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EX-99.4 - EX-99.4 - Daseke, Inc.a18-5227_4ex99d4.htm
EX-99.5 - EX-99.5 - Daseke, Inc.a18-5227_4ex99d5.htm
EX-99.3 - EX-99.3 - Daseke, Inc.a18-5227_4ex99d3.htm
EX-99.1 - EX-99.1 - Daseke, Inc.a18-5227_4ex99d1.htm
EX-23.2 - EX-23.2 - Daseke, Inc.a18-5227_4ex23d2.htm
EX-23.1 - EX-23.1 - Daseke, Inc.a18-5227_4ex23d1.htm
8-K/A - 8-K - Daseke, Inc.a18-5227_48ka.htm

Exhibit 99.2

 

MOORE FREIGHT SERVICE, INC. AND AFFILIATES

Combined Balance Sheets

(Unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2017

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

Cash

 

$

2,425,054

 

$

2,976,878

 

Accounts receivable (net of $40,000 allowance at September 30, 2017 and December 31, 2016)

 

2,063,321

 

783,996

 

Inventory

 

310,479

 

258,492

 

Due from officers and employees

 

62,233

 

60,634

 

Prepaid expenses

 

395,417

 

340,717

 

Deferred tax asset

 

 

1,054,017

 

TOTAL CURRENT ASSETS

 

5,256,504

 

5,474,734

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

Land

 

371,192

 

176,192

 

Buildings and improvements

 

2,226,050

 

2,449,298

 

Tractors

 

12,616,437

 

12,963,747

 

Trailers

 

16,133,143

 

17,061,198

 

Service vehicles and equipment

 

1,942,627

 

1,769,357

 

Office equipment and furnishings

 

1,830,236

 

690,808

 

 

 

35,119,685

 

35,110,600

 

Less: Accumulated depreciation

 

(22,585,652

)

(23,586,679

)

NET PROPERTY, PLANT AND EQUIPMENT

 

12,534,033

 

11,523,921

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

Computer software, net of accumulated amortization

 

 

33,960

 

Deposits

 

173,695

 

206,781

 

TOTAL OTHER ASSETS

 

173,695

 

240,741

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

17,964,232

 

$

17,239,396

 

 

See accompanying notes.

 

1



 

MOORE FREIGHT SERVICE, INC. AND AFFILIATES

Combined Balance Sheets continued

(Unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2017

 

2016

 

LIABILITIES AND STOCKHOLDERS’ AND MEMBERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Current portion of notes payable

 

$

2,990,824

 

$

3,212,237

 

Current portion of accounts payable and accrued expenses

 

695,562

 

808,241

 

Current portion of accrued taxes

 

592,755

 

726,990

 

Deferred income taxes

 

 

2,247,253

 

TOTAL CURRENT LIABILITIES

 

4,279,141

 

6,994,721

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

 

Notes payable, net of current portion

 

7,896,424

 

7,492,994

 

Accounts payable and accrued expenses

 

861,810

 

853,448

 

Accrued taxes

 

2,034,270

 

2,304,895

 

Deferred tax liability

 

1,992,011

 

 

TOTAL LONG-TERM LIABILITIES

 

12,784,515

 

10,651,337

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

17,063,656

 

17,646,058

 

 

 

 

 

 

 

STOCKHOLDERS’ AND MEMBERS’ EQUITY (DEFICIT)

 

900,576

 

(406,662

)

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ AND MEMBERS’ EQUITY (DEFICIT)

 

$

17,964,232

 

$

17,239,396

 

 

See accompanying notes.

 

2



 

MOORE FREIGHT SERVICE, INC. AND AFFILIATES

Combined Statements of Income

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

REVENUE

 

$

29,496,714

 

$

30,536,493

 

 

 

 

 

 

 

COST OF REVENUE (Supplemental Information — Schedule I)

 

20,497,587

 

20,551,927

 

 

 

 

 

 

 

GROSS PROFIT

 

8,999,127

 

9,984,566

 

 

 

 

 

 

 

ADMINISTRATIVE EXPENSES (Supplemental Information — Schedule II)

 

4,791,909

 

4,432,450

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

4,207,218

 

5,552,116

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

Interest expense

 

(706,625

)

(772,890

)

Other income

 

62,609

 

7,594

 

 

 

 

 

 

 

TOTAL OTHER EXPENSE

 

(644,016

)

(765,296

)

 

 

 

 

 

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

3,563,202

 

4,786,820

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

879,775

 

1,648,186

 

 

 

 

 

 

 

NET INCOME

 

$

2,683,427

 

$

3,138,634

 

 

See accompanying notes.

 

3



 

MOORE FREIGHT SERVICE, INC. AND AFFILIATES

Combined Statements of Changes in Stockholders’ and Members’ Equity (Deficit)

(Unaudited)

 

 

 

Common Stock

 

Retained
Earnings
(Deficit)

 

Members’ Equity
(Deficit)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance (Deficit) at December 31, 2016

 

$

850,265

 

$

(1,529,498

)

$

272,571

 

$

(406,662

)

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

1,233,776

 

1,449,651

 

2,683,427

 

 

 

 

 

 

 

 

 

 

 

Members’ Distributions, net

 

 

 

(1,376,189

)

(1,376,189

)

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2017

 

$

850,265

 

$

(295,722

)

$

346,033

 

$

900,576

 

 

See accompanying notes.

 

4



 

MOORE FREIGHT SERVICE, INC. AND AFFILIATES

Combined Statements of Cash Flows

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2017

 

2016

 

CASH FLOWS FROM OPERATINNG ACTIVITIES

 

 

 

 

 

Net income

 

$

2,683,427

 

$

3,138,634

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

2,335,579

 

2,024,211

 

Loss (gain) on disposition of fixed assets

 

(524,535

)

(940,466

)

Deferred taxes

 

798,775

 

1,584,846

 

Changes in operating assets and liabilities

 

 

 

 

 

Accounts receivable

 

(1,279,325

)

(644,790

)

Due from officers and employees

 

(1,599

)

(31,188

)

Inventories

 

(51,987

)

4,171

 

Prepaid expenses

 

(21,614

)

(147,798

)

Accounts payable and accrued expenses

 

(141,237

)

65,333

 

Accrued taxes

 

(404,860

)

(405,000

)

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

3,392,624

 

4,647,953

 

 

 

 

 

 

 

CASH FLOWS USED BY INVESTING ACTIVITIES

 

 

 

 

 

Purchase of property and equipment

 

(643,640

)

(2,032,559

)

Proceeds from disposition of fixed assets

 

703,421

 

1,160,330

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

 

59,781

 

(872,229

)

 

 

 

 

 

 

CASH FLOWS USED BY FINANCING ACTIVITIES

 

 

 

 

 

Members’ distributions

 

(1,376,189

)

(645,556

)

Principal repayments on long-term debt

 

(2,628,040

)

(2,949,680

)

NET CASH USED BY FINANCING ACTIVITIES

 

(4,004,229

)

(3,595,236

)

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

(551,824

)

180,488

 

CASH, BEGINNING OF PERIOD

 

2,976,878

 

2,055,069

 

CASH, END OF PERIOD

 

$

2,425,054

 

$

2,235,557

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW DISCLOSURES

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

Interest and loan costs

 

$

516,977

 

$

559,277

 

Income taxes

 

$

75,000

 

$

120,814

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON- CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

Equipment acquired with debt

 

$

3,510,790

 

$

2,856,436

 

 

See accompanying notes.

 

5



 

MOORE FREIGHT SERVICE, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Operations

 

Moore Freight Service, Inc. (Moore) and affiliates (the Company) are in the trucking business primarily hauling freight for the glass industry throughout the United States and into Canada and Mexico.

 

Principles of Combination

 

The combined financial statements include the accounts of Moore Freight Service, Inc., a Tennessee corporation, RT&L, LLC, RAND, LLC, JD, Partners, LLC and TM Transport, LLC, all of which are Tennessee limited liability companies. RT&L, LLC is owned by the wife of the majority shareholder of Moore and RAND, LLC is owned by the same shareholder’s brother. JD and Partners, LLC and TM Transport, LLC are each owned by a different minority shareholder of Moore.  All significant intercompany transactions and balances have been eliminated.

 

Basis of Presentation

 

These interim combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.

 

The consolidated balance sheet as of December 31, 2016 has been derived from the audited combined financial statements at that date. For additional information, including the Company’s significant accounting policies, refer to the combined financial statements and related footnotes for the year ended December 31, 2016 as set forth in Exhibit 99.1 filed in this Current Report on Form 8-K/A.

 

Use of Estimates

 

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

NOTE 2 - LONG-TERM DEBT

 

Long-term debt consists of several installment debts to banks and finance companies with interest rates ranging from 3.28% to 9.79%. The loans are payable monthly and secured by equipment.

 

See accompanying notes.

 

6



 

At September 30, 2017, future maturities of long-term debt were as follows:

 

2017

 

$

2,990,824

 

2018

 

2,792,734

 

2019

 

2,043,271

 

2020

 

1,426,330

 

2021

 

770,977

 

Thereafter

 

863,112

 

 

 

$

10,887,248

 

 

NOTE 3 — INCOME TAXES

 

Moore’s effective tax rates for the nine months ended September 30, 2017 and 2016 were 24.7% and 34.4%, respectively. The difference between the effective tax rate and the federal statutory rate primarily results from state income taxes, nondeductible expenses and the affiliates not subject to income taxes, state taxes and permanent differences.

 

NOTE 4 - RELATED PARTY TRANSACTIONS

 

The facility at Church Hill is owned by a related party. The lease is month-to-month at $6,500 per month. Total rent expense for the lease was $58,500 and $49,500 for the nine months ended September 30, 2017 and 2016, respectively.

 

As of September 30, 2017 and December 31, 2016, the majority shareholder owed the Company $48,218 and $48,718, respectively. The amount is unsecured and non-interest bearing.

 

NOTE 5 - DUE TO FACTOR

 

During 2017 and 2016, the Company sold a substantial portion of its accounts receivable to a factor under a continuing contract. The accounts were sold with recourse and therefore the Company bears the credit risk. The amount outstanding as of September 30, 2017 and December 31, 2016, was $443,350 and $460,730, respectively. Of this amount, only the reserve balances of $65,511 and $95,323 have been included in accounts receivable as of September 30, 2017 and December 31, 2016, respectively. Total charges paid by the Company during the nine months ended September 30, 2017 and 2016 were $271,462 and $301,573, respectively.

 

NOTE 6 - LEASE COMMITMENTS

 

The Company leases a facility in Church Hill, Tennessee, from a related party (see note 4), and other facilities under noncancelable and month-to-month lease agreements. The rent expense under these agreements was $99,600 and $56,800 for the nine months ended September 30, 2017 and 2016, respectively.

 

The Company also leases tractors and trailers under noncancelable operating leases. The equipment lease expense under these agreements was $4,183,170 and $3,319,181 for the nine months ended September 30, 2017 and 2016, respectively.

 

NOTE 7 - SUBSEQUENT EVENTS

 

On December 1, 2017, Daseke, Inc. acquired 100% of the outstanding equity interests of the Company.

 

The Company has evaluated subsequent events through February 11, 2018, the date the combined financial statements were available to be issued.

 

See accompanying notes.

 

7



 

MOORE FREIGHT SERVICE, INC. AND AFFILIATES

Supplementary Information - Schedule I

For the Nine Months Ended September 30, 2017 and 2016

 

 

 

September 30,

 

 

 

2017

 

2016

 

Cost of Revenue

 

 

 

 

 

Contract drivers

 

$

2,243,581

 

$

2,872,430

 

Depreciation and amortization

 

2,335,579

 

2,024,211

 

Fuel

 

3,393,832

 

3,222,792

 

Driver labor costs

 

6,060,552

 

6,179,688

 

Other labor costs

 

1,782,355

 

1,699,416

 

Equipment repairs and maintenance

 

1,288,909

 

1,638,818

 

Equipment insurance

 

1,005,574

 

1,078,151

 

Equipment leases

 

2,025,276

 

1,867,984

 

Licenses, permits, and tolls

 

308,751

 

324,827

 

Driver travel costs

 

17,507

 

21,781

 

Supplies

 

177,242

 

173,169

 

Base plates, prepass, and fines

 

231,355

 

235,458

 

Other operating costs

 

151,609

 

153,668

 

Gain on disposition of fixed assets

 

(524,535

)

(940,466

)

 

 

 

 

 

 

Total cost of revenue

 

$

20,497,587

 

$

20,551,927

 

 

See accompanying notes.

 

8



 

MOORE FREIGHT SERVICE, INC. AND AFFILIATES

Supplementary Information - Schedule II

For the Nine Months Ended September 30, 2017 and 2016

 

 

 

September 30,

 

 

 

2017

 

2016

 

Administrative expenses

 

 

 

 

 

Administrative labor costs

 

$

2,786,888

 

$

2,772,156

 

Taxes

 

77,514

 

73,521

 

Professional fees

 

45,313

 

109,301

 

Bank fees and factoring charges

 

278,274

 

305,191

 

Computer expense

 

201,018

 

191,912

 

Contributions

 

50,358

 

49,479

 

Insurance

 

41,821

 

43,374

 

Office supplies and other office expenses

 

233,163

 

143,623

 

Utilities

 

81,645

 

73,393

 

Office repairs and maintenance

 

132,040

 

76,303

 

Telephone

 

156,567

 

126,947

 

Advertising

 

51,982

 

22,722

 

Automobile

 

127,088

 

97,877

 

Meals and entertainment

 

125,262

 

120,459

 

Travel

 

127,662

 

77,581

 

Rent

 

65,290

 

66,815

 

Miscellaneous

 

210,024

 

81,796

 

 

 

 

 

 

 

Total administrative expenses

 

$

4,791,909

 

$

4,432,450

 

 

See accompanying notes.

 

9