-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MRF88Cr9BQ89Yr9qcsQq7lpBhSPUT5KuTZ0XR8AiR9MLY4clCjd/KDb9nzUs/NsF GYwzeD+rSsY2kCDWtwfAcA== /in/edgar/work/0000928385-00-001921/0000928385-00-001921.txt : 20000719 0000928385-00-001921.hdr.sgml : 20000719 ACCESSION NUMBER: 0000928385-00-001921 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000531 FILED AS OF DATE: 20000717 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAREY INTERNATIONAL INC CENTRAL INDEX KEY: 0000747201 STANDARD INDUSTRIAL CLASSIFICATION: [4100 ] IRS NUMBER: 521171965 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22551 FILM NUMBER: 674375 BUSINESS ADDRESS: STREET 1: 4530 WISCONSIN AVE NW CITY: WASHINGTON STATE: DC ZIP: 20016 BUSINESS PHONE: 2028951200 MAIL ADDRESS: STREET 1: 4530 WISCONSIN AVE NW CITY: WASHINGTON STATE: DC ZIP: 20016 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended May 31, 2000 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _________ to ________ Commission file number 000-22551 Carey International, Inc. ------------------------- (Exact name of registrant as specified in its charter) Delaware 52-1171965 -------- ---------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 4530 Wisconsin Avenue, NW, Suite 500, Washington, DC 20016 ---------------------------------------------------------- (Address of principal executive offices, including zip code) (202) 895-1200 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No There were 9,848,729 shares of the registrant's common stock, par value $0.01 per share, outstanding at July 13, 2000. CAREY INTERNATIONAL, INC. AND SUBSIDIARIES INDEX ----- PART I: FINANCIAL INFORMATION Item 1: Financial Statements (unaudited): Consolidated balance sheets as of November 30, 1999 and May 31, 2000 Consolidated statements of operations for the three and six month periods ended May 31, 1999 and 2000 Consolidated statements of cash flows for the six months ended May 31, 1999 and 2000 Notes to consolidated financial statements Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations PART II: OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K CAREY INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)
November 30, May 31, 1999 2000 ---------- ---------- (In thousands) ASSETS Cash and cash equivalents $ 8,595 $ 10,063 Accounts receivable, net 32,418 40,029 Notes receivable from contracts, current portion 1,739 1,634 Prepaid expenses and other current assets 1,630 2,648 ---------- ---------- Total current assets 44,382 54,374 Notes receivable from contracts, excluding current portion 9,098 9,187 Fixed assets, net 27,358 31,628 Franchise rights, net 11,405 11,169 Goodwill and other intangible assets, net 76,971 88,282 Trade name, trademark and contract rights, net 6,111 6,015 Deposits and other assets 2,812 2,436 ---------- ---------- Total assets $ 178,137 $ 203,091 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of notes payable $ 3,014 $ 2,576 Current portion of capital leases 584 712 Accounts payable and accrued expenses 24,289 30,006 ---------- ---------- Total current liabilities 27,887 33,294 Notes payable, excluding current portion 25,070 38,527 Capital leases, excluding current portion 1,427 1,832 Deferred taxes and other long-term liabilities 4,242 4,188 Deferred revenue 14,859 14,800 Commitments and contingencies Stockholders' equity: Common stock, $.01 par value; authorized 20,000,000 shares, 9,680,380 and 9,741,274 issued and outstanding shares at November 30, 1999 and May 31, 2000 respectively 97 97 Additional paid-in capital 81,509 82,690 Retained earnings 23,046 27,663 ---------- ---------- Total stockholders' equity 104,652 110,450 ---------- ---------- Total liabilities and stockholders' equity $ 178,137 $ 203,091 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 1 CAREY INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Six months ended -------------------------- ------------------------- May 31, May 31, May 31, May 31, 1999 2000 1999 2000 -------- -------- -------- ---------- (In thousands, except (In thousands, except per share data) per share data) Revenue, net $ 45,215 $ 67,009 $ 81,654 $ 115,888 Cost of revenue 29,817 44,883 54,220 79,119 -------- -------- -------- ---------- Gross profit 15,398 22,126 27,434 36,769 Selling, general and administrative expense 10,304 15,111 19,536 27,732 -------- -------- -------- ---------- Operating income 5,094 7,015 7,898 9,037 Other income (expense): Interest expense (207) (590) (313) (1,031) Interest income 87 80 203 174 Gain (loss) on sales of fixed assets (4) 19 28 72 -------- -------- -------- ---------- Income before provision for income taxes 4,970 6,524 7,816 8,252 Provision for income taxes 2,090 2,740 3,283 3,466 -------- -------- -------- ---------- Net income $ 2,880 $ 3,784 4,533 $ 4,786 ======== ======== ======== ========== Net income per common share - basic $ 0.30 $ 0.39 $ 0.48 0.49 ======== ======== ======== ========== Net income per common share - diluted $ 0.29 $ 0.38 $ 0.45 0.47 ======== ======== ======== ========== Weighted average common shares used in computing net income per common share - basic 9,579 9,739 9,534 9,723 ======== ======== ======== ========== Weighted average common shares used in computing net income per common share - diluted 10,001 10,020 9,974 10,221 ======== ======== ======== ==========
The accompanying notes are an integral part of these consolidated financial statements. 2 CAREY INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six months ended ------------------------ May 31, May 31, 1999 2000 ---------- ---------- (In thousands) Cash flows from operating activities: Net income $ 4,533 $ 4,786 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization of fixed assets 1,665 2,783 Amortization of intangible assets 1,416 1,818 Gain on sales of fixed assets (28) (72) Provision for deferred taxes 917 - Change in deferred revenue (423) (59) Changes in operating assets and liabilities: Accounts receivable (6,233) (6,525) Notes receivable from contracts 233 16 Prepaid expenses, deposits and other assets (1,016) (684) Accounts payable and accrued expenses 3,275 4,741 Deferred taxes and other long-term liabilities (5) (54) ---------- ---------- Net cash provided by operating activities 4,334 6,750 ---------- ---------- Cash flows from investing activities: Proceeds from sales of fixed assets 906 1,199 Purchases of fixed assets (4,737) (7,072) Acquisitions of chauffeured vehicle service companies (9,152) (10,218) ---------- ---------- Net cash used in investing activities (12,983) (16,091) ---------- ---------- Cash flows from financing activities: Principal payments under capital lease obligations (745) (452) Payments of notes payable (2,456) (1,433) Proceeds from notes payable 5,501 12,552 Issuance of common stock 380 142 ---------- ---------- Net cash provided by financing activities 2,680 10,809 ---------- ---------- Net increase (decrease) in cash and cash equivalents (5,969) 1,468 Cash and cash equivalents at beginning of period 14,456 8,595 ---------- ---------- Cash and cash equivalents at end of period $ 8,487 $10,063 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 3 CAREY INTERNATIONAL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Background and organization General Carey International, Inc. (the "Company") provides chauffeured vehicle and related services through a worldwide network of owned and operated companies, licensees and affiliates serving 480 cities in 75 countries. The Company owns and operates service providers in the form of wholly-owned subsidiaries in the following cities: Boston, Chicago, Detroit, Hartford, Indianapolis, Jacksonville, London, Los Angeles, Miami, New York, Paris, Philadelphia, San Francisco, Stamford, Washington, D.C., West Palm Beach and White Plains. In addition, the Company licenses the "Carey" name, and provides central reservations, billing and sales and marketing services to its licensees. The Company's worldwide network includes affiliates in locations in which the Company has neither owned and operated locations nor licensees. The Company provides central reservations and billing services to such affiliates. Acquisitions The Company is engaged in a program of acquiring chauffeured vehicle service and related businesses. The chauffeured vehicle service and related businesses that the Company seeks to acquire may be in cities in which the Company has owned and operated service providers, licensees operating under the Carey trade name and service mark, and affiliates of the Company. In February 2000, the Company acquired a chauffeured vehicle service company in Paris. In March 2000, the Company acquired a chauffeured vehicle service company in White Plains, New York. 2. Summary of significant accounting policies Basis of presentation The accompanying consolidated financial statements and these notes do not include all of the disclosures included in the Company's audited consolidated financial statements for the years ended November 30, 1998 and 1999, and should be read in conjunction with those financial statements. The consolidated financial statements included herein have not been audited. However, in the opinion of management, the consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the periods reflected. The results for these periods are not necessarily indicative of the results for the full fiscal year. New accounting standard In March 2000, FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25, (FIN 44) was issued. The interpretation is intended to clarify the accounting treatment for certain activities arising in connection with stock options since the issuance of APB 25 in October 1972. During the three months ended May 31, 2000 the Company repriced options to acquire 346,147 shares at $8.25, the market price at the date of repricing. In accordance with FIN 44, to the extent that the Company's common share price increases in the future, the Company will be required to record compensation expense in connection with the vested portion of such repriced options. 4 CAREY INTERNATIONAL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. Acquisitions In the periods ended May 31, 1999 and May 31, 2000, the following acquisition activity was recorded by the Company:
Six months ended ------------------------- May 31, May 31, 1999 2000 --------- ---------- Net assets purchased: (In thousands) Receivables and other assets $ 742 $ 1,127 Fixed assets 2,420 494 Franchise rights 304 - Goodwill and other intangibles assets 9,269 12,711 Other assets 227 - Accounts payable and accrued expenses (396) (806) --------- ---------- $ 12,566 $ 13,526 ========= ========== Consideration: Cash payments $ 9,152 $ 10,218 Notes assumed related to vehicle acquisitions 2,305 369 Notes payable - 1,900 Issuance of common stock (65,216 and 48,626 shares in 1999 and 2000, respectively) 1,109 1,039 --------- ---------- $ 12,566 $ 13,526 ========= ==========
5 CAREY INTERNATIONAL, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 4. Revolving credit facility In January 1999, the Company entered into a three-year Revolving Credit Facility consisting of an unsecured revolving line of credit of $75.0 million (the "Credit Facility"). Loans made under the Credit Facility bear interest at the Company's option at either the bank's prime rate or at a varying rate above the LIBOR rate, depending on the ratio of the Company's debt to equity. Commitment fees equal to 0.375% per annum are payable on the unused portion of the Credit Facility. The terms of the Credit Facility (i) prohibit the payment of dividends by the Company, (ii) with certain exceptions, prevent the Company from incurring or assuming other indebtedness that is not subordinate to the borrowings under the Credit Facility, and (iii) require the Company to comply with certain financial covenants. As of May 31, 2000, the Company had borrowed $33.4 million under the Credit Facility. 5. Commitments and contingencies The Company is from time to time a party to litigation arising in the ordinary course of business. Management believes that no pending legal proceeding will have a material adverse effect on the business, financial condition, results of operations or cash flows of the Company. 6. Comprehensive income In 1999, the Company adopted SFAS No. 130, Comprehensive Income. Comprehensive income for the Company is calculated by adjusting "Net income" for the change in the unrealized gains or losses from foreign currency translations. In the periods ended May 31,1999 and 2000, comprehensive income did not materially differ from net income. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended May 31, 2000 (the "2000 Period") Compared to Three Months Ended May 31, 1999 (the "1999 Period") Revenue, Net. Revenue, net increased $21.8 million or 48.2% from $45.2 million in the 1999 Period to $67.0 million in the 2000 Period. Of the increase, $10.6 million resulted from expanded use of the Carey network, including an increase in business from corporate travel customers and business travel arrangers. A further $11.2 million of the increase was due to revenues from companies acquired by the Company subsequent to the 1999 Period. Cost of Revenue. Cost of revenue increased $15.1 million or 50.5% from $29.8 million in the 1999 Period to $44.9 million in the 2000 Period. The increase was primarily attributable to higher costs due to increased business levels and to higher costs associated with businesses acquired by Carey subsequent to the 1999 Period. Cost of revenue increased as a percentage of revenue, net from 65.9% in the 1999 Period to 67.0% in the 2000 Period, primarily reflecting the effect of acquisitions made since the 1999 Period as the Company continues its assimilation of such acquisitions and, also, the Company's continuing reliance on farm-outs to service peak revenue demands with correspondingly narrower margins than those achieved with independent operators. Selling, General and Administrative Expense. Selling, general and administrative expense increased $4.8 million or 46.7% from $10.3 million in the 1999 Period to $15.1 million in the 2000 Period. The increase was largely due to the costs associated with higher business levels and costs of acquired businesses including personnel costs, administrative expenses and marketing expenses, and an increase in amortization of intangibles related to acquired businesses. Selling, general and administrative expenses decreased as a percentage of revenue, net, from 22.8% in the 1999 Period to 22.6% in the 2000 Period. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --(Continued) Three Months Ended May 31, 2000 (the "2000 Period") Compared to Three Months Ended May 31, 1999 (the "1999 Period") Interest Expense. Interest expense increased from approximately $207,000 in the 1999 Period to approximately $590,000 in the 2000 Period, primarily as a result of the use of debt to fund acquisitions during 1999 and 2000. Provision for Income Taxes. The provision for income taxes increased approximately $650,000 from $2.1 million in the 1999 Period to $2.7 in the 2000 Period. The increase primarily was a result of the increase in pre-tax income of the Company from $5.0 million in the 1999 Period to $6.5 million in the 2000 Period. Net Income. As a result of the foregoing, the Company's net income increased approximately $904,000 or 31.4% from $2.9 million in the 1999 Period to $3.8 million in the 2000 Period. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --(Continued) Six Months Ended May 31, 2000 (the "2000 Six-Month Period") Compared to Six Months Ended May 31, 1999 (the "1999 Six-Month Period") Revenue, Net. Revenue, net increased $34.2 million or 41.9% from $81.7 million in the 1999 Six-Month Period to $115.9 million in the 2000 Six-Month Period. Of the increase, $17.4 million resulted from expanded use of the Carey network, including an increase in business from corporate travel customers and business travel arrangers. A further $16.8 million of the increase was due to revenues from companies acquired by the Company subsequent to the 1999 Six-Month Period. Cost of Revenue. Cost of revenue increased $24.9 million or 45.9% from $54.2 million in the 1999 Six-Month Period to $79.1 million in the 2000 Six- Month Period. The increase was primarily attributable to higher costs due to increased business levels and to higher costs associated with businesses acquired by Carey subsequent to the 1999 Six-Month Period. Cost of revenue increased as a percentage of revenue, net from 66.4% in the 1999 Six-Month Period to 68.3% in the 2000 Six-Month Period, primarily reflecting increased reliance on farm-outs to service peak revenue demands and correspondingly narrower margins than those achieved with independent operators, seasonal and other reductions in revenues in the first three months of the 2000 Six-Month Period not offset by reduced costs of revenues and unrecovered cost increases in the Company's central reservations and central billing functions as investments in these areas grew to meet the demands of the revenue growth of the Company. Selling, General and Administrative Expense. Selling, general and administrative expense increased $8.2 million or 42.0% from $19.5 million in the 1999 Six-Month Period to $27.7 million in the 2000 Six-Month Period. The increase largely was due to the costs associated with higher business levels and costs of acquired businesses including personnel costs, administrative expenses and marketing expenses, and an increase in amortization of intangibles related to acquired businesses. Selling, general and administrative expense remained the same as a percentage of revenue, net at 23.9% for the 1999 and 2000 Six-Month Periods. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --(Continued) Six Months Ended May 31, 2000 (the "2000 Six-Month Period") Compared to Six Months Ended May 31, 1999 (the "1999 Six-Month Period") Interest Expense. Interest expense increased from approximately $313,000 in the 1999 Six-Month Period to $1.0 million in the 2000 Six-Month Period, primarily as a result of the use of debt to fund acquisitions during 1999 and 2000. Provision for Income Taxes. The provision for income taxes increased approximately $183,000 from $3.3 million in the 1999 Six-Month Period to $3.5 million in the 2000 Six-Month Period. The increase primarily was a result of the increase in pre-tax income of the Company from $7.8 million in the 1999 Six- Month Period to $8.3 million in the 2000 Six-Month Period. Net Income. As a result of the foregoing, the Company's net income increased approximately $253,000 or 5.6% from $4.5 million in the 1999 Six-Month Period to $4.8 million in the 2000 Six-Month Period. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --(Continued) Liquidity and Capital Resources Cash and cash equivalents increased $1.5 million during the 2000 Six-Month Period from $8.6 million at November 30, 1999 to $10.1 million at May 31, 2000. Operating activities increased net cash by approximately $6.8 million during the 2000 Six-Month Period compared to approximately $4.3 million in the 1999 Six- Month Period. The overall net increase in cash and cash equivalents at May 31, 2000 from November 30, 1999 primarily related to net cash provided by chauffeured vehicle service operations and borrowings to fund acquisitions and the use of cash to acquire chauffeured vehicle service companies, purchase fixed assets and retire debt. Cash used in investing activities during the 2000 Six-Month Period increased by $3.1 million over the 1999 Six-Month Period. Cash of $16.1 million was used in the 2000 Six-Month Period to acquire chauffeured vehicle service companies and purchase fixed assets, net of cash from sale of fixed assets, whereas cash of $13.0 million was used in the 1999 Six-Month Period to acquire chauffeured vehicle service companies and purchase fixed assets, net of cash from sale of fixed assets. Cash provided by financing activities during the 2000 Six-Month Period increased by approximately $8.1 million over the 1999 Six-Month Period, primarily as a result of the net notes payable activity used in financing new acquisitions. At May 31, 2000, the Company had notes payable outstanding of $41.1 million, of which approximately $2.6 million is to be repaid over the next 12 months. In January 1999, the Company entered into a three-year Revolving Credit Facility consisting of an unsecured revolving line of credit of $75.0 million (the "Credit Facility"). The Credit Facility is used for acquisitions and working capital. Loans made under the Credit Facility bear interest at the Company's option at either the banks' prime lending rate or at a varying rate above the LIBOR rate, depending upon the ratio of the Company's debt to equity. Commitment fees equal to 0.375% per annum are payable on the unused portion of the Credit Facility. The terms of the Credit Facility (i) prohibit the payment of dividends by the Company, (ii) with certain exceptions, prevent the Company from incurring or assuming other indebtedness that is not subordinated to the borrowings under the Credit Facility and (iii) require the Company to comply with certain financial covenants. As of May 31, 2000, the Company had borrowed $33.4 million under the Credit Facility. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --(Continued) While there can be no assurance, and depending on the methods of financing and size of potential acquisitions, management believes that cash flow from operations, cash and cash equivalents and funds from the Credit Facility will be adequate to meet the Company's capital requirements for the next 12 months. While the Company has financed many acquisitions primarily with cash over the past twelve months, it may seek to finance future acquisitions by using common stock for a portion or all of the consideration to be paid. The Company is in the process of upgrading its central and subsidiary reservation systems as well as its financial and certain other computer software and hardware systems. The upgrades are expected to provide significant enhancements to the Company's customer service and management information capabilities along with increased opportunities for more efficient processing and distribution of information. The Company also has undertaken an initiative to upgrade its web site on the worldwide web and to integrate an e-commerce capability with its program of enhancements and upgrades. The Company is currently committed to or anticipates spending approximately $7 to $10 million over the next 12 to 18 months on designing, developing and deploying software and replacing or upgrading computer-related hardware as part of its program of enhancements and upgrades and worldwide web initiatives. Factors To Be Considered The information set forth above contains forward-looking statements, which involve risks and uncertainties. The Company's actual results could differ materially from the results anticipated in these forward-looking statements. Readers should refer to discussion under "Risk Factors" contained in the Company's Registration Statement on Form S-1 (No. 333-59599) filed with the Securities and Exchange Commission, which is incorporated herein by reference, concerning certain factors which could cause the Company's actual results to differ materially from the results anticipated in the forward-looking statements contained herein. 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit: 27 Financial Data Schedule (for the six months ended May 31, 2000) (b) Reports on Form 8-K None 13 SIGNATURES 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 hereunto duly authorized. Carey International, Inc. Date: July 17, 2000 By: /s/ Vincent A. Wolfington ------------------------- Vincent A. Wolfington Chairman, Chief Executive Officer Date: July 17, 2000 By: /s/ David H. Haedicke --------------------- David H. Haedicke Executive Vice President, Chief Financial Officer 14 EXHIBIT INDEX NUMBER DESCRIPTION 27 Financial Data Schedule (for the six months ended May 31, 2000) 15 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS NOV-30-2000 DEC-01-1999 MAY-31-2000 10,063 0 41,899 1,870 0 54,374 42,332 10,704 203,091 33,294 0 0 0 97 110,353 203,091 0 115,888 79,119 106,851 0 0 1,031 8,252 3,466 4,786 0 0 0 4,786 0.49 0.47
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