<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
October 2, 1998
----------------
(Date of Report)
(Date of earliest event reported)
Carey International, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 000-22551 52-1171965
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number No.) Identification)
</TABLE>
4530 Wisconsin Avenue, NW, Washington, DC 20016
-----------------------------------------------
(Address of principal executive offices)
Registrant's telephone number: (202) 895-1200
--------------
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
AMERICAN AIRPORT LIMOUSINE CORPORATION
As disclosed in the Form 10-Q for the period ending August 31, 1998, on
October 2, 1998, the Company through a wholly-owned subsidiary, Airport
Limousine Acquisition Corp., acquired certain assets and the business of Airport
Limousine Partners, Inc. d/b/a American Airport Limousine Corporation
("American") and its affiliate, American Limousine Repair Service, Inc., as well
as all outstanding shares of capital stock of American's other affiliates, Syd's
Limousine, Inc., Limos "R" Us, Inc. and A.L. Transportation, Inc. (the
"Acquisition"). American and its affiliated companies operated a chauffeured
vehicle services business in Chicago. The Acquisition was effected pursuant to
the terms of the amended and Restated Purchase Agreement dated as of October 2,
1998 among the Company, Airport Limousine Acquisition Corp., American, American
Limousine Repair Service, Inc., George Jacobs, Aurbrey Jacobs, Hyma Levin and
Harriet Jacobs. The purchase price in the Acquisition was determined by
negotiations between the parties and consisted of $20 million paid in the form
of a Note, $19 million which has been paid and $1 million of which is due on
January 2, 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Audited Combined Balance Sheet as of December 31, 1997, and Related
Combined Statements of Operations, Changes in Stockholders' Equity, and
Cash Flows for the year ended December 31, 1997
(b) Combined Balance Sheet as of August 31, 1998 and Related Combined
Statements of Operations, Changes in Stockholders' Equity and Cash Flows
for the eight month period ended August 31, 1998
(c) Pro Forma Financial information
Unaudited Pro Forma Condensed Combined Financial Statements and Notes
(d) Consent of PricewaterhouseCoopers LLP
-2-
<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.
(Registrant)
Date: December 16, 1998
/S/ David H. Haedicke
---------------------------------------------
David H. Haedicke
Executive Vice President and Chief Financial
Officer (as both a duly authorized officer
of the registrant and the principal financial
officer of the registrant)
-3-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1) Audited Combined Balance Sheet as of December 31, 1997, and
Related Combined Statements of Operations, Changes in
Stockholders' Equity, and Cash Flows for the year ended
December 31, 1997
2) Combined Balance Sheet as of August 31, 1998 and Related
Combined Statements of Operations, Changes in Stockholders'
Equity, and Cash Flows for the eight-month period ended
August 31, 1998
3) Unaudited Pro Forma Condensed Combined Financial Statements
and Notes
23) Consent of PricewaterhouseCoopers LLP
-4-
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
D/B/A AMERICAN AIRPORT LIMOUSINE CORPORATION
_______
COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
AND
REPORT THEREON
_______
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Report of Independent Accountants 1
Financial Statements:
Combined Balance Sheet as of December 31, 1997 2
Combined Statement of Operations for the year ended December 31, 1997 3
Combined Statement of Changes in Stockholders' Equity for the year ended
December 31, 1997 4
Combined Statement of Cash Flows for the year ended December 31, 1997 5
Notes to Combined Financial Statements 6-12
</TABLE>
<PAGE>
August 28, 1998,
except for the second paragraph
of Note 9, as to which the date is
October 2, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Stockholders of Airport Limousine Partners, Inc.
In our opinion, the accompanying combined balance sheet and the related combined
statements of operations, of changes in stockholders' equity, and of cash flows
present fairly, in all material respects, the combined financial position of
Airport Limousine Partners, Inc. (d/b/a American Airport Limousine Corporation)
and its combined companies (the Company) as of December 31, 1997, and the
combined results of their operations and their cash flows for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoppers LLP
1
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
_______
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash $ 116,082
Trade and credit card receivables 964,929
Other receivables 196,989
Prepaid expenses and other current assets 275,539
------------
Total current assets 1,553,539
------------
Fixed assets:
Automobiles 4,374,153
Equipment & furniture 1,438,855
------------
5,813,008
Accumulated depreciation (2,917,793)
------------
Net fixed assets 2,895,215
Deposits 120,641
------------
Total assets $ 4,569,395
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit $ 391,803
Current portion of long-term debt 901,451
Accounts payable 172,002
Accrued expenses 88,596
Accrued corporate income taxes 15,539
Due to owners/operators 1,195
------------
Total current liabilities 1,570,586
Long-term debt, net of current portion 119,045
Note payable to stockholder 24,250
Owner/operator deposits 105,075
------------
Total liabilities 1,818,956
------------
Stockholders' equity (Note 4):
Common stock 54,000
Retained earnings 2,696,439
------------
Total stockholders' equity 2,750,439
------------
Total liabilities and stockholders' equity $ 4,569,395
============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
2
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
_______
<TABLE>
<S> <C>
Revenue, net $ 20,174,517
Cost of revenue 13,623,211
------------
Gross profit 6,551,306
Selling expenses 1,122,917
General and administrative expenses 4,708,883
------------
Operating income 719,506
Other income (expense):
Interest expense (91,206)
Gain on sale of fixed assets 96,112
Other income, primarily insurance recovery 232,784
------------
Income before provision for income taxes 957,196
Provision for state income taxes 15,539
------------
Net income $ 941,657
============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
3
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
________
<TABLE>
<CAPTION>
Common Stock Total
------------------ Retained Stockholders'
Shares Amount Earnings Equity
------ --------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 5,000 $ 50,000 $ 2,170,992 $ 2,220,992
Issuance of common stock 4,000 4,000 - 4,000
Net income - - 941,657 941,657
Stockholder distributions - - (416,210) (416,210)
------ --------- ------------- -------------
Balance at December 31, 1997 9,000 $ 54,000 $ 2,696,439 $ 2,750,439
====== ========= ============= =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
4
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
_______
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net income $ 941,657
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,014,006
Gain on sale of assets (96,112)
Change in operating assets and liabilities:
Trade and credit card receivables (2,070)
Other receivables (91,614)
Prepaid expenses and other current assets (177,156)
Accounts payable (13,522)
Accrued expenses (79,550)
Accrued corporate income taxes (1,554)
Due to owners/operators (79,385)
Decrease in owner/operator deposits (2,950)
------------
Net cash provided by operating activities 1,411,750
------------
Cash flows from investment activities:
Purchases of fixed assets (2,694,569)
Proceeds from dispositions of fixed assets 389,745
------------
Net cash used in investing activities (2,304,824)
------------
Cash flows from financing activities:
Borrowings on line of credit 709,988
Payments on line of credit (498,037)
Proceeds from long-term debt 1,487,277
Principal payments on long-term debt (617,881)
Distributions to stockholders (416,210)
Proceeds from issuance of common stock 4,000
------------
Net cash provided by financing activities 669,137
------------
Net decrease in cash (223,937)
Cash at beginning of year 340,019
------------
Cash at end of year $ 116,082
============
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 91,206
Income taxes paid $ 17,093
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
5
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
1. BACKGROUND AND ORGANIZATION
Airport Limousine Partners, Inc., doing business as American Airport
Limousine Corporation, and its combined companies (the "Company"), provide
limousine services in the greater Chicago area. This includes
transportation services through the use of limousines, vans, and buses.
The Company also has entities that own the vehicles, as well as maintain
and repair the vehicles.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The combined financial statements include the financial statements of
Airport Limousine Partners, Inc., Syd's Limousine, Inc., Limos R Us,
Inc., A.L. Transportation, Inc., and A.L. Repair Service, Inc., all with
identical common ownership. All significant intercompany balances and
transactions have been eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of accounts receivable.
The Company's customers are primarily based within the greater Chicago
area. Accounts receivable are generally diversified due to the large
number of entities comprising the Company's customer base. No single
customer accounted for more
Continued
6
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
than five percent of the Company's revenues and there were no accounts
receivable from a single customer greater than $106,000 as of
December 31, 1997.
Fixed Assets
Fixed assets are carried at cost. Depreciation is provided using an
accelerated method. Gains or losses on sales and retirements of fixed
assets are reflected in results of operations. Expenditures for
maintenance and repairs are charged against operations. Renewals and
betterments that materially extend the life of the assets are capitalized
Revenue recognition
The Company's principal source of revenue is from chauffeured vehicle
services. Such revenue, net of discounts, is recorded when services are
provided.
Income taxes
The management of the Company has elected S status corporation under the
Internal Revenue Code. Under this statute, profits are taxable to the
stockholders based on their percentage of ownership for the purpose of
federal income tax. The Company is liable for state taxes based on
income.
Continued
7
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
3. LINE OF CREDIT AND LONG- TERM DEBT
The Company has a line of credit at Oakbrook Bank which provides for
borrowings up to $750,000 with interest at 1.0% over an index (a total of
8.5% as of December 31, 1997), payable monthly. The line of credit is due
on demand and collateralized by limousines. The balance outstanding as of
December 31, 1997, was $391,803.
Long-term notes payable as of December 31, 1997, consist of the following:
<TABLE>
<S> <C>
Notes payable to Harris Bank Westchester with interest at 7.9% per
annum, payable monthly, with various due dates ranging from April 30,
1998 to April 4, 1999, collateralized by eighteen (18) limousines $ 304,553
Notes payable to Hinsdale Bank and Trust with interest at 0.5% over an
index (a total of 8.0% as of December 31, 1997), payable monthly, with
various due dates ranging from March 5, 1999 to October 1, 2000,
collateralized by five (5) limousines and computer equipment 215,943
Note payable to Harris Bank Westchester with interest at 8.5% per annum,
payable in periodic installments, due May 1, 1999, collateralized by
accounts receivable 500,000
------------
Total long-term debt 1,020,496
Less: Current maturities 901,451
------------
Long-term debt $ 119,045
============
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending December 31 Amount
----------------------------- ------------
<S> <C>
$
1998 901,451
1999 83,998
2000 35,047
------------
$ 1,020,496
============
</TABLE>
Continued
8
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
4. COMMON STOCK AND RETAINED EARNINGS
Common stock as of December 31, 1997 consists of:
<TABLE>
<S> <C>
Airport Limousine Partners, Inc., no par
value, 6,000 shares authorized; 5,000 issued
and outstanding $ 50,000
Syd's Limousine, Inc., no par value, 1,000
shares authorized; 1,000 shares issued and
outstanding 1,000
Limo's R Us, Inc., no par value, 1,000 shares
authorized; 1,000 shares issued and outstanding 1,000
A.L. Transportation, Inc., no par value,
1,000 shares authorized; 1,000 shares issued
and outstanding 1,000
A.L. Repair Service, Inc., no par value,
1,000 shares authorized; 1,000 shares issued
and outstanding 1,000
-----------
$ 54,000
===========
Retained earnings (deficit) as of December 31, 1997 consists of:
Airport Limousine Partners, Inc. $ 1,874,377
Syd's Limousine, Inc. (17,110)
Limo's R Us, Inc. 810,796
A.L. Transportation, Inc. (24,519)
A.L Repair Service, Inc. 52,895
------------
$ 2,696,439
============
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company has a $24,250 note payable to a stockholder. This note is non-
interest-bearing, with no maturity date.
The Company has various notes payable to Harris Bank amounting to $804,553
to finance the purchase of limousines. The Company's principal stockholder
and President is a member of the board of directors of Harris Bank.
Continued
9
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
6. CONTINGENCIES
An insurance company has filed suit against the Company seeking back
workers' compensation premiums of approximately $290,000. The Company is
vigorously defending said action. The insurance company's original and
first amended complaints have been stricken and the insurance company is
now seeking summary judgment on the second amended complaint. If the
insurance company's motion is denied, which the Company believes is
possible, the case will be tried before a jury in 1999. Another of the
Company's insurance carriers has also filed suit. It, too, is seeking back
workers' compensation insurance premiums in the amount of approximately
$2,940,000. The Company is also vigorously defending this action. Based on
the information currently available, no estimate of the potential loss, if
any, on either of these claims can be made at this time.
The Company has also filed for an administrative tax hearing against a
local taxing authority concerning the underpayment of taxes collected. As a
result of a tax audit, the local taxing authority claims that the Company
over-collected $670,000, including interest and penalties. The Company
believes that the local taxing authority's position is unfounded, and has
asked for a summary judgment in this case. The losing party in this case
has the right to appeal to the Circuit Court, but it is unknown at this
time if this will occur. Based on the information currently available, no
estimate of the potential loss, if any, on either of these claims can be
made at this time.
Continued
10
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
7. LEASING ARRANGEMENTS
The Company conducts its operations from facilities that are leased under a
five year, cancelable operating lease expiring April 30, 2002. The Company
also leases a garage and warehouse facility under a five year,
noncancelable lease, expiring September 30, 2002.
The following is a schedule of future minimum rental payments required
under the above operating leases as of December 31, 1997:
<TABLE>
<CAPTION>
Year Ending December 31 Amount
------------------------ ------------
<S> <C>
1998 $ 294,485
1999 302,589
2000 311,883
2001 321,406
2002 264,775
------------
$ 1,495,138
============
</TABLE>
Rental expense totaled $178,526 in 1997.
8. PROFIT SHARING PLAN
The Company sponsors a 401(k) Profit Sharing Plan covering substantially
all of its employees. The Company makes a matching contribution of $1.00
for every $3.00 on the first 3% of employee contributions. The Company may
also make an additional contribution at the discretion of the board of
directors based on the Company's profitability. Matching Company
contributions totaled $65,963 for the year ended December 31, 1997.
Continued
11
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
9. SUBSEQUENT EVENTS
In January of 1998, the Company acquired Hinsdale Limousine for $600,000 in
cash. The acquisition was accounted for under the purchase method, whereby
the purchase price was allocated to the underlying assets and liabilities
based on their respective estimated fair values at the date of the
acquisition, resulting in goodwill of approximately $460,000.
On October 2, 1998, the Company sold substantially all of its assets to and
certain liabilities were assumed by Airport Limousine Acquisition Corp., a
wholly owned subsidiary of Carey International, Inc. ("Carey").
12
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
_______
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
---------
<S> <C>
Financial Statements:
Combined Balance Sheet as of August 31, 1998 1
Combined Statement of Operations for the eight-month period ended
August 31, 1998 2
Combined Statement of Changes in Stockholders' Equity for the
eight-month period ended August 31, 1998 3
Combined Statement of Cash Flows for the eight-month period
ended August 31, 1998 4
Notes to Combined Financial Statements 5-11
</TABLE>
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED BALANCE SHEET
AS OF AUGUST 31, 1998
(unaudited)
_______
<TABLE>
<S> <C>
ASSETS
Cash $ 165,175
Trade and credit card receivables 1,099,503
Other receivables 214,037
Prepaid expenses and other current assets 472,697
------------
Total current assets 1,951,412
------------
Fixed assets:
Automobiles 4,268,086
Equipment & furniture 1,853,089
------------
6,121,175
Accumulated depreciation (3,565,570)
------------
Net fixed assets 2,555,605
Goodwill, net of accumulated amortization of $20,441 439,471
Deposits 8,841
------------
Total assets $ 4,955,329
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit $ 339,809
Current portion of long-term debt 653,066
Accounts payable 116,926
Accrued expenses 610,208
Due to owners/operators 198,470
------------
Total current liabilities 1,918,479
Long-term debt, net of current portion 157,907
Owner/operator deposits 121,463
------------
Total liabilities 2,197,849
------------
Stockholders' equity (Note 4):
Common stock 54,000
Retained earnings 2,703,480
------------
Total stockholders' equity 2,757,480
------------
Total liabilities and stockholders' equity $ 4,955,329
============
</TABLE>
The accompanying notes are an intregral part of these combined
financial statements.
1
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF OPERATIONS
FOR THE EIGHT MONTH PERIOD ENDED AUGUST 31, 1998
(unaudited)
_______
<TABLE>
<S> <C>
Revenue, net $ 14,291,755
Cost of revenue 9,955,279
------------
Gross profit 4,336,476
Selling expenses 456,752
General and administrative expenses 3,415,988
------------
Operating income 463,736
Other income (expense):
Interest expense (72,757)
Gain on sale of fixed assets 50,494
Other income 14,467
------------
Income before provision for state income taxes 455,940
Provision for income taxes -
------------
Net income $ 455,940
============
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
2
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE EIGHT MONTH PERIOD ENDED AUGUST 31, 1998
(unaudited)
_______
<TABLE>
<CAPTION>
Common Stock Total
---------------- Retained Stockholders'
Shares Amount Earnings Equity
------ -------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 9,000 $ 54,000 $ 2,696,439 $ 2,750,439
Net income - - 455,940 455,940
Stockholder distributions - - (448,899) (448,899)
------ -------- ----------- -----------
Balance at August 31, 1998 9,000 $ 54,000 $ 2,703,480 $ 2,757,480
====== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
3
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE EIGHT MONTH PERIOD ENDED AUGUST 31, 1998
(unaudited)
_______
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 455,940
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 832,642
Gain on sale of assets (50,494)
Change in operating assets and liabilities:
Trade and credit card receivables 5,514
Other receivables 57,952
Prepaid expenses and other assets (85,358)
Accounts payable (55,076)
Accrued expenses 521,612
Accrued corporate income taxes (15,539)
Due to owners/operators 197,275
Owner/operator deposits 16,388
------------
Net cash provided by operating activities 1,880,856
------------
Cash flows from investment activities:
Purchases of fixed assets (482,373)
Proceeds from dispositions of fixed assets 60,276
Acquisition of chauffeured vehicle service company (600,000)
Advance to officer (75,000)
------------
Net cash used in investing activities (1,097,097)
------------
Cash flows from financing activities:
Borrowings on line of credit 400,000
Payments on line of credit (451,994)
Proceeds from long-term debt 377,818
Principal payments on long-term debt (587,341)
Payment of note payable to stockholder (24,250)
Distributions to stockholders (448,899)
------------
Net cash used in financing activities (734,666)
------------
Net increase in cash 49,093
Cash at beginning of year 116,082
------------
Cash at end of year $ 165,175
============
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 72,757
Income taxes paid $ 15,539
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
4
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
----------------
1. BACKGROUND AND ORGANIZATION
Airport Limousine Partners, Inc., doing business as American Airport
Limousine Corporation, and its combined companies (the "Company"), provide
limousine services in the greater Chicago area. This includes
transportation services through the use of limousines, vans, and buses.
The Company also has entities that own the vehicles, as well as maintain
and repair the vehicles.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The combined financial statements include the financial statements of
Airport Limousine Partners, Inc., Syd's Limousine, Inc., Limo's R Us,
Inc., A.L. Transportation, Inc., and A.L. Repair Service, Inc., all
with identical ownership. All significant intercompany balances and
transactions have been eliminated.
The combined financial statements included herein have not been
audited. However, in the opinion of management, the combined financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results for the
period reflected. The results for the period are not necessarily
indicative of the results for the full fiscal year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of accounts
receivable. The Company's customers are primarily based within the
greater Chicago area. Accounts receivable are generally diversified due
to the large number of entities comprising the Company's customer base.
No single customer accounted for a more than five percent of the
Company's revenues and there were no accounts receivable greater than
$120,000 from a single customer as of August 31, 1998.
Continued
5
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
----------------
FIXED ASSETS
Fixed assets are carried at cost. Depreciation is provided using an
accelerated method. Gains or losses on sales and retirements of fixed
assets are reflected in results of operations. Expenditures for
maintenance and repairs are charged against operations. Renewals and
betterments that materially extend the life of the assets are
capitalized.
GOODWILL
Goodwill represents the excess of cost over the fair value of the net
assets of acquired businesses. Goodwill is amortized over 15 years
using the straight-line method. Such amortization is included in
general and administrative expenses in the statement of operations. The
Company evaluates the recoverability of goodwill at least annually
based on estimated undiscounted cash flows over the remaining
amortization period, giving consideration to revenue expected to be
realized. The determination is based on an evaluation of such factors
as the occurrence of a significant change in the environment in which
the business operates or the expected future net cash flows
(undiscounted and without interest). There have been no adjustments to
the carrying value of intangible assets resulting from this evaluation.
REVENUE RECOGNITION
The Company's principal source of revenue is from chauffeured vehicle
services. Such revenue, net of discounts, is recorded when services are
provided.
INCOME TAXES
The management of the Company has elected S corporation status under
the Internal Revenue Code. Under this statute, profits are taxable to
the stockholders based on their percentage of ownership for the purpose
of federal income tax. The Company is liable for state taxes based on
income.
Continued
6
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
----------------
3. LINE OF CREDIT AND LONG- TERM DEBT
The Company has a line of credit at Oakbrook Bank which provides for
borrowings up to $750,000 with interest at 1.0% over an index (a total of
8.5% as of August 31, 1998) payable monthly. The line of credit is due on
demand and collateralized by limousines. The balance outstanding as of
August 31, 1998 is $339,809.
Long-term notes payable at August 31, 1998, consist of the following:
<TABLE>
<S> <C>
Notes payable to Harris Bank Westchester with
interest at 7.9% per annum, payable monthly, with
various due dates ranging from October 17, 1998 to
July 1, 2000, collateralized by fifteen (15)
limousines and accounts receivable $ 170,333
Notes payable to Hinsdale Bank and Trust with
interest at 0.5% over an index (a total of 8.0%
as of August 31, 1998), payable monthly, with
various due dates ranging from March 5, 1999 to
October 1, 2000, collateralized by five (5)
limousines and computer equipment 140,640
Note payable to Oakbrook Bank with interest at 8.5%
payable monthly, due February 1, 1999, collateralized
by accounts receivable 100,000
Note payable to Harris Bank Westchester with interest
at 8.5% per annum, payable in periodic installments,
due May 1, 1999, collateralized by accounts receivable 400,000
---------
Total long-term debt 810,973
Less: Current maturities 653,066
---------
Long-term debt $ 157,907
=========
</TABLE>
Continued
7
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
----------------
Maturities of long-term debt as of August 31, 1998 are as follows:
<TABLE>
<S> <C>
1998 $ 372,092
1999 391,980
2000 46,901
----------
$ 810,973
==========
</TABLE>
4. COMMON STOCK AND RETAINED EARNINGS
Common stock as of August 31, 1998 consists of:
<TABLE>
<S> <C>
Airport Limousine Partners, Inc., no par
value, 6,000 shares authorized; 5,000 issued
and outstanding $ 50,000
Syd's Limousine, Inc., no par value, 1,000 shares
authorized; 1,000 shares issued and outstanding 1,000
Limo's R Us, Inc., no par value, 1,000 shares
authorized; 1,000 shares issued and outstanding 1,000
A.L. Transportation, Inc., no par value,
1,000 shares authorized; 1,000 shares issued
and outstanding 1,000
A.L. Repair Service, Inc., no par value,
1,000 shares authorized; 1,000 shares issued
and outstanding 1,000
--------
$ 54,000
========
</TABLE>
Retained earnings (deficit) as of August 31, 1998 consists of:
<TABLE>
<S> <C>
Airport Limousine Partners, Inc. $ 2,124,815
Syd's Limousine, Inc. (22,464)
Limo's R Us, Inc. 553,416
A.L. Transportation, Inc. (61,364)
A.L Repair Service, Inc. 109,077
-----------
$ 2,703,480
===========
</TABLE>
Continued
8
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
----------------
5. RELATED PARTY TRANSACTIONS
The current Company has a $75,000 advance to an officer of the Company
included in other current assets as of August 31, 1998.
As of August 31, 1998, the Company has various notes payable to Harris Bank
amounting to $570,333 to finance the purchase of limousines and provide for
working capital needs. The Company's principal stockholder and President
is a member of the board of directors of Harris Bank.
6. CONTINGENCIES
An insurance company has filed suit against the Company seeking back
workers' compensation premiums of approximately $290,000. The Company is
vigorously defending said action. The insurance company's original and
first amended complaints have been stricken and the insurance company is
now seeking summary judgment on the second amended complaint. If the
insurance company's motion is denied, which the Company believes is
possible, the case will be tried before a jury in 1999. Another of the
Company's insurance carriers has also filed suit. It, too, is seeking back
workers' compensation insurance premiums in the amount of approximately
$2.94 million. The Company is also vigorously defending this action. Based
on the information currently available, no estimate of the potential loss,
if any, on either of these claims can be made at this time.
The Company has also filed for an administrative tax hearing against a
local taxing authority concerning the underpayment of taxes collected.
As a result of a tax audit, the local taxing authority claims that the
Company over-collected approximately $670,000 including interest and
penalties. The Company believes that the the local taxing authority's
position is unfounded, and has asked for a summary
Continued
9
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
----------------
judgment in this case. The losing party in this case has the right to
appeal to the Circuit Court, but it is unknown at this time if this will
occur. Based on the information currently available, no estimate of the
potential loss, if any, on either of these claims can be made at this time.
7. LEASING ARRANGEMENTS
The Company conducts its operations from facilities that are leased under a
five year, cancelable operating lease expiring April 30, 2002. The Company
also leases a garage and warehouse facility under a five year,
noncancelable lease, expiring September 30, 2002.
The following is a schedule of future minimum rental payments required
under the above operating leases as of August 31, 1998:
<TABLE>
<S> <C>
1998 $ 86,738
1999 302,589
2000 311,883
2001 321,406
2002 264,775
-----------
$ 1,287,391
===========
</TABLE>
Rental expense totaled $204,179 for the eight-month period ended August 31,
1998.
8. PROFIT SHARING PLAN
The Company sponsors a 401(k) Profit Sharing Plan covering substantially
all of its employees. The Company makes a matching contribution of $1.00
for every $3.00 on the first 3% of employee contributions. The Company may
also make an additional contribution at the discretion of the board of
directors based on the Company's profitability. Matching Company
contributions totaled $33,333 for the eight-month period ended August 31,
1998.
Continued
10
<PAGE>
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
----------------
10. ACQUISITION
In January of 1998, the Company acquired Hinsdale Limousine for $600,000 in
cash. The acquisition was accounted for under the purchase method, whereby
the purchase price was allocated to the underlying assets and liabilities
based on their respective estimated fair values at the date of the
acquisition, resulting in goodwill of approximately $460,000.
11. SUBSEQUENT EVENT
On October 2, 1998, the Company sold substantially all of its assets to
and certain liabilities were assumed by Airport Limousine Acquistion
Corp., a wholly owned subsidiary of Carey International, Inc. ("Carey").
11
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The Pro Forma Consolidated Balance Sheet as of August 31, 1998 and the
Pro Forma Consolidated Statement of Operations for the year ended November 30,
1997 and for the nine-month period ended August 31, 1998 are based on the
historical consolidated financial statements of Carey International, Inc. and
subsidiaries (the "Company") and historical combined financial statements of
American Limousine Partners, Inc. The Pro Forma Consolidated Balance Sheet has
been prepared assuming the acquisition of American Limousine Partners, Inc.
occurred on August 31, 1998.
The Pro Forma Consolidated Statement of Operations for the year ended
November 30, 1997 and for the nine-month period ended August 31, 1998 have been
prepared assuming the acquisition of American Limousine Partners, Inc. occurred
on December 1, 1996. For purposes of the Pro Forma Consolidated Statements of
Operations for the year ended November 30, 1997 and the nine-month period ended
August 31, 1998, American Limousine Partners, Inc.'s Combined Statement of
Operations for the year ended December 31, 1997 has been consolidated with the
Consolidated Statement of Operations of the Company for the year ended
November 30, 1997 and American Limousine Partners, Inc.'s Combined Statement of
Operations for the eight-month period ended August 31, 1998 has been combined
with American Limousine Partners, Inc.'s Statement of Operations for the month
ended December 31, 1997 and the Consolidated Statement of Operations of the
Company for the nine-month period ended August 31, 1998. The Pro Forma
Consolidated Statement of Operations also reflects the issuance of an aggregate
of 940,623 shares of Common Stock (net of underwriting discounts) to repay
certain debt incurred in connection with the acquisition of American Limousine
Partners, Inc. These 940,623 shares, based on the Company's secondary public
offering in June of 1998, are assumed to have been issued and the debt repaid at
the beginning of the period presented, and thus interest expense attributable to
such debts have been excluded.
The Pro Forma Consolidated Financial Statements do not purport to
represent what the Company's actual results of operations or financial position
would have been had the acquisitions occurred as of such dates, or to project
the Company's results of operations or financial position for any period or
date, nor does it give effect to any matters other than those described in the
notes thereto. In addition, the allocation of purchase price to the assets and
liabilities of American Limousine Partners, Inc. is preliminary and the final
allocation may differ from the amounts reflected herein. The Pro Forma
Consolidated Financial Statements should be read in conjunction with the other
financial statements and notes thereto previously filed by the Company.
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
August 31, 1998
----------------------------------------------------------------
American
Limousine Acquisition
Company Partners, Inc. Adjustment Pro Forma
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 31,497,934 $ 165,175 $ (165,175)(1) $ 31,497,934
Accounts receivable, net 16,142,947 1,313,540 (214,037)(1) 17,242,450
Notes receivable from contracts, current portion 913,651 913,651
Prepaid expenses and other current assets 1,709,604 472,697 (411,852)(1) 1,770,449
------------- ------------- -------------- -------------
Total current assets 50,264,136 1,951,412 (791,064) 51,424,484
Fixed assets, net 9,095,343 2,555,605 (226,705)(1) 11,424,243
Notes receivable from contracts, excluding current portion 9,349,879 9,349,879
Franchise rights, net 10,656,665 10,656,665
Trade name, trademark and contract rights, net 6,353,220 6,353,220
Goodwill and other intangible assets, net 35,001,603 439,471 (439,471)(1) 53,563,325
18,561,722 (2)
Deferred tax assets 480,379 480,379
Deposits and other current assets 1,465,049 8,841 1,473,890
------------- ------------- -------------- -------------
Total assets $ 122,666,274 $ 4,955,329 $ 17,104,482 $ 144,726,085
============= ============= ============== =============
Liabilities and Stockholders' Equity
Curent portion of notes payable $ 1,020,587 $ 992,875 $ 20,000,000 (2) $22,013,462
Current portion of capital leases 400,948 400,948
Accounts payable and accrued expenses 16,832,139 925,604 (380,038)(1) 17,619,705
242,000 (2)
------------- ------------- -------------- -------------
Total current liabilities 18,253,674 1,918,479 19,861,962 40,034,115
Notes payable, excluding current portion 1,769,689 157,907 1,927,596
Capital leases, excluding current portion 830,393 830,393
Deferred tax and long-term liabilities 264,974 121,463 386,437
Deferred revenue 14,623,264 14,623,264
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 20,000,000 authorized
shares, 9,448,834 issued and outstanding shares 94,488 54,000 (54,000)(2) 94,488
Additional paid-in capital 78,730,451 78,730,451
Retained earnings 8,099,341 2,703,480 (1,077,202)(1) 8,099,341
(1,626,278)(2)
------------- ------------- -------------- -------------
Total stockholders' equity 86,924,280 2,757,480 (2,757,480) 86,924,280
------------- ------------- -------------- -------------
Total liabilities and stockholders' equity $ 122,666,274 $ 4,955,329 $ 17,104,482 $ 144,726,085
============= ============= ============== =============
</TABLE>
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the year ended November 30, 1997
-----------------------------------------------------------------------------------
American
Limousine Pro Forma
Company Partners, Inc Adjustment Pro Forma
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue, net $ 86,378,313 $ 20,174,517 $ 3,000,000 (4) $ 109,552,830
Cost of revenue 57,890,393 13,623,211 2,026,000 (4) 73,539,604
------------- ------------- ------------- -------------
Gross profit 28,487,920 6,551,306 974,000 36,013,226
Selling, general and administrative
expense 20,111,590 5,831,800 619,000 (3) 25,805,390
(650,000)(4)
(72,000)(4)
(86,000)(4)
(113,000)(4)
(460,000)(4)
624,000 (4)
------------- ------------- ------------- -------------
Operating income 8,376,330 719,506 1,112,000 10,207,836
Other income (expense)
Interest expense (1,141,946) (91,206) 91,206 (5) (1,141,946)
Interest and other income 451,388 328,896 (200,340)(4) 579,944
------------- ------------- ------------- -------------
Income before provision for income taxes 7,685,772 $ 957,196 $ 1,002,866 9,645,834
============= =============
Provision for income taxes 3,162,282 4,051,250 (6)
------------- -------------
Net income $ 4,523,490 $ 5,594,584
============= =============
Net income per common share - basic $1.00 $1.03 (7)
============= =============
Net income per common share - diluted $0.77 $0.82 (7)
============= =============
Weighted average common shares used in
computing net income per common share-
basic 4,506,108 5,446,731 (7)
============= =============
Weighted average common shares used in
computing net income per common share-
diluted 6,137,418 7,078,041 (7)
============= =============
Pro forma net income per common share -
basic $0.81 $0.85 (7)
============= =============
Pro forma net income per common share -
diluted $0.76 $0.81 (7)
============= =============
Pro forma weighted average common shares
outstanding used in computing net income
per common share - basic 5,819,145 6,759,768 (7)
============= =============
Pro forma weighted average common shares
outstanding used in computing net income
per common share - diluted 6,180,773 7,121,396 (7)
============= =============
</TABLE>
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the nine-month period ended August 31, 1998
-------------------------------------------------------------------------------------------
American Limousine Partners, Inc
-------------------------------------------
For the For the
eight-month month
period ended ended
August 31, December 31, Pro Forma
Company 1998 1997 Subtotal Adjustment Pro Forma
------------- ----------- --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue, net $84,797,598 $14,291,755 $ 1,553,807 $15,845,562 $ - $100,643,160
Cost of revenue 57,160,077 9,955,279 1,072,563 11,027,842 - 68,187,919
------------- ----------- --------------- ----------- ------------ ------------
Gross profit 27,637,521 4,336,476 481,244 4,817,720 - 32,455,241
Selling, general and administrative
expense 19,628,479 3,872,740 526,900 4,399,640 464,000 (3) 23,805,119
(337,000)(4)
(100,000)(4)
(250,000)(4)
------------- ----------- --------------- ----------- ------------ ------------
Operating income 8,009,042 463,736 (45,656) 418,080 223,000 8,650,122
Other income (expense)
Interest expense (328,257) (72,757) (7,850) (80,607) 80,607 (5) (328,257)
Interest and other income 852,121 64,961 199,035 263,996 (200,340)(4) 748,777
(167,000)(5)
------------- ----------- --------------- ---------- ------------ ------------
Income before provision for income
taxes 8,532,906 $ 455,940 $ 145,529 $ 601,469 $ (63,733) 9,070,642
=========== =============== ========== ============
Provision for income taxes 3,541,156 3,764,316(6)
------------ ------------
Net income $ 4,991,750 $ 5,306,326
============ ============
Net income per common share - basic $0.60 $0.59(7)
============ ============
Net income per common share - diluted $0.56 $0.56(7)
============ ============
Weighted average common shares used in
computing net income per common share -
basic 8,362,096 8,989,178(7)
============ ============
Weighted average common shares used in
computing net income per common share -
diluted 8,894,827 9,521,909(7)
============ ============
</TABLE>
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) Pro forma adjustment to give effect to the exclusion of certain assets and
liabilities, primarily cash, fixed assets, and owners' notes, from the
entities and assets acquired.
(2) Pro forma adjustment to give effect to the purchase of Airport Limousine
Partners, Inc. for $20.0 million, as if the acquisition occurred on
August 31, 1998. The adjustment reflects a promissary note issued in the
aggregate amount of $20.0 million, $19 million of which is due on
November 4, 1998 and $1 million of which is due on January 2, 1999. The
allocation of the purchase price to the estimated fair value of the assets
and liabilities assumed will result in the recognition by the Company of
$18.6 million in goodwill. As part of the fair market value allocation, the
Company determined that certain reserves and liabilities were required
as part of the acquisition, primarily for severance pay for certain members
of management and to accrue costs specific to completion of the operating
systems, approximately $242,000.
(3) Pro forma adjustment to give effect to the amortization of goodwill.
(4) Pro forma adjustments for certain nonrecurring expenses and other income
for the period and year ended August 31, 1998 and November 30, 1997,
respectively. Adjustment for (1) excess owners bonuses of $337,000 and
$650,000, respectively; (2) professional fees incurred in connection with
the sale of Airport Limousine Partners, Inc. and the purchase of Hindsdale
of $100,000 and $72,000, respectively; (3) salaries of terminated
individuals of $0 and $86,000, respectively, who are not to be replaced;
(4) cost of settling previous acquisitions expensed by Airport Limousine
Partners, Inc. of $0 and $113,000, respectively; (5) advertising costs
which are to be discontinued or reduced as a result of consolidation with
the Company of $250,000 and $460,000, respectively; and (6) additional
revenue and cost of revenue had the Hindsdale Acquisition occurred at
December 1, 1996; and (7) reduce other income which is nonrecurring in the
amount of $200,340.
(5) Pro forma adjustment's to (1) reduce interest earned on the $20.0 million
of net proceeds from the secondary public offering assumed to be used to
payoff acquisition debt and (2) reduce outstanding debt and related
interest expense of Airport Limousine Partners, Inc. as of the date of the
acquisition through working capital (approximately $1.1 million of debt as
of August 31, 1998).
(6) Pro forma adjustment to reflect the incremental provision for federal and
state income taxes at a consolidated effective tax rate of 41.5%, and 42%
for the nine months ended August 31, 1998, and the year ended November 30,
1997, respectively. The companies acquired were "Subchapter S" prior to the
acquisitions. No material operating loss carry forwards existed at the date
of acquisition.
(7) Net income per common share, for both the "Company" column and the "Pro
forma" column, was computed by dividing the net income for the nine-month
period ended August 31, 1998 and the year ended November 30, 1997 by the
weighted average number of common shares including common share
equivalents. The weighted average number of common shares, under the "Pro
forma" column, gives retroactive effect for the issuance of common stock in
a quantity sufficient to raise the acquisition proceeds to meet the needs
of the promissary note, 627,082 and 940,623, respectively. Net income used
in calculating Pro forma net income per common share has been adjusted for
(i) the elimination of 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.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements of Carey International, Inc. on Form S-8 (File Nos. 333-66155,
333-59631, 333-59629 and 333-32335) and on Forms S-4 (File No. 333-59599) of our
report dated August 28, 1998, except as to Note 9, for which the date is October
2, 1998, on our audit of the combined financial statements of Airport Limousine
Partners, Inc. (d/b/a American Airport Limousine Corporation) and its combined
companies as of December 31, 1997, and for the year then ended, which report is
included in this Report on Form 8-K.
PricewaterhouseCoopers LLP
Washington, D.C.
December 16, 1998
