AIRPORT LIMOUSINE PARTNERS, INC.
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TABLE OF CONTENTS
Page(s)
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Financial Statements:
Combined Balance Sheet as of August 31, 1998 1
Combined Statement of Operations for the eight-month period ended
August 31, 1998 2
Combined Statement of Changes in Stockholders' Equity for the
eight-month period ended August 31, 1998 3
Combined Statement of Cash Flows for the eight-month period
ended August 31, 1998 4
Notes to Combined Financial Statements 5-11
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED BALANCE SHEET
AS OF AUGUST 31, 1998
(unaudited)
_______
ASSETS
Cash $ 165,175
Trade and credit card receivables 1,099,503
Other receivables 214,037
Prepaid expenses and other current assets 472,697
------------
Total current assets 1,951,412
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Fixed assets:
Automobiles 4,268,086
Equipment & furniture 1,853,089
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6,121,175
Accumulated depreciation (3,565,570)
------------
Net fixed assets 2,555,605
Goodwill, net of accumulated amortization of $20,441 439,471
Deposits 8,841
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Total assets $ 4,955,329
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LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit $ 339,809
Current portion of long-term debt 653,066
Accounts payable 116,926
Accrued expenses 610,208
Due to owners/operators 198,470
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Total current liabilities 1,918,479
Long-term debt, net of current portion 157,907
Owner/operator deposits 121,463
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Total liabilities 2,197,849
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Stockholders' equity (Note 4):
Common stock 54,000
Retained earnings 2,703,480
------------
Total stockholders' equity 2,757,480
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Total liabilities and stockholders' equity $ 4,955,329
============
The accompanying notes are an intregral part of these combined
financial statements.
1
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF OPERATIONS
FOR THE EIGHT MONTH PERIOD ENDED AUGUST 31, 1998
(unaudited)
_______
Revenue, net $ 14,291,755
Cost of revenue 9,955,279
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Gross profit 4,336,476
Selling expenses 456,752
General and administrative expenses 3,415,988
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Operating income 463,736
Other income (expense):
Interest expense (72,757)
Gain on sale of fixed assets 50,494
Other income 14,467
------------
Income before provision for state income taxes 455,940
Provision for income taxes -
------------
Net income $ 455,940
============
The accompanying notes are an integral part of these combined
financial statements.
2
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE EIGHT MONTH PERIOD ENDED AUGUST 31, 1998
(unaudited)
_______
Common Stock Total
---------------- Retained Stockholders'
Shares Amount Earnings Equity
------ -------- ------------ -------------
Balance at December 31, 1997 9,000 $ 54,000 $ 2,696,439 $ 2,750,439
Net income - - 455,940 455,940
Stockholder distributions - - (448,899) (448,899)
------ -------- ----------- -----------
Balance at August 31, 1998 9,000 $ 54,000 $ 2,703,480 $ 2,757,480
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The accompanying notes are an integral part of these combined
financial statements.
3
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE EIGHT MONTH PERIOD ENDED AUGUST 31, 1998
(unaudited)
_______
Cash flows from operating activities:
Net income $ 455,940
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 832,642
Gain on sale of assets (50,494)
Change in operating assets and liabilities:
Trade and credit card receivables 5,514
Other receivables 57,952
Prepaid expenses and other assets (85,358)
Accounts payable (55,076)
Accrued expenses 521,612
Accrued corporate income taxes (15,539)
Due to owners/operators 197,275
Owner/operator deposits 16,388
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Net cash provided by operating activities 1,880,856
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Cash flows from investment activities:
Purchases of fixed assets (482,373)
Proceeds from dispositions of fixed assets 60,276
Acquisition of chauffeured vehicle service company (600,000)
Advance to officer (75,000)
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Net cash used in investing activities (1,097,097)
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Cash flows from financing activities:
Borrowings on line of credit 400,000
Payments on line of credit (451,994)
Proceeds from long-term debt 377,818
Principal payments on long-term debt (587,341)
Payment of note payable to stockholder (24,250)
Distributions to stockholders (448,899)
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Net cash used in financing activities (734,666)
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Net increase in cash 49,093
Cash at beginning of year 116,082
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Cash at end of year $ 165,175
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Supplemental Disclosure of Cash Flow Information:
Interest paid $ 72,757
Income taxes paid $ 15,539
The accompanying notes are an integral part of these combined
financial statements.
4
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
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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., Limo's R Us,
Inc., A.L. Transportation, Inc., and A.L. Repair Service, Inc., all
with identical ownership. All significant intercompany balances and
transactions have been eliminated.
The combined financial statements included herein have not been
audited. However, in the opinion of management, the combined financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results for the
period reflected. The results for the period are not necessarily
indicative of the results for the full fiscal year.
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 a more than five percent of the
Company's revenues and there were no accounts receivable greater than
$120,000 from a single customer as of August 31, 1998.
Continued
5
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
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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.
GOODWILL
Goodwill represents the excess of cost over the fair value of the net
assets of acquired businesses. Goodwill is amortized over 15 years
using the straight-line method. Such amortization is included in
general and administrative expenses in the statement of operations. The
Company evaluates the recoverability of goodwill at least annually
based on estimated undiscounted cash flows over the remaining
amortization period, giving consideration to revenue expected to be
realized. The determination is based on an evaluation of such factors
as the occurrence of a significant change in the environment in which
the business operates or the expected future net cash flows
(undiscounted and without interest). There have been no adjustments to
the carrying value of intangible assets resulting from this evaluation.
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 corporation status 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
6
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
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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 August 31, 1998) payable monthly. The line of credit is due on
demand and collateralized by limousines. The balance outstanding as of
August 31, 1998 is $339,809.
Long-term notes payable at August 31, 1998, 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 October 17, 1998 to
July 1, 2000, collateralized by fifteen (15)
limousines and accounts receivable $ 170,333
Notes payable to Hinsdale Bank and Trust with
interest at 0.5% over an index (a total of 8.0%
as of August 31, 1998), payable monthly, with
various due dates ranging from March 5, 1999 to
October 1, 2000, collateralized by five (5)
limousines and computer equipment 140,640
Note payable to Oakbrook Bank with interest at 8.5%
payable monthly, due February 1, 1999, collateralized
by accounts receivable 100,000
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 400,000
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Total long-term debt 810,973
Less: Current maturities 653,066
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Long-term debt $ 157,907
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Continued
7
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
----------------
Maturities of long-term debt as of August 31, 1998 are as follows:
1998 $ 372,092
1999 391,980
2000 46,901
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$ 810,973
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4. COMMON STOCK AND RETAINED EARNINGS
Common stock as of August 31, 1998 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
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$ 54,000
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Retained earnings (deficit) as of August 31, 1998 consists of:
Airport Limousine Partners, Inc. $ 2,124,815
Syd's Limousine, Inc. (22,464)
Limo's R Us, Inc. 553,416
A.L. Transportation, Inc. (61,364)
A.L Repair Service, Inc. 109,077
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$ 2,703,480
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Continued
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AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
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5. RELATED PARTY TRANSACTIONS
The current Company has a $75,000 advance to an officer of the Company
included in other current assets as of August 31, 1998.
As of August 31, 1998, the Company has various notes payable to Harris Bank
amounting to $570,333 to finance the purchase of limousines and provide for
working capital needs. The Company's principal stockholder and President
is a member of the board of directors of Harris Bank.
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
$2.94 million. 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 approximately $670,000 including interest and
penalties. The Company believes that the the local taxing authority's
position is unfounded, and has asked for a summary
Continued
9
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
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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.
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 August 31, 1998:
1998 $ 86,738
1999 302,589
2000 311,883
2001 321,406
2002 264,775
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$ 1,287,391
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Rental expense totaled $204,179 for the eight-month period ended August 31,
1998.
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 $33,333 for the eight-month period ended August 31,
1998.
Continued
10
AIRPORT LIMOUSINE PARTNERS, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
----------------
10. ACQUISITION
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.
11. SUBSEQUENT EVENT
On October 2, 1998, the Company sold substantially all of its assets to
and certain liabilities were assumed by Airport Limousine Acquistion
Corp., a wholly owned subsidiary of Carey International, Inc. ("Carey").
11