-----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, JFh7D+69T7RkDxpLFsUwsgJUMs9+q/asY2Rjy783jR6qKu+VGhk/bRu6+xIY7V2W t14To99I0ht3meM9s+oKZQ== 0000930661-96-001060.txt : 19960816 0000930661-96-001060.hdr.sgml : 19960816 ACCESSION NUMBER: 0000930661-96-001060 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERITRUCK DISTRIBUTION CORP CENTRAL INDEX KEY: 0001004153 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 752619368 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-99716 FILM NUMBER: 96613567 BUSINESS ADDRESS: STREET 1: 301 COMMERCE ST STREET 2: STE 1101 CITY: FORT WORTH STATE: TX ZIP: 76102-5384 BUSINESS PHONE: 8173326020 MAIL ADDRESS: STREET 1: 301 COMMERCE ST STREET 2: SUITE 1101 CITY: FORT WORTH STATE: TX ZIP: 76102 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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 June 30, 1996 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 33-99716 AMERITRUCK DISTRIBUTION CORP. (Exact name of registrant as specified in its charter) DELAWARE 75-2619368 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) City Center Tower II, Suite 1101, 301 Commerce Street, Fort Worth, Texas 76102 (Address of principal executive offices) (Zip Code) (817) 332-6020 (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. [X] Yes [ ] No AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES TABLE OF CONTENTS Part I FINANCIAL INFORMATION Page ---- Item 1. Financial Statements 1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II OTHER INFORMATION Item 1. Legal Proceedings 16 Item 6. Exhibits and Reports on Form 8-K 16 i PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 1996* 1995* 1996* 1995* -------- -------- -------- ------- Operating revenue $53,673 $20,886 $98,322 $41,090 ------- ------- ------- ------- Operating expenses: Salaries, wages and fringe benefits 17,685 6,162 32,125 12,322 Purchased transportation 13,901 6,031 24,121 11,665 Operating supplies and expenses 9,860 2,932 18,439 5,858 Depreciation and amortization of capital leases 3,233 1,507 6,220 2,960 Claims and insurance 2,026 780 3,724 1,676 Operating taxes and licenses 1,163 273 2,165 553 General supplies and expenses 2,521 601 4,338 1,224 Amortization of intangibles 265 120 498 240 Gain on disposal of property and equipment (68) (38) (255) (62) ------- ------- ------- ------- Total operating expenses 50,586 18,368 91,375 36,436 ------- ------- ------- ------- Operating income 3,087 2,518 6,947 4,654 Interest expense 3,955 833 7,643 1,558 Amortization of financing fees 120 2 235 3 Other income, net (135) (67) (290) (157) ------- ------- ------- ------- Income (loss) before income taxes and extraordinary item (853) 1,750 (641) 3,250 Income taxes (benefit) (380) 710 (287) 1,327 ------- ------- ------- ------- Income (loss) before extraordinary item (473) 1,040 (354) 1,923 Extraordinary item, loss on early retirement of debt, net of taxes of $154 - - (230) - ------- ------- ------- ------- Net income (loss) $ (473) $ 1,040 $ (584) $ 1,923 ======= ======= ======= =======
* Comparisons between periods are affected by acquisitions - see Note 2. See accompanying notes to consolidated financial statements. 1 AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars and shares in thousands)
June 30, December 31, 1996 1995 ----------- ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 4,070 $ 15,286 Accounts and notes receivable, net 22,126 12,269 Prepaid expenses 6,941 4,057 Repair parts and supplies 1,108 844 Deferred income taxes 1,206 960 Other current assets 2,141 941 -------- -------- Total current assets 37,592 34,357 Property and equipment, net 97,316 67,191 Goodwill, net 32,270 32,705 Notes receivable 921 - Other assets 8,145 6,282 -------- -------- Total assets $176,244 $140,535 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) Current liabilities: Current portion of long-term debt $ 6,590 $ 10,566 Accounts payable and accrued expenses 11,987 12,071 Claims and insurance accruals 1,594 1,852 Other current liabilities 576 499 -------- -------- Total current liabilities 20,747 24,988 Long-term debt 147,734 107,769 Deferred income taxes 7,597 7,773 Other liabilities 2,567 1,822 -------- -------- Total liabilities 178,645 142,352 -------- -------- Stockholders' equity (deficiency): Common stock; $.01 par value; 3,278 shares issued and outstanding 33 33 Loans to stockholders (1,435) (1,435) Accumulated deficit (999) (415) -------- -------- Total stockholders' equity (deficiency) (2,401) (1,817) -------- -------- Total liabilities and stockholders' equity (deficiency) $176,244 $140,535 ======== ========
See accompanying notes to consolidated financial statements. 2 AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Six Months Ended June 30, ------------------- 1996* 1995* --------- -------- OPERATING ACTIVITIES: Net income (loss) $ (584) $ 1,923 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization of capital leases 6,220 2,960 Amortization of intangibles 498 240 Gain on disposal of property and equipment (255) (62) Provision (benefit) for deferred income taxes (441) 232 Other, net (936) 64 Changes in current assets and liabilities, net of effects from acquisition: Accounts and notes receivable, net (8,588) 1,689 Prepaid expenses (1,507) (240) Repair parts and supplies (25) (94) Other current assets (7) 114 Accounts payable and accrued expenses (973) (1,037) Claims and insurance accruals 988 474 Other current liabilities 76 3 -------- ------- Net cash provided by (used in) operating activities (5,534) 6,266 -------- ------- INVESTING ACTIVITIES: Purchase of Freymiller assets, net of liabilities assumed (18,821) - Purchase of property and equipment (17,388) (3,594) Payment for Dietz acquisition, net of cash acquired - (1,959) Proceeds from sale of property and equipment 3,162 383 Other, net 528 (1) -------- ------- Net cash used in investing activities (32,519) (5,171) -------- ------- FINANCING ACTIVITIES: Revolving line of credit 28,596 - Proceeds from issuance of long-term debt 13,365 5,756 Repayment of long-term debt (15,124) (5,475) Dividends paid - (74) -------- ------- Net cash provided by financing activities 26,837 207 -------- ------- Net increase (decrease) in cash and cash equivalents (11,216) 1,302 Cash and cash equivalents, beginning of period 15,286 1,617 -------- ------- Cash and cash equivalents, end of period $ 4,070 $ 2,919 ======== ======= Supplemental cash flow information: Cash paid during the period for: Interest $ 7,650 $ 1,339 Income taxes 97 1,544 Property and equipment financed through capital lease obligations and other debt 5,786 4,451
* Comparisons between periods are affected by acquisitions - see Note 2. See accompanying notes to consolidated financial statements. 3 AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ACCOUNTING POLICIES AND INTERIM RESULTS The 1995 Annual Report on Form 10-K for AmeriTruck Distribution Corp. ("AmeriTruck" or the "Company") and its wholly-owned subsidiaries includes a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. The statements for the periods presented are condensed and do not contain all information required by generally accepted accounting principles to be included in a full set of financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of June 30, 1996 and December 31, 1995 and the results of operations for the three-month and six-month periods ended June 30, 1996 and 1995 and cash flows for the six-month periods ended June 30, 1996 and 1995 have been included. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the entire year. Certain prior year data has been reclassified to conform to current year presentation. Separate financial statements of the Company's subsidiaries are not included because (a) all of the Company's direct and indirect subsidiaries have guaranteed the Company's obligations under the Indenture, dated as of November 15, 1995 (the "Indenture"), among the Company, such subsidiaries (in such capacity, the "Guarantors"), and The Bank of New York, as Trustee, (b) the Guarantors have fully and unconditionally guaranteed the 12 1/4% Senior Subordinated Notes due 2005 ("Subordinated Notes") issued under the Indenture on a joint and several basis, (c) the Company is a holding company with no independent assets or operations other than its investments in the Guarantors and (d) the separate financial statements and other disclosures concerning the Guarantors are not presented because management has determined that they would not be material. 2. ACQUISITIONS AmeriTruck was formed in August 1995 to effect the combination of six regional trucking lines in November 1995 (the "Acquisitions"): W&L Services Corp. ("W&L"), Thompson Bros., Inc. ("TBI"), J.C. Bangerter & Sons, Inc. ("Bangerter"), CMS Transportation Services, Inc. and certain related companies ("CMS"), Scales Transport Corporation and a certain related company ("Scales") and C.B.S. Express, Inc. ("CBS" and, collectively the "Operating Companies"). Prior to the Acquisitions, W&L and TBI had certain common stockholders who controlled approximately 87 percent of the common equity of W&L and TBI on a combined basis. In addition, these stockholders control approximately 67 percent of the outstanding common stock of AmeriTruck after the consummation of the Acquisitions. Therefore, these common stockholders of W&L and TBI have been treated as the acquirer for purposes of accounting for the Acquisitions. The accompanying AmeriTruck consolidated statements of operations and cash flows reflect only W&L and TBI combined results for the 1995 periods. In February 1996, the Company, through CMS, purchased (the "Purchase") certain assets of Freymiller Trucking Inc. ("Freymiller"). Freymiller had been the subject of a Chapter 11 bankruptcy proceeding in Oklahoma. Pursuant to the Purchase, CMS purchased certain specific automobiles, computer hardware and software, furniture and fixtures, rights to the trade name "Freymiller", existing spare parts, tires and fuel, rights under certain leases, certain leasehold improvements and shop equipment and installment sales contracts relating to tractors and trailers sold by Freymiller out of the ordinary course of business (with all of the foregoing referred to as the "Freymiller Assets"). The Company also negotiated with Freymiller's lenders and lessors to purchase approximately 185 tractors and 309 trailers, previously operated by Freymiller, for approximately $14 million. An additional 80 trailers were leased for a seven-year period. In exchange for the Freymiller Assets, the Company paid approximately $2.7 million in cash at closing and assumed approximately $2 million in existing equipment financing. 4 In addition, the Company assumed a lease for Freymiller's maintenance facility in Oklahoma City and certain routine executory business contracts. Except as provided above, the Company did not assume any obligations or liabilities of Freymiller. In connection with these transactions, the Company purchased real property in Oklahoma City, Oklahoma from Freymiller's Chairman of the Board, President and Chief Executive Officer for approximately $1.5 million in cash. The Company has made the Purchase in order to supplement its existing temperature-controlled trucking business. The Company funded the cash payments referred to above primarily from borrowings under the NationsBank Credit Facility. See footnote "3. Long-Term Debt." In April 1996, the Company changed the corporate name of CMS to AmeriTruck Refrigerated Transport, Inc. ("ART"). ART currently conducts the operations not only of CMS but also those formerly conducted with the Freymiller Assets. The Company has signed a letter of intent to purchase the stock of KTL, Inc. ("KTL") of Largo, Florida. KTL is a carrier of refrigerated and non- refrigerated products and would significantly increase the Company's market share in Florida, New Jersey and Indiana. KTL had revenues of $23.6 million and $6.3 million for the year ended December 31, 1995 and for the quarter ended March 31, 1996, respectively. KTL operates approximately 140 tractors and 300 trailers and employs approximately 300 persons, of whom 240 are drivers and many of whom operate as teams. Consumation of this acquisition is subject to the completion of numerous items including, but not limited to, the negotiaion and execution of the definitive purchase agreement. In May 1995, W&L acquired Dietz Motor Lines, Inc. for $2.0 million in cash, which includes payment for non-compete agreements of $400,000 as well as an amount for certain eligible accounts receivable. This acquisition has been accounted for using the purchase method of accounting. Accordingly, the purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair values at the date of acquisition. The results of operations of the acquired company are included in the financial statements from the date of acquisition. 3. LONG-TERM DEBT NationsBank Credit Facility In February 1996, the Company and the Operating Companies entered into a Loan Agreement and related documents (collectively, the "NationsBank Credit Facility") with NationsBank of Texas, N.A. ("NationsBank") pursuant to which NationsBank has committed, subject to the terms and conditions of the NationsBank Credit Facility, to provide a $30 million credit facility to the Company. Borrowings under the NationsBank Credit Facility can be used for acquisitions, operating capital, capital expenditures, letters of credit and general corporate purposes. Pursuant to the NationsBank Credit Facility, as amended, NationsBank has agreed to provide a $30 million revolving credit facility, with a $7 million sublimit for letters of credit, maturing on February 1, 1998, at which time the revolving credit facility will convert into a term loan maturing on February 1, 2003. This facility is also subject to a borrowing base consisting of eligible receivables and eligible revenue equipment. Currently, the Company's borrowing base exceeds $30 million. Borrowings under the NationsBank Credit Facility bear interest at a per annum rate equal to either NationsBank's base rate or the rate of interest offered by NationsBank in the interbank eurodollar market plus an additional margin ranging from 1.5 percent to 2.0 percent based on the Senior Funded Debt Ratio of the Company. The Company also pays a letter of credit issuance fee and a quarterly unused facility fee. Borrowings under the NationsBank Credit Facility were $21.2 million at June 30, 1996 and were primarily used for the purchase of the Freymiller Assets. Available borrowings were $4.5 million at June 30, 1996 as there were $4.3 million in letters of credit outstanding. The Company's obligations under the NationsBank Credit Facility are collateralized by substantially all assets of the Company and its subsidiaries and are guaranteed in full by each of the Operating Companies. For purposes of the Indenture, such borrowings under the NationsBank Credit Facility constitute Senior Indebtedness of the Company and Guarantor Senior Indebtedness of the Operating Companies. 5 The NationsBank Credit Facility contains customary representations and warranties and events of default and requires compliance with a number of affirmative and negative covenants, including a limitation on the incurrence of indebtedness and a requirement that the Company maintain a specified Senior Funded Debt Ratio and Fixed Charge Coverage Ratio. Volvo Credit Facilities In February 1996, the Company and the Operating Companies entered into a Loan and Security Agreement, a Financing Integration Agreement and related documents (collectively, the "Volvo Credit Facilities") with Volvo Truck Finance North America, Inc. ("Volvo") pursuant to which Volvo has committed, subject to the terms and conditions of the Volvo Credit Facilities, to provide (i) a $10 million line of credit facility (the "Volvo Line of Credit") to the Company and the Operating Companies, and (ii) up to $28 million in purchase money or lease financing (the "Equipment Financing Facility") in connection with the Operating Companies' acquisition of new tractors and trailers manufactured by Volvo GM Heavy Truck Corporation. Borrowings under the Volvo Line of Credit are secured by certain specified tractors and trailers of the Company and the Operating Companies (which must have a value equal to at least 1.75 times the outstanding amount of borrowings under the Volvo Line of Credit) and are guaranteed in full by each of the Operating Companies. Borrowings under the Volvo Line of Credit bear interest at the prime rate. The Volvo Line of Credit contains customary representations and warranties and events of default and requires compliance with a number of affirmative and negative covenants, including a profitability requirement and a coverage ratio. The Equipment Financing Facility is being provided by Volvo in connection with the Operating Companies' agreement to purchase 400 new trucks manufactured by Volvo GM Heavy Truck Corporation between March 1, 1996 and June 30, 1997. The Operating Companies have agreed to utilize such facility for at least the first 200 of the new trucks. The borrowings under the Equipment Financing Facility are collateralized by the specific trucks being financed and are guaranteed in full by each of the Operating Companies. Borrowings under this facility bear interest at the prime rate. At June 30, 1996, borrowings outstanding under the Volvo Line of Credit and the Equipment Financing Facility were $7.4 million and $5.7 million, respectively. The Equipment Financing Facility contains customary representations and warranties, covenants and events of default. For purposes of the Indenture, the borrowings under the Volvo Credit Facilities constitute Senior Indebtedness of the Company and Guarantor Senior Indebtedness of the Operating Companies. 4. CHANGE IN ACCOUNTING ESTIMATES During 1995, the Company changed its estimate of the useful lives and salvage values of certain revenue equipment. This change had the effect of increasing operating income for the six months ended June 30, 1995, by approximately $207,000. 5. OTHER INCOME, NET Other (income) expenses consist of the following (in thousands):
Three Months Ended Six Months Ended June 30, June 30, -------------------- ------------------ 1996 1995 1996 1995 --------- --------- -------- -------- Interest income $(135) $ (65) $(286) $(158) Miscellaneous, net - (2) (4) 1 ----- ----- ----- ----- $(135) $ (67) $(290) $(157) ===== ===== ===== =====
6 6. CONTINGENCIES Bangerter has been named as a defendant in a lawsuit entitled The Ekotek ---------- Site PRP Committee v. Steven M. Self et al., Civil No. 2:94CV277K (U.S. ------------------------------------------- District Court Utah, Central Division), alleging that Bangerter is a potentially responsible party with respect to the removal and remediation cost of The Ekotek Site, located in North Salt Lake City, Utah. The suit alleges that hazardous waste generated by Bangerter, together with substantial volumes of additional hazardous waste generated by numerous other businesses, were taken to the site by a waste disposal firm engaged by Bangerter. Bangerter has reached an agreement in principle to settle the litigation for $25,000 and it is the opinion of management and counsel that there is no reasonable probability of additional liability. The Company cannot predict with any certainty that it will not in the future incur liability with respect to environmental compliance or liability associated with the contamination of additional sites owned or operated by the Company and the Operating Companies, sites formerly owned or operated by the Company and the Operating Companies (including contamination caused by prior owners and operators of such sites), or off-site disposal of hazardous material or waste that could have a material adverse effect on the Company's consolidated financial condition, operations or liquidity. The Company and the Operating Companies are a party to litigation incidental to its business, primarily involving claims for personal injury or property damages incurred in the transportation of freight. The Company is not aware of any claims or threatened litigation that might have a material adverse effect on the Company's consolidated financial position, operations or liquidity. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following analysis should be read in conjunction with the consolidated financial statements included in Item 1 - "Financial Statements." Results for the three and six months ended June 30, 1995 include W&L and TBI results on a combined basis as the "Predecessor Company". Results for the three and six months ended June 30, 1996 for the Company include the results of W&L, TBI, Bangerter, ART (including the Freymiller Assets since February 5, 1996), Scales and CBS for the entire 1996 periods. Bangerter, ART (including the Freymiller Assets), Scales and CBS are collectively referred to below as the "Acquired Companies." RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995 Net Income For the quarter ended June 30,1996, the Company had a net loss of $473,000 compared with net income of $1.0 million for the same period in 1995. The additional revenue and operating income from the Acquired Companies in the second quarter of 1996 was substantially offset by additional interest costs incurred on the Subordinated Notes and the NationsBank Credit Facility. Revenues Second quarter revenues for 1996 improved $32.8 million, or 157 percent, compared with the second quarter of 1995. Approximately $30.9 million, or 94 percent of this increase, reflects revenues of the Acquired Companies. The Predecessor Company had increased revenues of $1.9 million primarily attributable to increased volume during the three month period ended June 30, 1996. Expenses The following table sets forth operating expenses as a percentage of revenue and the related variance from 1996 to 1995.
THREE MONTHS ENDED JUNE 30, VARIANCE -------------------- INCREASE 1996 1995 (DECREASE) --------- --------- ---------- Salaries, wages and fringe benefits 32.9% 29.5% 3.4% Purchased transportation 25.9 28.9 (3.0) Operating supplies and expenses 18.4 14.0 4.4 Depreciation and amortization of capital leases 6.0 7.2 (1.2) Claims and insurance 3.8 3.7 .1 Operating taxes and licenses 2.1 1.3 .8 General supplies and expenses 4.7 2.9 1.8 Amortization of intangibles .5 .6 (.1) Gain on disposal of property and equipment (.1) (.2) .1 ---- ---- ---- Operating Ratio 94.2% 87.9% 6.3% ==== ==== ====
Salaries, wages and fringe benefits for the second quarter of 1996 increased $11.5 million, or 187 percent, compared with the second quarter 1995 due to the addition of $10.7 million in salaries, wages and fringe benefits attributable to the Acquired Companies. In addition, the increase is attributable to corporate salaries, some of which should generate future cost savings for the Company as a whole due to more competitive prices obtained in such areas as equipment and parts, fuel, insurance and financing. The 3.4 percentage point increase in salaries, wages and fringe benefits as a percentage of revenue is attributable primarily to the Acquired Companies, because only 16 percent of their three month average 8 combined driver base consisted of owner operators, whose costs are reflected in purchased transportation. In contrast, at June 30, 1995 41 percent of the Predecessor Company's driver base consisted of owner operators. The Predecessor Company also had increases in wages and salaries for drivers and terminal personnel due to the increased mileage during the second quarter of 1996. Purchased transportation costs were up $7.9 million in the second quarter of 1996, but decreased on a percentage of revenue basis by 3.0 percentage points. The Acquired Companies added $7.2 million to these costs, but their driver base, which consists of just 16 percent owner operators, helped to lower purchased transportation costs as a percentage of revenue. The Predecessor Company showed an increase of $709,000 in purchased transportation costs in the 1996 period due to expanded freight opportunities and its continued use of owner operator drivers. Operating supplies and expenses for the Company were $6.9 million higher for the quarter ended June 30, 1996 over 1995. Of this increase, $6.7 million is attributable to the Acquired Companies. The Predecessor Company also added $279,000 to this increase primarily due to increased fuel costs. The 4.4 percentage point increase in operating supplies as a percent of revenue is mainly attributable to the Acquired Companies, whose driver base consists of 84 percent of Company drivers, contributing to higher fuel and maintenance costs for Company owned equipment. The Company's fuel costs would have been lower by approximately $800,000 had the average fuel price for the second quarter of 1996 remained consistent with the first quarter of 1996. Depreciation and amortization of capital leases were up $1.7 million, but decreased as a percentage of revenue in the second quarter of 1996 due to the acquisition of used assets from Freymiller and the short-term lease of certain Freymiller assets. This amount as a percentage of revenue is expected to increase as these assets are replaced with new trailers and tractors. During 1995, the Company changed its estimate of the useful lives and salvage values of certain revenue equipment. This change had the effect of increasing operating income for the second quarter of 1995, by approximately $104,000. Claims and insurance expenses were up $1.2 million, for the second quarter of 1996 as compared to the same period in 1995, which is due primarily to costs attributable to the Acquired Companies. However, on a percentage of revenue basis, these costs were comparable. General supplies and expenses increased by $1.9 million for the second quarter of 1996 when compared with the same period in 1995. The general supplies and expenses of the Acquired Companies accounted for the majority of this increase as the Predecessor Company had only a slight increase in this category. The largest components of these expenses of the Acquired Companies were building and office equipment rents, utilities and office expenses. Interest expense increased $3.1 million for the quarter ended June 30, 1996 over the same period in 1995. Interest on the Subordinated Notes issued in November 1995 and the NationsBank Credit Facility, which was used to fund the acquisition of the Freymiller Assets, are the primary factors for this change. SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995 Net Income For the six months ended June 30,1996, the Company had a net loss of $584,000 compared with net income of $1.9 million for the same period in 1995. The additional revenue and operating income from the Acquired Companies in the first six months of 1996 was substantially offset by additional interest costs incurred on the Subordinated Notes and the NationsBank Credit Facility. The net loss in 1996 includes an extraordinary item, loss on early retirement of debt of $230,000, net of taxes of $154,000. These early retirements related to the use of proceeds from the Company's Subordinated Notes offering in 1995. 9 Revenues Revenues for the first six months of 1996 improved $57.2 million, or 139 percent, compared with the first six months of 1995. Approximately $53.6 million, or 94 percent of this increase, reflects revenues of the Acquired Companies. The Predecessor Company had increased revenues of $3.6 million primarily attributable to increased volume during the six month period ended June 30, 1996. Expenses The following table sets forth operating expenses as a percentage of revenue and the related variance from 1996 to 1995.
SIX MONTHS ENDED JUNE 30, VARIANCE ------------------ INCREASE 1996 1995 (DECREASE) -------- -------- ---------- Salaries, wages and fringe benefits 32.7% 30.0% 2.7% Purchased transportation 24.5 28.4 (3.9) Operating supplies and expenses 18.8 14.3 4.5 Depreciation and amortization of capital leases 6.3 7.2 (.9) Claims and insurance 3.8 4.1 (.3) Operating taxes and licenses 2.2 1.3 .9 General supplies and expenses 4.4 3.0 1.4 Amortization of intangibles .5 .6 (.1) Gain on disposal of property and equipment (.3) (.2) (.1) ---- ---- ---- Operating Ratio 92.9% 88.7% 4.2% ==== ==== ====
Salaries, wages and fringe benefits for the first six months of 1996 increased $19.8 million, or 161 percent, compared with the first six months of 1995 due to the addition of $18.6 million in salaries, wages and fringe benefits attributable to the Acquired Companies. In addition, the increase is attributable to corporate salaries, some of which should generate future cost savings for the Company as a whole due to more competitive prices obtained in such areas as equipment and parts, fuel, insurance and financing. The 2.7 percentage point increase in salaries, wages and fringe benefits as a percentage of revenue is attributable primarily to the Acquired Companies, because only 14 percent of their six month average combined driver base consisted of owner operators, whose costs are reflected in purchased transportation. In contrast, at June 30, 1995 41 percent of the Predecessor Company's driver base consisted of owner operators. The Predecessor Company also had increases in wages and salaries for drivers and terminal personnel due to the increased mileage during the first six months of 1996 and pay increases. Purchased transportation costs were up $12.5 million in the first six months of 1996, but decreased on a percentage of revenue basis by 3.9 percentage points. The Acquired Companies added $11.0 million to these costs, but their driver base, which consists of just 14 percent owner operators, helped to lower purchased transportation costs as a percentage of revenue. The Predecessor Company showed an increase of $1.5 million in purchased transportation costs in the 1996 period due to expanded freight opportunities and its continued use of owner operator drivers. Operating supplies and expenses for the Company were $12.6 million higher for the six months ended June 30, 1996 over 1995. Of this increase, $11.8 million is attributable to the Acquired Companies. The Predecessor Company also added $767,000 to this increase due to increased fuel costs and maintenance expenses. The 4.5 percentage point increase in operating supplies as a percent of revenue is mainly attributable to the Acquired Companies, whose driver base consists of 86 percent of Company drivers, contributing to higher fuel and maintenance costs for Company owned equipment. The Company's fuel costs would have been lower by approximately $800,000 had the average fuel price for the second quarter of 1996 remained consistent with the first quarter of 1996. Depreciation and amortization of capital leases were up $3.3 million, but decreased as a percentage of revenue in the first six months of 1996 due to the acquisition of used assets from Freymiller 10 and the short-term lease of certain Freymiller assets. This amount as a percentage of revenue is expected to increase as these assets are replaced with new trailers and tractors. During 1995, the Company changed its estimate of the useful lives and salvage values of certain revenue equipment. This change had the effect of increasing operating income for the six months ended June 30, 1995, by approximately $207,000. Claims and insurance expenses were up $2.0 million for the first half of 1996 as compared to the first half of 1995, which is due primarily to costs attributable to the Acquired Companies. However, on a percentage of revenue basis, these costs were comparable. General supplies and expenses increased by $3.1 million for the first six months of 1996 when compared with the same period in 1995. The general supplies and expenses of the Acquired Companies accounted for the majority of this increase as the Predecessor Company had only a slight increase in this category. The largest components of these expenses of the Acquired Companies were building and office equipment rents, utilities and office expenses. Interest expense increased $6.1 million for the six months ended June 30, 1996 over the same period in 1995. Interest on the Subordinated Notes issued in November 1995 and the NationsBank Credit Facility, which was used to fund the acquisition of the Freymiller Assets, are the primary factors for this change. CONTINGENCIES Bangerter has been named as a defendant in a lawsuit entitled The Ekotek ---------- Site PRP Committee v. Steven M. Self et al., Civil No. 2:94CV277K (U.S. District - ------------------------------------------- Court Utah, Central Division), alleging that Bangerter is a potentially responsible party with respect to the removal and remediation cost of The Ekotek Site, located in North Salt Lake City, Utah. The suit alleges that hazardous waste generated by Bangerter, together with substantial volumes of additional hazardous waste generated by numerous other businesses, were taken to the site by a waste disposal firm engaged by Bangerter. Bangerter has reached an agreement in principle to settle the litigation for $25,000 and it is the opinion of management and counsel that there is no reasonable probability of additional liability. The Company cannot predict with any certainty that it will not in the future incur liability with respect to environmental compliance or liability associated with the contamination of additional sites owned or operated by the Company and the Operating Companies, sites formerly owned or operated by the Company and the Operating Companies (including contamination caused by prior owners and operators of such sites), or off-site disposal of hazardous material or waste that could have a material adverse effect on the Company's consolidated financial condition, operations or liquidity. The Company and the Operating Companies are a party to litigation incidental to its business, primarily involving claims for personal injury or property damages incurred in the transportation of freight. The Company is not aware of any claims or threatened litigation that might have a material adverse effect on the Company's consolidated financial position, operations or liquidity. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities for the six months ended June 30, 1996 was $5.5 million compared with net cash provided by operating activities of $6.3 million for the six months ended June 30, 1995. The decrease of $11.8 million was primarily attributable to a $10.3 million increase in accounts receivable during the first six months of 1996, of which $8.7 million was for the Acquired Companies, and a decrease in net income of $2.5 million. These decreases were partially offset by an increase in depreciation and amortization of capital leases of $3.3 million. Subordinated Notes In November 1995, AmeriTruck completed a private placement of $100 million of 12 1/4% Senior Subordinated Notes due 2005 (the "Series A Notes"). The Series A Notes were exchanged for publicly registered 12 1/4% Senior Subordinated Notes due 2005, Series B (the "Subordinated Notes") in February 1996. The Subordinated Notes mature on November 15, 2005, and are unsecured subordinated 11 obligations of the Company. These notes bear interest at the rate of 12.25 percent per annum from November 15, 1995, payable semiannually on May 15 and November 15 of each year, commencing on May 15, 1996. The Subordinated Notes are subject to optional redemption on the terms set forth in the Indenture. As of June 30, 1996, the Company has applied the net proceeds of the Series A Notes primarily to finance the Acquisitions and prepay debt and capitalized leases. NationsBank Credit Facility In February 1996, the Company and the Operating Companies entered into a Loan Agreement and related documents (collectively, the "NationsBank Credit Facility") with NationsBank of Texas, N.A. ("NationsBank") pursuant to which NationsBank has committed, subject to the terms and conditions of the NationsBank Credit Facility, to provide a $30 million credit facility to the Company. Borrowings under the NationsBank Credit Facility can be used for acquisitions, operating capital, capital expenditures, letters of credit and general corporate purposes. Pursuant to the NationsBank Credit Facility, as amended, NationsBank has agreed to provide a $30 million revolving credit facility, with a $7 million sublimit for letters of credit, maturing on February 1, 1998, at which time the revolving credit facility will convert into a term loan maturing on February 1, 2003. This facility is also subject to a borrowing base consisting of eligible receivables and eligible revenue equipment. Currently, the Company's borrowing base exceeds $30 million. Borrowings under the NationsBank Credit Facility bear interest at a per annum rate equal to either NationsBank's base rate or the rate of interest offered by NationsBank in the interbank eurodollar market plus an additional margin ranging from 1.5 percent to 2.0 percent based on the Senior Funded Debt Ratio of the Company. The Company also pays a letter of credit issuance fee and a quarterly unused facility fee. Borrowings under the NationsBank Credit Facility were $21.2 million at June 30, 1996 and were primarily used for the purchase of the Freymiller Assets. Available borrowings were $4.5 million at June 30, 1996 as there were $4.3 million in letters of credit outstanding. The Company's obligations under the NationsBank Credit Facility are collateralized by substantially all assets of the Company and its subsidiaries and are guaranteed in full by each of the Operating Companies. For purposes of the Indenture, such borrowings under the NationsBank Credit Facility constitute Senior Indebtedness of the Company and Guarantor Senior Indebtedness of the Operating Companies. The NationsBank Credit Facility contains customary representations and warranties and events of default and requires compliance with a number of affirmative and negative covenants, including a limitation on the incurrence of indebtedness and a requirement that the Company maintain a specified Senior Funded Debt Ratio and Fixed Charge Coverage Ratio. Volvo Credit Facilities In February 1996, the Company and the Operating Companies entered into a Loan and Security Agreement, a Financing Integration Agreement and related documents (collectively, the "Volvo Credit Facilities") with Volvo Truck Finance North America, Inc. ("Volvo") pursuant to which Volvo has committed, subject to the terms and conditions of the Volvo Credit Facilities, to provide (i) a $10 million line of credit facility (the "Volvo Line of Credit") to the Company and the Operating Companies, and (ii) up to $28 million in purchase money or lease financing (the "Equipment Financing Facility") in connection with the Operating Companies' acquisition of new tractors and trailers manufactured by Volvo GM Heavy Truck Corporation. Borrowings under the Volvo Line of Credit are secured by certain specified tractors and trailers of the Company and the Operating Companies (which must have a value equal to at least 1.75 times the outstanding amount of borrowings under the Volvo Line of Credit) and are guaranteed in full by each of the Operating Companies. Borrowings under the Volvo Line of Credit bear interest at the prime rate. The Volvo Line of Credit contains customary representations and warranties and events of default and requires compliance with a number of affirmative and negative covenants, including a profitability requirement and a coverage ratio. The Equipment Financing Facility is being provided by Volvo in connection with the Operating Companies' agreement to purchase 400 new trucks manufactured by Volvo GM Heavy Truck Corporation between March 1, 1996 and June 30, 1997. The Operating Companies have agreed to utilize such facility for at least the first 200 of the new trucks. The borrowings under the Equipment Financing Facility are collateralized by the specific trucks being financed and are guaranteed in full by each of the Operating Companies. Borrowings under this facility bear interest at the prime rate. At June 30, 1996, borrowings outstanding under the Volvo Line of Credit and the Equipment Financing Facility were $7.4 million and $5.7 million, respectively. 12 The Equipment Financing Facility contains customary representations and warranties, covenants and events of default. For purposes of the Indenture, the borrowings under the Volvo Credit Facilities constitute Senior Indebtedness of the Company and Guarantor Senior Indebtedness of the Operating Companies. The Operating Companies began taking delivery of the Volvo trucks in early May at an average rate of 14 per week, with total deliveries for the second quarter of 99 trucks. Another 160 trucks are scheduled for delivery during the second half of 1996. To partially offset these expenditures of approximately $17 million, the Company intends to sell at least 246 used trucks from the Operating Companies for approximately $6 million. Capital Expenditures and Resources The Company had capital expenditures, net of cash proceeds from dispositions, of $14.2 million for the six months ended June 30, 1996, excluding the purchase of the Freymiller Assets, and $3.2 million for the six months ended June 30, 1995, excluding the Dietz acquisition. These amounts also do not include capital expenditures financed through capital leases and other debt which amounted to approximately $5.8 million and $4.5 million for the six months ended June 30, 1996 and 1995, respectively. The increase in capital expenditures during the first six months of 1996 was primarily due to the purchase of new tractors and trailers. AmeriTruck projects 1996 capital expenditures to increase over 1995 levels. The Company will purchase approximately 275 new trucks, including the 259 Volvo trucks, and 465 new trailers during 1996. Over 85 percent of these new tractors and over 65 percent of these new trailers are planned to replace older equipment. These equipment purchases and commitments will likely be financed using a combination of sources including, but not limited to, cash from operations, leases, debt issuances and other miscellaneous sources. Each financing decision will be based upon the most appropriate alternative available. As of June 30, 1996, the Company had taken delivery of 115 new trucks and 293 new trailers. In February 1996, the Company, through CMS, purchased (the "Purchase") certain assets of Freymiller Trucking Inc. ("Freymiller"). Freymiller had been the subject of a Chapter 11 bankruptcy proceeding in Oklahoma. Pursuant to the Purchase, CMS purchased certain specific automobiles, computer hardware and software, furniture and fixtures, rights to the trade name "Freymiller", existing spare parts, tires and fuel, rights under certain leases, certain leasehold improvements and shop equipment and installment sales contracts relating to tractors and trailers sold by Freymiller out of the ordinary course of business (with all of the foregoing referred to as the "Freymiller Assets"). The Company also negotiated with Freymiller's lenders and lessors to purchase approximately 185 tractors and 309 trailers previously operated by Freymiller for approximately $14 million. An additional 80 trailers were leased for a seven-year period. In exchange for the Freymiller Assets, the Company paid approximately $2.7 million in cash at closing and assumed approximately $2 million in existing equipment financing. In addition, the Company assumed a lease for Freymiller's maintenance facility in Oklahoma City and certain routine executory business contracts. Except as provided above, the Company did not assume any obligations or liabilities of Freymiller. In connection with these transactions, the Company purchased real property in Oklahoma City, Oklahoma from Freymiller's Chairman of the Board, President and Chief Executive Officer for approximately $1.5 million in cash. The Freymiller Assets and this real estate will supplement the Company's existing temperature-controlled operations. In April 1996, the Company changed the corporate name of CMS to AmeriTruck Refrigerated Transport, Inc. ("ART"). ART currently conducts the operations not only of CMS but also those formerly conducted with the Freymiller Assets. Operating profit margins were negatively impacted by the assimilation of significant assets from the Freymiller bankruptcy estate, the merger of the operations of CBS into Scales, and the cost of developing a corporated staff. 13 The Company has signed a letter of intent to purchase the stock of KTL, Inc. ("KTL") of Largo, Florida. KTL is a carrier of refrigerated and non- refrigerated products and would significantly increase the Company's market share in Florida, New Jersey and Indiana. KTL had revenues of $23.6 million and $6.3 million for the year ended December 31, 1995 and for the quarter ended March 31, 1996, respectively. KTL operates approximately 140 tractors and 300 trailers and employs approximately 300 persons, of whom 240 are drivers and many of whom operate as teams. Consummation of this acquisition is subject to the completion of numerous items including, but not limited to, the negotiation and execution of the definitive purchase agreement. In May 1995, W&L acquired Dietz Motor Lines, Inc. for $2.0 million in cash, which includes payment for non-compete agreements of $400,000 as well as an amount for certain eligible accounts receivable. This acquisition has been accounted for using the purchase method of accounting. Accordingly, the purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair values at the date of acquisition. The results of operations of the acquired company are included in the financial statements from the date of acquisition. Opportunistic Acquisitions The Company will pursue opportunistic acquisitions to broaden its geographic scope, to increase freight network density and to expand into other specialized trucking segments. Through acquisitions, the Company believes it can capture additional market share and increase its driver base without adopting a growth strategy based on widespread rate discounting and driver recruitment, which the Company believes would be less successful. The Company believes its large size relative to many other potential acquirers could afford it greater access to acquisition financing sources such as banks and capital markets. AmeriTruck has entered into a revolving credit facility with NationsBank of Texas, N.A. and a revolving credit facility with Volvo Truck Finance North America, Inc. As described above, these revolving credit facilities, subject to the conditions on borrowing contained therein, will give AmeriTruck the ability to pursue acquisitions that the Company could not otherwise fund through cash provided by operations. In addition, the Company may finance its acquisitions through equity issuances, seller financing and other debt financings. The Company is a holding company with no operations of its own. The Company's ability to make required interest payments on the Subordinated Notes depends on its ability to receive funds from the Operating Companies. The Company, at its discretion, controls the receipt of dividends or other payments from the Operating Companies. OTHER MATTERS Inflation and Fuel Costs Inflation can be expected to have an impact on the Company's earnings. Extended periods of escalating costs or fuel price increases without compensating freight rate increases would adversely affect the Company's results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Expenses." The industry as a whole has seen dramatic increases in fuel prices. According to a Department of Energy survey, reported by the American Trucking Association, the average price of diesel fuel peaked during the month of April at 15.7 cents above the December 31, 1995 price. Since April, the average price has decreased some, but still remains above its year end level. According to the survey, the average price of diesel fuel for the second quarter of 1996 was 5.0 cents above the first quarter average price. The Company has seen its fuel prices increase at a rate consistent with the national average. FORWARD LOOKING STATEMENTS AND RISK FACTORS From time to time, the Company issues statements in public filings (including this Form 10-Q)or press releases, or officers of the Company make public oral statements with respect to the Company, that may be considered forward-looking. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company believes that the following important factors, among others, could cause the Company's actual results for its 1996 fiscal year and beyond to differ materially from those expressed 14 in any forward-looking statements made by, on behalf of, or with respect to, the Company: inflation and fuel costs; substantial leverage; absence of combined operating history; dependence on certain customers; cyclicality and other economic factors; competition; availability of drivers; regulation; claims exposure; and dependence on key personnel. Each of these risk factors is discussed in more detail in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and other filings the Company has made with the Securities and Exchange Commission and are incorporated herein by reference. 15 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is a party to litigation incidental to its business, primarily involving claims for personal injury or property damages incurred in the transportation of freight. The Company is not aware of any claims or threatened litigation that might have a material adverse affect on the Company's consolidated financial position, operations or liquidity. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits The following exhibits are filed as part of this report:
Exhibit Number Description -------------- ----------- * 10.1 Loan and Security Agreement, dated February 21, 1996, between Volvo Truck Finance North America, Inc. ("Volvo") and the Company and certain of its Subsidiaries * 10.2 Financing Integration Agreement, dated February 21, 1996, between Volvo and the Company and certain of its Subsidiaries * 10.3 Loan Agreement, dated February 1, 1996, between the Company and NationsBank of Texas, N.A. * 10.4 Asset Purchase Agreement, dated as of January 5, 1996, between CMS Transportation Services, Inc. and Freymiller Trucking, Inc., as debtor and debtor-in-possession * 10.5 Consulting and Non-Competition Agreement, dated as of April 1, 1995, between Thompson Bros., Inc. and Dunbar Associates, Inc. 12 Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule * Incorporated by reference to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 1996.
B. Reports on Form 8-K On May 3, 1996, the Company filed a report on Form 8-K in connection with certain contracts which may be deemed to be "material contracts" within the meaning of Item 601 of Regulation S-K. Items 2, 3, 4, and 5 of Part II were not applicable and have been omitted. 16 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, thereunto duly authorized. AMERITRUCK DISTRIBUTION CORP. By: /s/ Michael L. Lawrence ------------------------- Michael L. Lawrence Chairman of the Board and Chief Executive Officer By: /s/ Kenneth H. Evans, Jr. ------------------------- Kenneth H. Evans, Jr. Treasurer and Chief Financial and Accounting Officer Date: August 14, 1996 AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES EXHIBIT INDEX Page Exhibit Number Description Number - -------------- ----------- ------ 12 Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule EX-12 2 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In thousands, except ratio amounts) (unaudited)
Three Months Ended Six Months Ended June 30, June 30, -------------------- ------------------ 1996* 1995* 1996* 1995* --------- --------- -------- -------- Earnings: Income (loss) before income taxes and extraordinary loss $ (853) $1,750 $ (641) $3,250 ------ ------ ------ ------ Fixed charges: Interest expense and amortization of debt discount and premium on all indebtedness 3,955 833 7,643 1,558 Portion of rent under long-term operating leases representative of an interest factor 434 61 760 114 Preferred stock dividend requirements of consolidated subsidiaries - 85 - 169 ------ ------ ------ ------ Total fixed charges 4,389 979 8,403 1,841 ------ ------ ------ ------ Earnings before income taxes and fixed charges $3,536 $2,729 $7,762 $5,091 ====== ====== ====== ====== Ratio of earnings to fixed charges (1) - 2.79x - 2.77x ====== ====== ====== =======
(1) The Company's earnings were insufficient to cover fixed charges by $853 and $641 for the three and six month periods ended June 30, 1996. * Comparisons between periods are affected by acquisitions - see Note 2 contained in the unaudited Notes to Consolidated Financial Statements. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERITRUCK DISTRIBUTION CORP.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 4,070 0 22,608 (482) 1,108 37,592 124,481 (27,165) 176,244 20,747 154,324 0 0 33 (2,434) 176,244 0 98,322 0 91,375 0 0 7,643 (641) (287) (354) 0 (230) 0 (584) 0 0
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