Consolidated Delivery & Logistics, Inc.
Consolidated Delivery & Logistics, Inc.
380 Allwood Road
Clifton, New Jersey 07012
Fax: (973) 471-5519
Web site: http://www.dsii.com
Sales: $171.5 million (1997)
Stock Exchanges: NASDAQ
Ticker Symbol: CDLI
SICs: 4215 Courier Services Except By Air; 4513 Air Courier Services
Consolidated Delivery & Logistics, Inc. is one of the largest full-service, same-day ground and air delivery companies in the United States. Operating 24 hours a day, seven days a week, the company provides one-, two-, and four-hour rush pickup and delivery of material for customers such as hospitals, lawyers, advertising and travel agencies, and commercial and industrial companies. The sorting, routing, and delivery of time-sensitive materials are also made on a more scheduled basis for deliveries such as large shipments from pharmaceutical suppliers to pharmacies and the distribution of financial documents, payroll data, and other documents between branches of insurance companies, banks, and other financial institutions. CD&L also provides home delivery services for customers including catalog marketers, large cosmetic companies, and other direct sales firms. For air delivery, the company offers next-flight-out (rush) and scheduled air services both domestically and internationally. In addition to its delivery services, the company provides mail-room management services (including providing and supervising personnel) for companies and professional firms.
As of February 1998, the company operated 60 offices in 23 states and the District of Columbia. Its ground delivery services were concentrated on the East Coast, with some operations in the Midwest and on the West Coast. CD&L’s air delivery services operated throughout the United States and to major cities around the world.
The Combination: 1994-95
Consolidated Delivery and Logistics, Inc. was founded in June 1994, by John Mattei and Joseph Wojak to consolidate localized operations that provided same-day delivery and logistics services into a national company. Mattei was president of JKM Associates, a consulting firm specializing in mergers and acquisitions, and became chairman and CEO of CD&L. Wojak, a financial and management consultant, became executive vice-president and CFO.
The ground and air delivery industry was essentially divided into three segments. The next-day and two-day delivery markets were dominated by national companies such as Federal Express and United Parcel Service. The same-day delivery market was completely different, being composed of some 10,000 companies. While that market generated over $15 billion in 1994, it was very segmented. The majority of the companies were very small and operated on a local basis to provide messenger and courier services or other ground delivery. Even those services were further segmented into companies specializing in rush/on-demand delivery or in scheduled and routed delivery. Completely different companies specialized in distribution or air courier/air freight or warehousing for just-in-time delivery. And the complexity of the business created the demand for other companies that specialized in logistics, coordinating all the steps involved in getting a product where it was supposed to go.
Several factors led Mattei and Wojak to establish CD&L. First, many of the larger companies that used same-day delivery and logistics services were outsourcing these activities as part of their cost-control efforts. Second, these and other customers were increasingly looking for a single source to provide a full range of delivery and logistic services that included responsive customer services such as tracking, storage, or customized billing. Finally, the growth in catalog sales, in-home medical care, and home shopping offered substantial growth opportunities in the home delivery area.
The company actually began operating on November 27, 1995, the date CD&L completed its initial public offering and, at the same time, acquired 11 existing companies (the founding companies). The IPO raised approximately $33.2 million (after expenses) from the sale of 3.2 million shares of common stock at a price of $13 per share. Most of the proceeds, approximately $29.6 million, were used to pay the cash portion of the purchase prices of the 11 founding companies. The total price of the combined mergers was $67.8 million, including 2.9 million shares. The company also used money from the offering to pay off $2.3 million in debt.
The 11 companies had been operating independently in the same-day delivery market for an average of 15 years. American Courier Express, Inc., a six-year old company based in Edison, New Jersey, specialized in rush/demand delivery and also offered distribution services and air courier/air freight. CD&L paid $536,000 in cash and 102,485 shares of stock for the merger. Click Messenger Service, Inc., of Cranford, New Jersey, had more than 35 years experience in the market. Click operated in New Jersey, upstate New York, and New York City, specializing in scheduled and routed delivery and also offering distribution, rush/demand, warehousing, and contract logistics. The merger with Click and related companies cost CD&L $1.77 million in cash and $177,212 shares. Court Courier Systems, Inc., also based in New Jersey, had been in business for over 16 years and provided scheduled and routed delivery in Hartford, Connecticut; Augusta, Maine; New Jersey, and upstate New York. Court also offered distribution services, rush/on-demand delivery, contract logistics, and warehousing. CD&L paid $1.75 million in cash and 175,362 shares for Court and a related company. Crown Courier Systems, Inc. and Bestway Distribution Services, Inc. (Crown-Bestway) was headquartered in Miami, Florida, and had operations throughout central and south Florida. In addition to its distribution services, the 20-year-old operation provided rush/demand and scheduled delivery, air courier/air freight, contract logistics, and warehousing. The price for Crown-Bestway was $1.9 million in cash and 192,063 shares. Distribution Solutions International, Inc. (DSI) was based in Michigan with another location in Philadelphia, and had been providing logistics services for over five years. DSI’s price was $1.37 million and 137,239 shares. One of the biggest of the founding companies, Clayton/National Courier Systems, Inc. was a same-day ground and air delivery service based in St. Louis, Missouri, with additional operations in San Francisco and Seattle. National also offered distribution, contract logistics, and facilities management services. CD&L paid $3.15 million in cash and 290,357 shares for 23-year-old National and a related company.
New York City-based Olympic Courier Systems, Inc. had been providing rush/on-demand delivery, air courier/air freight, and warehousing services in New York City and Long Island City for 12 years. CD&L paid $1.17 million in cash and 116,644 shares for Olympic and a related company. Orbit/Lightspeed Courier Systems, Inc. was also based in New York City, and had been providing rush/on-demand delivery, facilities management, and warehousing in New York City and Bayonne, New Jersey, for five years. The merger with Orbit/Lightspeed and related companies cost $1.89 million in cash and 194,000 shares. Securities Courier Corporation was another of the largest of the founding companies. Headquartered in South Hackensack, New Jersey, it had locations throughout New Jersey and New York City for its scheduled and routed delivery business. CD&L paid $3.74 million in cash and 357,301 in shares for the 22-year-old operation plus 16,667 shares for Liberty Transfer Corporation, a Securities Courier contractor. Six-year-old Silver Star Express, Inc. was headquartered in Miami, Florida. Primarily a distribution business, the company also offered scheduled and routed delivery and warehousing services, and operated in select cities in Florida, Georgia, Indiana, Louisiana, Maryland, New Jersey, Ohio, and Tennessee. The merger with Silver Star and related companies cost $3.34 million in cash and 307,327 shares. The biggest of the founding companies, SureWay Air Traffic Corporation was headquartered in Long Island City, New York. SureWay had been providing same-day air delivery services for 20 years, with additional operations in Los Angeles, Chicago, New Jersey, North Carolina, and Washington, D.C. SureWay also had sales agents across the United States. CD&L paid $8.96 million in cash and 968,045 shares for SureWay and a related company.
Upon completion of the “Combination,” the president or CEO of each of the founding companies was named to CD&L’s board of directors. The board was a large one, with 18 members, 12 of them from the original companies. John Mattei remained chairman of the board and CEO, while Wojak continued as executive vice-president and CFO. William Brannan, who had 23 years of experience in the transportation and logistics industry, was named president and COO. As CD&L began operations, it employed over 2,800 people, most as drivers, operated 64 leased facilities (not counting SureWay’s sales agent locations), and owned or leased 506 cars and 278 trucks. It also had contracts with some 770 independent owner/operators.
CD&L established its headquarters in Paramus, New Jersey. The companies kept their individual names initially, with plans to add “Consolidated Delivery & Logistics.” The new company ended the year with sales of $150.4 million, an increase of over nine percent from combined sales in 1994. Profits increased 7.7 percent to $45.5 million from $42.2 million.
Businesses that are outsourcing their transportation needs are looking for a single-source vendor that can meet their expedited delivery needs from multiple points around the country. These businesses are also looking for a vendor that can offer a broad range of services, from time-critical ground delivery and overnight transportation to timely logistics distribution support both domestically and internationally at the local, regional and national level and globally. CD&L’s ability to meet this constellation of needs will enable it to broaden its sales and marketing reach.
Building a National Company: 1996
CD&L’s strategy for becoming the leading provider of same-day delivery and logistics services focused on three areas. To begin with, the company expected to realize internal growth opportunities. This would be accomplished by offering existing customers a wider range of services and expanded geographic coverage, by having the original companies purchase services from each other rather than from outside delivery companies, and by offering customers a single source for meeting national and multi-regional delivery and logistics needs.
The company also expected to grow by making its operations more efficient. This meant consolidating operations as well as achieving savings in areas such as insurance coverage and vehicle costs as a result of its size and purchasing power. Finally, CD&L planned to grow by buying additional companies in existing markets as well as in new regions.
CD&L moved quickly to add new companies, spending some $3.3 million in cash and shares during 1996 to buy five smaller businesses whose annual revenues approached $15.6 million. The purchases were International Courier Services, Inc.; Celadon Express, Inc.; Interim Personnel, Inc.; HurryWagon, Inc.; and W.I. Services, Inc., and included three ground delivery services in the Northeast and two air courier companies, which expanded the New York to Los Angeles air route.
At the same time, CD&L worked to bring all the original companies under a single common management and began merging and rationalizing operations. For its delivery activities it initially established four divisions. The Manhattan Region combined Olympic, Orbit/Lightspeed, and the Manhattan operations of Click. The Northeast Region combined Court, American, and the rest of Click. Silver Star and Crown-Bestway combined to form the Southeast Region. The company’s fourth delivery division was SureWay Air Courier, providing air delivery services. Distribution Solutions International (DSI) handled the company’s contract logistics services.
But the anticipated cost savings did not occur as quickly as planned. After three quarters of improved earnings, the company lost money in the fourth quarter. As the company’s 1996 annual report acknowledged, “the melding of 11 original companies, overlaid by the acquisitions we did complete—meshing diverse systems, personalities and capabilities into a unified whole—proved much more difficult than originally anticipated, slowing the pace of consolidation cost savings.” According to Thorn Albrecht, an analyst at A.G. Edwards, although the Southeast and SureWay divisions were profitable, problems developed in the Northeast and Manhattan, largely due to “jealous managers, infighting, poor customer service, and imprudent facility consolidation.” However, the biggest contributor to the loss was Distribution Solutions International.
Causing further problems, CD&L’s stock price dropped after the initial offering and remained lower than expected, and the company lost $3.5 million in business when several long-term customers canceled or did not renew their logistic services contracts.
In September, Chairman and CEO John Mattei announced that he would leave the company at the beginning of 1997. Albert Van Ness, Jr., a director of the company, was named to replace him. The company also reduced the size of the board, from 18 to 13, buying out several of the original owners. Because of the problems in the logistic services business, the board decided to sell Distribution Solutions International, its contract logistics subsidiary.
In its first full year of operation, the company increased its revenues by 13.7 percent to $171 million, with sales growth in all areas except contract logistics. However, in the fourth quarter the company registered a loss of $1.7 million due to severance costs and charges related to consolidation, and a net loss for the year of $683,000. The financial situation caused the company to reexamine and alter its business strategy, deciding to curtail acquisitions and to focus on internal growth. The new strategy included 1) putting into place a new management incentive system that linked compensation to results in each region, and 2) eliminating underperforming subsidiaries and management.
As CD&L was working to build a national organization, the same-day delivery market segment was continuing to undergo changes. By September 1996, Colorado-based Corporate Express Corporation had become the largest operator in the market after buying up the number one and two operations. In March it acquired industry leader U.S. Delivery Systems of Houston for $500 million. Like CD&L, USDS was created in 1994 by consolidating a number of same-day delivery operations, though it initially concentrated on ground services and did not include air courier and air freight services. A few months later, Corporate Express paid $138 million for United TransNet, Inc. of Roswell, Georgia. As a result of these acquisitions, CD&L suddenly found itself in the number two position in the same-day delivery market.
1997 and Beyond
At the beginning of 1997, Albert Van Ness took over from John Mattei as chairman and CEO, and the company sold DSI to its former owner in exchange for 137,239 shares of CD&L common stock, worth approximately $601,107. CD&L continued its internal reorganization by further reducing the size of its board of directors to nine, with five outside directors, cut interest payments by restructuring its debt, and moved corporate headquarters from a Paramus, New Jersey, office park to an existing company facility in Clifton, New Jersey.
By the second quarter of the year, the financial Picture had improved, and that situation continued through the end of the year. CD&L sold its fulfillment and direct mail business for $850,000 in cash and notes, further concentrating on its core delivery operations. Revenue for 1997 increased to $171.5 million. And even with the loss of $1.7 million in business when two of the company’s largest banking customers merged and closed branches, ground delivery revenue (70 percent of total sales) increased by 7.4 percent as a result of the 1996 acquisitions and several new contracts. Revenue from air courier services (30 percent of sales) increased 9.1 percent due to growth of existing accounts and the 1996 acquisitions. Net income for the year was $459,000, compared to a net loss of $638,000 the year before. Earnings per share reached 250 for the year, up from a 130 loss in 1996.
For 1998, Van Ness announced that the company would examine selective acquisitions, implement a profit improvement plan for the air courier division, and continue to increase customer service standards.
American Courier, Inc.; Clayton/National Courier Systems, Inc.; Click Messenger Service, Inc.; Click Messenger Service of NY, Inc.; Court Courier Systems, Inc.; National Express Company, Inc.; Olympic Courier Systems, Inc.; Securities Courier Corporation; Silver Star Express, Inc.; Sure Way Air Traffic Corporation; Sure Way Logistics Corporation.
Albrecht, Thorn S., “Consolidated Delivery & Logistics,” A.G. Edwards Investment Opinion, April 25, 1997.
“Consolidated Delivery & Logistics, Inc. Announces Sale of Discontinued Operation,” PR Newswire, January 26, 1998.
“Consolidated Delivery & Logistics, Inc. Records Nearly $4.2 Million Operating Improvements From Continuing Operations for the Full Year 1997,” PR Newswire, February 25, 1998.
“The New America: Dynamex Inc.,” Investor’s Business Daily, October 4, 1996.
—Ellen D. Wernick