<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
April 23, 1998
MAC-GRAY CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware 011-13495 04-3361982
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
22 Water Street, Cambridge, MA 02141
(Address of principal executive offices and zip code)
(617) 492-4040
(Registrant's telephone number, including area code)
<PAGE>
The undersigned Registrant hereby amends Item 7 of its Current Report on Form 8-
K dated April 23, 1998, as amended, to read in its entirety as follows:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- ------- ------------------------------------------------------------------
(a) Financial Statements of Business Acquired
(1) Amerivend Corporation Audited Balance Sheet at December 31,
1997 and the Related Statements of Income, Changes in
Stockholders' Equity and of Cash Flows for the Year Then
Ended and Independent Auditors' Report.
(2) Amerivend Corporation Balance Sheet (unaudited) at March 31,
1998 and the Related Statements of Income (unaudited), and
of Cash Flows (unaudited) for the Three Months Then Ended.
(b) Pro Forma Financial Information
(1) Mac-Gray Corporation Pro Forma Combined Income Statement
(unaudited) for the Year Ended December 31, 1997.
(2) Mac-Gray Corporation Pro Forma Combined Balance Sheet
(unaudited) at March 31, 1998.
(3) Mac-Gray Corporation Pro Forma Combined Income Statement
(unaudited) for the Three Months Ended March 31, 1998.
(4) Notes to Pro Forma Consolidated Financial Statements
(unaudited).
(c) Exhibits
Exhibit No. Description
----------- -----------
2.1 Stock Purchase Agreement, dated as of March 31,
1998, by and among Mac-Gray Services, Inc., Copico,
Inc. and certain stockholders, is incorporated by
reference herein to the Registration Statement on
Form S-1 filed with the Securities and Exchange
Commission on April 9, 1998 (Reg. No. 333-49795).
2.2* Stock and Asset Purchase Agreement, dated as of
March 4, 1998, by and among Mac-Gray Services, Inc.,
Amerivend Corporation, Amerivend Southeast
Corporation, Gerald E. Pulver and the Gerald E.
Pulver Grantor Retained Annuity Trust. Pursuant to
Item 601(b)(2) of Regulation S-K, the Schedules
referred to in the Stock and Asset Purchase
Agreement are omitted. The Registrant hereby
undertakes to furnish supplementally a copy of any
omitted Schedule to the Commission upon request.
23.1 Consent of Independent Accountants.
99.1* Press release announcing the completion of the
acquisition by Mac-Gray Services, Inc. of the
outstanding capital stock of Copico, Inc., dated
April 24, 1998.
99.2* Press release announcing the completion of the
acquisition by Mac-Gray Services, Inc. of the
outstanding capital stock of Amerivend Corporation
and the assets of Amerivend Southeast Corporation,
dated April 27, 1998.
* Previously filed as part of this Current Report on Form
8-K, as amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 7, 1998 MAC-GRAY CORPORATION
By: /s/ John S. Olbrych
-------------------------------------
John S. Olbrych
Chief Financial Officer and Treasurer
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AMERIVEND CORPORATION
Audited Accountant's Report F-2
Balance Sheet F-4
Statement of Income F-5
Statement of Stockholders' Equity F-6
Statement of Cash Flows F-7
Notes to Financial Statements F-8
AMERIVEND CORPORATION
Balance Sheet as of March 31, 1998 (unaudited) F-15
Statement of Income for the Three Months Ended March 31, 1998 (unaudited) F-16
Statement of Cash Flows (unaudited) F-17
Notes to Unaudited Interim Financial Statements F-18
PROFORMA UNAUDITED COMBINED FINANCIAL STATEMENTS
Introduction to Pro Forma Unaudited Combined Financial Statements F-19
Pro Forma Unaudited Combined Statement of Income for the
Year Ended December 31, 1997 F-20
Pro Forma Unaudited Combined Balance Sheet as of March 31, 1998 F-21
Pro Forma Unaudited Combined Statement of Income for the Three
Months ended March 31, 1998 F-22
Notes to Pro Forma Unaudited Combined Financial Statements F-23
</TABLE>
<PAGE>
Amerivend Corporation
Financial Statements
December 31, 1997
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Board of Directors and Stockholder
Amerivend Corporation
We have audited the accompanying balance sheet of Amerivend Corporation as of
December 31, 1997 and the related statements of income and stockholder's equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amerivend Corporation as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
MORRISON, BROWN, ARGIZ & COMPANY
Certified Public Accountants
Miami, Florida
February 17, 1998
F-2
<PAGE>
AMERIVEND CORPORATION
FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<S> <C>
BALANCE SHEET................................................ F-4
STATEMENT OF INCOME.......................................... F-5
STATEMENT OF STOCKHOLDER'S EQUITY............................ F-6
STATEMENT OF CASH FLOWS...................................... F-7
NOTES TO FINANCIAL STATEMENTS................................ F-8
</TABLE>
F-3
<PAGE>
AMERIVEND CORPORATION
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,058,332
Accounts receivable 83,970
Inventory 715,094
Current portion of notes receivable 48,991
Prepaid expenses 62,842
-----------
TOTAL CURRENT ASSETS 1,969,229
PROPERTY AND EQUIPMENT - NET 11,723,833
DUE FROM STOCKHOLDER 401,944
NOTES RECEIVABLE, less current portion 94,308
OTHER ASSETS 263,323
-----------
$14,452,637
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt
and revolving line of credit $ 2,095,461
Accounts payable - trade 87,432
Other payables and accrued liabilities 1,118,265
-----------
TOTAL CURRENT LIABILITIES 3,301,158
LONG-TERM DEBT, less current maturities 5,061,279
DUE TO RELATED PARTY 401,481
-----------
TOTAL LIABILITIES 8,763,918
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock, $1.00 par value; 500 shares
authorized, issued and outstanding 500
Additional paid-in capital 859,062
Retained earnings 4,829,157
-----------
5,688,719
-----------
$14,452,637
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AMERIVEND CORPORATION
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
REVENUES
Vending income $15,736,569
Sales of stores 119,779
Sales of parts and equipment 1,677,575
Other income 93,216
-----------
TOTAL REVENUES 17,627,139
-----------
COSTS AND EXPENSES
Rent for vending locations 6,812,998
Costs of stores sold 87,424
Costs of parts and equipment sold 648,013
Operating costs 2,463,889
Depreciation and amortization 2,598,138
Selling, general and administrative 2,880,728
Interest 676,410
Loss on disposal of property and equipment, net 264,823
-----------
TOTAL EXPENSES 16,432,423
-----------
NET INCOME $1,194,716
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AMERIVEND CORPORATION
STATEMENT OF STOCKHOLDER'S EQUITY
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
-------- -------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balances - January 1, 1997 500 $500 $784,062 $ 3,906,941 $4,691,503
Additional paid-in capital - - 75,000 - 75,000
Net income - - - 1,194,716 1,194,716
Distribution of income - - - (272,500) (272,500)
----------- --------- ---------- ----------- -----------
Balances December 31, 1997 500 $500 $859,062 $4,829,157 $5,688,719
=========== ========= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AMERIVEND CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,194,716
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,598,138
Loss on disposal of property and equipment 264,824
Increase (decrease) in allowance for doubtful accounts 26,238
Inventory reserve 11,607
(Increase) decrease in assets:
Accounts receivable (9,601)
Inventory 20,558
Notes receivable 48,945
Prepaid expenses and other current assets (21,481)
Other assets 6,966
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 32,180
Accrued interest payable (24,126)
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,148,964
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption of certificate of deposit 50,000
Purchases of property and equipment (2,094,206)
Proceeds from the sale of property and equipment 35,634
-------------
NET CASH USED IN INVESTING ACTIVITIES (2,008,572)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholder (272,500)
Additional capital contribution 75,000
Principal payments on long-term debt and notes payable (1,420,011)
Proceeds from issuance of notes payable -
Borrowings under the line of credit 250,000
Repayments on the line of credit (700,000)
Advances to stockholder (388,295)
Advances from related party 155,261
-------------
NET CASH USED IN FINANCING ACTIVITIES (2,300,545)
-------------
NET DECREASE IN CASH (160,153)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,218,485
-------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 1,058,332
=============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 700,536
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
AMERIVEND CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BUSINESS OPERATIONS
Amerivend Corporation (the "Company") is engaged primarily in the
ownership and operation of coin-operated machines at various
third-party property locations throughout Florida, Georgia and
Alabama. Vending income accounts for approximately 89% of the
Company's revenue. In addition, the Company distributes coin-
operated laundry equipment for Maytag Corporation ("Maytag") in
Florida. Most of the Company's customers are in Florida, and that
state accounts for approximately 93% of the Company's revenue. No
single customer accounted for a significant amount of the
Company's revenue, and there were no significant trade accounts
receivable from any single customer. The Company estimates an
allowance for doubtful accounts based on the creditworthiness of
its customers, as well as general economic conditions.
Consequently, an adverse change in those factors could affect the
Company's estimate of its bad debt allowance.
B) MAJOR SUPPLIER
The Company purchases substantially all of its new equipment and
parts inventory from Maytag at the prevailing prices charged by
the manufacturer to all authorized dealers. The loss of this
supplier could have an impact on the operations of the Company;
however, management does not foresee the loss of this supplier in
the near future. In addition, management has a good relationship
with other potential suppliers.
C) INVENTORIES
Inventories are stated at the lower of cost or market with costs
being determined using the first-in, first-out ("FIFO") method.
D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and
amortization are computed using the straight-line method over the
estimated useful lives of the assets. Costs of additions and major
improvements are capitalized, and expenditures for maintenance and
repairs which do not extend the life of the asset are expensed.
The useful life for each asset type is summarized below:
Laundry vending equipment 8 - 10 years
Leasehold improvements 10 years
Office furniture and equipment 5 - 12 years
Vehicles 5 years
Tools and equipment 5 - 12 years
Facility 20 years
F-8
<PAGE>
AMERIVEND CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMEBER 31, 1997
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E) REVENUE RECOGNITION
Vending income is recognized at the time the service is
provided to the customer. Income from the sale of parts and
equipment is recognized upon transfer of title to the
customer, generally at the time of delivery.
F) INSTALLATION COSTS
Installation costs consist primarily of direct labor which is
expensed as incurred. The Company uses the same work force to
install the machines as it uses to perform repairs and
maintenance.
G) INCOME TAXES
The Company has elected for tax purposes to be treated as a
"Small Business Corporation" under Subchapter "S" of the
Internal Revenue Code. In accordance with the provisions of
such election, the Company's income or loss passes through to
its stockholder; accordingly, no provision for income taxes
has been made.
H) MANAGEMENT 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 at December 31, 1997, and
revenues and expenses during the year then ended. The actual
outcome could differ from those estimates made in the
preparation of the financial statements.
I) CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash
deposits in excess of FDIC-insured limits. The Company
generally limits its exposure by placing its deposits with
high credit, quality financial institutions. In addition, the
Company invests excess funds in an overnight investment
account with the same financial institution. While the funds
in the overnight investment account are not federally insured,
the account selected by the Company invests only in government
backed securities.
Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers
comprising the Company's customer base.
J) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with
original maturities of three months or less at the time of
purchase to be cash equivalents.
F-9
<PAGE>
AMERIVEND CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 2- RESTRICTED CASH
In accordance with a coin-operated laundry contract with a third party,
the Company was required to provide an irrevocable standby letter of
credit, which was collateralized by a certificate of deposit of $50,000
shown in other assets through March, 1997.
NOTE 3- ACCOUNTS RECEIVABLE
<TABLE>
<S> <C>
Trade $ 147,597
Due from employees 28,373
---------
175,970
Less allowance for doubtful accounts 92,000
---------
Accounts receivable, net $ 83,970
=========
</TABLE>
NOTE 4- INVENTORY
<TABLE>
<S> <C>
Equipment held for sale $ 282,568
Parts and other 432,526
---------
Inventory $ 715,094
=========
</TABLE>
Parts and other inventory are primarily used to service and maintain
laundry vending equipment and are charged to expense when used.
NOTE 5- PROPERTY AND EQUIPMENT NET
<TABLE>
<S> <C>
Laundry vending equipment $ 19,656,940
Leasehold improvements 1,958,309
Office furniture and equipment 517,804
Vehicles 860,269
Tools and equipment 102,031
Facility 64,976
------------
23,160,329
Less accumulated depreciation and amortization 11,436,496
------------
Property and equipment, net $ 11,723,833
============
</TABLE>
F-10
<PAGE>
AMERIVEND CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 5- PROPERTY AND EQUIPMENT - NET (CONTINUED)
Depreciation on property and equipment approximated $2,531,000 for
1997.
At December 31, 1997, the Company had approximately 30,000 laundry
machines generating revenue under various lease agreements with
location owners. The lease agreements primarily require the sharing of
vending income based upon fixed percentages (approximately 26,400
machines in 1997) and, in limited cases, fixed monthly amounts over the
lease life, generally from five to ten years (approximately 3,400
machines in 1997). Historically, the majority of the customers extend
their agreements with the Company beyond the original agreement term.
NOTE 6- NOTES RECEIVABLE
<TABLE>
<S> <C>
Notes receivable $ 143,299
Less current portion 48,991
---------
Long-term receivable $ 94,308
=========
</TABLE>
Notes receivable include amounts due from customers for laundry
facilities constructed by the Company. Interest rates range from 10% to
13% and mature from June, 1998 through March, 2001. Principal payments
are due as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1998 $ 48,991
1999 45,521
2000 36,300
2001 12,487
----------
$ 143,299
==========
</TABLE>
NOTE 7- OTHER PAYABLES AND ACCRUED LIABILITIES
<TABLE>
<S> <C>
Interest $ 49,581
Rent 863,470
Customers' deposits 81,126
Payroll and sales taxes 61,640
Profit sharing 56,907
Other accrued 5,541
----------
$1,118,265
==========
</TABLE>
F-11
<PAGE>
AMERIVEND CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 8 - LONG-TERM DEBT AND LINE OF CREDIT
<TABLE>
<S> <C>
Term note payable (A) $7,108,065
Other notes payable (B) 48,675
----------
7,156,740
Less current maturities 2,095,461
----------
$5,061,279
==========
</TABLE>
(A) On September 10, 1997, the Company entered into a new credit
facility with a commercial bank consisting of a $7,315,269 term
loan, and a $750,000 revolving-credit facility which expires
September 10, 1998. The principal balance is to be paid in forty-
eight equal monthly principal payments of $152,401, plus
interest, at prime (8.5% at December 31, 1997) from October, 1997
through September, 2001. At December 31, 1997, the Company had
$250,000 outstanding on the revolving-credit facility. The
interest rate of the revolving-credit facility is at prime. This
revolving-credit facility replaces and cancels the revolving-
credit facility obtained in November, 1994. The note is secured
by all of the Company's assets and is guaranteed by the
stockholder.
During 1996, the Company had a credit facility with a commercial
bank consisting of a $12,300,000 term loan, and a $1,000,000
revolving-credit facility. The principal balance was to be paid
in fifty-nine equal monthly principal payments of $170,833, plus
interest, at prime (8.25% at December 31, 1996) from December,
1994 through November, 1999, with a final balloon payment of
$2,220,833 due November, 1999. The note was secured by all of the
Company's assets and was guaranteed by the stockholder. At
December 31, 1996, the Company had $700,000 outstanding on the
revolving-credit facility. The interest rate of the revolving-
credit facility was at prime.
These credit facilities are collateralized by a $3 million life
insurance policy on the Company's stockholder. In addition, the
credit facilities contain certain restrictive covenants which,
among others, require the Company to maintain certain financial
ratios and places restrictions on additional indebtedness,
capital expenditures and possible distributions to the
shareholder. The Company obtained waivers covering periods of
non-compliance with certain restrictions in the November, 1994
credit facility. The waivers enabled the Company to comply with
the aforementioned covenants as of December 31, 1997.
(B) Various promissory notes with original principal balances of
approximately $400,000 obtained to finance purchases of laundry
routes and vehicles, payable in monthly installments, ranging
from $748 to $1,536, from November, 1995 to November, 2000;
interest at 8.25% and 10%; secured by laundry vending equipment
and vehicles.
F-12
<PAGE>
AMERIVEND CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 8 LONG-TERM DEBT AND LINE OF CREDIT (CONTINUED)
The aggregate maturities of long-term debt including the revolving-
credit facility subsequent to December 31, 1997 are as follows:
<TABLE>
Year ending December 31,
<S> <C>
1998 $2,095,461
1999 1,844,766
2000 1,844,900
2001 1,371,613
----------
$7,156,740
==========
</TABLE>
The carrying value of long-term debt approximates fair value at
December 31, 1997.
NOTE 9 PROFIT SHARING PLAN
The Company maintains a profit-sharing plan (the "Plan"), established
under the provisions of Section 401(k) of the Internal Revenue Code,
which covers substantially all employees. The Company's contributions
to the Plan are discretionary. Eligible employees ratably vest in the
Plan over seven years. Plan expense amounted to approximately $57,000
for the year ended December 31, 1997.
NOTE 10 RELATED-PARTY TRANSACTIONS
In the ordinary course of business, the Company engages in loans and
other transactions with an affiliate related through common ownership
and/or management.
A summary of these transactions during the year ended December 31, 1997
is as follows:
Management fees $234,000
Vending machine acquisitions $ 66,649
Vending machine transfers to affiliate $ 12,256
Rent expense paid to the Company's stockholder for the years ended
December 31, 1997 amounted to approximately $212,000.
Amounts due from stockholder are for expenses paid on behalf of the
stockholder and have no fixed repayment terms.
Amounts due to related party are for transactions conducted with
Amerivend Southeast Corporation. There are no fixed payment terms for
these liabilities.
F-13
<PAGE>
AMERIVEND CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 11 - LEASES
The Company leases warehouse and office space from its stockholder
under an operating lease through 2003. At December 31, 1997, the
Company is also a party to noncancelable operating leases with third
parties for vehicles.
Rent expense amounted to approximately $239,000 for the year ended
December 31, 1997.
Future minimum annual rental payments required under operating leases
that have initial or remaining noncancelable lease terms in excess of
one year as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
<S> <C>
1998 $ 238,181
1999 212,448
2000 212,448
2001 212,448
2002 212,448
Thereafter 108,767
-----------
$1,196,740
===========
</TABLE>
The Company leases the majority of the locations in which it has
installed equipment. The leases have terms ranging from five to ten
years with renewal options. Future rents are generally based on a
percentage of collections at the respective locations, generally
ranging from 40% to 50%. For the year ended December 31, 1997, rent
for vending locations was approximately $6,813,000.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company is subject to claims and legal actions that arise in the
ordinary course of its business. Management believes that the ultimate
liability, if any, with respect to these claims and legal actions will
not have a material effect on the financial position or results of
operations of the Company.
In connection with examinations of the Company's tax returns for the
years 1993 and 1994, the Internal Revenue Service has proposed certain
adjustments that will increase taxable income. The proposed
adjustments to the Company flow through as adjustments to the
stockholder's individual returns. The central issue relates to the
allocation of the purchase price to certain equipment in a 1991
transactions.
F-14
<PAGE>
Amerivend Corporation
Condensed Balance Sheet (Unaudited)
March 31, 1998
(In thousands)
<TABLE>
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,441
Accounts and notes receivables, net of allowance for doubtful accounts 163
Inventory 823
Other current assets 72
----------
Total current assets 2,499
----------
Property and equipment, net 11,430
Other assets 384
----------
Total assets $ 14,313
==========
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long term debt and revolving line of credit $ 2,094
Accounts payable 22
Accrued commissions 987
Accrued expenses 66
Deferred revenues and deposits 241
----------
Total current liabilities 3,410
----------
Long-term debt 4,599
Due to related party 488
Stockholders' equity:
Common stock ($1 par value, 500 shares
authorized issued and outstanding) 1
Additional capital 859
Retained earnings 4,956
----------
Total stockholders' equity 5,816
----------
Total liabilities and stockholders' equity $ 14,313
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-15
<PAGE>
Amerivend Corporation
Condensed Statement of Income (Unaudited)
Three Months Ended March 31, 1998
(In thousands)
<TABLE>
<S> <C>
Revenue $ 4,886
Cost of revenue:
Commissions 1,993
Route expenditures 1,050
Depreciation and amortization 616
Cost of equipment sales 183
--------
Total cost of revenue 3,842
--------
Operating expenses 361
--------
Income from operations 683
Interest expense, net 126
Other (income) expense, net 29
--------
Net income $ 528
========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-16
<PAGE>
Amerivend Corporation
Statement of Cash Flows (Unaudited)
March 31, 1998
(In thousands)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 528
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 616
Loss on sale of assets 33
Increase in accounts and notes receivable (79)
Increase in inventory (108)
Decrease in prepaid expenses and other assets 477
Decrease in accounts payable and accrued expenses 131
--------
Net cash flows provided by operating
activies $ 1,598
--------
CASH FLOWS FROM INVESTING ACTIVIES:
Captial expenditures (352)
Proceeds from sales of property and equiptment 3
--------
Net cash flows used in investing activities (349)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholder (402)
Principal payments on long-term debt (464)
--------
Net cash flows used in financing activities (866)
--------
Net increase in cash and cash equivalents 383
Cash and cash equivalents, beginning of period 1,058
--------
Cash and cash equivalents, end of period $ 1,441
========
</TABLE>
The accompanying notes are an itegral part of these financial statements
F-17
<PAGE>
Amerivend Corporation
Notes to Unaudited Interim Financial Statements
March 31, 1998
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Amerivend Corporation (the "Company") is engaged primarily in the ownership and
operation of coin-operated machines at various third-party property locations
throughout Florida, Georgia and Alabama.
Interim Financial Statements
The balance sheet at March 31, 1998 and statements of income and cash flows for
the three months ended March 31, 1998 are unaudited and, in the opinion of
management, include all adjustments (consisting of normal and recurring
adjustments) necessary for a fair presentation of results for these interim
periods. Certain information and footnote disclosures normally included in the
Company's annual financial statements have been condensed or omitted. The
results of operations for the interim period ended March 31, 1998 are not
necessarily indicative of the results to be expected for future quarters or the
entire year. These interim financial statements should be read in conjunction
with the audited financial statements for the Company.
2. SUBSEQUENT EVENTS
On April 24, 1998, Mac-Gray Corporation acquired through Mac-Gray Services,
Inc., its wholly-owned subsidiary, all of the outstanding stock of the Company
for approximately $33.8 million in cash and assumed liabilities.
F-18
<PAGE>
INTRODUCTION TO
PRO FORMA UNAUDITED COMBINED FINANCIAL STATEMENTS
The following pro forma unaudited combined financial statements give effect to
the acquisition by Mac-Gray Corporation ("Mac-Gray") through Mac-Gray Services,
Inc., a wholly-owned subsidiary of Mac-Gray, of one hundred percent of the
outstanding capital stock of Amerivend Corporation ("Amerivend") in a
transaction accounted for as a purchase. The pro forma unaudited combined
balance sheet presents the combined financial position of Mac-Gray and Amerivend
as of March 31, 1998. The pro forma unaudited combined statements of income
give effect to the acquisition by combining the results of operations of Mac-
Gray for the three months ended March 31, 1998 with the results of operations of
Amerivend for the comparable period on a purchase basis. The pro forma
unaudited combined statements of income give effect to the acquisition by
combining the results of operations of Mac-Gray for the year ended December 31,
1997 with the results of operations of Amerivend for the year ended December 31,
1997 on a purchase basis. These unaudited pro forma combined condensed
financial statements should be read in conjunction with the historical
consolidated financial statements and notes thereto of Mac-Gray and Amerivend.
The accompanying pro forma unaudited combined condensed statements of operations
are not necessarily indicative of future results of operations or of the results
of operations which would have actually occurred had the above transactions
occurred at the beginning of the earliest period presented.
F-19
<PAGE>
Mac-Gray Corporation ("Mac-Gray")
Amerivend Corporation ("Amerivend")
Pro Forma Unaudited Combined Condensed Statement of Income
Year Ended December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Pro Forma
Mac-Gray Amerivend Adjustments Combined
-------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $ 104,847 $ 17,627 $ 122,474
Cost of revenue:
Commissions 31,717 6,813 38,530
Route expenditures 12,449 2,464 14,913
Depreciation and amortization 9,725 2,598 1,295 (a) 12,241
(1,377) (d)
Cost of equipment sales 22,021 735 22,756
--------- -------- -------- ---------
Total cost of revenue 75,912 12,610 (82) 88,440
--------- -------- -------- ---------
Operating expenses 17,857 2,881 20,738
--------- -------- -------- ---------
Income from operations 11,078 2,136 82 13,296
Interest expense, net 2,975 676 (676) (f) 5,375
2,400 (f)
Other (income) expense, net (181) 265 84
--------- -------- -------- ---------
Income before provision for income taxes 8,284 1,195 (1,642) 7,837
Provision for income taxes 5,228 - (657) (g) 5,049
478 (g)
--------- -------- -------- ---------
Net income $ 3,056 $ 1,195 $ (1,463) $ 2,788
--------- -------- -------- ---------
Accretion and dividends on redeemable
preferred stock 320 320
--------- -------- -------- ---------
Income available to common stockholders $ 2,736 $ 1,195 $ (1,463) $ 2,468
========= ======== ======== =========
Net income per common share $ 0.32 $ 0.29
========= =========
Weighted average common shares outstanding 8,449 8,449
========= =========
Net income per common share - assuming dilution $ 0.31 $ 0.28
========= =========
Weighted average common shares outstanding -
assuming dilution 8,709 8,709
========= =========
</TABLE>
F-20
<PAGE>
Mac-Gray Corporation ("Mac-Gray")
Amerivend Corporation ("Amerivend")
Pro Forma Unaudited Combined Balance Sheet
March 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Pro-Forma
Mac-Gray Amerivend Adjustments Combined
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,335 $ 1,441 $ 5,776
Trade receivables, net of allowance for doubtful accounts 6,723 163 6,886
Inventory 7,934 823 (150) (a) 8,607
Deferred income taxes 357 357
Prepaid commissions and other current assets 3,358 72 3,430
-------- --------- ---------- ---------
Total current assets 22,707 2,499 (150) 25,056
-------- --------- ---------- ---------
Property, plant and equipment, net 45,012 11,430 (4,550) (a) 51,892
Intangible assets, net 28,229 51 25,904 (a) 54,184
Prepaid commissions and other assets 5,002 333 5,335
-------- --------- ---------- ---------
Total assets 100,950 14,313 21,204 136,467
======== ========= ========== =========
Liabilities, Redeemable Common Stock and Stockholders' Equity
Current Liabilities:
Current portion of long term debt 5,289 2,094 (2,094) (a) 5,289
Current portion of capital lease obligations 440 440
Accounts payable 3,508 22 3,530
Accrued commissions 5,642 987 6,629
Accrued expenses 2,683 66 2,749
Deferred revenues and deposits 1,437 241 1,678
-------- --------- ---------- ---------
Total current liabilities 18,999 3,410 (2,094) 20,315
-------- --------- ---------- ---------
Long-term debt 13,829 4,599 (4,599) (a) 47,630
33,801 (e)
Long-term capital lease obligations 551 551
Deferred income taxes 5,488 5,488
Deferred retirement obligations 1,026 1,026
Other Liabilities 260 488 (488) (a) 660
2,000 (b)
(1,600) (b)
Redeemable common stock, 612,026 shares 7,797 7,797
Stockholders' equity:
Preferred stock of Mac-Gray Corporation ($.01 par value,
5,000,000 shares authorized, no shares issued and outstanding) -
Common stock of Mac-Gray Corporation ($.01 par value;
30,000,000 shares authorized, 10,967,800 shares issued
and outstanding at December 31, 1997) 126 126
Common stock of Amerivend Corporation ($1 par value, 500 shares
authorized issued and outstanding) 1 (1) (c) -
Additional capital 56,346 859 (859) (c) 56,346
Retained earnings (deficit) (3,472) 4,956 (4,956) (c) (3,472)
-------- --------- ---------- ---------
Total stockholders' equity 53,000 5,816 (5,816) 53,000
-------- --------- ---------- ---------
Total liabilities, reademable common stock and stockholders' equity 100,950 14,313 21,204 136,467
======== ========= ========== =========
</TABLE>
F-21
<PAGE>
Amerivend Corporation ("Amerivend")
Pro Forma Unaudited Combined Condensed Statement of Income
Three Months Ended March 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Pro Forma
Mac-Gray Amerviend Adjustments Combined
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue $ 27,989 $ 4,886 $ 32,875
Cost of revenue:
Commissions 9,154 1,993 11,147
Route expenditures 3,625 1,050 4,675
Rental expenditures 7 7
Depreciation and
amortization 2,824 616 324 (a) 3,411
(353) (d)
Cost of equipment sales 4,666 183 4,849
--------- --------- ------------ ---------
Total cost of revenue 20,276 3,842 (29) 24,089
--------- --------- ------------ ---------
Operating expenses 5,272 361 5,633
--------- --------- ------------ ---------
Income from operations 2,441 683 29 3,153
Interest expense, net 315 126 (126) (f) 875
560 (f)
Other (income) expense, net (20) 29 9
---------- --------- ------------ --------
Income before provision for income taxes 2,146 528 (405) 2,269
Provision for income taxes 1,154 (162) (g) 1,203
211 (g)
---------- --------- ------------ ---------
Net income $ 992 $ 528 $ (454) $ 1,066
---------- --------- ------------ ---------
Accretion and dividens on redeemable
preferred stock 62 - - 62
---------- --------- ------------- ---------
Income available to common stockholders $ 930 $ 528 $ (454) $ 1,004
========== ========= ============= =========
Net income per common share $ 0.08 $ 0.08
========== =========
Weighted average common shares outstanding 12,188 12,188
========== =========
Net income per common share - assuming dilution $ 0.07 $ 0.08
========= =========
Weighted average common shares outstanding -
assuming dilution 12,657 12,657
========== =========
</TABLE>
F-22
<PAGE>
MAC-GRAY CORPORATION
Notes to Pro Forma Unaudited Combined Financial Statements
(Amounts in thousands)
(a) On April 24, 1998, Mac-Gray Corporation ("Mac-Gray") acquired through Mac-
Gray Services, Inc., a wholly-owned subsidiary of Mac-Gray, one hundred
percent of the outstanding capital stock of Amerivend Corporation for
approximately $33,801. The purchase price was comprised of a cash price of
approximately $24,486 and the assumption of approximately $8,654 in
liabilities of Amerivend. The pro forma effects of the transaction were as
follows: (1) the creation of approximately $25,904 of intangible assets
which have been assumed to have an average amortization period of twenty
years resulting in $1,295 of amortization expense for the year ended
December 31, 1997, (2) an accrual of an inventory reserve of $150 to adjust
values to fair market value in accordance with the purchase method of
accounting, (3) a write down of route equipment of $4,550 to adjust values
to fair market value in accordance with the purchase method of accounting
and (4) the immediate pay down of certain debt assumed in the transaction
of $7,258.
(b) Certain employees of Amerivend exercised parachute clauses in their
employment agreements upon consummation of the acquisition. The payments
totaled $2,000 of which $400 was withheld for payroll tax purposes.
(c) The adjustment is to eliminate the outstanding equity of Amerivend
Corporation as of March 31, 1998.
(d) Represents the estimated reduction in depreciation during the year based on
the write-down of fixed assets and an estimated average remaining life of 8
years.
(e) Funds necessary to consummate the transaction were advanced from the Mac-
Gray credit facility.
(f) All significant debt owed by Amerivend was retired using advances from the
Mac-Gray credit facility, therefore Amerivend interest is assumed to drop
to zero and Mac-Gray will incur interest charges on the credit advances at
an estimated rate of 7.25% per year.
(g) The tax (benefit) cost of the pro forma adjustments is calculated at 40%
which is the approximate weighted average rate against which taxes are paid
by Mac-Gray. Amerivend was an S-Corporation for income tax purposes and
historically has not incurred income tax expense. An adjustment has also
been made to recognize the additional tax expense on Amerivend income at a
rate of 40%.
F-23
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement of Mac-Gray Corporation on Form S-8 (File No. 333-44117), of our
report dated February 17, 1998, relating to the financial statements of
Amerivend Corporation, appearing in this Form 8-K/A.
/s/ MORRISON, BROWN, ARGIZ & COMPANY
Miami, Florida
July 7, 1998
