As filed with the Securities and Exchange Commission on October 10, 2000
Registration No. 333-31414
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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UNITED SHIPPING & TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
UTAH 87-0355929
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
9850 51ST AVENUE NORTH, SUITE 110
MINNEAPOLIS, MINNESOTA 55442
(952) 941-4080
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
--------------------------
PETER C. LYTLE, CHIEF EXECUTIVE OFFICER
UNITED SHIPPING & TECHNOLOGY, INC.
9850 51ST AVENUE NORTH, SUITE 110
MINNEAPOLIS, MINNESOTA 55442
(952) 941-4080
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
COPIES TO:
AVRON L. GORDON, ESQ. KENNETH D. ZIGRINO, ESQ.
THOMAS F. STEICHEN, ESQ. VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
BRIGGS AND MORGAN, P.A. UNITED SHIPPING & TECHNOLOGY, INC.
2400 IDS CENTER 9850 51ST AVENUE NORTH, SUITE 110
MINNEAPOLIS, MINNESOTA 55402 MINNEAPOLIS, MINNESOTA 55442
(612) 334-8400 (952) 941-4080
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AS DETERMINED BY
MARKET CONDITIONS.
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If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE AGGREGATE PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED SHARE(1)(2) PRICE(1)(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock ($.004 par value)..... 6,674,452 $4.00 $26,697,808 $21,750(3)(4)
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and based upon the last reported sale price for
such stock on October 4, 2000 as reported by the Nasdaq SmallCap Market.
(2) In accordance with Rule 416 under the Securities Act of 1933, common stock
offered hereby shall also be deemed to cover an indeterminate number of
securities to be offered or issued to prevent dilution resulting from stock
splits, stock dividends or similar transactions.
(3) $21,646 previously paid.
(4) $105 paid herewith.
----------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
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PROSPECTUS SUBJECT TO COMPLETION, DATED OCTOBER 10, 2000
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6,674,452 SHARES
UNITED SHIPPING & TECHNOLOGY, INC.
COMMON STOCK
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The shareholders listed on pages 22 through 26 below are offering and
may sell up to 6,674,452 shares of our common stock under this prospectus. We
will not receive any part of the proceeds from this offering.
Our common stock is quoted on the Nasdaq SmallCap Market and trades
under the ticker symbol "USHP." On October 4, 2000, the closing price of one
share of our stock on the Nasdaq SmallCap Market was $4.00.
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Purchase of our common stock involves a high degree of risk. You should
purchase shares only if you can afford a loss on your investment. SEE "RISK
FACTORS" BEGINNING ON PAGE 16 TO READ ABOUT CERTAIN FACTORS YOU SHOULD CONSIDER
BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
THE DATE OF THIS PROSPECTUS IS ___________________, 2000.
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PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SOME IMPORTANT INFORMATION FROM THIS
PROSPECTUS, BUT DOES NOT CONTAIN ALL IMPORTANT INFORMATION ABOUT US OR THE
OFFERING. YOU SHOULD READ THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
AND NOTES APPEARING IN, OR INCORPORATED BY REFERENCE IN, THIS PROSPECTUS. YOU
SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET FORTH UNDER
"RISK FACTORS" BEFORE YOU DECIDE TO PURCHASE OUR STOCK.
OUR BUSINESS
With the acquisition in September 1999 of Velocity Express, Inc.
formerly known as Corporate Express Delivery Systems, Inc. (CEDS), we have
become the largest same-day delivery company in the nation. We operate from 240
locations throughout the world, including 80 of the 100 largest markets in the
United States. We provide the following services:
* on-demand delivery;
* scheduled routing and delivery;
* fleet replacement;
* facilities management; and
* distribution delivery--which includes supply chain management,
integrated supply, third-party logistics and critical parts
banking.
OUR BUSINESS STRATEGIES
In 1998 and 1999, we substantially revised our historical business of
providing automated self-service shipping kiosks by focusing on the estimated
$15 billion same-day delivery industry. Based on our market research, we found
that this industry was highly fragmented, dominated by an estimated 6,000 small
companies, with no dominant national brands and relatively low technological
sophistication. We also felt that the same-day delivery industry could benefit
from a variety of emerging economic and technological trends, such as the
movement toward outsourcing of corporate services, the explosive growth of
e-commerce, the increasing use of the Internet and the availability of
sophisticated communications technologies. We concluded that these circumstances
presented us with an opportunity for growth. As a result, we adopted a new
strategy of growth through acquisitions in the same-day delivery industry. Our
goal was to develop a national network of delivery services and to combine it
with sophisticated communications technology and a national brand identity.
We began to acquire small local courier companies in 1998. In December
of that year, we acquired the assets of JEL Trucking, Inc., a Minneapolis-based
trucking company engaged in dock truck and courier shipments. In January 1999 we
acquired Twin City Transportation, Inc., a Minneapolis and St. Paul based
courier with revenues of approximately $1.8 million. These initial acquisitions
allowed us to refine and focus our consolidation strategy.
With the acquisition of Velocity Express, we have achieved our goal of
developing a national network of same-day delivery capabilities. As the largest
same-day delivery company in the United States, we believe that we are the only
service provider in the industry with the kind of national presence and variety
of service offerings needed to support the growing demands of corporate
customers and e-commerce for reliability, speed and outsourcing capabilities. We
intend to continue our strategy of growth through acquisition and also plan to
utilize sophisticated technology and develop a national brand identity to
provide greater value to our current and potential customers. Our goal is to
become the premier corporate same-day transportation corporate outsourcing and
e-commerce delivery and support company in the United States.
THIS OFFERING
We issued or will issue the securities covered by this prospectus to
the selling shareholders primarily in private placement transactions between the
selling shareholders and us. The selling shareholders may offer their shares
through public or private transactions, on or off the Nasdaq SmallCap Market, at
prevailing market prices or privately negotiated prices. No period of time has
been fixed within which the shares may be offered or sold.
2
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GENERAL
In 1979, we incorporated in Utah under the name Basin Energy
Corporation. We have amended our name several times since then. In 1992 we
changed our name to U-Ship, Inc., and in May 1999 we changed our name to United
Shipping & Technology, Inc. From 1979 until 1991, we engaged in business
activities that are unrelated to our current business. Our principal executive
offices are located at 9850 51st Avenue North, Suite 110, Minneapolis, Minnesota
55442 and our telephone number is (952) 941-4080. Our website is www.u-s-t.com.
This document and the documents incorporated herein by reference
contain various forward-looking statements, which provide other than historical
information, within the meaning of Section 21E of the Exchange Act. Although we
believe that, in making any such statements, our expectations are based on
reasonable assumptions, any such statement may be influenced by factors that
could cause actual outcomes and results to be materially different from those
projected. When used in this document and the documents incorporated herein by
reference, the words "anticipates," "believes," "expects," "intends," "plans,"
"estimates" and similar expressions, as they relate to us or our management, are
intended to identify such forward-looking statements. These forward-looking
statements are subject to numerous risks and uncertainties that could cause
actual results to differ materially from those anticipated. Factors that could
cause actual results to differ materially from those anticipated, certain of
which are beyond our control, are set forth herein under the caption "Risk
Factors."
Our actual results, performance or achievements could differ materially
from those expressed in, or implied by, forward-looking statements. Accordingly,
we cannot be certain that any of the events anticipated by forward-looking
statements will occur or, if any of them do occur, what impact they will have on
us. We caution you to keep in mind the cautions and risks described herein and
to refrain from placing undue reliance on any forward-looking statements, which
speak only as of the date of the document in which they appear.
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<PAGE>
RECENT SIGNIFICANT FINANCING
On September 22, 2000, we completed a sale of shares of Series C
Convertible Preferred Stock, together with warrants to purchase additional
shares of Series C preferred to TH Lee.Putnam Internet Partners, L.P., TH
Lee.Putnam Internet Parallel Partners, L.P., THLi Coinvestment Partners LLC, and
Blue Star I, LLC (the TH Li Funds) under the terms of a Securities Purchase
Agreement that we entered into with the TH Li Funds as of September 1, 2000.
Pursuant to the Series C purchase agreement, we sold 2,000,000 shares
of our Series C preferred to the TH Li Funds, at a price of $6.00 per share, for
a total purchase price of $12,000,000. We also agreed to issue the TH Li Funds
warrants to purchase a total of 825,484 additional shares of Series C preferred
for a period of five years at an exercise price of $0.01 per share. This
investment was structured into two separate fundings. The first, in the amount
of $5 million, was made on September 1, 2000 and the second, in the amount of $7
million, was completed on September 22, 2000.
In exchange for the Series C warrants, the TH Li Funds canceled all
warrants to purchase Series B preferred that were sold in connection with the
May 31 purchase of Series B preferred, as described below.
The shares of Series C preferred are convertible into shares of our
common stock (or shares or units of any security into which the common stock is
changed) at a conversion rate of 1:1, subject to adjustment to prevent dilution.
The shares of Series C preferred purchased pursuant to the Series C purchase
agreement were, as of September 22, 2000, convertible into 2,000,000 shares of
common stock, representing approximately 6% of our common stock outstanding on a
fully diluted basis.
We also entered into an amended and restated registration rights
agreement with the TH Li Funds dated as of September 1, 2000. Pursuant to the
amended registration agreement, the previous registration rights agreement
between us and two of the TH Li Funds dated May 31, 2000 was canceled. Under the
amended registration agreement, the holders of a majority of (a) our common
stock issued upon the conversion of any shares of Series c preferred issued or
issuable to the TH Li Funds pursuant to the Series C purchase agreement (whether
held by the TH Li Funds or any successors or assigns of the TH Li Funds) and (b)
any other shares of our common stock held by the persons referred to in clause
(a) may request up to three long-form registrations of the registrable
securities. Each holder of registrable securities may request an unlimited
number of short form registrations of our registrable securities. The
registrable securities enjoy piggyback registration rights if we intend to
register our other securities.
On May 31, 2000, we completed a sale of shares of our Series B
Convertible Preferred Stock and warrants to purchase additional shares of Series
B preferred and common stock to TH Lee.Putnam Internet Partners, L.P. and TH
Lee.Putnam Internet Parallel Partners, L.P. (TH Lee) under the terms of a
securities purchase agreement that we entered into with TH Lee as of May 15,
2000.
Pursuant to the Series B purchase agreement, we sold 2,806,797 shares
of our Series B preferred to TH Lee, at a price of $9.00 per share, for a total
purchase price of $25,261,173. We also issued TH Lee warrants to purchase $30
million of additional shares of our Series B preferred. The number of shares
purchased is determined by taking the $30 million and dividing it by the 45-day
average closing sales price of our common stock immediately prior to the date of
exercise, exercisable at the above described market price as of the date of
exercise. We also issued TH Lee additional warrants to purchase up to an
aggregate of 452,901 shares of Series B preferred. The exercise price for the
additional warrants was $9.00 per share, subject to adjustment in order to
prevent dilution. As described above, as of September 22, 2000, all of these
warrants to purchase Series B preferred were canceled.
We also issued TH Lee warrants to purchase up to an aggregate of
425,000 shares of our common stock. The common warrants become exercisable in
the event and to the extent that 3,000,000 options granted under our 2000 stock
option plan are exercised, on a pro rata basis. The exercise price of the common
warrants are equal to the lowest exercise price of the initially approved 2000
stock option plan options, subject to adjustment to prevent dilution. The common
warrants expire on May 31, 2004.
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The shares of Series B preferred are convertible into shares of our
common stock (or shares or units of any security into which the common stock is
changed) at a conversion rate of 1:1, subject to adjustment to prevent dilution.
The shares of Series B preferred purchased pursuant to the Series B purchase
agreement were, as of May 31, 2000, convertible into 2,806,797 shares of our
common stock, representing approximately 13% of our common stock outstanding on
a fully diluted basis.
5
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THE COMPANY
OVERVIEW-RECENT SIGNIFICANT ACQUISITION
On September 24, 1999, as effective August 24, 1999, we acquired the
same-day delivery operations of Corporate Express Delivery Systems, Inc. (CEDS)
from CEX Holdings, Inc. by a merger of CEDS with our wholly-owned subsidiary,
United Shipping & Technology Acquisition Corp. The purchase price was
approximately $91.2 million, subject to adjustment as defined in the merger
agreement. The purchase price consisted of $43.0 million in cash provided by an
institutional debt financier and an investment firm, and $19.5 million in a
combination of short-term and long-term notes issued to CEX. We, as a result of
the acquisition, received approximately $86.6 million of CEDS' assets and
assumed approximately $115.3 million of CEDS' liabilities, which resulted in our
recognition of approximately $91.2 million in goodwill. CEDS was the surviving
corporation in the merger. CEDS changed its name to UST Delivery Systems, Inc.
and then to Velocity Express, Inc. Velocity Express is incorporated in Delaware.
With the acquisition of Velocity Express, we have become the leader in
nationwide customized delivery solutions for same-day, time-critical shipping
and distribution. We provide an array of delivery services, including scheduled
delivery, on-demand delivery, distribution services and air courier services.
Our network (not including our agent locations) consists of approximately 210
locations in 86 of the top 100 metropolitan areas in the United States. Our
operations are supported by a fleet of approximately 8,000 vehicles, including
3,700 company-leased and owned vehicles and 4,270 vehicles utilized by
independent contractors. We currently have approximately 7,073 employees and we
engage approximately 4,385 independent contractors. We also have over 1,500
agents throughout the world.
The purchase of Velocity Express was a major step in meeting our goal
of becoming the premier same-day delivery and distribution/logistics service in
the United States. With the acquisition of Velocity Express, we now provide the
following products and services to individual consumers and businesses:
* same-day ground and air transportation services throughout the
United States and internationally;
* distribution, logistics and supply chain management services;
and
* the ability to fulfill any type of customer need in
transferring virtually any type of product or goods in many
different forms and time scenarios.
We now derive our revenues primarily from our same-day ground and air
delivery operations. Our revenues for the fiscal year ended July 1, 2000 were
approximately $471 million. Velocity Express' results of operations have been
included in our financial statements since the acquisition which was effective
August 24, 1999.
HISTORICAL BUSINESS AND EVOLUTION OF OUR BUSINESS STRATEGY
In 1991, we began the development and marketing of self-service
automated shipping systems designed to be installed at the shipping hubs of
major package carriers such as United Parcel Service, Inc. Our kiosks had a
limited test experience with UPS(R), but to date no significant sales of
hub-automation kiosks have been made to UPS(R) or any otheR carrier. Later, we
began to manufacture and operate self-service intelligent shipping kiosks (ISKs)
in retail locations.
In late 1997, as a result of lower than anticipated revenues from the
ISKs placed in retail locations, we began an extensive evaluation of our
strategies and results from our placement sites. Ultimately, in 1998, we
concluded that our historical ISK placement strategy was not profitable. In the
course of reviewing alternative directions for our business, we determined that
the same-day delivery business presented an opportunity for us to employ our
advanced technology in a large but fragmented market and obtain an independent
revenue stream in a growing industry. We also felt that the same-day delivery
industry could benefit from a variety of emerging economic and technological
trends, such as the movement toward outsourcing of corporate services, the
explosive growth of e-commerce, the increasing use of the Internet and the
availability of sophisticated communications technology. Based on this
determination, we adopted a revised business strategy with the
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goal of becoming the national leader in same-day delivery and related services
through a series of acquisitions of same-day delivery businesses. Our goal was
to develop a national network of time critical delivery services and to combine
it with sophisticated communications technology and a national brand identity.
We felt that this combination would allow customers to participate in
Internet-based business, or e-commerce, and would allow us to offer an array of
integrated distribution and logistics services to corporate clients and
companies engaged in e-commerce.
We began our same-day delivery consolidation strategy in late 1998,
through the acquisition of JEL Trucking, Inc., which enabled us to offer
same-day delivery and package delivery services in the Minneapolis/St. Paul
metropolitan area. In January 1999, we also acquired Twin City Transportation,
Inc., which expanded our same-day delivery service in the Minneapolis/St. Paul
metropolitan area. On September 24, 1999, we acquired Corporate Express Delivery
Systems, with fiscal year 1999 revenues in excess of $600 million. We continue
to explore the acquisition of additional same-day delivery companies to increase
market penetration and provide a national platform for e-commerce fulfillment
and logistics services. As of the date of this prospectus, we had no agreements
pending to acquire any additional companies.
In order to increase the strength of our market leadership in the
same-day delivery business and obtain the maximum economies of scale from our
consolidation efforts, we have made a determination that we must continue to
invest in upgrading and developing computer and communications technology. We
currently employ in most of our fleet sophisticated communications and dispatch
systems. In addition, we have begun the testing in certain of our larger
on-demand delivery operations of a computerized, on-demand routing system that
utilizes Global Positioning System (GPS) technology and mobile data terminals to
continuously track the location of every vehicle. Our ultimate goal is to expand
the capabilities of our communications systems to further improve our same-day
delivery, supply-chain management and logistics services, and to provide an
Internet-based platform for customized e-commerce delivery solutions.
In March 1999 we began testing an Internet-based shipping service
called i-courier(TM). This service offers securE, trackable electronic document
transfer and storage for small or large files. We expect to expand this service
to include links to our dispatch system and our recently-introduced on-line
ordering and package tracking system. We also expect to expand the capabilities
of i-courier(TM) and to pursue other e-commerce opportunities.
OUR SAME-DAY DELIVERY OPERATIONS
MARKET OPPORTUNITY
The same-day delivery market provides scheduled and non-scheduled,
same-day delivery of documents and packages in local and inter-city markets.
Some same-day delivery companies offer specialized services beyond small package
delivery, such as legal filing, process serving and dock-truck services for
large items. A few same-day delivery companies, such as us, offer warehousing
and facilities management, and logistics solutions, as well as supply chain
management and cross-dock and package aggregation services.
Industry sources, which we believe to be reliable, estimate that the
same-day delivery services industry is a $15 billion market in the United
States, with a growth rate of more than 8% per year. Although the market is
large, it is highly fragmented. There are relatively low entry barriers in this
market because the capital requirements to start a local courier business are
relatively small and the industry is not subject to extensive regulation. We
believe that there are currently as many as 6,000 same-day delivery companies in
the United States. Most participants are privately held and operate only on the
local level. The focus is generally on operations, with little attention given
to marketing and sales. Accordingly, we believe that there is little perceived
service differentiation between competitors, and that customer loyalty is
generally short-term. There are no dominant brands in the same-day delivery
industry, and the industry has a relatively basic level of technology usage. By
contrast, the next-day package delivery industry is highly consolidated and
dominated by large, well-recognized companies such as UPS(R) and Federal
Express(R), both of which use technology extensively.
Same-day delivery customers increasingly seek greater reliability,
convenience and speed, as well as additional services, from a package delivery
provider which they trust. We expect that further growth in the
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same-day shipping market will be fueled by corporate America's trend toward
outsourcing and third party logistics, as well as the rapid growth of
e-commerce, and the heightened demand for immediate response and comprehensive
distribution management solutions. We believe that customers will be attracted
to companies with the ability to offer greater efficiency through the use of
technology, such as our sophisticated dispatch and communications software, our
Internet document transfer capabilities, and our newly-introduced online
ordering and tracking system. We plan to use technology and the Internet to
manage and coordinate dispatching, delivery, tracking, warehousing and logistics
and other "back room" functions to help us and our customers operate more
efficiently and, we believe, more cost-effectively. Our customers will also
benefit from our national market presence because it offers them the ability to
purchase an array of services from one vendor operating in multiple markets. We
are also in the process of determining how the increasing demand for such
time-dependent same-day delivery services may provide opportunities to utilize
our ISK as an electronic drop box for same-day delivery services. We believe
that the integration of high-tech communications software with the currently
low-tech same-day delivery business can provide a market differentiation between
our services from those of our competitors.
SAME-DAY DELIVERY CONSOLIDATION STRATEGY
In late 1998, to meet potential customers' increased expectations and
needs, we adopted a same-day delivery services consolidation strategy with four
major objectives:
* develop a national market presence to serve large corporate
customers and e-commerce customers;
* use our present and developing technology to reduce costs,
provide better service, better manage our cash and move toward
making our business and fleet more environmentally
responsible, a "green shipping environment";
* develop a national brand to differentiate our service and
foster customer loyalty; and
* realize economies of scale in growing time-critical logistics
segments.
We initially entered the same-day delivery business in the
Minneapolis/St. Paul metropolitan area by acquiring courier and package delivery
companies beginning in late 1998. With the purchase of Velocity Express on
September 24, 1999, we became the national leader in same-day delivery services.
As we grow, we expect to be able to achieve substantial cost savings by
consolidating and standardizing dispatch, billing, tracking and other
administrative functions. We also plan to further increase our market
penetration through acquisition and internal growth.
We have developed a national brand, Velocity Express(TM) and we are
currently utilizing it for our same-day deliveRY services. We believe that
Velocity Express(TM) is a brand that will represent reliability, superior
customer service and a "green shipping environment". We believe that a uniform
presentation of our same-day delivery and related services across multiple
markets will provide a business advantage, by fostering customer and employee
loyalty and familiarity, and will help to integrate our acquired companies.
We also intend to use technology to provide better service to
customers. To meet our customers' needs for reliability, speed and efficiency,
we currently employ in most of our fleet, computerized communications and
dispatch systems. For example, we have begun the testing in certain of our
larger on-demand delivery operations of a computerized routing system that
utilizes GPS technology and mobile data terminals to continuously track every
vehicle. The system helps to optimize delivery routes, which we anticipate will
result in significantly lower mileage, fleet and administrative costs through
enhanced driver productivity and improved route density. In addition, we believe
that our existing and proposed systems will provide additional benefits to the
customer, including enhancing the accuracy of package delivery estimates,
up-to-the minute status updates on all jobs, and electronic proof-of-delivery
documentation. We intend to expand the capabilities of our communications
systems to further integrate and improve the efficiency of our same-day
delivery, supply chain management and logistics services. Our ultimate goal is
to provide an Internet-based platform for corporate outsourcing and e-commerce
delivery solutions.
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Our i-courier(TM) Internet initiative supports our consolidation
strategy by providing secure, trackable electronic document transfer services.
We have recently began testing a new web based service into selected markets
which gives our customers the capability of ordering delivery services online
and tracking packages over the Internet. We also intend to further expand our
offerings of logistics services to companies engaged in e-commerce, such as
those companies needing "just in time" inventory and spare parts warehousing and
delivery services.
SAME-DAY DELIVERY OPERATIONS
With the acquisition of Velocity Express, we are the nation's largest
provider of customized same-day, time-critical shipping, distribution and
logistics solutions. We believe that no public or private competitor currently
duplicates our national presence or our full complement of same-day delivery
service offerings. We believe that these capabilities give us a competitive
advantage in meeting the demands of sophisticated, national customers who depend
on same-day delivery services in the execution of their businesses. Our current
network (not including our agent network) is comprised of approximately 210
locations, which serve 86 of the top 100 metropolitan markets in the United
States and numerous secondary markets.
Our Velocity Express subsidiary now has approximately 7,073 employees
throughout the United States. The same-day ground delivery service employs
approximately 8,000 vehicles, 3,730 of which are owned or leased by us and 4,270
of which are utilized by independent contractors. Of our approximately 9,451
drivers, 5,066 are employees and 4,385 are independent contractors. We also
utilize approximately 1,500 agents worldwide.
GROUND SERVICES
We are the largest same-day ground delivery service provider in North
America. Our ground operations provide delivery services from approximately 210
locations in the United States and operate in 86 of the 100 top metropolitan
areas, as well as numerous secondary markets. We group our ground business into
three main business units and we derive approximately 85 percent of our total
ground revenues from same-day delivery services.
We generally enter into customer contracts for scheduled and routed
delivery, distribution and supply chain management services that are terminable
by customers upon notice. These are long-term contracts with short-term notice
provisions, usually ranging from 30 to 60 days. Typically, we do not enter into
contracts with our customers for on-demand delivery services. Prices for our
services are currently determined at the local level based on the distance and
time sensitivity of a particular delivery, the size, weight and quantity of the
delivery, and the specific type of goods being moved. Currently, billing
information is generated and processed locally through our computer systems. We
are in the process of having a single billing location for all of our business.
SCHEDULED DELIVERY. Same-day scheduled delivery services are provided
for time sensitive deliveries that are recurring in nature or scheduled by the
customer for specific time delivery. Pickup and delivery routes are pre-defined
based on the needs of the customer. A dispatcher coordinates and assigns
scheduled pickups and deliveries to the drivers and manages the delivery flow.
In many cases, certain drivers will handle a designated group of scheduled
routes on a recurring basis.
The largest customer base for this type of service consists of
financial institutions who need a wide variety of services including the pickup
and delivery of non-negotiable instruments, primarily canceled checks and ATM
receipts, the delivery of office supplies, and the transfer of inter-office mail
and correspondence. Typical service involves the pickup of non-negotiable
instruments or other correspondence from various bank branches in a designated
geographic area at a pre-scheduled time for delivery to a central processing
center. The expeditious and reliable transportation of the instruments from the
branches to a processing center is vital in order to obtain the rapid transfer
of funds from individual accounts to the institution. Consequently, financial
institutions consider scheduled delivery to be a critical part of their
outsourcing service needs. We believe that we maintain a leadership position in
scheduled delivery services for financial institutions. Other users of scheduled
delivery services include film processors, pharmaceutical companies and
companies with
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critical parts replenishment needs. We believe that scheduled delivery will play
an important role in e-commerce business opportunities.
ON-DEMAND DELIVERY. We provide local and inter-city same-day on-demand
delivery services, whereby our messengers or drivers respond to a customer's
request for immediate pickup and delivery. We typically offer one hour, two to
four hour, and over four hours delivery services depending on the customer's
time requirements. Most deliveries occur within a metropolitan area or radius of
40 miles. On-demand delivery services are typically available 24 hours a day,
seven days a week.
Most of our on-demand operations centers are staffed by dispatchers, as
well as customer service representatives and operations personnel. Incoming
calls are received by trained customer service representatives who provide the
customer with a job specific price quote and transmit the order to the
appropriate dispatched location. A dispatcher coordinates shipments for delivery
within a specific time frame. Shipments are routed according to the type and
weight of the shipment, the geographic distance between the origin and
destination, and the time allotted for the delivery. After proper routing for
the package is determined, coordination and deployment of delivery personnel is
accomplished either through mobile data terminals linked to our dispatch
computer system, through pagers or by radio. In addition to our fleet-wide
communications and dispatch systems, we also use, in a number of our facilities,
an advanced, on-demand management system which links dispatchers and drivers
through a personal two-way mobile data terminal. The system continuously tracks
every vehicle and every job in real-time and provides electronic proof of
delivery as evidence of delivery for chain of custody issues. This system may
enable us to streamline our routing and dispatch systems and add customer value.
Typical users of on-demand services include every type of customer ranging from
organ transportation for hospitals to delivery of legal documents for law
offices. We provide on-demand delivery services in 46 of the top 100
metropolitan areas.
DISTRIBUTION SERVICES. We also provide same-day distribution services
for time-sensitive local and regional deliveries that require intermediate
handling or sorting prior to being delivered to multiple locations. Typically,
we receive bulk shipments at our warehouse from customers' suppliers or
wholesalers. These shipments are then subdivided into smaller shipments and
sorted for delivery to specific locations. For example, we may receive a bulk
shipment of retail inventory for a pharmaceutical wholesaler, which we sort and
divide into smaller shipments, and deliver to the customer's stores or end user
destinations. Same-day distribution services are provided on both a local and
multi-city basis. Our on-demand delivery resources are available to supplement
the customer's drivers as needed. Customers utilizing distribution services
typically include air freight companies, pharmaceutical wholesalers, retailers,
manufacturers or other companies which must distribute merchandise every day
from a single point of origin to many locations within a clearly defined
geographic region. We provide distribution services in 83 of the top 100
metropolitan areas. We believe that distribution services will be critical with
Internet companies.
SUPPLY CHAIN MANAGEMENT. We offer supply chain management services
whereby we assume inventory replenishment responsibilities of repair, production
and supply items for customers. Our integrated supply services include
monitoring the customer's inventories based on predetermined inventory levels
and reordering needed supplies through the customer's purchasing agents.
Inventory shipments are sent to our site adjacent to the customer's facility,
from which we sort and then distribute items to their appropriate destination.
We also offer "critical parts banking" for a customer's parts and supplies and
offer related "just-in-time" transportation of those items to support service or
production activities. Parts are stored at our facilities located in a
metropolitan area. A customer's service technician lacking a needed repair part,
for instance, can order the part which is quickly delivered to the service site,
adding the kind of value which we believe allows purchase decisions to be based
more on capability than price. Though accounting for less than 2% of our current
total revenues, we view these services as a growth opportunity, and we intend to
expand our "just-in-time" warehousing and delivery and logistics business both
through internal growth and acquisitions. Companies utilizing integrated supply
services include petrochemical companies, which use the services to centralize
non-critical inventory management at their large chemical plants.
OTHER SERVICES. The remainder of our services include inter-company
delivery, fleet replacement, facilities management, logistics, warehouse and
storage services, and a limited amount of long-haul services. We also provide
third party logistic services through Velocity Express' 3PL division.
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Several industry sectors have a need for national or regional same-day
delivery services. Typical industries that we serve include:
FINANCIAL INSTITUTIONS. Financial institutions, primarily commercial
banks, utilize our scheduled delivery services to deliver non negotiable
instruments, such as canceled checks and ATM receipts, supplies and inter-office
correspondence. Typical service involves the pickup of non negotiable
instruments from various bank branches in a designated geographic area at a
pre-scheduled time for delivery to a central processing center. The expeditious
and reliable transportation of the instruments from the branches to the center
is vital. Consequently, financial institutions consider scheduled delivery to be
a crucial part of their outsourced service needs.
HEALTH CARE. Health care customers consist primarily of:
* pharmaceutical wholesalers;
* medical supply wholesalers;
* hospitals;
* medical labs;
* blood banks; and
* home healthcare providers.
Pharmaceutical wholesalers utilize our distribution delivery services
to transport bulk shipments from centralized locations to various retail sites,
hospitals and other care facilities. We typically receive bulk shipments from a
pharmaceutical or medical supply wholesaler, sort and divide the shipment into
smaller bundles, and then deliver the shipment to destination outlets, including
retail drug stores and hospitals. Hospitals primary utilize our on-demand
services for the transportation of such things as samples or equipment among
different areas within the hospitals or between different hospitals or labs.
Local, regional and national medical laboratories use our services to transport
samples among laboratories by either on-demand or scheduled ground or air
transportation delivery. Home healthcare providers use our services to provide
patients with such things as medications and the delivery of medical equipment.
RETAIL AND E-COMMERCE. Retail customers, typically large national
companies, primarily use our supply chain management service. For example, we
service our largest retail customer by providing a national network of scheduled
and routed vehicles to deliver primarily three separate product lines: technical
parts, gas repair shop parts and retail products. Included in these product
lines are items such as refrigerators, condensers, weed trimmers and other
retail products. Typically, we receive a bulk shipment and then break it down
into multiple shipments. We then deliver the items to retail locations or
pre-specified drop sites to be picked up by the customer.
PETROCHEMICAL. Petrochemical customers use our integrated supply
services to centralize non-critical inventory management at their large chemical
plants. Typically, we monitor a petrochemical customer's inventory based on
predetermined inventory levels and reorders of needed supplies through the
customer's purchasing agent. Inventory shipments are sent to one of our sites
adjacent to the customer's facility, from which we sort and then distribute
items to their appropriate destinations. Petrochemical customers prefer to use a
national provider such as us in order to reduce the number of different vendors
with whom they conduct business.
TECHNOLOGY. Technology customers primarily use our on-demand services.
The prototype service we aim to provide technology customers is a critical parts
management system utilizing the Internet. For example, we service our largest
technology customer by partnering with third party logistics supplier to provide
critical parts banking. This provider, one of the largest third party logistics
providers in North America, provides a national network whereby they centrally
manage 100 regional stocking locations ranging in size from 500 square feet to
4,500 square feet, utilizing an Internet-based warehouse management system.
Typically, our customers place orders over the telephone, which are then entered
into our suppliers' database. The database determines if the part is available
and, if available, the applicable regional stocking location. The part is then
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pulled from the regional stocking location while a driver is dispatched. The
driver delivers the part to its destination, sometimes in less than one hour,
and places the damaged part in a return package to be delivered to the repair
center.
AIR SERVICES
Our Air Group provides primarily same-day scheduled and on-demand
delivery services demanding inter-city delivery. The Air Group operates under
two brand names: Tricor and Air Courier Dispatch. Our Air Group provides
delivery services throughout the United States and certain international
locations. Approximately 30 locations are supported by its own ground fleet and
the remainder are supported by an agent network of ground carriers. We do not
own any aircraft. Instead, we purchase our air transportation from preferred
vendors. The Air Group has negotiated contracts with most major airlines on
favorable terms that enable us to charge competitive rates for services. In
order to utilize fleet assets efficiently, certain Air Group locations perform
scheduled ground and on-demand delivery services.
SCHEDULED AIR DELIVERY SERVICES. Same-day scheduled delivery services
are provided for time-sensitive deliveries that are recurring in nature. Pickup
and delivery routes are pre-defined based on the needs of the customer. The
largest customer base for this type of service consists of financial
institutions for delivery of non negotiable instruments, primarily canceled
checks.
A typical shipment of bank documents is picked up from the sending
bank's processing center by an Air Group driver. The driver follows a
predetermined pickup schedule. Shipments are pre-sorted by city by bank
personnel and then transported to Air Group facilities generally located in
close proximity to the local airport.
At our Air Group's facilities, packages are consolidated by
destination, placed in large shipping bags and then transferred to the airport
for shipment. At the airport, the bags are verified against an internal manifest
to ensure that all of the packages are accounted for and sent to the proper
destination. Upon arrival at the destination city, the shipment is off-loaded
for the final time and delivered by an Air Group driver to the receiving bank or
Federal Reserve Branch.
NEXT AVAILABLE FLIGHT AIR SERVICE. The Air Group provides local
same-day, on-demand delivery services, whereby messengers or drivers respond to
a customer's request for immediate pick up and delivery. The Air Group's
on-demand service begins with a customer placing an order to a customer service
representative who provides the customer with the job specific price quote, and
coordinates the pickup schedule, flight arrangements and delivery times. Similar
to its scheduled services, the Air Group purchases its air transportation from
certain major airlines and air charter operators. Pickup of the package is
handled by an Air Group carrier or agent, dependent upon whether the Air Group
maintains ground operations at a particular pickup location. Upon receipt by the
driver, the driver notifies the dispatcher that the package has been picked up
and is en route to the airport. At the airport, the package is placed on the
plane and sent to a specific destination. Upon arrival an Air Group carrier or
agent secures the package and notifies the Air Group of its receipt. The package
is then transported from the airport to its final destination where the customer
signs the bill and finishes the chain of custody. Typical customers of the Air
Group's on-demand services include: law firms, investment banks, advertising
agencies, hospitals, manufacturing firms to ship replacement parts for idled
equipment, blood banks, pharmaceutical companies and medical procurement
companies.
INDUSTRY BACKGROUND
We believe that the market for same-day delivery services is large and
growing. Based on industry studies which we believe to be reliable, the same-day
delivery services market in the United States is estimated to generate revenues
of approximately $15 billion per year, with an annual industry growth rate in
excess of 8%. Although the market is large, it is highly fragmented. There are
relatively low barriers to entry in this market because the capital requirements
to start a local same-day delivery business are relatively small and the
industry is not subject to extensive regulation. There are as many as 6,000
same-day delivery companies in the United States. Most participants are
privately held and operate only on the local level. The focus of same-day
delivery businesses is generally on operations, with little attention given to
marketing and sales. Accordingly, we believe that there is little perceived
service differentiation between competitors and that customer loyalty is
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generally short-term. There are no dominant brands in the same-day delivery
industry, and the industry has a relatively basic use of technology.
We believe that customers are seeking to streamline their processes,
improve their customer-vendor relationships and increase their productivity.
This principle, along with several other trends are benefiting the same-day
delivery market. First, the trend toward outsourcing of non-core functions has
resulted in numerous companies turning to third party providers for a range of
services including same-day delivery and the management of in-house logistics.
Many businesses that outsource their distribution and logistics requirements
prefer to purchase such services from one source capable of servicing multiple
cities, which not only decreases their number of vendors, but also maximizes
efficiency, improves customer service and simplifies billing. We believe that we
are the only national same-day delivery service with the geographic reach to
meet these evolving needs of national or e-commerce customers.
Trends also show that customers are increasingly seeking greater
reliability, convenience and customization from their package delivery service
provider, along with security, operating efficiency and speed. Customers are
seeking to reduce their cycle times and implement "supply chain management" and
"just-in-time" inventory management practices designed to reduce inventory
carrying costs, together with attendant logistics and customized warehousing
services. The growth of these practices has increased the demand for more
reliable delivery services. Technological developments such as e-mail and
facsimile transmission have increased the pace of business and other
transactions, thereby increasing demand for the same-day delivery of a wide
array of items, beyond voluminous documents, to include such products as
critical manufacturing parts to medical devices. Consequently, there has been
increased demand for same-day transportation of items that are not suitable for
fax or electronic transmission, but for which there is an immediate need.
Some industry participants have recently expanded demand-delivery
practices beyond basic point-to-point delivery into more advanced applications.
For instance, some same-day delivery companies, which includes us, provide
"critical parts banking" for a customer's parts and supplies, and offer related
just-in-time transportation of those items to support service or production
activities. Parts are stored at our facilities located primarily in a
metropolitan area. A customer's service technician can order a required repair
part, which is promptly delivered to the service site within a pre-determined
time period, generally under one hour. When such applications are provided, the
customer receives exceptional value, and we believe their purchase decisions are
based on capability more than price.
The nature of the growing e-commerce segment places additional demands
for reliability, communication and speed, including the capability to handle
consumer returns of goods and interface electronically with the e-commerce web
sites. We believe that customers will increasingly rely on more advanced
technology, such as our new computerized customer ordering, tracking, and
management systems, as well as professionalism and appropriate ancillary
services such as logistics, warehousing, and product returns. To serve these
current and emerging customers needs, same-day delivery service companies must
realize economies of scale and provide greater service options, such as our
current and planned critical parts banking, logistics and warehousing services.
Economies of scale will enable the low-cost application of technology, a more
dense or concentrated network of drivers and related operations, and more
intensive marketing to assist in customer acquisition and to reinforce customer
retention.
To meet our customers' needs for reliability, efficiency and speed, we
use a computerized fleet-wide communications and dispatch system. We have also
been testing, in certain of our larger on-demand delivery operations, a
computerized routing system that utilizes GPS technology and mobile data
terminals to continuously track every vehicle. The system increases pick-up
choices and route optimization, resulting in significantly lower mileage, fleet
and administrative expenses through improved driver productivity and route
density. In addition, we believe that our existing and planned communications
systems will provide additional benefits to the customer, including enhancing
the accuracy of package delivery estimates, up-to-the minute status updates on
all jobs, and electronic proof of delivery. Such route optimization software can
allow us to use our on-demand and scheduled resources interchangeably, allowing
more efficient utilization of our fleet and personnel. We also believe that
customers will seek vendors offering "green shipping" alternatives and
technologies.
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We anticipate that increased pressure will be placed on delivery
performance, full service, delivery and the security of a delivery. As a result,
customers will most likely rely on fewer and better providers of package
movement and services. No dominant national brand exists within the same-day
delivery industry, and we believe that our development of the Velocity
Express(TM) brand will instill greater confidence in our current and prospective
customers by building a perception of a higher level of professionalism,
superior service performance and a broader scope of service capabilities.
Through the achievement of market penetration and economies of scale in the
building of a strong brand, we believe that we will be uniquely suited for both
customer growth and customer retention.
REGULATION AND SAFETY
Our operations are subject to various state and local regulations and,
in many instances, require permits and licenses from various state authorities.
In connection with the operation of certain motor vehicles and the handling of
hazardous materials, we are subject to regulation by the United States
Department of Transportation and the corresponding agencies in the states in
which such same-day delivery operations occur. Our relationships with our
employees are subject to regulations that relate to occupational safety, hours
of work, workers' compensation and other matters. To the extent that we hold
licenses to operate two-way radios to communicate with couriers, we are
regulated by the Federal Communications Commission.
SALES AND MARKETING
We have recently initiated a comprehensive marketing program that
emphasizes our competitive position as the leading national provider of same-day
delivery services. We have also realigned our business development team,
restructured our field sales organization and hired new sales professionals to
help us implement our new marketing program.
Sales efforts are conducted at both the local and national levels
through our extensive network of local sales representatives and our business
development group. We employ over 87 marketing and sales representatives who
make regular calls on existing and potential customers to identify each
customer's delivery and logistics needs. Sales efforts are coordinated with
customer service representatives who regularly communicate with customers to
monitor the quality of services and to quickly respond to customer concerns.
Our business development and sales departments develop and execute
marketing strategies and programs which are supported by corporate
communications and research services. The business development and corporate
communications departments also provide ongoing communication of corporate
activities and programs to employees, the press and the general public.
RESEARCH AND DEVELOPMENT
We are focused on increasing the sophistication, use and deployment of
both our present and potential communications and computer systems. To meet our
customers' needs for reliability, speed and efficiency, we employ a computerized
communications and dispatch tracking system. In addition, we are currently
testing, in certain of our larger on-demand delivery operations, a computerized
routing system. This product utilizes GPS technology and mobile data terminals
to continuously track every vehicle. Our i-courier(TM) Internet initiative
supports our consolidation strategy by providing secure and trackable,
electronic document transfer services. We have recently introduced a new service
into selected markets which gives our customers the capability of ordering
delivery services online and tracking their packages over the Internet. If the
initial rollout proves successful, we plan to implement this system in all of
our markets nationwide. We plan to expand the capabilities of our present and
planned communications systems to further integrate our same-day delivery,
supply-chain management and logistics services, and to provide an Internet-based
platform for customized e-commerce delivery solutions. We also intend to test a
variety of "green transportation," container and software technology.
COMPETITION
We compete with established local couriers and messenger services in
the same-day delivery business. Competition in this market is intense. In the
Minneapolis/ St. Paul metropolitan area, for example, there are over 30 courier
services with which we compete, but none of the services has more than 10% of
the market.
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Nationally, we compete with other large companies. There are several
companies that have same-day delivery operations in multiple markets. Dynamex,
Dispatch Management Services and CDLI all have operations in a number of
domestic and international markets. These and other companies which may compete
with us have substantial resources and experience in the same-day delivery
business. We believe that our national presence and wide array of service
offerings, our use of sophisticated communications and other technology, and our
new branding strategy will differentiate our services and allow us to compete
successfully in any market in which we currently operate or may enter. There can
be no assurances that other, larger competitors will not enter the market or
develop as a result of the trend toward consolidation in the same-day delivery
market, thereby eroding our competitive position.
There are also a number of national and international carriers who
provide document and package shipment solutions to individuals and business
customers. This market, which is dominated by major carriers, such as UPS(R),
Federal Express(R), Airborne(TM), DHL(TM) and the United States Postal Service,
is also extremely competitive. These companies engage primarily in the next-day
and second-day ground and air delivery businesses and operate by imposing strict
drop-off deadlines, rigid package dimensions and weight limitations on
customers. By comparison, we operate in the same-day delivery business, and
handle deliveries as diverse as human organs to truckloads of steel pipe on a
same-day basis, either scheduled or on-demand. Accordingly, we do not believe
that we are in direct competition with these major carriers in same-day delivery
services, although there can be no assurances that such organizations will not
determine to enter into direct competition with us. Such organizations may have
more experience, as well as human and financial resources than we have.
PATENTS AND INTELLECTUAL PROPERTY
We currently own ten United States patents and one Canadian patent,
that together cover technology and methodology which is currently employed in
our kiosk products. We have also filed for patent protection in several foreign
countries, including Japan and the European Patent Community. However, there can
be no assurance that our patents will afford our technology and methodology
significant protection, and we may be vulnerable to competitors, many of whom
are larger and have greater financial and technological resources then we have
and who may attempt to copy or design around our products.
TRADEMARKS
We currently have applications for United States trademark
registrations for trademarks and service marks, including but not limited to
United Shipping & Technology and a related design, and i-courier(TM). There can
be no assurance that any of these registrations will be granted. These
applications for registration are for the following goods and services, among
others: automated shipping machine for packages and overnight letters which
computes charges and prints labels, receipts and other similar documents, the
provision of delivery services, and the secure transmission of documents over
the Internet. We have also recently applied for a trademark registration for the
name Velocity Express(TM). We also own United States trademark registrations for
the trademark U-Ship(R) and for U-Ship(R) and a related design/logo.
There can be no assurance that any of our trademarks or service marks,
if registered, will afford protection against competitors with similar marks
that may have a prior use date. In addition, no assurance can be given that our
trademarks will not be infringed upon by others. There also can be no assurance
that our trademarks will not infringe upon trademarks or proprietary rights of
others. Furthermore, there can be no assurance that challenges will not be
instituted against the validity or enforceability of any trademark claimed by us
and, if instituted, that such challenges will not be successful. The cost of
litigation to uphold the validity and prevent infringement of a trademark can be
substantial, as can be the costs of defending against such claims.
EMPLOYEES
As of September 1, 2000, we had approximately 7,073 employees. We
believe that our relations with our employees are good. Additionally, we use the
services of over 4,385 independent contractor drivers in our same-day delivery
operations and over 1,500 agents worldwide.
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RISK FACTORS
BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE OF THE
FOLLOWING RISKS. YOU SHOULD CONSIDER CAREFULLY THESE RISK FACTORS, AND THE OTHER
INFORMATION INCLUDED IN THIS PROSPECTUS, BEFORE YOU DECIDE TO PURCHASE SHARES OF
OUR COMMON STOCK.
WHEN USED IN THIS PROSPECTUS, THE WORDS "BELIEVES," "ANTICIPATES,"
"INTENDS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY "FORWARD-LOOKING
STATEMENTS," AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
THESE STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE WE PROJECT. YOU ARE CAUTIONED NOT
TO PLACE UNDUE RELIANCE ON OUR FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS
OF THE DATE OF THIS PROSPECTUS.
WE HAVE SUSTAINED LOSSES IN THE PAST AND WE EXPECT TO SUSTAIN LOSSES IN
THE FUTURE. Our net loss for the fiscal year ended June 30, 1999 was
approximately $2,894,000 and for the fiscal year ended July 1, 2000 was
approximately $28,212,000. We have put in place various measures to achieve the
goals set forth in our financial plan for fiscal 2001 of reducing and ultimately
eliminating these operating losses. This plan recognizes that losses will
continue through part of fiscal 2001 as we implement our strategies. the nature
and extent of such losses will ultimately depend on the success of our financial
and business strategies, and on other factors, some of which may be beyond our
control. We can make no assurances that we will eliminate operating losses and
achieve profitable operations. We face the risks, expenses and uncertainties
frequently encountered by emerging companies that operate in new and evolving
markets. Successfully achieving our growth plan depends upon, among other
things, our ability to:
* continue to reduce losses and position ourselves to achieve
positive cash flow;
* integrate acquisitions and divest of non-strategic operations;
* successfully promote our national brand for products and
services;
* deliver products and services which are equal or superior to
those of our competitors; and
* develop or buy technology.
We may not be successful in implementing our growth plans.
WE WILL NEED ADDITIONAL CAPITAL TO FINANCE OUR GROWTH AND CAPITAL
NEEDS. We may require additional cash to offset losses in the event our
financial plan for fiscal 2001 is not fully achieved or is delayed. Achieving
our financial goals involves implementing a number of strategies, some of which
may not develop when or as planned. We may be unable to obtain the cash we need
to finance our losses resulting from our failure to achieve our financial goals
or other contingencies. We believe we will continue to use sums of cash in our
operations for a period of time. To date, we have primarily relied upon equity
investments to fund our operations and growth. We need to spend cash or obtain
financing to:
* provide working capital to fund our growth, operating losses
and expenses;
* complete the integration of acquisitions;
* complete the development of new hardware and software; and
* respond to unanticipated developments or competitive
pressures.
Our working capital has been at a level to enable us to sustain our
current business and implement our consolidation strategy. If we exhaust our
current sources of capital and we cannot obtain additional capital, we will be
required to take various steps in order to continue our operations. Such steps
may include an immediate reduction of operating costs and other expenditures,
including reductions of personnel and suspension of acquisitions involving the
expenditure of cash. If those measures prove insufficient, we may need to
implement other cost reductions. Any of such actions could adversely effect our
ability to grow, increase sales and implement our growth plans. We cannot assure
you, however, that we would be able to reduce our costs to a level which would
be sufficient to achieve profitable operations or generate adequate cash
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flow. Ultimately, if we could not obtain additional capital and our cost
measures were not sufficient to allow us to achieve profitable operations and
adequate cash flow, we could be forced to change our business strategy.
WE HAVE SUBSTANTIAL INDEBTEDNESS, ARE SUBJECT TO RESTRICTIVE DEBT
COVENANTS AND HAVE NOT COMPLIED WITH ALL DEBT COVENANTS. On September 24, 1999,
in connection with our acquisition of Velocity Express, we entered into a
long-term subordinated promissory note for $6,519,000, a short-term subordinated
promissory note for $7,700,000, which we have paid down to $4,404,000 as of July
1, 2000, and a convertible subordinated promissory note in the amount of
$3,600,000, each with CEX Holdings, Inc. On September 24, 1999 we also entered
into a credit agreement with General Electric Capital Corporation whereby we
issued to GE Capital a revolving note in the amount of $55,000,000, of which
$21,903,000 was outstanding as of July 1, 2000. We also entered into a note and
warrant purchase agreement with Bayview Capital Partners LP whereby we issued to
Bayview a $5,000,000 senior subordinated note, of which $5,000,000 was
outstanding as of July 1, 2000. Substantially all of our assets are pledged to
lenders to secure our indebtedness. Subject to the restrictions in the notes, we
and our subsidiaries may incur additional indebtedness from time to time to
finance capital expenditures and acquisitions and for other general corporate
purposes.
The degree to which we are leveraged could have important consequences
to the holders of our stock, including: (a) we may be more vulnerable to
economic downturns and other adverse developments and more limited in our
ability to withstand competitive pressures than our competitors that are not as
leveraged; (b) the possible limitation in the future on our ability to obtain
additional financing for working capital, acquisitions, capital expenditures,
debt service requirements or other purposes; (c) a substantial portion of our
cash flow from operations will be dedicated to the payment of the principal of
and interest on our indebtedness, thereby reducing funds available for
operations and capital expenditures; (d) certain of our borrowings under the
notes are at variable rates of interest which could cause us to be vulnerable to
increases in interest rates; and (e) our leveraged status may affect our ability
to make acquisitions in the future.
Our ability to make scheduled payments of the principal of, or interest
on, or to refinance, our indebtedness, will depend on our future operating
performance and cash flow, which are subject to prevailing economic conditions,
prevailing interest rate levels, and financial, competitive, business and other
factors, many of which are beyond our control. However, based upon our current
and anticipated level of operations, we believe that our cash flow from
operations and cash available from revolving credit facilities, will be adequate
to meet our anticipated cash requirements for working capital, capital
expenditures, interest payments and scheduled principal payments. There can be
no assurance, however, that our business will continue to generate cash flow at
or above current levels. If we are unable to generate sufficient cash flow from
operations in the future to service our indebtedness, we may be required to
refinance all or a portion of our indebtedness, to obtain additional financing
or to dispose of material assets or operations.
The notes and agreements with our creditors contain a number of
significant covenants that, among other things, restrict our ability to dispose
of our assets, incur additional indebtedness or amend certain debt instruments,
pay dividends, create liens on assets, enter into sale and leaseback
transactions, make investments, loans or advances, make acquisitions, engage in
mergers or consolidations, change our business, or engage in certain
transactions with affiliates and otherwise restrict certain corporate
activities. Our failure to meet these covenants results in an event of default
under the credit agreements. Since December 31, 1999, we have been unable to
comply with various covenants relating to our credit agreements. Although our
lenders have waived the noncompliance with these covenants through the end of
our quarter ended July 1, 2000, none of them have agreed to waive these or other
defaults in the future.
We may not comply with these or other covenants in the current or a
future fiscal quarter, and we can give no assurance that any lender will agree
to waive noncompliance. Our ability to comply with such covenants will be
affected by our financial performance as well as events beyond our control,
including prevailing economic, financial and industry conditions. The breach of
any such covenants or restrictions could result in a default under the notes,
which would permit the senior lenders, or the holders of the notes, or both, as
the case may be, to declare all amounts borrowed thereunder to be due and
payable, together with accrued and unpaid interest. If we are unable to repay
our indebtedness, such lenders could proceed against the collateral securing
such indebtedness.
17
<PAGE>
THE RAPID TECHNOLOGICAL CHANGES IN THE INTERNET AND E-COMMERCE WILL
REQUIRE SUBSTANTIAL EXPENDITURES BY US. The Internet market in which we compete
is characterized by rapidly changing technology, evolving industry standards,
frequent new service and product announcements, introductions and enhancements,
compromises in security and changing customer demands. These market
characteristics are exacerbated by the emerging nature of the Internet and the
apparent need of companies from a multitude of industries to offer
Internet-based products, services and technologies. Accordingly, our future
success may depend on our ability to adapt to rapidly changing technologies, to
adapt our services to evolving industry standards and to continually improve the
performance, features and reliability of our technology and services in response
to competitive service and product offerings and evolving demands of the
marketplace. In addition, the widespread adoption of new Internet, networking or
telecommunications technologies or other technological changes will require
substantial expenditures by us, which could have a material adverse effect on
our business, results of operations and financial condition.
WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO EFFECTIVELY INTEGRATE AND
MANAGE ACQUIRED BUSINESSES. Our failure to successfully integrate acquisitions
would negatively affect our business and the execution of our business strategy.
We have acquired three businesses in the transportation and same-day delivery
industries and intend to acquire additional businesses. One of our acquisitions,
Velocity Express, is a very large company with operations throughout the
country. Integrating acquired businesses, especially Velocity Express, will
involve unforeseen difficulties and may require significant financial and other
resources, including management time. Our success will depend, in part, on the
extent to which we are able to integrate acquired businesses in terms of
centralizing record keeping, operating communications, administrative functions,
such as billing, collections and financial controls, and eliminating duplication
of other functions of acquired businesses with a view to maintaining a cohesive,
efficient enterprise. We could encounter delays, complications and unanticipated
expenses in implementing, integrating and operating such systems, any of which
could have a material adverse effect on our business, financial condition and
results of operations. In addition, we may not be able to successfully manage or
achieve anticipated cost savings from the combination of the companies we
acquire. If we are unable to successfully integrate acquisitions, we can expect
that this will have a material adverse effect on our business, financial
condition and results of operations. Further, our failure to integrate
operations could adversely effect our ability to attract additional acquisition
candidates.
WE FACE A NUMBER OF RISKS IN CONNECTION WITH OUR ACQUISITION STRATEGY.
We cannot assure you that we will successfully consummate any additional
acquisitions. One of our primary growth strategies is to increase revenues,
expand our markets served and achieve profitability through the acquisition of
additional same-day delivery and related businesses. Several large, national
publicly traded companies have implemented similar consolidation strategies
through the acquisition of independent courier companies. These companies may
have greater resources and more experience in acquiring, integrating and
managing acquisitions in the same-day delivery industry. We cannot assure you
that we have the ability to effectively compete for acquisition candidates on
terms we deem acceptable, or that we will be able to successfully integrate
acquired businesses without substantial costs, delays or other operational or
financial problems. We cannot assure you that companies acquired in the future
will remain or become profitable and be beneficial to the successful
implementation of our growth strategy, or that acquisitions will produce returns
that justify the investments to acquire them, or that we will be successful in
achieving meaningful economies of scale as a result of such acquisitions. In
addition, acquisitions involve a number of special risks including:
* possible adverse effect upon our operating results if
integration is not properly achieved;
* diversion of our management's attention;
* dependence upon the retention, hiring and training of key
personnel;
* unanticipated legal problems or liabilities;
* the ability to engage sufficient numbers of drivers; and
* maintaining customer satisfaction.
18
<PAGE>
To the extent we are unable to acquire additional same-day delivery or
transportation firms and successfully integrate them, our ability to expand our
operations and increase our revenues and earnings to desired goals would be
significantly reduced.
WE FACE SIGNIFICANT RISKS OF TAX AUTHORITIES CLASSIFYING INDEPENDENT
CONTRACTORS AS EMPLOYEES. The IRS may view our independent contractors as
employees, thereby increasing our labor costs. A significant number of our
delivery and pickup drivers are and will be independent contractors (meaning
that they are not our employees). From time to time, federal and state taxing
authorities have sought to assert that independent contractor drivers in the
same-day delivery and transportation industries are employees. We do not pay or
withhold federal or state employment taxes with respect to independent
contractors. Although we believe that the independent contractors which we
utilize are not our employees under existing interpretations of federal and
state laws, we cannot guarantee you that federal and state authorities will not
challenge our position or that other laws or regulations, including tax laws and
laws relating to employment and worker compensation, will not change. If the IRS
should successfully assert that our independent contractors are in fact our
employees, we would be required to pay withholding taxes and extend additional
employee benefits to such persons. In addition, we could become responsible for
certain past and future employment taxes and, if we are required to pay
withholding taxes with respect to amounts previously paid to such persons, we
could be required to pay penalties or be subject to other liabilities as a
result of incorrectly classifying such employees. If our drivers are deemed to
be employees rather than independent contractors, we could be required to
increase their compensation since they may no longer be receiving
commission-based compensation. Any of the foregoing possibilities could increase
our operating costs and have a material adverse effect on our business,
financial condition and results of operations.
WE COULD BE SUBJECT TO CLAIMS FOR PERSONAL INJURY, DEATH AND PROPERTY
DAMAGE OR NON-DELIVERY OR DELAYED DELIVERY OF PACKAGES. We could be exposed to
claims for personal injury, death and property damage as a result of accidents
involving our employees and independent contractors. We could also be subject to
claims resulting from non-delivery or delayed delivery of packages, many of
which could be significant because of unique or time sensitive nature
deliveries. If we have problems with our Internet site, we could be exposed to
claims caused by the non-delivery or misdelivery of packages or documents and
claims due to the mishandling of confidential information. We carry liability
insurance and require that our independent contractors maintain at least the
minimum amount of liability insurance required by state law. We also limit by
contract our liability with respect to our package delivery operations. We
cannot assure you that any claims made against us will not exceed the amount of
insurance coverage, or that we will be able to contractually limit our liability
for package deliveries. Successful claims could have an adverse effect upon our
business, financial condition and results of our operations.
WE FACE MANY RISKS UNIQUE TO THE PACKAGE SHIPPING AND SAME-DAY DELIVERY
INDUSTRIES. Numerous events and factors that affect the delivery services
industry could also affect our business, revenues and earnings, including:
* weather conditions;
* economic factors affecting customers, fuel prices and
shortages of, or disputes with, labor;
* downturns in the level of general economic activity or
employment in the United States, which could affect the demand
for package and priority document delivery; and
* the development and increased usage of communication media
which serve as alternatives to point-to-point delivery
services, including facsimile machines and e-mail.
In addition, our package and priority document delivery business faces
increased competition from major companies such as UPS(R), Federal Express(R),
DHL(TM) and other large, established carriers which dominate the overnight
courier induSTRY and which could enter the same-day delivery industry in direct
competition with us.
OUR BUSINESS DEPENDS UPON A NUMBER OF DIFFERENT INFORMATION AND
TELECOMMUNICATION TECHNOLOGIES INCLUDING THE INTERNET. We require these
technologies to maintain a high volume of inbound
19
<PAGE>
and outbound calls and process transactions accurately and on a timely basis.
Because we believe that our technology distinguishes us from our competitors,
any interruption of our ability to receive and send calls or to process
transactions on an accurate and timely basis could result in the loss of
customers and diminish our reputation.
We depend upon our ability to engage and retain, as employees or
through independent contractor or other arrangements, qualified driver and
delivery personnel who possess the skills and experience necessary to meet the
needs of our operations. We compete in markets in which unemployment is
relatively low and competition for couriers and other employees is intense. We
must continually evaluate, train and upgrade our pool of available drivers to
keep pace with the increasing demands for delivery services. We cannot assure
you that qualified driver employees or contractors will continue to be available
in sufficient numbers and on terms acceptable to us. Our inability to attract
and retain qualified driver personnel would have a material adverse impact on
our business, financial condition and results of operations.
WE MUST COMPLY WITH VARIOUS GOVERNMENTAL REGULATIONS. Various local,
state and federal regulations require us to obtain and maintain permits and
licenses in connection with our operations. Additionally, some of our operations
may involve the delivery of items subject to more stringent regulation,
including hazardous materials, which would require us to obtain additional
permits. Our failure to maintain required permits and licenses, or to comply
with applicable regulations, could result in substantial fines or revocation of
permits and licenses we may have to do business, any of which could have a
material adverse effect on our business, financial condition and results of
operations. Further, delays in obtaining permits or licenses, or the failure to
obtain them, could delay or impede possible acquisitions.
WE MAY BE UNABLE TO DEVELOP NEW SERVICES AND PRODUCTS. We believe our
long-term success depends in part on our ability to enhance our existing
services and products, particularly those related to our same-day delivery
business, develop new services and address the increasingly sophisticated needs
of our customers. If we fail to develop and introduce enhancement to our
services and products on a timely and cost-effective basis in response to
customer needs and changing technologies, our business, financial condition and
results of operations could be materially and adversely affected.
WE FACE INTENSE COMPETITION IN THE MARKET FOR SAME-DAY DELIVERY AND
OTHER DELIVERY SERVICES. No substantial barriers to entry exist in these markets
and we expect that competition will continue to intensify. Competitive pressures
could cause material adverse effects on our business and the trading price of
our stock. Companies which have more experience in the industry and greater
financial and technical resources than we do dominate the commercial package
shipping market.
The market for point-to-point delivery services is highly competitive,
with a number of companies having multi-state and multi-city operations and more
experience in the industry than we do. A number of these competitors have more
experience and name recognition than we do. In addition, several large, publicly
traded companies have begun to consolidate the courier industry through
acquisitions. We compete with these competitors not only in providing services,
but also for acquisition candidates. Any of the foregoing risks may have a
material adverse effect on our business, financial condition and results of
operations.
WE DEPEND ON OUR KEY PERSONNEL. We depend upon the continued services
of our senior management for our success. The loss of a member of our senior
management could have a negative impact on our business, financial condition and
results of operations. We cannot assure you that we will be able to retain our
senior management or our other key personnel.
WE HAVE A SUBSTANTIAL INVESTMENT IN EQUIPMENT AND TECHNOLOGY. As a part
of our business strategy, we have invested in equipment and technology, and we
will continue to make substantial investments in equipment and technology, in
order to successfully implement our same-day delivery consolidation strategy and
to successfully maintain our presence in the same-day delivery industry. We
believe that this investment will give us an advantage over our competitors. We
cannot assure you that this strategy will be successful or that we will be able
to recover our investment in such equipment and technology.
WE FACE VARIOUS RISKS ASSOCIATED WITH DEVELOPING OUR INTERNET
TECHNOLOGIES. We are currently in various stages of developing technologies to
be utilized by customers in Internet-related activities and e-commerce
20
<PAGE>
business. Developing and rolling out these technologies will take time and
require capital for research and development, testing, marketing and operations
to launch. There can be no assurances that our Internet technology will be
established successfully.
OUR E-COMMERCE BUSINESS IS EMERGING AND DEPENDENT UPON CONSUMER TRENDS.
We intend to derive a portion of our revenues from relationships with customers
engaged in Internet activities and e-commerce and fees from strategic alliances.
As a result, this source of revenue will depend to a large extent upon continued
demand for the types of goods and services that our customers and partners offer
via the Internet. A decline in the popularity of, or demand for, certain
products or other services sold through the customer's Internet site could
reduce the overall volume of transactions, resulting in reduced revenues to us.
In addition, certain consumer "fads" may temporarily inflate the volume of
certain types of products and services offered through the Internet sites of our
customer base, placing a significant strain upon the capacity of our
technologies or the customers' Internet sites. Any decline in the demand for the
goods and services offered through the Internet sites of our customers as a
result of changes in consumer trends could have a material adverse effect on our
business, results of operations and financial condition.
WE WILL BE DEPENDENT ON THE INTERNET INFRASTRUCTURE FOR E-COMMERCE. The
future success of our business will depend upon the development and maintenance
of the Internet infrastructure, as a reliable network backbone with the
necessary speed, data capacity and security, or timely development of
complementary products such as high speed modems, for providing reliable
Internet access and services. Because global commerce and the online exchange of
information is new and evolving, it is difficult to predict with any assurance
whether the Internet will prove to be a viable commercial marketplace in the
long term. The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic. To
the extent that the Internet continues to experience increased numbers of users,
frequency of use or increased bandwidth requirements of users, there can be no
assurance that the Internet infrastructure will continue to be able to support
the demands placed on it by this continued growth or that the performance or
reliability of the Internet will not be adversely affected. Furthermore,
Internet service providers have experienced a variety of outages and other
delays as a result of damage to portions of its infrastructure, and could face
such outages and delays in the future. These outages and delays could adversely
affect the level of Internet usage and also the level of traffic and the
processing of orders. In addition, the Internet could lose its viability due to
delays in the development or adoption of new standards and protocols to handle
increased levels of activity. In addition, companies that control access to
transactions through network access or Internet browsers could promote our
competitors or charge us substantial fees for inclusion. Any and all of these
events could have a material adverse effect on our business, results of
operations and financial condition.
21
<PAGE>
SELLING SHAREHOLDERS
The following table presents information regarding the selling
shareholders. The shares listed below represent the shares that each selling
shareholder owned on July 10, 2000, and the shares which each selling
shareholder may own upon the exercise of options or warrants.
The securities "beneficially owned" by a person are determined in
accordance with the SEC's definition of "beneficial ownership" and, accordingly,
may include securities owned by or for, among others, the spouse, children or
other relatives of such person, as well as other securities over which the
person has or shares voting or investment power or securities which the person
has the right to acquire within 60 days of July 10, 2000.
In the following table, percentage of beneficial ownership is based on
16,622,029 outstanding shares of common stock. Shares issuable pursuant to the
exercise of warrants are deemed outstanding for computing the percentage of the
person holding such securities but are not deemed outstanding for computing the
percentage of any other person. Our registration of the shares does not
necessarily mean that the selling shareholders will sell all or any of the
shares covered by this prospectus.
<TABLE>
<CAPTION>
SHARES SHARES PERCENTAGE OF
BENEFICIALLY BENEFICIALLY OUTSTANDING SHARES
OWNED(1) SHARES OWNED(1) UPON BENEFICIALLY OWNED
PRIOR TO OFFERED COMPLETION OF THE UPON COMPLETION OF
SELLING SHAREHOLDER OFFERING HEREBY OFFERING THE OFFERING
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bayview Capital Partners LP 1,507,529(2) 1,507,529 -- --
The Raptor Global Portfolio Ltd. 981,134(3) 981,134 -- --
BY Partners, L.P. 557,260(4) 557,260 -- --
Shawn Weinand 507,250(5) 120,000 387,250 2.3
Bruce H. Senske 278,612(6) 15,000 263,612 1.6
Robert F. and Barbara C. 275,000 125,000 150,000 *
McCullough Trustees for
McCullough Living Trust
Dated 11/30/92
Brahman Institutional Partners, L.P. 262,240(7) 262,240 -- --
J. Iver & Company 253,000(8) 253,000 -- --
John E. Feltl 222,152(9) 222,152 -- --
B. Bros. Investment Company 194,000(10) 83,000 111,000 *
Richard H. Hochman 188,000 60,000 128,000 *
Isaac Eugene Phelps 175,000 50,000 125,000 *
Humberto Martinez-Suarez 168,998(11) 41,666 127,332 *
Schottenfeld Associates, L.P. 166,666 166,666 -- --
Raymond Freeman 156,433(12) 156,433 -- --
C.S.L. Associates, L.P. 125,000 125,000 -- --
Robert F. McCullough, Jr. 124,998 41,666 83,332 *
RS Midcap Opportunities 100,000 100,000 -- --
Mark W. Sheffert 100,000(13) 100,000 -- --
David R. Chamberlin, TTEE 93,998 41,666 32,332 *
David R. Chamberlin Revocable Trust
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
SHARES SHARES PERCENTAGE OF
BENEFICIALLY BENEFICIALLY OUTSTANDING SHARES
OWNED(1) OWNED(1) UPON BENEFICIALLY OWNED
PRIOR TO SHARES OFFERED COMPLETION OF THE UPON COMPLETION OF
SELLING SHAREHOLDER OFFERING HEREBY OFFERING THE OFFERING
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Levon Perkins and Darlene L. 87,500 87,500 -- --
Bass-Perkins, JTWROS
Brahman Partners II, L.P. 87,340(14) 87,340 -- --
Pyramid Partners, L.P. 85,000(15) 85,000 -- --
Eldon F. Buschbom 83,334 83,334 -- --
Michael James Cunningham 77,000 62,500 14,500 *
James D. Cochran 75,001 75,001 -- --
Brewster Diversified Services, Inc. 70,000(16) 70,000 -- --
Brahman C.P.F. Partners, L.P. 67,980(17) 67,980 -- --
Oscar Investment Fund, LP 64,966(18) 64,966 -- --
Ronald Lee Randall 62,500(19) 62,500 -- --
Donald L. Johnson 57,750(20) 57,125 -- --
Howard L. Hatfield, Jr. 55,000(21) 55,000 -- --
Andrew K. Boszhardt, Jr. 53,334(22) 53,334 -- --
A. Alexander Arnold, III, Trustee 50,348 50,348 -- --
FBO David Berol Trust
A. Alexander Arnold III, Trustee 50,348 50,348 -- --
FBO John A. Berol Trust
John C. Lawrie 50,000 50,000 -- --
Leon W. Orr 45,250 3,250 42,000 *
Jeanne E. Schnack and 41,667 41,667 -- --
Thomas W. Schnack
Radwan Ibrahim 41,667 41,667 -- --
Richard Feldman 41,666 41,666 -- --
Hair Biz, Inc. 37,500 37,500 -- --
Coach LLC 30,000 10,000 20,000 *
RS Diversified Growth 30,000 30,000 -- --
A. Alexander Arnold, III 25,174 25,174 -- --
A. Alexander Arnold, III, Trustee, 25,174 25,174 -- --
Berol Family Trust FBO Margaret
Beattie
Michael E. Mahoney and Dana S. 25,000 25,000 -- --
Mahoney JTWROS
New England Diversified Growth 25,000 25,000 -- --
Wade W. Wilson 23,515(23) 16,015 7,500 *
Jennifer R. Skinner 23,515(23) 16,015 7,500 *
JoAnn J. Pihl 16,667(24) 16,667 -- --
David Arthur Lantz 15,100(25) 8,800 6,300 *
Ben Reuben and Sophie Reuben 15,000(26) 15,000 -- *
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
SHARES SHARES PERCENTAGE OF
BENEFICIALLY BENEFICIALLY OUTSTANDING SHARES
OWNED(1) OWNED(1) UPON BENEFICIALLY OWNED
PRIOR TO SHARES OFFERED COMPLETION OF THE UPON COMPLETION OF
SELLING SHAREHOLDER OFFERING HEREBY OFFERING THE OFFERING
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Anthony Scaramucci 13,334(27) 13,334 -- --
Cline Wood Agency, Inc. 13,200(28) 13,200 -- --
D. Michael Wood 13,200(28) 13,200 -- --
Richard W. Perkins 12,000(29) 12,000 -- --
Patrick M. Sidders 11,208(30) 9,625 1,583 *
Brahman Partners II Offshore, Ltd. 10,254(31) 10,254 -- --
Thomas M. Grossman 10,000 10,000 -- --
Aleem Siddiqui 9,464(32) 5,000 4,464 *
Dale Stoltenow 9,000(33) 750 8,250 *
William A. Goldberg 7,500(34) 7,500 -- --
Revocable Trust
Myra Halpern 7,000(35) 2,000 5,000 *
Strickland Family Ltd. Partnership 7,000(36) 7,000 -- --
Thomas W. Abbas and Rebecca A. 5,203(37) 5,203 -- --
Abbas, JTWROS
David Aronsohn 5,000(32) 5,000 -- --
Joel David Chesin 5,000(32) 5,000 -- --
Paul Marshall Dean 5,000(32) 5,000 -- --
Dennis Doyle 5,000(32) 5,000 -- --
Joseph Farmer and Carol Farmer, 5,000(32) 5,000 -- --
Trustees for Joseph and Carol
Farmer Trust
Stuart and Carol Holmer 5,000 5,000 -- --
Robert D. and Karen L. Johnson 5,000 5,000 -- --
Mark Kaiser 5,000(32) 5,000 -- --
Lawrence and Mary Mans 5,000(32) 5,000 -- --
Robert W. Mehlhouse 5,000(32) 5,000 -- --
Phil C. Murray 5,000(32) 5,000 -- --
Realty Center, Inc. p/s/t FBO: 5,000(32) 5,000 -- --
Thomas A. Ries, Thomas A. Ries
and James A. Lamson, Trustees
Jeffrey A. Robinson 5,000(32) 5,000 -- --
Ron Shimek 5,000(32) 5,000 -- --
Dan and Catherine Thums 5,000(32) 5,000 -- --
Marion A. Trybula 5,000(32) 5,000 -- --
John A. Tschida 5,000(32) 5,000 -- --
Peggy Cooper Trust 4,732 2,500 2,232 *
Michael Noe 4,136(38) 136 4,000 *
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
SHARES SHARES PERCENTAGE OF
BENEFICIALLY BENEFICIALLY OUTSTANDING SHARES
OWNED(1) OWNED(1) UPON BENEFICIALLY OWNED
PRIOR TO SHARES OFFERED COMPLETION OF THE UPON COMPLETION OF
SELLING SHAREHOLDER OFFERING HEREBY OFFERING THE OFFERING
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Altar Rock Fund L.P. 3,940(39) 3,940 -- --
Cary Musech 3,715(40) 3,715 -- --
Kristine R. Anders 3,008(41) 1,008 2,000 *
First Trust National Association 2,500(42) 2,500 -- *
FBO Kurt J. King
First Trust National Association 2,500 2,500 -- --
FBO Philip McLaughlin IRA
Steven C. Hunter 2,500(42) 2,500 -- --
Theresa Weber Johnson 2,400(43) 400 2,000 *
Bonnie J. Doepel 2,384(44) 384 2,000 *
Peter Slocum 2,230(45) 2,230 -- --
Robert E. and Katherine A. 1,487(46) 1,487 -- --
Tunheim, JTWRS
Matthew S. Carpenter 1,444 1,444 -- --
Scott M. Carpenter 1,444 1,444 -- --
Ann C. Kay 1,444 1,444 -- --
Judd Y. Carpenter 1,443 1,443 -- --
Allen J. Zenk 590 590 -- --
Vicki Lynn Anderson 438(47) 438 -- --
Kenneth W. Richards 69 69 -- --
</TABLE>
------------------------
* INDICATES AN AMOUNT LESS THAN 1%.
(1) The securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations of the Commission and accordingly, may include the
securities owned by or for, among others, the spouse, children or
certain other relatives of such person, as well as other securities
over which the person has or shares voting or investment power or
securities which the person has the right to acquire within 60 days.
(2) Includes 1,507,529 shares of common stock purchasable pursuant to the
exercise of warrants.
(3) Includes 89,194 shares of common stock purchasable pursuant to the
exercise of warrants.
(4) Includes 50,660 shares of common stock purchasable pursuant to the
exercise of warrants.
(5) Includes 20,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(6) Includes 151,406 shares of common stock owned by Mr. Senske, 91,750
shares of common stock purchasable pursuant to the exercise of warrants
and 35,456 shares of common stock owned by Mr. Senske's wife.
(7) Includes 23,840 shares of common stock purchasable pursuant to the
exercise of warrants.
(8) Indicates the estimated maximum number of shares of common stock
reserved for issuance upon the exercise of a convertible promissory
note we assumed in connection with the purchase of Velocity Express.
Includes 15,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(9) Includes 222,152 shares of common stock purchasable pursuant to the
exercise of warrants.
(10) Includes 10,500 shares of common stock purchasable pursuant to the
exercise of warrants.
(11) Includes 124,998 shares of common stock owned by Mr. Martinez and
44,000 shares of common stock owned by Mr. Martinez's wife.
(12) Includes 131,433 shares of common stock purchasable pursuant to the
exercise of warrants.
(13) Includes 100,000 shares of common stock purchasable pursuant to the
exercise of warrants.
25
<PAGE>
(14) Includes 7,940 shares of common stock purchasable pursuant to the
exercise of warrants.
(15) Includes 35,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(16) Includes 70,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(17) Includes 6,180 shares of common stock purchasable pursuant to the
exercise of warrants.
(18) Includes 30,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(19) Includes 62,500 shares of common stock purchasable pursuant to the
exercise of warrants.
(20) Includes 54,750 shares of common stock purchasable pursuant to the
exercise of warrants.
(21) Includes 5,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(22) Includes 13,334 shares of common stock purchasable pursuant to the
exercise of warrants.
(23) Includes 7,143 shares of common stock purchasable pursuant to the
exercise of warrants.
(24) Includes 16,667 shares of common stock purchasable pursuant to the
exercise of warrants.
(25) Includes 6,300 shares of common stock purchasable pursuant to the
exercise of warrants.
(26) Includes 15,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(27) Includes 3,334 shares of common stock purchasable pursuant to the
exercise of warrants.
(28) Includes 1,200 shares of common stock purchasable pursuant to the
exercise of warrants.
(29) Includes 12,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(30) Includes 9,625 shares of common stock purchasable pursuant to the
exercise of warrants.
(31) Includes 932 shares of common stock purchasable pursuant to the
exercise of warrants.
(32) Includes 5,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(33) Includes 7,250 shares of common stock purchasable pursuant to the
exercise of options.
(34) Includes 7,500 shares of common stock purchasable pursuant to the
exercise of warrants.
(35) Includes 2,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(36) Includes 7,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(37) Includes 473 shares of common stock purchasable pursuant to the
exercise of warrants.
(38) Includes 4,000 shares of common stock purchasable pursuant to the
exercise of options.
(39) Includes 358 shares of common stock purchasable pursuant to the
exercise of warrants.
(40) Includes 338 shares of common stock purchasable pursuant to the
exercise of warrants.
(41) Includes 2,000 shares of common stock purchasable pursuant to the
exercise of options.
(42) Includes 2,500 shares of common stock purchasable pursuant to the
exercise of warrants.
(43) Includes 2,000 shares of common stock purchasable pursuant to the
exercise of warrants.
(44) Includes 384 shares of common stock purchasable pursuant to the
exercise of options.
(45) Includes 202 shares of common stock purchasable pursuant to the
exercise of warrants.
(46) Includes 135 shares of common stock purchasable pursuant to the
exercise of warrants.
(47) Includes 438 shares of common stock purchasable pursuant to the
exercise of warrants.
We have agreed to bear all expenses (other than selling commissions and
fees) in connection with the registration and sale of the shares being offered
by the selling shareholders in over-the-counter market transactions or in
negotiated transactions. See "Plan of Distribution." This prospectus forms a
part of the registration statement.
USE OF PROCEEDS
The shares offered by this prospectus will be sold by the selling
shareholders. We will not receive any of the proceeds from the sale of the
shares by the selling shareholders.
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PLAN OF DISTRIBUTION
The selling shareholders may offer their shares at various times in one
or more of the following transactions:
* on the Nasdaq SmallCap Market;
* in transactions other than on such market;
* through the writing of options on Shares or short sales;
* in privately negotiated transactions; or
* in a combination of any of the above transactions.
The selling shareholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prices, or at
negotiated prices. We are indemnifying the selling shareholders against
liabilities under the Securities Act.
The selling shareholders may use broker-dealers to sell their shares.
If this happens, broker-dealers will either receive discounts, commissions or
concessions from the selling shareholders, or they will receive commissions from
purchasers of shares for whom they acted as brokers or agents.
The selling shareholders and any persons who participate in the sale of
the shares from time to time, may be deemed to be "underwriters" within the
meaning of Section 2(a)(11) of the Securities Act. Any commissions paid or
discounts or concessions allowed to any such persons and any profits received on
resale of the shares, may be deemed to be underwriting compensation under the
Securities Act.
If necessary, to comply with applicable state securities laws, the
shares will be sold only through registered or licensed brokers or dealers in
such jurisdictions. In addition, the shares will not be sold until they have
been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available.
LEGAL MATTERS
For the purposes of this offering, Kenneth D. Zigrino, our Vice
President, General Counsel and Secretary is giving his opinion on the validity
of the shares and certain legal matters. Mr. Zigrino has options to purchase
shares of our common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements as of and for the year ended July 1, 2000, and Lurie,
Besikof, Lapidus & Co., LLP, independent auditors, have audited our consolidated
financial statements as of and for the year ended June 30, 1999 included in our
Annual Report on Form 10-K for the year ended July 1, 2000, as set forth in
their reports, which are incorporated by reference in this prospectus and
elsewhere in the registration statement. Our firnancial statements are
incorporated by reference in reliance upon Ernst & Young LLP's and Lurie,
Besikof, Lapidus & Co. LLP's reports, given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You can inspect and copy the Registration
Statement as well as reports, proxy statements and other information we have
filed with the SEC at the public reference room maintained by the SEC in
Washington, D.C., New York, New York and Chicago, Illinois. You can call the SEC
at 1-800-732-0330 for further information about the public reference rooms. We
are also required to file electronic versions of these documents with the SEC,
which may be accessed through the SEC's Web Site at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to the documents we file with the SEC. The
27
<PAGE>
information incorporated by reference is considered to be part of this
prospectus. Information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until the selling
shareholders sell all the shares covered by this prospectus.
* Annual Report on Form 10-KSB for the year ended July 1, 2000;
and
* Description of our common stock contained in our Registration
Statement on Form SB-2 (No. 333-01652C) filed on May 29, 1996
(as amended).
This prospectus is part of a registration statement we filed with the
SEC. You may request a copy of the registration statement or any of the above
filings, at no cost, by writing or telephoning our Chief Financial Officer at
the following address:
United Shipping & Technology, Inc.
9850 51st Avenue North, Suite 110
Minneapolis, Minnesota 55442
(952) 941-4080
We have not authorized any dealer, salesperson or other person to give
any information or represent anything not contained in this prospectus. You
should not rely on any unauthorized information. This prospectus does not offer
to sell or buy any shares in any jurisdiction in which it is unlawful. The
information in this prospectus is current as of the date on the cover.
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<PAGE>
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN
THIS DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF
THIS DOCUMENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN
OFFER TO BUY ANY SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
---------------------
TABLE OF CONTENTS
---------------------
Page
----
Prospectus Summary.............................................................2
Recent Significant Financing...................................................4
The Company....................................................................6
Risk Factors..................................................................16
Selling Shareholders..........................................................22
Use of Proceeds...............................................................26
Plan of Distribution..........................................................27
Legal Matters.................................................................27
Experts .....................................................................27
Where You Can Find More Information...........................................27
6,674,452 SHARES
UNITED SHIPPING & TECHNOLOGY, INC.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
______________, 2000
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable by United
Shipping & Technology in connection with the sale and distribution of the shares
being registered. All amounts shown are estimates, except the registration fee.
SEC registration fee..................................... $ 21,750
----------
Legal fees and expenses.................................. $ 33,000
----------
Accounting fees and expenses............................. $ 10,000
----------
Blue sky and related fees and expenses................... $ 2,000
----------
Miscellaneous (including listing fees, if applicable).... $ 1,000
----------
Total.................................................. $ 67,750
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Unless prohibited in a corporation's articles, Utah Statutes Section
16-10a-903 requires indemnification of directors against reasonable expenses
(including attorneys' fees) incurred by such person in connection with the
successful defense of any proceeding to which he or she was a party because he
or she is or was a director of a Utah corporation. Further, Utah Statutes
Section 16-10a-907 requires indemnification for officers to the same extent as
directors, provides that a corporation may also indemnify employees and agents,
and provides that a corporation may indemnify all of such persons to a greater
extent than is statutorily required. Article IV of our Amended and Restated
Articles of Incorporation provide that we shall indemnify officers and directors
against any and all expenses arising out of any suit or proceeding to which they
are a party because of their serving us as such, except in relation to matters
as to which any officer or director is adjudged liable for his or her own
negligence or misconduct in the performance of his or her duty. Our Bylaws also
provide for certain indemnification of directors, officers, employees and
agents, past or present, of us, and persons serving as such of another
corporation or entity at the request of us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
5.1 Opinion of Kenneth D. Zigrino, Esq.
23.1 Consent of Kenneth D. Zigrino, Esq. (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Lurie, Besikof, Lapidus & Co., LLP
24.1 Power of Attorney (included on signature page to the Registration
Statement)
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
II-1
<PAGE>
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes, that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the provisions summarized in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis and State of Minnesota, on October 10,
2000.
UNITED SHIPPING & TECHNOLOGY, INC.
By /s/ Peter C. Lytle
---------------------------------------
Peter C. Lytle, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Peter C. Lytle and Timothy G.
Becker, jointly and severally, his or her true and lawful attorneys-in-fact,
each with full power of substitution, for him or her in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact or any
of them, or his or their substitute or substitutes, may lawfully do or cause to
be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on the dates and
in the capacities indicated.
Signature Title Date
--------- ----- ----
/s/ Peter C. Lytle President and Chief Executive October 10, 2000
------------------------ Officer and Director (Principal
Peter C. Lytle Executive Officer)
/s/ Timothy G. Becker Chief Financial Officer and October 10, 2000
------------------------ Principal Accounting and
Timothy G. Becker Financial Officer
* Director
------------------------
Marlin Rudebusch
* Director
------------------------
Susan M. Clemens
* Director
------------------------
Ronald G. Olson
/s/ James C. Brown Director October 10, 2000
------------------------
James C. Brown
* Director
------------------------
Marshall T. Masko
* Director
------------------------
Peter Kooman
*By: /s/ Peter C. Lytle October 10, 2000
-------------------
Peter C. Lytle
Attorney-In-Fact
II-3
<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION
------------- ----------------------------------------------------------------
5.1 Opinion of Kenneth D. Zigrino, Esq.
23.1 Consent of Kenneth D. Zigrino, Esq. (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Lurie, Besikof, Lapidus & Co., LLP
24.1 Power of Attorney (included on signature page to Registration
Statement)
