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
August 5, 1998
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 executive offices) (Zip Code)
(Registrant's telephone number, including area code) (973) 471-1005
NOT APPLICABLE
(Former name or former address, if changed since last report.)
This 8-K/A filing amends an 8-K filed on August 17, 1998. Item 7 is hereby
amended to state as follows:
ITEM 7. Financial Statements and Exhibits
a. Financial Statements of Business Acquired.
Audited financial statements of KBD Services, Inc. ("KBD")
KBD Balance Sheets as of March 31, 1998 and 1997 and the related
Statements of Income and Retained Earnings and Cash Flows for
the years ended March 31, 1998 and 1997.
Unaudited interim financial statements of KBD.
KBD Balance Sheets as of June 30, 1998 and March 31, 1998 and
Statements of Operations and Retained Earnings and Cash flows
for each of the three months ended June 30, 1998 and 1997.
b. Pro Forma Financial Information.
Consolidated Delivery & Logistics, Inc. ("CDL") and KBD Pro
Forma Condensed Combined Financial Statements (Unaudited). Pro
Forma Condensed Combined Balance Sheet as of June 30, 1998 and
Pro Forma Condensed Combined Statements of Continuing Operations
for the year ended December 31, 1997 and the six months ended
June 30, 1998.
c. Exhibits
10.1* Stock Purchase Agreement dated August 5, 1998 by and
between Consolidated Delivery & Logistics, Inc., KBD
Services, Inc., Silver Star Express, Inc. and David L.
Chesney.
10.2* 7% Subordinated Convertible Note Due 2003 of
Consolidated Delivery & Logistics, Inc.
10.3* 7% Contingent Subordinated Convertible Note Due 1999 of
Consolidated Delivery & Logistics, Inc.
* filed previously
K. B. D. SERVICES, INC.
FINANCIAL STATEMENTS
REVISED
FOR THE YEARS ENDED MARCH 31, 1998 AND MARCH 31, 1997
HOOVER & HOOVER
CERTIFIED PUBLIC ACCOUNTANTS
TABLE OF CONTENTS
Page No.
Independent Auditor's Report 1
Balance Sheets 2
Statements of Income and Retained Earnings 4
Statements of Cash Flows 5
Notes to Financial Statements 7
Supplementary Schedules:
Selling and Administrative Expenses 15
Hoover & Hoover
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
REVISED
Board of Directors
K.B.D. Services, Inc.
Cary, North Carolina
We have audited the accompanying balance sheets of K.B.D. Services,
Inc. (a North Carolina corporation), as of March 31, 1998, and 1997, and the
related statements of income, retained earnings and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 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 K.B.D. Services,
Inc., as of March 31, 1998, and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles. Our initial report, dated June 18, 1998, was revised on
July 30, 1998, to reflect our having verified, through the use of alternative
audit procedures, the reported value of motor vehicles. Our initial report was
qualified in that regard due to an audit scope limitation.
Our audit was conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The information included in the
accompanying schedules of selling and administrative expenses is presented for
supplementary purposes only. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Hoover & Hoover
Hoover & Hoover
Certified Public Accountants
Cary, North Carolina
June 18, 1998, except for the revision(s) described above, as to which the date
is July 30, 1998
K.B.D. SERVICES, INC.
BALANCE SHEETS
MARCH 31, 1998 and 1997
ASSETS
CURRENT ASSETS 1998 1997
------------------ -----------------
Cash $493,793.82 $184,619.51
Investments-CD 120,519.62 114,768.93
Accounts Receivable 641,163.52 494,959.45
Income Tax Receivable 2,205.00 2,205.00
Interest Receivable 2,450.00 1,050.00
Note Receivable 20,000.00 -
Prepaid Expenses 79,346.00 60,040.00
------------------ -----------------
Total Current Assets 1,359,477.96 857,642.89
------------------ -----------------
FIXED ASSETS
Office Equipment 173,267.23 124,555.00
Leasehold Improvements 16,315.00 16,315.00
Vehicles 2,837,606.00 2,368,681.00
Less: Accumulated Depreciation (2,072,777.00) (1,802,421.00)
------------------ -----------------
Total Fixed Assets 954,411.23 707,130.00
------------------ -----------------
OTHER ASSETS
Note Receivable-Stockholder - 20,000.00
------------------ -----------------
Total Other Assets - 20,000.00
------------------ -----------------
TOTAL ASSETS $2,313,889.19 $1,584,772.89
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $228,337.08 $171,056.04
Wage Garnishment 1,145.12 1,835.92
Accrued Payroll Taxes 27,055.68 16,922.12
Accrued Wages 81,128.87 52,890.19
Accrued Income Taxes 343,325.89 122,905.16
Accrued Interest and Penalty 5,616.08 1,146.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
K.B.D. SERVICES, INC.
BALANCE SHEETS
MARCH 31, 1998 and 1997
Continued
1998 1997
-------------------- ------------------
Line of Credit 135,000.00 100,000.00
Note Payable on Computer Equipment 37,322.00 -
Current Portion of Long-Term Debt, including Lease Obligations 459,278.96 403,387.93
-------------------- ------------------
Total Current Liabilities 1,318,209.68 870,143.36
-------------------- ------------------
LONG-TERM DEBT, Including Lease Obligations, Less Current
Portion 376,219.59 301,587.63
-------------------- ------------------
Total Liabilities 1,694,429.27 1,171,730.99
-------------------- ------------------
STOCKHOLDERS' EQUITY
Common Stock, $1 par value, 100,000 shares authorized and 100
shares issued and outstanding 100.00 100.00
Retained Earnings 619,359.92 412,941.90
-------------------- ------------------
Total Stockholders' Equity 619,459.92 413,041.90
-------------------- ------------------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $2,313,889.19 $1,584,772.89
==================== ==================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
K.B.D. SERVICES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
1998 1997
------------------ -------------------
REVENUE
Sales $6,602,611.06 $5,601,096.69
------------------ -------------------
EXPENSES
Wages 3,298,317.36 2,834,794.68
Selling and Administrative 2,277,260.95 2,033,477.34
Depreciation 412,897.00 342,710.00
------------------ -------------------
Total 5,988,475.31 5,210,982.02
------------------ -------------------
Operating Income 614,135.75 390,114.67
OTHER INCOME (EXPENSE)
Interest Expense (60,502.40) (71,507.47)
Gain (loss) on Sale of Assets 12,572.00 (200,055.42)
Interest Income 8,050.93 6,879.24
------------------ -------------------
Total Other Income (Expense) (39,879.47) (264,683.65)
------------------ -------------------
INCOME BEFORE INCOME TAXES 574,256.28 125,431.02
------------------ -------------------
INCOME TAXES
Current 220,420.73 122,905.16
Results of IRS Audit 22,495.00 -
------------------ -------------------
Total Income Taxes 242,915.73 122,905.16
------------------ -------------------
NET INCOME 331,340.55 2,525.86
BEGINNING RETAINED EARNINGS 412,941.90 410,416.04
ADJUSTMENT TO RETAINED EARNINGS (121,413.86) -
DIVIDEND (3,508.67) -
------------------ -------------------
ENDING RETAINED EARNINGS $619,359.92 $412,941.90
================== ===================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
K.B.D. SERVICES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
1998 1997
---------------- ----------------
Cash Flows From Operating Activities
Net Income $331,340.55 $2,525.86
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities
Depreciation 412,897.00 342,710.00
Loss on Sale of Assets - 200,055.42
Gain on Sale of Assets (12,572.00) -
(Increase) Decrease in:
Accounts Receivable, Interest & Income Tax Receivable (147,604.07) (103,382.11)
Prepaid Expenses (19,306.00) (57,299.99)
Increase (Decrease) in:
Accounts Payable 57,281.04 70,068.21
Accrued Expenses 42,151.52 14,243.67
Income Tax Payable 220,420.73 122,905.16
---------------- ----------------
Net Cash Provided by Operating Activities: 884,608.77 591,826.22
---------------- ----------------
Cash Flows from Investing Activities
Sale of Equipment 39,226.00 1,000.00
Purchase of Equipment (694,222.00) (476,249.00)
Long-Term Note Receivable - (20,000.00)
---------------- ----------------
Net Cash Used by Investing Activities (654,996.00) (495,249.00)
---------------- ----------------
Cash Flows From Financing Activities
New Borrowings 664,913.23 438,686.36
Debt Reduction (576,092.33) (418,507.70)
Dividend (3,508.67) -
---------------- ----------------
Net Cash Provided by Financing Activities: 85,312.23 20,178.66
---------------- ----------------
Net Increase in Cash and Cash Equivalents 314,925.00 116,755.88
Cash and Cash Equivalents-Beginning of Year 299,388.44 182,632.56
---------------- ----------------
Cash and Cash Equivalents-End of Year $614,313.44 $299,388.44
================ ================
Supplemental Disclosures of cash flow information:
Interest Paid $60,502.40 $71,507.47
Income taxes paid $22,495.00 $ -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
K.B.D. SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities
The Company provides a courier service. It specializes in same-day and emergency
delivery. It also provides daily dedicated courier services to customers that
require the use of a vehicle and driver for a certain number of hours per day.
The Company has offices located in Cary, Charlotte, Fayetteville, and Greensboro
in the State of North Carolina. There is one office located in Columbia, South
Carolina and one office located in Augusta, Georgia. The Company was
incorporated in the State of North Carolina on April 29, 1980. The Company is a
C Corporation.
Depreciation
The Company's motor vehicles and equipment are depreciated using an accelerated
method over five and seven years, respectively. Its leasehold improvements are
depreciated using the straight-line method over thirty-nine years. The same
methods are used for both income tax and financial reporting purposes.
Depreciation expense includes amortization of leased motor vehicles.
Deferred Income Taxes
The Company uses the same depreciation methods for income tax and financial
statement reporting. Therefore, there are no deferred income taxes.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
NOTE B - RELATED PARTY TRANSACTIONS
The loan from stockholder is a loan (See Note D) made to David Chesney,
President, by his father, C.K. Chesney. The funds were subsequently loaned to
the Company. The note is for $7,000 and is non-interesting bearing. If interest
were imputed at an interested rate of 7% per annum, the interest would be $490
for 1998 and 1997.
The Company leases office space in Cary and Charlotte from the President, David
Chesney. The annual lease payments for the Cary office location (present
location) were $106,524. The lease commenced on May 26, 1997, and the lease
termination date is June 30, 2007. The annual lease payments for the Charlotte
office location were $17,700 and the lease termination date is March 31, 1998.
(See Note E for future minimum lease payments)
K.B.D. SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
Continued
RELATED PARTY TRANSACTIONS (Continued)
The note receivable is a loan to David Chesney, President. The loan amount is
for $20,000 with a rate of interest of 7% per annum. Interest is payable
annually and the note is due on June 30, 1998.
In 1997 the Company sold land to the President, David Chesney, for $306,046.96.
The sale resulted in a loss of $194,801.42. Since this is a related party
transaction, the loss is not tax deductible, income taxes have been calculated
accordingly (See Note H).
NOTE C - MOTOR VEHICLES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
The cost of motor vehicles, equipment, and leasehold improvements were provided
by the President, David Chesney. At March 31, 1998 and March 31, 1997, motor
vehicles, equipment, and leasehold improvements consisted of the following:
1998 1997
----------------- ------------------
Furniture and Equipment $173,267.23 $124,555.00
*Delivery Vehicles (includes $331,686 in lease vehicles) 2,837,606.00 2,368,681.00
Leasehold Improvements 16,315.00 16,315.00
----------------- ------------------
3,027,188.23 2,509,551.00
Accumulated Depreciation (includes leased vehicles) (2,072,777.00) (1,802,421.00)
----------------- ------------------
$954,411.23 $707,130.00
================= ==================
* The cost of delivery vehicles includes the cost of the vehicle plus the cost
of the camper shell installed on the vehicle.
K.B.D. SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
Continued
NOTE D - DEBT
The Company's long-term debt consists of note payables and obligations under
capital leases on delivery vehicles. The total amount of the obligations under
capital leases is $160,199.40. The notes are secured by the vehicles. The
interest rates range from 7% to 13 %. The following is a summary of principal
maturities of long-term debt, including lease obligations, during the next five
years:
1999 $459,278.96
2000 263,954.47
2001 114,531.11
2002 731.09
2003 0
The Company has a $250,000.00 working capital line of credit which is due August
1, 1998. At March 31, 1998 and March 31, 1997, the outstanding balance of this
working capital line of credit was $135,000.00 and $100,000.00, respectively.
The interest rate is 8.50%. The loan is collateralized by equipment, furniture
and equipment and accounts receivable.
Long-term debt includes a loan from stockholder of $7,000.00 (See Note B).
On February 26, 1998, the Company borrowed $37,322 to purchase computer
equipment. The interest rate is 8.5% and the note matures on March 2, 2001. The
note is secured by equipment.
NOTE E - DESCRIPTION OF LEASING ARRANGEMENTS
The Company leases motor vehicles under a capital leases. The lease obligations
on the motor vehicles are included in long-term debt (See Note D). The leases
commenced on August 30, 1996, and expire on September 30, 1999. The leased motor
vehicles are included in Note C as delivery vehicles and are being depreciated
using an accelerated depreciation method over five years.
The following is a schedule of future minimum lease payments required under the
lease:
1999 $122,039
2000 61,020
K.B.D. SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
Continued
NOTE E - DESCRIPTION OF LEASING ARRANGEMENTS (Continued)
The Company leases office space from Edens & Avant, Inc. in Columbia, South
Carolina. The lease commenced on June 1, 1994, and expires on May 31, 1998. The
annual lease payments are $10,500.00.
The following is a schedule of future minimum lease payments required under the
lease:
1999 $1,750.00
The Company leases office space from M & M Properties, Inc. in Greensboro, North
Carolina. The lease commenced on July 1, 1993, and expires on June 30, 1998. The
annual lease payments are $8,995,92.
The following is a schedule of future minimum lease payments required under the
lease:
1999 $ 2,248.98
The Company leases office space from David Chesney, President, in Charlotte,
North Carolina. The lease commenced on March 24, 1995, and expires on March 31,
1998. The annual lease payments are $17,700.
K.B.D. SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
Continued
NOTE E - DESCRIPTION OF LEASING ARRANGEMENTS (Continued)
The Company leases office space from David Chesney, President, in Cary, North
Carolina. The lease commenced on May 26, 1997, and expires on June 30, 2007. The
annual lease payments are $106,524. This lease is for office space at its
current location, 760 Reedy Creek Road.
The following is a schedule of future minimum lease payments required under the
lease:
1999 $106,524
2000 106,524
2001 106,524
2002 106,524
2003 106,524
Later Years 452,727
The total rent expense for office space for March 31, 1998 and March 31, 1997,
was $142,856.67 and $105,917.03, respectively.
The Company leases a copier and postage machine month-by-month. There is no
formal lease agreement.
NOTE F - CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with an initial maturity of three months or less to be cash
equivalents.
NOTE G - BAD DEBT EXPENSE
Bad debt expense for fiscal years ending March 31, 1998 and March 31, 1997, was
$168.50 and $6,050.83, respectively.
K.B.D. SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
Continued
NOTE H - INCOME TAXES
The provision for income taxes consists of the following:
3-31-98 3-31-97
Year Year
End End
----------------------- ----------------------
Federal Taxes:
Current $184,282.82 $99,684.89
*Result of IRS Audit 22,495.00 -
State Taxes:
North Carolina 32,082.95 21,686.27
South Carolina 3,385.51 -
Georgia 532.85 10.00
Virginia 136.60 -
----------------------- ----------------------
$242,915.73 $121,381.16
======================= ======================
*As a result of an IRS income tax examination, the Company was assessed an
additional $22,495 in income taxes for the year ended March 31, 1996. The
additional tax resulted from the following adjustments made by the IRS to the
Company's taxable income:
1. Reduction of depreciation expense; 2. Life insurance that was not
tax deductible; 3. Dividend to shareholder; 4. Meals and entertainment
expenses that were only 50% tax deductible; 5. Leasehold improvements
that should have been amortized; and 6. Fringe benefits (personal use
of Company auto by shareholder).
During the fiscal year ending March 31, 1997, the Company sold land to
President, David Chesney, which resulted in a loss of $194,801.42 (See Note B).
Since this is a related party transaction, the loss is not tax deductible. The
above provision for income taxes for March 31, 1997, reflects the
nondeductibility of this loss.
K.B.D. SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE I - RETAINED EARNINGS ADJUSTMENT
In preparing the Company's 1997 audited financial statements, it was necessary
to make an adjustment to increase retained earnings by $121,413.86 to correct
for the Company's having inappropriately, among other things, charged an expense
account for repayments of notes payable on vehicles. While that adjustment is
reflected in the 1997 audited financial statements, it has not been entered in
the Company's books of account. Thus, the Company's 1998 books of account also
required adjustment. To accommodate the development of appropriate financial
statements for 1998, the 1997 adjustment was reversed.
NOTE J - FINANCIAL INSTRUMENTS
The Company has a number of cash deposits including a $100,000.00 certificate of
deposit. The Company estimates that the fair value of all financial instruments
at March 31, 1998, does not differ materially from the aggregate carrying values
of its financial instruments recorded in the accompanying balance sheet.
At March 31, 1998, the Company has $589,057.28 on deposit at First Citizens Bank
of Cary. The Company is at risk for cash deposits in excess of federally insured
limits.
Supplementary Schedule
K.B.D. SERVICES, INC.
SCHEDULES OF SELLING AND ADMINISTRATIVE EXPENSES
YEARS ENDED MARCH 31, 1998 AND 1997
1998 1997
---------------------- ----------------------
Payroll Taxes $302,190.27 $248,540.47
Utilities 16,545.32 10,691.44
Rent 142,856.67 105,917.03
Office 30,406.53 38,164.22
Operating Supplies 50,965.27 54,216.79
Employment Recruiting 18,228.45 24,859.73
Taxes and Licenses 30,770.71 28,829.98
Employee Record Checks 5,348.81 7,367.31
Payroll Service 22,294.98 18,993.49
Legal and Accounting 6,996.85 7,997.29
Dues & Subscriptions 2,176.50 1,800.93
Telephone, Pagers, Answering Service 97,868.43 73,185.95
Commissions - 3,135.46
Health Insurance 26,515.65 10,108.76
Equipment Rental 5,157.41 5,254.56
Advertising 81,158.74 70,054.29
General and Auto Insurance 412,595.65 416,116.22
Vehicle Expenses 1,003,639.05 898,855.81
Education and Training 3,051.00 2,576.78
Repairs to Customer Documents 18,326.16 -
Penalty - 760.00
Bad Debt Expense 168.50 6,050.83
---------------------- ----------------------
Total $2,277,260.95 $2,033,477.34
====================== ======================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
KBD SERVICES, INC.
CONDENSED BALANCE SHEETS
June 30, March 31,
1998 1998
------------------- -------------------
(Unaudited) (Audited)
ASSETS Note 1
CURRENT ASSETS
Cash and cash equivalents $373,312 $614,313
Accounts Receivable, net 809,119 641,164
Note Receivable - Stockholder 20,000 20,000
Prepaid expenses and other current assets 229,095 84,001
------------------- -------------------
Total current assets 1,431,526 1,359,478
PROPERTY AND EQUIPTMENT, net 861,477 954,411
------------------- -------------------
Total assets $2,293,003 $2,313,889
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $135,000 $135,000
Current maturities of long-term debt 390,661 496,601
Accounts payable and accrued liabilities 699,793 686,609
------------------- -------------------
Total current liabilities 1,225,454 1,318,210
LONG-TERM DEBT 346,631 376,219
------------------- -------------------
Total liabilities 1,572,085 1,694,429
------------------- -------------------
STOCKHOLDERS' EQUITY
Common Stock 100 100
Retained Earnings 720,818 619,360
------------------- -------------------
Total stockholders' equity 720,918 619,460
------------------- -------------------
Total liabilities and stockholders' equity $2,293,003 $2,313,889
=================== ===================
See notes to unaudited condensed interim financial statements.
KBD SERVICES, INC.
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
For the Three Months Ended June 30,
------------------ ---- -----------------
1998 1997
------------------ -----------------
Revenue $1,841,487 $1,494,202
Cost of Revenue 1,330,401 1,160,330
------------------ -----------------
Gross Profit 511,086 333,872
Selling, general, and administrative expenses 339,586 249,558
------------------ -----------------
Income from operations 171,500 84,314
Other (Income) Expense
Interest income (503) (721)
Interest expense 20,081 12,469
------------------ -----------------
19,578 11,748
------------------ -----------------
Income before income taxes 151,922 72,566
Provision for income taxes 50,464 16,907
------------------ -----------------
Net income 101,458 55,659
Retained earnings, beginning of period 619,360 412,942
------------------ -----------------
Retained earnings, end of period $720,818 $468,601
================== =================
See notes to unaudited condensed interim financial statements.
KBD SERVICES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months
Ended June 30,
-----------------------------------
1998 1997
---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $101,458 $55,659
Adjustments to reconcile net income to net cash (used in) provided
by operating activities -
Depreciation 92,934 103,440
Changes in operating assets and liabilities
(Increase) decrease in -
Accounts receivable, net (167,956) (72,891)
Prepaid expenses and other current assets (145,094) (39,306)
Increase (decrease) in -
Accounts payable and accrued liabilities 19,553 17,098
---------------- -----------------
Net cash (used in) provided by operating activities (99,105) 64,000
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (84,762)
---------------- -----------------
Net cash used in investing activities - (84,762)
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - 82,410
Repayments of long-term debt (141,896) (116,102)
---------------- -----------------
Net cash used in financing activities (141,896) (33,692)
---------------- -----------------
Net decrease in cash and cash equivalents (241,001) (54,454)
CASH AND CASH EQUIVALENTS, beginning of period 614,313 299,389
---------------- -----------------
CASH AND CASH EQUIVALENTS, end of period $373,312 $244,935
================ =================
See notes to unaudited condensed interim financial statements.
KBD SERVICES, INC.
NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed interim financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
condensed balance sheet at March 31, 1998, has been derived from the
audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Operating results for the three months ended June 30, 1998,
are not necessarily indicative of the results that may be expected for
any other interim period or for the year ending March 31, 1999.
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL DATA
The accompanying unaudited pro forma condensed combined financial data of CDL
and KBD have been prepared to present the effect of the acquisition of all of
the capital stock of KBD by CDL. The unaudited pro forma condensed combined
balance sheet as of June 30, 1998 was prepared as if the acquisition had
occurred on June 30, 1998. The unaudited pro forma condensed combined statement
of continuing operations for the year ended December 31, 1997 and for the six
months ended June 30, 1998 combines historical statements of operations for CDL
and KBD as if the acquisition occurred on January 1, 1997. The unaudited pro
forma condensed combined statement of continuing operations combines historical
statements of operations of CDL for the year ended December 31, 1997 and KBD for
the year ended March 31, 1998.
The detailed assumptions used to prepare the unaudited pro forma condensed
combined financial information are contained herein. The pro forma adjustments
are described in the accompanying notes and are based upon available information
and certain assumptions that the Company believes are reasonable. The unaudited
pro forma condensed combined financial information reflects the use of the
purchase method of accounting for the acquisition. The purchase price allocation
used in the preparation of the pro forma financial information is preliminary
and subject to change based upon the final evaluation being performed.
The following unaudited pro forma financial data does not purport to be
indicative of the results of operations or financial position of the Company
that would have actually been obtained had the transaction been completed as of
the assumed dates and for the periods presented, or which may be obtained in the
future. This information and accompanying notes should be read in conjunction
with CDL's Annual Report on Form 10-K for the year ended December 31, 1997, its
Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 1998
and KBD's financial statements included elsewhere in this report on Form 8-K/A.
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
June 30, 1998
(In thousands except share information)
Historical Pro Forma Pro Forma
CDL KBD Adjustments Combined
------------- ------------ ---------------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,281 $373 $1,654
Accounts receivable, net 19,477 809 20,286
Note receivable - stockholder 20 20
Prepaid expenses and other
current assets 2,492 229 2,721
------------- ------------ ---------------- --------------
Total current assets 23,250 1,431 24,681
EQUIPMENT AND LEASE-
HOLD IMPROVEMENTS, net 5,727 862 6,589
INTANGIBLE ASSETS, net 2,848 - $3,304 (b) 6,152
OTHER ASSETS 1,445 - 1,445
------------- ------------ ---------------- --------------
Total assets $33,270 $2,293 $3,304 $38,867
============= ============ ================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $4,500 $135 $2,000 (a) $6,635
Current maturities of long-term
debt 2,475 391 2,866
Accounts payable and accrued
liabilities 13,095 699 65 (a) 13,859
Net liabilities of discontinued
operations 111 - 111
------------- ------------ ---------------- --------------
Total current liabilities 20,181 1,225 2,065 23,471
------------- ------------ ---------------- --------------
LONG-TERM DEBT 2,398 347 1,960 (a) 4,705
OTHER LONG-TERM
LIABILITIES 1,529 - 1,529
------------- ------------ ---------------- --------------
Total liabilities 24,108 1,572 4,025 29,705
------------- ------------ ---------------- --------------
STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 7 - 7
Additional paid-in capital 9,026 - 9,026
Treasury stock (162) - (162)
Retained earnings 291 721 (721) (b) 291
------------- ------------ ---------------- --------------
Total stockholder's equity 9,162 721 (721) 9,162
------------- ------------ ---------------- --------------
Total liabilities and
stockholders' equity $33,270 $2,293 $3,304 $38,867
============= ============ ================ ==============
See notes to unaudited pro forma condensed combined financial statements.
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF CONTINUING OPERATIONS
For the Year Ended December 31, 1997
(Unaudited)
(In thousands except share information)
Historical
CDL KBD
Year Ended Year Ended
December March 31,
31, 1997 1998 Pro Forma Pro Forma
Adjustments Combined
------------- ------------- ---------------- ---------------
Revenue $171,502 $6,603 $178,105
Cost of revenue 130,577 4,896 135,473
------------- ------------- ---------------- ---------------
Gross profit 40,925 1,707 42,632
Selling, general and
administrative expenses 38,223 1,093 $50 (c) 39,366
------------- ------------- ---------------- ---------------
Operating income 2,702 614 (50) 3,266
Other (income) expense:
Gain on sale of subsidiary (816) - (816)
Other income, net (171) (21) (192)
Interest expense 1,144 61 317 (c) 1,522
------------- ------------- ---------------- ---------------
Income from continuing
operations before provision for
income taxes 2,545 574 (367) 2,752
Provision for income taxes 888 243 (168) (c) 963
------------- ------------- ---------------- ---------------
Income from continuing
operations $1,657 $331 ($199) $1,789
============= ============= ================ ===============
Basic income per share:
Continuing operations $.25 - - (d,e) $.27
============= ============= ================ ===============
Weighted average shares
outstanding 6,672 - - (d,e) 6,672
============= ============= ================ ===============
Diluted income per share:
Continuing operations $.25 - - (d,e) $.27
============= ============= ================ ===============
Weighted average shares
outstanding 6,675 - - (d,e) 6,675
============= ============= ================ ===============
See notes to unaudited pro forma condensed combined financial statements.
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998
(Unaudited)
(In thousands except share information)
Historical Pro Forma Pro Forma
CDL KBD Adjustments Combined
------------- ------------ ---------------- ----------------
Revenue $87,278 $3,532 $90,810
Cost of revenue 67,625 2,570 70,195
------------- ------------ ---------------- ----------------
Gross profit 19,653 962 20,615
Selling, general and
administrative expenses 18,181 622 $25 (c) 18,828
------------- ------------ ---------------- ----------------
Operating income (loss) 1,472 340 (25) 1,787
Other (income) expense:
Other income, net (171) (1) (172)
Interest expense 498 37 150 (c) 685
------------- ------------ ---------------- ----------------
Income (loss) before provision for
income taxes 1,145 304 (175) 1,274
Provision for income taxes 435 114 (65) (c) 484
------------- ------------ ---------------- ----------------
Net Income (loss) $710 190 ($110) $790
============= ============ ================ ================
Basic income per share:
Net income per share $.11 - - (d,e) $.12
============= ============ ================ ================
Weighted average shares
outstanding 6,660 - - (d,e) 6,660
============= ============ ================ ================
Diluted income per share:
Net income per share $.10 - - (d,e) $.12
============= ============ ================ ================
Weighted average shares
outstanding 6,824 - - (d,e) 6,824
============= ============ ================ ================
See notes to unaudited pro forma condensed combined financial statements.
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
(a) The following pro forma adjustments reflect CDL's purchase of KBD. Pro
forma adjustments include estimated direct costs of acquisition of
$65,000.
(in thousands)
Short-term borrowings $2,000
7% Subordinated convertible note payable 1,460
7% Contingent subordinated convertible note payable 500
Accrued expenses 65
------------
Total estimated purchase price $4,025
============
(b) The following pro forma adjustments reflect the excess of the purchase
price over book value, which is attributed to goodwill. The book value of
KBD's net assets approximate the estimated fair value.
(in thousands)
Total estimated purchase price $4,025
Elimination of KBD's retained earnings (721)
------------
Goodwill $3,304
============
(c) The following pro forma adjustments are incorporated in the pro forma
condensed combined statements of operations (in thousands):
Year ended Six months
December 31, ended
1997 June 30, 1998
------------------ ------------------
1. Increase in interest expense on 7% convertible
note payable. (102) (51)
2. Increase in interest expense on 7% contingent
note payable. (35) (9)
3. Increase in interest expense on assumed
borrowings on credit facility at 9%. (180) (90)
4. Increase in amortization expense resulting from
the acquired goodwill using a 25 year life. (132) (66)
5. Decrease in expenses for certain non-continuing items. 82 41
6. Decrease in income taxes associated with the above
adjustments and from the application of CDL's historical
effective tax rate for the periods presented to the pretax
income in the accompanying consolidated statements of
operations.
168 65
------------------ ------------------
($199) ($110)
================== ==================
(d) The holder of the $1.46 million 7% Subordinated Convertible Note Payable
(the "Note") has the right to convert the Note into fully paid shares of
CDL's common stock at any time after the acquisition of KBD by CDL
through July 1, 2003. The pro forma adjustments do not include an
adjustment for the conversion of the Note since the conversion price is
$6.00 per common share, which exceeds the average market price of CDL's
common stock for the periods presented. Diluted earnings per share is not
affected by the Note since the conversion of the Note into common stock
was antidilutive for the periods presented.
(e) The holder of the $500,000 7% Contingent Subordinated Convertible Note
Payable (the "Contingent Note") has the right to convert the Contingent
Note into fully paid shares of CDL's common stock between September 16,
1999 and October 20, 1999 at the conversion price of $6.00 per common
share, subject to adjustment of the amount of the Contingent Note based
on a dollar for dollar reduction or discharge if KBD's earnings before
interest and taxes is less than $700,000. For the pro forma
presentation, the Contingent Note was deemed to be payable in cash in its
entirety based on expectations that the earnings threshold will be
achieved. The pro forma adjustments do not include an adjustment for the
conversion of the Contingent Note since the conversion price exceeds the
average market price of CDL's common stock for the periods presented.
The pro forma diluted earnings per share was not affected by the
Contingent Note since the necessary conditions for conversion were not
satisfied by the end of the periods presented.
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: October 19, 1998 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