C2, Inc. Reports Financial Results for the First Quarter of Fiscal 1999
29 April 1999
C2, Inc. Reports Financial Results for the First Quarter of Fiscal 1999
MILWAUKEE--April 29, 1999--C2, Inc. today announced its financial results for the first quarter of fiscal 1999. Net earnings for the quarter ended March 31, 1999 before special charges were $159,000, or $0.03 per share. Comparable proforma earnings for the prior year's quarter were $196,000 or $0.04 per share. Revenues for the quarter increased 18.3% to $25,874,000. C2, Inc.'s operations for the period included a full three months of its subsidiary Total Logistic Control and two and one-half weeks of operations of Zero Zone, which was acquired on March 12, 1999. Including non-recurring charges incurred by TLC related to the merger of Christiana Companies, Inc. and Weatherford International, Inc. of $326,000 and acquisition-related charges incurred by Zero Zone of $198,000, the Company reported a net loss of $178,000 or $0.03 per share.William T. Donovan, C2 Chairman and CFO, commented, "Both C2's operating units are reflecting strong growth in revenues and orders which should lead to improved earnings in future periods. Total Logistic Control is operating at higher levels of capacity utilization in both warehousing and transportation segments. Zero Zone has an extensive backlog of orders and is rapidly increasing its manufacturing capacity. Our operating profitability in the quarter was impacted by one-time transaction-related expenses and increased overhead expenses associated primarily with new logistic service contracts which will generate revenues in future periods. We see strong demand across all lines of our businesses, much of which is under contractual commitments, and we continue to invest in capacity enhancements, information technology and personnel which are the principal factors underpinning C2's future expansion and profit growth."
C2, Inc. was organized to acquire 66.7% of Total Logistic Control in connection with a merger transaction between Christiana Companies, Inc. and Weatherford International, Inc. which was completed on February 8, 1999. On March 5, 1999, C2, Inc. completed a fully subscribed initial public offering of its common stock raising $20.8 million of equity capital. On March 12, 1999, C2 acquired 70.6% of Zero Zone, Inc., in a $19.5 million recapitalization transaction investing $4.5 million in equity and capital notes.
Total Logistic Control
Total Logistic Control, based in Zeeland, Michigan, is a national provider of integrated logistic services which include refrigerated and dry warehousing, transportation, transportation management, international freight forwarding, food distribution and packaging. Operations are conducted through a network of 12 distribution warehouses of which seven are refrigerated or frozen facilities with an aggregate capacity of 34 million cubic feet. TLC also operates a transportation fleet of 190 refrigerated units.
Revenues for the quarter attributable to TLC grew 8.6% to $23.7 million due to increased utilization of refrigerated warehousing capacity, growth in logistic services and food distribution. Operating earnings before one-time and non-cash charges (EBITDA) for the quarter were $2,788,000 compared to $3,244,000 recorded in the same period last year. Overhead expenses at TLC increased approximately $300,000 quarter to quarter largely due to infrastructure investment in systems and logistics personnel needed to support the Company's growth strategy in developing high volume logistic management services. In the quarter, TLC announced the execution of a five-year $135 million logistic services agreement with WLR Foods, Inc., a leading poultry processor based in Broadway, Virginia.
Zero Zone
Zero Zone is a Wisconsin-based manufacturer of refrigerated and freezer display cases used in grocery, convenience and drug store chains for retail merchandising of food, beverage and floral products. C2 purchased 70.6% of Zero Zone on March 12, 1999. Included in C2's first quarter financial results are two and one half weeks of Zero Zone's operations which contributed revenues of $1.8 million. If Zero Zone's operations for the full quarter were included, its revenue contribution would have been $7.9 million. Zero Zone is experiencing very rapid growth driven by demand from its major customers in their new store building and existing store refurbishment programs. For the year ending December 31, 1998, Zero Zone's revenues totaled $28.3 million, up 43.7% from $19.7 million of revenues in 1997 which increased 11.9% from $17.6 million reported in 1996. In response to continuing strong demand, Zero Zone has just completed a significant expansion of its manufacturing capacity at its main plant in North Prairie, Wisconsin.
Special Charges
In connection with the Christiana-Weatherford merger transaction, TLC paid a $20 million dividend to Christiana and incurred certain one-time, transaction-related expenses in the amount of $326,000 ($217,000 after tax and minority interest or $0.04 per share).
In connection with the acquisition of Zero Zone, Inc., the Company incurred a one-time inventory adjustment in the amount of $198,000 which increased the cost of product sales by the same amount in the period, thereby reducing operating income. The after tax and minority interest effect of this charge on net earnings totaled $120,000 or $0.02 per share.
Milwaukee-based C2, Inc. is a new public company principally engaged in third party product distribution services and equipment manufacturing. C2's operating units include Total Logistic Control, a provider of refrigerated and non-refrigerated third party integrated logistic services which include warehousing, transportation, distribution and international freight forwarding; and Zero Zone, a manufacturer of refrigerated and freezer display cases used in grocery, convenience and drug store chains for retail merchandising of food, beverage and floral products.
This press release contains forward-looking statements within the meaning of the Private Securities Reform Act of 1995 concerning, amon other things, C2 Inc.'s prospects for its operations. These risks and uncertainties are more fully described in the C2, Inc. prospectus filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should certain assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated.
C2, INC.
Consolidated Statement of Earnings
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
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1999 1998
Actual ProForma(a)
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Revenues:
Logistic Revenues $23,747 $21,865
Product Sales 2,127 --
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$25,874 $21,865
Costs and Expenses:
Logistic Expenses 19,073 16,991
Cost of Product Sales 1,744 --
Depreciation and Amortization 1,749 1,808
Selling, General and Administrative Expenses 2,334 1,630
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24,900 20,429
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Earnings from Operations 974 1,436
Other Income (Expense):
Interest Expense (827) (960)
Merger-Related Expenses (326) --
Other Income (Expense) -- 8
Minority Interests (10) (98)
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(1,163) (1,050)
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Earnings before Income Taxes (189) 386
Income Tax Provision (11) 190
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Net Earnings (Loss) ($178) $196
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Basic Net Earnings Per Share ($0.03) $0.04
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Average Number of Shares Outstanding 5,202,664 5,202,664
(a) Proforma March 31, 1998 represents actual results for Total
Logistic Control, LLC for the three months ended March 31, 1998
adjusted for increased expense, minority interest and income tax
provision. No results for Zero Zone, Inc. are included in this
proforma.