<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended
February 29, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
_________ to ________
Commission file number 000-22551
Carey International, Inc.
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(Exact name of registrant as specified in its charter)
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Delaware 52-1171965
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4530 Wisconsin Avenue, NW, Suite 500, Washington, DC 20016
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(Address of principal executive offices, including zip code)
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(202) 895-1200
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(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
------ ------
There were 9,741,206 shares of the registrant's common stock, par value
$0.01 per share, outstanding at April 12, 2000.
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
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PART I: FINANCIAL INFORMATION
Item 1: Financial Statements (unaudited):
Consolidated balance sheets as of November 30, 1999 and
February 29, 2000
Consolidated statements of operations for the three months
ended February 28, 1999 and February 29, 2000
Consolidated statements of cash flows for the three months
ended February 28, 1999 and February 29, 2000
Notes to consolidated financial statements
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
November 30, February 29,
1999 2000
-------------- ---------------
(In thousands)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 8,595 $ 5,034
Accounts receivable, net 32,418 33,099
Notes receivable from contracts, current portion 1,739 1,417
Prepaid expenses and other current assets 1,630 2,891
-------------- ---------------
Total current assets 44,382 42,441
Notes receivable from contracts, excluding current portion 9,098 9,454
Fixed assets, net 27,358 29,646
Franchise rights, net 11,405 11,304
Goodwill and other intangible assets, net 76,971 78,200
Trade name, trademark and contract rights, net 6,111 6,063
Deposits and other assets 2,812 2,815
-------------- ---------------
Total assets $178,137 $179,923
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of notes payable $ 3,014 $ 2,920
Current portion of capital leases 584 537
Accounts payable and accrued expenses 24,289 21,584
-------------- ---------------
Total current liabilities 27,887 25,041
Notes payable, excluding current portion 25,070 27,805
Capital leases, excluding current portion 1,427 1,298
Deferred taxes and other long-term liabilities 4,242 4,240
Deferred revenue 14,859 14,969
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 20,000,000 authorized
shares, 9,680,380 and 9,734,385 issued and
outstanding shares at November 30,1999 and February 29, 2000
respectively 97 97
Additional paid-in capital 81,509 82,618
Retained earnings 23,046 23,855
-------------- ---------------
Total stockholders' equity 104,652 106,570
-------------- ---------------
Total liabilities and stockholders' equity $178,137 $179,923
============== ===============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
1
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
----------------------------
February 28, February 29,
1999 2000
------------ --------------
(In thousands, except
per share data)
<S> <C> <C>
Revenue, net $ 36,440 $ 48,879
Cost of revenue 24,403 34,236
------------ --------------
Gross profit 12,037 14,643
Selling, general and administrative expense 9,232 12,621
------------ --------------
Operating income 2,805 2,022
Other income (expense):
Interest expense (108) (440)
Interest income 117 94
Gain on sales of fixed assets 32 52
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Income before provision for income taxes 2,846 1,728
Provision for income taxes 1,193 726
------------ --------------
Net income $ 1,653 $ 1,002
============ ==============
Net income per common share - basic $ 0.17 $ 0.10
============ ==============
Net income per common share - diluted $ 0.17 $ 0.10
============ ==============
Weighted average common shares used in
computing net income per common share - basic 9,488 9,706
============ ==============
Weighted average common shares used in
computing net income per common share - diluted 9,886 10,226
============ ==============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
2
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
----------------------------
February 28, February 29,
1999 2000
------------- --------------
(In thousands)
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,653 $ 1,002
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization of fixed assets 766 1,396
Amortization of intangible assets 694 856
Gain on sales of fixed assets (32) (52)
Provision for deferred taxes 907 -
Change in deferred revenue (112) 110
Changes in operating assets and liabilities:
Accounts receivable (1,787) (681)
Notes receivable from contracts 4 (34)
Prepaid expenses, deposits and other assets (994) (1,235)
Accounts payable and accrued expenses (551) (2,899)
Deferred taxes and other long-term liabilities (3) (3)
------------- --------------
Net cash provided by (used in) operating activities 545 (1,540)
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Cash flows from investing activities:
Proceeds from sales of fixed assets 282 322
Purchases of fixed assets (1,558) (4,024)
Acquisitions of chauffeured vehicle service companies (7,211) (855)
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Net cash used in investing activities (8,487) (4,557)
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Cash flows from financing activities:
Principal payments under capital lease obligations (701) (175)
Payments of notes payable (1,547) (751)
Proceeds from notes payable 4,500 3,392
Issuance of common stock 179 70
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Net cash provided by financing activities 2,431 2,536
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Net decrease in cash and cash equivalents (5,511) (3,561)
Cash and cash equivalents at beginning of period 14,456 8,595
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Cash and cash equivalents at end of period $ 8,945 $ 5,034
============= ==============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Background and organization
General
Carey International, Inc. (the "Company") provides chauffeured vehicle
and related services through a worldwide network of owned and operated
companies, licensees and affiliates serving 480 cities in 75 countries. The
Company owns and operates service providers in the form of wholly-owned
subsidiaries in the following cities: Boston, Chicago, Detroit, Hartford,
Indianapolis, Jacksonville, London, Los Angeles, Miami, New York, Paris,
Philadelphia, San Francisco, Stamford, Washington, D.C., and West Palm Beach.
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 and related businesses. The chauffeured vehicle service and related
businesses that the Company seeks to acquire may be in cities in which the
Company has owned and operated service providers, licensees operating under
the Carey trade name and service mark, and affiliates of the Company. In the
period ended February 29, 2000, the Company acquired a chauffeured vehicle
service company in Paris .
In March 2000, the Company acquired a chauffeured vehicle service company
in White Plains, New York.
2. Basis of presentation
The accompanying consolidated financial statements and these notes do not
include all of the disclosures included in the Company's audited
consolidated financial statements for the years ended November 30, 1998 and
1999, and should be read in conjunction with those financial statements.
The consolidated financial statements included herein have not been
audited. However, in the opinion of management, the consolidated financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results for the
periods reflected. The results for these periods are not necessarily
indicative of the results for the full fiscal year.
4
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. Acquisitions
In the periods ended February 28, 1999 and February 29, 2000, the
following acquisition activity was recorded by the Company:
<TABLE>
<CAPTION>
Three months ended
---------------------------
February 28, February 29,
1999 2000
------------ -------------
Net assets purchased: (In thousands)
<S> <C> <C>
Receivables and other assets $ 969 $ -
Fixed assets 2,379 -
Franchise rights 272 -
Goodwill and other intangibles assets 7,398 1,894
Accounts payable and accrued expenses (396) -
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$10,622 $ 1,894
============ =============
Consideration:
Cash payments $ 7,210 $ 855
Notes assumed related to vehicle
acquisitions 2,318 -
Issuance of common stock (64,437 and
48,626 shares in 1999 and 2000, 1,094 1,039
respectively)
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$10,622 $ 1,894
============ =============
</TABLE>
4. Revolving credit facility
In January 1999, the Company entered into a three-year Revolving Credit
Facility consisting of an unsecured revolving line of credit of $75.0
million (the "Credit Facility"). Loans made under the Credit Facility bear
interest at the Company's option at either the bank's prime rate or at a
varying rate above the LIBOR rate, depending on the ratio of the Company's
debt to equity. Commitment fees equal to 0.375% per annum are payable on
the unused portion of the Credit Facility. The terms of the Credit
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 subordinate to the borrowings under the Credit
Facility, and (iii) require the Company to comply with certain financial
covenants. As of February 29, 2000, the Company had borrowed $24.3 million
under the Credit Facility.
5
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Commitments and contingencies
The Company is from time to time a party to litigation arising in the
ordinary course of business. Management believes that no pending legal
proceeding will have a material adverse effect on the business, financial
condition, results of operations or cash flows of the Company.
6. Comprehensive income
In 1999, the Company adopted SFAS No. 130, Comprehensive Income.
Comprehensive income for the Company is calculated by adjusting "Net
income" for the change in the unrealized gains or losses from foreign
currency translations. In the periods ended February 28,1999 and February
29, 2000, comprehensive income did not materially differ from net income.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Months Ended February 29, 2000 (the "2000 Period") Compared to Three
Months Ended February 28, 1999 (the "1999 Period")
Revenue, Net. Revenue, net increased $12.4 million or 34.1% from $36.4
million in the 1999 Period to $48.9 million in the 2000 Period. Of the increase,
$6.8 million resulted from expanded use of the Carey network, including an
increase in business from corporate travel customers and business travel
arrangers. A further $5.6 million of the increase was due to revenues from
companies acquired by the Company subsequent to the 1999 Period.
Cost of Revenue. Cost of revenue increased $9.8 million or 40.2% from
$24.4 million in the 1999 Period to $34.2 million in the 2000 Period. The
increase was primarily attributable to higher costs due to increased business
levels and to higher costs associated with businesses acquired by Carey
subsequent to the 1999 Period. Cost of revenue increased as a percentage of
revenue, net from 67.0% in the 1999 Period to 70.0% in the 2000 Period,
primarily reflecting increased reliance on farm-outs to service peak periods of
demand and correspondingly narrower margins than those achieved with independent
operators, seasonal and other reductions in revenues not offset by reduced costs
of revenues and unrecovered cost increases in the Company's central reservations
and central billing functions as investments in these areas grew to meet the
demands of the revenue growth of the Company.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $3.4 million or 36.7% from $9.2 million in the
1999 Period to $12.6 million in the 2000 Period. The increase largely was due
to the costs associated with higher business levels and costs of acquired
businesses including personnel costs, administrative expenses and marketing
expenses, and an increase in amortization of intangibles related to acquired
businesses. Selling, general and administrative expense increased as a
percentage of revenue, net from 25.3% in the 1999 Period to 25.8% in the 2000
Period. The higher level of these expenses in relation to revenue, net reflected
the seasonal and other reductions in revenues noted earlier without a
corresponding reduction in cost and higher levels of training and recruitment
costs in response to the Company's growth and on-going deployment of new
systems.
Three Months Ended February 29, 2000 (the "2000 Period") Compared to Three
Months Ended February 28, 1999 (the "1999 Period")
Interest Expense. Interest expense increased from approximately $108,000 in
the 1999 Period to approximately $440,000 in the 2000 Period, primarily as a
result of the use of debt to fund acquisitions during 1999 and 2000. Interest
income decreased from approximately $117,000 in the 1999 period to approximately
$94,000 in the 2000 period.
Provision for Income Taxes. The provision for income taxes decreased
approximately $467,000 from $1.2 million in the 1999 Period to approximately
$726,000 in the 2000 Period. The decrease primarily was a result of the decrease
in pre-tax income of the Company from $2.8 million in the 1999 Period to $1.7
million in the 2000 Period.
Net Income. As a result of the foregoing, the Company's net income
decreased approximately $651,000 or 39.4% from $1.7 million in the 1999 Period
to $1.0 million in the 2000 Period.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS --(Continued)
Liquidity and Capital Resources
Cash and cash equivalents decreased $3.6 million during the 2000 Period from
$8.6 million at November 30, 1999 to $5.0 million at February 29, 2000.
Operating activities decreased net cash by approximately $1.5 million during the
2000 Period compared to an increase of approximately $545,000 in the 1999
Period. The overall net decrease in cash and cash equivalents at February 29,
2000 from November 30, 1999 primarily related to net cash used in chauffeured
vehicle service operations and the use of cash to acquire chauffeured vehicle
service companies, purchase fixed assets and retire debt.
Cash used in investing activities during the 2000 Period decreased by $3.9
million over the 1999 Period. Cash of $8.5 million was used in the 1999 Period
to acquire chauffeured vehicle service companies and purchase fixed assets, net
of cash from sale of fixed assets, whereas cash of $4.6 million was used in the
2000 Period to acquire chauffeured vehicle service companies and purchase fixed
assets, net of cash from sale of fixed assets.
Cash provided by financing activities during the 2000 Period increased by
approximately $100,000 over the 1999 Period, primarily as a result of the net
notes payable activity used in financing new acquisitions and the purchase of
fixed assets.
At February 29, 2000, the Company had notes payable outstanding of $30.7
million, of which approximately $2.9 million is to be repaid over the next 12
months.
In January 1999, the Company entered into a three-year Revolving Credit
Facility consisting of an unsecured revolving line of credit of $75.0 million
(the "Credit Facility"). The Credit Facility is used for acquisitions and
working capital. Loans made under the Credit Facility bear interest at the
Company's option at either the banks' prime lending rate or at a varying rate
above the LIBOR rate, depending upon the ratio of the Company's debt to equity.
Commitment fees equal to 0.375% per annum are payable on the unused portion of
the Credit
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS --(Continued)
Facility. The terms of the Credit 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 the
borrowings under the Credit Facility and (iii) require the Company to comply
with certain financial covenants. As of February 29, 2000, the Company had
borrowed $24.3 million under the Credit Facility.
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, cash and cash equivalents and funds from the Credit Facility will be
adequate to meet the Company's capital requirements for the next 12 months.
While the Company has financed many acquisitions primarily with cash over the
past twelve months, it may seek to finance future acquisitions by using common
stock for a portion or all of the consideration to be paid.
The Company is in the process of upgrading its central and subsidiary
reservation systems as well as its financial and certain other computer software
and hardware systems. The upgrades are expected to provide significant
enhancements to the Company's customer service and management information
capabilities along with increased opportunities for more efficient processing
and distribution of information. The Company has also undertaken an initiative
to upgrade its web site on the worldwide web and to integrate an e-commerce
capability with its program of enhancements and upgrades. The Company is
currently committed to or anticipates spending approximately $7 to $10 million
over the next 12 to 18 months on designing, developing and deploying software
and replacing or upgrading computer-related hardware as part of its program of
enhancements and upgrades and worldwide web initiatives.
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. 333-59599) 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.
9
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit:
27 Financial Data Schedule (for the three months ended
February 29, 2000)
(b) Reports on Form 8-K
None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Carey International, Inc.
Date: April 14, 2000 By: /s/ Vincent A. Wolfington
--------------------------
Vincent A. Wolfington
Chairman, Chief Executive Officer
Date: April 14, 2000 By: /s/ David H. Haedicke
----------------------
David H. Haedicke
Executive Vice President,
Chief Financial Officer
11
<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION
27 Financial Data Schedule (for the three months ended
February 29, 2000)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-2000
<PERIOD-START> DEC-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 5,034
<SECURITIES> 0
<RECEIVABLES> 34,303
<ALLOWANCES> 1,204
<INVENTORY> 0
<CURRENT-ASSETS> 42,441
<PP&E> 39,421
<DEPRECIATION> 9,775
<TOTAL-ASSETS> 179,923
<CURRENT-LIABILITIES> 25,041
<BONDS> 27,805
0
0
<COMMON> 97
<OTHER-SE> 106,473
<TOTAL-LIABILITY-AND-EQUITY> 179,923
<SALES> 0
<TOTAL-REVENUES> 48,879
<CGS> 0
<TOTAL-COSTS> 34,236
<OTHER-EXPENSES> 12,424
<LOSS-PROVISION> 197
<INTEREST-EXPENSE> 440
<INCOME-PRETAX> 1,728
<INCOME-TAX> 726
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,002
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.10
</TABLE>
