<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number: 001-14171
C2, INC.
(Exact name of registrant as specified in its charter)
A Wisconsin Corporation 39-1915787
(State of other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
700 N. Water Street, Suite 1200, Milwaukee, Wisconsin 53202
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (414) 291-9000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock - $1.00 par Value NASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value (based on $5.6875 closing price) of voting stock less
stock owned by all executive officers and directors as a group: $10,394,879
Number of Shares of Common Stock Outstanding at March 23, 1999: 5,202,664
The Exhibit Index is located on page 37.
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PART 1
ITEM 1. BUSINESS
C2, INC.
C2, Inc. ("C2" or "the Company") was formed on December 11, 1997 for
the purpose of consummating the acquisition of 66.67% of Total Logistic Control,
LLC ("TLC") for $10.67 million in cash, and the assumption of TLC's liabilities,
plus the assumption of contingent liabilities which might arise in the future
attributable to the historic operations or assets of Christiana Companies, Inc.
("Christiana") and any of it's current or former subsidiaries.
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. In line with that
strategy, on March 12, 1999, C2, Inc. announced the purchase of Zero Zone, Inc.,
a Wisconsin-based manufacturer of refrigerated and freezer display cases. C2
invested $4.5 million in equity and capital notes for 70.6% of the outstanding
common stock of Zero Zone with the balance being held by the President of Zero
Zone and other members of its management team.
C2 completed its initial public offering on February 8, 1999. The
offering resulted in the sale of 5,202,664 shares of C2 common stock and the
receipt of gross proceeds of $20,810,656, $10.67 million of which was used in
C2's acquisition of 666.67 membership units, representing a 66.7% ownership
interest in TLC as part of the merger of Christiana with and into a subsidiary
of Weatherford International, Inc. ("Weatherford"). Christiana, now a wholly
owned subsidiary of Weatherford owns the remaining 333.33 membership units of
TLC representing a 33.3% ownership interest.
TOTAL LOGISTIC CONTROL, LLC
TLC was formed on June 30, 1997 through a combination of the
operations of two wholly-owned subsidiaries of Christiana: Wiscold, Inc.
("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. a Zeeland, Michigan-based firm
engaged in providing fully integrated third-party logistic services, which
include 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 manufacture 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.
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TLC's customers consist primarily of national, regional and local
firms engaged in food processing, consumer product manufacturing, wholesale
distribution and retailing. During 1998, TLC's top 10 customers accounted for
approximately 39.7% of total revenues. TLC services approximately 1,300
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. TLC's refrigerated distribution centers are as follows:
- Rochelle Cold Storage campus, located in Rochelle, Illinois, is
TLC's newest and largest refrigerated warehouse operation,
initially constructed in 1986. Currently this location is comprised
of 14,100,000 cubic feet of capacity in two separate buildings
having undergone four capacity expansions in 1988, 1990, 1993 and
1996. All space is capable of temperatures of -20(degree)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 two
interstate highways, I-39 and I-88. Rochelle Cold Storage serves
primarily distribution customers in the Midwest.
- Beaver Dam Logistic Center, located in Beaver Dam, Wisconsin, was
originally constructed in 1975. Since 1975, this facility has
undergone three freezer additions, the most recent in 1991, and
today 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. Beaver Dam
Logistic Center's IQF tunnels have the capacity to freeze 30,000
pounds of product per hour.
- Milwaukee Logistic Center, located in Wauwatosa, Wisconsin, was
originally constructed in 1954. There have been six expansions of
this facility, and today 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(degree)F to +40(degree)F and daily blast freezing capacity of
750,000 pounds. This location has a 7-car private rail siding. An
additional 3 million 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.
- Holland Logistic Center, located in Holland, Michigan, has
undergone a number of expansions over the years, with a major
reconstruction in 1983 after a fire destroyed approximately 50
percent of the facility. Today, 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 Logistic Center services both
distribution customers as well as fruit 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, located in Kalamazoo, Michigan, has two
distribution centers. 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
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distribution customers in the Midwest and is strategically located
at the I-94 and US 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.
In addition to the refrigerated distribution centers described
above, TLC operates a network of owned and leased dry (non-refrigerated)
distribution centers comprising approximately 0.8 million square feet of storage
capacity. Dry distribution centers are located in Zeeland (2) and Kalamazoo,
Michigan; Munster, Indiana and Dayton, New Jersey.
Competition in integrated logistic services is on both a national
and local basis with a predominant emphasis on transportation services. At
present, there are no direct competitors providing the full scope of warehousing
and transportation services across the full range of temperatures provided by
TLC. However, each of TLC's individual business segments is highly fragmented
with many local, regional and national competitors, especially in the
transportation and dry warehousing industries. TLC's competitive edge is its
ability to provide fully integrated logistic services designed to its customers'
distribution needs which may, but would not necessarily, include utilizing its
network of strategically located refrigerated and dry distribution centers,
transportation equipment, and carrier management services. TLC's revenues and
earnings can be affected by changes in competitive pricing in both
transportation and warehousing operations, particularly at the local level;
harvest yields of certain vegetable and fruit crops grown in the Upper Midwest;
changes in customers distribution patterns or channels, and general economic
conditions.
TLC holds a trademark on its name and logo. No other trademarks,
patents, licenses, franchises or concessions are considered material to its
business.
Expenditures for research and development and compliance with
environmental regulations have not been, and are not anticipated to be,
significant.
EMPLOYEES
The following table shows the number of fulltime C2 and TLC
employees at the dates indicated.
<TABLE>
<CAPTION>
FULLTIME EMPLOYEES AT FEBRUARY 28,
----------------------------------------------------------------------
1997 1998 1999
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
C2 0 0 10
TLC 687 699 743
--------------------- --------------------- ---------------------
TOTAL 687 699 753
</TABLE>
At February 28, 1999, TLC has 44 more employees than at the same
date a year ago due primarily to expansion of its transportation fleet and a
substantial increase in a warehousing and distribution program at the Rochelle
Logistic Center.
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ITEM 2. PROPERTIES
REFRIGERATED WAREHOUSING FACILITIES
At December 31, 1998, TLC owned or leased twelve facilities in five
states. Of this total, seven are refrigerated with the balance being
non-refrigerated facilities. Refrigerated operations are conducted through seven
public refrigerated warehouses located in Wisconsin (2), Michigan (3), and
Illinois (2). TLC's refrigerated facilities are large single-story buildings
constructed at dock height will full insulation and vapor barrier protection.
Refrigeration is provided by screw-type compressors in ammonia-based cooling
systems. The facilities are strategically located and well served by rail and
truck.
TLC's refrigerated warehouse facilities are described in the
following table:
<TABLE>
<CAPTION>
TOTAL STORAGE SPACE
LOCATION (CUBIC FEET IN MILLIONS) TYPE OF FACILITY
- -------------------------------------------- ------------------------------ ----------------------------------
<S> <C> <C>
Rochelle Logistic Center I 10.6 Distribution
Rochelle Logistic Center II 3.5 Distribution
Beaver Dam Logistic Center 7.2 Distribution/Production
Milwaukee Logistic Center 4.3 Distribution
Holland Logistic Center (1) 2.1 Distribution/Production
Kalamazoo Logistic Center I (1)(2) 3.3 Distribution
Kalamazoo Logistic Center II (1) 2.8 Distribution
----
TOTAL 33.8
====
</TABLE>
(1) Leased Facility
(2) Includes 1.8 million cubic feet of non-refrigerated storage capacity.
At both the Rochelle and Beaver Dam Logistic Centers, the Company
owns substantial additional acreage available for expansion.
At December 31, 1998, TLC operated 5 public non-refrigerated or dry
warehouse distribution facilities located in Michigan (3), Indiana and New
Jersey. Zeeland Distribution Center II, located in Zeeland, Michigan is a
company owned facility. All other dry facilities are held under leases. Lease
terms generally match underlying contracts with major customers served at each
facility. These facilities are single story block or metal construction
buildings. All dry facilities are constructed at dock height and are approved as
food grade storage facilities.
TLC's dry warehouse facilities are described on the following table:
<TABLE>
<CAPTION>
TOTAL STORAGE
SPACE
SQ FT. IN
FACILITY LOCATION (THOUSANDS) TYPE OF FACILITY
- --------------------------------------------- -------------------------- --------------------- -----------------------
<S> <C> <C> <C>
Zeeland Logistic Center I (1) Zeeland, MI 202 Public
Zeeland Logistic Center II Zeeland, MI 220 Public
Michigan Distr. Center I (1) Kalamazoo, MI 88 Public
Munster Logistic Center (1) Munster, IN 125 Public
Dayton Logistic Center (1) Dayton, NJ 200 Public
---------------------
TOTAL 835
---------------------
</TABLE>
(1) Leased facility.
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TLC owns and operates a 10,000 square foot truck maintenance facility
located at the Kalamazoo Logistic Center. This facility is used for the
maintenance of TLC transportation equipment.
ITEM 3. LEGAL PROCEEDINGS.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
The common stock of the Company was listed on the NASDAQ SmallCap
Market effective March 5, 1999.
ITEM 6. SELECTED FINANCIAL DATA.
Selected Financial Data is provided under the caption "Five Year
Financial Information" is included on page 34.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
C2 did not conduct any operations during 1998 or 1997. The only
activities of C2 were related to the initial public offering of its common stock
and its subsequent acquisition of 666.67 membership units (two-thirds) of TLC.
Both of these events occurred during February 1999.
As of December 31, 1998, C2's assets consisted of $100 cash received
from its sole shareholder pertaining to its initial capitalization and $282,000
of offering costs which have been deferred until the time of the offering. The
acquisition of TLC by C2 is being accounted for as a combination of entities
under common control because a single group of shareholders that controlled TLC
will control C2. Accordingly, no purchase accounting adjustments will be
recorded at the time of acquisition, but rather the acquisition will be
accounted for like a pooling of interests.
The following discussion and analysis of financial condition and
results of operations related to TLC are provided for additional analysis and
give effect to what the combined results of C2 would have been if TLC and C2
were a combined entity prior to December 31, 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
TLC's consolidated revenues for the year ended December 31, 1998 were
$90,610,000 compared to $90,100,000 for the same period the prior year, an
increase of $510,000 or .6%. Revenue in 1998 attributable to Warehousing
Services declined by $296,000 or .8% compared to the prior year due to the
closure of two non-refrigerated warehousing operations in the third quarter of
1997 consistent with TLC's strategy to de-emphasize public, non-refrigerated
warehousing activities. The remaining facilities generated revenue growth
primarily through higher capacity utilization and to a lesser extent from price
increases in 1998 compared to 1997. Logistic Service revenues in 1998 increased
$806,000 or 1.6% in 1998 due primarily to a combination of continued high
utilization of transportation assets and expanded volume attributable to the
distribution services of food products for the State of Michigan Department of
Education under a multi-year contract.
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Gross profit for the year increased $667,000 or 4.9% to $14,399,000
compared to $13,732,000 generated in 1997. Gross profit in 1998 from Warehouse
Services increased $621,000 or 6.6% over 1997 through higher utilization of
facilities, improved productivity and strong cost controls in refrigerated
warehousing and improved non-refrigerated warehousing operations due to the
closure of two properties which had low utilization and losses. Logistic
Services gross profit in 1998 increased slightly over 1997 with consistent
results in each of the service offerings.
Selling, general and administrative expenses, which includes
marketing and advertising expenses, increased $23,000 or .4% in 1998 due to
increased staffing in information technology, logistic engineering and sales to
support the Company's growth strategy in non-asset based, third party logistic
services offset by certain cost savings in other areas.
Income from operations for 1998 increased by $644,000 or 10.4% due
primarily to improved gross profit, particularly from efficiencies resulting
from higher utilization of refrigerated warehousing facilities and lower
depreciation and amortization expenses.
Interest expense in fiscal 1998 was $2,586,000, a reduction of
$367,000 from the prior year of $2,953,000. Interest expense in 1998 was reduced
due to strong cash flow, which enabled over $7,700,000 of debt reduction during
the year. At the end of 1998, a $10,000,000 dividend was paid to Christiana, the
Company's then parent, related to its merger transaction with Weatherford. This
distribution was funded by borrowings under TLC's revolving credit facility.
Pretax earnings in 1998 totaled $4,375,000, an increase of $1,460,000
or 50.1% over 1997 pretax earnings of $2,915,000. Higher operating profit and
lower interest expense were principal factors in this improvement. The net
increase in other income of $899,000 over 1997 also contributed to the
improvement in pretax earnings in 1998.
No provision for income tax was recorded in 1998 as TLC was a limited
liability company for this period. In 1997, TLC recorded an income tax provision
of $515,000 on earnings through June 30, 1997, the period during which TLC was a
taxable entity. During 1997, TLC also recognized a non-recurring increase to
earnings of $11,171,000 related to the removal of deferred income taxes due to
its conversion from a taxable C Corporation to a nontaxable limited liability
company.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Total revenue in 1997 increased $11,751,000 or 15% to $90,100,000
compared to $78,349,000 in 1996. Revenues attributable to Warehousing Services
were lower in 1997 by $5,879,000 due primarily to a substantial reduction in the
volume of a customer in the Munster, Indiana Logistic Center, a non-refrigerated
facility and the closure of other non-refrigerated overflow facilities in West
Michigan. Logistic Services in 1997 generated revenue growth of $17,630,000 or
51.7% over 1996. A majority of this growth was attributed to a multi-year
logistic services contract with a large frozen food producer. Additional growth
in Logistic Services was generated by higher volume in both the food
distribution program for the Michigan Department of Education and international
freight forwarding.
Gross profit in 1997 totaled $13,732,000 up $1,562,000 or 12.8%, from
$12,170,000 generated in 1996. Warehouse Services gross profit was down
$1,141,000 due to the revenue decline in non-refrigerated warehousing
operations. primarily in Munster, Indiana. Logistic Services gross profit in
1997 increased $421,000 or 10.8% due primarily to higher volume in
transportation services, an expanded fleet of trucks, and greatly improved
equipment utilization and operating ratios.
Selling, general and administrative expenses increased by $589,000 or
8.5% in 1997, due in large part to increased activities in marketing and sales.
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Income from operations increased by $973,000 or 18.6% to $6,206,000
compared to $5,233,000 generated in 1996. This increase was due primarily to
volume and productivity gains in Logistic Services.
Interest expense for 1997 was $2,953,000, down slightly from
$3,067,000 in 1996.
Pretax profits for 1997 were $2,915,000 compared to $720,000 in 1996.
The increase relates to improved operating profit in 1997 and the negative
impact in 1996 resulting from a one time charge related to the disposal of
special freezing equipment in connection with securing a longer term contract
for vegetable processing, freezing and warehouse services. The pretax loss
recognized in 1996 on the disposal of this equipment was $1,085,000.
During 1997, TLC recorded a provision for taxes of $515,000 on
earnings through June 30, 1997, the period during which it was a taxable C
Corporation. Upon its conversion from a taxable C Corporation to a nontaxable
limited liability company, TLC recorded an adjustment of $11,171,000 related to
the removal of deferred income taxes which increased earnings.
Net earnings in 1997 attributable to continuing operations totaled
$2,400,000 compared to $416,000 in 1996. Higher operating profit, gain on
disposal of assets and lower interest expense were the principal factors in this
improvement.
Total net earnings in 1997 were $13,571,000 of which $11,171,000 were
attributable to the elimination of deferred taxes resulting from TLC' s change
in taxable status.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash equivalents and short-term investments totaled $9,000 at
December 31, 1998 compared to $388,000 at December 31, 1997. The Company's
working capital at December 31, 1998 was a deficit of $1,146,000 compared to
$390,000 at December 31, 1997.
Operating activities in 1998 provided cash of $11,160,000 derived
primarily from net earnings of $4,375,000, depreciation and amortization of
$6,254,000, offset by a net decrease in working capital accounts of $319,000.
Capital expenditures in 1998 totaled $2,845,000, the major components
of which were: $1,888,000 for machinery and equipment additions primarily
related to warehousing operations and $661,000 for computer systems. The
remaining expenditures were incurred for equipment and facility improvements
within the non-refrigerated warehousing and transportation operations.
Also included in cash provided by investing activities is $801,000 of
proceeds from the sale of transportation equipment.
Net operating cash flows in 1998 enabled reduction of long term debt
by $7,738,000 and funded tax distributions to Christiana of $1,757,000. In
addition, long-term debt increased $10,000,000 as a result of borrowing to fund
a year end dividend to Christiana in connection with its merger transaction with
Weatherford.
At December 31, 1998, TLC had a revolving credit agreement that
provided for borrowings of up to $70,000,000. Outstanding borrowings under this
credit agreement at December 31, 1998 totaled $35,198,000.
As of December 31, 1998, the Company had cash requirements of an
additional $10,000,000 dividend, repayment of a $3,000,000 note, and other
reimbursements in the amount of $1,552,000
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payable to Christiana contingent upon completion of its merger with Weatherford.
These payments were made on February 8, 1999 in connection with the completion
of the Christiana merger transaction with Weatherford and were funded by
additional borrowings under TLC's revolving credit facilities.
YEAR 2000
During 1998, TLC completed a comprehensive assessment of Year 2000
issues for both its financial information systems and other non-financial
systems. In the opinion of management, all hardware and software that could have
a significant Year 2000 impact have been identified and a remediation plan has
been implemented. Year 2000 issues for financial information systems are being
corrected through hardware and software upgrades. Non-financial systems,
primarily telephone and security, will be repaired or replaced in order to
achieve Year 2000 compliance. Based upon TLC's current projections, all Year
2000 compliant systems, both financial and non-financial, will be implemented no
later than April 30, 1999 to allow for sufficient testing. As of December 31,
1998, TLC was approximately 80% complete with the installation of its Year 2000
upgrades. By the time these upgrades are completed, TLC estimates that it will
have expended approximately $950,000 to resolve its Year 2000 problems.
TLC believes that its efforts are sufficient to address its Year 2000
problem. However, there can be no assurances that TLC will be successful in its
efforts. Any failure to address the Year 2000 problem may have a materially
adverse effect on TLC's ability to provide its transportation and warehousing
services and process vital financial data. This could result in material lost
revenues to TLC in amounts which are not known at this time. TLC currently has
no contingency plans if its efforts to address the Year 2000 problem fail. After
TLC has completed the upgrades described above, contingency plans will be
developed.
TLC has solicited all of its major service providers concerning their
progress in compliance with the Year 2000 problem. TLC has received responses
and is not aware of the inability of any service provider to address its Year
2000 problem.
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA.
See Index to Financial Information on page 17.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
The following table provides certain information, as of the date
hereof, about the Company's Board of Directors and Executive Officers and also
provides information about the beneficial ownership of the Company's capital
stock by all of the directors and executive officers as a group. Directors of
the Company are elected annually by a plurality of the votes cast by
shareholders. Executive Officers are appointed annually by the Board of
Directors.
<TABLE>
<CAPTION>
NO. OF SHARES
PRINCIPAL OCCUPATION BENEFICIALLY
NAME (AND AGE) DURING THE LAST FIVE YEARS OWNED
-------------- -------------------------- -----
<S> <C> <C>
Nicholas F. Brady (68) Chairman and President (since 2/93) of Darby 300,000 (1)
Advisors, Inc., a private investment company, (5.8%)
Easton, Maryland (1)
William T. Donovan (47) Chairman and Chief Financial Officer of C2, Inc. 145,000 (2)
(2) (2.8%)
David J. Lubar (44) President of C2, Inc. 919,164 (3)(8)
(17.7%)
Sheldon B. Lubar (69) Chairman of Lubar & Co., venture capital and 1,054,043 (5)(8)
investments, Milwaukee, Wisconsin (4) (20.3%)
Albert O. Nicholas (68) Chairman and Chief Executive Officer of Nicholas 310,700 (6)
Company, Inc., a registered investment advisor, (6.0%)
Milwaukee, Wisconsin (6)
Oyvind Solvang (40) Vice President of C2, Inc. (7) 646,086 (7)(8)
(12.4%)
All directors and executive officers as a group. 3,374,993
(64.9%)
</TABLE>
- --------
(1) Previously, Secretary of the United States Department of the Treasury for
over four years, and before that, Chairman of Dillon, Read & Co., Inc. He
is also 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. The shares listed are owned by a trust of which Mr.
Brady is the beneficiary and a co-trustee.
(2) Mr. Donovan has served in the capacity listed or in another capacity as an
executive officer of Christiana for more than the last five years. He has
also been a principal of Lubar & Co. for more than the last five years. Mr.
Donovan is a director of Grey Wolf, Inc. Shares reported by Mr. Donovan
include 20,000 shares held by a partnership in which Mr. Donovan is a
General Partner. Mr. Donovan disclaims beneficial interest in 15,935 of
these shares.
(3) Shares reported by David Lubar include 501,628 shares over which he may be
deemed to share voting power and investment power. David Lubar shares
voting and investment power over 423,250 shares held by various Lubar
family minor children's' trusts. Of these shares, 50,000 are also included
as
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beneficially owned by Sheldon Lubar and 78,378 represent shares for
which Mrs. David Lubar shares voting and investment power.
The remaining 417,536 shares are held by David Lubar directly.
(4) Sheldon Lubar has also been a principal of Lubar & Co. for more than the
last five years. Sheldon Lubar is also a director of Ameritech Corporation,
Weatherford International, Inc., Firstar Corporation, Massachusetts Mutual
Life Insurance Co., Jefferies & Company, Inc. and MGIC Investment
Corporation.
(5) Shares reported by Sheldon Lubar include 182,000 shares held by various
Lubar family minor children's' trusts over which Sheldon Lubar may be
deemed to share voting power and investment power as a trustee. Of these
shares, 50,000 shares are also included as beneficially owned by David
Lubar. Also includes 415,615 shares held directly by Sheldon Lubar's wife
and 8,312 shares held by the Lubar Family Foundation for which she may be
deemed to have voting power and investment power as a director. The
remaining 448,116 shares are held directly by Mr. Lubar or his retirement
plans.
(6) Albert O. Nicholas has been a Director of C2 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 is the adviser to six registered
investment companies: Nicholas Fund, Inc., Nicholas II, Inc., Nicholas
Income Fund, Inc., Nicholas Limited Edition, Inc., Nicholas Money Market
Fund, Inc. and Nicholas Equity Fund. Mr. Nicholas is the president and a
director of each of those companies. Mr. Nicholas is also a director of
Bando McGlocklin Capital Corporation.
(7) Oyvind Solvang has been Vice President of C2 since December 1997. Mr.
Solvang has served as President of Cleary Gull Rieland & McDevitt, Inc., an
investment banking firm located in Milwaukee, Wisconsin from January 1996
to October 1996 and Chief Operating Officer 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. Shares
reported by Oyvind Solvang include 50,000 shares over which he may be
deemed to share voting power and investment power as trustee, 433,086
shares held directly by his wife, and 143,000 shares over which his wife
may be deemed to share voting power and investment power as a trustee.
(8) Sheldon B. Lubar is the father of David J. Lubar and father-in-law of
Oyvind Solvang.
During 1998, the Board of Directors met two times. Each director
attended both meetings. The Board has established three standing committees:
audit, finance and compensation. It has no standing nominating committee or any
committee performing similar functions.
ITEM 11. 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 Christiana/Weatherford merger transaction and the acquisition of a
two-thirds interest in TLC), and has generated no revenue. The Company did not
pay any of its executive officers compensation during 1998. The Company
anticipates that during 1999 its most highly compensated officers will be
William T. Donovan, David J. Lubar and 0yvind Solvang, who will be paid salaries
of $175,000, $120,000 and $120,000, respectively. Subsequent to December 31,
1998 and in connection with C2's completion of its public offering, stock
options were granted to the Company's Executive Officers and Board of Directors.
Each independent director received an option to purchase 12,000 shares of C2
common stock at $4.00 per share. C2's Executive Officers received Incentive
Stock options to purchase C2 common stock at $4.00 per share as follows:
11
<PAGE> 12
<TABLE>
<CAPTION>
Option Shares
-------------------
<S> <C>
William T. Donovan 100,000
David J. Lubar 100,000
Oyvind Solvang 60,000
</TABLE>
All granted options vest ratably over a 5 year timeframe. In total
options to purchase 324,000 share of C2, Inc. were granted. Of the 324,000 total
options granted, 40,000 were issued to employees other than executive or
directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table gives information, as of March 5, 1999 about the
beneficial ownership of Common Stock of the Company by the persons known to the
Board of Directors who own beneficially more than 5% of the outstanding Common
Stock. As used in this Form 10K, "beneficial ownership" means, in general, the
sole or shared power to vote or dispose of stock.
<TABLE>
<CAPTION>
No. of Shares
Name and Address Beneficially Owned Percent of Class
- ---------------------------------------- -------------------------- -------------------------
<S> <C> <C>
Nicholas F. Brady 300,000 5.8%
1133 Connecticut Ave. NW, Suite 200
Washington, DC 20036
Sheldon B. Lubar 630,116 (1) 12.1
700 N. Water Street, Suite 1200
Milwaukee, WI 53202
Marianne S. Lubar 423,927 (2) 8.1
700 N. Water Street, Suite 1200
Milwaukee, WI 53202
David J. Lubar 919,164 (3) 17.7
700 N. Water Street, Suite 1200
Milwaukee, WI 53202
Joan P. Lubar 584,973 (4) 11.2
700 N. Water Street, Suite 1200
Milwaukee, WI 53202
Susan Lubar Solvang 646,086 (5) 12.4
700 N. Water Street, Suite 1200
Milwaukee, WI 53202
Kristine Lubar Thomson 638,014 (6) 12.3
700 N. Water Street, Suite 1200
Milwaukee, WI 53202
Albert O. Nicholas 310,700 6.0
700 N. Water Street, Suite 1010
Milwaukee, WI 53202
</TABLE>
12
<PAGE> 13
(1) Shares reported by Sheldon Lubar include 182,000 shares held by various
Lubar family minor children's' trusts over which he may be deemed to share
voting power and investment power as a trustee. Of these shares, 50,000
shares are also included as beneficially owned by David Lubar. The
remaining 448,116 shares are held directly by Mr. Lubar or his retirement
plans.
(2) Shares reported by Marianne S. Lubar include 415,615 shares held by her
directly and 8,312 shares held by the Lubar Family Foundation for which she
may be deemed to have voting power and investment power as a director.
(3) Shares reported by David Lubar include 501,628 shares over which he may be
deemed to share voting power and investment power as a trustee. David Lubar
shares voting and investment power over 423,250 shares held by various
Lubar family minor children's' trusts. Of these shares, 50,000 are also
included as beneficially owned by Sheldon Lubar and 78,378 represent shares
for which Mrs. David Lubar shares voting and investment power. The
remaining 417,536 shares are held by him directly.
(4) Shares reported by Joan P. Lubar include 441,973 shares held by her
directly and 143,000 shares for which she may be deemed to share voting
power and investment power as a trustee.
(5) Shares reported by Susan L. Solvang include 433,086 shares held by her
directly, 20,000 shares held directly by her husband, 143,000 shares for
which she may be deemed to share voting power and investment power as a
trustee, and 50,000 shares for which her husband may be deemed to share
voting power and investment power as a trustee.
(6) Shares reported by Kristine L. Thomson include 425,546 shares held by her
directly and 213,368 shares for which she may be deemed to share voting
power and investment power as a trustee.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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 1998,
Emmpak Foods, Inc. accounted for approximately $2.2 million in gross revenue for
TLC. David J. Lubar serves on the board of directors of Emmpak Foods, Inc.
Sheldon B. Lubar and David J. Lubar are officers and directors of
Lubar & Co. Incorporated, and own 50% each of its stock. The Company's
headquarters shares offices with Lubar & Co. Incorporated. The office building
is owned by 700 North Water LLC which is owned by Sheldon B. Lubar, David J.
Lubar, and the Lubar Family (90%) and William T. Donovan (5%). The Company pays
its pro rata share of the rent, utilities and other expenses of these premises
(approximately $6,500 per month).
13
<PAGE> 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Financial Statement and Schedules:
See Index on page 17.
Exhibits:
See Index on page 37.
Reports on Form 8-K:
In a Current Report filed on Form 8-K dated February 17, 1999, the
Company reported the acquisition of two-thirds of the outstanding
interests of Total Logistic Control, LLC for $10.67 million, as
previously reported in the Form S-1 Registration Statement of C2,
Inc.
In an Amended Report filed on Form 8-K dated March 15, 1999, the
Company filed the required financial statements for the acquisition
of two-thirds of the outstanding interests of Total Logistic
Control, LLC.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirement of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
C2, Inc.
Date: March 24, 1998 By: /s/ William T. Donovan
--------------------------------------
William T. Donovan, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934
this 10-K report has been signed below on March 24, 1999 the following persons
on behalf of the Registrant and in the capacity indicated.
<TABLE>
<CAPTION>
Signature
<S> <C>
/s/ William T. Donovan Chairman, Chief Financial Officer and
- ------------------------------------------------------
William T. Donovan a Director
/s/David J. Lubar President and a Director
- ------------------------------------------------------
David J. Lubar
/s/ Oyvind Solvang Vice President
- ------------------------------------------------------
Oyvind Solvang
/s/ Betty J. White Treasurer, Controller and Assistant
- ------------------------------------------------------
Betty J. White Secretary
/s/ David E. Beckwith Secretary
- ------------------------------------------------------
David E. Beckwith
/s/ Nicholas F. Brady Director
- ------------------------------------------------------
Nicholas F. Brady
/s/ Sheldon B. Lubar Director
- ------------------------------------------------------
Sheldon B. Lubar
/s/ Albert O. Nicholas Director
- ------------------------------------------------------
Albert O. Nicholas
</TABLE>
15
<PAGE> 16
C2, Inc.
FINANCIAL INFORMATION
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1998
16
<PAGE> 17
C2, INC.
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
<S> <C>
C2, Inc. Balance Sheets as of December 31, 1998 and 1997................................................18
C2, Inc. Notes to Balance Sheets........................................................................19
Report of Independent Public Accountants................................................................21
Total Logistic Control, LLC Balance Sheets as of December 31, 1998 and 1997.............................22
Total Logistic Control, LLC Statements of Income for the
years ended December 31, 1998, 1997 and 1996..........................................................23
Total Logistic Control, LLC Statements of Member's Equity
For the years ended December 31, 1998, 1997 and 1996..................................................24
Total Logistic Control, LLC Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996................................................................25
Report of Independent Public Accountants................................................................26
Notes to Financial Statements...........................................................................27
Selected Financial Data.................................................................................34
</TABLE>
17
<PAGE> 18
C2, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------------- -----------------
<S> <C> <C>
ASSETS:
Cash $ 100 $--
Due from Shareholder for common stock subscribed -- 100
Deferred offering costs 282,000 --
================ =================
Total assets $282,100 $ 100
================ =================
LIABILITIES AND SHARHEOLDER'S EQUITY
Current Liabilities:
Accrued offering expenses $282,000 $--
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 100 100
---------------- -----------------
Total shareholder's equity 100 100
---------------- -----------------
Total liabilities and shareholders' equity $282,100 $ 100
================ =================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
18
<PAGE> 19
C2, INC.
NOTES TO BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
A. BUSINESS AND ORGANIZATION:
DESCRIPTION OF BUSINESS: C2, Inc. (the "Company") was organized in December
1997, for the purpose of acquiring a two-thirds interest in Total Logistic
Control, LLC ("TLC"), a warehousing and logistics company (the "Acquisition").
The Company will complete an initial public offering in 1999 of 5,202,664 shares
of its common stock (the "Offering") and utilize the proceeds to fund the
Acquisition and future operations.
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's assets at December 31, 1998 consist of $100 cash
received from the sole shareholder and $282,000 of offering costs which have
been deferred until the time of the Offering. It is anticipated that an
additional $45,000 of offering costs will be incurred in connection with the
transaction. At the time of the Offering, these deferred offering costs will be
charged against additional paid-in capital. The Company has not conducted any
operations and all activities to date have been related to the Acquisition and
the Offering. Accordingly, statements of operations, 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 Weatherford International, Inc.
As part of the Agreement, the Company agreed to indemnify Christiana for
certain liabilities of Christiana. Christiana further has the right to require
the Company or TLC to purchase all of Christiana's 333.333 Membership Units in
TLC for a price equal to $7 million.
D. SUBSEQUENT EVENTS:
On January 7, 1999, the Company made an amended initial public offering
to the shareholders of Christiana Companies, Inc. to purchase one share of the
Company for each share of Christiana held immediately before Christiana is
acquired by Weatherford International, Inc. At the completion of the offering,
C2 would purchase a two-thirds ownership in TLC.
On February 8, 1999, the shareholders of both Christiana and
Weatherford approved the acquisition of Christiana by Weatherford. On March 4,
1999, the Company's common shares were issued to subscribers contemporaneous
with the distribution of the cash merger consideration attributable to the
Christiana and Weatherford transaction. At that time, the Company acquired
two-thirds of TLC.
19
<PAGE> 20
On March 12, 1999, the Company completed the purchase of Zero Zone,
Inc., a Wisconsin-based manufacturer of refrigerated and freezer display cases.
The Company invested $4.5 million in equity and capital notes and owns 70.6% of
Zero Zone with the balance being held by the President of Zero Zone and other
members of its management team.
E. SUPPLEMENTAL FINANCIAL INFORMATION
The acquisition of TLC by the Company is being accounted for as a
combination of entities under common control because a single group of
shareholders that controlled TLC will control the Company. Accordingly, no
purchase accounting adjustments will be recorded at the time of purchase, but
rather the purchase will be accounted for like a pooling of interests.
As the combination of TLC and the Company had not occurred as of
December 31, 1998, restatement of the financial statements as if the Company was
a combined entity at December 31, 1998 is not permitted. However, the audited
financial statements of TLC that are included on pages 22 to 25 are presented to
give effect to the combined entity as if the combination had occurred prior to
December 31, 1998. The historical financial statements of TLC do not reflect the
historical activity of the Company as such activity would not be material to
those financial statements.
20
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholder of C2, Inc.
We have audited the accompanying balance sheets of C2, Inc. (a
Wisconsin corporation), as of December 31, 1998 and 1997. These balance sheets
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these balance sheets 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 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 balance sheet presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the balance sheets referred to above present fairly, in
all material respects, the financial position of C2, Inc. as of December 31,
1998 and 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 22, 1999
21
<PAGE> 22
TOTAL LOGISTIC CONTROL, LLC
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------------------- --------------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 9,000 $ 388,000
Accounts receivable, net 9,411,000 8,694,000
Inventories 2,346,000 703,000
Prepaids and other assets 85,000 233,000
------------------- -------------------
Total current assets 11,851,000 10,018,000
------------------- -------------------
Long-Term Assets:
Fixed assets, net 68,996,000 73,261,000
Goodwill 5,357,000 5,514,000
Other assets 857,000 641,000
------------------- -------------------
Total long-term assets 75,210,000 79,416,000
------------------- -------------------
Total assets $87,061,000 $89,434,000
==================== ===================
LIABILITIES AND MEMBER'S EQUITY:
Current Liabilities:
Current maturities of long-term debt $ 1,848,000 $ 1,245,000
Accounts payable 6,519,000 4,804,000
Accrued liabilities 4,630,000 3,579,000
------------------- -------------------
Total current liabilities 12,997,000 9,628,000
------------------- -------------------
Due to Parent Company 3,000,000 3,000,000
Long-Term Liabilities:
Long-term debt, less current maturities 35,277,000 33,617,000
Other liabilities 330,000 350,000
------------------- -------------------
Total long-term liabilities 38,607,000 36,967,000
------------------- -------------------
Total liabilities 51,604,000 46,595,000
------------------- -------------------
TOTAL MEMBER'S EQUITY 35,457,000 42,839,000
=================== ===================
Total liabilities and member's equity $87,061,000 $89,434,000
=================== ===================
</TABLE>
See notes to financial statements.
22
<PAGE> 23
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------------- -------------------- ------------------
Revenues:
<S> <C> <C> <C>
Warehousing and logistic services $ 90,610,000 $ 90,100,000 $ 78,349,000
Operating Expenses:
Warehousing and logistic expenses 76,211,000 76,368,000 66,179,000
Selling, general and administrative expenses 7,549,000 7,526,000 6,937,000
------------------ ----------------- ----------------
83,760,000 83,894,000 73,116,000
------------------ ----------------- ----------------
Income from operations 6,850,000 6,206,000 5,233,000
Other (Income) Expenses:
Interest expense (2,586,000) (2,953,000) (3,067,000)
Gain (loss) on disposal of assets (212,000) 238,000 (1,281,000)
Other income (expenses), net 323,000 (576,000) (165,000)
------------------ ----------------- ----------------
(2,475,000) (3,291,000) (4,513,000)
------------------ ----------------- ----------------
Net income before income taxes 4,375,000 2,915,000 720,000
Provision for Income Taxes: -- 515,000 304,000
Current provision for income taxesProvision for income taxes
Adjustment of deferred income taxes
resulting from a change in tax status -- 11,171,000 --
------------------ ----------------- ----------------
Net income $ 4,375,000 $ 13,571,000 $ 416,000
================== ================= ================
Basic and diluted income per membership unit $ 4,375 $ 13,571 $ 416
------------------ ----------------- ----------------
Basic and diluted weighted average number of
Membership units outstanding 1,000 1,000 1,000
------------------ ----------------- ----------------
</TABLE>
See notes to financial statements.
23
<PAGE> 24
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF MEMBER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Membership Member's
Units Equity
------------------ ---------------------
<S> <C> <C>
BALANCE, DECEMBER 31, 1996 1,000 $31,594,000
Net income -- 13,571,000
Distribution to Christiana for promissory note retirement -- (2,326,000)
------------------ ---------------------
BALANCE, DECEMBER 31, 1997 1,000 42,839,000
Net income -- 4,375,000
Distribution to Christiana for income taxes -- (1,757,000)
Distribution to Christiana related to Merger Agreement (Note H) -- (10,000,000)
------------------ ---------------------
BALANCE, DECEMBER 31, 1998 1,000 $35,457,000
================== =====================
</TABLE>
See notes to financial statements.
24
<PAGE> 25
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------------- ------------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income $ 4,375,000 $ 13,571,000 $ 416,000
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and amortization 6,254,000 6,753,000 6,690,000
(Gain) loss on disposal of assets 212,000 (238,000) 1,281,000
Deferred income tax provision -- (46,000) 52,000
Adjustment of deferred income taxes resulting
from a change in tax status -- (11,171,000) --
------------------ ------------------ ----------------
Changes in Assets and Liabilities:
(Increase) decrease in accounts receivable (717,000) 74,000 856,000
(Increase) decrease in inventories (1,643,000) (345,000) 631,000
(Increase) decrease in prepaids and others assets (67,000) 681,000 1,194,000
Increase (decrease) in accounts payable and accrued liabilities 2,746,000 2,312,000 (1,272,000)
----------------- ------------------ -----------------
Net cash provided by operating activities 11,160,000 11,591,000 9,848,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (2,845,000) (2,602,000) (14,406,000)
Proceeds from sale of fixed assets 801,000 950,000 645,000
----------------- ------------------ -----------------
Net cash used in investing activities (2,044,000) (1,652,000) (13,761,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) on line of credit, net -- (1,735,000) (44,000)
Proceeds from issuance of long-term debt 10,000,000 -- 6,176,000
Payment of amounts due to Christiana (295,000) --
Payment of long-term debt (7,738,000) (5,703,000) (2,157,000)
Distribution to Christiana for promissory note retirement -- (2,326,000) --
Distribution to Christiana for income taxes (1,757,000) -- --
Distribution to Christiana related to merger agreement (10,000,000) -- --
----------------- ------------------ -----------------
Net cash provided by (used in) financing activities (9,495,000) (10,059,000) 3,975,000
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (379,000) (120,000) 62,000
BEGINNING CASH AND CASH EQUIVALENTS, JANUARY 1 388,000 508,000 446,000
----------------- ------------------ -----------------
ENDING CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 9,000 $ 388,000 $ 508,000
================= ================== =================
Supplemental Disclosures of Cash Flow Information
Interest paid $ 2,915,000 $ 3,065,000 $ 3,279,000
Amounts paid to Parent for income taxes $ 1,757,000 $ 300,000 $ 279,000
</TABLE>
See notes to financial statements.
25
<PAGE> 26
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 December 31, 1998 and 1997, and the related
statements of income, member's equity and cash flows for each of the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Total Logistic Control, LLC
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the years in the three year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
February 19, 1999
26
<PAGE> 27
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 December 31,
1998 and 1997 balance sheets reflect the consolidated results of TLC. The
statements of earnings, member's equity and cash flows for the year ended
December 31, 1998 and for the period from July 1, 1997 through December 31, 1997
reflect the consolidated results of TLC. The statements of earnings, equity and
cash flows for the period from January 1, 1997 through June 30, 1997 and for the
year ended December 31, 1996 reflect the combined operations of Wiscold and
Total Logistic. All material intercompany transactions have been eliminated. TLC
operates in two industry segments (i) refrigerated and non-refrigerated
warehousing, and (ii) integrated third-party logistics services including
freight management, distribution and transportation services.
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 $200,000 and $310,000 at December 31, 1998 and
1997, respectively. The provision for bad debts was $145,000, $106,000 and
$248,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
INVENTORIES: Inventories consist of transportation equipment, repair parts
and commodities held for distribution under an exclusive logistic contract.
These items are carried at their lower of FIFO (first-in, first-out) cost or
market value. As of December 31, 1998 and 1997, inventories are comprised of the
following:
<TABLE>
<CAPTION>
1998 1997
----------------- ----------------
<S> <C> <C>
Transportation repair parts $ 137,000 $212,000
Commodities and other 2,209,000 491,000
----------------- ----------------
$2,346,000 $703,000
================= ================
</TABLE>
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:
27
<PAGE> 28
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------- ESTIMATED
1998 1997 USEFUL LIVES
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Land $ 3,330,000 $ 3,330,000 --
Machinery and equipment 54,838,000 56,183,000 5-7 years
Buildings and improvements 41,047,000 41,570,000 30-32 years
Construction in progress 1,038,000 494,000
-------------------- --------------------
100,253,000 101,577,000
Less: Accumulated depreciation (31,257,000) (28,316,000)
==================== ====================
$68,996,000 $73,261,000
==================== ====================
</TABLE>
GOODWILL: Goodwill is amortized on a straight-line basis over 40 years
($157,000 in 1998, 1997 and 1996). The accumulated amortization at December 31,
1998 and 1997 was $758,000 and $601,000, 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 to measure whether the goodwill is
impaired. If impaired, a loss is recognized for the amount by which 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.
LONG-LIVED ASSETS: During 1997, TLC adopted Statement of Financial
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 an 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 of long-lived assets may warrant
revision or that the remaining balance 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 to measure whether the long-lived assets are impaired. If
impaired, a loss is recognized for the amount by which the carrying value
exceeds the fair value.
28
<PAGE> 29
B. RELATED PARTY TRANSACTIONS:
As of December 31, 1998 and 1997, TLC had amounts due to Christiana of
$3,000,000 which represented a note payable to Christiana that bears interest at
a rate of 8.0% per annum. Related party interest expense was $240,000 for 1998,
1997 and 1996. Prior to the combination of Wiscold and Total Logistic, Total
Logistic charged Christiana a management fee related to certain administrative
services rendered by TLC on behalf of Christiana. The amount of this management
fee was $120,000 and $240,000 for 1997 and 1996, respectively, 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
1998, 1997 and 1996 is not material.
During 1997, TLC made a payment on behalf of Christiana to retire a
promissory note and accrued interest thereon in the amount of $2,326,000. TLC
also repaid $295,000 of debt to Christiana during 1997. TLC is required to make
distributions to Christiana for current taxes payable attributable to TLC's
income. During 1998, TLC recorded distributions to Christiana for income taxes
of $1,757,000. Also during 1998, TLC made a distribution to Christiana of
$10,000,000 to fund Christiana's purchase of additional shares of Wheatherford
International, Inc. in accordance with a Merger Agreement (Note H). These
distributions to Christiana are reflected as reductions to Member's Equity in
1998 and 1997 as applicable.
C. INDEBTEDNESS:
The following is a summary of indebtedness as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------------ -------------------
<S> <C> <C>
Revolving credit agreement $35,198,000 $29,573,000
Notes payable 163,000 3,525,000
Subordinated Note 1,764,000 1,764,000
------------------ -------------------
37,125,000 34,862,000
Less: Current portion of long-term debt (1,848,000) (1,245,000)
================== ===================
Long-term debt $35,277,000 $33,617,000
================== ===================
</TABLE>
TLC has a revolving credit agreement that provides for borrowings at
December 31, 1998 of up to $70,000,000. Borrowings under this agreement mature
on November 2, 2003 and bear interest, payable monthly at either LIBOR plus 100
basis points, or a floating rate at the bank's prime rate (6.9% at December 31,
1998) and are secured by substantially all of TLC's assets. The interest rate
will vary over the term of the credit agreement pursuant to a pricing grid based
on the ratio of funded debt to EBITDA, as defined. 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. As of December 31,
1998, TLC was in compliance with all covenants. No compensating balances are
required under the terms of this credit facility.
TLC's subordinated note, due January 2, 1999, bears interest at 8% and is
guaranteed by Christiana.
29
<PAGE> 30
As of December 31, 1998, the future maturities of consolidated indebtedness
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 1,848,000
2000 77,000
2001 --
2002 --
2003 35,200,000
</TABLE>
The weighted average interest rate paid on short-term borrowings was 7.69%
and 7.65% for 1998 and 1997, 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:
Prior to July 1, 1997, TLC was 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 was no longer a
taxable entity as of June 30, 1997, all deferred taxes of TLC were 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 $515,000 and $304,000 provision for income taxes for 1997 and 1996,
respectively, represents the combined Federal and state income tax provision for
the periods during which TLC was a C-Corporation.
A summary of TLC's provision for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996
---------------- -----------------
<S> <C> <C>
Current:
Federal $487,000 $219,000
State 74,000 33,000
Deferred (46,000) 52,000
================ =================
$515,000 $304,000
================ =================
</TABLE>
In the event that TLC was a taxable entity, a net deferred tax liability of
$11,477,000 and $11,523,000 as of December 31, 1998 and 1997 would have been
recorded on the balance sheet. The components are as follows:
30
<PAGE> 31
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------
1998 1997
-------------------- --------------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses $ 1,035,000 $ 853,000
Book over tax amortization 478,000 595,000
-------------------- --------------------
Total deferred tax assets $ 1,513,000 $ 1,448,000
==================== ====================
Deferred tax liabilities:
Tax over book depreciation $ 12,990,000 $ 12,971,000
==================== ====================
Total deferred tax liabilities $ 12,990,000 $ 12,971,000
==================== ====================
</TABLE>
A reconciliation of the statutory Federal income tax rate to TLC's effective
tax rate for the six months ended June 30, 1997 and for the year ended December
31, 1996, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996
------------- -----------------
<S> <C> <C>
Statutory Federal income tax rate 34% 34%
Increase in taxes resulting from State income tax, net 4 4
Other, net 4 4
============= =================
42% 42%
============= =================
</TABLE>
E. EMPLOYEE BENEFIT PLANS:
Prior to the combination of Wiscold and Total Logistic Control, TLC had two
401(k) plans covering substantially all employees. Upon formation of TLC these
plans were merged to form one continuing plan. 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
$6,017,000, $6,965,000 and $6,483,000 in 1998, 1997 and 1996, respectively. At
December 31, 1998, future minimum lease payments under these operating leases
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 $4,563,000
2000 4,531,000
2001 3,822,000
2002 2,851,000
2003 2,016,000
Thereafter 9,308,000
</TABLE>
G. ACCOUNTING PRONOUNCEMENTS:
During 1998, TLC adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income." This statement establishes
standards for the reporting and display of comprehensive income and its
components. Components of comprehensive income are net income and all other
non-member changes in equity. TLC does not have any other comprehensive income
items. Accordingly, comprehensive income and net income are the same for all
periods presented.
During 1998, the Financial Accountings Standards Board released
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivatives and hedging activities. It
31
<PAGE> 32
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value. As
TLC does not use derivatives nor engage in hedging activities, this statement
will not have an impact on TLC's financial position. Adoption of this statement
is required by TLC beginning on January 1, 2000.
H. WEATHERFORD INTERNATIONAL, INC. MERGER AGREEMENT:
On December 12, 1997, Christiana entered in an agreement with
Weatherford International, Inc. ("Weatherford") whereby Weatherford would
purchase all of the outstanding shares of Christiana. The terms of the merger
provided that each Christiana common share would be converted into (i) .7453
shares of Weatherford International, Inc. common stock, (ii) cash in the
approximate amount of $4.00, depending upon the balance of certain assets and
liabilities at the time of closing and (iii) a contingent cash payment of
approximately $1.92 after 5 years, subject to the incurrence of any indemnity
claims by Weatherford during this period.
On August 17, 1998, the shareholders of both Weatherford and Christiana
overwhelmingly approved the Merger agreement and sale of TLC to C2, Inc.
However, due to a decline in the value of Weatherford's common stock price, the
merger transaction was postponed until the conditions were met for Christiana's
shareholders to not recognize any taxable gain or loss on their exchange of
Christiana shares for Weatherford common stock in the merger. To meet this
requirement, Weatherford's stock price was to be approximately $30.00 per share.
On October 14, 1998, Weatherford and Christiana amended the merger agreement
in order to complete the merger on a partially tax-free basis. The revised
merger agreement eliminated the requirement for a contingent cash payment after
five years. This cash payment was instead used by Christiana to purchase
additional Weatherford common stock in the open market. Additionally, Christiana
agreed to spend up to $5 million of available cash to purchase additional shares
of Weatherford stock, if necessary. The share price of Weatherford stock needed
to consummate the merger was reduced from $30 to approximately $13 per share.
By its terms, the Merger Agreement was consummated on February 8, 1999. At
or prior to the completion of the merger:
(1) TLC declared and paid a $20,000,000 dividend to Christiana. $10,000,000
was declared and paid during 1998 while the remaining $10,000,000 was
declared and paid during 1999, prior to the merger.
(2) C2, Inc. purchased 666.667 Membership Units, representing a 66.7%
ownership of TLC to Christiana for $10,667,000.
(3) TLC agreed to indemnify Christiana for certain liabilities of
Christiana.
I. SEGMENT INFORMATION:
TLC divides its operations into two primary segments - warehousing services
and logistic services. These segments are determined based upon the primary
service lines provided to customers by TLC. However, TLC provides multiple
services from both segments to many customers.
TLC's warehousing segment operates twelve distribution warehouses consisting
of seven refrigerated and five non-refrigerated. These distribution centers
offer storage, order selection, assembly and repackaging services in addition to
inventory management services. In addition, TLC's refrigerated warehousing
operations offer temperature sensitive storage, blast freezing and individual
quick freeze (IQF) and packaging services.
32
<PAGE> 33
TLC's logistic segment offers transportation and logistics management
services in addition to international transportation and foodservice
distribution services. These services are provided using both owned company
equipment and carrier management services utilizing third party owned equipment.
The accounting policies used by TLC's business segments are the same
accounting policies used in the preparation of the TLC financial statements.
Segment profit for 1998 is revenues less direct and allocable operating
expenses. Segment profit for 1997 and 1996 reflects only the segment gross
margin as TLC did not specifically allocate selling, general and administrative
expenses to its warehousing and logistic segments during these years. Corporate
items include interest expense, interest income, amortization expense, other
income/expense and income taxes. Corporate items for 1997 and 1996 also include
all selling, general and administrative expenses. Beginning in 1998, all
corporate depreciation and amortization has been included as a component of
warehousing and logistic segment profit. Corporate assets are principally cash
and cash equivalents, goodwill, prepaid items and certain nonoperating fixed
assets. Corporate capital expenditures consist primarily of computer equipment
and software and other nonoperating fixed assets.
Financial information by business segment is as follows:
<TABLE>
<CAPTION>
Warehousing Logistic
Services Services Corporate Total
----------------- ------------------ ------------------ -----------------
1998
<S> <C> <C> <C> <C>
Revenues $38,099,000 $52,511,000 $ -- $90,610,000
Segment profit 4,609,000 2,241,000 (2,475,000) 4,375,000
Total assets 68,644,000 10,723,000 7,694,000 87,061,000
Capital expenditures 1,888,000 296,000 661,000 2,845,000
Depreciation and amortization 5,107,000 1,147,000 -- 6,254,000
1997
Revenues $38,395,000 $51,705,000 $ -- $90,100,000
Segment profit 9,414,000 (1) 4,318,000 (1) (161,000) (2) 13,571,000
Total assets 71,927,000 10,424,000 7,083,000 89,434,000
Capital expenditures 2,146,000 102,000 354,000 2,602,000
Depreciation and amortization 4,998,000 1,216,000 539,000 6,753,000
1996
Revenues $44,274,000 $34,075,000 $ -- $78,349,000
Segment profit 8,273,000 (1) 3,897,000 (1) (11,754,000) (2) 416,000
Total assets 76,087,000 10,899,000 7,838,000 94,824,000
Capital expenditures 13,106,000 994,000 306,000 14,406,000
Depreciation and amortization 4,652,000 1,578,000 460,000 6,690,000
</TABLE>
(1) Segment profit in 1997 and 1996 does not include an allocation for selling,
general and administrative expenses.
(2) Corporate segment profit for 1997 and 1996 includes selling, general and
administrative expenses of TLC's warehousing and logistic segments. Included in
Corporate segment profit during 1997 is the $11,171,000 adjustment of deferred
income taxes related to TLC's change in tax status.
33
<PAGE> 34
TOTAL LOGISTIC CONTROL, LLC
QUARTERLY FINANCIAL INFORMATION (1)
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER TOTAL
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Revenues $21,865,000 $21,600,000 $22,370,000 $24,775,000 $90,610,000
Earnings From Operations 1,437,000 1,784,000 1,764,000 1,865,000 6,850,000
Earnings Before Taxes 740,000 1,297,000 1,086,000 1,252,000 4,375,000
Net Earnings 740,000 1,297,000 1,086,000 1,252,000 4,375,000
Basic and Diluted Earnings Per
Membership Unit 740 1,297 1,086 1,252 4,375
1997
Revenues $22,450,000 $20,936,000 $23,047,000 $23,667,000 $90,100,000
Earnings From Operations 1,307,000 1,291,000 1,847,000 1,761,000 6,206,000
Earnings Before Taxes 735,000 356,000 923,000 901,000 2,915,000
Net Earnings 450,000 11,297,000 923,000 901,000 13,571,000
Basic and Diluted Earnings Per
Membership Unit 450 11,297 923 901 13,571
</TABLE>
FIVE YEAR FINANCIAL INFORMATION (1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $90,610,000 $90,100,000 $78,349,000 $74,266,000 $68,110,000
Net Earnings 4,375,000 13,571,000 416,000 1,966,000 2,426,000
Basic Earnings Per Membership Unit 4,375 13,571 416 1,966 2,426
Total Assets 87,061,000 89,434,000 94,823,000 91,651,000 90,018,000
Long-Term Liabilities 38,607,000 36,967,000 58,037,000 58,281,000 55,615,000
Shareholders' Equity 35,457,000 42,839,000 36,786,000 36,370,000 31,831,000
</TABLE>
(1) The unaudited quarterly data for 1998 and 1997 and the five year financial
information reflect the historical financial information of TLC. This
information is being presented for purposes of additional analysis as if C2
and TLC were a combined entity for all periods presented.
34
<PAGE> 35
C2, INC.
CORPORATE INFORMATION
<TABLE>
<CAPTION>
DIRECTORS
<S> <C>
WILIAM T. DONOVAN, Chairman of the Board and SHELDON B. LUBAR, Chairman , Lubar & Co.
Chief Financial Officer Incorporated
NICHOLAS F. BRADY, Chairman of Darby ALBERT O. NICHOLAS, President of Nicholas
Advisors, Inc. Company, Inc.
DAVID J. LUBAR, President
OFFICERS
WILLIAM T. DONOVAN, Chairman of the Board and BETTY J. WHITE, Treasurer, Controller and
Chief Financial Officer Assistant Secretary
DAVID J. LUBAR, President DAVID E. BECKWITH, Secretary
OYVIND SOLVANG, Vice President
TRANSFER AGENT AND REGISTRAR EXCHANGE LISTING
Firstar Trust Company C2, Inc. common stock is listed on the NASDAQ
P.O. Box 2077 (Symbol CTOO).
Milwaukee, Wisconsin 53201
CORPORATE HEADQUARTERS
700 North Water Street
Suite 1200
Milwaukee, WI 53202
Telephone: (414) 291-9000
Facsimile: (414) 291-9061
</TABLE>
35
<PAGE> 36
C2, INC.
EXHIBITS
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1998
36
<PAGE> 37
INDEX TO EXHIBITS
EXHIBIT NO. BRIEF DESCRIPTION OF EXHIBIT
2 Purchase Agreement dated as of December 22, 1997, as
amended by subsidiary Weatherford International,
Inc., TLC, Christiana Companies, Inc. and the
Company [Incorporated by referenced to Annex A of
the C2, Inc. Prospectus filed as part of Company's
Form S-1 Registration Statement (Reg. No.
333-460270)].
3A Company's Amended and Restated Articles of
Incorporation. [Incorporated by referenced to
Exhibit 3.1 to Company's Form S-1 Registration
Statement (Reg. No. 333-46027)].
10 Purchase agreement dated as of December 22, 1997, as
amended by subsidiary Weatherford International,
Inc., TLC, Christiana Companies, Inc. and the
Company [Incorporated by referenced to Annex A of
the C2, Inc. Prospectus filed as part of Company's
Form S-1 Registration Statement (Reg. No.
333-46027)].
3B Company's Amended and Restated Bylaws.
[Incorporated by reference to Exhibit 3.2 to
Company's Form S-1 Registration Statement (Reg. No.
333-46027)].
21 Company's Subsidiaries.
27 Financial Data Schedule.
37
<PAGE> 1
C2, INC.
EXHIBIT 21 - SUBSIDIARIES
This exhibit sets forth the Registrant's corporate subsidiary at December 31,
1998 and its state of incorporation. This subsidiary does business under its own
corporate name and is included in the Consolidated Financial Statement. This
subsidiary is two-thirds owned by Registrant.
JURISDICTION OF
NAME INCORPORATION
Total Logistic Control, LLC Delaware
38
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001052102
<NAME> C2, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 282,100
<CURRENT-LIABILITIES> 282,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 100
<TOTAL-LIABILITY-AND-EQUITY> 282,100
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
