SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 9, 1998
---------------------------
UNITED ROAD SERVICES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 000-24019 94-3278455
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) Identification No.)
8 Automation Lane, Albany, New York 12205
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code 518-446-0140
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. OTHER EVENTS
In addition to its acquisition of Pilot, which occurred on December 9,
1998, referred to in the Form 8-K filed December 23, 1998, on January 11, 1999,
United Road Services, Inc. acquired MPG Transco, Ltd. ("MPG") for an aggregate
of $10.4 million in cash and 996,351 shares of Common Stock. Historical
financial statements for MPG are contained in Exhibit 99.2 attached hereto.
Unaudited pro forma combined financial information relating to the Pilot and MPG
acquisitions is contained in Exhibit 99.3 attached hereto.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
1. The balance sheets of Pilot Transport, Inc. as of December 31, 1996
and 1997 (audited) and September 30, 1998 (unaudited) and statements of
operations, stockholders' equity and cash flows for the years ended December 31,
1996 and 1997 (audited) and the nine months ended September 30, 1997 and 1998
(unaudited) contained in Exhibit 99.1 attached hereto are incorporated herein by
reference.
2. The balance sheets of MPG Transco, Ltd. as of July 31, 1997 and 1998
(audited) and October 31, 1998 (unaudited) and statements of operations,
stockholders' equity and cash flows for the years ended July 31, 1997 and 1998
(audited) and the three months ended October 31, 1997 and 1998 (unaudited)
contained in Exhibit 99.2 attached hereto are incorporated herein by reference.
(b) Pro Forma financial information
The unaudited Pro Forma Combined Financial Statements for United Road
Services, Inc. contained in Exhibit 99.3 attached hereto are incorporated herein
by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 11, 1999 UNITED ROAD SERVICES, INC.
By: /s/ Edward T. Sheehan
---------------------
Edward T. Sheehan
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
99.1 The balance sheets of Pilot Transport, Inc. as of December 31,
1996 and 1997 (audited) and September 30, 1998 (unaudited) and
statements of operations, stockholders' equity and cash flows
for the years ended December 31, 1996 and 1997 (audited) and
the nine months ended September 30, 1997 and 1998 (unaudited).
99.2 The balance sheets of MPG Transco, Ltd. as of July 31, 1998
and 1997 (audited) and October 31, 1998 (unaudited) and
statements of operations, stockholders' equity and cash flows
for the years ended July 31, 1997 and 1998 (audited) and the
three months ended October 31, 1997 and 1998 (unaudited).
99.3 The unaudited Pro Forma Combined Financial Statements for
United Road Services, Inc.
EXHIBIT 99.1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Pilot Transport, Inc.
We have audited the accompanying balance sheets of Pilot Transport, Inc. as
of December 31, 1996 and 1997, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Pilot Transport, Inc. as of
December 31, 1996 and 1997, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/S/ KPMG LLP
Detroit, Michigan
November 12, 1998
<PAGE>
<TABLE>
PILOT TRANSPORT, INC.
BALANCE SHEETS
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997 1998
----- ----- ----
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 13,853 12,413 181,442
Accounts receivable.................................................. 1,703,812 1,268,230 1,944,997
Prepaid expenses..................................................... 57,545 76,355 55,428
Contracts for trailer purchases (note 6)............................. 99,458 194,510 560,471
--------- ------- -------
Total current assets.......................................... 1,874,668 1,551,508 2,742,338
Vehicles and equipment, net (note 2).................................... 5,071,066 4,283,866 3,680,568
--------- --------- ---------
Total assets.................................................. $6,945,734 5,835,374 6,422,906
========== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loan payable (note 3)................................................ $2,200,000 1,050,000 2,005,000
Accounts payable..................................................... 164,100 73,276 240,236
Accrued bonus and profit sharing..................................... -- -- 792,326
Other accrued expenses............................................... 160,000 236,852 272,528
--------- ------- -------
Total current liabilities .................................... 2,524,100 1,360,128 3,310,090
========== ========= =========
Stockholders' equity:
Common stock, $1 par value; 1,000,000 shares authorized, 10,000
shares issued and outstanding...................................... 10,000 10,000 10,000
Retained earnings.................................................... 4,411,634 4,465,246 3,102,816
--------- --------- ---------
Total stockholders' equity.................................... 4,421,634 4,475,246 3,112,816
--------- --------- ---------
Total liabilities and stockholders' equity.................... $6,945,734 5,835,374 6,422,906
========== ========= =========
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
PILOT TRANSPORT, INC.
STATEMENTS OF OPERATIONS
<CAPTION>
FOR THE YEARS ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------ -------------
1996 1997 1997 1998
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Transportation revenue...................... $14,381,761 17,118,927 13,135,339 14,405,086
Cost of revenue............................. 9,386,529 10,066,642 7,463,219 8,906,264
----------- ---------- ---------- ----------
Gross profit...................... 4,995,232 7,052,285 5,672,120 5,498,822
Selling, general and administrative expense. 2,920,385 4,009,480 3,149,367 3,090,791
----------- ---------- ---------- ----------
Income from operations............ 2,074,847 3,042,805 2,522,753 2,408,031
Other income (expense):
Interest................................. (249,378) (167,880) (144,432) (113,612)
Loss on sale of assets................... (48,926) (167,047) (151,709) (31,640)
----------- ---------- ---------- ----------
Income before income tax.......... 1,776,543 2,707,878 2,226,612 2,262,779
Income taxes (note 1)....................... -- -- -- --
----------- ---------- ---------- ----------
Net income........................ $ 1,776,543 2,707,878 2,226,612 2,262,779
=========== ========= ========= =========
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
PILOT TRANSPORT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDERS'
STOCK EARNINGS EQUITY
----- -------- ------
<S> <C> <C> <C>
Balance at December 31, 1995....................................... $10,000 3,903,266 3,913,266
Net income--1996................................................... -- 1,776,543 1,776,543
Dividends.......................................................... -- (1,268,175) (1,268,175)
---------- ----------- -----------
Balance at December 31, 1996....................................... 10,000 4,411,634 4,421,634
Net income--1997................................................... -- 2,707,878 2,707,878
Dividends.......................................................... -- (2,654,266) (2,654,266)
---------- ----------- -----------
Balance at December 31, 1997....................................... 10,000 4,465,246 4,475,246
Net income nine months ended September 30, 1998 (unaudited)........ -- 2,262,779 2,262,779
Dividends (unaudited).............................................. -- (3,625,209) (3,625,209)
---------- ----------- -----------
Balance at September 30, 1998 (unaudited).......................... $10,000 3,102,816 3,112,816
========== ========= =========
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
PILOT TRANSPORT, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
1996 1997 1997 1998
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $1,776,543 2,707,878 2,226,612 2,262,779
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 797,272 815,703 606,964 599,660
Loss on sale of equipment........................ 48,926 167,047 151,709 31,640
Decrease (increase) in accounts receivable....... 503,556 435,582 (367,252) (676,767)
Decrease (increase) in prepaid expenses.......... 85,253 (18,810) (26,135) 20,927
Decrease (increase) in equipment deposits and
other.......................................... (94,458) (95,052) 12,848 (365,961)
Increase (decrease) in accounts payable and
accrued expenses............................... 96,244 (13,972) 948,292 994,962
---------- ---------- ---------- ---------
Net cash provided by operations............. 3,213,336 3,998,376 3,553,038 2,867,240
---------- ---------- ---------- ---------
Cash flows from investing activities:
Purchases of vehicles and equipment................... (1,625,686) (905,247) (799,532) (536,703)
Proceeds from sale of equipment....................... 338,850 709,695 610,695 508,701
---------- ---------- ---------- ---------
Net cash used in investing activities....... (1,286,836) (195,552) (188,837) (28,002)
----------- --------- --------- --------
Cash flows from financing activities:
Net borrowings (repayments) from facility loan........ (675,000) (1,150,000) (700,000) 955,000
Dividends paid........................................ (1,268,175) (2,654,264) (2,654,264) (3,625,209)
----------- ----------- ----------- -----------
Net cash used in financing activities....... (1,943,175) (3,804,264) (3,354,264) (2,670,209)
----------- ----------- ----------- -----------
Net increase (decrease) in cash............. (16,675) (1,440) 9,937 169,029
Cash at beginning of period.............................. 30,528 13,853 13,853 12,413
---------- ---------- ---------- ---------
Cash at end of period.................................... $ 13,853 12,413 23,790 181,442
---------- ---------- ---------- ---------
Supplemental disclosures:
Interest paid......................................... $ 249,638 168,019 144,571 100,791
=========== ========== ========== =========
Income taxes paid..................................... $ -- -- -- --
=========== ========== ========== =========
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
PILOT TRANSPORT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 (UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Pilot Transport Inc. (the Company) operates a fleet of automobile carriers
and provides transportation of automobiles nationwide, primarily to the
automotive manufacturers. The Company's corporate headquarters are located in
Brighton, Michigan and it has an office in Tempe, Arizona.
(b) Revenue Recognition
The Company operates one segment related to the transportation of vehicles.
The Company's revenue is derived from customers who require transportation
of vehicles. Transport revenue is recognized upon the delivery of the vehicles
to their final destination. Expenses related to the generation of revenue are
recognized as incurred.
(c) Vehicles and Equipment
Vehicles and equipment are stated at cost. Depreciation is determined for
financial statement purposes using the straight-line method over the estimated
useful lives of the individual assets. Accelerated methods of depreciation have
been used for income tax purposes. For financial statement purposes, the Company
provides for depreciation of vehicles and equipment over the following estimated
useful lives.
Transportation equipment................................. 10 years
Furniture and fixtures................................... 5 years
Office and warehouse equipment........................... 5 years
Automobiles.............................................. 5 years
(d) Income Taxes
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
Federal corporate income taxes on its taxable income. Instead, the stockholders
are liable for individual Federal and state income taxes on their respective
shares of the Company's taxable income. The State of Michigan has a tax based
primarily on gross sales and the corporation is subject to this tax. Other
states have various corporate taxes not based upon income and the corporation is
subject to these taxes. All state taxes are included in selling, general and
administrative expense.
The Company utilizes accelerated depreciation for transportation equipment
in reporting taxable income to its shareholders. This results in a lower tax
basis for assets than is reported in the accompanying financial statements of
$2,445,469, $2,027,962 and $1,729,441 at December 31, 1996 and 1997 and at
September 30, 1998, respectively.
(e) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
<PAGE>
PILOT TRANSPORT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(f) Fair Value of Financial Instruments
Due to the short-term nature of various financial instruments and the
current variable borrowing rates available to the Company on its bank
borrowings, the fair value of the Company's financial instruments approximates
their carrying values.
(g) Interim Financial Statements
The interim financial information included in these financial statements is
unaudited but reflects all adjustments (consisting of only normal recurring
accruals) which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented.
(2) VEHICLES AND EQUIPMENT
Vehicles and equipment consist of the following:
DECEMBER 31, SEPTEMBER 30,
------------ -------------
1996 1997 1998
---- ---- ----
Transportation equipment................... $ 7,306,993 6,316,499 5,600,964
Automobiles................................ 68,168 68,168 45,586
Office equipment........................... 223,509 270,801 323,033
Warehouse equipment and improvements....... 74,166 74,166 93,516
----------- --------- ---------
Total ..................................... 7,672,836 6,729,634 6,063,099
Accumulated depreciation................... 2,601,770 2,445,768 2,382,531
----------- --------- ---------
Net vehicles and equipment............ $ 5,071,066 4,283,866 3,680,568
=========== ========= =========
(3) FACILITY LOAN PAYABLE
A note payable to Comerica Bank is a Secured Accounts Financing Facility
("Facility") Master Revolving Note with a variable rate (at one-half a
percentage point less than prime rate) and is due on demand. The Facility is
renewed annually. The Company can borrow up to $5,000,000 for working capital
and the purchase of equipment. Advances and required repayments are determined
by a formula which is based upon a percentage of eligible accounts receivable,
the price of new equipment and a predetermined sliding scale of existing
equipment. Collateral for this note is a first lien on all accounts receivable,
vehicles and equipment. In addition, there is a third collateral position on
Michigan real estate owned by the Pilot Partners, LLC (see note 5).
(4) PENSION PLAN
The Company has a 401(k) profit-sharing plan for substantially all
employees who are over 21 years of age and have six months of service.
Contributions are not required by the Company; however, when made, they are
determined as a percentage of each eligible employee's salary. The Company
contributions for the years ended December 31, 1996 and 1997 and the nine months
ended September 30, 1997 and 1998 (unaudited) were $223,106, $250,991, $158,396
and $286,485, respectively.
<PAGE>
PILOT TRANSPORT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) RELATED PARTY TRANSACTIONS
The Company has entered into several agreements with various partnerships
owned by the shareholders of Pilot Transport, Inc. Following is a summary of the
significant activities between the Company and the partnerships:
(a) Equipment Leases
The Company leased trailers from three family partnerships. The leases
expired in March 1997 and were not renewed. The Company had the responsibility
to repair, maintain and insure the equipment during the lease period. The
Company paid these partnerships $96,000, $24,000, $24,000 and $0 in lease
payments for the years ending December 31, 1996 and 1997 and the nine months
ended September 30, 1997 and 1998 (unaudited), respectively.
(b) Building and Land Lease
The Company leases an office building in Brighton, Michigan and land in
Tempe, Arizona from partnerships owned by the principal shareholders. All leases
require the Company to maintain the facility and insure its contents. The lease
of the land in Tempe, Arizona was terminated in March 1997. The Brighton
property lease expires in March 1999 and requires monthly payments of $11,400.
The Company paid the partnerships $180,000, $147,000, $135,000 and $102,600 for
the years ending December 31, 1996 and 1997 and the nine months ended September
30, 1997 and 1998 (unaudited), respectively, for rental of these facilities.
(6) LONG-TERM LEASES
The Company has entered into various operating leases for a building and
certain tractors and trailers used in providing transportation services to its
customers. The leases of tractors and trailers are generally over a 49-month
period. Following is a schedule of future minimum rental payments required as of
December 31, 1997 (including related party leases discussed in note 5(b)), which
includes new leases beginning at various dates in 1998 with monthly payments of
$50,650.
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
1998........................................... $ 1,104,315
1999........................................... 1,079,354
2000........................................... 1,023,666
2001........................................... 919,071
2002........................................... 285,190
Rental expense for the years ended December 31, 1996 and 1997 and the nine
months ended September 30, 1997 and 1998 (unaudited) was $350,281, $483,959,
$332,071 and $775,621, respectively.
The Company purchased six new "closed" trailers at September 30, 1998, for
which the purchase price has been deposited with the vendor as final
modifications are being made. It is anticipated these units will be delivered
and placed into service in the fourth quarter of 1998. Upon delivery of these
trailers, they will be subject to a sale lease-back under which the trailers
will be sold at cost and leased back.
<PAGE>
PILOT TRANSPORT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) SIGNIFICANT CONCENTRATION OF CREDIT RISK
Approximately 65% of the Company's revenues for each of the years ended
December 31, 1996 and 1997 and the nine months ended September 30, 1997 and 1998
were generated from General Motors and its subdivisions. The Company has entered
into a three-year contract with General Motors which expires January 1, 2001 to
transport vehicles at a predetermined fixed fee on select routes throughout the
United States. Additional business is done on other routes at prevailing
transportation rates. At September 30, 1998 and December 31, 1997 and 1996, the
accounts receivable from General Motors and its subdivisions represented
approximately 60% of the total.
(8) SUBSEQUENT EVENT
The stockholders of the Company entered into a definitive agreement on
November 5, 1998 to sell Pilot Transport, Inc. to United Road Services, Inc.
EXHIBIT 99.2
INDEPENDENT AUDITORS' REPORT
The Board of Directors
MPG Transco, Ltd.:
We have audited the accompanying balance sheets of MPG Transco, Ltd. as of
July 31, 1997 and 1998, and the related statements of operations, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our 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 MPG Transco, Ltd. as of July
31, 1997 and 1998, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
/S/ KPMG LLP
Detroit, Michigan
December 11, 1998
<PAGE>
<TABLE>
MPG TRANSCO, LTD.
BALANCE SHEETS
<CAPTION>
JULY 31, OCTOBER 31,
ASSETS 1997 1998 1998
----- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................................ $ 88,927 1,074,291 347,593
Trade accounts receivable, net of allowance for doubtful
accounts of $100,000 in 1997 and 1998......................... 1,368,797 1,986,064 1,957,619
Accounts receivable from employees............................... 12,016 52,853 42,073
Income tax receivable (note 7)................................... 152,991 -- --
Prepaid and other current assets (note 2)........................ 344,503 158,569 111,853
Deferred income taxes (note 7)................................... 101,824 208,225 171,418
----------- --------- ----------
Total current assets........................................ 2,069,058 3,480,002 2,630,556
Property and equipment, net (notes 3 and 5)........................... 11,504,108 9,655,810 10,630,088
Cash surrender value of officer's life insurance...................... 246,065 302,734 320,045
Other assets 28,200 27,700 27,700
----------- --------- ----------
Total assets................................................ $13,847,431 13,466,246 13,608,389
=========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit (note 5).......................................... $ 1,125,000 999,580 986,224
Current installments of notes payable (note 5)................... 3,170,821 1,799,544 2,004,499
Accounts payable................................................. 759,029 879,062 818,074
Due to related party (note 9).................................... 95,982 894,794 23,936
Income taxes payable (note 7).................................... -- 625,665 739,706
Other accrued liabilities (note 4)............................... 689,317 920,460 891,820
----------- --------- ----------
Total current liabilities................................... 5,840,149 6,119,105 5,464,259
Long-term liabilities:
Notes payable, excluding current installments (note 5)........... 2,526,498 846,588 1,421,428
Deferred income taxes (note 7)................................... 1,360,324 1,460,514 1,462,047
----------- --------- ----------
Total liabilities........................................... 9,726,971 8,426,207 8,347,734
----------- --------- ----------
Stockholders' equity:
Common stock, no par value. 10,000 shares authorized; 1,000
shares issued and outstanding................................. 1,000 1,000 1,000
Paid-in capital in excess of stated value........................ 1,417,234 1,417,234 1,417,234
Retained earnings................................................ 2,702,226 3,621,805 3,842,421
----------- --------- ----------
Total stockholders' equity.................................. 4,120,460 5,040,039 5,260,655
----------- --------- ----------
Total liabilities and stockholders' equity.................. $13,847,431 13,466,246 13,608,389
=========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MPG TRANSCO, LTD.
STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JULY 31, OCTOBER 31,
-------------------- -----------
1997 1998 1997 1998
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenue $20,469,778 23,471,030 5,813,482 5,816,476
Cost of revenue.............................. 14,503,066 16,093,952 3,991,915 4,136,818
----------- ---------- --------- ---------
Gross profit....................... 5,966,712 7,377,078 1,821,567 1,679,658
Selling, general and administrative expenses. 5,224,312 5,225,129 1,245,141 1,222,955
----------- ---------- --------- ---------
Income from operations............. 742,400 2,151,949 576,426 456,703
Other income (expense):
Interest expense........................ (472,981) (487,295) (157,336) (76,608)
Interest income......................... 19,736 17,453 69 2,457
Other (13,257) (10,731) (1,867) 679
Loss on sale of assets.................. (250,767) (132,343) (127,490) (10,234)
----------- ---------- --------- ---------
Income before income taxes......... 25,131 1,539,033 289,802 372,997
Income tax expense (note 7).................. 39,683 619,454 122,578 152,381
----------- ---------- --------- ---------
Net income (loss).................. $ (14,552) 919,579 167,224 220,616
=========== ========== ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MPG TRANSCO, LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
PAID-IN
CAPITAL IN TOTAL
COMMON EXCESS OF RETAINED STOCKHOLDERS'
STOCK STATED VALUE EARNINGS EQUITY
----- ------------ -------- ------
<S> <C> <C> <C> <C>
Balance at July 31, 1996................................... $ 1,000 1,417,234 2,716,778 4,135,012
Net loss--Year ended July 31, 1997......................... -- -- (14,552) (14,552)
------- --------- --------- ---------
Balance at July 31, 1997................................... 1,000 1,417,234 2,702,226 4,120,460
Net income--Year ended July 31, 1998....................... -- -- 919,579 919,579
------- --------- --------- ---------
Balance at July 31, 1998................................... 1,000 1,417,234 3,621,805 5,040,039
Net income--
Three months ended October 31, 1998 (unaudited)....... -- -- 220,616 220,616
------- --------- --------- ---------
Balance at October 31, 1998 (unaudited).................... $ 1,000 1,417,234 3,842,421 5,260,655
======= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MPG TRANSCO, LTD.
STATEMENTS OF CASH FLOWS
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JULY 31, OCTOBER 31,
-------------------- -----------
1997 1998 1997 1998
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................... $ (14,552) 919,579 167,224 220,616
Adjustments to reconcile net income (loss) to net cash provided
by (used in)operating activities:
Depreciation and amortization............................... 1,392,177 1,526,643 405,590 404,264
Deferred income taxes....................................... 192,674 (6,211) -- 38,340
Loss on sale of property and equipment...................... 250,767 132,343 127,490 10,234
(Increase) decrease in trade accounts
receivable................................................ (111,392) (617,267) (461,594) 28,445
(Increase) decrease in accounts receivable from employees... (12,016) (40,837) (15,616) 10,780
(Increase) decrease in income tax receivable................ (152,991) 152,991 152,991 --
(Increase) decrease in prepaid and other
assets.................................................... (139,705) 129,765 (356,312) 29,405
Increase (decrease) in accounts payable..................... 178,135 120,033 719,500 (60,988)
Increase in income taxes payable............................ -- 625,665 122,578 114,041
Increase (decrease) in other accrued
liabilities............................................... 450,143 231,143 221,578 (28,640)
--------- --------- --------- -------
Net cash provided by (used in) operating activities..... 2,033,240 3,173,847 1,083,429 766,497
--------- --------- --------- -------
Cash flows from investing activities:
Purchases of property and equipment............................. (4,517,395) (227,568) (40,214) (1,450,467)
Proceeds from sale of equipment................................. 400,144 416,880 322,193 61,691
--------- --------- --------- ----------
Net cash provided by (used in) investing activities..... (4,117,251) 189,312 281,979 (1,388,776)
--------- --------- --------- ----------
Cash flows from financing activities:
Net borrowings (repayment) on line of credit.................... 1,125,000 (125,420) 277,835 (13,356)
Proceeds from long-term debt.................................... 1,051,227 -- -- 1,367,170
Principal payments on long-term debt............................ (973,590) (3,051,187) (1,087,873) (587,375)
Increase (decrease) in due to related party..................... 719,699 798,812 319,095 (870,858)
--------- --------- --------- --------
Net cash provided by (used in) financing activities..... 1,922,336 (2,377,795) (490,943) (104,419)
--------- --------- --------- -------
Net change in cash and cash equivalents............................. (161,675) 985,364 874,465 (726,698)
Cash and cash equivalents at beginning of period.................... 250,602 88,927 88,927 1,074,291
--------- --------- --------- ---------
Cash and cash equivalents at end of period.......................... $ 88,927 1,074,291 963,392 347,593
======== ========= ======= ========
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest.................................................... $ 472,981 487,296 157,336 76,608
========= ======= ======= =======
Income taxes................................................ $ -- (152,991) -- --
========= ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
MPG TRANSCO, LTD.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 AND 1998
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
MPG Transco, Ltd.'s (MPG) primary business is transporting vehicles for
automotive manufacturers and transporting consumer merchandise for major retail
manufacturers. MPG's automotive operations utilize three terminals in Toledo,
Boston and Newark, while the consumer merchandise operation uses a terminal in
Allen Park, Michigan. MPG operates approximately 140 vehicles.
(b) Revenue Recognition
MPG operates as one segment related to the transportation of vehicles and
consumer merchandise for customers.
MPG's revenue is derived from customers who require transportation of
vehicles and consumer merchandise. Transport revenue is recognized upon the
delivery of the vehicles and consumer merchandise to their final destination.
Expenses related to the generation of revenue are recognized as incurred.
(c) Cash and Cash Equivalents
For purposes of the statement of cash flows, MPG considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation is determined for
financial statement purposes using the straight-line method over the estimated
useful lives of the individual assets or, for leasehold improvements, over the
terms of the related leases if shorter. Accelerated methods of depreciation have
been used for income tax purposes. For financial statement purposes, MPG
provides for depreciation of property and equipment over the following estimated
useful lives.
Transportation equipment.............................. 10 years
Furniture and fixtures................................ 5 years
Office equipment...................................... 5 years
Automobiles........................................... 5 years
Leasehold improvements................................ 3-5 years
(e) Fair Value of Financial Instruments
Due to the short-term nature of various financial instruments and the
current incremental borrowing rates available to MPG on bank loans with similar
terms and maturities, the fair value of MPG's financial instruments approximates
their carrying values.
(f) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
<PAGE>
MPG TRANSCO, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(g) Use of Estimates
Management of MPG has made a number of estimates and assumptions relating
to the reporting of assets and liabilities and the disclosure of contingent
assets and liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
(h) Interim Financial Statements
The interim financial information included in these financial statements is
unaudited but reflects all adjustments (consisting of only normal recurring
accruals) which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented.
(2) PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets consist of the following:
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1997 1998 1998
----- ----- ----
(UNAUDITED)
<S> <C> <C> <C>
Prepaid insurance..................................................................... $235,245 17,609 13,484
Prepaid vehicle registration.......................................................... 77,552 82,185 47,442
Other................................................................................. 31,706 58,775 50,927
------ ------ ------
$344,503 158,569 111,853
======== ======= =======
</TABLE>
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1997 1998 1998
----- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Transportation equipment....................................................... $13,430,048 12,555,659 13,850,320
Office equipment and furniture................................................. 186,782 186,782 190,578
Computer equipment............................................................. 781,133 897,094 936,670
Automobiles.................................................................... 320,454 235,317 214,543
Leasehold improvements......................................................... 82,005 104,805 104,805
----------- ---------- ----------
Total.......................................................................... 14,800,422 13,979,657 15,296,916
Less accumulated depreciation and amortization................................. 3,296,314 4,323,847 4,666,828
----------- ---------- ----------
$11,504,108 9,655,810 10,630,088
=========== ========= ==========
</TABLE>
(4) OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following:
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1997 1998 1998
----- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll................................................................ $ 554,247 237,000 386,000
Accrued bonus.................................................................. -- 212,000 212,000
Accrued vacation............................................................... 50,000 55,000 55,000
Accrued lease termination...................................................... -- 132,257 88,172
Accrued customer damage claims................................................. -- 90,146 49,000
Other.......................................................................... 85,070 194,057 101,648
--------- ------- -------
$ 689,317 920,460 891,820
========= ======= =======
</TABLE>
<PAGE>
MPG TRANSCO, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) INDEBTEDNESS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1997 1998 1998
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Note payable to Associates Commercial Corporation, payable in monthly
installments of $59,816, including interest at 7.75%, maturing January
2000. Secured by transportation equipment........................................ $1,577,222 960,087 798,206
Note payable to Michigan National Bank, payable in monthly installments
of $28,023, including interest at 7.65%, maturing January 2000. Secured
by transportation equipment...................................................... 762,993 475,346 399,665
Note payable to Financial Federal Credit, Inc., payable in monthly
installments of $18,546, including interest at 9.25%, maturing July 2000.
Secured by transportation equipment.............................................. 565,945 404,325 357,885
Note payable to Concord Commercial Corporation, payable in monthly
installments of $21,016, including interest at 8.20%, maturing October
1998. Secured by transportation equipment........................................ 298,649 62,196 --
Note payable to Associates Commercial Corporation, payable in monthly
installments of $26,601, including interest at 8.00%, maturing October
1998. Secured by transportation equipment........................................ 402,434 78,751 --
Note payable to Navistar Financial Corporation, payable in monthly
installments of $51,043, including interest at 8.00%, scheduled to mature
August 1998. Secured by transportation equipment................................. 563,629 81,499 35,309
Note payable to Concord Commercial Corporation, payable in monthly
installments of $24,728, including interest at 8.00%, maturing October
1997. Secured by transportation equipment.................................. 73,079 -- --
Note payable to NBD Equipment Finance, Inc., payable in monthly
installments of $9,557, including interest at 8.57%, scheduled to mature
April 1998. Secured by transporation equipment............................. 85,633 -- --
Note payable to Michigan National Bank, payable in monthly installments
of $14, 945, including interest at 8.85%, maturing March 1998. Secured
by transportion equipment.................................................. 115,686 -- --
Note payable to Michigan National Bank, payable in monthly installments
of $11,614, including interest at 8.85%, maturing August 1997. Secured
by transportation equipment................................................ 185,924 -- --
Note payable to General Electric Capital Corporation, payable in monthly
installments of $30,471, including interest at 7.45%, maturing January
2000. Secured by transportation equipment.................................. 849,010 535,070 453,140
</TABLE>
<PAGE>
MPG TRANSCO, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1997 1998 1998
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Note payable to General Electric Capital Corporation, payable in monthly
installments of $20,082 until October 2001 and $1,521 thereafter, including
interest at 6.6%, maturing July 2003. Secured by
transportation equipment.................................................. $ -- -- 682,265
Note payable to General Electric Capital Corporation, payable in monthly
installments of $20,454 until September 2001 and $1,541 thereafter,
including interest at 7.5%, maturing September 2003. Secured by
transportation equipment.................................................. -- -- 668,732
Various other notes payable secured by transportation equipment.............. 104,686 --
Various other notes payable secured by automobile equipment.................. 112,429 48,858 30,725
--------- --------- ---------
Total long-term debt............................................ 5,697,319 2,646,132 3,425,927
Less current installments.................................................... 3,170,821 1,799,544 2,004,499
--------- --------- ---------
Long-term debt, excluding current installments.................. $2,526,498 846,588 1,421,428
========== ========= =========
</TABLE>
Annual maturities of long-term as of July 31, 1998 are as follows:
1999........................................... $1,799,544
2000........................................... 846,588
----------
$2,646,132
==========
(6) LEASES
MPG leases its operating facility and other equipment from third parties
under noncancelable operating leases. Rent expense in 1997 and 1998 was $789,315
and $719,851, respectively.
Future minimum operating lease payments as of July 31, 1998 are:
1999................................................. $ 598,199
2000................................................. 625,334
2001................................................. 584,010
2002................................................. 297,131
2003................................................. 63,369
----------
Total........................................ $2,168,043
==========
<PAGE>
MPG TRANSCO, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) INCOME TAXES
Income tax expense (benefit) for the years ended July 31, 1997 and 1998
consists of the following:
<TABLE>
<CAPTION>
1997 1998
---- ----
Current:
<S> <C> <C>
Federal.................................................. $(152,991) 511,665
State.................................................... -- 114,000
--------- -------
(152,991) 625,665
Deferred--federal............................................. 192,674 (6,211)
--------- -------
$ 39,683 619,454
======== =======
</TABLE>
The following table reconciles the expected tax expense at the federal
statutory tax rate to the effective tax rate.
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
--------------------
1997 1998
---- ----
<S> <C> <C>
Computed expected tax......................................... $ 8,545 523,271
Non-deductible expenses....................................... 31,138 20,943
State income taxes, net of federal tax benefit................ -- 75,240
--------- -------
$ 39,683 619,454
======== =======
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities as of July 31, 1997 and 1998 are presented
below:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts.......................... $ 34,000 34,000
Accrued expenses not currently deductible............... 67,824 174,225
-------- ------
Gross deferred tax assets........................... 101,824 208,225
-------- ------
Deferred tax liabilities--property and equipment, due to
differences in depreciation lives and methods.............. 1,360,324 1,460,514
-------- ------
Net deferred tax liability.......................... $1,258,500 1,252,289
========== =========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
projected future taxable income and tax planning strategies, as well as
carryback opportunities, in making this assessment. Based upon the level of
historical taxable income, projections for future taxable income and carryback
opportunities over the periods in which the deferred tax assets are deductible,
management believes it is more likely than not that MPG will realize the
benefits of these deductible differences. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if estimates
of future taxable income are reduced.
<PAGE>
MPG TRANSCO, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(8) EMPLOYEE BENEFITS
All employees of MPG are employed by Translesco, a related entity owned by
the same shareholders of MPG, and leased by MPG.
Translesco has a retirement savings plan pursuant to section 401(k) of the
Internal Revenue Code that is available to all employees with at least 90 days
of service to Translesco and who are at least 18 years of age. Eligible
participants may contribute up to 20% of their compensation. MPG does not make
contributions to the plan. The accompanying financial statements include all
payroll and related costs associated with the employees serving MPG.
(9) RELATED PARTY TRANSACTIONS
MPG and Translesco maintain a combined cash management system. As a result
of this arrangement, approximately $96,000 and $895,000 were due to Translesco
at July 31, 1997 and 1998, respectively. For the years ended July 31, 1997 and
1998, average balances due Translesco were less than $100,000 except for a
borrowing in June, 1998, of $1,250,000 and repayments of approximately $355,000
in July, 1998.
(10) CONTINGENT LIABILITIES
Various legal claims arise against MPG during the normal course of
business. In the opinion of management, liabilities, if any, arising from
proceedings would not have a material effect on the financial statements.
(11) SUBSEQUENT EVENTS
The stockholders of the Company entered into a definitive agreement on
November 12, 1998 to sell MPG Transco, Ltd. to United Road Services, Inc.
(12) CONCENTRATION OF BUSINESS RISKS
Sales to the Company's three largest customers, General Motors, Volkswagen
and Mercedes-Benz, amounted to 22%, 10% and 10%, respectively, of total revenues
for the year ended July 31, 1997 and 43%, 14% and 8%, respectively, for the year
ended July 31, 1998. The loss of one or all of these customers could
significantly affect MPG's performance.
EXHIBIT 99.3
UNITED ROAD SERVICES, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to certain acquisitions completed by United Road Services, Inc. since its
inception in July 1997. All of these acquisitions were accounted for using the
purchase method of accounting.
The September 30, 1998 unaudited pro forma combined balance sheet gives
effect to the acquisition by United Road Services, Inc. of MPG Transco, Ltd.
("MPG") and Pilot Transport, Inc. ("Pilot"), which were consummated on January
11, 1999 and December 9, 1998, respectively. The unaudited pro forma combined
balance sheet gives effect to these acquisitions as if they had occurred on
September 30, 1998. The unaudited pro forma combined statements of operations
give effect to the acquisitions of MPG and Pilot as if they had occurred on
January 1, 1997.
The unaudited pro forma combined statements of operations also give effect
to the acquisitions by United Road Services, Inc. of Northland Auto
Transporters, Inc. and Northland Fleet Leasing, Inc., Falcon Towing and Auto
Delivery, Inc., Smith-Christensen Enterprises, Inc. and subsidiary, Caron Auto
Works, Inc. and Caron Auto Brokers, Inc., Absolute Towing and Transporting,
Inc., ASC Transportation Services and subsidiary and Silver State Towing &
Recovery, Inc. (collectively, the "Founding Companies"), which were consummated
simultaneously with United Road Services, Inc.'s initial public offering
completed on May 6, 1998, as if such acquisitions had occurred on January 1,
1997. Additionally, the unaudited pro forma combined statements of operations
also give effect to the acquisitions by United Road Services, Inc. of E&R Towing
& Garage, Inc. and Subsidiaries (E&R"), Environmental Auto Removal, Inc.
("EAR"), Neil's Used Truck & Car Sales, Incorporated ("Neil's"), 5-L Corporation
and ADP Transport, Inc. ("5L/ADP"), Car Transporters Corporation ("CTC"),
Schroeder Auto Carriers, Inc. (Schroeders"), Keystone Towing ,Inc. ("Keystone"),
Fast Towing, Inc. ("Fast") and Alert Auto Transport , Inc. ("Alert")
(collectively the `Selected Acquired Companies") as if such acquisitions had
occurred on January 1, 1997.
To the extent the former owners of the Founding Companies, MPG, Pilot and
Selected Acquired Companies have agreed to reductions in salary, bonuses and
benefits, these reductions have been reflected in the unaudited pro forma
combined statements of operations.
The pro forma adjustments are based on estimates, available information and
certain assumptions, and may be revised, as additional information becomes
available. The pro forma financial information does not purport to represent
what United Road Services, Inc.'s financial position or results of operations
would actually have been had such transactions occurred on these dates and are
not necessarily indicative of United Road Services, Inc.'s financial position or
results of operations for any future period. Since United Road Services, Inc.,
the Founding Companies, MPG, Pilot and the Selected Acquired Companies were not
under common control or management during the periods presented, historical
combined results may not be comparable to, or indicative of, future performance.
The unaudited pro forma combined financial statements should be read in
conjunction with the other financial statements and notes thereto included
elsewhere herein.
<PAGE>
<TABLE>
UNITED ROAD SERVICES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS)
<CAPTION>
UNITED
ROAD
SERVICES, PRO FORMA PRO FORMA
INC. MPG PILOT ADJUSTMENTS COMBINED
---- --- ----- ----------- --------
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents....................... $ 2,290 348 181 (1,952)(a)(b) 867
Accounts receivable............................. 16,096 2,058 1,945 -- 20,099
Less: allowance............................. 1,317 100 -- -- 1,417
------- ----- --- ------ ------
Accounts receivable, net........................ 14,779 1,958 1,945 -- 18,682
Accounts receivable from related parties and 285 42 -- -- 327
employees.......................................
Inventory....................................... 564 -- -- -- 564
Notes receivables............................... 430 -- -- -- 430
Prepaid and other current assets................ 2,078 283 616 -- 2,977
------- ----- --- ------ ------
Total Current Assets........................ 20,426 2,631 2,742 (1,952) 23,847
Property and equipment, net..................... 37,094 10,630 3,681 (341)(a) 51,064
Other non-current assets, net................... 1,592 347 -- -- 1,939
Goodwill........................................ 137,516 -- -- 41,930 (a) 179,446
------- ----- --- ------ ------
Total Assets................................ $ 196,628 13,608 6,423 39,637 256,296
========= ====== ===== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current installment of notes payable............ $ 170 2,005 -- -- 2,175
Current installment of lease obligations........ 1,435 -- -- -- 1,435
Borrowings under lines of credit................ -- 986 2,005 -- 2,991
Payable to related parties...................... 1,134 -- -- -- 1,134
Accounts payable................................ 10,011 818 240 -- 11,069
Income taxes payable............................ 616 740 -- -- 1,356
Payable to stockholders......................... 1,064 24 -- -- 1,088
Other accrued liabilities....................... 4,761 891 1,065 -- 6,717
------- ----- --- ------ ------
Total Current Liabilities................... 19,191 5,464 3,310 -- 27,965
Credit facility borrowings...................... 26,000 -- -- 19,000 (b) 45,000
Notes payable, excluding current installments... -- 1,422 -- -- 1,422
Capital lease obligations, excluding current 2,253 -- -- -- 2,253
installments....................................
Deferred income taxes........................... 2,736 1,462 -- (136)(a) 4,062
------- ----- --- ------ ------
Total Liabilities........................... 50,180 8,348 3,310 18,864 80,702
Stockholders' Equity:
Common stock.................................... 14 1 10 (9)(a) 16
Additional paid-in capital...................... 144,413 1,417 -- 27,727 (a) 173,557
Retained earnings............................... 2,021 3,842 3,103 (6,945)(a) 2,021
------- ----- --- ------ ------
Total Stockholders' Equity.................. 146,448 5,260 3,113 20,773 175,594
------- ----- --- ------ ------
Total Liabilities and Stockholders' Equity. $ 196,628 13,608 6,423 39,637 256,296
========= ====== ===== ======= =======
The accompanying notes are an integral part of these unaudited pro
forma combined financial statements.
</TABLE>
<PAGE>
<TABLE>
UNITED ROAD SERVICES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
TOTAL
UNITED FOUNDING PRO
ROAD COMPANIES SELECTED FORMA
SERVICES, 1/1/98 - PRO FORMA PRO FORMA ACQUIRED PRO FORMA COMBINED
INC. 5/5/98 MPG PILOT ADJUSTMENTS COMBINED COMPANIES ADJUSTMENTS AS ADJUSTED
---- ------ --- ----- ----------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue................... $44,842 19,035 17,082 14,405 -- 95,364 35,418 (1,400)(g) 129,382
Cost of revenue............... 32,073 13,851 11,639 8,906 (610)(b) 65,859 26,787 (2,326)(b)(g) 90,320
------- ------- ------- ------ ----- ------ ------ -------- ------
Gross profit................ 12,769 5,184 5,443 5,499 610 29,505 8,631 926 39,062
Selling general and
administrative 7,565 3,525 3,420 3,091 (1,604)(a) 15,997 6,054 (1,900)(h) 20,151
expenses....................
Goodwill amortization......... 883 -- -- -- 1,160 (c) 2,043 -- 922 (i) 2,965
------- ------- ------- ------ ----- ------ ------ -------- ------
Income (loss) from operations. 4,321 1,659 2,023 2,408 1,054 11,465 2,577 1,904 15,946
Other income (expense):
Interest expense............ (526) (451) (292) (114) (1,205)(d) (2,588) (423) -- (3,011)
Interest income............. 615 19 19 -- -- 653 96 -- 749
Gain (loss) on sale of assets -- (24) (325) (32) -- (381) (87) -- (468)
Other....................... -- (232) (2) -- -- (234) 66 -- (168)
------- ------- ------- ------ ----- ------ ------ -------- ------
Income (loss) before income 4,410 971 1,423 2,262 (151) 8,915 2,229 1,904 13,048
taxes.........................
Income tax expense (benefit).. 2,215 437 591 -- 689 (e) 3,932 274 1,879 (e) 6,085
------- ------- ------- ------ ----- ------ ------ -------- ------
Net income (loss)............. $ 2,195 534 832 2,262 (840) 4,983 1,955 25 6,963
======== ======== ======= ===== ======= ===== ===== ===== =====
Basic earnings per share (f).. -- -- -- -- -- $0.50 -- -- $ 0.64
===== ======
Diluted earnings per share (f) -- -- -- -- -- $0.49 -- -- $ 0.63
===== ======
The accompanying notes are an integral part of these unaudited pro
forma combined financial statements
</TABLE>
<PAGE>
<TABLE>
UNITED ROAD SERVICES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
UNITED
ROAD TOTAL SELECTED PRO FORMA
SERVICES, FOUNDING PRO FORMA PRO FORMA ACQUIRED PRO FORMA COMBINED
INC. COMPANIES MPG PILOT ADJUSTMENTS COMBINED COMPANIES ADJUSTMENTS AS ADJUSTED
---- --------- --- ----- ----------- -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue................ $ -- 42,599 21,745 17,119 -- 81,463 64,768 (2,800)(g) 143,431
Cost of revenue............ -- 31,258 15,416 10,067 (1,028)(b) 55,713 49,795 (4,369)(b)(g) 101,139
------- ------ ------ ------ ------ ------ ------ ------ -------
Gross profit........... -- 11,341 6,329 7,052 1,028 25,750 14,973 1,569 42,292
Selling general and
administrative expenses.. 174 8,070 5,536 4,009 (3,451)(a) 14,338 11,831 (3,220)(h) 22,949
Goodwill amortization...... -- -- -- -- 2,207 (c) 2,207 -- 1,562 (i) 3,769
------- ------ ------ ------ ------ ------ ------ ------ -------
Income (loss) from (174) 3,271 793 3,043 2,272 9,205 3,142 3,227 15,574
operations.................
Other income (expense):
Interest expense....... -- (835) (569) (168) (1,524)(d) (3,096) (1,078) -- (4,174)
Interest income........ -- 48 8 -- -- 56 91 -- 147
Gain (loss) on sale of
assets............... -- 207 (92) (167) -- (52) 157 -- 105
Other.................. -- 201 (13) -- -- 188 (115) -- 73
------- ------ ------ ------ ------ ------ ------ ------ -------
Income (loss) before income
taxes.................... (174) 2,892 127 2,708 748 6,301 2,197 3,227 11,725
Income tax expense
(benefit)............... -- 826 68 -- 2,339 (e) 3,233 334 2,320 (e) 5,887
--- ------ ------ ------ ------ ------ ------ ------ -------
Net income (loss).......... $ (174) 2,066 59 2,708 (1,591) 3,068 1,863 907 5,838
======= ===== ====== ===== ===== ===== ===== ====== =====
Basic earnings per share(f) -- -- -- -- -- $0.31 -- -- $0.54
===== =====
Diluted earnings per -- -- -- -- -- $0.31 -- -- $0.53
share(f)................... ===== =====
The accompanying notes are an integral part of these unaudited pro
forma combined financial statements
</TABLE>
<PAGE>
UNITED ROAD SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. GENERAL:
United Road Services, Inc. was founded in July 1997 to become a leading
national provider of motor vehicle and equipment towing, recovery and transport
services. United Road Services, Inc. acquired the Founding Companies
simultaneously with its initial public offering and acquired the Selected
Acquired Companies subsequent to its initial public offering.
The historical financial data reflect the financial position and results of
operations of United Road Services, Inc., the Founding Companies, MPG, Pilot and
the Selected Acquired Companies and were derived from their respective financial
statements, included in reports filed with the Securities and Exchange
Commission. The information included in these financial statements for MPG is as
of October 31, 1998 and for the nine-month period ended September 30, 1998 and
for the twelve-month period ended December 31, 1997. The information included in
these financial statements for the Founding Companies is for the period January
1, 1998 through May 5, 1998 and for the years ended December 31, 1997, with the
exception of Caron Auto Works, Inc. and Caron Auto Brokers, Inc. for which the
information is as of and for the six months ended June 30, 1998 and for the
fiscal year ended September 30, 1997. The information included in these
financial statements for the Selected Acquired Companies is as of and for the
nine-months ended September 30, 1998 and for the year ended December 31, 1997,
with the exception of E&R, EAR, Neil's, 5-L/ADP, CTC, Schroeder, Keystone and
Fast Tow which are for the six-month period ended June 30, 1998 and for the year
ended December 31, 1997, and Alert for which the information is as of and for
the six-month period ended May 31, 1998 and for the twelve-month period ended
February 28, 1998.
2. ACQUISITION OF MPG, PILOT AND THE SELECTED ACQUIRED COMPANIES:
United Road Services, Inc. acquired MPG, Pilot and the Selected Acquired
Companies in transactions accounted for using the purchase method of accounting.
The following table sets forth the consideration paid in cash and in shares
of Common Stock to the stockholders of MPG, Pilot and the Selected Acquired
Companies.
SHARES OF
CASH COMMON STOCK
(DOLLARS IN THOUSANDS)
MPG ............................................. $ 10,363 996,351
Pilot............................................ 10,589 1,000,000
Selected Acquired Companies...................... 44,597 1,032,930
------- ---------
Total....................................... $65,549 3,029,281
======= =========
<PAGE>
UNITED ROAD SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
(a) Reflects the acquisitions of MPG and Pilot by United Road Services,
Inc. for an aggregate purchase price of $50.0 million consisting of $21.0
million in cash and 1,996,351 shares of Common Stock. The aggregate purchase
price less the net assets acquired, including an adjustment for property and
equipment to reflect fair market value, including the resulting tax effect,
results in aggregate goodwill of $41.9 million. Based upon management's
preliminary analysis, it is anticipated that the historical value of the assets
and liabilities of the acquired companies, with the exception of the adjustments
made for property and equipment, will approximate fair value. Management has not
identified any other material tangible or intangible assets to which a portion
of the purchase price could be reasonably allocated.
(b) Reflects $19.0 million of credit facility borrowings utilized to
fund the acquisitions of MPG and Pilot.
4. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS:
Nine-months ended September 30, 1998 and year ended December 31, 1997
(a) Reflects the reductions in salaries, bonuses and benefits to which
the former stockholders of the Founding Companies, MPG and Pilot have agreed in
the amounts of $774,000, $247,000 and $583,000 for the nine-months ended
September 30, 1998, respectively, and $2.3 million, $329,000 and $777,000 for
the year ended December 31, 1997, respectively.
(b) Adjusts the depreciation of vehicles based upon adjusted carrying
values utilizing lives of 10 to 15 years.
(c) Reflects the amortization over a 40-year estimated life of goodwill
to be recorded as a result of the acquisition of the Founding Companies, MPG and
Pilot of $383,000, $374,000 and $403,000 for the nine-months ended September 30,
1998, respectively, and $1.2 million, $499,000 and $549,000 for the year ended
December 31, 1997, respectively.
(d) Reflects the interest expense of $1.3 million for the nine months
ended September 30, 1997 and $1.7 million for the year ended December 31, 1997
relating to the $19.0 of credit facility borrowings utilized to fund
acquisitions of MPG and Pilot. The reduction in interest expense related to $1.6
million and $1.5 million of debt of the Founding Companies at December 31, 1997
and September 30, 1998, respectively which has been repaid.
(e) Reflects the incremental provision for federal and state income
taxes relating to all entities being combined and other statements of operations
adjustments including the non-deductibility of goodwill at an estimated rate of
38%.
(f) The number of shares used in the calculations of basic and diluted
earnings per share have been derived as follows:
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA COMBINED
COMBINED AS ADJUSTED
-------- -----------
<S> <C> <C>
Shares issued in connection with the formation of United Road Services, Inc. 2,604,000 2,604,000
Shares issued in January 1998 218,736 218,736
Shares issued in the initial public offering 2,594,863 2,594,863
Shares issued in connection with the acquisitions of the Founding Companies,
MPG, Pilot and the Selected Acquired Companies 4,372,092 5,405,022
--------- ----------
Basic shares estimated to be outstanding 9,789,691 10,822,621
Incremental effect of options on shares outstanding 159,117 159,117
========= ==========
Diluted shares estimated to be outstanding 9,948,808 10,981,731
========= ==========
</TABLE>
UNITED ROAD SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(g) Reflects the elimination of $1.4 million and $2.8 million of
intercompany revenue and related cost of revenue between E&R and EAR for the
nine-months ended September 30, 1998 and the year ended December 31, 1997,
respectively.
(h) Reflects the reductions in salaries, bonuses and benefits to which
the former stockholders of the Selected Acquired Companies have agreed in the
amounts of $1.9 million and $3.2 million for the nine-months ended September 30,
1998 and for the year ended December 31, 1997, respectively.
(i) Reflects the amortization over a 40-year estimated life of goodwill
to be recorded as a result of the acquisition of the Selected Acquired
Companies.
