<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended May 31, 1998 or
------------
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ to ____
COMMISSION FILE NUMBER 000-22551
CAREY INTERNATIONAL, INC.
-------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52-1171965
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4530 WISCONSIN AVENUE, NW, SUITE 500, WASHINGTON, DC 20016
----------------------------------------------------------
(Address of principal executive offices, including zip code)
(202) 895-1200
--------------
(Registrant's telephone number, including area code)
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
--- ---
There were 9,315,067 shares of the registrant's common stock, par value $.01 per
share, outstanding at July 7, 1998.
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
-----
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements (unaudited)
Consolidated balance sheets as of November 30, 1997 and
May 31, 1998
Consolidated statements of operations for the three and six
month periods ended May 31, 1997 and 1998
Consolidated statements of cash flows for the six
month periods ended May 31, 1997 and 1998
Notes to consolidated financial statements
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II: OTHER INFORMATION
Item 2: Changes in Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, May 31,
1997 1998
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,333,402 $ 30,957,134
Accounts receivable, net 15,932,426 17,314,518
Notes receivable from contracts, current portion 670,266 824,779
Prepaid expenses and other current assets 1,435,176 1,935,007
----------- ------------
Total current assets 23,371,270 51,031,438
Fixed assets, net 9,278,319 8,945,644
Notes receivable from contracts, excluding current portion 8,164,337 9,128,438
Franchise rights, net 5,112,348 8,436,326
Trade name, trademark and contract rights, net 6,493,693 6,401,080
Goodwill and other intangible assets, net 30,991,450 34,746,233
Deferred tax assets 501,545 1,032,820
Deposits and other assets 1,481,252 1,520,603
----------- ------------
Total assets $85,394,214 $121,242,582
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of notes payable $ 996,575 $ 1,107,844
Current portion of capital leases 321,965 412,891
Accounts payable and accrued expenses 17,054,081 18,919,477
----------- ------------
Total current liabilities 18,372,621 20,440,212
Notes payable, excluding current portion 2,792,022 1,870,886
Capital leases, excluding current portion 1,339,666 903,918
Deferred rent and other long-term liabilities 1,193,577 290,565
Deferred revenue 13,396,104 14,396,801
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 20,000,000 authorized
shares, and 7,630,007 and 9,308,144 issued and
outstanding shares in 1997 and 1998, respectively 76,300 93,081
Additional paid-in capital 45,173,336 77,468,927
Retained earnings 3,050,588 5,778,192
----------- ------------
Total stockholders' equity 48,300,224 83,340,200
----------- ------------
Total liabilities and stockholders' equity $85,394,214 $121,242,582
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended May 31, Six months ended May 31,
-------------------------- ---------------------------
1997 1998 1997 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue, net $18,690,072 $30,800,199 $34,284,901 $54,450,787
Cost of revenue 12,194,860 20,682,528 22,663,808 36,859,443
----------- ----------- ----------- -----------
Gross profit 6,495,212 10,117,671 11,621,093 17,591,344
Selling, general and administrative
expense 4,505,610 6,920,262 8,719,957 12,768,523
----------- ----------- ----------- -----------
Operating income 1,989,602 3,197,409 2,901,136 4,822,821
Other income (expense):
Interest expense (424,258) (129,335) (852,638) (243,755)
Interest income 29,440 124,208 59,259 179,002
Gain on sales of fixed assets 18,999 46,572 140,478 78,770
----------- ----------- ----------- -----------
Income before provision for income taxes 1,613,783 3,238,854 2,248,235 4,836,838
Provision for income taxes 605,496 1,350,731 874,237 2,031,472
----------- ----------- ----------- -----------
Net income $ 1,008,287 $ 1,888,123 $ 1,373,998 $ 2,805,366
=========== =========== =========== ===========
Net income per common share - basic $ 0.67 $ 0.23 $ 0.95 $ 0.36
=========== =========== =========== ===========
Net income per common share - diluted $ 0.26 $ 0.22 $ 0.37 $ 0.34
=========== =========== =========== ===========
Weighted average common shares used in
computing net income per common share-
basic 1,503,718 8,045,668 1,441,330 7,850,973
=========== =========== =========== ===========
Weighted average common shares used in
computing net income per common share-
diluted 4,218,169 8,597,725 4,152,326 8,360,407
=========== =========== =========== ===========
Pro forma net income per common share -
basic $ 0.25 $ 0.35
=========== ===========
Pro forma net income per common share -
diluted $ 0.25 $ 0.37
=========== ===========
Pro forma weighted average common
shares used in computing net income per
common share - basic 4,003,513 3,941,125
=========== ===========
Pro forma weighted average common
shares used in computing net income per
common share - diluted 4,304,172 4,238,329
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended May 31,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
(Unaudited)
Cash flows from operating activities:
Net income $ 1,373,998 $ 2,805,366
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of fixed assets 846,752 1,247,236
Amortization of intangible assets 535,297 827,142
Gain on sales of fixed assets (140,478) (78,770)
Provision for deferred taxes (256,025) (531,275)
Change in deferred revenue 623,179 1,000,697
Changes in operating assets and liabilities:
Accounts receivable 1,485,989 (864,573)
Notes receivable from contracts (781,503) (1,118,614)
Prepaid expenses, deposits and other assets (968,502) (538,699)
Accounts payable and accrued expenses (133,790) 273,359
Deferred rent and other long-term liabilities (46,912) (903,012)
----------- -----------
Net cash provided by operating activities 2,538,005 2,118,857
----------- -----------
Cash flows from investing activities:
Proceeds from sales of fixed assets 629,692 816,745
Purchases of fixed assets (1,548,570) (1,117,562)
Acquisitions of chauffeured vehicle service companies (323,654) (3,636,381)
----------- -----------
Net cash used in investing activities (1,242,532) (3,937,198)
----------- -----------
Cash flows from financing activities:
Principal payments under capital lease obligations (108,831) (534,529)
Payments of notes payable (2,728,915) (4,454,691)
Proceeds from notes payable 1,387,150 2,343,377
Payment of pre-offering costs (440,928) -
Proceeds from issuance of common stock 9,920 30,087,916
----------- -----------
Net cash provided by (used in) financing activities (1,881,604) 27,442,073
----------- -----------
Net increase (decrease) in cash and cash equivalents (586,131) 25,623,732
Cash and cash equivalents at beginning of period 2,867,711 5,333,402
----------- -----------
Cash and cash equivalents at end of period $ 2,281,580 $30,957,134
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND AND ORGANIZATION
General
Carey International, Inc. (the "Company") provides services through a
worldwide network of owned and operated companies, licensees and affiliates
serving 420 cities in 65 countries. The Company owns and operates service
providers in the form of wholly-owned subsidiaries in the following cities:
Boston (Boston Cars, Inc.), Indianapolis (Carey Limousine Indiana, Inc.),
London, England (Carey UK Limited), Los Angeles (Carey Limousine L.A.), New
York (Carey Limousine N.Y., Inc. and Manhattan International Limousine
Network, Ltd.), Philadelphia (Carey Limousine Corporation, Inc.), San
Francisco (Carey Limousine SF, Inc.), South Florida (Carey Limousine
Florida, Inc.),and Washington, D.C. (Carey Limousine D.C., Inc.). In
addition, the Company licenses the "Carey" name, and provides central
reservations, billing, and sales and marketing services to its licensees.
The Company's worldwide network includes affiliates in locations in which
the Company has neither owned and operated locations nor licensees. The
Company provides central reservations and billing services to such
affiliates.
Acquisitions
The Company is engaged in a program of acquiring chauffeured vehicle
service businesses. The chauffeured vehicle service businesses that the
Company seeks to acquire may be in cities in which the Company has owned and
operated service providers, licensees operating under the Carey name and
trademark, and affiliates of the Company. In fiscal 1997 the Company
acquired chauffeured vehicle service companies in New York, Los Angeles
and Indianapolis. In the first six months in fiscal 1998, the Company
acquired four chauffeured vehicle service companies in London, England,
Boston and Miami. (See Note 3)
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements and these notes do
not include all of the disclosures included in the Company's audited
consolidated financial statements for the years ended November 30, 1996 and
1997, and should be read in conjunction with those financial statements. For
further information, such as the significant accounting policies followed by
the Company, refer to the notes to the Company's audited consolidated
financial statements.
The consolidated financial statements included herein have not been
audited. However, in the opinion of management, the consolidated financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results for the
periods reflected. The results for these periods are not necessarily
indicative of the results for the full fiscal year.
4
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pro forma net income per common share
Consistent with Staff Accounting Bulletin IB-2, the Company has
recalculated historical weighted average common shares outstanding and net
income per common share to give effect to a recapitalization effected by the
Company during fiscal 1997. The recalculated pro forma net income per common
share is determined by (i) adjusting net income available to common
shareholders to reflect the elimination in interest expense, net of taxes,
resulting from the conversion of $4,867,546 of subordinated debt into Common
Stock and (ii) increasing the weighted average common shares outstanding by
the number of common shares resulting from the conversion of such debt, as
well as the partial conversion of the Series A Preferred Stock.
3. ACQUISITIONS
In the periods ended May 31, 1997 and 1998, the following acquisition
activity was recorded by the Company:
<TABLE>
<CAPTION>
Six months ended May 31,
------------------------
1997 1998
---------- -----------
<S> <C> <C>
Fair value of net assets and liabilities acquired:
Receivables and other assets $ - $ 551,281
Fixed assets - 948,400
Goodwill and other intangibles 323,654 4,325,377
Franchise rights - 3,451,526
Accounts payable and accrued expenses - (1,514,275)
Notes payable - (1,301,447)
Capital leases - (600,025)
Common stock - (2,224,456)
---------- -----------
Fair value of assets and liabilities acquired $ 323,654 $ 3,636,381
========== ===========
Cash payments $ 323,654 $ 3,636,381
========== ===========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is subject to various
legal actions which are not material to the financial condition, results of
operations or cash flows of the Company.
One of the corporations acquired by the Company has been examined by the
Internal Revenue Service ("IRS") for periods prior to the acquisition date.
The IRS has notified the acquired corporation of challenges to its methods
of accounting and the tax treatment of certain items in those
5
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
tax returns. The Company believes that any assessments ultimately
sustainable by the IRS in this matter would be offset by Net Operating Loss
Carryforwards (NOLs) of the acquired corporation and indemnification
payments under the acquisition agreements, and would not have a material
effect on the financial position, results of operations or cash flows of the
Company.
5. NET INCOME PER COMMON SHARE
In 1998, the Company adopted SFAS No. 128, Earnings Per Share. Basic net
income per common share has been computed by dividing net income by the
weighted-average number of common shares outstanding during the period.
Diluted net income per common share has been computed by dividing net income
by the weighted average number of common shares outstanding plus an assumed
increase in common shares outstanding for dilutive securities. Dilutive
securities consist of convertible securities which are dilutive, preferred
stock, and options and warrants to acquire Common Stock for a specified
price and for which the dilutive effect is measured using the treasury
method. Net income per common share amounts for all periods presented have
been restated to conform to SFAS No. 128.
Net income per common share, on a historical basis, is as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
May 31, May 31,
------------------------ -----------------------------
1997 1998 1997 1998
----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Net income $1,008,287 $1,888,123 $1,373,998 $2,805,366
Effect of conversion of subordinated
debt 88,218 - 176,436 -
----------- ----------- ----------- ----------------
Net income available to common
stockholders plus effect of conversion $1,096,505 $1,888,123 $1,550,434 $2,805,366
=========== =========== =========== ================
Weighted average common shares
outstanding - basic 1,503,718 8,045,668 1,441,330 7,850,973
Dilutive effect of:
Stock options 237,171 397,894 233,716 372,576
Warrants 63,488 154,163 63,488 136,858
Convertible preferred stock:
Series B preferred stock 663,761 - 663,761 -
Series F preferred stock 135,025 - 135,025 -
Series G preferred stock 673,638 - 673,638 -
</TABLE>
6
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Effect of conversion of subordinated
debt 941,368 - 941,368 -
----------- ----------- ----------- ----------------
Weighted average common shares
outstanding - diluted 4,218,169 8,597,725 4,152,326 8,360,407
=========== =========== =========== ================
Net income per share - basic $0.67 $ 0.23 $0.95 $ 0.36
=========== =========== =========== ================
Net income per share - diluted $0.26 $ 0.22 $0.37 $ 0.34
=========== =========== =========== ================
</TABLE>
6. SUBSEQUENT EVENTS
In June and July 1998, the Company acquired chauffeured vehicle
limousine companies in Chicago and Boston.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1998 (THE "1998 PERIOD") COMPARED TO THREE MONTHS
ENDED MAY 31, 1997 (THE "1997 PERIOD")
Revenue, Net. Revenue, net increased $12.1 million or 64.8% from $18.7
million in the 1997 Period to $30.8 million in the 1998 Period. Of the increase,
$4.0 million resulted from expanded use of the Carey network, including an
increase in business from corporate travel customers and business travel
arrangers. A further $8.1 million of the increase was due to the revenues from
companies acquired by Carey, including Manhattan International Limousine
Network, Ltd. and affiliate ("Manhattan Limousine"), which was acquired on June
2, 1997, Commonwealth Limousine Services, Inc., which was acquired on October 1,
1997, TWW, which was acquired on December 1, 1997, Custom Transportation
Services International, Inc. which was acquired on March 1, 1998 and A and A
Limousine Renting, Inc. which was acquired on May 1, 1998.
Cost of Revenue. Cost of revenue increased $8.5 million or 69.6% from $12.2
million in the 1997 Period to $20.7 million in the 1998 Period. The increase was
primarily attributable to higher costs due to increased business levels and to
increased cost associated with businesses acquired by Carey subsequent to the
1997 Period. Cost of revenue increased as a percentage of revenue, net from
65.2% in the 1997 Period to 67.1% in the 1998 Period, primarily reflecting
relatively greater reliance on subcontractors, or "farm-outs," to service higher
levels of business during peak periods as well as increases in costs for
businesses acquired during the 1998 Period that were not fully integrated into
the Company's operations.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $2.4 million or 53.6% from $4.5
million in the 1997 Period to $6.9 million in the 1998 Period. The increase
largely was due to the costs associated with higher business levels and costs of
acquired businesses including personnel costs, administrative expenses and
marketing expenses, and an increase in amortization of intangibles. Selling,
general and administrative expense decreased as a percentage of revenue, net
from 24.1% in the 1997 Period to 22.5% in the 1998 Period as a result of an
increase in revenue, net without a corresponding increase in administrative
costs.
Interest Expense. Interest expense decreased 69.5% from approximately
$424,000 in the 1997 Period to approximately $129,000 in the 1998 Period,
primarily as a result of the use of proceeds from the Company's sale of common
stock to repay outstanding debt and the conversion of subordinated and certain
other debt to Common Stock coincident with the Company's 1997 initial public
offering (the "IPO").
Provision for Income Taxes. The provision for income taxes increased
approximately $745,000 from approximately $605,000 in the 1997 Period to
approximately $1.4 million in the 1998 Period. The increase primarily was a
result of the increase in pre-tax income of the Company from $1.6 million in the
1997 Period to $3.2 million in the 1998 Period.
Net Income. As a result of the foregoing, the Company's net income increased
approximately $880,000 or 87.3% from approximately $1.0 million in the 1997
Period to approximately $1.9 million in the 1998 Period.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
SIX MONTHS ENDED MAY 31, 1998 (THE "1998 SIX-MONTH PERIOD") COMPARED TO SIX
MONTHS ENDED MAY 31, 1997 (THE "1997 SIX-MONTH PERIOD")
Revenue, Net. Revenue, net increased $20.2 million or 58.8% from $34.3
million in the 1997 Six-Month Period to $54.5 million in the 1998 Six-Month
Period. Of the increase, $6.1 million related to expanded use of the Carey
network, including an increase in business from corporate travel customers and
business travel arrangers, and $14.1 million was due to revenues of Manhattan
Limousine, Commonwealth Limousine Services, Inc., TWW, Custom Transporation
Services International, Inc. and A and A Limousine Renting, Inc., which were not
included in the 1997 Six-Month Period.
Cost of Revenue. Cost of revenue increased $14.2 million or 62.6% from $22.7
million in the 1997 Six-Month Period to $36.9 million in the 1998 Six-Month
Period. The increase was primarily attributable to higher costs due to increased
business levels and to costs of revenue of the acquired corporations which were
not included in the 1997 Six-Month Period. Cost of revenue increased as a
percentage of revenue, net from 66.1% in the 1997 Six-Month Period to 67.7% in
the 1998 Six-Month Period, primarily reflecting a greater reliance on
subcontractors or "farmouts," to service higher levels of business during peak
periods as well as increases in costs for busineses acquired during the 1998
Six-Month that were not fully integrated into the Company's operations.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $4.0 million or 46.4% from $8.7 million in the
1997 Six-Month Period to $12.8 million in the 1998 Six-Month Period. The
increase was largely due to the costs of additional personnel, increased
marketing expenses and increased administrative expense in support of higher
business levels. Selling, general and administrative expense decreased as a
percentage of revenue, net from 25.4% in the 1997 Six-Month Period to 23.4% in
the 1998 Six-Month Period as a result of an increase in revenue, net without a
corresponding increase in administrative costs.
Interest Expense. Interest expense decreased approximately $609,000 or 71.4%
from approximately $853,000 in the 1997 Six-Month Period to approximately
$244,000 in the 1998 Six-Month Period. The decrease resulted from repayment of
the principal amounts of debt outstanding between the two periods and conversion
of subordinated and certain other debt to Common Stock coincident with the IPO.
Provision for Income Taxes. The provision for income taxes increased $1.2
million from approximately $874,000 in the 1997 Six-Month Period to $2.0 million
in the 1998 Six-Month Period. The increase primarily related to the increase in
pre-tax income of the Company from $2.2 million in the 1997 Six-Month Period to
$4.8 million in the 1998 Six-Month Period.
Net Income. As a result of the foregoing, the Company's net income increased
$1.4 million or 104.2% from $1.4 million in the 1997 Six-Month Period to $2.8
million in the 1998 Six-Month Period.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS --(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funding have been cash flow from operations,
commercial bank credit facilities, notes issued by the Company to sellers of
acquired chauffeured vehicle service companies and, to a lesser extent, the sale
of vehicles obtained from acquired companies. In June 1997, the Company
completed the IPO from which it received net proceeds of $30.8 million and in
May 1998, the Company completed a secondary offering which it received net
proceeds of $29.8 million.
The Company's principal uses of cash have been, and will continue to be, the
funding of acquisitions, repayment of debt, and investment in both Carey
International Reservations System (CIRS) and the Company's automated operation
and information systems.
Net cash provided by in operating activities was $2.5 million in the 1997
Six Month Period, compared to net cash provided by operating activities of
approximately $2.1 million in the 1998 Six-Month Period. As of May 31, 1998, the
Company's working capital and current ratio improved to approximately $30.6
million and 2.5:1, respectively, as a result of the use of net proceeds from
the secondary offering and continued cash flow from operations.
Cash used in investing activities was $1.2 million in the 1997 Six-Month
Period compared to cash used in investing activities of $3.9 million in the
1998 Six-Month Period. Cash was used in the 1998 Six-Month Period to acquire
operations in London, Boston and Miami, whereas relatively little acquisition
activity occurred in the 1997 Six-Month Period. In both Six-Month Periods,
funds used for acquisitions and capital expenditures were offset in part by
proceeds from the sale of fixed assets, primarily vehicles acquired in
connection with the purchase of chauffeured vehicle service companies.
Cash used in financing activities was $1.9 million in the 1997 Six-Month
Period compared to cash provided by financing activities of $27.4 million in the
1998 Six-Month Period, primarily from the issuance of stock in the secondary
offering in the 1998 Six-Month Period after the net payment of notes payable
from such net proceeds.
On August 15, 1997, the Company entered into a senior credit facility with
three banks consisting of a secured revolving line of credit of $25.0 million
(the "Facility"). As of May 31, 1998, the Company had no amounts outstanding
under the Facility, as a result of the repayment of balances from the net
proceeds of the secondary offering. The Facility, which may be used for
acquisitions and working capital, is collateralized by the assets of the Company
and its domestic subsidiaries and by a pledge of the stock of its international
subsidiary. The Facility also provides availability for the issuance of letters
of credit. Loans made under the revolving line of credit bear interest at the
Company's option at either the bank's prime lending rate or 2.0% above the LIBOR
rate. Commitment fees equal to 0.375% per annum are payable on the unused
portion of the revolving line of credit. On the second anniversary of the
Facility, outstanding balances under the Facility will convert to a five-year
term loan, which will bear interest either at a fixed rate
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
(subject to availability) or at a variable LIBOR or prime-based rate with
adjustments determined based on the Company's earnings. The terms of the
Facility (i) prohibit the payment of dividends by the Company, (ii) with certain
exceptions, prevent the Company from incurring or assuming other indebtedness
that is not subordinated to borrowings under the Facility and (iii) require the
Company to comply with certain financial covenants.
The Company is in the process of upgrading the CIRS and certain other computer
systems. The upgrades are designed to provide enhanced customer service and
management information. These upgrades, which will continue throughout 1998 and
1999, also are designed to allow such systems to overcome what commonly is
referred to as the "Year 2000 Problem." The Year 2000 Problem, which is common
to most corporations, concerns the inability of certain information systems,
primarily computer software programs, to properly recognize and process date
sensitive information related to the year 2000 and beyond. The Company does not
anticipate that the cost of these upgrades will have a material adverse effect
on its financial condition and results of operations in any single future year.
FACTORS TO BE CONSIDERED
The information set forth above contains forward-looking statements, which
involve risks and uncertainties. The Company's actual results could differ
materially from the results anticipated in these forward-looking statements.
Readers should refer to discussion under "Risk Factors" contained in the
Company's Registration Statement on Form S-1 (No. 333-50245) filed with the
Securities and Exchange Commission concerning certain factors which could cause
the Company's actual results to differ materially from the results anticipated
in the forward-looking statements contained herein.
11
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds:
In its Report on Form 10-Q for the quarterly period ended
February 28, 1998 and its Report on Form 10-K/A for the year ended
November 30, 1997, the Company reported on the use of proceeds from
the sale of 3,335,000 shares of its Common Stock pursuant to the
Company's Registration Statement on Form S-1 (File No. 333-22651),
which was declared effective on May 27, 1997, in connection with
the IPO. In addition to the use of proceeds previously reported,
the Company used approximately $894,000 of the net proceeds from
the IPO for acquisitions during the quarter ended May 31, 1998.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were approved at the Company's annual
stockholders' meeting, which was held on June 3, 1998:
a) Election of the following members of the Board of Directors:
<TABLE>
<CAPTION>
VOTES
------------------------------------
FOR WITHHELD
------------------------------------
<S> <C> <C>
Dennis I. Meyer 6,462,709 1,878
Joseph V. Vittoria 6,461,709 2,878
</TABLE>
b) Approval of the 1997 Equity Incentive Plan, as amended:
<TABLE>
<CAPTION>
VOTES
-------------------------------------------------------------------
FOR AGAINST ABSTAIN NON-VOTES
-------------------------------------------------------------------
<S> <C> <C> <C>
4,132,188 529,130 6,007 1,797,262
</TABLE>
Item 5. Other Information
The By-laws of the Company specify when a stockholder must
submit nominations for director or proposals for consideration at
a stockholders' meeting in order for those nominations or proposals
to be considered in the meeting. In order for the nominations or
proposals to be considered at a stockholders' meeting, the
stockholder making them must have given timely notice in writing
to the Secretary of the Company. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal
executive offices of the Company, 4530 Wisconsin Avenue, N.W.,
Suite 500, Washington, D.C. 20016, not less than 60 days nor more
than 90 days prior to the meeting; except that in the event that
less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the
stockholder to be timely must be received no later than the close
of business on the 10th day following the day on which such notice
of the date of the meeting was mailed or such public disclosure
was made.
A stockholder's notice to the Secretary concerning nominations
for director shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as
a director all information relating to such person that is required
to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the stockholder giving the notice (i) the
name and address, as they appear on the Company's books, of such
stockholder and (ii) the class and number of shares of the Company
which are beneficially owned by such stockholder.
A stockholder's notice to the Secretary with respect to other
proposals shall set forth as to each matter the stockholder
proposes to bring before the meeting (a) a brief description of
the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (b) the name
and address, as they appear on the Company's books, of the
stockholder proposing such business, (c) the class and number of
shares of the Company which are beneficially owned by the
stockholder and (d) any material interest in the stockholder in
such business.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit:
27 Financial Data Schedule (for the six months ended
May 31, 1997 and 1998)
(b) Reports on Form 8-K:
None
12
<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.
Carey International, Inc.
Date: July 14, 1998 By: /s/ Vincent A. Wolfington
--------------------------
Vincent A. Wolfington
Chairman, Chief Executive Officer
Date: July 14, 1998 By: /s/ David H. Haedicke
----------------------
David H. Haedicke
Executive Vice President,
Chief Financial Officer
13
<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION
27 Financial Data Schedule (for the six months ended May 31, 1997 and 1998)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> MAY-31-1998
<CASH> 30,957,134
<SECURITIES> 0
<RECEIVABLES> 18,139,297
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51,031,438
<PP&E> 8,945,644
<DEPRECIATION> 0
<TOTAL-ASSETS> 121,242,582
<CURRENT-LIABILITIES> 20,440,212
<BONDS> 0
0
0
<COMMON> 93,081
<OTHER-SE> 77,468,927
<TOTAL-LIABILITY-AND-EQUITY> 121,242,582
<SALES> 54,450,787
<TOTAL-REVENUES> 54,450,787
<CGS> 36,859,443
<TOTAL-COSTS> 49,627,966
<OTHER-EXPENSES> (257,772)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 243,755
<INCOME-PRETAX> 4,836,838
<INCOME-TAX> 2,031,472
<INCOME-CONTINUING> 2,805,366
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,805,366
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.34
</TABLE>
