UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
April 30, 1999
Date of Report (Date of earliest event reported)
CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-26954 22-3350958
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
380 Allwood Road, Clifton, New Jersey 07012
(Address of principal (Zip Code)
executive offices)
(Registrant's telephone number, including area code) (973) 471-1005
NOT APPLICABLE
(Former name or former address, if changed since last report.)
ITEM 5. Other Events
On April 30, 1999, Consolidated Delivery & Logistics, Inc. ("CDL")
entered into and consummated an asset purchase agreement (the "Purchase
Agreement") with its subsidiary, Clayton/National Courier Systems, Inc.
("Clayton/National") and Westwind Express, Inc., Logistics Delivery
Systems, Inc., Fastrak Delivery Systems, Inc., Sierra Delivery
Services, Inc., and Steven S. Keihner (collectively, "Westwind"),
whereby Clayton/National purchased certain of the assets and
liabilities of Westwind.
This acquisition was previously reported under Item 2. The Form 8-K
is being amended to report the acquisition under Item 5, as the
acquisition referred to above does not fall within the requirements
for an Item 2 disclosure. Financial statements of the acquired entity
are not required, but certain financial information is voluntarily
provided as noted below.
The purchase price was comprised of approximately $2,650,000 in cash
excluding estimated direct acquisition costs, $1,680,000 in various 7%
subordinated notes (the "Notes") and 149,533 shares of CDL's common
stock at $3.21 per share. The Notes are comprised of two-year notes
due April 30, 2001 with a total principal amount of $1,200,000 and
three-year notes due April 30, 2002 with a total principal amount of
$480,000. Interest on the Notes is payable quarterly commencing July
31, 1999. The Notes are subordinate to all existing or future senior
debt of CDL. In addition, a contingent earn out in the aggregate
amount of up to $700,000 is payable based on the achievement of
certain financial goals during the two year period following the
closing. The earn out is payable 60% in cash and 40% in one year
promissory notes bearing interest at a rate of 7% per annum having
similar terms as the Notes referred to above. CDL financed the
acquisition using proceeds from its revolving credit facility with
First Union Commercial Corporation.
The description above of the Purchase Agreement and the Note is a
summary and does not purport to be complete. Reference should be made
to the copies of such documents filed as exhibits to this report for a
complete description of their terms.
ITEM 7. Financial Statements and Exhibits
a. Financial Statements of Business Acquired.
Audited combined financial statements for Westwind Express, Inc.,
Fastrak Delivery Systems, Inc., Sierra Delivery Services, Inc. and
Logistics Delivery Systems, Inc. (collectively "Westwind") as of
December 31, 1998 and 1997.
Westwind Combined Balance Sheets as of December 31, 1998 and 1997 and
the related Combined Statements of Income and Retained Earnings and
Cash Flows for the years ended December 31, 1998 and 1997.
b. Pro Forma Financial Information
Pro Forma Financial Information is not required.
c. Exhibits
10.1*Purchase Agreement dated April 30, 1999 by and among Consolidated
Delivery & Logistics, Inc., Clayton/National Courier Systems,
Inc., Westwind Express, Inc., Logistics Delivery Systems, Inc.,
Fastrak Delivery Systems, Inc. and Sierra Delivery Services, Inc.
and Steven S. Keihner.
10.2*Form of 7% Subordinated Notes Due April 30, 2001 and April 30,
2002.
99.1*Press Release issued May 6, 1999 regarding the Westwind
acquisition .
* filed previously
WESTWIND EXPRESS, INC. AND AFFILIATES
FINANCIAL REPORT
For the years ended December 31, 1998 and 1997
TABLE OF CONTENTS
PAGE
Independent auditors' report 1
Combined financial statements:
Balance sheets 2
Statements of income and retained earnings 3
Statements of cash flows 4
Notes to financial statements 5-10
Independent Auditors' Report
The Board of Directors
Westwind Express, Inc.
Newbury Park, California
We have audited the accompanying combined balance sheets of Westwind Express,
Inc., Fastrak Delivery Systems, Inc., Sierra Delivery Services, Inc. and
Logistics Delivery Systems, Inc. (the "Companies") as of December 31, 1998 and
1997, and the related combined statements of income and retained earnings, and
cash flows for the years then ended . These combined financial statements are
the responsibility of the Companies' management. Our responsibility is to
express an opinion on these combined 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 audits to obtain
reasonable assurance about whether the combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Companies as of
December 31, 1998 and 1997, and the results of their operations and cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ GUMBINER, SAVETT, FINKEL, FINGLESON & ROSE, INC.
Santa Monica, California
May 6, 1999
WESTWIND EXPRESS, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
As of December 31, 1998 and 1997
(Note 10)
ASSETS
1998 1997
-------------- --------------
CURRENT ASSETS
Cash (Note 2) $ 486,260 $ 459,789
Accounts receivable (Note 2) 347,558 286,941
Prepayments and other current assets 69,077 52,183
Due from officer (Note 3) 52,288 134,731
------------ -----------
TOTAL CURRENT ASSETS 955,183 933,644
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation (Notes 4 and 6) 1,029,333 726,905
LEASED PROPERTY UNDER CAPITAL LEASES,
net of accumulated amortization (Note 5) 114,379 171,000
----------- ----------
TOTAL ASSETS $2,098,895 $1,831,549
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current obligations under capital leases (Note 5) 27,295 56,867
Current portion of long-term debt (Note 6) 235,491 138,284
Accounts payable and accrued expenses 49,826 71,216
Accrued salaries and payroll taxes payable 183,073 125,875
---------- ---------
TOTAL CURRENT LIABILITIES 495,685 392,242
---------- ---------
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES (Note 5) - 37,077
---------- ---------
LONG-TERM DEBT (Note 6) 528,086 425,608
---------- ---------
STOCKHOLDER'S EQUITY
Common stock (Note 9) 37,093 37,093
Retained earnings 1,038,031 939,529
--------- ----------
TOTAL STOCKHOLDER'S EQUITY 1,075,124 976,622
--------- ----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,098,895 $1,831,549
========= =========
The accompanying notes are an integral part of these statements.
WESTWIND EXPRESS, INC. AND AFFILIATES
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the years ended December 31, 1998 and 1997
1998 1997
----------- ----------
REVENUE (Note 2) $ 6,844,653 $ 6,263,459
COST OF REVENUE 4,583,325 4,047,703
--------- ---------
GROSS PROFIT 2,261,328 2,215,756
--------- ---------
OPERATING EXPENSES
Selling, general and administrative 1,294,509 1,053,227
Depreciation and amortization 278,533 252,044
---------- ----------
TOTAL OPERATING EXPENSES 1,573,042 1,305,271
--------- ---------
OPERATING PROFIT 688,286 910,485
INTEREST EXPENSE (Notes 5 and 6) 45,202 62,854
----------- ----------
INCOME BEFORE TAXES
ON INCOME 643,084 847,631
TAXES ON INCOME 7,556 14,276
------------ ----------
NET INCOME 635,528 833,355
RETAINED EARNINGS - BEGINNING 939,529 835,759
OF YEAR
DIVIDENDS (537,026) (729,585)
---------- ----------
RETAINED EARNINGS - END OF YEAR $ 1,038,031 $ 939,529
========= ==========
The accompanying notes are an integral part of these statements.
WESTWIND EXPRESS, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998 and 1997
1998 1997
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 635,528 $ 833,355
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 278,533 252,044
Loss (gain) on sale of property and equipment (682) 8,188
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (60,617) 171,760
(Increase) decrease in prepayments and other
current assets (16,894) 29,269
Decrease in accounts payable and accrued expenses (21,390) (994)
Increase in accrued salaries and payroll taxes
payable 57,198 20,805
-------- -----------
Net cash provided by operating activities 871,676 1,314,427
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment purchased (176,324) ( 53,336)
Proceeds from sale of property and equipment 41,413 103,866
Repayment of advances to officer 82,443 -
Advances to officer - (112,659)
--------- ----------
Net cash used in investing activities (52,468) ( 62,129)
-------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt incurred - 210,000
Long-term debt paid (189,062) (343,159)
Payments under capital lease obligations ( 66,649) (125,134)
Dividends paid (537,026) (729,585)
------- ----------
Net cash used in financing activities (792,737) (987,878)
------- ----------
NET INCREASE IN CASH 26,471 264,420
CASH - BEGINNING OF YEAR 459,789 195,369
------- ----------
CASH - END OF YEAR $ 486,260 $ 459,789
======= ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $57,398 $73,081
Income taxes $13,645 $11,640
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
The Companies incurred long-term debt of $388,747 and $65,039 in 1998 and
1997, respectively, when they entered into financing agreements for
transportation equipment.
The accompanying notes are an integral part of these statements.
WESTWIND EXPRESS, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
For the years ended December 31, 1998 and 1997
Westwind Express, Inc., Fastrak Delivery Systems, Inc., Sierra Delivery
Services, Inc. and Logistics Delivery Systems, Inc. (the "Companies") provide
delivery services in the states of California, Kansas and Missouri.
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of combination:
The combined financial statements include the accounts of the
following companies, all of which are under common control:
Westwind Express, Inc.
Fastrak Delivery Systems, Inc.
Sierra Delivery Services, Inc.
Logistics Delivery Systems, Inc.
All significant intercompany accounts, transactions and profits
have been eliminated upon combination.
Financial instruments:
The carrying value of cash, accounts receivable and payable,
and accrued liabilities approximate fair value due to the
short-term maturities of these assets and liabilities. The fair
value of the obligation under capital lease and long-term debt
are estimated based on current rates offered to the Company for
debt with the same remaining maturities, and approximates its
carrying value.
Depreciation and amortization:
Depreciation is computed principally on the straight-line
method based on the estimated useful lives of the assets,
generally as follows:
Transportation equipment 5-7 years
Furniture and equipment 5 years
S corporation election:
The Companies and their stockholder have elected to treat
corporate taxable income as income to their stockholder.
Accordingly, federal and state income taxes are liabilities of
the stockholder and not of the Companies, except that
California levies a 1.5% corporate tax on electing corporations.
Deferred taxes:
The Companies use the cash basis of accounting for tax
reporting purposes. For state income tax purposes, no deferred
taxes are recognized because the use of the liability method to
compute the differences between the tax bases of assets and
liabilities and the related financial reporting amounts using
enacted future tax laws and rates do not have a material effect
on either the Companies' financial position or statements of
operations.
(Continued)
WESTWIND EXPRESS, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 1998 and 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Capital leases:
Westwind Express, Inc. leases transportation equipment under
capital leases expiring in 1999. The fair value of the equipment
has been capitalized and the related assets and obligations
recorded, using the interest rate implicit in the lease. The
assets are amortized on a straight-line basis over their
estimated useful lives of seven years. Interest is charged to
expense over the term of the obligations.
Revenue recognition:
Revenue is recognized when delivery services are rendered to
customers, and expenses are recognized as incurred.
Long-lived assets:
Management of the Companies review long-lived assets for
impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. The
measurement of impairment losses to be recognized is based on the
difference between the fair values and the carrying amounts of
the assets. Impairment would be recognized in operating results
if a diminution in value occurred. Management of the Companies
does not believe that any such changes have occurred.
Reclassifications:
Certain items in prior financial statements are reclassified to
the current presentation.
NOTE 2: CONCENTRATIONS
Cash:
The Companies maintain bank accounts at various banking
institutions, which are guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") up to $100,000. At various
times throughout the year, cash balances may be in excess of
the FDIC insurance limits.
(Continued)
WESTWIND EXPRESS, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 1998 and 1997
NOTE 2: CONCENTRATIONS (Continued)
Accounts receivable and revenue:
For the years ended December 31, 1998 and 1997, approximately 75%
and 70%, respectively, of the Companies' revenue was derived from
two customers. As of December 31, 1998 and 1997, approximately
60% and 50%, respectively, of the Companies' accounts receivable
were due from these customers. The Companies act as a
sub-contractor for these customers which are also delivery
services.
NOTE 3: DUE FROM OFFICER
As of December 31, 1998 and 1997, $49,628 and $35,771,
respectively, was due from the Companies' officer for expenses
incurred by the Companies on his behalf. In addition, as of
December 31, 1998 and 1997, $2,660 and $98,960, respectively, was
due from the officer for advances. No interest was charged by the
Companies on these receivables.
NOTE 4: PROPERTY AND EQUIPMENT
As of December 31, 1998 and 1997, property and equipment
consisted of the following:
1998 1997
----------------- -------------
Transportation equipment $1,480,264 $1,016,873
Furniture and equipment 203,054 190,486
---------- ----------
1,683,318 1,207,359
Less accumulated depreciation 653,985 480,454
--------- ----------
$1,029,333 $ 726,905
========= ==========
These assets were sold in April, 1999 (see Note 10).
NOTE 5: OBLIGATIONS UNDER CAPITAL LEASES
Leased property under capital leases:
A summary of leased property under capital leases as of
December 31, 1998 and 1997 follows:
1998 1997
----------- ---------
Transportation equipment $320,266 $337,174
Less accumulated depreciation 205,887 166,174
------- -------
$114,379 $171,000
======= =======
Depreciation of leased property under capital leases for the
years ended December 31, 1998 and 1997 amounted to
approximately $46,800 and $63,200, respectively.
(Continued)
WESTWIND EXPRESS, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 1998 and 1997
NOTE 5: OBLIGATIONS UNDER CAPITAL LEASES (Continued)
Capital lease obligations:
The following is a schedule by years of future minimum lease
payments under capital leases, together with the present value of
the net minimum lease payments as of December 31, 1998:
Year ending December, 1999 $28,318
Less amount representing interest (a) 1,023
Present value of net minimum lease payments $27,295
======
(a) The amount necessary to reduce net minimum
lease payments to present value was calculated
at the interest rate implicit in the leases,
with interest rates ranging from 9.1% to 10.9%.
See Note 10 regarding subsequent event.
NOTE 6: LONG-TERM DEBT
As of December 31, 1998 and 1997, long-term
debt consisted of the following:
1998 1997
Notes, collateralized by transportation
equipment, payable at $22,875 per month
including interest at rates ranging from
3.5% to 11.5% per annum, due May, 1999
through October, 2000.
$534,683 $563,892
Notes, collateralized by transportation
equipment, guaranteed by the Companies'
stockholder, payable at $2,653 per month
including interest at rates ranging from
8.05% to 8.25% per annum, due
March, 2003. (a) 228,894 -------
763,577 563,892
Current portion 235,491 138,284
------- -------
Noncurrent portion $528,086 $425,608
======== ========
(a) These notes are financed as part of a $350,000 revolving
equipment line of credit expiring September 1999. Interest
on advances is payable monthly at either the treasury rate
plus 3.5% or bank's prime rate plus .5% at the Companies'
option.
Maturities of long-term debt during the succeeding five years are
approximately $235,000 (1999); $238,000 (2000); $178,000 (2001);
$84,000 (2002); and $28,000 (2003).
See Note 10 regarding subsequent event.
WESTWIND EXPRESS, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 1998 and 1997
NOTE 7: NOTE PAYABLE, BANK
The Companies may borrow up to $100,000 under a revolving line of
credit through September, 1999. Interest on borrowings is payable
monthly at the bank's prime rate plus .5%. Advances under this
line of credit are collateralized by equipment and general
intangibles and are guaranteed by the Companies' stockholder. No
borrowings were outstanding under this line of credit as of
December 31, 1998 and 1997.
NOTE 8: RENT EXPENSE
The Companies lease their facilities in Palmdale and Newbury Park,
California on a month-to-month basis. For the years ended
December 31, 1998 and 1997, rent expense amounted to approximately
$54,000 and $43,600, respectively.
NOTE 9: COMMON STOCK
As of December 31, 1998 and 1997, common stock, no par value, of
the Companies consisted of the following:
Westwind Express, Inc.:
Authorized 100,000 shares;
Outstanding, 18,854 shares $34,093
Fastrak Delivery Systems, Inc.:
Authorized 1,000,000 shares;
Outstanding 1,000 shares 1,000
Sierra Delivery Services, Inc.:
Authorized, 1,000,000 shares;
Outstanding, 1,000 shares 1,000
Logistics Delivery Systems, Inc.:
Authorized 1,000,000 shares;
Outstanding 10,000 shares 1,000
-------
$37,093
========
WESTWIND EXPRESS, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
For the years ended December 31, 1998 and 1997
NOTE 10: SUBSEQUENT EVENT
On April 30, 1999, the Companies sold their property and
equipment, leased property under capital leases, and intangibles
to another company. The purchase price consisted of $2,650,000 in
cash, $1,680,000 in notes, 149,533 shares of the buyer's common
stock and the assumption of the Companies' long-term debt,
obligations under capital leases and accrued vacation liability.
Additional funds may be received by the Companies in future years
depending on the earnings before interest and taxes of the former
businesses of the Companies.
NOTE 11: YEAR 2000 COMPLIANCE (UNAUDITED)
The worldwide challenge facing organizations, commonly referred
to as the Year 2000 (Y2K) issue, is the result of problems that
may be encountered with date-related transactions on systems that
have historically recognized years using two digits vs. four
digits, e.g., 98 versus 1998. These systems will potentially
recognize "00" as the year 1900 instead of 2000.
The Companies recognize the potential implications of the Y2K
issue on the systems that may contain date-related transactions,
data or embedded chips. The Companies have assessed the impact of
the Y2K issue on their operations and are now in the process of
renovating or replacing, as necessary, the computer applications
and business processes to provide for continued services in the
new millennium. An assessment of the preparedness of external
entities that interface with the Companies is also ongoing. There
can be no assurance that there will not be a material adverse
effect on the Companies if their actions or those of related
third parties fail to address all significant issues in a timely
manner.
The costs of the Companies' compliance efforts are charged to
expense as incurred and are being funded with cash flows from
operations. At this time, the costs of these efforts are not
expected to be material to the Companies' combined financial
position or the results of their operations in any given period.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 14, 1999 CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Registrant)
By: /s/ Albert W. Van Ness, Jr.
Albert W. Van Ness, Jr.
Chairman of the Board, Chief
Executive Officer and Chief
Financial Officer
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 14, 1999 CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Registrant)
By: /s/ Albert W. Van Ness, Jr.
Albert W. Van Ness, Jr.
Chairman of the Board, Chief
Executive Officer and Chief
Financial Officer