<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------
FORM 8-K/A
-------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
October 31, 1997
-----------------------------
(Date of Report)
(Date of earliest event reported)
CAREY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-22551 52-1171965
(State of incorporation (Commission (IRS Employer
or organization) File Number) Identification No.)
4530 Wisconsin Avenue, NW, Fifth Floor
Washington, DC 20016
(202) 895-1200
(Address of principal executive offices, including zip code
and telephone numbers)
N/A
-----------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
------------
The supplemental consolidated financial statements of Carey
International, Inc. and Subsidiaries as of November 30, 1995 and 1996, and
August 31, 1997, for each of the years in the three-year period ended November
30, 1996 and for the three month and nine month periods ended August 31, 1997
and 1996, together with the related supplemental schedules and supplemental
Management's Discussion and Analysis of Results of Operations and Financial
Condition, in each case as restated for the merger of Carey International, Inc.
with and into Indy Connection Limousines, Inc. and Subsidiary (consummated on
October 31, 1997) accounted for as a pooling-of-interests under Accounting
Principles Board Opinion No. 16, are filed as exhibits hereto and incorporated
by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information
-----------------------------------------------------
a. Financial statements of business acquired.
1 Indy Connection Limousines, Inc. Financial Statements
b. Pro forma financial information
The supplemental financial data schedules (Exhibits 99.1 to 99.8)
provide the pro forma financial information giving effect to the
acquisition of Indy Connection Limousines, Inc.
c. Exhibits.
--------
The following exhibits are filed herewith:
2.1 Amended and Restated Agreement and Plan of Merger made as of
October 10, 1997 by and among Carey International, Inc., Carey
Limousine Indiana, Inc., Indy Connection Limousines, Inc., Transit
Tours, Inc., KD & Associates Professional Corporation, Craig Del
Fabro and Kim Del Fabro. (Previously provided with companies 8-K
filed November 13, 1997.)
11 Supplemental Computations of Earnings Per Share
23 Consent of Coopers & Lybrand L.L.P.
99.1 Supplemental consolidated financial statements of Carey
International, Inc. and Subsidiaries as of August 31, 1997, and
for the three and nine month periods ended August 31, 1997 and
1996, restated for the merger of Carey International, Inc. and
Indy Connection Limousine, Inc. and Subsidiary (consummated on
October 31, 1997) accounted for as a pooling-of-interests
under Accounting Principles Board Opinion No. 16 ("APB No. 16").
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information, (Continued)
------------------------------------------------------------------
c. Exhibits.
--------
99.2 Supplemental consolidated financial statements of Carey
International, Inc. and Subsidiaries as of November 30, 1996 and
1995, and for each of the years in the three-year period ended
November 30, 1996 restated for the merger of Carey International,
Inc. and Indy Connection Limousine, Inc. and Subsidiary
(consummated on October 31, 1997) accounted for as a pooling-of-
interests under Accounting Principles Board Opinion No. 16.
99.3 Supplemental Management's Discussion and Analysis of Financial
Condition and Results of Operation restated for the merger of
Carey International, Inc. and Indy Connection Limousine, Inc. and
Subsidiary (consummated on October 31, 1997) accounted for as a
pooling-of-interests under Accounting Principles Board No. 16.
99.4 Supplemental Financial Data Schedules as of and for the nine month
period ended August 31, 1997.
99.5 Supplemental Financial Data Schedule for the nine month period
ended August 31, 1996.
99.6 Supplemental Financial Data Schedules as of and for the year ended
November 30, 1996.
99.7 Supplemental Financial Data Schedules as of and for the year ended
November 30, 1995.
99.8 Supplemental Financial Data Schedule for the year ended
November 30, 1994.
<PAGE>
SIGNATURE
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 thereunto duly authorized.
CAREY INTERNATIONAL, INC.
By: /s/ David H. Haedicke
----------------------------------
David H. Haedicke
Executive Vice President
Chief Financial Officer
Date: January 13, 1998
<PAGE>
Exhibit 1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Indy
Connection Limousines, Inc.
We have audited the accompanying consolidated balance sheet of Indy
Connection Limousines, Inc. ("the Company") and subsidiary as of September 30,
1997, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 audit provides 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 Indy Connection
Limousines, Inc. and subsidiary as of September 30, 1997, and the results of
their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
Washington, D.C.
November 14, 1997
<PAGE>
INDY CONNECTION LIMOUSINES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
ASSETS
<TABLE>
<CAPTION>
1997
----------
<S> <C>
Current assets:
Cash............................................................. $ 171,013
Accounts receivable.............................................. 364,595
Insurance claim receivable....................................... 40,000
Other current assets............................................. 163,413
----------
Total current assets......................................... 739,021
----------
Property and equipment:
Transportation equipment......................................... 3,285,636
Transportation accessories....................................... 102,938
Office equipment and leasehold improvements...................... 245,450
----------
3,634,024
Accumulated depreciation (809,306)
----------
Property and equipment, net.................................. 2,824,718
----------
Goodwill (net of accumulated amortization of $14,812).............. 22,188
Deposits and licenses.............................................. 32,219
Other assets....................................................... 33,646
----------
Total assets................................................. $3,651,792
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total liabilities:
Current maturities of long-term debt............................. $ 761,756
Accounts payable, trade.......................................... 85,016
Accrued payroll and related expenses............................. 105,997
Accrued expenses, other.......................................... 195,380
Chauffeur tips and other......................................... 71,807
Customer deposits................................................ 11,100
----------
Total current liabilities.................................... 1,231,056
----------
Long-term debt, less current maturities.......................... 709,655
Deferred income taxes............................................ 90,000
Stockholders' equity:
Preferred Stock, no par value; 250,000 shares authorized
Common stock, no par value; authorized--1,750,000 shares; 727,542
shares issued and outstanding................................... 491,725
Retained earnings................................................ 1,129,356
----------
1,621,081
----------
Total liabilities and stockholders' equity................... $3,651,792
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INDY CONNECTION LIMOUSINES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
1997
----------
<S> <C>
Revenues, net....................................................... $6,830,225
Cost of revenues.................................................... 3,411,327
----------
Gross profit...................................................... 3,418,898
Selling, general and administrative expenses........................ 1,798,382
----------
Income from operations.............................................. 1,620,516
----------
Other income (expense):
Interest expense, net............................................. (146,875)
Gain of disposals of property and equipment....................... 45,943
----------
Total other expenses, net....................................... (100,932)
----------
Income before income taxes.......................................... 1,519,584
Provision for income taxes.......................................... 559,361
----------
Net income.......................................................... $960,223
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INDY CONNECTION LIMOUSINES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
COMMON STOCK
---------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at September 30, 1996........ 707,542 $491,525 $270,989 $762,514
Exercise of common stock options..... 20,000 200 -- 200
Common stock dividends ($.14 per
share).............................. -- -- (101,857) (101,857)
Net income........................... -- -- 960,224 960,224
------- -------- ---------- ----------
Balance at September 30, 1997........ 727,542 $491,725 $1,129,356 $1,621,081
======= ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INDY CONNECTION LIMOUSINES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
1997
-----------
<S> <C>
Cash flows from operating activities:
Net income....................................................... $ 960,224
Add (deduct) items charged against income not affecting cash:
Depreciation and amortization.................................. 849,198
Deferred income taxes.......................................... (3,000)
Gain on disposals of property and equipment.................... (62,048)
Changes in assets and liabilities:
Accounts receivable............................................ (72,192)
Other assets................................................... (17,198)
Accounts payable, trade........................................ 34,971
Accrued expenses............................................... 56,530
Customer deposits.............................................. 8,681
-----------
Net cash flows provided by operating activities.............. 1,755,166
-----------
Cash flows from investing activities:
Proceeds from sales of property and equipment.................... 1,231,940
Purchases of property and equipment.............................. (2,603,567)
-----------
Net cash flows used in investing activities.................. (1,371,627)
-----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt......................... 1,684,150
Repayment of notes payable and long-term debt.................... (1,917,237)
Common stock dividends paid...................................... (116,007)
-----------
Net cash used in financing activities........................ (349,094)
-----------
Net increase in cash............................................... 34,445
Cash and cash equivalents at beginning of year..................... 136,568
-----------
Cash and cash equivalents at end of year........................... $ 171,013
===========
Supplemental disclosures of cash flow information:
Cash payments for interest....................................... $ 151,085
Cash payments for income taxes................................... $ 653,346
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INDY CONNECTION LIMOUSINES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of Indy
Connection Limousines, Inc., and its wholly-owned subsidiary Transit Tours,
Inc. (the "Company"). The Company provides various ground transportation
services to individuals and businesses in the greater Indianapolis, Indiana
area, by utilizing limousines, sedans, vans and buses. All significant
intercompany transactions have been eliminated.
Accounting estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make certain 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. The reported amounts of revenue and expenses during the reporting
period may also be affected by the estimates and assumptions management is
required to make. Actual results may differ from the estimates.
Cash and cash equivalents
The Company considers all short-term investments with original maturities of
three months or less to be cash equivalents.
Property and equipment
Furniture, equipment, vehicles and leasehold improvements are stated at
cost. Depreciation is generally computed on straight-line and accelerated
methods for financial statements purposes over the estimated useful lives of
the related assets, generally one to ten years. Depreciation expense for the
year ended September 30, 1997 was $847,348. Gains or losses on sales and
retirements are reflected in results of operations.
Income taxes
Deferred tax assets and liabilities are computed based on the differences
between the financial reporting and income tax bases of assets and liabilities
using the enacted tax rates. Deferred income tax expense is based on the
change in deferred tax assets and liabilities from period to period, subject
to an ongoing assessment of realization.
Goodwill
Goodwill is being amortized over twenty years on the straight-line method.
The Company evaluates the recoverability of its goodwill based on estimated
undiscounted cash flows over the lesser of the remaining amortization periods
or calculated lives, giving consideration to revenue expected to be realized.
This 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 goodwill resulting from this
evaluation.
Revenue recognition
Revenue for ground transportation services is recognized when such services
are provided.
<PAGE>
INDY CONNECTION LIMOUSINES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. LINES OF CREDIT
Borrowings under lines of credit at September 30, 1997 consist of the
following:
<TABLE>
<S> <C>
NBD Bank, N.A. .................................................. $ 394,940
First of America--Indiana........................................ 1,076,471
----------
1,471,411
Less current portion............................................. (761,756)
----------
$ 709,655
==========
</TABLE>
The Company has a $950,000 discretionary credit agreement ("Agreement") with
NBD Bank, N.A. that allows the Company to purchase revenue earning vehicles
under installment notes. Separate notes are required for each vehicle
purchased with the maximum term on the note ranging from twenty-four to
thirty-six months. These installment notes bear interest at rates ranging from
8.75% to 9.5%. The Agreement is collateralized by the vehicles, and is subject
to various restrictive covenants, the most restrictive of which require the
Company to maintain compliance with certain financial ratios and minimum
tangible net worth. Borrowings under the Agreement are personally guaranteed
by the majority shareholder of the Company. This Agreement expires January 1,
1998. The outstanding balance was repaid on October 8, 1997.
The Company has a $1,000,000 discretionary credit agreement ("Agreement")
with First of America--Indiana that allows the Company to purchase revenue
earning vehicles under installment notes. Separate notes are required for each
vehicle purchased with the maximum term on the note generally ranging from
twenty-four to thirty-six months. These installment notes bear interest at
rates ranging from 8.75% to 10.5%. The Agreement is collateralized by the
vehicles, and is subject to various restrictive covenants, the most
restrictive of which require the Company to maintain compliance with certain
financial ratios and minimum tangible net worth. Borrowings under the
Agreement are personally guaranteed by the majority shareholder of the
Company. The Agreement expires January 31, 1998, however, any borrowings
outstanding at the date would be repaid over the remaining term of the
individual notes.
The Company also maintains a $125,000 working capital line of credit with
First of America-Indiana. There were no borrowings outstanding at September
30, 1997. The line of credit is collateralized by substantially all other
assets of the Company not collateralizing the NBD Bank borrowings. Under the
terms of the line of credit, the Company is subject to various general
covenants. The bank also requires the personal guarantee of the majority
shareholder of the Company.
Annual maturities of all outstanding borrowings at September 30, 1997 are as
follows:
<TABLE>
<S> <C>
1998.............................................................. $ 761,756
1999.............................................................. 385,019
2000.............................................................. 66,614
2001.............................................................. 194,670
2002.............................................................. 31,313
Thereafter........................................................ 32,039
----------
$1,471,411
==========
</TABLE>
3. LEASES
The Company leases office and warehouse space and certain transportation
equipment under various operating leases. Annual rental expense totaled
approximately $46,000 in 1997. At September 30, 1997, the only remaining lease
commitment was for office space through July 31, 1998, with monthly payments
of $3,500.
<PAGE>
INDY CONNECTION LIMOUSINES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INCOME TAXES
Deferred tax assets and liabilities at September 30, 1997 were as follows:
<TABLE>
<S> <C>
Capital loss carryforwards........................................ $(74,000)
Property and equipment............................................ 90,000
Less valuation allowance on capital loss carryforwards............ 74,000
--------
Net deferred tax liability........................................ $ 90,000
========
</TABLE>
The provision for income taxes for the year ended September 30, 1997
consists of the following:
<TABLE>
<S> <C>
Current:
Federal.......................................................... $468,200
State............................................................ 94,160
--------
562,360
Deferred:
Federal.......................................................... --
State............................................................ (3,000)
--------
Total.......................................................... $559,360
========
</TABLE>
The Company has capital loss carryforwards totaling approximately $216,000,
expiring in various years through September 30, 2000, available to be applied
against future capital gains.
The Company's 1997 effective income tax rate differed from the applicable
Federal rate as follows:
<TABLE>
<S> <C>
Federal statutory rate................................................... 34%
State income taxes, net of federal benefit............................... 4
Other, net............................................................... (1)
---
Effective rate........................................................... 37%
===
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company has a consulting agreement with a corporation whose sole
stockholder is a principal stockholder, officer and director of the Company.
The Company incurred related consulting fees of $49,052 in 1997.
6. 401(K) RETIREMENT PLAN
The Company has a defined contribution retirement savings plan which covers
substantially all eligible employees, as defined. Participants may contribute
up to 15% of their gross compensation, as defined annually. The Company may
contribute matching amounts as determined annually by the Board of Directors.
For 1997 the Company contributed an amount equal to 25% of the participant's
contributions up to 5% of the participant's eligible compensation, as defined.
The Company may make additional discretionary contributions as determined
annually by the Board of Directors. Total retirement plan expenses in 1997
were approximately $15,000.
<PAGE>
INDY CONNECTION LIMOUSINES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. STOCK OPTION PLAN
During December 1995, the Company adopted a stock option plan intended to
promote a close identity of interest between the Company and its directors and
officers, as well as to provide a means to attract and retain outstanding
management. The Company made available 100,000 shares of common stock to be
granted. There were no outstanding options as of September 30, 1997.
8. SUBSEQUENT EVENT
On October 10, 1997, the Company entered into an Agreement and Plan of
Merger (subsequently amended) with Carey International, Inc. ("Carey") to
exchange substantially all of its outstanding common shares for common shares
of Carey. At a special meeting of the stockholders held on October 27, 1997,
the Amended Agreement and Plan of Merger was ratified by the Board of
Directors and 99% of the Companies stockholders. On October 31, 1997, the
transaction closed and the Company's stockholders received for each share of
common stock held; (1) .99211 shares of Carey's common stock valued at $16.625
per share and (2) cash for fractional shares remaining. On November 1, 1997
the Company's operations continued as Carey Limousine Indiana, Inc., a wholly-
owned subsidiary of Carey.
<PAGE>
Exhibit 11
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
SUPPLEMENTAL HISTORICAL EARNINGS PER SHARE
<TABLE>
<CAPTION>
November 30, November 30, November 30,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) available to common shareholders:
Net income (loss).................................... $ (38,132) $ 98,121 $ 3,494,967
Preferred stock dividends............................ (8,750) (4,375) (900)
------------ ------------ ------------
Net income (loss) available to common shareholders... $ (46,882) $ 93,746 $ 3,494,067
============ ============ ============
Common Stock and Common Stock Equivalents:
Weighted average shares outstanding.................. 1,323,415 1,332,879 1,359,073
Convertible Securities:
Series B Preferred Stock............................ 663,761 663,761 663,761
Series F Preferred Stock............................ 135,025 135,025 135,025
Series G Preferred Stock............................ 673,638 673,638 673,638
Options (calculated on Treasury Method) 1987 Plan.... 24,561 11,790 21,374
Options and warrants issued within one year of the
offering (calculated on Treasury Method):
Vested options repriced or granted.................. 219,706 219,706 219,706
Warrants repriced................................... 69,799 69,799 69,799
------------ ------------ ------------
289,505 289,505 289,505
------------ ------------ ------------
Total common stock and common stock equivalents... 3,109,905 3,106,598 3,142,376
============ ============ ============
Earnings (loss) per common share...................... $ (0.02) $ 0.03 $ 1.11
============ ============ ============
</TABLE>
11.1
<PAGE>
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
SUPPLEMENTAL HISTORICAL EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
August 31, August 31,
---------------------------- ---------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income available to common shareholders:
Net income................................................... $ 680,613 $ 1,129,222 $ 1,466,604 $ 2,553,720
Preferred stock dividend..................................... - - (900) -
------------ ------------ ------------ ------------
Net income available to common shareholders.................. $ 680,613 $ 1,179,722 $ 1,465,704 $ 2,553,720
============ ============ ============ ============
Common stock and common stock equivalents:
Weighted average shares outstanding.......................... 1,357,714 7,468,832 1,357,714 3,475,722
Convertible Securities:
Series B Preferred Stock.................................. 663,761 14,430 663,761 445,738
Series F Preferred Stock.................................. 135,025 2,935 135,025 90,674
Series G Preferred Stock.................................. 673,638 14,644 673,638 452,370
Options (calculated on Treasury Method) 1987 Plan............ 21,374 16,956 21,374 16,956
Options and warrants issued within one year of the offering
(calculated on Treasury Method):
Vested options repriced or granted........................ 207,020 297,690 207,020 296,162
Warrants repriced......................................... 65,782 89,547 65,782 80,391
------------ ------------ ------------ ------------
272,802 387,237 272,802 376,553
------------ ------------ ------------ ------------
Total common stock and common stock equivalents.............. 3,124,314 7,905,034 3,124,314 4,858,013
============ ============ ============ ============
Net income per common share.................................. $ 0.22 $ 0.15 $ 0.47 $ 0.53
============ ============ ============ ============
</TABLE>
11.2
<PAGE>
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS (CONTINUED)
PRO FORMA EARNINGS PER SHARE
TO GIVE EFFECT TO THE RECAPITALIZATION
(Presented on the face of the November 30, 1996,
and August 31, 1997 Supplemental Statements of Operations)
<TABLE>
<CAPTION>
For the three For the nine
November 30, months ended months ended
1996 August 31, 1997 August 31, 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Pro forma net income:
Net income available to common shareholder..................................... $ 3,494,067 $ 1,179,722 $ 2,553,720
Add back interest (net of applicable income taxes) on debt included in
Recapitalization:
$2,000,000 subordinated note (7.74%) converted to stock in Recapitalization.... 92,879 - 46,440
$2,867,546 subordinated note (12.0%) converted to stock in Recapitalization.... 206,464 - 103,232
--------------- --------------- ---------------
Pro forma net income........................................................... $ 3,793,410 $ 1,179,722 $ 2,703,392
=============== =============== ===============
Common Stock and Common Stock Equivalents:
Historical weighted average shares outstanding................................. 3,142,376 7,905,034 4,858,013
Add back:
Less common stock equivalents included in historical earnings per share:
Series B Preferred Stock...................................................... (663,761) (14,430) (445,738)
Series F Preferred Stock...................................................... (135,025) (2,935) (90,674)
Series G Preferred Stock...................................................... (673,638) (14,644) (452,370)
Add effect of Recapitalization:
Series A Preferred Stock...................................................... 86,003 1,870 57,754
Series B Preferred Stock...................................................... 663,761 14,430 445,738
Series F & G Preferred Stock.................................................. 763,748 16,603 512,882
Shares for $2,867,546 of subordinated debt.................................... 616,544 13,403 414,030
Shares for $2,000,000 of subordinated debt.................................... 430,015 9,348 288,769
--------------- --------------- ---------------
Total pro forma common stock and common stock equivalents...................... 4,230,023 7,928,679 5,588,404
=============== =============== ===============
Pro forma earnings per common share.............................................. $ 0.90 $ 0.15 $ 0.48
=============== =============== ===============
</TABLE>
11.3
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Carey International, Inc. on Form S-8 (File No. 333-32335) or our report dated
November 14, 1997, on our audit of the consolidated financial statements of Indy
Connection Limousines, Inc. as of September 30, 1997, and for the year then
ended, which report is included in this Report on Form 8-K/A.
Coopers & Lybrand L.L.P.
Washington, DC
January 13, 1997
<PAGE>
Exhibit 99.1
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31,
1997
------------
ASSETS (Unaudited)
<S> <C>
Cash and cash equivalents......................................... $ 5,603,023
Accounts receivable, net.......................................... 9,636,912
Notes receivable from contracts, current portion.................. 663,807
Prepaid expenses and other current assets......................... 1,469,214
------------
Total current assets...................................... 17,372,956
Fixed assets, net................................................. 7,424,135
Notes receivable from contracts, excluding current portion........ 8,326,216
Franchise rights, net............................................. 5,171,327
Trade name, trademark and contract rights, net.................... 6,541,553
Goodwill and other intangible assets, net......................... 27,951,806
Deferred tax assets............................................... 2,968,058
Deposits and other assets......................................... 2,082,024
------------
Total assets.............................................. $ 77,838,075
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of notes payable.................................. $ 1,113,670
Current portion of capital leases................................. 226,069
Accounts payable and accrued expenses............................. 13,418,458
------------
Total current liabilities................................. 14,758,197
Notes payable, excluding current portion.......................... 1,469,302
Capital leases, excluding current portion......................... 955,336
Deferred rent and other long-term liabilities..................... 53,116
Deferred tax liabilities.......................................... 1,594,071
Deferred revenue.................................................. 13,721,483
Commitments and contingencies.....................................
Stockholders' equity:
Common stock, $.01 par value; 20,000,000 authorized shares;
7,564,512 shares issued and outstanding........................ 75,645
Additional paid-in capital..................................... 44,228,503
Retained earnings.............................................. 982,422
------------
Total stockholders' equity................................ 45,286,570
------------
Total liabilities and stockholders' equity................ $ 77,838,075
============
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
1
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended August 31, Nine months ended August 31,
------------------------------- ------------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue, net........................................ $ 16,072,518 $ 22,932,463 $ 45,659,761 $ 57,217,364
Cost of revenue..................................... 10,600,231 15,358,731 30,281,404 38,022,538
------------ ------------ ------------ ------------
Gross profit................................... 5,472,287 7,573,732 15,378,357 19,194,826
Selling, general and administrative expenses........ 4,128,861 5,551,586 12,085,577 14,271,544
------------ ------------ ------------ ------------
Operating income............................... 1,343,426 2,022,146 3,292,780 4,923,282
Other income (expense):
Interest expense.................................. (470,728) (169,919) (1,445,561) (1,022,554)
Interest income................................... 55,223 111,142 109,402 170,397
Gain on sales of fixed assets..................... 82,830 38,993 245,489 179,471
------------ ------------ ------------ ------------
Income before provision for income taxes............ 1,010,751 2,002,362 2,202,110 4,250,596
Provision for income taxes.......................... 330,138 822,640 735,506 1,696,876
------------ ------------ ------------ ------------
Net income.......................................... $ 680,613 $ 1,179,722 $ 1,466,604 $ 2,553,720
============ ============ ============ ============
Pro forma earnings per common share................. $ 0.15 $ 0.48
============ ============
Pro forma weighted average common and common
equivalent shares outstanding...................... 7,928,679 5,588,404
============ ============
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
2
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended August 31,
---------------------------------
1996 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 1,466,604 $ 2,553,720
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization of fixed assets................... 1,387,651 1,444,831
Amortization of intangible assets............................... 781,630 900,346
Gain on sales of fixed assets................................... (245,489) (179,471)
Provision for deferred taxes.................................... - (424,025)
Change in deferred revenue...................................... 772,581 860,543
Changes in operating assets and liabilities:
Accounts receivable........................................... 1,250,240 1,010,533
Notes receivable from contracts............................... (830,085) (1,170,305)
Prepaid expenses, deposits and other assets................... (733,619) (453,038)
Accounts payable and accrued expenses......................... (53,030) (1,675,064)
Deferred rent and other long-term liabilities................. (43,264) (58,165)
------------ ------------
Net cash provided by operating activities................... 3,753,219 2,809,905
------------ ------------
Cash flows from investing activities:
Proceeds from sales of fixed assets................................ 1,699,233 1,291,286
Purchases of fixed assets.......................................... (2,605,483) (3,177,135)
Acquisitions of chauffeured vehicle service companies.............. (1,248,585) (7,394,060)
------------ ------------
Net cash used in investing activities....................... (2,154,835) (9,279,909)
------------ ------------
Cash flow from financing activities:
Proceeds of sales of notes receivable from independent operators... 404,307 -
Principal payments under capital lease obligations................. (206,989) (185,574)
Payments of notes payable.......................................... (3,257,478) (17,838,591)
Proceeds from notes payable........................................ 2,320,541 450,000
Issuance of common stock........................................... - 30,897,290
Common stock dividends............................................. (28,302) (101,857)
Preferred stock dividends.......................................... (900) -
Payments under Recapitalization Plan............................... - (4,015,952)
Redemption of Series E preferred stock............................. (137,500) -
------------ ------------
Net cash provided by (used in) financing activities......... (906,321) 9,205,316
------------ ------------
Net increase in cash and cash equivalents............................ 692,063 2,735,312
Cash and cash equivalents at beginning of period..................... 1,615,711 2,867,711
------------ ------------
Cash and cash equivalents at end of period........................... $ 2,307,774 $ 5,603,023
============ ============
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
3
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE SUPPLEMENTAL 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: New York (Carey
Limousine N.Y., Inc. and Manhattan International Limousine Network, Ltd.),
San Francisco (Carey Limousine SF, Inc.), Los Angeles (Carey Limousine L.A.,
Inc.), Indianapolis (Indy Connection Limousine, Inc., See Note 2),
Washington, D.C. (Carey Limousine D.C., Inc.), South Florida (Carey Limousine
Florida, Inc.), Philadelphia (Carey Limousine Corporation, Inc.) and London,
England (Carey UK Limited). 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. Such acquisitions include unrelated chauffeured vehicle
service businesses, some of which 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 the first quarter of
1996, the Company acquired a chauffeured vehicle service company operating in
London, England. As more fully discussed in Note 3, on June 2, 1997 the
Company acquired Manhattan International Limousine Network Ltd. and an
affiliated company ("Manhattan Limousine").
Initial public offering and reverse stock split
In connection with the Company's initial public offering ("IPO") completed
June 2, 1997, the Company's Board of Directors authorized a one for 2.3255
reverse stock split of the outstanding shares of the Company's common stock.
All references to common stock, options, warrants and per share data have
been restated to give effect to the reverse stock split. On February 25,
1997, the Board of Directors also authorized a Recapitalization Plan (the
"Recapitalization"), which is more fully described in Note 7.
2. Basis of presentation
The supplemental consolidated financial statements of Carey International,
Inc. and subsidiaries have been prepared to give retroactive effect to the
merger of Indy Connection Limousines, Inc. and subsidiary (Indy Connection)
with and into Carey International, Inc. and subsidiaries on October 31, 1997.
Generally accepted accounting principles proscribe giving effect to a
consummated business combination accounted for by the pooling-of-interests
method in financial statements that do not include the date of consummation.
These supplemental financial statements do not extend through the date of
4
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
consummation; however, they will become the historical consolidated financial
statements of Carey International, Inc. and subsidiaries after financial
statements covering the date of consummation of the business combination are
issued.
The accompanying consolidated financial statements and these notes do not
include all of the disclosures included in the Company's supplemental audited
consolidated financial statements for the years ended November 30, 1994, 1995
and 1996, which should be read in conjunction with these financial
statements. For further information, such as the significant accounting
policies followed by the Company, refer to the notes to the Company's
supplemental consolidated financial statements.
The supplemental consolidated financial statements included herein have not
been audited. However, in the opinion of management, the supplemental
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.
Pro forma net income per common share
Consistent with Securities and Exchange Commission Staff Accounting
Bulletin ("SAB") No. 1B-2, the Company has recalculated historical weighted
average common shares outstanding and net income per common share to give
effect to the Recapitalization (see Note 7). The recalculated pro forma net
income per common share is determined by (i) adjusting net income available
to common shareholders to reflect the elimination of interest expense, net of
taxes, resulting from the conversion of a portion of the 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
subordinated debt and the partial conversion of the Series A Preferred Stock.
3. Acquisitions
In February 1996, the Company acquired the common stock of a chauffeured
vehicle service company in London, England for approximately $1,500,000.
Additional contingent consideration of up to approximately $1,000,000 may be
payable for the two-year period ending February 28, 1998 based on the level
of revenues referred to the acquired company by the seller. As of August 31,
1997, the Company has paid approximately $550,000 in such contingent
consideration in connection with the London acquisition. In September 1997,
the Company made an additional contingent consideration payment of
approximately $280,000.
In June 1997, the Company acquired the common stock of Manhattan Limousine
for $14,200,000. The purchase price for the acquisition was composed of
$4,740,00 in debt to the sellers, a cash payment of $7,060,000 and the
issuance of 228,571 shares of common stock. The debt to the sellers was paid
off on July 31, 1997.
5
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In the periods ended August 31, 1996 and 1997, the following acquisition
activity was recorded by the Company:
<TABLE>
<CAPTION>
Nine months ended August 31,
--------------------------------
1996 1997
------------ ------------
<S> <C> <C>
Fair value of net assets and liabilities acquired:
Receivables and other assets $ 632,554 $ 159,575
Notes receivable from contracts - 6,647,766
Fixed assets 928,377 1,498,444
Franchise rights 50,065 -
Goodwill and other tangibles 160,040 21,046,816
Trade payables and accrued expenses (522,451) (4,353,898)
Notes payable - (8,524,850)
Deferred revenue - (6,679,793)
------------ ------------
Fair value of assets and liabilities acquired $ 1,248,585 $ 9,794,060
============ ============
Issuance of stock (228,571 shares of common stock) $ - $ 2,400,000
============ ============
Cash payments (net of $223,695 cash acquired in 1996) $ 1,248,585 $ 7,394,060
============ ============
</TABLE>
At the time of its acquisition by the Company, Manhattan Limousine was
subject to guarantees of certain independent operator leases with third party
finance companies of approximately $2.1 million.
4. Senior credit facility
With effect 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"). The Facility, which may be used for
acquisitions and working capital, is collateralized by the assets of the
Company and its domestic operating 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 (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.
6
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. 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.
The Company, certain of the Company's subsidiaries and certain officers and
directors of the Company were named in a civil action filed on May 15, 1996
in the United States District Court for the Eastern District of Pennsylvania
entitled "Felix v. Carey International, Inc., et. al." The plaintiff's
complaint, which purports to be a class action, alleges that the plaintiff
and others similarly situated suffered monetary damages as a result of
misrepresentations by the various defendants in their use of a surface
transportation billing charge (the "STC"). The plaintiff seeks damages in
excess of $1 million on behalf of the class for each of the counts in the
complaint including fraud, negligent misrepresentation and violations of the
Racketeer Influenced and Corrupt Organizations law of 1970, which permits the
recovery of treble damages and attorneys' fees. The proposed class has
received preliminary certification by the court. The Company is indemnifying
and defending its officers and directors who were named as defendants in the
case, subject to conditions imposed by applicable law.
The Company has reached a tentative settlement with the plaintiff and
plaintiff's counsel. The settlement calls for the Company to deposit $500,000
into a settlement fund and provide a $450,000 letter of credit for a class
consisting of all persons who paid the STC during the period from May 15,
1992 through March 15, 1997. As a condition of the final settlement, the
Company will change its disclosure concerning the STC, and each class member
showing proper authentication of a claim shall be entitled to receive either
(i) cash totaling 10% of the STC paid during the period described above or
(ii) a nontransferable credit to be applied toward future use of the
Company's services in an amount equal to 30% of such STC.
The Company does not believe the settlement described above will have a
material adverse effect on its business, financial condition, results of
operations and cash flows.
6. Net income per common share
Net income per common share, on a historical basis, is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
August 31, August 31,
---------------------------- ----------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income available to common shareholders $ 680,613 $ 1,179,722 $ 1,465,704 $ 2,553,720
============ ============ ============ ============
Weighted average common and common equivalent
shares outstanding 3,124,314 7,905,034 3,124,314 4,858,013
============ ============ ============ ============
Net income per common share $ 0.22 $ 0.15 $ 0.47 $ 0.53
============ ============ ============ ============
</TABLE>
7
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Common equivalent shares are included in the per share calculations where
the effect of their inclusion would be dilutive. Common equivalent shares
consist of Series B, F and G preferred stock as well as substantially all of
the subordinated debt of the Company and the assumed exercise of vested
outstanding stock options and warrants. Pursuant to SAB No. 83, the common
equivalent shares issued by the Company during the twelve months preceding
the effective date of the Registration Statement relating to the IPO, using
the treasury stock method and the IPO price of $10.50 per share, have been
included in the calculation of net income per common share.
7. Recapitalization
On February 25, 1997, the Board of Directors authorized a Recapitalization,
which was implemented on June 2, 1997, coincident with the closing of the
IPO. Under the Recapitalization, the $2,000,000 subordinated convertible note
dated September 1, 1991 and the $3,780,000 subordinated note dated July 30,
1992 were converted into 1,046,559 shares of common stock and the remaining
principal balance of $912,454 was repaid. The Series A preferred stock was
converted, in part, into 86,003 shares of common stock and redeemed in part
for $2,103,500. All of the Series F preferred stock and 3,000 shares of the
Series G preferred stock was redeemed for $1,000,000.
The remaining preferred stock has been converted into 1,427,527 shares of
common stock. As a result of the Recapitalization, preferred stock with a
liquidation preference of $11,154,900 and subordinated debt with a principal
amount of $5,780,000 has been converted in part into 2,560,071 shares of
common stock and repaid or redeemed in part for $4,015,952 in cash, with the
cash portion paid out of the proceeds of the IPO.
8
<PAGE>
Exhibit 99.2
Report of Independent Accountants
---------------------------------
To the Stockholders and Board of Directors of
Carey International, Inc.
We have audited the accompanying supplemental consolidated balance sheets
of Carey International, Inc. and Subsidiaries as of November 30, 1995 and 1996,
and the related supplemental consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended November 30, 1996. 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 supplemental consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Carey International Inc. and Subsidiaries as of November 30, 1995 and 1996, and
the results of their operations and their cash flows for each of the three years
in the period ended November 30, 1996, in conformity with generally accepted
accounting principles.
The supplemental financial statements give retroactive effect to the merger
on October 31, 1997, of Carey International, Inc., Indy Connection Limousine,
Inc. and Subsidiary, which has been accounted for as a pooling-of-interests as
described in Notes 1, 2 and 13 to the supplemental consolidated financial
statements. Generally accepted accounting principles proscribe giving effect to
a consummated business combination accounted for by the pooling-of-interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation;
however, they will become the historical consolidated financial statements of
Carey International, Inc. and Subsidiaries after financial statements covering
the date of consummation of the business combination are issued.
As discussed in Note 16 to the supplemental consolidated financial
statements, the accompanying supplemental consolidated balance sheets as of
November 30, 1994 and 1995, and the related supplemental consolidated statements
of operations, changes in stockholders' equity and cash flows for each of the
two years in the period ended November 30, 1995, have been restated for a change
in the revenue recognition method.
Washington, D.C. Coopers & Lybrand, L.L.P.
January 31, 1997, except
for Note 18, as to which
the date is March 1, 1997,
and Notes 1, 2 and 13 and
the fourth paragraph above,
as to which the date is
January 9, 1998
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30,
----------------------------
ASSETS 1995 1996
------------ ------------
<S> <C> <C>
Cash and cash equivalents....................... $ 1,615,711 $ 2,867,711
Accounts receivable, net of allowance for
doubtful accounts of $294,000 in
1995 and $535,000 in 1996...................... 9,364,356 10,542,331
Notes receivable from contracts,
current portion................................ 659,609 402,751
Prepaid expenses and other current assets....... 481,947 2,061,738
------------ ------------
Total current assets................... 12,121,623 15,874,531
Fixed assets, net of accumulated depreciation
of $3,643,000 in 1995 and $3,394,000 in 1996... 4,318,711 5,634,910
Notes receivable from contracts, excluding
current portion................................ 193,298 769,201
Franchise rights, net of accumulated
amortization of $1,494,000 in 1995 and
$1,729,000 in 1996............................. 5,533,956 5,348,264
Trade name, trademark and contract rights,
net of accumulated amortization of
$781,000 in 1995 and $973,000 in 1996.......... 6,876,578 6,685,135
Goodwill and other intangible assets, net of
accumulated amortization of $585,000 in
1995 and $840,000 in 1996...................... 7,139,263 7,285,933
Deferred tax assets............................. 892,993 2,461,573
Deposits and other assets....................... 1,652,892 1,419,006
------------ ------------
Total assets........................... $38,729,314 $45,478,553
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of notes payable................ $ 5,365,412 $ 5,858,249
Current portion of capital leases............... 252,953 199,224
Current portion of subordinated notes payable... 100,000 440,000
Accounts payable and accrued expenses........... 8,351,312 11,564,963
------------ ------------
Total current liabilities.............. 14,069,677 18,062,436
Notes payable, excluding current portion........ 8,639,769 6,035,964
Capital leases, excluding current portion....... 82,021 663,030
Subordinated notes payable, excluding
current portion................................ 5,780,000 5,340,000
Deferred rent and other long-term liabilities... 148,195 111,281
Deferred tax liabilities........................ 1,086,480 1,511,611
Deferred revenue................................ 4,726,134 6,181,147
Commitments and contingencies
Stockholders' equity:
Preferred stock............................. 1,252,900 1,115,400
Class A common stock, $.01 par value,
authorized 314,000 Shares, issued
and outstanding............................ - -
Common stock, $0.01 par value; issued and
outstanding 1,377,556 shares............... 13,577 13,776
Additional paid-in capital.................. 7,821,570 7,841,371
Accumulated deficit......................... (4,891,009) (1,397,463)
------------ ------------
Total stockholders' equity............. 4,197,038 7,573,084
------------ ------------
Total liabilities and stockholders'
equity................................ $38,729,314 $45,478,553
============ ============
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
2
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended November 30,
-------------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenue, net.................... $40,313,722 $48,969,395 $65,544,942
Cost of revenue................. 27,699,677 33,027,209 43,649,178
----------- ----------- -----------
Gross profit................ 12,614,045 15,942,186 21,895,764
Selling, general and
administrative expense......... 11,042,949 14,081,152 16,726,610
----------- ----------- -----------
Operating income............ 1,571,096 1,861,034 5,169,154
Other income (expense):
Interest expense............ (1,513,163) (1,910,966) (1,898,231)
Interest income............. 173,313 262,647 162,711
Gain (loss) on sales of
assets..................... (106,568) 156,005 355,754
----------- ----------- -----------
Income before provision for
income taxes................... 124,678 368,720 3,789,388
Provision for income taxes...... 162,810 270,599 294,421
----------- ----------- -----------
Net income (loss)............... $ (38,132) $ 98,121 $ 3,494,967
=========== =========== ===========
Pro forma net income per
common share................... $ 0.90
===========
Weighted average common shares
outstanding.................... 4,230,023
===========
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
3
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A Series B Series E Series F Series G Carey Indiana
preferred preferred preferred preferred preferred preferred
stock stock stock stock stock stock
---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1993...... $ 420,700 $ 95,800 $ 266,250 $ 100,000 $ 498,900 $ 400,000
Accretion of redeemable
preferred stock.................. - - 8,750 - - -
Issue Class B preferred stock..... - - - - - 80,000
Payment of common stock
dividends........................ - - - - - -
Redemption of preferred
stock............................ - - (62,500) - - (400,000)
Issue common stock................ - - - - - -
Exchange stock for
investment in
discontinued operations.......... - - - - - -
Payment of accrued
dividends........................ - - (26,250) - - -
Payment of Series E
dividends........................ - - - - - -
Net loss.......................... - - - - - -
---------- ---------- ---------- ---------- ---------- -------------
Balance at November 30, 1994...... 420,700 95,800 186,250 100,000 498,900 80,000
Accretion of redeemable
preferred stock.................. - - 4,375 - - -
Payment of common stock
dividends........................ - - - - - -
Redemption of preferred
stock............................ - - (62,500) - - (40,000)
Payment of preferred stock
dividends........................ - - (30,625) - - -
Issuance of stock................. - - - - - -
Net income........................ - - - - - -
---------- ---------- ---------- ---------- ---------- -------------
Balance at November 30, 1995...... 420,700 95,800 97,500 100,000 498,900 40,000
Redemption of preferred
stock............................ - - (97,500) - - (40,000)
Issuance of options at
below fair market value.......... - - - - - -
Payment of preferred stock
dividend......................... - - - - - -
Payment of common stock
dividend......................... - - - - - -
Cumulative effect of
currency translation............. - - - - - -
Net income........................ - - - - - -
---------- ---------- ---------- ---------- ---------- -------------
Balance at November 30, 1996...... $ 420,700 $ 95,800 $ - $ 100,000 $ 498,900 $ -
========== ========== ========== ========== ========== =============
</TABLE>
<TABLE>
<CAPTION>
Common Stock
---------------------- Additional Total
Shares $ paid-in Accumulated stockholders'
capital deficit equity
---------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at November 30, 1993.......... $1,323,048 $ 13,230 $7,798,322 $(4,822,643) $ 4,770,559
Accretion of redeemable
preferred stock...................... - - (8,750) - -
Issue Class B preferred
stock................................ - - - - 80,000
Payment of common stock
dividends............................ - - - (103,076) (103,076)
Redemption of preferred
stock................................ - - - - (462,500)
Issue common stock.................... 14,881 149 14,851 15,000
Exchange stock for
investment in
discontinued operations.............. (12,897) (129) (12,871) - (13,000)
Payment of accrued
dividends............................ - - - - (26,250)
Payment of Series E
dividends............................ - - - (4,378) (4,378)
Net loss.............................. - - - (38,132) (38,132)
---------- ---------- ---------- ------------ -------------
Balance at November 30, 1994.......... 1,325,032 13,250 7,791,552 (4,968,229) 4,218,223
Accretion of redeemable
preferred stock...................... - - (4,375) - -
Payment of common stock
dividends............................ - - - (20,901) (20,901)
Redemption of preferred
stock................................ - - - - (102,500)
Payment of preferred stock
dividends............................ - - - - (30,625)
Issuance of stock..................... 32,682 327 34,393 - 34,720
Net income............................ - - - 98,121 98,121
---------- ---------- ---------- ------------ -------------
Balance at November 30, 1995.......... 1,357,714 13,577 7,821,570 (4,891,009) 4,197,038
Redemption of preferred
stock................................ - - - - (137,500)
Issuance of options at
below fair market value.............. 19,842 199 19,801 - 20,000
Payment of preferred stock
dividend............................. - - - (900) (900)
Payment of common stock
dividend............................. - - - (42,057) (42,057)
Cumulative effect of
currency translation................. - - - 41,536 41,536
Net income............................ - - - 3,494,967 3,494,967
---------- ---------- ---------- ------------ -------------
Balance at November 30, 1996.......... 1,377,556 $ 13,776 $7,841,371 $(1,397,463) $ 7,573,084
========== ========== ========== ============ =============
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
4
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended November 30,
----------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (38,132) $ 98,121 $ 3,494,967
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization of fixed assets 1,816,307 2,087,370 2,095,439
Amortization of intangible assets 672,983 714,199 1,064,255
(Gain) loss on sales of fixed assets 106,568 (156,005) (355,754)
Deferred income taxes benefit 70,000 102,000 (1,346,557)
Change in deferred revenue 184,220 237,306 1,455,013
Change in operating assets and liabilities:
Accounts receivable (948,971) (2,601,429) (545,421)
Notes receivable from contracts (519,155) 11,000 (1,052,838)
Prepaid expenses, deposits and other assets (362,838) (189,180) (665,084)
Accounts payable and accrued expenses 810,819 3,306,393 2,021,101
Deferred rent and other long-term liabilities (61,967) 87,490 (36,914)
------------ ------------ ------------
Net cash provided by operating activities 1,729,834 3,697,265 6,128,207
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of fixed assets 971,864 1,639,766 1,788,380
Purchases of fixed assets (2,347,495) (2,768,982) (3,091,353)
Software development costs - (203,529) -
Redemption of investment in affiliate - 100,000 -
Acquisitions of chauffeured vehicle service companies (128,596) (3,949,393) (1,730,232)
------------ ------------ ------------
Net cash used in investing activities (1,504,227) (5,182,138) (3,033,205)
------------ ------------ ------------
Cash flow from financing activities:
Proceeds from sale of notes receivable from independent operators 378,733 1,493,399 733,793
Principal payments under capital lease obligations (384,181) (436,169) (297,549)
Preferred stock dividends (30,628) (30,625) (900)
Payment of notes payable (4,036,740) (4,496,659) (5,976,357)
Proceeds from notes payable 3,357,185 5,141,022 3,857,568
Issuance of common stock 15,000 34,720 20,000
Common stock dividends (103,076) (20,901) (42,057)
Issue preferred stock 80,000 - -
Redemption of preferred stock (462,500) (102,500) (137,500)
------------ ------------ ------------
Net cash provided by (used in) financing activities (1,186,207) 1,582,287 (1,843,002)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (960,600) 97,414 1,252,000
Cash and cash equivalents at beginning of year 2,478,897 1,518,297 1,615,711
------------ ------------ ------------
Cash and cash equivalents at end of year $ 1,518,297 $ 1,615,711 $ 2,867,711
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
5
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
1. Background and organization
General
Carey International, Inc. (the Company) is one of the world's largest
chauffeured vehicle service companies, providing 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: New York (Carey Limousine NY,
Inc.), San Francisco (Carey Limousine SF, Inc.), Los Angeles (Carey Limousine
L.A., Inc.), London (Carey UK Limited), Indianapolis (Indy Connection
Limousine, Inc., See Note 2), Washington, DC (Carey Limousine DC, Inc.),
South Florida (Carey Limousine Florida, Inc.) and Philadelphia (Carey
Limousine Corporation, Inc.). In addition, the Company generates revenues
from licensing the "Carey" name, and from providing central reservations,
billing, sales and marketing services to its licensees. The Company's
worldwide network also included 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 and franchises
The Company is engaged in a program of acquiring chauffeur vehicle service
businesses, including licensees operating under the Carey name and trademark.
These acquisitions are accounted for as purchases. The carrying value of the
assets acquired is determined by the negotiated purchase price. In addition
to acquiring licensees operating under the Carey name, the Company has
acquired chauffeured vehicle service businesses in cities where the Company
operates. In 1995, these acquisitions included chauffeur vehicle service
companies operating in Washington, D.C., Miami, West Palm Beach and San
Francisco. In 1996, the Company acquired a chauffeured vehicle service
company in London, England.
Reverse Stock Split
On February 25, 1997, the Board of Directors authorized management of the
Company to file a Registration Statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock in an
initial public offering (the "IPO"). The Board of Directors, at the same
meeting and subject to stockholder approval, authorized a reverse stock split
of approximately one-for-2.3255 of the outstanding shares of the Company's
common stock. A majority of the Company's stockholders have approved the
reverse stock split. All references to common stock, options, warrants and
per share data have been restated to give effect to the reverse stock split.
The Board of Directors also authorized a Recapitalization (see Note 18) on
February 25, 1997.
6
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Summary of significant accounting policies
Basis of presentation
The supplemental consolidated financial statements of Carey International,
Inc. and subsidiaries have been prepared to give retroactive effect to the
merger of Indy Connection Limousines, Inc. and subsidiary (Indy Connection)
with and into Carey International, Inc. and subsidiaries on October 31, 1997
(See Note 13). Generally accepted accounting principles proscribe giving
effect to a consummated business combination accounted for by the pooling-of-
interests method in financial statements that do not include the date of
consummation. These supplemental financial statements do not extend through
the date of consummation; however, they will become the historical
consolidated financial statements of Carey International, Inc. and
subsidiaries after financial statements covering the date of consummation of
the business combination are issued.
The supplemental consolidated financial statements include the financial
statements of the Company and its subsidiaries. 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all short-term investments with original maturities
of three months or less to be cash equivalents.
Notes receivable from contracts
An important component of the Company's operating strategy involves the
preferred use of non-employee independent operators chauffeuring their own
vehicles rather than employee chauffeurs operating Company-owned vehicles.
Each independent operator enters into an agreement with the Company to
provide prompt and courteous service to the Company's customers with a
properly maintained, late model vehicle which he or she owns and for which he
or she pays all of the maintenance and operating expenses, including
gasoline. The Company, under the independent operator agreement, agrees to
bill and collect all revenues and remit to the independent operator 60% to
65% of revenues, as defined in the agreement. Each new operator agrees to pay
a one-time fee generally ranging from $30,000 to $45,000 to the Company under
the terms of the independent operator agreement. Through 1996,
7
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the term of the independent operator agreement generally ranged from 10 years
to perpetuity. (See "Revenue recognition").
The Company typically receives a promissory note from the independent
operator as payment for the one-time fee under the terms of the Standard
Independent Operator Agreement (see Note 3) and records the note in notes
receivable from contracts. The notes evidencing such financing generally were
sold on a non-recourse basis by the Company to third party finance companies
(see Note 11) in exchange for cash and promissory notes. Since September
1996, the Company has ceased selling notes to third parties. Such promissory
notes due from finance companies have also been recorded in notes receivable
from contracts in the consolidated balance sheets.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash
equivalents, accounts receivable and notes receivable from contracts. The
Company maintains its cash and cash equivalents with various financial
institutions. In order to limit exposure to any one institution, the
Company's cash equivalents are composed mainly of overnight repurchase
agreements collateralized by U.S. Government securities. Accounts receivable
are generally diversified due to the large number of entities comprising the
Company's customer base and their dispersion across many different
industries. The Company performs ongoing credit evaluations of its customers,
and may require credit card documentation or prepayment of selected
transactions. Notes receivable from contracts are supported by the underlying
base of revenue serviced by each respective independent operator (see Notes 4
and 11). The Company performs ongoing evaluations of each independent
operator's productivity and payment capacity and has utilized third-party
financing to reduce credit exposure.
Fixed assets
Furniture, equipment, vehicles and leasehold improvements are stated at
cost. Equipment under capital leases is stated at the lower of the present
value of minimum lease payments or the fair market value at the inception of
the lease. Depreciation on furniture, equipment, vehicles and leasehold
improvements is calculated on the straight-line method over the estimated
useful lives of the assets, generally three to five years. The building owned
by the Company is depreciated over 40 years on a straight-line basis. Sales
and retirements of fixed assets are recorded by removing the cost and
accumulated depreciation from the accounts. Gains or losses on sales and
retirements of property are reflected in results of operations.
Intangible assets
Effective September 1, 1991, the Company acquired the Carey name and
trademark and the contract rights to all royalty fee payments by various
Carey licensees for a purchase price of $7 million. These assets are held by
Carey Licensing, Inc. and are being amortized over 40 years.
8
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company has acquired chauffeured vehicle service companies, all of
which have been accounted for as purchases, except for Indy Connection which has
been accounted for as a pooling-of-interests. For each business acquired which
is a licensee of the Company, the excess of cost over the fair market value of
the net assets acquired is allocated to franchise rights in the balance sheet.
With respect to acquired businesses which are not licensees of the Company, the
excess of cost over the net assets acquired is allocated to goodwill. Goodwill
and franchise rights are amortized over 30 years using the straight-line method.
Such amortization is included in selling, general and administrative expense in
the statement of operations. The Company evaluates the recoverability of its
intangible assets based on estimated undiscounted cash flows over the lesser of
the remaining amortization periods or calculated lives, giving consideration to
revenue expected to be realized. This 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
Chauffeured vehicle services - The Company's principal source of revenue is
from chauffeured vehicle services provided by its operating subsidiaries. Such
revenue, net of discounts, is recorded when such services are provided. The
Company, through the Carey International Reservation System ("CIRS"), has a
central reservation system capable of booking reservations on behalf of its
licensees and affiliates. Under most circumstances, central reservations are
billed by the Company to the customer when the Company receives a service
invoice from the licensee or affiliate that provided the service. At such time,
the Company also records the gross revenue for the transaction.
Fees from licensees - The Company charges an initial license fee under its
domestic license agreement and records the fee as revenue on signing of the
agreement. The Company also charges its domestic licensees monthly franchise and
marketing fees equal to stated percentages of monthly revenues, as defined in
the licensing agreement. Monthly fees to domestic licensees are generally less
than 10% of the licensee's monthly revenues. The Company records such fees as
revenues as they are charged to the licensees.
International licensees and the Company's domestic and international
affiliates historically have not paid fees to the Company, but have instead
given a discount on business referred to them through CIRS. Such discounts
reduce the amount of service invoices to the Company from such licensees and
affiliates for services provided to customers whose reservations have been
booked and invoiced centrally by the Company.
Independent operator fees - The Company enters into contracts with
independent operators ("Standard Independent Operator Agreements") to provide
chauffeured vehicle services exclusively to the Company's customers. When
independent operator agreements are executed, the Company defers revenue equal
to the amount of the one-time fees and recognizes the fees as revenue over the
terms of the contracts or over 20 years for perpetual contracts. Upon
termination of an independent operator
9
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
agreement, the remaining deferred revenue associated with the specific contract,
less any amounts due from the independent operator deemed uncollectible, is
recognized as revenue.
Income taxes
The provision for income taxes includes income taxes currently payable and
the change during the year in the net deferred tax liabilities or assets.
Deferred income tax liabilities and assets are determined based on the
differences between the financial statement and tax bases of liabilities and
assets using enacted tax rates in effect for the year in which the differences
are expected to reverse. A valuation allowance is provided to reduce the net
deferred tax asset, if any, to a level which, more likely than not, will be
realized.
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 the following matters pursuant to the
Recapitalization (see Note 18). 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.
Stock-based Compensation
In October 1995, the Financial Accounting Standards Boards issued Statement
of Financial Accounting Standards No. 123 ("SFAS 123") Accounting for Stock-
Based Compensation, which is effective for the Company's financial statements
for fiscal years beginning after December 15, 1995. SFAS 123 allows companies to
either account for stock-based compensation under the new provisions of SFAS 123
or under the provisions of Accounting Principles Board Option No. 25 ("APB 25"),
Accounting for Stock Issued to Employees. The Company will continue to apply the
provisions of APB 25 and provide pro forma disclosure in the notes to the
financial statements.
Foreign operations
The Consolidated Balance Sheets include foreign assets and liabilities of
$3.7 million and $2.7 million as of November 30, 1996. The net effects of
foreign currency transactions reflected in income were immaterial. Assets and
liabilities of the Company's foreign operations are translated into United
States dollars using exchange rates in effect at the balance sheet date and
results of operations items are translated using the average exchange rate
prevailing throughout the period.
10
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Reclassifications
Certain accounts in 1994 and 1995 have been reclassified to conform with
the 1996 presentation.
3. Fees from licensees
The total of all domestic license fees, franchises fees and marketing fees
earned in each of 1994, 1995 and 1996 was $1,466,588, $1,228,472 and
$2,180,540, respectively. Amounts due from licensees of $46,520 and $143,041
at November 30, 1995 and 1996, respectively, are included in accounts
receivable in the consolidated balance sheets of the Company.
4. Transactions with Independent Operators
The Company recorded approximately $1,153,000, $1,130,000 and $2,371,000 in
1994, 1995 and 1996, respectively, as deferred revenue relating to fees from
new agreements with independents operators. Amounts of deferred revenue
recognized as revenues in 1994, 1995 and 1996 amounted to approximately
$969,000, $889,000 and $936,000, respectively.
Notes receivable from contracts include approximately $305,000 and $917,000
at November 30, 1995 and 1996, respectively, for amounts due from independent
operators and approximately $548,000 and $255,000 at November 30, 1995 and
1996, respectively, for amounts due from a related party financing company
(see Note 11).
In the normal course of business, the Company's independent operators are
responsible for financing their own vehicles through third parties. From time
to time, the Company has arranged lease and purchase financing for certain
vehicles and has in turn leased back such vehicles to independent operators
on terms and conditions similar to those under which the Company is obligated
(see Note 5).
11
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Fixed assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
November 30,
-----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Vehicles......................................... $ 5,352,304 $ 5,026,897
Equipment........................................ 1,801,668 2,303,348
Furniture........................................ 543,782 749,840
Leasehold improvements........................... 263,758 419,232
Land and building................................ - 529,634
------------ ------------
7,961,512 9,028,951
Less accumulated depreciation and amortization... (3,642,801) (3,394,041)
------------ ------------
Net fixed assets................................. $ 4,318,711 $ 5,634,910
============ ============
</TABLE>
The Company is obligated under various vehicle and equipment capital
leases. Vehicles and equipment under capital leases included in fixed assets are
as follows:
<TABLE>
<CAPTION>
November 30,
-----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Equipment........................................ $ 444,983 $ 1,048,633
Vehicles......................................... 352,796 621,420
------------ ------------
797,779 1,670,053
Less accumulated amortization.................... (536,713) (561,871)
------------ ------------
$ 261,066 $ 1,108,182
============ ============
</TABLE>
12
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
6. Notes payable
Notes payable consist of the following:
November 30,
-----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Bank revolving credit/term loan dated April 13, 1995, modified December 1,
1996. Collateralized by accounts receivable of the Company and the
pledge of common stock of the Company's U.S. subsidiaries. Interest only
is payable until June 30, 1996; beginning July 1, 1996, quarterly
principal payments are required in an amount sufficient to amortize the
outstanding balance over a four-year period. Interest is payable monthly
at a floating rate based on the Wall Street Journal prime plus 1.25%
(9.5% at November 30, 1996). This loan is guaranteed by the Chairman of
the Board and the President of the Company.............................. $ 4,500,000 $ 3,937,500
Note payable dated September 1, 1991, at an annual rate of interest of
7.74%, collateralized by the assets of Carey Licensing, Inc. Pursuant to
an agreement with the lender effective November 30, 1996, principal
payments of $220,000 are due quarterly from December 31, 1996 through
December 31, 1997 and a final principal payment of $240,000 due March 1,
1998.................................................................... 2,220,000 1,340,000
Bank line of credit of $1,000,000, dated October 17, 1994, collateralized
by accounts receivable of Carey NY and assignment of license agreement
between the Company and Carey NY; due April 30, 1997. Interest is
payable monthly at a variable interest rate of .75% above the bank's
prime rate (9.0% at November 30, 1996).................................. 990,000 990,000
Various installment notes payable, with interest rates ranging from 8.75%
to 14.5%, collateralized by certain vehicles and equipment of the
Company's subsidiaries; principal and interest are payable monthly over
36-month terms.......................................................... 1,514,715 555,834
Notes payable to bank, dated March 26, 1996, at the prime rate (8.25 at
November 30, 1996) plus 1.0% per annum and matures on January 31, 1998.
The notes are collateralized by substantially all Indy Connection's
assets. Under the terms of the agreement, Carey Limousine Indiana is
subject to various general covenants. The bank also required the
personal guaranty by the former shareholder of Indy Connection.......... - 497,582
Discretionary credit agreement with a bank that allows the Company to
purchase revenue earning vehicles under installment notes. Separate
notes are required for each vehicle purchase with a maximum term on the
note being thirty-six months. These notes bear interest at rates ranging
from 8.9% to 11.0%. The notes are collateralized by Indy Connection's
accounts receivable, inventory and equipment and is subject to various
restrictive covenants. The agreement was subsequently renegotiated at
similar terms........................................................... 845,753 411,402
</TABLE>
13
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Two notes payable to bank, with interest at a fixed rate of 9.25% and a 48
month and 84 month term, respectively. The notes require monthly
principal and interest payments that total $4,413. The notes are
collateralized by vehicles. The agreement subjects Indy Connection to
various general covenants and required a personal guaranty by the former
owners of Indy Connection............................................... 390,263 363,705
Installment notes payable to sellers under acquisition agreements dated
various dates from June 30, 1994 to September 8, 1995. Interest rates
ranges from 7.5% to 8.5%. Interest is generally payable monthly.
Principal is payable in varying installments............................ 2,339,418 1,305,574
Convertible note payable to seller under acquisition agreement dated
September 30, 1993 at an annual rate of 7.5%, interest payable
quarterly; principal due in two equal annual installments of $116,667 on
January 2, 1996 and 1997. The note was repaid in January 1997........... 233,333 116,666
Bank line of credit $200,000, dated October 31, 1995 at variable interest
rate (10% at November 30, 1995), collateralized by accounts receivable
of Carey DC. This facility was refinanced by a term loan with the same
bank on March 1, 1996................................................... 200,000 -
Amount payable to seller under acquisition agreement dated January 1, 1995.
Due 30 days after receipt of an audit of the predecessor company. Amount
of the payment is subject to reduction based on the results of the
audit. The audit has been completed and the amount was subsequently
reduced in 1996 to $210,821 and has been repaid......................... 250,000 -
Note payable to bank, dated September 30, 1995, payable in monthly
installments of $4,167 plus interest. Interest rate is variable at
bank's prime plus 1% (10.0% at November 30, 1996)....................... 241,667 191,717
Note payable to bank, dated August 30, 1993, collateralized by accounts
receivable, fixed assets and intangible assets of Carey DC; monthly
payments of $9,401 for principal and interest are due through August 31,
1996. Interest rate is fixed at 8%. This note was refinanced on March 1,
1996 by a term loan with the same bank.................................. 90,631 -
Note payable to bank, dated October 17, 1994, collateralized by accounts
receivable and fixed assets of Carey NY. Principal and interest payments
of $2,848 are payable monthly. Remaining balance is due October 17,
1999. Interest rate is fixed at 9.25%................................... 189,401 149,001
Bank line of credit of $750,000, dated February 26, 1996 collateralized by
accounts receivable of Carey Licensing, Inc.; due March 31, 1997.
Interest is payable monthly at 1% above the Wall Street Journal's "Prime
Rate" (9.25% at November 30, 1996)...................................... - 750,000
Bank line of credit of $200,000, dated February 26, 1996, collateralized by
accounts receivable of Carey FLA; due March 31, 1997. Interest is
payable monthly at 1% above Wall Street Journal's "Prime Rate" (9.25% at
November 30, 1996)...................................................... - 200,000
</TABLE>
14
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<S> <C> <C>
Note payable to bank, dated March 1, 1996, collateralized by accounts
receivable of Carey DC Monthly payments of $12,735 of principal and
interest through March 1, 2001. Interest is payable monthly at .5% above
the bank's Prime Rate (9.5% at November 30, 1996)....................... - 662,053
Note payable to bank, dated May 10, 1996, collateralized by the land and
building held by Carey DC; monthly payments of $3,863 of principal and
interest are due through April 10, 2001 and a balloon payment of
$375,468 on May 10, 2001. Interest fixed at 8.75%....................... - 423,179
----------- -----------
Total notes payable........................................................ 14,005,181 11,894,213
Less current installments.................................................. 5,365,412 5,858,249
----------- -----------
Long-term portion.......................................................... $ 8,639,769 $ 6,035,964
=========== ===========
</TABLE>
Subordinated notes payable consist of the following:
<TABLE>
<CAPTION>
November 30,
------------------------------
1995 1996
------------ ------------
<S> <C> <C>
Subordinated convertible note, dated September 1, 1991, with the principal
of $2,000,000 is due on August 30, 2000; interest payable quarterly as a
fixed rate of 7.74%. After September 1, 1992, this debt is convertible
into shares of common stock of the Company at the discretion of the
holder at a conversion price of $6.14. A warrant for the purchase of
86,003 shares of common stock of the Company was issued in connection
with the note. The warrant is exercisable immediately, expires at the
earlier of the third anniversary of an initial public offering or
November 30, 2001, and has an exercise price of $6.14 per share. The
note contains certain antidilutive provisions which lower its conversion
price in the event dilutive securities are subsequently issued by the
Company at prices below the note's conversion price. The warrant has not
been exercised. The terms of the agreement have been modified as part of
the "Recapitalization" (see Notes 15 and 18)............................ $ 2,000,000 $ 2,000,000
</TABLE>
15
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<S> <C> <C>
Subordinated note dated July 30, 1992, interest only payable quarterly
until September 30, 1995. The interest rate is fixed at 12%. Principal
of $220,000 was paid on September 30, 1995. Pursuant to an agreement
with the lender effective November 30, 1996, principal payments of
$220,000 are due from June 30, 1997 until December 31, 1997; an
installment of principal of $880,000 is due March 31, 1998; and a final
payment of principal of $2,240,000 is due June 30, 1998. A warrant for
the purchase of 616,544 shares of Class A common stock or common stock
was issued in connection with the note. The warrant is exercisable
immediately, has an exercise price of $6.14 per share and expires at the
earlier fifth anniversary of the repayment of the note or July 30, 2000.
The warrants contain certain antidilutive provisions which lower their
exercise price in the event dilutive securities are subsequently issued
by the Company at prices below the warrant's exercise price. The warrant
has not been exercised. The terms of the agreement have been modified as
part of the "Recapitalization" (see Note 18)............................ 3,780,000 3,780,000
Convertible note payable to seller under acquisition agreement, dated
September 30, 1992; interest payable quarterly at a fixed rate of 7.74%.
The note was repaid in September 1996................................... 100,000 -
------------ ------------
Total subordinated notes payable........................................... 5,880,000 5,780,000
Less current installments.................................................. 100,000 440,000
------------ ------------
Subordinated notes payable, excluding current installments................. $ 5,780,000 $ 5,340,000
============ ============
</TABLE>
Future annual principal payments on all notes payable at November 30, 1996
are as follows:
<TABLE>
<CAPTION>
Year ending November 30:
- -----------------------
<S> <C>
1997 $ 6,298,249
1998 6,129,209
1999 1,691,567
2000 924,900
2001 and thereafter 2,630,288
-------------
$ 17,674,213
=============
</TABLE>
Certain loan agreements contain restrictive covenants which include
financial ratios related to working capital, debt service coverage, debt to net
worth and maintenance of a minimum tangible net worth, and submission of audited
financial statements, prepared in accordance with generally accepted accounting
principles, within 120 days after the end of the fiscal year. Additionally,
these covenants restrict the Company's capital expenditures and prohibit the
payment of dividends on the Company's common and preferred stock, except for the
Series E preferred stock and Indy Connection preferred stock. The Company did
not meet certain covenants related to the timely submission of financial
statements, working capital, debt to net worth and maintenance of a minimum
tangible net worth at November 30, 1996. The Company obtained waivers for
compliance with these covenants through and including November 30, 1996.
16
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The carrying value of notes payable approximates the current value of the
notes payable at November 30, 1996. (See Note 18 for discussions of the fair
value for the subordinated debt). Interest paid during the years ended
November 30, 1994, 1995, and 1996 was approximately $1,512,000, $1,878,000
and $1,883,000, respectively.
7. Leases
The Company has several noncancelable operating leases, primarily for
office space and equipment, that expire over the next five years. Certain of
the Company's facilities are under operating leases which provide for rent
adjustments based on increases of defined indexes, such as the Consumer Price
Index. These agreements also typically include renewal options.
Future minimum lease payments under noncancelable operating leases and the
present value of future minimum capital lease payments as of November 30,
1996 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year ending November 30 leases leases
- ----------------------- ------------ ------------
<S> <C> <C>
1997 $ 233,778 $ 1,395,093
1998 171,653 1,277,009
1999 155,984 662,698
2000 155,984 245,746
2001 138,659 219,128
Thereafter 138,169 -
------------ ------------
Total minimum lease payments 994,227 $ 3,799,674
============
Less estimated executory costs 5,189
------------
989,038
Less amount representing interest (at rates ranging from
9% to 12%) 126,784
------------
Present value of net minimum capital lease payments 862,254
Less current portion of obligations under capital lease 199,224
------------
Obligations under capital leases, excluding current portion $ 663,030
============
</TABLE>
During the years ended November 30, 1994, 1995 and 1996 the Company
recognized $1,004,818, $508,724 and $252,355, respectively, of sublease
rental revenue under vehicle sublease arrangements with independent operators
and others.
During the years ended November 30, 1994, 1995 and 1996, the Company
entered into capital lease obligations of $79,414, $346,666 and $810,993,
respectively, related to the acquisition of vehicles and equipment.
Total rental expense for operating leases in 1994, 1995 and 1996 was
$1,075,029, $1,362,518 and $2,250,335, respectively.
17
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Accounts payable and accrued expenses
Included in accounts payable and accrued expenses are the following:
<TABLE>
<CAPTION>
November 30,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Trade accounts payable.................... $ 5,273,123 $ 5,385,328
Accrued expenses and other liabilities.... 2,632,204 4,895,495
Gratuities payable........................ 445,985 458,801
Accrued offering costs.................... - 825,339
------------ ------------
$ 8,351,312 $ 11,564,963
============ ============
</TABLE>
9. Income taxes
The provision for income taxes is composed of the following:
<TABLE>
<CAPTION>
November 30,
---------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Federal:
Current................................................ $ 65,558 $ 139,401 $ 1,368,311
Deferred............................................... 63,000 87,000 (1,197,799)
------------ ------------ ------------
128,558 226,401 170,512
------------ ------------ ------------
State and local:
Current................................................ 27,252 29,198 128,296
Deferred............................................... 7,000 15,000 (148,758)
------------ ------------ ------------
34,252 44,198 (20,462)
------------ ------------ ------------
Foreign
Current................................................ - - 144,371
------------ ------------ ------------
Total income tax provision.................................. $ 162,810 $ 270,599 $ 294,421
============ ============ ============
</TABLE>
The Company's tax provision for the years ended November 30, 1994, 1995 and
1996, respectively, differs from the statutory rate for federal income taxes
as a result of the tax effect of the following factors:
<TABLE>
<CAPTION>
Years ended November 30,
------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Statutory rate............................ 34.0% 34.0% 34.0%
State income tax, net of federal benefit.. 18.0 7.2 (1.5)
Goodwill amortization..................... 11.5 6.0 .6
Non-deductible life insurance............. 8.7 10.9 .3
Meals and entertainment expenses.......... 10.8 16.9 1.1
Valuation allowance....................... 11.8 (13.0) (27.6)
Other..................................... 35.8 14.7 1.0
-------- -------- --------
130.6% 76.7% 7.9%
======== ======== ========
</TABLE>
18
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The source and tax effects of temporary differences are composed of the
following:
<TABLE>
<CAPTION>
November 30,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Allowances for bad debts............... $ 108,000 $ 176,000
Net operating losses carry-forward..... 266,000 -
Capital loss carryforward.............. 119,000 74,000
Deferred revenue....................... 1,701,000 2,040,000
Deferred state taxes and other......... 425,000 558,000
------------ ------------
Gross deferred tax asset............... 2,619,000 2,848,000
Valuation allowance.................... (1,618,000) (74,000)
------------ ------------
1,001,000 2,774,000
------------ ------------
Amortization of intangible assets...... (951,000) (1,350,000)
Other.................................. (135,000) (162,000)
------------ ------------
Gross deferred tax liability........... (1,086,000) (1,512,000)
------------ ------------
Net deferred tax asset................. $ (85,000) $ 1,262,000
============ ============
</TABLE>
A valuation allowance was provided in 1995 to reduce the net deferred tax
asset to $0. In the fourth quarter of 1996, the Company concluded that it was
more likely than not that substantially all of the deferred tax assets would
be realized and reduced the valuation allowance by $1,499,000.
Income taxes paid during the years ended November 30, 1994, 1995 and 1996
amounted to approximately $0, $187,000 and $616,000, respectively.
10. Preferred stock
The Company had the following series of preferred stock:
<TABLE>
<CAPTION>
November 30,
-----------------------------------
1995 1996
------------ ------------
<S> <C> <C>
Series A, par value $10.00, authorized 43,000 shares, issued and
outstanding 42,070 shares (liquidation preference of $4,207,000,
redeemable at option of the Company). Non-cumulative dividend of $7.00
per annum when declared by the Board of Directors....................... $ 420,700 $ 420,700
Series B, par value $10.00, authorized 10,000 shares, issued and
outstanding 9,580 shares (liquidation preference of $958,000). Non-
cumulative dividend of $5.00 per annum when declared by the Board of
Directors............................................................... 95,800 95,800
Series E, par value $10.00, authorized 50 shares, issued and outstanding
12.5 shares at November 30, 1995 (liquidation preference of $97,500).... 97,500 -
Series F, par value $10.00, authorized 10,000 shares, issued and
outstanding 10,000 shares (liquidation preference of $1,000,000). Non-
cumulative dividend of $5.00 per annum when declared by the Board of
Directors............................................................... 100,000 100,000
Series G, par value $10.00, authorized 110,000 shares, issued and
outstanding 49,890 shares, (liquidation preference of $4,989,900). Non-
cumulative dividend of $5.00 per annum when declared by the Board of
Directors............................................................... 498,900 498,900
</TABLE>
19
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<S> <C> <C>
Class B, par value $4.00, 20,000
shares, authorized, issued and
outstanding (All shares were
redeemed at September 30, 1996)................ 40,000 -
------------ ------------
$ 1,252,900 $ 1,115,400
============ ============
</TABLE>
At the option of the preferred stockholders or upon closing of
underwritten public offering, yielding net proceeds of at least $10,000,000
and having an offering price of at least $14.81 per share, each share of the
series B, F and G preferred stock is convertible into the number of shares
of common stock equal to 500, 100 and 100 divided by the conversion price,
respectively. The conversion price at November 30, 1996 was $7.216, $7.406
and $7.406 for Series B, F and G preferred stock, respectively. The Company
has reserved 663,759, 135,025 and 633,393 shares of common stock,
respectively, for conversion of the Series B, F and G preferred stock.
Antidilutive provisions lower the conversion price if certain securities are
issued by the Company at a price below the respective conversion prices then
in effect. The Company must redeem, on a pro rata basis, the outstanding
shares of Series A preferred stock plus for $100 per share any declared and
unpaid dividends upon the completion of an initial public offering yielding
net proceeds to the Company of at lease $10,000,000. Series A, B, and G
preferred stock have voting rights and Series F preferred stock is non-
voting, except to certain circumstances (see Note 18 for discussion of the
Recapitalization, pursuant to which all of the preferred stock will be
redeemed or converted into common stock).
11. Related-party transactions
The Company has invested $750,000 in non-voting redeemable preferred
stock of a privately-held finance company formed for the purpose of
providing financing to the chauffeured vehicle service industry. This entity
provides financing to the Company's independent operators, without recourse
to the Company, for both automobiles and amounts due under independent
operator agreements. The Company sold $378,733, $1,762,345 and $1,015,897 of
independent operator notes receivable to this related-party finance company
for cash of $378,733, $1,290,899 and $733,793 and demand promissory notes of
$0, $471,446 and $282,104 in 1994, 1995 and 1996, respectively. The unpaid
balances of the promissory notes were $547,930 and $255,664 at November 30,
1995 and 1996, respectively, and are included in notes receivable from
contracts. These promissory notes are due on demand and, generally, monthly
principal payments are received by the Company. These notes generally bear
interest at rates of 7%.
It is not practicable to estimate the fair value of a preferred stock
investment in a privately-held company. As a result, the Company's
investment in the privately-held finance company noted above is carried at
its original cost (less redemptions) of $750,000. At April 30, 1996, the
total assets reported by the privately-held company were $10,502,234 and
stockholders' equity was $1,108,448, revenues were $1,088,720 and net income
was $96,681.
Pursuant to a stock ownership agreement between the common stockholders
of the related party finance company and the Company, the Company has an
option to purchase all of the outstanding common stock of the affiliate at
$12,500 per common share or market value, if higher. The option is not
exercisable until April 15, 1998.
20
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A guarantee fee of $45,000 has been paid to both the Chairman of the
Board and the President of the Company for guaranteeing certain indebtedness
(see Note 6).
12. Commitments and contingencies
In the normal course of business, the Company is subject to various legal
actions which are not material to the financial position, the results of
operations or cash flows of the Company.
The Company, certain of the Company's subsidiaries and certain officers
and directors of the Company were named in a civil action filed on May
16,1996 in the United States District Court for the Eastern District of
Pennsylvania entitled "Felix v. Carey International, Inc., et al." The
plaintiff's complaint, which purports to be a class action, alleges that the
plaintiff and others similarly situated suffered monetary damages as a
result of misrepresentations by the various defendants in their use of a
surface transportation billing charge. The plaintiff seeks damages in excess
of $1 million on behalf of the class for each of the counts in the complaint
including fraud, negligent misrepresentation and violations of the Racketeer
Influenced and Corrupt Organizations Act of 1970. A class has not yet been
certified in this case. At the appropriate time, the Company intends to file
an answer denying any liability in connection with this litigation. The
Company has agreed to indemnify and defend its officers and directors who
were named as defendants in the case, subject to conditions imposed by
applicable law. The Company does not believe that this litigation will have
a material adverse effect on its financial condition, results of operations
or cash flows of the Company.
13. Acquisitions
Effective October 31, 1997, in connection with the merger, the Company
issued 721,783 shares of its Common Stock in exchange for all the
outstanding common stock of Indy Connection based on a conversion ratio of
1.008 shares (the merger exchange ratio) of the Company's common stock for
each share of Indy Connection common stock, for a total value of
approximately $12.0 million. The merger qualified as a tax-free
reorganization and has been accounted for as a pooling-of-interests.
Accordingly, the Company's supplemental consolidated financial statements
have been restated for all periods prior to the business combination to
include the combined financial results of Carey International, Inc. and Indy
Connection. (See Note 2)
Revenue net and net income (loss) for the individual companies reported
prior to the merger are as follows:
<TABLE>
<CAPTION>
November 30,
------------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenue, net
Carey International, Inc. .... $ 35,525,309 $ 43,483,947 $ 59,505,698
Indy Connection............... 4,788,413 5,485,448 6,080,105
Elimination................... - - (40,861)
------------ ------------ ------------
Total....................... $ 40,313,722 $ 48,969,395 $ 65,544,942
============ ============ ============
</TABLE>
21
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<S> <C> <C> <C>
Net Income (loss)
Carey International, Inc. $ (128,993) $ (195,195) $ 2,816,104
Indy Connection 90,861 293,316 678,863
------------ ------------ ------------
Total: $ (38,132) $ 98,121 $ 3,494,967
============ ============ ============
</TABLE>
The conforming of the accounting practices of the Company and Indy
Connection resulted in no adjustments to net income (loss) or shareholders'
equity.
The Company estimates that transaction costs associated with the merger
will be approximately $200,000. All fees and transaction expenses related to
the merger and the restructuring of the combined companies will be expensed
as required under the pooling-of-interests accounting method. These expenses
have not been reflected in the supplemental consolidated statements of
operations, but will be reflected in the consolidated statements of
operations of the Company in the fourth quarter of 1997.
In February 1996, the Company acquired certain assets and liabilities of
a chauffeured vehicle service company in London, England for approximately
$1,500,000. The acquisition was financed through the incurrence of $950,000
in debt and a payment of $550,000. Additional contingent consideration of up
to $1,000,000 may be payable with respect to each of the two years ending
February 28, 1998 based on the level of revenues referred to the acquired
company by the seller. As of November 30, 1996, the Company has paid
$278,304 in contingent consideration in the acquisition of the London
company. In addition, the Company is required to pay a standard commission
to the seller of the acquired chauffeured vehicle service company for
business referral, which will be expensed as incurred.
In April 1995, the Company acquired certain assets and liabilities of a
chauffeured vehicle service company in the Washington, DC area and combined
the acquired operations with those of Carey DC.
In January 1995, the Company acquired certain assets and liabilities of
the Carey licensee in San Francisco, California (Carey SF). Subsequently,
the Company acquired the business of two additional chauffeured service
companies (in May and August 1995) and combined the acquired operations with
those of Carey SF.
In December 1994, the Company acquired certain assets and liabilities of
a chauffeured vehicle service company in Boca Raton, Florida and
consolidated the operations within its existing operations in West Palm
Beach. Subsequently, the Company acquired an additional chauffeured vehicle
service company in Boca Raton (in August 1995) and the Carey licensee in
Fort Lauderdale-Miami (in April 1995) and consolidated the two additional
businesses into the Carey Florida operations.
All acquisitions have been accounted for as purchases (except for the
pooling as described above). The net assets acquired and results of
operations have been included in the financial statements as of and from,
respectively, the effective dates of the acquisitions. The total
consideration was allocated to the assets acquired based upon their
estimated fair values with any remaining considerations allocated to either
franchise rights or goodwill, as follows:
22
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year ended November 30,
---------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net assets purchased
Receivables and other assets..... $ - $ - $ 632,554
Fixed assets..................... - 1,703,521 928,377
Franchise rights................. - 1,527,402 89,243
Goodwill......................... 128,596 5,013,731 447,269
Accounts payable and accrued
expenses......................... - - (367,211)
---------- ---------- ----------
Fair value of assets acquired.... $ 128,596 $8,244,654 $1,730,232
========== ========== ==========
Consideration
Cash (exclusive of $223,695
cash acquired in 1996).......... $ 128,596 $3,949,393 $1,730,232
Capital leases assumed related
to vehicle acquisitions......... - 346,666 -
Notes assumed related to vehicle
acquisitions.................... - 895,571 -
Uncollateralized promissory
notes issued to sellers......... - 3,053,024 -
---------- ---------- ----------
Total consideration....... $ 128,596 $8,244,654 $1,730,232
========== ========== ==========
</TABLE>
Certain of these acquisitions require the payment of contingent
consideration based on percentages of annual net revenue of the acquired
entities over a defined future period. The Company paid $39,521, $315,773
and $291,755 for the years ended November 30, 1994, 1995 and 1996,
respectively, as contingent consideration (see Note 2) which is reflected in
the table above.
Of the total uncollateralized promissory notes issued to sellers in 1995,
two notes totaling $303,000 were subject to reduction based upon the results
of the acquired entities (see Note 6). The two notes were repaid in 1996 for
approximately $211,000 and the difference of approximately $92,000 reduced
recorded goodwill.
The unaudited pro forma summary consolidated results of operations
assuming the acquisitions had occurred for the purposes of the 1995 summary
at the beginning of fiscal 1995, and for the purposes of the 1996 summary at
the beginning of fiscal 1996, are as follows:
<TABLE>
<CAPTION>
Year ended November 30,
---------------------------
1995 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Revenue..................................... $ 56,975,000 $ 66,483,000
Cost of revenue............................. (38,182,000) (44,515,000)
Other expense, net.......................... (18,109,000) (18,320,000)
Provision for income taxes.................. (316,000) (235,000)
------------ ------------
Net income.................................. $ 368,000 $ 3,413,000
============ ============
Net income per common share................. $ .12 $ 1.09
============ ============
Weighted average common shares outstanding.. 3,089,895 3,124,314
============ ============
</TABLE>
23
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. 401 (k) Plan
The Company sponsors (but has made no contributions to) a defined
contribution plan established pursuant to Section 401 (k) of the Internal
Revenue Code for the benefit of employees of the Company.
15. Stock option plans
On December 1, 1987, the Company established a Stock Option Plan (the
"1987 Plan") that included all officers and key employees of the Company,
non-employee directors of the Company, and certain persons retained by the
Company as consultants. In accordance with the 1987 Plan, the Company's
Board of Directors may, from time to time, determine the persons to whom the
stock options are to be granted, the number of shares under option, the
option price and the manner in which payment of the option price shall be
made. The 1987 Plan provides for the options to be exercised 25% each year
beginning after the year following the grant. The options are exercisable
for a period of ten years after grant date. The total number of options
authorized under the 1987 Plan is 195,656.
On July 28, 1992, the Company established a Stock Option Plan (the "1992
Plan") that included all officers and key employees of the Company, non-
employee directors of the Company, and certain persons retained by the
Company as consultants. In accordance with the 1992 Plan, the Company's
Board of Directors may, from time to time, determine the persons to whom the
stock options are to be granted, the number of shares under option, the
option price, the time or times during the exercise period at which each
such option shall become exercisable, and the manner in which payment of the
option price shall be made. The options are exercisable for a period of ten
years after grant date. The total number of options authorized under the
1992 plan is 388,647.
24
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock activity under the 1987 Plan and the 1992 Plan is as follows:
<TABLE>
<CAPTION>
1987 Plan 1992 Plan
--------------------- --------------------
Option Option
Price per price per
Shares Share Shares Share
-------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Balance, December 1, 1993... 64,502 $ 1.44 384,494 $7.40
Granted..................... - - 12,040 7.40
Exercised................... - - - -
Forfeited................... - - (13,287) -
-------- ----------- --------- ---------
Balance, November 30, 1994.. 64,502 1.44 383,247 7.40
Granted..................... - - 21,673 7.40
Exercised................... (32,681) - - -
Forfeited................... (860) - (60,985) -
-------- ----------- --------- ---------
Balance, November 30, 1995.. 30,961 1.44 343,935 7.40
Granted..................... 38,701 4.65 43,578 4.65
Exercised................... - - - -
Forfeited................... - - (3,011) -
-------- ----------- --------- ---------
Balance, November 30, 1996.. 69,662 $1.44-$4.65 384,502 $4.65
======== =========== ========= =========
Vested and Exercisable at
November 30, 1996......... 43,861 $1.44-$4.65 341,948 $4.65
======== =========== ========= =========
</TABLE>
In May of 1996, the options granted under the 1992 Plan and a warrant to
purchase 86,003 shares of common stock (see Note 6) were repriced to $4.65.
The options and warrant were repriced at the determined fair market value as
of the date of repricing (see Note 18).
On February 25, 1997, the Board of Directors adopted the 1997 Equity
Incentive Plan and the Stock Plan for Non-Employee Directors (see Note 18).
16. Revenue recognition method
The Company enters into agreements with independent operators under which
the independent operator contracts to provide chauffeured vehicle services
exclusively to the Company's customers over a contract period pursuant to a
Standard Independent Operator Agreement. Upon signing the Standard
Independent Operator Agreement, the Company is entitled to receive a one-
time fee from the independent operator. Previously, the Company would
recognize the one-time fee as revenue upon signing of the independent
operator agreement and when collection of the fee was reasonably assured. In
accordance with APB 20, the financial statements have been retroactively
restated to report such fees as deferred revenue which are recognized as
revenue over the terms of the contracts. (See Note 2). The effect of such
restatements was to reduce 1994 and 1995 revenue, results of operations and
stockholders' equity by $665,391 and $1,144,511, respectively (net of income
taxes of $0 and $586,680 for 1994 and 1995, respectively).
25
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
17. Net income per common share
Net income per common share, on a historic basis, is as follows:
<TABLE>
<CAPTION>
Year ended November 30,
------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income (loss) available
to common shareholders....... $ (46,882) $ 93,746 $3,494,067
========== ========== ==========
Weighted average common
shares outstanding........... 3,109,905 3,106,598 3,142,376
========== ========== ==========
Net income (loss) per
common share................. $ (0.02) $ 0.03 $ 1.11
========== ========== ==========
</TABLE>
Common equivalent shares are included in the per share calculations where
the effect of their inclusion would be dilutive. Common equivalent shares
consist of common shares issuable upon (a) conversion of Series B, F and G
preferred stock and (b) the assumed exercise of outstanding stock options
and warrants. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 83, the common equivalent shares issued by the
Company during the twelve months preceding the anticipated effective date of
the Registration Statement relating to the Company's initial public
offering, using the treasury stock method and an assumed public offering
price of $11.00 per share, have been included in the calculation of net
income per common share.
Net income (loss) available to common shareholders is the net income
(loss) for the fiscal year less accretion of dividends on the Series E
preferred stock of $8,750 and $4,375 for 1994 and 1995, respectively, and
$900 of preferred dividends from Indy Connection preferred stock in 1996.
In February 1997, the Financial Accounting Standards Boards issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(FAS 128). FAS 128 simplifies the existing earnings per share (EPS)
computations under Accounting Principles Board Opinion No. 15, "Earnings Per
Share," revises disclosure requirements, and increases the comparability of
EPS data on an international basis. In simplifying the EPS computations, the
presentation of primary EPS is replaced with basic EPS, with the principal
difference being that common stock equivalents are not considered in
computing basic EPS. In addition, FAS 128 requires dual presentation of
basic and diluted EPS. FAS 128 is effective for financial statements issued
for periods ending after December 15, 1997. The Company's supplemental pro
forma basic EPS under FAS 128 for the year ended November 30, 1996 would
have been $2.57 and supplemental dilutive EPS under FAS 128 would not differ
significantly form the reported pro forma net income per share.
18. Subsequent events
On February 25, 1997, pursuant to an agreement reached in May 1996, the
Board of Directors authorized a recapitalization ("Recapitalization Plan"),
which will be implemented at the time of the IPO. Under the
Recapitalization, the $2,000,000 subordinated convertible note dated
September 1, 1991 and the $3,780,000 subordinated note dated July 30, 1992
will be converted or exchanged for 1,046,559 shares of common stock and
payment of $912,454. The Series A preferred stock will be converted into
86,003 shares of common stock and redeemed in part for $2,103,500. All of
the Series F preferred stock and 3,000 shares of Series G preferred stock
will be redeemed for an
26
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
aggregate of $1,000,000. The remaining preferred stock will be converted into
1,427,509 shares of common stock. As a result of the Recapitalization, preferred
stock with a liquidation preference of $11,154,900 and subordinated debt with a
principal amount of $5,780,000 will be converted in part into 2,560,071 shares
of common stock and repaid or redeemed in part for $4,015,952 in cash. All of
the cash amounts will be paid out of the proceeds of the IPO.
On February 25, 1997, the Board of Directors adopted the 1997 Equity
Incentive Plan (the "1997 Plan"). A total of 650,000 shares of common stock are
reserved for issuance under the 1997 Plan. The Board of Directors also granted
options to purchase at the IPO price a total of 411,500 shares of common stock
under the 1997 Plan, such grants to be effective upon the execution of an
underwriting agreement in connection with the IPO.
Also on February 25, 1997, the Board of Directors, subject to stockholder
approval, adopted the Stock Plan for Non-Employee Directors (the "Directors'
Plan"). A total of 100,000 shares of common stock of the Company are reserved
for issuance under the Directors' Plan. Options to purchase at the IPO price a
total of 22,500 shares of common stock will be granted under the Directors'
Plan, such grants to be effective upon the execution of an underwriting
agreement in connection with the IPO.
Also on February 25, 1997, the Board of Directors approved amendments to
the Company's Certificate of Incorporation increasing the number of authorized
shares of the Company's Common Stock from 9,512,950 to 20,000,000, and
increasing the number of authorized shares of the Company's preferred stock from
173,050 to 1,000,000.
On March 1, 1997, the Company entered into an agreement to purchase the
stock of Manhattan International Limousine Network Ltd. and an affiliated
company (collectively, "Manhattan Limousine"). Manhattan Limousine is one of the
largest providers of chauffeured vehicle services in the New York metropolitan
area. The Company expects to consummate the acquisition at the time of the IPO.
If the acquisition of Manhattan Limousine is not completed by June 2, 1997, the
Company has agreed to pay additional purchase price in the amount of $7,500 for
each day after such date until the closing of the acquisition, up to an
aggregate of $675,000.
27
<PAGE>
Exhibit 99.3
SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Supplemental Consolidated Financial Statements and related notes thereto
Supplemental appearing elsewhere in this Prospectus. Unless otherwise indicated
or the context otherwise requires, each reference to a year is to the Company's
fiscal year which ends on November 30 of such year.
Overview
The company generates revenues primarily from chauffeured vehicle services
provided by (i) Carey's owned and operated businesses and (ii) Carey's licensees
and affiliates when services provided by such licensees and affiliates are
billed through the Company's central reservation and billing system. In 1995 and
1996, approximately 77.6% and 76.1%, respectively, of the Company's revenue, net
was generated by chauffeured vehicle services provided by the Company's owned
and operated businesses, approximately 14.5% and 14.1%, respectively, was
generated by chauffeured vehicle services provided by the Company's licensees
and billed by the Company, and approximately 2.2% and 1.8%, respectively, was
generated by chauffeured vehicle services provided by the Company's affiliates
and billed by the Company. Carey also generates revenues from its licensees
through fees (both initial and monthly) related to (i) licensing the use of its
name and service mark, (ii) its central reservation and billing services and
(iii) its marketing activities. In 1995 and 1996, approximately 2.4% and 3.0%,
respectively, of the Company's revenue, net was generated from its licensees
through such fees. To a lesser extent, the Company derives revenues from the
payment of fees by independent operators. The Company recognizes revenues from
these fees ratably over the terms of the independent operators' agreements with
the Company, which typically range from 10 to 20 years. As of August 31, 1997,
the Company had $13.7 million of deferred revenue on its balance sheet.
Cost of revenue primarily consists of amounts due to the Company's
independent operators. The amount due to independent operators is a percentage
(ranging from 60% to 67%) of the charges of services provided, net of discounts
and commissions. Cost of revenue also includes amounts due to the Company's
licensees and affiliates for chauffeured vehicle services provided by them and
billed by the Company. Such amounts generally include the charges for service
provided less a referral fee ranging from 15% to 25% of net vehicle service
revenue. Cost of revenue includes costs associated with owning and maintaining
the vehicles owned by the Company, telecommunications expense, salaries and
benefits for reservationists, marketing expenses for the benefit of licensees,
and commissions due to travel agents and credit card companies.
Selling, general and administrative expenses consist primarily of
compensation and related benefits for the Company's officers and administrative
personnel, marketing and promotional expenses for the Company's owned and
operated chauffeured vehicle service companies, and professional fees, as well
as amortization costs related to the intangibles recorded as a result of the
Company's acquisitions.
In addition to internal growth from the Company's sales and marketing
efforts, an important component in the Company's growth to date has been the
acquisition of its licensees and other chauffeured vehicle service companies.
Since December 1994, Carey has acquired ten chauffeured vehicle service
companies. Each of these acquisitions was made for cash and the issuance or
assumption of notes and was accounted for using the purchase method of
accounting. A substantial majority of the purchase price paid by the Company in
each such acquisition represented goodwill, franchise rights (if a
1
<PAGE>
SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
license was acquired) and/or intangibles. In addition, the Company completed a
merger with Indy Connection which was accounted for as a pooling-of-interests.
The results of operations for the acquired companies have been included in
the Company's consolidated financial statements from their respective dates of
acquisition. Carey expects to benefit from its acquisitions by consolidating
general and administrative functions, increasing operating efficiencies, and, as
a result of converting salaried chauffeurs to independent operators, eliminating
the overhead and capital costs associated with employing salaried chauffeurs,
leasing garages, maintaining parts and fuel inventories, and owning and
operating vehicles. The Company generally realizes these benefits within six to
twelve months after an acquisition, depending upon whether the acquisition is of
a chauffeured vehicle service company in a location in which the Company already
operates, or of a licensee in a market where Carey has yet to establish
operations.
Results of Operations
The following table sets forth, for the periods indicated, certain
financial data for the Company expressed as a percentage of revenue, net. With
respect to the pro forma data, see "Pro Forma Consolidated Financial Statements"
and the notes thereto.
<TABLE>
<CAPTION>
Fiscal Year Ended November 30, Nine Months Ended August 31,
--------------------------------- ----------------------------
1994 1995 1996 1996 1997
------ ------ ------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue, net................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue ............ 68.7 67.4 66.6 66.3 66.5
------ ------ ------ ----------- -----------
Gross profit................ 31.3 32.6 33.4 33.7 33.5
Selling, general and
administrative expense..... 27.4 28.8 25.5 26.5 24.9
------ ------ ------ ----------- -----------
Operating income............ 3.9 3.8 7.9 7.2 8.6
Interest income (expense)
and other income (expense). (3.6) (3.0) (2.1) 2.4 1.2
------ ------ ------ ----------- -----------
Income before provision
for income taxes........... 0.3 0.8 5.8 4.8 7.4
Provision for income taxes. 0.4 0.6 0.5 1.6 2.9
------ ------ ------ ----------- -----------
Net income (loss)........... (0.1%) 0.2% 5.3% 3.2% 4.5%
====== ====== ====== =========== ===========
</TABLE>
Three Months Ended August 31, 1997 (the "1997 Period") Compared to Three Months
Ended August 31, 1996 (the "1996 Period")
Revenue, Net. Revenue, net increased $6.9 million or 42.7% from $16.1
million in the 1996 Period to $22.9 million in the 1997 Period. Of the increase,
$2.1 million resulted from expanded use of the Carey network, including an
increase in business from corporate travel customers and business travel
arrangers. A further $4.8 million of the increase was due to the revenues of
Manhattan International Limousine Network Ltd ("Manhattan Limousine"), which was
acquired on June 2, 1997.
2
<PAGE>
SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
Cost of Revenue. Cost of revenue increased $4.8 million or 44.9% from $10.6
million in the 1996 Period to $15.4 million in the 1997 Period. The increase was
primarily attributable to higher costs due to increased business levels and to
cost of revenue of Manhattan Limousine, which was not included in the 1996
Period. Cost of revenue increased as a percentage of revenue, net from 66.0% in
the 1996 Period to 67.0% in the 1997 Period, primarily reflecting increases in
telephone, chauffeur and certain other costs as a percentage of revenue, net.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $1.4 million or 34.5% from $4.1
million in the 1996 Period to $5.6 million in the 1997 Period. The increase was
largely due to the costs of additional personnel, increased marketing expenses
and increased administrative expenses related to acquired operations and
generally in support of higher business levels. Selling, general and
administrative expenses decreased as a percentage of revenue, net from 25.7% in
the 1996 Period to 24.2% in the 1997 Period as a result of an increase in
revenue, net without a corresponding increase in administrative costs.
Interest Expense. Interest expense decreased approximately $301,000 or
63.9% from approximately $471,000 in the 1996 Period to approximately $170,000
in the 1997 Period. Interest expense decreased as a percentage of revenue, net
from 2.9% in the 1996 Period to 0.7% in the 1997 Period. The decrease resulted
from both the use of proceeds from the Company's initial public offering ("IPO")
to repay outstanding debt and the conversion of subordinated and certain other
debt to Common Stock coincident with the IPO.
Provision for Income Taxes. The provision for income taxes increased
approximately $493,000 from approximately $330,000 in the 1996 Period to
approximately $823,000 in the 1997 Period. The increase primarily related to the
increase in pre-tax income of the Company from approximately $1.0 million in the
1996 Period to $2.0 million in the 1997 Period. In addition, the Company
utilized the benefit of a net operating loss carryovers ("NOLs") in determining
its provision for income taxes in the 1996 Period, but such NOLs were not
available to the Company in the 1997 Period.
Net Income. As a result of the foregoing, the Company's net income
increased approximately $499,000 or 73.3% from approximately $681,000 in the
1996 Period to approximately $1.2 million in the 1997 Period.
Nine Months Ended August 31, 1997 (the "1997 Nine-Month Period") Compared
to Nine Months Ended August 31, 1996 (the "1996 Nine-Month Period")
Revenue, Net. Revenue, net increased $11.6 million or 25.3% from $45.6
million in the 1996 Nine-Month Period to $57.2 million in the 1997 Nine-Month
Period. Of the increase, approximately $5.9 million related to expanded use of
the Carey network, including an increase in business from corporate travel
customers and business travel arrangers, and approximately $5.7 million was due
to revenues of Manhattan Limousine and the Company's operations in London, which
were not included in the 1996 Nine-Month Period.
Cost of Revenue. Cost of revenue increased $7.7 million or 25.6% from $30.3
million in the 1996 Nine-Month Period to $38.0 million in the 1997 Nine-Month
Period. The increase was primarily attributable to higher costs due to increased
business levels and to costs of revenue of Manhattan
3
<PAGE>
SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
Limousine and the Company's operations in London, which were not included
in the 1996 Nine-Month Period. Cost of revenue increased as a percentage of
revenue, net from 66.3% in the 1996 Nine-Month Period to 66.5% in the 1997 Nine-
Month Period, primarily reflecting the effects of seasonally higher operating
costs as a percentage of revenues in the Company's London operations in the
first quarter of 1997 and the relative increases in telephone, chauffeur and
certain other costs in the third quarter of 1997, offset by the benefit of
increased implementation of the Company's independent operator program.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $2.2 million or 18.1% from $12.1
million in the 1996 Nine-Month Period to $14.3 million in the 1997 Nine-Month
Period. The increase was largely due to the costs of additional personnel,
increased marketing expenses and increased administrative expenses related to
acquired operations and generally, in support of higher business levels.
Selling, general and administrative expenses decreased as a percentage of
revenue, net from 26.5% in the 1996 Nine-Month Period to 24.9% in the 1997 Nine-
Month Period as a result of an increase in revenue, net without a corresponding
increase in administrative costs.
Interest Expense. Interest expense decreased approximately $423,000 or
29.3% from $1.4 million in the 1996 Nine-Month Period to approximately $1.0
million in the 1997 Nine-Month Period. Interest expense decreased as a
percentage of revenue, net from 3.2% in the 1996 Nine-Month Period to 1.8% in
the 1997 Nine-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
approximately $961,000 from approximately $736,000 in the 1996 Nine-Month Period
to $1.7 million in the 1997 Nine-Month Period. The increase primarily related to
the increase in pre-tax income of the Company from $2.2 million in the 1996
Nine-Month Period to $4.3 million in the 1997 Nine-Month Period. In addition,
the Company utilized NOLs in determining its provision for income taxes in the
1996 Nine-Month Period but such NOLs were not available to the Company in the
1997 Nine-Month Period.
Net Income. As a result of the foregoing, the Company's net income
increased approximately $1.1 million or 74.1% from approximately $1.5 million in
the 1996 Nine-Month Period to $2.6 million in the 1997 Nine-Month Period.
Year Ended November 30, 1996 Compared to Year Ended November 30, 1995
Revenue, Net. Revenue, net increased approximately $16.6 million or 33.8%
from $49.0 million in the 1995 to $65.5 million in 1996. Of the increase,
approximately $10.2 million was contributed by existing operations as a result
of expanded use of the Carey network, including an increase in business from
corporate travel customers and business travel arrangers, and approximately $6.4
million was due to revenues of companies which were not acquired from December
1994 through February 1996.
Cost of Revenue. Cost of revenue increased approximately $10.6 million or
32.2% from $33.0 million in 1995 to $43.6 million in 1996. The increase was
primarily attributable to higher costs due to increased business levels. Cost
of revenue decreased as a percentage of revenue, net from 67.4% in
4
<PAGE>
SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
1995 to 66.6% in 1996 as a result of spreading the fixed costs of the Company's
reservations infrastructure over a larger revenue base.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $2.6 million or 18.8% from $14.1
million in 1995 to $16.7 million in 1996. The increase was largely due to higher
administrative costs associated with additional personnel, increased marketing
expenses, and higher amortization of intangibles as a result of the
acquisitions. Selling, general and administrative expenses decreased as a
percentage of revenue, net from 28.8% in 1995 to 25.5% in 1996 as a result of an
increase in revenue without a corresponding increase in administrative costs.
Interest Expense. Interest expense was $1.9 million or in each of 1995 and
1996, respectively. Interest expense decreased as a percentage of revenue, net
from 3.9% in 1995 to 2.9% in 1996.
Provision for Income Taxes. The provision for income taxes increased
approximately $24,000 from approximately $271,000 in 1996 to approximately
$294,000 in 1996. Prior to 1996, the Company recorded a valuation allowance
against its net deferred tax assets. This allowance was reversed in 1996 in
accordance with generally accepted accounting principles. The reversal reduced
the provision for income taxes in 1996 by approximately $1.5 million. The
increase in the provision recordable in 1996, which was offset by the effect of
reducing the valuation allowance against deferred tax assets, was attributable
to the Company's increased pretax profit level in 1996 which exceeded the
beneficial tax effect of net operating loss carryforwards of prior years. The
Company has utilized the full amount of its net operating loss carryforwards.
Net Income. As a result of the foregoing, the Company's net income
increased approximately $3.4 million from approximately $3.5 million in 1996
compared to a net income of approximately $98,000 in 1995.
Year Ended November 30, 1995 Compared to Year Ended November 30, 1994
Revenue, Net. Revenue, net increased approximately $8.1 million or 21.5%
from $40.3 million in 1994 to $49.0 million in 1995. Of the increase,
approximately $4.7 million was due to revenues of companies acquired from
December 1994 through August 1995, as well as the full year effect in 1995 of
companies acquired in 1994. Approximately $4.0 million of the increase was
contributed by existing operations as a result of an increase in business from
corporate travel customers, business travel arrangers, special event business,
and the implementation in mid-1995 of charges to licensees for central
reservation and billing services.
Cost of Revenue. Cost of revenue increased approximately $5.3 million or
19.2% from $27.7 million in 1994 to $33.0 million in 1995. The increase was
primarily attributable to higher operating costs due to increased business
levels and to operating costs related to acquired companies. Cost of revenue
decreased as a percentage of revenue, net from 68.7% in 1994 to 67.4% in 1995 as
a result of increased utilization of the Company's operating resources and the
implementation, in mid-1995, of charges of licensees for central reservation and
billing services which did not result in a corresponding increase in cost.
5
<PAGE>
SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $3.0 million or 27.5% from $11.0
million in 1994 to $14.1 million in 1995. This increase was largely due to
higher costs associated with additional personnel, increased marketing and
promotional expense, and the increase in the amortization of intangibles
recorded as a result of acquisitions. Selling, general and administrative
expenses increased as a percentage of revenue, net from 27.4% in 1994 to 28.8%
in 1995 as a result of relatively higher levels of administrative costs in
existing operations and additional expenses related to companies acquired late
in 1995 whose operations were not consolidated with the Company's operations
until 1996.
Interest Expense. Interest expense increased approximately $398,000 or
26.3% from approximately $1.5 million in 1994 to $1.9 million in 1995. This
increase was due to net increases in debt in 1995 to fund acquisitions. Interest
expense as a percentage of revenue, net increased slightly from 3.8% in 1994 to
3.9% in 1995.
Provision for Income Taxes. The provision for income taxes increased
approximately $98,000 from approximately $163,000 in 1994 to approximately
$271,000 in 1995. The tax provisions reflects the separate tax provisions of
Carey International, Inc. and Subsidiaries and Carey of Indiana, Inc. prior to
the two companies becoming a consolidated tax payer.
Net Income. As a result of the foregoing, the Company's net income
increased approximately $136,000 from approximately $108,000 in 1995 compared to
a net loss of approximately $38,000 in 1994.
Quarterly Results
The following table presents unaudited quarterly financial information for
1995, 1996 and the first two quarters of 1997. This information has been
prepared by the Company on a basis consistent with the Company's audited
financial statements and includes all adjustments (consisting only of normal
recurring adjustments) which management considers necessary for a fair
presentation of the results for such quarters.
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------------------------------------
1995 1996
------------------------------------------- ------------------------------------------
Feb. May Aug. Nov. Feb. May Aug. Nov.
28 31 31 30 29 31 31 30
------- ------- ------- ------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net.............. $9,503 $11,865 $11,686 $15,916 $12,892 $16,695 $16,073 $19,885
Gross profit.............. 3,081 3,874 3,610 5,376 4,232 5,674 5,472 6,517
Operating income (loss)... (42) 548 (27) 1,382 490 1,459 1,343 1,876
Quarter Ended
-------------------------------
1997
-------------------------------
Feb. May Aug.
28 31 31
------- ------- ------
<S> <C> <C> <C>
Revenue, net.............. $15,595 $18,690 $2,932
Gross profit.............. 5,126 6,495 7,574
Operating income (loss)... 912 1,990 2,022
<CAPTION>
Quarter Ended
-------------------------------------------------------------------------------------------
1995 1996
------------------------------------------- ------------------------------------------
Feb. May Aug. Nov. Feb. May Aug. Nov.
28 31 31 30 29 31 31 30
------- ------- ------- ------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net.............. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit.............. 32.4 32.7 30.9 33.8 32.8 34.0 34.0 32.8
Operating income (loss)... (0.4)% 4.6% (0.2)% 8.7% 3.8% 8.7% 8.4% 9.4%
Quarter Ended
-------------------------------
1997
-------------------------------
Feb. May Aug.
28 31 31
------- ------- ------
<S> <C> <C> <C>
Revenue, net.............. 100.0% 100.0% 100.0%
Gross profit.............. 32.9 34.8 33.0
Operating income (loss)... 5.8% 10.6% 8.8%
</TABLE>
6
<PAGE>
SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
The Company believes that its future operating results may continue to be
subject to quarterly variations caused by such factors as seasonal business
travel, variable scheduling of special events and the timing of acquisitions by
the Company. The Company's least profitable quarter generally has been the first
quarter (ending February 28 or 29), and its most profitable quarter generally
has been the fourth quarter (ending November 30).
Liquidity and Capital Resources
Cash and cash equivalents increased $2.7 million from $2.9 million at
November 30, 1996 to $5.6 million at August 31, 1997. Operating activities
provided net cash of $2.8 million during the 1997 Nine-Month Period. The overall
net increase in cash and cash equivalents during the 1997 Nine-Month Period
primarily related to the cash proceeds to the Company from its IPO and net cash
provided by operations, offset by the use of such cash to retire debt, acquire
Manhattan Limousine and redeem certain preferred stock.
Cash used in investing activities increased by $7.1 million over the 1996
Nine-Month Period. Cash of $1.2 million was used in the 1996 Nine-Month Period
to acquire operations in London, whereas $7.4 million of cash was used in the
1997 Nine-Month Period to acquire Manhattan Limousine and to make additional
payments of contingent consideration for the acquisition of London.
Cash provided by financing activities increased by $10.1 million over the
1996 Nine-Month Period, primarily as a result of the net proceeds from the IPO
and after using such proceeds to retire debt and complete the Recapitalization.
In connection with the IPO, the Company issued a total of 3,335,000 shares
of Common Stock and received proceeds, net of underwriters' discounts and
commissions and offering costs, of $30.7 million. The Company utilized the net
proceeds from the IPO to repay principal on subordinated indebtedness of
approximately $7.1 million and to fund the Recapitalization by repaying
principal on subordinated indebtedness of approximately $912,000 and redeeming
preferred stock for $3.1 million. Additionally, the Company completed its
acquisition of Manhattan Limousine by paying $11.8 million to the sellers of
Manhattan Limousine and repaying principal on indebtedness of Manhattan
Limousine in the amount of $3.4 million. The remaining net proceeds will be used
for acquisitions and other general corporate purposes, including working
capital.
As part of the Recapitalization, a further $4.9 million of debt was
converted to Common Stock of the Company. At August 31, 1997, the Company had
borrowings of $1.1 million, approximately $303,000 of which is to be repaid over
the next 12 months.
Effective as of 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"). The Facility, which may be used for acquisitions
and working capital, is collateralized by the assets of the Company and its
domestic operating 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
7
<PAGE>
SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
under the Facility will convert to a five-year term loan, which will bear
interest either at a fixed rate (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.
While there can be no assurance, and depending on the methods of financing
and size of potential acquisitions, management believes that cash flow from
operations, the remaining net proceeds from the IPO and funds from the credit
Facility will be adequate to meet the Company's capital requirements for the
next 12 months, While the Company historically has financed acquisitions
primarily with cash, it may seek to finance future acquisitions by using common
stock for a portion or all of the consideration to be paid.
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. 333-22651) filed with the
Securities and Exchange Commission, which is incorporated herein by reference,
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.
8
<PAGE>
Exhibit 99.4
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
AUGUST 31, 1997
<TABLE>
<CAPTION>
Carey Indy
International, Connection
Inc. Limousine, Inc. Eliminations Total
-------------- --------------- ---------------- ------------
ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 5,277,921 $ 325,102 $ $ 5,603,023
Accounts receivable, net 9,210,589 426,323 9,636,912
Notes receivable from contracts, current portion 663,807 663,807
Prepaid expenses and other current assets 1,316,417 152,797 1,469,214
-------------- --------------- ---------------- ------------
TOTAL CURRENT ASSETS 16,468,734 904,222 17,372,956
Fixed assets, net 4,589,016 2,835,119 7,424,135
Notes receivable from contracts, excluding current portion 8,326,216 0 8,326,216
Franchise rights, net 5,171,327 5,171,327
Trade name, trademark and contract rights, net 6,541,553 6,541,553
Goodwill and other intangible assets, net 27,929,464 22,342 27,951,806
Deferred tax assets 2,968,058 2,968,058
Deposits and other assets 2,049,915 32,109 2,082,024
-------------- --------------- ---------------- ------------
TOTAL ASSETS $ 74,044,283 $ 3,793,792 $ $ 77,838,075
============== =============== ================ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of notes payable $ 303,400 $ 810,270 $ $ 1,113,670
Current portion of capital leases 226,069 226,069
Accounts payable and accrued expenses 12,768,218 650,240 13,418,458
-------------- --------------- ---------------- ------------
TOTAL CURRENT LIABILITIES 13,297,687 1,460,510 14,758,197
Notes payable, excluding current portion 842,825 626,477 1,469,302
Capital leases, excluding current portion 955,336 955,336
Deferred rent and other long-term liabilities 53,116 53,116
Deferred tax liabilities 1,493,071 101,000 1,594,071
Deferred revenue 13,721,483 13,721,483
STOCKHOLDERS' EQUITY
Preferred stock
Common stock 68,427 491,725 (484,507) 75,645
Additional paid-in capital 43,743,996 484,507 44,228,503
Retained earnings (accumulated deficit) (131,658) 1,114,080 982,422
-------------- --------------- ---------------- ------------
TOTAL STOCKHOLDERS' EQUITY 43,680,765 1,605,805 45,286,570
-------------- --------------- ---------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 74,044,283 $ 3,793,792 $ $ 77,838,075
============== =============== ================ ============
</TABLE>
99.4.1
<PAGE>
EXHIBIT 99.4
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
Carey Indy
International, Connection
Inc. Limousine, Inc. Eliminations Total
-------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue, net $ 52,050,523 $ 5,230,482 $ (63,641) $57,217,364
Cost of revenue 35,597,997 2,488,182 (63,641) 38,022,538
-------------- --------------- ------------ -----------
Gross profit 16,452,526 2,742,300 19,194,826
Selling, general and administrative expense 12,902,857 1,368,687 14,271,544
-------------- --------------- ------------ -----------
Operating income 3,549,669 1,373,613 4,923,282
Other income (expense):
Interest expense (904,896) (117,658) (1,022,554)
Interest and other income 161,985 8,412 170,397
Gain on sales of fixed assets 167,852 11,619 179,471
-------------- --------------- ------------ -----------
Income before provision for income taxes 2,974,610 1,275,986 4,250,596
Provision for income taxes 1,227,183 469,693 1,696,876
-------------- --------------- ------------ -----------
Net income $ 1,747,427 $ 806,293 $ $ 2,553,720
============== =============== ============ ===========
</TABLE>
99.4.2
<PAGE>
EXHIBIT 99.5
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
Carey Indy
International Connection
Inc. Limousine, Inc. Eliminations Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUE, NET $ 41,176,235 $ 4,508,460 $ (24,934) $ 45,659,761
COST OF REVENUE 27,950,106 2,356,232 (24,934) 30,281,404
--------------- --------------- --------------- ---------------
GROSS PROFIT 13,226,129 2,152,228 0 15,378,357
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE 10,909,283 1,176,294 12,085,577
--------------- --------------- --------------- ---------------
OPERATING INCOME 2,316,846 975,934 0 3,292,780
OTHER INCOME (EXPENSE):
INTEREST EXPENSE (1,299,988) (145,573) 0 (1,445,561)
INTEREST AND OTHER INCOME 104,689 4,713 0 109,402
GAIN ON SALES OF FIXED ASSETS 229,229 16,260 0 245,489
--------------- --------------- --------------- ---------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 1,350,776 851,334 0 2,202,110
PROVISION FOR INCOME TAXES 420,106 315,400 0 735,506
--------------- --------------- --------------- ---------------
NET INCOME $ 930,670 $ 535,934 $ 0 $ 1,466,604
=============== =============== =============== ===============
</TABLE>
99.5.1
<PAGE>
EXHIBIT 99.6
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
Carey Indy
International, Connection
Inc. Limousine, Inc. Eliminations Total
-------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 2,754,276 $ 113,435 $ $ 2,867,711
Accounts receivable, net 10,141,732 400,599 10,542,331
Notes receivable from contracts, current portion 402,751 402,751
Prepaid expenses and other current assets 1,936,961 124,777 2,061,738
------------- -------------- ------------ -----------
TOTAL CURRENT ASSETS 15,235,720 638,811 15,874,531
Fixed assets, net 3,379,246 2,255,664 5,634,910
Notes receivable from contracts, excluding current portion 769,201 769,201
Franchise rights, net 5,348,264 5,348,264
Trade name, trademark and contract rights, net 6,685,135 6,685,135
Goodwill and other intangible assets, net 7,262,203 23,730 7,285,933
Deferred tax assets 2,461,573 2,461,573
Deposits and other assets 1,384,787 34,219 1,419,006
------------- -------------- ------------ -----------
TOTAL ASSETS $ 42,526,129 $ 2,952,424 $ $45,478,553
============= ============== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of notes payable $ 5,131,227 $ 727,022 $ $ 5,858,249
Current portion of capital leases 199,224 199,224
Current portion of subordinated notes payable 440,000 440,000
Accounts payable and accrued expenses 11,196,949 368,014 11,564,963
------------- -------------- ------------ -----------
TOTAL CURRENT LIABILITIES 16,967,400 1,095,036 18,062,436
Notes payable, excluding current portion 5,188,742 847,222 6,035,964
Capital leases, excluding current portion 663,030 633,030
Subordinated notes payable, excluding current portion 5,340,000 5,340,000
Deferred rent and other long-term liabilities 111,281 111,281
Deferred tax liabilities 1,402,611 109,000 1,511,611
Deferred revenue 6,181,147 6,181,147
STOCKHOLDERS' EQUITY
Preferred stock 1,115,400 1,115,400
Common stock 6,558 491,525 (484,307) 13,776
Additional paid-in capital 7,357,064 484,307 7,841,371
Accumulated deficit (1,807,104) 409,641 (1,397,463)
------------- -------------- ------------ -----------
TOTAL STOCKHOLDERS' EQUITY 6,671,918 901,166 7,573,084
------------- -------------- ------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 42,526,129 $ 2,952,424 $ $45,478,553
============= ============== ============ ===========
</TABLE>
99.6.1
<PAGE>
EXHIBIT 99.6
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1996
<TABLE>
<CAPTION>
Carey Indy
International, Connection
Inc. Limousine, Inc. Eliminations Total
---------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenue, net $ 59,505,698 $ 6,080,105 $ (40,861) $ 65,544,942
Cost of revenue 40,438,449 3,251,590 (40,861) 43,649,178
---------------- ----------------- --------------- ----------------
Gross profit 19,067,249 2,828,515 21,895,764
Selling, general and administrative expense 15,077,553 1,649,057 16,726,610
---------------- ----------------- --------------- ----------------
Operating income 3,989,696 1,179,458 5,169,154
Other income (expense):
Interest expense (1,704,187) (194,044) (1,898,231)
Interest and other income 156,695 6,016 162,711
Gain (loss) on sales of fixed assets 269,654 86,100 355,754
---------------- ----------------- --------------- ----------------
Income before provision for income taxes 2,711,858 1,077,530 3,789,388
Provision for income taxes (104,246) 398,667 294,421
---------------- ----------------- --------------- ----------------
Net income $ 2,816,104 $ 678,863 $ $ 3,494,967
================ ================= =============== ================
</TABLE>
99.6.2
<PAGE>
EXHIBIT 99.7
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEETS
NOVEMBER 30, 1995
<TABLE>
<CAPTION>
Carey Indy
International, Connection
Inc. Limousine, inc. Eliminations Total
-------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 1,438,659 $ 177,052 $ $ 1,615,711
Accounts receivable, net 9,023,016 341,340 9,364,356
Notes receivable from contracts, current portion 659,609 659,609
Prepaid expenses and other current assets 364,741 117,206 481,947
-------------- -------------- ------------ -----------
TOTAL CURRENT ASSETS 11,486,025 635,598 12,121,623
Fixed assets, net 2,185,071 2,133,640 4,318,711
Notes receivable from contracts, excluding current portion 193,298 193,298
Franchise rights, net 5,533,956 5,533,956
Trade name, trademark and contract rights, net 6,876,578 6,876,578
Goodwill and other intangible assets, net 7,113,684 25,579 7,139,263
Deferred tax assets 892,993 892,993
Deposits and other assets 1,615,316 37,576 1,652,892
-------------- -------------- ------------ -----------
TOTAL ASSETS $35,896,921 $2,832,393 $ $38,729,314
============== ============== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of notes payable $ 4,585,703 $ 779,709 $ $ 5,365,412
Current portion of capital leases 206,031 46,922 252,953
Current portion of subordinated notes payable 100,000 100,000
Accounts payable and accrued expenses 8,000,972 350,340 8,351,312
-------------- -------------- ------------ -----------
TOTAL CURRENT LIABILITIES 12,892,706 1,176,971 14,069,677
Notes payable, excluding current portion 7,361,749 1,278,020 8,639,769
Capital leases, excluding current portion 74,879 7,142 82,021
Subordinated notes payable, excluding current portion 5,780,000 5,780,000
Deferred rent and other long-term liabilities 148,195 148,195
Deferred tax liabilities 1,001,480 85,000 1,086,480
Deferred revenue 4,726,134 4,726,134
STOCKHOLDERS' EQUITY
Preferred stock 1,212,900 40,000 1,252,900
Common stock 6,558 471,525 (464,506) 13,577
Additional paid-in capital 7,357,064 464,506 7,821,570
Accumulated deficit (4,664,744) (226,265) (4,891,009)
-------------- -------------- ------------ -----------
TOTAL STOCKHOLDERS' EQUITY 3,911,778 285,260 4,197,038
-------------- -------------- ------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $35,896,921 $2,832,393 $ $38,729,314
============== ============== ============ ===========
</TABLE>
99.7.1
<PAGE>
EXHIBIT 99.7
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
Carey Indy
International, Connection
Inc. Limousine, Inc. Eliminations Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenue, net $ 43,483,947 $ 5,485,448 $ $ 48,969,395
Cost of revenue 29,942,961 3,084,248 33,027,209
--------------- --------------- --------------- ---------------
Gross profit 13,540,986 2,401,200 15,942,186
Selling, general and administrative expense 12,419,062 1,662,090 14,081,152
--------------- --------------- --------------- ---------------
Operating income 1,121,924 739,110 1,861,034
Other income (expense):
Interest expense (1,682,886) (228,080) (1,910,966)
Interest and other income 259,854 2,793 262,647
Gain on sales of fixed assets 130,913 25,092 156,005
--------------- --------------- --------------- ---------------
Income before provision for income taxes (170,195) 538,915 368,720
Provision for income taxes 25,000 245,599 270,599
--------------- --------------- --------------- ---------------
Net income $ (195,195) $ 293,316 $ $ 98,121
================ ================ ================ ================
</TABLE>
99.7.2
<PAGE>
EXHIBIT 99.8
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
Carey Indy
International, Connection
Inc. Limousine, Inc. Eliminations Total
-------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue, net $ 35,525,309 $ 4,788,413 $ $ 40,313,722
Cost of revenue 24,953,904 2,745,773 27,699,677
-------------- --------------- ------------- ------------
Gross profit 10,571,405 2,042,640 12,614,045
Selling, general and administrative expense 9,486,797 1,556,152 11,042,949
-------------- --------------- ------------- ------------
Operating income 1,084,608 486,488 1,571,096
Other income (expense):
Interest expense (1,348,883) (164,280) (1,513,163)
Interest and other income 172,641 672 173,313
Loss on sales of assets (18,359) (88,209) (106,568)
-------------- --------------- ------------- ------------
Income before provision for income taxes (109,993) 234,671 124,678
Provision for income taxes 19,000 143,810 162,810
-------------- --------------- ------------- ------------
Net income $ (128,993) $ 90,861 $ $ (38,132)
============== =============== ============= ============
</TABLE>
99.8.1
