-----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, GXbGiqRUjE3yaIG6L5/w3I4+9Spo9tqhKmW/fbE3oaN/M3JaZbG/unf1qmF5Rrt1 ufqjzlnfAzhy4TFt85bVDg== 0000948830-99-000390.txt : 19990817 0000948830-99-000390.hdr.sgml : 19990817 ACCESSION NUMBER: 0000948830-99-000390 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S TRUCKING INC CENTRAL INDEX KEY: 0000820408 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 680133692 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 033-16417-LA FILM NUMBER: 99693947 BUSINESS ADDRESS: STREET 1: 3125 ASHLEY PHOSPHATE ROAD STREET 2: SUITE 128 CITY: NORTH CHARLESTON STATE: SC ZIP: 29418 BUSINESS PHONE: 8437679197 MAIL ADDRESS: STREET 1: 3125 ASHLEY PHOSPHATE ROAD STREET 2: SUITE 128 CITY: NORTH CHARLESTON STATE: SC ZIP: 29418 FORMER COMPANY: FORMER CONFORMED NAME: NORTHERN DANCER CORP DATE OF NAME CHANGE: 19930723 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Three Months Ended June 30, 1999 Commission File Number: 33-9640-LA U. S. TRUCKING, INC. -------------------------------------------------- (Exact Name of Issuer as Specified in its Charter) COLORADO 68-0133692 - ------------------------------- --------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification Number) Incorporation or Organization) 3125 Ashley Phosphate Road, Suite 128, North Charleston, S.C. 29418 ------------------------------------------------------------------- (Address of Principal Executive Offices) (843) 767-9197 ---------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ] There were 6,901,258 shares of the Registrant's common stock outstanding as of June 30, 1999. Item 1: FINANCIAL STATEMENTS U. S. TRUCKING, INC. FORM 10-QSB INDEX Page Number PART I: FINANCIAL INFORMATION Item 1. Consolidated Financial Statements: Consolidated Balance Sheets (Unaudited) - June 30, 1999 and December 31, 1998 3-4 Consolidated Statement of Income (Unaudited) - Six Months Ended June 30, 1999 and 1998 5 Consolidated Statement of Income (Unaudited) - Three Months Ended June 30, 1999 and 1998 6 Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 1999 and 1998 7-8 Notes to Condensed Consolidated Financial Statements 9-10 Item 2. Management's Discussion and Analysis or Plan of Operation 11-14 PART II: OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Defaults Upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 16 2 U.S. TRUCKING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET June 30, 1999 December 31, 1998 (Unaudited) (Unaudited) Assets Current Assets Cash In Bank $ 789,052 $ 22,976 Trade Accounts Receivable - net 5,854,779 3,447,570 Accounts Receivable - Other 204,794 141,673 Parts and Supply Inventory 287,141 257,030 Prepaid Expenses and Other 540,411 162,036 ----------- ----------- Total Current Assets 7,676,177 4,031,285 ----------- ----------- Transportation & Other Equipment at cost - Less accumulated depreciation and amortization 7,544,458 9,718,805 Other Assets Restricted Cash - Factor 135,706 - Restricted Cash - Owner Operators 2,320 2,320 Restricted Cash - Letters of Credit 86,354 10,000 Restricted Cash - Captive Insurance 233,376 - Due from Related Party 100,000 100,000 Due from Captive Insurer 456,732 355,321 Security Deposits 14,007 12,575 Intangible Assets - net of accumulated amortization 3,602,494 2,082,055 ----------- ----------- Total Other Assets 4,630,989 2,562,271 ----------- ----------- Total Assets $19,851,624 $16,312,361 =========== =========== Liabilities and Stockholders' Equity Current Liabilities Accounts Payable - Trade 1,797,246 1,443,415 Revolving Credit Line 3,193,669 1,795,888 Accruals & Other Current Liabilities 1,144,276 669,957 Current Portion - Long Term Debt 2,229,247 2,034,756 ----------- ----------- Total Current Liabilities 8,364,438 5,944,016 Other Liabilities Owner Operator Escrow 121,588 55,874 Convertible Debentures 540,000 0 Long-Term Notes Payable - net of current portion 3,548,708 5,224,092 ----------- ----------- Total Other Liabilities 4,210,296 5,279,966 ----------- ----------- Total Liabilities 12,574,734 11,223,982 3 Stockholders' Equity Preferred Stock (no par value - 20,000,000 shares authorized, 990,000 Series A issued and out- standing; 900 Series B issued and outstanding; and 50,000 Series C issued and outstanding 900,762 Common Stock (no par value - 75,000,000 shares authorized, 6,901,258 issued and outstanding on June 30, 1999, and 16,074,591 on December 31, 1998) 3,368,238 2,796,000 Additional paid-in Capital 4,223,480 3,821,812 Accumulated Deficit (1,095,590) (1,409,433) Subscription Receivable (120,000) (120,000) ----------- ----------- Total Stockholders' Equity 7,276,890 5,088,379 ----------- ----------- Total Liabilities & Stockholders' Equity $19,851,624 $16,312,361 =========== =========== 4 U.S. TRUCKING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME For the Six For the Six Months Ending Months Ending June 30, 1999 June 30, 1998 (Unaudited) (Unaudited) Net Revenues $17,824,169 $10,718,964 Operating Expenses Purchased Transportation & Rentals 7,087,882 39.8% 3,667,666 34.2% Salaries, Wages & Benefits 4,137,873 23.2% 2,666,923 24.9% Fuel 1,457,324 8.2% 1,112,614 10.4% Operating Supplies & Maintenance 625,508 3.5% 621,429 5.8% Insurance & Claims 469,137 2.6% 340,933 3.2% Misc. Operating Expenses 300,831 1.7% 293,687 2.7% Taxes & Licenses 235,013 1.3% 203,562 1.9% Insurance Captive Expense 582,803 3.3% 0 0.0% Occupancy Costs 172,032 1.0% 125,308 1.2% Depreciation and Amortization 1,146,717 6.4% 813,820 7.6% ----------- ----- ----------- ----- Total Operating Expenses 16,215,120 91.0% 9,845,942 91.9% General Administrative Expenses 1,069,171 6.0% 411,565 3.8% Operating Income 539,878 3.0% 461,457 4.3% Interest Expense (378,472) -2.1% (315,076) -2.9% Gain on Sale of Equipment 124,114 0.7% 0 0.0% Interest Income 2,425 0.0% 1,200 0.0% Other Income 25,899 0.1% 45,241 0.4% ----------- ----- ----------- ----- Net Income Before Taxes 313,844 1.8% 192,822 1.8% Provision for Income Taxes 104,459 0.6% 83,500 0.8% Tax Benefit of Net Operating Loss Carryforward (104,459) -0.6% (83,500) -0.8% ----------- ----- ----------- ----- Net Income 313,844 1.8% 192,822 1.8% =========== ===== =========== ===== Accumulated Deficit - beginning (1,409,434) (1,531,200) Accumulated Deficit - ending $(1,095,590) $(1,338,378) ----------- ----------- Earnings per Common Share 0.04 0.01 Fully Diluted Earnings per Share 0.02 0.01 Average Number of Shares Outstanding 8,925,676 13,000,000 5 U.S. TRUCKING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME For the Three For the Three Months Ending Months Ending June 30, 1999 June 30, 1998 (Unaudited) (Unaudited) Net Revenues $10,162,797 $ 5,651,634 Operating Expenses Purchased Transportation & Rentals 4,417,867 43.5% 2,110,710 37.3% Salaries, Wages & Benefits 2,082,744 20.5% 1,385,005 24.5% Fuel 742,225 7.3% 550,188 9.7% Operating Supplies & Maintenance 303,321 3.0% 319,079 5.6% Insurance & Claims 245,709 2.4% 169,971 3.0% Misc. Operating Expenses 99,044 1.0% 152,565 2.7% Taxes & Licenses 119,520 1.2% 102,122 1.8% Insurance Captive Expense 311,667 3.1% 0 0.0% Occupancy Costs 87,002 0.9% 55,405 1.0% Depreciation and Amortization 596,082 5.9% 379,165 6.7% ----------- ----- ----------- ----- Total Operating Expenses 9,005,181 88.6% 5,224,210 92.4% General Administrative Expenses 696,425 6.9% 235,018 4.2% ----------- ----- ----------- ----- Operating Income 461,191 4.5% 192,406 3.4% Interest Expense (269,676) -2.7% (174,002) -3.1% Gain on Sale of Equipment - 0.0% - 0.0% Interest Income 2,383 0.0% 1,015 0.0% Other Income - 0.0% 35,805 0.6% ----------- ----- ----------- ----- Net Income Before Taxes 193,898 1.9% 55,224 1.0% Provision for Income Taxes 57,659 0.6% 21,537 0.4% Tax Benefit of Net Operating Loss Carryforward (57,659) -0.6% (21,537) -0.4% ----------- ----- ----------- ----- Net Income 193,898 1.9% 55,224 1.0% Accumulated Deficit - beginning (1,289,488) (1,393,601) ----------- ----------- Accumulated Deficit - ending $(1,095,590) $(1,338,377) =========== =========== Earnings per Common Share $ 0.03 $ 0.01 Fully Diluted Earnings per Share $ 0.01 $ 0.01 Average Number of Shares Outstanding 6,988,351 13,000,000 6 U.S. TRUCKING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the Six For the Six Months Ending Months Ending June 30, 1999 June 30, 1998 (Unaudited) (Unaudited) ----------- ----------- Cash Flows from Operating Activities Net Income $ 313,844 $ 192,822 Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities: Depreciation & Amortization 1,146,717 805,293 Expense related to stock-based compensation plan - 15,000 Gain on Sale of Equipment (124,114) - (Increase) Decrease - Assets - - Restricted Cash (445,436) (220,600) Accounts Receivable (2,571,741) 78,070 Parts & Supply Inventory (30,111) (9,740) Prepaid Expenses & Other Current Assets (378,376) (132,189) Increase (Decrease) - Liabilities Accounts Payable & Revolving Credit Line 1,751,612 (78,983) Accrued Expenses and Other Liabilities 540,034 51,576 ----------- ----------- Total Adjustments (111,415) 508,427 Net Cash Provided by Operating Activities 202,429 701,249 ----------- ----------- Cash Flows from Investing Activities Reduction (Increase) in security deposit (1,433) 50 Purchase of Equipment (244,673) (108,287) Sale of Transportation and Other Equipment 1,104,114 - Payment for Refinancing of Acquisition Debt - (55,274) Proceeds from Sale of Common Stock and Additional Paid In Capital 1,883,732 - ----------- ----------- Net Cash Provided (Used) by Investing Activities 2,741,740 (163,511) Subtotal 7 Cash Flows from Financing Activities Discount on note payable - 9,144 Cash paid for acquisitions (340,000) - Principal Payments on Long-Term Debt (1,838,093) (427,734) Principal Payments on Capital Lease Obligations - (160,906) ----------- ----------- Net Cash Used by Financing Activities (2,178,093) (579,496) Net Increase (Decrease) in Cash 766,076 (41,758) Cash at Beginning of Year 22,976 60,099 ----------- ----------- Cash at End of Period $ 789,052 $ 18,341 =========== =========== Supplementary Disclosure of Cash Flow Information Cash Paid during the period Interest Expense $ 378,472 $ 305,123 =========== =========== Income Taxes $ - $ - =========== =========== 8 U.S. TRUCKING, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999 NOTE 1 - Basis of Presentation The accompanying consolidated financial statements include the parent company, US Trucking, Inc. and its wholly owned subsidiaries, Gulf Northern Transport, Inc., ProStar, Inc., Mencor, Inc. and the US Trucking Captive Insurance Program(hereinafter collectively called the "Company"). All material inter-company items and transactions have been eliminated in consolidation. The consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles ("GAAP"), pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures have been omitted or condensed pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Results of operations in interim periods are not necessarily indicative of results for a full year. These consolidated financial statements and notes thereto should be read in conjunction with the Company's consolidated financial statements and notes. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities, at the date of the accompanying consolidated financial statements, and the reported amounts of the revenues and expenses during the reporting periods. Actual results could differ from those estimates. NOTE 2 - Earnings per Share Earnings per common share amounts are based on the weighted average number of common shares outstanding and diluted earnings per share amounts are based on the weighted average number of common shares outstanding plus the incremental shares that would have been outstanding upon the assumed exercise of all diluted preferred shares. NOTE 3 - Segment Information Description of the types of services from which each reportable segment derives its revenues. The Company has three major business segments: long-haul trucking of refrigerated and nonrefrigerated products, interstate freight brokerage and a captive insurance program for liability insurance for the trucking industry. During the fourth quarter of 1998, the company adopted Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS 131). The adoption of SFAS 131 requires the presentation of descriptive information about reportable segments which is consistent with that made available to the management of U S Trucking to assess performance. As a result of this change, the company now reports information on its truck brokerage operation. In addition, during 1998, the company added the captive liability insurance program (business) and reports that segment's performance similarly. In determining that net income of each segment of the company, 100% of the interest expense is allocated to long-haul trucking and effective tax rates are determined for each business segment. 9 The Company evaluates performance and allocated resources based on net profit and loss from operations. The Company's reportable segments are business units that offer different transportation services. The reportable segments are each managed separately because of their distinct differences in the operations. SIX MONTH PERIOD ENDED JUNE 30, 1999
Long Haul Truck Liability Intersegment Total Trucking Brokerage Insurance Sales 14,712,520 2,513,413 937,214 (338,978) 17,824,169 Net Income 121,933 90,490 101,421 0 313,844 Assets 17,412,698 949,767 1,489,159 0 19,851,624 Depreciation & Amortization 1,133,808 12,909 0 0 1,146,717
THREE MONTH PERIOD ENDED JUNE 30, 1999
Long Haul Truck Liability Intersegment Total Trucking Brokerage Insurance Sales 7,691,441 2,168,294 458,215 (155,153) 10,162,797 Net Income 26,650 99,807 67,441 0 193,898 Assets 17,412,698 949,767 1,489,159 0 19,851,624 Depreciation & Amortization 583,473 12,609 0 0 596,082
NOTE 4 - Acquisitions (A) The Company acquired the stock of a S.Carolina brokerage company during the quarter ended June 30, 1999. The Company expects to add approximately $7.5 million of annual operating revenue with the acquisition while expecting significant bottom line enhancement. The Company has relocated the acquired company to the Company's General Offices in Charleston, S.C. to ensure quick synergies with the brokerage company (Mencor) already owned by the Company. The purchase was recorded at the estimated fair value, at the acquisition date, in accordance with AFB Opinion No. 16. In conjunction with the acquisition, the Company issued 200,000 shares of common stock and paid $340,000 in cash. Adjustments, if any, to the purchase price allocations are not expected to have a material impact on the accompanying consolidated financial statements. (B) The Company completed the acquisition of the assets of a container company located in S. Carolina during the quarter ended June 30, 1999. The Company expects to add approximately $6.0 million of annual operating revenue with the acquisition, while meeting on going demands from its customer base. With the Company's General Offices' located in a city ranked in the Top Ten ports in the Nation, entering the transportation of containerized freight was a natural transition and much needed. The purchase was recorded at the estimated fair value, at the acquisition date, in accordance with AFB Opinion 16. In conjunction with the acquisition, the Company agreed to issue a total of 188,000 shares of common stock over the next three years based on a vesting schedule and to pay a total of $300,000 in cash during the third quarter of the current fiscal year. Adjustments, if any, to the purchase price allocations are not expected to have a material impact on the accompanying consolidated financial statements. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the Company's financial condition and results of operations for the Six months ended June 30, 1999, and 1998 should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto contained elsewhere in this report. This Quarterly Report on Form 10-Q contains forward-looking statements. The words "believe," "expect," "anticipate", and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are within the meaning of that term in Section 27A of the Securitites Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may include, but are not limited to, projections of revenues, income, or loss, capital expenditures, plans for future operations, financing needs or plans, the impact of inflation and plans relating to the foregoing. Statements in the Company' Form 10-K, including Notes to the Consolidated Financial Results of Operations, describe factors, among others, that could contribute to or cause such differences. GENERAL The Company was established in January of 1997 by combining under U S Trucking-Nevada the operations of Gulf Northern Transport, a mid-to-long-haul truckload carrier and Mencor, Inc. a third party logististics (brokerage) company. The Company's operating results are driven by the results of the truckload business of its operating subsidiary, Gulf Northern Transport, Inc., it's brokerage operations, Mencor, Inc., ProStar Inc, and the Company's Captive Auto-Liability Insurance Program. The Company reported profits in the six months and three months periods ending June 30, 1999, by significantly decreasing the operating expenses, increasing brokerage productivity, improving utilization in its trucking division and by adding new profit flow from its Captive Auto-Liability Insurance Program. RESULTS OF OPERATIONS: The Company's operating revenue for the six months ended June 30, 1999, increased by 66.9% to $17.8 million as compared to $10.7 million over the same period in 1998.For the three months ended June 30, 1999, operating revenue increased by 78.1% to $10.1 million from $5.7 million over the same period in 1998. The increase in operating revenue resulted from increased brokerage revenues, expansion of the Company's customer base, increased volume from existing customers, and was facilitated by the continued expansion of the Company's fleet, including approximately 40 leased owner operators which was part of the expansion into the container business during the period ended June 30, 1999. The Company's fleet increased 18.5% to 294 tractors (including 118 owned by independent contractors) as of June 30, 1999, from 248 tractors (including 78 owned by independent contractors) as of June 30, 1998. 11 Purchased transportation increased as a percentage of operating revenue to 39.8% for the six months ended June 30, 1999, from 34.2% for the same period in 1998. For the three months ended June 30, 1999, purchased transportation as a percentage of operating revenue increased to 43.5% from 37.3% during the same period in 1998. These increases were primarily due to the increase in the ratio of independent contractors to company drivers, and the increase in brokerage operating revenue which in turn creates a payable due to outside carriers that the Company uses to haul its freight at a gross profit margin of 11% to 16%. Salaries, wages and benefits decreased as a percentage of operating revenue to 23.2% for the six months ended June 30, 1999, from 24.9% for the same period in 1998. For the three months ended June 30, 1999, salaries, wages and benefits decreased as a percentage of operating revenue to 20.5% from 24.5% for the same period in 1998. These decreases were primarily the result of the Company's efforts to reduce management overhead when practical, increasing the Company's percentage of brokerage operating revenues, increasing the Company's independent contractor base and the continuation of consolidating facilities. For Company drivers, the Company records accruals for worker's compensation as a component of of its claims accrual and the related expense is reflected in salaries, wages and benefits expense in its consolidated statements of income. Fuel expense decreased as a percentage of operating revenue to 8.2% for the six months ended June 30, 1999, from 10.4% for the same period in 1998. This decrease was primarily the result of an increase in the purchase of bulk fuel, along with the increase in the percentage of independent contractors to Company drivers for the 1999 period. For the three months ended June 30, 1999, fuel expense as a percentage of operating revenue decreased to 7.3% from 9.7% for the same period in 1998. This decrease was primarily the result of an increase in the purchase of bulk fuel, along with the increase in the percentage of independent contractors to Company drivers. Operations and maintenance expense decreased to 3.5% of operating revenue for the six months ended June 30, 1999, from 5.8% for the same period in 1998. This decrease was primarily the result of increasing the Company's brokerage operating revenue and to a lesser extent limiting the use of older, high cost equipment, trading out of older equipment for newer, increasing the independent contractor base, and capitalizing engine rebuilds that were necessary during the period. For the three months ended June 30, 1999, operations and maintenance expense as a percentage of operating revenue decreased to 3.0% from 5.6% for the same period in 1998. This decrease was primarily the result of the increase of brokerage operating revenue, and to a lesser extent the increase of the independent contractor base and the Company's ongoing control of not using its older equipment just for revenue sake, while it negotiates new equipment transactions that it expects to complete in the very near future. The Company's insurance programs for medical, physical damage and cargo are covered by premium insurance providers with deductibles the Company has chosen and feels are manageable while being in the best interest of the Company. In addition the Company provides its auto-liability coverage through its own Auto-Liability Insurance Program which has become a strong revenue and profit producer. Management considers all of its coverages adequate. insurance and claims expense decreased to 2.6% for the six months ended June 30, 1999, from 3.2% for the same period in 1998. For the three months ended June 30, 1999, insurance and claims decreased to 2.4% from 3.0% for the same period in 1998. These decreases in percentages were due to the following factors which are 12 listed in order of impact with the factor having the most impact first: an increase in the Company's brokerage revenue, the increase of independent contractors, and the decreased values of the Company's owned fleet on an insurance cost basis. Operating taxes and licenses decreased as a percentage of operating revenue to 1.3% for the six months ended June 30, 1999, from 1.9% for the same period in 1998. For the three months ended June 30, 1999, operating taxes and licenses as a percentage of operating revenue decreased to 1.2% compared to 1.8% for the same period in 1998. This decrease was primarily due to the increase in the Company's brokerage operating revenue, the increase in the Company's Auto-Liability Insurance Program operating revenue and the increase in independent contractors who are required to pay their own mileage taxes. Depreciation and amortization expense as a percentage of operating revenue decreased to 6.4% for the six months ended June 30, 1999, from 7.6% for the same period in 1998. This decrease was primarily the result of increasing the Company's operating revenue through its brokerage operations and increasing the number of independent contractors leased to the Company. For the three months ended June 30, 1999, depreciation and amortization expense decreased to 5.9% from 6.7% for the same period in 1998 for the reasons listed above. For both the six months and three months ended June 30, 1999, net interest expense decreased as a percentage of revenue compared to the same periods in 1998. These decreases were primarily the result of reducing long term debt and the converting of some debt to track leases. Income taxes have been provided at the statutory federal and state rates adjusted for certain permanent differences between financial statement and income tax reporting. The Company has net operating losses available to offset future income for financial reporting expiring in the year 2012. The Company's net income as a percentage of operating revenue was 1.8% for the six month period ending June 30, 1999, as compared to 1.7% for the same period in 1998. Net income as a percentage of operating revenue was 1.9% for the three month period ending June 30, 1999, as compared to 0.9% for the same period in 1998. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1999, the Company had a working capital deficit of $688,261 as compared to a deficit of $1,912,731 at December 31, 1998. The Company's working capital deficit improved primarily as a result of operations, $1,104,114 received from the sale of transportation equipment in February 1999, $900,000 received from the issuance of Series B Preferred Stock and $540,000 of proceeds from a sale of an convertible debenture to a foreign investor. Net cash provided by operating activities was approximately $202,429 for the first six months of 1999 compared to $701,249 for the corresponding period in 1998. The company has historically funded its working capital requirements through a combination of funds provided from operations, the Company's working capital facility with GE Capital and invested capital. In order to continue with its growth plans, the Company intends to raise additional funds through private placement of equity and/or debt securities which will depend upon prevailing market conditions, the market price of common stock and other factors over which the company has no control. Since June 30, 1999, the Company has raised approximately $1,100,000 in gross proceeds from the sale of Series B Convertible Preferred Stock. 13 INFLATION Many of the Company's operating expenses, including fuel costs and fuel taxes, are sensitive to the effects of inflation, which could result in higher operating costs. The effects of inflation on the Company's business during the six months ended June 30, 1999, were negligible. SEASONALITY In the transportation industry, results of operations frequently show a seasonal pattern. Seasonal variations may result from weather or from customer's reduced shipments after the busy winter holiday season. To date, the Company's revenues have not shown any significant seasonal pattern. The current expansion of the Company's operations into the West Coast could expose the Company to greater operating variances due to seasonal weather. YEAR 2000 ISSUE The "Year 2000 Issue" arose because many existing computer programs use only the last two digits to refer to a year. Therefore, these computer programs do not properly recognize a year that begins with "20" instead of the familiar "19". If not corrected, many computer applications could fail or create erroneous results. The Company is in the process of reviewing, testing, and implementing various modifications to ensure that its computer equipment and software will function properly in the Year 2000 and beyond. The Company has completed the purchase of a new hardware system consisting of a Compaq Proliant P2 300 MHz processor; 320 MB RAM, 2/9.1 GB mirror hard drive, a Server Tower and new Software that enables the Company to generate all functions of the Company's operating systems, including, but not limited to, the initiation of loads, dispatch, billing, accounts payable and receivable, general ledger functions and preparation of financial statements. All maintenance records for all of the trucks, inventory records for all parts and supplies, claim records and accident records as well as fuel and mileage for taxing bodies will be supplied. Information from the Company's fuel provider, Comdata, will be downloaded into the system as well. The Company is also working on on-line banking services. All internal and external costs associated with the Company's Year 2000 compliance activities are expensed as incurred. The Company believes that the costs of addressing the Year 2000 issue will be approximately $120,000. The Company has reviewed the Year 2000 issue with its major suppliers, vendors and customers and believes that the Year 2000 issue will not pose significant problems for the Company. The Company has discussed the issue with Comdata, the primary fuel provider, GE Capital and the other major financial institutions which provide financing to the Company, and the major customers, and each of these companies has advised the Company that they expect to be Year 2000 compliant. Since all major computerized systems and applications will have been reviewed and tested as part of the Year 2000 project, the Company feels that it has reasonably addressed all material risks that may effect its operations. The Company presently believes that the Year 2000 issue will not pose significant operational problems for the Company. However, if all Year 2000 issues are not properly identified and corrected, there can be no assurance that the Year 2000 issues will not materially effect the Company's relationships with 14 vendors, customers, and others. Also, there can be no assurance that the Year 2000 issues of other entities with whom the Company deals will not have a material adverse impact on the Company's operations. The Company is in the process of evaluating and developing a contingency plan to provide for the most reasonably likely worst cast scenarios regarding Year 2000 compliance. This contingency plan will be completed in the second half of 1999. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is party to ordinary, routine litigation and administrative proceedings incidental to its business. These proceedings primarily involving personnel matters, including Equal Employment Opportunity Commission claims and claims for personal injury or property damage incurred in the transportation of freight. It is the Company's policy to comply with applicable equal employment opportunity laws and the Company periodically reviews it policies and practices for equal employment opportunity compliance. ITEM 2. CHANGES IN SECURITIES During the three months ended June 30, 1999, the Company issued 200,000 shares of its Common Stock to two persons in connection with the acquisition of ProStar, Inc. With respect to these transactions, the Company relied on Section 4(2) of the Act. Each person was provided with information on the Company and each person executed a Subscription Agreement in which he represented that he was purchasing the shares for investment only and not for the purpose of resale or distribution. The appropriate restrictive legend was placed on the certificate and stop transfer orders were issued to the transfer agent. ITEM 3. DEFAULTS UPON SENIOR SECURITIES NONE ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE ITEM 5. OTHER INFORMATION The Company is in the process of adding additional Company operated and Agent operated container offices in strategic cities. The Company is also in the process of establishing a lease-purchase program as a means of growing its independent contractor base. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. EXHIBIT NUMBER DESCRIPTION LOCATION 3.6 Articles of Amendment dated May 5 Filed herewith 1999 regarding Series C Preferred electronically Stock 27 Financial Data Schedule Filed herewith electronically (b) Reports on Form 8-K. None. 15 SIGNATURES In accordance with the requirements of the Exchange Act, the Issuer caused this Report to be signed on it's behalf by the undersigned, thereunto duly authorized. US TRUCKING, INC. By:/s/ Dan L. Pixler Dan L. Pixler, Chief Exectutive Officer By:/s/ John Ragland John Ragland, Chief Financial Officer Dated: August 13, 1999 16 EX-3.6 2 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF U. S. TRUCKING, INC. (SERIES C PREFERRED STOCK) Pursuant to the requirements of Section 7-106-102 of the Colorado Business Corporation Act, the undersigned Corporation submits the following Articles of Amendment to Articles of Incorporation. FIRST: The name of the Corporation is U. S. Trucking, Inc. SECOND: The Articles of Incorporation of the Corporation are hereby amended as follows: "There is hereby established a series of Preferred Stock of the Corporation designated "Series C Preferred Stock." The number of shares of this series of Preferred Stock shall be 50,000 shares. The powers, designations, preferences and relative, participating, optional or other special rights of the shares of this series of Preferred Stock and the qualifications, limitations and restrictions of such preferences and rights shall be as follows: Section 1. Voting Rights. Except as otherwise expressly provided herein or by law, the holders of shares of Series C Preferred Stock shall be entitled to vote on all matters and shall be entitled to one hundred votes for each share of Series C Preferred Stock held by such holder, such number of votes to be appropriately adjusted in the event of any split, reverse split or dividend of the common stock. Except as otherwise expressly provided herein or as expressly required by law, the holders of shares of Series C Preferred Stock and common stock shall vote together as a single class on all matters. Section 2. Liquidation. The holders of shares of the Series C Preferred Stock are not entitled to any liquidation rights. Section 3. Dividend Provisions. The holders of shares of the Series C Preferred Stock are not entitled to receive any dividends. Section 4. Notices. Any notice required to be given to holders of shares of Series C Preferred Stock shall be deemed given upon deposit in the United States mail, postage prepaid, addressed to such holder of record at his address appearing on the books of the Corporation, or upon personal delivery at the aforementioned address." Section 5. Amendment. The terms of the Series C Preferred Stock shall not be amended without the consent of the holders of not less than a majority of the outstanding Series C Preferred Stock. THIRD: Such Amendment was duly adopted by the Board of Directors of the Corporation on the 5th day of May 1999. IN TESTIMONY WHEREOF, the undersigned Corporation has caused these Articles of Amendment to the Articles of Incorporation to be signed by a duly authorized officer and duly attested by another such officer, to be hereunto affixed this 5th day of May 1999. U. S. TRUCKING, INC. By:/s/ Danny Pixler, President Danny Pixler, President ATTEST: /s/ Marion Huff Secretary EX-27 3
5 This schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of operations found on pages 3, 4 and 5 of the Company's Form 10-Q for the year to date, and is qualified in its entirety by reference to such financial statements. 6-MOS DEC-31-1999 JUN-30-1999 789,052 0 6,059,573 0 287,141 7,676,177 7,544,458 0 19,851,624 8,364,438 0 3,368,238 0 0 3,127,890 19,851,624 17,824,169 17,824,169 0 16,215,120 1,069,171 0 378,472 313,844 0 313,844 0 0 0 313,844 .04 .02
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