-----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, FVLAeT/lxiy21MwncS2m6oS11z20UCP9O/ICsX/rhfA22D70PKmTeg2dr67+bgvB +IiMdBWCGrFDKZX4FTUTVQ== 0000950137-96-002139.txt : 19961107 0000950137-96-002139.hdr.sgml : 19961107 ACCESSION NUMBER: 0000950137-96-002139 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AASCHE TRANSPORTATION SERVICES INC CENTRAL INDEX KEY: 0000927809 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 363964954 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24576 FILM NUMBER: 96655030 BUSINESS ADDRESS: STREET 1: 10214 N MT VERNON RD CITY: SHANNON STATE: IL ZIP: 61078 BUSINESS PHONE: 8158642421 MAIL ADDRESS: STREET 1: 10214 N MT VERNON ROAD CITY: SHANNON STATE: IL ZIP: 61078 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ COMMISSION FILE NUMBER 0-24576 AASCHE TRANSPORTATION SERVICES, INC. ------------------------------------------------------------------ (Exact name of Registrant as specified in its charter) DELAWARE 36-3964954 - ------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 10214 NORTH MOUNT VERNON ROAD SHANNON, ILLINOIS 61078 (Address of Principal Executive Offices) 815-864-2421 (Registrant's telephone number, including area code) N/A - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date 3,953,077 SHARES OF PAR VALUE $.0001 COMMON STOCK 2 PART I: FINANCIAL INFORMATION Item 1. Financial Statements AASCHE TRANSPORTATION SERVICES, INC. CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1996 1995 ------------- ------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 86,000 $ 503,000 Trade receivables, less allowance for doubtful accounts of $71,000 and $67,000 7,751,000 6,454,000 Prepaid expenses and other current assets 2,164,000 1,631,000 ------------ ------------ Total current assets 10,001,000 8,588,000 Property and equipment, at cost 58,057,000 60,640,000 Less accumulated depreciation and amortization (16,206,000) (12,360,000) ------------ ------------ Net property and equipment 41,851,000 48,280,000 ------------ ------------ Excess of cost over net assets acquired, less accumulated amortization of $372,000 and $220,000 7,698,000 7,850,000 Other assets 532,000 639,000 ------------ ------------ TOTAL ASSETS $ 60,082,000 $ 65,357,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,454,000 $ 2,974,000 Accrued liabilities 1,425,000 1,659,000 Guaranteed obligation of Employee Stock Ownership Plan 256,000 334,000 Line of credit 4,732,000 2,859,000 Current maturities of long-term debt with unrelated parties 7,325,000 7,108,000 Current maturities of long-term debt with related party 995,000 995,000 Current maturities of capital lease obligations with unrelated parties 3,024,000 3,447,000 Current maturities of capital lease obligations with related parties 1,143,000 1,007,000 ------------ ------------ Total current liabilities 22,354,000 20,383,000 Long-term debt with unrelated parties, less current maturities 11,173,000 15,470,000 Long-term debt with related party, less current maturities 2,736,000 3,483,000 Capital lease obligations with unrelated parties, less current maturities 7,012,000 9,668,000 Capital lease obligations with related parties, less current maturities 1,404,000 1,497,000 Deferred income taxes 2,104,000 1,951,000 ------------ ------------ Total liabilities 46,783,000 52,452,000 Stockholders' equity: Common stock, $.0001 par value, 10,000,000 shares authorized, 3,953,077 shares issued and outstanding - - Additional paid-in capital 14,598,000 14,442,000 Guarantee of Employee Stock Ownership Plan obligation (256,000) (334,000) Accumulated deficit (1,043,000) (1,203,000) ------------ ------------ Total stockholders' equity 13,299,000 12,905,000 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 60,082,000 $ 65,357,000 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 2 3 AASCHE TRANSPORTATION SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, -------------------------- -------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- NET REVENUES $19,881,000 $18,641,000 $58,970,000 $48,982,000 OPERATING EXPENSES: Salaries, wages and benefits 6,400,000 6,430,000 19,638,000 17,680,000 Fuel 3,406,000 2,880,000 9,702,000 7,400,000 Purchased transportation 3,396,000 2,034,000 8,932,000 4,915,000 Supplies and maintenance 1,490,000 1,780,000 5,102,000 4,619,000 Depreciation and amortization 2,013,000 2,157,000 6,139,000 5,368,000 Taxes and licenses 704,000 487,000 1,536,000 1,246,000 Insurance 627,000 536,000 2,157,000 2,049,000 Communications and utilities 215,000 215,000 615,000 593,000 Loss (gain) on disposition of equipment (124,000) 9,000 (56,000) (109,000) Litigation settlement - - 150,000 - Polar Express restructuring - - 490,000 - Severance - - 42,000 - Other 741,000 345,000 1,692,000 914,000 ----------- ----------- ----------- ----------- Total operating expenses 18,868,000 16,873,000 56,139,000 44,675,000 ----------- ----------- ----------- ----------- OPERATING INCOME 1,013,000 1,768,000 2,831,000 4,307,000 OTHER (EXPENSES) INCOME: Interest expense (830,000) (1,118,000) (2,666,000) (2,907,000) Amortization of debt issuance cost - - - (447,000) Other 48,000 31,000 106,000 114,000 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAX PROVISION 231,000 681,000 271,000 1,067,000 INCOME TAX PROVISION (96,000) (171,000) (111,000) (307,000) ----------- ----------- ----------- ----------- NET INCOME $ 135,000 $ 510,000 $ 160,000 $ 760,000 =========== =========== =========== =========== NET INCOME PER COMMON SHARE $ 0.03 $ 0.13 $ 0.04 $ 0.20 =========== =========== =========== =========== Weighted average common and common equivalent shares outstanding 4,001,069 3,977,260 3,963,287 3,842,926 =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 3 4 AASCHE TRANSPORTATION SERVICES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
Guarantee Common Stock of Employee ------------------- Stock $.0001 Par Value Additional Ownership Total ------------------- Paid-In Plan Accumulated Stockholders' Shares Amount Capital Obligation Deficit Equity ------------------------------------------------------------------------ Balance at December 31, 1995 3,947,107 $ - $14,442,000 $(334,000) $(1,203,000) $12,905,000 Escrow shares in connection with Litigation Settlement (Note 6) (34,030) - - - - - Common stock issued for options exercised 40,000 - 156,000 - - 156,000 Reduction in Guarantee of Employee Stock Ownership Plan obligation - - - 78,000 - 78,000 Net Income - - - - 160,000 160,000 ------------------------------------------------------------------------ Balance at September 30, 1996 3,953,077 $ - $14,598,000 $(256,000) $(1,043,000) $13,299,000 ========================================================================
The accompanying notes are an integral part of these consolidated financial statements. 4 5 AASCHE TRANSPORTATION SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, --------------------------- 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 160,000 $ 760,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,139,000 5,886,000 Gain on disposition of equipment (56,000) (109,000) Deferred income taxes 153,000 65,000 Changes in other current operating items: Trade receivables (1,297,000) (752,000) Prepaid expenses and other assets (463,000) (363,000) Accounts payable 480,000 26,000 Accrued liabilities (234,000) 271,000 ---------- ---------- Net cash provided by operating activities 4,882,000 5,784,000 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Property and equipment additions: Revenue equipment (322,000) (7,434,000) Building, office equipment and other (628,000) (1,084,000) Proceeds from the sale of equipment 1,485,000 725,000 Purchase of AG Carriers, net of cash acquired - (2,974,000) Retirements of revenue equipment and other - 1,587,000 ---------- ---------- Net cash provided by (used in) investing activities 535,000 (9,180,000) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings on line of credit 1,873,000 1,270,000 Borrowings on long-term debt 800,000 5,854,000 Principal payments on long-term debt with unrelated parties (4,880,000) (7,801,000) Principal payments on long-term debt with related party (747,000) (249,000) Principal payments on capital leases with unrelated parties (2,418,000) (1,119,000) Principal payments on capial leases with related parties (618,000) (316,000) Issuance of common stock 156,000 3,215,000 ---------- ---------- Net cash (used in) provided by financing activities (5,834,000) 854,000 ---------- ---------- DECREASE IN CASH AND CASH EQUIVALENTS (417,000) (2,542,000) CASH AND CASH EQUIVALENTS: Beginning of period 503,000 3,797,000 ---------- ---------- End of period $ 86,000 $1,255,000 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $2,661,000 $2,850,000 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 5 6 AASCHE TRANSPORTATION SERVICES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although management believes these disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments necessary for fair presentation for the periods presented have been reflected and are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the two years ended December 31, 1995 and 1994, as filed with the Securities and Exchange Commission as part of the Company's Annual Report on Form 10-KSB. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the year. NOTE 2 - PURCHASE OF AG TRANSPORTATION SERVICE, INC. AND AG. CARRIERS, INC. On May 16, 1995, the Company purchased all of the outstanding common stock of AG Transportation Service, Inc. and the net assets of AG. Carriers, Inc. (collectively, AG Carriers) in exchange for $11,250,000 consisting of $5,275,000 cash, $1,000,000 in the Company's common stock (115,075 shares) and two notes payable in the amount of $4,975,000. The Company also issued 5,000 shares to a certain individual as consideration for a finders fee in connection with the acquisition. In conjunction with the acquisition, the Company preliminarily recorded $5,871,000 in cost in excess of net assets acquired. Subsequently, the Company adjusted the cost in excess of net assets acquired to $6,279,000 to reflect finalization of the purchase price allocation. This acquisition was accounted for as a purchase and accordingly, the consolidated statements of operations, include the results of AG Carriers from the date of its acquisition. AG Carriers is a Florida-based carrier specializing in transporting temperature-controlled foodstuffs and juice concentrates. NOTE 3 - MERGER WITH POLAR EXPRESS CORPORATION On December 22, 1995, the Company completed a merger, pursuant to which Polar Express Corporation ("Polar") became a wholly owned subsidiary of the Company. Under the terms of the merger agreement, 1,401,355 shares of the Company's common stock were issued in exchange for all of the outstanding common shares and unit purchase options of Polar. Approximately 5% of these shares were held in an escrow account to cover liability and litigation costs related to the litigation described in Note 6. In addition, the Company issued 1,006,905 warrants to purchase the Company's common stock in exchange for all the outstanding warrants of Polar. The merger was accounted for as a pooling of interests. Accordingly, the accompanying consolidated financial statements have been retroactively restated for all periods presented to include the results of operations, financial position and cash flows of the merged entities. In connection with the acquisition of Polar Express, Inc. ("PEI") by Polar in September 1994, Polar incurred a one-time, non-cash deferred debt issuance cost of $2,233,000 resulting from the issuance of 1,000,000 shares of Polar common stock to subordinated note holders, of which $1,786,000 was expensed in the fourth quarter of 1994 and $447,000 was expensed in the first quarter of 1995. In February 1995, Polar completed an initial public offering of 1,350,000 units, each consisting of one share of Polar common stock and one Polar common stock purchase warrant, and raised net proceeds of approximately $3,020,000. 6 7 Polar is an Arkansas-based truckload carrier specializing in transporting temperature-controlled and time-sensitive freight. NOTE 4 - RELATED PARTY TRANSACTIONS The Company currently leases certain of its revenue equipment from related parties. Effective July 1, 1995, the leases were renegotiated by lowering imputed interest to a fixed 12% rate and adjusting the residual balance to more closely approximate the fair market value of the trailers at the end of the expected life of each lease. These leases are accounted for as capital leases. This change reduced interest expense by approximately $190,000 and increased net income by approximately $118,000 in the nine month period ended September 30, 1996 ($0.03 per share) and reduced interest expense by approximately $63,000 and increased net income by approximately $39,000 in the three month periods ended September 30, 1996 and 1995, respectively. Payments to related parties on capital lease obligations for the nine months ended September 30, 1996 and 1995 were approximately $618,000 and $829,000, respectively. NOTE 5 - NET INCOME PER SHARE Net income per share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding. NOTE 6 - LITIGATION SETTLEMENT In May 1996, the Company settled all outstanding litigation related to Polar's acquisition of PEI for $150,000 ($93,000 after-tax). This expense was accrued for by the Company in the first quarter of 1996 ($0.02 net income per share). This amount does not include the Company's legal costs incurred related to its defense of this matter, which had been expensed as incurred and had not been included in the settlement amount. In conjunction with the Polar merger, 5% of the Company's common stock issued in the merger (69,941 shares) were held in an escrow account pending final determination of the litigation. Upon reaching a final settlement, 34,030 of the common shares held in the escrow account were retired by the Company. NOTE 7 - RESTRUCTURING The Company recorded a non-recurring one-time $490,000 restructuring charge ($304,000 after-tax) in the second quarter of 1996 related to severance payments to terminated employees of Polar ($0.08 net income per share). ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations contain forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors. Beginning in 1992, the Company commenced a program to increase its size and operational efficiency. This program changed the Company's strategic direction by implementing a shift to company-owned revenue equipment and equipping tractors with the QUALCOMMTM two-way satellite-based tracking and communication system and advanced computer software systems. The Company also implemented a strategy of pursuing strategic acquisitions of other temperature-controlled truckload carriers. Since its initial public offering, the Company acquired all of the assets of AG Carriers (the "AG Acquisition") and merged with Polar (the "Polar Merger"). The Polar merger was accounted for as a pooling of interests. Accordingly, the Company restated its prior years' financial statements as if the Company and Polar had been operated on a combined basis for all periods presented. Therefore, all financial information presented reflects the combined operations of both companies. 7 8 The results of operations discussed below are not necessarily comparable between periods because the results from operations for the nine month period ended September 30, 1995 only include AG Carriers since the date of the AG Acquisition. RESULTS OF OPERATIONS COMPARISON OF THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996 WITH THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1995. Net revenues increased $10.0 million, or 20.4%, to $59.0 million in 1996, from $49.0 million in 1995, largely due to the AG Acquisition. During the first nine months of 1996, the Company increased its owned tractor fleet by 25 units. Without giving effect to the additional net revenues contributed by the AG Acquisition, the Company's net revenues increased by $3.1 million, or 7.2%, due to having more tractors in service, increased volume from existing customers and the addition of new customers. Net revenues on a pro forma basis (assuming the AG Acquisition had occurred on January 1, 1995) increased $3.8 million, or 6.8%, in 1996. The higher pro forma net revenues are due to having more tractors in service, increased volume from existing customers and the addition of new customers. Total miles increased 10.7 million, or 25.5%, to 52.8 million in 1996 from 42.0 million in 1995, largely due to the AG Acquisition. Average miles per tractor increased 3.3% to 90,339 miles in 1996 from 87,412 miles in 1995. Average revenue per tractor decreased 0.9% to $100,967 in 1996 from $101,834 in 1995. The decrease in average revenue per tractor is attributable to the effects of the AG Acquisition as well as increased competition in the industry. Historically, AG Carriers has operated profitably with lower average miles per tractor and lower average revenue per mile than Asche Transfer, Inc. and Polar. Without giving effect to the AG Acquisition, the Company's total miles increased by 4.5 million, or 12.3%, due to having more tractors in service, increased volume from existing customers and the addition of new customers. Total miles on a pro forma basis increased 5.4 million, or 11.3%, to 52.8 million in 1996. The higher pro forma miles are due to having more tractors in service, increased volume from existing customers and the addition of new customers. The Company's operating ratio (operating expenses divided by operating revenues) increased 4.0%, to 95.2% in 1996 from 91.2% in 1995. The increase in the operating ratio is due to increased competition in the industry, the litigation settlement described in Note 6, and Polar Express' restructuring charge described in Note 7. Total operating expenses increased $11.5 million, or 25.7%, to $56.1 million in 1996, compared to $44.7 million in 1995, largely due to the AG Acquisition. Without giving effect to the AG Acquisition, the Company's total operating expenses increased by $5.0 million, or 12.6%, due to costs related to operating the additional tractors in service, the litigation settlement and Polar Express' restructuring charge. Operating expenses on a pro forma basis increased $6.1 million, or 12.2%, to $56.1 million in 1996, due to costs related to operating the additional tractors in service, the litigation settlement and Polar Express' restructuring charge. Salaries, wages, and benefits increased $2.0 million, or 11.1%, to $19.6 million in 1996 compared to $17.7 million in 1995, largely due to the AG Acquisition. Without giving effect to the AG Acquisition, the Company's salaries, wages, and benefits decreased by $0.1 million, or 0.3%. Salaries, wages, and benefits on a pro forma basis increased $0.2 million, or 1.1%, to $19.6 million in 1996. The increase was due to an increase in drivers related to increased equipment levels. Fuel expenses increased $2.3 million, or 31.1%, to $9.7 million in 1996 compared to $7.4 million in 1995, largely due to the AG Acquisition, increased fuel costs, as well as additional volume related to company-owned units added 8 9 in 1996. Without giving effect to the AG Acquisition, the Company's fuel expense increased by $1.3 million, or 19.5%, due to having more tractors in service and increased fuel costs. Fuel expense on a pro forma basis increased $1.4 million, or 17.0%, to $9.7 million for 1996, due to having more tractors in service and increased fuel costs. Purchased transportation expense increased $4.0 million, or 81.7%, to $8.9 million in 1996 compared to $4.9 million in 1995, largely due to the AG Acquisition and expenses related to brokerage operations, as well as an increase in contractor-operated units. Without giving effect to the AG Acquisition, the Company's purchased transportation expense increased by $2.1 million, or 52.4%, due to an increase in contractor-operated units. Purchased transportation expense on a pro forma basis increased $3.2 million, or 54.8%, to $8.9 million for 1996, due to an increase in contractor-operated units. Supplies and maintenance expenses increased $0.5 million, or 10.5%, to $5.1 million in 1996 compared to $4.6 million in 1995, largely due to the AG Acquisition. Without giving effect to the AG Acquisition, the Company's supplies and maintenance expense decreased by $0.1 million, or 2.3%. Supplies and maintenance expense on a pro forma basis increased $0.9 million, or 17.4%, to $5.1 million for 1996. Depreciation and amortization expense increased $0.8 million, or 14.4%, to $6.1 million in 1996 compared to $5.4 million in 1995, largely due to the AG Acquisition, as well as costs related to additional company-owned units in service and amortization of goodwill related to the AG Acquisition. Without giving effect to the AG Acquisition, the Company's depreciation and amortization expense increased by $0.2 million, or 3.5%, due to costs related to additional company-owned units in service. Depreciation and amortization expense on a pro forma basis increased $0.1 million, or 1.8%, to $6.1 million for 1996, due to costs related to additional company-owned units in service. Litigation settlement expense represents the final settlement of all outstanding litigation related to Polar's acquisition of PEI. PEI restructuring expense represents severance payments to terminated employees of Polar. Interest expense decreased $0.2 million, or 8.3%, to $2.7 million in 1996 compared to $2.9 million in 1995, due to the AG Acquisition and a lower overall interest rate. Without giving effect to the AG Acquisition, the Company's interest expense decreased $0.5 million, due to lower debt levels and a lower overall interest rate. Interest expense on a pro forma basis decreased $0.4 million, due to lower debt levels and a lower overall interest rate. In connection with the Polar acquisition of PEI in September 1994, Polar incurred a one-time non-cash deferred debt issuance cost of $2.2 million resulting from the issuance of one million shares of Polar common stock to subordinated note holders, of which $0.4 million was expensed in the first quarter of 1995 and $1.8 million was expensed in the fourth quarter of 1994. COMPARISON OF THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1996 WITH THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1995. Net revenues increased $1.2 million, or 6.7%, to $19.9 million in 1996, from $18.6 million in 1995, due to having more tractors in service, increased volume from existing customers and the addition of new customers. During the third quarter of 1996, the Company increased its owned tractor fleet by 9 units. 9 10 Total miles increased 1.7 million, or 10.4%, to 18.1 million in 1996 from 16.4 million in 1995, largely due to having more tractors in service and increased volume. Average miles per tractor decreased 0.9% to 30,759 miles in 1996 from 31,047 miles in 1995. Average revenue per tractor decreased 4.2% to $33,869 in 1996 from $35,372 in 1995. The decreases in average miles per tractor and average revenue per tractor are attributable to increased competition in the industry. The Company's operating ratio (operating expenses divided by operating revenues) increased 4.4%, to 94.9% in 1996 from 90.5% in 1995. The increase in the operating ratio is due to increased competition in the industry. Total operating expenses increased $2.0 million, or 11.8%, to $18.9 million in 1996, compared to $16.9 million in 1995. Salaries, wages, and benefits remained constant at $6.4 million in 1996 and 1995. Fuel expenses increased $0.5 million, or 18.3%, to $3.4 million in 1996 compared to $2.9 million in 1995, largely due to increased fuel costs, as well as additional volume related to company-owned units added in 1996. Purchased transportation expense increased $1.4 million, or 67.0%, to $3.4 million in 1996 compared to $2.0 million in 1995, largely due to expenses related to brokerage operations, which the Company had not previously engaged in, as well as an increase in contractor-operated units. Supplies and maintenance expense decreased $0.3 million, or 16.3%, to $1.5 million in 1996 compared to $1.8 million in 1995. Depreciation and amortization expense decreased $0.1 million, or 6.7%, to $2.0 million in 1996 compared to $2.2 million in 1995. Interest expense decreased $0.3 million, or 25.8%, to $0.8 million in 1996 compared to $1.1 million in 1995, due to lower debt levels and a lower overall interest rate. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1996, the Company had a net working capital deficit of $12.4 million, partially attributable to the impact of growth of the Company through acquisitions. The working capital deficit also results from the financing of revenue equipment purchases (non-current assets) through borrowings, a portion of which is in current liabilities. The Company historically has funded its working capital requirements through a combination of operating profits, short turnover in trade accounts receivable, effective cash management practices, and borrowings under its revolving bank line of credit. The Company has a revolving bank line of credit with a $5.0 million borrowing limit based on a percentage of eligible accounts receivables, $4.7 million of which was borrowed against this line of credit at September 30, 1996, and approximately $0.3 million was available. The Company's growth and the significant investment in its modern fleet of tractors and temperature-controlled trailers has been financed substantially through long-term debt and capital lease obligations collateralized by the equipment. During the first nine months of 1996, the Company increased its owned tractor fleet by 25 units and trailers by 97 units. The Company's outstanding debt and capital lease obligations, including current maturities, aggregated $39.8 million and $45.9 million at September 30, 1996 and December 31, 1995, respectively. In October 1994, the Company completed an initial public offering of its common stock that raised net proceeds to the Company of $6.4 million. To date, the Company has utilized proceeds to repay outstanding indebtedness under its revolving bank line of credit and certain long-term debt obligations, to purchase trailers and for the AG Acquisition and the Polar Merger. The AG Acquisition and the Polar Merger, as well as the continued growth of Asche Transfer's fleet, has resulted in a debt to equity ratio (calculated excluding payables and other liabilities) of 2.99:1 at September 30, 1996, and 3.55:1 at December 31, 1995. The Company believes that available cash, cash flow from future operations, and borrowings available under its line of credit will be sufficient to meet its current working capital needs. As the Company continues to facilitate its planned future growth, the Company's capital needs may require additional borrowings or an equity infusion. 10 11 RELATED PARTY LEASES The Company currently leases certain of its revenue equipment from related parties. Effective July 1, 1995, the leases were renegotiated by lowering imputed interest to a fixed 12% rate and adjusting the residual balances to more closely approximate the fair market value of the trailers at the end of the expected life of each lease. These leases are accounted for as capital leases. This change reduced interest expense by approximately $190,000 and increased net income by approximately $118,000 in the third quarter of 1996 ($0.03 net income per share) and reduced interest expense by approximately $63,000 and increased net income by approximately $39,000 in the three month periods ended September 30, 1996 and 1995, respectively. Payments to related parties on capital lease obligations during the nine month periods ended September 30, 1996 and 1995 were approximately $618,000 and $829,000, respectively. 11 12 PART II: OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - None. (b) Reports on Form 8-K. 12 13 SIGNATURE In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Aasche Transportation Services, Inc. Date November 4 , 1996 BY: /s/Leon M. Monachos ----------------------------------------- Leon M. Monachos, Chief Financial Officer Date November 4 , 1996 BY: /s/Larry L. Asche ----------------------------------------- Larry L. Asche, Chairman and Chief Operating Officer 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 86,000 0 7,751,000 (71,000) 0 10,001,000 58,057,000 (16,206,000) 60,082,000 22,354,000 0 0 0 0 13,299,000 60,082,000 0 58,970,000 0 56,139,000 2,560,000 0 2,666,000 271,000 111,000 160,000 0 0 0 160,000 0.04 0.04
-----END PRIVACY-ENHANCED MESSAGE-----