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 ***************************** 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 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. K. J. TRANSPORTATION, INC. AND AFFILIATES Combined Balance Sheets, December 31, 1997 and 1996 ASSETS 1997 1996 ---- ---- 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 ================= ================= The accompanying Notes to Combined Financial Statements are an integral part of these statements. LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996 ---- ---- 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 ================= ================= 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 ---- ------- ---- ------- 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 ============== ============== The accompanying Notes to Combined Financial Statements are an integral part of these statements. K. J. TRANSPORTATION, INC. AND AFFILIATES Combined Statements of Cash Flows For the Years Ended December 31, 1997 and 1996 1997 1996 ---- ---- 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) ----------------- ----------------- 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 The accompanying Notes to Combined Financial Statements are an integral part of these statements. 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. 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. 3. Accounts Receivable Accounts receivable consist of the following at December 31: 1997 1996 ---- ---- Accounts receivable - Gross $ 7,863,253 $ 6,504,926 Allowance for doubtful accounts (70,000) (50,000) ----------------- ----------------- $ 7,793,253 $ 6,454,926 ================= ================= 4. Property Property, together with estimated useful lives, consists of the following at December 31: 1997 1996 ---- ---- 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 ================= ================= Accumulated depreciation consists of the following at December 31: 1997 1996 ---- ---- 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 ================= ================= 5. Customer Lists Customer lists consist of the following at December 31: 1997 1996 ---- ---- Customer lists - Gross $ 203,919 $ 196,919 Accumulated amortization (123,149 (104,945) ----------------- ----------------- $ 80,770 $ 91,974 ================= ================= 6. Revolving Credit Line 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% $ 4,973,516 $ 2,018,825 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. 7. Installment Loans Payable 1997 1996 ---- ---- 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 ================= ================= 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. 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. 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. 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. 13. Income Taxes Provision for income taxes - -------------------------- 1997 1996 Current: ---- ---- 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 ================= ================= The net deferred tax assets in the accompanying balance sheets include the following components: 1997 1996 Current deferred tax assets ---- ---- 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) ================= ================= 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. 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. K. J. TRANSPORTATION, INC. AND AFFILIATES Combined Operating Expenses FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 % of % of 1997 Revenue 1996 Revenue ---- ------- ---- ------- 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 ============== ===== ============== ===== K. J. TRANSPORTATION, INC. AND AFFILIATES Combining Balance Sheets, December 31, 1997 ASSETS K. J. J & L 1997 Transportation, Leasing, Inc. Eliminations Total Inc. ---- ------------- ------------ ----- 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 ============== ============= ============== ============== 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 ---- ------------- ------------ ----- 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 ============== ============= ============== ============== 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 ---- ---- ------------- ------------ ----- 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 ============= ============= ============= ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY K.J. KAJE Transportation Transport, J & L 1997 Inc. Inc. Leasing, Inc. Eliminations Total ---- ---- ------------- ------------ ----- 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 ============= ============= ============= ============= ============= 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 ---- ---- ------------ ----- 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 ============== ============== ============== ============== 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 ---- ---- ---- ------------ ----- 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 ============= ============= ============= ============= ============= 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 ---- ---- ------------ ----- 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 ============== ============== ============== ============== 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 ---- ---- ---- ------------ ----- 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 ============= ============= ============= ============= =============