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 27, 1998 (June 16, 1998)
TRANSIT GROUP, INC.
(Exact name of Registrant as specified in its charter)
Florida
(State or other jurisdiction of 33-30123-A 59-2576629
incorporation or organization) (Commission File No.) (IRS Employer
Identification No.)
2859 Paces Ferry Road
Suite 1740
Atlanta, Georgia 30339
(Address of principal executive offices, including zip code)
(770) 444-0240
(Registrant's telephone number, including area code)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The K. J. Transportation, Inc. and Affiliates Combined Financial Statements
and Independent Auditors' Report for the fiscal years ending December 31, 1997
and 1996 are contained in Exhibit 99.1 hereto.
(b) Pro Forma Financial Information
Such required pro forma financial information is contained in Exhibit
99.2 hereeto.
23.1 Consent of Davie Kaplan Chapman & Braverman, PC
99.1 K. J. Transportation, Inc. and Affiliates Combined Financial
Statements and Independent Auditors' Report for the fiscal years ending
December 31, 1997 and 1996.
99.2 Pro Forma Statements of Operations for the twelve months
ending December 31, 1997 and six months ending June 30, 1998.
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: August 31, 1998 /s/ Philip A. Belyew
--------------------
Philip A. Belyew
President and Chief
Executive Officer
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-48939) of Transit Group, Inc. of our report
dated March 16, 1998 relating to the combined financial statements of K.J.
Transportation, Inc. and Affiliates, which appears in the Current Report on
Form 8-K of Transit Group, Inc. dated August 31, 1998.
/s/ Davie Kaplan Chapman & Braverman, P.C.
- ------------------------------------------
Davie Kaplan Chapman & Braverman, P.C.
Rochester, New York
August 31, 1998
EXHIBIT 99.1
K. J. TRANSPORTATION, INC.
AND AFFILIATES
COMBINED FINANCIAL STATEMENTS
AND
SUPPLEMENTAL SCHEDULES
FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996
AND
INDEPENDENT AUDITORS' REPORT
*****************************
<PAGE>
K. J. TRANSPORTATION, INC. AND AFFILIATES
December 31, 1997 and 1996
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Combined balance sheets 2
Combined statements of income and retained earnings 3
Combined statements of cash flows 4
Notes to financial statements 5 - 15
SUPPLEMENTAL INFORMATION
Combined operating expenses 16
Combining balance sheets 17 - 20
Combining statements of income and retained earnings 21 - 22
Combining schedule of operating expenses 23 - 24
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders
K. J. Transportation, Inc. and Affiliates
We have audited the accompanying combined balance sheets of K. J.
Transportation, Inc. and Affiliates, as of December 31, 1997 and 1996 and the
related combined statements of income, retained earnings and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of K. J. Transportation, Inc. and
Affiliates, as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information in the accompanying
schedule of combined operating expenses, combining balance sheets, statements
of income and retained earnings and schedules of operating expenses for the
years ended December 31, 1997 and 1996, are presented for purposes of
additional analysis and are not required for a fair presentation of financial
position, results of operations and cash flows. Such information has been
subjected to the audit procedures applied in the audit of the basic financial
statements. In our opinion, the combined and combining supplementary
information is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
March 16, 1998 /s/ Davie Kaplan Chapman & Braverman, P.C.
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combined Balance Sheets, December 31, 1997 and 1996
ASSETS
1997 1996
---- ----
<S> <C> <C>
Current assets
Cash and cash equivalents (Note 2) $ 1,389,418 $ 237,948
Accounts receivable - Trade (Note 3) 7,793,253 6,454,926
Other receivables (Note 11) 179,839 52,825
Insurance refund receivable -- 253,462
Inventories (Note 2) 178,770 159,947
Prepaid assets 713,373 699,182
Prepaid income taxes (Note 2) 239,593 2,702
Deferred tax assets (Notes 2 & 13) 56.600 51,200
----------------- -----------------
10,550,846 7,912,192
----------------- -----------------
Property (Notes 2 & 4) 19,645,264 18,832,929
Less accumulated depreciation 10,794,883 8,704,537
----------------- -----------------
8,850,381 10,128,392
----------------- -----------------
Other assets
Customer lists (Notes 2 & 5) 80,770 91,974
Loans receivable - Officers (Note 11) 89,000 89,000
Cash value - Officers' life insurance 84,761 53,613
Deposits 95,555 99,056
----------------- -----------------
350,086 333,643
----------------- -----------------
$ 19,751,313 $ 18,374,227
================= =================
</TABLE>
The accompanying Notes to Combined Financial
Statements are an integral part of these
statements.
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
---- ----
<S> <C> <C>
Current liabilities (amounts due within one year)
Revolving credit line (Note 6) $ 4,973,516 $ 2,018,825
Installment notes payable (Note 7) 2,815,638 3,241,642
Capital lease obligation (Note 8) 54,506 53,024
Accounts payable 2,473,693 2,571,685
Loans payable - Officers (Note 11) 16,258 21,202
Accrued expenses
Payroll and payroll taxes 281,966 171,486
Employee benefits 76,813 93,719
Income taxes -- 269,979
Insurance 805,300 722,217
Vacation payroll 191,200 188,000
Other 372,770 379,775
----------------- -----------------
12,061,660 9,731,554
----------------- -----------------
Long-term liabilities (amounts due after one year)
Installment notes payable (Note 7) 3,699,832 5,433,519
Capital lease obligation (Note 8) 156,459 210,965
Loans payable - Officers (Note 11) 11,635 34,987
Deferred tax liability (Notes 2 & 13) 733,681 497,752
----------------- -----------------
4,601,607 6,177,223
----------------- -----------------
Commitments and contingencies (Note 9)
Stockholders' equity
Common stock (Note 10) 2,375 7,150
Additional paid in capital 604,771 618,946
Retained earnings 2,485,900 1,863,504
----------------- -----------------
3,093,046 2,489,600
----------------- -----------------
Stockholders' equity
Less: Subscription receivable -- (19,150)
Treasury stock at cost - 30 shares (5,000) (5,000)
----------------- -----------------
3,088,046 2,465,450
----------------- -----------------
$ 19,751,313 $ 18,374,227
================= =================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combined Statements of Income and Retained Earnings
For the Years Ended December 31, 1997 and 1996
% of % of
1997 Revenue 1996 Revenue
---- ------- ---- -------
<S> <C> <C> <C> <C>
Revenue
$ 69,419,935 100.0 $ 58,855,324 100.0
Operating expenses 67,254,729 96.9 56,743,769 96.4
-------------- ----- -------------- -----
Operating income 2,165,206 3.1 2,111,555 3.6
-------------- ----- -------------- -----
Other income (expense)
Interest income 32,521 -- 4,459 --
Interest expense (1,345,880) (1.9) (1,230,642) (2.1)
Gain on disposal of property 210,778 0.3 137,681 0.2
-------------- ----- -------------- -----
(1,102,581) (1.6) (1,088,502) (1.9)
-------------- ----- -------------- -----
Income before provision for income taxes 1,062,625 1.5 1,023,053 1.7
Provision for income taxes (Notes 2 & 13) 440,229 0.6 441,560 0.8
-------------- ----- -------------- -----
Net income 622,396 0.9 581,493 0.9
===== =====
Retained earnings, beginning 1,863,504 1,282.011
-------------- --------------
Retained earnings, ending $ 2,485,900 $ 1,863,504
============== ==============
</TABLE>
The accompanying Notes to Combined Financial Statements are an integral part of
these statements.
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combined Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 622,396 $ 581,493
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation 2,978,663 3,017,635
Amortization 18,204 17,618
Deferred taxes (Note 13) 230,529 203,500
(Gain) on sale of property (210,778) (137,681)
----------------- -----------------
3,639,014 3,682,565
Increase (decrease) in cash due to changes in operating assets and
liabilities
Accounts receivable (1,338,327) (559,933)
Other receivables (127,014) (14,015)
Insurance refund receivable 253,462 --
Inventories (18,823) 67,854
Prepaid assets (14,191) 77,444
Prepaid income taxes (236,891) --
Customer lists (7,000) --
Deposits 3,501 --
Accounts payable (97,992) (88,978)
Accrued expenses (97,127) 404,273
----------------- -----------------
1,958,612 3,569,210
----------------- -----------------
Cash flows from investing activities
Purchases of property (591,108) (317,098)
Proceeds from disposition of property 408,850 431,699
Increase in cash value - Officers' life insurance (31,148) (10,337)
Net change in officers' loans receivable -- (8,000)
----------------- -----------------
(213,406) 96,264
----------------- -----------------
Cash flows from financing activities
Net change in revolving credit line 2,954,691 922,873
Payments on installment notes (3,467,107) (4,741,775)
Payments on capital lease (53,024) (35,175)
Proceeds from installment notes -- 337,500
Net change in officers' loans (28,296) (40,949)
Purchase of treasury stock -- (5,000)
----------------- -----------------
(593,736) (3,562,526)
----------------- -----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Net increase in cash 1,151,470 102,948
Cash and cash equivalents, beginning 237,948 135,000
----------------- -----------------
Cash and cash equivalents, ending $ 1,389,418 $ 237,948
================= =================
Non-cash investing and financing activities
Financing obligations incurred to acquire
revenue equipment, inventory and customer lists $ 1,305,137 $ 2,988,621
Supplemental disclosures
Cash paid during the year for:
Interest $ 1,321,141 $ 1,215,444
Income taxes (net of refunds received) $ 714,870 $ 23,784
</TABLE>
The accompanying Notes to Combined Financial Statements
are an integral part of these statements.
<PAGE>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Notes to Combined Financial Statements
December 31, 1997 and 1996
1. Description of Business
K. J. Transportation, Inc., is an ICC regulated irregular route common carrier
for hire and hauls general freight in the Northeastern and Eastern coast states.
KAJE Transport, Inc., is a transportation broker whose business consists of
arranging the shipment of goods for a variety of shippers and hauling shipments
of goods for various carriers. The Company operates in the Northeastern,
Mid-Atlantic and Southeastern states. KAJE Transport, Inc. merged with K. J.
Transportation, Inc. December, 1997.
J & L Leasing of Farmington, Inc. leases tractors, trailers and drivers
primarily to related companies.
The Companies grant credit to their customers in the normal course of business.
2. Summary of Significant Accounting Policies
Principles of combination
- -------------------------
The combined financial statements include the accounts of K. J. Transportation,
Inc., and its affiliates, KAJE Transport, Inc. and J & L Leasing of Farmington,
Inc. The Companies are affiliated through common ownership. All material
inter-company transactions have been eliminated in combination.
Use of estimates
- ----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities (and the disclosure
of contingent assets and liabilities) at the date of the financial statements
and expenses during the reporting period. Actual results could differ from
those estimates.
Cash and cash equivalents
- -------------------------
Cash and cash equivalents include time deposits with maturities of one year or
less.
Inventory
- ---------
Inventory is stated at the lower of cost on a first-in, first-out basis, or
market and consists of revenue equipment parts, supplies and fuel.
<PAGE>
2. Summary of Significant Accounting Policies (Continued)
Property
- --------
Property is recorded at cost. The cost of revenue equipment does not include
the cost of tires and tubes which is included as a prepaid expense and is
amortized over a period of ten months. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are amortized using the straight-line method over the
lesser of the lease period or the estimated useful lives of the improvement.
Maintenance and repairs are charged to income as incurred; renewals and
betterments are capitalized.
Customer lists
- --------------
Customer lists are being amortized using the straight-line method over periods,
ranging from 120 to 180 months.
Profit-sharing plan
- -------------------
The Companies sponsor a 401(k) retirement plan that covers all eligible
employees meeting the required age and length of service requirements. The
Companies have agreed to match at a rate of 25% of the first 5% of employee
contributions. Any additional contributions to the plan are discretionary.
Advertising costs
- -----------------
Advertising costs are charged to operations when incurred.
Income taxes
- ------------
K. J. Transportation, Inc. and Affiliates account for income taxes under FASB
Statement 109. Under this accounting method, income taxes are provided for the
tax effects of transactions reported in the financial statements. They consist
of taxes currently due plus deferred taxes related primarily to temporary
differences in accounts receivable, accrued vacation and depreciation of
property for financial income and tax reporting. The deferred tax assets and
liabilities represent the future tax return consequences of those differences
which will either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred tax benefits are also recognized for operating
losses and Federal alternative minimum tax credits that are available to offset
future taxable income. Tax credits are accounted for on a flow-through method
recognizing the tax benefit in the year they are generated.
Reclassifications
- -----------------
Certain prior year items have been reclassified to conform with the current
year presentation.
<PAGE>
3. Accounts Receivable
<TABLE>
<CAPTION>
Accounts receivable consist of the following at December 31:
1997 1996
---- ----
<S> <C> <C>
Accounts receivable - Gross $ 7,863,253 $ 6,504,926
Allowance for doubtful accounts (70,000) (50,000)
----------------- -----------------
$ 7,793,253 $ 6,454,926
================= =================
</TABLE>
4. Property
<TABLE>
<CAPTION>
Property, together with estimated useful lives, consists of the
following at December 31:
1997 1996
---- ----
<S> <C> <C>
Revenue equipment (3 to 7 years) $ 17,373,447 $ 16,811,368
Service vehicles (5 years) 678,701 649,945
Shop equipment (5 years) 156,741 156,741
Office equipment (5 years) 414,620 302,339
Office equipment under capital lease (5 years) 310,616 310,616
Leasehold improvements (15 years) 625,315 601,920
Construction-in-progress 85,824 --
----------------- -----------------
$ 19,645,264 $ 18,832,929
================= =================
</TABLE>
<TABLE>
<CAPTION>
Accumulated depreciation consists of the following at December 31:
1997 1996
---- ----
<S> <C> <C>
Revenue equipment $ 9,692,732 $ 7,767,097
Service vehicles 442,760 430,092
Shop equipment 122,905 104,251
Office equipment 252,588 217,240
Office equipment under capital lease 86,479 28,745
Leasehold improvements 197,419 157,112
----------------- -----------------
$ 10,794,883 $ 8,704,537
================= =================
</TABLE>
<PAGE>
5. Customer Lists
<TABLE>
<CAPTION>
Customer lists consist of the following at December 31:
1997 1996
---- ----
<S> <C> <C>
Customer lists - Gross $ 203,919 $ 196,919
Accumulated amortization (123,149 (104,945)
----------------- -----------------
$ 80,770 $ 91,974
================= =================
</TABLE>
6. Revolving Credit Line
<TABLE>
<CAPTION>
1997 1996
Proceeds under the revolving credit line are limited to the lesser of ---- ----
$7,000,000 or 85% of K. J. Transportation, Inc.'s less than 90-day
receivable balances minus any undrawn letters of credit. The maximum
amount available for letters of credit is $2,000,000. The line bears
interest at the Bank's prime rate plus 1.25%, payable monthly. All
balances drawn on the line are due October, 1999. A first lien and
perfected security interest in assets of K. J. Transportation, Inc. and
its subsidiaries, the unlimited guarantees of two officers and the
unlimited corporate guarantee of the combined companies are collateral
to the line. $878,500 worth of letters of credit were issued and $- 0
- were outstanding as of December 31, 1997. The interest rate in
effect at December 31, 1997 was 9.75%
<S> <C> <C>
$ 4,973,516 $ 2,018,825
</TABLE>
The combined Company is subject to the following financial
covenants under the above revolving line of credit at December 31,
1997:
1. Cash and financed capital expenditures, including capital
leases, may not exceed $4,000,000.
2. Working capital ratio of at least 0.9 to 1, including the
revolving line of credit.
3. Tangible net worth may not be less than $3,000,000.
4. Ratio of debt to tangible net worth shall not exceed 7.5 to 1.
5. Debt service ratio may not be less than 1.1 to 1.
6. Interest coverage ratio may not be less than 4 to 1.
The Company was in violation of covenants 2 and 6 at December 31,
1997. A waiver has been obtained from the bank.
<PAGE>
7. Installment Loans Payable
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Various obligations due in monthly installments ranging from $380 to
$21,547 including interest ranging from 8% to 13%. Final payments are
due between January, 1998 and May, 2003. The loans are secured by
specific revenue equipment, service vehicles and the personal
guarantees of two of the stockholders. $ 6,424,318 $ 8,455,842
Installment loan - Bank, due in monthly installments of $8,380
including interest at prime plus 2%. Final payment is due December,
1998. The loan is secured by all business assets (except rolling
stock), the assignment of two life insurance policies covering an
officer and the unconditional guarantees of two of the stockholders 91,152 176,863
Installment loan - Bank, interest only payments at prime plus 2% on the
outstanding balance were made monthly December, 1995 through March,
1996. Principal and interest payments of $26,770 were made April
through November, 1996. The remaining balance was paid July, 1997 with
accrued and unpaid interest. The loan was secured by all business
assets (except rolling stock) and the unconditional guarantees of two
of the stockholders
-- 42,456
----------------- -----------------
6,515,470 8,675,161
Less amount due in one year 2,815,638 3,241,642
----------------- -----------------
Amount due after one year $ 3,699,832 $ 5,433,519
================= =================
</TABLE>
The prime rate in effect at December 31, 1997 was 8.5%.
A summary of payments on notes payable due within five years from December
31, 1997 is as follows:
Year Amount
---- ------
1998 $ 2,815,638
1999 2,076,453
2000 1,210,318
2001 295,157
2002 and thereafter 117,904
--------------
$ 6,515,470
==============
All of the Companies' outstanding debt has cross-guarantees among
the combined Companies.
<PAGE>
8. Capital Lease Obligation
During 1996, the Company extended its current computer lease and increased it
for additional computer scanning equipment under an agreement classified as a
capital lease.
The computer equipment requires equal monthly payments of $4,970 including
interest at 2.75%. The lease is secured by the equipment. Final payment is due
September, 2001.
The following is a schedule of future minimum lease payments under the capital
lease as of December 31, 1997:
Year Amount
---- ------
1998 $ 59,640
1999 59,640
2000 59,640
2001 44,730
--------------
Total future minimum lease payments 223,650
Less amount representing interest 12,685
--------------
Present value of future minimum lease
payments 210,965
Less current portion 54,506
--------------
Long-term portion $ 156,459
==============
9. Commitments and Contingencies
Buy-sell agreement
- ------------------
K. J. Transportation, Inc., and J & L Leasing of Farmington, Inc., have entered
into agreements to repurchase the outstanding stock of their respective
shareholders upon death. The purchase price of each share is equal to the book
value of the respective companies. The total unfunded potential liability
amounted to $1,078,705 at December 31, 1997.
Concentration of credit risk
- ----------------------------
The Company maintains cash in accounts which, at times, exceed amounts insured
by the Federal Deposit Insurance Corporation.
Lease commitments
- -----------------
The Company leases various revenue equipment over terms ranging from 48 to 84
months. Monthly payments range from $244 to $12,891 under the terms of the
leases which expire at various times between October, 1998 and January, 2005.
The Company leases automobiles and office equipment requiring monthly payments
ranging from $84 to $3,231 in accordance with the lease agreements expiring at
various times between January, 1998 and August, 2002.
<PAGE>
As of December 31, 1997, the total minimum commitment under these agreements is
as follows:
Year Amount
---- ------
1998 $ 3,714,913
1999 3,442,663
2000 2,900,187
2001 2,389,928
2002 and thereafter 2,318,385
$ 14,766,076
Total expense under these agreements amounted to $2,890,114 and $2,303,931 for
the years ended December 31, 1997 and 1996, respectively.
The Company also rents terminal, parking and office facilities in various
states on a month-to-month basis for $9,961. Total payments amounted to
$127,211 and $122,165 for the years ended December 31, 1997 and 1996,
respectively.
Sales agreement
- ---------------
K. J. Transportation, Inc. entered into a four-year agreement during 1997 to
pay commissions on sales generated from the purchase of certain revenue
equipment and customer lists. The sales agreement calls for commissions to be
paid at a rate of 1.5% of sales in excess of $2,000,000 and 3.0% of sales in
excess of $4,800,000 for a three-year period ending July, 2000. Commissions of
3.0% are to be paid on sales exceeding $4,800,000 during the fourth year ending
July, 2001.
Commissions expensed under this agreement amounted to $21,191 and $-0- for the
years ended December 31, 1997 and 1996, respectively.
10. Common Stock
Common stock of K. J. Transportation, Inc., and its affiliates consisted of
the following at December 31, 1997:
Shares
Shares Issued and
Authorized Outstanding Par Value
---------- ----------- ---------
K. J. Transportation, Inc. 300 290 No par value
J & L Leasing of Farmington, Inc. 200 170 No par value
KAJE Transport, Inc., was merged into K. J. Transportation, Inc., on December
31, 1997. Each share of common stock of K. J. Transportation, Inc., remained
outstanding after the merger. All shares of KAJE Transport, Inc., were
cancelled.
<PAGE>
11. Related Party Transactions
Other receivables
- -----------------
Other receivables represent amounts due from two related corporations and are
expected to be received in the current year.
Loans receivable - officers
- ---------------------------
Non-interest bearing loans receivable from officers amounted to $89,000 for
each of the years ended December 31, 1997 and 1996, respectively. There are no
defined payment terms.
Loans payable - Officers
- ------------------------
Loans payable to stockholders amounted to $27,893 and $56,189 for the years
ended December 31, 1997 and 1996, respectively. Monthly payments of $2,108 are
due, including interest at 8% per annum. Final payment is due August, 1998.
Operating lease
- ---------------
The Company leases its terminal facilities in Farmington, New York and Winter
Haven, Florida from a stockholder under an annual verbal lease agreement.
Monthly lease payments are $14,150. Rent expense amounted to $169,800 for each
of the years ended December 31, 1997 and 1996, respectively.
Interest expense
- ----------------
Interest paid to stockholders of the Company amounted to $4,008 and $5,989 for
the years ended December 31, 1997 and 1996, respectively.
Commissions
- -----------
During 1997, the Company paid sales commissions to an affiliated (non-combined)
company. The commission expense amounted to $127,805 for the year ended
December 31, 1997.
12. Profit-Sharing Plan Contributions
Total employer matching contributions to the 401(k) profit-sharing plan
amounted to $56,621 and $48,527 for the years ended December 31, 1997 and 1996,
respectively. There were no discretionary contributions made for the years
ended December 31,1997 or 1996.
<PAGE>
13. Income Taxes
<TABLE>
<CAPTION>
Provision for income taxes
- --------------------------
1997 1996
Current: ---- ----
<S> <C> <C>
State transportation tax $ 99,800 $ 96,800
State income tax 67,600 81,260
Federal income tax (net of alternative minimum tax credits, 1997 -
$298, 400, 1996 - $14,000) 42,300 60,000
----------------- -----------------
209,700 238,060
----------------- -----------------
1997 1996
Deferred: ---- ----
State income tax $ 8,500 $ 400
Federal income tax 222,029 203,100
----------------- -----------------
230,529 203,500
----------------- -----------------
$ 440,229 $ 441,560
================= =================
</TABLE>
The net deferred tax assets in the accompanying balance sheets include
the following components:
<TABLE>
<CAPTION>
1997 1996
Current deferred tax assets ---- ----
<S> <C> <C>
Non-current: $ 56,600 $ 51,200
----------------- -----------------
Deferred tax assets 145,619 555,748
Deferred tax liabilities (879,300) (1,053,500)
----------------- -----------------
Non-current tax liabilities $ (733,681) $ (497,752)
================= =================
</TABLE>
Carryforwards
- -------------
The Company has alternative minimum tax credit carryforwards of approximately
$101,000 available to offset future Federal taxes. These credits have no
expiration dates.
14. Advertising Expense
For the years ended December 31, 1997 and 1996, advertising expense amounted to
$67,329 and $50,289, respectively.
<PAGE>
15. Major Customer
The Company has one customer who for the year ended December 31, 1996 accounted
for 10.1% of the combined sales revenue. Amounts due from this customer
included in accounts receivable - Trade at December 31, 1996 amounted to
$500,710. There were no major customers for the year ended December 31, 1997.
16. Subsequent Event
During February, 1998, K. J. Transportation, Inc. agreed to purchase certain
assets of Jones Express, Inc. as follows:
Revenue equipment $ 3,768,000
Customer and driver lists 200,000
------------------
$ 3,968,000
==================
The transaction is being financed primarily through bank financing. The closing
is scheduled for September 1998.
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combined Operating Expenses
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
% of % of
1997 Revenue 1996 Revenue
---- ------- ---- -------
<S> <C> <C> <C> <C>
Purchased transportation $ 32,009,112 46.1 $ 25,150,376 42.6
Salaries and wages
Officers 651,359 0.9 573,119 1.0
Terminal managers 1,527,989 2.2 1,354,525 2.3
Office 914,083 1.3 645,124 1.1
Traffic 131,899 0.2 118,842 0.2
Line-haul 7,260,257 10.5 6,360,349 10.8
Local 845,384 1.2 586,112 1.0
Safety 434,163 0.6 412,632 0.7
Other - Shop 828,693 1.2 767,538 1.3
Fuel 4,927,172 7.1 4,830,682 8.2
Depreciation and amortization 2,996,867 4.3 3,035,253 5.2
Equipment rental 2,890,114 4.2 2,303,931 3.9
Fringe benefits 2,150,626 3.1 1,911,535 3.2
Insurance 1,152,398 1.7 1,342,046 2.3
Payroll taxes 979,318 1.4 882,501 1.5
Operating supplies 839,138 1.2 576,563 1.0
Tolls 813,604 1.2 762,488 1.3
Professional fees 295,080 0.4 217,034 0.4
General supplies and expense 212,646 0.3 180,986 0.3
Repairs 607,968 0.9 503,204 0.9
Tires 959,992 1.4 716,112 1.2
Parts 720,360 1.0 609,239 1.0
Operating taxes and licenses 1,028,535 1.5 919,952 1.6
Communications 503,075 0.7 475,276 0.8
Utilities 120,975 0.2 122,578 0.2
Rent 297,011 0.4 291,966 0.5
Travel 170,156 0.2 129,094 0.2
Office supplies 620,083 0.9 600,519 1.0
Profit-sharing plan 56,621 0.1 48,527 0.1
Bad debts 59,418 0.1 42,089 0.1
Miscellaneous 250,633 0.4 273,577 0.5
-------------- ----- -------------- -----
$ 7,254,729 96.9 $ 56,743,769 96.4
============== ===== ============== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combining Balance Sheets, December 31, 1997
ASSETS
K. J. J & L 1997
Transportation, Leasing, Inc. Eliminations Total
Inc.
---- ------------- ------------ -----
<S> <C> <C> <C> <C>
Current assets
Cash $ 999,439 $ 389,979 $ -- $ 1,389,418
Accounts receivable - Trade (net of
allowance -$70,000) 7,743,344 44,309 5,600 7,793,253
Other receivable 1,353,682 1,034,013 (2,207,856) 179,839
Inventories 10,847 167,923 -- 178,770
Prepaid assets 674,575 38,798 -- 713,373
Prepaid income taxes 245,677 (6,084) -- 239,593
Deferred tax assets 56,600 -- -- 56,600
-------------- ------------- -------------- --------------
11,084,164 1,668,938 (2,202,256) 10,550,846
-------------- ------------- -------------- --------------
Property
Less accumulated depreciation 15,961,748 3,683,516 -- 19,645,264
8,820,619 1,974,264 -- 10,794,883
-------------- ------------- -------------- --------------
7,141,129 1,709,252 -- 8,850,381
-------------- ------------- -------------- --------------
Other assets
Customer lists (net of accumulated
amortization - $104,945) 75,170 56,000 -- 80,770
Loans receivable - Officers 89,000 -- -- 89,000
Cash value - Officers' life insurance 84,761 -- -- 84,761
Security deposit 69,800 25,755 -- 95,555
318,731 31,355 -- 350,086
-------------- ------------- -------------- --------------
$ 18,544,024 $ 3,409,545 $ (2,202,256) $ 19,751,313
============== ============= ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combining Balance Sheets, December 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
K. J
Transportation, J & L 1997
Inc. Leasing, Inc. Eliminations Total
---- ------------- ------------ -----
<S> <C> <C> <C> <C>
Current liabilities (amounts due within
one year)
Revolving credit line $ 4,973,516 $ -- $ -- $ 4,973,516
Installment of notes payable 2,247,195 568,443 -- 2,815,638
Capital lease obligation 54,506 -- -- 54,506
Accounts payable
Trade 3,325,224 140,826 (992,357) 2,473,693
Affiliates 74,878 1,135,021 (1,209,899) --
Loans payable - Officers 16,258 -- -- 16,258
Accrued expenses
Payroll and payroll taxes 254,466 27,500 -- 281,966
Employee benefits 76,813 -- -- 76,813
Insurance 805,300 -- -- 805,300
Vacation payroll 191,200 -- -- 191,200
Other 372,007 763 -- 372,770
-------------- ------------- -------------- --------------
12,391,363 1,872,553 (2,202,256) 12,061,660
-------------- ------------- -------------- --------------
Long-term liabilities (amounts due after one
year)
Installment notes payable 2,824,331 875,501 -- 3,699,832
Capital lease obligation 156,459 -- -- 156,459
Loans payable - Officers 11,635 -- -- 11,635
Deferred tax liability 613,324 120,357 -- 733,681
-------------- ------------- -------------- --------------
3,605,749 995,858 -- 4,601,607
-------------- ------------- -------------- --------------
Commitments and contingencies
Stockholders' equity
Common stock 2,175 200 -- 2,375
Additional paid in capital 604,771 -- -- 604,771
Retained earnings 1,939,966 545,934 -- 2,485,900
-------------- ------------- -------------- --------------
2,546,912 546,134 -- 3,093,046
Less: Treasury stock at cost - 30 shares -- (5,000) -- (5,000)
-------------- ------------- -------------- --------------
2,546,912 541,134 -- 3,088,046
-------------- ------------- -------------- --------------
$ 18,544,024 $ 3,409,545 $ (2,202,256) $ 19,751,313
============== ============= ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combining Balance Sheets, December 31, 1996
ASSETS
K. J. KAJE
Transportation, Transport, J & L 1996
Inc. Inc. Leasing, Inc. Eliminations Total
---- ---- ------------- ------------ -----
<S> <C> <C> <C> <C> <C>
Current assets
Cash $ 12,838 $ 86,207 $ 138,903 $ -- $ 237,948
Accounts receivable - Trade
(net of allowance - $50,000)
4,248,708 2,227,476 1,877 (23,135) 6,454,926
Other receivables (4,628) 331,482 359,379 (633,408) 52,825
Insurance refund receivable
253,462 -- -- -- 253,462
Inventories 159,947 -- -- -- 159,947
Prepaid assets 665,994 -- 33,188 -- 699,182
Prepaid income taxes -- -- 2,702 -- 2,702
Deferred tax assets 51,200 -- -- -- 51,200
------------- ------------- ------------- ------------- -------------
5,387,521 2,645,165 536,049 (656,543) 7,912,192
------------- ------------- ------------- ------------- -------------
Property 14,755,540 494,008 3,583,381 -- 18,832,929
Less accumulated depreciation
7,124,850 148,193 1,431,494 -- 8,704,537
------------- ------------- ------------- ------------- -------------
7,630,690 345,815 2,151,887 -- 10,128,392
------------- ------------- ------------- ------------- -------------
Other assets
Customer lists (net of
accumulated amortization -
$104,945)
91,974 -- -- -- 91,974
Loans receivable - Officers
40,000 49,000 -- -- 89,000
Cash value - Officers' life
insurance
53,613 -- -- -- 53,613
Deposits 73,301 -- 25,755 -- 99,056
258,888 49,000 25,755 -- 333,643
------------- ------------- ------------- ------------- -------------
$ 13,277,099 $ 3,039,980 $ 2,713,691 $ (656,543) $ 18,374,227
============= ============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
K.J. KAJE
Transportation Transport, J & L 1997
Inc. Inc. Leasing, Inc. Eliminations Total
---- ---- ------------- ------------ -----
<S> <C> <C> <C> <C> <C>
Current liabilities (amounts
due within one year)
Revolving credit line $ 1,719,066 $ 299,759 $ -- $ -- $ 2,018,825
Installment of notes payable 2,538,755 12,706 690,181 -- 3,241,642
Capital lease obligation -- 53,024 -- -- 53,024
Accounts payable
Trade 1,871,581 947,384 77,289 (324,569) 2,571,685
Affiliates -- 77,917 254,057 (331,974) --
Loans payable - Officers 21,202 -- -- -- 21,202
Accrued expenses
Payroll and payroll taxes 163,139 8,347 -- -- 171,486
Employee benefits 91,108 2,611 -- -- 93,719
Income taxes 186,544 83,435 -- -- 269,979
Insurance 722,217 -- -- -- 722,217
Vacation payroll 173,000 15,000 -- -- 188,000
Other 379,775 -- -- -- 379,775
------------- ------------- ------------- ------------- -------------
7,866,387 1,500,183 1,021,527 (656,543) 9,731,554
------------- ------------- ------------- ------------- -------------
Long-term liabilities (amounts due
after one year)
Installment notes payable 4,094,547 1,942 1,337,030 -- 5,433,519
Capital lease obligation -- 210,965 -- -- 210,965
Loans payable - Officers 34,987 -- -- -- 34,987
Deferred tax liability 457,966 -- 39,786 -- 497,752
------------- ------------- ------------- ------------- -------------
4,587,500 212,907 1,376,816 -- 6,177,223
------------- ------------- ------------- ------------- -------------
Commitments and contingencies
Stockholders' equity
Common stock 2,200 4,750 200 -- 7,150
Additional paid in capital 618,946 -- -- -- 618,946
Retained earnings 216,266 1,326,890 320,348 -- 1,863,504
------------- ------------- ------------- ------------- -------------
837,412 1,331,640 320,548 -- 2,489,600
Less: Treasury stock at cost - 30
shares (14,200) (4,750) (200) -- (19,150)
-- -- (5,000) -- (5,000)
------------- ------------- ------------- ------------- -------------
823,212 1,326,890 315,348 -- 2,465,450
------------- ------------- ------------- ------------- -------------
$ 13,277,099 $ 3,039,980 $ 2,713,691 $ (656,543) $ 18,374,227
============= ============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combining Statements of Income and Retained Earnings
For the Year Ended December 31, 1997
K. J. J & L
Transportation, Leasing, 1997
Inc. Inc. Eliminations Total
---- ---- ------------ -----
<S> <C> <C> <C> <C>
Revenue $ 68,446,588 $ 5,381,121 $ (4,407,774) $ 69,419,935
Operating expenses 66,689,266 4,973,237 (4,407,774) 67,254,729
-------------- -------------- -------------- --------------
Operating income 1,757,322 407,884 -- 2,165,206
-------------- -------------- -------------- --------------
Other income (expense)
Interest income 30,213 2,308 -- 32,521
Interest expense (1,180,936) (164,944) -- (1,345,880)
Gain (loss) on disposal of property 140,569 70,209 -- 210,778
-------------- -------------- -------------- --------------
(1,010,154 (92,427) -- (1,102,581)
-------------- -------------- -------------- --------------
Income before provision for income taxes 747,168 315,457 -- 1,062,625
Provision for income taxes (Notes 2 & 13) 350,358 89,871 -- 440,229
-------------- -------------- -------------- --------------
Net income 396,810 225,586 -- 622,396
Retained earnings, beginning (K. J.
Transportation, Inc. amount includes $1,326,891
of KAJE Transport, Inc. beginning retained
earnings) 1,543,156 320,348 -- 1,863,504
-------------- -------------- -------------- --------------
Retained earnings, ending $ 1,939,966 $ 545,934 $ -- $ 2,485,900
============== ============== ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combining Statements of Income and Retained Earnings
For the Year Ended December 31, 1996
K. J. KAJE J & L
Transportation, Transport, Leasing, 1996
Inc. Inc. Inc. Eliminations Total
---- ---- ---- ------------ -----
<S> <C> <C> <C> <C> <C>
Revenue $ 40,077,578 $ 19,292,287 $ 1,253,160 $ (1,767,701) $ 58,855,324
Operating expenses 38,814,189 18,688,467 1,008,814 (1,767,701) 56,743,769
------------- ------------- ------------- ------------- -------------
Operating income 1,263,389 603,820 244,346 -- 2,111,555
------------- ------------- ------------- ------------- -------------
Other income (expense)
Interest income 3,223 -- 1,236 -- 4,459
Interest expense (981,855) (44,138) (204,649) -- (1,230,642)
Gain on disposal of property 148,508 -- (10,827 -- 137,681
------------- ------------- ------------- ------------- -------------
(830,124) (44,138) (214,240) -- (1,088,502)
------------- ------------- ------------- ------------- -------------
Income before provision for income
taxes 433,265 559,682 30,106 -- 1,023,053
Provision for income taxes 334,500 103,260 3,800 -- 441,560
------------- ------------- ------------- ------------- -------------
Net income 98,765 456,422 26,306 -- 581,493
Retained earnings, beginning 117,498 870,469 294,044 -- 1,282,011
------------- ------------- ------------- ------------- -------------
Retained earnings, ending $ 216,263 $ 1,326,891 $ 320,350 $ -- $ 1,863,504
============= ============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combining Schedule of Operating Expenses
For the Year Ended December 31, 1997
K. J. J & L
Transportation, Leasing, 1997
Inc. Inc. Eliminations Total
---- ---- ------------ -----
<S> <C> <C> <C> <C>
Purchased transportation $ 32,009,112 $ -- $ -- $ 32,009,112
Salaries and wages
Officers 637,056 -- 14,303 651,359
Terminal managers 1,527,989 -- -- 1,527,989
Office 662,366 231,284 20,433 914,083
Traffic 131,899 -- -- 131,899
Line-haul 7,250,918 9,339 -- 7,206,257
Local 845,384 -- -- 845,384
Safety 434,163 -- -- 434,163
Other - Shop 115,116 713,577 -- 828,693
Fuel 4,841,952 87,889 (2,669) 4,927,172
Depreciation and amortization 2,414,949 581,918 -- 2,996,867
Equipment rental 3,091,905 277,964 (479,755) 2,890,114
Fringe benefits 1,881,346 263,150 6,130 2,150,626
Insurance 1,116,780 35,618 -- 1,152,398
Payroll taxes 968,478 10,840 -- 979,318
Operating supplies 680,582 158,556 -- 839,138
Tolls 813,604 -- -- 813,604
Professional fees 276,317 18,763 -- 295,080
General supplies and expense 209,261 3,385 -- 212,646
Administrative reimbursement 25,840 15,026 (40,866) --
Repairs 3,745,652 787,325 (3,925,009) 607,968
Tires 16,924 943,409 (341) 959,992
Parts (2,353) 722,713 -- 720,360
Operating taxes and licenses 950,532 78,003 -- 1,028,535
Communications 502,642 433 -- 503,075
Utilities 119,560 1,415 -- 120,975
Rent 297,011 -- -- 297,011
Travel 160,049 10,107 -- 170,156
Office supplies 610,631 9,452 -- 620,083
Profit-sharing plan 56,621 -- -- 56,621
Bad debts 59,418 -- -- 59,418
Miscellaneous 237,562 13,071 -- 250,633
-------------- -------------- -------------- --------------
$ 66,689,266 $ 4,973,237 $ (4,407,774) $ 67,254,729
============== ============== ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
K. J. TRANSPORTATION, INC. AND AFFILIATES
Combining Schedule of Operating Expenses
For the Year Ended December 31, 1996
K. J. KAJE J & L
Transportation, Transport, Leasing, 1996
Inc. Inc. Inc. Eliminations Total
---- ---- ---- ------------ -----
<S> <C> <C> <C> <C> <C>
Purchased transportation $ 9,483,148 $ 17,214,393 $ -- $ (1,547,165) $ 25,150,376
Salaries and wages
Officers 376,246 130,712 46,335 19,826 573,119
Terminal managers 669,445 685,080 -- -- 1,354,525
Office 616,801 -- -- 28,323 645,124
Traffic 118,842 -- -- -- 118,842
Line-haul 6,305,623 25,901 28,825 -- 6,360,349
Local 586,112 -- -- -- 586,112
Safety 412,632 -- -- -- 412,632
Other - Shop 767,538 -- -- -- 767,538
Fuel 4,821,833 -- 8,849 -- 4,830,682
Depreciation and amortization 2,506,492 40,092 488,669 -- 3,035,253
Equipment rental 2,177,226 -- 126,705 -- 2,303,931
Fringe benefits 1,838,240 64,798 -- 8,497 1,911,535
Insurance 1,331,002 300 10,744 -- 1,342,046
Payroll taxes 810,203 68,033 4,265 -- 882,501
Operating supplies 576,563 -- -- -- 576,563
Tolls 762,488 -- -- -- 762,488
Professional fees 156,295 38,625 22,114 -- 217,034
General supplies and expense 165,500 7,552 7,934 -- 180,986
Administrative reimbursement -- 38,760 17,885 (56,645) --
Repairs 567,937 -- 155,804 (220,537) 503,204
Tires 716,112 -- -- -- 716,112
Parts 609,239 -- -- -- 609,239
Operating taxes and licenses 844,704 16,897 58,351 -- 919,952
Communications 377,654 97,622 -- -- 475,276
Utilities 112,006 10,572 -- -- 122,578
Rent 233,178 58,788 -- -- 291,966
Travel 86,042 32,815 10,237 -- 129,094
Office supplies 577,006 21,407 2,106 -- 600,519
Pension 48,527 -- -- -- 48,527
Bad debts 21,409 20,680 -- -- 42,089
Miscellaneous 138,146 115,440 19,991 -- 273,577
------------- ------------- ------------- ------------- -------------
$ 38,814,189 $ 18,688,467 $ 1,008,814 $ (1,767,701) $ 56,743,769
============= ============= ============= ============= =============
</TABLE>
EXHIBIT 99.2-PRO-FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTH ENDED TRANSIT CAROLINA SERVICE CAPITOL CARROLL RAINBOW CERTIFIED KJ UNAUDITED
DECEMBER 31, 1997 GROUP,INC. PACIFIC EXPRESS WAREHOUSE FULMER TRUCKING TRM,INC. TRANSPORT TRANS ADJ. PRO FORMA
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(897)(b)
REVENUES 34,011 6,690 2,860 12,127 42,817 14,294 5,958 21,095 69,663 1,500 (c) 210,118
---------------------------------------------------------------------------------------------------- ----------
SALARIES & WAGES 7,665 2,510 899 3,547 5,730 3,937 2,410 4,191 12,591 (250)(e) 43,230
1,545 (c)
OPERATING EXPENSES 22,115 3,747 1,273 5,730 34,401 8,337 2,368 12,905 50,511 (186)(b) 142,746
DEPRECIATION
& AMORTIZATION 1,339 362 306 1,537 447 254 760 1,688 2,997 (640)(c) 9,050
GOODWILL ADJ. 271 - - - - - - - 782 (d) 1,053
GENERAL
& ADMINISTRATIVE 1,243 54 175 94 1,311 810 99 782 1,156 - 5,724
(184)(c)
INTEREST EXPENSE 1,045 155 54 680 537 153 275 409 1,346 1,325 (d) 5,795
---------------------------------------------------------------------------------------------------- ----------
TOTAL EXPENSES 33,678 6,828 2,707 11,588 42,426 13,491 5,912 19,975 68,601 2,392 207,598
---------------------------------------------------------------------------------------------------- ----------
INCOME (LOSS) FROM 333 (138) 153 539 391 803 46 1,120 1,062 (1,789) 2,520
CONT. OPERATIONS BEFORE
INCOME TAXES
INCOME TAXES ATTR. 71 (55) 61 217 156 321 18 448 440 (1,412)(f) 265
TO CONT. OPERATIONS
---------------------------------------------------------------------------------------------------- ----------
INCOME (LOSS) FROM 262 (83) 92 322 235 482 28 672 622 (377) 2,255
CONT. OPERATIONS
==================================================================================================== ==========
11,094,207 WEIGHTED AVERAGE NO OF SHARES-BASIC 18,778,967
========== ==========
11,094,207 WEIGHTED AVERAGE NO OF SHARES-DILUTED 19,997,189
========== ==========
.02 EARNINGS PER SHARE-BASIC 0.12
========== ==========
.02 EARNINGS PER SHARE-DILUTED 0.11
========== ==========
</TABLE>
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) ON JUNE 17,1998 TRANSIT GROUP, INC. (THE "COMPANY") COMPLETED THE
ACQUISITION OF KJ TRANSPORTATION, INC. ("KJ") THE COMPANY HAD
COMPLETED SEVEN ACQUISITIONS PRIOR TO THE ACQUISITION OF KJ. A
RECAP OF THE COMPANY'S ACQUISITIONS IS AS FOLLOWS:
<TABLE>
<CAPTION>
DATE CASH PERIODS SHARES
COMPANY ACQUIRED PAID(MIL) PRESENTED ISSUED
------- -------- --------- --------- ------
<S> <C> <C> <C> <C>
KJ TRANSPORTATION, INC. JUNE 17, 1998 $3.5 1/1/97-12/31/97 878,688
CERTIFIED TRANSPORT, INC. MAY 5, 1998 $1.5 1/1197-12/31/97 1,072,000
TRM, INC. JANUARY 31, 1998 $0.2 1/1/97-12/31/97 366,000
RAINBOW TRUCKING, INC. DECEMBER 30, 1997 - 1/1/97-12/31/97 679,000
CARROLL FULMER, INC. AUGUST 29, 1997 - 1/1/97-8/28/97 4,167,000
SERVICE EXPRESS, INC. AUGUST 15, 1997 - 1/1/97-8/14/97 903,000
CAPITOL WAREHOUSE, INC. AUGUST 15, 1997 - 1/1/97-8/14/97 641,000
CAROLINA PACIFIC
DISTRIBUTORS, INC. JULY 11, 1997 $3.7 1/1/97-7/10/97 1,733,000
</TABLE>
THE PRO FORMA 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 ELIMINATE INTERCOMPANY TRANSACTIONS.
(c) TO REFLECT ADDITIONAL INTEREST AND DEPRECIATION EXPENSE INCURRED IN
CONNECTION WITHTHE PURCHASE BY THE COMPANY OF CERTAIN ADDITIONAL
PRODUCTIVE ASSETS FROM AN AFFILIATE OF CAROLINA PACIFIC DISTRIBUTORS,
INC. AND THE ASSUMPTION OF RELATED BORROWINGS, AND THE CAPITAL LEASE
BY THE COMPANY OF ADDITIONAL PRODUCTIVE ASSETS FROM AFFILIATES OF
CARROLL FULMER, INC.
(d) TO REFLECT ADDITIONAL INTEREST EXPENSE AS A RESULT OF FINANCING CASH
PAID AT CLOSING, THE ISSUANCE OF SHARES AT FAIR MARKET VALUE OF THE
COMPANY'S COMMON STOCK TO THE SHAREHOLDERS OF THE ACQUIRED
COMPANIES AND EXPENSES ASSOCIATED WITH THE ACQUISITIONS. IN
CONNECTION WITH THE ACQUISITIONS, GOODWILL OF APPROXIMATELY $42.0
MILLION WAS RECORDED. SUCH GOODWILL WILL BE AMORTIZED OVER A 40-YEAR
PERIOD.
(e) TO REFLECT CERTAIN ADJUSTMENTS TO SALARIES AND EMPLOYEE BENEFITS
RESULTING FROM THE ACQUISITION OF CAROLINA PACIFIC DISTRIBUTORS, INC.
(f) TO REFLECT UTILIZATION OF NET OPERATING LOSS CARRYFORWARD.
<PAGE>
EXHIBIT 99.2-PRO-FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(A) (B) (C) (D)
SIX MONTHS ENDED TRANSIT CERTIFIED KJ PRO FORMA UNAUDITED
JUNE 30, 1998 GROUP,INC. TRANSPORT TRANSPORTATION ADJUSTMENTS PRO FORMA
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES 61,839 6,656 33,834 (196) (a) 102,133
------------------------------------------------------------------------------------
SALARIES & WAGES 13,580 1,462 6,149 - 21,191
OPERATING EXPENSES 39,616 4,087 25,617 69,320
DEPRECIATION & AMORTIZATION 2,992 322 1,131 (640) (b) 3,862
GOODWILL ADJUSTMENT 57 (c)
GENERAL & ADMINISTRATIVE 1,765 190 219 2,174
INTEREST EXPENSE 1,671 180 634 31 (d) 2,516
-----------------------------------------------------------------------------------
TOTAL EXPENSES 59,624 6,241 33,750 (552) 99,063
-----------------------------------------------------------------------------------
PRE-TAX INCOME 2,215 415 84 356 3,070
INCOME TAXES 209 84 31 12 (e) 336
----------------------------------------------------------------------------------
NET INCOME 2,006 331 53 344 2,734
==================================================================================
WEIGHTED AVERAGE NO OF SHARES-BASIC 22,881,021
===============
WEIGHTED AVERAGE NO OF SHARES-DILUTED 24,270,509
===============
EARNINGS PER SHARE-BASIC 0.12
===============
EARNINGS PER SHARE-DILUTED 0.11
===============
</TABLE>
<PAGE>
(A) CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30,
1998 FOR TRANSIT GROUP, INC.
(B) STATEMENT OF OPERATIONS FOR THE FOUR MONTHS ENDED APRIL 30, 1998 FOR
CERTIFIED TRANPORT, INC. ("CTI") WHICH WAS ACQUIRED BY TRANSIT GROUP
ON MAY 5, 1998.
(C) STATEMENT OF OPERATIONS FOR THE FIVE AND ONE HALF MONTHS ENDED JUNE
15, 1998 FOR KJ TRANSPORTATION, INC. ("KJ") WHICH WAS ACQUIRED BY
TRANSIT GROUP ON JUNE 16, 1998.
(D) PRO FORMA ADJUSTMENTS
(a) TO ADJUST FOR GAIN ON SALE OF REVENUE EQUIPMENT REALIZED BY
CTI AND KJ.
(b) TO REFLECT IMPACT OF BASIS STEP UP ON FIXED ASSETS AND ADJUSTMENT OF
USEFUL LIVES OF EQUIPMENT TO COMPLY WITH COMPANY POLICY.
(c) TO REFLECT AMORTIZATION OF GOODWILL
(d) TO REFLECT INTEREST EXPENSE ASSOCIATED WITH NEW BORROWINGS
INCURRED IN CONNECTION WITH THE ACQUISITION OF CTI and KJ AT AN
AVERAGE INTEREST RATE OF 8.20%.
(e) TO REFLECT INCOME TAX EFFECT OF PROFORMA ADJUSTMENTS.
