As filed with the Securities and Exchange Commission on April 22, 1998
Registration No. 333-46027
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
___________________
C2, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1915787
(State of incorporation) (Primary Standard (I.R.S. Employer
Industrial Identification No.)
Classification Code
Number)
700 North Water Street, Suite 1200
Milwaukee, Wisconsin
(414) 291-9000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
_______________________
William T. Donovan
Chairman
C2, Inc.
700 North Water Street, Suite 1200
Milwaukee, Wisconsin 53202
(414) 291-9000
Facsimile (414) 291-9061
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
______________________________
Copies to:
Marc J. Marotta, Esq.
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 297-5658
Facsimile: (414) 297-4998
____________________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
____________________________
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. [_]
____________________________
CALCULATION OF REGISTRATION FEE
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount To Offering Aggregate Amount of
To Be Be Price Per Offering Registration
Registered Registered Unit Price(1) Fee(1)
Common Stock, 5,202,664 $4.00 $20,810,656 $6,139.14
$.01 par
value . . . .
Rights to -- -- -- --
Purchase
Common Stock
(1) Estimated in accordance with Rule 457(o) under the Securities Act of
1933 solely for the purpose of calculating the registration fee pursuant
to Section 6(b) thereunder.
______________________
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>
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.
5,202,664 Shares Subject to Completion
April 22, 1998
C2, Inc.
Common Stock
C2, Inc. (the "Company" or "C2") is hereby offering 5,202,664 shares
of common stock, $0.01 par value per share ("Common Stock") of the Company
for $4.00 per share (the "Subscription Price"). The Company intends to
use the proceeds of this offering (1) to finance its acquisition of
666.667 membership units ("Membership Units") of Total Logistic Control,
LLC ("TLC"), a wholly-owned subsidiary of Christiana Companies, Inc.
("Christiana"), representing two-thirds of the issued and outstanding
ownership interests in TLC (the "Acquisition") and (2) to raise additional
proceeds for general corporate purposes, including future acquisitions.
Payment for the TLC Membership Units purchased in the Acquisition will be
due no later than thirty (30) days following completion of the Acquisition
and the Merger (as defined below). Immediately prior to the offering, a
wholly-owned subsidiary of EVI, Inc. ("EVI") will merge with and into
Christiana (the "Merger"). Holders ("Christiana Shareholders") of common
stock, $1.00 par value per share of Christiana ("Christiana Common Stock")
have a right ("Right") to subscribe for their pro rata share of Common
Stock offered hereby. Each Right consists of a "Basic Subscription
Privilege" and an "Additional Subscription Privilege." The Rights are not
represented by a certificate or other evidence of ownership and are non-
transferable. The "Basic Subscription Privilege" entitles each Christiana
Shareholder to purchase one share of Common Stock for each share of
Christiana Common Stock held immediately prior to the effective time of
the Merger (the "Effective Time"). Each Christiana Shareholder may use
cash received as consideration in the Merger to purchase Common Stock. In
the event not all shares of Common Stock are subscribed for pursuant to
the Basic Subscription Privilege, TLC management, Christiana Shareholders
who have exercised their Basic Subscription Privilege in full and the
general public, in that order of allocation preference, will have an
"Additional Subscription Privilege" to subscribe for the remaining shares
of Common Stock in the manner described under "The Offering-Additional
Subscription Privilege." The offering of Common Stock pursuant to this
Prospectus is hereinafter referred to as the "Offering."
Prior to the Offering, there has not been a public market for the
Common Stock. See "Risk Factors - No Prior Public Market; Possible Stock
Price Volatility" and "The Offering" for factors that were considered in
determining the Subscription Price.
The Basic Subscription Privilege and the Additional Subscription
Privilege will be exercisable only during the period commencing on the
date hereof and ending at 5:00 p.m. Central Standard Time, on
______________, 1998 (the "Expiration Date"). See "The Offering" for the
manner in which the Basic Subscription Privilege and the Additional
Subscription Privilege may be exercised. The Offering is contingent upon
the closing of the Merger. In the event the closing of the Merger does
not occur, or the Merger Agreement is terminated, this Offering will
immediately cease and any payment for shares of Common Stock hereunder
will promptly be refunded, without interest.
(continued on next page)
--------------
The Common Stock offered hereby involves a high degree of risk.
See "Risk Factors" commencing on page 11 hereof.
--------------
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.
Proceeds to
Price to Public Company(1)
Amount Per Share . $4.00 $4.00
Maximum Amount . . $20,810,656 $20,810,656
Minimum Amount . . $10,852,000(2) $10,852,000
(1) Before deducting expenses of the offering, payable by the Company,
estimated at $170,000.
(2) Assumes that only 2,718,000 shares of Common Stock are purchased by
the Lubar Family pursuant to the Lubar Commitment.
The date of this Prospectus is , 1998.
<PAGE>
Sheldon B. Lubar, David J. Lubar and certain members of the Lubar
family (collectively the "Lubar Family") have committed, pursuant to an
agreement between the Company and Sheldon B. Lubar, and certain related
agreements, to exercise their Basic Subscription Privilege in full to
ensure that the net proceeds of the Offering to the Company (after
deducting expenses estimated to be $170,000) will be at least $10,666,667,
which will allow the Company to have sufficient funds to complete the
Acquisition (the "Lubar Commitment"). The exercise of this Basic
Subscription Privilege by the Lubar Family will result in the Lubar Family
purchasing a minimum of 2,718,000 shares of Common Stock in the Offering.
In the event all Christiana Shareholders exercise their Basic Subscription
Privilege in full, the Lubar Family, TLC executive officers, and directors
and executive officers of the Company (excluding Lubar Family members,
Sheldon B. Lubar and David J. Lubar) will own approximately 52%, 0.7% and
13% of the outstanding shares of Common Stock, respectively and
collectively, such entities will own approximately 66% of the outstanding
shares of Common Stock. Members of the Lubar Family may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act") and the rules and regulations promulgated
thereunder. If any such members of the Lubar Family are deemed to be
underwriters, they will not be able to resell their shares of Common
Stock, except pursuant to a registration statement declared effective
under the Securities Act or under an applicable exemption from
registration under the Securities Act.
The Company has applied to have the Common Stock approved for
quotation on the Nasdaq SmallCap Market under the symbol "CTOO."
<PAGE>
The TLC Network
[Map with Distribution Centers Identified]
- Refrigerated Distribution Center
+ Dry Distribution Center
TLC operates through an extensive network of refrigerated
distribution centers and dry (non-refrigerated) distribution
centers. TLC uses this network to provide its warehousing and
logistic services to its customers.
_________________________
The Company intends to furnish its shareholders with annual
reports containing consolidated financial statements audited by its
independent auditors and with quarterly reports containing unaudited
interim consolidated financial information for each of the first three
quarters of each year.
<PAGE>
PROSPECTUS SUMMARY
Simultaneous with the closing of the Offering, the Company will
acquire for approximately $10.7 million in cash 666.667 Membership Units
of TLC, representing two-thirds of the issued and outstanding ownership
interests in TLC (sometimes hereinafter referred to as the "Acquisition").
The following summary is qualified in its entirety by the more detailed
information, and the consolidated financial statements of the Company and
TLC and notes thereto, appearing elsewhere in this Prospectus.
The Company
The Company was formed on December 11, 1997 for the purpose of
consummating the Acquisition. The Company intends to utilize any
additional funds raised in the Offering for general corporate purposes,
including future acquisitions.
TLC provides refrigerated and dry (non-refrigerated) third-party
logistic services including warehousing, transportation, distribution and
international freight forwarding. The third-party logistics industry is
comprised generally of entities which provide either asset-based or
non-asset based services. Asset-based entities provide services through
their warehousing and fleet operations, while non-asset based entities
provide strategic solutions to, and arrange for, the distribution and
warehousing needs of their customers. TLC believes that its ability to
offer customers "one-stop shopping" through its complement of services
which include both asset and non-asset based solutions provides it with a
competitive advantage. The Company's integrated logistic services
generally combine transportation, warehousing and information services to
manage the distribution channel for a customer's products from the point
of manufacturing to the point of consumption and allows the Company to
capitalize on the growing trend of corporations toward seeking to reduce
costs by outsourcing large components of their logistics function.
TLC's operations are conducted through a network of 13 distribution
warehouses, comprised of an aggregate of 33 million cubic feet of
refrigerated and frozen storage capacity in eight locations and five dry
distribution centers in key markets, primarily in the upper Midwest.
TLC's refrigerated warehousing operations include temperature sensitive
storage services, blast freezing, individual quick freeze services,
vegetable blanching and processing and automated poly bag and bulk
packaging services. TLC's transportation and distribution services
include full service truckload, less-than-truckload and pooled
consolidation in both temperature controlled and dry freight equipment,
dedicated fleet services and specialized store-door delivery formats.
Transportation and logistic services are provided utilizing Company-owned
equipment as well as through carrier management services utilizing third
party common and contract carriers. TLC also provides a full range of
international freight management services, fully computerized inventory
management, assembly, repackaging and just-in-time production supply
services.
TLC believes it is the nation's seventh largest provider of public
refrigerated warehouse space. Two of TLC's refrigerated distribution
centers are located in Rochelle, Illinois; and two are located in
Kalamazoo, Michigan. Other TLC refrigerated distribution centers are
located in Milwaukee, Wisconsin; Beaver Dam, Wisconsin (located
approximately 60 miles northwest of Milwaukee); Wauwatosa, Wisconsin (a
suburb of Milwaukee); and Holland, Michigan (located approximately 20
miles southwest of Grand Rapids). Two of TLC's dry distribution centers
are located in Zeeland, Michigan and the others are located in Kalamazoo,
Michigan; Munster, Indiana; and South Brunswick, New Jersey. TLC's
customers consist primarily of national, regional and local firms engaged
in food processing, consumer product manufacturing, wholesale distribution
and retailing.
Set forth below is certain summary financial data regarding TLC
(amounts in thousands):
<TABLE>
<CAPTION>
Six Months Ended December 31, Year Ended June 30,
1997 1996 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Revenues $46,714 $40,821 $84,208 $76,976 $71,029
Income from operations 3,648 3,636 6,311 5,689 7,555
Net income 1,704(2) 316 12,181(3) 1,536 2,562
EBITDA(1) 6,862 7,177 13,143 12,552 14,218
Cash flows from operating
activities 6,002 3,883 9,294 11,043 10,180
Cash flows from investing
activities (980) (1,327) (1,822) (16,262) (7,116)
Cash flows from financing
activities (4,858) (2,077) (7,277) 4,883 (3,247)
_______________
(1) EBITDA is defined as income (loss) before taxes plus fixed charges. Fixed charges consist
of interest expense, depreciation and amortization, and gains or losses on the disposal of
assets. EBITDA is not a measure of financial performance under generally accepted
accounting principles and should not be considered as an alternative to net income as a
measure of performance nor as an alternative to cash flow as a measure of liquidity. Since
all companies do not calculate EBITDA uniformly, it may not be an accurate measure of
comparison.
(2) Net income for the six months ended December 31, 1997 does not reflect the impact of an
income tax provision as TLC was a limited liability company during this period. For
comparative purposes, net income for the six month period ended December 31, 1996 (during
which TLC was a C-Corporation) would have been $497 absent a provision for income taxes of
$181.
(3) Includes $11,171 of income related to an adjustment of deferred income taxes resulting from
a change in TLC's tax status from a C-Corporation to a limited liability company.
</TABLE>
TLC was formed on June 30, 1997 as a result of the combination of
Wiscold, Inc. ("Wiscold") and Total Logistic Control, Inc. ("Total
Logistic Inc.") (two former wholly-owned subsidiaries of Christiana) into
TLC. Christiana acquired Wiscold in September of 1992 and Total Logistic
Inc. in January of 1994.
The Company is a Wisconsin corporation with its executive offices
located at 700 North Water Street, Suite 1200, Milwaukee, Wisconsin 53202,
and its telephone number is (414) 291-9000. TLC is a Delaware limited
liability company with is principal executive offices located at 8300
Logistic Drive, Zeeland, Michigan 49464, and its telephone number is (616)
748-0701.
<PAGE>
The Merger and the Acquisition
The Merger will result in Christiana becoming a wholly-owned
subsidiary of EVI. Pursuant to the Merger, each outstanding share of
Christiana Common Stock will be converted into a right to receive
- approximately .74193 of a share of EVI Common Stock, subject to
certain adjustments based on the number of shares of Christiana
Common Stock outstanding at the Effective Time;
- cash of approximately $3.50 per share of Christiana Common
Stock, subject to adjustment based on the amount of certain
Christiana liabilities existing as of the Effective Time (the "Cash
Consideration"); and
- a contingent cash payment of approximately $1.92 payable to the
shareholders of record following the fifth anniversary of the
Effective Time, subject to any indemnity claims by EVI under the
Merger Agreement (the "Contingent Cash Consideration").
Immediately prior to the Effective Time of the Merger, Christiana
will complete the Acquisition by selling two-thirds of its interest in TLC
to the Company for approximately $10.7 million. The Acquisition will be
completed with the Company obligated to pay the purchase price of $10.7
million to Christiana no later than thirty (30) days thereafter (the
"Payment Date"). The Acquisition will be effected pursuant to the terms
of an Agreement, dated December 12, 1997, by and among the Company, TLC,
Christiana and EVI (the "Purchase Agreement") and the Agreement and Plan
of Merger, dated as of December 12, 1997, by and among EVI, Christiana
Acquisition Co., a wholly-owned subsidiary of EVI ("Sub"), Christiana and
the Company pursuant to which the Merger will be effected (the "Merger
Agreement"). Approximately $10.7 million of the net proceeds from the
Offering will be utilized to fund the Acquisition.
Pursuant to the Merger, TLC is required to pay to Christiana a
distribution in the amount of $20 million (the "TLC Dividend") and to pay
to Christiana in full the entire principal amount of $3,000,000 advanced
to Wiscold pursuant to a note dated September 1, 1992 (the "Wiscold
Note"), together with all accrued interest thereon. See "Risk Factors -
Substantial Leverage; Deficit of Earnings to Fixed Charges" and "Pro Forma
Summary Combined Financial Data." TLC will use its revolving credit
facility, which has a maximum limit of up to $65,000,000, to pay the TLC
Dividend, to pay the Wiscold Note, to refinance existing bank debt of
approximately $36,000,000 and to pay related fees and expenses. See
"Management's Discussion and Analysis of Financial Conditions and Results
of Operations - Description of Credit Agreement." In addition, the
Purchase Agreement provides that the Company will assume, pay and
discharge when due all liabilities known or unknown, fixed or contingent
(including all expenses related to the Merger) ("Liabilities") to which
EVI, Christiana or any of its current and historical subsidiaries,
predecessors and affiliates (collectively "Christiana Affiliates") may
become liable in any way as a result of the business, operations or assets
of Christiana or any Christiana Affiliate (including TLC) on or prior to
the Effective Time (such liabilities being hereinafter referred to as the
"Assumed Liabilities") which shall include, without limitation,
Liabilities resulting from, arising out of or relating to (i) any
Christiana Affiliate, (ii) the business, operations or assets of
Christiana or Christiana Affiliate on or prior to the Effective Time,
(iii) any taxes to which Christiana or any Christiana Affiliate may be
obligated for periods ending on or before the Effective Time (except for
Christiana taxes expressly retained by Christiana pursuant to the Merger
Agreement), (iv) any obligation, matter, fact, circumstance or action or
omission by any person in any way relating to or arising from the
business, operations or assets of Christiana or a Christiana Affiliate
that existed on or prior to the Effective Time, (v) any product or service
provided by Christiana or any Christiana Affiliate prior to the Effective
Time, (vi) the Merger, the Acquisition or any of the other transactions
contemplated thereby, (vii) previously conducted operations of Christiana
or any Christiana Affiliate and (viii) the Company's ownership interest in
TLC. See Annex A. In addition, TLC has agreed to assume, pay and
discharge when due the Assumed Liabilities relating to any historical
business operations or assets of TLC ("TLC Historic Business"). See "Risk
Factors - Assumed Liabilities and Indemnification Obligations of the
Company and TLC."
The Purchase Agreement provides that the Company and TLC, jointly and
severally, will indemnify Christiana and any Christiana Affiliates from
and against any and all the Liabilities that are based upon, arise out of,
or relate to, any breach of the Purchase Agreement by the Company or TLC;
any acts or omissions of Christiana and any Christiana Affiliates on or
before the Effective Time; the Assumed Liabilities; any taxes resulting
from the transactions contemplated by the Purchase Agreement other than
any tax Liability for income of EVI attributable to Christiana under the
equity method of accounting either before or after the Effective Time, and
any taxes as a result of the Merger subsequently being determined to be
taxable; any environmental Liabilities arising out of conditions existing
on, at or underlying any properties currently or previously owned or
operated by Christiana or any Christiana Affiliates; and certain other
Liabilities.
As soon as possible after the Effective Time, but no later than the
Payment Date, the parties to the Merger Agreement will calculate and agree
upon the Cash Consideration (anticipated to be approximately $3.50 per
share of Christiana Common Stock), and the Contingent Cash Consideration
(approximately $1.92 per share of Christiana Common Stock). On the
Payment Date, EVI will pay the Cash Consideration due each Christiana
Shareholder to Firstar Trust Company (the "Subscription Agent") (which
will also act as escrow agent in the Merger), and the Subscription Agent
will promptly distribute such cash to each Christiana Shareholder, unless
the Christiana Shareholder has requested that all or a portion of the Cash
Consideration be applied to the purchase of Common Stock of the Company,
in which case such Cash Consideration will be so applied. Such a request
must be made by a Christiana Shareholder pursuant to the Letter of
Transmittal, provided as part of the Joint Proxy Statement/Prospectus of
Christiana and EVI (the "Merger Proxy Statement") in connection with the
Merger (the "Letter of Transmittal"). See "The Offering." The Contingent
Cash Consideration will be retained by EVI for a period of at least five
years. EVI will pay the Contingent Cash Consideration as determined as of
such future date and issue the payment to the Christiana Shareholders of
record as of the record date fixed by Christiana in connection with its
Special Meeting of Shareholders described in the Merger Proxy Statement.
No fraction of a share of EVI Common Stock will be issued in the
Merger. In lieu thereof, all fractional shares of EVI Common Stock that
would otherwise be issuable in the Merger will be rounded to the nearest
whole share of EVI Common Stock.
The following diagram sets forth the organizational structure and
stock ownership of the Company, TLC, Christiana and EVI following the
Merger and the Acquisition.
[BEFORE AND AFTER DIAGRAM]
<PAGE>
Set forth below is a timeline of key events relating to the Offering,
the Merger and the Acquisition.
Timeline of Key Events
Key Event Proposed Date
- Special Meeting of Shareholders of EVI and
Christiana to Vote on Merger. July 9, 1998
- Expiration Date for submission of Letter of
Transmittal and/or Subscription Agreement
(for non-Christiana Shareholders) to
purchase Company Common Stock. July 9, 1998
- Complete Acquisition with obligation to pay
purchase price no later than thirty(30)
days thereafter. July 20, 1998
- Complete Merger with distribution of Cash
Consideration to be made no later than
thirty (30) days thereafter, except to the
extent applied to purchase Company Common
Stock pursuant to Letter of Transmittal. July 20, 1998
- Distribution of Cash Consideration and/or
application of Cash Consideration to
purchase Company Common Stock, based on
election made in Letter of Transmittal. August 20, 1998
- Purchase of at least 2,718,000 shares of
Company Common Stock by Lubar Family. August 20, 1998
- Payment of Purchase Price for Acquisition. August 20, 1998
- Issuance of Company Common Stock to
Subscribers. August 21, 1998
The Offering
Common Stock offered hereby . . 5,202,664 shares
Minimum Number of Shares of
Common Stock to be Outstanding
after the Offering . . . . . . 2,718,000 shares (1)
Maximum Number of Shares of
Common Stock to be Outstanding
after the Offering . . . . . . 5,202,689 shares
Subscription Price . . . . . . $4.00 per share of Common Stock. The
Subscription Price was determined by
the Company's Board of Directors and is
not based on an independent valuation
of the Company. The purchase price was
determined based on a number of factors
including the desire to simplify the
process of Christiana Shareholders
purchasing Common Stock by setting a
price which would be proximate to the
Cash Consideration per share to be
received in the Merger, while at the
same time, meeting the minimum initial
bid price of $4.00 per share for the
Common Stock to qualify for listing on
the Nasdaq SmallCap Market. In setting
the price, the Company also considered
the fairness of the price to be paid
for its two-thirds interest in TLC and
the potential usefulness of the excess
funds to be generated from the
Offering. These factors, taken
together, formed the basis of the $4.00
per share price for the Common Stock.
Rights . . . . . . . . . . . . Each Christiana Shareholder has a
Right, consisting of the Basic
Subscription Privilege and the
Additional Subscription Privilege.
Basic Subscription Privilege . Each Christiana Shareholder has a Basic
Subscription Privilege to purchase one
share of Common Stock for every one
share of Christiana Common Stock held
immediately prior to the Effective
Time. The Basic Subscription Privilege
is nontransferable.
Additional Subscription
Privilege . . . . . . . . . . In the event the entire Basic
Subscription Privilege is not exercised
in full, TLC management, Christiana
Shareholders who exercise their Basic
Subscription Privilege in full and the
general public, in that order of
allocation preference, will have an
Additional Subscription Privilege to
purchase any remaining shares of Common
Stock (subject to proration as
described below). In the event all
allocation preferences ranking prior to
the general public's ability to
purchase Common Stock are exercised in
full, there will be no shares available
to the general public. The Additional
Subscription Privilege is
nontransferable.
Subscription Procedure for
Christiana Shareholders . . . The Basic Subscription Privilege may be
exercised by delivery of a properly
completed Letter of Transmittal
delivered to Christiana Shareholders in
connection with the Merger. Christiana
Shareholders wishing to exercise their
Basic Subscription Privilege will
automatically, upon completion and
delivery of the Letter of Transmittal,
have the exercise price paid directly
by the Subscription Agent. See
"Summary of Certain Terms of the
Merger" for a description of the Cash
Consideration. However, because the
Cash Consideration per share is
expected to be less than the
Subscription Price, any exercise of the
Basic Subscription Privilege in full
will require an additional cash
payment. Christiana Shareholders
wishing to exercise their Additional
Subscription Privilege shall also do so
pursuant to the Letter of Transmittal.
Payment for shares purchased pursuant
to the Additional Subscription
Privilege shall be made in the form of
an additional cash payment by the
subscriber. The Letter of Transmittal
must be delivered to the Subscription
Agent following the Effective Time and
on or before the Expiration Date. See
"The Offering."
Subscription Procedure for
Others . . . . . . . . . . . . Others wishing to exercise the
Additional Subscription Privilege shall
do so pursuant to the Subscription
Agreement provided herewith, together
with full payment for all shares of
Common Stock subscribed for pursuant to
the Additional Subscription Privilege.
The Subscription Agreement must be
delivered to the Subscription Agent
following the Effective Time and on or
before the Expiration Date.
Proration . . . . . . . . . . . In the event of a proration of shares
of Common Stock to persons exercising
the Additional Subscription Privilege,
the Subscription Agent will promptly
refund, without interest, the amount of
any overpayment.
Expiration Date . . . . . . . . July 9, 1998 at 5:00 p.m., Central
Standard Time.
Proceeds of the Offering . . . If fully subscribed, the Offering will
result in proceeds to the Company, net
of Offering expenses, of approximately
$20,640,656 million. Approximately
$10.7 million of the proceeds will be
used to fund the Acquisition, with the
remainder, if any, being used for
general corporate purposes, including
future acquisitions.
Risk Factors . . . . . . . . . Certain risk factors should be
considered in evaluating an investment
in the Common Stock, including, without
limitation, the Company's dependence on
a single line of business and
significant customers; competition in
TLC's industry; TLC's substantial
leverage; the assumed liabilities and
indemnification obligation of the
Company and TLC; and other risks
described more fully under "Risk
Factors."
Listing . . . . . . . . . . . . The Company has applied for listing on
the Nasdaq SmallCap Market under the
symbol "CTOO."
Further Information . . . . . . Any questions or requests for
assistance concerning the method of
subscribing for Common Stock or
requests for additional copies of this
Prospectus can be directed to
William T. Donovan (414) 291-9000.
________________________
(1) Represents the Lubar Commitment. The minimum percentage of ownership
of outstanding Common Stock following the Offering by the Lubar
Family will be 52% and the maximum percentage of ownership by the
Lubar Family following the Offering (assuming no other Christiana
Shareholders exercise their Basic Subscription Privilege and that TLC
management and the general public do not purchase shares of Common
Stock in the Offering) is 100%.
<PAGE>
RISK FACTORS
Prospective purchasers should carefully consider the following
factors, together with other information in this Prospectus, in evaluating
an investment in the shares of Common Stock. This Prospectus contains
certain forward-looking statements,including statements containing the
words "believes," "anticipates," "expects" and words of similar import.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors
include, among others, the following: adverse changes in national or local
economic conditions; increased competition; ability to service its debt;
changes in availability, cost and terms of financing; oversupply of
warehousing space; changes in operating expenses; indemnification
obligations; and other factors referenced in this Prospectus. Given these
uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the results
of any revision to any of the forward-looking statements contained in this
Prospectus to reflect future events or developments.
Dependence on Single Line of Business and Significant Customers
While the Company intends to make additional acquisitions of
companies that are within TLC's general industry or unrelated thereto, in
the foreseeable future the Company's only non-cash asset will be its
ownership interest in TLC.
If, for any reason, TLC's business of providing warehousing and
logistic services ceases to be a preferred method of outsourcing these
functions, or if new technological methods of food preservation become
available and widely utilized, TLC's business could be adversely affected.
A number of TLC's facilities depend, to a large extent, upon one or a
small number of customers or commodities. During fiscal 1997, 10 of TLC's
customers accounted for 47% of TLC's total revenues. An interruption or
reduction in the business received by such facilities from such customers
or a decline in the demand for such commodities may result in a decrease
in the sales at such facilities and in the overall net sales of TLC.
Moreover, increasing consolidation among TLC's customers and the resulting
ability of such customers to utilize their size to negotiate lower
outsourcing costs has and may continue in the future to have a depressing
effect on the pricing of third-party logistic services. See "Business-
General; Services, Sales and Customers."
Competition
Each of TLC's individual business segments is highly fragmented and
competitive with significant competition from local and regional companies
and national companies which may seek to expand their presence into local
markets in which TLC competes. Some of these companies have substantially
greater financial and other resources than TLC. Competition generally
varies by local market and is characterized by low barriers to entry since
any competitor able to obtain financing may build a warehouse facility.
Companies that compete in the warehousing market include Americold
Corporation, United Refrigerated Services, Inc., Millard Refrigerated
Services, Christian Salvesen, Inc. and KLLM Transfer Services in the
refrigerated warehousing sector and Exel Logistics and many regional
operators and real estate developers in the dry warehousing sector.
Competition in the third-party logistic services sector includes Menlo
Logistics, Schneider Logistics, Inc., Caliber Logistics and Ryder
Dedicated Logistics. In the transportation market, TLC's competitors
include Schneider National, J.B. Hunt, M.S. Carriers, CR England and a
substantial number of local and regional operators. Additionally, TLC's
customers, many of which have substantially greater resources than TLC,
may divert business from TLC by building their own warehouse facilities or
establishing their own fleet operations. To the extent there is a
proliferation of competition which leads to excess warehousing capacity,
it will likely have a depressing effect on the pricing of warehousing, a
function which, in fiscal 1997, accounted for approximately 58% of TLC's
business. See "Business-Competition; Services, Sales and Customers."
Substantial Leverage; Deficit of Earnings to Fixed Charges
Pursuant to the Merger and prior to the Effective Time, TLC is
required to pay to Christiana the TLC Dividend and to pay to Christiana in
full the entire principal amount of $3,000,000 advanced to Wiscold
pursuant to the Wiscold Note, together with all accrued interest thereon.
To finance these obligations TLC will borrow $23 million under its
revolving credit facility. After such borrowing, TLC will have
approximately $9 million of available borrowing capacity under its
revolving credit facility. As a result, TLC, as well as the Company on a
pro forma basis, will be highly leveraged. The Company's pro forma total
funded debt to total capitalization including minority interest at
December 31, 1997 was 65% assuming the maximum number of shares are sold.
See "Capitalization" and "Pro Forma Summary Combined Balance Sheet." In
addition, TLC may, subject to certain restrictions in its debt agreements,
incur further indebtedness from time to time to finance expansion, either
through acquisitions or capital leases, or for other purposes.
Due to TLC's substantial indebtedness, a significant portion of its
cash flow from operations will be required for debt service. On a pro
forma basis, for the fiscal year ended June 30, 1997, this results in the
Company's earnings being insufficient to cover fixed charges by
approximately $79,000, principally as a result of significant interest
charges on the debt to be incurred in connection with the financing of the
TLC Dividend. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." In addition, the Company's Pro
Forma Income Statement reflects a loss of $738,000 for the year ended June
30, 1997 and net income of $20,000 for the six months ended December 31,
1997. See "Pro Forma Summary Combined Financial Data."
The extent to which TLC is leveraged could have consequences to the
holders of Common Stock, including (a) impairment of TLC's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions or other purposes; (b) dedication of a
substantial portion of TLC's cash flow from operations to the payment of
debt service requirements (principal and interest) on its indebtedness;
(c) vulnerability of TLC to changes in general economic conditions; and
(d) limitations on TLC's ability to capitalize on significant business
opportunities and to respond to competition. In addition, if TLC
experiences losses, the Company may decide to contribute some or all of
the excess proceeds of this Offering to TLC to fund such operating losses.
To the extent of such a contribution, the proceeds of this Offering in
excess of the amount necessary to finance the Acquisition would be
unavailable for future acquisitions.
TLC will have substantial payment obligations with respect to its
indebtedness. No assurance can be given that TLC will be able to generate
sufficient cash flow from operations to meet its debt service obligations.
TLC anticipates, however, that the level of cash flow from operations will
be sufficient to cover all interest payments, principal payments, working
capital requirements and capital expenditure needs for the foreseeable
future.
If for any reason TLC were unable to meet its debt service
obligations, it would be in default under the terms of its indebtedness.
In the event of such a default, the financial institutions holding such
indebtedness could elect to declare all such indebtedness immediately due
and payable, including accrued and unpaid interest, and to terminate their
commitments (if any) with respect to funding obligations under such
indebtedness. In addition, such holders could proceed against their
collateral (if any). Any such default would have a significant adverse
effect on the market value and marketability of the Common Stock.
Assumed Liabilities and Indemnification Obligations of the Company and TLC
Under the Purchase Agreement pursuant to which the Company has agreed
to purchase 666.667 Membership Units of TLC, the Company will assume, pay
and discharge when due the Assumed Liabilities. In addition, TLC has
agreed to assume, pay and discharge when due the Assumed Liabilities to
the extent such Assumed Liabilities relate to any of the TLC Historic
Business.
The Purchase Agreement also provides that the Company and TLC,
jointly and severally, will indemnify EVI, Christiana and their affiliates
(the "EVI Indemnified Parties") from and against any and all Liabilities
to which any EVI Indemnified Party becomes subject that are based upon,
arise out of, or relate to, any breach of the Purchase Agreement by the
Company or TLC; any acts or omissions of Christiana or any of its
affiliates on or before the Effective Time; the Assumed Liabilities; any
taxes resulting from the transactions contemplated by the Purchase
Agreement other than any tax Liability for income of EVI attributable to
Christiana under the equity method of accounting either before or after
the Effective Time, and any taxes as a result of the Merger subsequently
being determined to be taxable (the Merger is intended to qualify as a
tax-free reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code") by reason of
Section 368(a)(2)(E) of the Code); any environmental Liabilities arising
out of conditions existing on, at or underlying any properties currently
or previously owned or operated by Christiana or any Christiana Affiliate;
and certain other Liabilities. If the Liability subject to such
indemnification provisions relates to the TLC Historic Business, TLC, as
between the Company and TLC, will be primarily responsible for the payment
of any such Liability and the defense of any indemnification claim. If
TLC does not defend or pay such obligation, the Company will be
responsible for such Liability and the defense of any such claim. If the
Liability or claim relates primarily to a matter other than the TLC
Historic Business, the Company, as between the Company and TLC, will be
primarily responsible, with TLC backing up the Company's indemnity
obligation.
Notwithstanding the foregoing, however, the Purchase Agreement
provides that with respect to a Liability or claim relating to a matter
other than the TLC Historic Business, the costs of defense and payment of
the Liability shall be the obligation of EVI to the extent and only to the
extent of the $10 million of cash (the "Holdback") withheld, pursuant to
the Merger Agreement from payment to Christiana Shareholders for a period
of five (5) years from the Effective Time to pay for any items for which
any EVI Indemnified Party is entitled to indemnification under the
Purchase Agreement. Once the Holdback is exhausted or paid to Christiana
Shareholders pursuant to the terms of the Merger Agreement, EVI shall have
no obligation to pay such amounts and the Company and TLC will continue to
be responsible for the indemnity obligations described herein. In
addition, neither the Company nor TLC will be obligated to indemnify the
EVI Indemnified Parties for amounts which are covered and paid by
insurance of the EVI Indemnified Parties (excluding deductibles or
self-insured retentions).
If TLC is obligated to pay any amounts relating to an Assumed
Liability or an indemnification claim, Christiana will be entitled to
receive a cash payment from the Company equal to one-third of any such
amount paid when and if (i) TLC or all or substantially all of its assets
are sold; (ii) the Company sells its Membership Units in TLC; (iii) or if
there is a direct or indirect transfer or sale of Membership Units of TLC
held by the Company or of all of the Common Stock.
The obligations of the Company under the Purchase Agreement are
secured by all of the Company's ownership interest in TLC. Any
substantial claims made by EVI, Christiana or any of their affiliates in
connection with the Assumed Liabilities or the indemnification obligations
contained in the Purchase Agreement which are not covered by the insurance
of the EVI Indemnified Parties or which are in excess of the Holdback may
have a material adverse effect on the Company's financial condition and
results of operations and, if the Company were unable to satisfy its
obligations under the Assumed Liabilities and indemnification provisions
of the Purchase Agreement, could result in the loss of the Company's
ownership interest in TLC.
Restrictions on Actions of TLC Under Operating Agreement; Transfer
Restrictions and Christiana Put and Participation Rights
The Operating Agreement to be entered into as of the Effective Time
between the Company and Christiana (the "Operating Agreement") restricts
the Company's control of TLC. The Operating Agreement provides that the
management of TLC shall be vested in a Board of Managers which shall
consists of six initial members. Each Manager is elected by the vote or
written consent of the members (currently the Company and Christiana) (the
"Members") holding at least a majority of the Membership Units in TLC;
provided, however, that Christiana and the Company will at all times each
be entitled to elect, without the consent of any other member, a number of
Managers that is proportionate to the number of Membership Units held by
Christiana and the Company, respectively. Christiana, a wholly-owned
subsidiary of EVI that will be unaffiliated with the Company and beyond
its control (at the Effective Time), shall have the power to appoint two
members of the Board of Managers. Consequently, whenever unanimous action
is required, the Company will not have the means to assure unanimous
consent.
The Operating Agreement also provides that the Board of Managers may
not cause TLC to take certain specified actions without the prior approval
of the Members by unanimous consent. As a result of the foregoing, the
Company may not take certain actions relating to TLC without the prior
written consent of Christiana including (i) the authorization or issuance
of additional Membership Units; (ii) the authorization or payment of any
distribution with respect to Membership Units, except for the payment of
any distribution that is necessary for the Company to fulfill its purchase
obligation with respect to Christiana's interest in TLC; (iii) any direct
or indirect purchase or acquisition by TLC or any subsidiary of TLC of
Membership Units; (iv) approval of any merger, consolidation or similar
transaction or sale of all or substantially all of the operating assets of
TLC in one or more transactions; (v) the creation of any new direct or
indirect subsidiary of TLC; (vi) the making of any tax election; (vii) the
liquidation or dissolution of TLC or any subsidiary of TLC; (viii) any
transaction between TLC or subsidiary of TLC and any affiliate of a Member
(other than a transaction between TLC and a subsidiary of TLC); (ix) the
payment of any compensation to any Member or any affiliate of a Member or
entering into any employee benefit plan or compensatory arrangement with
or for the benefit of any Member or affiliate of any Member; (x) any
amendment to the Operating Agreement or the Certificate of Organization;
and (xi) any other matter for which approval of Members is required under
the Delaware Limited Liability Company Act. See "The Operating
Agreement."
Except as specifically set forth in the Operating Agreement, a Member
may not voluntarily sell, give, assign, bequeath or pledge (each a
"Transfer") any Membership Unit without the prior written consent of the
Board of Managers; provided, however, that the Company may pledge and
assign its Membership Units to Christiana and Christiana may effect a
Transfer of the Company's Membership Units pursuant to any action taken
with respect to any security interest granted to Christiana by the
Company. Christiana may also Transfer its Membership Units if the
transferee is an affiliate of Christiana or the Company and the transferee
agrees to be bound by the provisions of the Operating Agreement. At any
time after the fifth anniversary of the date of the Operating Agreement,
Christiana may Transfer any or all of its Membership Units to any person;
provided, however, that the Company shall have a right of first refusal to
purchase such Membership Units for the same price and at the same terms as
such Membership Units were offered to the transferee. See "The Operating
Agreement." In addition, the Purchase Agreement provides that neither the
Company nor TLC may transfer, directly or indirectly, a majority of the
Company's or TLC's assets to any person or entity unless the acquiring
person or entity expressly assumes the obligations of the Company or TLC,
as the case may be, under the Purchase Agreement (See "- Assumed
Liabilities and Indemnification Obligations of the Company and TLC" above)
and has a net worth, on a pro forma basis after giving effect to the
acquisition equal to or greater than the Company or TLC, as the case may
be, on a consolidated basis. See "The Purchase Agreement."
The Purchase Agreement also provides that at any time during the one
year period following the fifth anniversary of the Effective Time,
Christiana will have the option (but not the obligation) to sell to the
Company or TLC, at Christiana's option, and the Company or TLC, as
applicable, will be required to purchase, all (but not less than all) of
Christiana's 333.333 Membership Units in TLC for a price equal to $7
million, payable in cash within 60 days of Christiana providing notice of
its intent to exercise this option.
In the event of a proposed merger, consolidation or share exchange
involving TLC or if the Company proposes to transfer or sell all of its
interest in TLC to an unrelated third party ("Third Party") in one or more
transactions, Christiana will have the right ("Tag Along Right") to
participate in such sale with respect to its Membership Units in TLC for
the same equivalent consideration per equivalent Membership Unit and
otherwise on the same terms as the Company transfers its Membership Units
in TLC. The Company is obligated to provide notice to Christiana of any
circumstances which gives rise to the Tag Along Right and if Christiana
exercises its Tag Along Right in the manner set forth in the Purchase
Agreement it will be obligated to sell its Membership Units upon
substantially the same terms and conditions as the Company transfers its
Membership Interests in TLC.
Availability and Integration of Potential Future Acquisitions
The Company's strategy provides that a substantial part of its future
growth will come from acquiring either directly or through TLC other
businesses which may or may not be related to TLC's current business.
There can be no assurance that the Company or TLC will be able to identify
suitable acquisition candidates or, if identified, negotiate successfully
their acquisition. If the Company or TLC is successful in identifying and
negotiating suitable acquisitions, there can be no assurance that any debt
or equity financing necessary to complete such acquisition can be arranged
on terms satisfactory to the Company or TLC, as the case may be, or that
such financing will not increase the Company's leverage or result in
additional dilution to existing Company shareholders. Moreover, there can
be no assurance that any acquired warehousing or logistics business can be
integrated successfully into TLC or that TLC or the Company, as the case
may be, will manage or improve the operating or administrative
efficiencies of any acquired business. Failure of the Company or TLC to
implement successfully their acquisition strategies will limit the
Company's growth potential.
TLC's Fleet; Relationship with Truckload Contract Carriers
TLC utilizes both its own fleet of trucks and truckload contract
carriers ("Contract Carriers") to conduct its operations. Thus, as TLC
expands, it will likely be required to expand its fleet of trucks and
require the services of additional Contract Carriers. At some TLC
locations, only a few Contract Carriers meet TLC's quality standards. In
addition, the trucking industry has experienced severe shortages of
available drivers in recent years, which may curtail the ability of TLC
and Contract Carriers to expand the size of their fleets. This shortage
may also require TLC and Contract Carriers to increase drivers'
compensation, thereby increasing transportation costs to TLC. If TLC were
unable to successfully expand its own fleet and secure additional local
Contract Carrier capacity to handle the transportation needs of its
customers or had to increase the amount paid for transportation services,
TLC's results of operations, and accordingly, the Company's results of
operations, could be adversely affected.
Possible Effect of Economic Developments; Geographic Concentration
Interest rate fluctuations, economic recession, customers' business
cycles, changes in fuel prices and supply, increases in fuel or energy
taxes and the transportation costs of TLC's internal fleet of trucks and
Contract Carriers are economic factors over which TLC has little or no
control. Increased operating expenses incurred by Contract Carriers,
together with any internal increases in the cost of TLC's fleet of trucks,
can be expected to result in higher transportation operating costs for
TLC. TLC's operating margins would be adversely affected if it were
unable to pass through to its customers the full amount of increased
operating costs. Economic recession or a downturn in customers' business
cycles also could have an adverse effect on TLC's results of operations
and TLC's growth by reducing demand for TLC's services.
TLC's operations and customers are currently located primarily in
Wisconsin, Illinois and Michigan. Therefore, TLC's results of operations,
and accordingly, the Company's results of operations, are susceptible to
downturns in the general economy in this geographic region.
Dependence on Management
The Company and TLC are, and for the foreseeable future will be,
dependent on the services of their respective senior management teams
including, in the case of the Company, William T. Donovan and David J.
Lubar and in the case of TLC, Brian L. Brink, John R. Patterson, Gary R.
Sarner and other members of TLC's senior management group. Neither the
Company nor TLC has written employment agreements with any of its
executive officers and does not maintain insurance on the life of any of
its executive officers.
The loss of any of these individuals could adversely affect the
operations of the Company and TLC. See "Management."
Conflicts of Interest
Sheldon B. Lubar, a director of the Company, David J. Lubar,
President and a director of the Company and William T. Donovan, Chairman
and a director of the Company, have, from time to time, participated
individually, and as a group, in acquisitions of, and investments in,
other business entities independent from Christiana. The Company's Board
of Directors have adopted guidelines which generally require that before
independently pursuing an acquisition opportunity, the opportunity will be
presented to the Board of Directors. The decision as to whether to pursue
the opportunity will be made by a majority of the members of the Board who
are not otherwise potentially interested in the opportunity.
Concentration of Ownership of Common Stock
Following the Offering, the Lubar Family and the other officers and
directors of the Company will beneficially own approximately 66% of the
outstanding shares of Common Stock assuming such individuals exercise
their Basic Subscription Privilege in full. In the event the entire Basic
Subscription Privilege is not exercised in full by Christiana
Shareholders, it is likely that the Lubar Family and the other directors
and officers of the Company will beneficially own an even higher
percentage of outstanding shares of Common Stock.
Accordingly, the Lubar Family and the other directors and officers of
the Company will have the ability to influence significantly the election
of directors and most corporate actions. See "Principal Shareholders."
No Prior Public Market; Possible Stock Price Volatility
Prior to this Offering, there has been no public market for the
Common Stock, and there can be no assurance that an active trading market
for the Common Stock will develop or be sustained following this Offering.
The initial public offering price for the Common Stock has been determined
at the discretion of the Company's Board of Directors and bears no
relationship to the price at which the Common Stock will trade after this
Offering. There can be no assurance that future market prices of the
Common Stock will not be lower than the initial public offering price.
After this Offering, the market price of the Common Stock may be
subject to significant fluctuations in response to such factors as
variations in the annual or quarterly financial results of the Company or
its competitors, changes by financial research analysts in their estimates
of the earnings of the Company or other companies in, or with ownership
interests in, the warehousing and transportation industries, conditions in
the economy in general or in the Company's or TLC's industry in
particular, unfavorable publicity or changes in applicable laws and
regulations (or judicial or administrative interpretations thereof)
affecting the Company, TLC or the warehousing and transportation industry.
Dilution
Investors will experience substantial dilution as a result of the
Acquisition to the extent of intangible assets purchased in the
Acquisition, which, at December 31, 1997, was $5,514,000, or $1.06 per
share assuming the Offering is fully subscribed.
Dividends from TLC
The Operating Agreement to be entered into at the Closing between
Christiana and the Company (the "Operating Agreement") will govern the
relationship between Christiana and the Company as the two Members of TLC.
The Operating Agreement provides that other than quarterly distributions
to cover the estimated income tax payments on items of income, gain, loss
or deduction allocated to the Members with respect to TLC's taxable income
(which will be passed through to each Member since TLC, as a limited
liability company, will be taxed as a partnership), no distributions from
TLC will be made to the Members without the consent of both Christiana and
the Company. For the foreseeable future, the Company and Christiana do
not anticipate causing TLC to pay any cash distributions (other than to
cover the tax liabilities of the Members with respect to federal, state
and local income tax liabilities resulting from the Members' ownership
interest in TLC). TLC will pay to the Company an annual management fee of
$250,000. In addition, the new credit agreement to be entered into by TLC
as of the Effective Time will prohibit TLC from declaring or paying
dividends, subject to limited exceptions. See "Dividend Policy" below.
Restrictive Covenants in the TLC Credit Agreement
The Credit Agreement to be entered into by TLC contains affirmative
and negative covenants (including, where appropriate, certain exceptions
and baskets mutually agreed upon), including but not limited to furnishing
financial and other information, payment of obligations, conduct of
business, maintenance of property, insurance, inspection of property,
books and records, notices, environmental laws, additional subsidiary
guarantors, bank accounts, indebtedness, liens, nature of business,
consolidation, merger, sale or purchase of assets, advances, investments
and loans guarantee obligations, transactions with affiliates, ownership
of subsidiaries, fiscal year, prepayment of indebtedness and dividends.
The Credit Agreement also contains the following financial covenants:
minimum consolidated tangible net worth; maximum consolidated funded debt
ratio; minimum cash flow coverage ratio; and positive annual earnings.
Failure of TLC to meet any of the covenants described above may have a
material adverse affect on the Company or TLC's future operations. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations - Description of Credit Agreement."
USE OF PROCEEDS
The net proceeds to the Company from the sale of 5,202,664 shares of
Common Stock offered hereby, after deducting offering expenses payable by
the Company of $170,000 will be approximately $20,641,000. The Lubar
Family has committed to exercise their Basic Subscription Privilege in
full to ensure that the net proceeds of the Offering to the Company will
be at least $10,666,667 after expenses. The first $10,666,667 of the net
proceeds will be used no later than 30 days following the Effective Time
to consummate the Acquisition. The remainder of the net proceeds will be
used for general corporate purposes, including future acquisitions.
Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities or other
high-grade, short-term, interest-bearing investments.
DIVIDEND POLICY
The Company was recently formed on December 11, 1997 and has never
paid any cash dividends on its capital stock. The Company's ability to
generate cash for the payment of dividends is restricted by the terms of
the Operating Agreement. See "Risk Factors - Dividends" and "The
Operating Agreement." Moreover, the Company and its Board of Directors
currently intend to retain any earnings for use in the expansion of the
Company's business and do not anticipate paying any cash dividends on the
Common Stock in the foreseeable future.
Upon the Effective Time, TLC will replace its existing revolving
credit facility with a new revolving credit facility. Pursuant to this
revolving credit facility, TLC is prohibited from declaring or paying
dividends (other than a dividend or distribution payable solely in stock
or an equity interest); provided, that TLC may declare and pay
distributions to its Members from time to time in amounts up to the
Members' respective federal, state and local income tax liabilities
resulting from such Members' ownership of limited liability company
interests in TLC subject to the limitation that no such distribution shall
be made if there shall exist any default or event of default or if the
making of any such payment would cause a default or event of default to
occur under this revolving credit facility. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Description of Credit Agreement."
SUMMARY OF CERTAIN TERMS OF THE MERGER
General
At the Effective Time, EVI will acquire Christiana through the Merger
of Sub with and into Christiana.
Each outstanding share of Christiana Common Stock will be converted
in the Merger into a right to receive (i) approximately .74193 of a share
of EVI Common Stock, subject to certain adjustments based on the number of
shares of Christiana Common Stock outstanding at the Effective Time; (ii)
cash of approximately $3.50 per share of Christiana Common Stock, subject
to adjustment based on the amount of certain Christiana liabilities
existing as of the Effective Time (the "Cash Consideration"); and (iii) a
contingent cash payment of approximately $1.92 payable to the shareholders
of record following the fifth anniversary of the Effective Time, subject
to any indemnity claims by EVI under the Merger Agreement (the "Contingent
Cash Consideration").
Cash Consideration to be Received in the Merger
The exact calculation of Cash Consideration will equal the quotient
of the Christiana Net Cash (as defined below) divided by 5,202,664, the
amount of shares of Christiana Common Stock to be outstanding as of the
Effective Time. The definitive calculation of Cash Consideration will be
made by the parties to the Merger Agreement no later than thirty (30) days
following the Effective Time.
The "Christiana Net Cash" will be equal to (i) the sum of
- $20,000,000 obtained in connection with the TLC Dividend;
- $10,666,667 to be obtained by Christiana in connection with the
Acquisition;
- $3,000,000 obtained in connection with payment in full by TLC of
the entire principal amount of the Wiscold Note;
- the cash received from the exercise of Christiana stock options;
and
- all of the cash on hand of Christiana as of the Effective Time,
minus (ii) the sum of
- an amount of cash necessary to pay the Assumed Liabilities
(which include, without limitation, all expenses relating to the
Merger) in full without giving effect to the use or application
of any tax deductions relating to the exercise of options or any
tax benefits that may be realized as a result of amended tax
returns of Christiana (such Assumed Liabilities are described
more fully herein under "Risk Factors - Assumed Liabilities and
Indemnification Obligations of the Company and TLC" and "Pro
Forma Combined Financial Data"); and
- $10,000,000 (the initial amount of the Contingent Cash
Consideration).
Based on the current capitalization of Christiana and the assets and
Liabilities of Christiana as of December 31, 1997, and after giving effect
to the estimated expenses of the Merger payable by Christiana, the Cash
Consideration per share is anticipated to be approximately $3.50 and the
Contingent Cash Consideration, assuming no reductions for indemnity
payments during the five year period following the Effective Time, is
anticipated to be $1.92 per share.
Christiana Shareholders purchasing shares of Common Stock pursuant to
the Basic Subscription Privilege, will, upon proper completion and
delivery of the Letter of Transmittal to the Subscription Agent (which
will also act as exchange agent in the Merger), authorize the Subscription
Agent to apply the Cash Consideration to be received in the Merger toward
payment for such shares of Common Stock. See "The Offering - How to
Exercise Basic Subscription Privilege and Additional Subscription
Privilege." However, because the Cash Consideration per share of
Christiana Common Stock is expected to be less than the Subscription Price
per share of Common Stock offered hereby, any exercise of the Basic
Subscription Privilege in full will require an additional cash payment.
CAPITALIZATION
The following table sets forth the combined capitalization of the
Company as of December 31, 1997 (i) on a pro forma combined basis to give
effect to the Acquisition, the TLC Dividend and repayment of the Wiscold
Note; and (ii) as further adjusted to give effect to the Offering and the
application of the estimated net proceeds therefrom, assuming the sale of
a minimum 2,718,000 shares of Common Stock pursuant to the Lubar
Commitment and a fully subscribed (maximum) offering of 5,202,664 shares
of Common Stock. This table should be read in conjunction with the
unaudited Pro Forma Combined Financial Data of the Company and the notes
thereto included elsewhere in this Prospectus. See "Pro Forma Summary
Combined Financial Data."
December 31, 1997
As Adjusted
Pro Forma Minimum Maximum(4)
(Amounts in thousands, except per share
data)
Short-term debt:
Short-term
obligations(1) $ - $ - $ -
Current maturities of
long-term debt(1) 1,245,000 1,245,000 1,245,000
Liability for purchase of
666.667 Membership Units
of Total Logistic
Control, LLC 10,667,000 - -
Long-term debt, net of
current maturities(1) 56,617,000 56,617,000 56,617,000
Minority interest(2) 7,607,000 7,607,000 7,607,000
Shareholders' equity:
Preferred Stock, par
value $0.01 per share,
10,000,000 shares
authorized; none issued
or outstanding - - -
Common Stock, par value
$0.01 per share,
50,000,000 shares
authorized, none issued
and outstanding; pro
forma 2,718,000
(minimum) and 5,202,689
(maximum) shares issued
and outstanding, as
adjusted(3) - 27,000 52,000
Additional paid-in capital - 10,675,000 20,589,000
Retained earnings 2,729,000 2,729,000 2,729,000
---------- ---------- ----------
Total shareholders'
equity 2,729,000 13,431,000 23,370,000
---------- ---------- ----------
Total capitalization
including minority
interest $78,865,000 $78,900,000 $88,839,000
========== ========== ==========
(1) For a description of TLC's debt, see "Notes to the Financial
Statements of TLC" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Description of Credit
Agreement."
(2) The retained earnings amount as included in the capitalization table
represents the difference between the purchase price of 667
membership units of TLC ($10,667,000) and the carry over basis of TLC
equity as adjusted for (i) the TLC Dividend; (ii) the drop down of
certain Christiana assets and liabilities; (iii) minority interest:
and (iv) deferred income taxes of the Registrant related to the
difference between purchase price and carry over basis. A
calculation of the retained earnings adjustment is as follows:
Purchase price of two-third
TLC 10,667,000
Net book value of TLC at
12/31/97 42,839,000
Less: Dividend to Christiana 20,000,000
Less: Drop down
assets/liabilities 17,000
Less: Minority interest 7,607,000
Less: Deferred income taxes 1,819,000 13,396,000
---------- ----------
Retained earnings adjustment 2,729,000
----------
(3) Does not include up to 520,000 additional shares reserved for
issuance pursuant to the 1998 Equity Incentive Plan (the "1998
Plan"), of which options to purchase _____ shares of Common Stock
will be granted to independent directors of the Company concurrently
with the Offering at an exercise price of $4.00 per share. See
"Management - 1998 Equity Incentive Plan."
(4) The minimum number of shares of Common Stock which will be issued in
the Offering is 2,718,000 pursuant to the Lubar Commitment and the
maximum number of shares to be issued in the Offering is 5,202,664.
COMPANY FINANCIAL DATA
Set forth below is the balance sheet of the Company as of
December 31, 1997 which is derived from and qualified by reference to, and
should be read in conjunction with the balance sheet of the Company and
notes thereto which have been audited by Arthur Andersen LLP and which
appear elsewhere in this Prospectus. The balance sheet of the Company set
forth below reflects only the initial capitalization of the Company
pursuant to a $100 investment by Sheldon B. Lubar.
C2, Inc.
(A Newly-Formed Holding Company)
BALANCE SHEET
December 31, 1997
ASSETS:
Due from shareholder for Common Stock Subscribed $100
---
Total Assets $100
===
LIABILITIES AND SHAREHOLDER'S EQUITY:
Total Liabilities: $ -
SHAREHOLDER'S EQUITY:
Preferred Stock, $.01 par value, 10,000,000 shares
authorized, none issued or outstanding -
Common Stock, $.01 par value, 50,000,000 shares
authorized, 25 shares issued and outstanding -
Additional paid-in capital 100
---
Total Shareholder's Equity 100
---
Total Liabilities and Shareholder's Equity $100
===
PRO FORMA SUMMARY COMBINED FINANCIAL DATA
Set forth below is unaudited pro forma summary combined financial
statements for the year ended June 30, 1997 and for the six months ended
December 31, 1997 and as of December 31, 1997.
These pro forma summary combined financial statements should be read
in conjunction with other information contained elsewhere in this
Prospectus, including "Selected Historical TLC Financial Data," and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," the historical financial statements of TLC, and the
historical balance sheet of the Company. See "Index to Financial
Statements."
The pro forma summary combined statements of income for the year
ended June 30, 1997 and the six months ended December 31, 1997 reflect the
effects on the historical results of operations of the Company of the
following transactions as if these transactions had occurred on July 1,
1996: (i) the sale of 5,202,664 shares of Common Stock; (ii) the
application of the proceeds for the purchase of 666.667 Membership Units
of TLC from Christiana for approximately $10.7 million; (iii) the
additional operating expenses associated with corporate charges including
officers salaries, professional, legal, occupancy, public company and
other corporate related expenses; and (iv) the establishment of deferred
income taxes for TLC. In addition, the pro forma financial data reflects
the following pre-Acquisition adjustments: (i) the refinancing of the
Wiscold Note; (ii) $20 million of borrowings by TLC and subsequent payment
of the TLC Dividend; and (iii) the additional interest expense associated
with these aforementioned increases in outstanding debt and the adjustment
to interest expense to reflect the costs of borrowing under TLC's new
credit facility to be entered into as of the Effective Time.
The pro forma financial data does not purport to represent what the
Company's financial position or results of operations would actually have
been if such a transaction in fact had occurred on those dates or to
project the Company's financial position or results of operations for any
future period.
<PAGE>
PRO FORMA SUMMARY COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
As of December 31, 1997
Historical Pro Forma Pro Forma Offering As
TLC Adjustments(1) C2, Inc. Adjustments Adjusted
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 388,000 $ - $388,000 $20,641,000 (8) $10,362,000
(10,667,000)(9)
Other current assets 10,194,000 71,000 (4) 10,265,000 10,265,000
Total long-term assets 78,852,000 2,279,000 (4) 81,131,000 81,131,000
---------- ---------- ---------- ---------- -----------
Total assets $89,434,000 $2,350,000 $91,784,000 $9,974,000 $101,758,000
========== ========== ========== ========== ===========
Total current liabilities $9,628,000 $1,525,000 (4) $11,153,000 $11,153,000
Due to Parent company 3,000,000 (3,000,000)(2) - -
Liability for purchase of
666.667 Membership Units
of TLC - 10,667,000 (7) 10,667,000 (10,667,000)(9) -
Deferred income taxes - 1,819,000 (6) 1,819,000 1,819,000
Long-term debt 33,617,000 20,000,000 (3) 56,617,000 56,617,000
3,000,000 (2)
Other liabilities 350,000 842,000 (4) 1,192,000 1,192,000
---------- ---------- ---------- ---------- ----------
Total liabilities 46,595,000 34,853,000 81,448,000 (10,667,000) 70,781,000
Minority interest - 7,607,000 (5) 7,607,000 7,607,000
Preferred stock -
Common Stock - 52,000 (8) 52,000
Additional paid-in capital - 20,589,000 (8) 20,589,000
Retained earnings - 2,729,000 2,729,000
Members' equity 42,839,000 (20,000,000)(3)
(7,607,000)(5)
(17,000)(4)
(1,819,000)(6)
(10,667,000)(7)
---------- ---------- ---------- ---------- ----------
Total shareholders' equity 42,839,000 (40,110,000) 2,729,000 20,641,000 23,370,000
---------- ---------- ---------- ---------- -----------
Total liabilities and
shareholders' equity $89,434,000 $2,350,000 $91,784,000 $9,974,000 $101,758,000
========== ========== ========== ========== ===========
</TABLE>
<PAGE>
NOTES TO PRO FORMA SUMMARY COMBINED BALANCE SHEET
(1) The acquisition of 666.667 Membership Units of TLC by the Company
represents a combination of entities under common control because a
single group of shareholders controlled TLC and will control the
Company. Accordingly, no purchase accounting adjustments have been
recorded and the difference between the acquisition price and the
historical cost basis of TLC has been reflected as an equity
adjustment.
(2) Represents a $3 million draw on TLC's revolving credit facility and
subsequent payment of the Wiscold Note prior to the Acquisition.
(3) Represents a $20 million draw on TLC's revolving credit facility
(interest at LIBOR plus 225 basis points) and the subsequent payment
of the TLC Dividend prior to the Acquisition.
(4) Represents the book value of certain assets and liabilities of
Christiana which were contributed to TLC prior to the Acquisition as
follows:
ASSETS:
Prepaids and other assets $ 71,000
Other long-term assets 2,279,000
LIABILITIES:
Accrued liabilities $(1,525,000)
Other long-term liabilities (842,000)
----------
Equity adjustment related to
asset/liability transfer $ (17,000)
==========
(5) Represents the establishment of Minority Interest for the one-third
interest in TLC not owned by the Company. Minority Interest
represents one-third of TLC's Members equity subsequent to the
adjustment for the TLC Dividend and contribution of certain
Christiana assets and liabilities.
(6) Represents the establishment of a deferred income tax liability
attributed to temporary differences between the purchase price and
carryover basis of TLC assets and liabilities.
(7) Represent the liability for cash consideration to be paid to
Christiana related to the purchase of 666.667 Membership Units of
TLC.
(8) Represents the amount of net proceeds associated with the sale of
5,202,664 shares of Common Stock offered by the Company at $4.00 per
share, net of expenses of $170,000.
(9) Represents the payment of the purchase price due to Christiana in
connection with the Acquisition.
<PAGE>
PRO FORMA SUMMARY COMBINED STATEMENTS OF INCOME
For the Year Ended June 30, 1997
Historical Pro Forma Pro Forma
TLC Adjustments C2, Inc.
Revenues $84,208,000 $ - $84,208,000
Operating expenses 77,897,000 1,240,000 (1) 79,137,000
Interest expense 3,216,000 1,934,000 (2) 5,150,000
Other (income) expense, net 1,390,000 - 1,390,000
Income (loss) before
minority interest and
income taxes 1,705,000 (3,174,000) (1,469,000)
Provision for (benefit
from) income taxes 695,000 (1,187,000)(3) (492,000)
Adjustment of deferred
income taxes resulting
from a change in tax
status 11,171,000 (11,171,000)(4) -
Minority interest income - 239,000(5) 239,000
Net income (loss) 12,181,000 (12,919,000) (738,000)
Basic and diluted net loss
per share of common stock $ (0.14)
For the Six Months Ended December 31, 1997
Historical Pro Forma Pro Forma
TLC Adjustments C2, Inc.
Revenues $46,714,000 $ - $46,714,000
Operating expenses 43,066,000 500,000 (1) 43,566,000
Interest expense 1,560,000 967,000 (2) 2,527,000
Other (income) expense,
net 384,000 - 384,000
Income before minority
interest and income
taxes 1,704,000 (1,467,000) 237,000
Provision for income
taxes - (13,000)(3) (13,000)
Minority interest
expense - (204,000)(5) (204,000)
Net income (loss) 1,704,000 (1,684,000) 20,000
Basic and diluted net
earnings per share of
common stock -
<PAGE>
NOTES TO PRO FORMA SUMMARY
COMBINED STATEMENTS OF INCOME
(1) Represents (i) additional operating expenses resulting from corporate
expenses, including officers' salaries, occupancy expenses,
professional, legal, public company and other corporate related
expenses and (ii) the elimination of the management fee income paid
to TLC by Christiana:
For the Year For the Six
Ended Months Ended
June 30, December 31,
1997 1997
Officers salaries $390,000 $195,000
Occupancy expenses 150,000 75,000
Other corporate expenses 460,000 230,000
Elimination of TLC management
fee income 240,000 -
--------- ---------
$1,240,000 $ 500,000
(2) Represents (i) the additional interest expense on the $20 million of
additional debt incurred immediately prior to the Acquisition and
(ii) the increase in interest expense related to higher borrowing
rates on the new revolving credit facility as follows:
For the Year For the Six
Ended Months Ended
June 30, 1997 December 31, 1997
$20 million draw on TLC's
revolving credit facility,
interest at an average rate of
LIBOR + 225 basis points $1,572,000 $786,000
Additional interest expense on
historical outstanding debt
bearing interest at a rate of
LIBOR + 225 basis points
(revolving credit facility rate)
versus a historical rate of
LIBOR + 125 basis points 362,000 181,000
--------- --------
$1,934,000 $967,000
(3) Represents the incremental provision for Federal and state income
taxes required on the earnings of TLC, in addition to the required
adjustment for the tax impact of the pro forma adjustments.
(4) Represents the elimination of the Adjustment of Deferred Income Taxes
Resulting from a Change in Tax Status. This non-recurring charge to
income incurred during the year ended June 30, 1997, pertains to the
elimination of the net deferred income tax liability resulting from
TLC's conversion from a taxable C-Corporation to a limited liability
company.
(5) Represents 33.3% of net income allocable to TLC's minority interest
owner.
<PAGE>
SELECTED HISTORICAL TLC FINANCIAL DATA
The following table sets forth certain selected historical financial
data for TLC as of and for each of the five years ended June 30, 1997 and
as of December 31, 1997 and 1996 and for the six months then ended. The
historical financial data as of and for each of the three years ended June
30, 1997 was derived from the Financial Statements of TLC, which were
audited by Arthur Andersen LLP, independent public accountants. The
historical financial data as of and for each of the two years ended June
30, 1994 and as of December 31, 1997 and 1996 and for the six months then
ended have not been audited. In the opinion of TLC, the historical
financial data as of and for the two years ended June 30, 1994 include all
adjusting entries necessary to present fairly the information set forth
therein. The following selected historical financial data should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and TLC's Financial Statements and
related notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Selected Historical TLC Financial Data
(Amounts in thousands, except per membership unit data)
Six months ended
December 31 For the Year Ended June 30
1997 1996 1997 1996 1995 1994(2) 1993(1)
Statement of Income
Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $46,714 $40,821 $84,208 $76,976 $71,029 $42,355 $15,190
Income from operations 3,648 3,636 6,311 5,689 7,555 4,611 3,273
Interest expense 1,560 1,703 3,216 3,176 3,378 3,003 2,356
Net income 1,704(6) 316 12,181(5) 1,536 2,562 995 585
Basic and diluted
income per membership
unit(3) 1,704 316 12,181 1,536 2,562 995 585
Other Data:
Capital Expenditures 980 1,476 3,294 17,646 7,552 3,146 8,017
Depreciation and
amortization 3,398 3,891 7,186 6,971 6,684 4,671 2,795
EBITDA(4) 6,862 7,177 13,143 12,552 14,218 9,303 6,097
Cash flows from
operating activities 6,002 3,883 9,294 11,043 10,180 7,121 4,162
Cash flows from
investing activities (980) (1,327) (1,822) (16,262) (7,116) (2,858) (7,830)
Cash flows from
financing activities (4,858) (2,077) (7,277) 4,883 (3,247) (3,934) 3,888
<CAPTION>
As of December 31 As of June 30
1997 1996 1997 1996 1995 1994(2) 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total Assets $89,434 $94,823 $90,140 $97,923 $88,731 $87,079 $65,417
Total Debt 37,862 45,595 40,394 47,671 42,788 46,035 42,374
Total Member's Equity 42,839 36,786 43,461 31,280 29,744 27,182 15,207
_______________
(1) Effective September 1, 1992, Christiana consummated the acquisition of Wiscold. The statement of income data and cash
flow information for fiscal 1993 reflects only the results of operations subsequent to the date of acquisition.
(2) Effective January 4, 1994, Christiana consummated the acquisition of Total Logistic Inc. The statement of income data
and cash flow information for fiscal 1994 reflects the combined operating results of Wiscold and Total Logistic Inc.
subsequent to its date of acquisition. The balance sheet data reflects the combined results of these aforementioned
entities as of June 30, 1994.
(3) Effective June 30, 1997, Wiscold and Total Logistic Inc. were merged to form TLC. Income per membership unit for periods
presented prior to 1997 are shown as if the units had been outstanding for all periods presented.
(4) EBITDA is defined as income (loss) before taxes plus fixed charges. Fixed charges consist of interest expense,
depreciation and amortization and gains or losses on disposal of assets. EBITDA is not a measure of financial
performance under generally accepted accounting principles and should not be considered as an alternative to net income
as a measure of performance nor as an alternative to cash flow as a measure of liquidity. Since all companies do not
calculate EBITDA uniformly, it may not be an accurate measure of comparison.
(5) Includes $11,171 of income related to an adjustment of deferred income taxes resulting from a change in TLC's tax status
from a C-Corporation to a limited liability company.
(6) Net income for the six months ended December 31, 1997 do not reflect the impact of an income tax provision as TLC was a
limited liability company during this period. For comparative purposes, net income for the six month period ended
December 31, 1996 (during which TLC was a C-Corporation) would have been $497 absent a provision for income taxes of
$181.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
TLC provides full service public and contract warehousing and
logistic services in all ranges of frozen, refrigerated and ambient
temperatures. TLC's transportation and distribution services include full
service truckload, less-than-truckload and pooled consolidation in both
temperature controlled and dry freight equipment, dedicated fleet services
and specialized store-door delivery formats. Transportation and logistic
services are provided utilizing company-owned equipment, as well as
through carrier management services utilizing third party common and
contract carriers. Integrated logistic services generally combine
transportation, warehousing and information services to manage the
distribution channel for a customer's products from the point of
manufacturer to the point of consumption. TLC also provides a full range
of international freight management services, fully computerized inventory
management, kitting, repackaging and just-in-time production supply
services.
TLC Historical Income Statement Information
The following table sets forth, for the fiscal years ended June 30,
1997, 1996 and 1995 respectively, certain consolidated financial data for
TLC, expressed as a percentage of net sales, and the percentage changes in
the dollar amounts as compared to the prior period:
Percentage of Revenues
June 30, Percentage Change
1996 1995
1997 1996 1995 to 1997 to 1996
Revenues 100.0% 100.0% 100.0% 9.4% 8.4%
Warehouse and
Logistic
Expenses 84.3% 84.4% 80.1% 9.3% 14.2%
Selling and
Administration 8.2% 8.2% 9.3% 9.4% (3.9)%
Income from
operations 7.5% 7.4% 10.6% 10.9% (24.7)%
Comparison of Six Months Ended December 31, 1997 to the Six Months Ended
December 31, 1996 for TLC
For the six months ended December 31, 1997, revenues increased
$5,893,000 or 14.4% to $46,714,000 from $40,821,000 for the period ended
December 31, 1996. Transportation operations had strong sales growth of
$4,978,000 over the prior year from the operation of an expanded fleet and
continued heavy demand for freight. Growth in Refrigerated Warehousing
operations of $3,513,000 was derived primarily from improved warehouse
occupancy levels from new customers and a strong vegetable crop. Dry
Warehousing operations had a decline in revenue for the period of
$2,126,000, resulting from the closure at the end of fiscal 1997 of two
dry warehouses and a substantial volume reduction in the Munster, Indiana
facility. The balance of the change in revenue for the six months ended
December 31, 1997 came from reduced volume in the area of international
freight forwarding.
Gross profit for the six months increased $490,000 or 7.1% to
$7,398,000 compared to the same period for the prior year. Gross profit
attributable to Transportation operations for the first half of fiscal
1998 increased $1,126,000, up 186%, primarily as a result of an expanded
transportation fleet and more efficient utilization thereof. Gross profit
for Refrigerated Warehousing operations increased $162,000, up 3.5% due to
improved capacity utilization and higher processing revenue from the
Beaver Dam Logistic Center. Gross profit for Dry Warehousing operations
decreased $777,000 or 52.3%, due to the closure of two facilities and a
substantial decline in utilization in the Munster, Indiana facility. The
remaining change in gross profit is attributable to a decrease in
international freight forwarding operations.
Selling, general and administrative expenses, which includes
marketing and advertising expenses, increased $478,000 or 14.6% for the
first six months of fiscal 1998 compared to the same period for the prior
year. The increase was primarily attributable to sales and marketing
activities designed to develop and grow the logistics business.
Earnings from operations for the six months ended December 31, 1997
increased $12,000 or 0.3% to $3,648,000 compared to $3,636,000 for the
same period in the prior year. Increased margin from Transportation
operations was the primary reason for this improvement.
Interest expense for the first half of the fiscal year declined by
$143,000 to $1,560,000 compared to $1,703,000 for the same period in the
prior year. The reduction resulted from a combination of lower rates and
lower borrowings outstanding during the period.
Pre-tax income for the first six months ended December 31, 1997, was
$1,704,000, an increase of $1,207,000 or 243%. Stronger capacity
utilization and efficiencies in Refrigerated Warehousing and
Transportation operations contributed to these results. The pre-tax
results for the prior year were reduced by the loss of $1,036,000 for the
disposal of special freezing equipment in connection with securing a
long-term contract for vegetable processing, IQF freezing and warehouse
services with a major customer of the Beaver Dam Logistics Center. No
provision for income taxes was recorded for the six months ended
December 31, 1997, because TLC was a limited liability company for this
period. For the six months ended December 31, 1996 TLC recorded an income
tax provision of $181,000.
Net income increased $1,388,000 or 439% to $1,704,000 for the six
months ended December 31, 1997 compared to $316,000 for the same period in
1996, primarily as the result of the non-recurring charge related to the
loss in disposal of fixed assets and the elimination of the provision for
income taxes as TLC was a limited liability company during this period.
Comparison of Fiscal 1997 to Fiscal 1996 for TLC
Total revenue for fiscal 1997 increased $7,232,000 or 9.4% to
$84,208,000 compared to fiscal 1996 due primarily to increased volume in
Transportation and Refrigerated Warehousing services. The most
significant improvement was in revenue from Transportation operations
which increased 20.6% over the previous year, from $27,677,000 in fiscal
1996 to $33,392,000 in fiscal 1997. During fiscal 1997, TLC secured a
large multi-year contract to provide logistic services to a major frozen
food producer. This contract, and certain management changes, enabled TLC
to improve significantly the operating performance in transportation-
related logistic services during fiscal 1997. Refrigerated Warehousing
service revenue increased 5.7% from $35,428,000 to $37,450,000 due
primarily to increased utilization of expanded capacity at the Rochelle
Logistic Center and higher utilization at all the Michigan based
refrigerated facilities during fiscal 1997. In late fiscal 1997, TLC
closed two dry public warehouses which were leased facilities in Atlanta,
Georgia and Sparks, Nevada. The closure of these facilities resulted from
TLC's strategic focus to provide value-added logistic services on a
contractual and longer term basis in Dry Warehousing operations. As a
result of these strategic changes, revenue for Dry Warehousing operations
was down for fiscal year 1997 by $1,600,000 or 11.9%.
Gross profit increased in fiscal 1997 by $1,215,000 or 10.1% compared
to fiscal 1996, primarily as a result of revenue growth combined with
aggressive cost management. An expanded transportation fleet and better
utilization of transportation equipment contributed to an increase of
$1,200,000 in gross profit for the year, compared to 1996. Refrigerated
Warehousing increased gross profit by $110,000 for the year, compared to
fiscal 1996, mainly through higher occupancy levels in TLC's Michigan
facilities and increased utilization of the new Rochelle Logistic Center.
Dry Warehousing and added logistic expenses had a negative impact on gross
profits by $358,000 due to changes related to warehouse closures and
corporate restructuring.
Selling, general and administrative expenses increased $593,000 or
9.4% in fiscal 1997, due in large part to increased activities in
marketing and sales.
Income from operations increased by $622,000 or 10.9% over fiscal
1996. Operating income in 1997 were $6,311,000 compared to $5,689,000 in
1996. This increase was due primarily to volume and productivity gains in
Transportation operations.
Interest expense for the year was $3,216,000 compared to $3,176,000
in fiscal 1996.
Pre-tax income was $1,705,000, a decrease of $906,000 compared to
fiscal 1996, due primarily to a loss of $1,036,000 related to the disposal
of special freezing equipment in connection with securing a longer term
contract for vegetable processing, IQF freezing and warehouse services
with a major customer of the Beaver Dam Logistic Center.
The provision for taxes for fiscal year 1997 was $695,000 compared to
$1,075,000 for 1996. The effective tax rates for the two years were the
same. In 1997, an adjustment of $11,171,000 was made to add to income the
deferred income taxes that resulted from a change in TLC's tax status from
a C-corporation to a limited liability company.
Net income for 1997 was $12,181,000, up from $1,536,000 in 1996 based
on the results of operations and the change in the tax status that
eliminated the deferred taxes as of 1997.
Comparison of Fiscal 1996 to Fiscal 1995 for TLC
Total revenue for fiscal 1996 increased $5,947,000 or 8.4% to
$76,976,000 compared to $71,029,000 for fiscal 1995, primarily as a result
of increased warehouse capacity and growth in logistic services. Logistic
services grew in both Transportation operations by $2,282,000 or 9.0% and
International Freight Forwarding operations by $1,210,000 or 65.2%
compared to fiscal 1995.
Gross profit for fiscal year 1996 decreased $2,120,000 or 15.0% to
$12,020,000 compared to $14,140,000 in fiscal 1995, primarily as a result
of reduced vegetable processing and freezing volumes in Refrigerated
warehousing, and start-up costs for high volume distribution accounts.
The balance of reduced gross profit results from higher transportation
costs than historical levels and less than optimal utilization of
equipment.
Fiscal 1996 selling, general and administrative expenses declined
from those reported for fiscal 1995 by $254,000 due to improved cost
controls. Selling, general and administrative expense for 1996 was
$6,331,000 compared to $6,585,000 in fiscal 1995.
TLC's income from operations declined by $1,866,000 or 24.7% from
$7,555,000 in fiscal 1995 to $5,689,000 in fiscal 1996. Reduced volume
and profitability attributable to vegetable processing and freezing
operations, along with higher transportation expenses were the principal
factors in the reduction of earnings from operations.
Interest expense for fiscal 1996 was $3,176,000 which was down from
$3,378,000 in fiscal 1995 due to lower borrowing levels in 1996.
Pre-tax income declined in fiscal 1996 to $2,611,000 from $4,286,000
or 39.1%, due primarily to the reduction in gross profit.
TLC's effective tax rate in fiscal 1996 increased to 41% from 40% in
fiscal 1995 due to changes in the relative state components of TLC's
income. The provision for taxes for fiscal 1996 was $1,075,000 compared
to $1,724,000 in fiscal 1995.
Net income for TLC in 1996 was $1,536,000, down $1,026,000 or 40.0%
from $2,562,000 in fiscal 1995, primarily as a result of reduced gross
profits in Refrigerated Warehousing, operational inefficiencies in
Transportation operations and the increased effective income tax rate.
Financial Liquidity and Capital Resources for the Company and TLC
The Company's current sources of capital to fund corporate expenses
are management fees of $250,000 payable by TLC, short-term investments
which are expected to be $9,900,000, assuming the Offering is fully
subscribed, and the income on such investments.
The Company will continue to evaluate new acquisitions in areas
strategic to existing operations as well as new lines of business. Future
acquisitions may be funded through the proceeds of this Offering, cash
from operations, borrowings under the existing line of credit or other
credit facilities, along with potential future equity issuances.
TLC has historically funded its operations and capital expenditures
with cash flow from operations supplemented by its revolving credit
facility. Net cash provided from operations was $9,294,000 in fiscal 1997
compared to $11,043,000 in fiscal 1996, primarily as a result of (i) a
decrease in accounts payable from fiscal 1996 when TLC was engaged in a
construction project generating significant accounts payable compared to
fiscal 1997 when no similar construction project was in process and
(ii) lower earnings after considering the elimination of $11,171,000 of
income related to an adjustment of deferred income taxes resulting from a
change in TLC's tax status from a C-Corporation to a limited liability
company. Net cash provided from operating activities was $10,180,000 for
fiscal 1995.
Net cash used in investing activities for TLC for the fiscal year
ended June 30, 1997 decreased to $1,822,000 from $16,262,000 in fiscal
1996. The decrease between years is predominantly the result of a
decrease in capital expenditures, most notably $11,422,000 related to a
major expansion of a refrigerated warehouse facility during fiscal 1996.
TLC anticipates capital expenditures to be approximately $4,000,000 per
year over the next two fiscal years.
Net cash used in financing activities for the fiscal year ended June
30, 1997 was $7,277,000. During fiscal 1996, TLC provided cash from
financing activities of $4,883,000. TLC issued $9,011,000 of long-term
debt during fiscal 1996 to fund the capital expansion of a refrigerated
warehouse facility. During fiscal 1997, no additional debt was issued.
Additionally, total payments on TLC's line of credit and long-term debt
were $3,149,000 higher in fiscal 1997 than the previous fiscal year.
In January 1997, TLC increased its transportation fleet by assuming
the leases for 60 additional tractors and 75 additional trailers from one
of its customers. The addition of these tractors and trailers represented
an approximately 50% increase in TLC's transportation fleet.
During fiscal 1997, TLC evaluated and developed a plan to address the
impact of the Year 2000 and beyond on its computer systems. TLC's plan is
being managed by a team of internal staff. The team's activities are
designed to ensure that TLC's transactions with customers, suppliers and
financial institutions are compatible with the Year 2000 and beyond. TLC
recently began to explore the plans of its significant suppliers to
determine their ability to remediate the Year 2000 problems and the
effects or TLC'S vulnerability if these entities fail to become Year 2000
compliant. While TLC believes its plan is adequate to address its Year
2000 concerns, there can be no guarantee that the systems of other
companies on which TLC's systems rely will be converted on a timely basis
and will not have a material effect on TLC. The cost of the TLC's plan is
not expected to be material to TLC's ongoing results of operations.
TLC will have available to it a revolving credit facility of
$65,000,000 at a floating rate of LIBOR plus 225 basis points to finance
its capital needs, the TLC Dividend and the refinancing of the Wiscold
Note. As of consummation of the Offering, TLC will have approximately $9
million of additional available borrowings under its credit facility.
As of June 30, 1997, TLC had no significant capital commitments.
TLC believes the future cash generated from operations will be more
than adequate to service its debt requirements and future capital
expenditures for the foreseeable future.
Description of Credit Agreement
TLC intends to enter into a credit agreement (the "Credit Agreement")
with Firstar Bank Milwaukee, N.A., as agent, and certain other banks which
will be parties thereto (together, the "Banks") on or before the Effective
Time of the Merger. Pursuant to the Credit Agreement, TLC will, subject
to the achievement of certain financial ratios and compliance with certain
conditions, have the right to obtain revolving loans in the following
outstanding principal amounts:
Maximum Amount of
Time Period Revolving Loans Outstanding
Closing date through April 15, 1999 $65 million
April 16, 1999 through April 15, 2000 $61 million
April 16, 2000 through April 15, 2001 $56 million
April 16, 2001 through April 15, 2002 $50.5 million
April 16, 2002 through April 15, 2003 $43 million
The entire unpaid principal balance of loans made under the Credit
Agreement will be due and payable on April 15, 2003.
The proceeds of the initial loans under the Credit Agreement will be
used to refinance existing indebtedness of TLC to the Banks in the amount
of approximately $36,000,000; finance the payment of the TLC Dividend;
finance the repayment of the Wiscold Note; and pay related fees and
expenses. The balance of the facility, estimated to be $9 million as of
the completion of this Offering, will be available for working capital and
general corporate purposes, including the issuance of letters of credit of
up to $3.5 million outstanding at any one time.
The Credit Agreement will be secured by liens or security interests
on all or substantially all of the assets of TLC, other than certain
transportation equipment, and mortgages on its real estate.
The initial interest rate on borrowings under the Credit Agreement is
expected to be, at the option of TLC, LIBOR plus 225 basis points or the
prime rate. These rates will vary over the term of the Credit Agreement
pursuant to a pricing grid based on the ratio of Consolidated Funded Debt
to Consolidated EBITDA (the "Consolidated Funded Debt Ratio"), all as
defined in the Credit Agreement, in accordance with the following table:
APPLICABLE PERCENTAGES
Applicable
Percentage Applicable Applicable
for Percentage Percentage
Consolidated Eurodollar for for
Pricing Funded Debt Revolving Prime Rate Letter of
Level Ratio Loans Loans Credit Fee
7 >4.5:1.0 2.25 0.00 1.25
6 <4.5:1.0 but >4.0:1.0 2.00 (0.25) 1.25
5 <4.0:1.0 but >3.5:1.0 1.75 (0.25) 1.25
4 <3.5:1.0 but >3.5:1.0 1.50 (0.50) 1.25
3 <3.0:1.0 but >2.5:1.0 1.25 (0.50) 1.25
2 <2.5:1.0 but >2.0:1.0 1.00 (0.50) 1.25
1 <2.0:1.0 0.75 (1.00) 1.25
The Credit Agreement also contains provisions requiring TLC to reimburse
the Banks for increases in certain taxes, revenue requirements and other
costs incurred by the Banks.
Loans made under the Credit Agreement may be prepaid in whole or in
part without premium or penalty, except for reimbursement of the Banks for
any losses the Banks suffer as a result of repayment of LIBOR-based loan
prices to the last day of that applicable interest period.
The Credit Agreement contains representations and warranties,
including without limitation those relating to financial statements,
ownership of properties, liens and encumbrances, corporate existence,
compliance with law, legal authorization and enforceability, absence of
default, litigation, ERISA, environmental and tax matters, use of
proceeds, solvency, accuracy of information and the matters set forth in
the merger and divestiture documents.
The Credit Agreement also contains conditions precedent (or in
certain instances concurrent) to the initial funding at the Closing, which
will include, without limitation, those relating to the following:
(i) satisfactory financing documentation; (ii) the obtaining of certain
approvals and agreements; (iii) consummation of the Merger;
(iv) satisfactory proforma and other financial statements;
(v) environmental reports; (vi) certain appraisals and business
valuations; (vii) the absence of a material adverse change; and (viii) the
delivery of customary closing documents. The conditions to all borrowings
include requirements relating to prior notice of borrowing, the accuracy
of representations and warranties, the absence of any default or potential
event of default and the absence of a material adverse change in TLC's
business.
The Credit Agreement also contains affirmative and negative covenants
(including, where appropriate, certain exceptions and baskets mutually
agreed upon), including but not limited to furnishing financial and other
information payment of obligations, conduct of business, maintenance of
existence, maintenance of property, insurance, inspection of property,
books and records, notices, environmental laws, additional subsidiary
guarantors, bank accounts, indebtedness, liens, nature of business,
consolidation, merger, sale or purchase of assets, advances, investments
and loans guarantee obligations, transactions with affiliates, ownership
of subsidiaries, fiscal year, prepayment of indebtedness and dividends.
The Credit Agreement also contains the following financial covenants:
minimum consolidated tangible net worth; maximum consolidated funded debt
ratio; minimum cash flow coverage ratio; and positive annual earnings.
Events of default under the Credit Agreement, include without
limitation, those relating to: (i) non-payment of interest, principal or
fees payable under the Credit Agreement; (ii) inaccuracy of
representations or warranties in the loan documents; (iii) non-performance
of covenants; (iv) cross-default to other material debt of the Company and
its subsidiaries; (v) bankruptcy or insolvency; (vi) judgments in excess
of specified amounts; (vii) certain ERISA events; (viii) impairment of
security interests in collateral; (ix) invalidity of guarantees;
(x) materially inaccurate or false representations or warranties; and
(xi) a change in control.
BUSINESS
General
The Company was formed on December 11, 1997 and has conducted no
operations to date other than in connection with the Acquisition.
Following this Offering and the Acquisition, the Company's only non-cash
asset will be its ownership interest in TLC. The Company intends to
pursue acquisitions of businesses which may or may not relate to the
third-party logistics business of TLC. As of the date hereof, the Company
has not identified any acquisition candidates.
Immediately prior to the Merger, the Company will acquire 666.667
Membership Units of TLC (representing two-thirds of the outstanding
ownership interests of TLC) from Christiana pursuant to the Purchase
Agreement. For additional information concerning the Merger and the
Acquisition, see "Summary of Certain Terms of the Merger" and "The
Purchase Agreement."
TLC was formed on June 30, 1997 through a combination of the
operations of two wholly-owned subsidiaries of Christiana, Wiscold and
Total Logistic Inc. On September 1, 1992, Christiana acquired the assets
of Wiscold, a company formed in 1915, which engaged in providing public
refrigerated warehousing services, vegetable processing and individual
quick freeze (IQF) services, automated vegetable poly bag and bulk
packaging services, and transportation services into and out of its
facilities. On January 4, 1994, Christiana acquired Total Logistic Inc.
(formerly known as The TLC Group, Inc.), a Zeeland, Michigan-based firm
engaged in providing fully integrated third-party logistic services, which
includes warehouse, distribution and transportation services in both
refrigerated and non-refrigerated facilities.
TLC provides third-party logistic services as well as full service
public and contract warehousing in all ranges of frozen refrigerated and
ambient temperatures. Integrated logistic services generally combine
transportation, warehousing and information services to manage the
distribution channel for a customer's products from the point of
manufacturer to the point of consumption. TLC's transportation and
distribution services include full service truckload, less-than-truckload
and pooled consolidation in both temperature controlled and dry freight
equipment, dedicated fleet services and specialized store-door delivery
formats. Transportation and logistic services are provided utilizing
company-owned equipment as well as through carrier management services
utilizing third party common and contract carriers. TLC also provides a
full range of international freight management services, fully
computerized inventory management, kitting, repackaging and just-in-time
production supply services.
TLC's transportation fleet is comprised of 175 tractors, 97 of which
are 0-3 years old; 78 of which are 4-6 years old; and none of which are
older than 6 years.
TLC's customers consist primarily of national, regional and local
firms engaged in food processing, consumer product manufacturing,
wholesale distribution and retailing. During fiscal 1997, TLC's top 10
customers accounted for approximately 47% of total revenues. TLC serves
approximately 1,250 customers.
TLC believes it is the nation's seventh largest provider of public
refrigerated warehouse space. All of TLC's refrigerated facilities are
modern and efficient single story buildings at dock height elevation and
fully insulated.
Prior to the Merger, Christiana will contribute certain assets and
liabilities to TLC for no consideration. See "Pro Forma Combined
Financial Data." On the asset side, these item consist primarily of
mortgage notes receivable derived from certain condominium sales by
Christiana which, as of December 31, 1997, had an aggregate principal
amount outstanding of $1,273,000 (accruing interest at rates ranging from
6.875% to 9%). In addition, Christiana has already contributed to TLC
approximately 1.9 acres of undeveloped, partially submerged land in
Huntington Beach, California with a current book value of $0. This
property is currently subject to an easement granted in favor of the City
of Huntington Beach. Christiana is currently pursuing a change in zoning
applicable to the property in order to conduct residential development on
the property. The outcome of these efforts, and the value of the
property if such efforts are successful, are unable to be predicted at
this time. On the liability side, the items contributed by Christiana
consist of accounts payable and accrued liabilities including
compensation, vacation, insurance benefits and taxes in the aggregate
amount of $2,966,000.
Strategy
The Company's strategy is to identify and pursue suitable acquisition
candidates in businesses related and unrelated to the third-party logistic
services business of TLC.
TLC's strategy is to grow its business by emphasizing and enhancing
its ability to offer "one-stop shopping" to its customers through its wide
variety of asset and non-asset based services. Asset-based services are
generally considered to include warehousing and transportation related
activities provided through TLC's owned or leased assets. Non-asset based
services utilize warehouses and transportation equipment owned by others
for which TLC contracts on a one-time or short-term basis. TLC believes
that its asset base of refrigerated and dry warehouses and fleet
operations, together with its expertise in logistics strategy and
solutions, provides it with an advantage over its competitors which
generally offer only asset or non-asset based services. TLC's competitors
provide individual services such as warehousing, transportation and
freight forwarding in substantially the same manner as TLC. Some TLC
competitors provide only transportation services and/or warehousing
services. Others provide only logistics management services. TLC,
however, provides all of these services in an integrated fashion,
providing more efficient distribution programs and reduced inventory for
its customers. It is the goal of TLC to continue to enhance the services
that it provides to its customers by continuing to develop solutions
involving multiple services throughout the entire supply chain from the
manufacturer to end consumer.
TLC's focus on its third-party logistic services is based on its
belief that competitive market forces are dictating that corporations
focus on core competencies leading more and more corporations to outsource
logistic services and distribution functions. In addition, TLC believes
that corporations are recognizing, on an increasing basis, that properly
provided logistic services will provide enhanced inventory management,
more responsive information systems and more efficient use of fleet
capacity.
Management believes that if TLC continues to market and enhance its
integrated logistics, transportation and warehousing business, it will be
able to capitalize on the trends of its customers toward the use of
multi-service providers and the outsourcing of distribution and
warehousing functions and thereby maximize the utilization and income
potential of its assets.
TLC provides both asset-based and non-asset based solutions to its
customers because it believes that long-term success in integrated
logistic services will be dependent on offering a wide array of solutions
which entail both TLC-owned assets and the assets of TLC's established
subcontractors. By offering a complement of both asset and non-asset
based solutions, TLC believes growth will be less capital intensive than a
company which offers only asset-based services, and more intensive in the
areas of management, services and systems.
Services, Sales and Customers
TLC assists companies in managing the logistics of the physical
movement of product and materials. TLC offers refrigerated and frozen
warehousing, dry warehousing, transportation, information systems, and
international freight forwarding services. These services can be applied
to customers' needs individually, as a single service or in combination as
a unified set of services.
TLC provides various solutions that address a wide range of customer
needs. A few examples of the types of services TLC provides to its
customers follow:
TLC provides an international food manufacturer a combination of
transportation solutions, which includes the use of TLC's transportation
fleet and carrier-managed equipment and refrigerated storage. TLC
provides a national food manufacturer with a consolidation and
distribution center and with outbound transportation. TLC provides a
national food distributor with refrigerated warehousing, including high
volume order selection and shipping to facilitate rapid inventory
turnover. TLC serves as the distributor for the Michigan Department of
Education school lunch program, which involves a combination of
warehousing, order selection, store door delivery and related customer
billings. TLC has a strategic alliance with a furniture manufacturer to
provide warehousing services for the consolidation of products and order
selection for international shipments on a global basis.
TLC's revenue for each of the basic service lines are detailed below
for fiscal years ended June 30, 1997, 1996, and 1995.
Revenues
(Dollars in Millions)
1997 1996 1995
Amount % Amount % Amount %
Refrigerated
Warehousing $38 45% $35 45% $34 48%
Dry Warehousing 12 14% 14 18% 11 15%
Transportation 33 39% 28 36% 25 35%
International 3 4% 3 4% 2 3%
Eliminations (2) (2%) (3) (3%) (1) (1%)
Total Revenues $ 84 100% $ 77 100% $ 71 100%
==== ==== ==== ==== ==== ====
TLC's services target the consumer goods industries; industries in
which logistics performance is important to success. Nearly 75% of TLC's
revenues come from food manufacturers, food wholesalers and food
retailers. Because of its unique storage and distribution needs, the food
industry has launched broad industry-wide initiatives, such as Efficient
Consumer Response (ECR) and Efficient Foodservice Response (EFR), that are
formulated on high quality logistic services. The basis of ECR is to
reduce the cost of delivering products from the place of manufacture to
the point of sale. TLC believes that its one of only a few companies
which have the capabilities and range of service offerings to sufficiently
address these initiatives.
While TLC's top 15 customers, all of which participate in the food
industry, account for 60% of revenues, no one customer represents more
than 10% of TLC's business. Beyond the food industry, the balance of
TLC's customer base is spread across a broad base of industries including
pharmaceuticals, automotive suppliers, building supplies and office
furniture.
Competition
Competition in the logistic services industry is very fragmented.
Leonard's Guide, a leading industry publication, lists more than 1500
companies competing in the United States marketplace. TLC believes that
competitors can be characterized as either asset or non-asset based
providers and single or integrated service providers. Asset-based
companies, such as Exel, Americold Corporation, GATX Logistics, Inc., or
Ryder Integrated Logistics, Inc. own and operate warehouses and/or
transportation equipment. These companies utilize their asset- base and
the expertise with which to operate them to provide services. Non-asset
based competitors, such as Hub Group Logistics Services, Menlo Logistics,
and C.H. Robinson Logistics offer logistics management expertise and
information systems and sub-contract warehousing and transportation
services to asset-based providers.
TLC experiences competition for logistic services on a national basis
and in its warehousing and transportation business TLC competes generally
on a regional and local basis. Other than the high capital requirements
of building a refrigerated warehouse facility, there are no significant
barriers to entry into the transportation, warehousing and non-asset based
logistic service markets in which TLC operates, permitting a relatively
large number of smaller competitors to enter the various markets.
In addition, TLC's customers, many of which have substantially
greater resources than TLC, may divert business from TLC's warehousing and
transportation operations by building their own warehouse facilities
and/or operating their own transportation fleet.
Organization
TLC's operations are headquartered in Zeeland, Michigan, and TLC also
maintains an office in Milwaukee, Wisconsin. TLC is organized into three
main operating units: refrigerated warehousing, dry warehousing and
transportation. Each operating unit is headed up by a group vice
president/general manager. Sales and marketing for TLC are principally
performed at the corporate level, with support from the group vice
presidents as well as local warehouse facility managers. TLC also
maintains a business development group which is responsible for pricing,
logistics engineering, and transporting large logistic accounts over from
sales to operations during start up.
Sales and Marketing
Sales and marketing are principally performed at the corporate level,
with support from the group vice presidents and facility managers. The
sales organization is comprised of seven individuals and is divided into
the following teams: refrigerated warehousing team; dry warehousing team;
transportation team; and logistics sales team. Each of these teams has
primary responsibility for selling their specific services. The goal is
to develop the sales team to effectively present the fullest extent of
TLC's services suited for each customer.
Marketing and advertising is done centrally for the entire company
and uses a combination of media advertising and direct mail. The
marketing organization also has responsibility for maintaining and
gathering information on market intelligence related to competition,
customers and the logistic industry in general.
Business development supports both sales and operations by providing
logistics engineering capabilities, pricing and costing services, and
assists in the startup of complex logistic projects.
Employees
The only employees of the Company are the executive officers
described under "Management-Executive Officers and Directors of the
Company." TLC had approximately 735 employees as of December 31, 1997. A
breakdown of the employees by functional area is set forth below:
Function Number of Employees Percentage of Total
Operations 472 64.2%
Transportation 207 28.2%
Administration 46 6.2%
Sales and Marketing 10 1.4%
--- ----
Total 735 100%
No TLC employees are covered by union contracts.
Patents, Licenses and Trademarks
TLC's operations are not dependent on any particular patent, license,
franchises, or trademarks. TLC has registered a trademark and the name
"Total Logistic Control" with the United States Patent and Trademark
office.
Research and Product Development
TLC does not operate in an environment which has a strong need or
reliance on research and development. TLC has not made material
expenditures with regard to research or development in the past and does
not see it as a material issue in the future.
Government Regulations
TLC's transportation operations in interstate commerce are regulated
by the Interstate Commerce Commission ("ICC") and the operations of TLC in
intrastate commerce are regulated by various state agencies. These
regulatory authorities have broad authority, including the power to
authorize motor carrier operations, approve rates, charges and accounting
systems, require periodic financial reporting, and approve certain merger,
consolidations and acquisitions. TLC is also subject to safety
requirements prescribed by the United States Department of
Transportation ("DOT"). Such matters as weight and dimension of equipment
and load are also subject to federal and state regulations.
TLC's operations related to refrigerated food storage are subject to
regulations promulgated by the United States Department of
Agriculture ("USDA").
TLC believes it is in compliance in all material respects with
applicable regulatory requirements relating to its operations. The
failure of TLC to comply with the regulations of the ICC, DOT, USDA or
state agencies could result in substantial fines or revocation of TLC's
operating authority.
Properties
As of December 31, 1997, TLC owned or leased thirteen facilities in
five states. Of this total, eight are refrigerated/frozen with the
balance being dry facilities. The refrigerated facilities are operated
through eight public refrigerated warehouses located in Wisconsin (3),
Michigan (3), and Illinois (2). Other than Wisconsin Cold Storage,
located in downtown Milwaukee, TLC's refrigerated facilities are large
single-story buildings constructed at dock height with full insulation and
vapor barrier protection. The refrigeration is provided by screw-type
compressors in ammonia-based cooling systems. These facilities are
strategically located and well served by rail and truck.
The Wisconsin Cold Storage facility was closed in March 1998. The
property is currently offered for sale.
In addition to the refrigerated facilities discussed above, there are
five public non-refrigerated (or dry) warehouse distribution facilities,
three of which are located in Michigan and one in each of Indiana and New
Jersey. Zeeland Distribution Center II, located in Zeeland, Michigan is a
company owned facility. All other dry facilities are held under lease.
Lease terms generally match the underlying contracts with major customers
served at each facility. These facilities are single-story block or metal
construction buildings. All dry facilities are approved as food grade
storage facilities.
The following tables list the thirteen facilities by location, size,
type, and if owned or leased. Other than as indicated, all facilities are
owned.
REFRIGERATED WAREHOUSE FACILITIES
Total
Storage
Space
(cubic feet Type of
Facility Location in millions) Facility
Rochelle Logistic Rochelle, Illinois 10.6 Distribution
Center I #1
Rochelle Logistic Rochelle, Illinois 3.5 Distribution
Center II #2
Beaver Dam Logistic Beaver Dam, Wisconsin 7.2 Distribution/
Center Production
Milwaukee Logistic Wauwatosa, Wisconsin 4.3 Distribution
Center
Holland Logistic Holland, Michigan* 2.1 Distribution/
Center Production
Kalamazoo Logistic Kalamazoo Logistic 3.3 Distribution
Center I #1**
Kalamazoo Logistic Kalamazoo Logistic #2 2.8 Distribution
Center II
Wisconsin Logistic Milwaukee, Wisconsin 1.0 Distribution
Center
----
TOTAL 34.8
====
DRY WAREHOUSE FACILITIES
Total Storage
Space (sq. ft. Type of
Facility Location in thousands) Facility
Zeeland Logistic Center I* Zeeland, MI 202 Public
Zeeland Logistic Center II Zeeland, MI 220 Public
Michigan Distr. Center I* Kalamazoo, MI 88 Public
Munster Logistic Center* Munster, IN 125 Public
South Brunswick Logistic South 200 Public
Center* Brunswick, NJ
----
TOTAL 835
====
*Leased facility
**Includes 1.8 million cubic feet of dry storage capacity.
Description of Properties
A brief description of each of the Properties follows, listed
alphabetically by state and city.
Illinois Properties
Rochelle Logistic Center I Rochelle Logistic Center II
975 South Caron Road 600 Wiscold Drive
Rochelle, IL 61068 Rochelle, IL 61068
Rochelle Cold Storage campus is TLC's newest and largest refrigerated
facility, initially constructed in 1986. TLC believes that Rochelle Cold
Storage is one of the largest and most modern cold storage warehouse
facilities in the United States. Currently this facility is comprised of
14,100,000 cubic feet of capacity after undergoing four capacity
expansions in 1988, 1990, 1993, and 1996. All space is capable of
temperatures of -20 degrees F to ambient. Rochelle Cold Storage is
strategically located at the intersection of two main line East-West
railroads, the Burlington Northern and the Chicago Northwestern, and the
cross roads of interstate highways I 39 and I 88. Rochelle Cold Storage
serves primarily distribution customers in the Midwest.
Indiana Properties
Munster Logistic Center
9200 Calumet Avenue
Munster, IN 46321
Munster Logistic Center is located just south of the Chicago market with
access to major north-south and east-west highways. The facility has
access to rail through Conrail and is a food grade warehouse. The total
facility has available 125,000 square feet of dry storage. The warehouse
operates as a public warehouse with most of the customer base on short
term contracts.
Michigan Properties
Holland Logistic Center
449 Howard Avenue
Holland, MI 49424
Holland Logistic Center has undergone a number of expansions over the
years, with a major reconstruction in 1983 after a fire destroyed
approximately 50% of the facility. This refrigerated facility comprises
2,100,000 cubic feet of storage capacity of which 1,300,000 cubic feet is
freezer capacity, 400,000 cubic feet is cooler capacity and 400,000 cubic
feet is convertible capacity between freezer and cooler. Holland services
both distribution customers as well as blueberry growers in the West
Michigan area. This location is situated on a CSX rail spur with two
refrigerated rail docks. This facility is held under a lease which
expires December 31, 2000.
Kalamazoo Logistic Center I Kalamazoo Logistic Center II
6677 Beatrice Drive 6805 Beatrice Drive
Kalamazoo, MI 49009 Kalamazoo, MI 49009
Kalamazoo Logistic Center campus has two distribution centers at this
location. Facility #1 is a 3,300,000 cubic foot facility with 1,100,000
cubic feet of freezer capacity, 400,000 cubic feet of cooler capacity and
1,800,000 cubic feet of dry storage capacity. This location services a
number of distribution customers in the Midwest and is strategically
located at the I 94 and U.S. 31 crossroads in Michigan, equal distance
between Chicago and Detroit.
Facility #2 is located adjacent to Facility #1 and is comprised of
2,800,000 cubic feet of capacity. This facility contains 1,500,000 cubic
feet of cooler capacity and 1,300,000 cubic feet of freezer capacity. Two
large distribution customers utilize 75% of this space. These facilities
are held under long term leases.
Also located at the Kalamazoo Logistic Center is a company owned 10,000
square foot transportation equipment maintenance center. Approximately
50% of TLC's fleet of over-the-road transportation units is domiciled in
Kalamazoo, Michigan.
Zeeland Logistic Center I Zeeland Logistic Center II
8250 Logistic Drive 8363 Logistic Drive
Zeeland, MI 49464 Zeeland, MI 49464
Zeeland Logistic Center campus has two facilities each of which provide
dry warehousing storage as public warehouses. Each of these facilities
are Foreign Trade Zones and food grade warehouses, that provide both
racked and bulk storage. Capacity is utilized by both long term
contractual customers and as short term public warehouses. Zeeland
Logistic Center I has 201,600 square feet of storage and Zeeland Logistic
Center II has 220,000 square feet.
New Jersey Properties
South Brunswick Logistic Center
308 Herrod Blvd.
South Brunswick, NJ 08852
South Brunswick provides warehousing and distribution services for
customers to the Northeast region of the country. The facility has both
contractual and short term customers and operates as a public warehouse.
In total, the facility has 200,000 square feet of dry storage capacity.
Wisconsin Properties
Beaver Dam Logistic Center
1201 Green Valley Road
Beaver Dam, WI 53916
Beaver Dam Logistic Center was originally constructed in 1975. Since
1975, this facility has undergone three freezer additions, the most recent
in 1991, and is comprised of 7,200,000 cubic feet of freezer storage
space. Beaver Dam Logistic Center serves distribution related customers
as well as vegetable and cranberry processors. This facility's unique
capabilities involve value added services for vegetable processors
including IQF, blanching, slicing, dicing and food service and retail poly
bag packaging operations. Badger's IQF tunnels have the capacity to
freeze 30,000 pounds of product per hour.
Milwaukee Logistic Center
11400 West Burleigh Street
Milwaukee, WI 53222
Milwaukee Logistic Center was originally constructed in 1954. There have
been six expansions of this facility. The Milwaukee Logistic Center
facility comprises 4,300,000 cubic feet of which 3,754,000 cubic feet is
freezer capacity and 546,000 cubic feet is cooler space. This facility
has multi-temperature refrigerated storage ranging from -20 degrees F to
+40 degrees F and daily blast freezing capacity of 750,000 pounds. This
location has a 7-car private rail siding. An additional 3,000,000 cubic
feet of company owned refrigerated and processing space adjacent to the
Milwaukee Logistic Center facility is leased on a long term basis to a third
party retail grocery company.
Legal Proceedings
As of the date of this Prospectus, the Company has never been a party
to any legal proceeding. From time to time, TLC is named as a defendant
in actions arising out of the normal course of its business. As of the
date of this Prospectus, TLC is not a party to any pending legal
proceeding that it believes to be material.
THE PURCHASE AGREEMENT
The following is a brief summary of certain provisions of the
Purchase Agreement which is attached as Annex A and incorporated herein by
reference. Such summary is qualified in its entirety by reference to the
Purchase Agreement.
Purchase Price and Assumption of Liabilities
The Purchase Agreement provides that, prior to the Effective Time of
the Merger, the Company will complete the Acquisition by purchasing
666.667 Membership Units of TLC for an aggregate purchase price of
$10,666,667. The Purchase Agreement provides that the purchase price is
payable no later than thirty (30) days following the Effective Time of the
Merger and the completion of the Acquisition. Accordingly, the
Acquisition will be completed with the obligation of the Company to pay
the purchase price no later than thirty (30) days thereafter. During this
thirty (30) day period, the Christiana Shareholders will mail to the
Subscription Agent (which will also act as exchange agent for the Merger)
Letters of Transmittal electing one of the following:
- To purchase no shares of Common Stock
- To purchase as many shares of Common Stock as possible
using the Cash Consideration to be received in the Merger
(estimated to be $3.50)
- To purchase a stated number of shares of Common Stock
using a portion of the Cash Consideration
- To purchase all shares of Common Stock to which such
Christiana Shareholder is entitled using the Cash Consideration,
together with an additional payment
- To purchase all shares of Common Stock to which such
Christiana Shareholder is entitled, plus a stated number of
additional shares (subject to availability) using the Cash
Consideration and an additional payment.
All Letters of Transmittal must be received by the Subscription Agent
on or prior to the Expiration Date (expected to be July 9, 1998). Once
received, EVI will pay to the Subscription Agent the Cash Consideration
due to such Christiana Shareholder and the Subscription Agent will apply
such Cash Consideration in the manner directed by the Letter of
Transmittal submitted by such Christiana Shareholder.
In connection with the Merger, the Company and TLC have agreed to
assume the Assumed Liabilities. The term Assumed Liabilities shall
include, without limitation, Liabilities resulting from, arising out of or
relating to (i) any Christiana Affiliate, (ii) the business, operations or
assets of Christiana or Christiana Affiliate on or prior to the Effective
Time, (iii) any taxes to which Christiana or any Christiana Affiliate may
be obligated for periods ending on or before the Effective Time (except
for Christiana taxes expressly retained by Christiana pursuant to the
Merger Agreement), (iv) any obligation, matter, fact, circumstance or
action or omission by any person in any way relating to or arising from
the business, operations or assets of Christiana or a Christiana Affiliate
that existed on or prior to the Effective Time, (v) any product or service
provided by Christiana or any Christiana Affiliate prior to the Effective
Time, (vi) the Merger, the Acquisition or any of the other transactions
contemplated thereby, (vii) previously conducted operations of Christiana
or any Christiana Affiliate and (viii) the Company's ownership interest in
TLC.
Christiana "Put" and Participation Rights
The Purchase Agreement also provides that at any time after the fifth
anniversary of the Effective Time of the Merger, Christiana has the option
to sell to the Company or TLC, and the Company or TLC will be obligated to
purchase, Christiana's 333.333 Membership Unit for $7 million. In
addition, if the Company proposes to sell its interest in TLC to an
unrelated third party, Christiana has the right to participate in such
sale with respect to its 333.333 Membership Units for the same equivalent
consideration per equivalent unit in TLC.
Indemnification Obligations
TLC and the Company have agreed under the Purchase Agreement, to
indemnify, defend and hold Christiana, EVI and the EVI Indemnified Parties
harmless from and against any and all Liabilities (including, without
limitation, reasonable fees and expenses of attorneys, accountants,
consultants and experts) that such parties incur, are subject to a claim
for, or are subject to, that are based upon, arising out of, relating to
or otherwise in respect of:
- any breach of any covenant or agreement of TLC or the
Company contained in the Purchase Agreement or any other
agreement contemplated thereby;
- the acts or omissions of Christiana or any Christiana
Affiliate on or before the Effective Time;
- the acts or omissions of any Christiana Affiliate,
TLC, the Company or TLC's or the Company's affiliates or the
conduct of any business by them on or after the Effective Time;
- the Assumed Liabilities;
- any taxes as a result of the Merger subsequently being
determined to be a taxable transaction for foreign, Federal,
state or local law purposes regardless of the theory or reason
for the transactions being subject to tax;
- any and all amounts for which Christiana or EVI may be
liable on account of any claims, administrative charges,
self-insured retentions, deductibles, retrospective premiums or
fronting provisions in insurance policies, including as the
result of any uninsured period, insolvent insurance carriers or
exhausted policies, arising from claims by Christiana's or any
Christiana Affiliate, or the employees of any of the foregoing,
or claims by insurance carriers of Christiana or any Christiana
Affiliate for indemnity arising from or out of claims by or
against Christiana or any Christiana Affiliate for acts or
omissions of Christiana or any Christiana Affiliate, or related
to any current or past business of Christiana or any Christiana
Affiliate or any product or service provided by Christiana or
any Christiana Affiliate in whole or in part prior to the
Effective Time;
- any liability under the Consolidated Omnibus Budget
Reconciliation Act of 1986 with respect to any employees of
Christiana or any Christiana Affiliate who become employees of
TLC or the Company after the Acquisition;
- any settlements or judgements in any litigation
commenced by one or more insurance carriers against Christiana
or EVI on account of claims by TLC or the Company or any
Christiana Affiliate or employees of TLC or the Company or any
Christiana Affiliate;
- any and all liabilities incurred by Christiana or EVI
pursuant to its obligations hereunder in seeking to obtain or
obtaining any consent or approval to assign, transfer or lease
any interest in any asset or instrument, contract, lease, permit
or benefit arising thereunder or resulting therefrom;
- the on-site or off-site handling, storage, treatment
or disposal of any Waste Materials (as hereinafter defined)
generated by Christiana or any Christiana Affiliate on or prior
to the Effective Time or any Christiana Affiliate at any time;
- any and all Environmental Conditions (as hereinafter
defined) on or prior to the Effective Time, known or unknown,
existing on, at or underlying any of the properties owned,
leased or operated by Christiana on or after the Effective Time;
- any acts or omissions on or prior to the Effective
Time of Christiana or any Christiana Affiliate relating to the
ownership or operation of the business of Christiana or any
Christiana Affiliate or the properties currently or previously
owned or operated by Christiana or any Christiana Affiliate;
- any liability relating to any claim or demand by any
stockholder of Christiana or EVI with respect to the Merger,
this Acquisition or the transactions relating thereto; and
- any liability relating to Christiana's 401(k) Plan and
the other employee benefit or welfare plans of Christiana or any
Christiana Affiliate arising out of circumstances occurring on
or prior to the Effective Time.
Certain Definitions
For purposes of the Purchase Agreement, the following terms have the
following meanings:
"Environmental Conditions" means any pollution, contamination,
degradation, damage or injury caused by, related to, arising from or in
connection with the generation, handling, use, treatment, storage,
transportation, disposal, discharge, release or emission of any Waste
Materials (as hereinafter defined).
"Environmental Laws" means all laws, rules, regulations, statutes,
ordinances, decrees or orders of any governmental entity now or at any
time in the future in effect relating to (i) the control of any potential
pollutant or protection of the air, water or land, (ii) solid, gaseous or
liquid waste generation, handling, treatment, storage, disposal or
transportation and (iii) exposure to hazardous, toxic or other substances
alleged to be harmful. The term "Environmental Laws" includes, without
limitation, (1) the terms and conditions of any license, permit, approval
or other authorization by any governmental entity and (2) judicial,
administrative or other regulatory decrees, judgments and orders of any
governmental entity. The term "Environmental Laws" includes, but is not
limited to the following statutes and the regulations promulgated
thereunder: the Clean Air Act, 42 U.S.C. sec. 7401 et seq., The Clean
Water Act, 33 U.S.C. sec. 1251 et seq., the Resource Conservation Recovery
Act, 42 U.S.C. sec. 6901 et seq., the Superfund Amendments and
Reauthorization Act, 42 U.S.C. sec. 11011 et seq., the Toxic Substances
Control Act, 15 U.S.C. sec. 2601 et seq., the Water Pollution Control Act,
33 U.S.C. sec. 1251, et. seq., the Safe Drinking Water Act, 42 U.S.C. sec.
300f et seq., the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. sec. 9601, et. seq., and any state, county or
local regulations similar thereto.
"Waste Materials" means any (i) toxic or hazardous materials or
substances, (ii) solid wastes, including asbestos, polychlorinated
biphenyls, mercury, buried contaminants, chemicals, flammable or explosive
materials, (iii) radioactive materials, (iv) petroleum wastes and spills
or releases of petroleum products and (v) any other chemical, pollutant,
contaminant, substance or waste that is regulated by any governmental
entity under any Environmental Law.
Dispute Resolution
Any disputes, claims or counterclaims connected with or arising out
of, or related to, this Agreement are to be settled by Arbitration to be
conducted in accordance with the Commercial Rules of Arbitration of the
American Arbitration Association, except as otherwise provided in the
Purchase Agreement. The dispute, claim or controversy will be decided by
three independent arbitrators, one to be appointed by TLC and the Company,
one to be appointed by EVI and the third to be appointed by the two so
appointed. The place of any such arbitration will be in Houston, Texas.
THE OPERATING AGREEMENT
The following is a brief summary of certain provisions of the
Operating Agreement between the Company and Christiana as the two members
of TLC. The Operating Agreement is attached as Annex B and is incorporated
herein by reference. The summary below is qualified in its entirety by
reference to the Operating Agreement.
General
The Operating Agreement sets forth the terms and conditions of the
Company's and Christiana's interests in TLC. The Operating Agreement
provides that TLC is a Delaware limited liability company.
Members
The initial Members of TLC are the Company and Christiana.
Additional members may be admitted to TLC only with the unanimous vote or
written consent of the existing Members.
Capital Contributions
Christiana made an initial capital contribution to TLC in exchange
for 1,000 Membership Units representing 100 percent of the ownership
interests in TLC. Pursuant to the terms of the Purchase Agreement, the
Company acquired 666.667 Membership Units in TLC representing a two-thirds
interest in TLC from Christiana. The Membership Units have identical
preferences, limitations and other relative rights. No additional capital
contributions are required and no additional Membership Units may be
issued without the vote or consent of the both the Company and Christiana.
No Member may make a loan to TLC without approval by the Board of
Managers. Capital contributions made by the Members will not earn
interest. A separate capital account will be maintained for each Member
on the books and records of TLC in accordance with the requirements of
Section 704(b) of the Code, and the Treasury Regulations promulgated
thereunder.
Allocations
All items of income, gain, loss or deduction of TLC determined in
accordance with the Code will be allocated among the Members in proportion
to the number of Membership Units held by each Member. The allocation of
items of income, gain, loss or deduction will be interpreted so as to
comply with the Treasury Regulations promulgated under the Code.
Distributions
In order to permit the Members to make their required estimated
income tax payments on items of income, gain, loss or deduction allocated
to the Members, TLC will make mandatory distributions to the Members in an
amount equal to TLC's estimated federal taxable income for each calendar
quarter, multiplied by the sum of (i) the highest corporate federal and
Wisconsin income tax rates minus (ii) the product of both tax rates. The
mandatory distributions will be made to the Members in proportion to the
number of Membership Units held by each Member. TLC may make additional
distributions to the Members in proportion to the number of Membership
Units held by each Member at such times as the Company and Christiana
determine by vote or written consent. See "Risk Factors - Dividends from
TLC" for additional information regarding distributions from TLC.
Management
The Management of TLC is vested in a Board of Managers. The initial
Board of Managers consists of six Managers, which includes William T.
Donovan, Bernard J. Duroc-Danner, Ghazi J. Hashem, Sheldon B. Lubar, John
R. Patterson and Gary R. Sarner. See "Management-Executive Officers and
Managers of TLC". Each Manager is elected by the vote or written consent
of the Members holding at least a majority of the Membership Units in TLC;
provided, however, that Christiana and the Company will at all times each
be entitled to elect, without the consent of any other Member, a number of
Managers that is proportionate to the number of Membership Units held by
Christiana and the Company, respectively. The Operating Agreement
provides that the Board of Managers may not cause TLC to take certain
specified actions without the prior approval of the Members by unanimous
vote or written consent. Such matters include (i) the authorization or
issuance of additional Membership Units, (ii) the authorization or payment
of any distribution with respect to Membership Units, except for the
payment of any distribution that is necessary for the Company to fulfill
its purchase obligation with respect to Christiana's interest in TLC,
(iii) any direct or indirect purchase or acquisition by TLC or any
subsidiary of TLC of Membership Units, (iv) approval of any merger,
consolidation or similar transaction or sale of all or substantially all
of the operating assets of TLC in one or more transactions, (v) the
creation of any new direct or indirect subsidiary of TLC, (vi) the making
of any tax election, (vii) the liquidation or dissolution of TLC or any
subsidiary of TLC, (vii) any transaction between TLC or subsidiary of TLC
and any affiliate of a Member (other than a transaction between TLC and a
subsidiary of TLC), (viii) the payment of any compensation to any Member
or any affiliate of a Member or entering into any employee benefit plan or
compensatory arrangement with or for the benefit of any Member or
affiliate of any Member, (ix) any amendment to the Operating Agreement or
the Certificate of Organization and (x) any other matter for which
approval of Members is required under the Delaware Limited Liability
Company Act.
TLC will generally indemnify the Managers to the fullest extent
permitted under the Delaware Limited Liability Company Act against any
losses incurred by reason of any act or omission in connection with the
business of TLC. The Board of Managers may appoint officers of TLC to
perform such duties as are set forth in the Operating Agreement or as
specified by the Board of Managers. The Board of Managers may authorize
TLC to pay the officers any reasonable fees for their services. Neither
the Members nor the Managers are required to devote their full time and
efforts to the Company. TLC will pay the Company an annual management fee
of $250,000.
Assignment, Transfer and Repurchase of a Member's Units
Except as specifically set forth in the Operating Agreement, a Member
may not voluntarily sell, give, assign, bequeath or pledge (each a
"Transfer") any Membership Unit without the prior written consent of the
Board of Managers; provided, however that the Company may pledge and
assign its Membership Units to Christiana. Christiana may effect a
Transfer of the Company's Membership Units pursuant to any action taken
with respect to any security interest granted to Christiana by the
Company. Christiana may also Transfer its Membership Units if the
transferee is an affiliate of Christiana or the Company and the transferee
agrees to be bound by the provisions of the Operating Agreement. At any
time after the fifth anniversary of the date of the Operating Agreement,
Christiana may Transfer any or all of its Membership Units to any person
provided, however, that the Company shall have a right of first refusal to
purchase such Membership Units for the same price and at the same terms as
such Membership Units were offered to the transferee. In the event of any
attempted involuntary Transfer of a Unit, TLC shall have the option to
purchase the Membership Units subject to the involuntary Transfer at an
amount equal to the book value of such Membership Units. An involuntary
transferee receiving Membership Units will not be considered a member of
TLC unless all of the Members consent in writing to treat the involuntary
transferee as a member.
Dissolution and Winding Up
TLC will be dissolved upon (i) the unanimous vote or written consent
of the Members to dissolve TLC; (ii) TLC being adjudicated insolvent or
bankrupt; or (iii) an entry of a decree of judicial dissolution relating
to TLC. Upon a dissolution of TLC, the Members will select a liquidator
to liquidate TLC, pay and discharge all of TLC's debts and liabilities,
and distribute all remaining assets of TLC to the Members in accordance
with their respective capital accounts.
THE OFFERING
Rights
Each Christiana Shareholder has a Right to subscribe for their pro
rata share of Common Stock in the Offering. This Right consists of the
Basic Subscription Privilege and the Additional Subscription Privilege.
Basic Subscription Privilege
The Basic Subscription Privilege entitles each Christiana Shareholder
to purchase one share of Common Stock for $4.00 per share for each share
of Christiana Common Stock held immediately prior to the Effective Time.
Christiana Shareholders are entitled to subscribe for all, or any whole
number of, the shares of Common Stock underlying their Basic Subscription
Privilege. Because the Cash Consideration per share of Christiana Common
Stock to be received in this Merger is expected to be less than the
Subscription Price per share of Common Stock, Christiana shareholders
wishing to exercise their Basic Subscription Privileges in full will be
required to make an additional cash payment, as described below under "-
How to Exercise Basic Subscription Privilege and Additional Subscription
Privilege." The Lubar Commitment ensures that the net proceeds of the
Offering to the Company (after deducting expenses estimated to be
$170,000) will be at least $10,666,667.
Additional Subscription Privilege
Each Christiana Shareholder who subscribes in full for all shares of
Common Stock that the holder is entitled to purchase pursuant to the Basic
Subscription Privilege, as well as the Management of TLC and the general
public, will be entitled to purchase additional shares of Common Stock
(the "Remaining Shares") at the Subscription Price from any unsubscribed
shares remaining, if any, after the exercise or expiration of the Basic
Subscription Privilege, (such entitlement heretofore and hereinafter
referred to as the "Additional Subscription Privilege"); provided that,
(i) members of senior management of TLC shall have the ability to
subscribe for up to 100,000 of the Remaining Shares (the "Management
Allocation"); (ii) each Christiana Shareholder shall have a right to
subscribe for the Remaining Shares on a pro rata basis if any shares are
remaining after the Management Allocation (the "Shareholder Allocation");
and (iii) the general public shall have a right to subscribe to the
Remaining Shares on a pro rata basis if any shares are remaining after the
Management Allocation and the Shareholder Allocations.
Subscription Price
The Subscription Price was determined by the Company's Board of
Directors and is not based on an independent valuation of the Company.
The purchase price was determined based on a number of factors including
the desire to simplify the process of Christiana Shareholders purchasing
Common Stock by setting a price which would be proximate to the Cash
Consideration per share to be received in the Merger, while at the same
time, meeting the minimum initial bid price of $4.00 per share for the
Common Stock to qualify for listing on the Nasdaq SmallCap Market. In
setting the price, the Company also considered the fairness of the price
to be paid for its two-thirds interest in TLC and the potential usefulness
of the excess funds to be generated from the Offering. These factors,
taken together, formed the basis of the $4.00 per share price for the
Common Stock.
Subscription Expiration Date
The ability to subscribe for Common Stock will expire at 5:00 p.m.,
Central Standard Time, on the Expiration Date. The Company is not
obligated to honor any subscriptions received by the Subscription Agent
after the Expiration Date, regardless of when such subscriptions were
sent.
How To Exercise Basic Subscription Privilege and Additional Subscription
Privilege
Christiana Shareholders. Christiana Shareholders may exercise the
Basic Subscription Privilege by delivering to the Subscription Agent at
its offices listed under "Subscription Agent" below, prior to 5:00 p.m.,
Central Standard Time, on the Expiration Date, a properly completed and
executed Letter of Transmittal provided pursuant to the Merger Proxy
Statement delivered simultaneously herewith to Christiana Shareholders.
Christiana Shareholders wishing to exercise their Basic Subscription
Privilege will automatically upon completion and delivery of the Letter of
Transmittal, have the Subscription Price paid on the Effective Time by the
Subscription Agent from the Cash Consideration received from EVI. For a
description of the Cash Consideration, see "Summary of Certain Terms of
the Merger - Cash Consideration to be Received in the Merger." Because
the Cash Consideration per share is expected to be less than the
Subscription Price ($3.50 relative to a $4.00 subscription price), any
exercise of the Basic Subscription Privilege in full will require an
additional cash payment for the difference in the form of a check made
payable to "Firstar Trust Company" as Subscription Agent. For example, if
a Christiana Shareholder holds 1,000 shares of Christiana Common Stock
immediately prior to the Effective Time and wishes to purchase 1,000
shares of Common Stock in this Offering, $3,500 ($3.50 multiplied by
1,000) will be applied automatically by the Subscription Agent from the
anticipated Cash Consideration to be received in the Merger, and the
Christiana Shareholder will be required to pay the difference of $500
($4,000 total Subscription Price less the $3,500 paid automatically by the
Subscription Agent) in the form of a check made payable to "Firstar Trust
Company." Christiana Shareholders who exercise their Basic Subscription
Privilege in full, may exercise, pursuant to the Letter of Transmittal,
the Additional Subscription Privilege, together with full payment of the
aggregate Subscription Price, to be paid in the form of check made payable
to "Firstar Trust Company." To the extent the Cash Consideration at the
Determination Date is greater than $3.50, any excess amount paid by
Christiana Shareholder will be refunded promptly following the
Determination Date, without interest.
Others. Others, such as TLC management and the general public
wishing to exercise the Additional Subscription Privilege shall do so by
delivery of a properly completed and executed Subscription Agreement
(provided with this Prospectus) to the Subscription Agent, together with
payment in full in the form of a check made payable to "Firstar Trust
Company" as Subscription Agent.
Manner of Purchase. Any cash payment shall be made with the delivery
of the Letter of Transmittal and/or the Subscription Agreement, as the
case may be, by check payable to "Firstar Trust Company", as Subscription
Agent at or prior to 5:00 p.m., Central Standard Time, on the Expiration
Date.
COMPLETED LETTERS OF TRANSMITTAL, SUBSCRIPTION AGREEMENTS AND THE
RELATED PAYMENT SENT TO THE OFFICE OF THE SUBSCRIPTION AGENT MUST BE
RECEIVED BEFORE 5:00 P.M. CENTRAL STANDARD TIME, ON THE EXPIRATION DATE.
DO NOT SEND ELECTION FORMS, SUBSCRIPTION AGREEMENTS OR PAYMENTS TO THE
COMPANY, CHRISTIANA, TLC, SUB OR EVI. SUBSCRIBERS WILL NOT HAVE ANY
ALLOCATION PREFERENCE TO REVOKE THE EXERCISE OF THEIR ALLOCATION
PREFERENCES OR THEIR ADDITIONAL SUBSCRIPTION PRIVILEGE AFTER DELIVERY OF
THEIR LETTER OF TRANSMITTAL AND/OR SUBSCRIPTION AGREEMENTS TO THE
SUBSCRIPTION AGENT.
THE METHOD OF DELIVERY OF LETTERS OF TRANSMITTAL, SUBSCRIPTION
AGREEMENTS AND PAYMENT OF THE SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT
WILL BE AT THE ELECTION AND RISK OF THE SUBSCRIBER, NOT THE COMPANY,
CHRISTIANA, TLC, SUB, EVI, THE SUBSCRIPTION AGENT, OR ANY AFFILIATES
THEREOF. IF SENT BY MAIL, IT IS RECOMMENDED THAT THE LETTER OF
TRANSMITTAL AND/OR SUBSCRIPTION AGREEMENT BE SENT BY REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT
NUMBER OF DAYS BE ALLOWED TO ENSURE RECEIPT BY THE SUBSCRIPTION AGENT
PRIOR TO 5:00 P.M., CENTRAL STANDARD TIME, ON THE EXPIRATION DATE.
Proration. In the event of a proration of shares of Common Stock to
persons exercising the Additional Subscription Privilege as described
above under "- Additional Subscription Privilege," the Subscription Agent
will promptly refund, without interest, the amount of any overpayment as
described above under "- Additional Subscription Privilege." The
instructions that accompany the Letter of Transmittal and Subscription
Agreement should be read carefully and followed in detail.
Brokers, Trusts and Depositaries. Record holders of shares of
Christiana Common Stock, such as brokers, trusts or depositaries for
securities, who hold the shares for the account of others, should notify
the respective beneficial owners of the shares as soon as possible to
ascertain the beneficial owners' intentions and instructions with respect
to the related Basic Subscription Privilege and Additional Subscription
Privilege. Based upon the instructions received from the beneficial
holders, the record holders should complete the Letter of Transmittal
and/or Subscription Agreements and submit them with the applicable
payment.
Company Discretion with Respect to Offering. All questions regarding
the timeliness, validity, form and eligibility of any exercise of the
Basic Subscription Privilege will be determined by the Company, in its
sole discretion, whose determination will be final and binding. The
Company reserves the absolute right to reject any subscription if such
subscription is not in proper form or if the acceptance thereof or the
issuance of shares of Common Stock pursuant thereto could be deemed
unlawful. The Company, in its sole discretion may waive any defect or
irregularity, permit a defect or irregularity to be corrected within such
time as it may determine or reject the purported exercise of any
allocation preferences or the exercise of any Additional Subscription
Privilege. Subscriptions will not be deemed to have been received or
accepted until all irregularities have been waived or cured within such
time as the Company determines in its sole discretion. The Company and
the Subscription Agent will not be under any duty to give notification of
any defect or irregularity in connection with the submission of Letters of
Transmittal, or Subscription Agreements nor will any of them incur any
liability for failure to give such notification.
Delivery of Certificates
Certificates for shares of Common Stock issuable on exercise of the
Basic Subscription Privilege and/or the Additional Subscription Privilege
will be mailed as soon as practicable after the subscriptions have been
accepted by the Subscription Agent, but not prior to the Expiration Date.
Certificates for shares of Common Stock issued pursuant to the exercise of
the Basic Subscription Privilege and the Additional Subscription Privilege
will be registered in the name of the person exercising such privilege.
Subscription Agent
The Subscription Agent is Firstar Trust Company. The address to
which Letters of Transmittal and Subscription Agreements should be
delivered, whether by hand, by mail or by overnight courier, is:
Firstar Trust Company
1555 North River Center Drive
Suite 301
Milwaukee, Wisconsin 53212
Any questions or requests for assistance concerning the method of
subscribing for shares of Common Stock should be directed to the
Subscription Agent at (414) 905-5000.
MANAGEMENT
Executive Officers and Directors of the Company
The following table contains the name, age and position with the
Company of each executive officer and director as of January 1, 1998.
Each person's respective background is described following the table.
NAME AGE POSITION
William T. Donovan 45 Chairman and Director
David J. Lubar 43 President and Director
Oyvind Solvang 38 Vice President
David E. Beckwith 69 Secretary
Nicholas F. Brady 67 Director
Sheldon B. Lubar 68 Director
Albert O. Nicholas 66 Director
William T. Donovan was named Chairman of the Company in December
1997. Mr. Donovan is also the President, Chief Financial Officer and a
director of Christiana, positions he will vacate on the Effective Time.
Mr. Donovan has held various executive positions with Christiana since
June 1988. Mr. Donovan has also been a principal of Lubar & Co., a
venture capital and investments firm located in Milwaukee, Wisconsin since
January 1980. Mr. Donovan is also a Director of Grey Wolf, Inc.
David J. Lubar has been President of the Company since December 1997.
Mr. Lubar also serves as President of Lubar & Co., a position he has held
since January 1991. Mr. Lubar is a Director of Christiana, a position he
will vacate as of the Effective Time. Mr. Lubar is the son of Sheldon B.
Lubar.
Oyvind Solvang has been Vice President of the Company since December
1997. Mr. Solvang is also the Vice President of Christiana, a position he
will vacate on the Effective Time. Mr. Solvang has served as President of
Cleary Gull Reiland & McDevitt, Inc., an investment banking firm located
in Milwaukee, Wisconsin from January 1996 to October 1996 and Chief
Operating Officer of Cleary Gull Reiland & McDevitt, Inc., from October
1995 to January 1996. Prior thereto, from May 1994 to September 1995, Mr.
Solvang served as President of Scinticor, Incorporated, a manufacturer of
cardiac imaging devices, located in Milwaukee, Wisconsin, and from August
1990 to April 1994 as Vice President and General Manager of Applied Power,
Inc., a supplier of hydraulic systems, located in Butler, Wisconsin.
David E. Beckwith has been Secretary of the Company since December
1997. Since May 1995, he served as Secretary of Christiana, a position he
will vacate as of the Effective Time. Mr. Beckwith has been associated
with the law firm of Foley & Lardner since 1952 and has been a Partner at
Foley & Lardner since 1960.
Nicholas F. Brady has been a Director of the Company since December
1997. Since February 1993, Mr. Brady has been Chairman and President of
Darby Advisors, Inc., a private investment company located in Easton,
Maryland. Prior thereto, Mr. Brady served as Secretary of the United
States Department of the Treasury for over four years, and before that,
Chairman of Dillon, Reed & Co., Inc. Mr. Brady is a Director of Amerada
Hess Corporation and H.J. Heinz Company, as well as a Director (or
trustee) of 27 Templeton funds, which are registered investment companies.
Mr. Brady is also a Director of Christiana, a position he will vacate as
of the Effective Time.
Sheldon B. Lubar has been a Director of the Company since December
1997. Mr. Lubar has also been a principal of Lubar & Co. since its
inception in 1977. Mr. Lubar is a Director of Ameritech Corporation, EVI,
Firstar Corporation, Massachusetts Mutual Life Insurance Co. and MGIC
Investment Corporation. Mr. Lubar currently serves as Chairman, Chief
Executive Officer and a Director of Christiana, all of which positions he
will vacate as of the Effective Time. Mr. Lubar is the father David J.
Lubar.
Albert O. Nicholas has been a Director of the Company since December
1997. Mr. Nicholas has been owner and President of Nicholas Company,
Inc., a registered investment advisor located in Milwaukee, Wisconsin
since December, 1967. Nicholas Company, Inc. is the advisor to six
registered investment companies: Nicholas Fund, Inc., Nicholas Two, Inc.,
Nicholas Income Fund, Inc., Nicholas Limited Addition, Inc., Nicholas
Money Market Fund, Inc. and Nicholas Equity Income Fund. Mr. Nicholas is
the President and a Director of each of these investment companies. Mr.
Nicholas is also a Director of Bando McGlocklin Capital Corporation. In
addition, Mr. Nicholas serves as a Director of Christiana, a position he
will vacate as of the Effective Time.
Executive Officers and Managers of TLC
The following table contains the name, age and position with TLC of
each executive officer as of January 1, 1998. Each person's respective
background is described following the table.
NAME AGE POSITION
Gary R. Sarner 51 Chairman and Director
John R. Patterson 50 President, Chief Executive
Officer and Director
Brian L. Brink 37 Vice President and Chief
Financial Officer
Sheldon B. Lubar 68 Director
William T. Donovan 45 Director
Bernard J. Duroc-Danner 44 Director
Ghazi J. Hashem 63 Director
Gary R. Sarner was named Chairman of TLC in January 1994. Prior
thereto, Mr. Sarner was the President of Wiscold, Inc., the business of
which was acquired by Christiana in September 1992. Mr. Sarner is a
Director of Christiana, a position he will vacate as of the Effective
Time.
John R. Patterson has served as President and Chief Executive Officer
of TLC since February 1996. Prior thereto, from June 1993 to February
1996, Mr. Patterson served as Vice President-Operations for Schneider
Logistics, Inc., a provider of transportation and logistics services
located in Green Bay, Wisconsin. For the six prior years, Mr. Patterson
was the President and principal owner of Pro Drive, Inc., a truck driver
recruiting and training firm in Green Bay, Wisconsin. Mr. Patterson is a
director of Christiana, a position he will vacate as of the Effective
Time.
Brian L. Brink has been Vice President and Chief Financial Officer of
TLC since May 1997. Prior thereto from December 1993 to May 1997, Mr.
Brink served as Chief Financial Officer for the Van Eerden Company, a
national refrigerated transportation and wholesale food distribution
company. From May 1988 to December 1993, Mr. Brink served as Controller
of Bil Mar Foods, a division of Sara Lee Company, an international food
processor.
Bernard J. Duroc-Danner joined EVI in May 1987 to initiate the
start-up of EVI's oilfield service and equipment business. He was elected
President of EVI in January 1990 and Chief Executive Officer in May 1990.
In prior years, Mr. Duroc-Danner was with Arthur D. Little Inc., a
management consulting firm in Cambridge, Massachusetts. Mr. Duroc-Danner
is a director of Parker Drilling Company and Dailey Petroleum Services
Corp.
Ghazi J. Hashem was elected Senior Vice President, Technical
Operations of EVI in May 1994 and Vice President, Technical Operations in
November 1992. Mr. Hashem previously served as Chairman of the Board of
Grant Prideco, Inc., a wholly owned subsidiary of EVI, from May 1992 to
November 1992 and as president of Grant Prideco from April 1984 to May
1992.
Board Committees of the Company
The Board of Directors has established an Audit Committee, a
Compensation and Nominating Committee and a Finance Committee, each
consisting of three or more directors.
The duties of the Audit Committee will be to select and engage
independent public accountants to audit the books and records of the
Company annually, to review the activities and the reports of the
independent public accountants and authorize appropriate action. The
Audit Committee will also approve any other services to be performed by
and approve the audit fee and other fees payable to the independent public
accountants and monitor the internal accounting controls of the Company.
A majority of the members of the Audit Committee will consist of
Independent Directors.
The duties of the Compensation and Nominating Committee will be to
(i) provide a general review of the Company's compensation and benefit
plans to ensure that they meet the Company's objectives; (ii) to
administer the 1998 Plan described below and to grant awards thereunder;
(iii) to consider and establish the compensation of all officers of the
Company and adopt major Company compensation policies and practices;
(iv) to consider and make recommendations to the Board of Directors
regarding the selection and retention of all elected officers of the
Company and its subsidiaries; and (v) such other duties assigned by the
Board of Directors or the Bylaws of the Company. A majority of the
members of the Compensation and Nominating Committee will consist of
Independent Directors.
The duties of the Finance Committee will be to assist the Board of
Directors in making financial decisions, which shall include (i) reviewing
and approving all investments and capital commitments of the Company not
delegated to management pursuant to resolutions adopted by the majority of
the entire Board of Directors; (ii) development of financial plans and
strategies of the Company; and (iii) such other duties delegated to the
Finance Committee by the Board of Directors.
Executive Compensation
The Company was incorporated on December 11, 1997. Since its
incorporation, the Company has conducted no operations (other than in
connection with the Merger and the Acquisition), and has generated no
revenue. The Company did not pay any of its executive officers
compensation during 1997. The Company anticipates that during 1998 its
most highly compensated officers will be William T. Donovan, David J.
Lubar and Oyvind Solvang, who will be paid $150,000, $120,000 and
$120,000, respectively.
1998 Equity Incentive Plan
The 1998 Plan authorizes the granting of: (i) stock options, which
may be either incentive stock options meeting the requirements of Section
422 of the Code or nonqualified stock options; (ii) stock appreciation
rights ("SARs"); (iii) restricted stock; (iv) performance shares; and (v)
stock option grants to directors who are not employees of the Company
("Independent Directors"). The 1998 Plan is designed to provide the
Compensation and Nominating Committee with broad flexibility and
discretion to deal with the ever changing executive compensation
environment. In general, the terms and conditions of key employee awards
under the 1998 Plan will be left to the discretion of the Compensation and
Nominating Committee. This will allow the Compensation and Nominating
Committee to structure varying incentive compensation awards from time to
time in order to best achieve the purposes of the 1998 Plan. The 1998
Plan provides that up to a total of 520,000 shares of Common Stock will be
available for issuance pursuant to the granting of awards thereunder, with
no more than 50,000 shares issuable as restricted stock.
As of the date of the Prospectus, no awards have been granted under
the 1998 Plan, except automatic grants to Independent Directors on the
effective date of this Offering, as described under "Director
Compensation" below.
Director Compensation
The directors of the Company will receive no compensation for service
as members of either the Board of Directors or committees thereof other
than option grants pursuant to 1998 Plan. Effective after this Offering,
Independent Directors will be entitled to reimbursement of out-of-pocket
expenses.
In addition, under the 1998 Plan, on the effective date of this
Offering, each then serving Independent Director will be granted
non-qualified stock options under the 1998 Plan to purchase ______ shares
of Common Stock at a per share exercise price equal to the $4.00 per
share. Each new Independent Director joining the Board of Directors after
the Offering will receive an initial non-qualified stock option to
purchase _______ shares of Common Stock exercisable at the closing sale
price of the Common Stock on the date of grant. Each Independent
Director's initial option grant will vest ratably over an approximate
five-year period, provided that the Independent Director continues to
serve as a member of the Board of Directors at the end of each vesting
period with respect to the increment then vesting. The 1998 Plan also
provides that, beginning with the 1998 annual shareholders meeting and for
each annual meeting thereafter, each then serving and continuing
Independent Director will receive an additional non-qualified stock option
to purchase ______ shares of Common Stock at an exercise price equal to
the closing sale price of the Common Stock on the date of grant. These
annual option grants will vest in full within six months from the date of
grant. Notwithstanding the aforementioned vesting provisions, all
outstanding options granted to Independent Directors under the 1998 Plan
will vest immediately upon a "change in control," or the director's death
or disability. All options granted to Independent Directors under the
1998 Plan will expire upon the earlier to occur of five years from the
grant date or one year from the Independent Director ceasing to hold such
position.
CERTAIN TRANSACTIONS
Pursuant to the Merger, each share of Christiana Common Stock as of
the Effective Time will be converted into the right to receive
(i) approximately .74193 of a share of EVI Common Stock subject to certain
adjustments based on the number of shares of Christiana Common Stock
outstanding at the Effective Time; (ii) cash of approximately $3.50 per
share of Christiana Common Stock, subject to adjustment based on the
amount of certain Christiana liabilities existing as of the Effective
Time; and (iii) a contingent cash payment of approximately $1.92 payable
to the shareholders of record following the fifth anniversary of the
Effective Time, subject to any indemnity claims by EVI under the Merger
Agreement. For more information concerning the terms and conditions of
the Merger, potential investors are urged to read carefully the Merger
Proxy Statement.
The directors and officers of the Company beneficially own shares of
Christiana Common Stock (including shares of Common Stock subject to
options) in the following amounts:
SHARES OF CHRISTIANA COMMON
NAME STOCK BENEFICIALLY OWNED
Sheldon B. Lubar 968,615(1)
Albert O. Nicholas 310,700
David J. Lubar 427,403
Nicholas F. Brady 200,000
William T. Donovan 178,532
____________________
(1) Includes 433,705 shares owned by Mr. Lubar's wife and 91,205 shares
held in trusts for the benefit of Mr. Lubar's grandchildren for which Mr.
Lubar serves as trustee.
Sheldon B. Lubar's three daughters, Joan P. Lubar, Kristine L.
Thomson and Susan L. Solvang (the wife of Oyvind Solvang, a Vice President
of the Company), own 448,551, 430,478 and 442,953 shares of Christiana
Common Stock, respectively.
In connection with the Merger and the Acquisition, Sheldon B. Lubar
entered into a letter agreement with the Company in which the Company and
Mr. Lubar agreed (i) that all Christiana Shareholders would have the right
to purchase at least the same percentage ownership in the Company as such
Christiana Shareholder has in Christiana immediately prior to the
Effective Time and at the same price per share as each of the Lubar Family
and (ii) that Mr. Lubar and the remainder of the Lubar Family would
exercise their Basic Subscription Privilege in full to ensure that the met
proceeds of the Offering to the Company will be at least $10,666,667.
The Lubar Family, Lubar & Co. and Venture Capital Fund, L.P., a fund
managed by Lubar & Co., and William T. Donovan own 5.3%, 0.8%, 6.0% and
0.7%, respectively, of Emmpak Foods, Inc., a customer of TLC. During
fiscal 1997, Emmpak Foods, Inc. accounted for approximately $2.1 million
in gross revenue for TLC. David J. Lubar serves on the board of directors
of Emmpak Foods, Inc.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
the beneficial ownership of Common Stock of the Company, after giving
effect to the Merger and this Offering, by (i) each of the Company's
directors; (ii) each of the Company's executive officers; (iii) each
person who is known by the Company to own beneficially more than 5% of the
Common Stock; and (iv) all Company's executive officers and directors as a
group.
Number of Shares
Beneficially Owned Shares Beneficially
Prior to Offering Owned After Offering
Name Number Percent Number Percent
William T. Donovan -- -- (1) (1)
David J. Lubar(2) -- -- (1) (1)
Oyvind Solvang -- -- (1) (1)
David E. Beckwith -- -- (1) (1)
Nicholas F. Brady -- -- (1) (1)
Sheldon B. Lubar 25 100% (1) (1)
Albert O. Nicholas -- -- (1) (1)
Joan P. Lubar(2) -- -- (1) (1)
Kristine L. Thomson(2) -- -- (1) (1)
Susan L. Solvang(2) -- -- (1) (1)
All directors and
executive officers as a
group (seven persons): 25 100% (1) (1)
_______________
* Less than one percent.
(1) To be determined following the amount of shares purchased by
Christiana Shareholders and the above named individuals pursuant to
the Basic Subscription Privilege and the Additional Subscription
Privilege. The Lubar Family (which includes Sheldon B. Lubar, David
J. Lubar, Joan P. Lubar, Kristine L. Thomson and Susan L. Solvang)
has committed pursuant to an agreement between the Company and
Sheldon B. Lubar, dated December 24, 1997, and certain related
agreements, to exercise their Basic Subscription Privileges in full
to generate proceeds from the Offering of at least $10,666,667, after
expenses estimated to be $170,000.
(2) David J. Lubar is the son of Sheldon B. Lubar and Joan P. Lubar,
Kristine L. Thomson and Susan L. Solvang are daughters of Sheldon B.
Lubar.
DESCRIPTION OF CAPITAL STOCK
Upon consummation of the Offering, the authorized capital stock of
the Company will consist of 50,000,000 shares of Common Stock, $.01 par
value, and 10,000,000 shares of undesignated preferred stock, $.01 par
value. Upon consummation of the Offering, 5,202,689 shares of Common
Stock and no shares of preferred stock will be issued and outstanding,
assuming the maximum number of shares of Common Stock offered hereby are
sold.
The following summary description of the Common Stock and preferred
stock is subject to, and qualified in its entirety by, the provisions of
the Amended and Restated Articles of Incorporation and Amended and
Restated By-laws which are included as exhibits to the Registration
Statement of which this Prospectus is a part and by the provisions of
applicable law.
Common Stock
After all cumulative dividends have been paid or declared and set
apart for payment on any shares of preferred stock that are outstanding,
the Common Stock is entitled to such dividends as may be declared from
time to time by the Board of Directors in accordance with applicable law.
For certain restrictions on the ability of the Company to declare
dividends, see "Dividend Policy."
Except as may be determined by the Board of Directors of the Company
with respect to any series of preferred stock, only the holders of Common
Stock shall be entitled to vote for the election of directors of the
Company and on all other matters. Upon any such vote the holders of
Common Stock will be entitled to one vote for each share of Common Stock
held by them subject to any applicable law. Cumulative voting is not
permitted.
All shares of Common Stock are entitled to participate equally in
distributions in liquidation, subject to the prior rights of any preferred
stock that may be outstanding. Except as the Board of Directors may in
its discretion otherwise determine, holders of Common Stock have no
preemptive rights to subscribe for or purchase shares of the Company.
There are no conversion rights or sinking fund or redemption provisions
applicable to the Common Stock. The Common Stock to be outstanding upon
completion of the Offering will be fully paid and nonassessable (subject
to Section 180.0622(2)(b) of the Wisconsin Business Corporation Law
("WBCL")).
The transfer agent for the Common Stock is Firstar Trust Company.
Preferred Stock
The Company's Amended and Restated Articles of Incorporation will
provide that the Board of Directors has the authority, without further
action by the shareholders, to issue up to 10,000,000 shares of preferred
stock in one or more series and to fix the designations, powers,
preferences, privileges, and relative participating, optional or special
rights and the qualifications, limitations or restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, any or all of which may be greater
than the rights of the Common Stock. The Board of Directors, without
shareholder approval, can issue preferred stock with voting, conversion or
other rights that could adversely affect the voting power and other rights
of the holders of Common Stock. Preferred stock could thus be issued
quickly with terms calculated to delay or prevent a change in control of
the Company or make removal of management more difficult. Additionally,
the issuance of preferred stock may have the effect of decreasing the
market price of the Common Stock, and may adversely affect the voting and
other rights of the holders of Common Stock. The Company has no present
plans to issue any shares of preferred stock.
Certain Anti-Takeover and Indemnification Provisions
By-law Provisions
The Company's Amended and Restated By-laws provide that a Special
Meeting may be called only by (i) the Chairman of the Board, (ii) the
President, or (iii) the Board of Directors and shall be called by the
Chairman of the Board or the President upon the demand of the holders of
record of shares representing at least 10% of all the votes entitled to be
cast on any issue proposed to be considered at the Special Meeting.
The Amended and Restated By-laws provide that the directors and
executive officers of the Company shall be indemnified to the fullest
extent permitted by the WBCL against expenses (including attorneys' fees),
judgments, fines, settlements and other amounts actually and reasonably
incurred by them in connection with any proceeding arising out of their
status as directors and executive officers.
The foregoing provisions and the prohibitions set forth in the WBCL
could have the effect of delaying, deferring or preventing a change in
control or the removal of existing management of the Company.
Statutory Provisions
Section 180.1150 of the WBCL provides that the voting power of shares
of public Wisconsin corporations, such as the Company, held by any person
or persons acting as a group that hold in excess of 20% of the voting
power for the election of directors is limited to 10% of the full voting
power of those shares. This restriction does not apply to shares acquired
directly from the Company or in certain specified transactions or shares
for which full voting power has been restored pursuant to a vote of
shareholders.
Sections 180.1140 to 180.1144 (the "Wisconsin Business Combination
Statute") of the WBCL contain certain limitations and special voting
provisions applicable to "business combinations" between a Wisconsin
corporation and an "interested shareholder." The term "business
combination" is defined for purposes of the Wisconsin Business Combination
Statute to include a merger or share exchange, sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets equal to at
least 5% of the market value of the stock or assets of a corporation or
10% of its earning power, issuance of stock or rights to purchase stock
with a market value equal to at least 5% of the outstanding stock,
adoption of a plan of liquidation and certain other transactions involving
an "interested shareholder." An "interested shareholder" is defined as a
person who beneficially owns, directly or indirectly, 10% of the voting
power of the outstanding voting stock of a corporation or who is an
affiliate or associate of the corporation and beneficially owned 10% of
the voting power of the then outstanding voting stock within the last
three years. The Wisconsin Business Combination Statute prohibits a
corporation from engaging in a business combination (other than a business
combination of a type specifically excluded from the coverage of the
statute) with an interested shareholder for a period of three years
following the date such person becomes an interested shareholder, unless
the Board of Directors approved the business combination or the
acquisition of the stock that resulted in a person becoming an interested
shareholder before such acquisition. Business combinations after the
three-year period following the stock acquisition date are permitted only
if (i) the Board of Directors approved the acquisition of the stock prior
to the acquisition date; (ii) the business combination is approved by a
majority of the outstanding voting stock not beneficially owned by the
interested shareholder; or (iii) the consideration to be received by
shareholders meets certain requirements of the Wisconsin Business
Combination Statute with respect to form and amount.
Sections 180.1130 to 180.1133 of the WBCL provide that certain
"business combinations" not meeting certain fair price standards must be
approved by a vote of at least 80% of the votes entitled to be cast by all
shareholders and by two-thirds of the votes entitled to be cast by
shareholders other than a "significant shareholder" who is a party to the
transaction. The term "business combination" is defined, for purposes of
Sections 180.1130 to 180.1133 of the WBCL, to include, subject to certain
exceptions, a merger or consolidation of the corporation (or any
subsidiary thereof) with, or the sale or other disposition of
substantially all of the assets of the corporation to, any significant
shareholder or affiliate thereof. "Significant shareholder" is defined
generally to include a person that is the beneficial owner of 10% or more
of the voting power of the corporation.
Section 180.1134 of the WBCL (the "Wisconsin Defensive Action
Restrictions") provides that, in addition to the vote otherwise required
by law or the articles of incorporation of an issuing public corporation,
the approval of the holders of a majority of the shares entitled to vote
is required before such corporation can take certain action while a
takeover offer is being made or after a takeover offer has been publicly
announced and before it is concluded. Under the Wisconsin Defensive
Action Restrictions, shareholder approval is required for the corporation
to (i) acquire more than 5% of its outstanding voting shares at a price
above the market price from any individual or organization that owns more
than 3% of the outstanding voting shares and has held such shares for less
than two years, unless a similar offer is made to acquire all voting
shares; or (ii) sell or option assets of the corporation that amount to at
least 10% of the market value of the corporation, unless the corporation
has at least three independent directors or a majority of the independent
directors vote not to have the provision apply to the corporation. The
restrictions described in clause (i) above may have the effect of
deterring a shareholder from acquiring shares of the Company with the goal
of seeking to have the Company repurchase such shares at a premium over
the market price.
SHARES ELIGIBLE FOR FUTURE SALE
After the Offering, assuming the issuance of 5,202,664 shares of
Common Stock, the Company will have outstanding 5,202,689 shares of Common
Stock. The 5,202,664 shares of Common Stock to be sold in this Offering
will be freely tradeable without restriction unless acquired by affiliates
of the Company. All but the 25 shares of Common Stock issued to Sheldon
B. Lubar in connection with the Company's initial capitalization were
registered in the Offering. The registered shares held by affiliates are
hereinafter referred to as "Control Shares" and the 25 unregistered shares
held by Sheldon B. Lubar are hereinafter referred to as "Restricted
Shares." The Restricted Shares may be resold only upon registration under
the Securities Act or in compliance with an exemption from the
registration requirements of the Securities Act.
With respect to Restricted Shares, under Rule 144 as currently in
effect, if one year has elapsed (the "Waiting Period") since the later of
the date of the acquisition of Restricted Shares from either the Company
or any affiliate of the Company, the acquiror or subsequent holder thereof
may sell, within any three-month period commencing 90 days after
consummation of the Offering, a number of shares that does not exceed the
greater of one percent of the then outstanding shares of the Common Stock,
or the average weekly trading volume of the Common Stock on the Nasdaq
SmallCap Market during the four calendar weeks preceding the date on which
notice of the proposed sale is sent to the Commission. Sales under Rule
144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. If two years have elapsed since the later of the date of the
acquisition of Restricted Shares of Common Stock from the Company or any
affiliate of the Company, a person who is not deemed to have been an
affiliate of the Company at any time for 90 days preceding a sale would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations, manner of sale provisions or notice requirements.
Affiliates, will also be able to sell their Control Shares pursuant to the
Rule 144 exemption, except that the Waiting Period will not apply.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will
be passed upon for the Company by Foley & Lardner, Milwaukee, Wisconsin.
EXPERTS
The audited financial statements of the Company and TLC appearing in
this Prospectus and elsewhere in this 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 giving said
reports.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-1 under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete; with respect to each such contract, agreement or other document
are not necessarily complete; with respect to each such contract,
agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete
description of the matter involved.
After the consummation of the Offering, the Company will be subject
to the informational requirements of the Securities and Exchange Act of
1934, as amended, and, in accordance therewith, will file reports, proxy
and information statements and other information with the Commission. The
Registration Statement, as well as any such reports, proxy and information
statements and other information filed by the Company with the Commission,
may be inspected and copies at the public reference facilities maintained
by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York, 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by its independent
auditors.
Christiana and EVI have filed the Merger Proxy Statement under
Section 14(a) of the Exchange Act, with respect to the Merger and certain
other matters. Christiana and EVI are subject to the information
requirements of the Exchange Act and in accordance therewith, have filed
reports and information with the Commission in accordance with the
Commission's rules, which reports and information may be obtained as
described above.
The Commission maintains an Internet 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>
INDEX TO FINANCIAL STATEMENTS
Page
C2, INC. FINANCIAL STATEMENTS:
Report of Independent Public Accountants . . . . . . . . . . . . F-2
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Notes to Balance Sheet . . . . . . . . . . . . . . . . . . . . . F-4
TLC FINANCIAL STATEMENTS
Report of Independent Public Accountants . . . . . . . . . . . . F-6
Balance Sheets as of June 30, 1997 and 1996 . . . . . . . . . . F-7
Statements of Income for the years
ended June 30, 1997, 1996 and 1995 . . . . . . . . . . . . . . F-8
Statements of Equity for the years
ended June 30, 1997, 1996 and 1995 . . . . . . . . . . . . . . F-9
Statements of Cash Flows for the years
ended June 30, 1997, 1996 and 1995 . . . . . . . . . . . . . .F-10
Notes to Financial Statements . . . . . . . . . . . . . . . . .F-11
Condensed Balance Sheets as of December 31,
1997 and June 30, 1997 (unaudited) . . . . . . . . . . . . . .
F-16
Condensed Statements of Income for the
three months ended December 31, 1997
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
Condensed Statements of Income for the
six months ended December 31, 1997 and
1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . .F-18
Condensed Statements of Cash Flows for the
six months ended December 31, 1997 and
1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . .F-19
Notes to Condensed Financial Statements
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . .F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholder of C2, Inc.
We have audited the accompanying balance sheet of C2, Inc. (a Wisconsin
corporation), as of December 31, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement 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 balance sheet is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. 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 balance sheet referred to above presents fairly, in
all material respects, the financial position of C2, Inc. as of December
31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 6, 1998
<PAGE>
C2, Inc.
Balance Sheet
As of December 31, 1997
ASSETS:
Due from Shareholder for common stock
subscribed $ 100
------
Total assets $ 100
======
LIABILITIES AND SHAREHOLDER'S EQUITY:
Total liabilities $ -
SHAREHOLDER'S EQUITY:
Preferred stock, $.01 par, 10,000,000
shares authorized, none issued or
outstanding -
Common stock, $.01 par, 50,000,000
shares authorized, 25 shares issued
and outstanding -
Additional paid-in capital 100
-----
Total shareholder's equity 100
-----
Total liabilities and shareholder's
equity $ 100
=====
The accompanying notes are an integral part of this balance sheet.
<PAGE>
C2, Inc.
Notes to Balance Sheet
A. Business and Organization:
C2, Inc. (the "Company") was organized in December 1997, for the purposes
of acquiring a two-thirds interest in Total Logistic Control, LLC ("TLC"),
a transportation, warehousing and logistics company (the "Acquisition").
The Company intends to complete an initial public offering of up to
5,202,664 shares of its common stock (the "Offering") and utilize the
proceeds to fund the Acquisition and for future operations. There is no
assurance the Acquisition will be completed and that the Company will be
able to generate future operating revenues.
The Company's assets as of December 31, 1997 consist exclusively of an
amount due from the sole shareholder pertaining to the initial
capitalization of the Company. The Company has not conducted any
operations and all activities to date have related to the Acquisition and
the Offering. Accordingly, statements of operations, changes in
shareholder's equity and cash flows would not provide meaningful
information and have been omitted.
B. Shareholder's Equity:
In connection with its organization and initial capitalization, the
Company issued 25 shares of common stock for $100.
C. Commitments and Contingencies:
On December 12, 1997, the Company entered into a Purchase Agreement (the
"Agreement") to acquire from Christiana Companies, Inc. ("Christiana")
666.667 Membership Units (two-thirds) of TLC for cash consideration of
$10,667,000. The Acquisition is contingent upon the consummation of the
merger between Christiana and EVI, Inc. discussed elsewhere in this
Prospectus.
Under the Agreement, the company agreed to indemnify Christiana for
certain liabilities of Christiana. Christiana further has the right to
require the Company to purchase all of Christiana's 333.333 Membership
Units in TLC for a price equal to $7 million. See "The Purchase
Agreement" included elsewhere in the Prospectus.
D. Stock Options
The Company's shareholder has approved the 1998 Equity Incentive Plan (the
"1998 Plan") under which a total of 520,000 shares of Common Stock are
reserved for awards to officers, directors and key employees as stock
options, stock appreciation rights, restricted stock and performance
shares. As of December 31, 1997, no awards have been granted under the
1998 Plan.
E. Events Subsequent to Date of Report of Independent Public Accountants
(Unaudited):
(1) Subsequent to December 31, 1997, the Company has incurred various
legal and professional fees associated with the Acquisition and the
Offering. On February 10, 1998, the Company filed a Registration
Statement on Form S-1 for the sale of its common stock. See "Risk
Factors" included elsewhere in this Prospectus.
(2) Subsequent to December 31, 1997, the Company amended its Articles of
Incorporation to change the par value of its Common Stock from $1.00
to $.01, increase the number of common shares authorized from 9,000
to 50,000,000 and authorize 10,000,000 shares of $.01 par value
preferred stock. The impact of this amendment resulted only in a
reclassification of amounts within the Company's shareholder equity
accounts. The balance sheet as of December 31, 1997 has been
restated to reflect the impact of this amendment.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of Total Logistic Control, LLC:
We have audited the accompanying balance sheets of Total Logistic
Control, LLC (a Delaware limited liability company and wholly owned
subsidiary of Christiana Companies, Inc.) as of June 30, 1997 and 1996,
and the related statements of income, equity and cash flows for each of
the three years in the period ended June 30, 1997. 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, evidencing 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 Total Logistic
Control, LLC as of June 30, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three year
period ended June 30, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
August 1, 1997
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
BALANCE SHEETS
AS OF JUNE 30
ASSETS 1997 1996
CURRENT ASSETS:
Cash and cash equivalents $ 224,000 $ 29,000
Accounts receivable, less
allowance for uncollectable
accounts 7,552,000 8,017,000
Inventories 273,000 439,000
Prepaids and other assets 259,000 1,202,000
---------- ----------
Total current assets 8,308,000 9,687,000
LONG-TERM ASSETS:
Fixed assets, net 75,501,000 81,272,000
Goodwill 5,592,000 5,749,000
Other assets 739,000 1,215,000
---------- ----------
Total long-term assets 81,832,000 88,236,000
---------- ----------
Total assets $ 90,140,000 $ 97,923,000
========== ==========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Short-term debt - $ 1,354,000
Current maturities of long-
term debt $1,245,000 1,595,000
Accounts payable 2,868,000 5,298,000
Accrued liabilities 3,056,000 2,768,000
---------- ----------
Total current liabilities 7,169,000 11,015,000
DUE TO PARENT COMPANY 3,000,000 3,295,000
LONG-TERM LIABILITIES:
Long-term debt 36,149,000 41,427,000
Deferred income taxes - 10,528,000
Other liabilities 361,000 378,000
---------- ----------
Total long-term liabilities 36,510,000 52,333,000
---------- ----------
Total liabilities 46,679,000 66,643,000
---------- ----------
TOTAL MEMBER'S EQUITY 43,461,000 31,280,000
---------- ----------
Total liabilities and member's
equity $90,140,000 $97,923,000
=========== ===========
The accompanying notes are an integral part of these balance sheets.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30
1997 1996 1995
REVENUES:
Warehousing and logistic
services $84,208,000 $76,976,000 $71,029,000
OPERATING EXPENSES:
Warehousing and logistic
expenses 70,973,000 64,956,000 56,889,000
Selling, general and
administrative expenses 6,924,000 6,331,000 6,585,000
---------- ---------- ----------
77,897,000 71,287,000 63,474,000
---------- ---------- ----------
Income from operations 6,311,000 5,689,000 7,555,000
OTHER INCOME (EXPENSES):
Interest expense (3,216,000) (3,176,000) (3,378,000)
Gain (Loss) on disposal of
assets (1,036,000) 206,000 130,000
Other expense, net (354,000) (108,000) (21,000)
---------- ---------- ----------
(4,606,000) (3,078,000) (3,269,000)
---------- ---------- ----------
NET INCOME BEFORE INCOME TAXES 1,705,000 2,611,000 4,286,000
PROVISION FOR INCOME TAXES 695,000 1,075,000 1,724,000
ADJUSTMENT OF DEFERRED INCOME
TAXES RESULTING FROM A CHANGE
IN TAX STATUS 11,171,000 - -
---------- ---------- ----------
NET INCOME $12,181,000 $ 1,536,000 $ 2,562,000
========== ========== ==========
BASIC AND DILUTED INCOME PER
MEMBERSHIP UNIT $ 12,181 $ 1,536 $ 2,562
========== ========== ==========
BASIC AND DILUTED WEIGHTED
AVERAGE MEMBERSHIP UNITS
OUTSTANDING 1,000 1,000 1,000
========== =========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF EQUITY
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
Membership Member's
Units Equity
Balance, June 30, 1994 1,000 $27,182,000
Net income - 2,562,000
--------- ----------
Balance, June 30, 1995 1,000 29,744,000
Net income - 1,536,000
--------- ----------
Balance, June 30, 1996 1,000 31,280,000
Net income - 12,181,000
--------- ----------
Balance, June 30, 1997 1,000 $43,461,000
========= ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997,1996 AND 1995
1997 1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $12,181,000 $1,536,000 $2,562,000
Adjustments to Reconcile Net
Income to Net Cash Provided by
Operating Activities:
Depreciation and amortization 7,186,000 6,971,000 6,684,000
(Gain) loss on disposal of
assets 1,036,000 (206,000) (130,000)
Deferred income tax provision 1,023,000 746,000 1,400,000
Adjustment of deferred income
taxes resultingfrom a change
in tax status (11,171,000) - -
Changes in Assets and
Liabilities:
(Increase) decrease in
accounts receivable 465,000 (404,000) (401,000)
(Increase) decrease in
inventories 166,000 (191,000) 163,000
(Increase) decrease of
prepaids and other assets 668,000 564,000 (998,000)
Increase (decrease) in
accounts payable and accrued
liabilities (2,260,000) 2,027,000 900,000
---------- ---------- ----------
Net cash provided by operating
activities 9,294,000 11,043,000 10,180,000
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of fixed assets (3,294,000) (17,646,000) (7,522,000)
Proceeds from sale of fixed
assets 1,472,000 1,384,000 406,000
---------- ---------- ----------
Net cash used in investing
activities (1,822,000) (16,262,000) (7,116,000)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings (payments) on line
of credit, net (1,354,000) (490,000) 501,000
Proceeds from issuance of
long-term debt - 9,011,000 4,125,000
Payment of amounts due to
parent (295,000) - -
Payment of long-term debt (5,628,000) (3,638,000) (7,873,000)
---------- ---------- ----------
Net cash provided by (used
in) financing activities (7,277,000) 4,883,000 (3,247,000)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 195,000 (336,000) (183,000)
BEGINNING CASH AND CASH
EQUIVALENTS, JULY 1 29,000 365,000 548,000
--------- -------- ---------
ENDING CASH AND CASH
EQUIVALENTS, JUNE 30 $ 224,000 $ 29,000 $ 365,000
========= ======== =========
Supplemental Disclosures of Cash
Flow Information
Interest paid $ 3,000,000 $3,046,000 $3,148,000
Amounts paid to Parent for
income taxes 300,000 279,000 201,000
The accompanying notes are an integral part of these financial statements.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
NOTES TO FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business: Total Logistic Control, LLC ("TLC") is a
wholly owned subsidiary of Christiana Companies, Inc. ("Christiana").
TLC was formed on June 30, 1997 as a result of the combination of
Wiscold, Inc. ("Wiscold") and Total Logistic Control, Inc. ("Total
Logistic"), both former wholly owned subsidiaries of Christiana. The
accompanying financial statements have been restated to reflect this
combination for all periods presented. The June 30, 1997 and 1996
balance sheets reflect the consolidated results of TLC and combined
results of Wiscold and Total Logistic, respectively. The fiscal
1997, 1996 and 1995 statements of earnings, equity and cash flows
reflect the combined operations of Wiscold and Total Logistic. All
material intercompany transactions have been eliminated. TLC
operates in one industry segment providing fully integrated third-
party logistic services, including warehousing, distribution and
transportation services in both refrigerated and non-refrigerated
facilities predominantly in the Midwest United States.
Revenue Recognition: Transportation revenue is recognized when the
goods are delivered to the customer. Warehousing revenue is
recognized as services are provided. Costs and related expenses are
recorded as incurred.
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.
Accounts Receivable: Accounts receivable are presented net of an
allowance for uncollectable accounts of $223,000 and $253,000 at
June 30, 1997 and 1996, respectively. The provision for bad debts
was $123,000 and $227,000 for the years ended June 30, 1997 and 1996,
respectively.
Inventories: Inventories consist predominately of transportation
equipment repair parts. These items are carried at their lower of
FIFO (first-in, first-out) cost or market value.
Fixed Assets: Fixed assets are carried at cost less accumulated
depreciation, which is computed using both straight-line and
accelerated methods for financial reporting purposes. The cost of
major renewals and improvements are capitalized; repair and
maintenance costs are expensed as incurred. Tires related to new
equipment are included in the capitalized equipment cost and
depreciated using the same methods as equipment. Replacement tires
are expensed when placed in service. A summary of the cost of fixed
assets, accumulated depreciation and the estimated useful lives for
financial reporting purposes is as follows:
Estimated
1997 1996 Useful Lives
Land $ 3,380,000 $ 3,416,000 -
Machinery and equipment 52,816,000 54,047,000 5-7 years
Buildings and
improvements 41,534,000 41,394,000 30-32 years
Construction in progress 451,000 12,000 -
Less: Accumulated
depreciation (22,680,000) (17,597,000)
---------- ----------
$75,501,000 $ 81,272,000
========== ==========
Goodwill: Goodwill is amortized on a straight-line basis over
40 years ($157,000 in both 1997 and 1996). The accumulated
amortization at June 30, 1997 and 1996 was $566,000 and $409,000,
respectively. TLC continually evaluates whether events and
circumstances have occurred that indicate the remaining estimated
useful life may warrant revision or that the remaining balance of
goodwill may not be recoverable. When factors indicate that goodwill
should be evaluated for possible impairment, TLC uses an estimate of
the undiscounted cash flows over the remaining life of the goodwill
measuring whether the goodwill is impaired. If impaired, a loss is
recognized for the amount the carrying value exceeds the fair value.
Cash and Cash Equivalents: TLC considers all highly liquid
investments with original maturities of less than ninety days to be
cash equivalents.
Income Per Membership Unit: Basic and Diluted Income per Membership
Unit have been restated in accordance with SFAS 128, "Earnings per
Share" and have been computed based on the weighted number of units
as if the units had been outstanding for all periods presented. As
TLC does not have dilutive financial instruments, basic and diluted
income per membership unit are the same for all periods presented.
Derivatives: Derivative financial instruments have been used by TLC
to manage its interest rate exposure on certain debt instruments.
Amounts to be received or paid under interest rate swap agreements
are recognized as interest income or expense in the periods which
they accrue. If interest rate swap agreements are terminated due to
the underlying debt being extinguished, any resulting gain or loss is
recognized as interest income or expense at the time of termination.
Long-lived assets: During fiscal 1997, TLC adopted statement of
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and Assets to be Disposed of." Adoption of this
standard did not have a material impact on TLC's financial position
or results of operations. TLC continually evaluates whether events
and circumstances have occurred that may indicate the remaining
estimated useful life may warrant revision or that the remaining
balance of long-lived assets may not be recoverable. When factors
indicate that long-lived assets should be evaluated for possible
impairment, TLC uses an estimate of the undiscounted cash flows over
the remaining life of the long-lived assets measuring whether the
long-lived assets are impaired. If impaired, a loss is recognized
for the amount the carrying value exceeds the fair value.
B. RELATED PARTY TRANSACTIONS:
As of June 30, 1997 and 1996, TLC had amounts due to Christiana of
$3,000,000 and $3,295,000, respectively. As of June 30, 1997 and
1996, $3,000,000 of the outstanding balance was a note payable to
Christiana that bears interest at a rate of 8.0% per annum. Related
party interest expense was $240,000 for fiscal 1997, 1996 and 1995.
TLC charges Christiana a management fee related to certain
administrative services rendered by TLC on behalf of Christiana. The
amount of this management fee was $240,000 for fiscal 1997, 1996 and
1995 and is reflected as a reduction to selling, general and
administrative expenses in the statement of earnings. The amount of
services rendered by Christiana on behalf of TLC for fiscal 1997,
1996 and 1995 are not material.
C. INDEBTEDNESS:
The following is a summary of indebtedness as of June 30, 1997 and
1996:
1997 1996
Revolving credit agreement $31,248,000 $35,248,000
Line of credit - 1,354,000
Notes payable 4,382,000 6,010,000
Subordinated Note 1,764,000 1,764,000
---------- ----------
37,394,000 44,376,000
---------- ----------
Less: Current portion of (1,245,000) (1,595,000)
long-term debt
Line of credit - (1,354,000)
---------- ----------
Long-term debt $36,149,000 $41,427,000
========== ==========
TLC has a revolving credit agreement that provides for borrowings at
June 30, 1997 up to $40,000,000. Borrowings under this agreement
mature on March 31, 2001 and bear interest, payable monthly at either
LIBOR plus 125 basis points, or a floating rate at the bank's prime
rate (6.7% at June 30, 1997) and are unsecured. At June 30, 1996,
TLC's borrowings under the original revolving credit agreement were
priced at LIBOR plus 175 basis points or prime (7.1% at June 30,
1996) and were secured by TLC's assets. The revolving credit
agreement requires, among other things, that defined levels of net
worth and debt service coverage be maintained and restricts certain
activities including limitation on new indebtedness and the
disposition of assets. No compensating balances are required under
the terms of this credit facility.
On September 15, 1992, TLC entered into an interest rate swap
agreement with three commercial banks which expires on December 15,
1997. As of June 30, 1997, $12,650,000 of outstanding debt was
subject to the swap agreement. The agreement effectively fixes the
interest rate payable by TLC on this portion of the debt at 5.3% plus
an interest rate spread determined by TLC's leverage ratio. As of
June 30, 1997, the effective rate of this outstanding debt was 6.55%.
Under the swap agreement, TLC is exposed to credit risk only in the
event of non-performance by the commercial banks, which is not
anticipated.
TLC has a bank line of credit which permits borrowings up to
$5,000,000. Borrowings bear interest at either LIBOR plus 200 basis
points, or the bank's prime rate, at TLC's option (7.69% and 7.48% at
June 30, 1997 and 1996, respectively), and are secured by certain
accounts receivable. Notes payable relate to specific equipment
purchases, primarily transportation and material handling equipment
and a new distribution facility, and are secured by certain assets of
TLC. These notes bear interest on both fixed and floating terms
ranging from 6.375% to 9.37%. No compensating balances are required
under the terms of these credit arrangements. TLC's subordinated
note bears interest at 8% and is guaranteed by the Parent.
Future maturities of consolidated indebtedness are as follows:
Year Ended
June 30 Total
1998 $ 1,245,000
1996 4,078,000
2000 5,193,000
2001 25,150,000
2002 1,728,000
Thereafter -
The weighted average interest rate paid on short-term borrowings was
7.46% and 8.21% for fiscal 1997 and 1996, respectively. The carrying
value of TLC's debt approximates fair value. The carrying amount of
TLC's floating rate debt was assumed to approximate its fair value.
The fair value of TLC's fixed-rate, long-term notes payable was based
on the market value of debt with similar maturities and interest
rates. The fixed-rate subordinated note that was given to a former
owner of TLC was negotiated in the overall context of the
acquisition. TLC believes it is impracticable to obtain the current
fair value of this note because of the excessive costs that would
have to be incurred to obtain this information.
D. INCOME TAXES:
TLC is included in the consolidated income tax return of Christiana.
The amounts reflected in the financial statements are as if TLC was
filing on a stand alone basis. Income taxes paid as shown in the
statement of cash flows represents combined cash payments made to
Christiana by TLC.
Effective June 30, 1997, TLC converted from a C-Corporation to a
Limited Liability Company. For purposes of taxation, all earnings of
TLC are "passed through" to its members and taxed at the member
level. As TLC is no longer a taxable entity at June 30, 1997, all
deferred taxes of TLC have been removed from the balance sheet. The
removal of these deferred taxes due to TLC's change in tax status
resulted in an increase to earnings of $11,171,000 during fiscal
1997. The $695,000 provision for income taxes for fiscal 1997
represents the combined Federal and state income tax provision for
the period during the fiscal year that TLC was a C-Corporation.
Year Ended June 30
1997 1996 1995
Current:
Federal $(279,000) $280,000 $275,000
State (49,000) 49,000 49,000
Deferred 1,023,000 746,000 1,400,000
--------- --------- ---------
$ 695,000 $1,075,000 $1,724,000
========= ========= =========
In the event that TLC was a taxable entity, a net deferred tax liability
of $11,171,000 as of June 30, 1997 would have been recorded on the balance
sheet. The components are as follows:
1997 1996
Deferred tax assets:
Alternative minimum tax - $1,255,000
Accrued expenses $ 399,000 358,000
Book over tax amortization 584,000 480,000
Deferred revenue 197,000 201,000
--------- ---------
Total deferred tax asset $1,180,000 $2,294,000
========= =========
Deferred tax liabilities:
Tax over book depreciation $7,838,000 $7,183,000
Condemnation proceeds 4,513,000 5,259,000
---------- ----------
Total deferred tax liability $12,351,000 $12,442,000
========== ==========
A reconciliation of the statutory Federal income tax rate to TLC's
effective tax rate is as follows:
Year ended June 30
1997 1996 1995
Statutory Federal income tax rate 34% 34% 34%
Increase in taxes resulting from
State income tax, net 5 5 6
Other, net 2 2 --
---- ---- ----
41% 41% 40%
==== ==== ====
E. EMPLOYEE BENEFIT PLANS:
TLC has two 401(k) plans covering substantially all employees. The
expense incurred by TLC related to these plans is not material. TLC
does not provide post employment medical or insurance benefits.
F. COMMITMENTS:
TLC has operating leases for warehousing and office facilities along
with certain transportation equipment. Rental expense under these
leases was $7,213,000, $5,479,000 and $5,100,000 in fiscal 1997, 1996
and 1995, respectively. At June 30, 1997, future minimum lease
payments under these operating leases are as follows:
Year Ended
June 30 Amount
1998 $5,800,000
1999 4,513,000
2000 3,982,000
2001 2,993,000
2002 2,274,000
Thereafter 11,976,000
G. Events Subsequent to Date of Report of Independent Public Accountants
(Unaudited):
On December 12, 1997, Christiana, the parent of TLC, entered into an
agreement and plan of merger with EVI, Inc. At or prior to the
completion of the merger:
(1) TLC will declare and pay a $20,000,000 dividend to Christiana
which will be financed by a new $65,000,000 revolving credit
facility which will bear interest at a floating rate of LIBOR
plus 225 basis points, mature on April 15, 2003, and be secured
by substantially all of the assets of TLC.
(2) Christiana will sell 666.667 Membership Units (two-thirds) of
TLC to C2, Inc. (a newly formed corporation) for $10,667,000.
(3) TLC will agree to indemnify Christiana for certain liabilities
of Christiana. See "The Purchase Agreement" included elsewhere
in this prospectus.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED BALANCE SHEETS (UNAUDITED)
AS OF DECEMBER 31, 1997 AND JUNE 30, 1997
December 31, June 30,
1997 1997
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $388,000 $224,000
Accounts receivable, net 9,258,000 7,552,000
Inventories, prepaids and other assets 936,000 532,000
---------- ----------
Total current assets 10,582,000 8,308,000
LONG-TERM ASSETS:
Fixed assets, net 73,261,000 75,501,000
Goodwill 5,514,000 5,592,000
Other assets 77,000 739,000
---------- ----------
Total long-term assets 78,852,000 81,832,000
---------- ----------
Total assets $89,434,000 $90,140,000
========== ==========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $1,245,000 $1,245,000
Accounts payable 4,684,000 2,868,000
Accrued liabilities 3,699,000 3,056,000
---------- ----------
Total current liabilities 9,628,000 7,169,000
DUE TO PARENT COMPANY 3,000,000 3,000,000
LONG-TERM LIABILITIES:
Long-term debt 33,617,000 36,149,000
Other liabilities 350,000 361,000
---------- ----------
Total long-term liabilities 33,967,000 36,510,000
---------- ----------
Total liabilities 46,595,000 46,679,000
---------- ----------
MEMBER'S EQUITY 42,839,000 43,461,000
---------- ----------
Total liabilities and member's
equity $89,434,000 $90,140,000
========== ==========
The accompanying notes are an integral part of these condensed balance
sheets.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
1997 1996
REVENUES:
Warehousing and logistic services $23,667,000 $20,341,000
OPERATING EXPENSES:
Warehousing and logistic expenses 20,115,000 16,612,000
Selling, general and administrative
expenses 1,791,000 1,856,000
---------- ----------
21,906,000 18,468,000
---------- ----------
Income from operations 1,761,000 1,873,000
OTHER INCOME (EXPENSES):
Interest expense (787,000) (819,000)
Loss on disposal of assets - (1,086,000)
Other expense, net (133,000) (283,000)
---------- ----------
(920,000) (2,188,000)
---------- ----------
NET INCOME (LOSS) BEFORE INCOME TAXES 841,000 (315,000)
BENEFIT FROM INCOME TAXES - (128,000)
---------- ----------
NET INCOME (LOSS) $ 841,000 $ (187,000)
========== =========
BASIC AND DILUTED NET INCOME (LOSS)
PER MEMBERSHIP UNIT $ 841 $ (187)
========== =========
BASIC AND DILUTED WEIGHTED AVERAGE
MEMBERSHIP UNITS OUTSTANDING 1,000 1,000
========== =========
The accompanying notes are an integral part of these condensed statements.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
REVENUES:
Warehousing and logistic services $46,714,000 $40,821,000
OPERATING EXPENSES:
Warehousing and logistic expenses 39,316,000 33,913,000
Selling, general and administrative
expenses 3,750,000 3,272,000
---------- ----------
43,066,000 37,185,000
---------- ----------
Income from operations 3,648,000 3,636,000
OTHER INCOME (EXPENSES):
Interest expense (1,560,000) (1,703,000)
Loss on disposal of assets - (1,086,000)
Other expense, net (384,000) (350,000)
--------- ---------
(1,944,000) (3,139,000)
--------- ---------
NET INCOME BEFORE INCOME TAXES 1,704,000 497,000
PROVISION FOR INCOME TAXES - 181,000
--------- ---------
NET INCOME $1,704,000 $316,000
========= =========
BASIC AND DILUTED NET INCOME PER MEMBERSHIP
UNIT $1,704 $316
========= =========
BASIC AND DLUTED WEIGHTED AVERAGE MEMBERSHIP
UNITS OUTSTANDING 1,000 1,000
========= =========
The accompanying notes are an integral part of these condensed statements.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,704,000 $316,000
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 3,398,000 3,891,000
Loss on sale of assets - 1,086,000
Deferred income tax provision - 141,000
Changes in Assets and Liabilities:
Increase in accounts receivable (1,706,000) (591,000)
Decrease in inventories, prepaids and
other assets 158,000 627,000
Increase (decrease) in accounts payable
and accrued liabilities 2,448,000 (1,587,000)
--------- ---------
Net cash provided by operating
activities 6,002,000 3,883,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (980,000) (1,476,000)
Profits from sale of fixed assets - 149,000
--------- ---------
Net cash used in investing activities (980,000) (1,327,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit, net - 80,000
Payment of long-term debt (2,532,000) (2,157,000)
Dividend distribution to Parent Company (2,326,000) -
--------- ---------
Net cash used in financing activities (4,858,000) (2,077,000)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 164,000 479,000
BEGINNING CASH AND CASH EQUIVALENTS 224,000 29,000
--------- ---------
ENDING CASH AND CASH EQUIVALENTS $388,000 $508,000
========= =========
Supplemental Disclosures of Cash Flow
Information:
Interest paid $1,450,000 $1,654,000
Amounts paid to Parent for income taxes - -
The accompanying notes are an integral part of these condensed statements.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1997
1. Basis of Presentation:
The condensed financial statements reflect all adjustments which are,
in the opinion of management, necessary for a fair presentation of
the results for the interim periods presented. These financial
statements should be read in conjunction with the TLC's audited
financial statements for the year ended June 30, 1997 found elsewhere
in this Prospectus.
TLC is a wholly owned subsidiary of Christiana Companies, Inc.
("Christiana"). TLC was formed on June 30, 1997 as a result of the
combination of Wiscold, Inc. ("Wiscold") and Total Logistic Control,
Inc. ("TLC"), both former wholly owned subsidiaries of Christiana.
The accompanying financial statements have been restated to reflect
this combination for all periods presented.
2. Earnings per Membership Unit:
Earnings per Membership Unit have been computed based on the weighted
number of units outstanding as if outstanding for all periods
presented. Effective December 1997, TLC adopted Statement of
Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
Under SFAS No. 128 presentation of both basic and diluted earnings
per membership unit is required.
As TLC does not have any outstanding dilutive financial instruments,
there is no difference between basic and diluted earnings per
membership unit as presented.
3. Income Taxes:
TLC is included in the consolidated income tax return of Christiana.
The amounts reflected in the financial statements are as if TLC was
filing on a stand alone basis. Income taxes paid as shown in the
statement of cash flows represent cash payments made to the Parent.
Effective June 30, 1997, TLC converted from a C-Corporation to a
Limited Liability Company ("LLC"). For purposes of taxation, all
earnings of the LLC are "passed through" to its members and taxed at
the member level. As the LLC is no longer a taxable entity, deferred
income taxes are not reflected on the balance sheets. Additionally,
provisions for income taxes for the three and six months ended
December 31, 1997 are not required. The provisions for income taxes
for the three and six month periods ended December 31, 1996 represent
the combined Federal and state income tax provisions for the periods
during the fiscal year that TLC was a C-Corporation.
4. Distribution to Parent Company:
During the six month period ended December 31, 1997, TLC made a
payment on behalf of Christiana to pay down a promissory note payable
and accrued interest thereon in the amount of $2,326,000. This
payment has been deemed a dividend distribution to Christiana and is
reflected as a reduction to member's equity in the period then ended.
<PAGE>
No person is authorized in connection with any offering made
hereby to give any information or to make any representation other
than as contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having
been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy
any security other than shares of Common Stock offered hereby, nor
does it constitute an offer to sell or a solicitation of an offer
to buy any of the securities offered hereby to any persons in any
jurisdiction in which it is unlawful to make such an offer or
solicitation to such person. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any
circumstance create any implication that the information herein is
correct as of any date subsequent to the date hereof.
_________________________________
TABLE OF CONTENTS
Page
Prospectus Summary . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . .
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . .
Summary of Certain Terms of the Merger . . . . . . . . . . . .
Capitalization . . . . . . . . . . . . . . . . . . . . . . . .
Company Financial Data . . . . . . . . . . . . . . . . . . . .
Pro Forma Summary Combined Financial Data . . . . . . . . . . .
Selected Historical TLC Financial Data . . . . . . . . . . . .
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . .
Business . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Purchase Agreement . . . . . . . . . . . . . . . . . . . .
The Operating Agreement . . . . . . . . . . . . . . . . . . . .
The Offering . . . . . . . . . . . . . . . . . . . . . . . . .
Management . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Transactions . . . . . . . . . . . . . . . . . . . . .
Principal Shareholders . . . . . . . . . . . . . . . . . . . .
Description of Capital Stock . . . . . . . . . . . . . . . . .
Shares Eligible for Future Sale . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available Information . . . . . . . . . . . . . . . . . . . . .
Index to Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . F-1
Purchase Agreement . . . . . . . . . . . . . . . . . . Annex A
Operating Agreement . . . . . . . . . . . . . . . . . . Annex B
______________________________
Until , 1998 (25 days after the date of this
Prospectus), all dealers effecting transactions in the Common
Stock, whether or not participating in this distribution, may be
required to deliver a Prospectus.
5,202,664 Shares
C2, INC.
Common Stock
_________________________
PROSPECTUS
, 1998
_________________________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission filing fee . . . $ 6,140
Nasdaq listing fee . . . . . . . . . . . . . . . . $ 10,000
Blue sky fees and expenses . . . . . . . . . . . . $ 2,000
Transfer agent expenses and fees . . . . . . . . . $ 3,000
Printing and engraving . . . . . . . . . . . . . . $ 30,000
Accountants' fees and expenses . . . . . . . . . . $ 45,000
Legal fees and expenses . . . . . . . . . . . . . . $ 70,000
Miscellaneous . . . . . . . . . . . . . . . . . . . $ 3,860
-------
Total . . . . . . . . . . . . . . . $170,000
=======
__________________________
All of the above fees, costs and expenses above will be paid by the
Company. Other than the SEC filing fee, all fees and expenses are
estimated.
Item 14. Indemnification of Directors and Officers.
Pursuant to the WBCL and the Company's By-Laws, directors and
officers of the Company are entitled to mandatory indemnification from the
Company against certain liabilities and expenses (i) to the extent such
officers or directors are successful in the defense of a proceeding and
(ii) in proceedings in which the director or officer is not successful in
defense thereof, unless (in the latter case only) it is determined that
the director or officer breached or failed to perform his duties to the
Company and such breach or failure constituted: (a) a willful failure to
deal fairly with the Company or its Shareholders in connection with a
matter in which the director or officer had a material conflict of
interest; (b) a violation of criminal law unless the director or officer
had reasonable cause to believe his or her conduct was lawful or had no
reasonable cause to believe his or her conduct was unlawful; (c) a
transaction from which the director or officer derived an improper
personal profit; or (d) willful misconduct. The WBCL specifically states
that it is public policy of Wisconsin to require or permit
indemnification, allowance of expenses and insurance in connection with a
proceeding involving securities regulation, as described therein, to the
extent required or permitted as described above. Additionally, under the
WBCL, directors of the Company are not subject to personal liability to
the Company, its Shareholders or any person asserting rights on behalf
thereof for certain breaches or failures to perform any duty resulting
solely from their status as directors, except in circumstances paralleling
those in subparagraphs (a) through (d) outlined above.
The indemnification provided by the WBCL and the Company's By-Laws is
not exclusive of any other rights to which a director or officer may be
entitled. The general effect of the foregoing provisions may be to reduce
the circumstances under which an officer or director may be required to
beach the economic burden of the foregoing liabilities and expense.
Item 15. Recent Sales of Unregistered Securities.
On December 11, 1997, as part of its initial capitalization, the
Company issued 25 shares of Common Stock to Sheldon B. Lubar in exchange
for total cash consideration of $100.
Other than as set forth in the preceding paragraphs, the Company has
not sold any securities within the past three years.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits. The exhibits filed herewith are as specified on the
Exhibit Index included herein.
(b) Financial Statement Schedules. All schedules are omitted
because the required information is not present or is not
present in amounts sufficient to require submission of a
schedule or because the information required is included in the
consolidated financial statements of the Registrant or notes
thereto or the schedule is not required or inapplicable under
the related instructions.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 action, 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 that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed 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 fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Milwaukee, and State of Wisconsin, on this 22nd day of April,
1998.
C2, INC.
By: /s/ William T. Donovan
William T. Donovan, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on April 22, 1998.
Signature Title Date
Chairman (Principal
/s/ William T. Donovan Executive Officer and April 22, 1998
William T. Donovan Principal Financial and
Accounting Officer)
/s/ David J. Lubar* President and Director April 22, 1998
David J. Lubar
/s/ Nicholas F. Brady* Director April 22, 1998
Nicholas F. Brady
/s/ Albert O. Nicholas* Director April 22, 1998
Albert O. Nicholas
/s/ Sheldon B. Lubar* Director April 22, 1998
Sheldon B. Lubar
By: /s/ William T. Donovan
*Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Page
Number Exhibit Description Number
2.1 Agreement and Plan of Merger, dated as of
December 12, 1997, by and among EVI, Sub,
Christiana and the Company.*
2.2 Form of Purchase Agreement, dated as of December
12, 1997, by and among EVI, TLC, Christiana and
the Company, Incorporated by reference to Annex
A of this Registration Statement.*
3.1 Amended and Restated Articles of Incorporation
of the Company.*
3.2 Amended and Restated Bylaws of the Company.*
4.1 Specimen Common Stock Certificate.**
4.2 See Exhibits 3.1 and 3.2 for provisions of the
Amended and Restated Articles of Incorporation
and Bylaws of the Company defining the rights of
the holders of Common Stock.*
4.3 Form of Subscription Agreement.*
4.4 Form of Letter of Transmittal.*
5.1 Opinion of Foley & Lardner regarding the
legality of securities being offered.*
10.1 Form of Credit Agreement, by and among the TLC,
Firstar Bank Milwaukee, N.A., individually and
as agent, and the lenders that are a party
thereto. This agreement will be executed and
become effective on the Effective Date.*
10.2 Form of First Amended and Restated Operating
Agreement, by and among the Company and
Christiana, Incorporated by reference to Annex B
of this Registration Statement. This agreement
will be executed and become effective on the
Effective Date.*
10.3 C2, Inc. 1998 Equity Incentive Plan.*
21.1 List of Subsidiaries of the Company.*
23.1 Consent of Arthur Andersen LLP, independent
public accountants.
23.2 Consent of Foley & Lardner (included in Exhibit
5.1).*
24.1 Power of Attorney (included on the signature
page to the Registration Statement).*
27.1 Financial Data Schedule.*
_________________________
*Previously filed.
**To be filed by amendment.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and all references to our Firm) included in or made a part of
this Registration Statement.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
April 22, 1998
