AIRPORT LIMOUSINE PARTNERS, INC.
D/B/A AMERICAN AIRPORT LIMOUSINE CORPORATION
_______
COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
AND
REPORT THEREON
_______
AIRPORT LIMOUSINE PARTNERS, INC.
________
TABLE OF CONTENTS
Page(s)
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Report of Independent Accountants 1
Financial Statements:
Combined Balance Sheet as of December 31, 1997 2
Combined Statement of Operations for the year ended December 31, 1997 3
Combined Statement of Changes in Stockholders' Equity for the year ended
December 31, 1997 4
Combined Statement of Cash Flows for the year ended December 31, 1997 5
Notes to Combined Financial Statements 6-12
August 28, 1998,
except for the second paragraph
of Note 9, as to which the date is
October 2, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Stockholders of Airport Limousine Partners, Inc.
In our opinion, the accompanying combined balance sheet and the related combined
statements of operations, of changes in stockholders' equity, and of cash flows
present fairly, in all material respects, the combined financial position of
Airport Limousine Partners, Inc. (d/b/a American Airport Limousine Corporation)
and its combined companies (the Company) as of December 31, 1997, and the
combined results of their operations and their cash flows for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
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 audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoppers LLP
1
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
_______
ASSETS
Cash $ 116,082
Trade and credit card receivables 964,929
Other receivables 196,989
Prepaid expenses and other current assets 275,539
------------
Total current assets 1,553,539
------------
Fixed assets:
Automobiles 4,374,153
Equipment & furniture 1,438,855
------------
5,813,008
Accumulated depreciation (2,917,793)
------------
Net fixed assets 2,895,215
Deposits 120,641
------------
Total assets $ 4,569,395
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit $ 391,803
Current portion of long-term debt 901,451
Accounts payable 172,002
Accrued expenses 88,596
Accrued corporate income taxes 15,539
Due to owners/operators 1,195
------------
Total current liabilities 1,570,586
Long-term debt, net of current portion 119,045
Note payable to stockholder 24,250
Owner/operator deposits 105,075
------------
Total liabilities 1,818,956
------------
Stockholders' equity (Note 4):
Common stock 54,000
Retained earnings 2,696,439
------------
Total stockholders' equity 2,750,439
------------
Total liabilities and stockholders' equity $ 4,569,395
============
The accompanying notes are an integral part of these combined financial
statements.
2
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
_______
Revenue, net $ 20,174,517
Cost of revenue 13,623,211
------------
Gross profit 6,551,306
Selling expenses 1,122,917
General and administrative expenses 4,708,883
------------
Operating income 719,506
Other income (expense):
Interest expense (91,206)
Gain on sale of fixed assets 96,112
Other income, primarily insurance recovery 232,784
------------
Income before provision for income taxes 957,196
Provision for state income taxes 15,539
------------
Net income $ 941,657
============
The accompanying notes are an integral part of these combined financial
statements.
3
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
________
Common Stock Total
------------------ Retained Stockholders'
Shares Amount Earnings Equity
------ --------- ------------- -------------
Balance at December 31, 1996 5,000 $ 50,000 $ 2,170,992 $ 2,220,992
Issuance of common stock 4,000 4,000 - 4,000
Net income - - 941,657 941,657
Stockholder distributions - - (416,210) (416,210)
------ --------- ------------- -------------
Balance at December 31, 1997 9,000 $ 54,000 $ 2,696,439 $ 2,750,439
====== ========= ============= =============
The accompanying notes are an integral part of these combined financial
statements.
4
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
_______
Cash flows from operating activities:
Net income $ 941,657
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,014,006
Gain on sale of assets (96,112)
Change in operating assets and liabilities:
Trade and credit card receivables (2,070)
Other receivables (91,614)
Prepaid expenses and other current assets (177,156)
Accounts payable (13,522)
Accrued expenses (79,550)
Accrued corporate income taxes (1,554)
Due to owners/operators (79,385)
Decrease in owner/operator deposits (2,950)
------------
Net cash provided by operating activities 1,411,750
------------
Cash flows from investment activities:
Purchases of fixed assets (2,694,569)
Proceeds from dispositions of fixed assets 389,745
------------
Net cash used in investing activities (2,304,824)
------------
Cash flows from financing activities:
Borrowings on line of credit 709,988
Payments on line of credit (498,037)
Proceeds from long-term debt 1,487,277
Principal payments on long-term debt (617,881)
Distributions to stockholders (416,210)
Proceeds from issuance of common stock 4,000
------------
Net cash provided by financing activities 669,137
------------
Net decrease in cash (223,937)
Cash at beginning of year 340,019
------------
Cash at end of year $ 116,082
============
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 91,206
Income taxes paid $ 17,093
The accompanying notes are an integral part of these combined financial
statements.
5
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
1. BACKGROUND AND ORGANIZATION
Airport Limousine Partners, Inc., doing business as American Airport
Limousine Corporation, and its combined companies (the "Company"), provide
limousine services in the greater Chicago area. This includes
transportation services through the use of limousines, vans, and buses.
The Company also has entities that own the vehicles, as well as maintain
and repair the vehicles.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The combined financial statements include the financial statements of
Airport Limousine Partners, Inc., Syd's Limousine, Inc., Limos R Us,
Inc., A.L. Transportation, Inc., and A.L. Repair Service, Inc., all with
identical common ownership. All significant intercompany balances and
transactions have been eliminated.
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.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of accounts receivable.
The Company's customers are primarily based within the greater Chicago
area. Accounts receivable are generally diversified due to the large
number of entities comprising the Company's customer base. No single
customer accounted for more
Continued
6
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
than five percent of the Company's revenues and there were no accounts
receivable from a single customer greater than $106,000 as of
December 31, 1997.
Fixed Assets
Fixed assets are carried at cost. Depreciation is provided using an
accelerated method. Gains or losses on sales and retirements of fixed
assets are reflected in results of operations. Expenditures for
maintenance and repairs are charged against operations. Renewals and
betterments that materially extend the life of the assets are capitalized
Revenue recognition
The Company's principal source of revenue is from chauffeured vehicle
services. Such revenue, net of discounts, is recorded when services are
provided.
Income taxes
The management of the Company has elected S status corporation under the
Internal Revenue Code. Under this statute, profits are taxable to the
stockholders based on their percentage of ownership for the purpose of
federal income tax. The Company is liable for state taxes based on
income.
Continued
7
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
3. LINE OF CREDIT AND LONG- TERM DEBT
The Company has a line of credit at Oakbrook Bank which provides for
borrowings up to $750,000 with interest at 1.0% over an index (a total of
8.5% as of December 31, 1997), payable monthly. The line of credit is due
on demand and collateralized by limousines. The balance outstanding as of
December 31, 1997, was $391,803.
Long-term notes payable as of December 31, 1997, consist of the following:
Notes payable to Harris Bank Westchester with interest at 7.9% per
annum, payable monthly, with various due dates ranging from April 30,
1998 to April 4, 1999, collateralized by eighteen (18) limousines $ 304,553
Notes payable to Hinsdale Bank and Trust with interest at 0.5% over an
index (a total of 8.0% as of December 31, 1997), payable monthly, with
various due dates ranging from March 5, 1999 to October 1, 2000,
collateralized by five (5) limousines and computer equipment 215,943
Note payable to Harris Bank Westchester with interest at 8.5% per annum,
payable in periodic installments, due May 1, 1999, collateralized by
accounts receivable 500,000
------------
Total long-term debt 1,020,496
Less: Current maturities 901,451
------------
Long-term debt $ 119,045
============
Maturities of long-term debt are as follows:
Year Ending December 31 Amount
----------------------------- ------------
$
1998 901,451
1999 83,998
2000 35,047
------------
$ 1,020,496
============
Continued
8
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
4. COMMON STOCK AND RETAINED EARNINGS
Common stock as of December 31, 1997 consists of:
Airport Limousine Partners, Inc., no par
value, 6,000 shares authorized; 5,000 issued
and outstanding $ 50,000
Syd's Limousine, Inc., no par value, 1,000
shares authorized; 1,000 shares issued and
outstanding 1,000
Limo's R Us, Inc., no par value, 1,000 shares
authorized; 1,000 shares issued and outstanding 1,000
A.L. Transportation, Inc., no par value,
1,000 shares authorized; 1,000 shares issued
and outstanding 1,000
A.L. Repair Service, Inc., no par value,
1,000 shares authorized; 1,000 shares issued
and outstanding 1,000
-----------
$ 54,000
===========
Retained earnings (deficit) as of December 31, 1997 consists of:
Airport Limousine Partners, Inc. $ 1,874,377
Syd's Limousine, Inc. (17,110)
Limo's R Us, Inc. 810,796
A.L. Transportation, Inc. (24,519)
A.L Repair Service, Inc. 52,895
------------
$ 2,696,439
============
5. RELATED PARTY TRANSACTIONS
The Company has a $24,250 note payable to a stockholder. This note is non-
interest-bearing, with no maturity date.
The Company has various notes payable to Harris Bank amounting to $804,553
to finance the purchase of limousines. The Company's principal stockholder
and President is a member of the board of directors of Harris Bank.
Continued
9
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
6. CONTINGENCIES
An insurance company has filed suit against the Company seeking back
workers' compensation premiums of approximately $290,000. The Company is
vigorously defending said action. The insurance company's original and
first amended complaints have been stricken and the insurance company is
now seeking summary judgment on the second amended complaint. If the
insurance company's motion is denied, which the Company believes is
possible, the case will be tried before a jury in 1999. Another of the
Company's insurance carriers has also filed suit. It, too, is seeking back
workers' compensation insurance premiums in the amount of approximately
$2,940,000. The Company is also vigorously defending this action. Based on
the information currently available, no estimate of the potential loss, if
any, on either of these claims can be made at this time.
The Company has also filed for an administrative tax hearing against a
local taxing authority concerning the underpayment of taxes collected. As a
result of a tax audit, the local taxing authority claims that the Company
over-collected $670,000, including interest and penalties. The Company
believes that the local taxing authority's position is unfounded, and has
asked for a summary judgment in this case. The losing party in this case
has the right to appeal to the Circuit Court, but it is unknown at this
time if this will occur. Based on the information currently available, no
estimate of the potential loss, if any, on either of these claims can be
made at this time.
Continued
10
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
7. LEASING ARRANGEMENTS
The Company conducts its operations from facilities that are leased under a
five year, cancelable operating lease expiring April 30, 2002. The Company
also leases a garage and warehouse facility under a five year,
noncancelable lease, expiring September 30, 2002.
The following is a schedule of future minimum rental payments required
under the above operating leases as of December 31, 1997:
Year Ending December 31 Amount
------------------------ ------------
1998 $ 294,485
1999 302,589
2000 311,883
2001 321,406
2002 264,775
------------
$ 1,495,138
============
Rental expense totaled $178,526 in 1997.
8. PROFIT SHARING PLAN
The Company sponsors a 401(k) Profit Sharing Plan covering substantially
all of its employees. The Company makes a matching contribution of $1.00
for every $3.00 on the first 3% of employee contributions. The Company may
also make an additional contribution at the discretion of the board of
directors based on the Company's profitability. Matching Company
contributions totaled $65,963 for the year ended December 31, 1997.
Continued
11
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
------------
9. SUBSEQUENT EVENTS
In January of 1998, the Company acquired Hinsdale Limousine for $600,000 in
cash. The acquisition was accounted for under the purchase method, whereby
the purchase price was allocated to the underlying assets and liabilities
based on their respective estimated fair values at the date of the
acquisition, resulting in goodwill of approximately $460,000.
On October 2, 1998, the Company sold substantially all of its assets to and
certain liabilities were assumed by Airport Limousine Acquisition Corp., a
wholly owned subsidiary of Carey International, Inc. ("Carey").
12