Exhibit 99.4
AUTOMATIC LAUNDRY COMPANY, LTD.
BALANCE SHEETS
March 31, 2008 and 2007
Unaudited
ASSETS
|
| 2008 |
| 2007 |
| ||
|
|
|
|
|
| ||
CURRENT ASSETS |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 3,331,782 |
| $ | 4,352,468 |
|
Investment securities |
| — |
| 6,346,210 |
| ||
Current portion of prepaid lease costs |
| 3,394,584 |
| 3,734,573 |
| ||
Prepaid expenses and other current assets |
| 938,603 |
| 261,965 |
| ||
|
|
|
|
|
| ||
Total current assets |
| 7,664,969 |
| 14,695,216 |
| ||
|
|
|
|
|
| ||
PROPERTY AND EQUIPMENT, NET |
| 9,550,436 |
| 11,191,774 |
| ||
|
|
|
|
|
| ||
OTHER ASSETS |
|
|
|
|
| ||
Prepaid lease costs, less current portion included above |
| 2,499,769 |
| 2,887,670 |
| ||
Covenants not to compete, less accumulated amortization of $1,043,688 in 2008 and $957,688 in 2007 |
| 165,307 |
| 251,306 |
| ||
Goodwill |
| 8,371,159 |
| 8,371,159 |
| ||
Cash surrender value of life insurance |
| — |
| 540,391 |
| ||
Deposits and other assets |
| 30,468 |
| 349,730 |
| ||
|
|
|
|
|
| ||
Total other assets |
| 11,066,703 |
| 12,400,256 |
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
| $ | 28,282,108 |
| $ | 38,287,246 |
|
AUTOMATIC LAUNDRY COMPANY, LTD.
BALANCE SHEETS
March 31, 2008 and 2007
Unaudited
LIABILITIES AND PARTNERS’ CAPITAL
|
| 2008 |
| 2007 |
| ||
|
|
|
|
|
| ||
CURRENT LIABILITIES |
|
|
|
|
| ||
Accounts payable and accrued expenses |
| $ | 891,122 |
| $ | 1,777,439 |
|
Current maturities of notes payable |
| — |
| 703,863 |
| ||
Due to affiliated entity |
| 110,435 |
| 1,157,821 |
| ||
Location rentals payable |
| 3,927,476 |
| 3,924,222 |
| ||
|
|
|
|
|
| ||
Total current liabilities |
| 4,929,033 |
| 7,563,345 |
| ||
|
|
|
|
|
| ||
LONG-TERM LIABILITIES |
|
|
|
|
| ||
Notes payable, less current maturities included above |
| — |
| 527,782 |
| ||
Related party notes payable, less current maturities included above |
| — |
| 6,085,000 |
| ||
Other long-term liabilities |
| — |
| 324,397 |
| ||
|
|
|
|
|
| ||
Total long-term liabilities |
| — |
| 6,937,179 |
| ||
|
|
|
|
|
| ||
Total liabilities |
| 4,929,033 |
| 14,500,524 |
| ||
|
|
|
|
|
| ||
PARTNERS’ CAPITAL |
|
|
|
|
| ||
General partner |
| 394,357 |
| 398,693 |
| ||
Limited partner |
| 22,958,718 |
| 23,388,029 |
| ||
|
|
|
|
|
| ||
Total partners’ capital |
| 23,353,075 |
| 23,786,722 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND PARTNERS’ CAPITAL |
| $ | 28,282,108 |
| $ | 38,287,246 |
|
The accompanying notes are an integral part of the unaudited financial statements
AUTOMATIC LAUNDRY COMPANY, LTD.
STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2008 and 2007
Unaudited
|
| 2008 |
| 2007 |
| ||
|
|
|
|
|
| ||
REVENUE |
|
|
|
|
| ||
Laundry route income |
| $ | 16,701,787 |
| $ | 16,713,637 |
|
Equipment lease income |
| 153,620 |
| 151,666 |
| ||
|
|
|
|
|
| ||
Total revenue |
| 16,855,407 |
| 16,865,303 |
| ||
|
|
|
|
|
| ||
OPERATING EXPENSES |
|
|
|
|
| ||
Location rentals |
| 8,314,582 |
| 8,269,324 |
| ||
Depreciation and amortization |
| 2,212,817 |
| 2,329,265 |
| ||
Salaries, wages, and employee benefits |
| 2,798,229 |
| 2,751,388 |
| ||
Administrative service fees |
| 68,300 |
| 1,273,385 |
| ||
Other location expenses |
| 184,048 |
| 149,463 |
| ||
Parts and supplies |
| 372,980 |
| 379,978 |
| ||
General and administrative |
| 360,427 |
| 378,201 |
| ||
Rent and occupancy |
| 507,792 |
| 203,924 |
| ||
Transportation |
| 281,532 |
| 252,364 |
| ||
Other operating expenses |
| 269,275 |
| 254,071 |
| ||
Marketing expenses |
| 57,213 |
| 90,239 |
| ||
Executive services fee |
| 50,000 |
| 33,500 |
| ||
Loss on disposal of property and equipment |
| 278,063 |
| — |
| ||
|
|
|
|
|
| ||
Total operating expenses |
| 15,755,258 |
| 16,365,102 |
| ||
|
|
|
|
|
| ||
Operating income |
| 1,100,149 |
| 500,201 |
| ||
|
|
|
|
|
| ||
OTHER INCOME (EXPENSE) |
|
|
|
|
| ||
Interest income |
| 80,841 |
| 67,886 |
| ||
Interest expense |
| (140,985 | ) | (157,077 | ) | ||
Other, net |
| 210,892 |
| 71,135 |
| ||
|
|
|
|
|
| ||
Total other income (expense) |
| 150,748 |
| (18,056 | ) | ||
|
|
|
|
|
| ||
NET INCOME |
| $ | 1,250,897 |
| $ | 482,145 |
|
The accompanying notes are an integral part of the unaudited financial statements
AUTOMATIC LAUNDRY COMPANY, LTD.
STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2008 and 2007
Unaudited
|
| 2008 |
| 2007 |
| ||
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| ||
Net income |
| $ | 1,250,897 |
| $ | 482,145 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
| 2,212,817 |
| 2,329,265 |
| ||
Loss on disposal of property and equipment |
| 278,063 |
| — |
| ||
Increase in cash surrender value of life insurance |
| (4,944 | ) | (6,581 | ) | ||
Changes in operating assets and liabilities: |
|
|
|
|
| ||
Prepaid lease costs |
| (414,629 | ) | (849,846 | ) | ||
Prepaid expenses and other current assets |
| (691,049 | ) | (15,267 | ) | ||
Deposits and other assets |
| 447,252 |
| (28,482 | ) | ||
Accounts payable and accrued expenses |
| (672,542 | ) | (194,612 | ) | ||
Due to affiliated entity |
| (1,047,386 | ) | (13,333 | ) | ||
Location rentals payable |
| 174,812 |
| 123,214 |
| ||
Other long term liabilities |
| (448,884 | ) | 27,158 |
| ||
|
|
|
|
|
| ||
Net cash provided by operating activities |
| 1,084,407 |
| 1,853,661 |
| ||
|
|
|
|
|
| ||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| ||
Purchases of investment securities |
| (3,456,560 | ) | (2,928,492 | ) | ||
Proceeds from maturities of investment securities |
| 9,834,825 |
| 2,452,736 |
| ||
Expenditures for property and equipment |
| (1,354,599 | ) | (1,520,714 | ) | ||
Proceeds from sale of property and equipment |
| 864,777 |
| — |
| ||
|
|
|
|
|
| ||
Net cash provided (used) by investing activities |
| 5,888,443 |
| (1,996,470 | ) | ||
|
|
|
|
|
| ||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| ||
Principal payments on notes payable |
| (6,779,449 | ) | (184,827 | ) | ||
Distributions to partners |
| (2,300,237 | ) | — |
| ||
|
|
|
|
|
| ||
Net cash used by financing activities |
| (9,079,686 | ) | (184,827 | ) | ||
|
|
|
|
|
| ||
NET DECREASE IN CASH AND CASH EQUIVALENTS |
| (2,106,836 | ) | (327,636 | ) | ||
|
|
|
|
|
| ||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
| 5,438,618 |
| 4,680,104 |
| ||
|
|
|
|
|
| ||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
| $ | 3,331,782 |
| $ | 4,352,468 |
|
|
|
|
|
|
| ||
SUPPLEMENTAL CASH FLOW INFORMATION |
|
|
|
|
| ||
Interest paid |
| $ | 140,985 |
| $ | 157,077 |
|
NON-CASH TRANSACTIONS
During 2008, the Company transferred the cash surrender value of life insurance in the amount of $559,170 to PaceCo Investors, LP.
During 2008, the Company transferred the net book value of certain property in the amount of $126,509 to PaceCo Investors, LP.
The accompanying notes are an integral part of the unaudited financial statements
AUTOMATIC LAUNDRY COMPANY, LTD.
NOTES TO FINANCIAL STATEMENTS
March 31, 2008 and 2007
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting. The unaudited interim financial statements do not include all information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of the management of Automatic Laundry Company Ltd. the accompanying unaudited financial statements contain all adjustments (consisting of normal, recurring adjustments), which are necessary to present fairly Automatic Laundry Company Ltd.’s financial position, the results of its operations, and its cash flows. The results for interim periods are not necessarily indicative of the results to be expected for the full year.
Note 2. Fair Value Measurements
Effective January 1, 2008, the Automatic Laundry Company Ltd. adopted SFAS No. 157, “Fair Value Measurements” (“FAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Adoption of SFAS 157 did not have a material effect on the Automatic Laundry Company Ltd.’s financial position and results from operations.
Note 3 - New Accounting Standards
In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," an interpretation of FASB Statement No. 109 ("FIN 48"), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, disclosure and transition. FIN 48 is effective for nonpublic entities for annual periods beginning after December 15, 2007. Automatic Laundry Company Ltd. did adopt FIN 48 as of January 1, 2008, as required. The cumulative effect of adopting FIN 48 did not have a material effect on the Automatic Laundry Company Ltd.’s financial position and results from operations.
NOTE 4 – Subsequent Events
On April 1, 2008, the general partner and the limited partner sold 100% of their interests in Automatic Laundry Company, Ltd. to Mac-Gray Corporation. The purchase price consisted of $106,500,000 in cash and an unsecured note for $10,000,000. The note carries an interest rate of 9% per annum and matures on April 1, 2010. Under the terms of the agreement, the seller will receive all of the uncollected cash and has assumed responsibility for all liabilities of Automatic Laundry Company, Ltd. as of March 31, 2008. In conjunction with the sale, distributions of $2,200,000 were also paid to Automatic Laundry Company, Ltd. owners on March 31, 2008. During the quarter ended March 31, 2008, Automatic Laundry Company, Ltd. also liquidated all of its investment securities and paid off all of its notes payable.