-----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, F+abwnaPJUSjMyRsQlGmBFI3yZRBHDM8NiDINJiATi1phYiIB9H822uaxa0TuAEI ZlImAxVawO+kCq1ePI9W3Q== 0000719271-97-000008.txt : 19970428 0000719271-97-000008.hdr.sgml : 19970428 ACCESSION NUMBER: 0000719271-97-000008 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970425 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANUHCO INC CENTRAL INDEX KEY: 0000719271 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 460278762 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12070 FILM NUMBER: 97587647 BUSINESS ADDRESS: STREET 1: 8245 NIEMAN ROAD, STE 100 STREET 2: SUITE 100 CITY: LENEXA STATE: KS ZIP: 66214 BUSINESS PHONE: (913)859-0055X262 MAIL ADDRESS: STREET 1: 8245 NIEMAN ROAD STREET 2: SUITE 100 CITY: LENEXA STATE: KS ZIP: 66214 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CARRIERS INC DATE OF NAME CHANGE: 19910812 10-K/A 1 FORM 10-K/A-1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Year Ended December 31, 1996 Commission File Number - 0-12321 ANUHCO, INC. State of Incorporation - Delaware IRS Employer Identification No. - 46-0278762 8245 Nieman Road, Suite 100, Lenexa, Kansas 66214 Telephone Number - (913) 859-0055 Securities Registered Pursuant to Section 12(b) of the Act Name of Each Exchange Title of Each Class on Which Registered Anuhco, Inc. Common Stock, par value American Stock Exchange $0.01 per share, 6,371,709 shares outstanding, as of March 5, 1997 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x . No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of the Common Stock held by non-affiliates of Anuhco, Inc. as of March 5, 1997, was $45,582,000 based on the last trade on the American Stock Exchange on that date. DOCUMENTS INCORPORATED BY REFERENCE The information called for by Part III, Items 10, 11, 12 and 13 is incorporated herein by reference from Anuhco, Inc.'s definitive Proxy Statement for the 1997 Annual Meeting of Shareholders which will be filed within 120 days after December 31, 1996. ANUHCO, INC. 1996 FORM 10-K TABLE OF CONTENTS Page PART I Item 1. Business.................................................. 3 Item 2. Properties................................................ 8 Item 3. Legal Proceedings......................................... 9 Item 4. Submission of Matters to a Vote of Security Holders....... 10 Executive Officers of Registrant.......................... 10 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................................................. 10 Item 6. Selected Financial Data................................... 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 12 Item 8. Financial Statements and Supplementary Data............... 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures..................... 37 PART III Item 10. Directors and Executive Officers of the Registrant.......... 37 Item 11. Executive Compensation...................................... 37 Item 12. Security Ownership of Certain Beneficial Owners and Management 37 Item 13. Certain Relationships and Related Transactions.............. 38 PART IV Item 14. Exhibits, Financial Statements, Schedules,and Reports on Form 8-K....................................................... 38 PART I ITEM 1. BUSINESS. Anuhco, Inc. ("Anuhco" or the "Company"), headquartered in Lenexa, Kansas, is a Delaware holding company which was formed in April, 1976. Anuhco operates in two industry segments; transportation, through its subsidiary Crouse Cartage Company ("Crouse") and financial services, through Agency Premium Resource, Inc. and its subsidiaries ("APR") and Universal Premium Acceptance Corporation and UPAC of California, Inc. (together "UPAC"). Crouse was acquired by Anuhco as of September 1, 1991. APR was acquired on May 31, 1995. UPAC was acquired on March 29, 1996. Anuhco also owns American Freight System, Inc. ("AFS"), a discontinued operation. Financial information about the Company's operating industry segments is presented in Note 1 to the consolidated financial statements. TRANSPORTATION Crouse operates a diversified motor freight transportation system primarily serving the upper central and midwest portion of the United States. Crouse is a regular-route motor common carrier of general commodities in less-than-truckload ("LTL") quantities with a twelve state service area, and also offers irregular- route motor common carrier service for truckload quantities of general and perishable commodities throughout the 48 contiguous United States. The following table sets forth certain financial and operating data with respect to Crouse prior to the effects of acquisition related adjustments for the years 1996 through 1992.
1996 1995 1994 1993 1992 Revenue (000's).................................. $ 107,502 $95,152 $95,772 $76,888 $71,266 Operating Income (000's)......................... 2,915 3,970 6,017 3,419 3,093 Operating Ratio (Note 1)......................... 97.3% 95.8% 93.7% 95.6% 95.7% Number of shipments (000's) - Less-than-truckload (Note 2)................. 894 742 744 620 583 Truckload.................................... 32 32 33 28 28 Revenue per hundredweight - Less-than-truckload.......................... $ 8.84 $ 9.25 $ 9.38 $ 9.19 9.15 Truckload.................................... 2.31 2.30 2.19 2.06 2.04 Tonnage (000's) - Less-than-truckload.......................... 487 402 398 321 292 Truckload.................................... 461 451 479 433 434 Intercity miles operated (000's)................. 44,523 39,424 36,720 32,139 31,110 At year end, number of - Terminals (Note 3).......................... 55 54 53 48 44 Tractors and trucks......................... 585 527 504 483 426 Trailers.................................... 1,194 1,004 948 869 841 Employees................................... 1,113 945 965 806 769
Notes: (1) Operating ratio is the percent of operating expenses to operating revenue. (2) Less-than-truckload refers to shipments weighing less than 10,000 pounds. (3) Includes company-owned, company leased, agent and other operating locations. Crouse, an Iowa Corporation headquartered in Carroll, Iowa, is engaged in the transportation of general commodities which include all types of freight other than personal household goods, commodities of exceptionally high value, explosives and commodities in bulk or requiring special equipment. During 1996, LTL shipments (less than 10,000 pounds) comprised 80% of revenue and truckload shipments (10,000 pounds or greater) comprised 20% of revenue. Crouse is an LTL regular route common carrier with LTL service in the 12 states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin. Crouse also has a truckload general commodities and special commodities division which operates in all 48 contiguous states. A substantial portion of Crouse's business is concentrated in the states of Iowa, Illinois, Minnesota, Missouri and Wisconsin. Crouse with more than 12,000 customers has a broad customer base, with no single customer comprising a significant portion of its total revenue. LTL shipments must be handled rapidly and carefully in several coordinated stages. Shipments are first picked up from customers by local drivers operating from the Crouse network of 55 service locations, each of which services a particular territory. The freight is then transported to a terminal, loaded into intercity trailers, carried by linehaul drivers to the terminal which services the delivery area, transferred to trucks or trailers and then delivered to the consignee by local drivers. Much of Crouse Cartage's LTL freight is handled and/or transferred through one of three centrally located "break bulk" terminals between the origin and destination service areas. Competition for LTL freight is primarily based upon service and freight rates. LTL operations require substantial equipment capabilities and an extensive network of terminal facilities. Accordingly, LTL operations, compared to truckload shipments and operations, command higher rates per weight shipped and have tended historically to be less vulnerable to competition from other forms of transportation such as railroads. When required by customer's service needs, Crouse's concentrated and efficient operations typically allow it to provide next day service (delivery on the day after pickup) for much of the LTL freight it handles. SEASONALITY Crouse's quarterly operating results, as well as those of the motor carrier industry in general, fluctuate with the seasonal changes in tonnage levels and with changes in weather-related operating conditions. Tonnage levels are generally highest from September through November. A smaller peak also generally occurs in April through June. Inclement weather conditions during the winter months adversely affect the number of freight shipments and increase operating costs. Historically, Crouse has achieved its best operating results in the second and third quarters when adverse weather conditions do not affect its operations and seasonal peaks occur in the freight shipped via public transportation. INSURANCE AND SAFETY Crouse is largely self-insured with respect to public liability, property damage, workers' compensation, cargo loss or damage, fire, general liability and other risks. In addition, Crouse maintains excess liability coverage for risks over and above the self-insured retention limits. All claims pending against Crouse are fully covered by outside insurance or, in the opinion of management, are adequately reserved under Crouse's self-insurance program. Because most risks are largely self-insured, Crouse's insurance costs are primarily a function of the success of its safety programs and less subject to increases in insurance premiums. Crouse conducts a comprehensive safety program to meet its specific needs. Crouse's drivers have good driving records and have won individual Iowa State Truck Driving Championships 16 times in the past 18 years. COMPETITION Crouse's operations are subject to intense competition with other motor common carriers and, to a lesser degree, with contract and private carriage. Intense competition for freight has resulted in a proliferation of discount programs among competing carriers. Crouse competes in such price discounting on an account by account basis, taking into consideration the cost of services relative to the net revenue to be obtained, the competing carriers and the need for freight in specific traffic lanes. Crouse's main competition over its shorter routes is with American Freightways, Harrison, Arkansas; ANR Advance Transportation Co., Milwaukee, Wisconsin; Con-Way Express, Ann Arbor, Michigan; H&W Motor Express, Dubuque, Iowa; Hyman Freightways, St. Paul, Minnesota; Midland Transportation, Marshalltown, Iowa; US Freightways Corporation, Rosemont, Illinois; and Viking Motor Freight, San Jose, California. For freight moving over greater distances, Crouse must compete with national and large inter-regional carriers. REGULATION Through December 31, 1995, the interstate operations of Crouse were subject to regulation by the Interstate Commerce Commission ("ICC") and the Department of Transportation ("DOT"). Effective January 1, 1996, The ICC Termination Act of 1995 closed the ICC and transferred its remaining responsibilities to the DOT and a newly created panel within the DOT, the Surface Transportation Board ("STB"). Motor carriers are required to register with the DOT. Registration is granted by the DOT upon showing safety, fitness, financial responsibility and willingness to abide by DOT regulations. Under the ICC Termination Act, antitrust protections are continued for certain collective activities by motor carriers, including through rates and joint rates; household goods rates; classifications; mileage guides; rules; divisions and rate bureau activities. All collectively-set rates, classifications, guides, etc. must be published and made available for public inspection upon request. Collective discussions by motor carriers regarding rates may only involve general rate increases relating to average costs for the industry as a whole. Such discussions may not relate to individual single-line rates or specific markets. Carriers relying on these collective activities must participate in the governing publication and issue a power of attorney to the publishing agent. Agreements establishing collective activities by motor carriers must be submitted to the STB for approval under a public interest test. These changes did not materially affect the financial position or results of operations of the Company. Crouse is subject to state public utilities commissions and similar state regulatory agencies with respect to safety and financial responsibility in its intrastate operations. Crouse is also subject to safety regulations of the states in which it operates, as well as regulations governing the weight and dimensions of equipment. EMPLOYEES Crouse employs approximately 1,113 persons, of whom approximately 929 are drivers, mechanics, dockworkers or terminal office clerks. The remainder are engaged in managerial, sales and administrative functions. Labor costs represent the largest single component of Crouse's operating expenses, totaling 55.9% of transportation operating revenue for 1996. In the opinion of its management, Crouse has a good working relationship with its employees. Approximately 80% of Crouse employees, including primarily drivers, dockworkers and mechanics, are represented by the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America ("Teamsters Union") or other local unions. Crouse and the Teamsters Union are parties to the National Master Freight Agreement ("NMFA") which expires on March 31, 1998. As an employer signatory to the agreement, Crouse must contribute to certain pension plans established for the benefit of employees belonging to the Teamsters Union. Under provisions of the NMFA, Crouse has maintained a profit sharing program for all employees since 1988 ("Profit Sharing"). In 1994 the Profit Sharing was extended for at least another four years after 87% of the union employees and 91% of its non-union employees voted for such extension. Profit Sharing is structured to allow all Crouse employees to ratably share 50% of Crouse's income before income taxes (excluding extraordinary items and gains and losses on the sale of assets) in return for a 15% reduction in wages. Profit Sharing distributions, made quarterly, totaled $2.8 million for 1996. FINANCIAL SERVICES APR and UPAC, headquartered in Lenexa, Kansas, are engaged primarily in the business of financing the payment of insurance premiums. The operations of APR and UPAC were combined effective December 31, 1996. Effective in 1997 the Company will conduct its insurance premium finance business as UPAC. UPAC offers financing of insurance premiums primarily to commercial purchasers of property, casualty and liability insurance who wish to pay their insurance premiums on an installment basis. Whereas many insurance carriers require advance payment of a full year's premium, UPAC allows the insured to spread the cost of the insurance policy over time. UPAC finances insurance premiums without assuming the risk of claims loss borne by insurance carriers. When insureds buy an insurance policy from an independent insurance agent or broker who offers financing through UPAC, the insureds generally pay a down payment of 15 to 25% of the total premium and sign a premium finance agreement for the balance. Under the terms of UPAC's standard form of financing contract, UPAC is given the power to cancel the insurance policies if there is a default in the payment on the finance contracts and to collect the unearned portion of the premiums from the insurance carrier. The down payments are set at a level designed, in the event of cancellation of a policy, such that the return premiums from the insurance carriers are expected to be sufficient to cover the loan balances plus interest and other charges due to UPAC. Agency Services, Inc. ("ASI"), a wholly-owned subsidiary of APR, also provides motor vehicle report services to insurance agents and brokers. UPAC provides financing through insurance agents or brokers throughout the 48 continental United States. UPAC currently does business with more than 3,500 insurance agencies or brokers, the largest of which referred approximately 6% of the total premiums financed in 1996. The following table sets forth certain financial and operating data with respect to APR and UPAC since their acquisitions by Anuhco on May 31, 1995 and March 29, 1996, respectively: 1996 1995 Premiums financed (000's) $120,355 $37,852 Number of premium finance contracts 46,968 7,214 Average amount of contracts $ 2,562 $ 5,247 REGULATION UPAC's operations are regulated by state statutes, and regulations promulgated thereunder, which provide for the licensing, administration and supervision of premium finance companies. Such statutes and regulations impose significant restrictions on the operation of UPAC's business. UPAC is currently licensed to do business as an insurance premium finance company in 35 states and does business as a foreign corporation in 12 other states that do not require separate licensing of insurance premium finance companies. UPAC generally must renew its licenses annually. UPAC is also subject to periodic examinations and investigations by state regulators. The licensing agency for insurance premium finance companies is generally the banking department or the insurance department of the applicable state. State statutes and regulations impose minimum capital requirements, govern the form and content of financing agreements and limit the interest and service charges UPAC may impose. State statutes also prescribe notice periods prior to the cancellation of policies for non-payment, limit delinquency and collection charges and govern the procedure for cancellation of policies and collection of unearned premiums. After deducting all interest, service and late charges due it, UPAC must, under applicable state laws, refund the surplus unearned premium, if any, to the insureds. Changes in the regulation of UPAC's activities, such as increased rate regulation, could have an adverse effect on its operations. The statutes do not provide for automatic adjustments in the rates a premium finance company may charge. Consequently, during periods of high prevailing interest rates on institutional indebtedness and fixed statutory ceilings on rates UPAC may charge its insureds, UPAC's ability to operate profitably could be adversely affected. COMPETITION UPAC encounters intense competition from numerous other firms, including companies affiliated with insurance carriers, independent insurance brokers who offer premium finance services, banks and other lending institutions. Some of UPAC's competitors are larger and have greater financial and other resources and are better known to insurance agents and brokers than UPAC. In addition, there are few, if any, barriers to entry in the event other firms, particularly insurance carriers and their affiliates, seek to compete in this market. The market for premium finance companies is two-tiered. The first tier is that of national companies that are owned by insurance companies, banks, and commercial finance companies. In this group are five companies that on a combined basis finance more than $9 billion per annum of premium finance agreements. The second tier is comprised of numerous smaller local companies, which finance approximately $2 billion per annum of premium finance agreements, and is highly fragmented. Competition to provide premium financing to insureds is based primarily on interest rate or cost of financing as well as level of service to agents and insureds and flexibility of terms for down payment and number of payments. UPAC believes that its commitment to account service distinguishes it from its first tier competitors and that its cost of funds allows it to compete favorably with second tier competitors. PERSONNEL UPAC's staff consists of 64 employees (including 5 part-time employees). DISCONTINUED OPERATION American Freight System, Inc. ("AFS") is treated as a discontinued operation of Anuhco. The primary obligation of AFS is to administer the provisions of a Joint Plan of Reorganization ("Joint Plan"). AFS is to resolve creditor claims against the estates and make distributions to holders of allowed claims. The Joint Plan also provided for certain distributions from AFS to Anuhco as unsecured creditor distributions occurred in excess of 50% of allowed claims. Anuhco also receives the full benefit of any remaining assets through its ownership of the capital stock of AFS after unsecured creditors received distributions equivalent to 130% of their allowed claims. As of December 31, 1996, all unsecured creditors have been paid an amount equal to 130% of their allowed claims, which was the maximum distribution provided under the Joint Plan. Anuhco received distributions in accordance with the Joint Plan of $36 million. In addition, AFS paid dividends of $25 million, $6.8 million and $8.5 million to Anuhco on December 28, 1994, July 5, 1995 and July 11, 1996, respectively. AFS had remaining net assets of $7.6 million as of December 31, 1996. The settlement of the remaining liabilities as of December 31, 1996 was substantially completed in February 1997. The closure of the bankruptcy estate is anticipated later in 1997. See Note 8 to the consolidated financial statements - AFS Net Assets - for further discussion. ITEM 2. PROPERTIES. Anuhco's corporate offices are located in approximately 1,000 square feet of a 24,000 square foot office building owned by the Company at 8245 Nieman Road, Lenexa, Kansas 66214. UPAC utilizes about 10,000 square feet of office space in the Company's building in Lenexa, Kansas. The remainder of the space is leased or available for lease to third-party tenants. Anuhco owns property through Crouse which operates a modern intercity fleet and maintains a network of terminals to support the intercity movement of freight. Crouse owns most of its fleet but leases some equipment from owner- operators to supplement the owned equipment and to provide flexibility in meeting seasonal and cyclical business fluctuations. As of December 31, 1996 Crouse owned 555 tractors and 30 trucks. During 1996 Crouse leased 205 tractors and 30 flatbed trailers from owner-operators. On December 31, 1996, it also owned 340 temperature controlled trailers, 822 volume vans (including, 341 53-foot high-cube van trailers), and 32 flatbed trailers. The table below sets forth the number of operating locations at year end for the last five years: 1996 1995 1994 1993 1992 Owned terminals......... 27 26 26 10 9 Leased terminals........ 8 8 8 19 19 Agency terminals........ 20 20 19 19 16 Total............. 55 54 53 48 44 Effective January 1, 1994, Crouse exercised its purchase options under certain operating leases to purchase eleven (11) of the "Leased Terminals", above. ITEM 3. LEGAL PROCEEDINGS. On February 5, 1991, AFS (including certain subsidiaries subsequently merged with AFS) and its parent filed a Joint Plan of Reorganization ("Joint Plan") and a related Disclosure Statement with the United States Bankruptcy Court, District of Kansas, Topeka Division ("Bankruptcy Court"). After approval by each class of creditors entitled to vote and the equity security holders, on June 10, 1991, following a confirmation hearing, the Bankruptcy Court confirmed the Joint Plan with an Effective Date of July 11, 1991. The Joint Plan provided for the reorganization of the Company with $3.8 million in cash, no debt and the expressed intent of acquiring one or more operating companies; and the administration of the Joint Plan by AFS. (See Item 1, Discontinued Operation - for further discussion.) On January 12, 1994 a complaint was filed in the District Court of Johnson County, Kansas, against Anuhco, AFS and certain employees of those companies by a former employee of AFS. Such complaint alleges breach of contract, promissory estoppel, tortious interference, and misrepresentation and fraud, as it relates to an alleged incentive compensation arrangement between the former employee and AFS. The suit claims, from Anuhco and others, actual damages in excess of $2 million and punitive damages of $5 million. Management believes such claims will not likely have a material adverse effect on Anuhco's financial position or results of operations. Anuhco's subsidiaries are parties to routine litigation, other than litigation being conducted pursuant to the Joint Plan, primarily involving claims for personal injury and property damage incurred in the transportation of freight and the collection of receivables. Anuhco and its subsidiaries maintain insurance programs and accrue for expected losses in amounts designed to cover liability resulting from personal injury and property damage claims. In the opinion of management, the outcome of such claims and litigation will not materially affect the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of the security holders during the fourth quarter of 1996. Included herein, pursuant to General Instruction G, is the information regarding executive officers required by Item 401 (b), (c) and (e) of Regulation S-K, as of March 5, 1997. EXECUTIVE OFFICERS Name Age Position Timothy P. O'Neil 40 President, Chief Financial Officer, and Director Lawrence D. Crouse 56 Vice President and Director Mark A. Foltz 38 Treasurer and Corporate Secretary Timothy P. O'Neil, a member of the Company's Board since August, 1995, has been President since May, 1995, Chief Financial Officer since April, 1995. From October, 1989 through May, 1995, Mr. O'Neil served in various positions with the Company, including, Senior Vice President, Vice President, Treasurer and Director of Finance. Mr. O'Neil has also served as President, Chief Executive Officer, Chief Financial Officer and Treasurer of AFS since July, 1991. Lawrence D. ("Larry") Crouse has been a member of the Company's Board and Vice President of the Company since September 5, 1991. He has served as Vice Chairman of Crouse since January 1997. He served as Chairman and Chief Executive Officer of Crouse from 1987 until December 1996. Mark A. Foltz has been Treasurer and Corporate Secretary of Anuhco since May 1996. He was employed with Anuhco as Director of Finance in July 1995 and also served as Assistant Treasurer and Assistant Secretary from August 1995 to May 1996. Mr. Foltz served in various financial positions, most recently as Assistant Vice President - Finance, with Mark VII, Inc., a publicly-held transportation company, headquartered in Memphis, Tennessee, from October 1987 to June 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. (A) MARKET INFORMATION. Anuhco's Common Stock is traded on the American Stock Exchange under the symbol ANU. The following table shows the sales price information for each quarterly period of 1996 and 1995. 1996 High Low Fourth Quarter....................... $ 8 9/16 $ 7 5/8 Third Quarter........................ 8 11/16 7 5/8 Second Quarter....................... 9 1/2 7 1/2 First Quarter........................ 8 7/8 7 1/2 1995 High Low Fourth Quarter....................... $ 8 3/4 $ 7 Third Quarter........................ 8 15/16 7 3/8 Second Quarter....................... 9 3/8 7 5/8 First Quarter........................ 10 1/2 8 1/2 (B) HOLDERS. Number of Holders of Record Title of Class at December 31, 1996 Common Stock, par value $0.01 per share 5,686 (C) DIVIDENDS. No cash dividends were paid during 1996 or 1995 on Anuhco's Common Stock. Anuhco currently intends to retain earnings to finance expansion and does not anticipate paying cash dividends on its Common Stock in the near future. Anuhco's future policy with respect to the payment of cash dividends will depend on several factors including, among others, any acquisitions, earnings, capital requirements and financial and operating conditions. ITEM 6. SELECTED FINANCIAL DATA.
1996 1995 1994 1993 1992 (In Thousands, Except Per Share Data) Operating Revenue........................... $ 114,883 $ 97,444 $ 95,772 $ 76,888 $ 71,266 Income from Continuing Operations............................. $ 852 $ 2,810 $ 5,495 $ 2,673 $ 2,296 Income from Discontinued Operations1............................ $ -- $ 3,576 $ 54,845 $ 3,750 $ 2,250 Net Income.................................. $ 852 $ 6,386 $ 60,340 $ 6,423 $ 4,546 Net Income per Share - Continuing Operations.................. $ 0.13 $ 0.38 $ 0.73 $ 0.35 $ 0.30 Discontinued Operations1............... $ 0.00 $ 0.48 $ 7.27 $ 0.50 $ 0.30 Total.................................. $ 0.13 $ 0.86 $ 8.00 $ 0.85 $ 0.60 Total Assets................................ $ 86,812 $ 88,426 $ 85,399 $ 24,484 $ 19,388 Long-Term Debt2............................. $ - $ - $ - $ 1,860 $ 3,927 Cash Dividends per Common Share........................... $ - $ - $ - $ - $ - 1 See Note 8 of the Notes to Consolidated Financial Statements. 2 Including current maturities of $297,000 for 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS With the acquisition of APR on May 31, 1995 and UPAC on March 29, 1996, Anuhco now operates in two distinct industries; transportation, through its subsidiary, Crouse; and insurance premium finance, through its subsidiaries, APR and UPAC. Transportation OPERATING REVENUE - The changes in transportation operating revenue are summarized in the following table (in thousands): 1996 1995 vs. vs. 1995 1994 Increase (decrease) from: Increases in LTL tonnage.................. $ 15,724 $ 673 Decreases in LTL revenue per hundredweight (3,946) (1,048) Increase (decrease) in truckload revenues. 571 (245) Net increase (decrease)................. $ 12,349 $ (620) Less-than-truckload ("LTL") operating revenues rose by 15.8% in 1996 in comparison to 1995 after a decrease of 0.5% in 1995 as compared to 1994. LTL tonnage rose 21.1% and 0.9% in 1996 and 1995, respectively, as compared to the preceding years. The substantial increase in LTL tonnage in 1996 was due to increased freight volumes with existing and new customers resulting from improved economic conditions and expansion of the Company's markets. The impact on operating revenues from increased LTL tonnages in 1996 and 1995 was offset in part by decreases in revenue yield. Revenue per hundredweight decreased by 4.3% and 1.4% in 1996 and 1995, as compared to the preceding year, as the trucking industry, including Crouse, was adversely impacted by industry over-capacity which resulted in competitive market pressures on freight rates. Truckload operating revenue rose 2.7% in 1996 as a result of a 2.1% increase in shipments and a 0.6% increase in revenue per shipment. Truckload operating revenue fell 1.2% in 1995 from 1994 as the net result of a 4.2% decline in the number of shipments hauled and a 3.0% increase in revenue per shipment. OPERATING EXPENSES - A comparative summary of transportation operating expenses as a percent of transportation operating revenue follows: Percent of Operating Revenue 1996 1995 1994 Salaries, wages & employee benefits..... 55.9% 55.5% 53.9% Operating supplies and expenses......... 13.2 11.4 11.0 Operating taxes and licenses............ 2.7 2.7 2.7 Insurance and claims.................... 1.9 1.9 2.2 Depreciation and amortization........... 2.7 2.5 2.2 Purchased transportation and rents...... 20.9 21.8 21.7 Total operating expenses................ 97.3% 95.8% 93.7% Crouse's operating expenses as a percentage of operating revenue, or operating ratio, rose from 93.7% in 1994 to 95.8% and 97.3% for 1995 and 1996, respectively. These increases were primarily due to higher salaries, wages and employee benefits costs resulting from contractual wage increases and an increased number of employees to handle greater freight volumes in 1996 relative to reduced revenue yields due to competitive market pressures. Additionally, 1996 levels of operating supplies and expenses were adversely impacted by higher fuel costs throughout 1996 and increased operating costs resulting from severe winter weather in early 1996. In 1996, the increase in salaries, wages and employee benefits and operating supplies and expenses and decrease in purchased transportation and rents as a percentage of operating revenues was the result of an increase in LTL tonnage as a percentage of total tonnage. The 1994 operating ratio of 93.7% represents an exceptional result caused by the unusual circumstances occurring in 1994. In 1994, a teamsters union strike against certain of the Company's competitors, the closing of a regional competitor and the generally stronger economy allowed Crouse to handle higher freight volumes at better revenue yields without proportionately increasing its fixed costs. The 1995 operating ratio is more in line with the Company's historical operating performance. Financial Services In 1996, UPAC and APR financed $120.4 million in insurance premiums and generated net earned finance charges, fees and other income of $7.4 million and an operating loss of $653,000. The operating loss was substantially the result of certain duplicate administrative costs incurred in connection with the integration of the operations of UPAC and APR. In addition, as a result of the termination of the prior receivables securitization agreements, unamortized deferred transaction costs of $175,000 were expensed in December 1996. The Company believes that substantially all of the duplicate integration costs were incurred in 1996. In 1995 APR financed $37.9 million in insurance premiums. APR generated net earned finance charges, fees and other income of $2.3 million and operating income of $283,000 for 1995. Other The Company's general corporate expenses, consisting primarily of Salaries, Wages and Employee Benefits and Operating Supplies and Expenses were $1.4 million in 1996 and 1995. In 1994 general corporate expenses were approximately $800,000. This increase in 1995 was due primarily to certain expenses which were incurred in connection with the acquisition of APR. As a result of Anuhco's use of funds for the UPAC acquisition and the stock repurchase programs, the Company's interest earnings on invested funds were substantially lower in 1996 than in 1995. Anuhco recorded a substantial increase in interest income for 1995 from 1994 due to higher average balances of invested funds in 1995. In addition, in 1996, the Company recorded non- operating expenses reserves for certain non-operating insurance and other reserves. Anuhco's effective tax rates for 1996 and 1995 were 51% and 43% respectively. The increase in the effective rate in 1996 was the result of the greater significance of non-deductible intangibles amortization relative to reduced pre-tax income. No provision for income taxes was recorded during 1994 due to the Company's utilization of certain tax net operating loss attributes. The impact of inflation for the last three fiscal years on revenue and income from continuing operations has been minimal. Outlook The following statements are forward-looking statements, as well as certain other statements under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" which are followed by the symbol "*"., within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as such involve risks and uncertainties which are detailed below under the caption "Forward-Looking Statements". The Company has developed a three-year strategic plan with the goals of continuing the growth of its business segments, and making the financial services segment a more equal contributor to the Company's earnings per share. In the transportation segment the plan calls for the Company to continue to provide and improve upon its already superior service to its customers in its primary operating territory, while extending its operations throughout the Midwest. As the Company makes the strategic investments necessary to support this expansion, the Company intends to continue to improve the efficiency and effectiveness of its existing base of operations. The financial services segment will focus on increasing its market penetration in certain states with substantial population and industrial base. The additional volumes of premium finance contracts is expected to be handled within the Company's existing administrative operations without incurring significant additional fixed costs. In addition to the expansion of its existing operations in each of its business segments, the Company continues to consider potential acquisitions which would complement these operations. Forward-Looking Statements Certain statements contained in this Annual Report on Form 10-K which are not statements of historical fact constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, the statements specifically identified as forward-looking statements in this Form 10-K. In addition, certain statements in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases, and in oral statements made by or with the approval of an authorized executive officer of the Company which are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to (i) projections of revenues, income or loss, earnings or loss per share, capital expenditures, the payment or non-payment of dividends, capital structure and other financial items, (ii) statements of plans and objectives of the Company or its management or Board of Directors, including plans or objectives relating to the products or services of the Company, (iii) statements of future economic performance, and (iv) statements of assumptions underlying the statements described in (i), (ii) and (iii). These forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from those anticipated in such statements. The following discussion identifies certain important factors that could affect the Company's actual results and actions and could cause such results or actions to differ materially from any forward-looking statements made by or on behalf of the Company that related to such results or actions. Other factors, which are not identified herein, could also have such an effect. Transportation Certain specific factors which may affect the Company's transportation operation include: increasing competition from other regional and national carriers for freight in the Company's primary operating territory; increasing price pressure; changes in fuel prices; labor matters; including changes in labor costs, and other labor contract issues; and, environmental matters. Financial Services Certain specific factors which may affect the Company's financial services operation include: the performance of financial markets and interest rates; the performance of the insurance industry; increasing competition from other premium finance companies and insurance carriers for finance business in the Company's key operating states; failure to achieve the Company's anticipated levels of expense savings from the integration of APR's and UPAC's administrative functions; difficulty in integrating the computer and operating systems; the loss of experienced, trained personnel during the transition period; the loss of customer identification with the Company as the businesses are combined; and, the inability to obtain continued financing at a competitive cost of funds. General Factors Certain general factors which could affect both the Company's transportation operation and the Company's financial services operation include: changes in general business and economic conditions; changes in governmental regulation, and; tax changes. Expansion of these businesses into new states or markets is substantially dependent on obtaining sufficient business volumes from existing and new customers in these new markets at compensatory rates. The cautionary statements made pursuant to Section 21E of the Securities Exchange Act of 1934, as amended, are made as of the date of this Report and are subject to change. The cautionary statements set forth in this Report are not intended to cover all of the factors that may affect the Company's businesses in the future. Forward-looking information disseminated publicly by the Company following the date of this Report may be subject to additional factors hereafter published by the Company. FINANCIAL CONDITION The Company's financial condition remained strong at December 31, 1996 with no debt and approximately $19 million in cash and investments at the Anuhco level, as well as approximately $6 million in cash and investments included in the net assets of AFS. In addition to cash and investment reserves, a substantial amount of the Company's cash is generated by operating activities. Cash generated in operating activities declined slightly in 1996 and 1995 from 1994, due primarily to decreased income from continuing operations. Investing Activities - The continuing winddown of its discontinued operation, AFS, has been a source of cash to the Company's operation as AFS has distributed $8.5 million, $6.8 million and $33.8 million in dividends and distributions in 1996, 1995 and 1994, respectively. The Company expects to complete the winddown of AFS and distribute the remaining cash and investments, $6 million at December 31, 1996, and other assets to Anuhco in 1997.* The principal use of cash has been the acquisitions of UPAC for approximately $12 million and APR for approximately $11.3 million in 1996 and 1995, respectively. In addition, Crouse has expended $10.2 million, $4.3 million and $6.1 million in 1996, 1995 and 1994, respectively, to replace and expand its fleet of tractors and trailers and to acquire new terminals. A substantial portion of the capital required for UPAC's and APR's insurance premium finance operations has been provided through the sale of undivided interests in a designated pool of receivables on an ongoing basis under receivables securitization agreements, as well as secured borrowings against UPAC's receivables from the date of its acquisition through December 31, 1996. The current securitization agreement which matures December 31, 1999 currently provides for the sale of a maximum of $50 million of eligible receivables. As of December 31, 1996, $37.2 million of such receivables had been securitized. See Note 4 to the consolidated financial statements - Securitization of Receivables and Revolving Credit Agreement. Financing Activities - From March 31, 1996 to December 31, 1996, UPAC's receivables were financed by secured borrowings under a $30 million revolving credit agreement with an average interest rate of 7.4% The balance outstanding under this agreement at December 30, 1996, $22.5 million, was repaid from the proceeds from the initial sale of receivables under the Company's new receivable securitization agreement on December 31, 1996. Crouse has a revolving credit agreement which provides for borrowings up to $2.5 million bearing interest at the bank's prime rate, 8.25% at December 31, 1996. Borrowings are secured by Crouse's revenue equipment. In 1994 through 1996, Crouse has utilized this agreement only on a limited basis for short-term operational needs and had no balance outstanding at December 31, 1996. In the third quarter of 1995, the Company initiated a program to repurchase up to 10% of its outstanding shares of common stock. During the second quarter, the Company completed this initial repurchase program and expanded the number of shares authorized to be repurchased by an additional 10% of its then outstanding shares. During 1996 and 1995, the Company repurchased 768,800 and 417,100 shares, respectively, at a total cost of $9,963,500. Approximately 250,000 additional shares are authorized to be repurchased under the Company's current stock repurchase program. Additionally, during the fourth quarter of 1996, the Company repurchased 28,541 shares of common stock at a cost of $237,500 pursuant to an "Odd Lot Tender Offer" to holders of less than 100 shares. The Company believes available cash and investments, cash generated from operations and funds available under the $50 million receivables securitization agreement and $2.5 million revolving credit agreement will be sufficient to fund operations and other cash needs for 1997.* At December 31, 1996, Crouse owns or leases 35 parcels of real property which are utilized in their operations. Six of these facilities maintain underground fuel storage tanks. Old tanks and piping of five of the six facilities were replaced and upgraded with tanks equipped with corrosion protection and automatic tank monitoring equipment between 1990 and 1992. Any contamination detected during the tank replacement process at these sites was remediated at the same time. The cost of replacing and upgrading tanks and remediating contamination, if any was detected, was not material to the financial position of the Company. The sixth facility was acquired in 1996. Testing of the site as a condition of purchase did not detect any contamination, however, the Company expects to replace the existing underground tanks with new tanks and piping equipped with corrosion protection and automatic tank monitoring before the end of 1998.* The cost of this replacement and any potential remediation is not expected to be material. The Company is not currently under any requirement to incur mandated expenditures to remediate previously contaminated sites and does not anticipate any material costs for other infrequent or non-recurring clean-up expenditures.* Crouse retains a $100,000 per occurrence self-insured exposure, or deductible, on its worker's compensation, general and automobile liability, bodily injury and property damage and cargo damage insurance coverages. The Company maintains reserves for the estimated cost of the self-insured portion of claims based on management's evaluation of the nature and severity of individual claims and the Company's past claims experience. There have been no material adverse trends involving the differences in claims experience versus claims estimates on any of the above categories of self-insured risks. Based upon management's evaluation of the nature and severity of individual claims and the Company's past claims experience, Management believes accrued reserves are adequate for its self- insured exposures as of December 31, 1996. A new accounting pronouncement, Statement of Financial Accounting Standards No. 125, on "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" was issued in June, 1996, effective on January 1, 1997. This standard provides accounting and reporting standards for transfers and servicing of financial assets under a "financial-components approach" and is applied on a prospective basis only for transfers occurring after December 31, 1996. The Company is evaluating the impact of the application of the new rules, but, based on current circumstances, believes this impact will not be material to the financial statements of the Company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders of Anuhco, Inc.: We have audited the consolidated balance sheets of Anuhco, Inc. (a Delaware corporation) and Subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended. We have also audited Schedule II - Valuation and Qualifying Accounts, as listed in Item 14(a)2 of the Form 10-K, for the years ended December 31, 1996 and 1995. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Anuhco, Inc. and Subsidiaries as of December 31, 1996 and 1995 and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. Kansas City, Missouri February 19, 1997 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders of Anuhco, Inc.: We have audited the accompanying consolidated statements of income, shareholders' equity and cash flows of Anuhco, Inc. (a Delaware corporation) and Subsidiaries for the year ended December 31, 1994. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Anuhco, Inc. and Subsidiaries for the year ended December 31, 1994, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II is presented for the purpose of complying with the Securities and Exchange Commission rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Kansas City, Missouri February 16, 1995 ANUHCO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31 1996 1995 (In Thousands) ASSETS Current Assets Cash and temporary cash investments........................................ $ 9,021 $ 6,617 Short-term investments..................................................... 9,957 27,366 Freight accounts receivable, less allowance for credit losses of $419 and $409, respectively......................................................... 9,233 7,952 Finance accounts receivable, less allowance for credit losses of $769 and $351, respectively......................................................... 14,554 8,290 Current deferred income taxes.............................................. 618 177 Other current assets....................................................... 1,965 1,291 AFS net assets (Note 8).................................................... 7,570 16,840 Total current assets.................................................. 52,918 68,533 Operating Property, at Cost Revenue equipment.......................................................... 24,373 18,944 Land....................................................................... 3,489 2,826 Structures and improvements................................................ 10,087 7,534 Other operating property................................................... 5,328 4,436 43,277 33,740 Less Accumulated Depreciation.............................................. (19,887) (17,517) Net operating property................................................ 23,390 16,223 Intangibles, net of accumulated amortization................................... 9,497 3,498 Other Assets .................................................................. 1,007 172 $ 86,812 $ 88,426 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable........................................................... $ 2,980 $ 1,041 Accrued payroll and fringes................................................ 5,533 5,203 Claims and insurance accruals.............................................. 246 224 Accrued income taxes....................................................... -- 288 Other accrued expenses..................................................... 2,289 847 Total current liabilities............................................. 11,048 7,603 Deferred Income Taxes.......................................................... 1,203 543 Contingencies and Commitments (Note 7)......................................... -- -- Shareholders' Equity (Notes 1 and 5) Preferred stock $0.01 par value, authorized 1,000,000 shares, none outstanding.................................... -- -- Common stock $0.01 par value, authorized 13,000,000 shares, issued 7,605,570 and 7,557,070 shares, respectively........................................ 76 76 Paid-in capital............................................................ 5,529 5,357 Retained earnings.......................................................... 79,242 78,390 Treasury stock, 1,224,661 and 417,100 shares, at cost, respectively.................................................... (10,286) (3,543) Total shareholders' equity............................................ 74,561 80,280 $ 86,812 $ 88,426 The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
ANUHCO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31 1996 1995 1994 (In Thousands, Except Per Share Amounts) Operating Revenue Transportation........................................... $ 107,502 $ 95,152 $ 95,772 Earned finance charges, fees and other Income............ 8,645 2,292 -- Less: Interest on secured borrowings..................... 1,264 -- -- Net earned finance charges, fees and other income... 7,381 2,292 -- Total operating revenue............................. 114,883 97,444 95,772 Operating Expenses Salaries, wages and employee benefits.................... 63,165 53,854 51,732 Operating supplies and expenses.......................... 18,487 12,441 10,869 Provision for credit losses.............................. 892 175 -- Operating taxes and licenses............................. 2,978 2,577 2,597 Insurance and claims (Note 3)............................ 2,224 1,873 2,209 Depreciation and amortization............................ 3,702 2,821 2,315 Purchased transportation and rents....................... 22,589 20,851 20,829 Total operating expenses............................ 114,037 94,592 90,551 Operating Income............................................. 846 2,852 5,221 Nonoperating Income (Expense) Interest income.......................................... 1,141 2,087 342 Interest expense......................................... (27) (76) (114) Gain on sale of operating property, net.................. 78 59 45 Other, net............................................... (299) 8 1 Total nonoperating income (expense)................. 893 2,078 274 Income From Continuing Operations Before Income Taxes............................................. 1,739 4,930 5,495 Income Tax Provision (Note 6)................................ 887 2,120 -- Income From Continuing Operations............................ 852 2,810 5,495 Income From Discontinued Operations (Note 8)................. -- 3,576 54,845 Net Income ................................................ $ 852 $ 6,386 $ 60,340 Average Common Shares Outstanding............................ 6,780 7,409 7,545 Income Per Share from Continuing Operations.................. $ 0.13 $ 0.38 $ 0.73 Income Per Share from Discontinued Operations................ $ 0.00 $ 0.48 $ 7.27 Net Income Per Share......................................... $ 0.13 $ 0.86 $ 8.00 The accompanying notes to consolidated financial statements are an integral part of these statements.
ANUHCO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31 1996 1995 1994 (In Thousands) Cash Flows From Operating Activities- Net income............................................... $ 852 $ 6,386 $ 60,340 Adjustments to reconcile net income to net cash generated in operating activities- Gain on sale of operating property.................. (78) (59) (45) Depreciation and amortization....................... 3,702 2,821 2,315 Amortization of deferred transaction costs............................... 272 63 -- Provision for credit losses............................................. 1,012 265 150 Deferred tax provision.............................. 336 569 -- Net increase (decrease) from change in working capital items affecting operating activities- Freight accounts receivable..................... (1,401) 633 (2,094) Accrued payroll and fringes..................... 330 (572) 1,841 Other........................................... 1,860 (7) 84 Income from discontinued operations (Note 8)............................................ -- (3,576) (54,845) 6,885 6,523 7,746 Cash Flows From Investing Activities- Proceeds from discontinued operations.................... 8,500 6,753 33,750 Purchase of operating property, net...................... (10,150) (4,280) (6,086) Purchase of finance subsidiaries, net of cash acquired................................ (11,979) (11,267) -- Origination of finance accounts receivables......................................... (120,989) (40,548) -- Sale of finance accounts receivables..................... 61,289 27,110 -- Collection of owned finance accounts receivables......................................... 82,836 14,138 -- Collections of long-term receivable...................... -- 1,270 -- Purchase of short-term investments....................... (35,823) (71,142) (28,815) Maturities of short-term investments..................... 53,232 70,670 1,922 26,916 (7,296) 771 Cash Flows from Financing Activities- Repayment of debt........................................ (23,775) -- (1,860) Payments to acquire treasury stock....................... (6,656) (3,543) -- Other ................................................ (966) (432) -- (31,397) (3,975) (1,860) Net Increase (Decrease) in Cash and Temporary Cash Investments............................... 2,404 (4,748) 6,657 Cash and Temporary Cash Investments at Beginning of Period...................................... 6,617 11,365 4,708 Cash and Temporary Cash Investments at End of Period............................................ $ 9,021 $ 6,617 $ 11,365 Cash Paid During the Period for- Interest ................................................ $ 1,109 $ -- $ 118 Income Tax............................................... 332 1,537 547
ANUHCO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) Supplemental Schedule of Noncash Investing Activities: The Company acquired all of the capital stock of UPAC for approximately $11,979,000. In conjunction with the acquisition, liabilities were assumed as follows (see Note 9): 1996 Fair value of assets acquired............................ $30,587 Cash paid for capital stock and acquisition expenses..... (11,979) Intangibles.............................................. 6,617 Liabilities assumed...................................... $25,225 The Company acquired all of the capital stock of APR and a software and service agreement for approximately $11,301,000. In conjunction with the acquisition, liabilities were assumed as follows (See Note 9): 1995 Fair value of assets acquired............................ $10,582 Cash paid for capital stock, software/service agreement and acquisition expenses................... (11,301) Intangibles.............................................. 2,441 Liabilities assumed...................................... $ 1,722 The accompanying notes to consolidated financial statements are an integral part of these statements. ANUHCO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In Thousands)
Total Share- Common Paid-In Retained Treasury holders' Stock Capital Earnings Stock Equity Balance at Dec. 31, 1993 $ 75 $ 5,319 $ 11,664 $ -- $ 17,058 Income from continuing operations......................... -- -- 5,495 -- 5,495 Income from discontinued operations......................... -- -- 54,845 -- 54,845 Issuance of shares under Incentive Stock Plan............... 1 20 -- -- 21 Balance at Dec. 31, 1994 76 5,339 72,004 -- 77,419 Income from continuing operations......................... -- -- 2,810 -- 2,810 Income from discontinued operations......................... -- -- 3,576 -- 3,576 Issuance of shares under Incentive Stock Plan............... -- 18 -- -- 18 Purchase of 417,100 shares of common stock.................... -- -- -- (3,543) (3,543) Balance at Dec. 31, 1995 76 5,357 78,390 (3,543) 80,280 Income from continuing operations......................... -- -- 852 -- 852 Issuance of shares under Incentive Stock Plan............... -- 172 -- (87) 85 Purchase of 797,341 shares of common stock.................... -- -- -- (6,656) (6,656) Balance at Dec. 31, 1996 $ 76 $ 5,529 $ 79,242 $ (10,286) $ 74,561 The accompanying notes to consolidated financial statements are an integral part of these statements.
ANUHCO, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include Anuhco, Inc. and its subsidiary companies ("the Company"), all of which are wholly-owned. Anuhco's holdings include Crouse Cartage Company ("Crouse"), Agency Premium Resource, Inc. ("APR") and its subsidiaries, Universal Premium Acceptance Corporation and UPAC of California, Inc. (together "UPAC") and American Freight System, Inc. ("AFS"). The operating results of APR and UPAC are included from May 31, 1995 and March 29, 1996, the date of their respective acquisitions (See Note 9). On June 10, 1991, the Joint Plan of Reorganization ("Joint Plan") was confirmed by the Bankruptcy Court resulting in the formal discharge of AFS and its affiliates from Chapter 11 Bankruptcy proceedings. AFS, whose responsibility it is to administer the Joint Plan, has been accounted for as a discontinued operation since 1991 with only net assets reflected in the Anuhco consolidated financial statements (see Note 8). All significant intercompany accounts and transactions have been eliminated in consolidation. Segment Information - Anuhco operates in two industry segments, transportation and financial services. Through Crouse, the Company operates as a regional less-than-truckload motor carrier primarily serving the upper central and midwest portion of the United States. A substantial portion of Crouse's business is provided in next day service and is concentrated in the states of Iowa, Illinois, Minnesota, Missouri and Wisconsin. Anuhco also operates as an insurance premium finance company through APR and UPAC. The Company provides short-term secured financing for commercial insurance premiums through insurance agencies throughout the United States. Over half of the insurance premiums financed by APR and UPAC are placed through insurance agencies in Missouri, Florida, Massachusetts and Kansas. Information regarding the Company's industry segments for the years ended December 31, 1996 and 1995 (since May 31, 1995 for APR and since March 29, 1996 for UPAC) is as follows:
Transpor- Financial Consoli- tation Services dated (in Thousands) 1996 Revenues................................................ $ 107,502 $ 7,381 $ 114,883 Segment Operating Income................................ $ 2,915 $ (653) $ 2,262 General Corporate Expenses.............................. (1,416) Operating Income........................................ 846 Nonoperating Income..................................... 893 Income from Continuing Operations before Income Taxes................................. $ 1,739 Depreciation and Amortization........................... $ 3,001 $ 701 $ 3,702 Capital Expenditures.................................... $ 9,556 $ 1,397 $ 10,953 Identifiable Assets at 12/31/96......................... $ 33,633 $ 37,022 $ 70,655 Corporate Assets........................................ 16,157 Total Assets at December 31, 1996....................... $ 86,812 1995 Revenues................................................ $ 95,152 $ 2,292 $ 97,444 Segment Operating Income ............................... $ 3,970 $ 283 $ 4,253 General Corporate Expenses.............................. (1,401) Operating Income........................................ 2,852 Nonoperating Income..................................... 2,078 Income from Continuing Operations before Income Taxes................................. $ 4,930 Depreciation and Amortization........................... $ 2,587 $ 234 $ 2,821 Capital Expenditures.................................... $ 4,432 $ 21 $ 4,453 Identifiable Assets at 12/31/95......................... $ 26,809 $ 13,607 $ 40,416 Corporate Assets........................................ 48,010 Total Assets at December 31, 1995....................... $ 88,426
Depreciation and Maintenance - Depreciation is computed using the straight-line method and the following useful lives for new equipment: Revenue Equipment - Linehaul Tractors.................... 3 - 5 years Linehaul Trailers.................... 3 - 7 years Terminal Facilities..................... 19 - 39 years Other Equipment......................... 2 - 10 years Upon sale or retirement of operating property, the cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in non-operating income. The Company expenses costs related to repairs and overhauls of equipment as incurred. Cost of Tires - The cost of tires, including those purchased with new equipment, is expensed when the tires are placed in service. Recognition of Revenues - Transportation operating revenues, and related direct expenses, are recognized when freight is delivered. Other operating expenses are recognized as incurred. Finance charges on premium finance receivables are recognized when earned under applicable state regulations using methods which approximate the interest method. Recognition of earned finance charges on delinquent accounts is suspended where it is determined that collectibility of principal and interest is not probable. Interest on delinquent accounts is recognized when collected. Late fees and other ancillary fees are recognized when chargeable. Uncollectible accounts are generally charged off after one year, unless there is specific assurance of collection through return of unearned premiums from the insurance carrier. Recoveries of charged off accounts are recognized when collected. Allowance for Credit Losses - The allowances for credit losses are maintained at amounts considered adequate to provide for potential losses. The following is an analysis of changes in the allowance for 1996 credit losses on finance accounts receivable for and 1995, respectively (in thousands): 1996 1995 Balance, beginning of year................ $ 351 $ -- Allowance acquired with UPAC and APR...... 510 515 Provision for credit losses............... 892 175 Charge-offs, net of recoveries of $175 and $12, respectively................... (984) (339) Balance, at the end of year............... $ 769 $ 351 Income Taxes - The Company accounts for income taxes in accordance with the liability method. Deferred income taxes are determined based upon the difference between the book and the tax basis of the Company's assets and liabilities. Deferred taxes are provided at the enacted tax rates expected to be in effect when these differences reverse. Cash Equivalents - The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Short Term Investments - The Company's short term investments generally are held in U. S. Treasury securities or commercial paper of the highest rating. These investments are classified as held to maturity securities and are recorded at amortized cost which approximates market value. Disclosures about Fair Value of Financial Instruments - The following methods and assumptions were used to estimate the fair value of each class of financial instruments: a. Temporary Cash Investments and Short-Term Investments. The carrying amount approximates fair value because of the short maturity of these instruments. b. Finance Accounts Receivable Under Premium Finance Agreements The carrying amount approximates fair value because of the short maturity of these instruments. Pervasiveness of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Reclassifications - Certain amounts in the accompanying consolidated balance sheets and consolidated statements of cash flows in prior periods have been reclassified to conform with the current period's presentations. Accounting for the Impairment of Long-Lived Assets - Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" was effective for the Company's financial statements for the year ended December 31, 1996. The Company has reviewed its long-lived assets and associated intangible assets to be held and has identified no events or changes in circumstances which indicate that the carrying amount of these assets may not be recoverable. When impairment is indicated, any impairment loss is measured by the excess of carrying values over fair values. The Company currently has no material assets to be disposed of. New Accounting Pronouncements - Statement of Financial Accounting Standards No. 125, on "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" was issued in June, 1996, effective in January 1, 1997. This standard provides accounting and reporting standards for transfers and servicing of financial assets under a "financial-components approach" and is applied on a prospective basis only for transfers occurring after December 31, 1996. The Company is evaluating the impact of the application of the new rules, but, based on current circumstances, believes this impact will not be material to the financial statements of the Company. 2. EMPLOYEE BENEFITS Multiemployer Plans Crouse participates in multiemployer pension plans which provide defined benefits to substantially all of the drivers, dockworkers, mechanics and terminal office clerks who are members of a union. Crouse contributed $4,596,000, $3,688,000 and $3,222,000 to the multiemployer pension plans for 1996, 1995 and 1994, respectively. Crouse contributed $5,904,000, $5,142,000, $4,231,000 to the multiemployer health and welfare plans for 1996, 1995 and 1994, respectively. Non-Union Pension Plan Crouse has a defined contribution profit sharing (as defined by the Internal Revenue Code) plan ("the Non-union Plan") providing for a mandatory Company contribution of 5% of annual earned compensation of the non-union employees. Additional discretionary contributions can be made by the Board of Directors of Crouse depending upon profitability of Crouse. Any discretionary funds contributed to the Non-union Plan will be invested 100% in Anuhco Common Stock. Pension expense, exclusive of the multiemployer pension plans, was $420,000, $396,000 and $609,000 for the years 1996, 1995 and 1994, respectively. The accompanying consolidated balance sheets include a pension liability of $240,000 and $215,000 as of December 31, 1996 and 1995, respectively. Profit Sharing In September, 1988, the employees of Crouse approved the establishment of a profit sharing plan ("the Plan"). The Plan is structured to allow all employees (union and non-union) to ratably share 50% of Crouse's income before income taxes (excluding extraordinary items and gains or losses on the sale of assets) in return for a 15% reduction in their wages. The Plan calls for profit sharing distributions to be made on a quarterly basis. The Plan was recertified in 1991 and 1994, and shall continue in effect through March 31, 1998, or until a replacement Collective Bargaining Agreement is reached between the parties, whichever is later. The accompanying consolidated balance sheets include profit sharing accruals of $691,000 and $1,005,000 for 1996 and 1995, respectively. The accompanying consolidated statements of income include profit sharing expense of $2,833,000, $3,923,000 and $5,956,000 for 1996, 1995 and 1994, respectively. 401(k) Plan Effective January 1, 1990, Crouse established a salary deferral program under Section 401(k) of the Internal Revenue Code ("the Code"). To date, participant contributions to the 401(k) plan have not been matched with Company contributions. All employees of Crouse, Anuhco and AFS are eligible to participate in the 401(k) plan after they attain age 21 and complete one year of qualifying employment. UPAC Plans Effective June 1, 1995, the Company established a 401(k) Savings Plan and a Money Purchase Pension Plan, both of which are defined contribution plans. Employees of APR are eligible to participate in the plans after they attain age 21 and complete one year of employment. Participants in the 401(k) Savings Plan may defer up to 10% of annual compensation. The Company matches 50% of the amount deferred by each employee. Company contributions vest over five years. Company matching contributions in 1996 and 1995 were $27,000 and $10,000, respectively. Under the Money Purchase Pension Plan, the Company contributes 7% of each eligible employee's annual compensation plus 5.7% of any compensation in excess of the Social Security wage base. Company contributions in 1996 and 1995 were $66,000 and $30,000, respectively. 3. INSURANCE COVERAGE Claims and insurance accruals reflect accrued insurance premiums and the estimated cost of incurred claims for cargo loss and damage, bodily injury and property damage and workers' compensation not covered by insurance. The Company estimates reserves required for the self-insured portion of claims based on management's evaluation of the nature and severity of individual claims and the Company's past claims experience. The Company regularly assesses and adjusts estimated reserves based on continued development of information regarding claims through the ultimate claims settlement. Adjustments to estimated reserves are recorded in the period in which additional information becomes known. Workers' compensation expense is included in "Salaries, wages and employee benefits" in the accompanying consolidated statements of income. The Company's public liability and property damage, cargo and workers' compensation premiums are subject to retrospective adjustments based on actual incurred losses. The actual adjustments normally are not known for at least one year; however, based upon a review of the preliminary compilation of losses incurred through December 31, 1996, management does not believe any material adjustment will be made to the premiums paid or accrued at that date. 4. SECURITIZATION OF RECEIVABLES AND REVOLVING CREDIT AGREEMENT Securitization of Receivables In December, 1996, the Company, UPAC and APR Funding Corporation (wholly- owned subsidiary of APR) entered into an extendible three year securitization agreement whereby it can sell undivided interests in a designated pool of accounts receivable on an ongoing basis. The maximum allowable amount of receivables to be sold under the agreement is $50,000,000. This agreement replaced a similar securitization agreement with another financial institution that was entered into in October, 1995 and UPAC's secured credit agreement, dated July, 1994. The purchaser permits principal collections to be reinvested in new financing agreements. The Company had securitized receivables of $37.2 million at December 31, 1996. The cash flows from the sale of receivables are reported as investing activities in the accompanying consolidated statement of cash flows. The securitized receivables are reflected as sold in the accompanying balance sheet. The proceeds from the initial securitization of the receivables were used to purchase previous securitized receivables under the prior agreement and to pay off the secured note payable under UPAC's secured credit agreement. The terms of the agreement requires UPAC to maintain a minimum tangible net worth of $5 million and contain restrictions on the payment of dividends by UPAC to Anuhco without prior consent of the financial institution. The terms of the agreement also requires the Company to maintain a minimum tangible net worth of $50 million. The Company was in compliance with all such provisions at December 31, 1996. The Company did not record a gain or loss on the sales as the costs of receivables sold approximated the proceeds (See Note 1 - "New Accounting Pronouncements" for a discussion of the impact of FAS Statement No. 125 which will be effective on 1997). The terms of the securitization agreement require that UPAC maintain a default reserve at specified levels which serves as collateral. At December 31, 1996, approximately $4.9 million of owned finance receivables served as collateral under the default reserve provision. The Company continues to service the securitized receivables for which it receives a servicing fee. Included in finance revenue was $1,150,000 and $733,000 of servicing income for 1996 and 1995, respectively. Revolving Credit Agreement In September, 1988, Crouse entered into a five-year credit agreement with a commercial bank which provided for maximum borrowings equaling the lesser of $2,500,000 or the borrowing base, as defined in such agreement. Based on the value of its revenue equipment, such borrowing base exceeds $2,500,000 at December 31, 1996. This agreement was amended and superseded on September 30, 1991, and Anuhco was added as a guarantor. In September, 1996 the term was extended to June 30, 1998. There was no outstanding balance on this revolving line of credit at December 31, 1996 or 1995. On the last day of each calendar month through the term of the agreement, Crouse is required to pay to the bank equal payments of principal, each in an amount equal to one forty-eighth (1/48) of the highest unpaid principal balance of the previous 12-month period. The agreement provides for interest on borrowings at the bank's prime rate. The effective rate at December 31, 1996 was 8.25%. The agreement can be terminated by the bank on six months notice or by Crouse on 30 days notice after full payment of any debt to the bank. The terms of the agreement require the maintenance of a minimum shareholder's equity and contain restrictions on declaration and payment of dividends, acquisition of Crouse stock, loans to officers or employees and type of investments. The Company was in compliance with all such provisions at December 31, 1996. 5. COMMON STOCK On June 26, 1995, the Company adopted a program to repurchase up to 10% of its outstanding shares of common stock. During the second quarter of 1996, the Company completed this initial repurchase program and expanded the number of shares authorized to be repurchased by an additional 10% of its then outstanding shares. During 1996 and 1995, respectively, the Company repurchased 768,800 and 417,100 shares of common stock, which represented 15.7% of outstanding shares before initiating the program, at a cost of $9,963,000. Additionally, during the fourth quarter of 1996, the Company made an "Odd Lot Tender Offer" to holders of less than 100 shares of Anuhco Common Stocks. Pursuant to this offer the Company repurchased 28,541 shares at a cost of $237,000. An Incentive Stock Option Plan was adopted in 1983 which provides that options for shares of Anuhco Common Stock may be granted to officers and key employees at fair market value of the stock at the time such options are granted. This plan terminated under its provisions in May, 1993 and no further options may be granted. In 1994, options for 5,000 shares were exercised at an exercise price of $1.96 per share. In 1995, options for 25,000 shares were exercised at an average exercise price of $2.44 per share. At December 31, 1996, no options were outstanding or exercisable pursuant to this plan. An Incentive Stock Plan was adopted in 1992 ("1992 Plan") which provides that options for shares of Anuhco Common Stock shall be granted to directors, and may be granted to officers and key employees at fair market value of the stock at the time such options are granted. Initially, 500,000 shares of Anuhco common stock were reserved for issuance pursuant to the 1992 Plan. As of December 31, 1996, options for 223,500 shares were available for grant pursuant to the 1992 Plan. These options generally become exercisable ratably over two to five years and remain exercisable for ten years from the date of grant. In each of 1995 and 1996, the Company granted non-statutory options to acquire 10,000 shares of common stock to an officer of APR pursuant to an employment agreement. These options become exercisable in 1998 and 1999 and expire in 2005 and 2006, respectively. The Company has elected to continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock issued to Employees" ("APB 25") and related Interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of each of the Company's stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Financial Accounting Standards Board Statement No. 123 ("Statement 123") "Accounting for Stock-Based Compensation," requires the use of option valuation models to estimate the fair value of stock options granted and recognize that estimated fair value as compensation expense. Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its stock options under the fair value method of Statement 123. The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 1996 and 1995, respectively: risk-free interest rate of 6.1%; expected life of options of 4.9 years and 4.5 years; and a volatility factor of the expected market price of the Company's common stock of .20. The preceding assumptions used as inputs to the option valuation model are highly subjective in nature. Changes in the subjective input assumptions can materially affect the fair value estimates thus, in management's opinion, the estimated fair values presented do not necessarily represent a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The Company's unaudited pro forma information follows (in thousands, except for per share amounts): 1996 1995 Pro forma net income......................... $ 743 $2,771 Pro forma earnings per share from continuing operations................... $ 0.11 $ 0.37 The following table is a summary of data regarding stock options granted during the three years ended December 31, 1996:
1996 1995 1994 Weighted Weighted Weighted Average Average Average Options Price Options Price Options Price Options outstanding at beginning of year................. 198,200 $ 6.43 127,850 $ 4.79 73,000 $ 4.00 Granted................................ 106,500 7.96 75,500 9.06 63,000 5.50 Forfeited.............................. (18,000) 6.85 (1,000) 9.00 (2,500) 4.41 Exercised.............................. (23,500) 4.73 (4,150) 3.23 (5,650) 2.69 Options outstanding at end of year........................... 263,200 7.17 198,200 6.43 127,850 4.79 Options exercisable at end of year........................... 91,650 $ 5.62 64,500 $ 4.47 23,150 $ 3.39 Estimated weighted average fair value per share of options granted during the year.......................... $ 2.00 $ 2.40 N/A The per share exercise prices of options outstanding as of December 31, 1996, ranged from $2.41 to $9.79 per share. The weighted average remaining contractual life of those options was 7.8 years.
6. INCOME TAXES Deferred tax assets (liabilities) attributable to continuing operations are comprised of the following at December 31:
1996 1995 (In Thousands) Current Deferred Tax Assets (Liabilities): Employee benefits..................................... $ (75) $ (217) Claims accruals and other............................. 258 90 Reserve for doubtful accounts......................... 435 304 Net Current Deferred Tax Assets.................. $ 618 $ 177 Deferred Tax Assets (Liabilities): Operating Property, principally due to differences in depreciation............... $ (1,858) $ (1,272) Amortization of intangibles........................... (132) (30) Alternative minimum tax credits....................... 787 759 Net Deferred Tax Liabilities..................... $ (1,203) $ (543)
At December 31, 1996 the Company had approximately $2.9 million of net operating loss carryforwards which were available for Federal income tax purposes. At December 31, 1996 and 1995, the Company had $787,000 and $759,000, respectively, of alternative minimum tax credit carryforwards available which do not expire. Net Deferred Tax Assets of $974,000 and $1,745,000 were recorded as a portion of the AFS Net Assets as of December 31, 1996 and 1995, respectively (see Note 8). The following is a reconciliation of the Federal statutory income tax rate to the effective income tax rate for continuing operations.
1996 1995 1994 Federal statutory income tax rate................ 35.0% 35.0% 35.0% State income tax rate, net....................... 6.7 5.6 7.9 Amortization of non-deductible acquisition intangibles...................... 6.3 2.2 -- Non-deductible meals and entertainment................................ 2.8 0.9 -- Other............................................ 0.2 (0.7) -- Net operating losses............................. -- -- (42.9) Effective income tax rate........................ 51.0% 43.0% 0.0%
The components of the income tax provision, attributable to continuing operations, consisted of the following:
1996 1995 (in thousands) Current Deferred Total Current Deferred Total Federal................... $ 441 $ 267 $ 708 $ 1,241 $ 455 $ 1,696 State..................... 110 69 179 310 114 424 Total................ $ 551 $ 336 $ 887 $ 1,551 $ 569 $ 2,120
No net provision for income tax was made for the year ended December 31, 1994 due to significant tax losses and related carryforwards from the discontinued operations during that year. 7. CONTINGENCIES AND COMMITMENTS The Company is party to certain other claims and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such claims and litigation will not materially affect the Company's results of operations, cash flows or financial position. Payments are made to tractor owner-operators under various short-term lease agreements for the use of revenue equipment. These lease payments, which totaled $13,179,000, 11,527,000 and $11,138,000 for 1996, 1995 and 1994, respectively, are primarily based on miles traveled or on a percent of revenue generated through the use of the equipment. 8. AFS NET ASSETS Under the provisions of the Joint Plan, AFS is responsible for the administration of pre-July 12, 1991 creditor claims and conversion of assets owned before that date. As claims were allowed, distributions to those creditors occurred. The Joint Plan also provided for distributions to Anuhco as unsecured creditor distributions occurred in excess of 50% of allowed claims. Such distributions were recognized as "Income from Discontinued Operations". After unsecured creditors received distributions, including interest, equivalent to 130% of their allowed claims, Anuhco receives the full benefit of any remaining assets through its ownership of AFS stock. As of December 31, 1994 all unsecured creditors had been paid an amount equal to 130% of their allowed claims, which was the maximum distribution provided under the Joint Plan. Anuhco received distributions in accordance with the Joint Plan of $36 million. In addition, AFS paid dividends of $25 million, $6.8 million and $8.5 million to Anuhco on December 28, 1994, July 5, 1995, and July 11, 1996, respectively. On November 3, 1994 Anuhco, through its subsidiary AFS, collected a judgment against Westinghouse Electric Corporation ("WEC") for failure to provide financing pursuant to a loan commitment issued by WEC on June 3, 1988. As a result, on November 16, 1994, AFS declared a distribution under the Joint Plan to unsecured creditors and Anuhco. Such distribution resulted in the full payment of all AFS's resolved claims and liabilities. These events resulted in the recognition of Income from Discontinued Operations of $54.8 million in 1994. No net provision for income tax was recorded in 1994 due to the reversal of valuation allowances previously provided as a result of the significant tax losses and related carryforwards which existed from previous years. In 1995, the Company recognized Income from Discontinued Operations of $3.6 million (net of income tax provision of $1.9 million) resulting primarily from a more favorable resolution of a significant claim against the estate, than had originally been estimated. The remaining AFS net assets are depicted in the following table. The conversion of these assets and settlement of these liabilities is anticipated to be substantially completed during 1997. Amount (In Thousands) Cash and Short-Term Investments ................. $ 6,320 Deposits, Prepayments and Other Receivables ..... 223 Deferred Income Tax Asset (primarily Other Assets and net operating losses) .......... 974 Other Assets, at estimated net realizable value................................ 1,172 Real Property, at estimated net realizable value........................................... 133 Priority Wages, Taxes and Other ................. (502) Unsecured Liabilities..... ...................... (750) Net Assets ...................................... $ 7,570 Assets and Liabilities - Assets, including real property remaining at December 31, 1996, are stated at estimated net realizable value. AFS has provided notice to all known creditors and the deadline for filing claims to be resolved under the Joint Plan has expired. Creditors are barred from submitting claims after the deadline. At December 31, 1996, unresolved claims filed by the creditors of approximately $4 million were significantly in excess of recorded liabilities. The remaining claims as of December 31, 1996 were resolved during January and February 1997 with no impact on AFS net assets. With the settlement of these final claims the closure of the estate is anticipated to occur in 1997. 9. ACQUISITION OF PREMIUM FINANCE SUBSIDIARIES On May 31, 1995, Anuhco completed the acquisition of all of the issued and outstanding stock of Agency Premium Resource, Inc. and Subsidiary ("APR"). The purchase price, together with payments for certain services to be rendered by the sellers after closing, was approximately $11.3 million. In addition to the Stock Purchase Agreement by which Anuhco acquired all of the APR stock, Anuhco entered into a consulting agreement with the former majority shareholder of APR, and an employment agreement with APR's president and chief executive officer. Under the former, Anuhco is entitled to consult with the former majority shareholder regarding APR for three years. Under the latter, APR was entitled to the continuation of the services of APR's president and chief executive officer for five years. This contract was amended and extended for two additional years with no increase in compensation. This transaction was accounted for as a purchase. Anuhco utilized a portion of its available cash to consummate the purchase. The terms of the acquisition and the purchase price resulted from negotiations between Anuhco and the APR shareholders. In connection with the purchase of APR, Anuhco recorded goodwill of $2.4 million, which is being amortized on the straight-line basis over 15 years, and a software and service agreement of $1.0 million, which is being amortized over 5 years. On March 29, 1996, Anuhco completed the acquisition of all of the issued and outstanding stock of Universal Premium Acceptance Corporation and UPAC of California, Inc. (together referred to as "UPAC"). UPAC offers short-term collateralized financing of commercial and personal insurance premiums through approved insurance agencies in over 30 states throughout the United States. At March 31, 1996, UPAC had outstanding net finance receivables of approximately $30 million. This transaction was accounted for as a purchase. Anuhco utilized a portion of its available cash and short-term investments to consummate the purchase at a price of approximately $12 million. The terms of the acquisition and the purchase price resulted from negotiations between Anuhco and William H. Kopman, the former sole shareholder of UPAC. In connection with the purchase of UPAC, Anuhco has recorded goodwill of $6.6 million, which will be amortized on the straight-line basis over 25 years. In addition to the Stock Purchase Agreement by which Anuhco acquired all of the UPAC stock, Anuhco entered into a consulting agreement with Mr. Kopman. Under the consulting agreement, Anuhco is entitled to consult with Mr. Kopman on industry developments as well as UPAC operations through December 31, 1998. In addition to retaining the services of Mr. Kopman under a consulting agreement, certain existing executive management personnel of UPAC have been retained under multi-year employment agreements. The following reflects the operating results of Anuhco for the three years ended December 31, 1996, 1995, and 1994 assuming the acquisitions occurred as of the beginning of each of the respective periods: Pro Forma Operating Results (Unaudited) (In thousands, except per share data)
1996 1995 1994 Operating Revenue............................... $ 116,116 $ 102,329 $ 101,328 Income from Continuing Operations................................. 837 2,915 5,894 Income from Discontinued Operations................................. -- 3,576 54,845 Net Income...................................... $ 837 $ 6,491 $ 60,739 Net Income Per Share - Continuing Operations...................... $ 0.12 $ 0.39 $ 0.78 Discontinued Operations.................... 0.00 0.48 7.27 Total...................................... $ 0.12 $ 0.87 $ 8.05 The pro forma results of operations are not necessarily indicative of the actual results that would have been obtained had the acquisition been made at the beginning of the respective periods, or of results which may occur in the future.
ANUHCO, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION DECEMBER 31, 1996 AND 1995 SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED): Anuhco's quarterly operating results, as well as those of the motor carrier industry in general, fluctuate with the seasonal changes in tonnage levels and with changes in weather related operating conditions. Inclement weather conditions during the winter months adversely affect freight shipments and increase operating costs. Historically, Anuhco has achieved its best operating results in the second and third quarters when adverse weather conditions have a lesser effect on operating efficiency. Discontinued operations reflects the continuing winddown of the AFS and related estates. Included in Income from Discontinued Operations for the fourth quarter of 1995 was the adjustment of management's estimate of the net realizable value of AFS Net Assets of $2.7 million resulting primarily from the favorable resolution of a significant claim against the estate. The following table sets forth selected unaudited financial information for each quarter of 1996 and 1995 (in thousands, except per share amounts).
1996 First Second Third Fourth Full Yr. Revenue................................... $ 25,216 $ 28,345 $ 30,041 $ 31,281 $ 114,883 Operating Income (Loss)................... 194 426 709 (483) 846 Nonoperating Income (Expense)............. 425 209 297 (38) 893 Net Income (Loss)......................... 353 362 505 (368) 852 Net Income (Loss) per Share............... 0.05 0.05 0.08 (0.05) 0.13 1995 First Second Third Fourth Full Yr. Revenue................................... $ 24,632 $ 24,569 $ 24,651 $ 23,592 $ 97,444 Operating Income.......................... 969 483 684 716 2,852 Nonoperating Income (Expense)............. 630 505 500 443 2,078 Income from Continuing Operations............................. 911 563 675 661 2,810 Income from Discontinued Operations............................. 368 227 272 2,709 3,576 Net Income................................ 1,279 790 947 3,370 6,386 Income per Share from Continuing Operations.................. 0.12 0.07 0.09 0.09 0.38 Income per Share from Discontinued Operations................ 0.05 0.03 0.04 0.38 0.48 Net Income per Share...................... 0.17 0.10 0.13 0.47 0.86
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES As previously reported in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, effective November 2, 1995, Arthur Andersen LLP resigned as independent public accountants for the Company. Arthur Andersen LLP's report on the financial statements of the Company for the two years preceding their resignation did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. During the two most recent fiscal years and subsequent interim period preceding the resignation of Arthur Andersen LLP there were no disagreements or reportable events on any matters of accounting principles or practices, financial statement disclosures or auditing scopes or procedures. None of the reportable events listed in Item 304(a) (1) (v) of Regulation S-K occurred with respect to the Company and Arthur Andersen LLP. Pursuant to Item 304(a)(3) of Regulation S-K, the Company has provided Arthur Andersen LLP with a copy of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and requested Arthur Andersen LLP to furnish the Company with a response addressed to the Securities and Exchange Commission as to whether Arthur Andersen LLP concurs with the statements made in Item 5 of the Form 10-Q with respect to Arthur Andersen LLP. A copy of such letter was filed as Exhibit 16 to the Form 10-Q. On November 3, 1995, the Company selected Coopers & Lybrand L.L.P. as independent public accountants for the 1995 fiscal year. During the two years ended December 31, 1994 and 1993, and the interim period of 1995, the Company did not consult Coopers & Lybrand L.L.P. regarding the application of accounting principles or the type of opinion that might be rendered on the Company's financial statements. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to General Instruction G(3), the information required by this Item 10 is hereby incorporated by reference from the Anuhco, Inc. Proxy Statement for the 1997 Annual Meeting of Shareholders, which the Registrant will file pursuant to Regulation 14A. (See Item 4, included elsewhere herein, for a listing of Executive Officers of the Registrant). ITEM 11. EXECUTIVE COMPENSATION Pursuant to General Instruction G(3), the information required by this Item 11 is hereby incorporated by reference from the Anuhco, Inc. Proxy Statement for the 1997 Annual Meeting of Shareholders, which the Registrant will file pursuant to Regulation 14A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Pursuant to General Instruction G(3), the information required by this Item 12 is hereby incorporated by reference from the Anuhco, Inc. Proxy Statement for the 1997 Annual Meeting of Shareholders, which the Registrant will file pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant to General Instruction G(3), the information required by this Item 13 is hereby incorporated by reference from the Anuhco, Inc. Proxy Statement for the 1997 Annual Meeting of Shareholders, which the Registrant will file pursuant to Regulation 14A. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)1. Financial Statements Included in Item 8, Part II of this Report - Consolidated Balance Sheets at December 31, 1996 and 1995 Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements Supplemental Financial Information (Unaudited) - Summary of Quarterly Financial Information for 1996 and 1995 (a)2. Financial Statement Schedules Included in Item 14, Part IV of this Report - Financial Statement Schedules for the three years ended December 31, 1996: Schedule II - Valuation and Qualifying Accounts Other financial statement schedules are omitted either because of the absence of the conditions under which they are required or because the required information is contained in the consolidated financial statements or notes thereto. (a)3. Exhibits 2(a)- Fifth Amended Joint Plan of Reorganization of the Registrant and others and Registrant's Disclosure Statement Relating to the Fifth Amended Joint Plan of Reorganization. Filed as Exhibit 28(a) and 28(b) to the Registrant's Form 8-K dated March 21, 1991. 2(b)- United States Bankruptcy Court order confirming the Fifth Amended Joint Plan of Reorganization of the Registrant and others. Filed as Exhibit 28(c) to Registrant's Form 8-K dated June 11, 1991. 3(a)- 1993 Restated Certificate of Incorporation of the Registrant. Filed as Exhibit 3 to Registrant's Form 10-Q dated August 4, 1993. 3(b)- Restated By-Laws of the Registrant. Filed as Exhibit 3(b) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. 4- Specimen Certificate of the Common Stock, no par value, of the Registrant. Filed as Exhibit 4 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 by Amendment No. 1 dated July 30, 1992. 10(a)-Form of Indemnification Agreement with Directors and Executive Officers. Filed as Exhibit 10(k) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1986. 10(b)-Trust and Security Agreement by and between American Freight System, Inc. (Grantor) and The Merchants Bank (Trustee), dated July 11, 1991. Filed as Exhibit 10(c) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 by Amendment No. 1 dated July 30, 1992. 10(c)-Secured Revolving Credit Agreement for a revolving credit facility in the amount of $2,500,000 by and between Crouse Company and Bankers Trust Company of Des Moines, Iowa. Filed as Exhibit 10(i) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 by Amendment No. 1 dated July 30, 1992. 10(d)-Registrant's 1992 Incentive Stock Plan. Filed as Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. 10(d)-Stock Purchase Agreement dated May 23, 1995 by and among Anuhco, Inc., Seafield Capital Corporation and C. Ted McCarter. Filed as Exhibit 2(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995. 10(e)-Consulting and Assignment Agreement dated May 31, 1995 by and between Seafield Capital Corporation and Anuhco, Inc. Filed as Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995. 10(f)-Stock purchase Agreement by and between Anuhco, Inc. and William H. Kopman, dated December 18, 1995. Filed as Exhibit 2(a) to Registrant's Current Report on Form 8-K, dated March 29, 1996. 10(g)-First Amendment to Stock Purchase Agreement by and between Anuhco, Inc. and William H. Kopman, dated March 7, 1996. Filed as Exhibit 2(b) to Registrant's Current Report on Form 8-K dated March 29, 1996. 10(h)-Second Amendment to Stock Purchase Agreement by and between Anuhco, Inc. and William H. Kopman, dated March 29, 1996. Filed as Exhibit 2(c) to Registrant's Current Report on Form 8-K dated March 29, 1996. 10(i)-Consulting Agreement by and between William H. Kopman and Anuhco, Inc., dated March 29, 1996. Filed as Exhibit 10(a) to Registrant's Current Report on Form 8-K, dated March 29, 1996. 10(j)-Receivables Purchase Agreement by and among APR Funding Corporation, Universal Premium Acceptance Corporation, Anuhco, Inc., EagleFunding Capital Corporation, The First National Bank of Boston, dated December 31, 1996. Filed as Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the year ended December 331, 1996. 22- List of all subsidiaries of Anuhco, Inc., the state of incorporation of each such subsidiary, and the names under which such subsidiaries do business. Filed as Exhibit 22 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. 24(a)*-Consent of Independent Accountant (Coopers & Lybrand L.L.P.). 24(b)*-Consent of Independent Accountant (Arthur Andersen LLP). 27*- Financial Data Schedule. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1996. *Filed herewith. ANUHCO, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions Balance at Charged Charged Balance Beginning to to Other Deduc- at End Description of Year Expense Accounts tions(1) of Year (In Thousands) Allowance for credit losses accounts (deducted from freight accounts receivable) Year Ended December 31 - 1996.................. $409 $ 120 -- $(110) $419 1995.................. 412 90 -- (93) 409 1994.................. 358 150 -- (96) 412 Allowance for credit losses (deducted from finance accounts receivable) Year Ended December 31 - 1996.................... $351 $ 892 $ 510(2) $(984) $769 1995.................... - 175 515(3) (339) 351 (1)Deduction for purposes for which reserve was created. (2)Allowance established as of March 29, 1996, the date of acquisition of Universal Premium Acceptance Corporation and UPAC of California, Inc. (3)Allowance established as of May 31, 1995, the date of acquisition of Agency Premium Resource, Inc. and Subsidiary.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: April 25, 1997 By /s/ Timothy P. O'Neil Timothy P. O'Neil, President and Chief Financial Officer ANUHCO, INC. AND SUBSIDIARIES EXHIBIT INDEX Exhibit No. Exhibit Description 24(a) Consent of Independent Accountant (Coopers & Lybrand L.L.P.). 24(b) Consent of Independent Accountant (Arthur Andersen LLP). 27 Financial Data Schedule. EX-24 2 Exhibit 24(b) CONSENT OF INDEPENDENT ACCOUNTANTS As independent accountants, we hereby consent to the incorporation of our report included in this Form 10-K into the Company's previously filed Registration Statements on Form S-8 for the Anuhco, Inc. 1992 Incentive Stock Plan, File No. 33-51494, the American Carriers, Inc. 1983 Incentive Stock Option Plan, File No. 2-86915 and the Stock Option Agreement by and between Anuhco, Inc. and C. Ted McCarter, effective May 31, 1995, File No. 33-62553. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Kansas City, Missouri April 25, 1997 1 2 EX-24 3 Exhibit 24(a) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference into the Company's previously filed Registration Statements on Form S-8 for the Anuhco, Inc. 1992 Incentive Stock Plan, File No. 33-51494, the American Carriers, Inc. 1983 Incentive Stock Option Plan, File No. 2-86915, and the Stock Option Agreement by and between Anuhco, Inc. and C. Ted McCarter, effective May 31, 1995, File No. 33-62553, of our report dated February 18, 1997 on our audit of the consolidated financial statements and financial statement schedule of Anuhco, Inc. as of December 31, 1996 and for the two years then ended, which report is incorporated by reference in this Annual Report on Form 10-K. /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. Kansas City, Missouri April 25, 1997 EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANUHCO, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 AND CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000719271 ANUHCO, INC. 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 9021 9957 24975 1188 0 52918 43277 19887 86812 11048 0 0 0 76 74485 86812 0 114883 0 113145 0 892 27 1739 887 852 0 0 0 852 .13 .13
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