SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K(a)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: March 27, 1996.
PIONEER RAILCORP
(Exact name of registrant as specified in its charter)
IOWA 33-6658-C 37-116131
- ------------------------ --------------------- ---------------------
(State of Incorporation) (Commission File No.) (IRS Employer ID No.)
1318 S. JOHANSON ROAD, PEORIA, ILLINOIS 61607
- ---------------------------------------- ----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (309) 697-1400
<PAGE>
Item 2. Acquisition or disposition of assets.
On March 12, 1996, the Registrant purchased 176,675 shares of the common stock
of KNRECO, Inc., an Iowa corporation (hereinafter "KNRECO") from the
shareholders, for $16.50 per share. This represents approximately 93% of the
outstanding common stock of KNRECO. The Registrant also offered to purchase all
of the remaining common shares of KNRECO, and as of the date of this report
Pioneer Railcorp has acquired 100% of said shares.
KNRECO operates a common carrier railroad line within the City of Keokuk, Iowa,
and from Keokuk to LaHarpe, Illinois, as well as a branch from Hamilton to
Warsaw, Illinois, a total of approximately 38 miles, under the d/b/a "Keokuk
Junction Railway". KNRECO also owns 5 locomotives, 30 railcars (of various
descriptions), an office building, engine house, and several vehicles,
miscellaneous pieces of equipment, materials and supplies. In addition, KNRECO
owns all of the common stock of Keokuk Union Depot Company, an Iowa corporation,
that owns the former Keokuk Union Depot building, along with surrounding track
and real estate.
Prior to the purchase there was no material relationship between the Registrant
and KNRECO, or any of the officers, directors or shareholders of KNRECO and the
Registrant. The total consideration for the purchase of 100% of the outstanding
shares of KNRECO was $5,919,136. This was paid by $3,124,357 in cash, 342 shares
of Pioneer Railcorp Class A common stock valued at $1,240 and the assumption of
liabilities totaling $2,793,539. Of the total liabilities assumed, approximately
$1.5 million were current liabilities, $575,000 was long term debt as described
above, and approximately $775,000 relates to the deferred tax liability
resulting from the preliminary purchase price allocation.
The purchase was financed largely through a $2.5 million acquisition line of
credit Pioneer Railcorp has with Citizens Bank & Trust Company of Chillicothe,
Missouri. The line of credit is collateralized by the Common Stock of the
Alabama Railroad Co. and the Mississippi Central Railroad Co., as well as the
Company's investment in stock of any subsidiaries acquired under the line. The
interest rate for the line is currently 11%. The interest rate is adjustable
quarterly to 2.5% over New York Prime, limited, however, to a one percent annual
increase or decrease, not to exceed 13.5% or be reduced below 10%. Any amounts
drawn on the line must be repaid monthly over a seven year period. The current
monthly debt service resulting from the $2.5 million borrowed is $43,000, with
monthly payments beginning on April 8, 1996. The remainder of the purchase price
was financed through internal cash flow.
The Registrant filed a Notice of Exemption with the Surface Transportation Board
(the successor to the Interstate Commerce Commission) for the Registrant's
continuance in control of KNRECO and the Registrant's other eight shortline
railroad subsidiaries.
KNRECO has two (2) long-term debt arrangements which are collateralized by
mortgages and/or security interests, one of which is guaranteed by John J.
Warfield, former President of KNRECO. Pioneer Railcorp ("PRC"), as part of the
stock purchase, agreed to indemnify Warfield if KNRECO defaults on this debt and
Mr. Warfield is called upon to pay the debt.
The principal amounts and terms of these debts are as follows:
Note to For Principal Rate/Term
- ------------ ------------- --------- ------------------------------
Illinois DOT Track Rehab $331,380 2% fixed rate, annual payments
of $40,580, final payment due
November 30, 2004
SBA Disaster Loan $247,805 4% fixed rate, monthly payments
of $3,062, final payment due
January 24, 2004
<PAGE>
Item 7 (A). Financial Statements of Business Acquired
Attached herein as exhibit #1 is the audited consolidated balance sheet of
KNRECO, Inc. and subsidiary d/b/a Keokuk Junction Railway as of March 12, 1996
and the related consolidated statements of income, stockholders' equity, and
cash flows for the period June 1, 1995 through March 12, 1996.
Item 7 (B). Pro Forma Financial Information
PIONEER RAILCORP - KNRECO, Inc.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Description of Acquisition
On March 12, 1996, the Registrant purchased 176,675 shares of the common stock
of KNRECO, Inc., an Iowa corporation (hereinafter "KNRECO") from the
shareholders, for $16.50 per share. This represents approximately 93% of the
outstanding common stock of KNRECO. The Registrant also offered to purchase all
of the remaining common shares of KNRECO, and as of the date of this report
Pioneer Railcorp has acquired 100% of said shares.
KNRECO operates a common carrier railroad line within the City of Keokuk, Iowa,
and from Keokuk to LaHarpe, Illinois, as well as a branch from Hamilton to
Warsaw, Illinois, a total of approximately 38 miles, under the d/b/a "Keokuk
Junction Railway." KNRECO also owns 5 locomotives, 30 railcars (of various
descriptions), an office building, engine house, and several vehicles,
miscellaneous pieces of equipment, materials and supplies. In addition, KNRECO
owns all of the common stock of Keokuk Union Depot Company, an Iowa corporation,
that owns the former Keokuk Union Depot building, along with surrounding track
and real estate.
Nature and Amount of Consideration Given
The total consideration for the purchase of 100% of the outstanding shares of
KNRECO was $5,919,136. This was paid by $3,124,357 in cash, 342 shares of
Pioneer Railcorp Class A common stock valued at $1,240 and the assumption of
liabilities totaling $2,793,539. Of the total liabilities assumed, approximately
$1.5 million were current liabilities, $575,000 was long term debt as described
above, and approximately $775,000 relates to the deferred tax liability
resulting from the preliminary purchase price allocation.
PRO FORMA UNAUDITED FINANCIAL STATEMENTS
The Registrant's most recent balance sheet filed with the Company's first
quarter 1996 Form 10-QSB includes the preliminary allocation of the purchase
price and is incorporated by reference herein. The preliminary asset values are
subject to appraisal, and it is possible that the purchase price may exceed the
fair value of the assets purchased, resulting in goodwill. If an allocation of
the purchase price to goodwill is required as a result of appraisals, a
deduction to track assets would most likely be required. This entry would have
an immaterial effect on the financial statements.
The following pro forma unaudited statement of income for the year ended
December 31, 1995, consolidates the historical results of the Registrant and
KNRECO, Inc. for the year ended December 31, 1995. This statement reflects the
purchase as if it had occurred on January 1, 1995. The fiscal year of KNRECO,
Inc. used in the pro forma statement is for the period June 1, 1995 through
March 12, 1996. To include the results of operations for a full twelve month
period would not materially change the pro forma information presented.
The following pro forma unaudited statement of income for the quarter ended
March 31, 1996, consolidates the historical results of the Registrant and
KNRECO, Inc. for the quarter ended March 31, 1996. This statement reflects the
purchase as if it had occurred on January 1, 1996. Pioneer Railcorp's pro forma
includes the actual operating results of KNRECO, Inc. for the period March 13,
1996 through March 31, 1996.
The pro forma statements do not purport to be indicative of the actual results
of operations which would have occurred had the operations of the companies been
consolidated during the period, or of future results of operations which may be
obtained by the consolidated companies.
<PAGE>
PIONEER RAILCORP - KNRECO, INC.
NOTES TO THE DECEMBER 31, 1995 UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
A. Adjustment to depreciation expense to reflect depreciation of the recorded
KNRECO assets at fair values with new useful lives. The Registrant and
KNRECO both use the straight-line depreciation method for book
depreciation.
The following table sets forth the calculation of pro forma depreciation of
the acquired assets using the Registrant's (PRC) estimated useful lives.
KNRECO asset lives are presented as a matter of reference:
Fair Value
KNRECO PRC Of Fixed Annual
Life Life Assets Depreciation
Years Years Acquired Expense
------ ----- ---------- ------------
Railroad Facilities 20 30 $3,384,134 $105,500
Transportation Equip. 10-15 14 $ 320,000 $ 22,000
Buildings 20-40 40 $ 185,000 $ 4,430
Machinery & Equip. 5-10 10 $ 156,150 $ 19,500
Railcars 10-15 14 $ 443,900 $ 8,100
---------- --------
Totals $4,489,184 $159,530
KNRECO depreciation expense 6/1/95 - 3/12/96 $270,004
Less Calculated KNRECO depreciation expense
using fair value of assets acquired $159,530
Equals Pro Forma Depreciation Adjustment $110,474
B. Adjustment to interest expense to reflect the interest on debt incurred to
finance the acquisition of the KNRECO stock purchase by Pioneer Railcorp.
The Interest expense reflects 12 months of interest expense based on a 7
year amortization of principal and interest. The Company borrowed $2.5
million from Citizens Bank & Trust at an interest rate of prime +2.5%
adjusted quarterly. The rate used in the pro forma adjustment is 11%.
C. Reflects the estimated income tax effect of pro forma presentation of the
two entities to reflect a 40% tax rate.
<PAGE>
PIONEER RAILCORP AND SUBSIDIARIES
KNRECO, Inc.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<TABLE>
KNRECO, Inc. PIONEER RAILCORP UNAUDITED
PERIOD FISCAL YEAR UNAUDITED PRO FORMA
6/01/95 - 1/01/95 - COMBINED PRO FORMA AFTER
3/12/96 12/31/95 HISTORICAL ADJUSTMENTS ADJUSTMENTS
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE ......................... $ 2,458,342 $ 8,577,421 $ 11,035,763 $ 11,035,763
OPERATING EXPENSES
Maintenance of Ways .................... 266,624 877,654 1,144,278 1,144,278
Maintenance of Equipment ............... 73,664 1,030,975 1,104,639 1,104,639
Transportation Expenses ................ 1,434,547 1,822,982 3,257,529 3,257,529
Administrative Expenses ................ 398,605 2,240,581 2,639,186 2,639,186
Depreciation and Amortization .......... 270,004 914,458 1,184,462 (110,474)A 1,073,988
----------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES ............... 2,443,444 6,886,650 9,330,094 9,219,620
-----------------------------------------------------------------------------------
INCOME FROM OPERATIONS ................. 14,898 1,690,771 1,705,669 1,816,143
OTHER INCOME & EXPENSE
Other (Income) Expense ................. (127,391) (132,294) (259,685) (259,685)
Interest Expense, Other ................ 13,893 785,371 799,264 262,591 B 1,061,855
Net (Gain) Loss On Fixed Assets ........ 0 (43,862) (43,862) (43,862)
-----------------------------------------------------------------------------------
TOTAL OTHER INCOME & EXPENSE ............ (113,498) 609,215 495,717 758,308
-----------------------------------------------------------------------------------
NET INCOME BEFORE INCOME TAXES ............ 128,396 1,081,556 1,209,952 1,057,835
------------
PROVISION FOR INCOME TAXES ................ 81,986 495,443 577,429 (154,295)C 423,134
------------
MINORITY INTEREST IN PREFERRED
STCOK DIVIDENDS OF SUBSIDIARIES ........... 0 124,405 124,405 124,405
NET INCOME ................................ $ 46,410 $ 461,708 $ 508,118 $ 510,296
============ ============ ============ ============
EARNINGS PER SHARE: ....................... $ 0.11 $ 0.11
============ ============
AVERAGE NUMBER OF SHARES
OUTSTANDING ............................... 8,359,758 8,359,758
------------ ------------
</TABLE>
<PAGE>
PIONEER RAILCORP - KNRECO, INC.
NOTES TO THE MARCH 31, 1996 UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
A. Adjustment to depreciation expense to reflect depreciation of the recorded
KNRECO assets at fair values with new useful lives. The Registrant and
KNRECO both use the straight-line depreciation method for book
depreciation.
The following table sets forth the calculation of pro forma depreciation of
the acquired assets using the Registrant's (PRC) estimated useful lives.
KNRECO asset lives are presented as a matter of reference:
Fair Value
KNRECO PRC Of Fixed Quarter
Life Life Assets Depreciation
Years Years Acquired Expense
------ ----- ----------- ------------
Railroad Facilities ........ 20 30 $3,384,134 $ 22,900
Transportation Equip ....... 10-15 14 $ 320,000 $ 4,700
Buildings .................. 20-40 40 $ 185,000 $ 950
Machinery & Equip .......... 5-10 10 $ 156,150 $ 4,200
Railcars ................... 10-15 14 $ 443,900 $ 1,700
---------- ----------
Totals ......... $4,489,184 $ 34,450
KNRECO depreciation expense 1/01/96 - 3/12/96 $ 76,940
Less Calculated KNRECO depreciation expense
using fair value of assets acquired $ 34,450
Equals Pro Forma Depreciation Adjustment $ 42,490
B. Adjustment to interest expense to reflect the interest on debt incurred to
finance the acquisition of the KNRECO stock purchase by Pioneer Railcorp.
The Interest expense reflects accrued interest from the period 1/1/96 -
3/12/96. Pioneer Railcorp's pro forma includes interest expense from
3/13/96 through 3/31/96. Interest expense is based on a 7 year amortization
of principal and interest. The Company borrowed $2.5 million from Citizens
Bank & Trust at an interest rate of prime +2.5% adjusted quarterly. The
rate used in the pro forma adjustment is 11%. The total interest expense
relating to the financing would have been approximately $68,200 for the
period 1/1/96 through 3/31/96.
C. Reflects the estimated income tax effect of pro forma presentation of the
two entities to reflect a 40% tax rate.
<PAGE>
PIONEER RAILCORP AND SUBSIDIARIES
KNRECO, Inc.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
<TABLE>
KNRECO, Inc. PIONEER RAILCORP UNAUDITED
PERIOD PERIOD UNAUDITED PRO FORMA
1/01/96 - 1/01/96 COMBINED PRO FORMA AFTER
3/12/96 3/31/96 HISTORICAL ADJUSTMENTS ADJUSTMENTS
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE ......................... $ 444,348 $ 2,450,441 $ 2,894,789 $ 2,894,789
OPERATING EXPENSES
Maintenance of Ways .................... 88,714 201,518 290,232 290,232
Maintenance of Equipment ............... 19,144 279,920 299,064 299,064
Transportation Expenses ................ 416,475 455,289 871,764 871,764
Administrative Expenses ................ 25,955 615,457 641,412 641,412
Depreciation and Amortization .......... 76,904 314,576 391,480 (42,490)A 348,990
----------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES ............... 627,192 1,866,760 2,493,952 2,451,462
----------------------------------------------------------------------------------
INCOME FROM OPERATIONS ................. (182,844) 583,681 400,837 443,327
OTHER INCOME & EXPENSE
Other (Income) Expense ................. (138,400) (59,433) (197,833) (197,833)
Interest Expense, Other ................ 2,410 287,434 289,844 53,132 B 342,976
Net (Gain) Loss On Fixed Assets ........ 0 (29,505) (29,505) (29,505)
----------------------------------------------------------------------------------
TOTAL OTHER INCOME & EXPENSE ............ (135,990) 198,496 62,506 115,638
----------------------------------------------------------------------------------
NET INCOME BEFORE INCOME TAXES ............ (46,854) 385,185 338,331 327,689
PROVISION FOR INCOME TAXES ................ (18,273) 142,400 124,127 3,672 C 127,799
MINORITY INTEREST IN PREFERRED
STCOK DIVIDENDS OF SUBSIDIARIES ........... 0 31,308 31,308 31,308
NET INCOME ................................ ($ 28,581) $ 211,477 $ 182,896 $ 168,582
=========== =========== =========== ===========
EARNINGS PER SHARE: ....................... $ 0.04 $ 0.03
=========== ===========
AVERAGE NUMBER OF SHARES
OUTSTANDING ............................... 8,385,796 8,385,796
----------- -----------
</TABLE>
<PAGE>
Exhibit # 1 - Audited consolidated balance sheet of KNRECO, Inc. and subsidiary
d/b/a Keokuk Junction Railway as of March 12, 1996 and the related consolidated
statements of income, stockholders' equity, and cash flows for the period June
1, 1995 through March 12, 1996.
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.
PIONEER RAILCORP
(Registrant)
Date: May 24, 1996 /s/ J. Michael Carr
-----------------------
J. Michael Carr,
Assistant Treasurer/CFO.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K(a)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: March 27, 1996.
PIONEER RAILCORP
(Exact name of registrant as specified in its charter)
IOWA 33-6658-C 37-116131
- ------------------------ --------------------- ---------------------
(State of Incorporation) (Commission File No.) (IRS Employer ID No.)
1318 S. JOHANSON ROAD, PEORIA, ILLINOIS 61607
- ---------------------------------------- ----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (309) 697-1400
<PAGE>
Item 2. Acquisition or disposition of assets.
On March 12, 1996, the Registrant purchased 176,675 shares of the common stock
of KNRECO, Inc., an Iowa corporation (hereinafter "KNRECO") from the
shareholders, for $16.50 per share. This represents approximately 93% of the
outstanding common stock of KNRECO. The Registrant also offered to purchase all
of the remaining common shares of KNRECO, and as of the date of this report
Pioneer Railcorp has acquired 100% of said shares.
KNRECO operates a common carrier railroad line within the City of Keokuk, Iowa,
and from Keokuk to LaHarpe, Illinois, as well as a branch from Hamilton to
Warsaw, Illinois, a total of approximately 38 miles, under the d/b/a "Keokuk
Junction Railway". KNRECO also owns 5 locomotives, 30 railcars (of various
descriptions), an office building, engine house, and several vehicles,
miscellaneous pieces of equipment, materials and supplies. In addition, KNRECO
owns all of the common stock of Keokuk Union Depot Company, an Iowa corporation,
that owns the former Keokuk Union Depot building, along with surrounding track
and real estate.
Prior to the purchase there was no material relationship between the Registrant
and KNRECO, or any of the officers, directors or shareholders of KNRECO and the
Registrant. The total consideration for the purchase of 100% of the outstanding
shares of KNRECO was $5,919,136. This was paid by $3,124,357 in cash, 342 shares
of Pioneer Railcorp Class A common stock valued at $1,240 and the assumption of
liabilities totaling $2,793,539. Of the total liabilities assumed, approximately
$1.5 million were current liabilities, $575,000 was long term debt as described
above, and approximately $775,000 relates to the deferred tax liability
resulting from the preliminary purchase price allocation.
The purchase was financed largely through a $2.5 million acquisition line of
credit Pioneer Railcorp has with Citizens Bank & Trust Company of Chillicothe,
Missouri. The line of credit is collateralized by the Common Stock of the
Alabama Railroad Co. and the Mississippi Central Railroad Co., as well as the
Company's investment in stock of any subsidiaries acquired under the line. The
interest rate for the line is currently 11%. The interest rate is adjustable
quarterly to 2.5% over New York Prime, limited, however, to a one percent annual
increase or decrease, not to exceed 13.5% or be reduced below 10%. Any amounts
drawn on the line must be repaid monthly over a seven year period. The current
monthly debt service resulting from the $2.5 million borrowed is $43,000, with
monthly payments beginning on April 8, 1996. The remainder of the purchase price
was financed through internal cash flow.
The Registrant filed a Notice of Exemption with the Surface Transportation Board
(the successor to the Interstate Commerce Commission) for the Registrant's
continuance in control of KNRECO and the Registrant's other eight shortline
railroad subsidiaries.
KNRECO has two (2) long-term debt arrangements which are collateralized by
mortgages and/or security interests, one of which is guaranteed by John J.
Warfield, former President of KNRECO. Pioneer Railcorp ("PRC"), as part of the
stock purchase, agreed to indemnify Warfield if KNRECO defaults on this debt and
Mr. Warfield is called upon to pay the debt.
The principal amounts and terms of these debts are as follows:
Note to For Principal Rate/Term
- ------------ ------------- --------- ------------------------------
Illinois DOT Track Rehab $331,380 2% fixed rate, annual payments
of $40,580, final payment due
November 30, 2004
SBA Disaster Loan $247,805 4% fixed rate, monthly payments
of $3,062, final payment due
January 24, 2004
<PAGE>
Item 7 (A). Financial Statements of Business Acquired
Attached herein as exhibit #1 is the audited consolidated balance sheet of
KNRECO, Inc. and subsidiary d/b/a Keokuk Junction Railway as of March 12, 1996
and the related consolidated statements of income, stockholders' equity, and
cash flows for the period June 1, 1995 through March 12, 1996.
Item 7 (B). Pro Forma Financial Information
PIONEER RAILCORP - KNRECO, Inc.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Description of Acquisition
On March 12, 1996, the Registrant purchased 176,675 shares of the common stock
of KNRECO, Inc., an Iowa corporation (hereinafter "KNRECO") from the
shareholders, for $16.50 per share. This represents approximately 93% of the
outstanding common stock of KNRECO. The Registrant also offered to purchase all
of the remaining common shares of KNRECO, and as of the date of this report
Pioneer Railcorp has acquired 100% of said shares.
KNRECO operates a common carrier railroad line within the City of Keokuk, Iowa,
and from Keokuk to LaHarpe, Illinois, as well as a branch from Hamilton to
Warsaw, Illinois, a total of approximately 38 miles, under the d/b/a "Keokuk
Junction Railway." KNRECO also owns 5 locomotives, 30 railcars (of various
descriptions), an office building, engine house, and several vehicles,
miscellaneous pieces of equipment, materials and supplies. In addition, KNRECO
owns all of the common stock of Keokuk Union Depot Company, an Iowa corporation,
that owns the former Keokuk Union Depot building, along with surrounding track
and real estate.
Nature and Amount of Consideration Given
The total consideration for the purchase of 100% of the outstanding shares of
KNRECO was $5,919,136. This was paid by $3,124,357 in cash, 342 shares of
Pioneer Railcorp Class A common stock valued at $1,240 and the assumption of
liabilities totaling $2,793,539. Of the total liabilities assumed, approximately
$1.5 million were current liabilities, $575,000 was long term debt as described
above, and approximately $775,000 relates to the deferred tax liability
resulting from the preliminary purchase price allocation.
PRO FORMA UNAUDITED FINANCIAL STATEMENTS
The Registrant's most recent balance sheet filed with the Company's first
quarter 1996 Form 10-QSB includes the preliminary allocation of the purchase
price and is incorporated by reference herein. The preliminary asset values are
subject to appraisal, and it is possible that the purchase price may exceed the
fair value of the assets purchased, resulting in goodwill. If an allocation of
the purchase price to goodwill is required as a result of appraisals, a
deduction to track assets would most likely be required. This entry would have
an immaterial effect on the financial statements.
The following pro forma unaudited statement of income for the year ended
December 31, 1995, consolidates the historical results of the Registrant and
KNRECO, Inc. for the year ended December 31, 1995. This statement reflects the
purchase as if it had occurred on January 1, 1995. The fiscal year of KNRECO,
Inc. used in the pro forma statement is for the period June 1, 1995 through
March 12, 1996. To include the results of operations for a full twelve month
period would not materially change the pro forma information presented.
The following pro forma unaudited statement of income for the quarter ended
March 31, 1996, consolidates the historical results of the Registrant and
KNRECO, Inc. for the quarter ended March 31, 1996. This statement reflects the
purchase as if it had occurred on January 1, 1996. Pioneer Railcorp's pro forma
includes the actual operating results of KNRECO, Inc. for the period March 13,
1996 through March 31, 1996.
The pro forma statements do not purport to be indicative of the actual results
of operations which would have occurred had the operations of the companies been
consolidated during the period, or of future results of operations which may be
obtained by the consolidated companies.
<PAGE>
PIONEER RAILCORP - KNRECO, INC.
NOTES TO THE DECEMBER 31, 1995 UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
A. Adjustment to depreciation expense to reflect depreciation of the recorded
KNRECO assets at fair values with new useful lives. The Registrant and
KNRECO both use the straight-line depreciation method for book
depreciation.
The following table sets forth the calculation of pro forma depreciation of
the acquired assets using the Registrant's (PRC) estimated useful lives.
KNRECO asset lives are presented as a matter of reference:
Fair Value
KNRECO PRC Of Fixed Annual
Life Life Assets Depreciation
Years Years Acquired Expense
------ ----- ---------- ------------
Railroad Facilities 20 30 $3,384,134 $105,500
Transportation Equip. 10-15 14 $ 320,000 $ 22,000
Buildings 20-40 40 $ 185,000 $ 4,430
Machinery & Equip. 5-10 10 $ 156,150 $ 19,500
Railcars 10-15 14 $ 443,900 $ 8,100
---------- --------
Totals $4,489,184 $159,530
KNRECO depreciation expense 6/1/95 - 3/12/96 $270,004
Less Calculated KNRECO depreciation expense
using fair value of assets acquired $159,530
Equals Pro Forma Depreciation Adjustment $110,474
B. Adjustment to interest expense to reflect the interest on debt incurred to
finance the acquisition of the KNRECO stock purchase by Pioneer Railcorp.
The Interest expense reflects 12 months of interest expense based on a 7
year amortization of principal and interest. The Company borrowed $2.5
million from Citizens Bank & Trust at an interest rate of prime +2.5%
adjusted quarterly. The rate used in the pro forma adjustment is 11%.
C. Reflects the estimated income tax effect of pro forma presentation of the
two entities to reflect a 40% tax rate.
<PAGE>
PIONEER RAILCORP AND SUBSIDIARIES
KNRECO, Inc.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
<TABLE>
KNRECO, Inc. PIONEER RAILCORP UNAUDITED
PERIOD FISCAL YEAR UNAUDITED PRO FORMA
6/01/95 - 1/01/95 - COMBINED PRO FORMA AFTER
3/12/96 12/31/95 HISTORICAL ADJUSTMENTS ADJUSTMENTS
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE ......................... $ 2,458,342 $ 8,577,421 $ 11,035,763 $ 11,035,763
OPERATING EXPENSES
Maintenance of Ways .................... 266,624 877,654 1,144,278 1,144,278
Maintenance of Equipment ............... 73,664 1,030,975 1,104,639 1,104,639
Transportation Expenses ................ 1,434,547 1,822,982 3,257,529 3,257,529
Administrative Expenses ................ 398,605 2,240,581 2,639,186 2,639,186
Depreciation and Amortization .......... 270,004 914,458 1,184,462 (110,474)A 1,073,988
----------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES ............... 2,443,444 6,886,650 9,330,094 9,219,620
-----------------------------------------------------------------------------------
INCOME FROM OPERATIONS ................. 14,898 1,690,771 1,705,669 1,816,143
OTHER INCOME & EXPENSE
Other (Income) Expense ................. (127,391) (132,294) (259,685) (259,685)
Interest Expense, Other ................ 13,893 785,371 799,264 262,591 B 1,061,855
Net (Gain) Loss On Fixed Assets ........ 0 (43,862) (43,862) (43,862)
-----------------------------------------------------------------------------------
TOTAL OTHER INCOME & EXPENSE ............ (113,498) 609,215 495,717 758,308
-----------------------------------------------------------------------------------
NET INCOME BEFORE INCOME TAXES ............ 128,396 1,081,556 1,209,952 1,057,835
------------
PROVISION FOR INCOME TAXES ................ 81,986 495,443 577,429 (154,295)C 423,134
------------
MINORITY INTEREST IN PREFERRED
STCOK DIVIDENDS OF SUBSIDIARIES ........... 0 124,405 124,405 124,405
NET INCOME ................................ $ 46,410 $ 461,708 $ 508,118 $ 510,296
============ ============ ============ ============
EARNINGS PER SHARE: ....................... $ 0.11 $ 0.11
============ ============
AVERAGE NUMBER OF SHARES
OUTSTANDING ............................... 8,359,758 8,359,758
------------ ------------
</TABLE>
<PAGE>
PIONEER RAILCORP - KNRECO, INC.
NOTES TO THE MARCH 31, 1996 UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
A. Adjustment to depreciation expense to reflect depreciation of the recorded
KNRECO assets at fair values with new useful lives. The Registrant and
KNRECO both use the straight-line depreciation method for book
depreciation.
The following table sets forth the calculation of pro forma depreciation of
the acquired assets using the Registrant's (PRC) estimated useful lives.
KNRECO asset lives are presented as a matter of reference:
Fair Value
KNRECO PRC Of Fixed Quarter
Life Life Assets Depreciation
Years Years Acquired Expense
------ ----- ----------- ------------
Railroad Facilities ........ 20 30 $3,384,134 $ 22,900
Transportation Equip ....... 10-15 14 $ 320,000 $ 4,700
Buildings .................. 20-40 40 $ 185,000 $ 950
Machinery & Equip .......... 5-10 10 $ 156,150 $ 4,200
Railcars ................... 10-15 14 $ 443,900 $ 1,700
---------- ----------
Totals ......... $4,489,184 $ 34,450
KNRECO depreciation expense 1/01/96 - 3/12/96 $ 76,940
Less Calculated KNRECO depreciation expense
using fair value of assets acquired $ 34,450
Equals Pro Forma Depreciation Adjustment $ 42,490
B. Adjustment to interest expense to reflect the interest on debt incurred to
finance the acquisition of the KNRECO stock purchase by Pioneer Railcorp.
The Interest expense reflects accrued interest from the period 1/1/96 -
3/12/96. Pioneer Railcorp's pro forma includes interest expense from
3/13/96 through 3/31/96. Interest expense is based on a 7 year amortization
of principal and interest. The Company borrowed $2.5 million from Citizens
Bank & Trust at an interest rate of prime +2.5% adjusted quarterly. The
rate used in the pro forma adjustment is 11%. The total interest expense
relating to the financing would have been approximately $68,200 for the
period 1/1/96 through 3/31/96.
C. Reflects the estimated income tax effect of pro forma presentation of the
two entities to reflect a 40% tax rate.
<PAGE>
PIONEER RAILCORP AND SUBSIDIARIES
KNRECO, Inc.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
<TABLE>
KNRECO, Inc. PIONEER RAILCORP UNAUDITED
PERIOD PERIOD UNAUDITED PRO FORMA
1/01/96 - 1/01/96 COMBINED PRO FORMA AFTER
3/12/96 3/31/96 HISTORICAL ADJUSTMENTS ADJUSTMENTS
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE ......................... $ 444,348 $ 2,450,441 $ 2,894,789 $ 2,894,789
OPERATING EXPENSES
Maintenance of Ways .................... 88,714 201,518 290,232 290,232
Maintenance of Equipment ............... 19,144 279,920 299,064 299,064
Transportation Expenses ................ 416,475 455,289 871,764 871,764
Administrative Expenses ................ 25,955 615,457 641,412 641,412
Depreciation and Amortization .......... 76,904 314,576 391,480 (42,490)A 348,990
----------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES ............... 627,192 1,866,760 2,493,952 2,451,462
----------------------------------------------------------------------------------
INCOME FROM OPERATIONS ................. (182,844) 583,681 400,837 443,327
OTHER INCOME & EXPENSE
Other (Income) Expense ................. (138,400) (59,433) (197,833) (197,833)
Interest Expense, Other ................ 2,410 287,434 289,844 53,132 B 342,976
Net (Gain) Loss On Fixed Assets ........ 0 (29,505) (29,505) (29,505)
----------------------------------------------------------------------------------
TOTAL OTHER INCOME & EXPENSE ............ (135,990) 198,496 62,506 115,638
----------------------------------------------------------------------------------
NET INCOME BEFORE INCOME TAXES ............ (46,854) 385,185 338,331 327,689
PROVISION FOR INCOME TAXES ................ (18,273) 142,400 124,127 3,672 C 127,799
MINORITY INTEREST IN PREFERRED
STCOK DIVIDENDS OF SUBSIDIARIES ........... 0 31,308 31,308 31,308
NET INCOME ................................ ($ 28,581) $ 211,477 $ 182,896 $ 168,582
=========== =========== =========== ===========
EARNINGS PER SHARE: ....................... $ 0.04 $ 0.03
=========== ===========
AVERAGE NUMBER OF SHARES
OUTSTANDING ............................... 8,385,796 8,385,796
----------- -----------
</TABLE>
<PAGE>
Exhibit # 1 - Audited consolidated balance sheet of KNRECO, Inc. and subsidiary
d/b/a Keokuk Junction Railway as of March 12, 1996 and the related consolidated
statements of income, stockholders' equity, and cash flows for the period June
1, 1995 through March 12, 1996.
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.
PIONEER RAILCORP
(Registrant)
Date: May 24, 1996 /s/ J. Michael Carr
-----------------------
J. Michael Carr,
Assistant Treasurer/CFO.
