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 (Date of Earliest Event Reported): August 15, 1997
TRANSIT GROUP, INC.
(Exact name of Registrant as specified in its charter)
Florida 33-30123-A 59-2576629
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
3350 Cumberland Circle, Suite 1900
Atlanta, Georgia 30339
(Address of principal executive offices, including zip code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 15, 1997, Transit Group, Inc. ("Transit Group"),
formerly known as "General Parcel Service, Inc."consummated the
acquisition of Service Express, Inc., an Alabama corporation ("Service
Express"). Pursuant to the Agreement and Plan of Reorganization
executed at closing, a wholly-owned Alabama subsidiary of Transit
Group was merged with and into Service Express in a reverse triangular
merger, with Service Express remaining as the surviving corporation of
the merger. Upon consummation of the merger, all of the outstanding
common stock of Service Express was converted into 903,226 shares of
Transit Group common stock.
In addition, on August 15, 1997, Transit Group consummated the
acquisition of Capitol Warehouse, Inc., a Kentucky corporation
("Capitol Warehouse"). Pursuant to the Agreement and Plan of
Reorganization executed at closing, a wholly-owned Kentucky subsidiary
of Transit Group was merged with and into Capitol Warehouse in a
reverse triangular merger, with Capitol Warehouse remaining as the
surviving corporation of the merger. Upon consummation of the merger,
all of the outstanding common stock of Capitol Warehouse was converted
into 641,283 shares of Transit Group common stock.
Service Express and Capitol Warehouse are truckload carriers
based in Tuscaloosa, Alabama and Louisville, Kentucky, respectively.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
At the time Form 8-K was filed to report the acquisitions of
Service Express and Capitol Warehouse, it was impractical to provide
the required financial statements for Service Express and Capitol
Warehouse relative to their respective acquisitions as required by
Article 11 of Regulation S-X and this Item 7 of Form 8-K. Transit
Group is filing such financial information under cover of this Form
8-K/A as the following exhibits:
Exhibit 7.1 - Financial Statements for Service Express
Exhibit 7.2 - Financial Statements for Capitol Warehouse
(b) Pro Forma Financial Information
At the time Form 8-K was filed to report the acquisitions of
Service Express and Capitol Warehouse, it was impractical to provide
the pro forma financial information relative to the Service Express
and Capitol Warehouse acquisitions as required by Article 11 of
Regulation S-X and this Item 7 of Form 8-K. Transit Group is filing
such pro forma financial information under cover of this Form 8-K/A
as the following exhibit:
Exhibit 7.3 - Pro Forma Financial Information
<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 hereunto duly authorized.
TRANSIT GROUP, INC.
Date: November 4, 1997
By: Wayne N. Nellums
Vice President,
Chief Financial Officer and
Secretary
<PAGE>
Exhibit 7.1 - Financial Statements of Service Express, Inc.
SERVICE EXPRESS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1996
Report Of Independent Accountants
July 8, 1997, except as to Note 9 which
is as of August 15, 1997
To the Board of Directors and Shareholders of
Service Express, Inc.
In our opinion, the accompanying balance sheet and the related
statement of income and retained earnings and of cash flows presents
fairly, in all material respects, the financial position of Service
Express, Inc. at December 31, 1996 and the results of its operations
and its cash flows for the year then ended in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
<PAGE>
SERVICE EXPRESS, INC.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
Current assets
Cash $ 186,295
Accounts receivable (net of allowance
for doubtful accounts of $30,064) 365,325
Prepaid expenses 68,742
----------
Total current assets 620,362
Property and equipment, net 1,346,523
----------
Total assets $1,966,885
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable and accrued expenses $ 51,216
Current maturity of long-term debt 438,091
----------
Total current liabilities 489,307
Long term liabilities
Deferred tax liability 179,780
Long term debt 708,463
----------
Total liabilities 1,377,550
Stockholder's equity
Common stock, 75 shares $100 par issued and outstanding $ 7,500
Paid-in capital 7,500
Retained earnings 574,335
----------
Total stockholder's equity 589,335
----------
Total liabilities and stockholder's equity $1,966,885
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SERVICE EXPRESS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
Revenues
Freight revenue $4,380,099
Other operating revenue 47,894
----------
Total revenues 4,427,993
Carrier operating expenses
Salaries and benefits 1,262,679
Repairs and drivers expense 456,681
Operating taxes and licenses 498,699
Insurance 474,237
Facilities expense 11,699
Depreciation 619,737
Equipment rent 447,997
Fuel 471,322
Selling and administrative expense 225,459
----------
Total operating expenses 4,468,510
----------
Operating (loss) (40,517)
Interest expense 114,180
Other income (32,990)
----------
(Loss) before income taxes (121,707)
Benefit for income taxes 19,094
----------
Net (loss) (102,613)
Retained earnings, beginning of year 676,948
----------
Retained earnings, end of year $ 574,335
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SERVICE EXPRESS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
Cash flows from operating activities
Net loss $ (102,613)
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation 619,737
(Gain) on sale of equipment (24,325)
Increase in allowance for bad debt 30,064
Decrease in trade receivables 38,757
Decrease in prepaid expenses 3,012
Increase in accounts payable and accrued expenses 4,491
Increase in deferred income taxes 24,352
----------
Net cash provided by operating activities 593,475
----------
Cash flows from investing activities
Purchase of equipment (356,408)
Proceeds from sale of equipment 42,515
----------
Net cash used in investing activities (313,893)
----------
Cash flows from financing activities
Net repayment of notes payable (399,970)
----------
Net cash used in financing activities (399,970)
----------
Net decrease in cash (120,388)
Cash, beginning of year 306,683
----------
Cash, end of year $ 186,295
==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 114,180
Income taxes -
The accompanying notes are an integral part of these financial statements.
<PAGE>
SERVICE EXPRESS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of operations
Service Express, Inc. (the "Company") is engaged in the freight
transportation business, serving customers primarily located in
the southern United States.
Revenues and receivables
Revenues are recognized upon delivery of freight.
Accounts receivable is primarily concentrated with various commercial
customers. The Company performs on-going credit evaluations of its
customers and believes that accounts receivable is well diversified,
thereby reducing potential credit risk.
Property and equipment
Property and equipment are stated at cost and are depreciated over
estimated useful lives ranging from 3 to 7 years using the straight
-line method. Expenditures for maintenance and repairs are charged
against income as incurred. The asset cost and related accumulated
depreciation of assets sold, or otherwise disposed of, are removed
from the related accounts and any gain or loss is included in
operations.
Income taxes
The company accounts for income taxes in accordance with Statement of
Financial Standards No. 109 "Accounting for Income Taxes: (SFAS 109).
Deferred income taxes are provided for the differences in the treatment
of income and expense items for financial reporting and income tax
purposes. A valuation allowance is provided for deferred income taxes
for which the future utilization is not assured.
Use of estimates
The preparation of the 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.
<PAGE>
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31,
1996
Trucks, tractors, and autos $3,683,314
Shop equipment 40,271
Office furniture and fixtures 14,920
Other 17,958
----------
3,756,463
Less: Accumulated depreciation 2,409,940
----------
Net property and equipment $1,346,523
==========
3. LONG-TERM DEBT
Long-term debt at December 31, 1996 consists of the following:
Bank term loan, secured by tractors and trailers,
payable in monthly installments of principal and
interest of $43,020, with principal and interest due
February 5, 2000, bearing interest at 8.25% $1,146,554
Aggregate principal payments on borrowing for each of
the next five years are estimated as follows:
1997 $ 438,091
1998 355,204
1999 318,392
2000 34,867
----------
Total debt $1,146,554
==========
<PAGE>
4. INCOME TAXES
For federal income tax purposes, the Company files a consolidated
federal income tax return with its parent company, Industrial Warehouse
Services, Inc.
The components of the provision (benefit) for income
taxes is summarized as follows:
December 31,
1996
Current:
Federal $ (36,930)
State (6,516)
-----------
(43,446)
-----------
Deferred:
Federal 20,700
State 3,652
-----------
24,352
-----------
Total $ (19,094)
===========
The benefit for income taxes differs from the federal statutory
income tax rate as follows:
December 31,
1996
Benefit at federal statutory rate $ (41,380)
Non-deductible expenses 23,834
Other (1,548)
-----------
Net provision for income taxes $ (19,094)
===========
A net deferred income tax liability results from temporary differences
in recognition of certain items for tax and financial statement purposes.
The primary sources of these differences and the (asset) liability
at December 31, 1996 consists of the following:
December 31,
1996
Depreciation methods $ 179,450
Allowance for doubtful accounts (11,125)
Other 11,455
-----------
Totals $ 179,780
===========
<PAGE>
5. EMPLOYEE BENEFIT PLANS
The Company sponsors a 401(k) plan for all eligible employees. The
Company matches 50% of the employee's contribution, limited to 4% of
their gross salary. The employee vests in the Company's contributions
based on years of service.
6. RELATED PARTY TRANSACTIONS
The Company leases its terminal on a month-to month basis from a
stockholder. Lease payments of $30,000 were paid for the year ended
December 31, 1996.
The company paid $28,000 to Independent Warehouse Services (IWS),
owned by one of the Company's stockholders, for administrative fees
for the year ended December 31, 1996.
In the course of business, the Company has transactions with IWS and
one of its subsidiaries, Tuscaloosa Warehouse (TW). At December 31, 1996,
the Company has accounts receivable for freight services of $2,051 and
$4,799 from IWS and TW, respectively,
7. COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities and equipment under operating
leases which expire at various dates through 2002. The minimum rental
obligations under these leases are as follows:
1997 $ 12,500
1998 30,000
1999 30,000
2000 17,500
----------
$ 90,000
==========
Rent expense totaled $30,000 in 1996.
The Company has certain contingent liabilities resulting from litigation
and claims incident to the ordinary course of business. Management
believes that the probable resolution of such contingencies will not
materially affect the financial position or results of operations of
the Company.
<PAGE>
8. PRINCIPAL CUSTOMERS
Twelve customers account for approximately 80% percent of the Company's
revenues for the year ended December 31, 1996.
9. SUBSEQUENT EVENTS
On August 15, 1997 all outstanding stock of the Company was acquired
by Transit Group, Inc. for a purchase price of approximately $3.5 million
consisting of the issuance of 903,226 shares of Transit Group, Inc. stock
for all issued and outstanding common stock of the Company.
<PAGE>
Exhibit 7.2 - Financial Statements of Capital Warehouse, Inc.
CAPITAL WAREHOUSE, INC.
FINANCIAL STATEMENTS
FEBRUARY 29, 1997 AND FEBRUARY 28, 1996
Report of Independent Accountants
August 22, 1997
To the Board of Directors and Stockholder of
Capitol Warehouse, Inc.
In our opinion, the accompanying balance sheets and the
related statements of income and retained earnings and of
cash flows present fairly, in all material respects, the
financial position of Capitol Warehouse, Inc. at
February 29, 1997 and February 28, 1996, and the results
of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting
principles. These financial statements are the
responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits
of these statements in accordance with generally accepted
auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating
the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion
expressed above.
/S/ PRICE WATERHOUSE LLP
<PAGE>
<TABLE>
<CAPTION>
CAPITAL WAREHOUSE, INC.
Balance Sheets
February 29, February 28,
1997 1996
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 26,989 $ 92,188
Accounts receivable, trade (net of
allowance of $65,275 and $0 respectively) 1,559,488 1,309,357
Other current assets 94,525 86,547
------------ ------------
Total current assets 1,681,002 1,488,092
Long term assets
Equipment, at net book value 13,732,911 11,136,476
Other assets 68,612 174,564
------------ ------------
Total assets $ 15,482,525 $ 12,799,132
============ ============
Liabilities and Stockholder's Equity
Current Liabilities
Current obligations under lease $ 3,553,927 $ 2,702,182
Accounts payable 757,369 533,548
Accrued expenses 348,778 589,566
------------ ------------
Total current liabilities 4,660,074 3,825,296
Long term liabilities
Deferred Taxes 433,810 419,065
Long term obligations under capital
lease 8,733,492 6,883,055
Other long term liabilities 59,775 79,374
------------ ------------
Total liabilities 13,887,151 11,206,790
Stockholder's equity
Common stock , no par value; 2000
shares authorized, 301 shares issued 105,198 105,198
Retained earnings 1,574,241 1,571,209
------------ ------------
1,679,439 1,676,407
Less: Treasury stock, at cost -
200 shares 84,065 84,065
------------ ------------
Total stockholders' equity 1,595,374 1,592,342
------------ ------------
Total liabilities and stockholder's
equity $ 15,482,525 $ 12,799,132
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
CAPITAL WAREHOUSE, INC.
Statements of Income
February 29, February 28,
1997 1996
<S> <C> <C>
Revenue $ 16,919,893 $ 13,514,852
Operating expenses
Operations salaries and benefits 4,660,551 3,985,729
Fuel 3,081,206 2,086,867
Equipment rental 841,956 523,517
Insurance 1,032,059 789,938
Tires and maintenance 1,087,128 473,601
Depreciation 2,511,525 2,272,716
Terminal expense 11,501 31,410
Purchased transportation 976,630 737,283
Other operating costs 1,685,852 685,469
Selling and administrative expenses 432,814 967,023
------------ ------------
Total costs and expenses 16,321,222 12,553,553
Income from operations 598,671 961,299
Other income (expense)
Other income, net 485,716 178,077
Interest income 994 3,431
Interest expense (1,067,604) (882,762)
----------- ------------
Income before income taxes 17,777 260,045
Provision for income taxes 14,745 105,388
----------- ------------
Net income $ 3,032 $ 154,657
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
CAPITAL WAREHOUSE, INC.
Statements of Retained Earnings
February 29, February 28,
1997 1996
<S> <C> <C>
Balance at beginning of year $ 1,571,209 $ 1,416,552
Net Income 3,032 154,657
------------ ------------
Balance at end of year $ 1,574,241 $ 1,571,209
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
CAPITAL WAREHOUSE, INC.
Statements of Statements of Cash Flows
February 29, February 28,
1997 1996
<S> <C> <C>
Cash flows from operating activities
Net income $ 3,032 $ 154,657
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 2,511,525 2,272,716
Deferred income taxes 14,745 59,485
Changes in operating assets and liabilities
Accounts receivable (250,131) (432,730)
Other current assets (7,978) (10,413)
Other assets 105,952 (51,498)
Accounts payable 223,821 (35,368)
Accrued expenses (240,788) 445,882
Other liabilities (19,598) (20,536)
------------ ------------
Net cash provided by operating
activities 2,340,580 2,382,195
------------ ------------
Cash flows from investing activities
Purchases of equipment (2,481,041) (4,130,916)
------------ ------------
Cash flows from financing activities
Net financing of capital lease obligations 75,262 1,696,790
------------ ------------
Decrease in cash and cash equivalents (65,199) (51,931)
Cash and cash equivalents, beginning of year 92,188 144,119
------------ ------------
Cash and cash equivalents, end of year $ 26,989 $ 92,188
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 860,721 $ 765,433
Income taxes - -
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CAPITAL WAREHOUSE, INC.
Notes to Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
Nature of operations
The Company is engaged in the transportation and warehousing business,
serving customers located primarily in the eastern half of the United
States. The ability of the Company's customers to honor their
obligations is greatly dependent upon the manufacturing economy.
Revenues and receivables
Revenues are recognized upon delivery of freight or upon services
rendered. Accounts receivable is primarily concentrated with various
commercial customers. The company performs on-going credit
evaluations of its customers and believes that accounts receivable
is well diversified, thereby reducing potential credit risk.
Basis of presentation
Certain prior year accounts have been reclassified to conform
with current year classifications.
Use of estimates
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.
Fair value of financial instruments
The carrying amounts of financial instruments including cash,
accounts receivable, accounts payable and accrued expenses approximate
fair value at February 29, 1997 due to the relatively short period
to maturity of these instruments. Long-term purchase obligations
with fixed interest rates are recorded at face value (see Note 4):
however, the obligations' fair values at February 29, 1997 are not
practicable to estimate.
Property and equipment
The Company uses the straight-line and accelerated methods of computing
depreciation at rates adequate to amortize the cost of the applicable
assets over their estimated useful lives.
Items capitalized as part of property and equipment are valued at cost.
Maintenance and repairs are expensed as incurred. The asset cost and
related accumulated depreciation of assets sold, or otherwise disposed
of, are removed from the related accounts and any gain or loss is
included in operations.
Income taxes
Deferred income tax assets and liabilities are computed for differences
between the financial reporting basis and income tax basis of assets and
liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income.
The provision for income taxes is the tax payable or refundable for
the period plus or minus the change during the period in deferred tax
assets and liabilities.
2. Prepaid Lease
The Company has $48,552 in prepaid lease expense representing the
remaining basis of transportation equipment traded from transportation
equipment lease under an operating lease. The prepaid expense is
being amortized over the remaining life of the lease. The amount to
be amortized in the next twelve months is included in prepaid expenses
on the financial statements as a current asset.
3. Retirement Plan
On March 1, 1995, The Company established a salary reduction
retirement savings plan covering substantially all employees.
Under the plan, the Company will match 10% of the first 5%
contributed by the employee. Employees are fully vested after
6 years of service. During the years ended 1997 and 1996,
related contributions charged to expense were $10,627 and $9,088,
respectively.
4. Long-Term Debt
Long-term debt at February 29, 1997 and February 28,
1996 consists of the following:
1997 1996
7.84% to 14.015% equipment purchase
obligations payable in monthly,
instalments, including interest $ 8,733,492 $ 6,883,055
Lease payments due in one year 3,553,927 2,702,182
------------ ------------
Total long-term debt $ 12,287,419 $ 9,585,237
============ ============
Future minimum lease payments on initial or remaining term capital
lease obligations at February 29, 1997 consists of the following:
Year ending
February 29,
1998 $ 4,745,662
1999 4,025,462
2000 3,670,066
2001 2,631,898
2002 1,517,819
------------
Total capital leases 16,590,907
Less: Amount representing
interest (4,303,488)
------------
$ 12,287,419
============
In addition, the Company leases various equipment on a monthly
basis under non-cancelable operating leases. Rent expense for
1997 and 1996 amounted to $521,642 and $381,509, respectively.
5. Income Taxes
The components of the provision for income taxes is summarized
as follows:
1997 1996
Current:
Federal $ $ 39,018
State 6,885
------------ ------------
45,903
------------ ------------
Deferred:
Federal 12,535 50,560
State 2,210 8,925
------------ ------------
14,745 59,485
------------ ------------
$ 14,745 $ 105,388
============ ============
The provision for income taxes differed from the federal statutory
income tax rate as follows:
1997 1996
Provision at federal statutory rate $ 6,044 $ 88,415
State and local income taxes-
net of federal tax benefit 800 11,702
Non-deductible expenses 8,197 5,879
Other (296) (608)
----------- ------------
Net provision for income taxes $ 14,745 $ 105,388
=========== ============
A net deferred income tax liability results from temporary
differences in recognition of differences for tax and financial
statement purposes. The sources of these differences and the
(asset) liability at February 29, 1997 and February 28, 1996
from each were as follows:
1997 1996
Depreciation methods $ 1,895,140 $ 1,505,468
Allowance for doubtful accounts (25,457) -
Utilization of carryovers
Net operating loss (1,312,053) (962,578)
Alternative minimum tax (103,742) (103,742)
Investment tax credit (18,320) (18,320)
Other (1,758) (1,763)
------------ ------------
Totals $ 433,810 $ 419,065
============ ============
For income tax purposes, the Company has available net operating
loss carryovers of $3,364,238 which may be used to reduce taxable
income of the Company for subsequent years. The carryovers expire
as follows:
February 28, 2002 $ 30,918
February 28, 2005 11,428
February 28, 2009 120,974
February 28, 2010 425,416
February 28, 2011 545,217
February 28, 2012 2,230,285
-----------
$ 3,364,238
===========
6. Related Party Transactions
The Company leases its warehouses and terminal on a month-to-month
basis from its sole stockholder. Rentals of $481,722 and $381,509
on these properties were paid for the years ended 1997 and 1996,
respectively.
A life insurance policy with cash surrender value of $68,600 at
February 29, 1997 is pledged as security on a mortgage loan on
property owned by the sole stockholder which is rented to the
Company. The cash surrender value has been recorded in other
assets on the accompanying balance sheet. The Company also leases
a tractor from its sole stockholder; rental of $12,000 was paid
for the years ended 1997 and 1996.
The Company leases trailers from a company which is owned by the
sole stockholder's spouse. Rent expense on these trailers was
approximately $31,400 for the years ended 1997 and 1996, respectively.
7. Workers' Compensation Claims Payable
The Company has settled workers' compensation claims related to
prior years and continues to make periodic payments. At February 29,
1997, the balance sheet reflects future minimum payments on these
settlements as follows:
Year ending
February 28,
1998 $ 24,893
1999 20,389
2000 20,389
2001 18,369
2002 628
------------
$ 84,668
============
8. Contingent Liabilities
The Company has certain contingent liabilities resulting from
litigation and claims incident to the ordinary course of business.
Management believes the ultimate result of these legal actions and
proceedings will not have a material adverse affect upon the
financial position of the Company.
9. Principal Customers
The Company serves six customers which were responsible for
approximately 63 percent of revenues for the years ended
February 29, 1997 and February 28, 1996.
10. Subsequent Event
On August 15, 1997, all outstanding stock of the Company was
acquired by Transit Group, Inc. for a purchase price of
approximately $4.3 million consisting of the issuance of 641,283
shares of Transit Group, Inc. stock for all issued and outstanding
common stock of the Company.
<PAGE>
Exhibit 7.3 - Pro Forma Financial Information
<TABLE>
<CAPTION>
(in thousands, except shares)
Unaudited Unaudited
Transit Carolina Service Capitol Pro Forma Pro Forma
Group, Inc. Pacific Express Warehouse Adjustments Combined
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets $ 284 $ 973 $ 792 $ 1,668 $ $ 3,717
Property and equipment 4 1,787 1,243 12,896 730 (b) 16,660
Goodwill 16,490 (c) 16,490
Other noncurrent assets 6,764 68 6,832
----------- -------- ------- --------- ---------- ----------
Total assets $ 7,052 $ 2,760 $ 2,035 $ 14,632 $ 17,220 $ 43,699
Current debt $ - $ 711 $ 516 $ 3,734 $ - (b) $ 4,961
Other current liabilities 12,887 407 152 1,900 15,346
Long-term debt 1,441 417 7,549 3,700 (c) 13,637
530 (b)
----------- -------- ------- --------- ----------- ----------
Total liabilities 12,887 2,559 1,085 13,183 4,230 33,944
Stockholder's equity (deficit) (5,835) 201 950 1,449 12,990 (c) 9,755
----------- -------- ------- --------- ----------- ----------
Total Liabilities &
stockholder's equity $ 7,052 $ 2,760 $ 2,035 $ 14,632 $ 17,220 $ 43,699
=========== ======== ======= ========= =========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the six months ended June 30, 1997
-----------------------------------------------------------------------
(in thousands, except shares)
Unaudited Unaudited
Transit Carolina Service Capitol Pro Forma Pro Forma
Group, Inc. Pacific Express Warehouse Adjustments Combined
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 4,722 $ 2,288 $ $9,628 $ 1,500 (b) $ 18,138
Expenses
Salaries and wages expense 1,780 674 2,667 (250) (d) 5,339
468 (b)
Operating expense 2,298 429 4,992 (738) (b) 6,981
Depreciation and amortization 255 266 1,256 353 (e) 2,471
275 (c)
66 (b)
General and administration expense 268 43 148 32 (108) 383
Interest expense 68 45 517 388 (f) 1,018
Other expense 518 596 (244) (500) 370
----------- -------- ------- ---------- ---------- ----------
Total expenses 268 4,962 2,158 9,220 (46) 16,562
Operating income (loss) (268) (240) 130 408 1,546 1,576
Provision for income taxes 45 (62) (190) 299 92
----------- -------- ------- ---------- ---------- ----------
Income (loss) before discontinued
operations (268) (195) 68 218 1,845 1,668
Discontinued operations (13,570) - - - - (13,570)
----------- --------- ------- --------- ---------- ----------
Net income (loss) $ (13,838) $ (195) $ 68 $ 218 $ 1,845 $ (11,902)
Loss per common share:
Continuing operations $ (0.13) $ 0.14
Discontinued operations (2.77) (1.43)
----------- ----------
Total $ (2.90) $ (1.29)
=========== ==========
Weighted average number of shares 4,909,528 9,519,370
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the twelve months ended December 31, 1996
-----------------------------------------------------------------------
(in thousands, except shares)
Unaudited Unaudited
Transit Carolina Service Capitol Pro Forma Pro Forma
Group, Inc. Pacific Express Warehouse Adjustments Combined
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 23,404 $ 11,691 $ 4,428 $ 16,920 $ 3,000 (b) $ 36,039
(23,404) (g)
Expenses
Salaries and wages expense 13,377 4,528 1,263 4,661 (800) (d) 13,584
3,932 (b)
(13,377) (g)
Operating expense 7,126 5,533 1,875 8,705 1,587 (b) 17,700
(7,126) (g)
Depreciation and amortization 1,857 957 620 2,512 711 (e) 5,482
550 (c)
132 (b)
(1,857) (g)
General and administration expense 5,335 37 711 443 (4,585) (g) 1,941
Interest expense 717 226 114 1,068 280 (f) 1,688
(717) (g)
Other expense 141 375 (33) (487) (141) (g) (145)
---------- -------- ------- --------- ----------- -----------
Total expenses 28,553 11,656 4,550 16,902 (21,411) 40,250
---------- -------- ------- --------- ----------- -----------
Operating income (loss) (5,149) 35 (122) 18 1,007 (4,211)
Provision for income taxes (103) 19 (15) 294 (h) 195
---------- -------- -------- -------- ----------- ------------
Income (loss) before discontinued
operations (5,149) (68) (103) 3 1,301 (4,016)
Discontinued operations - - - - - -
---------- -------- -------- -------- ----------- ------------
Net income (loss) $ (5,149) $ (68) $ (103) $ 3 $ 1,301 $ (4,016)
========== ======== ======== ======== =========== ============
Loss per common share:
Continuing operations $ (1.48) $ (0.39)
Discontinued operations
---------- ------------
Total $ (1.48) $ (0.39)
========== ============
Weighted average number of shares 3,758,671 11,202,180
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS:
(a) On August 15, 1997, Transit Group, Inc. (the
"Company") completed the acquisition of Capital Warehouse,
Inc. ("Capital") and Service Express, Inc. ("Service").
Previously, on July 11, 1997, the Company completed the
acquisition of Carolina Pacific Distributors, Inc.
("Carolina"). Pursuant to the Stock Purchase Agreements
executed at the closings (the "Agreements"), the Company
purchased all the outstanding capital stock of Capital,
Service and Carolina. The total purchase price of
approximately $18.4 million consists of $3.7 million in
cash, the issuance of 641,283 shares of common stock of
the Company to the shareholder of Capital and 903,226
shares of Company stock to the shareholder of Service and
the issuance of 1,733,000 shares of common stock of the
company to the shareholders of Carolina, and the
assumption of approximately $0.6 million of debt. The
Company's and Service's financial statements are prepared
on a calendar year-end basis while Capital used a fiscal
year ended February 29, 1997 and Carolina used a fiscal
year ended September 30, 1996. Accordingly, the
accompanying unaudited pro forma combined financial
statements combine the December 31, 1996 and June 30, 1997
financial statements of the Company and Service, and the
February 29, 1997 and August 31, 1997 financial statements
of Capital, and the September 30, 1996 and June 30, 1997
financial statements of Carolina, respectively. Such
financial information is intended to reflect the combined
financial position and results of operations as of each of
the periods presented and is not necessarily indicative of
future combined financial position or results of
operations.
(b) To reflect the purchase by the Company of certain
additional productive assets from an affiliate of Carolina
and the assumption of related borrowings.
(c) To reflect the APB 16 purchase accounting adjustments
including the financing of $3.5 million in cash paid at
closing, the issuance of 3,277,509 shares at fair market
value of the Company's common stock to the shareholders of
Capital, Service and Carolina, resulting in goodwill of
approximately $16.4 million and amortization of goodwill
recorded in connection with the acquisition over a 30-year
period.
(d) To reflect certain adjustments to salaries and
employee benefits expense resulting from the acquisition
of Carolina.
(e) To eliminate the depreciation expense associated with
certain assets not acquired in the purchases of Carolina.
(f) To reflect interest expense associated with new
borrowings acquired in connection with the acquisition at
an average annual interest rate of 8%.
(g) To eliminate the discontinued parcel delivery and
courier operations at Transit Group, Inc.
(h) To reflect the utilization of the Company's net
operating loss carryforwards to offset Capital, Service
and Carolina taxable income.
