SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
10-Q
QUARTERLY REPORT
PURSUANT TO
SECTION 13 OR
SECTION 15 (d)
OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 2000
LOOMIS, FARGO
& CO.
(Exact name of
registrant as specified in its charter)
| Delaware
(State or other
jurisdiction)
|
|
333-24689
(Commission File
Number)
|
|
76-0521092
(IRS Employer
Identification No.)
|
|
| File No.
333-24689-01
LFC Holding
Corporation
(Exact Name of
Registrant
as Specified in
its Charter)
|
|
File No.
333-24689-02
Loomis, Fargo
& Co.
(Exact Name of
Registrant
as Specified in
its Charter)
|
|
File No.
333-24689-04
Loomis, Fargo
& Co. of Puerto Rico
(Exact Name of
Registrant
as Specified in
its Charter)
|
|
| Delaware
(State or other
jurisdiction of
incorporation or
organization)
|
|
Texas
(State or other
jurisdiction of
incorporation or
organization)
|
|
Tennessee
(State or other
jurisdiction of
incorporation or
organization)
|
|
| 75-2371825
(I.R.S.
Employer
Identification
No.)
|
|
75-0117200
(I.R.S.
Employer
Identification
No.)
|
|
66-0215016
(I.R.S.
Employer
Identification
No.)
|
|
| 2500 CityWest
Blvd., Suite 900
Houston,
Texas
(Address of
principal executive offices)
|
|
77042
(Zip
Code)
|
|
Registrants’ telephone number, including area code: (713)
435-6700
Indicate
by check mark whether the registrants: (1) have filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No ¨
As of May
2, 2000, 10,000,000 shares of the Common Stock, $0.01 par value, of Loomis,
Fargo & Co.; 2,652,705 shares of the Class A Common Stock, $0.01 par
value, of LFC Holding Corporation; 1,000 shares of the Common Stock, $10.00
par value, of Loomis, Fargo & Co. (a Texas corporation); and 250 shares
of Common Stock, no par value, of Loomis, Fargo & Co. of Puerto Rico,
were outstanding.
PART
I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
Loomis, Fargo
& Co.
Consolidated
Balance Sheets
(Unaudited, in
thousands)
| Assets |
|
March 31,
2000
|
|
December 31,
1999
|
| Current
assets: |
|
|
|
|
|
|
| Cash
and cash equivalents |
|
$ 4,255 |
|
|
$ 3,905 |
|
|
Accounts receivable, net |
|
23,408 |
|
|
25,757 |
|
| Prepaid
expenses and other current assets |
|
6,029 |
|
|
4,915 |
|
| |
|
|
|
|
|
|
|
Total current
assets |
|
33,692 |
|
|
34,577 |
|
|
|
| Property and
equipment, net |
|
47,125 |
|
|
46,744 |
|
| Deferred taxes,
net |
|
7,043 |
|
|
6,823 |
|
| Intangible assets,
net |
|
95,238 |
|
|
96,468 |
|
| Other assets,
net |
|
3,242 |
|
|
3,445 |
|
| |
|
|
|
|
|
|
| Total
Assets |
|
$186,340 |
|
|
$188,057 |
|
| |
|
|
|
|
|
|
|
|
| Liabilities
and stockholders’ deficit |
| Current
liabilities: |
|
Accounts payable |
|
$ 18,449 |
|
|
$ 18,937 |
|
|
Accrued expenses and other current liabilities |
|
29,630 |
|
|
29,501 |
|
|
Current portion, long-term debt—affiliates |
|
— |
|
|
2,904 |
|
|
Current portion, capital lease obligations |
|
221 |
|
|
292 |
|
| |
|
|
|
|
|
|
|
Total
current liabilities |
|
48,300 |
|
|
51,634 |
|
|
|
| Long-term
liabilities: |
|
Long-term debt |
|
129,700 |
|
|
128,700 |
|
|
Capital lease obligations |
|
25 |
|
|
37 |
|
|
Other long-term liabilities |
|
10,351 |
|
|
10,796 |
|
| |
|
|
|
|
|
|
|
Total
long-term liabilities |
|
140,076 |
|
|
139,533 |
|
|
|
| Stockholders’ deficit: |
|
Common stock |
|
100 |
|
|
100 |
|
|
Additional paid-in capital |
|
24,755 |
|
|
24,755 |
|
|
Accumulated deficit |
|
(26,891 |
) |
|
(27,965 |
) |
| |
|
|
|
|
|
|
|
Total stockholders’ deficit |
|
(2,036 |
) |
|
(3,110 |
) |
| |
|
|
|
|
|
|
| Total
liabilities and stockholders’ deficit |
|
$186,340 |
|
|
$188,057 |
|
| |
|
|
|
|
|
|
See accompanying
notes.
Loomis, Fargo
& Co.
Consolidated
Statements of Operations
(unaudited, in
thousands)
| |
|
Quarter Ended
March 31,
|
| |
|
2000
|
|
1999
|
| Revenues |
|
$96,692 |
|
$94,050 |
| Cost of
operations: |
|
|
|
|
|
Payroll and related expense |
|
61,016 |
|
57,884 |
|
Vehicle expense |
|
10,667 |
|
10,991 |
|
Facilities expense |
|
4,030 |
|
4,098 |
|
Other operating expenses |
|
15,764 |
|
16,691 |
| |
|
|
|
|
| |
|
91,477 |
|
89,664 |
| |
|
|
|
|
| Operating
income |
|
5,215 |
|
4,386 |
|
|
| Interest
expense |
|
3,425 |
|
3,450 |
| |
|
|
|
|
| Income before
income taxes |
|
1,790 |
|
936 |
| Income
taxes |
|
716 |
|
468 |
| |
|
|
|
|
| Net income
|
|
$ 1,074 |
|
$ 468 |
| |
|
|
|
|
See accompanying
notes.
Loomis,
Fargo & Co.
Consolidated
Statements of Cash Flows
(Unaudited,
in thousands)
| |
|
Quarter
Ended
March 31,
|
| |
|
2000
|
|
1999
|
| Operating
activities |
|
|
|
|
|
|
| Net
income |
|
$ 1,074 |
|
|
$ 468 |
|
| Adjustments to
reconcile net income to net cash provided by (used in) operating
activities: |
|
Depreciation and amortization expense |
|
3,189 |
|
|
3,281 |
|
|
Amortization of financing costs |
|
241 |
|
|
241 |
|
|
Accretion of discount on NOL note |
|
— |
|
|
12 |
|
|
Deferred income taxes |
|
357 |
|
|
— |
|
|
Gain on disposal of property and equipment |
|
10 |
|
|
12 |
|
|
Provision for doubtful accounts |
|
(13 |
) |
|
(97 |
) |
|
Changes in current assets and liabilities: |
|
Accounts receivable |
|
2,362 |
|
|
(635 |
) |
|
Prepaid expenses and other current assets |
|
(1,151 |
) |
|
(1,938 |
) |
|
Accounts payable |
|
(488 |
) |
|
(5,660 |
) |
|
Accrued expenses and other liabilities |
|
(316 |
) |
|
3,857 |
|
| |
|
|
|
|
|
|
| Net cash
provided by (used in) operating activities |
|
5,265 |
|
|
(459 |
) |
| |
|
|
|
|
|
|
| Investing
activities |
|
|
|
|
|
|
| Acquisition of
property and equipment |
|
(2,942 |
) |
|
(3,866 |
) |
| Proceeds from
sale of property and equipment |
|
14 |
|
|
27 |
|
| |
|
|
|
|
|
|
| Net cash used
in investing activities |
|
(2,928 |
) |
|
(3,839 |
) |
| |
|
|
|
|
|
|
| Financing
activities |
|
|
|
|
|
|
| Net borrowings
(repayments) of debt |
|
1,000 |
|
|
6,900 |
|
| Repayment of
long-term debt—affiliates |
|
(2,904 |
) |
|
— |
|
| Repayments of
capital lease obligations |
|
(83 |
) |
|
(119 |
) |
| |
|
|
|
|
|
|
| Net cash
provided by (used in) financing activities |
|
(1,987 |
) |
|
6,781 |
|
| |
|
|
|
|
|
|
| Net increase
in cash and cash equivalents |
|
350 |
|
|
2,483 |
|
| Cash and cash
equivalents at beginning of period |
|
3,905 |
|
|
2,548 |
|
| |
|
|
|
|
|
|
| Cash and cash
equivalents at end of period |
|
$ 4,255 |
|
|
$ 5,031 |
|
| |
|
|
|
|
|
|
See accompanying
notes.
LOOMIS,
FARGO & CO.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
March 31,
2000
NOTE 1 BASIS
OF PRESENTATION
The
accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The
information included in this Form 10-Q should be read in conjunction
with the audited consolidated financial statements of Loomis, Fargo
& Co. (the “Company”) as of December 31, 1999 included in
the Form 10-K filed with the Securities and Exchange Commission on
March 30, 2000. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the
quarter ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the full year.
Certain prior period amounts have been reclassified to conform
with the 2000 presentation.
NOTE 2 RECENT
PRONOUNCEMENTS
In
June 1998, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities (“SFAS 133”). SFAS No. 133 requires that
all derivatives be recognized as assets and liabilities and measured at
fair value. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the
resulting designation. In June 1999, the Financial Accounting Standards
Board delayed the effective date of SFAS 133, requiring the Company to
adopt SFAS 133 effective January 1, 2001. The Company does not
anticipate that the new standard will have a material impact on the
financial statements.
In
December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 (SAB 101), which provides the
staff’s views in applying generally accepted accounting principles
to selected revenue recognition issues. In March 2000, the SEC issued
SAB 101A, which delayed the effective date of this statement until
April 1, 2000. The Company does not anticipate that SAB 101 will have a
material impact on the financial statements.
NOTE 3 INCOME
TAXES
The
Company continually reviews the adequacy of the valuation allowance
related to deferred tax assets and reduced the reserve by $0.6 million
during the quarter ended March 31, 2000. The reduction resulted from a
reassessment by the Company which indicates that it is more likely than
not that additional benefits will be realized. As the reduction in
valuation allowance was related to purchase accounting, a corresponding
reduction in goodwill resulted.
NOTE 4
SIGNIFICANT CUSTOMER
One
of the Company’s customers accounted for approximately 13% and 12%
of the Company’s consolidated revenue for the quarters ended March
31, 2000 and 1999, respectively.
ITEM
2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
Loomis, Fargo & Co. (the “Company”) provides
armored car transport services to a variety of financial, commercial,
industrial and retail establishments within the United States and
Puerto Rico. The Company offers secure, expedited transportation and
protection for valuable commodities, provides extensive automatic
teller machine (“ATM”) services, cash management and related
services to financial institutions and other commercial customers. The
Company also provides contract security officers to patrol and control
access to customer facilities in Puerto Rico.
FORWARD-LOOKING INFORMATION
Certain statements in this report including such terms as
“believe”, “estimate”, “should”,
“may”, “expect”, “anticipate” and similar
expressions which are not historical are forward-looking statements
that involve risks and uncertainties. Such statements include, without
limitation, the Company’s expectation as to future performance.
Such forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Important factors that could cause the actual results, performance or
achievements of the Company to differ materially from the
Company’s expectations (“Cautionary Statements”) are
disclosed in this report. Investors are cautioned that all
forward-looking statements involve risks and uncertainty. Factors that
could cause or contribute to such differences include, but are not
limited to, risks and uncertainties relating to leverage and debt
service, changes in interest rates, risks inherent in the armored
transport industry, general economic and business conditions,
restrictions imposed by the bank credit facility, the ability to
attract and retain qualified employees, environmental and other
regulatory matters and future legal proceedings. All written or oral
forward-looking statements attributable to the Company are expressly
qualified in their entirety by the Cautionary Statements.
RESULTS OF
OPERATIONS
The
following table sets forth the Company’s consolidated results of
operations expressed as a percentage of revenue.
| |
|
Quarter
Ended
March 31,
|
| |
|
2000
|
|
1999
|
| Revenues |
|
100.0 |
% |
|
100.0 |
% |
| Cost of
operations: |
|
|
|
|
|
|
|
Payroll and related expense |
|
63.1 |
|
|
61.5 |
|
|
Vehicle expense |
|
11.0 |
|
|
11.7 |
|
|
Facilities expense |
|
4.2 |
|
|
4.4 |
|
|
Other operating expense |
|
16.3 |
|
|
17.7 |
|
| |
|
|
|
|
|
|
|
Operating Income |
|
5.4 |
|
|
4.7 |
|
|
Interest expense |
|
3.6 |
|
|
3.7 |
|
| |
|
|
|
|
|
|
|
Income before taxes |
|
1.8 |
|
|
1.0 |
|
|
Income taxes |
|
.7 |
|
|
.5 |
|
| |
|
|
|
|
|
|
|
Net income |
|
1.1 |
% |
|
.5 |
% |
| |
|
|
|
|
|
|
Revenues. Revenues for the first quarter of 2000
increased by approximately $2.6 million (2.8%) from last year’s
corresponding period. This increase resulted from net-new business
since the end of the first quarter of 1999, normal rate increases on
existing business and an additional workday during the first quarter of
2000. In addition, the Company implemented a fuel fee on its
transportation-related services during February 2000 as a result of
fuel prices reaching nine-year highs.
The following table analyzes revenues by type of service. The increase
in the armored transport services during the quarter ended March 31,
2000 represents additional customers being serviced and the majority of
the fuel fees previously discussed. The slight reduction in ATM
services represents the shift of certain customers to either service
their own ATMs or request the manufacturers to service their ATMs,
which brought about a reduction in the amount of first-line maintenance
services rendered by the Company.
| |
|
Quarter
Ended
March 31,
|
|
Change
|
| |
|
2000
|
|
1999
|
| Traditional
armored transport services |
|
$58.7 |
|
$54.8 |
|
$3.9 |
|
| ATM
services |
|
29.0 |
|
29.9 |
|
(0.9 |
) |
| Cash
management services |
|
9.0 |
|
9.3 |
|
(0.3 |
) |
| |
|
|
|
|
|
|
|
|
Total Revenue |
|
$96.7 |
|
$94.0 |
|
$2.7 |
|
| |
|
|
|
|
|
|
|
Payroll and related expense. Payroll and related expense
for the quarter ended March 31, 2000 increased by approximately $3.1
million (5.4%) from the corresponding period in 1999. The increase
primarily resulted from the increased costs of providing group
insurance and the strengthening of management staffing throughout the
Company. As a percentage of revenue, payroll and related expense
increased to 63.1% for the quarter ended March 31, 2000 from 61.5% for
the comparative period in 1999. These changes reflect the business
strategy of improved wages and fringe benefits throughout the Company
as well as increases in the number of crew operating certain higher
risk routes.
Vehicle expense. Vehicle expense for the first quarter of
2000 decreased by approximately $0.3 million (2.9%) from the
corresponding period in 1999. Vehicle expense as a percent of revenues
decreased to 11.0% from 11.7% from the corresponding period in 1999.
Reductions in the amounts paid for vehicle rentals, auto liability
claims and related premiums were the primary cause for this reduction.
These positive variances were partially offset by recent increases in
the price of fuel.
Facilities expense. Facilities expense for the first
quarter of 2000, and the expense as a percent of revenue, remained
relatively constant with the corresponding period in 1999.
Other operating expenses. Other operating expenses for the
first quarter of 2000 decreased by approximately $0.9 million (5.6%)
from the corresponding period in 1999. Other operating expenses as a
percent of revenues decreased to 16.3% from 17.7% from the
corresponding period in 1999. Other operating expenses include such
expenses as cargo insurance premiums and retained losses, costs of a
centralized dispatch center, subcontracting costs, bad debt expense,
and the testing, recruiting and training of employees. Combined
cash-in-transit insurance premiums and cargo loss totals have declined
by approximately $0.8 million for the first quarter of 2000 from last
year’s corresponding period.
Interest expense. Interest expense for the first quarter
of 2000 remained relatively constant with the corresponding period in
1999. While the daily average borrowing under the Company’s credit
facility was approximately $2.6 million lower during the first quarter
of 2000 as compared to the same period in 1999, market interest rates
have increased substantially as compared to the first quarter of
1999.
LIQUIDITY
AND CAPITAL RESOURCES
Total cash and cash equivalents at March 31, 2000 and 1999 were
$4.3 million and $5.0 million, respectively. Changes in cash and cash
equivalents are described in the statements of cash flows, which are
summarized below.
| |
|
Quarter
Ended
March 31,
|
| |
|
2000
|
|
1999
|
| Net cash
provided by (used in) operating activities |
|
$ 5.3 |
|
|
$(0.5 |
) |
| Net cash used
in investing activities |
|
(2.9 |
) |
|
(3.8 |
) |
| Net cash
provided by (used in) financing activities |
|
(2.0 |
) |
|
6.8 |
|
| |
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
$ 0.4 |
|
|
$ 2.5 |
|
| |
|
|
|
|
|
|
Operating
Activities
Net
cash of $5.3 million was provided by operating activities during the
first quarter of 2000 as compared to $0.5 million used by operating
activities during the same quarter of 1999. This increase is primarily
attributable to the improved operations during the quarter as reflected
by a 129.5% increase in net income as well as a greater amount of
accounts receivable collections during the first quarter of
2000.
Investing
Activities
In
the first quarter of 2000, cash of $2.9 million was used for
acquisitions of property and equipment, which primarily related to the
enhancement of the Company’s fleet. Planned capital expenditures
for the next twelve months are estimated to be approximately $16.0
million.
Financing
Activities
Net
borrowings of $1.0 million were made on the Company’s bank credit
facility during the first quarter of 2000. The Company’s average
daily balance outstanding was $2.6 million less during this period than
the corresponding period in 1999. The primary reason the Company was
able to reduce the level of debt has been the continued focus on
collections. In connection with the utilization of certain net
operating losses in the 1999 Federal Income Tax return, the Company was
required to make a $2.9 million payment on the long-term debt to
affiliates during the first quarter of 2000.
The
Company’s balance sheet reflected a working capital deficit of
$14.6 million at March 31, 2000, a decrease from the December 31, 1999
working capital deficit of $17.1 million. The Company is highly
leveraged, with long-term liabilities comprising 75.2% of total
liabilities and a stockholders’ deficit at March 31,
2000.
The
Company’s revolving bank credit facility provided aggregate
commitments of $85.6 million at March 31, 2000. Under the facility,
funds can be borrowed either for unspecified periods of time at a base
rate tied to the bank’s prime rate, or for set periods of time
under variable rates tied to LIBOR. The facility includes guarantees of
letters of credit, of which approximately $18.8 million were
outstanding at March 31, 2000. Remaining commitments available under
the facility at March 31, 2000 were $22.1 million.
The
credit facility agreement includes a step-down of commitments over the
final four years of the facility. By December 31, 2000, total
commitments under the bank credit facility will decrease to $72.5
million. It is anticipated that letters of credit requirements,
principally for casualty liabilities, should not exceed $20.0 million
by December 31, 2000, leaving at least $52.5 million in available
borrowing capacity. Management believes that the operating cash flow
and this remaining financing commitment will be more than adequate to
fund future operating needs and capital expenditures.
IMPACT OF
YEAR 2000
In
prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant
disruptions in mission critical information technology and
non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either
with its products, its internal systems, or the products and services
of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.
PART
II—OTHER INFORMATION
Item 6
Exhibits and Reports on Form 8-K
| 3.1 |
|
Certificate of
Incorporation of Loomis, Fargo & Co. (Delaware), as amended.
(1) |
|
|
| 3.2 |
|
Bylaws of
Loomis, Fargo & Co. (Delaware). (1) |
|
|
| 3.3 |
|
Certificate
of Incorporation of LFC Holding Corporation, as amended.
(1) |
|
|
| 3.4 |
|
Bylaws of
LFC Holding Corporation, as amended. (1) |
|
|
| 3.5 |
|
Articles
of Incorporation of Loomis, Fargo & Co. (Texas), as amended.
(1) |
|
|
| 3.6 |
|
Bylaws of
Loomis, Fargo & Co. (Texas), as amended. (1) |
|
|
| 3.9 |
|
Amended
and Restated Articles of Incorporation of Loomis, Fargo &
Co. of Puerto Rico, as
amended. (1) |
|
|
| 3.10 |
|
Bylaws
of Loomis, Fargo & Co. of Puerto Rico. (1) |
|
|
| 4.1 |
|
Indenture, dated as of January 24, 1997, among Loomis,
Fargo & Co. (Delaware), as Issuer, LFC
Holding Corporation, Loomis, Fargo & Co. (Texas), LFC
Armored of Texas Inc. (formerly known as
Wells Fargo Armored Service Corporation of Texas), and Loomis,
Fargo & Co. of Puerto Rico
(formerly known as Wells Fargo Armored Service Corporation of
Puerto Rico), as Guarantors, and
Marine Midland Bank, as trustee. (1) |
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| 4.2 |
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Form of
New Note (included in Exhibit 4.1, Exhibit A-3).
(1) |
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| 27.1 |
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Financial Data Schedule for Loomis, Fargo &
Co.* |
(1)
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Incorporated by reference to the Registration Statement
on Form S-1 (File No. 333-24689) of Loomis, Fargo & Co.
initially filed with the Securities and Exchange Commission on
April 7, 1997, as amended.
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(b)
Reports on Form 8-K
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No reports on Form 8-K were filed by the Company
during the quarter for which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the co-registrants have duly
caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized.
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Loomis,
Fargo & Co. (Delaware)
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Loomis,
Fargo & Co. (Texas)
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Loomis,
Fargo & Co. of Puerto Rico
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Date: May
4, 2000
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/S
/ JAMES
K. JENNINGS
, JR
.
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Executive Vice President and Chief
Financial
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Officer
(Principal Financial and Accounting
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Officer
of the Co-registrants)
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