SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 2 TO CURRENT REPORT ON FORM 8-K
FILED WITH THE COMMISSION ON APRIL 8, 1996
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 14, 1996
CONTINENTAL AMERICAN TRANSPORTATION, INC.
Exact name of Registrant as specified in charter)
Colorado 0-18729 84-1089599
(State or other (Commission (IRS employee
jurisdiction of file number) identification
incorporation no.)
495 Lovers Lane Road, Calhoun, Georgia 30701
(Address of principal executive office) Zip Code
Registration telephone number, including area code: (706) 629-8682
401 West High Street, Pottstown, Pennsylvania 19464
(Former name or former address, if changed since last report)
Item 1. Changes in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
Please see identification of Exhibits in Item 7
below.
Item 3. Bankruptcy or Receivership.
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not applicable.
Item 5. Other Events.
Not applicable.
Item 6. Resignation of Registrant's Directors.
Not applicable.
Item 7. Financial Statements and Exhibits.
Attached hereto as an Exhibit are the following
financial statements filed pursuant to this Item:
(1) Audited Financial Statements of Carpet Transport,
Inc., which include (a) that Company's Independent
Auditors' Report (b) Balance Sheet at June 30, 1995,
(c) Statements of Income at June 30, 1995 and 1994
(d) Statement of Changes in Stockholders' Equity at
June 30, 1995 and 1994, (e) Statement of Cash Flows
at June 30, 1995 and 1994 and (f) Notes to the
Financial Statements.
(2) Audited Financial Statements of A & P
Transportation, Inc., which include (a) that
Company's Independent Auditor's Report (b) Balance
Sheet at November 30, 1995, (c) Statements of
Operations at November 30, 1995 and 1994, (d)
Statement of Changes in Stockholders' Equity at
November 30, 1995 and 1994, (e) Statements of Cash
Flows at November 30, 1995 and 1994 and (f) Notes to
Financial Statements.
(3) Compiled Financial Statements of Chase Brokerage,
Inc., which include (a) that Company's Independent
Auditor's Report re Compilation of such Statements,
(b) Balance Sheet at November 30, 1995, (c)
Statements of Income and Retained Earnings at
November 30, 1995 and 1994 and (d) Notes to Financial
Statements.
2
(4) Unaudited Financial Statements of Carpet
Transport, Inc. at March 31, 1996, which
include (a) that Company's Balance Sheet, (b)
Statement of Operations and (c) Statements of
Cash Flows.
(5) Unaudited Financial Statements of A & P
Transportation, Inc. at March 31, 1996, which include
(a) that Company's Balance Sheet, (b) Statements of
Operation and (c) Statements of Cash Flows.
(6) Unaudited Financial Statements of Chase
Brokerage, Inc. at March 31, 1996, which
include (a) that Company's Balance Sheet, (b)
Statements of Operations and (c) Statements of
Cash Flows.
(7) Unaudited Pro Forma Combined Condensed
Financial Information, which include (a) the
Pro Forma Combined Condensed Balance Sheet of
Continental American Transportation, Inc. and
its wholly owned subsidiaries, Blue Mack
Transport, Inc., HMX, Inc., Carpet Transport,
Inc., A & P Transportation, Inc. and Chase
Brokerage, Inc. at March 31, 1996, (b) Pro
Forma Combined Condensed Statement of
Operations for Continental American
Transportation, Inc. and its above named
wholly owned subsidiaries at June 30, 1995 and
(c) Notes thereto.
Item 8. Change in Fiscal Year.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CONTINENTAL AMERICAN TRANSPORTATION, INC.
By: s/Erik Bailey
Dated: June 14, 1996 Erik Bailey, Chief Financial Officer
Carpet Transport, Inc.
Financial Statements
June 30, 1995
Carpet Transport, Inc.
Index to the Financial Statements
June 30, 1995
Page
Independent Auditors' Report.......................... 1
Financial Statements
Balance Sheet.................................... 2
Statements of Income............................. 3
Statement of Changes in Stockholders' Equity..... 4
Statements of Cash Flows......................... 5
Notes to the Financial Statements............... 6-12
Independent Auditors' Report
To the Board of Directors and Stockholders of
Carpet Transport, Inc.
We have audited the accompanying balance sheet of Carpet Transport, Inc. as of
June 30, 1995 and the related statements of income, changes in stockholders'
equity and cash flows for the years ended June 30, 1995 and 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 Carpet Transport, Inc. as of
June 30, 1995, and the results of its operations and its cash flows for the
years ended June 30, 1995 and 1994 in conformity with generally accepted
accounting principles.
Bridgewater, New Jersey
March 1, 1996
Carpet Transport, Inc.
Balance Sheet
June 30, 1995
Assets
Current Assets
Cash and cash equivalents $ 197,218
Restricted cash 700,000
Trade accounts receivable,
net of allowance for doubtful accounts of $630,734 7,020,449
Trade accounts receivable - affiliates 1,885,172
Notes receivable - stockholder 542,357
Notes receivable, current portion 672,323
Other current assets 317,716
---------------
Total Current Assets 11,335,235
---------------
Property, plant and equipment 49,620,609
---------------
Other Assets
Notes receivable 1,201,944
Cash value of officers' life insurance 611,080
Other 89,508
---------------
Total Other Assets 1,902,532
---------------
Total Assets 62,858,376
===============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 1,678,022
Accounts payable - affiliates 1,040,827
Accrued expenses 865,340
Current maturities of long-term debt 883,159
Current maturities of capital lease obligations 9,154,312
Income taxes payable 1,695,942
---------------
Total Current Liabilities 15,317,602
Deferred Income Taxes 518,039
Long-Term Debt, excluding current maturities 3,400,578
Capital Lease Obligations 34,179,568
---------------
Total Liabilities 53,415,787
---------------
Stockholders' Equity Common stock, $100 par value, 50 shares authorized, 6
shares issued,
4 shares outstanding 600
Retained earnings 9,526,239
Treasury stock, 2 shares, at cost (84,250)
---------------
Total Stockholders' Equity 9,442,589
---------------
Total Liabilities and Stockholders' Equity $ 62,858,376
===============
See notes to the financial statements.
Carpet Transport, Inc.
Statements of Income
Year Ended June 30,
-----------------------------------
1995 1994
--------------- ---------------
Operating Revenues $ 61,938,130 $ 55,966,496
--------------- ---------------
Operating Expenses
Purchased transportation 9,019,499 8,198,870
Salaries and benefits 14,235,181 13,468,713
Operating expenses and supplies 17,671,306 13,881,261
Operating taxes and licenses 2,039,443 1,632,260
Claims and insurance 3,501,374 2,941,804
Communication and utilities 1,151,439 1,049,231
General and administrative 3,525,925 2,993,289
Depreciation and amortization 8,742,518 7,864,073
--------------- ---------------
Total Operating Expenses 59,886,685 52,029,501
--------------- ---------------
Income From Operations 2,051,445 3,936,995
--------------- ---------------
Other Income (Expense)
Interest and other income 523,044 487,576
Interest expense (2,982,049) (3,979,594)
Gain on sale of equipment 2,483,191 643,765
Gain on sale of land 157,428 -
--------------- ---------------
Total Other Income (Expense) 181,614 (2,848,253)
--------------- ---------------
Income before income taxes 2,233,059 1,088,742
Provision for income taxes 1,049,145 471,465
--------------- ---------------
$ 1,183,914 $ 617,277
Net Income
=============== ===============
See notes to the financial statements.
Carpet Transport, Inc.
Statement of Changes in Stockholders' Equity
For the Year Ended June 30, 1995 and 1994
Common Retained
Stock Earnings
--------------- --------------
Balance, June 30, 1993 $ 600 $ 7,725,048
Net income, year ended June 30, 1994 - 617,277
--------------- --------------
Balance, June 30, 1994 600 8,342,325
Net income, year ended June 30, 1995 - 1,183,914
--------------- --------------
$ 600 $ 9,526,239
Balance, June 30, 1995
=============== ==============
Treasury
Stock Total
-------------- ---------------
Balance, June 30, 1993 $ (84,250) $ 7,641,398
Net income, year ended June 30, 1994 - 617,277
-------------- ---------------
Balance, June 30, 1994 (84,250) 8,258,675
Net income, year ended June 30, 1995 - 1,183,914
-------------- ---------------
Balance, June 30, 1995 $ (84,250) $ 9,442,589
============== ===============
See notes to the financial statements.
Carpet Transport, Inc.
Statements of Cash Flows
Year Ended June 30,
-----------------------------------
1995 1994
--------------- ---------------
Cash Flows From Operating Activities
Net Income $ 1,183,914 $ 617,277
--------------- ---------------
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
Activities
Depreciation and amortization 8,742,518 7,864,073
Gain on sale of property and equipment and land (2,483,191) (643,765)
Deferred income taxes (896,404) -
Increase in accounts receivable and other assets (2,182,026) (344,336)
Increase in accounts payable and other liabilities 522,490 18,051
Increase in taxes payable 1,097,694 101,517
--------------- ---------------
Total Adjustments 4,801,081 6,995,540
--------------- ---------------
Net Cash Provided by Operating Activities 5,984,995 7,612,817
--------------- ---------------
Cash Flows From Investing Activities:
Principal payments received on notes receivable 858,441 936,520
Proceeds from sale of property and equipment 10,568,323 1,004,294
Purchases of property and equipment (17,438,536) (15,027,631)
Loans made to shareholders (20,502) (287,152)
--------------- ---------------
Net Cash Used in Investing Activities (6,032,274) (13,373,969)
--------------- ---------------
Cash Flows From Financing Activities:
Proceeds from new borrowings 10,758,378 14,768,091
Principal payments on notes payable (2,508,058) (2,130,118)
Principal payments on obligations under capital leases (8,137,981) (7,516,596)
--------------- ---------------
Net Cash Provided by Financing Activities 112,339 5,121,377
--------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted
Cash 65,060 (639,775)
Cash and Cash Equivalents, Including Restricted Cash - Beginning of Year 832,158 1,471,933
--------------- ---------------
Cash and Cash Equivalents, Including Restricged Cash - End of Year $ 897,218 $ 832,158
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for
Interest $ 2,982,049 $ 3,979,594
Income taxes $ 706,213 $ 493,893
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
The Company acquired revenue equipment aggregating $940,418 and $1,259,975
in satisfaction of defaulted notes receivable.
The Company received installment notes receivable aggregating $1,032,821
and $3,842,986 in connection with sales of certain revenue equipment.
See notes to the financial statements.
Carpet Transport, Inc.
Notes to the Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
The Company was incorporated on November 29, 1967 under the laws of the
State of Florida, and provides motor freight transportation with
operating rights throughout the forty-eight continental United States.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
Depreciation and Amortization
Property, plant and equipment is carried at cost less an allowance for
depreciation and amortization. Major additions and improvements are
capitalized while maintenance and repairs that do not improve or extend
the lives of the respective assets are charged to expense as incurred.
Depreciation is principally computed on the straight-line method for
financial statement purposes and various accelerated methods for income
tax purposes over the estimated useful lives of the related assets.
Amortization of revenue equipment under capital leases is computed on
the straight-line method over the term of the leases.
Income Taxes
Deferred income taxes are determined based upon temporary differences
between the financial and tax basis of assets and liabilities at the
balance sheet date which will result in taxable or deductible amounts
in future years, as affected by tax rates under existing laws. Deferred
income taxes are provided by the Company on the financial and tax
reporting differences resulting from accumulated depreciation, capital
lease obligations, and deferred gains on sale of equipment. A valuation
reserve is provided, if necessary, to reduce deferred tax assets to the
estimated realizable amounts as of the balance sheet date.
Revenue Recognition
Revenues consist principally of freight revenues. Freight revenues are
recognized as earned when freight is received from the shipper.
Estimated costs are accrued at the end of each reporting period.
CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash accounts in various financial institutions
located in various states. Accounts at each commercial bank are guaranteed
by the Federal Deposit Insurance Corporation (FDIC) for up to $100,000 at
each bank. At June 30, 1995, the Company's uninsured cash balances total
$1,011,951.
Carpet Transport, Inc.
Notes to the Financial Statements
NOTES RECEIVABLE
The Company finances the sale of revenue equipment to independent owner
operators. These notes require monthly payments of principal and interest
over a period ranging from twelve to forty-eight months, with interest
ranging principally from 12% to 23% per annum. These notes mature between
September 16, 1995 and January 30, 2002. Title to such revenue equipment,
substantially all of which serves as additional collateral for long-term
debt or capitalized lease obligations of the Company, is retained by the
Company until the note is paid in full.
Total notes receivable $ 1,874,267
Less: current portion (672,323)
---------------
$ 1,201,944
Long-Term Portion
===============
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including assets under capital leases,
consist of the following:
Land $ 698,373
Buildings 2,198,820
Leasehold improvements 1,963,760
Revenue equipment 65,206,225
Other operating equipment 1,236,201
Shop, furniture and office equipment 747,415
Construction in progress 216,828
---------------
Total 72,267,622
Accumulated depreciation and amortization 22,647,013
---------------
Net Book Value $ 49,620,609
===============
Carpet Transport, Inc.
Notes to the Financial Statements
LONG-TERM DEBT
Long-term debts consist of the following:
A mortgage note payable to a financial institution with one hundred and
nineteen (119) consecutive monthly payments of $8,412, including interest
at 10.5% per annum for the initial five (5) years. Commencing with the
sixth loan year, the interest rate shall be the greater of 10.5% or two
percent (2%) plus the offered yield rate of 10.625% - 2015 U.S. Treasury
Bonds. Principal and interest payments are based on a thirty (30) year
amortization table with a balloon payment due on November 1, 1996. This
note contains prepayment penalties and is collateralized by a mortgage and
security agreement on specific real property. $ 659,072
A mortgage note payable to a financial institution with one hundred and
nineteen (119) consecutive monthly payments of $6,444 including interest at
9.75% per annum for the initial five (5) years. Commencing with the sixth
loan year, the interest rate shall be the greater of 9.75% or two percent
(2%) plus the offered yield rate of 8.75% - 2017 U.S. Treasury Bonds.
Principal and interest payments are based on a thirty (30) year
amortization table with a balloon payment due in March, 1998. This note
contains prepayment penalties and is collateralized by a mortgage and
security agreement on specific real property. 705,950
Note payable to an equipment financing corporation with ninety six (96)
monthly payments of $34,963 plus interest at 1% over the prime rate of
Chemical Bank of New York, maturing October 1, 2000 and collateralized by
specific equipment. 2,202,680
Various notes payable to financial institutions and other credit providers
with combined monthly payments of $45,738 including interest at rates
ranging principally from 7.50% to 13.50% per annum. These notes mature from
July 15, 1995 through January 1, 2000 and are collateralized by specific
equipment. 716,035
---------------
Total 4,283,737
Less current maturities 883,159
---------------
Long-Term debt, net of current maturities $ 3,400,578
===============
The above debt is collateralized by substantially all the property, plant
and equipment of the Company.
Carpet Transport, Inc.
Notes to the Financial Statements
LONG-TERM DEBT, Continued
Maturities of notes payable are as follows:
For the Year Ending June 30,
1996 $ 883,159
1997 1,271,995
1998 1,167,488
1999 436,647
2000 419,558
Thereafter 104,890
---------------
Total $ 4,283,737
===============
CAPITALIZED LEASE OBLIGATIONS
Leases meeting certain criteria are considered capital leases and the
related asset and lease obligations are recorded at their present value in
the financial statements. The interest rates of capital leases range from
approximately 4.65% to 14.68%, and are imputed based on the lower of the
Company's incremental borrowing rate at the inception date of the lease or
the lessor's implicit rate of return. Minimum future obligations on all
capital leases in effect as of June 30, 1995 are as follows:
Year Ending June 30,
1996 $ 12,230,804
1997 12,379,863
1998 15,980,415
1999 8,305,226
2000 1,279,893
Thereafter 2,320,520
---------------
Net Minimum Lease Payments 52,496,721
Less: Amount representing interest 9,162,841
---------------
Present Value of Net Minimum Lease Payments 43,333,880
Current maturities of capital lease obligations 9,154,312
---------------
Total Long-Term Capital Lease Obligation $ 34,179,568
===============
Following is a summary of property held under capital leases included in
property, plant and equipment:
Revenue Equipment $ 59,331,020
Less: Accumulated Amortization (17,731,283)
---------------
$ 41,599,737
===============
Amortization on assets under capital leases charged to expense for the
years ended June 30, 1995 and 1994 was $7,633,290 and $6,665,000,
respectively.
Carpet Transport, Inc.
Notes to the Financial Statements
PROVISION FOR INCOME TAXES
The income tax provision (benefit) is comprised of the following:
Year Ended June 30, 1995
Current $ 1,698,072
Deferred (648,927)
---------------
1,049,145
===============
Year Ended June 30, 1994
Current $ 718,465
Deferred (247,000)
---------------
$ 471,465
===============
In accordance with Statement of Financial Accounting Standards No. 109, the
deferred income tax liabilities in the accompanying balance sheet includes
the following amounts of deferred tax assets and liabilities:
Deferred Tax Liabilities $ 4,567,515
Deferred Tax Assets (4,049,476)
---------------
$ 518,039
===============
The deferred tax liability results from the use of accelerated methods of
depreciation and the installment sale treatment of the deferred gain from
the sale of its equipment for tax reporting purposes. The deferred tax
asset results from the capitalization of lease obligations (net of the
capitalized asset) for financial reporting purposes. No valuation allowance
is deemed necessary to reduce the deferred tax asset.
The Company files returns and pays state corporate income tax and/or
franchise tax in various states. Management believes the Company files
state returns in all required states. Occasionally an issue may arise where
it is necessary to file in an additional state. Management then files the
tax return and pays the tax as required.
RELATED PARTY TRANSACTIONS
The Company leases its revenue equipment and contracts for hauling expenses
and brokerage services with affiliates that are controlled by the same
interests that control the Company.
Accounts receivable at June 30, 1995 includes $1,885,172 of trade
receivables due from affiliated companies.
Notes receivable from stockholders due to the Company at June 30, 1995
aggregate $542,357 and are payable upon demand with no interest.
Accounts payable at June 30, 1995 include amounts due to an affiliated
company aggregating $1,040,827.
Included in the Company's revenues is $6,666,544 and $4,343,992 for
services provided to affiliated companies in 1995 and 1994, respectively.
Included in purchased transportation is $6,004,686 and $5,307,675 for
services provided by an affiliated company in 1995 and 1994, respectively.
Carpet Transport, Inc.
Notes to the Financial Statements
LEASES
The Company leases warehouse terminal facilities and equipment in various
states under noncancelable operating leases with lease terms ranging from
two to five years. Certain of these leases have specific renewal options,
or if no renewal option, certain of these leases give the Company a right
of first refusal to re-negotiate the lease terms. Total rent expense for
the year ended June 30, 1995 and 1994 amounted to $771,203 and $830,000,
respectively.
The following is a schedule of future minimum rental payments required
under operating leases that have initial or remaining non-cancelable lease
terms in excess of one year as of June 30, 1995.
Years Ending June 30,
1996 $ 1,114,349
1997 1,005,459
1998 499,706
1999 167,575
2000 102,062
Thereafter 7,800
---------------
Total $ 2,896,951
===============
EMPLOYEE BENEFIT PLAN
All active full-time employees are offered a comprehensive health benefit
plan (the Plan). Employees contribute a specified amount each month
determined periodically by the Plan's insurance company. The employer makes
contributions to the Plan to cover medical claims to be paid in excess of
employees' contributions. The Plan maintains a group excess loss insurance
policy that pays for medical claims of any participant whose medical claims
exceed $50,000 for any year up to a maximum benefit of $500,000. The Plan
pays for all qualified medical claims not paid for by the insurance policy.
The amount of contributions paid by the Company were $910,967 and $578,391
for the years ended June 30, 1995 and 1994, respectively.
SUBSEQUENT EVENTS
The Company has been under investigation by a Federal Grand Jury. On or
about October 18, 1995, a criminal indictment was issued naming among
others, the President and Vice President/General Manager, who were the two
stockholders of the Company, as individual defendants. While the Company
was not included as a named defendant in the indictment, the indictment
states among other things that the Grand Jury believes the Company
intentionally failed to report gross income as follows:
Alleged
Understated
Year Ended, Revenue
-----------------
June 30, 1991 $ 308,123
June 30, 1992 669,897
June 30, 1993 1,748,561
June 30, 1994 963,838
June 30, 1995 23,909
Carpet Transport, Inc.
Notes to the Financial Statements
SUBSEQUENT EVENTS, Continued
The Company intends to vigorously contest the allegations made by the
Federal Grand Jury. Management believes that it will be able to prove that
the expenses fully offset any revenues not included in gross income for the
periods reflected above. However, should Management fail in this effort,
the potential tax assessments, penalties and interest could amount to
approximately $3,400,000.
On February 29, 1996 the two former stockholders of the Company sold their
shares to Continental American Transportation, Inc. (CAT) for among other
consideration, a promissory note in the principal amount of $7,290,000 due
March 1, 2002. As a component of this transaction, the two former
shareholders have agreed to be responsible for and satisfy any and all tax
liabilities that might arise as a result of the allegations described
above. Further, CAT has the right to deduct from the principal amount of
the note described above any such liabilities paid by the Company.
RESTRICTED CASH/LETTERS OF CREDIT
The Company has elected to self insure its workers' compensation insurance.
An excess insurance policy has been purchased to limit its liability to a
maximum of $250,000 per claim and $1,000,000 in the aggregate. The Company
has established an irrevocable letter-of-credit up to the aggregate amount
of $500,000 with the Georgia Self-Insurer Guaranty Trust Fund, to be used
only if the Company does not pay its workers compensation claims, valid
through October 28, 1995. In October 1995, the Georgia State Board of
Workers Compensation (the Board) revoked the Company's priviledge to
self-insure due to failure to comply with state statutes requiring the
furnishing of required financial information. This revocation has been
extended pending receipt of such required financial information, at which
time the Board will reconsider its revocation order.
The Company at June 30, 1995 had the following irrevocable
letters-of-credit secured by various certificates of deposits (CD) as
follows:
Expiration Interest
Holder Amount Date Rate Security
- - ----------------------------- --------- ------------ ---------- -----------
Georgia Self Insurer Guaranty
Trust Fund $ 500,000 10/28/95 7.75% $ 500,000 CD
Comdata Network 100,000 09/04/96 6.68% 100,000 CD
Harold Ives Trucking Company 100,000 09/06/96 7.90% 100,000 CD
------------
$ 700,000
============
A&P Transportation, Inc.
Financial Statements
November 30, 1995
A&P Transportation, Inc.
Index to the Financial Statements
November 30, 1995
Page
Independent Auditors' Report........................ 1
Financial Statements
Balance Sheet.................................. 2
Statements of Operations....................... 3
Statement of Changes in Stockholders' Equity... 4
Statements of Cash Flows....................... 5
Notes to the Financial Statements............. 6-8
Independent Auditors' Report
To the Board of Directors and Stockholders of
A&P Transportation, Inc.
We have audited the accompanying balance sheet of A&P Transportation, Inc. as of
November 30, 1995 and the related statements of operations, changes in
stockholders' equity and cash flows for the years ended November 30, 1995 and
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits 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 audits provide 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 A&P Transportation, Inc. as of
November 30, 1995, and the results of its operations and its cash flows for the
years November 30, 1995 and 1994 in conformity with generally accepted
accounting principles.
Bridgewater, New Jersey
March 1, 1996
A&P Transportation, Inc.
Balance Sheet
November 30, 1995
Assets
Current Assets
Cash and cash equivalents $ 79,268
Accounts receivable, 1,286,991
net of allowance for doubtful accounts of $243,392
Deferred income tax asset 82,754
Income taxes receivable 70,606
Other current assets 431,688
-------------
Total Current Assets 1,951,307
Equipment 589
Other Assets
Loan receivable - stockholder 50,000
Cash value of officers' life insurance 41,196
-------------
Total Assets 2,043,092
=============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 941,262
Note payable 296,492
Due to affiliates 219,503
Escrow payable 116,411
Income taxes payable 86,864
Other accrued liabilities 226,544
-------------
Total Current Liabilities 1,887,076
Escrow payable 71,035
-------------
Total Liabilities 1,958,111
-------------
Stockholders' Equity
Common stock, $1 par value, 1,000 shares authorized 1,000, shares issued,
1,000 shares outstanding
527
Retained earnings 84,454
-------------
Total Stockholders' Equity 84,981
-------------
Total Liabilities and Stockholders' Equity $ 2,043,092
=============
See notes to the financial statements.
A&P Transportation, Inc.
Statements of Operations
Year Ended November 30,
-----------------------------------
1995 1994
--------------- ---------------
Operating Revenues $ 21,704,416 $ 24,045,628
--------------- ---------------
Operating Expenses
Salaries and benefits 3,140,782 2,526,082
Operating expenses and supplies 16,474,643 18,806,935
Operating taxes and licenses 685,743 742,844
Claims and insurance 1,019,436 1,018,771
Communication and utilities 183,495 157,852
General and administrative 221,672 214,131
Depreciation and amortization 2,445 2,445
--------------- ---------------
Total Operating Expenses 21,728,216 23,469,060
--------------- ---------------
Income (Loss) From Operations (23,800) 576,568
--------------- ---------------
Other Income (Expense)
Interest and other income 1,972 160
Interest expense (75,275) (30,203)
--------------- ---------------
Total Other Income (Expense) (73,303) (30,043)
--------------- ---------------
Income (Loss) before income taxes (97,103) 546,525
Provision (benefit) for income taxes (70,929) 190,768
--------------- ---------------
$ (26,174) $ 355,757
Net Income (Loss) =============== ===============
See notes to the financial statements.
A&P Transportation, Inc.
Statement of Changes in Stockholders' Equity
Year Ended November 30, 1995 and 1994
Common Retained
Stock Earnings Total
----------- ------------- ----------
Balance, November 30, 1993 $ 527 $ (245,129) $ (244,602)
Net income - 355,757 355,757
----------- ------------ ----------
Balance, November 30, 1994 527 110,628 111,155
Net (loss) - (26,174) (26,174)
----------- ------------ ----------
$ 527 $ 84,454 $ 84,981
Balance, November 30, 1995
=========== ============= ==========
See notes to the financial statements.
A&P Transportation, Inc.
Statements of Cash Flows
Year Ended November 30,
-----------------------------------
1995 1994
--------------- ---------------
Reconciliation of Net Income to Net Cash Provided by Operating Activities
Net Income (Loss) $ (26,174) $ 355,757
--------------- ---------------
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
Activities
Depreciation and amortization 2,445 2,445
Deferred income tax provision (benefit) 34,596 (67,931)
Decrease (increase) in accounts receivable and other assets 522,365 (431,377)
Increase in accounts payable and other liabilities 309,818 305,885
Increase (decrease) in income taxes payable (111,268) 337,686
--------------- ---------------
Total Adjustments 757,956 146,708
--------------- ---------------
Net Cash Provided by Operating Activities 731,782 502,465
--------------- ---------------
Cash Flows From Investing Activities:
Loans to stockholders (50,000) -
--------------- ---------------
Net Cash Used in Investing Activities (50,000) -
--------------- ---------------
Cash Flows From Financing Activities:
Proceeds from escrow payments 32,996 78,529
Proceeds from new borrowings - 300,617
Principal payments on notes payable (4,125) -
Advances to affiliates (706,452) (806,544)
--------------- ---------------
Net Cash Used in Financing Activities (677,581) (427,398)
--------------- ---------------
Net Increase in Cash and Equivalents 4,201 75,067
Cash and Cash Equivalents - Beginning of Year 75,067 -
--------------- ---------------
Cash and Cash Equivalents - End of Year $ 79,268 $ 75,067
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for
Interest $ 75,785 $ 29,145
Income taxes $ 163,702 $ -
See notes to the financial statements.
A&P Transportation, Inc.
Notes to the Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
The Company was incorporated on November 13, 1984 under the laws of the
State of Georgia, and provides motor freight transportation with
operating rights throughout all forty-eight continental states.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
Equipment
Equipment is carried at cost less an allowance for depreciation. Major
additions and improvements are capitalized while maintenance and
repairs that do not improve or extend the lives of the respective
assets are charged to expense as incurred. Depreciation is principally
computed on the straight-line method for financial statement purposes
and various accelerated methods for income tax purposes over the
estimated useful lives of the related assets.
Income Taxes
Deferred income taxes are determined based upon temporary differences
between the financial and tax basis of assets and liabilities at the
balance sheet date which will result in taxable or deductible amounts
in future years, as affected by tax rates under existing laws. The
differences relate primarily to the allowance for doubtful accounts,
which is deductible for financial statement purposes but not for income
tax purposes.
Revenue Recognition
Revenues consist principally of freight revenues. Freight revenues are
recognized as earned when freight is received from the shipper.
Estimated costs are accrued at the end of each reporting period.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash accounts in one financial institution.
Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC)
for up to $100,000. At November 30, 1995, the Company's uninsured cash
balances total $126,607.
EQUIPMENT
Equipment consists of the following:
Furniture and office equipment $ 23,329
---------------
Total 23,329
Accumulated depreciation and amortization 22,740
---------------
Net Book Value $ 589
===============
A&P Transportation, Inc.
Notes to the Financial Statements
NOTE PAYABLE
The note payable represents a factoring agreement wherein the Company
finances selected accounts receivable with interest at 13.65% of the unpaid
balance plus a per invoice charge. Collateral for this note includes
accounts receivable, inventory, equipment and fixtures and the Company's
operating authority. There are guarantees of the note by a stockholder and
the Company's two affiliates.
PROVISION FOR INCOME TAXES
The Company's provision for income taxes differs from applying the
statutory U.S. Federal income tax rate to income before taxes. The primary
differences result from providing for state income taxes and from deducting
certain expenses for financial statement purposes but not for federal
income tax purposes.
The income tax provision (benefit) is comprised of the following:
Federal State Total
------------ ----------- -----------
Year Ended November 30, 1995
Current $ (106,702) $ 1,177 $ (105,525)
Deferred 34,596 - 34,596
------------ ----------- -----------
(72,106) 1,177 (70,929)
============ =========== ===========
Year Ended November 30, 1994
Current 253,981 4,718 258,699
Deferred (67,931) - (67,931)
------------ ----------- -----------
$ 186,050 $ 4,718 $ 190,768
============ =========== ===========
RELATED PARTY TRANSACTIONS
The Company leases most of its equipment and purchases fuel, maintenance
and other goods and services from an affiliate. In addition, the affiliate
is the Company's largest customer, representing 31% of its revenue.
Included in the Company's revenues is $6,800,000 for services provided to
affiliated companies. Expenses paid to this affiliate totaled $6,605,495
for goods and services as described above. Amounts due to the affiliate was
$219,503 at November 30, 1995.
The Company leases warehouse and terminal facilities in Calhoun, Georgia
from its affiliate under no formal lease agreement. Rent expense for the
years ended November 30, 1995 and November 30, 1994 aggregated $24,000 in
each year.
EMPLOYEE BENEFIT PLAN
All active full-time employees are offered a comprehensive health benefit
plan (the Plan). Employees contribute a specified amount each month
determined periodically by the Plan's insurance company. The employer makes
contributions to the Plan to cover medical claims to be paid in excess of
employees' contributions. The Plan maintains a group excess loss insurance
policy that pays for medical claims of any participant whose medical claims
exceed $50,000 for any year up to a maximum benefit of $500,000. The Plan
pays for all qualified medical claims not paid for by the insurance policy.
The amount of contributions paid by the Company were $72,118 and $87,906
for the years ended November 30, 1995 and 1994, respectively.
A&P Transportation, Inc.
Notes to the Financial Statements
COMMITMENTS AND CONTINGENCIES
The Company has elected to self insure its workers' compensation insurance.
An excess insurance policy has been purchased to limit its liability to a
maximum of $250,000 per claim and $1,000,000 in the aggregate. The
Company's affiliate has established an irrevocable standby letter-of-credit
up to the aggregate amount of $500,000 with the Georgia Self-Insurer
Guaranty Trust Fund, valid through October 28, 1996 which is automatically
extended for one additional period of one year from each future expiration
date unless otherwise elected. In October 1995, the Georgia State Board of
Workers Compensation (the Board) revoked the Company's privilege to
self-insure due to failure to comply with state statutes requiring the
furnishing of required financial information. This revocation has been
extended pending receipt of such required financial information, at which
time the Board will reconsider its revocation order.
As of November 30, 1995, the Federal Highway Administration ("FHWA") had
outstanding administrative claims in the approximate amount of $82,000. The
factual and legal basis for a number of the alleged violations giving rise
to the claims is disputed by management. A hearing has been demanded on
these and management has indicated its intent to defend itself
aggressively.
The Company files returns and pays state corporate income tax and/or
franchise tax in various states. Management believes they file state
returns in all required states. Occasionally an issue may arise where it is
necessary to file in an additional state. Management then files the return
and pays the tax as required.
In the ordinary course of conducting business, the Company becomes involved
in lawsuits, administrative and other proceedings. Some of these
proceedings may result in fines, penalties, or judgments being assessed
against the Company which from time-to-time, may have an impact on its
business and financial condition. Pending proceedings in the aggregate,
could have a material adverse effect on its business or financial
condition.
Chase Brokerage, Inc.
Financial Statements
November 30, 1995
Chase Brokerage, Inc.
Index to the Financial Statements
November 30, 1995
Page
Accountants' Compilation Report.......................... 1
Financial Statements
Balance Sheet....................................... 2
Statements of Income and Retained Earnings.......... 3
Statements of Cash Flows............................ 4
Notes to the Financial Statements................... 5-6
Accountants' Report on Additional Information............ 7
Additional Information
Schedules of General and Administrative Expenses.... 8
To the Board of Directors and Stockholders of
Chase Brokerage, Inc.
We have compiled the accompanying balance sheet of Chase Brokerage, Inc. as of
November 30, 1995 and the related statements of income and retained earnings and
cash flows for the years ended November 30, 1995 and 1994 in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements, and, accordingly, do not express
an opinion or any other form of assurance on them.
Bridgewater, New Jersey
March 1, 1996
Chase Brokerage, Inc.
Balance Sheet
November 30, 1995
Assets
Current Assets
Accounts receivable $ 477,948
Advances to drivers 72,498
---------------
Total Current Assets 550,446
Property and equipment 17,968
Loans to stockholders 241,793
---------------
Total Assets 810,207
===============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 219,933
Loan from affiliate 105,995
Income taxes payable 35,539
---------------
Total Current Liabilities 361,467
---------------
Deferred income tax liabilities 5,288
---------------
Stockholders' Equity
Common stock, $1 par value,
1,000 shares authorized, 1,000 shares
issued and outstanding 1,000
Retained earnings 442,452
---------------
Total Stockholders' Equity 443,452
---------------
Total Liabilities and Stockholders' Equity $ 810,207
===============
See notes to the financial statements and accountants' report.
Chase Brokerage, Inc.
Statements of Income and Retained Earnings
Year Ended November 30,
-----------------------------------
1995 1994
--------------- ---------------
Revenue $ 4,851,241 $ 2,493,528
Cost of sales 3,817,180 1,802,947
--------------- ---------------
Gross Profit 1,034,061 690,581
--------------- ---------------
Operating Expenses 727,871 318,335
--------------- ---------------
Income From Operations 306,190 372,246
Other Income (Expense)
Interest expense (4,085) -
--------------- ---------------
Income Before Income Taxes 302,105 372,246
Provision for income taxes 127,223 129,337
--------------- ---------------
Net Income $ 174,882 $ 242,909
=============== ===============
Retained Earnings at Beginning of Year $ 267,570 $ 24,661
Net income above 174,882 242,909
--------------- ---------------
Retained Earnings at End of Year $ 442,452 $ 267,570
=============== ===============
See notes to the financial statements and accountants' report.
Chase Brokerage, Inc.
Statements of Cash Flows
Year Ended November 30,
-----------------------------------
1995 1994
--------------- ---------------
Cash Flows From Operating Activities
Net Income $ 174,882 $ 242,909
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by
Operating Activities
Depreciation 6,993 2,292
Deferred income taxes 5,288 -
Decreases (Increases) in Assets
Accounts receivable (103,603) (216,354)
Loans to stockholders (81,906) (159,889)
Advances to drivers (72,498) -
Increases (Decreases) in Liabilities
Accounts payable and accrued expenses 105,219 98,142
Income taxes payable (141,773) 129,338
--------------- ---------------
Net Cash Provided (Used) by Operating Activities (107,398) 96,438
--------------- ---------------
Cash Flows From Investing Activities
Purchases of property and equipment (2,947) (20,089)
--------------- ---------------
Net Cash (Used) by Investing Activities (2,947) (20,089)
--------------- ---------------
Cash Flows From Financing Activities
Loans from affiliate (413,401) 447,397
--------------- ---------------
Net Cash Provided (Used) by Financing Activities (413,401) 447,397
--------------- ---------------
Net Increase (Decrease) in Cash (523,746) 523,746
Cash at Beginning of Year 523,746 -
--------------- ---------------
Cash at End of Year $ - $ 523,746
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 262,522 $ -
Interest $ 4,085 $ -
See notes to the financial statements and accountants' report.
Chase Brokerage, Inc.
Notes to the Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization Chase Brokerage, Inc. (the Company) is a motor
carrier freight broker of farm produce with brokerage rights
throughout the forty-eight contiguous states.
Depreciation and Amortization
The cost of property and equipment is depreciated for financial
reporting purposes using the double-declining balance method over the
estimated useful lives of the assets which is 5-7 years. Repairs and
maintenance expenditures which do not extend the useful lives of the
related assets are expensed as incurred.
For federal income tax purposes, depreciation is computed under
accelerated methods over the asset's class life.
Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the bases of
depreciable property and allowance for doubtful accounts for financial
and income 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.
PROPERTY AND EQUIPMENT
Property and equipment at cost, less accumulated depreciation consists of
the following:
Furniture and equipment $ 31,681
Less accumulated depreciation 13,713
---------------
Total $ 17,968
===============
Depreciation expense charged to operations was $6,993 and $2,292 in 1995
and 1994, respectively.
LOANS TO STOCKHOLDERS
Loans to stockholders represent unsecured non-interest bearing demand loans
to certain stockholders.
LOAN FROM AFFILIATE
Loan from affiliate represents an unsecured non-interest bearing demand
loan from an affiliated company.
See accountants' report on the financial statements.
Chase Brokerage, Inc.
Notes to the Financial Statements
INCOME TAXES
The income tax provision is comprised of the following:
Federal State Total
----------- ------------ ------------
Year Ended November 30, 1995
Current $ 104,155 $ 17,780 $ 121,935
Deferred 4,452 836 5,288
----------- ------------- ------------
$ 108,607 $ 18,616 $ 127,223
=========== ============= ============
Year Ended November 30, 1994
Current $ 110,623 $ 18,714 $ 129,337
Deferred - - -
----------- ------------- ------------
$ 110,623 $ 18,714 $ 129,337
=========== =============== ============
Deferred taxes are recognized for temporary differences between the basis
of assets and liabilities for financial statement and income tax purposes.
The differences relate primarily to depreciable assets (using accelerated
depreciation methods for income tax purposes).
The Company's provision for income taxes differs from applying the
statutory U.S. federal income tax rate to income before income taxes. The
primary differences result from providing for state income taxes and from
deducting certain expenses for financial statement purposes but not for
federal income tax purposes.
RELATED PARTY TRANSACTIONS
The Company purchases a portion of its transportation from an affiliated
company. Purchased transportation costs amounted to $322,009 and $61,586
during 1995 and 1994, respectively.
See accountants' report on the financial statements.
Accountants' Report on Additional Information
To the Board of Directors and Stockholders of
Chase Brokerage, Inc.
Our report on our compilations of the basic financial statements of Chase
Brokerage, Inc. as of November 30, 1995 and for the years ended November 30,
1995 and 1994 appears on page 1. A compilation is limited to presenting in the
form of financial statements information that is the representation of
management. We have not audited or reviewed the financial statements and,
accordingly, do not express an opinion or any other form of assurance on them.
The additional information on the following page is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. This data has been summarized from the Company's records, without
audit or review. Accordingly, we do not express an opinion or any other form of
assurance on the additional information.
Bridgewater, New Jersey
March 1, 1996
Chase Brokerage, Inc.
Schedules of General and Administrative Expenses
November 30,
--------------------------------
1995 1994
-------------- ------------
Repairs and maintenance $ 7,704 $ 18,740
Office supplies and expense 19,799 8,818
Broker fees 412,186 189,969
Claims 32,020 696
Travel 4,611 3,407
Communications 89,377 35,175
Depreciation 6,993 2,292
Rent 20,721 11,958
Professional fees 66,415 41,305
Bad debts 41,696 -
Penalties 13,973 1,395
Advertising 5,356 3,801
Miscellaneous 7,020 779
-------------- ------------
$ 727,871 $ 318,335
Total General and Administrative Expenses
============== ============
See accountants' report on the additional information.
Carpet Transport, Inc.
Balance Sheet
March 31, 1996
(Unaudited)
Current Assets
Cash and cash equivalents $ 333,779
Restricted cash 700,000
Trade accounts receivable, net of allowance for doubtful accounts of $406,186 5,580,123
Trade accounts receivable - affiliates 1,629,998
Notes receivable - stockholder 437,472
Notes receivable, current portion 743,919
Deferred tax asset 1,061,174
Other current assets 250,727
---------------
Total Current Assets 10,737,192
---------------
Property, plant and equipment, net of accumulated depreciation 47,068,000
---------------
Other Assets
Notes receivable 838,888
Cash value of officers' life insurance 611,080
Other 93,584
---------------
Total Other Assets 1,543,552
---------------
Total Assets 59,348,744
===============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 4,275,623
Accrued expenses 2,191,265
Current maturities of long-term debt 1,117,746
Current maturities of capital lease obligations 8,151,112
Income taxes payable 1,324,944
---------------
Total Current Liabilities 17,060,690
Long-Term Debt, excluding current maturities 2,608,075
Capital Lease Obligations 32,604,446
---------------
Total Liabilities 52,273,211
---------------
Stockholders' Equity
Common stock, $100 par value, 50 shares authorized, 6 shares issued, 4 shares outstanding 600
Retained earnings 7,159,183
Treasury stock, 2 shares, at cost (84,250)
---------------
Total Stockholders' Equity 7,075,533
---------------
Total Liabilities and Stockholders' Equity $ 59,348,744
===============
Carpet Transport, Inc.
Statements of Operations
Nine Months Ended March 31,
-----------------------------------
1996 1995
--------------- ---------------
(Unaudited) (Unaudited)
Operating Revenues $ 41,931,357 $ 46,453,598
--------------- ---------------
Operating Expenses
Purchased transportation 1,461,179 6,764,625
Salaries and benefits 12,835,622 10,676,386
Operating expenses and supplies 16,252,395 13,253,480
Operating taxes and licenses 908,476 1,529,583
Claims and insurance 2,507,085 2,626,031
Communication and utilities 989,935 863,580
General and administrative 2,291,387 2,644,444
Depreciation and amortization 6,708,162 6,556,889
--------------- ---------------
Total Operating Expenses 43,954,241 44,915,018
--------------- ---------------
Income (Loss) From Operations (2,022,884) 1,538,580
--------------- ---------------
Other Income (Expense)
Interest and other income 255,979 392,283
Interest expense (2,910,058) (2,236,537)
Gain on sale of equipment 641,051 1,862,394
Gain on sale of land 90,050 118,071
--------------- ---------------
Total Other Income (Expense) (1,922,978) 136,211
--------------- ---------------
Income (loss) before income taxes (3,945,862) 1,674,791
Provision for (benefit from) income taxes (1,578,779) 786,859
--------------- ---------------
Net Income (Loss) $ (2,367,083) $ 887,932
=============== ===============
Carpet Transport, Inc.
Statements of Cash Flows
Nine Months Ended March 31,
-----------------------------------
1996 1995
--------------- ---------------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities
Net Income (Loss) $ (2,367,083) $ 887,932
--------------- ---------------
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by
Operating Activities
Depreciation and amortization 6,708,162 6,556,888
Gain on sale of property and equipment and land (731,101) (1,862,393)
Deferred income taxes (1,579,186) (672,303)
Decrease (increase) in accounts receivable and other assets 1,758,413 (1,636,520)
Increase in accounts payable and other liabilities 2,882,699 391,872
(Decrease) increase in taxes payable (370,998) 823,271
--------------- ---------------
Total Adjustments 8,667,989 3,600,815
--------------- ---------------
Net Cash Provided by Operating Activities 6,300,906 4,488,747
--------------- ---------------
Cash Flows From Investing Activities:
Principal payments received on notes receivable 291,460 643,831
Proceeds from sale of property and equipment 1,495,735 7,926,242
Purchases of property and equipment (4,920,187) (13,078,902)
Loans made to shareholders - (15,377)
Payments received on loans to shareholders 104,885 -
--------------- ---------------
Net Cash (Used) by Investing Activities (3,028,107) (4,524,206)
--------------- ---------------
Cash Flows From Financing Activities:
Proceeds from new borrowings 234,587 8,068,784
Principal payments on notes payable (792,503) (1,881,044)
Principal payments on obligations under capital leases (2,578,322) (6,103,486)
--------------- ---------------
Net Cash Provided (Used) by Financing Activities (3,136,238) 84,254
--------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted
Cash 136,561 48,795
Cash and Cash Equivalents, Including Restricted Cash - June 30 897,218 832,158
--------------- ---------------
Cash and Cash Equivalents, Including Restricted Cash - March 31 $ 1,033,779 $ 880,953
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for
Interest $ 2,910,058 $ 2,236,537
=============== ===============
Income taxes $ 786,859 $ 529,660
=============== ===============
A&P Transportation, Inc.
Balance Sheet
March 31, 1996
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 4,429
Accounts receivable, net of allowance for doubtful accounts of $45,312 901,308
Other current assets 295,888
---------------
Total Current Assets 1,201,625
Other Assets
Loan receivable - stockholder 50,000
Cash value of officers' life insurance 41,196
---------------
Total Assets 1,292,821
===============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 820,245
Note payable 339,310
Due to affiliates 704,932
Escrow payable 64,370
Income taxes payable 10,634
Deferred taxes payable 82,754
---------------
Total Current Liabilities 2,022,245
Escrow payable 51,363
---------------
Total Liabilities 2,073,608
---------------
Stockholders' Equity (Deficit)
Common stock, $1 par value, 1,000 shares authorized 527 shares issued and
outstanding 527
Retained earnings (deficit) (781,314)
---------------
Total Stockholders' Equity (Deficit) (780,787)
---------------
Total Liabilities and Stockholders' Equity (Deficit) $ 1,292,821
===============
A&P Transportation, Inc.
Statements of Operations
Four Months Ended March 31,
-----------------------------------
1996 1995
--------------- ---------------
(Unaudited) (Unaudited)
Operating Revenues $ 5,739,295 $ 7,234,806
--------------- ---------------
Operating Expenses
Salaries and benefits 237,405 1,046,928
Operating expenses and supplies 3,113,423 5,491,548
Operating taxes and licenses 44,516 228,581
Claims and insurance 29,956 339,812
Communication and utilities - 61,165
General and administrative 31,499 73,891
Depreciation and amortization - 815
--------------- ---------------
Total Operating Expenses 3,456,799 7,242,740
--------------- ---------------
Income (Loss) From Operations 2,282,496 (7,934)
--------------- ---------------
Other Income (Expense)
Interest and other income 285 658
Interest expense (12,675) (25,092)
--------------- ---------------
Total Other Income (Expense) (12,390) (24,434)
--------------- ---------------
Income (Loss) before income taxes 2,270,106 (32,368)
Provision (benefit) for income taxes 908,043 (23,643)
--------------- ---------------
$ 1,362,063 $ (8,725)
Net Income (Loss)
=============== ===============
A&P Transportation, Inc.
Statements of Cash Flows
Four Months Ended March 31,
-----------------------------------
1996 1995
--------------- ---------------
(Unaudited) (Unaudited)
Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities
Net Income (Loss) $ 1,362,063 $ (8,725)
--------------- ---------------
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by
Operating Activities
Depreciation and amortization - 815
Deferred income tax provision (61,036) 11,532
(Increase) decrease in accounts receivable and other assets (522,072) 174,122
Increase (decrease) in accounts payable and other liabilities (121,017) 103,272
(Decrease) in income taxes payable (5,624) (37,089)
--------------- ---------------
Total Adjustments (709,749) 252,652
--------------- ---------------
Net Cash Provided by Operating Activities 652,314 243,927
--------------- ---------------
Cash Flows From Investing Activities
Loans to stockholders - (16,667)
--------------- ---------------
Net Cash Used by Investing Activities - (16,667)
--------------- ---------------
Cash Flows From Financing Activities:
Payment on escrow account (71,713) -
Proceeds from escrow payments - 10,999
Proceeds from new borrowings 42,818 -
Principal payments on notes payable - (1,375)
Advances to affiliates (698,258) (235,484)
--------------- ---------------
Net Cash (Used) by Financing Activities (727,153) (225,860)
--------------- ---------------
Net (Decrease) Increase in Cash and Equivalents (74,839) 1,400
Cash - November 30 79,268 75,067
--------------- ---------------
Cash - March 31 $ 4,429 $ 76,467
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for
Interest $ 12,675 $ 25,262
=============== ===============
Chase Brokerage, Inc.
Balance Sheet
March 31, 1996
(Unaudited)
Assets
Current Assets
Trade accounts receivable $ 432,921
Accounts receivable - affiliates 9,134
Other current assets 116,714
---------------
Total Current Assets 558,769
Property and equipment, net of accumulated depreciation 18,264
Loans to stockholders 241,793
---------------
Total Assets 818,826
===============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 162,404
Income taxes payable 4,268
---------------
Total Current Liabilities 166,672
---------------
Stockholders' Equity
Common stock, $1 par value, 1,000 shares authorized,
issued and outstanding 1,000
Retained earnings 651,154
---------------
Total Stockholders' Equity 652,154
---------------
Total Liabilities and Stockholders' Equity $ 818,826
===============
Chase Brokerage, Inc.
Statements of Operations
Four Months Ended March 31,
-----------------------------------
1996 1995
--------------- ---------------
(Unaudited) (Unaudited)
Operating Revenues $ 1,905,829 $ 1,617,081
--------------- ---------------
Operating Expenses
Purchased transportation 1,426,045 1,272,394
Operating Expenses and Supplies 176,533 242,624
Operating taxes and licenses 30 -
Claims and insurance 9,419 -
General and administrative 46,000 -
Depreciation and amortization 2,108 -
--------------- ---------------
Total Operating Expenses 1,660,135 1,515,018
--------------- ---------------
Income From Operations 245,694 102,063
Other Expense
Interest expense 5,322 1,362
--------------- ---------------
Income Before Income Taxes 240,372 100,701
Provision for income taxes 96,149 42,407
--------------- ---------------
$ 144,223 $ 58,294
Net Income
=============== ===============
Chase Brokerage, Inc.
Statements of Cash Flows
Four Months Ended March 31,
-----------------------------------
1996 1995
--------------- ---------------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities
Net Income $ 144,223 $ 58,294
--------------- ---------------
Adjustments to Reconcile Net Income to Net Cash (Used) by
Operating Activities
Depreciation 2,108 2,331
Deferred income taxes (5,288) 1,763
Decreases (Increases) in Assets
Accounts receivable and other assets (8,323) (34,534)
Loans to stockholders - (27,302)
Advances to drivers - (24,166)
Increases (Decreases) in Liabilities
Accounts payable and accrued expenses 6,950 35,073
Income taxes payable (31,271) (47,258)
--------------- ---------------
Net Cash Provided (Used) by Operating Activities 108,399 (35,799)
--------------- ---------------
Cash Flows From Investing Activities
Purchases of property and equipment (2,404) (982)
--------------- ---------------
Net Cash (Used) by Investing Activities (2,404) (982)
--------------- ---------------
Cash Flows From Financing Activities
Loans from affiliate (105,995) (137,800)
--------------- ---------------
Net Cash (Used) by Financing Activities (105,995) (137,800)
--------------- ---------------
Net (Decrease) in Cash - (174,581)
Cash - November 30 - 523,746
--------------- ---------------
Cash - March 31 $ - $ 349,165
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 5,322 $ 1,362
=============== ===============
Income Taxes $ - $ 87,507
=============== ===============
Pro Forma Combined Condensed Financial Information
The following unaudited pro forma combined condensed financial information
presents the Pro Forma Combined Condensed Balance Sheet of Continental American
Transportation, Inc. and its wholly owned subsidiaries, Blue Mack Transport,
Inc. and HMX, Inc. (CAT) and Carpet Transport, Inc. (CTI), A&P Transportation,
Inc. (A&P) and Chase Brokerage, Inc. (Chase) at March 31, 1996 giving effect to
the February 29, 1996 Restated Stock and Assets Purchase Agreement as if it had
been consummated at that date. Also presented is the Pro Forma Combined
Condensed Statement of Operations for the year ended June 30, 1995 giving effect
to the Restated Stock and Assets Purchase Agreement as if it was consummated as
of July 1, 1994. The unaudited pro forma information is based upon the
historical financial information of CAT, CTI, A&P and Chase after giving effect
to the Restated Stock and Assets Purchase Agreement. The transaction is
accounted for as a direct acquisition whereas CAT is the acquiror and CTI, A&P
and Chase are the acquirees and is based upon the adjustments contained in the
accompanying notes to the Pro Forma Combined Condensed Financial Statements.
The unaudited pro forma information has been prepared by CAT and Subsidiaries
management based upon the historical financial statements and related notes
thereto of CAT, CTI, A&P and Chase incorporated herein by reference. The
unaudited pro forma information should be read in conjunction with such
historical financial statements and notes. The Pro Forma Combined Condensed
Statement of Operations is not necessarily indicative of operating results which
would have been achieved had the Restated Stock and Assets Purchase Agreement
been consummated as of the beginning of the period for which such data is
presented and should not be construed as being representative of future periods.
Continental American Transport, Inc. and Subsidiaries, CTI, A&P and Chase
Pro Forma Combined Condensed Balance Sheet
March 31, 1996
(Unaudited)
Pro-Forma Pro-Forma
CAT CTI A&P Chase Adjustments Combined
---------- ----------- ----------- ---------- ------------- ------------
Assets
Current Assets
Cash $ 480 $ 333,779 $ 4,429 $ - $ - $ 338,688
Restricted cash - 700,000 - - - 700,000
Trade accounts receivable 1,041,951 5,580,123 901,308 432,921 - 7,956,303
Trade accounts receivable -
affiliates - 1,629,998 - 9,134 - 1,639,132
Notes receivable - stockholder 64,500 437,472 50,000 241,793 (200,000)(A)
(496,578)(A) 97,187
Notes receivable - current portion - 743,919 - - - 743,919
Parts inventory 306,179 - - - - 306,179
Deferrred tax asset - 1,061,174 - - - 1,061,174
Other current assets 242,028 250,727 295,888 116,714 - 905,357
---------- ------------ ------------ ----------- ------------- ------------
Total Current Assets 1,655,138 10,737,192 1,251,625 800,562 (696,578) 13,747,939
---------- ------------ ------------ ----------- ------------- ------------
Property and equipment, net of
accumulated depreciation 4,334,093 47,068,000 - 18,264 7,290,000 (B)
6,955,419 (C)
Organization cost, net of accumulated (100,000)(A) 65,565,776
amortization 2,470 - - - - 2,470
Other Assets
Goodwill 208,000 - - - - 208,000
Deferred charges 163,706 - - - - 163,706
Notes receivable - 838,888 - - - 838,888
Cash value of officers' life
insurance - 611,080 41,196 - (652,276)(A) -
Other - 93,584 - - - 93,584
Investment in CTI, A&P and Chase - - - - 18,438,854 (A)
(18,438,854)(B) -
--------- ------------ ----------- ----------- --------------- -----------
Total Other Assets 371,706 1,543,552 41,196 - (652,276) 1,304,178
--------- ------------ ----------- ----------- --------------- -----------
Total Assets $ 6,363,407 $ 59,348,744 $1,292,821 $ 818,826 $12,796,565 $ 80,620,363
=========== ============= =========== ============ ============ ============
See notes to unaudited pro forma combined condensed financial information.
Pro-Forma Pro-Forma
CAT CTI A&P Chase Adjustments Combined
----------- ---------- ------------ ----------- -------------- -------------
Liabilities and
Stockholders' Equity
Current Liabilities
Convertible subordinated debt $ - $ - $ - $ - $ 700,000 (C) $ 700,000
Notes payable 363,910 - 339,310 - 3,440,000 (A)
4,760,000 (A)
(680,000)(A) 8,223,220
Current maturities of long-term
debt 1,039,059 1,117,746 - - - 2,156,805
Current portion of obligations
under capital leases 204,373 8,151,112 - - - 8,355,485
Due to shareholders 105,813 - - - 50,000 (C) 155,813
Due to related parties (225,000) - 704,932 - - 479,932
Accounts payable 645,121 4,275,623 820,245 162,404 - 5,903,393
Accrued expenses 609,692 2,191,265 - - - 2,800,957
Deferred taxes payable - current 25,000 - 82,754 - - 107,754
Escrow payable - - 64,370 - - 64,370
Income taxes payable - 1,324,944 10,634 4,268 - 1,339,846
----------- ------------ ----------- ----------- ----------- -------------
Total Current Liabilities 2,767,968 17,060,690 2,022,245 166,672 8,270,000 30,287,575
Long-Term Liabilities
Escrow payable - - 51,363 - - 51,363
Security deposits 13,312 - - - - 13,312
Long-term debt, net of current
portion 203,875 2,608,075 - - - 2,811,950
Obligations under capital
leases, long-term 393,543 32,604,446 - - - 32,997,989
Mortgage payable - - - - 7,290,000 (A) 7,290,000
Deferred taxes payable - long-
term 28,000 - - - - 28,000
---------- ------------ ----------- ------------ ------------ -------------
Total Liabilities 3,406,698 52,273,211 2,073,608 166,672 15,560,000 73,480,189
---------- ------------ ----------- ------------ ------------ -------------
Stockholders' Equity
Common stock 1,100 600 527 1,000 (2,127)(B) 1,100
Additional paid-in capital 6,091,057 - - - 1,500,000 (A)
1,476,756 (B) 9,067,813
Demand notes receivable from
sale of stock (1,200,000) - - - - (1,200,000)
Demand notes from exercise of
stock options (77,500) - - - - (77,500)
Retained earnings (deficit) (1,857,948) 7,159,183 (781,314) 651,154 (5,752,314)(B)
(70,000)(C) (651,239)
Treasury stock, 2 shares - (84,250) - - 84,250 (B) -
at cost ---------- ------------ ------------ ------------ -------------- -------------
Total Stockholders' Equity 2,956,709 7,075,533 (780,787) 652,154 (2,763,435) 7,140,174
---------- ------------ -------------- ------------ -------------- -------------
Total Liabilities and $ 6,363,407 $ 59,348,744 $ 1,292,821 $ 818,826 $ 12,796,565 $ 80,620,363
Stockholders' Equity
========== ============ ============== ============ ============== =============
Continental American Transport, Inc. and Subsidiaries, CTI, A&P and Chase
Pro Forma Combined Condensed Statement of Operations
Year Ended June 30, 1995
(Unaudited)
CAT
& Pro-Forma Pro-Forma
Subsidiaries CTI A&P Chase Adjustments Combined
------------- -------------- ------------ ------------ -------------- ------------
Operating Revenues $ - $ 61,938,130 $ 22,679,921 $ 3,868,861 $ - $ 88,486,912
------------- -------------- ------------- ----------- -------------- ------------
Operating Expenses
Purchased transportation - 9,019,499 8,806,375 2,977,916 - 20,803,791
Salaries and benefits - 14,235,181 2,884,657 - - 17,119,838
Operating expenses - 17,671,306 8,640,056 319,596 - 26,630,958
Operating taxes and licenses - 2,039,443 709,535 - - 2,748,978
Claims and insurance - 3,501,374 1,019,159 18,968 - 4,539,501
Communications and utilities - 1,151,439 172,810 66,793 - 1,391,042
General and administrative 171,196 3,525,925 218,530 146,840 70,000(C) 4,062,491
Depreciation and amortization - 8,742,518 2,445 4,251 1,159,237(D) 9,908,451
------------- -------------- ------------- ------------ -------------- ------------
Total Operating Expenses 171,196 59,886,685 22,453,567 3,534,364 1,229,237 87,205,050
------------- -------------- ------------- ------------ -------------- ------------
Income (Loss) From Operations (171,196) 2,051,445 226,354 334,497 (1,229,237) 1,281,862
------------- -------------- ------------- ------------ -------------- ------------
Other Income (Expense)
Interest and other income - 523,044 1,217 - - 524,261
Interest expense - (2,982,049) (56,495) (2,383) - (3,040,927)
Gain on sale of equipment and
land - 2,640,619 - - - 2,640,619
------------- -------------- ------------- ------------- ------------- ------------
Total Other Income
(Expense) - 181,614 (55,278) (2,383) - 123,953
------------- -------------- ------------- ------------- ------------- ------------
Income (loss) before income taxes (171,196) 2,233,059 171,075 332,114 (1,229,237) 1,335,815
(Provision for) benefit from
income taxes - (1,049,145) (38,111) (128,104) 491,695(E) (723,665)
------------- -------------- ------------- ------------- ------------- ------------
Net Income (Loss) $ (171,196) $ 1,183,914 $ 132,964 $ 204,010 $ (737,542) $ 612,150
============= ============== ============ ============= ============= ============
Net Income (Loss) per Common
Share $ (.21) $ .46
============= ============
Weighted Average - of Common
Shares Outstanding 825,668 1,325,668
============= ============
See notes to unaudited pro forma combined condensed financial information.
Notes to the Pro Forma Combined Condensed Financial Information
NOTE A
Pursuant to a Restated Stock and Assets Purchase Agreement effective February
29, 1996, CAT acquired CTI, A&P and Chase in a business combination accounted
for as a purchase. The Pro Forma adjustment to record the acquisition is as
follows:
Short-term notes payable to former 50% shareholder of CTI, A&P and Chase $ 3,440,000
Short-term notes payable to former 50% shareholder of CTI, A&P and Chase 4,760,000
Mortgage payable 7,290,000
CAT common shares issued to former 50% shareholder of CTI, A&P and Chase
(500,000 shares valued at $3 per share) 1,500,000
Notes receivable - former shareholders of CTI, A&P and Chase (not to be repaid) 496,578
Cash surrender values of officers life insurance assumed by former shareholders of
CTI, A&P and Chase 652,276
Assumption of fixed asset ($100,000) and note receivable ($200,000) by former 50%
shareholder of CTI, A&P and Chase 300,000
--------------
Investment in CTI, A&P and Chase $ 18,438,854
==============
NOTE B
The following Pro Forma adjustments are made to reflect estimated fair values of
assets and liabilities acquired and to eliminate CAT's investment in CTI, A&P
and Chase:
CTI, A&P and Chase - net assets at February 29, 1996 $ 5,670,191
(comprised of Common Stock ($2,127),
Retained Earnings ($5,752,314) and Treasury Stock (-$84,250)) Fair value
adjustment:
Increase of carrying amount of property 7,290,000
Increase of carrying amount of equipment 6,955,419
Increase in additional paid-in capital (1,476,756)
--------------
$ 18,438,854
Investment in CTI, A&P and Chase
==============
NOTE C
Convertible subordinated debt was issued in the amount of $700,000 (less a
$70,000 commission expense) as well as a $50,000 loan from a shareholder of CAT.
The resulting $680,000 of proceeds was used to pay a portion of the notes
payable to a former 50% shareholder of CTI, A&P and Chase.
NOTE D
The increase in depreciation expense resulting from the increase in the carrying
amount of Property and Equipment using the straight-line method over a useful
life of 6 years amounted to $1,159,237.
NOTE E
Decrease in income taxes attributable to NOTE C and D using a 40% estimated
statutory rate ($491,695).
catform4-8-K
amend no.2 re financial Exhibits