalties and all expenses, attorneys'
fees and accountants' fees incurred in connection therewith) as a result of
any adjustment associated with a return filed with respect to a period during
which the Company was an S Corporation. Payments under the agreement in favor
of its stockholders of record immediately prior to the consummation of the
Offering must be approved by a majority of the directors who are not
affiliated with the Company as being consistent with the terms of the
agreement.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of June 30, 1996, and as
adjusted to reflect the sale of the shares of the Common Stock offered hereby
by the Company, by (i) all stockholders known by the Company to be beneficial
owners of more than 5% of its outstanding Common Stock immediately prior to
the Offering, (ii) each director of the Company, (iii) each of the Named
Executive Officers and (iv) all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
STOCKHOLDER(1) Number of Number of TOTAL COMMON STOCK
Shares of Class A Shares of Class
Common Stock B Common Stock Percent of Percent of
Beneficially Beneficially Total
Owned Prior to Owned Prior to Total VotingVoting
THE OFFERING(2) THE OFFERING(2)(3)(4)
Power Prior to After
the
THE OFFERING
<S> <C> <C> <C> <C>
Mary K. Black - 2,553,000 46% 45.6%
Robert D. Black - 2,553,000 46% 45.6%
All directors and officers - 5,106,000 92% 91.2%
as a group (5 persons)
</TABLE>
___________
(1) The address of all stockholders who are executive officers is 707 West
Lincolnway, P.O. Box 188, Morrison, Illinois 61270.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Shares
of Common Stock subject to options or warrants exercisable or
convertible within 60 days are deemed outstanding for computing the
percentage of the person or group holding such options or warrants, but
are not outstanding for computing the percentage of any other person.
Except as indicated in the footnotes to this table and subject to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all share of Common
Stock beneficially owned.
(3) Each share of Class B Common Stock is convertible at the option of the
holder into one share of Class A Common Stock and is automatically
converted into a share of Class A Common Stock upon transfer to a person
who is not a Black Family Member or if the total number of shares of
Class B Common Stock is less than 20% of the aggregate number of shares
of Common Stock outstanding on the record date of any stockholders
meeting. See "Description of Capital Stock."
(4) Excluding 222,000 shares of Class B Common Stock owned by a child of the
Blacks, for which the Blacks disclaim beneficial ownership.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital consists of 2,500,000
shares of Preferred Stock, no par value per share, 25,000,000
shares of Class A Common Stock, par value $.01 per share, and
25,000,000 shares of Class B Common Stock, par value $.01 per
share. As of the date of this Prospectus there are 5,550,000
shares of Class B Common Stock outstanding (which may be
converted into Class A Common Stock at any time), all of which
are owned by Black Family Members and no shares of Class A
Common Stock outstanding. See "Principal Stockholders."
COMMON STOCK
The shares of Class A Common Stock and Class B Common Stock
are identical in all respects, except for voting rights and
certain conversion rights and transfer restrictions in respect
of the shares of the Class B Common Stock, as described below.
VOTING RIGHTS. Each share of Class A Common Stock entitles
the holder to one vote on each matter submitted to a vote of the
Company's stockholders and each share of Class B Common Stock
entitles the holder to ten votes on each such matter, including
the election of directors. Except as required by applicable
law, holders of the Class A Common Stock and Class B Common
Stock will vote together on all matters submitted to a vote of
the stockholders. See "Risk Factors - Control By Current
Stockholders and Anti-Takeover Effect of Dual Classes of Stock."
Neither the Class A Common Stock nor the Class B Common Stock
have cumulative voting rights.
Any action that can be taken at a meeting of the
stockholders may be taken by written consent in lieu of the
meeting if the Company receives consents signed by stockholders
having the minimum number of votes that would be necessary to
approve the action at a meeting at which all shares entitled to
vote on the matter were present. This could permit the holders
of Class B Common Stock to take all actions required to be taken
by the stockholders without providing the other stockholders the
opportunity to make nominations or raise other matters at a
meeting.
DIVIDENDS. Holders of Class A Common Stock and Class B
Common Stock are entitled to receive dividends at the same rate
if and when declared by the Board of Directors out of funds
legally available therefrom, subject to the dividend and
liquidation rights of any Preferred Stock that may be issued and
outstanding. No dividend or other distribution (including
redemptions or repurchases of shares of capital stock) may be
made if after giving effect to such distribution, the Company
would not be able to pay its debts as they become due in the
usual course of business, or if the Company's total assets would
be less than the sum of its total liabilities plus the amount
that would be needed at the time of a liquidation to satisfy the
preferential rights of any holders of Preferred Stock. See
"Dividend Policy."
If a dividend or distribution payable in Class A Common
Stock is made on the Class A Common Stock, the Company must also
make a pro rata and simultaneous dividend or distribution on the
Class B Common Stock payable in shares of Class B Common Stock.
Conversely, if a dividend or distribution payable in Class B
Common Stock is made on the Class B Common Stock, the Company
must also make a pro rata and simultaneous dividend or
distribution on the Class A Common Stock payable in shares of
Class A Common Stock.
RESTRICTIONS ON TRANSFER. If a holder of Class B Common
Stock transfers such shares, whether by sale, assignment, gift,
bequest, appointment or otherwise, to a person other than a
Black Family Member, such shares will be converted automatically
into shares of Class A Common Stock. In the case of a pledge of
shares of Class B Common Stock to a financial institution, such
shares will not be deemed to be transferred unless and until a
foreclosure or similar event occurs.
CONVERSION. Class A Common Stock has no conversion rights.
Class B Common Stock is convertible into Class A Common Stock,
in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of Class A
Common Stock for each share of Class B Common Stock converted.
In the event of a transfer of shares of Class B Common Stock to
any person other than a Black Family Member, each share of
Class B Common Stock so transferred will be converted
automatically into one share of Class A Common Stock. Each
share of Class B Common Stock will also automatically convert
into one share of Class A Common Stock if, on the record date
for any meeting of the stockholders, the number of shares of
Class B Common Stock then outstanding is less than 20% of the
aggregate number of shares of Class A Common Stock and Class B
Common Stock then outstanding.
LIQUIDATION. In the event of liquidation, after payment of
the debts and other liabilities of the Company, the remaining
assets of the Company will be distributable ratably among the
holders of the Class A Common Stock and Class B Common Stock
treated as a single class.
MERGERS AND OTHER BUSINESS COMBINATIONS. Upon the merger or
consolidation of the Company, holders of each class of Common
Stock are entitled to receive equal per share payments or
distributions, except that in any transaction in which shares of
capital stock are distributed, such shares may differ as to
voting rights to the extent and only to the extent that the
voting rights of the Class A Common Stock and Class B Common
Stock differ at that time.
OTHER PROVISIONS. The holders of the Class A Common Stock
and Class B Common Stock are not entitled to preemptive rights.
Neither the Class A Common Stock nor the Class B Common Stock
may be subdivided or combined in any manner unless the other
class is subdivided or combined in the same proportion.
TRANSFER AGENT AND REGISTRAR. The Company is the Transfer
Agent and Registrar for the Common Stock.
PREFERRED STOCK. The Board of Directors of the Company is
authorized, without further stockholder action, to divide any or
all shares of the authorized Preferred Stock into series and fix
and determine the designations, preferences and relative rights
and qualifications, limitations, or restrictions thereon of any
series so established, including voting powers, dividend rights,
liquidation preferences, redemption rights and conversion
privileges. As of the date of this Prospectus, the Board of
Directors has not authorized any series of Preferred Stock, and
there are no plans, agreements or understandings for the
authorization or issuance of shares of Preferred Stock. The
issuance of Preferred Stock with voting rights or conversion
rights may adversely affect the voting power of the Common
Stock, including the loss of voting control to others. The
issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change of control of the Company
without stockholder approval. See "Risk Factors-Preferred
Stock."
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
AND ILLINOIS BUSINESS CORPORATION ACT
DIRECTORS
The Bylaws provide that the number of directors is two,
subject to change from time to time as determined by the Board
of Directors or the stockholders, and that vacancies on the
Board of Directors (including vacancies created by an increase
in the number of directors) may be filled by the Board of
Directors, acting by a majority of the remaining directors then
in office. Officers are elected annually by and serve at the
pleasure of the Board of Directors. Upon consummation of the
Offering, the number of directors will be increased to eight.
LIMITATION OF LIABILITY AND INDEMNIFICATION
As permitted by the Illinois Business Corporation Act, the
Articles provide that directors of the Company shall not be
personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty
of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under
Section 8.65 of the Illinois Business Corporation Act or
(iv) for any transaction from which the director derives an
improper personal benefit. In addition, the Bylaws provide that
the Company shall, to the fullest extent authorized by the
Illinois Business Corporation Act, as amended from time to time,
indemnify all directors and officers and may, at the election of
the Company as determined by the Board of Directors, indemnify
all other persons serving at the request of the Company as a
director, officers, employee or agent of another corporation or
of a partnership, trust or other enterprise.
The Company will also enter into indemnification agreements
in the form described below with each person who is currently a
member of its board of directors and with persons who in the
future become directors of the Company. Such indemnification
agreements provide for indemnification against any and all
expenses incurred in connection with, as well as any and all
judgments, fines and amounts paid in settlement resulting from,
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(collectively an "Action"), by reason of the fact that such
director is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. The
indemnification agreements provide that if any payment, advance
or indemnification of the director requires that he or she acted
in good faith, in a manner he or she reasonably believed to be
for or not opposed to the best interest of the Company or
without reasonable cause to believe his or her conduct was
unlawful, then it shall be presumed that he or she so acted
unless proven otherwise by clear and convincing evidence. The
indemnification agreements also provide for the advancement of
all expenses, including reasonable attorneys' fees, arising from
the investigation of any claim, preparation for the defense or
defense of settlement of an Action. The indemnification
agreements authorize the Company to participate in the defense
of any Action and to assume the defense thereof, with counsel
who shall be reasonably satisfactory to the director, provided
that the director shall be entitled to separate counsel of his
or her choosing if he or she reasonably believes that (i) there
exists conflicting interests between himself or herself and the
Company or other party (the defense of whom the Company shall
have assumed) or (ii) there is any substantial likelihood that
the Company will be financially or legally unable to satisfy its
obligations under the indemnification agreements. The
indemnification agreements provide that a director's rights
under such contract are not exclusive of any other
indemnification rights he or she may have under any provision of
law, the Articles or Bylaws of the Company, the vote of the
Company's stockholders or disinterested directors, other
agreements or otherwise. (Insofar as indemnification by the
Company for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, the Company has
been advised that such indemnification is considered by the
Commission to be against public policy and, therefore,
unenforceable.)
CERTAIN STATUTORY PROVISIONS
Following the Offering, the Company will be subject to
Section 7.85 of the Business Corporation Act of Illinois
("Section 7.85"), Section 7.85 prohibits a publicly held
Illinois corporation from engaging in a "business combination"
with an "interested stockholder," unless the proposed "business
combination" receives (i) the affirmative vote of the holders of
at least 80% of the combined voting power of the then
outstanding shares of all classes and series of the corporation
entitled to vote generally in the election of directors (the
"Voting Shares"), voting together as a single class and (ii) the
affirmative vote of a majority of the combined voting power of
the then outstanding Voting Shares held by disinterested
stockholders voting together as a single class. For purposes of
Section 7.85 and Section 11.75 described below, a "business
combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder
and, for purposes of Section 7.85, an "interested stockholder"
is a person who, together with affiliates and associates, owns
(or, within the prior two years, did own) 10% or more of the
combined voting power of the outstanding Voting Shares.
Further, the Company is also subject to Section 11.75 of the
Business Corporation Act of Illinois ("Section 11.75") which
prohibits "business combinations" with "interested stockholders"
for a period of three years following the date that such
stockholder became an "interested stockholder," unless (i) prior
to such date, the Board of Directors approved the transaction
which resulted in the stockholder becoming an "interested
stockholder," or (ii) upon consummation of such transaction, the
"interested stockholder" owned at least 85% of the Voting Shares
outstanding at the time such transaction commenced (excluding
shares owned by directors who are also officers and shares
reserved under an employee stock plan), or (iii) on or after
such date, the "business combination" is approved by the Board
of Directors and authorized at a meeting of the stockholders by
662/3% of the outstanding Voting Shares not owned by the
"interested stockholder." For purposes of Section 11.75, an
"interested stockholder" is a person who, together with
affiliates and associates, owns (or, within the prior three
years, did own) 15% of the Voting Shares.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have
outstanding 450,000 shares of Class A Common Stock and 5,550,000
shares of Class B Common Stock. Of such shares, the
450,000 shares of Class A Common Stock sold in this Offering
will be freely tradeable without restrictions or further
registration under the Securities Act, unless acquired by an
affiliate of the Company, in which case those shares will be
subject to the resale limitations of Rule 144. The remaining
5,550,000 shares of Class B Common Stock are "restricted
securities" within the meaning of Rule 144 (the "Restricted
Shares").
Except as provided below, the Restricted Shares will be
eligible for sale in the public market, in accordance with
Rule 144, 90 days following the date of this Prospectus, subject
to certain volume and other limitations, except for shares
acquired upon the exercise of employee stock options which will
be registered under the Securities Act as soon as practicable
after the consummation of the Offering and may be sold without
limitation after the effective date of such registration.
In general, under Rule 144 as currently in effect, a person
(or persons whose shares are aggregated) who has beneficially
owned Restricted Shares for at least two years, including
persons who may be deemed to be "affiliates" of the Company, as
that term is defined under Rule 144, may sell within any three-
month period a number of Restricted Shares that does not exceed
the greater of one percent of the then outstanding shares of the
Common Stock (estimated to be 60,000 shares after completion of
this Offering) or the average weekly trading volume of the
Common Stock on the open market during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to
certain manner-of-sale limitations, notice requirements, and the
availability of current public information about the Company.
Pursuant to Rule 144(k), a person (or persons whose shares are
aggregated) who is deemed not to have been an "affiliate" of the
Company at any time during the three months preceding a sale,
and who has beneficially owned Restricted Shares for at least
three years, would be entitled to sell such shares under
Rule 144 without regard to volume limitations, manner-of-sale
provisions or notice requirements. The 5,550,000 Restricted
Shares that have met such three-year holding period requirement,
are all deemed beneficially owned by persons who will be deemed
to be "affiliates" of the Company after the Offering.)
Restricted Shares properly sold in reliance upon Rule 144 are
thereafter freely tradeable without restrictions or registration
under the Securities Act, unless thereafter held by an
"affiliate" of the Company.
Prior to this Offering there has been no market for the
Class A Common Stock, and no prediction can be made as to the
effect, if any, that sales of Restricted Shares, or availability
of Restricted Shares for sale, by existing stockholders in
reliance upon Rule 144 or otherwise will have on the market
price of Class A Common Stock. The sale by the Company or the
stockholders referred to above of a substantial number of shares
of Class A Common Stock after this Offering could adversely
affect the market price for the Class A Common Stock. The
Company is not obligated to register any Restricted Shares for
sale under the Securities Act or otherwise. Upon the
consummation of the Offering, the Company intends to register,
under the Securities Act, the sale of the shares of Class A
Common Stock to be issued in connection with the employee and
director stock option plans described under "Management."
PLAN OF DISTRIBUTION
GENERAL
The Company is offering to sell up to 450,000 shares of its
Class A Common Stock. The Class A Common Stock will be sold by
the Company on a "best efforts" basis through one or more
officers and directors of the Company who will not receive
compensation in connection with any offers or sales of the
Class A Common Stock. The Company may also retain licensed
broker-dealers ("Agents") to sell the Class A Common Stock on a
"best efforts" basis. There are no underwriters involved in
this Offering. If the Company retains Agents to sell the
Class A Common Stock offered hereby, the Company will pay such
Agents a selling commission of up to 10% of the gross Offering
proceeds attributable to Class A Common Stock sold by such
Agents. The Company and the Agents, if any, will, in all
likelihood, agree to indemnify each other against certain
liabilities, including liabilities under the Securities Act of
1933.
The Class A Common Stock will be sold at the price of $10.00
per share. A subscriber is required to purchase 100 shares of
Class A Common Stock in order to subscribe to the Offering
hereby. The Company reserves the right to withdraw, cancel or
modify the Offering hereby and to reject subscriptions, in whole
or in part, for any reason.
DETERMINATION OF OFFERING PRICE
Prior to the Offering hereby, there has been no public
market for the Company's Class A Common Stock. The price to the
public has been arbitrarily determined by the Company and may
not be indicative of the market price for the Class A Common
Stock after this Offering. The Company makes no representations
as to any objectively determinable value of the Class A Common
Stock.
SUBSCRIPTION PROCEDURES
An agreement to purchase shares of Class A Common Stock
offered hereby (the "Subscription Agreement") accompanies this
Prospectus. Subject to availability and the Company's right to
reject subscriptions, in whole or in part, for any reason,
shares of Class A Common Stock may be subscribed for by
completing, executing and returning the Subscription Agreement,
together with payment for all shares subscribed for, to the
Company. All checks should be made payable to the Super Wash
Offering Escrow. Company's acceptance of a subscription shall
be evidenced solely by the delivery to the subscriber of a
written confirmation of acceptance. Receipt by the Company of a
Subscription Agreement and/or deposit by the Company of payment
for the subscribed shares as described below shall not
constitute acceptance of a subscription. The subscription
payments will be deposited into an escrow account at First
Bank/Sterling, 3014 East Lincolnway, Sterling, Illinois 61081,
by the Company, subject to the Closing on such escrowed funds
once the Company has accepted subscriptions for at least 250,000
shares of Class A Common Stock offered hereby.
Unless the Company is able to sell at least 250,000 shares
of Class A Common Stock, the Company will cancel this Offering,
promptly return all monies collected from subscribers, and pay
to each subscriber the interest earned by the Company, if any,
on such subscriber's escrowed subscription payment. Likewise,
the Company will promptly refund any monies collected and
attributed to a subscription, or portion thereof, rejected by
the Company and pay to each rejected subscriber all interest
earned by the Company, if any, on such subscriber's rejected
escrowed subscription payment, or portion thereof. However,
unless the Company cancels this Offering or rejects a
subscription, in whole or in part, subscribers will have no
right to a return of their subscription payment held in the
escrow account and all interest earned on the escrowed proceeds
will belong to the Company.
Stock certificates will not be issued to subscribers until
such time as the funds related to the purchase of Class A Common
Stock by such subscribers are released from the escrow account
to the Company by the Escrow Agent. Until such time as stock
certificates are issued to the subscribers, the subscribers will
not be considered stockholders of the Company.
WARRANTIES BY SUBSCRIBERS
In the Subscription Agreement, each subscriber represents
and warrants to the Company that the subscriber (i) has received
this Prospectus and in making a subscription is only relying on
the representations set forth in this Prospectus and (ii) has
indicated his or her true state of legal residence.
Each potential investor should carefully read this
Prospectus in its entirety prior to purchasing shares of the
Class A Common Stock offered hereby. The warranty given to the
Company by each subscriber indicating that the subscriber has
received this Prospectus and is only relying on the
representations set forth herein provides the Company with some
comfort that each subscriber has read this Prospectus. To the
extent permitted by federal and state securities laws, the
Company might assert its rights under this warranty to rebut a
subscriber's claim that he or she relied on any oral
representations or written representations other than those set
forth in this Prospectus.
In some states, for various reasons, the Company will not
obtain permission to sell shares of the Class A Common Stock
offered hereby. The Company will reject subscription agreements
received, if any, from residents of such states. The warranty
given by each subscriber indicating the subscriber's true state
of legal residence will assist the Company in complying with
state securities laws. The Company might assert its rights
under this warranty if a misrepresentation by a subscriber
resulted in the Company selling shares of Class A Common Stock
in a state in which the Company was not permitted to sell such
shares in violation of such state's securities laws.
A subscriber does not waive any rights under the federal
securities laws by executing the Subscription Agreement.
TERMINATION OF OFFERING
This Offering of the Class A Common Stock begins on the date
hereof and terminates upon the earlier of (i) the date upon
which the Company receives the proceeds for all 450,000 shares
of Class A Common Stock offered hereby in the specified escrow
account; (ii) February 14, 1997 (subject to the right of the
Company to extend the Offering for an additional 30 days); or
(iii) the date upon which the Company terminates this Offering
prior to the sale of all the shares of Class A Common Stock
offered hereby. The Company may terminate this offering at any
time prior to the sale of all 450,000 shares of Class A Common
Stock offered hereby.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE
SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR
DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FOR FLORIDA RESIDENTS ONLY:
WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN THIS STATE,
ANY SALE IN THIS STATE MADE PURSUANT TO SUBSECTION 517.061 OF
THE FLORIDA INVESTOR PROTECTION ACT IS VOIDABLE BY THE PURCHASER
IN SUCH SALE EITHER WITHIN 3 DAYS AFTER THE FIRST TENDER OF
CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT
OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE
AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH
PURCHASER, WHICHEVER OCCURS LATER.
FOR NEW JERSEY RESIDENTS ONLY:
THE ATTORNEY GENERAL OF THE STATE OF NEW JERSEY HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. THE FILING
OF THIS OFFERING WITH THE BUREAU OF SECURITIES DOES NOT
CONSTITUTE APPROVAL OF THE ISSUE OR SALE THEREOF BY THE BUREAU
OF SECURITIES OF THE DEPARTMENT OF LAW AND PUBLIC SAFETY OF THE
STATE OF NEW JERSEY. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
FOR PENNSYLVANIA RESIDENTS ONLY:
PURSUANT TO SECTION 207(M) OF THE PENNSYLVANIA SECURITIES
ACT, EACH PERSON WHO ACCEPTS THIS OFFER TO PURCHASE UNITS EXEMPT
FROM REGISTRATION UNDER SECTION 203(D) OF THE PENNSYLVANIA
SECURITIES ACT DIRECTLY FROM THE PARTNERSHIP OR ITS AFFILIATES
WILL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING
ANY LIABILITY TO THE SELLER, UNDERWRITER OR ANY OTHER PERSON
WITHIN TWO BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER
OF HIS WRITTEN BINDING CONTRACT OF PURCHASE OR, IN THE CASE OF A
TRANSACTION IN WHICH THERE IS NO WRITTEN BINDING CONTRACT OF
PURCHASE, WITHIN TWO BUSINESS DAYS AFTER HE MAKES THE INITIAL
PAYMENT FOR THE SECURITIES BEING OFFERED.
<PAGE>
LEGAL MATTERS
The validity of the Class A Common Stock offered hereby will
be passed upon for the Company by Rudnick & Wolfe, Chicago,
Illinois.
EXPERTS
The consolidated financial statements and schedule of Super
Wash, Inc. and Subsidiary as of February 28, 1995 and December
31, 1995 and for each of the two years in the period ended
February 28, 1995 and the ten month period ended December 31,
1995 included in this Prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing
in giving said reports.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration
statement on Form S-1 (the "Registration Statement") under the
Securities Act with respect to the shares of Class A Common
Stock offered hereby. This Prospectus, which constitutes a part
of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain
items of which are contained in schedules and exhibits to the
Registration Statement and have been omitted pursuant to rules
and regulations of the Commission. For further information with
respect to the Company and the shares of Class A Common Stock
offered hereby, reference is made to such Registration Statement
and the exhibits and schedules thereto. Statements contained in
this Prospectus as to the contents of any contract or any other
document referred to are complete in all material respects; with
respect to each such contract or other document filed as an
exhibit to the Registration Statement reference is made to the
exhibit for a more complete description of the matters involved,
and each such statement shall be deemed qualified in its
entirety by such reference.
Following the consummation of the Offering, the Company will
be subject to the informational requirements of the Exchange Act
and in accordance therewith will be required to file reports and
other information with the Commission. The Company intends to
furnish its stockholders with annual reports containing audited
financial statements reported on by independent public
accountants following the end of each fiscal year. A copy of
the Registration Statement, including exhibits and schedules
thereto, filed by the Company with the Commission may be
inspected without charge at the public reference facility
maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, 13th Floor, New York, New York
10048; and Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material
may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 upon
the payment of fees prescribed by the Commission. The
Commission maintains a web site that contains reports, proxy and
information statements and other information regarding
registrants that file electronically with the Commission. The
address of the Commission's web site is: http://www.sec.gov.
<PAGE>
SUPER WASH, INC. AND
SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants F-3
Consolidated Balance Sheets as of February 28, 1995, and
December 31, 1995, and as of June 30, 1996 (Unaudited) F-4
Consolidated Statements of Operations for the Years Ended
February 28, 1994 and 1995, and for the Ten-Month Period
Ended December 31, 1995, and for the Six Months Ended
June 30, 1995 and 1996 (Unaudited) F-5
Consolidated Statements of Stockholders' Equity for the
Years Ended February 28, 1994 and 1995, and for the Ten-
Month Period Ended December 31, 1995, and for the Six Months F-6
Ended June 30, 1996 (Unaudited)
Consolidated Statements of Cash Flows for the Years Ended
February 28, 1994 and 1995, and for the Ten-Month Period
Ended December 31, 1995, and for the Six Months Ended
June 30, 1995 and 1996 (Unaudited) F-7
Notes to Consolidated Financial Statements F-8
</TABLE>
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
When the transaction referred to in Note 14 of Notes to
Consolidated Financial Statements has been consummated, we will
be in a position to render the following report.
ARTHUR ANDERSEN LLP
To the Board of Directors of
Super Wash, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of
SUPER WASH, INC. (an Illinois corporation) AND SUBSIDIARY as of
February 28, 1995, and December 31, 1995, and the related
consolidated statements of income, stockholders' equity and cash
flows for each of the two years in the period ended February 28,
1995, and for the ten-month period ended December 31, 1995.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the 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 Super Wash, Inc. and Subsidiary as of February 28, 1995, and
December 31, 1995, and the results of their operations and their
cash flows for each of the two years in the period ended
February 28, 1995, and for the ten-month period ended
December 31, 1995, in conformity with generally accepted
accounting principles.
Chicago, Illinois
May 15, 1996 (except for
Note 14, which is as of
________, 1997)
SUPER WASH, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<PAGE>
<TABLE>
<CAPTION>
Pro
Forma
<S> <C> <C> <C> <C>
A S S E T S FEB.28,1995 DEC.31,1995 JUNE 30,1996 JUNE 30,1996
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash $216,936 $523,324 $914,699 $914,699
Marketable securities 1,779,981 1,855,0851,898,004 1,898,004
Receivables, net of allowance for
doubtful accounts of $75,000-
Trade 1,393,693 2,427,590 2,813,494 2,813,494
Stockholders 218,260 29,806 130,536 130,536
Affiliates 482,227 86,362 302,042 302,042
Related party - 15,905 585 585
Other 111,646 181,517 193,154 193,154
Current portion of notes
receivable-
Related party - 14,522 14,522 14,522
Other 92,358 67,275 54,964 54,964
Costs and estimated earnings in
excess of billings on uncompleted
contracts - 5,416 1,551,282 1,551,282
Inventories-
Car wash facility parts,
supplies and equipment 996,176 1,005,283 1,058,013 1,058,013
Land, construction and
equipment costs in car wash
facilities under construction 1,617,354 2,328,460 3,690,241 3,690,241
Land purchase deposits 32,500 28,500 60,000 60,000
Car wash facilities held for
sale 1,808,206 4,013,530 4,252,585 4,252,585
Prepaid expenses 45,735 55,137 47,648 47,648
Deferred income taxes 85,000 - - -
---------- ----------- ----------- -----------
Total current assets 8,880,072 12,637,712 16,981,769 16,981,769
---------- ----------- ----------- -----------
PROPERTY AND EQUIPMENT:
Car wash facilities 515,245 1,427,556 1,427,556 1,427,556
Vehicles 553,564 727,582 794,016 794,016
Office equipment 178,192 178,192 204,908 204,908
Construction equipment, tools and
loaner parts 129,049 143,180 178,759 178,759
Computer hardware and
software 166,996 387,630 446,143 446,143
---------- ----------- ----------- -----------
1,543,046 2,864,140 3,051,382 3,051,382
Less- Accumulated
depreciation (776,009) (997,985) (1,110,175) (1,110,175)
---------- ----------- ----------- -----------
Property and equipment,
net 767,037 1,866,155 1,941,207 1,941,207
---------- ----------- ----------- -----------
OTHER ASSETS:
Notes receivable, net of current
portion-
Related party 90,773 213,017 206,817 206,817
Other - 93,541 41,165 41,165
Investment in Super Wash Limited
Partnership 66,922 55,922 42,609 42,609
---------- ----------- ----------- -----------
Total other assets 157,695 362,480 290,591 290,591
---------- ----------- ----------- -----------
$9,804,804 $14,866,347 $19,213,567 $19,213,567
========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND Pro
Forma
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY FEB.28,1995 DEC.31,1995 JUNE 30,1996 JUNE 30,1996
(Unaudited) (Unaudited)
CURRENT LIABILITIES:
Current portion
of note payable $34,259 $35,552 $37,060 $37,060 Lines of credit
- 1,000,000 5,450,000 5,450,000
Payables-
Trade 423,046 452,016 1,286,937 1,286,937
Stockholders 34,500 55,620 82,477 82,477
Affiliates 19,109 - 9,828 9,828
Related parties 62,400 83,530 84,918 84,918
Employees 161,121 357,734 575,963 575,963
Other 53,000 97,624 97,624 97,624
Billings in excess of costs and
estimated earnings on uncompleted
contracts - - 100,339 100,339
Accrued expenses 558,025 693,772 556,327 556,327
Income taxes
payable 159,370 108,278 18,000 18,000
Dividend payable - - - 2,700,000
---------- -------- --------- ---------
Total current
liabilities 1,504,830 2,884,126 8,299,473 10,999,473
-------- -- ------- --------- ----------
NOTE PAYABLE, net of current
portion 206,291 176,005 156,928 156,928
---------- --------- --------- ----------
DEFERRED INCOME
TAXES 10,000 - - 135,000
---------- ----------- ------- ----------
MINORITY INTEREST 14,869 14,869 14,869 14,869
---------- --------- -------- ---------
STOCKHOLDERS' EQUITY:
Class B common stock, $.01 par
value; 25,000,000 shares
authorized, 5,550,000 shares
issued and outstanding 1,000 1,000 1,000 1,000
Unrealized gain on equity
securities, net of tax 28,166 79,142 89,299 89,299
Retained earnings 8,039,648 11,711,205 10,651,998 7,816,998
---------- --------- --------- -----------
Total stockholders' equity 8,068,814 11,791,347 10,742,297 7,907,297
---------- --------- --------- -----------
$9,804,804 $14,866,347 $19,213,567 $19,213,567
========== ========= =========== ===========
</TABLE>
<PAGE>
The accompanying notes to consolidated financial statements are
an integral part of these balance sheets.
SUPER WASH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended February 28 Ten Six Months Ended June 30
Months
<S> <C> <C> <C>
------------------------- Ended ------------------------
</TABLE>
<TABLE>
<CAPTION>
1994 1995 DEC.31,1995 1995 1996
(Unaudited)
<S> <C> <C> <C> <C>
SALES:
</TABLE>
<TABLE>
<CAPTION>
Car wash facilities $12,488,337 $16,989,479 $18,913,000 $6,336,107 $ 9,379,049
<S> <C> <C> <C> <C> <C>
Car wash facilities--
related parties 2,016,441 2,345,660 916,601 - 1,316,288
Parts, supplies
and service 2,441,364 2,899,027 2,523,333 1,523,947 1,878,589
Parts, supplies
and service--
related 279,623 341,595 304,429 145,806 125,633
parties
Other 534,559 407,355 841,476 404,018 752,443
Other--related
parties 85,693 88,162 86,756 45,946 56,888
----------- ---------- --------- ---------- ----------
Total sales 17,846,017 23,071,278 23,585,595 8,455,824 13,508,890
----------- ---------- -------- ---------- -----------
COST OF SALES:
Car wash facilities 9,886,284 13,458,332 14,438,695 5,067,938 7,479,352
Car wash facilities
- --related parties 1,859,951 1,912,615 869,913 - 1,136,232
Parts, supplies
and service 2,041,511 2,563,838 2,045,053 1,340,400 1,672,101
Parts, supplies
and service
- --related 162,129 196,519 175,388 31,428 66,859
parties
Other 457,944 307,417 633,734 307,602 558,269
Other--related
parties 170,797 295,729 228,459 110,966 148,718
----------- ----------- ---------- ---------- ----------
Total cost sales 14,578,616 18,734,450 18,391,242 6,858,334 11,061,531
----------- ----------- ---------- --------- ----------
Gross profit 3,267,401 4,336,828 5,194,353 1,597,490 2,447,359
SELLING, GENERAL
AND ADMINISTRATIVE 1,749,695 1,893,054 1,483,391 793,931 813,834
EXPENSES
----------- ----------- ---------- ---------- -----------
Income from
operations 1,517,706 2,443,774 3,710,962 803,559 1,633,525
----------- ---------- --------- ---------- -----------
OTHER INCOME (EXPENSE):
Miscellaneous income 59,821 58,138 41,099 48,823 4,981
Dividend income 17,580 29,088 28,410 19,700 14,442
Interest income 215,408 232,739 214,393 102,433 115,580
Interest expense (64,740) (127,427) (185,419) (27,984) (154,299)
----------- --------- --------- ---------- -----------
Other income, net 228,069 192,538 98,483 142,972 (19,296)
----------- --------- --------- ---------- -----------
Income before income
taxes 1,745,775 2,636,312 3,809,445 946,531 1,614,229
PROVISION FOR
INCOME TAXES 683,220 1,036,983 137,888 (20,368) 17,436
----------- ----------- --------- --------- ----------
NET INCOME $ 1,062,555 $ 1,599,329 $3,671,557 $ 966,899 $ 1,596,793
=========== =========== ========== ========= ===========
PRO FORMA INCOME DATA (Unaudited):
Net income as
reported $1,062,555 $1,599,329 $3,671,557 $ 966,899 $ 1,596,793
Pro forma adjustment
to recognize "C"
Corporation provision
for income taxes - - 1,347,112 390,368 611,564
---------- ----------- ---------- ---------- ----------
Pro forma net
income $1,062,555 $1,599,329 $2,324,445 $ 576,531 $ 985,229
=========== =========== ========== ========== ===========
Pro forma net
income per share $.40 $.10 $.17
=========== ========== ===========
Pro forma weighted average number of
shares outstanding 5,820,000 5,820,000 5,820,000
=========== ========= ===========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
<PAGE>
SUPER WASH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class B
<S> <C> <C> <C> <C>
Common Shares Unrealized
------------------ Gain
Total
on
</TABLE>
<TABLE>
<CAPTION>
Shares Retained Equity
Stockholders'
<S> <C> <C> <C> <C> <C>
ISSUED AMOUNT EARNINGS SECURITIES
EQUITY
BALANCE,
February 28, 1993 100 $1,000 $ 5,377,764 $ - $ 5,378,764
Retroactive restatement for a 55,500-to-1
stock split 5,549,900 - - - -
--------- ------ ----------- ------- -----------
As restated 5,550,000 1,000 5,377,764 - 5,378,764
Net income - - 1,062,555 - 1,062,555
--------- ------ ----------- ------- -----------
BALANCE, February 28
, 1994 5,550,00 1,000 6,440,319 - 6,441,319
Net income - - 1,599,329 - 1,599,329
Change in
unrealized
gains, net
of tax - - - 28,166 28,166
--------- ------ ----------- ------- -----------
BALANCE,
February 28,
1995 5,550,000 1,000 8,039,648 28,166 8,068,814
Net income - - 3,671,557 - 3,671,557
Change in
unrealized
gains, net
of tax - - - 50,976 50,976
--------- ------ ---------- ------ -----------
BALANCE,
December 31,
1995 5,550,000 1,000 11,711,205 79,142 11,791,347
Net income - - 1,596,793 - 1,596,793
Dividends paid - - (2,656,000) - (2,656,000)
Change in
unrealized
gains, net
of tax - - - 10,157 10,157
--------- ------ ---------- ------- -----------
BALANCE,
June 30,
1996
(unaudited 5,550,000 $1,000 $10,651,998 $89,299 $10,742,297
========= ====== =========== ======= ===========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
<PAGE>
SUPER WASH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
10 Months Six Months Ended
<S> <C> <C> <C>
Years Ended February 28 Ended June 30
----------------------- December 31
-----------------------
</TABLE>
<TABLE>
<CAPTION>
1994 1995 1995 1995 1996
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net income$1,062,555 $1,599,329 $3,671,557 $ 966,899 $1,596,793
Adjustments to reconcile net income to net cash
provided by (used in) operating activities-
Depreciation221,308 162,013 250,971 76,229 167,906
Gain on sale
of property
and equipment(70,139) - (5,603) - -
Provision
for deferred
income taxes - (75,000) 75,000 (45,000) -
Changes in operating assets and liabilities-
(Increase)
decrease in
receivables 1,089,877 (1,823,602) (535,354) 2,023,202 (686,320)
(Increase) decrease in costs and estimated
earnings in
excess of
billings on
uncompleted (674,176) 704,466 (5,416) 237,216 (1,545,866)
contracts
Increase in
inventories (764,773) (771,253) (716,213) (1,344,743) (1,446,011)
(Increase)
decrease in
prepaid
expenses 5,557 (24,974) (9,402) 5,207 7,489
(Increase)
decrease in car
wash facilities
held 245,618 (1,783,589) (2,205,324) (1,928,315) (239,055)
for sale
Increase
(decrease)
in payables 256,379 430,304 293,348 (92,108) 1,091,223
Increase (decrease)
in income taxes
payable - 136,334 (51,092) (221,915) (90,278)
Increase (decrease) in accrued
expenses 49,555 341,747 135,747 (312,592) (137,445)
Increase in billings in excess of costs and
estimated earnings on
uncompleted
contracts - - - 158,679 100,339
---------- ---------- ---------- ---------- ----------
Net cash
provided by (used in)
operating 1,421,761 (1,104,225) 898,219 (477,241) (1,181,225)
activities
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from
sale of property and
equipment 1,131,188 - - - -
Purchase of property and
equipment (95,660) (400,993) (1,344,486) (137,126) (242,958)
Purchase of
marketable
securities (297,254) (143,981) (13,128) (6,626) (32,762)
Sale of investment in
Super Wash Limited
Partnership - 46,000 - - -
(Increase) decrease in notes
and other
receivables- 77,753 (1,052) (205,224) (14,248) 71,889
long term
Proceeds from sale of marketable
securities 341,965 - - - -
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
investing 1,157,992 (500,026) (1,562,838) (158,000) (203,831)
activities
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on long-term debt and line
of
credit (1,142,955) (29,819) 971,007 (515,398) 4,432,431
Dividends
paid - - - - (2,656,000)
---------- ---------- ---------- ---------- ----------
Net cash provided by
(used in)
financin (1,142,955) (29,819) 971,007 (515,398) 1,776,431
activities
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE)
IN CASH 1,436,798 (1,634,070) 306,388 (1,150,639) 391,375
CASH AT BEGINNING OF
PERIOD 414,208 1,851,006 216,936 1,990,182 523,324
---------- ---------- ---------- ---------- ----------
CASH AT END OF CURRENT
PERIOD $1,851,006 $ 216,936 $ 523,324 $ 839,543 $ 914,699
========== ========== ========== ========== ==========
CASH PAID DURING THE PERIOD FOR:
Interest$ 65,100 $ 109,238 $ 163,453 $ 17,927 $ 61,638
========== ========== ========== ========== ==========
Income
taxes $ 660,439 $ 973,608 $ 113,980 $ 201,548 $ -
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
SUPER WASH, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--DESCRIPTION OF THE BUSINESS
Super Wash, Inc. (the "Company") specializes in the design,
construction, operation and licensing of coin-operated, self-
service and brushless automatic Super Washreg-trade-mark car
wash facilities. Licensees are provided a "turn-key" package
whereby the Company acquires the car wash site, handles all
zoning and permitting issues, performs as the general
contractor, installs the equipment, trains the licensee and
their employees and conducts the grand opening. The Company
provides ongoing services through its parts, service and
advertising and management departments.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. INTERIM FINANCIAL INFORMATION
The unaudited balance sheet as of June 30, 1996, the unaudited
statement of stockholders' equity for the six months ended
June 30, 1996, and the unaudited statements of income and cash
flows for the six months ended June 30, 1995, and 1996, include,
in the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the
Company's financial position, results of operations and cash
flows. Operating results for the six months ended June 30,
1996, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. The information
included in these notes relating to June 30, 1995 and 1996, is
unaudited.
b. CHANGE IN YEAR-END
The Company changed its year-end to December 31 on March 1,
1995, the date the Company elected to be treated as an
S Corporation.
c. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company and its 75%-owned subsidiary,
Lincolnway, Inc. (also see Note 3). All intercompany accounts
and transactions have been eliminated.
d. MARKETABLE SECURITIES
Marketable securities are carried at the fair value of the
security in accordance with Statement of Financial Accounting
Standard ("SFAS") No. 115. All securities held by the Company
are equity securities that are classified as available for sale.
e. INVENTORIES
Inventories are carried at the lower of cost or market value,
cost being determined on the first-in, first-out ("FIFO") basis.
f. CAR WASH FACILITIES HELD FOR SALE
Car wash facilities held for sale are completed car wash
facilities which the Company plans to sell. Until the
facilities are sold, the Company operates the car washes. Car
wash facilities held for sale are carried at the lower of cost
or fair value.
g. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of
property and equipment is computed using straight-line and
various accelerated methods at rates adequate to depreciate the
cost of applicable assets over their expected useful lives.
Maintenance and repairs are charged to operations as incurred
and major improvements are capitalized. The cost of assets
retired, or otherwise disposed of, and the accumulated
depreciation thereon are removed from the accounts with any gain
or loss realized upon sale or disposal charged or credited to
operations.
Estimated useful lives are as follows:
<TABLE>
<CAPTION>
Building and equipment included in car
wash facility 16-20 years
<S> <C>
Vehicles 5-6 years
Office equipment 5-10 years
Construction and service equipment 7-10 years
Computer hardware and software 5 years
===========
</TABLE>
The car wash facilities are composed of:
<TABLE>
<CAPTION>
FEB.28,1995 DEC.31,1995 JUNE 30,1996
<S> <C> <C> <C>
(Unaudited)
Land $105,000 $ 406,728 $ 406,728
Building 211,028 561,044 561,044
Equipment 199,217 459,784 459,784
-------- ---------- ----------
$515,245 $1,427,556 $1,427,556
======== ========== ==========
</TABLE>
For the year ended February 28, 1995, the Company changed the
depreciable lives for the building and equipment included in the
car wash facility to more properly reflect the useful lives.
This change resulted in an increase in income of approximately
$26,000.
h. REVENUE RECOGNITION
Parts and supplies revenues are recognized when the parts and
supplies are shipped. Service revenues are recorded when the
services are rendered.
i. CONSTRUCTION CONTRACTS
Revenues from construction contracts are recognized on the
percentage-of-completion method, measured by the percentage of
costs incurred to date to the estimated total costs for each
contract. Any losses expected to be incurred on contracts in
progress are charged to operations in the period such losses are
determined. The asset, costs and estimated earnings in excess
of billings on uncompleted contracts represents revenues
recognized in excess of amounts billed.
Costs and estimated earnings in excess of billings on
uncompleted contracts are comprised of the following:
<TABLE>
<CAPTION>
DEC.31,1995 JUNE 30,1996
<S> <C> <C>
Costs incurred on uncompleted
contracts $25,754 $1,398,504
Estimated earnings 13,673 549,724
Less- billings to date (34,011) (396,946)
------- ----------
Costs and estimated earnings in
excess of billings $ 5,416 $1,551,282
======= ==========
</TABLE>
Billings in excess of costs and estimated earnings on
uncompleted contracts are comprised of the following as of
June 30, 1996:
<TABLE>
<CAPTION>
Costs incurred on uncompleted contracts
$ 708,855
<S> <C>
Estimated earnings 289,532
Billings (1,098,726)
----------
Billings in excess of costs and estimated
earnings on uncompleted contracts
$ 100,339
==========
</TABLE>
j. ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
FEB.28,1995 DEC.31,1995 JUNE 30,1996
<S> <C> <C> <C>
(Unaudited)
Accrued payroll and
payroll taxes $171,855 $241,530 $ 75,741
Other 386,170 452,242 480,586
-------- -------- --------
Total $558,025 $693,772 $556,327
======== ======== ========
</TABLE>
k. 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.
l. EARNINGS PER SHARE (UNAUDITED)
Earnings per share are computed based upon the weighted average
number of common shares and common share equivalents outstanding
during each period presented after retroactive adjustment for
the stock split that will occur immediately prior to the
consummation of the proposed initial public offering of the
Company's common A shares (the "Offering"). See Note 14.
NOTE 3--INCOME TAXES
Timing differences for financial reporting and income tax
purposes include the allowances for doubtful accounts and
certain inventory costs. Effective March 1, 1995, the Company
elected to be treated as an S Corporation. By this election,
income of the S Corporation is taxable to the stockholders
rather than the Company itself. Income tax expense for the
period ended December 31, 1995, includes the write-off of the
deferred income taxes as the Company was previously a
C Corporation, 1.5% state replacement taxes and a built-in gains
tax for the sale of two car washes. The S Corporation will
terminate upon consummation of the proposed Offering. Upon the
successful completion of the Offering and effective termination
of the S Corporation election, deferred income taxes will be
recorded resulting in income tax expense in the Company's
statements of income. If the effective date of the Offering had
been June 30, 1996, deferred income taxes and income tax
expenses of $135,000 would have been recorded. Deferred income
taxes will be recorded under the asset and liability method of
accounting for income taxes which requires the recognition of
deferred income taxes based upon the tax consequences of
"temporary differences" by applying enacted statutory rates
applicable to future years to differences between the financial
statement carrying amounts and the tax basis of existing assets
and liabilities.
The Company intends to enter into a tax agreement with its
shareholders which provides, among other things, that the
Company will indemnify its current shareholders against
additional income taxes resulting from adjustments made (as a
result of a final determination made by a competent tax
authority) to the taxable income reported by the Company as an
S Corporation for periods prior to the Offering.
NOTE 4--RELATED-PARTY TRANSACTIONS
The Company leases office and warehouse facilities from its two
stockholders. Rental expense relating to these agreements is
$60,000 for the years ended February 28, 1994 and 1995, $50,000
for the ten-month period ended December 31, 1995, and $30,000
and $79,500 for the six months ended June 30, 1995 and 1996,
respectively. Beginning in 1996, additional office space is
being leased from the stockholders and new revised agreements
replaced the existing leases. Annual rental expense relating to
these agreements will be $157,800. The terms of the leases
extend through 1998.
During the year ended February 28, 1995, the Company had sold
one Super Washreg-trade-mark car wash facility to the
stockholders for approximately $442,000 or $11,000 over cost.
On February 28, 1995, the Company sold a 25% interest in its
subsidiary, Lincolnway, Inc., to the stockholders. Proceeds
from this sale were approximately $46,000.
The Company sells parts, supplies, equipment and Super
Washreg-trade-mark car wash facilities at retail to Super Wash
Limited Partnership. Lincolnway, Inc. holds the 10% general
partnership interest in Super Wash Limited Partnership and
accounts for its investment on the cost method. Super Wash
Limited Partnership owns and operates Super Washreg-trade-mark
car wash facilities in Utah and Illinois. These facilities are
managed by the Company for a contracted fee. Management and
administrative fees charged to this affiliate for the years
ended February 28, 1994 and 1995, for the ten-month period ended
December 31, 1995, and the six months ended June 30, 1995 and
1996, were approximately $79,000, $74,000, $70,000, $38,000 and
$43,000, respectively. Total sales excluding management fees to
this affiliate for the years ended February 28, 1994 and 1995,
the ten-month period ended December 31, 1995, and the six months
ended June 30, 1995 and 1996, were approximately $170,000,
$1,065,000, $80,000, $37,000 and $286,000, respectively.
The Company sells parts, supplies, equipment and Super
Washreg-trade-mark car wash facilities to Town's Edge Car
Wash, Inc. ("Town's Edge"), a company also owned by the
stockholders of the Company. Sales to this affiliate were
approximately $1,741,000, $657,000, $210,000, $80,000 and
$639,000 for the years ended February 28, 1994 and 1995, the
ten-month period ended December 31, 1995, and the six months
ended June 30, 1995 and 1996, respectively. Sales discounts on
parts, supplies and equipment amounted to approximately $44,000,
$58,000, $51,000, $29,000 and $36,000 for the years ended
February 28, 1994 and 1995, the ten-month period ended
December 31, 1995, and the six months ended June 30, 1995 and
1996, respectively, while Super Washreg-trade-mark car wash
facilities were sold at $117,063, $15,123, $5,523, $0 and
$15,000 over cost. In addition, the Company manages the daily
operation of the individual car wash facilities owned by Town's
Edge. No fees are charged to Town's Edge for these services.
The Company sells parts, supplies, equipment and Super
Washreg-trade-mark car wash facilities to Edge Town Car Wash,
Inc. ("Edge Town"), a company that was incorporated during 1995
and is owned by the stockholders of the Company. Sales to this
affiliate were approximately $379,000, $1,400 and $6,150 for the
ten-month period ended December 31, 1995, and for the six months
ended June 30, 1995 and 1996, respectively. There are no sales
discounts on parts, supplies and equipment, while Super
Washreg-trade-mark car wash facilities were sold at $10,850
over cost during the ten-month period ended December 31, 1995.
In addition, the Company manages the daily operation of the
individual car wash facilities owned by Edge Town. Management
fees charged to this affiliate were approximately $1,500, $375
and $750 for the ten-month period ended December 31, 1995, and
the six months ended June 30, 1995 and 1996, respectively.
The Company sells parts, supplies, equipment and Super
Washreg-trade-mark car wash facilities to an employee-owned
company that was incorporated during 1995 and is managed by the
Company's executive committee. Sales to this affiliate were
approximately $500,000 for the ten-month period ended
December 31, 1995, and $3,980 for the six months ended June 30,
1996. There were no sales discounts on parts, supplies and
equipment for the period ended December 31, 1995, while a Super
Washreg-trade-mark car wash facility was sold to the employee-
owned company at $30,315 over cost. Sales discounts on parts
supplies and equipment for the six month period ended June 30,
1996, were approximately $200. There were no Super
Washreg-trade-mark car wash facilities sold during the six-
month period ended June 30, 1996. In addition, the Company
manages the daily operation of the individual car wash facility
owned by the employees. The management fee charged to them was
$1,900 for the ten-month period ended December 31, 1995, and
$4,800 for the six months ended June 30, 1996.
During the year ended February 28, 1994, two car wash facilities
were sold to an officer for approximately $352,000 or $113 over
net book value. During the year ended February 28, 1995, one
car wash facility was sold to an officer for approximately
$470,000 or $121,000 over cost. During the six months ended
June 30, 1996, one car wash facility was sold to an officer for
$479,332 or $111,000 over cost.
NOTE 5--CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and
trade accounts receivable. The Company places its cash with
high credit quality financial institutions. At times, such cash
may be in excess of the FDIC insurance limit.
The Company's customers are concentrated in the Midwest, with
approximately 78% of the Super Washreg-trade-mark car wash
facilities located in Illinois, Wisconsin, Iowa, Indiana and
Ohio. The Company reviews a customer's credit history before
extending credit. In addition, the Company routinely assesses
the financial strength of its customers and, as a consequence,
believes that its trade accounts receivable credit risk is
limited. The Company has no off-balance-sheet credit risk.
NOTE 6--MARKETABLE SECURITIES
The Company had approximately $680,000, $1,003,000 and
$1,022,000 invested in repurchase agreements as of February 28,
1995, December 31, 1995, and June 30, 1996, respectively. The
repurchase agreements have due dates between May, 1995, and May,
1997, and bear interest rates between 5.1% and 6.4%.
NOTE 7--LINES OF CREDIT
At December 31, 1995, the Company had available lines of credit
of approximately $4,500,000 for working capital and $16,560,000
for the financing of car wash acquisitions. As of December 31,
1995, the Company had borrowings of $1,000,000 outstanding on
the working capital line of credit. These lines of credit have
expiration dates ranging from January 15, 1996, to February 28,
1998. Interest rates on borrowings outstanding as of
December 31, 1995, ranged from 8.75% to 9.75%. The weighted
average interest rates during the year ended February 28, 1995,
and the ten-month period ended December 31, 1995, were 10% and
9.1%, respectively. Borrowings are secured by substantially all
of the Company's assets. The agreements require the Company to
meet certain restrictive covenants including, among other
things, certain financial statement ratios. As of December 31,
1995, the Company obtained waivers or was in compliance with all
applicable covenants.
At June 30, 1996, the Company had available lines of credit of
approximately $6,500,000 for working capital and $12,000,000 for
the financing of car wash acquisitions. As of June 30, 1996,
the Company had borrowings of $5,450,000 outstanding on the
working capital lines of credit. These lines of credit have
expiration dates ranging from September, 1996, to February 28,
1998. Interest rates on borrowings outstanding as of June 30,
1996, ranged from 8.25% to 9.25%. Borrowings are secured by
substantially all of the Company's assets. The agreements
require the Company to meet certain restrictive covenants
including, among other things, certain financial statement
ratios. As of June 30, 1996, the Company was in compliance with
all covenants.
Subsequent to June 30, 1996, the Company changed its line of
credit facilities to approximately $8,500,000 for working
capital and $10,000,000 for financing of car wash acquisitions.
These facilities expire from September, 1996, to August, 1999.
NOTE 8--LONG-TERM DEBT
Long-term debt at February 28, 1995, and December 31, 1995,
consisted of the following:
<TABLE>
<CAPTION>
FEB.28,1995 DEC.31,199 JUNE 30,1996
<S> <C> <C> <C>
(Unaudited)
Mortgage payable to bank--variable at
prime plus 1% (10% at February 28,
1995, 9.5% at December 31, 1995, and
9.25% at June 30, 1996), payable with
interest in monthly installments of
$4,511 through February, 1998, secured
by certain equipment, real estate,
repurchase agreements and fixtures
$240,550 $211,557 $193,988
Less- Current maturities 34,259 35,552 37,060
-------- -------- --------
$206,291 $176,005 $156,928
======== ======== ========
</TABLE>
Long-term debt matures as follows:
<TABLE>
<CAPTION>
Remainder of 1996 $ 37,060
<S> <C>
1997 39,080
1998 117,848
--------
$193,988
========
</TABLE>
NOTE 9--LEASE COMMITMENTS
In addition to the facilities leased from the stockholders, the
Company is obligated under two operating leases for office and
warehouse rent. These leases require aggregate monthly payments
of $1,898. One of the leases is month to month and the
remaining lease is payable in monthly installments of $950 until
a 90-day notification is provided.
Total rent expense for the years ended February 28, 1994 and
1995, the ten-month period ended December 31, 1995, and the six
months ended June 30, 1995 and 1996, was $95,192, $85,850,
$69,175, $42,675 and $86,490, respectively, including related-
party lease expense.
NOTE 10--COMMITMENTS
As of February 28, 1995, December 31, 1995, and June 30, 1996,
the Company was contingently liable for letters of credit in the
aggregate amount of $24,320, $10,510 and $173,278, respectively.
The letters of credit cover bonding requirements of various
municipalities where Super Washreg-trade-mark car wash
facilities are being constructed.
NOTE 11--RETIREMENT PLAN
The Company sponsors a defined contribution retirement plan (the
"plan") covering substantially all full-time employees.
Eligible employees may contribute up to 15% of their eligible
salary. In addition, the employer may make discretionary
contributions to the plan. During 1994, 1995 and 1996, no
discretionary employer contributions were made to the plan.
NOTE 12--RECLASSIFICATIONS
Certain prior-year balances have been reclassified to conform
with the current-year presentation.
NOTE 13--PRO FORMA DATA (UNAUDITED)
The pro forma net income and net income per share includes a
provision for federal and state income taxes as if the Company
had been a C Corporation for all periods presented. The Company
will convert to a C Corporation in connection with the
completion of the Offering resulting in the recording of
$135,000 in deferred income taxes as discussed in Note 3. Prior
to consummation of the Offering, the Company intends to declare
a dividend (the "Dividend") equal to the Company's taxable
income while it has been an S Corporation prior to its
conversion to a C Corporation, to the extent such taxable income
has not been previously distributed. The Company currently
estimates (based in part on the Company estimate of its earnings
for the remainder of 1996 through the consummation date) that
the dividend will equal approximately $5,400,000. As of
June 30, 1996, the Company's taxable income while it has been an
S Corporation that has not been distributed is approximately
$2,700,000. The unaudited pro forma balance sheet gives effect
to the deferred tax liability of $135,000 and the $2,700,000
dividend. No other contemplated transactions in connection with
the Offering are included in the unaudited pro forma balance
sheet information.
NOTE 14--SUBSEQUENT EVENTS
The Company's Board of Directors approved (i) the creation of
two classes of stock--A and B, (ii) a 55,500-for-1 stock split
of B shares and (iii) an increase in the authorized common stock
to 25,000,000 Class A shares and 25,000,000 Class B shares, all
to be effective immediately prior to the consummation of the
Offering. All common share and per share amounts have been
adjusted retroactively to give effect to the stock split.
Additionally, the authorized number of shares have been adjusted
to give effect to these increases. The shares of Class A common
stock and Class B common stock are identical in all respects,
except for voting rights and certain conversion rights and
transfer restrictions in respect of the shares of Class B common
shares. Each share of Class A common stock entitles the holder
to one vote and each share of Class B common stock entitles the
holder to ten votes. Class A common stock has no conversion
rights. Class B common stock is convertible into Class A common
stock, in whole or in part, at the option of the holder, on the
basis of one share of Class A common stock for each share of
Class B common stock converted. In the event of a transfer of
shares of Class B common stock to any person other than a Black
Family Member (as defined), each share will automatically
convert into a Class A share of common stock.
<PAGE>
No dealer, salesperson or other individual has 450,000 Shares
been authorized to give any information or to make
any representations not contained in or
incorporated by reference in this Prospectus and,
if given or made, such information or
representation must not be relied upon as having SUPER WASH, INC.
been authorized by the Company. This Prospectus
does not constitute an offer to sell or a
solicitation of an offer to buy any of the Common
Stock in any jurisdiction to any person to whom it Class A
is unlawful to make such offer or solicitation in Common Stock
such jurisdiction. Neither the delivery of this ($0.01 par value)
Prospectus nor any sale made hereunder shall,
under any circumstances, create an implication
that the information contained herein is correct
as of any date subsequent to the date hereof or
that there has been no change in the affairs of Prospectus
the Company since such date.
Until _________, 1996 (25 days from the date
of this Prospectus), all agents and dealers
effecting transactions in the Common Stock offered
hereby, whether or not participating in this
distribution, may be required to deliver a
Prospectus. This is in addition to the obligation
of dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold
allotments or subscriptions.
TABLE OF CONTENTS
Prospectus Summary
.....................Risk Factors
......................The Company
..................Use of Proceeds
.......S Corporation Distribution
..................Dividend Policy
.........................Dilution
...................Capitalization
Selected Financial and Operating Data
Management's Discussion and Analysis of
Financial Condition and Results of
...................Operations
.........................Business
.......................Management
Certain Relationships and
...Related Party Transactions _____________, 1996
...........Principal Stockholders
.....Description of Capital Stock
..Shares Eligible for Future Sale
.............Plan of Distribution
....................Legal Matters
..........................Experts
............Available Information
....Index to Financial Statements
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by
the Company in connection with the registration, issuance
and distribution of the securities being registered hereby,
other than underwriting discounts and commissions. All the
amounts shown are estimates except the Securities and
Exchange Commission registration fee.
ITEM AMOUNT
Registration Fee - Securities and Exchange Commission
$1,552.00
Printing and Engraving Fees and Expenses *
Legal Fees and Expenses (other than Blue Sky) *
Accounting Fees and Expenses *
Blue Sky Fees and Expenses (including fees of counsel)
*
Miscellaneous Expenses *
Total $
100,000.00
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 8.75 of the Illinois Business Corporation Act
authorizes indemnification of directors, officers,
employees and agents of the Company; allows the advancement
of costs of defending against litigation; and permits
companies incorporated in Illinois to purchase insurance on
behalf of directors, officers, employees and agents against
liabilities whether or not in the circumstances such
companies would have the power to indemnify against such
liabilities under the provisions of the statute.
The Company's Articles, incorporated by reference as
Exhibit 3.1, and its Bylaws, incorporated by reference as
Exhibit 3.2, provide for indemnification of its officers
and directors to the full extent permitted by the Illinois
Business Corporation Act. The Articles of the Company
eliminate, to the fullest extent permitted by Illinois law,
liability of a director to the Company or its stockholders
for monetary damages for breach of such director's
fiduciary duty of care except for liability where a
director (a) breaches his or her duty of loyalty to the
Company or its stockholders, (b) fails to act in good faith
or engages in intentional misconduct or knowing violation
of law, (c) authorizes payment of an illegal dividend or
stock repurchase or (d) obtains an improper personal
benefit. While liability for monetary damages has been
eliminated, equitable remedies, such as injunctive relief
or recision remain available. In addition, a director is
not relieved of his responsibilities under any other law,
including the federal securities laws.
The Company will enter into indemnification agreements
in the form described below with each person who is
currently a member of its board of directors and with
persons who in the future become directors of the Company.
Such indemnification agreements provide for indemnification
against any and all expenses incurred in connection with,
as well as any and all judgments, fines and amounts paid in
settlement resulting from, any threatened, pending or
completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (collectively an
"Action"), by reason of the fact that such director is or
was a director, officer, employee or agent of the Company,
or is or was serving at the request of the Company as a
director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise. The indemnification agreements provide that if
any payment, advance or indemnification of the director
requires that he or she acted in good faith, in a manner he
or she reasonably believed to be for or not opposed to the
best interest of the Company or without reasonable cause to
believe his or her conduct was unlawful, then it shall be
presumed that he or she so acted unless proven otherwise by
clear and convincing evidence. The indemnification
agreements also provide for the advancement of all
expenses, including reasonable attorneys' fees, arising
from the investigation of any claim, preparation for the
defense or settlement of an Action. The indemnification
agreements authorize the Company to participate in the
defense of any Action and to assume the defense thereof,
with counsel who shall be reasonably satisfactory to the
director, provided that the director shall be entitled to
separate counsel of his or her choosing if he or she
reasonably believes that (i) there exist conflicting
interests between himself or herself and the Company or
other party (the defense of whom the Company shall have
assumed) or (ii) there is any substantial likelihood that
the Company will be financially or legally unable to
satisfy its obligations under the indemnification
agreements. The indemnification agreements provide that a
director's rights under such contract are not exclusive of
any other indemnification rights he or she may have under
any provision of law, the Articles or Bylaws of the
Company, the vote of the Company's stockholders or
disinterested directors, other agreements or otherwise.
(Insofar as indemnification by the Company for liabilities
arising under the Securities Act of 1933, as amended (the
"Securities Act") may be permitted to directors, officers
and controlling persons of the Company pursuant to the
foregoing provisions, the Company has been advised that
such indemnification is considered by the Commission to be
against public policy and therefore unenforceable.)
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
There were no transactions by the Company during the last
three years involving sales of the Company's securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
*1.1 Form of Subscription Agreement
*1.2 Form of Escrow Agreement
*3.1 Amended and Restated Articles of Incorporation of Super Wash, Inc.
*3.2 Amended and Restated Bylaws of Super Wash, Inc.
*4 Specimen Common Stock Certificate of Super Wash, Inc.
*5.1 Opinion of Rudnick & Wolfe
*10.1 Form of Director Indemnification Agreement
*10.2 Form of Operations Agreement
*10.3 Form of Tax Indemnification Agreement
**23.1 Consent of Arthur Andersen LLP
*23.3 Consent of Rudnick & Wolfe (included in Exhibit 5.1 hereof)
**24 Power of Attorney
**27 Financial Data Schedule
*99.1 Consents of persons named to become directors
* To be filed by amendment
** Filed with this document
} Previously filed
(b) Financial Statement Schedule
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising
under the Act, may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful
defense of any election, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes:
() To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
<PAGE>
() To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
() To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar
value of securities offered would not exceed that which
was registered) and any deviation from the low or high
and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
() To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
do not apply if the registration statement is on Form S-3,
Form S-8 or Form F-3, and the information required to be
included in a post-effective amendment by those paragraphs
is contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
() That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and
the offering of such securities at that time shall be
deemed to be the initial BONA BIDE Offering thereof.
() To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the Offering.
() If the registrant is a foreign private issuer, to
file a post-effective amendment to the registration
statement to include any financial statements required by
Rule 3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial
statements and information otherwise required by Section
10(a)(3) of the Act need not be furnished, provided, that
the registrant includes in the prospectus, by means of a
post-effective amendment, financial statements required
pursuant to this paragraph (a)(4) and other information
necessary to ensure that all other information in the
prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with
respect to registration statements on Form F-3, a post-
effective amendment need not be filed to include financial
statements and information required by Section 10(a)(3) of
the Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on
September 27, 1996.
SUPER WASH, INC.
By: /S/ MARY K. BLACK
Mary K. Black
Chairman of the Board
Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed by the
following persons in the capacities and on the dates
indicated.
NAME TITLE
DATE
Mary K. Black* Chairman of the Board
September 27, 1996
and Secretary
Robert D. Black* Director, President and Treasurer
September 27, 1996
(principal executive officer)
Donald B. Vogel* Vice President (principal financial
September 27, 1996
and accounting officer)
*By: /S/ MARY K. BLACK
Individually and as Attorney-in-Fact September 27, 1996
Mary K. Black
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
*1.1 Form of Subscription Agreement
*1.2 Form of Escrow Agreement
*3.1 Amended and Restated Articles of Incorporation of Super Wash, Inc.
*3.2 Amended and Restated Bylaws of Super Wash, Inc.
*4 Specimen Common Stock Certificate of Super Wash, Inc.
*5.1 Opinion of Rudnick & Wolfe
*10.1 Form of Director Indemnification Agreement
*10.2 Form of Operations Agreement
*10.3 Form of Tax Indemnification Agreement
**23.1 Consent of Arthur Andersen LLP
*23.3 Consent of Rudnick & Wolfe (included in Exhibit 5.1 hereof)
**24 Power of Attorney
**27 Financial Data Schedule
*99.1 Consents of persons named to become directors
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby
consent to the inclusion in this registration statement on Form
S-1 of our reports, which contained a captioned opinion dated
May 15, 1996, on our audits of the consolidated financial
statements of Super Wash, Inc. and Subsidiary and to all
references to our firm included in this registration statement.
ARTHUR ANDERSON LLP
Chicago, Illinois
September 26, 1996
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the
undersigned, being a director or officer, or both, of SUPER
WASH, INC., an Illinois corporation (the "Company"), does hereby
constitute and appoint MARY K. BLACK, ROBERT D. BLACK and JOSEPH
HERMES with full power to each of them to act alone, as the true
and lawful attorneys and agents of the undersigned, with full
power of substitution and resubstitution to each of said
attorneys to execute, file or deliver any and all instruments
and to do all acts and things which said attorneys and agents,
or any of them, deem advisable to enable the Company to comply
with the Securities Act of 1933, as amended, and any
requirements or regulations of the Securities and Exchange
Commission in respect thereof, in connection with the Company's
filing with respect to the registration under said Securities
Act of 4,500,000 shares of Class A Common Stock, par value $0.01
per shares, including specifically, but without limitation of
the general authority hereby granted, the power and authority to
sign his name as a director or officer or both, of the Company,
as indicated below opposite his signature, to the registration
statement, and any amendment, post-effective amendment,
supplement or papers supplemental thereto, to be filed with
respect to said shares of common stock; and each of the
undersigned does hereby fully ratify and confirm all that said
attorneys and agents, or any of them, or the substitute of any
of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed
these presents, as of this 10th day of September, 1996.
/S/ MARY K. BLACK
Mary K. Black Chairman of the Board
of Directors
/S/ ROBERT D. BLACK
Robert D. Black Director and
President (Principal
Executive Officer)
/S/ DONALD B. VOGEL
Donald B. Vogel Vice President
(Principal Financial
and Accounting
Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
When the transaction referred to in Note 14 of Notes to Consolidated
Financial Statements has been consummated we will be in a position to
render the following report. ARTHUR ANDERSEN LLP
To the Board of Directors of Super Wash, Inc. and Subsidiary:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements of Super Wash, Inc.
and Subsidiary included in this registration statement and have issued
our report thereon dated May 15, 1996, except for Note 14 of Notes to
Consolidated Financial Statements which is as of _________, 1997. Our
audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the
index in Item 16(b) is the responsibility of the Company's management
and 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 the audit 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.
Chicago, Illinois
May 15, 1996
S-1
<PAGE>
SCHEDULE II
SUPER WASH, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Balance at Charged to
Beginning Costs & Balance at
OF YEAR EXPENSES DEDUCTION END OF YEAR
Allowance for Doubtful
Accounts:
<S> <C> <C> <C> <C>
Year Ended February 28,
1994 $ 63,000 $ 51,609 $49,609 $65,000
Year Ended February 28,
1995 $ 65,000 $ 10,000 $ $
-- 75,000
Ten Month Period Ended
December $ 75,000 $ $ $
31, 1995 -- -- 75,000
</TABLE>
