<PAGE>
As filed with the Securities and Exchange Commission on May 31, 1996
Registration No. 33-99716
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
AMERITRUCK DISTRIBUTION CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 4213 75-2619368
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
City Center Tower II, Suite 1101, 301 Commerce St.,
Fort Worth, Texas 76102 (817) 332-6020
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
MICHAEL L. LAWRENCE
Chairman, President and Chief Executive Officer
AmeriTruck Distribution Corp.
City Center Tower II, Suite 1101
301 Commerce Street
Fort Worth Texas 76102 (817) 332-6020
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
JOHN R. UTZSCHNEIDER, ESQ.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
(617) 951-8000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective date
registration statement for the same offering: [_]
If any of the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration Fee
Securities to be Registered Registered per Unit(1) Offering Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 1/4% Senior Subordinated Notes due 2005, Series B.... $100,000,000 100% $100,000,000 $34,482.76(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Subsidiary Guarantees(3)................................ (4) (4) (4) (4)
====================================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 of Regulation C under the Securities Act of 1933, as amended.
(2) Previously paid.
(3) The Company's subsidiaries, J.C. Bangerter & Sons Inc., CBS Express,
Inc., AmeriTruck Refrigerated Transport, Inc. (formerly known as "CMS
Transportation Services, Inc."), Scales Transport Corporation, Scales
Leasing Company, Inc., Thompson Bros., Inc., W&L Services Corp., Best Way
Motor Lines, Inc., Billings Trucking Corporation, BLS Investments, Inc.,
CAS Services Corp., CAS Transportation, Inc., Frontier Freight, Inc. and
W&L Motor Lines, Inc. (collectively, the "Guarantors"), have guaranteed on
a senior subordinated unsecured basis, jointly and severally, the payment
of the principal of, premium, if any, and interest on the 12 1/4% Senior
Subordinated Notes due 2005, Series B being registered hereby (the
"Subsidiary Guarantees"). The Guarantors are registering the Subsidiary
Guarantees. Pursuant to Rule 457(n) under the Securities Act of 1933, as
amended, no registration fee is required with respect to the Subsidiary
Guarantees.
Set forth below is the name, address and I.R.S. Employer Identification
Number for each of the Guarantors. The primary standard industrial
classification number for each of the Guarantors is 4213 (except for BLS
Investments, Inc., CAS Services Corp. and Frontier Freight, Inc., each of
which is inactive).
<TABLE>
<CAPTION>
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NAME ADDRESS IRS ID#
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<S> <C> <C>
J.C. Bangerter & Sons Inc. 695 N. Angel Street 87-0264580
Layton, UT 84041
- ----------------------------------------------------------------------------------------------------
CBS Express, Inc. 1555 Industrial Blvd. 58-2056510
Conyers, GA 30207
- ----------------------------------------------------------------------------------------------------
AmeriTruck Refrigerated Transport, Inc. 4200 Northside Parkway 58-1743382
Building 8, Suite C
Atlanta, GA 30327
- ----------------------------------------------------------------------------------------------------
Scales Transport Corporation P.O. Box 189 58-1541166
Homer, GA 30547
- ----------------------------------------------------------------------------------------------------
Scales Leasing Company, Inc. P.O. Box 189 58-1984377
Homer, GA 30547
- ----------------------------------------------------------------------------------------------------
Thompson Bros., Inc. 3605 Teem Drive 46-0255807
Sioux Falls, SD 57101-1283
- ----------------------------------------------------------------------------------------------------
W&L Services Corp. 1515 4th Street SW 56-1393274
Conover, NC 28613
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Best Way Motor Lines, Inc. 1515 4th Street SW 56-1408750
Conover, NC 28613
- ----------------------------------------------------------------------------------------------------
Billings Trucking Corporation 1515 4th Street SW 56-0513403
Conover, NC 28613
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BLS Investments, Inc. 2625 Concord Pike, Box 7138 51-0273108
Wilmington, DE 19803
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CAS Services Corp. 1515 4th Street SW 72-1163014
Conover, NC 28613
- ----------------------------------------------------------------------------------------------------
CAS Transportation, Inc. 1515 4th Street SW 72-1126686
Conover, NC 28613
- ----------------------------------------------------------------------------------------------------
Frontier Freight, Inc. 1515 4th Street SW 56-1408754
Conover, NC 28613
- ----------------------------------------------------------------------------------------------------
W&L Motor Lines, Inc. 1515 4th Street SW 56-0746784
Conover, NC 28613
- ----------------------------------------------------------------------------------------------------
====================================================================================================
</TABLE>
(4) Not applicable.
------------------------
The Registrant hereby amends this Post-Effective Amendment No. 1 to its
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 Post-Effective Amendment No. 1 to its Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Post-Effective Amendment No. 1 to its
Registration Statement shall become effective on such date as the commission,
acting pursuant to Section 8(a) may determine.
<PAGE>
EXPLANATORY NOTE
In February 1996 AmeriTruck Distribution Corp. (the "Company")
completed the exchange of $100,000,000 aggregate principal amount of its 12 1/4%
Senior Subordinated Notes due 2005, Series B (the "New Notes") for its
outstanding 12 1/4% Senior Subordinated Notes due 2005 (the "Old Notes"). This
Registration Statement, as amended by this Post-Effective Amendment No. 1,
contains an updated form of prospectus to be used in connection with any resale
of New Notes by persons who are "affiliates" of the Company within the meaning
of Rule 405 under the Securities Act of 1933, as amended.
<PAGE>
AMERITRUCK DISTRIBUTION CORP.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Form S-4 Item Number
--------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and Outside Front Cover of
Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges, and Other Information
4. Terms of the Transaction
5. Pro Forma Financial Information
6. Material Contracts With the Company Being Acquired
7. Additional Information Required For Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Counsel
9. Disclosure of Commission Position on Indemnification For Securities Act
Liabilities
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants
11. Incorporation of Certain Information by Reference
12. Information With Respect to S-2 or S-3 Registrants
13. Incorporation of Certain Information by Reference
14. Information With Respect to Registrants Other Than S-2 or S-3 Companies
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies
16. Information With Respect to S-2 or S-3 Companies
17. Information With Respect to Companies Other Than S-2 or S-3 Companies
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations Are to be Solicited
19. Information if Proxies, Consents or Authorizations Are Not to be
Solicited, or in an Exchange Offer
Heading or Subheading in Prospectus
-----------------------------------
Facing Page of Registration Statement; Cross Reference Sheet; Outside Front
Cover Page of Prospectus.
Prospectus Summary; Risk Factors; The Company; Recent Developments; Unaudited
Combined Pro Forma Statement of Income.
Prospectus Summary; Description of the New Notes.
Prospectus Summary; Unaudited Pro Forma Combined Statement of Income
Not Applicable.
Selling Noteholders
Legal Matters; Experts.
Not Applicable.
Not Applicable.
Not Applicable.
Not Applicable.
Not Applicable.
Prospectus Summary; Capitalization; The Company; The Acquisitions; Acquisition
of Freymiller Assets; Management's Discussion and Analysis of Financial
Condition and Results of Operations; Unaudited Pro Forma Combined Statement of
Income; Selected Combined Financial Data; Business; Description of the New
Notes; Financial Statements.
Not Applicable.
Not Applicable.
Not Applicable.
Not Applicable.
Management.
______________
<PAGE>
PROSPECTUS
AmeriTruck Distribution Corp.
$13,500,000
Senior Subordinated Notes due 2005, Series B
This Prospectus relates to $13,500,000 aggregate principal amount of
12 1/4% Senior Subordinated Notes due 2005, Series B (the "New Notes") of
AmeriTruck Distribution Corp. (the "Company") offered for public sale by
those persons identified elsewhere herein as selling noteholders (the
"Selling Noteholders"). The Company will not receive any of the proceeds
from the sale of New Notes by the Selling Noteholders. See "Selling
Noteholders."
The Registration Statement, of which this Prospectus forms a part,
also related to the offer by the Company (the "Exchange Offer") to exchange
$100,000,000 aggregate principal amount of New Notes for $100,000,000
aggregate principal amount of its outstanding 12 1/4% Senior Subordinated
Notes due 2005 (the "Old Notes").
The New Notes are unsecured and subordinated to all existing and
future Senior Indebtedness (as defined herein) of the Company. The New
Notes are unconditionally guaranteed (the "Guarantees"), jointly and
severally, on a senior subordinated basis, by each of the Company's
subsidiaries (the "Guarantors"). As of March 31, 1996 the Company had
approximately $25.6 million aggregate principal amount of Senior
Indebtedness (as defined) outstanding and the Guarantors had outstanding
approximately $12.4 million aggregate principal amount of Guarantor Senior
Indebtedness (as defined). See "Description of the New Notes."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DESCRIPTION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NEW
NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY __, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-4 (the
"Registration Statement," which term shall include all amendments, exhibits,
annexes and schedules thereto) pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations promulgated
thereunder, covering the New Notes being offered hereby. This Prospectus does
not contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to in the Registration Statement
are not necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
The Company is subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended ( the "Exchange
Act"). Periodic reports, proxy statements and other information filed by the
Company with the Commission may be inspected at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at its regional offices located at the Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10007. Copies of such material can be obtained
from the Company or the guarantors upon request.
The Company has agreed to file with the Commission, to the extent
permitted, and distribute to holders of the New Notes reports, information and
documents specified in Sections 13 and 15(d) of the Exchange Act, so long as
the New Notes are outstanding, whether or not the Company is subject to such
informational requirements of the Exchange Act. While any New Notes remain
outstanding, the Company will make available, upon request, to any holder of the
New Notes, the information required pursuant to Rule 144A(d)(4) under the
Securities Act during any period in which the Company is not subject to Section
13 or 15(d) of the Exchange Act. Any such request should be directed to the
Secretary of the Company at City Center Tower II, Suite 1101, 301 Commerce
Street, Fort Worth, Texas 76102 (telephone number (817) 332-6020).
-2-
<PAGE>
________________________________________________________________________________
PROSPECTUS SUMMARY
Simultaneously with the closing of the initial offering of the Old
Notes (the "Initial Offering"), AmeriTruck Distribution Corp. acquired all the
outstanding capital stock of W&L Services Corp., Thompson Bros., Inc., J.C.
Bangerter & Sons, Inc., AmeriTruck Refrigerated Transport, Inc. and certain
related companies, Scales Transport Corporation and a related company and CBS
Express, Inc. in exchange for shares of its Common Stock and cash. See "The
Acquisitions". Unless the context otherwise requires, references in this
Prospectus to the "Company" and "AmeriTruck" are to AmeriTruck Distribution
Corp. and its consolidated subsidiaries after giving effect to the Acquisitions.
The following summary is qualified in its entirety by reference to the more
detailed information and the consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus.
THE COMPANY
OVERVIEW
AmeriTruck Distribution Corp. ("AmeriTruck" or the "Company") is
one of the largest specialized trucking companies in the United States. The
Company's services include time-sensitive delivery (e.g., mail, inventory for
customers with just in time programs), special handling (e.g., medical lab
supplies, furniture), specific temperature control (e.g., processed foods,
laboratory supplies), "dedicated" fleets and logistics services. For the year
ended December 31, 1995, the Company had pro forma historical combined revenues
of $150.2 million and EBITDA (earnings before interest expense, net, income
taxes, depreciation and amortization) of $27.3 million.
On a pro forma basis, for the year ended December 31, 1995 the Company
had an operating profit margin that would have ranked among the top 10% in the
industry, based on all trucking companies officially reporting to the Interstate
Commerce Commission ("ICC"). After giving effect to the Acquisitions and the
Initial Offering, the Company's pro forma operating ratio (operating expenses as
a percentage of operating revenues) was 89.3% for 1995, compared to the industry
average of 96.6% for trucking companies officially reporting to the ICC for the
first nine months of 1995 (the most recent period for which data is available).
AmeriTruck's high profitability and strong cash flow are largely attributable to
the compensatory rates that the Company charges for reliable, specialized
service and to its operational efficiency. Moreover, the Company's low driver
turnover rate provides a substantial competitive advantage by enabling
AmeriTruck to retain experienced, professional drivers and to provide cost-
efficient, high-quality service. The Company's driver turnover rate in 1995 was
approximately 40%, which the Company believes is substantially lower than the
industry as a whole, with many carriers having turnover rates of 80% or higher.
The Company believes that, due to the nature of its customer base, on a combined
basis the Operating Companies are less exposed than many other large trucking
companies to cyclical and seasonal fluctuations.
AmeriTruck was formed in August 1995 to effect the combination of six
regional trucking lines (the "Acquisitions"): W&L Services Corp. ("W&L"),
Thompson Bros., Inc. ("Thompson Brothers"), J.C. Bangerter & Sons, Inc.
("Bangerter"), AmeriTruck Refrigerated Transport, Inc. (formerly known as "CMS
Transportation Services, Inc.") and certain related companies ("ART"), Scales
Transport Corporation and a related company ("Scales") and CBS Express, Inc.
("CBS" and, collectively, the "Operating Companies"). The Acquisitions were
made in consideration for shares of AmeriTruck common stock ("Common Stock")
and cash. The cash portion was funded with a portion of the proceeds of the
Initial Offering and the Acquisitions closed simultaneously with the closing of
the Initial Offering. All of the chief executive officers of the Operating
Companies have remained with the Company in senior management positions, and
after consummation of the Acquisitions management and employees of the Company
beneficially own in the aggregate approximately 51% of the Company's outstanding
Common Stock.
________________________________________________________________________________
-3-
<PAGE>
________________________________________________________________________________
In February 1996, the Company, through ART, purchased certain assets
of Freymiller Trucking Inc. See "Acquisition of Freymiller Assets."
STRATEGY
The Company focuses largely on specialized segments of the trucking
industry, where customized service and strong customer relationships provide
defensible market positions. By managing the Company's operations on a
decentralized basis, AmeriTruck intends to preserve the entrepreneurial drive
and customer and driver relationships of the regional Operating Companies, while
benefiting from the critical mass of a larger, national company. Given the
fragmented nature of the trucking industry, the Company intends to pursue growth
through opportunistic acquisitions. See "Acquisition of Freymiller
Assets."
Specialized Service in Defensible Market Segments
By providing specialized services for customers with complex
distribution requirements, the Company reduces its exposure to the intense price
competition that is common in the general freight segment of the trucking
industry. Moreover, because much of the Company's operations are integrated with
its customers' inventory and distribution systems, AmeriTruck's services often
cannot be easily or quickly replaced. For example, the Company's "dedicated"
services (i.e., dedicated, specialized equipment and employees) enable customers
to rely on AmeriTruck and eliminate or reduce their in-house distribution
operations and trucking fleets. In such cases, customers are often heavily
dependent on the Company. The Company also provides just-in-time distribution
services that enable customers to eliminate or minimize inventory. Timing errors
can force production shutdowns or otherwise be extremely costly for customers
with operations that depend on just-in-time deliveries, so service reliability
is critical.
Decentralized Operations Management
The Company manages its operations and marketing on a decentralized
basis. Management believes this strategy will enable AmeriTruck to maintain the
high quality service and close customer relationships that are more typical of
smaller carriers. Management also believes this approach is critical to
maintaining the low driver turnover rates of the Operating Companies, which
contribute to their ability to provide high quality service and to minimize
costs.
Administrative/Purchasing Savings and Freight Network Coordination
The Company currently commands negotiating strength greater than the
Operating Companies have recognized independently in such areas as equipment and
parts, fuel, insurance and financing. Additionally, the Company expects to
benefit from cross-marketing and backhaul opportunities among the Operating
Companies' respective geographic regions. For example, the Company expects that
Thompson Brothers, which holds a strong market position in the Dakotas, will now
be able to profitably move freight to the western mountain states, from which it
can haul return loads sourced by Bangerter, which operates in these states. In
the past, Thompson Brothers had foregone certain opportunities to ship into
these states because it lacks a direct customer base in that region and,
accordingly, would have been forced to backhaul brokered loads at significantly
lower rates. The Company believes that freight network coordination will enable
it to improve equipment utilization, decrease the frequency of brokered loads,
and create a network that better allows the Company to consistently haul higher-
rate loads with a lower percentage of empty miles and reduced downtime between
loads.
________________________________________________________________________________
-4-
<PAGE>
________________________________________________________________________________
Opporttunistic Acquisitions
The Company will pursue opportunistic acquisitions to broaden its
geographic scope, to increase freight network density and to expand into other
specialized trucking segments. Through acquisitions, the Company can capture
additional market share and increase its driver base without adopting a growth
strategy based on widespread rate discounting and driver recruitment, which the
Company believes would be less successful. The trucking industry is extremely
fragmented with over 40,000 carriers. Most of these companies are
undercapitalized, regional operators that lack both the balanced freight
networks required to maintain high utilization and the regional density needed
to fully satisfy customer equipment requirements. The Company believes its
large size relative to many other potential acquirers could afford it greater
access to acquisition financing sources such as banks and capital markets. See
"Acquisition of Freymiller Assets."
THE ACQUISITIONS
In August 1995 the management and stockholders of the Operating
Companies formed AmeriTruck Distribution Corp. in order to effect the
Acquisitions. Also in August 1995, Thompson Brothers acquired all of the
outstanding capital stock of Bangerter. Pursuant to an Agreement and Plan of
Reorganization, dated as of October 20, 1995 (the "Reorganization Agreement"),
the stockholders of W&L, Thompson Brothers, ART, Scales and CBS entered into a
number of related transactions whereby the Company acquired all the outstanding
common stock of W&L, Thompson Brothers, Bangerter, ART, Scales and CBS in
exchange for shares of the Company's Common Stock and the payment of
approximately $35 million in cash. In addition, pursuant to the Reorganization
Agreement, Thompson Brothers redeemed all outstanding shares of its preferred
stock for a redemption price of approximately $2 million (including accrued
dividends).
Concurrently with the consummation of the Acquisitions, the Company
issued and sold the Old Notes (the "Initial Offering").
________________________________________________________________________________
-5-
<PAGE>
________________________________________________________________________________
TERMS OF THE NEW NOTES
The form and terms of the New Notes are the same as the form and terms of the
Old Notes except that the New Notes are registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof. See
"Description of the New Notes."
NEW NOTES $100 million aggregate principal amount of
12 1/4% Senior Subordinated Notes due 2005,
Series B of the Company.
MATURITY November 15, 2005.
INTEREST PAYMENT DATES May 15 and November 15, commencing May 15,
1996.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or in part,
at any time, on or after November 15, 2000, at the redemption prices set forth
herein, plus accrued interest. In addition, at any time prior to November 15,
1998, the Company may, at its option, redeem up to an aggregate of $25 million
principal amount of the Notes from the proceeds of one or more Public Equity
Offerings (as defined), at 112.50% of their principal amount together with
accrued interest; provided however, that such redemption may be effected only to
the extent that immediately after such redemption not less than $75 million
aggregate principal amount of Notes remains outstanding. See "Description of
the New Notes - Optional Redemption."
CHANGE OF CONTROL
Upon a Change of Control (as defined), the Company will be obligated to make an
offer to purchase all the outstanding Notes at a purchase price equal to 101% of
the principal amount thereof, plus accrued interest. See "Description of the
New Notes--Change of Control."
RANKING AND GUARANTEES
The Notes will be subordinated in right of payment to all existing and future
Senior Indebtedness (as defined) of the Company. The Notes are unconditionally
guaranteed (the "Guarantees"), jointly and severally, on a senior subordinated
basis by each subsidiary of the Company (the "Guarantors"). Each guarantee
will be subordinated to all existing and future Guarantor Senior Indebtedness
(as defined). As of March 31, 1996, the Company had approximately $25.6 million
aggregate principal amount of Senior Indebtedness outstanding, the Guarantors
had approximately $12.4 million aggregate principal amount of Guarantor Senior
Indebtedness outstanding, and the Company and the Guarantors had no indebtedness
outstanding which ranks pari passu with the Notes or the Guarantees,
respectively. See "Description of the New Notes--Subordination and Ranking."
See "Description of the Notes - Certain Covenants - Limitation on Indebtedness".
CERTAIN COVENANTS
The Indenture contains certain covenants that, subject to certain exceptions and
qualifications, among other things, limit the ability of the Company and its
subsidiaries to incur indebtedness, pay dividends and make certain other
restricted payments, engage in transactions with stockholders and affiliates,
create liens, sell assets, engage in mergers or consolidations, and limit the
ability of its subsidiaries to issue preferred stock or guarantee indebtedness
of the Company. See "Description of the New Notes--Certain Covenants."
________________________________________________________________________________
-6-
<PAGE>
________________________________________________________________________________
SUMMARY HISTORICAL COMBINED FINANCIAL DATA
Prior to the Acquisitions, W&L and Thompson Brothers had certain common
stockholders who controlled approximately 87 percent of the common equity of the
combined entities. In addition, these stockholders control approximately 67
percent of the outstanding Common Stock of AmeriTruck Distribution Corp. after
the consummation of the Acquisitions. Therefore, these common stockholders of
W&L and Thompson Brothers have been treated as the acquirer for purposes of
accounting for the Acquisitions. W&L's and Thompson Brothers' separate
financial information has been combined for historical presentation, and has
been combined with the financial information for Bangerter, ART, Scales and CBS
only for the periods described below.
The following table sets forth summary combined financial data for the
periods indicated. Results for the year ended December 31, 1995 include 12
months of operations for W&L and Thompson Brothers while Bangerter results are
included since August 1, 1995 and the results for ART, Scales and CBS are
included since November 1, 1995. The summary historical combined financial
information was derived from the audited consolidated financial statements of
AmeriTruck for the year ended December 31, 1995, the audited consolidated
financial statements of W&L for the four years ended December 31, 1994, the
audited financial statements of Thompson Brothers for the three years ended
December 31, 1994, the unaudited financial statements of Thompson Brothers for
the year ended December 31, 1991, the unaudited consolidated financial
statements of AmeriTruck for the three month period ended March 31, 1996, and
the unaudited combined financial statements of W&L and Thompson Brothers for the
three month period ended March 31, 1995. All significant intercompany accounts
and transactions have been eliminated. The consolidated financial statements of
W&L for the three years ended December 31, 1993 were audited by Deloitte &
Touche LLP, independent auditors. The consolidated financial statements of
AmeriTruck for the year ended December 31, 1995, the consolidated financial
statements of W&L for the year ended December 31, 1994 and the financial
statements of Thompson Brothers for the three years ended December 31, 1994 were
audited by Coopers & Lybrand L.L.P., independent auditors. The unaudited
financial statements include all adjustments (consisting of only normal
recurring adjustments) that management considers necessary for a fair
presentation of the information for such periods. The results of any interim
periods are not necessarily indicative of results of operations for a full
fiscal year.
The following summary information should be read in conjunction with the
financial statements included elsewhere in this Prospectus. See "Selected
Combined Financial Data," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
------- -------- -------- -------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT CERTAIN OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues(1)........................ $74,378 $69,516 $72,783 $80,087 $102,846 $20,203 $44,784
Operating expenses(2).............. 70,694 67,767 65,810 71,439 92,561 18,070 40,910
Operating income(1)(2)............. 3,684 1,749 6,973 8,648 10,285 2,133 3,874
Interest expense, net.............. (2,910) (3,075) (3,486) (3,233) (4,634) (633) (3,544)
Other, net......................... 45 44 64 16 26 (1) (118)
Income (loss) before income
taxes.............................. 819 (1,282) 3,551 5,431 5,677 1,499 212
Income before extraordinary
item(3)............................ 420 (1,390) 2,302 3,115 3,181 882 119
Net income (loss)(1)............... 420 (1,390) 2,302 3,115 3,158 882 (111)
===================================
</TABLE>
________________________________________________________________________________
-7-
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT CERTAIN OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CERTAIN OTHER DATA:
EBITDA (1)(4)...................... $ 7,928 $ 6,294 $12,853 $15,136 $17,718 $ 3,707 $ 7,089
EBITDAR(5)......................... 11,536 8,773 13,772 16,063 19,436 3,855 8,228
Depreciation and amortization (2).. 4,199 4,501 5,816 6,472 7,407 1,575 3,220
Rents.............................. 3,608 2,479 919 927 1,718 148 1,139
Capital expenditures, net of cash
proceeds from dispositions(6)...... 47 (55) 194 1,619 11,879 1,428 8,387
Interest expense, net.............. 2,910 3,075 3,486 3,233 4,634 633 3,544
Ratio of earnings to fixed
charges (7)........................ 1.14x - 1.67x 2.01x 1.98x 2.94x 1.05x
CERTAIN OPERATING DATA:
Operating ratio(2)(8).............. 92.7% 92.5% 90.4% 89.2% 90.0% 89.4% 91.3%
Total miles (in thousands)(9)...... 50,879 55,961 60,915 66,028 81,683 15,761 37,127
Revenue per total mile(10)......... $1.177 $1.186 $1.195 $1.213 $1.249 $1.278 $1.190
Daily revenue per tractor(11)...... $ 491 $ 493 $ 547 $ 567 $ 518 $ 585 $ 483
At period end, number of
Line haul tractors(12)........... 482 528 520 556 1,126 530 1,578
Trailers......................... 914 901 979 1,084 2,344 1,201 2,876
Employees:
Drivers(13).................... 283 314 337 349 938 259 1,289
Owner operators................ 243 251 236 252 374 267 542
Non-drivers.................... 225 231 249 287 584 351 669
</TABLE>
(dollars in thousands)
(1) During May 1992, CAS Transportation, Inc. ("CAS"), a subsidiary of W&L,
ceased operations. The closing of CAS cost W&L $924. These costs included
salaries and fringe benefits, operating and general supplies, operating
taxes, insurance and claims, property and equipment rents and other
miscellaneous expenses. In conjunction with the closing of CAS, W&L also
incurred a loss of $1,100 due to certain fixed asset transactions.
Excluding the CAS operations, the Company had revenues, operating income,
net income (loss) and EBITDA of $66,407, $5,015, $1,833 and $9,492 in 1992,
and $59,916, $4,404, $1,115 and $8,508, in 1991, respectively.
(2) During 1994, W&L changed its estimate of the useful lives and salvage
values of certain revenue equipment. This change had the effect of
decreasing depreciation and increasing operating income for the year ended
December 31, 1995 by $155. During 1995, Thompson Brothers changed its
estimate of the useful lives and salvage values of certain revenue
equipment. This change had the effect of decreasing depreciation and
increasing operating income for the year ended December 31, 1995 by $360.
(3) The extraordinary item consists of an extraordinary loss on early
retirement of debt, net of taxes.
(4) EBITDA represents earnings (loss) before interest expense, net, income
taxes, depreciation and amortization. The Company believes EBITDA provides
useful information regarding the Company's ability to service its debt;
however, EBITDA does not represent cash flow from operations, as defined by
generally accepted accounting principles, and should not be considered as a
substitute for net income as an indicator of the Company's operating
performance or for cash flow as a measure of liquidity.
________________________________________________________________________________
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<PAGE>
________________________________________________________________________________
(5) EBITDAR represents earnings before interest expense, net, income taxes,
depreciation, amortization and rents.
(6) Capital expenditures, net of cash proceeds from dispositions, excludes the
acquisition of Freymiller assets. See "Acquisition of Freymiller Assets."
(7) For purposes of the ratio of earnings to fixed charges, (i) earnings
include earnings before income taxes and fixed charges and (ii) fixed
charges consist of interest on all indebtedness, amortization of deferred
financing costs and that portion of rental expense (one-third) that the
Company believes to be representative of interest. The Company's earnings
were insufficient to cover fixed charges by $1,282 for the year ended
December 31, 1992.
(8) Operating ratio represents the Company's combined operating expenses, less
those of CAS (see note (1) above), divided by the Company's combined
revenues less CAS revenues.
(9) Excludes CAS miles (see note (1) above).
(10) Freight revenues (excluding CAS revenues), which excludes brokerage and
other revenues, divided by total miles (excluding CAS miles).
(11) Daily revenue per tractor represents freight revenue divided by number of
working days and further divided by number of line haul tractors at period
end. Calculating daily revenue per tractor based on the average number of
line haul tractors during each monthly period would produce more accurate
daily revenue per tractor information. However, this information was not
available for all Operating Companies. CAS revenues and line haul tractors
have been excluded (See note (1) above). In June 1995 W&L purchased 35
line haul tractors that were not fully placed in service until the middle
of the third quarter; therefore, for comparability purposes these tractors
were included in the daily revenue per tractor calculations on a pro rata
basis by number of days outstanding in 1995. Results for Bangerter, ART,
Scales, and CBS were also included on a pro rata basis by number of days
outstanding in 1995.
(12) The number of line haul tractors includes owned, leased and independent
contractor units.
(13) Represents line haul drivers only. Local drivers of 58, 58, 53, 55, 69, 63
and 69 have been excluded from this count for the years ended December 31,
1991, 1992, 1993, 1994 and 1995 and the three months ended March 31, 1995
and 1996, respectively, which is consistent with the presentation of line
haul tractors.
________________________________________________________________________________
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RISK FACTORS
Prospective investors should evaluate the following factors, as well as the
other information set forth in this Prospectus, regarding an investment in the
New Notes. This Prospectus contains forward looking statements. These statements
are subject to a number of risks and undercertainties, certain of which are
beyond the Company's control. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Forward Looking Statements and
Risk Factors."
INFLATION AND FUEL COSTS
Inflation can be expected to have an impact on the Company's earnings;
however, its effects have been minimal during 1993, 1994 and 1995. Extended
periods of escalating costs or fuel price increases without compensating freight
rate increases would adversely affect the Company's results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Fuel Costs."
SUBSTANTIAL LEVERAGE
As a result of the Acquisitions and the Initial Offering, the Company has
substantial indebtedness in relation to its total capitalization. At March 31,
1996, the Company had approximately $136.6 million of outstanding indebtedness
(consisting primarily of the aggregate principal amount of the New Notes and
$25.4 outstanding under the NationsBank Credit Facility (as defined)) and total
stockholders' deficit of approximately $1.9 million, and the Operating Companies
had outstanding indebtedness of approximately $12.4 million (excluding
indebtedness of the Company guaranteed by the Operating Companies). After
giving effect to the Acquisitions and the Initial Offering and the application
of the estimated net proceeds therefrom as if each had occurred on January 1,
1995, the Company's as adjusted pro forma ratio of earnings to fixed charges
would have been approximately 1.2 to 1 for the year ended December 31, 1995.
See "Use of Proceeds of New Notes", "Capitalization", and "Unaudited Pro Forma
Combined Statement of Income."
This substantial indebtedness poses substantial risks to holders of the
Notes, including the possibility that the Company might not generate sufficient
cash flow to pay the principal and interest on the Notes. Such indebtedness may
also adversely affect the Company's ability to finance its future operations and
capital needs, may limit its ability to pursue other business opportunities and
may make its results of operations more susceptible to adverse economic and
industry conditions. The Company used a portion of the net proceeds of the
Initial Offering to purchase revenue equipment. The Company will need to
continue to purchase additional revenue equipment, and, if the Company is unable
to enter into operating or capital leases or obtain borrowed funds in the
future, it may have to limit its growth or operate its revenue equipment for
longer periods. The Company believes that cash available from operations and
borrowings under the NationsBank Credit Facility and the Volvo Credit Facilities
(as defined) will be sufficient to enable it to make required interest payments
on the Notes and its other debt obligations and required payments under
operating and capital leases for 1996. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources", "Description of Certain Indebtedness", and "Description of the New
Notes". However, significant assumptions underlie this belief, including, among
other things, that the Company will succeed in implementing its business
strategy and that there will be no material adverse developments in the
business, liquidity or capital requirements of the Company. If the Company is
unable to generate sufficient cash flow from operations in the future to service
its debt and make necessary capital expenditures, the Company may be required to
refinance all or a portion of its existing debt, including the Notes, to sell
assets or to obtain additional financing. There can be no assurance that any
such refinancing would be possible or that any such sale of assets or additional
financing could be achieved.
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<PAGE>
SUBORDINATION; SUBSIDIARY OPERATIONS
The Notes and the Guarantees will be general unsecured obligations of the
Company and the Guarantors, respectively, and will be subordinated in right of
payment to all existing and future Senior Indebtedness and Guarantor Senior
Indebtedness, respectively. At March 31, 1996, the Guarantor Senior Indebtedness
(without duplication of Senior Indebtedness) was approximately $12.4 million and
the Company had approximately $25.6 aggregate principal amount of Senior
Indebtedness outstanding. The Indenture limits, but does not prohibit, the
incurrence of additional Senior Indebtedness and Guarantor Senior Indebtedness.
In addition, the Indenture permits Senior Indebtedness and Guarantor Senior
Indebtedness to be secured. In the event of the insolvency, liquidation,
reorganization, dissolution or other winding-up of the Company or a Guarantor,
or upon a default in payment with respect to, or the acceleration of, or if a
judicial proceeding is pending with respect to any default under, any Senior
Indebtedness or Guarantor Senior Indebtedness, the holders of Senior
Indebtedness or Guarantor Senior Indebtedness must be paid in full before a
holder of the Notes and the Guarantees may be paid; accordingly, there may be
insufficient assets remaining after such payments to pay amounts due on the
Notes and the Guarantees.
The Company is a holding company with no operations of its own. The
Company's ability to make required interest payments on the Notes depends on its
ability to receive funds from the Guarantors. The Company, at its discretion,
controls the receipt of dividends or other payments from the Guarantors.
POSSIBLE EFFECTS OF FRAUDULENT CONVEYANCE LAWS
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the Notes or
any Guarantee in favor of other existing or future creditors of the Company or a
Guarantor.
A portion of the proceeds from the Initial Offering was used to acquire all
of the outstanding common stock of W&L, Thompson Brothers, ART, Scales and CBS
and to redeem all of the outstanding preferred stock of Thompson Brothers. If a
court in a lawsuit on behalf of any unpaid creditor of the Company or a
representative of the Company's creditors were to find that, at the time the
Company consummated such transactions, the Company (x) intended to hinder, delay
or defraud any existing or future creditor or contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or in part of
others or (y) did not receive fair consideration or reasonably equivalent value
for issuing the Old Notes and the Company (i) was insolvent, (ii) was rendered
insolvent by reason of such payments, (iii) was engaged or about to engage in a
business or transaction for which its remaining assets constituted unreasonably
small capital to carry on its business, or (iv) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they matured,
the obligations of the Company under the Notes could be avoided, or claims in
respect of the Notes could be subordinated to all other debts of the Company.
The Company's obligations under the Notes are guaranteed by the Guarantors.
To the extent that a court were to find that a Guarantor, at the time it incurs
a Guarantee, (x) intended to hinder, delay or defraud any existing or future
creditor or contemplated insolvency with a design to prefer one or more
creditors to the exclusion in whole or in part of others or (y) did not receive
fair consideration or reasonably equivalent value for issuing the Old Notes and
the Company (i) was insolvent, (ii) was rendered insolvent by reason of such
payments, (iii) was engaged or about to engage in a business or transaction for
which its remaining assets constituted unreasonably small capital to carry on
its business, or (iv) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they matured, the obligations of such
Guarantor under its Guarantee could be avoided, or claims in respect of such
Guarantee could be subordinated to all other debts of such Guarantor. Among
other things, a legal challenge of a Guarantee on fraudulent conveyance grounds
may focus on the benefits, if any, realized by such Guarantor as a result of the
issuance by the Company of the Old Notes. To the extent that any Guarantee were
a fraudulent conveyance or held unenforceable for any other reason, the holders
of the Notes would cease to have any claim in respect of a Guarantor and would
be solely creditors of the Company and any other Guarantors whose Guarantees
were not avoided or held unenforceable. In such event, the claims of the holders
of the Notes would be subject to the prior payment of all liabilities of the
Guarantor whose Guarantee was avoided. There can be no assurance
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<PAGE>
that, after providing for all prior claims, there would be sufficient assets to
satisfy the claims of the holders of the Notes relating to any avoided portion
of a Guarantee.
Each Guarantor has agreed, jointly and severally with the other Guarantors,
to contribute to the obligations of any Guarantor under a Guarantee of the
Notes. Further, the Guarantee of each Guarantor provides that it is limited to
an amount that would not render the Guarantor thereunder insolvent. The Company
believes that the Guarantors will receive equivalent value at the time the
indebtedness is incurred under the Guarantees. In addition, the Company believes
that none of the Guarantors will be, at the time of or as a result of the
issuance of the Guarantees, insolvent, that none of the Guarantors is or will be
engaged in a business or transaction for which its remaining assets constitute
unreasonably small capital and that none of the Guarantors will have intended or
will intend to incur debts beyond its ability to pay such debts as they mature.
Since each of the components of the question of whether a Guarantee is a
fraudulent conveyance is inherently fact based and fact specific, there can be
no assurance that a court passing on such questions would agree with the
Company.
ABSENCE OF COMBINED OPERATING HISTORY
The Company was founded in August, 1995 and conducted no operations prior
to consummation of the Acquisitions. Prior to the Acquisitions, the Operating
Companies operated independently. The Company believes that opportunities exist
for the Operating Companies to combine administrative functions when doing so
will not adversely affect the quality of customer service or driver relations.
For example, the Company intends to merge ART's pre-existing longhaul truckload
operations with certain longhaul operations currently being operated with the
Freymiller Assets. In addition, the Company may merge CBS with Scales. There can
be no assurance that the Company will be able to successfully integrate these
businesses or any other businesses of the Operating Companies on an economic
basis or that any anticipated economies of scale or other cost savings will be
realized. While the Company's senior management is highly experienced in the
trucking industry and senior management includes all the chief executive
officers of the Operating Companies prior to the Acquisitions, the Company's
management group has been assembled only recently and there can be no assurance
that the management group will be able to oversee the combined entity and
effectively implement the Company's operating or growth strategies. See
"Management."
DEPENDENCE ON CERTAIN CUSTOMERS
For the year ended December 31, 1995, Smith's Food & Drug accounted for
approximately 12%, the U.S. Postal Service accounted for 8%, and Curtin Matheson
Scientific accounted for approximately 7% of the Operating Companies' pro forma
combined revenues. The sudden loss of or reduction in demand for its services
from Smith's Food & Drug, the U.S. Postal Service or Curtin Matheson Scientific
could have a material adverse effect on the Company's business. In addition,
although no other customer accounted for more than 5% of the Operating
Companies' pro forma combined revenues during 1995, each Operating Company has a
small number of significant customers, and the loss of any of these customers
could have a material adverse effect on the business of the applicable Operating
Company. As is customary in the trucking industry, the Operating Companies
typically do not have long-term contracts with their customers. See "Business--
Operations--Customer Service and Marketing."
CYCLICALITY AND OTHER ECONOMIC FACTORS
Recessionary business cycles or downturns in customers' business cycles
could have a material adverse effect on the operating results of the Company.
Although management believes that because of the nature of its customer base,
the Company is less sensitive to cyclical pressures than many other large
trucking firms, a significant portion of the Company's customers are in cyclical
industries, such as furniture manufacturing. Fuel prices, fuel taxes, tolls,
insurance costs, interest rates, license and registration fees and fluctuations
in the resale value of revenue equipment are economic factors over which the
Company has little or no control. Significant increases or rapid fluctuations in
fuel prices or fuel taxes, interest rates or increases in license and
registration fees, tolls or insurance costs, to the extent not offset by
increases in freight rates, would reduce the Company's profitability.
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<PAGE>
In addition, freight shipments, operating costs and earnings are also adversely
affected by inclement weather conditions. Fluctuations in the resale value of
tractors and trailers are also important factors that the Company cannot
control. A decline in the resale value of the Company's tractors and trailers
could cause the Company to retain some of its equipment longer than desired,
resulting in increased operating expenses for fuel, maintenance and repairs, or
to realize losses on sale. See "Management's Discussion and Analysis of
Financial Position and Results of Operations" and "Business--Fuel Availability
and Cost."
COMPETITION
The trucking industry is highly competitive. The Operating Companies
compete with many other truck carriers of varying sizes and, to a lesser extent,
with railroads. This competition has created downward pressure on the trucking
industry's pricing structure. Some of the Company's larger competitors in the
refrigerated business include Prime, FFE Transportation Services and KLLM Inc.,
and Merchants Home Delivery Service is one of the largest competitors in the
furniture business. A number of trucking companies with which the Operating
Companies compete have greater financial resources or own more revenue equipment
than does the Company. See "Business--Competition."
AVAILABILITY OF DRIVERS
The difficulty in attracting qualified drivers (including owner-operators)
is a wide-spread problem in the trucking industry and is an important factor in
the Company's ability to provide a high level of service to its customers and to
effectively utilize the Company's equipment. Competition for drivers is intense
and, in part because their driver standards are high, the Operating Companies
have sometimes experienced difficulty attracting and retaining qualified
drivers. Although in the past the Operating Companies have experienced lower
turnover rates than the trucking industry as a whole, there can be no assurance
that the Company's business will not be affected by a shortage of qualified
drivers in the future. See "Business--Drivers and Other Personnel; Safety."
REGULATION
Interstate and intrastate motor carriage has been substantially deregulated
as a result of the enactment of the Motor Carrier Act of 1980 and the Trucking
Industry Regulatory Reform Act of 1994. Carriers can now readily enter the
trucking industry and rates and services are largely free of regulatory
controls. However, interstate for-hire carriers do remain subject to certain
regulatory controls imposed by the United States Department of
Transportation ("DOT"). In addition, the Operating Companies' operations are
subject to various environmental laws and regulations, including laws and
regulations dealing with underground fuel storage tanks and ownership of
property that may contain hazardous substances and laws and regulations
governing air emissions. The trucking industry may in the future become subject
to stricter air emission standards regulation, including requirements that
manufacturers produce cleaner-running tractors and that fleet operators perform
more rigorous inspection and maintenance procedures. See "Business--Drivers and
Other Personnel; Safety", "Business--Risk Management and Insurance," "Business--
Regulation" and "Business--Environmental Regulation."
CLAIMS EXPOSURE
The primary risk areas in the Company's businesses are bodily injury and
property damage, workers' compensation and cargo loss and damage. The Operating
Companies currently maintain insurance against these risks and are subject to
liability as a self-insurer to the extent of the deductible under each policy.
The Company maintains liability insurance for bodily injury and property damage
-13-
<PAGE>
in the amount of $25 million per incident, with a deductible for bodily injury
and property damage of between $50,000 and $300,000 per incident. The current
deductible for workers' compensation in states where most of the Company's
drivers are domiciled ranges from no deductible to $400,000 per claim. The
Company is self-insured as to damage or loss to the property and equipment they
own or lease. In addition, the Company maintains cargo loss and damage insurance
of between $100,000 and $1 million per incident with a deductible ranging from
$5,000 to $50,000 per incident. To the extent that the Company or any of the
Operating Companies were to experience a material increase in the frequency or
severity of accidents or workers' compensation claims, or unfavorable
developments on existing claims, the Company might have to collateralize its
self-insurance amounts and the Company's operating results and financial
condition could be materially adversely affected. In addition, significant
increases in insurance costs, to the extent not offset by increases in freight
rates, would reduce the Company's future profitability. See "Business--Risk
Management and Insurance."
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent upon its senior management team, as
well as its ability to attract and retain qualified management personnel. There
is competition for qualified personnel in the trucking industry. There is no
assurance that the Company will be able to retain its existing senior management
or to attract additional qualified management personnel. The Company does not
maintain key man life insurance on any of its senior management team but the
Company has entered into employment agreements with each member of its senior
management team. See "Management."
CONTROL OF THE COMPANY
BancBoston Ventures, Inc. owns approximately 43% of the outstanding Common
Stock of the Company and it owns a warrant exercisable for additional shares
representing approximately 10.3% of the outstanding Common Stock, and, pursuant
to the terms of the Company's Certificate of Incorporation and agreements
entered into with the Company and its stockholders, under certain circumstances
may be in a position to control the Company with respect to certain major
events. See "Certain Transactions."
ABSENCE OF PUBLIC MARKET
There has not previously been any public market for the New Notes. There
can be no assurance as to the liquidity of any markets that may develop for the
New Notes, the ability of holders to sell the New Notes, or the price at which
holders would be able to sell the New Notes. Future trading prices of the New
Notes will depend on many factors, including among other things, prevailing
interest rates, the Company's operating results and the market for similar
securities. Historically, the market for securities similar to the New Notes,
including non-investment grade debt, has been subject to disruptions that have
caused substantial volatility in the prices of such securities. There can be no
assurance that any market for the New Notes, if such market develops, will not
be subject to similar disruptions. Smith Barney, Inc., the initial purchaser of
the Old Notes (the "Initial Purchaser"), has advised the Company that it
currently intends to make a market in the New Notes offered hereby. However, the
Initial Purchaser is not obligated to do so and any market making may be
discontinued at any time without notice.
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<PAGE>
THE COMPANY
AmeriTruck is one of the largest specialized trucking companies in the
United States. The Company's services include time-sensitive delivery (e.g.,
mail, inventory for customers with just in time programs), special handling
(e.g., medical lab supplies, furniture), specific temperature control (e.g.,
processed foods, laboratory supplies), "dedicated" fleets and logistics
services. For the year ended December 31, 1995, the Company had pro forma
historical combined revenues of $150.2 million and EBITDA of $27.3 million.
On a pro forma basis, for the year ended December 31, 1995 the Company had
an operating profit margin that would have ranked among the top 10% in the
industry, based on all trucking companies officially reporting to the ICC. After
giving effect to the Acquisitions and the Initial Offering, the Company's pro
forma operating ratio (operating expenses as a percentage of operating revenues)
was 89.3% for 1995, compared to the industry average of 96.6% for trucking
companies officially reporting to the ICC for the first nine months of 1995 (the
most recent period for which data is available). AmeriTruck's high profitability
and strong cash flow are largely attributable to the compensatory rates that the
Company charges for reliable, specialized service and to its operational
efficiency. Moreover, the Company's low driver turnover rate provides a
substantial competitive advantage by enabling AmeriTruck to retain experienced,
professional drivers and to provide cost-efficient, high quality service. The
Company's driver turnover rate in 1995 was approximately 40%, which the Company
believes is substantially lower than the industry as a whole, with many carriers
having turnover rates of 80% or higher. The Company believes that, due to the
nature of its customer base, on a combined basis the Operating Companies are
less exposed than many other large trucking companies to cyclical and seasonal
fluctuations.
AmeriTruck was formed in August 1995 to effect the combination of six
regional trucking lines: W&L, Thompson Brothers, Bangerter, ART, Scales and CBS.
The Acquisitions were made in consideration for shares of AmeriTruck Common
Stock and cash. The cash portion was funded with a portion of the proceeds of
the Initial Offering and the Acquisitions closed simultaneously with the closing
of the Initial Offering. All of the chief executive officers of the Operating
Companies have remained in senior management positions, and upon consummation of
the Acquisitions management and employees of the Company will beneficially own
in the aggregate approximately 51% of the Company's outstanding Common Stock.
The Company was incorporated in Delaware in 1995. The Company's executive
offices are located at City Center Tower II, Suite 1101, 301 Commerce Street,
Fort Worth, Texas 76102 and its telephone number is (817) 332-6020.
THE ACQUISITIONS
In August 1995 the management and stockholders of the Operating Companies
formed AmeriTruck Distribution Corp. in order to effect the combination of the
Operating Companies. Also in August 1995, Thompson Brothers acquired all of the
outstanding capital stock of Bangerter for a cash purchase price of $86,000 and
a contingent deferred purchase price of up to approximately $1.3 million.
Pursuant to an Agreement and Plan of Reorganization, dated as of October 20,
1995 (the "Reorganization Agreement"), the stockholders of W&L, Thompson
Brothers, ART, Scales and CBS (the "Stockholders") entered into a number of
related transactions whereby on November 15, 1995 the Company acquired all the
outstanding common stock of W&L, Thompson Brothers, Bangerter, ART, Scales and
CBS in exchange for shares of the Company's Common Stock and the payment of
approximately $35 million in cash. In addition, pursuant to the Reorganization
Agreement, Thompson Brothers redeemed all outstanding shares of its preferred
stock for a redemption price of approximately $2 million (including accrued
dividends). See "Certain Transactions." The foregoing payments were funded from
the proceeds of the Initial Offering.
Prior to the Acquisitions, W&L and Thompson Brothers had common
shareholders who controlled approximately 87% of the common equity of the
combined entity. These shareholders control approximately 67% of the outstanding
Common Stock of AmeriTruck after the consummation of the Acquisitions.
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<PAGE>
Therefore, these common shareholders of W&L and Thompson Brothers have been
treated as the acquirer for purposes of accounting for the Acquisitions. W&L and
Thompson Brothers are sometimes referred to in this Prospectus as the
"Predecessor Company" and their separate financial information has been combined
in certain cases for historical presentation. See "Selected Combined Financial
Data."
Pursuant to the Reorganization Agreement, the Stockholders made certain
representations and warranties to AmeriTruck Distribution Corp. regarding, among
other things, the assets, liabilities, operations, contracts, employee benefit
plans, taxes, environmental matters and financial statements of the Operating
Companies, title to the shares or assets being sold and corporate or other
authority to consummate the Acquisitions. AmeriTruck Distribution Corp. made
certain representations and warranties to the Stockholders regarding, among
other things, its corporate authority to consummate the Acquisitions and the
validity of the shares of its Common Stock issued to the Stockholders in
connection with the Acquisitions. After the consummation of the Acquisitions the
Stockholders will indemnify the Company only for breaches of their
representations and warranties regarding title to the shares and assets
transferred and certain identified matters. Pursuant to the Reorganization
Agreement, the Stockholders also entered into a Stockholders Agreement providing
for, among other things, a voting agreement with respect to the Board of
Directors of AmeriTruck Distribution Corp. See "Certain Transactions--
Reorganization Agreement and Related Transactions."
In connection with the Acquisitions, all of the senior managers of the
Operating Companies have entered into or renewed long-term employment contracts,
including non-competition provisions, with the Company. The Company's Chairman
and the Presidents of the Operating Companies have an average of approximately
24 years' experience in the transportation industry. Management and employees of
the Company beneficially own in the aggregate approximately 51% of the Company's
outstanding Common Stock. See "Management" and "Certain Transactions."
ACQUISITION OF FREYMILLER ASSETS
In February 1996, the Company, through ART, purchased (the "Purchase")
certain assets of Freymiller Trucking Inc. ("Freymiller"). Freymiller had been
the subject of a Chapter 11 bankruptcy proceeding in Oklahoma. Pursuant to the
Purchase, ART purchased certain specific automobiles, computer hardware and
software, furniture and fixtures, rights to the trade name "Freymiller",
existing spare parts, tires and fuel, rights under certain leases, certain
leasehold improvements and shop equipment and installment sales contracts
relating to tractors and trailers sold by Freymiller out of the ordinary course
of business (with all of the foregoing referred to as the "Assets"). The Company
also negotiated with Freymiller's lenders and lessors to purchase approximately
185 tractors and 309 trailers, previously operated by Freymiller, for
approximately $14 million. An additional 80 trailers were leased for a seven
year period. In exchange for the Assets, the Company paid approximately $2.7
million is cash at closing and assumed approximately $2 million in existing
equipment financing. In addition, the Company assumed a lease for Freymiller's
maintenance facility in Oklahoma City and certain routine executory business
contracts. Except as provided above, the Company did not assume any obligations
or liabilities of Freymiller.
In connection with these transactions, the Company purchased real property
in Oklahoma City, Oklahoma from Freymiller's Chairman of the Board, President
and Chief Executive Officer for approximately $1.5 million in cash.
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<PAGE>
The Company has made the Purchase in order to supplement its existing
temperature-controlled trucking business. The Company funded the cash payments
referred to above primarily from borrowings under the NationsBank Credit
Facility. See "Description of Certain Indebtedness - NationsBank Credit
Facility".
The assimilation of the Freymiller Assets put downward pressure on the
Company's profit margins during the first quarter of 1996. While the Company
expects that the contribution of these Assets as a part of ART will improve over
time, the relative performance of the Freymiller Assets will continue to put
downward pressure on the Company's profit margins for the second quarter of
1996.
USE OF PROCEEDS OF NEW NOTES
The Exchange Offer was intended to satisfy certain obligations of the
Company under the registration rights agreement entered into in connection with
the Initial Offering. The Company did not receive any proceeds from the issuance
of the New Notes in connection with the Exchange Offer. In consideration for
issuing the New Notes in connection with the Exchange Offer, the Company
received, in exchange, Old Notes in like principal amount. The Old Notes
surrendered in exchange for the New Notes in connection with the Exchange Offer
were retired and cancelled and cannot be reissued. Accordingly, issuance of the
New Notes in connection with the Exchange Offer did not result in any increase
in the outstanding debt of the Company.
The Company will not receive any proceeds in connection with the sale of
New Notes by the Selling Noteholders.
-17-
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of March 31, 1996. The table should be read in conjunction with
the consolidated financial statements included elsewhere in this Prospectus. See
"Use of Proceeds of New Notes" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------
(IN THOUSANDS)
<S> <C>
Short-term debt:
Current portion of long-term debt............... $ 5,509
--------
Long-term debt, less current portion:
Revolving credit facility....................... 25,448
Obligations secured by equipment................ 7,004
12/1//4% Senior Subordinated Notes due 2005,
Series B, net of unamortized discount.......... 98,595
--------
Total long-term debt, less current portion... 131,047
--------
Common stockholders' deficit....................... (1,928)
--------
Total capitalization......................... $134,628
========
</TABLE>
-18-
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Prior to the Acquisitions, W&L and Thompson Brothers had certain common
shareholders who controlled approximately 87% of the common equity of the
combined entity (the "Controlling Shareholders"). In addition, the Controlling
Shareholders control approximately 67% of the outstanding Common Stock of
AmeriTruck after the consummation of the Acquisitions. Therefore, the
Controlling Shareholders on a combined basis have been treated as the acquirer
for purposes of accounting for the Acquisitions. With respect to the
Acquisitions of W&L and Thompson Brothers, their acquisitions are accounted for
as a purchase by the Controlling Shareholders of the stock of the remaining
shareholders of W&L and Thompson Brothers (the "Minority Shareholders"), who own
approximately 13% of these companies on a combined basis. W&L and Thompson
Brothers are sometimes referred to in this Prospectus as the "Predecessor
Company", and the separate financial information of these companies has been
combined in certain cases for historical presentation.
The following unaudited pro forma combined statement of income gives effect
to the combination of the Predecessor Company with Bangerter, which was acquired
by Thompson Brothers effective August 4, 1995. In addition, it gives effect to
the acquisitions of ART, Scales and CBS, which occurred upon the closing of the
Initial Offering on November 15, 1995.
The pro forma adjustments result from renegotiated salaries, conformed
depreciation lives and salvage values among all of the Operating Companies,
adjustment of the effective tax rate to the expected rate of AmeriTruck and the
acquisition of Bangerter by Thompson Brothers. The pro forma adjustments also
reflect an accrual for the cash payments, which are treated for accounting
purposes as a dividend, to be received by the Controlling Shareholders upon
consummation of the Acquisitions.
The unaudited pro forma combined statement of income also gives effect to
Initial Offering adjustments that show the effect of the sale of the Old Notes
and the application of the net proceeds therefrom. The Initial Offering
adjustments reflect the consummation of the Acquisitions (including the purchase
of the stock of the Predecessor Company owned by the Minority Shareholders)
based on the purchase method of accounting, thereby adjusting to their fair
value the assets and liabilities of Bangerter, ART, Scales and CBS, and with
respect to the Predecessor Company, that portion of its assets and liabilities
equal to the percentage of ownership deemed to be purchased from the Minority
Shareholders (13%), based upon preliminary estimates and certain other
assumptions described in the notes to this unaudited pro forma combined
statement of income. The pro forma and Initial Offering adjustments do not
reflect any operating efficiencies and cost savings that the Company believes
are achievable.
The unaudited pro forma combined statement of income for the year ended
December 31, 1995 combines the historical consolidated statements of operations
of the six Operating Companies giving effect to the Acquisitions as if they had
been consummated on January 1, 1995.
The unaudited pro forma combined statement of income is not necessarily
indicative of the results of operations that might have occurred had the
Acquisitions actually taken place on January 1, 1995, or of future results of
operations or financial position of AmeriTruck.
As a result of the repayment of certain debt out of a portion of the
proceeds from the Initial Offering through March 31, 1996, the Company recorded
debt extinguishment cost of $253,000, net of taxes, to write off existing
unamortized debt discount and to accrue related extinguishment costs and
expenses which will be accounted for as an extraordinary item. The unaudited pro
forma combined financial statement of income does not include the effects of
these debt extinguishment costs.
The unaudited pro forma combined statement of income is based on the
historical consolidated financial statements of the six Operating Companies and
should be read in conjunction with "Summary Historical Combined Financial Data,"
"Selected Combined Financial Data," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," included elsewhere in this
Prospectus.
-19-
<PAGE>
AMERITRUCK DISTRIBUTION CORP.
PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED, DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA HISTORICAL
COMBINED(A) ADJUSTMENTS COMBINED
----------- ----------- --------
<S> <C> <C> <C>
Revenues $150,171 $ - $150,171
Operating expenses
Salaries and wages 48,023 (497)(B) 47,526
Purchased services 36,880 (3,471)(C) 33,409
Depreciation and amortization 10,868 300(C) 11,168
Insurance and claims 6,602 - 6,602
Other operating expenses 35,040 343(D) 35,383
--------- ------- --------
Total operating expenses 137,413 (3,325) 134,088
Operating income 12,758 3,325 16,083
Interest expense, net (6,396) (5,975)(E) (12,371)
Amortization of financing fees (38) (412)(F) (450)
Other, net 64 - 64
--------- ------- --------
Income before income taxes and extraordinary
item 6,388 (3,062) 3,326
Income tax expense (benefit) 2,762 (1,365)(G) 1,397
--------- ------- --------
Income before extraordinary item $ 3,626 $(1,697)(H) $ 1,929
========= ======= ========
CERTAIN OTHER DATA:
Operating ratio 91.5% 89.3%
EBITDA(I)........................................ $ 23,690 $ 27,315
EBITDAR(J)....................................... 33,797 33,951
Depreciation and amortization.................... 10,868 11,618
Rents............................................ 10,107 6,636
Interest expense, net............................ 6,396 12,371
Ratio of EBITDA to interest(I)................... 3.70x 2.21x
Ratio of earnings to fixed charges(J)............ 1.64x 1.22x
</TABLE>
See accompanying notes to pro forma combined statement of income
-20-
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
A. The Historical Combined information was derived from the separate financial
statements of the Operating Companies. Bangerter has a March 31 year-end.
Therefore, Bangerter's results for the twelve months ended December 31,
1995, represent Bangerter's fourth, first, second and third fiscal
quarters.
B. Salaries and wages have been adjusted to reflect a reduction in
compensation resulting from the renegotiation of certain compensation
arrangements in order to compensate equivalent positions equally. As a
result of this adjustment, salaries and wages were reduced by $497 for the
year ended December 31, 1995.
C. Purchased services and depreciation and amortization were adjusted to
reflect the elimination of rental expense and increased depreciation
expense associated with the purchase of equipment which was leased. This
equipment was purchased using the funds provided by the Initial Offering.
Depreciation was calculated using the straight-line method and the lives
and salvage values used are consistent with those of the Predecessor
Company. The lives and salvage values used by the Predecessor Company were
also used to conform depreciation expense for the companies to be acquired
with those of the Predecessor Company. Additionally, depreciation expense
was reduced to reflect the recording of assets at their fair value for the
companies to be acquired. Depreciation and amortization were also adjusted
to reflect the increase in amortization expense on the goodwill recorded in
purchase accounting related to these acquisitions. Goodwill is being
amortized on a straight-line basis over an estimated life of 40 years.
Purchased services decreased $3,471 for the year ended December 31, 1995.
Depreciation and amortization increased $300 for the year ended December
31, 1995.
D. Other operating expenses were adjusted to reflect a reduction in gain on
sale of property and equipment of $343 for the year ended December 31,
1994. These adjustments were related to the change in estimate pertaining
to depreciation. See note C above for additional information.
E. Interest expense was adjusted to reflect the effective interest rate of
12 1/2% on the Notes, net of interest on existing debt to be repaid from
the proceeds of the Initial Offering. Interest expense was increased by
$5,975 for the year ended December 31, 1995.
F. Amortization of financing fees was adjusted to reflect the amortization of
underwriting fees and transaction expenses, which will be capitalized and
amortized over the ten-year life of the Notes.
G. Income tax expense was adjusted to reflect an effective tax rate of 42
percent, which is the expected effective tax rate of AmeriTruck.
H. For AmeriTruck, it is expected that the total annual cost savings resulting
from the networking of operations could be significant. The Company
believes that combining the operations of the Operating Companies will
create opportunities to lower costs. The Company expects to achieve
additional cost savings as a result of the collective negotiating strength
of the Company in such areas as equipment and parts purchasing, fuel and
maintenance networking, risk management, finance and various other items.
None of these anticipated cost savings, or any related overhead costs
attributable to the Company, have been reflected in the unaudited pro forma
combined statement of income. There can be no assurance that any of these
anticipated cost savings will be realized. See "Risk Factors-Absence of
Combined Operating History."
I. EBITDA represents earnings before interest expense, net, income taxes,
depreciation and amortization.
J. EBITDAR represents earnings before interest expense, net, income taxes,
depreciation, amortization and rents.
-21-
<PAGE>
SELECTED COMBINED FINANCIAL DATA
Prior to the Acquisitions, W&L and Thompson Brothers had certain common
stockholders who controlled approximately 87 percent of the common equity of the
combined entities. In addition, these stockholders control approximately 67
percent of the outstanding Common Stock of AmeriTruck Distribution Corp. after
the consummation of the Acquisitions. Therefore, these common stockholders of
W&L and Thompson Brothers have been treated as the acquirer for purposes of
accounting for the Acquisitions. W&L's and Thompson Brothers' separate financial
information has been combined for historical presentation, and has been combined
with the financial information for Bangerter, ART, Scales and CBS only for the
periods described below.
The following table sets forth selected combined financial data for the
periods indicated. Results for the year ended December 31, 1995 include 12
months of operations for W&L and Thompson Brothers while Bangerter results are
included since August 1, 1995 and the results for ART, Scales and CBS are
included since November 1, 1995. The selected historical combined financial
information was derived from the audited consolidated financial statements of
AmeriTruck for the year ended December 31, 1995, the audited consolidated
financial statements of W&L for the four years ended December 31, 1994, the
audited financial statements of Thompson Brothers for the three years ended
December 31, 1994, the unaudited financial statements of Thompson Brothers for
the year ended December 31, 1991, the unaudited consolidated financial
statements of AmeriTruck for the three month period ended March 31, 1996, and
the unaudited combined financial statements of W&L and Thompson Brothers for the
three month period ended March 31, 1995. All significant intercompany accounts
and transactions have been eliminated. The consolidated financial statements of
W&L for the three years ended December 31, 1993 were audited by Deloitte &
Touche LLP, independent auditors. The consolidated financial statements of
AmeriTruck for the year ended December 31, 1995, the consolidated financial
statements of W&L for the year ended December 31, 1994 and the financial
statements of Thompson Brothers for the three years ended December 31, 1994 were
audited by Coopers & Lybrand L.L.P., independent auditors. The unaudited
financial statements include all adjustments (consisting of only normal
recurring adjustments) that management considers necessary for a fair
presentation of the information for such periods. The results of any interim
periods are not necessarily indicative of results of operations for a full
fiscal year.
The following summary information should be read in conjunction with the
financial statements included elsewhere in this Prospectus and "Summary
Historical Combined Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- ---------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- --------- ----------
(DOLLARS IN THOUSANDS, EXCEPT CERTAIN OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues(1)........................... $74,378 $69,516 $72,783 $80,087 $102,846 $20,203 $144,784
Operating expenses
Salaries and wages.................. 21,834 20,414 21,590 23,639 32,463 6,160 14,094
Purchased services.................. 24,254 23,330 21,236 23,504 26,564 5,642 10,776
Depreciation and amortization(2).... 4,199 4,501 5,816 6,472 7,407 1,575 3,220
Insurance and claims................ 3,189 3,115 3,000 3,169 4,471 879 1,681
Subsidiary closing(1)............... - 2,024 - - - - -
Other operating expenses............ 17,218 14,383 14,168 14,655 21,656 3,814 11,139
------- ------- ------- ------- -------- ------- --------
Total operating expenses.......... 70,694 67,767 65,810 71,439 92,561 18,070 40,910
Operating income(1)(2)................ 3,684 1,749 6,973 8,648 10,285 2,133 3,874
</TABLE>
-22-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Interest expense, net................. (2,910) (3,075) (3,486) (3,233) (4,634) (633) (3,544)
Other, net............................ 45 44 64 16 26 (1) (118)
------- ------- ------- ------- -------- ------- --------
Income (loss) before income taxes
and extraordinary item............. 819 (1,282) 3,551 5,431 5,677 1,499 212
Income tax expense.................... 399 108 1,249 2,316 2,496 617 93
------- ------- ------- ------- -------- ------- --------
Income before extraordinary item...... 420 (1,390) 2,302 3,115 3,181 882 119
Extraordinary item(3)................. - - - - (23) - (230)
------- ------- ------- ------- -------- ------- --------
Net income (loss)..................... $ 420 $(1,390) $ 2,302 $ 3,115 $ 3,158 $ 882 $ (111)
======= ======= ======= ======= ======== ======= ========
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents............. $ 2,026 $ 1,619 $ 1,629 $ 1,617 $ 15,286 * $ 1,886
Total assets.......................... 46,164 47,638 52,974 54,245 140,535 * 161,201
Long-term debt (including current
portion)............................. 27,620 31,320 33,936 29,449 118,335 * 136,556
Redeemable preferred stock(4)......... 10,369 11,056 11,322 2,000 - * -
Common shareholders' equity
(deficit)(4).......................... (1,333) (3,690) (2,409) 10,488 (1,817) * (1,928)
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- ---------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- --------- ----------
(DOLLARS IN THOUSANDS, EXCEPT CERTAIN OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CERTAIN OTHER DATA:
EBITDA(5).................................. $ 7,928 $ 6,294 $12,853 $15,136 $17,718 $ 3,707 $ 7,089
EBITDAR(6)................................. 11,536 8,773 13,772 16,063 19,436 3,855 8,228
Depreciation and amortization(2)........... 4,199 4,501 5,816 6,472 7,407 1,575 3,220
Rents...................................... 3,608 2,479 919 927 1,718 148 1,139
Capital expenditures, net of cash
proceeds from dispositions(7).............. 47 (55) 194 1,619 11,879 1,428 8,387
Interest expense, net...................... 2,910 3,075 3,486 3,233 4,634 633 3,544
Ratio of EBITDA to interest(5)............. 2.72x 2.05x 3.69x 4.68x 3.82x 5.86x 2.00x
Ratio of earnings to fixed charges(8)...... 1.14x - 1.67x 2.01x 1.98x 2.94x 1.05x
CERTAIN OPERATING DATA(1):
Operating ratio(2)(9)...................... 92.7% 92.5% 90.4% 89.2% 90.0% 89.4% 91.3%
Total miles (in thousands)(10)............. 50,879 55,961 60,915 66,028 81,683 15,761 37,127
Revenue per total mile(11)................. $ 1.177 $ 1.186 $ 1.195 $ 1.213 $ 1.249 $ 1.278 $ 1.190
Daily revenue per tractor(12).............. $ 491 $ 493 $ 547 $ 567 $ 518 $ 585 $ 483
At period end, number of
Line haul tractors(13)................... 482 528 520 556 1,126 530 1,578
Trailers................................. 914 901 979 1,084 2,344 1,201 2,876
Employees:
Drivers(14)......................... 283 314 337 349 938 259 1,289
Owner operators..................... 243 251 236 252 374 267 542
Non-drivers......................... 225 231 249 287 584 351 669
</TABLE>
______________________
(dollars in thousands)
* Not presented.
(1) During May 1992, CAS Transportation, Inc. ("CAS"), a subsidiary of W&L,
ceased operations. The closing of CAS cost W&L $924. These costs included
salaries and fringe benefits, operating and general supplies, operating
taxes, insurance and claims, property and equipment rents and other
miscellaneous expenses. In conjunction with the closing of CAS, W&L also
incurred a loss of $1,100 due to certain fixed asset transactions.
Excluding the CAS operations, the Company had revenues, operating income,
net income (loss) and EBITDA of $66,407, $5,015, $1,833 and $9,492 in 1992,
and $59,916, $4,404, $1,115 and $8,508, in 1991, respectively.
(2) During 1994, W&L changed its estimate of the useful lives and salvage
values of certain revenue equipment. This change had the effect of
decreasing depreciation and increasing operating income for the year ended
December 31, 1995 by $155. During 1995, Thompson Brothers changed its
estimate of the useful lives and salvage values of certain revenue
equipment. This change had the effect of decreasing depreciation and
increasing operating income for the year ended December 31, 1995 by $360.
(3) The extraordinary item consists of an extraordinary loss on early
retirement of debt, net of taxes.
(4) During the year ended December 31, 1994, all shares of W&L's outstanding
redeemable preferred stock were converted into shares of W&L's Common
Stock.
(5) EBITDA represents earnings (loss) before interest expense, net, income
taxes, depreciation and amortization. The Company believes EBITDA provides
useful information regarding the Company's ability to service its debt;
however, EBITDA does not represent cash flow from operations, as defined by
generally accepted accounting principles, and should not be considered as a
substitute for net income as an indicator of the Company's operating
performance or for cash flow as a measure of liquidity. For purposes of
calculating the ratio of EBITDA to interest, interest represents total
interest expense, net of interest income, less amortization of deferred
financing costs.
(6) EBITDAR represents earnings before interest expense, net, income taxes,
depreciation, amortization and rents.
-24-
<PAGE>
<PAGE>
(7) Capital expenditures, net of cash proceeds from dispositions, excludes the
acquisition of Freymiller assets. See "Acquisition of Freymiller Assets."
(8) For purposes of the ratio of earnings to fixed charges, (i) earnings
include earnings before income taxes and fixed charges and (ii) fixed
charges consist of interest on all indebtedness, amortization of deferred
financing costs and that portion of rental expense (one-third) that the
Company believes to be representative of interest. The Predecessor
Company's earnings were insufficient to cover fixed charges by $1,282 for
the year ended December 31, 1992.
(9) Operating ratio represents the Predecessor Company's combined operating
expenses, less those of CAS (see note (1) above), divided by the
Predecessor Company's combined revenues less CAS revenues.
(10) Excludes CAS miles (see note (1) above).
(11) Freight revenues (excluding CAS revenues), which excludes brokerage and
other revenues, divided by total miles (excluding CAS miles).
(12) Daily revenue per tractor represents freight revenue divided by number of
working days and further divided by number of line haul tractors at period
end. Calculating daily revenue per tractor based on the average number of
line haul tractors during each monthly period would produce more accurate
daily revenue per tractor information, however, this information was not
available for all Operating Companies. CAS revenues and line haul tractors
have been excluded. See note (1) above. In June 1995 W&L purchased 35
line haul tractors that were not fully placed in service until the middle
of the third quarter; therefore, for comparability purposes these tractors
were included in the daily revenue per tractor calculations on a pro rata
basis by number of days outstanding in 1995. Results for Bangerter, ART,
Scales, and CBS were also included on a pro rata basis by number of days
outstanding in 1995.
(13) The number of line haul tractors includes owned, leased and independent
contractor units.
(14) Represents line haul drivers only. Local drivers numbering 58, 58, 53, 55,
55, 69, 63 and 69 have been excluded from this count for the years ended
December 31, 1991, 1992, 1993, 1994 and 1995 and the three months ended
March 31, 1995 and 1996, respectively, which is consistent with the
presentation of line haul tractors.
-25-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the financial condition and results of operations
of the Company and the Predecessor Company should be read in conjunction with
the consolidated financial statements of the Company and "Selected Combined
Financial Data" included elsewhere in this Prospectus. References below to the
Company mean AmeriTruck Distribution Corp. and its Subsidiaries, references to
the Predecessor Company mean W&L and Thompson Brothers and references to the
Acquired Companies means Bangerter, ART, CBS and Scales.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
Net Income
For the quarter ended March 31, 1996, the Company had a net loss of
$111,000 compared with net income of $882,000 for the Predecessor Company for
the same period in 1995. The additional revenue and operating income from the
Acquired Companies in the first quarter of 1996 was substantially offset by
additional interest costs incurred with respect to the New Notes and the
NationsBank Credit Facility. The net loss in 1996 includes an extraordinary
item, loss on early retirement of debt of $230,000, net of taxes of $154,000.
These early retirements related to the use of proceeds from the Company's
offering of the Old Notes in 1995.
Revenues
First quarter revenues for 1996 improved $24.6 million, or 122 percent,
compared with the first quarter of 1995. Approximately $22.8 million, or 93
percent of this increase, reflects revenues of the Acquired Companies. The
Predecessor Company had increases in revenues of $1.7 million, which is
primarily attributable to increased volume during the three month period.
Expenses
The following table sets forth operating expenses as a percentage of
revenues for the Company for the three month period ended March 31, 1996 and for
the Predecessor Company for the three month period ended March 31, 1995, and the
related variance from 1996 to 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED VARIANCE
MARCH 31 INCREASE
--------------------
1996 1995 (DECREASE)
--------- --------- ----------
<S> <C> <C> <C>
Salaries, wages and fringe benefits 31.4% 30.5% 0.9%
Purchased transportation 24.0 27.9 (3.9)
Operating supplies and expenses 18.0 13.0 5.0
Depreciation and amortization of capital 6.7 7.2 (0.5)
leases
Claims and insurance 3.8 4.3 (0.5)
Operating taxes and licenses 3.2 2.9 0.3
General supplies and expenses 4.1 3.1 1.0
Amortization of intangibles 0.5 0.6 (0.1)
Gain on disposal of property and equipment (0.4) (0.1) (0.3)
---- ---- ----
Operating Ratio 91.3% 89.4% 1.9%
==== ==== ====
</TABLE>
-26-
<PAGE>
Salaries, wages and fringe benefits for the first quarter of 1996 increased
$7.9 million or 128 percent compared with the first quarter 1995 due to the
addition of $7.6 million in salaries, wages and fringe benefits attributable to
the Acquired Companies. The 0.9 percentage point increase in salaries, wages and
fringe benefits as a percentage of revenues is attributable primarily to the
Acquired Companies, because at March 31, 1996 only 22 percent of their combined
driver base consisted of owner operators, whose costs are reflected in purchased
transportation. In contrast, at March 31, 1995 50.7 percent of the Predecessor
Company driver base consisted of owner operators. The Predecessor Company also
had increases in wages and salaries for drivers and terminal personnel due to
the increased mileage during the first quarter of 1996.
Purchased transportation costs were up $5.1 million in the first quarter of
1996, but decreased on a percentage of revenue basis by 3.9 percentage points.
The Acquired Companies added $4.3 million to these costs, but their driver base,
which consists of just 22 percent owner operators, helped to lower purchased
transportation costs as a percentage of revenue. The Predecessor Company showed
an increase of $793,000 in purchased transportation costs due to expanded
freight opportunities and its continued use of owner operator drivers.
Operating supplies and expenses for the Company were $5.4 million higher
for the quarter ended March 31, 1996 than for the Predecessor Company for the
quarter ended March 31, 1995. Of this increase, $5.0 million is attributable to
the Acquired Companies. The Predecessor Company also added $419,000 to this
increase due to increased fuel costs and maintenance expenses. The 5.0
percentage point increase in operating supplies as a percent of revenues is
mainly attributable to the Acquired Companies, whose driver base consists of 78
percent of Company employees, contributing to higher fuel and maintenance costs
for Company owned equipment. The Company's fuel price has increased
approximately $.12 per gallon from the first quarter of 1995 to 1996. See
"--Fuel Costs" below.
Depreciation and amortization of capital leases were up $1.5 million, but
decreased as a percentage of revenue in the first quarter of 1996 due to the
acquisition of used assets from Freymiller and the short-term lease of certain
Freymiller assets. This amount as a percentage of revenues is expected to
increase as these assets are replaced with new trailers and tractors.
Claims and insurance expenses were up $802,000, but as a percentage of
revenues improved during the first quarter of 1996 due to continued favorable
claims experience at the Predecessor Company and to the centralization of
AmeriTruck's risk management program.
General supplies and expenses increased by $1.2 million for the first
quarter of 1996 when compared with the same period in 1995. The general supplies
and expenses of the Acquired Companies account for the entire increase as the
Predecessor Company had a slight decrease in this category. The largest
components of these expenses of the Acquired Companies were building and
equipment rents, utilities and office expenses.
Interest expense increased $3.0 million for the quarter ended March 31,
1996 over the same period in 1995. Interest on the Old Notes issued in November
1995 is the primary factor for this change.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994
Net Income
For the year ended December 31, 1995, the Company had net income of $3.2
million compared with net income for the Predecessor Company of $3.1 million for
1994. The additional revenue and operating income in 1995 from the Acquired
Companies was substantially offset by additional interest costs incurred on the
Old Notes.
-27-
<PAGE>
Revenues
In 1995 the Company had revenues of $102.8 million compared with $80.1
million for the Predecessor Company in 1994, an improvement of 28.4 percent.
This increase reflects $17.5 million of revenues from the Acquired Companies.
The Predecessor Company had increases of 11.1 percent in total miles and 4.6
percent in revenues per total mile. Expanded freight opportunities at W&L added
$5.5 million to revenues, primarily as a result of the purchase of Dietz Motor
Lines, Inc. in May 1995.
Expenses
The following table sets forth operating expenses as a percentage of
revenues and the related variance from 1995 to 1994.
<TABLE>
<CAPTION>
Variance
Increase
1995 1994 (Decrease)
----- ----- ----------
<S> <C> <C> <C>
Salaries, wages and fringe benefits 31.6% 29.5% 2.1%
Purchased transportation 25.8 29.4 (3.6)
Operating supplies and expenses 14.4 12.5 1.9
Depreciation and amortization of 7.2 7.3 (0.1)
capital leases
Claims and insurance 4.3 4.0 0.3
Operating taxes and licenses 3.0 3.0 -
General supplies and expenses 3.6 3.1 0.5
Amortization of intangibles 0.5 0.8 (0.3)
Gain on disposal of property and (0.4) (0.4) -
equipment ---- ---- ----
Operating Ratio 90.0% 89.2% 0.8%
==== ==== ====
</TABLE>
Salaries, wages and fringe benefits for the year ended December 31, 1995
increased $8.8 million or 37.3 percent compared with 1994 due to the addition of
$6.7 million in salaries, wages and fringe benefits attributable to the Acquired
Companies. The 2.1 percentage point increase in salaries, wages and fringe
benefits as a percentage of revenues is attributable primarily to the Acquired
Companies because only 10.9 percent of their combined driver base consisted of
owner operators, whose costs are reflected in purchased transportation. In
contrast, at December 31, 1995, 43.2 percent of the Predecessor Company driver
base consisted of owner operators. Of the remaining difference, $1.9 million in
additional salaries and wages were incurred by W&L. This was attributable to an
increase in drivers for 1995 due to expanded freight opportunities.
Purchased transportation costs were up $3.1 million, but decreased on a
percentage of revenue basis by 3.6 percentage points. The Acquired Companies
added $2.1 million to these costs, but their driver base, which consists of just
10.9 percent owner operators, helped to lower purchased transportation costs on
a percentage of revenue basis. W&L showed an increase of $1.3 million in
purchased transportation costs due to expanded freight opportunities and its
continued use of owner operator drivers. Thompson Brothers partially offset
these increases with a small decline in its purchased transportation costs.
Operating supplies and expenses for the Company were $4.7 million higher
for the year ended December 31, 1995 over 1994. Of this increase, $3.9 million
is attributable to the Acquired Companies. Thompson Brothers also added $610,000
to this increase due to increased maintenance and fuel costs. The 1.9 percentage
point increase as a percentage of revenues is mainly attributable to the
Acquired Companies, whose driver base consists of 89.1 percent of Company
employees which contributes to more Company owned equipment and higher
maintenance and fuel costs.
Interest expense increased $1.6 million for the year ended December 31,
1995 over the same period in 1994. Interest on the Old Notes issued in
November 1995 is the primary factor for this change.
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<PAGE>
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1993
Net Income
For the year ended December 31, 1994, the Predecessor Company's net income
improved $811,000, or 35.2 percent when compared to the prior year, due
primarily to an $830,000, or 191.5 percent, improvement in net income at W&L.
This increase in net income resulted from a 17.3 percent improvement in
revenues, caused by strong specialized freight demand, selected rate increases
and improved equipment utilization, and a 2.7 percentage point decrease in
operating expenses as a percentage of revenues. These improvements produced a
$1.6 million improvement in income from operations.
Revenues
In 1994 the Predecessor Company had revenues of $80.1 million compared with
$72.8 million in 1993, an improvement of 10.0 percent. This increase in revenues
was primarily attributable to strong specialized freight demand, selected rate
increases and improved equipment utilization. As a result of the above, the
Predecessor Company had increases of 8.4 percent in total miles, 1.5 percent in
revenues per total mile and 3.7 percent in daily revenues per tractor. The $6.6
million improvement in W&L's revenues accounted for 90.9 percent of the overall
improvement in total revenue.
Expenses
The following table sets forth operating expenses as a percentage of
revenues and the related variance from 1994 to 1993.
<TABLE>
<CAPTION>
Variance
Increase
1994 1993 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Salaries, wages and fringe benefits 29.5% 29.7% (0.2)%
Purchased transportation 29.4 29.2 0.2
Operating supplies and expenses 12.5 14.1 (1.6)
Depreciation and amortization of capital 7.3 7.1 0.2
leases
Claims and insurance 4.0 4.1 (0.1)
Operating taxes and licenses 3.0 2.8 0.2
General supplies and expenses 3.1 3.0 0.1
Amortization of intangibles 0.8 0.9 (0.1)
(Gain) loss on disposal of property and (0.4) (0.5) 0.1
equipment ---- ---- -----
Operating Ratio 89.2% 90.4% (1.2)%
==== ==== =====
</TABLE>
Salaries, wages and fringe benefits increased $2.0 million, or 9.5 percent,
for the year ended December 31, 1994 when compared with the same period in 1993,
due primarily to an increase in total miles and a corresponding increase in
drivers, but declined 0.2 percentage points as a percentage of revenue.
Operating supplies and expenses for the Predecessor Company were down
$208,000, or 1.6 percentage points as a percentage of revenues, for the year
ended December 31, 1994 compared to the year ended December 31, 1993. These
savings were primarily attributable to reductions in tractor supplies and
maintenance costs at Thompson Brothers.
Interest expense for the Predecessor Company decreased $219,000, as average
long-term debt outstanding was lower on a year over year basis.
-29-
<PAGE>
CONTINGENCIES
Bangerter has been named as a defendant in a lawsuit entitled The Ekotek
----------
Site PRP Committee v. Steven M. Self et al., Civil No. 2:94CV277K (U.S. District
- ------------------------------------------
Court Utah, Central Division), alleging that Bangerter is a potentially
responsible party with respect to the removal and remediation cost of The Ekotek
Site, located in North Salt Lake City, Utah. The suit alleges that hazardous
waste generated by Bangerter, together with substantial volumes of additional
hazardous waste generated by numerous other businesses, were taken to the site
by a waste disposal firm engaged by Bangerter. It is the opinion of management
and counsel that the probable exposure to Bangerter is approximately $40,000. It
is reasonably possible that Bangerter could be required to pay up to $85,000.
The Company cannot predict with any certainty that it will not in the future
incur liability with respect to environmental compliance or liability associated
with the contamination of additional sites owned or operated by the Company and
the Operating Companies, sites formerly owned or operated by the Company and the
Operating Companies (including contamination caused by prior owners and
operators of such sites), or off-site disposal of hazardous material or waste
that could have a material adverse effect on the Company's consolidated
financial condition, operations or liquidity.
The Company and the Operating Companies are a party to litigation
incidental to its business, primarily involving claims for personal injury or
property damages incurred in the transportation of freight. The Company is not
aware of any claims or threatened litigation that might have a material adverse
effect on the Company's consolidated financial position, operations or
liquidity.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the three months ended March 31,
1996 was $2.6 million compared with net cash provided by operating activities of
$4.1 million for the three months ended March 31, 1995. The decrease of $6.7
million was primarily attributable to a $6.3 million increase in accounts
receivable during the first quarter of 1996 for the Acquired Companies and a
decrease in net income of $1.0 million. These decreases were partially offset by
an increase in depreciation and amortization of capital leases of $1.5 million.
In November 1995, AmeriTruck completed the private placement of the Old
Notes. The Old Notes were exchanged for the New Notes in February 1996. The New
Notes mature on November 15, 2005, and are unsecured subordinated obligations of
the Company. These notes bear interest at the rate of 12.25 percent per annum
from November 15, 1995, payable semiannually on May 15 and November 15 of each
year, commencing on May 15, 1996. The New Notes are subject to optional
redemption on the terms set forth in the Indenture. As of March 31, 1996, the
Company has applied the net proceeds of the Old Notes primarily to finance the
Acquisitions and prepay debt and capitalized leases.
NationsBank Credit Facility
In February 1996, the Company and the Operating Companies entered into a
Loan Agreement and related documents (collectively, the "NationsBank Credit
Facility") with NationsBank of Texas, N.A. ("NationsBank") pursuant to which
NationsBank has committed, subject to the terms and conditions of the
NationsBank Credit Facility, to provide a $30 million credit facility to the
Company. Borrowings under the NationsBank Credit Facility can be used for
acquisitions, operating capital, capital expenditures, letters of credit and
general corporate purposes. Pursuant to the NationsBank Credit Facility,
NationsBank has agreed to provide a $30 million revolving credit facility, with
a $7 million sublimit for letters of credit, maturing on February 1, 1998, at
which time the revolving credit facility will convert into a term loan maturing
on February 1, 2003. Borrowings under the NationsBank Credit Facility bear
interest at a per annum rate equal to either NationsBank's base rate or the rate
of interest offered by NationsBank in the interbank eurodollar market plus an
additional margin ranging from 1.5 percent to 1.75 percent based on the Senior
Funded Debt Ratio of the Company. The Company also pays a letter of credit
issuance fee and a quarterly unused facility fee. Borrowings under the
NationsBank Credit Facility were $25.4 million at March 31, 1996 and were
primarily used for the purchase of the Freymiller Assets.
The Company's obligations under the NationsBank Credit Facility are
collateralized by substantially all assets of the Company and its subsidiaries
and are guaranteed in full by each of the Operating Companies. For purposes of
the Indenture, such borrowings under the NationsBank Credit Facility constitute
Senior Indebtedness of the Company and Guarantor Senior Indebtedness of the
Operating Companies.
The NationsBank Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative and negative covenants, including a limitation
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<PAGE>
on the incurrence of indebtedness and a requirement that the Company maintain a
specified Senior Funded Debt Ratio and Fixed Charge Coverage Ratio.
Volvo Credit Facilities
In February 1996, the Company and the Operating Companies entered into a
Loan and Security Agreement, a Financing Integration Agreement and related
documents (collectively, the "Volvo Credit Facilities") with Volvo Truck Finance
North America, Inc. ("Volvo") pursuant to which Volvo has committed, subject to
the terms and conditions of the Volvo Credit Facilities, to provide (i) a $10
million line of credit facility (the "Volvo Line of Credit") to the Company and
the Operating Companies, and (ii) up to $28 million in purchase money or lease
financing (the "Equipment Financing Facility") in connection with the Operating
Companies' acquisition of new tractors and trailers manufactured by Volvo GM
Heavy Truck Corporation. Borrowings under the Volvo Line of Credit are secured
by certain specified tractors and trailers of the Company and the Operating
Companies (which must have a value equal to at least 1.75 times the outstanding
amount of borrowings under the Volvo Line of Credit) and are guaranteed in full
by each of the Operating Companies. Borrowings under the Volvo Line of Credit
bear interest at the prime rate. The Volvo Line of Credit contains customary
representations and warranties and events of default and requires compliance
with a number of affirmative and negative covenants, including a profitability
requirement and a coverage ratio.
The Equipment Financing Facility is being provided by Volvo in connection
with the Operating Companies' agreement to purchase 400 new trucks manufactured
by Volvo GM Heavy Truck Corporation between March 1, 1996 and June 30, 1997. The
Operating Companies have agreed to utilize such facility for at least the first
200 of the new trucks. The borrowings under the Equipment Financing Facility are
collateralized by the specific trucks being financed and are guaranteed in full
by each of the Operating Companies. Borrowings under this facility bear interest
at the prime rate. There were no borrowings outstanding at March 31, 1996.
The Equipment Financing Facility contains customary representations and
warranties, covenants and events of default. For purposes of the Indenture, the
borrowings under the Volvo Credit Facilities constitute Senior Indebtedness of
the Company and Guarantor Senior Indebtedness of the Operating Companies.
The Operating Companies began taking delivery of the trucks in early May at
the rate of 10 per week, with total expected deliveries for the second quarter
of 80 trucks. Another 30 trucks are scheduled for delivery during the third
quarter of 1996. To offset these expenditures of approximately $7.6 million, the
Company intends to sell at least 83 used trucks from the Operating Companies for
approximately $2.7 million.
Capital Expenditures and Resources
The Company had capital expenditures, net of cash proceeds from
dispositions, of $8.4 million for the three months ended March 31, 1996,
excluding the purchase of the Freymiller Assets, and $1.4 million for the three
months ended March 31, 1995. These amounts also do not include capital
expenditures financed through capital leases and other debt which amounted to
approximately $110,000 and $915,000 for the first quarters of 1996 and 1995,
respectively. The increase in capital expenditures during the first quarter of
1996 was primarily due to the purchase of new trailers.
AmeriTruck projects 1996 capital expenditures to increase over 1995 levels.
The Company will purchase at least 200 new trucks and 200 new trailers during
1996. In addition, in February 1996, the Company, through ART, purchased certain
assets of or related to Freymiller Trucking Inc. See "Acquisition of Freymiller
Assets."
-31-
<PAGE>
These purchases and commitments will likely be financed using a combination
of sources including, but not limited to cash from operations, leases, debt
issuances and other miscellaneous sources. Each financing decision will be based
upon the most appropriate alternative available.
Opportunistic Acquisitions
The Company will pursue opportunistic acquisitions to broaden its
geographic scope, to increase freight network density and to expand into other
specialized trucking segments. Through acquisitions, the Company believes it can
capture additional market share and increase its driver base without adopting a
growth strategy based on widespread rate discounting and driver recruitment,
which the Company believes would be less successful. The Company believes its
large size relative to many other potential acquirers could afford it greater
access to acquisition financing sources such as banks and capital markets.
AmeriTruck has entered into a revolving credit facility with NationsBank of
Texas, N.A. and a revolving credit facility with Volvo Truck Finance North
America, Inc. As described above, these revolving credit facilities, subject to
the conditions on borrowing contained therein, will give AmeriTruck the ability
to pursue acquisitions that the Company could not otherwise fund through cash
provided by operations. In addition, the Company may finance its acquisitions
through equity issuances, seller financing and other debt financings.
The Company is a holding company with no operations of its own. The
Company's ability to make required interest payments on the New Notes depends on
its ability to receive funds from the Operating Companies. The Company, at its
discretion, controls the receipt of dividends or other payments from the
Operating Companies.
FUEL COSTS
The industry as a whole has seen dramatic increases in fuel prices.
According to a Department of Energy survey, reported by the American Trucking
Association, the price of diesel fuel has increased on a national average of
15.7 cents per gallon from January 1, 1996 to April 15, 1996. Steeper increases
have occurred in the East Coast, Midwest and Gulf Coast regions. The Company has
seen its fuel prices increase at a rate consistent with the national average.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
From time to time, the Company issues statements in public filings or press
releases, or officers of the Company make public oral statements with respect to
the Company, that may be considered forward-looking. In connection with the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, the Company believes that the following important factors, among others,
could cause the Company's actual results for its 1996 fiscal year and beyond to
differ materially from those expressed in any forward-looking statements made
by, on behalf of, or with respect to, the Company: inflation and fuel costs;
substantial leverage; absence of combined operating history; dependence on
certain customers; cyclicality and other economic factors; competition;
availability of drivers; regulation; claims exposure; and dependence on key
personnel. Each of these risk factors is discussed in more detail under "Risk
Factors" and are incorporated herein by reference.
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<PAGE>
THE INDUSTRY
GENERAL
The Company estimates that the highly fragmented U.S. trucking industry had
revenues of approximately $312 billion in 1993. The largest segments of the
industry include local carriers (i.e., pick-up and delivery within a
metropolitan area or town) and private or "in-house" fleets. These segments of
the industry collectively accounted for approximately $196 billion in revenues
in 1993. The remainder of the U.S. trucking industry is comprised of intercity
"for-hire" carriers which collectively accounted for approximately $116 billion
in revenues in 1993.
Intercity for hire carriers consist primarily of truckload ("TL") carriers,
which generally carry large shipments (typically over 10,000 pounds) by the full
truckload for customers paying on the basis of mileage rather than weight, and
less-than-truckload ("LTL") carriers, which generally handle shipments ranging
from 50 to 10,000 pounds, for customers paying on the basis of weight, volume
and mileage.
Both the TL and LTL segments consist of general freight carriers and
specialized freight carriers. General freight carriers compete primarily on the
basis of price and service quality and reliability. Specialized carriers compete
less on price than do general freight carriers, and differentiate themselves
more on the basis of quality, specialized handling and equipment, and often on
customized service. Such specialized services generally command higher rates.
Specialized trucking companies include carriers of time-sensitive freight,
temperature-controlled goods, hazardous materials, oversize freight,
automobiles, bulk liquids and other freight requiring special attention and
specialized equipment, personnel and handling.
AmeriTruck competes in specialized niches primarily as a TL carrier, but
also has substantial specialized LTL operations.
U.S. TRUCKING INDUSTRY 1993 REVENUE
$311.8 BILLION
(IN BILLIONS)
[Includes a pie chart that shows the following information:
Segment 1993 Revenue (in billions)
------- --------------------------
Local (private &
For-hire) $122.1
Inter-city
Private Fleets $ 74.1
Intra-state
For-hire $ 20.0
Parcel and other $ 24.8
Truckload $ 47.8
LTL $ 23.0]
Source: Transportation Technical Services, "The Motor Carrier Industry in
Transition"
-33-
<PAGE>
TRUCKLOAD AND LESS-THAN-TRUCKLOAD CARRIERS
TL Carriers. Truckload carriers generally carry large shipments (typically
over 10,000 pounds) by the full truckload. TL carriers are typically not
unionized and generally have lower capital requirements and operating costs than
LTL carriers, the largest of which are unionized. The truckload market is
generally segmented on the basis of length of haul. In the long haul market, the
average length of haul is generally greater than 750 miles. In this segment,
truckload carriers compete with air freight on the basis of lower prices and
with railroads on the basis of service. In the medium-to-long haul segment, the
average length of haul generally ranges from 250 to 750 miles. In both the long
haul and medium haul segments, intermodal transportation, or the transportation
of freight containers or truck trailers by a combination water, rail and truck
carriers, has become an increasingly important competitor as railroads have
reduced costs and improved overall dependability. In the short haul segment, the
average length of haul is generally less than 250 miles. This segment usually
involves "same day" or next day service, and has a heavy concentration of
in-house carriers. Generally, freight rates and operating expenses are higher in
the short haul segment than in longer haul segments.
LTL Carriers. Less-than-truckload carriers specialize in carrying
merchandise in less-than-truckload quantities, typically 50 to 10,000 pounds per
shipment. LTL carriers typically utilize a network of regional hubs to sort,
consolidate and distribute the loads they receive from their customers. The LTL
segment also is categorized by length of haul, and is divided into long-haul and
regional carriers. Regional LTL operations, such as certain of the operations
conducted by the Company, tend to be more profitable than long-haul LTL
businesses, in part because more regional LTL carriers are non-union and can
operate with fewer sorting facilities.
CONSOLIDATION AND OTHER TRENDS
Although the trucking industry is still highly fragmented, the industry has
consolidated in recent years. For example, according to statistics officially
reported to the ICC, the ten largest truckers represented 56% of ICC-reported
revenue in 1994, compared to only 40% for the ten largest carriers in 1980.
Excluding United Parcel Service, a large package express company, the ten
largest carriers had approximately 42% of the ICC-reported revenue in 1994
compared to 26% in 1980. While historically the LTL segment has been
substantially more concentrated than other segments of the trucking industry,
the rate of consolidation in the TL and specialized segments have been
accelerating. The factors contributing to increased consolidation include the
popularity of "core carrier programs", the reduced dependence of many shippers
on their own private fleets, substantial operating cost efficiencies that accrue
to carriers that achieve "critical mass", the increased importance of out-
sourced logistics services and the substantial easing of trucking regulation
since 1980.
In recent years, many shippers have substantially improved the cost and
efficiency of their distribution systems by relying on a smaller number of
preferred, core carriers. This trend has increased the service and reliability
demands placed on such core carriers, and has increased carriers' needs for
sizable pools of dedicated equipment. At the same time, many private fleet
operators are increasingly utilizing for-hire carriers in lieu of their own
fleets for many of their transportation functions. Some shippers are dropping
part or all of their private trucking operations, often by selling their fleets
to a carrier that then acts as the shipper's core carrier.
The operating cost advantages of large carriers can be substantial in areas
such as negotiating purchasing discounts for equipment, fuel, parts, tires,
insurance, telecommunications services and banking services. In addition, with
properly synchronized freight networks, large fleets can reduce idle time and
empty miles run between successive loads to levels which most small fleets
cannot achieve. Many carriers, for example, are continually looking for
acquisitions that would complement the acquiring carriers' regional
capacity/demand imbalances.
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<PAGE>
Shippers are increasingly outsourcing logistics management services, as
many companies realize that such services can be more efficiently provided by
third party logistics specialists. Logistics involves the co-ordination of
transportation, inventory management, warehousing, materials management and
customer service in a manner that optimizes the total profit contribution of all
five functions. The Company believes that many of the participants in the
logistics industry function primarily as brokers who purchase transportation
services on the shipper's behalf. As the demand for third-party logistics
services increases, carriers that cannot offer logistics services may
increasingly find themselves dealing with third-party providers of logistics
services rather than dealing with shippers themselves. Most small carriers are
unwilling to make the substantial investments in technology and staffing
required to develop an ongoing competence in logistics, and large carriers that
have developed the required logistics staffing and technical support are among
the major practitioners of logistics out-sourcing.
Certain laws, including the Motor Carrier Act of 1980 and the Trucking
Industry Regulatory Reform Act of 1994, have substantially deregulated the
trucking industry. The two most important results of regulatory reform have been
the reduced role of Teamster's labor in trucking and the dramatic increase in
competitive standards throughout the industry. While entry barriers are
relatively low in many segments of the industry, smaller operators often are
inefficient. Such industry circumstances present significant growth
opportunities for the better-managed companies.
Certain carriers have focused on regional growth strategies. A regional
focus enables LTL carriers to provide higher service levels to customers. In the
TL segment, a regional strategy helps to minimize driver turnover because
drivers are able to return home frequently. With average driver turnover in the
TL segment at very high levels, the growth of many carriers is constrained by
their ability to hire qualified drivers. Carriers such as the Operating
Companies, which focus on regional markets, generally have had more success in
attracting and retaining drivers because drivers generally return home with more
regularity.
The trucking industry as a whole tends to be seasonal, with higher revenues
in the second and third quarters and significantly lower revenues in the first
quarter of the year.
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<PAGE>
BUSINESS
OVERVIEW
AmeriTruck is one of the largest specialized trucking companies in the
United States. The Company's services include time-sensitive delivery (e.g.,
mail, inventory for customers with just in time programs), special handling
(e.g., medical lab supplies, furniture), specific temperature control (e.g.,
processed foods, laboratory supplies), "dedicated" fleets and logistics
services. For the year ended December 31, 1995, the Company had pro forma
historical combined revenues of $150.2 million and EBITDA of $27.3 million.
On a pro forma basis, for the year ended December 31, 1995 the Company had
an operating profit margin that would have ranked among the top 10% in the
industry, based on all trucking companies officially reporting to the ICC. After
giving effect to the Acquisitions and the Initial Offering, the Company's pro
forma operating ratio (operating expenses as a percentage of operating revenues)
was 89.3% for 1995, compared to the industry average of 96.6% for trucking
companies officially reporting to the ICC for the first nine months of 1995 (the
most recent period for which data is available). AmeriTruck's high profitability
and strong cash flow are largely attributable to the compensatory rates that the
Company charges for reliable, specialized service and to its operational
efficiency. Moreover, the Company's low driver turnover rate provides a
substantial competitive advantage by enabling AmeriTruck to retain experienced,
professional drivers and to provide cost-efficient, high quality service. The
Company's driver turnover rate in 1995 was approximately 40%, which the
Company believes is substantially lower than the industry as a whole, with many
carriers having turnover rates of 80% or higher. The Company believes that, due
to the nature of its customer base, on a combined basis the Operating Companies
are less exposed than many other large trucking companies to cyclical and
seasonal fluctuations.
AmeriTruck was formed in August 1995 to effect the combination of six
regional trucking lines: W&L, Thompson Brothers, Bangerter, ART, Scales and CBS.
The Acquisitions were made in consideration for shares of AmeriTruck Common
Stock and cash. The cash portion was funded with a portion of the proceeds of
the Initial Offering and the Acquisitions closed simultaneously with the closing
of the Initial Offering. All of the chief executive officers of the Operating
Companies have remained in senior management positions, and management and
employees of the Company will beneficially own in the aggregate approximately
51% of the Company's outstanding Common Stock.
STRATEGY
The Company focuses largely on specialized segments of the trucking
industry, where customized service and strong customer relationships provide
defensible market positions. By managing the Company's operations on a
decentralized basis, AmeriTruck intends to preserve the entrepreneurial drive
and customer and driver relationships of the regional Operating Companies, while
benefiting from the critical mass of a larger, national company. Given the
fragmented nature of the trucking industry, the Company intends to pursue growth
through opportunistic acquisitions.
Specialized Service in Defensible Market Segments
By providing specialized services for customers with complex distribution
requirements, the Company reduces its exposure to the intense price competition
that is common in the general freight segment of the trucking industry.
Moreover, because much of the Company's operations are integrated with its
customers' inventory and distribution systems, AmeriTruck's services often
cannot be easily or quickly replaced. For example, the Company's "dedicated"
services (i.e., dedicated, specialized equipment and employees) enable customers
to rely on AmeriTruck and eliminate or reduce their in-house distribution
operations and trucking fleets. In such cases, customers are often heavily
dependent on the Company. The Company also provides
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<PAGE>
just-in-time distribution services that enable customers to eliminate or
minimize inventory. Timing errors can force production shutdowns or otherwise be
extremely costly for customers with operations that depend on just-in-time
deliveries, so service reliability is critical.
Decentralized Operations Management
The Company manages operations and marketing on a decentralized basis.
Management believes this strategy will enable AmeriTruck to maintain the high
quality service and close customer relationships that are more typical of
smaller carriers. Management also believes this approach is critical to
maintaining the low driver turnover rates of the Operating Companies, which
contribute to their ability to provide high quality service and to minimize
costs.
Administrative/Purchasing Savings and Freight Network Coordination
The Company commands negotiating strength greater than the Operating
Companies have recognized independently in such areas as equipment and parts,
fuel, insurance and financing. Additionally, the Company expects to benefit from
cross-marketing and backhaul opportunities among the Operating Companies'
respective geographic regions. For example, the Company expects that Thompson
Brothers, which holds a strong market position in the Dakotas, will now be able
to profitably move freight to the western mountain states, from which it can
haul return loads sourced by Bangerter, which operates in these states. In the
past, Thompson Brothers had foregone certain opportunities to ship into these
states because it lacks a direct customer base in that region and, accordingly,
would have been forced to backhaul brokered loads at significantly lower rates.
The Company believes that freight network coordination will enable it to improve
equipment utilization, decrease the frequency of brokered loads, and create a
network that better allows the Company to consistently haul higher-rate loads
with a lower percentage of empty miles and reduced downtime between loads.
Opportunistic Acquisitions
The Company will pursue opportunistic acquisitions to broaden its
geographic scope, to increase freight network density and to expand into other
specialized trucking segments. Through acquisitions, the Company can capture
additional market share and increase its driver base without adopting a growth
strategy based on widespread rate discounting and driver recruitment, which the
Company believes would be less successful. The trucking industry is extremely
fragmented with over 40,000 carriers. Most of these companies are
undercapitalized, regional operators that lack both the balanced freight
networks required to maintain high utilization and the regional density needed
to fully satisfy customer equipment requirements. The Company believes its large
size relative to many other potential acquirers could afford it greater access
to acquisition financing sources such as banks and capital markets. AmeriTruck
has entered into a $30 million revolving credit facility with NationsBank of
Texas, N.A. and a $10 million revolving credit facility with Volvo Truck Finance
North America, Inc. See "Description of Certain Indebtedness" for a description
of these revolving credit facilities. These revolving credit facilities, subject
to the conditions on borrowing contained therein, will give AmeriTruck the
ability to pursue acquisitions that the Company could not otherwise fund through
cash provided by operations. In addition, the Company may finance its
acquisitions through equity issuances, seller financing and other debt
financings.
-37-
<PAGE>
OVERVIEW OF THE OPERATING COMPANIES
<TABLE>
<CAPTION>
THOMPSON
W&L BROTHERS BANGERTER ART SCALES CBS
-------------- --------------- -------------- ----------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Headquarters: Conover, NC Sioux Falls, SD Layton, UT Atlanta, GA Homer, GA Conyers, GA
Business Lines: . Furniture . Temperature . Temperature . Just in time . Just in time . General freight
. Temperature controlled controlled (hospital and
controlled . Mail medical
supplies)
. Temperature
controlled
Significant . Thomasville . U.S. Postal . Smith Food . Curtin . Target . International
Customers: Furniture Service & Drug Matheson . CertainTeed Paper
. Broyhill . Ore-Ida . Frito-Lay Scientific . Owens . Everything's
Furniture . J.R. Simplot . Ocean . Crowley Corning A Dollar
. Iowa Beef Spray Maritime . American
Processors Corp. National
. Kahn's Foods Can
Line haul 382 248 201 536 104 107
tractors(1):
Trailers(1): 968 366 356 624 377 185
Average Length 994 673 419 975 261 573
of Haul (in
miles)(2):
Number of 3 4 4 20 5 3
Facilities(2):
</TABLE>
_____________
(1) Includes owned, leased and independent contractor units as of March 31,
1996.
(2) As of March 31, 1996.
-38-
<PAGE>
W&L Services Corp.
W&L is headquartered in Hickory, North Carolina and has been in business
since 1961. At March 31, 1996, W&L operated 382 line haul tractors and 866 line
haul trailers, approximately 33% of which are temperature controlled, 69 local
tractors and 102 local trailers.
W&L provides high quality, specialized outbound service to furniture
manufacturers located in the North Carolina and southern Virginia markets and to
shippers of refrigerated products for backhaul to North Carolina. Management
believes that W&L is the second largest specialized furniture hauler in the
country. W&L's operations are structured for the efficient handling of LTL
shipments of upholstered and cartoned furniture, averaging approximately 450
pounds per shipment. Freight is generally picked up at primary manufacturing
locations through regularly scheduled daily service and moved to W&L's
consolidation centers in Hickory and Conover, North Carolina. Freight is held in
the consolidation center until a full load has been accumulated for a specific
market area, which generally takes two or three days. Freight is loaded from the
consolidation center into line haul trailers, in a sequence consistent with the
ordering of the stops, which approximate 10 per truckload. Because of its
greater size, relative to its competitors, W&L is able to hold freight at its
consolidation center for shorter periods of time and to configure loads that
deliver within a smaller geographic vicinity. This results in faster deliveries
and better service for both furniture manufacturers and retailers and more
efficient equipment utilization for W&L. W&L's strongest outbound lanes are from
North Carolina into the Midwest and upper Midwest, and its primary backhauls
consist of hauling processed refrigerated foods into North and South Carolina.
Over the years W&L has built strong customer relationships as a result of
its high quality specialized services. W&L's largest customers are Thomasville
Furniture, Broyhill Furniture, Iowa Beef Processors, Lexington Furniture, Basset
Furniture, Hormel Foods, Stanley Furniture, Pulaski Furniture, L&M
Transportation and Vaughan/Bassett. These ten customers accounted for
approximately 31% of W&L's revenues for the year ended December 31, 1995. W&L
has been a multiple recipient of the "Spirit of Excellence Award" from Hormel
Foods.
-39-
<PAGE>
Thompson Bros., Inc.
Thompson Brothers is headquartered in Sioux Falls, South Dakota and has
been in business since 1959. As of March 31, 1996, Thompson Brothers operated a
fleet of 248 line haul tractors, 366 trailers, approximately 69% of which
were temperature-controlled, and five local trailers.
Thompson Brothers operates as a specialized, regional truckload carrier for
various shippers throughout the United States, primarily for the United States
Postal Service and packaged food processors. Thompson Brothers provides contract
mail service to the United States Postal Service under 17 separate contracts,
each contract having a four year term with renewal provisions. These contracts
have various expiration dates ranging from June 30, 1997 through June 30, 1999.
Thompson Brothers' mail contract business accounted for approximately 31% of
revenue for the year ended December 31, 1995. The United States Postal Service
has been a customer of Thompson Brothers since 1962. The United States Postal
Service contracts are operated from three of the four Thompson Brothers
terminals which are located in Kansas City, Kansas, Sioux Falls, South Dakota,
and Fargo, North Dakota.
Thompson Brothers also provides dedicated logistics for Ore-Ida Foods,
Inc., a food processing company. This service includes a dedicated fleet and on-
site loading with freight management services supporting the transportation of
raw materials and the distribution of retail goods. Ore-Ida Foods, Inc.
represented approximately 11% of Thompson Brothers' revenues for the year ended
December 31, 1995. Other principal customers of Thompson Brothers include J.R.
Simplot, John Morrell, American Foods Group, Wampler Longacre, Perdue
Transportation, Americold Trans System, Hendrickson Trailer Suspension and
Federal Beef Processors. These eight customers accounted for approximately 22%
of Thompson Brothers' revenues for the year ended December 31, 1995. Processed
food is generally hauled outbound from the midwest to eastern and southeastern
markets.
J.C. Bangerter & Sons, Inc.
Bangerter is headquartered in Layton, Utah and has been in business since
1964. As of March 31, 1996, Bangerter operated 201 line haul tractors and 356
trailers, of which approximately 87% were temperature controlled.
Bangerter operates as a specialized, regional truckload carrier serving the
grocery store and processed food industries. Bangerter's largest customer is
Smith's Food & Drug, for which it is the company's core truckload carrier.
Smith's Food & Drug accounted for approximately 72% of Bangerter's revenues for
the year ended December 31, 1995. Bangerter concentrates its efforts in the
states of Utah, Arizona and California among a select group of customers who
demand reliable, time-sensitive service. Other large customers include
Frito-Lay, Ocean Spray, Moltan, Day Mark, Kings Onion, Pet, Inc., Blaine Hartley
and Interamerican Public Distribution. These eight customers accounted for
approximately 12% of Bangerter's revenues for the year ended December 31, 1995.
Smith's Food & Drug has been a customer of Bangerter's since 1968, and Bangerter
has been named Smith's Food & Drug Stores' "Vendor of the Year-Transportation"
in each of the past two years.
AmeriTruck Refrigerated Transport, Inc.
ART is headquartered in Atlanta, Georgia and has been in business since
1986. As of March 31, 1996, ART operated 22 straight trucks (vehicles in
which the trailer is integrated with the tractor), 514 line haul tractors and
624 trailers, of which approximately 96% were temperature controlled.
ART provides dedicated transportation and logistics services to customers
with highly individualized freight requirements. ART manages dedicated
refrigerated fleet services for customers in the hospital and medical laboratory
industries. In addition, as a result of the acquisition of the Freymiller
Assets, ART now provides nationwide longhaul temperature-controlled services.
ART's largest customer, Curtin Matheson Scientific, Inc. ("Curtin
Matheson") accounted for approximately 52% of revenues for the year ended
December 31, 1995. For Curtin Matheson, ART linehauls hospital and laboratory
supplies in truckload quantities from a central distribution warehouse in
Florence, Kentucky to regional distribution centers operated by Curtin Matheson
in Atlanta, Orlando, Chicago, New York and Los Angeles. ART provides on-site
transportation managers and uniformed, local delivery drivers for these Curtin
Matheson distribution centers. At one Curtin Matheson facility ART personnel
operate six internal supply centers. For other customers ART designs, implements
and manages both long haul and store door delivery systems for products
requiring high level of service including scheduled deliveries within 30 minute
"windows". ART's goal is to provide greater frequency and reliability of service
at a reduced cost to its customers. For the year ended December 31, 1995 Curtin
Matheson Scientific accounted for approximately 7% of the Operating Companies'
pro forma combined revenues. See "Risk Factors--Dependence on Certain
Customers." Other large customers include Crowley Maritime Corp., Kahns' Foods,
Caruso, Fisons Pharmaceutical, Federal Paperboard, Eli Lilly, Pillsbury, CGM
Lines and Voyager. These nine customers accounted for approximately 33% of ART's
revenues for the year ended December 31, 1995.
The Company believes that the current trend in the industry to outsource
all services outside of core business operations could lead to expanded
opportunities for ART.
-40-
<PAGE>
Scales Transport Corporation
Scales is headquartered in Homer, Georgia and has been in business since
1984. As of March 31, 1996, it operated 104 line haul tractors and 377
trailers. Scales specializes in providing just in time pickup and delivery
service, generally on routes running between Georgia and Florida. Customers
taking advantage of this service are able to minimize inventory levels by
relying on the timeliness of Scales' service. Scales initially specialized in
hauling insulation products for CertainTeed Corporation out of Athens, Georgia.
Scales expanded operations in the late 1980's by adding just in time services
for the container and packaging industry, particularly new cans and bottles. The
commitment to just-in-time service enabled Scales to expand rapidly. In 1989 the
Company opened its second facility in order to service the busy traffic lanes
between Florida and Georgia. Scales has been successful in developing business
in these lanes over the last several years, and now has five facilities.
Target Stores, CertainTeed Corp. and Owens Corning Fiberglass accounted for
approximately 36%, 17% and 10%, respectively, of Scales' revenues for the year
ended December 31, 1995. Other principal customers of Scales include Reynolds
Metals, Crackin' Good Bakers, Southeastern Container, Johnson Control, Ball
Metal, Constar and Anchor Glass. These seven customers accounted for
approximately 20% of Scales' revenues for the year ended December 31, 1995. By
concentrating on serving a select core of customers, Scales is able to achieve
on time performance approximately 99% of the time. Scales has received
outstanding service commendations from CertainTeed Corp. and has been named
"Outbound Carrier of the Year" three years in a row by Target Stores.
The Company believes that growth in the Florida-Georgia routes, coupled
with the demand for just in time service, continues to provide Scales with
opportunities to expand service. By focusing its operations in this region,
Scales intends to increase its visibility and reputation as a carrier delivering
consistent service at a competitive price.
The Company may decide to merge Scales with CBS in order to combine
administrative functions and to create operating efficiencies.
CBS Express, Inc.
CBS is headquartered in Conyers, Georgia and was formed in 1993 by
management of ART and Scales to provide quality service to customers of ART and
Scales with respect to their freight that does not require just in time
delivery. By putting the two groups of clients together, management intended to
devise an efficient mode of operations for an irregular route truckload carrier
servicing the southeastern quadrant of the United States. In addition,
management of ART and Scales have been able to take advantage of the revenue
opportunities created by their complementary customer lists without diverting
attention and resources from the different niche markets served by ART and
Scales. CBS has also sourced freight to ART and Scales at times when their
principal freight sources are at seasonal lows.
As of March 31, 1996, CBS operated 107 line haul tractors and 185
trailers. CBS' primary lanes stretch from Texas to Florida and up into Virginia
and the Carolinas.
International Paper, Everything's A Dollar, American National Can and Owens
Brockway accounted for approximately 21%, 13%, 11% and 7%, respectively, of CBS'
revenues for the year ended December 31, 1995. Other large customers include
Crown Cork & Seal, WalMart, Anheuser-Busch, Trane and Visy Board. These five
customers accounted for approximately 18% of CBS' revenues for the year ended
December 31, 1995.
The Company may decide to merge CBS with Scales in order to combine
administrative functions and to create operating efficiencies.
OPERATIONS
For each of the Operating Companies, the functions of marketing, customer
service and fleet management are managed on a decentralized basis with
coordination provided by the Company.
-41-
<PAGE>
Customer Service and Marketing
The Operating Companies have approximately 119 personnel that work in sales
and marketing. At each of the Operating Companies, the President's primary
responsibility is marketing and maintaining close relationships with major
customers. In addition, each terminal manager functions as both a marketing
executive and an operations executive.
The customer service representatives spend most of their time on the phone
with customers discussing equipment requirements in various regions. In
addition, they coordinate with fleet managers to match available units and
customer demand. In many instances, both the customer service representative and
the driver have worked with the specific customer for several years, which
creates a strong relationship between the Operating Company and the customer.
For the year ended December 31, 1995, Smith Food & Drug accounted for
approximately 12%, the U.S. Postal Service accounted for 8%, and Curtin Matheson
Scientific accounted for approximately 7%, of the Operating Companies' pro forma
combined revenues. The remainder of the Operating Companies' customers are
diversified in terms of customer concentration, industry, and geography.
Following the Acquisitions, the Operating Companies have continued to
market to their existing customers and in their particular regions, primarily by
emphasizing their specialized services and customer attention. However, the
Operating Companies have also begun to cross-market the services offered by the
other Operating Companies, with the intent of creating substantial freight
networking advantages and improving the Operating Companies operating
efficiencies as a whole.
Fleet Management
The primary purpose of fleet management is to promote a productive
relationship between a carrier and its drivers and to optimize the service
performance and productivity of its tractor and trailer fleet. Each of the
Operating Company's fleet managers works with between 40 and 80 drivers and
tractors and is responsible for overseeing and improving driver turnover, driver
productivity, tractor utilization, safety, fuel efficiency, service reliability
and performance and compliance with tractor preventive maintenance requirements.
The Company believes that the relatively small size and personalized management
philosophy at each of the Operating Companies significantly improves the fleet
managers' ability to communicate with and motivate drivers.
The fleet manager's primary role is to communicate with drivers on the road
concerning work assignments, customer needs and driver needs. Fleet managers
also review performance reports for the fleet as a whole and each driver and
tractor within the fleet, reward good drivers, counsel underperforming drivers
and terminate chronically underperforming drivers.
In the future, the fleet managers for each of the Operating Companies will
provide assistance to drivers from other Operating Companies operating in their
geographic region. For example, a Thompson Brothers driver operating in North
Carolina will be able to get help from W&L. The Company believes that this will
improve overall operating efficiencies and driver morale. In addition, through
its management information systems the Company intends to monitor the relative
performance of each fleet manager, with respect to both his or her own drivers
and with respect to drivers from other Operating Companies.
-42-
<PAGE>
REVENUE EQUIPMENT
The Company's equipment fleet at March 31, 1996 was comprised of the
equipment outlined below:
<TABLE>
<CAPTION>
<S> <C>
Line-haul tractors
Tractors................... 1,556
Straight-line trucks....... 22
Local tractors............... 74
-----
Total tractors........ 1,652
=====
Trailers
Temperature-controlled..... 1,447
Dry van and other.......... 1,429
-----
Total trailers........ 2,876
=====
</TABLE>
As the Company replaces older equipment, downtime as well as operating and
maintenance expenses should be reduced. Including the equipment purchased by
the Company that was formerly used in the Freymiller operations, the Company
intends to replace approximately 300 existing tractors with new tractors by June
30, 1997.
In addition to replacing older tractors with new tractors, the Company also
intends to reduce its operating costs by purchasing or replacing tractors and
trailers that are currently held under operating leases.
MAINTENANCE
All the Operating Companies have comprehensive preventive maintenance
programs for their tractors and trailers to minimize equipment downtime and
prolong equipment life. These programs include regular safety checks when a
tractor returns to the terminal, regular preventive maintenance including oil
and filter changes, lubrication, cooling system check and wheel alignment every
15,000 to 20,000 miles, and more extensive maintenance procedures at greater
intervals.
Repairs and maintenance are performed regularly at the Operating Companies'
ten full-service maintenance facilities, with a total of approximately 116
maintenance personnel at March 31, 1996, and at outside shops. ART performs all
of its maintenance at outside shops, and CBS and Scales perform little of their
maintenance at outside shops. As a group the Operating Companies incurred
approximately 33% of their maintenance costs at outside shops for the three
months ended March 31, 1996.
The Company intends to share certain maintenance facilities and personnel
among all the Operating Companies in the future. Combined with the advantages of
a newer fleet, the Company expects this will result in a decrease in the
percentage of maintenance costs incurred at outside shops.
In the future, the Company expects that its replacement of older tractors
with newer tractors will reduce maintenance costs for several reasons. Late
model trucks and components in general are more reliable and have better
warranties. In addition, the Company believes that it will be able to negotiate
better warranty terms because of the negotiating strength of the combined
Operating Companies. Finally, the Company intends to purchase more tractors with
standard specifications for components such as engines and axles, thereby
reducing the complexity of maintenance management.
-43-
<PAGE>
The Company also believes that in the future it will be able to purchase
tires and parts on more favorable terms, thereby reducing maintenance costs. The
Company also intends to trade tractors and trailers out of the fleet before they
could become severe maintenance problems.
FACILITIES
The Company's facilities consist principally of terminals and shops. Some
of these are full service terminals, which typically include administrative
facilities and customer service personnel and complete facilities to perform
both routine and heavy maintenance and to service all equipment based there.
Certain terminals, such as W&L's, have facilities in which freight is
consolidated. Other terminals are limited service terminals, which may include
some customer service personnel but do not have complete maintenance facilities.
The Company also has a number of drop yards, which are used primarily for the
short-term storage of trailers.
The Operating Companies have headquarters in Sioux Falls, South Dakota,
Conover, North Carolina, Layton, Utah, Atlanta, Georgia, Homer, Georgia and
Conyers, Georgia. The Company maintains its principal executive and
administrative offices in Fort Worth, Texas.
-44-
<PAGE>
Set forth below is certain information relating to the Operating Companies'
terminals and office facilities at March 31, 1996:
<TABLE>
<CAPTION>
USE
--------------------------------------------
HEADQUARTERS/
OPERATING OWNED/ ADMINISTRATIVE TRAILER
COMPANY LOCATION LEASED ACREAGE TERMINAL MAINTENANCE OFFICES YARD
- ------- -------- ------ ------- -------- ----------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
W&L Conover, NC Leased 33 X X X X
Hickory, NC Owned 38 X X X
Thomasville, NC Owned 3.1 X X
Thompson Brothers Kansas City, KS Owned 4 X X X
Grand Island, NE Leased 4 X
Fargo, ND Owned 4.5 X X X
Sioux Falls, SD Owned 4 X X X X
Bangerter Phoenix, AZ Owned 9.5 X X X
Fontana, CA Leased 2.8 X
Layton, UT Owned 6.4 X X X X
Green River, WY Leased 4.5 X X X
ART Yorba Linda, CA * * X
Denver, CO * * X
Haines City, FL Leased 1 X X
Orlando, FL * * X
Atlanta, GA Leased 1 X
Kennesw, GA * * X
Ft. Wentworth, GA * * X
Chicago, IL * * X
Florence, KY * * X
Jefferson, LA * * X
Wilmington, MA * * X
Jessup, MD * * X
Morris Plains, NJ * * X
Delco, NC Leased 1 X
Broadview Hts., OH * * X
Charleston, SC Leased 1 X
Houston, TX * * X
Oklahoma City, OK Owned 1 X
Oklahoma City, OK Owned 15 X
Oklahoma City, OK Leased 5 X X
Scales Tampa, FL Leased 2.5 X X X
Athens, GA Leased 3 X
Homer, GA Leased 2 X
Tifton, GA Leased 5 X X X
Valdosta, GA Leased 3 X X
CBS Mobile, AL Leased 4 X
Conyers, GA Leased 3.5 X X X X
Winston-Salem, NC Leased 4 X
</TABLE>
_______________________
* Facility located on customer's property.
In the future, the ability of each of the Operating Companies to use terminals
of other Operating Companies for maintenance and driver support will increase
operating efficiencies for the Operating Companies as a whole.
-45-
<PAGE>
Certain of the Company's facilities are leased from related parties. See
"Certain Transactions."
DRIVERS AND OTHER PERSONNEL; SAFETY
At March 31, 1996, the Operating Companies had approximately 2,500 employees,
of whom 1,831 were drivers. As with most trucking operations, the Operating
Companies experience turnover of its company-employed drivers and contract
operators and, as a result, are continuously seeking qualified individuals to
handle the transportation of shipments. Safety and dependability of all drivers
are of great importance to the Operating Companies' operations. Driver
applicants are required to have at least one year's experience and to pass a
drug test. The Operating Companies' employees are not represented by
unions.
In the year ended December 31, 1995, the Operating Companies combined reported
.67 accidents per million miles. (An accident, as defined by the DOT, involves
death, personal injury with treatment sought immediately, away from the
accident, or a disabled vehicle requiring towing). The industry average, as
reported by the American Trucking Association, for DOT reportable accidents in
1992 (the most recent year for which such information is publicly available)
was 0.9 accidents per million miles. In addition to following DOT regulations
requiring random drug testing and post-accident drug testing, the Operating
Companies rigorously enforce their accident and incident reporting and follow-up
standards.
The Operating Companies employ safety specialists and maintain safety programs
designed to meet their specific needs. In addition, the Operating Companies
employ specialists to perform compliance checks and conduct safety tests
throughout the Operating Companies' operations. The Operating Companies conduct
a number of safety programs designed to promote compliance with rules and
regulations, and to reduce accidents and cargo claims. These programs include
an incentive pay program for accident and claim-free driving, driver safety
meetings, distribution of safety bulletins to drivers and participation in
national safety associations.
RISK MANAGEMENT AND INSURANCE
The primary risk areas in the Company's businesses are bodily injury and
property damage, workers' compensation, and cargo loss and damage. The
Operating Companies currently maintain insurance against these risks and are
subject to liability as a self-insurer to the extent of the deductible under
each policy. The primary risk areas in the Company's businesses are bodily
injury and property damage, workers' compensation and cargo loss and damage.
The Operating Companies currently maintain insurance against these risks and are
subject to liability as a self-insurer to the extent of the deductible under
each policy. The Company maintains liability insurance for bodily injury and
property damage in the amount of $25 million per incident, with a deductible for
bodily injury and property damage of between $50,000 and $300,000 per incident.
The current deductible for workers' compensation in states where most of the
Company's drivers are domiciled ranges from no deductible to $400,000 per claim.
The Company is self-insured as to damage or loss to the property and equipment
they own or lease. In addition, the Company maintains cargo loss and damage
insurance of between $100,000 and $1 million per incident with a deductible
ranging from $5,000 to $50,000 per incident.
FUEL AVAILABILITY AND COST
Approximately 48% of the Company's fuel was purchased at commercial fuel stops
during the year ended December 31, 1995, with the remainder being purchased at
Company facilities. The Company expects that the volumes of fuel purchased by
the Operating Companies, in the aggregate, will create substantially more
negotiating leverage with fuel vendors than the Operating Companies currently
have individually.
-46-
<PAGE>
Furthermore, the Company expects that fuel efficiency (MPG) will improve as the
average age of its tractor fleet improves.
COMPETITION
The Company competes with many other TL and LTL carriers of various sizes,
including divisions or subsidiaries of larger companies, and, to a lesser
extent, railroads, on the basis of price, service and the ability to supply
capacity to customers in a timely manner. The competition has created downward
pressure on the trucking industry's pricing structure. Several trucking
companies with which the Operating Companies compete have greater financial
resources and more revenue equipment than does the Company. See "The
Industry."
REGULATION
State and intrastate motor carriage has been substantially deregulated as a
result of the enactment of the Motor Carrier Act of 1980 and the Trucking
Industry Regulatory Reform Act of 1994. Carriers can now readily enter the
trucking industry and rates and services are largely free from regulatory
controls. However, interstate for hire carriers do remain subject to certain
regulatory controls imposed by the United States Department of Transportation
("DOT"). The trucking industry remains subject to regulation by the states with
respect to certain safety and insurance requirements.
ENVIRONMENTAL REGULATION
The Company's operations are subject to federal, state and local environmental
laws and regulations that impose limitations on the discharge of, and establish
standards for the handling, generation, emission, release, discharge, treatment,
storage and disposal of, certain materials, substances and wastes.
Bangerter has been named as a defendant in a lawsuit entitled The Ekotek Site
---------------
PRP Committee v. Steven M. Self et al., Civil No. 2:94CV277K (U.S. District
- -------------------------------------
Court Utah, Central Division), alleging that Bangerter is a potentially
responsible party with respect to the removal and remediation cost of The Ekotek
Site, located in North Salt Lake City, Utah. The suit alleges that hazardous
waste generated by Bangerter, together with substantial volumes of additional
hazardous waste generated by numerous other businesses, were taken to the site
by a waste disposal firm engaged by Bangerter. It is the opinion of management
and counsel that the probable exposure to Bangerter is approximately $40,000.
It is reasonably possible that Bangerter could be required to pay up to $85,000.
The Company cannot predict with any certainty that it will not in the future
incur liability with respect to environmental compliance or liability associated
with the contamination of additional sites owned or operated by the Company and
the Operating Companies, sites formerly owned or operated by the Company and the
Operating Companies (including contamination caused by prior owners and
operators of such sites), or off-site disposal of hazardous material or waste
that could have a material adverse effect on the Company's consolidated
financial condition, operations or liquidity.
The Company's operations are also subject to laws and regulations governing
air emissions, including the 1990 amendments to the Clean Air Act. The Company
expects that it, together with the rest of the trucking industry, will in the
future become subject to stricter air emission standards, including requirements
that manufacturers produce cleaner-running tractors and that fleet operators
perform more rigorous inspection and maintenance procedures.
-47-
<PAGE>
LEGAL PROCEEDINGS
The Operating Companies are party to routine litigation incidental to its
business, primarily involving claims for personal injury or property damages
incurred in the transportation of freight. The Company is not aware of any
claims or threatened claims that might materially adversely affect the Company's
operating or financial results.
-48-
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and the Presidents of the
Operating Companies are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Michael L. Lawrence(2)..... 51 Director, Chairman and Chief Executive Officer
Richard A. Beauchamp....... 56 Director, Chief Executive Officer of ART
Michael J. Crowe........... 44 Director, President of W&L
Kenneth H. Evans, Jr.(1)... 43 Director, Chief Financial Officer
William Greenwood(1)(2).... 57 Director
Michael J. Langevin(1)..... 49 Director
J. Michael May............. 51 Director, General Counsel and Secretary
Michael Noel............... 58 Vice President--Marketing and Sales
Joseph M. Samford.......... 48 Executive Vice President--Equipment and Maintenance
William P. Scales.......... 55 Director, President of CBS and Scales
Randy Thompson............. 41 Director, President of Thompson Brothers
</TABLE>
_______________________
(1) Member of Audit Committee
(2) Member of Compensation Committee
Richard A. Beauchamp has been a Director and the Chief Executive Officer of
ART since 1988. He has been the President of Transportation Management
Services, Inc. since 1990, the President of I.L.C. Leasing, Inc. from 1988 until
1994, and the President of Carolina Transportation Company from 1992 until June
of 1995. He has also been a director of Crown Anderson, Inc., a pollution
control company, since 1974. Mr. Beauchamp was previously President and Chief
Executive Officer of Refrigerated Transportation Company, Inc. and has 31 years
experience in the trucking industry.
Michael J. Crowe has been a Director and the President of W&L since 1988. He
has also been President of various entities affiliated with W&L. Mr. Crowe, who
has worked in transportation for 17 years, was Vice President of Burlington
Northern Motor Carriers and held executive positions at Roadway and Schneider
National, Inc.
Kenneth H. Evans, Jr. became a Director and Chief Financial Officer of the
Company upon consummation of the Initial Offering. He was National Co-
Chairperson, Transportation Industry Services of Coopers & Lybrand L.L.P. from
1993 until 1995. He was a Business Assurance Partner of Coopers & Lybrand
L.L.P. from 1985 until 1995 and has served transportation clients for 12 years.
-49-
<PAGE>
William E. Greenwood has been President of Zephyr Group since 1994. From 1990
until 1994, Mr. Greenwood was the Chief Operating Officer of Burlington Northern
Railroad. He was the Executive Vice President of marketing from 1986 to 1990.
Mr. Greenwood is a director of Mark VII, an intermodal, third party, truck
brokerage and logistics company, and has served in such position since 1994. He
is also a director of Trancisco, a railcar repair, railcar leasing and full
service railcar manufacturing and transport service company, and has served in
such position since 1994.
Michael J. Langevin has been a Director of the Company since January 1996.
Since 1989, Mr. Langevin has been an independent financial consultant associated
with Dunbar Associates, Inc., a financial management consulting firm.
Michael L. Lawrence has been a Director and the Chairman of the Board of
Directors of Thompson Brothers since July 1990 and of W&L since August 1994.
Mr. Lawrence was a Director and Chief Executive Officer of TRISM, Inc., a
trucking company specializing in carrying heavy machinery and equipment,
explosives and radioactive materials, from January 1990 to March 1995. Mr.
Lawrence was the President, Chief Executive Officer and principal owner of Lucas
Trucking and Leasing from August 1989 to March 1991. He has a total of 22 years
experience in the trucking industry.
J. Michael May has been a Director, General Counsel and Secretary of the
Company since January 1996. From August 1991 to January 1996, Mr. May was
General Counsel and Secretary of TRISM, Inc., and from December 1979 to August
1991 was General Counsel and Secretary of McGil Specialized Carriers, Inc. He
has 25 years experience in the trucking industry.
Michael Noel has been Corporate Vice President of Sales of the Company since
April 1996. He was employed as Executive Vice President of Tranax, Ltd., the
largest Canadian carrier of commodities requiring temperature control, from
April 1994 to April 1996. Prior to that, Mr. Noel was employed as Executive Vice
President of Wintz Companies for ten years.
Joseph M. Samford has been Executive Vice President--Equipment and Maintenance
of the Company since March 1996. He was employed by TRISM, INC. from June 1992
until March 1996, last holding the position of President, Trism Maintenance
Services, Inc., a subsidiary of TRISM, INC. For more than five years prior to
March 1992, Mr. Samford was Vice President of Maintenance at Burlington Motor
Carriers.
William P. Scales has been a Director and the Chief Executive Officer of
Scales since 1984 and a Director and the Chief Executive Officer of CBS since
1993. He has also been the President of Scales Leasing Co., Inc. since 1988.
Mr. Scales previously held managerial positions with Ranger Transportation and
with Refrigerated Transportation Company, Inc. and has 28 years experience in
the trucking industry.
Randy Thompson has been a Director, President and Chief Executive Officer of
Thompson Brothers since 1976. He has 19 years experience in the trucking
industry.
Pursuant to a Stockholder Agreement (the "Stockholder Agreement") entered
into at the time the Acquisitions were consummated, pursuant to the
Reorganization Agreement, the stockholders of AmeriTruck Distribution Corp.
agreed that it will have a Board of Directors comprised of nine members. The
shareholders have agreed to vote for the following persons as Directors: (i) two
individuals designated by BBV, so long as BBV shall hold at least 10% of the
outstanding shares, and thereafter one individual designated by BBV, so long as
it holds any shares; (ii) initially Michael Lawrence, so long as he is the
Chairman, President or Chief Executive Officer of the Company, and thereafter an
individual designated by the nominating committee referred to below; (iii)
initially, Messrs. Crowe, Thompson, Beauchamp and Scales, so long as each is an
executive officer of the Company or the Chairman, President or Chief Executive
Officer of any of the Operating Companies, and thereafter individuals designated
by the nominating committee referred to below; (iv) initially William Greenwood,
and thereafter a person designated by the nominating committee referred to
below; and (v) initially Kenneth H. Evans, Jr., and thereafter a person
designated by the nominating committee referred to below. One of the directors
designated by BBV and the Chairman and Chief Executive Officer of the Company
shall constitute a nominating committee with the power to designate any
replacement for the Directors referred to in (ii) through (v) above.
Notwithstanding the foregoing, if a Control Event (as defined in the Charter)
has occurred and is continuing, the Board of Directors shall be elected as
provided below under "Charter Provisions", and each Stockholder will agree to
vote all shares held by it in favor of any matters recommended for approval by
the stockholders of the Company by the Board of Directors until such time as the
Control Period (as defined in the Charter) has terminated.
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Executive officers of the Company are appointed by the Board of Directors on
an annual basis and serve until their successors have been duly elected and
qualified. There are no family relationships among any of the executive
officers and directors of the Company.
OTHER KEY MANAGEMENT
In addition to the executive officers and directors named above, the
Operating Companies have other key executives, including the following:
Paul L. Bangerter President of Bangerter
James Wills President, Freymiller
Division of ART
Robert O. Tate, Jr. President, CMS
Division of ART
Paul L. Bangerter has been a director and the President of Bangerter since
1990. Prior to that, he was a Vice President of Bangerter and has 30 years
experience in the transportation industry.
Robert O. Tate, Jr. has been President of the CMS Divison of ART since 1992.
Mr. Tate was President of CMS Distribution, a subsidiary of ART, from 1988 to
1992. From 1983 to 1988 he was the owner and President of Dawg Trucking Company,
Inc.
James Wills has been President of the Freymiller Division of ART since
March 1996. Mr. Wills was President of National Carriers, Inc., Liberal, Kansas,
a nationwide transporter of articles requiring temperature control, for more
than five years prior to March 1996. He has more than 25 years experience in the
transportation industry.
EXECUTIVE COMPENSATION
The Company was incorporated in 1995 and did not conduct any operations prior
to November 15, 1995. During the fiscal year ended December 31, 1995, the
Company's most highly compensated executive officers were Messrs. Lawrence,
Evans, Bangerter, Beauchamp, Crowe, Scales and Thompson (the "Named Executive
Officers"), who were paid an initial annual salary of $75,000 (increasing to
$300,000 in October 1996), $192,000, $95,000, $150,000, $150,000, $150,000 and
$150,000, respectively. See "--Employment Agreements."
During the fiscal year ended December 31, 1994, each of the Named Executive
Officers received total cash compensation from the Operating Companies as
follows: Mr. Lawrence--$170,084; Mr. Bangerter--$93,169; Mr. Beauchamp--
$254,000; Mr. Crowe--$379,210; Mr. Scales--$204,000; and Mr. Thompson--$237,380.
Mr. Evans commenced employment with the Company in November, 1995, and Mr. May
commenced employment with the Company in January, 1996.
In addition to their base salary, the Named Executive Officers through their
employment agreements will be eligible to participate in the Company's executive
incentive compensation plan. See "--Executive Incentive Compensation Plan."
See "Certain Transactions."
As of March 31, 1996, Messrs. Evans, Bangerter and May held options to
purchase 105,000, 23,000 and 40,000 shares, respectively, of the Company's
Common Stock.
STOCK OPTION PLAN
Prior to the completion of the Initial Offering, the Company's Board of
Directors and stockholders approved the Company's 1995 Stock Option Plan (the
"1995 Plan"), which provides for the grant of incentive stock options and
nonstatutory stock options to employees, and for the grant of nonstatutory stock
options to consultants, of the Company and its subsidiary corporations. A
maximum of 927,887 shares of Common Stock are currently reserved for issuance
under the 1995 Plan. After giving effect to the Acquisitions there are
approximately 3,300,000 shares of Common Stock outstanding and a warrant to
purchase 375,000 shares of Common Stock. No individual may be granted options
under the 1995 Plan for a number of shares in excess of two-thirds of the shares
that from time to time may be reserved for issuance under the 1995 Plan.
The 1995 Plan is administered by the Compensation Committee, which has
authority to determine which eligible individuals are to receive options, the
terms of such options, including the status of such options as incentive or
nonstatutory stock options under the federal income tax laws, the numbers of
shares, exercise prices, and times at which the options become and remain
exercisable, and the time, manner, and form of payment upon exercise of options,
including cashless exercise or payment of the exercise price with a promissory
note. The exercise price of incentive stock options granted under the 1995 plan
may not be less than 100% of the fair market value of the underlying shares of
Common Stock on the date of grant. Options granted under the 1995 Plan may be
immediately exercisable, or may become exercisable in such cumulative or non-
cumulative installments as the Compensation Committee may determine (subject to
acceleration by the Compensation Committee in whole or in part at any time).
Incentive stock options may not be exercised after a maximum of three months
following termination of the optionee's employment with the Company or one of
its affiliates, except in the event that termination is due to death or
disability, in which case the incentive stock option is exercisable for a
maximum of one year after such termination. Such three-month and one-year
periods may be shortened by the Compensation Committee in the option agreement
evidencing an option grant. In any event, no incentive stock option may be
exercised after the tenth anniversary of its date of grant.
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In the event of any stock dividend, stock split, or reverse stock split
affecting Common Stock, the numbers of shares and exercise prices of outstanding
options under the 1995 Plan will be proportionately adjusted. In the event of a
reclassification or change of outstanding shares of Common Stock, upon exercise
of an option granted under the 1995 Plan, the optionee will receive such shares
of stock or other securities as are equivalent in kind and value to the shares
of Common Stock that the optionee would have received if he had exercised the
option immediately prior to such reclassification or change and thereafter had
continued to hold those shares and all other shares, stock, and securities
thereafter issued in respect thereof.
In the event of a consolidation or merger of the Company with or into another
company, or the sale to another company of all or substantially all of the
Company's assets, then, subject to the following sentence, upon exercise of an
option granted under the 1995 Plan, the optionee will receive such shares of
stock or other securities as are equivalent in kind and value to the shares of
stock and/or other securities that the optionee would have received if he had
held the full number of shares of Common Stock subject to the option immediately
prior to such consolidation, merger, or sale, and thereafter had continued to
hold those shares and all other shares, stock, and securities thereafter issued
in respect thereof. Unless any particular option agreement provides otherwise,
however, in the event of any such consolidation, merger, or sale the
Compensation Committee in its discretion may provide instead that any
outstanding option will terminate, to the extent not previously exercised,
either (i) as of the date of such transaction, in consideration of the Company's
payment to the optionee of an amount of cash equal to the difference between the
aggregate fair market value of the shares of the Company's Common Stock for
which the option is then exercisable and the aggregate exercise price for such
shares under the option, or (ii) at the close of a period of not less than ten
days specified by the Compensation Committee and commencing on the Compensation
Committee's delivery of written notice to the optionee of its decision to
terminate such option without payment of such consideration.
Upon dissolution or liquidation of the Company, all outstanding options
granted under the 1995 Plan will terminate to the extent not previously
exercised.
The Company's Board of Directors may at any time terminate the 1995 Plan or
make such modifications of the 1995 Plan as it deems advisable. No termination
or amendment of the 1995 Plan may adversely affect the rights of any individual
to whom an option has previously been granted without such individual's consent.
As of March 31, 1996, options to purchase an aggregate of approximately
402,000 shares of Common Stock have been granted under the 1995 Plan and were
outstanding, and options to purchase an aggregate of approximately 525,887
additional shares of Common Stock were available for future grants under the
1995 Plan.
EMPLOYMENT AGREEMENTS
Employment Agreements have been entered into by AmeriTruck or one of the
Operating Companies, as specified below, with each of Messrs. Lawrence,
Beauchamp, Crowe, Evans, Scales, Thompson, May, Noel and Samford.
Mr. Lawrence, the Chairman and Chief Executive Officer of AmeriTruck, has
entered into an employment agreement having a term expiring in November 1998 and
providing for a base salary of $75,000 annually through November 30, 1996, and
thereafter, an annual base salary of $300,000. Any additional increases are at
the discretion of AmeriTruck's board of directors.
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Mr. Beauchamp, the Chief Executive Officer of ART, has entered into an
employment agreement having a term expiring in November 1998 and providing for a
base salary of $150,000 with increases thereafter being at the discretion of the
employer's board of directors.
Mr. Crowe, the President of W&L, has entered into an employment agreement
having a term expiring in November 1997 and providing for a base salary of
$150,000 for the first twelve months following execution of an amendment to the
employment agreement in November 1995 with any increases thereafter being at the
discretion of W&L's board of directors.
Mr. Evans, the Chief Financial Officer and Executive Vice President of the
Company, has entered into an employment agreement having a term expiring in
November 1998 and providing for a base salary of $192,000 for the first twelve
months with any increases thereafter being at the discretion of the Company's
board of directors.
Mr. Scales, the President of CBS and Scales, has entered into an employment
agreement having a term expiring in November 1998 and providing for a base
salary of $150,000 with increases thereafter being at the discretion of Scales'
board of directors.
Mr. Thompson, the President of Thompson Brothers, has entered into an
employment agreement having a term expiring in July 1997 and providing for a
base salary of $150,000 for the first twelve months following execution of an
amendment to the employment agreement in November 1995. Increases are at the
discretion of Thompson Brothers' board of directors.
Pursuant to his offer letter from the Company, Mr May, the Vice President,
General Counsel and Secretary of the Company, will enter into an employment
agreement having a term expiring in November 1998 and providing for a base
salary of $125,000 with increases thereafter being at the discretion of the
Company's Board of Directors.
Mr. Noel, the Vice President -- Marketing and Sales of the Company, has
entered into an employment agreement having a term expiring in November 1998 and
providing for a base salary of $150,000 with increases thereafter being at the
discretion of the Company's Board of Directors.
Mr. Samford, the Executive Vice President -- Equipment and Maintenance of the
Company, has entered into an employment agreement having a term expiring in
November 1998 and providing for a base salary of $150,000 with increases
thereafter being at the discretion of the Company's Board of Directors.
Each of the above described employment agreements includes a severance clause
under the terms of which the employee is entitled to severance pay if during the
term of the agreement or a renewal term, his employment is terminated without
cause by written notice by the employer to the employee. Under this severance
clause, the employer must continue to pay to the employee his base salary as in
effect prior to the termination, such salary being payable until the longer of
(i) one year after the date of termination, or (ii) the end of the stated term
of the agreement. In addition, each of the above described employment
agreements provides that upon the employee's termination (i) without cause by
written notice by the employer to the employee or (ii) due to the death or
disability of the employee, the employee is entitled to receive the management
incentive bonus (described below under ''Executive Incentive Compensation
Plan''), if any, that the employee would have received for the fiscal year of
the Company in which the employment was terminated. The employee is not
entitled to such severance pay or management incentive bonuses in the event of a
termination for cause.
Each of the above described employment agreements also provides that the
employee shall be provided accident, disability and health insurance under the
respective employer's group accident, disability and health insurance plan
maintained for its full-time salaried employees.
Each of the above described employment agreements also contains a non-
competition provision pursuant to which the employee is prohibited, during the
term of his employment and generally for one year thereafter, from engaging,
within a designated area described below, in competition with the employer, from
diverting to any competitor of the employer any customer of the employer, and
from soliciting or encouraging any officer, employee or consultant of the
employer to leave the employment of the employer for employment with any
competitor of the employer. Each of the above described employment agreements
provides that the employee may not compete with the employer for the time
periods and under the circumstances described above anywhere within the
continental United States of America.
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Each of the above employment agreements also provides that the employee shall
be eligible to participate in the Executive Incentive Compensation Plan,
described below and that the employee may be granted options to purchase shares
of common stock of the Company pursuant to the stock option plan of the Company
which is described elsewhere in this Prospectus.
EXECUTIVE INCENTIVE COMPENSATION PLAN
Senior management of the Company and each of the Operating Companies are
eligible to participate in an executive incentive compensation plan pursuant to
which, in general, they will be paid annual bonuses based upon the financial
performance of both their respective individual Operating Companies and that of
the Company. The bonus for each participant will be determined by reference to
the relevant Operating Company's growth and return on invested capital as well
as an assessment of the participant's individual performance rating.
DIRECTOR COMPENSATION
Mr. Greenwood will receive compensation as a Director in the amount of $1,000
per month and $1,000 per committee meeting attended. He was also awarded
options to purchase 5,000 shares of the Company's Common Stock. No other
Director will receive any compensation for his service as a Director. All
Directors will be reimbursed for any out-of-pocket expenses incurred in
attending Board of Directors meetings.
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CERTAIN TRANSACTIONS
REORGANIZATION AGREEMENT AND RELATED TRANSACTIONS
The information contained herein relating to the Reorganization Agreement, the
Contribution Agreements, the Charter, the Stockholder Agreement, the Employment
Agreements and the Common Registration Rights Agreement (each as defined herein)
is qualified in its entirety by reference to the complete text of such
agreements, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part.
Acquisition Agreements
As of October 19, 1995 AmeriTruck and the stockholders of certain of the
Operating Companies entered into several agreements relating to the Acquisition
(the "Acquisition Agreements"). These Acquisition Agreements include:
. Reorganization Agreement. The Reorganization Agreement among AmeriTruck and
the stockholders of each of W&L, Thompson, ART, Scales and CBS (the "Old
Stockholders"), provides for the overall framework for the Acquisitions.
Pursuant to the Reorganization Agreement, AmeriTruck Distribution Corp. and the
Old Stockholders agreed to enter into a number of related transactions whereby
the Company acquired all the outstanding common stock of W&L, Thompson Brothers,
Bangerter, CBS, Scales and ART in exchange for shares of the Company's Common
Stock and the payment of approximately $30.7 million in cash. In addition,
pursuant to the Reorganization Agreement Thompson Brothers redeemed all
outstanding shares of its preferred stock, which were held by BancBoston
Ventures, Inc. ("BBV"), for a redemption price of approximately $2.0 million
including accrued dividends. The foregoing payments were funded from the
proceeds of the Initial Offering. Finally, CBS purchased its Conyers,
Georgia facility from certain of the Old Stockholders or related parties for a
total purchase price of approximately $600,000.
. Contribution Agreements. Pursuant to the Reorganization Agreement,
AmeriTruck entered into separate Stock Contribution Agreements with the Old
Stockholders (collectively, the "Contribution Agreements"). Pursuant to the
Contribution Agreements, the Old Stockholders made customary representations and
warranties to AmeriTruck and AmeriTruck made customary representations and
warranties to the Stockholders. After the consummation of the Acquisitions the
Old Stockholders will indemnify the Company for breaches of their
representations and warranties regarding title to the shares transferred and
certain specified matters.
Charter Provisions
In connection with the Acquisitions, the Company amended its Certificate of
Incorporation to add the provisions described below (as so amended, the
"Charter").
. Classes of Stock. The Charter provides for three classes of Common Stock:
4,875,000 shares of Class A Common Stock, par value $.01 per share (the "Class A
Common Stock"); 4,875,000 shares of Class B Common Stock, par value $.01 per
share (the "Class B Common Stock"); and 1,775,000 shares of Class C Common
Stock, par value $.01 per share (the "Class C Common Stock").
The holders of Class A Stock have one vote per share. The holders of Class B
Common Stock do not have any right to vote except as may be provided pursuant to
the Delaware General Corporation Law. The holders of Class C Common Stock have
one vote per share and normally vote together with the holders of the Class A
Common Stock as a single class. In addition, the holders of Class C Common
Stock have the additional voting rights described below.
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Board Designation Rights. At any time while a Control Event (as defined
below) has occurred and is continuing, the holders of not less than 51% of the
Company's then outstanding Class C Common Stock are entitled to deliver a notice
to the Company. Upon delivery of such a notice, the holders of Class C Common
Stock will be entitled to 1,000 votes per share and will continue to vote
together with the holders of the Company's Class A Common Stock as a single
class on all matters other than the election or removal of directors. In
addition, the holders of Class C Common Stock, voting together as a separate
class, shall be entitled to elect the smallest number of directors to the Board
of Directors of the Company that shall constitute a majority of the authorized
number of directors on such Board of Directors. In such event, the holders of
the Class A Common Stock shall be entitled to elect the remaining directors.
BBV owns all of the outstanding Class C Common Stock.
A "Control Event", as defined in the Charter, means (a) the Company shall
have failed to make any required payment of principal or interest when due
pursuant to the terms of any agreement evidencing Senior Indebtedness or
pursuant to the terms of the Indenture, and such failure to pay shall have
continued without being cured, waived or consented to, beyond the period of
grace, if any, specified in such agreement or the Indenture, as applicable, (b)
there shall have occurred an event of default with respect to any financial
performance tests under any agreement evidencing Senior Indebtedness which event
of default shall have continued uncured for three out of four consecutive fiscal
quarters, (c) the Company shall have failed to complete a Qualified Public
Offering (as described below under "Stockholders' Agreement") on or prior to
the third anniversary of the completion of the Acquisitions, or (d) there shall
exist a default or breach of any covenant, agreement or provision contained in
Section 6 of the Stockholders Agreement (as defined below under "Stockholders
Agreement").
Stockholders Agreement
Pursuant to the Reorganization Agreement, the stockholders of AmeriTruck
entered into a Stockholders Agreement (the "Stockholders Agreement") at the
consummation of the Acquisitions. Under the Stockholders Agreement, each
stockholder of the Company agreed to be subject to certain restrictions on such
stockholder's ability to transfer its shares of Common Stock; to consent to and
participate in any sale of the Company to an unaffiliated third party that is
approved by the Board of Directors and the holders of a majority of the Class C
Common Stock (all of which will initially be owned by BBV); and to vote for
certain individuals as directors of the Company. See "Management--Executive
Officers and Directors."
Each Stockholder other than BBV also agreed not to vote or cause any director
designated by such Stockholder to vote and approve any of the following actions
without the prior consent of BBV at any time while BBV holds at least ten
percent of the issued and outstanding shares of Common Stock: (i) the
appointment or termination of the Chairman and Chief Executive Officer of the
Company; (ii) the appointment of auditors of the Company and its subsidiaries
(other than auditors who constitute one of the national "Big-Six" accounting
firms); (iii) retaining and compensating by the Company or any of its
subsidiaries of any investment banker whose annual remuneration exceeds $50,000,
except as provided by the Consulting and Non-Competition Agreement, between the
Company and Dunbar Associates, Inc. so long as such remuneration does not exceed
$492,000 per year; (iv) (A) any purchase by the Company or any of its
subsidiaries of the securities or business or integral part of the business of
any other person or entity (including, without limitation, any purchase of all
or any substantial portion of the assets of such person or entity but not
including (1) the acquisition of stock or securities in connection with the
satisfaction or enforcement of indebtedness or claims due or owing to the
Company or any of its subsidiaries or as security for any such indebtedness or
claim or (2) the purchase of investment securities as permitted by the Indenture
or any commitment to make such purchase or (B) the making of any capital
expenditures by the Company or any of its subsidiaries other than as permitted
by the Indenture; (v) the issuance, purchase or redemption of stock or other
securities of the Company and its subsidiaries including, without limitation,
options and warrants, except (A) pursuant to certain rights of first offer
provisions, (B) up to the designated number shares of Common Stock pursuant to
the 1995 Plan described above in "Stock Option Plan", and (C) pursuant to a
public offering yielding net proceeds to the Company of at least $20,000,000 and
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attributing to the Company's Common Stock an aggregate market capitalization of
at least $50,000,000 (a "Qualified Public Offering"); (vi) the declaration or
payment of any dividends or other distribution in respect of the capital of the
Company and its subsidiaries other than dividends or distributions from any of
the Company's subsidiaries to the Company; (vii) the making of an initial public
offering or the registration of any of the Company's capital stock under the
Securities Act of 1933 other than a Qualified Public Offering; (viii) the
borrowing of any money or giving of any guaranties or indemnities by the Company
or any of its subsidiaries other than as permitted in the Indenture; (ix) any
agreement, commitment or transaction by the Company or any of its subsidiaries
with any affiliate thereof other than (A) on an arm's-length basis in the
ordinary course of business, (B) transactions between the Company and/or its
subsidiaries or (C) as otherwise permitted by the Indenture; (x) the institution
or settlement of any lawsuit or other legal proceeding involving a claim by the
Company or any of its subsidiaries or by any third party against the Company or
any of its subsidiaries the uninsured portion of which exceeds $500,000; (xi)
the entering into or consummating of any merger or sale of all or any
substantial portion of the assets of the Company or any of its subsidiaries
other than (A) sales of assets for cash in the ordinary course of business
consistent with past practice, (B) the merger of any subsidiary of the Company
into any other subsidiary of the Company or the merger of any subsidiary of the
Company into the Company or (C) the sales of any assets of any subsidiary of the
Company outside of the ordinary course of business which do not exceed $500,000
in the aggregate in any fiscal year; (xii) any action to effect the voluntary,
or which would precipitate an involuntary, dissolution or winding-up of the
Company or any of its subsidiaries; (xiii) the entering into by the Company or
any of its subsidiaries of any partnership, joint venture or other similar joint
business undertaking requiring a capital investment by the Company or any of its
subsidiaries in excess of $500,000; (xiv) the creation, modification, amendment
or repeal of the Charter or By-laws of the Company or any of its subsidiaries;
and (xv) the establishment of any new business or change in the business of the
Company or its subsidiaries which is not part of the trucking, distribution or
logistics business or any other business or service reasonably related thereto.
Employment Agreements
In connection with the Acquisitions, the Company entered into or amended
employment agreements with each of the members of senior management. For a
description of the employment agreements, see "Management--Employment
Agreements".
Common Registration Rights Agreement
Pursuant to the Reorganization Agreement, the Company entered into a
registration rights agreement (the "Common Registration Rights Agreement")
with its stockholders. Pursuant to the Common Registration Rights Agreement,
the Company will provide certain demand registration rights, to become effective
only six (6) months after the Company has completed an initial public offering
of its Common Stock, and certain piggyback registration rights.
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Payments To Management and Significant Stockholders
Certain members of senior management of the Company or certain of their
spouses received in the aggregate approximately $19.7 million in cash and
1,480,676 shares of Common Stock in exchange for their interests in the
Operating Companies. In addition, BBV, which (together with its affiliates)
after the Acquisitions owns approximately 43% of the outstanding Common
Stock and a warrant exercisable for additional shares representing 10.3% of the
outstanding Common Stock, will receive $11,007,381 in cash and 1,394,814 shares
of Common Stock in exchange for its interests in W&L and Thompson Brothers. Set
forth below are the respective amounts received by BBV and members of senior
management:
<TABLE>
<CAPTION>
NAME SHARES (1) CASH
---- ----------- -----------
<S> <C> <C>
BancBoston Ventures, Inc./(2)/...... 1,394,814 $11,007,381
Michael L. Lawrence................. 361,239 2,850,770
Randy Thompson...................... 338,782 2,673,552
Michael J. Crowe.................... 105,075 829,208
Richard A. Beauchamp/(3)/........... 283,363 8,817,600
William P. Scales/(3)/.............. 392,217 4,485,000
Dunbar Associates, Inc./(4)/........ 102,934 812,309
--------- -----------
Total............................... 2,978,424 $31,475,820
========= ===========
</TABLE>
(1) 3,278,003 shares of Common Stock were issued and outstanding upon
consummation of the Acquisitions.
(2) Does not include a warrant issued upon consummation of the Acquisitions
for 375,000 shares of Common Stock.
(3) Includes amounts received by spouse and, in the case of Mrs. Beauchamp, a
trust for her benefit.
(4) Dunbar Associates, Inc. is owned by the spouse of Michael J. Langevin, a
Director of the Company.
In consideration for its advisory services in connection with the
Acquisitions, upon consummation of the Acquisitions the Company issued a warrant
to BancBoston Ventures, Inc. ("BBV") or one or more affiliates exercisable on
or after February 15, 1996 but prior to February 15, 2003 for 375,000 shares of
Common Stock at an exercise price of $4.00 per share.
Certain affiliates of the Company are Selling Noteholders. See "Selling
Noteholders."
PRE-ACQUISITION TRANSACTIONS
Since January 1, 1994 the Operating Companies have entered into a number of
transactions with significant stockholders, officers and directors.
W&L
On June 9, 1994, W&L entered into an agreement with BBV, The First National
Bank of Boston ("FNBB"), an affiliate of BBV, Thompson Brothers and two
finance companies whereby the parties agreed to refinance W&L debt owed to FNBB
in accordance with certain terms and conditions. In general, FNBB agreed to a
specified pay-off amount of $7,778,573 and contributed the $1,675,901 remaining
debt balance to the capital of W&L. In addition, BBV exchanged its W&L
preferred stock, having an aggregate liquidation preference of $8,812,000, for
Class B common stock of W&L. BBV prior to giving effect to the Acquisitions
owned more than half of the outstanding common stock of Thompson Brothers and
W&L and after the Acquisitions owns approximately 43% of the outstanding Common
Stock of the Company and it owns a warrant exercisable for additional shares
representing approximately 10.3% of the outstanding Common Stock.
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Thompson Brothers
Pursuant to the arrangements entered into in 1990 in connection with the
acquisition of Thompson Brothers by an investor group led by BBV, Thompson
Brothers made deferred purchase price and non-competition payments to Randy
Thompson aggregating approximately $4.5 million since January 1, 1994. These
obligations were paid in full in July 1995.
Prior to the Acquisitions, BBV owned all of the outstanding shares of
preferred stock of Thompson Brothers. This preferred stock had a dividend of
10% per annum prior to July 31, 1995 and 12% thereafter. Between January 1,
1994 and June 30, 1995 Thompson Brothers paid BBV at total of approximately
$450,000 in dividends. In connection with the Acquisitions, Thompson Brothers
redeemed all outstanding shares of preferred stock for approximately $2.0
million (including accrued dividends).
Bangerter
At September 10, 1995 Bangerter owed $596,971 to the parents of Paul
Bangerter, the Chief Executive Officer of Bangerter. This debt was incurred in
connection with a 1990 stock redemption, bore interest at 9% per annum, matured
in 2001 and was secured by Bangerter's accounts receivable. The Company paid
this debt in full with proceeds from the Initial Offering.
ART
The spouse of Mr. Richard A. Beauchamp (a stockholder and director of the
Company and an executive officer of ART) owed ART $639,073 as of June 30, 1995,
representing an unsecured advance. Prior to completion of the Initial Offering,
ART forgave $437,823 of such amount. The balance of $201,250 is represented by
an interest-bearing note (with interest at the lowest rate required by the
Internal Revenue Service to avoid imputation of interest income) due in ten
years, with certain mandatory prepayments in the event of public sales of Common
Stock held by Mrs. Beauchamp.
Mrs. Beauchamp had pledged approximately $120,000 in personal certificates of
deposit as collateral for certain insurance deposits and fuel purchase
agreements of ART. These funds were refunded to Mrs. Beauchamp upon completion
of the Acquisitions.
ART had guaranteed indebtedness of the Beauchamps to a bank. The largest
aggregate amount of such indebtedness at any one time was approximately $1
million, and approximately $400,000 was outstanding prior to completion of the
Acquisitions. This indebtedness was paid in full by the Beauchamps upon
consummation of the Acquisitions.
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CBS
CBS contracted with Transportation Management Services, Inc. ("TMS"), a
company whose majority shareholders are Mr. and Mrs. Beauchamp, for accounting
services on a month-to-month cancelable basis. Total fees paid were $45,000 for
the nine months ended September 30, 1995. TMS was merged into ART prior to the
consummation of the Acquisitions.
REAL PROPERTY LEASES
CBS entered into a commercial lease agreement with respect to its Conyers,
Georgia facility with Carol M. Beauchamp, the owner of such real property and
the spouse of Richard A. Beauchamp. CBS paid a total of $54,000 rent to Ms.
Beauchamp during 1994 under the terms of such lease agreement. Pursuant to the
terms of the Contribution Agreement between the Company and CBS' stockholders,
CBS purchased the Conyers, Georgia facility for approximately $600,000.
Michael Lawrence and Mr. Beauchamp negotiated the terms of this purchase,
including the determination of the property's fair market value. In determining
fair market value, management and Mr. Beauchamp considered the most recent
appraisal for this property and their estimate of the rent that the Company
would pay to lease a similar facility in this area.
Scales entered into lease agreements with respect to its Tampa, Florida and
Homer, Georgia facilities, respectively, with Phil and Barbara Scales, the
owners of both such facilities. Mr. Scales is a stockholder and director of the
Company, and he is an executive officer of Scales and CBS. Scales paid a total
of $38,844 rent to Mr. and Mrs. Scales during 1994 under the terms of the lease
agreement with respect to the Tampa facility and no rent to Mr. and Mrs. Scales
during 1994 under the terms of the lease agreement with respect to the Homer
facility, but did pay the taxes and insurance with respect to the Homer
facility. In connection with the Acquisitions these leases were revised to
provide for three-year terms, terminable by either party upon six-months' prior
notice, and rent of $57,600 per year for the Tampa facility and $6,000 per year
for the Homer facility.
ARRANGEMENTS WITH DUNBAR ASSOCIATES, INC.
Thompson Brothers has entered into a Consulting and Non-Competition
Agreement with Dunbar Associates, Inc. ("Dunbar"), pursuant to which Dunbar
agreed to provide, through its representative, consulting services to Thompson
Brothers for a term extending until November 13, 1998 (renewable for additional
one year terms thereafter upon the consent of the parties thereto). Thompson
Brothers agreed to pay transaction fees to Dunbar, as approved by Thompson
Brothers' board of directors, in connection with the completion of any major
financing or acquisition transaction by Thompson Brothers, the aggregate amount
of which transaction fees shall not be less than $192,000 nor more than $492,000
during any calendar year. Thompson Brothers also agreed to pay a retainer to
Dunbar in the amount of $16,000 per month during the term of the agreement, such
retainer being applied against the amount of transaction fees earned by Dunbar
as described above. Michael J. Langevin, a Director of the Company, is an
employee of Dunbar, which is owned by his spouse.
Dunbar has also issued separate promissory notes in favor of Thompson
Brothers and W&L, in the original principal amounts of $366,023 and $732,991,
respectively, in connection with Dunbar's purchase of capital stock of Thompson
Brothers and W&L. This stock was subsequently converted into shares of the
Company's Common Stock in connection with the Acquisitions. Each of the
promissory notes is secured by these shares and is payable in one installment
which is due on October 10, 2005. Each of the promissory notes bears interest
at the rate of 6.77% per annum, such interest being payable at maturity.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock of the Company at March 31, 1996 (i) by each
person known to the Company to own beneficially more than 5% of its outstanding
Common Stock, (ii) by each director of the Company, (iii) by each of the Named
Executive Officers, and (iv) by all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
-----------------
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP PERCENT OF CLASS/(1)/
- ---------------- ----------------------- ----------------------
<S> <C> <C>
BancBoston Ventures, Inc./(2)/ .......................... 1,769,814 45.7%
100 Federal Street
Boston, MA 02110
William P. Scales/(3)/ ................................... 392,217 10.1%
c/o Scales Transport Corporation
507 A Samples
Scales Road
P.O. Box 189
Homer, GA 30547
Michael L. Lawrence ...................................... 361,239 9.3%
c/o AmeriTruck Distribution Corp.
City Center Tower II
Suite 1101
301 Commerce Street
Fort Worth, TX 76102
Randy Thompson ........................................... 338,782 8.8%
c/o Thompson Bros., Inc.
3605 Teem Drive
Sioux Falls, SD 57107
Richard Beauchamp/(4)/ ................................... 287,290 7.4%
c/o AmeriTruck Refrigerated Transport, Inc.
4200 Northside Parkway
Building 8, Suite C
Atlanta, GA 30327
Michael J. Crowe ......................................... 105,075 2.7%
Michael J. Langevin/(5)/................................... 102,934 2.7%
William E. Greenwood(6).................................... 5,000 *
Kenneth H. Evans, Jr.(6)................................... 105,000 2.7%
J. Michael May(6).......................................... 7,288 *
Michael Noel(6)............................................ 1,671 *
Joseph M. Samford(6)....................................... 3,411 *
All Directors and Executive Officers as a Group
(11 persons)(6)........................................... 1,709,907 44.2%
* Less than 1%.
</TABLE>
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_____________________
(1) Represents percentage ownership of all outstanding classes of Common Stock,
including shares issuable upon exercise of options and warrants that were
exercisable at March 31, 1996 or within sixty (60) days of such date.
All stockholders except BBV hold shares of Class A Common Stock. See
"Certain Transactions-Reorganization Agreement and Related Transactions-
Charter Provisions."
(2) Includes a warrant issued upon consummation of the Acquisitions to BBV
exercisable at March 31, 1996 for 375,000 shares.
(3) Includes 27,860 shares held by Mr. Scales' spouse. Mr. Scales disclaims
beneficial ownership with respect to these shares.
(4) Includes 278,587 shares held by Mr. Beauchamp's spouse. Mr. Beauchamp
disclaims beneficial ownership with respect to these shares.
(5) Consists of 102,934 shares held by Dunbar Associates, Inc. The owner of
Dunbar Associates, Inc. is Vickie D. Langevin, Mr. Langevin's spouse. Mr.
Langevin disclaims beneficial ownership with respect to these shares.
(6) Includes shares issuable upon exercise of options and warrants that were
exercisable at March 31, 1996 or within sixty (60) days of such date.
Except as noted in the notes, the Company believes the beneficial holders
listed in the table above have sole voting and investment power regarding the
shares shown as being beneficially owned by them. Except as noted in the
footnotes, none of such shares is known by the Company to be shares with respect
to which the beneficial owner has the right to acquire such shares.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
As of March 31, 1996, the Company had an aggregate of approximately $38
million of debt outstanding which is senior to the Notes. The outstanding Senior
Indebtedness and Guarantor Senior Indebtedness as of March 31, 1996 is described
below.
TERM DEBT AND CAPITAL LEASES
At March 31, 1996, the Operating Companies had outstanding approximately $12.5
million of equipment loans and capital lease obligations maturing through 1999
with interest rates ranging from 7.3% to 16.5%. All of the foregoing
indebtedness constitutes Guarantor Senior Indebtedness.
NATIONSBANK CREDIT FACILITY
In February of 1996, the Company and the Operating Companies entered into a
Loan Agreement and related documents (collectively, the "NationsBank Credit
Facility") with NationsBank of Texas, N.A. ("NationsBank") pursuant to which
NationsBank has committed, subject to the terms and conditions of the
NationsBank Credit Facility, to provide a $30 million credit facility to the
Company. Borrowings under the NationsBank Credit Facility can be used for
acquisitions, operating capital, capital expenditures, letters of credit and
general corporate purposes. Pursuant to the NationsBank Credit Facility,
NationsBank has agreed to provide a $30 million revolving credit facility, with
a $7,000,000 sublimit for letters of credit, maturing on February 1, 1998, at
which time the revolving credit facility will convert into a term loan maturing
on February 1, 2003. Borrowings under the NationsBank Credit Facility bear
interest at a per annum rate equal to either NationsBank's base rate or the rate
of interest offered by NationsBank in the interbank eurodollar market plus an
additional margin ranging from 1.5% to 1.75% based on the Senior Funded Debt
Ratio of the Company. The Company also pays a letter of credit issuance fee and
a quarterly unused facility fee. At March 31, 1996, an aggregate of $25.4
million in borrowings was outstanding under the NationsBank Credit Facility.
The Company's obligations under the NationsBank Credit Facility are secured by
substantially all assets of the Company and its subsidiaries and are guaranteed
in full by each of the Operating Companies. For purposes of the Indenture, such
borrowings under the NationsBank Credit Facility constitute Senior Indebtedness
of the Company and Guarantor Senior Indebtedness of the Operating Companies.
The NationsBank Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative and negative covenants, including a limitation on the incurrence of
indebtedness and a requirement that the Company maintain a specified Senior
Funded Debt Ratio and Fixed Charge Coverage Ratio.
VOLVO CREDIT FACILITIES
In February of 1996, the Company and the Operating Companies entered into a
Loan and Security Agreement, a Financing Integration Agreement and related
documents (collectively, the "Volvo Credit Facilities") with Volvo Truck Finance
North America, Inc. ("Volvo") pursuant to which Volvo has committed, subject
to the terms and conditions of the Volvo Credit Facilities, to provide (i) a $10
million line of credit facility (the "Volvo Line of Credit") to the Company and
the Operating Companies, and (ii) up to $28 million in purchase money or lease
financing (the "Equipment Financing Facility") in connection with the Operating
Companies' acquisition of new tractors and trailers manufactured by Volvo GM
Heavy Truck Corporation. Borrowings under the Volvo Line of Credit are secured
by certain specified tractors and trailers of the Company and the Operating
Companies (which must have a value equal to at least 1.75 times the
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outstanding amount of borrowings under the Volvo Line of Credit) and are
guaranteed in full by each of the Operating Companies. Borrowings under the
Volvo Line of Credit bear interest at the prime rate. The Volvo Line of Credit
contains customary representations and warranties and events of default and
requires compliance with a number of affirmative and negative covenants,
including a profitability requirement and a coverage ratio. At March 31, 1996,
no amounts were outstanding under the Volvo Line of Credit.
The Equipment Financing Facility is being provided by Volvo in connection with
the Operating Companies' agreement to purchase 400 new trucks manufactured by
Volvo GM Heavy Truck Corporation between March 1, 1996 and June 30, 1997. The
Operating Companies have agreed to utilize the Equipment Financing Facility
provided by Volvo for at least the first 200 of such new trucks.
The borrowings under the Equipment Financing Facility are secured by the
specific trucks being financed and are guaranteed in full by each of the
Operating Companies. Borrowings under the Equipment Financing Facility bear
interest at the prime rate. At March 31, 1996, no amounts were outstanding
under the Equipment Financing Facility.
The Equipment Financing Facility contains customary representations and
warranties, covenants and events of default. For purposes of the Indenture, the
borrowings under the Volvo Credit Facilities constitute Senior Indebtedness of
the Company and Guarantor Senior Indebtedness of the Operating Companies.
The Operating Companies began taking delivery of the trucks in early May at
the rate of 10 per week, with total expected deliveries for the second quarter
of 80 trucks. Another 30 trucks are scheduled for delivery during the third
quarter of 1996. To effect these expenditures of approximately $7.6 million, the
Company intends to sell at least 83 used trucks from the Operating Companies for
approximately $2.7 million.
DESCRIPTION OF THE NEW NOTES
The Old Notes and the New Notes were issued under an Indenture dated as of
November 15, 1995 (the "Indenture") among the Company, the Guarantors and The
Bank of New York, as trustee (the "Trustee"). For purposes of the following
summary, the Old Notes and the New Notes are collectively referred to as the
"Notes". The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to and is qualified in its entirety by
reference to the Trust Indenture Act of 1939, as amended (the "TIA"), and all
of the provisions of the Indenture (including the definitions of certain terms
therein) and those terms made a part of the Indenture by reference to the TIA as
in effect on the date of the Indenture. However, the Company believes that the
summary set forth below is an accurate description of all material terms of the
Notes. Certain capitalized terms used in this Section are defined under
"Certain Definitions." As used in this Section, the "Company" means
AmeriTruck Distribution Corp. and does not include any of the Subsidiaries
unless the context otherwise requires. A copy of the Indenture is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
GENERAL
The Notes will mature on November 15, 2005, will be limited to $100 million in
aggregate principal amount and will be unsecured obligations of the Company.
Each Note will bear interest at the rate of 12 1/4% per annum from November 15,
1995, payable semiannually on May 15 and November 15 of each year, commencing on
May 15, 1996, to the Person in whose name the Note (or any predecessor Note) is
registered at the close of business on the May 1 or November 1 next preceding
such interest payment date. Interest on the Old Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from November 15, 1995 (the "Issue Date"). Holders whose Old Notes are accepted
for exchange will receive accrued interest thereon to, but not including, the
date of issuance of the New Notes, such interest to be payable with the first
interest payment on the New Notes, but will not receive any payment in respect
of interest on the Old Notes accrued after the issuance of the New Notes. The
Company will pay interest on overdue principal from time to time on demand at
the rate of 12 1/4% per annum; it shall, to the extent lawful, pay interest on
overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the rate of 12 1/4% per annum. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
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Principal of, premium, if any, and interest on the Notes will be payable at
the office or agency of the Company in the City of New York maintained for such
purposes, which initially will be the principal corporate trust office of the
Trustee or an agent thereof; provided, however, that payment of interest may be
made at the option of the Company by check mailed to the address of the Person
entitled thereto as shown on the security register. The Notes will be issued
only in registered form without coupons and only in denominations of $1,000 and
any integral multiple thereof. Initially, the Trustee will act as Paying Agent
and Registrar for the Notes. The Notes may be presented for registration of
transfer or exchange at the offices of the Registrar, which initially will be
the Trustee's corporate trust office. The Company may change any Paying Agent
and Registrar without notice to holders of the Notes. No service charge will be
made to a holder for any registration of transfer, exchange or redemption of
Notes, except in certain circumstances for any tax or other governmental charge
that may be imposed in connection therewith.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be subject
to redemption prior to November 15, 2000. On or after such date, the Company may
redeem the Notes, in whole or in part, on not less than 30 nor more than 60
days' prior notice in amounts of $1,000 or in integral multiples of $1,000 at
the following redemption prices (expressed as percentages of the principal
amount), if redeemed during the 12-month period beginning on November 15 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- -----------------
<S> <C>
2000................. 106.250%
2001................. 104.167%
2002................. 102.083%
2003 and thereafter.. 100.000%
</TABLE>
in each case together with accrued and unpaid interest to the redemption date
(subject to the right of holders of record on relevant record dates to receive
interest due on an interest payment date). If less than all of the Notes are to
be redeemed, the Trustee shall select the Notes or portions thereof to be
redeemed pro rata, by lot or by any other method the Trustee shall deem fair and
reasonable.
Prior to November 15, 1998, the Company may redeem up to an aggregate of $25
million aggregate principal amount of Notes with the proceeds of one or more
Public Equity Offerings, at any time as a whole, or from time to time in part,
at a redemption price (expressed as a percentage of principal amount), plus
accrued and unpaid interest to the redemption date, of 112.50%; provided,
however, that such redemption may be effected only to the extent that
immediately after such redemption not less than $75 million aggregate principal
amount of Notes remains outstanding.
The Notes are not subject to any mandatory redemption provisions.
SUBORDINATION AND RANKING
The payment of the principal of, premium, if any, and interest on the Notes
will be subordinate and subject in right of payment, as provided in the
Indenture, to the prior payment in full of all Senior Indebtedness.
The Indenture prohibits the Company and the Subsidiaries from creating,
incurring, assuming, guaranteeing or in any other manner becoming liable with
respect to any Indebtedness, other than the Notes and the Guarantees, as the
case may be, that is subordinate in right of payment to any Senior Indebtedness,
in the case of the Company, or any Guarantor Senior Indebtedness, in the case of
the Guarantors, unless such Indebtedness expressly by its terms is
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also subordinate or ranks pari passu in right of payment to the Notes or the
Guarantees, as the case may be. During the continuance of any default in the
payment of principal of, premium, if any, or interest on any Senior
Indebtedness, beyond any applicable grace period with respect thereto (a
"Payment Default") and upon receipt by the Trustee from the Company or the
holders of Senior Indebtedness of written notice of such Payment Default, no
payment or distribution of any assets of the Company of any kind or character
(excluding Permitted Junior Securities) may be made on account of the principal
of, premium, if any, or interest on, the Notes or on account of the purchase,
redemption or other acquisition of the Notes unless and until such Payment
Default has been cured, waived or has ceased to exist or such Senior
Indebtedness shall have been discharged or paid in full or payment thereof
provided for.
During the continuance of any event (other than a Payment Default) the
occurrence of which entitles one or more Persons to accelerate the maturity of
any Designated Senior Indebtedness (a "Covenant Default") and the receipt by
the Trustee from the Senior Representative of such Designated Senior
Indebtedness of a written notice of such Covenant Default, no payment or
distribution of any assets of the Company of any kind or character (excluding
Permitted Junior Securities) may be made by the Company on account of the
principal of, premium, if any, or interest on the Notes or on account of the
purchase, redemption or other acquisition of the Notes for the period specified
below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of a
Covenant Default by the Trustee from the Senior Representative and shall end
(subject to any blockage of payment that may be in effect in respect of a
Payment Default or insolvency) on the earliest of (i) 179 days in the case of
any Designated Senior Indebtedness after the receipt of such notice (provided
such Designated Senior Indebtedness shall not theretofore have been
accelerated), (ii) the date on which such Covenant Default is cured, waived or
ceases to exist or such Designated Senior Indebtedness is discharged or paid in
full, or (iii) the date on which such Payment Blockage Period shall have been
terminated by written notice to the Company or the Trustee from the Senior
Representative initiating such Payment Blockage Period, or the holders of at
least a majority in principal amount of such issue of Designated Senior
Indebtedness, after which the Company shall resume making any and all required
payments in respect of the Notes, including any missed payments. In no event
will a Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Trustee of the notice initiating such Payment Blockage Period.
Any number of notices of a Covenant Default may be given during a Payment
Blockage Period; provided, however, that no such notice shall extend such
Payment Blockage Period beyond the 179-day limit. Only one Payment Blockage
Period may be commenced within any 365-day period. No Covenant Default with
respect to Designated Senior Indebtedness that existed or was continuing on the
date of the commencement of any Payment Blockage Period will be, or can be, made
the basis for the commencement of a second Payment Blockage Period, whether or
not within a period of 365 consecutive days, unless such event of default has
been cured or waived for a period of not less than 90 consecutive days.
If the Company fails to make any payment on the Notes when due, or prior to
the expiration of any applicable grace period, whether or not on account of the
payment blockage provisions referred to above, such failure would constitute an
Event of Default under the Indenture and would enable the holders of the Notes
to accelerate the maturity thereof. See "Events of Default."
The Indenture provides that in the event of any insolvency or bankruptcy case
or proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or its assets, or any liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary, or any assignment
for the benefit of creditors or other marshalling of assets or liabilities of
the Company, all Senior Indebtedness must be paid in full, or provision made for
such payment, before any payment or distribution (other than in Permitted Junior
Securities) may be made on account of the principal of, premium, if any, or
interest on the Notes.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes and funds which would be otherwise
payable to the holders of the Notes will be paid to the holders of the Senior
Indebtedness
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to the extent necessary to pay the Senior Indebtedness in full, and the Company
may be unable to meet its obligations fully with respect to the Notes.
As of March 31, 1996, the Company had approximately $25.6 million aggregate
principal amount of Senior Indebtedness outstanding and the Operating Companies
had approximately $12.4 million aggregate principal amount of Guarantor Senior
Indebtedness outstanding and there was no indebtedness of the Company and the
Guarantors ranking pari passu with the Notes or the Guarantees, respectively.
GUARANTEES
The Company's obligations under the Notes will be irrevocably and
unconditionally guaranteed, jointly and severally, by each of the Operating
Companies and their subsidiaries (each such corporation, together with any other
Person executing a guarantee of the Notes required by the Indenture, a
"Guarantor," and collectively, the "Guarantors"). The Guarantees will rank
subordinate in right of payment to Guarantor Senior Indebtedness, and superior
in right of payment to any guarantees by such Guarantors of Indebtedness of the
Company which is subordinated to Senior Indebtedness other than indebtedness
which is pari passu with the Notes, in respect of which guarantees of the
Guarantors will be pari passu. See "Subordination and Ranking." Upon the sale
or other disposition (by merger or otherwise) to any Person which is not a
Subsidiary or Affiliate of the Company, of all of the Company's Capital Stock
in, or all or substantially all of the assets of, any Guarantor, which sale or
disposition is otherwise in compliance with the terms of the Indenture
(including without limitation the provisions described under "Certain
Covenants--Disposition of Proceeds of Asset Sales"), such Guarantor shall be
automatically and unconditionally released and discharged from all obligations
under its Guarantee without any further action required on the part of the
Trustee or any holder of Notes (provided, however, that any guarantee by such
Guarantor of other Indebtedness of the Company shall have been released by the
holders thereof). Any Guarantor not so released will remain liable for the full
amount of principal of, premium, if any, and interest on the Notes and the
obligations to the Trustee under the Indenture, as provided in its Guarantee.
The Trustee is required to deliver an appropriate instrument evidencing such
release upon receipt of a request of the Company accompanied by an officers'
certificate certifying as to the compliance with the Indenture.
The Indenture provides that, for purposes of the Guarantee, each Guarantor's
liability (a Guarantor's "Base Guaranty Liability") will be that amount from
time to time equal to the aggregate liability of a Guarantor thereunder, but
shall be limited to the least of (A) the aggregate amount of the obligations of
the Company under the Notes and the Indenture or (B) the amount, if any, which
would not have (i) rendered such Guarantor "insolvent" (as such term is
defined under Title 11 of the U.S. Code and in the Debtor and Creditor Law of
the State of New York) or (ii) left it with unreasonably small capital at the
time its Guarantee of the Notes was entered into, after giving effect to the
incurrence of existing Indebtedness immediately prior to such time; provided,
however, that it shall be a presumption in any lawsuit or other proceeding in
which a Guarantor is a party that the amount guaranteed is the amount set forth
in clause (A) above unless a creditor, or representative of creditors of such
Guarantor, or debtor in possession or trustee in bankruptcy of the Guarantor,
otherwise proves in such a lawsuit that the aggregate liability of the Guarantor
is limited to the amount set forth in clause (B). The Indenture provides that,
in making any determination as to the solvency or sufficiency of capital of a
Guarantor in accordance with the previous sentence, the right of such Guarantor
to contribution from other Guarantors, to subrogation as described in the
following paragraph, and any other rights such Guarantor may have, contractual
or otherwise, shall be taken into account.
The Indenture provides that each Guarantor shall be subrogated to all rights
of the holder of any Notes and the Trustee against the Company or any of the
other Guarantors in respect of any amounts paid to the holders of Notes and the
Trustee by such Guarantor pursuant to the provisions of the Guarantee; provided,
however, that such Guarantor shall not be entitled to enforce or to receive any
payments arising out of, or based upon, such right of subrogation until the
principal of, premium, if any, and interest on all of the Notes, and the
obligations to the Trustee under the Indenture, have been paid in full.
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CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Notes shall have
the right to require that the Company purchase such holder's Notes pursuant to
an offer (a "Change of Control Offer") of the Company in whole or in part in
integral multiples of $1,000, at a purchase price in cash in an amount equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase, in accordance with the procedures set forth in the
Indenture. A "Change of Control" shall occur if (A) any Person (other than any
Permitted Holder) (i) acquires (whether through legal or beneficial ownership,
by contract, in a series of related or unrelated transactions or otherwise),
directly or indirectly, the right to vote more than 50% of the total voting
power of all classes of Voting Stock of the Company or (ii) shall have elected,
or caused to be elected, a sufficient number of its nominees to the Board of
Directors of the Company such that the nominees so elected (regardless of when
elected) shall collectively constitute a majority of the Board of Directors of
the Company or (B) the Company consolidates with or merges with or into another
Person or the Company or any Subsidiary, directly or indirectly, sells, assigns,
conveys, transfers, leases or otherwise disposes of, in one transaction or a
series of related transactions, all or substantially all of the property or
assets of the Company and the Subsidiaries (determined on a Consolidated basis)
to any Person, or any Person consolidates with, or merges with or into, the
Company (in each case, whether or not in compliance with the terms of the
Indenture), in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is converted into or exchanged for cash, securities
or other property, other than any such transaction where (i) the outstanding
Voting Stock of the Company is converted into or exchanged for (1) Voting Stock
(other than Redeemable Capital Stock) of the surviving or transferee corporation
or (2) cash, securities and other property in an amount which could then be paid
by the Company as a Restricted Payment under the Indenture, or a combination
thereof, and (ii) immediately after such transaction no Person other than a
Permitted Holder or a group controlled by or comprised of Permitted Holders is
the "beneficial owner", directly or indirectly, of more than 50% of the total
Voting Stock of the surviving or transferee corporation. For purposes of the
foregoing, (x) the term "Person" includes any "group" as that term is used
in Section 13(d)(3) or 14(d)(2) of the Exchange Act; provided, however, that no
group shall be deemed to have been created solely by reason of the execution or
existence of the Stockholders Agreement or the termination thereof, and (y) the
term "beneficial ownership" shall have the meaning set forth in Rules 13d-3
and 13d-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire whether such right is exercisable immediately or after the passage of
time.
With respect to a disposition of assets that could constitute a "Change of
Control", the phrase "all or substantially all" as used in the Indenture
(including as set forth under the caption "Merger, Sale of Assets, etc.")
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under New York law (which governs the Indenture)
and is subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of the Company, and therefore it may be unclear as to whether a Change of
Control has occurred and whether the holders of Notes have the right to require
the Company to purchase Notes.
If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the purchase price for all the Notes
that the Company would be required to purchase. In the event that the Company
were required to purchase the outstanding Notes pursuant to a Change of Control
Offer, the Company expects that it would need to seek third-party financing to
the extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that the Company would be able to obtain such
financing.
Senior debt instruments entered into by the Company in the future may impair
the ability of the Company to purchase Notes upon a Change of Control by
providing that a Change of Control constitutes an event of default under the
applicable senior debt instrument, by prohibiting such purchase and/or by
requiring
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the Company to prepay or offer to repay such senior indebtedness prior to such
purchase of the Notes. See "Description of Certain Indebtedness."
Neither the Board of Directors nor the Trustees can waive the obligation of
the Company to purchase Notes on the terms described above in the event of a
Change of Control. The Indenture provides that this obligation of the Company
may be waived with the consent of Holders holding 75% or more aggregate
principal amount of the outstanding Notes.
The Company will comply, to the extent applicable, with the requirements of
Rule 14e-1 under the Exchange Act and other securities laws or regulations in
connection with the repurchase of the Notes as described above. To the extent
that the provisions of any securities laws or regulations conflict with the
foregoing provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the foregoing provisions of the Indenture by
virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Indenture provides that the Company will
not, and will not permit any Subsidiary to, create, incur, assume or, directly
or indirectly, guarantee the payment of any Indebtedness (including any Acquired
Indebtedness but excluding any Permitted Indebtedness, the incurrence of which
is not subject to this limitation) except that the Company and the Subsidiaries
may incur Indebtedness (including Acquired Indebtedness) if at the time of such
incurrence and after giving effect thereto on a pro forma basis the Company's
Fixed Charge Coverage Ratio, would have been not less than 2.0:1.0 if incurred
during the period from the Issue Date through November 15, 1998 and 2.25:1.0 if
incurred thereafter.
Limitation on Restricted Payments and Restricted Investments. (a) The
Indenture provides that, except for dividends or distributions by any Wholly
Owned Subsidiary to the Company or any Wholly Owned Subsidiary, the Company will
not, and will not permit any Subsidiary to, directly or indirectly, (i) declare
or pay any dividend on, or make any distribution to holders of, any Capital
Stock of the Company (other than dividends or distributions payable in shares of
Qualified Capital Stock of the Company or in options, warrants or other rights
to purchase Qualified Capital Stock of the Company), (ii) purchase, redeem or
otherwise acquire or retire for value, any Capital Stock of the Company or any
Affiliate of the Company or any option, warrant or other right to acquire such
Capital Stock, or (iii) make any principal payment on, or redeem, repurchase,
defease or otherwise acquire or retire for value, prior to any scheduled
repayment, sinking fund obligation or maturity, any Subordinated Indebtedness or
Indebtedness which ranks pari passu with the Notes or the Guarantees, as
applicable, and, in each case, having a scheduled maturity date subsequent to
the maturity of the Notes (such payments described in clauses (i)-(iii),
collectively, "Restricted Payments"), or (iv) make any Investment in any
Person that is not a Wholly Owned Subsidiary and a Guarantor, except in each
case for Permitted Investments and any such Investments existing on the date of
the Indenture (such payments described in this clause (iv), collectively,
"Restricted Investments"), unless at the time of and after giving effect to
the proposed Restricted Payment or Restricted Investment (the amount of any such
Restricted Payment or Restricted Investment, if other than in cash, being the
Fair Market Value thereof as determined reasonably and in good faith by the
Board of Directors), (1) no Default or Event of Default shall have occurred and
be continuing, (2) the Company could incur an additional $1.00 of Indebtedness
(other than Permitted Indebtedness) pursuant to the covenant described under the
caption "Limitation on Indebtedness" (assuming such Restricted Payment or
Restricted Investment had been made as of the first day of the relevant
reference period), and (3) the sum of (x) the aggregate amount of all Restricted
Payments declared or made after the Issue Date and (y) the aggregate amount of
Restricted Investments (valued at the time made) outstanding at the time of such
determination shall not exceed the sum of (A) 50% of the Consolidated Net Income
accrued on a cumulative basis during the period beginning on the first day after
the Issue Date and ending on the last day of the Company's last fiscal quarter
ending prior to the date of
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such proposed Restricted Payment or Restricted Investment (or, if such aggregate
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss),
(B) the aggregate net cash proceeds received after the Issue Date and on or
prior to the date of making of such Restricted Payment or Restricted Investment
by the Company as capital contributions to the Company (including conversion or
exchange of any debt security into Qualified Capital Stock) other than to the
extent the proceeds thereof are utilized to redeem the Notes, (C) the aggregate
net cash proceeds received after the Issue Date and on or prior to the date of
making of such Restricted Payment or Restricted Investment by the Company from
the issuance or sale (other than to any of the Subsidiaries) of shares of
Qualified Capital Stock of the Company or any options or warrants or rights to
purchase such shares (other than issuances in respect of clause (i) of the
subsequent paragraph); provided, however, that net cash proceeds received by the
Company from any issuance or sale described in this clause (C) from an employee
stock ownership or benefit plan maintained for employees of the Company and its
Subsidiaries shall not be included pursuant to this clause (C) to the extent
that such net cash proceeds were provided to such plan by the Company, directly
or indirectly, for the purpose of funding, by way of contribution, extension of
credit or guarantee, such plan, and (D) the aggregate net cash proceeds received
by the Company (other than from any of the Subsidiaries) after the Issue Date
and on or prior to the date of making of such Restricted Payment or Restricted
Investment upon the exercise of any options or warrants or rights to purchase
shares of Qualified Capital Stock of the Company. Notwithstanding the foregoing,
the provisions of this paragraph shall not prohibit the payment of any dividends
within 60 days after the date of declaration if, at the date of declaration,
such payment would be permitted by the provisions of this paragraph; provided,
however, that such payment shall be deemed to have been paid on such date of
declaration for purposes of the calculation required by the provisions of this
paragraph.
(b) So long as no Default or Event of Default is continuing and would not
result therefrom, the foregoing provisions shall not prohibit:
(i) any redemption, repurchase, or other acquisition or retirement of
Subordinated Indebtedness, Indebtedness which ranks pari passu with the Notes or
the Guarantees, as applicable, or Capital Stock made by exchange for, or out of
the proceeds of the substantially concurrent issuance for cash (other than to a
Subsidiary) of, any Qualified Capital Stock of the Company (provided, however,
that such redemption, repurchase, acquisition or retirement or the receipt of
such proceeds shall not be taken into account in the calculations in the
preceding paragraph);
(ii) any redemption, repurchase, or other acquisition or retirement of
Subordinated Indebtedness or Indebtedness which ranks pari passu with the Notes
or the Guarantees, as applicable, made by exchange for, or out of the proceeds
of the substantially concurrent issuance for cash (other than to a Subsidiary)
of, new Indebtedness of the Company so long as (A) the principal amount of such
new Indebtedness does not exceed the principal amount of the Indebtedness being
so redeemed, repurchased, acquired or retired (plus the amount of any premium
required to be paid under the terms of the instrument governing the Indebtedness
being so redeemed, repurchased, acquired or retired), (B) such new Indebtedness
is subordinated to Senior Indebtedness and subordinated to, or pari passu with,
the Notes or the Guarantees, as applicable, in the same manner and at least to
the same extent as the Indebtedness, being so redeemed, repurchased, acquired or
retired, (C) such new Indebtedness has a Stated Maturity for its final scheduled
principal payment later than the Stated Maturity for the final scheduled
principal payment of the Notes, and (D) such Indebtedness has an Average Life
equal to or greater than the remaining Average Life of the Notes (provided,
however, that any such redemption, repurchase, acquisition or other retirement
shall not be taken into account in the calculations in the preceding paragraph);
and
(iii) the purchase, redemption, acquisition, cancellation, or other retirement
for value of shares of the Capital Stock of the Company, options on any such
shares or related phantom stock or stock appreciation rights or similar
securities held by officers or employees or former officers or employees (or
their estates or beneficiaries under their estates) or by any employee benefit
plan, upon the death, disability, retirement or termination of employment of
such employee or former employee, pursuant to the terms of an employee benefit
plan or any other agreement under which such shares of stock or related rights
were issued; provided, however, that the aggregate cash consideration paid, or
distributions made, pursuant to this clause (iii) after
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the Issue Date does not in any one fiscal year exceed an aggregate amount of
$750,000 plus the cash proceeds received by or contributed to the Company from
any reissuance of Capital Stock by the Company to members of management and
employees of the Company and the Subsidiaries.
(c) Notwithstanding the foregoing, this restriction on Restricted Payments and
Restricted Investments did not apply to (i) the purchase of shares of capital
stock of the Operating Companies in connection with the consummation of the
Acquisitions and (ii) the redemption of Thompson Brothers' outstanding preferred
stock in connection with the consummation of the Acquisitions.
(d) Not later than thirty (30) days after the end of any fiscal quarter of the
Company during which any Restricted Payment or Restricted Investment has been
made, the Company shall deliver to the Trustee an officers' certificate stating
that such Restricted Payment or Restricted Investment complies with the
Indenture and setting forth in reasonable detail the basis upon which the
required calculations were computed, which calculations may be based upon the
Company's latest available internal quarterly financial statements.
Limitation on Issuance of Other Subordinated Indebtedness Senior to the Notes.
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, create, incur, assume, guarantee or in any other manner become
liable with respect to any Indebtedness, other than the Notes and the
Guarantees, that is, in the case of the Company, subordinate in right of payment
to any Senior Indebtedness or, in the case of any Guarantor, subordinate in
right of payment to Guarantor Senior Indebtedness unless such Indebtedness is
expressly by its terms also subordinate or ranks pari passu in right of payment
to the Notes or the Guarantees, as the case may be.
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries.
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind, on the ability of any
Subsidiary to (a) pay dividends or make any other distribution on its Capital
Stock, (b) pay any Indebtedness owed to the Company or any other Subsidiary, (c)
make any Investment in the Company or any other Subsidiary, (d) transfer any of
its property or assets to the Company or any other Subsidiary or (e) guarantee
the Notes, Exchange Notes or any renewals, extensions, refinancings or
refundings thereof, except: (i) any encumbrance or restriction pursuant to
agreements in effect on the Issue Date as in effect on the Issue Date; (ii) any
encumbrance or restriction under any instrument governing Acquired Indebtedness
incurred in accordance with the provisions described under the caption
"Limitation on Indebtedness"; provided, however, that no such encumbrance or
restriction shall be applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or asset of the Person, so
acquired; (iii) customary provisions restricting subletting or assignment of any
lease of the Company or any Subsidiary or customary restrictions imposed on the
transfer of copyrighted or patented materials; (iv) any encumbrance or
restriction contained in contracts for the sale of assets to be consummated in
accordance with the Indenture solely in respect of the assets to be sold
pursuant to such contract; (v) any encumbrance or restriction existing under any
agreement that extends, renews, refinances or replaces the agreements containing
the restrictions in the foregoing clauses (i)-(iii); provided, however, that the
terms and conditions of any such restrictions shall not be materially less
favorable to the holders of the Notes or the Company than those under or
pursuant to the agreement evidencing the Indebtedness so extended, renewed,
refinanced or replaced; and (vi) any encumbrance or restriction existing under
or by reason of applicable law.
Limitation on Liens Securing Indebtedness. The Indenture provides that the
Company will not, and will not permit any Subsidiary to, create, incur, assume
or suffer to exist any Lien securing Indebtedness of any kind upon any of their
respective assets or properties now owned or acquired after the Issue Date or
any income or profits therefrom without at the same time causing the Notes to be
secured equally and ratably with, or prior to, any Indebtedness secured by such
Lien. The foregoing shall not prohibit: (i) Liens securing Senior Indebtedness
or Guarantor Senior Indebtedness, (ii) Liens in respect of purchase money
Indebtedness incurred by the Company or any Subsidiary to acquire assets or
Capital Stock, provided that (a) such Liens are limited to the assets or Capital
Stock acquired with the proceeds of such Indebtedness (and the proceeds of such
assets or Capital Stock) and (b) the principal amount of the Indebtedness
secured by such Lien does
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not exceed the cost of the assets or Capital Stock acquired (including
applicable transaction costs), (iii) Liens securing any Indebtedness which
becomes Indebtedness of the Company or any Subsidiary, pursuant to a transaction
permitted by the provisions described under the caption "Mergers, Sale of
Assets, etc.," or Liens securing Acquired Indebtedness if such Liens were in
existence at the time of such transaction or incurrence of such Acquired
Indebtedness (unless such Indebtedness was incurred in connection with, or in
contemplation of, such transaction or incurrence of such Acquired Indebtedness),
so long as such Liens do not extend to or cover any property or assets of the
Company or any Subsidiary other than property or assets acquired in such
transaction or securing such Acquired Indebtedness, (iv) certain other Permitted
Liens, or (v) Liens in addition to the foregoing; provided, however, that the
amount of the obligations secured by the Liens under this clause (v) shall not
exceed in the aggregate $1 million at any time outstanding.
Limitation on Transactions with Shareholders and Affiliates. The Indenture
provides that the Company will not, and will not permit any Subsidiary to,
directly or indirectly (x) make any Investment in, or (y) conduct any business,
or enter into any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of any assets or
property, the giving of any guarantee or the rendering of any services) with,
any registered or beneficial owner of 5% or more of the Capital Stock (taking
all classes of Capital Stock together as one class for this purpose) of the
Company (or any Affiliate of such owner) or any officer, director or Affiliate
of the Company unless (a) the terms of such business transaction or series of
related transactions are (I) set forth in writing, if such transaction or series
of transactions involve aggregate payments in excess of $100,000, and (II) are
either no less favorable to the Company or such Subsidiary, as the case may be,
than would be obtainable in a comparable transaction or series of related
transactions in arm's-length dealings with an unrelated third party or are in
the ordinary course of business and consistent with past practice, and (b) with
respect to a transaction or series of related transactions involving aggregate
payments in excess of $1 million, such transaction or series of related
transactions has been reasonably and in good faith determined by a majority of
the disinterested directors of the Board of Directors of the Company, as
evidenced by a resolution of such Board of Directors, that such transaction or
series of transactions complies with the foregoing clause (a)(II), and (c) with
respect to a transaction or series of related transactions involving aggregate
payments in excess of $3 million, such transaction or series of related
transactions has been determined, in the written opinion of a nationally
recognized investment banking firm or other recognized independent experts in
the type of transaction proposed, to be fair to the Company or such Subsidiary,
as the case may be, from a financial point of view. The foregoing provisions do
not prohibit (i) any transaction with an officer or director of the Company (in
their capacity as officer or director) entered into in the ordinary course of
business of the Company or such Subsidiary consistent with its past practice
(including compensation or employee benefit arrangements approved by the Board
of Directors of the Company with any such officer or director), (ii) any
transaction between the Company and any Wholly Owned Subsidiary otherwise
permitted by the terms of the Indenture, (iii) any transaction between or among
Wholly Owned Subsidiaries otherwise permitted by the terms of the Indenture,
(iv) any sale of Common Stock of the Company or grants of options to purchase
Common Stock of the Company, (v) any Restricted Payment expressly permitted by
the provisions described under the caption "Limitation on Restricted Payments
and Restricted Investments" or (vi) any Investments in the form and in an
amount not greater than that existing on the date of the Indenture.
Additional Guarantors. The Indenture provides that the Company will not
permit any Subsidiary, directly or indirectly, to assume, guarantee or in any
other manner become liable with respect to any Indebtedness of the Company or
any other Subsidiary unless (i) such assumption, guarantee or other liability is
permitted under the covenant described under the caption "Limitation on
Indebtedness", (ii) such Subsidiary if it is not then a Guarantor
simultaneously executes and delivers to the Trustee a guarantee in favor of the
Trustee, substantially in the form of the Guarantee of the Guarantors set forth
in the Indenture (and, if requested by the Trustee, a supplemental indenture in
form and substance reasonably satisfactory to the Trustee), providing for the
guarantee of payment of the Notes by such Subsidiary, and (iii) (a) if any such
assumption, guarantee or other liability of such Subsidiary is provided in
respect of Senior Indebtedness, the guarantee or other instrument provided by
such Subsidiary in respect of such Senior Indebtedness may be senior to the
Guarantee, pursuant to subordination provisions no less favorable than those
contained in the Indenture, and (b) if such assumption, guarantee or other
liability of such Subsidiary is provided in respect of
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Subordinated Indebtedness, the guarantee or other instrument provided by such
Subsidiary in respect of such Subordinated Indebtedness shall be subordinated to
the Guarantee, pursuant to subordination provisions not less favorable than
those contained in the Indenture.
The Indenture provides that, notwithstanding the foregoing, any such Guarantee
by a Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any holder, upon any sale or other
disposition (by merger or otherwise) to any Person which is not a Subsidiary or
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all of the assets of, such Subsidiary; provided, however, that (a)
such sale or disposition of such Capital Stock or assets shall be otherwise in
compliance with the terms of the Indenture, and (b) such assumption, guarantee
or other liability of such Subsidiary shall have been released by the holders of
the other Indebtedness so guaranteed.
Restrictions on Preferred Stock or Redeemable Capital Stock of Subsidiaries
and Subsidiary Distributions. The Indenture provides that the Company will not
permit any Subsidiary to issue any Preferred Stock or Redeemable Capital Stock
(other than to the Company or a Wholly Owned Subsidiary), or permit any Person
(other than the Company or a Wholly Owned Subsidiary) to own or hold any
Preferred Stock or Redeemable Capital Stock of any Subsidiary, unless at the
time of such issuance, and after giving pro forma effect thereto, such
Subsidiary would be able to create, incur or assume Indebtedness (other than
Permitted Indebtedness) pursuant to the covenant described under the caption
"Limitation on Indebtedness" in an aggregate amount equal to the aggregate
liquidation value of the Preferred Stock to be issued; provided, however, that
the foregoing covenant shall not prohibit the issuance or ownership of Preferred
Stock or Redeemable Capital Stock if such Preferred Stock or Redeemable Capital
Stock was issued by a Person prior to the time at which (i) such Person became a
Subsidiary or (ii) a Subsidiary merges with or into such Person (unless the
Preferred Stock or Redeemable Capital Stock was issued in connection with, or in
contemplation of, such Person becoming a Subsidiary or a Subsidiary merging with
or into such Person).
Disposition of Proceeds of Asset Sales. Pursuant to the Indenture, the
Company and its Subsidiaries will be permitted to make Asset Sales from time to
time, provided that they comply with the limitations set forth below, and, if
applicable, the limitations set forth under the caption "Mergers, Sale of
Assets, etc."
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, make any Asset Sale unless (i) the Company or such Subsidiary
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the shares or assets subject to such Asset Sale as determined in
good faith by the Board of Directors of the Company or such Subsidiary, as
evidenced by a resolution of such Board of Directors, (ii) 75% of the
consideration for such Asset Sale shall be received in the form of cash, (iii)
(A) within 270 days of such Asset Sale, the Net Cash Proceeds thereof are
applied to the mandatory or optional repayment or prepayment of Senior
Indebtedness resulting in the permanent reduction of commitments to lend
thereunder or (B) within 270 days of such Asset Sale, the Net Cash Proceeds
thereof are invested in assets that (as determined by the Board of Directors)
will be used in the businesses of the Company and the Subsidiaries existing on
the Issue Date or in businesses reasonably related thereto and (iv) the amount
of the Net Cash Proceeds not applied or invested as provided in clause (iii)
(the "Excess Proceeds") is applied pro rata (determined by reference to
principal amount or accreted value, as the case may be) to the repayment or
prepayment of the Notes and other Indebtedness ranking pari passu with the Notes
or the Guarantees, as applicable, for which the Company is obligated to make an
offer to purchase substantially similar to the offer to purchase required
pursuant to this provision ("Other Indebtedness"), in accordance with the
provisions described below and, in the case of such Other Indebtedness, in
accordance with the provisions of the instrument governing such Other
Indebtedness.
The Indenture provides that when the aggregate amount of Excess Proceeds from
one or more Asset Sales equals or exceeds $7.5 million, the Company shall make
an offer to purchase (an "Asset Sale Offer"), from all holders thereof, Notes
in an amount equal to the maximum principal amount (expressed as a multiple of
$1,000) of Notes that may be purchased with the portion of the Excess Proceeds
allocated to the purchase of Notes (subject to proration in the event such
amount is less than the sum of the aggregate Offered Price of
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all Notes tendered). The Indenture provides that the offer price shall be
payable in cash in an amount equal to 100% of the principal amount of the Notes
tendered plus accrued and unpaid interest, if any, to the date such Asset Sale
Offer is consummated (the "Offered Price"), in accordance with the procedures
set forth in the Indenture. To the extent that the sum of the aggregate Offered
Price of the Notes tendered pursuant to an Asset Sale Offer and the aggregate
offered price of Other Indebtedness tendered pursuant to a similar offer is less
than the maximum that could be purchased with the Excess Proceeds (such
shortfall constituting a "Deficiency"), the Company may use such Deficiency,
or a portion thereof, in the business of the Company and the Subsidiaries. Upon
completion of the purchase of all the Notes and Other Indebtedness tendered, the
amount of Excess Proceeds will be reset at zero.
The Indenture provides that if the Company becomes obligated to make an Asset
Sale Offer as described in the preceding paragraph, Notes shall be repurchased
by the Company, at the option of the holder thereof, in whole or in part in
integral multiples of $1,000, on a date that is not earlier than 30 days nor
later than 60 days from the date the offer notice is mailed to holders, or such
later date as may be necessary for the Company to comply with requirements under
the Exchange Act, subject to proration in the event the maximum amount of Notes
that could be purchased is less than the aggregate Offered Price of all Notes
tendered, and to the satisfaction by or on behalf of the holders of the
requirements set forth in the Indenture.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and the Subsidiaries as an entirety to a
Person in a transaction permitted under the provisions described under the
caption "Merger, Sale of Assets, etc.," the successor corporation shall be
deemed to have sold the properties and assets of the Company and the
Subsidiaries not so transferred for purposes of this covenant, and shall comply
with the provisions of this covenant with respect to such deemed sale as if it
were an Asset Sale; provided, however, that to the extent that the Company is
required to make an offer to purchase the Notes pursuant to the provisions
described under the caption "Change of Control" above in connection with any
transaction that would otherwise be within the terms of this paragraph, the
Company need not comply with the provisions of this paragraph. In addition, the
Fair Market Value of such properties and assets of the Company or the
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this covenant.
Senior debt instruments entered into by the Company in the future may prohibit
the Company from purchasing Notes in connection with an Asset Sale. See
"Description of Certain Indebtedness."
The Company shall comply with applicable tender offer rules, including Rule
14e-1 under the Exchange Act, in connection with an Asset Sale Offer. To the
extent that the provisions of any securities laws or regulations conflict with
the foregoing provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the foregoing provisions of the Indenture by
virtue thereof.
Limitation on Sale and Leaseback Transactions. The Indenture provides that
the Company will not, and will not permit any Subsidiary to, directly or
indirectly, enter into any Sale and Leaseback Transaction unless (i) immediately
after giving pro forma effect to such Sale and Leaseback Transaction (the
Attributable Value of such Sale and Leaseback Transaction being deemed to be
Indebtedness of the Company that ranks pari passu with the Notes), the Company
could Incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the covenant described under the caption
"Limitation on Indebtedness" (assuming a market rate of interest with respect
to such additional Indebtedness) and (ii) such Sale and Leaseback Transaction
complies with the covenant described under the caption "Disposition of Proceeds
of Asset Sales."
Reports to Holders of Notes. The Company (at its own expense) shall file
with the Commission, and shall file with the Trustee within 15 days after it
files with the Commission, copies of the quarterly and annual reports and of the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) to be
filed pursuant to Section 13 or 15(d)
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of the Exchange Act (whether or not the Company is subject to the requirements
of Section 13 or 15(d) of the Exchange Act). Upon qualification of the Indenture
under the TIA, the Company shall also comply with the provisions of TIA (S)
314(a). At the Company's expense, the Company shall cause an annual report if
furnished by it to stockholders generally and each quarterly or other financial
report if furnished by it to stockholders generally to be filed with the Trustee
and mailed to the holders of Notes at their addresses appearing in the register
of Notes maintained by the Registrar at the time of such mailing or furnishing
to stockholders. If the Trustee (at the Company's request and expense) is to
mail the foregoing information to the holders of Notes, the Company shall supply
such information to the Trustee at least five business days prior thereto. The
Company shall make such annual, quarterly and other financial reports available
to securities analysts and prospective investors upon request. The Company shall
provide to any holder of Notes any information reasonably requested by such
holder concerning the Company and the Subsidiaries (including financial
statements) necessary in order to permit such holder to sell or transfer Notes
in compliance with Rule 144A under the Securities Act.
MERGERS, SALE OF ASSETS, ETC.
The Indenture provides that the Company will not, in a single transaction or
through a series of related transactions, consolidate or amalgamate with or
merge with or into any other Person or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as an
entirety or substantially as an entirety to any other Person or group of
affiliated Persons or permit any Subsidiary to enter into any such transaction
or transactions if such transaction or transactions, in the aggregate, would
result in a sale, assignment, transfer, lease or disposal of all or
substantially all of the properties and assets of the Company and the
Subsidiaries on a Consolidated basis to any other Person or group of affiliated
Persons, or permit any Person to merge or amalgamate with or into the Company
unless at the time and after giving effect thereto (a) either (i) the Company
will be the continuing Person, or (ii) the Person (if other than the Company)
formed by such consolidation or amalgamation or into which the Company is merged
or amalgamated or to which all or substantially all of the properties and assets
of the Company, as an entirety or substantially as an entirety, are transferred
(the "Surviving Entity") will be a corporation, partnership or trust organized
and validly existing under the laws of the United States of America, any State
thereof or the District of Columbia, and will expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form and
substance reasonably satisfactory to the Trustee, the due and punctual payment
of the principal of, premium, if any, and interest on all the Notes and the
performance and observance of every covenant of the Indenture on the part of the
Company to be performed or observed; (b) immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness not previously
an obligation of the Company or a Subsidiary which becomes the obligation of the
Company or any Subsidiary in connection with or as a result of such transaction
as having been incurred at the time of such transaction), the Consolidated
Tangible Net Worth of the Company (or the Surviving Entity if the Company is not
the continuing obligor under the Indenture) is equal to or greater than the
Consolidated Tangible Net Worth of the Company immediately before such
transaction; (c) immediately before and immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness not previously
an obligation of the Company or a Subsidiary which becomes the obligation of the
Company or any Subsidiary in connection with or as a result of such transaction
as having been incurred at the time of such transaction), no Default or Event of
Default shall have occurred and be continuing, (d) immediately after giving
effect to such transaction on a pro forma basis (and treating any Indebtedness
not previously an obligation of the Company or a Subsidiary which becomes the
obligation of the Company or any Subsidiary in connection with or as a result of
such transaction as having been incurred at the time of such transaction), the
Company (or the Surviving Entity if the Company is not the continuing obligor
under the Indenture) could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the covenant described in the first
paragraph under the caption "Certain Covenants--Limitation on Indebtedness",
and (e) each Guarantor, unless it is the other party to the transactions
described above or unless such Guarantor is not transferred as part of such
transaction and the successor corporation complies with the provisions set forth
under "Disposition of Proceeds of Asset Sales" (in which case such Guarantor
shall be released from its obligations under the Guarantee), shall have by
supplemental indenture confirmed that its Guarantee shall apply to the Company's
or the Surviving Entity's obligations under the Indenture and the Notes. The
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foregoing covenant does not prohibit mergers, amalgamations or consolidations
between a Wholly Owned Subsidiary and another Wholly Owned Subsidiary or between
a Wholly Owned Subsidiary and the Company.
The Indenture provides that in connection with any such consolidation, merger,
amalgamation, transfer, lease or disposition, the Company or such Person shall
have delivered to the Trustee (i) an officers' certificate and an opinion of
counsel, each in form and substance reasonably satisfactory to the Trustee,
stating that such consolidation, amalgamation, merger, sale, assignment,
conveyance, transfer, lease or disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with the Indenture and that all conditions precedent therein provided for
relating to such transaction have been complied with, and (ii) if a supplemental
indenture is required in connection with such transaction, an opinion of
counsel, in form and substance reasonably satisfactory to the Trustee, that such
supplemental indenture constitutes the legal, valid, binding and enforceable
obligation of the Surviving Entity and each Guarantor which is a party thereto
(subject to customary exceptions for bankruptcy and equitable principles).
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries, the
Capital Stock of which constitutes all or substantially all of the properties
and assets of the Company, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
The Indenture also provides that no Guarantor (other than any Subsidiary whose
Guarantee is being released in accordance with the provisions described under
the caption "Guarantees" as a result of such transaction) shall, and the
Company shall not permit any Guarantor to, in a single transaction or through a
series of related transactions, consolidate or amalgamate with or merge into any
other Person or sell, assign, convey, transfer, lease or otherwise dispose all
or substantially all of its properties and assets on a Consolidated basis as an
entirety or substantially as an entirety to any other Person or group of
affiliated Persons other than to the Company or any other Guarantor unless (a)
either (i) such Guarantor shall be the continuing Person or (ii) the Person (if
other than such Guarantor) formed by such consolidation or amalgamation or into
which such Guarantor is merged or the Person which acquires by sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of such Guarantor as an entirety or substantially as an
entirety (the "Transaction Survivor") shall be a corporation, partnership or
trust organized and validly existing under the laws of the United States, any
State thereof or the District of Columbia, and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form and
substance reasonably satisfactory to the Trustee all the obligations of such
Guarantor under the Guarantee, the Notes and the Indenture; and (b) immediately
before and immediately after giving effect to such transaction (and treating any
Indebtedness not previously an obligation of such Guarantor or a subsidiary
thereof which becomes the obligation of such Guarantor or any of its
subsidiaries in connection with or as a result of such transaction as having
been incurred at the time of such transaction), no Default or Event of Default
shall have occurred and be continuing.
The Indenture provides that in connection with any such consolidation, merger,
amalgamation, transfer, lease or disposition, such Guarantor or such Person
shall have delivered to the Trustee (i) an officers' certificate and an opinion
of counsel, each in form and substance reasonably satisfactory to the Trustee,
stating that such consolidation, amalgamation, merger, sale, assignment,
conveyance, transfer, lease or disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with the Indenture and that all conditions precedent therein provided for
relating to such transaction have been complied with, and (ii) if a supplemental
indenture is required in connection with such transaction, an opinion of
counsel, in form and substance reasonably satisfactory to the Trustee, that such
supplemental indenture constitutes the legal, valid, binding and enforceable
obligation of the Transaction Survivor (subject to customary exceptions for
bankruptcy and equitable principles).
The Indenture also provides that, upon any consolidation, amalgamation or
merger, or any sale, assignment, conveyance, transfer, lease or disposition of
all or substantially all of the properties and assets of the Company or any
Guarantor in accordance with the Indenture, the successor Person formed by such
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consolidation or into which the Company or such Guarantor, as the case may be,
is merged, or the successor Person to which such sale, assignment, conveyance,
transfer, lease or disposition is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company or such Guarantor, as the
case may be, under the Indenture, with the same effect as if such successor had
been named as the Company or such Guarantor, as the case may be, in the
Indenture; and thereafter, except in the case of a lease, the Company or such
Guarantor, as the case may be, shall be discharged from all obligations and
covenants under the Indenture and the Notes.
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a failure to pay an installment of interest on any of the
Notes when it becomes due and payable, and continuance of such default for a
period of 30 days after the date when due; or
(ii) there shall be a failure to pay when due the principal of (at its Stated
Maturity, upon optional redemption, required purchase or otherwise) or premium,
if any, on any of the Notes; or
(iii) the Company or any Guarantor shall fail to perform, or breach, any
covenant, warranty or agreement of the Company or such Guarantor in the Notes or
the Indenture (other than a default in the performance, or a breach, of a
covenant, warranty or agreement which is specifically dealt with in another
clause in this provision) for a period of 30 days after written notice of such
failure, requiring the Company to remedy the same, is delivered (a) to the
Company by the Trustee or (b) to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the Notes then outstanding; or
(iv) there shall have occurred either (a) a default by the Company or any
Subsidiary in the payment when due of (x) any portion of the principal of
Designated Senior Indebtedness, and such unpaid portion is not paid, or such
default is not cured or waived, prior to the expiration of any grace period
applicable thereto, or (y) any portion of the principal of any other
Indebtedness, and such unpaid portion exceeds $5 million and is not paid, or
such default is not cured or waived, within any grace period applicable thereto,
or (b) an event of default, as defined in any agreement, indenture or other
instrument evidencing or under which the Company or any Subsidiary has
outstanding at least $5 million principal amount of Indebtedness, shall occur
and such Indebtedness shall have been accelerated so that the same shall be or
become due and payable prior to the date on which the same would otherwise have
become due and payable; or
(v) any Guarantee is determined by a court of competent jurisdiction to be
null and void with respect to any Guarantor or any Guarantor denies that it has
any further liability under its Guarantee or gives notice to such effect (other
than by reason of (i) the indefeasible payment in full of all principal of,
premium, if any, and interest on the Notes, (ii) the termination of the
Indenture or (iii) a release pursuant to the provisions described under the
caption "Guarantees"); or
(vi) one or more judgments, orders or decrees of any court or regulatory or
administrative agency for the payment of money, aggregating in excess of $5
million and not covered by insurance, are entered against the Company or any
Significant Subsidiary, and there shall have occurred any period of 60
consecutive days during which a stay of enforcement of such judgments, orders or
decrees, by reason of pending appeals or otherwise, shall not be in effect,
unless such judgments, orders or decrees shall have been vacated, satisfied or
dismissed or bonded pending appeal; or
(vii) the Company shall fail to comply with its obligations under the
provisions described under the caption "Mergers, Sale of Assets, etc."; or
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(viii) the Company shall fail to comply with the provisions to make an offer
to repurchase the Notes as set forth under the caption "Change of Control" or
"Certain Covenants--Disposition of Proceeds of Asset Sales" above; or
(ix) certain events of bankruptcy with respect to the Company or any
Significant Subsidiary shall have occurred.
If an Event of Default (other than as specified in clause (ix)) occurs and is
continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes outstanding may, and the Trustee, upon the request
of the holders of not less than 25% in aggregate principal amount of the Notes
outstanding, shall, declare the principal of all the Notes to be due and payable
immediately in an amount equal to the principal amount of the Notes, together
with accrued and unpaid interest to the date the Notes become due and payable,
and thereupon the Trustee may, at its discretion, proceed to protect and enforce
the rights of the holders of Notes by appropriate judicial proceedings. If an
Event of Default specified in clause (ix) above occurs and is continuing, then
all unpaid principal and accrued interest on all the Notes outstanding shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holder.
The Indenture provides that at any time after a declaration of acceleration,
but before a judgment or decree for payment of the money due has been obtained
by the Trustee, the holders of a majority in principal amount of the Notes
outstanding, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if (a) the Company has paid or
deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced
by the Trustee and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest
(including any interest accrued subsequent to an Event of Default specified in
clause (ix) above) on all Notes, (iii) the principal of and premium, if any, on
any Notes which have become due otherwise than by such declaration or occurrence
of acceleration and interest thereon at the rate borne by the Notes, and (iv) to
the extent that payment of such interest is lawful, interest upon overdue
interest at the rate borne by the Notes; and (b) all Events of Default, other
than the non-payment of principal of Notes which have become due solely by such
declaration or occurrence of acceleration, have been cured or waived; and (c)
the rescission would not conflict with any judgment, order or decree of any
court of competent jurisdiction.
The Indenture provides that no holder of any Notes shall have any right to
institute any proceeding, judicial or otherwise, with respect to the Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless (a) such holder has previously given written notice to the
Trustee of a continuing Event of Default; (b) the holders of not less than 25%
in principal amount of the outstanding Notes shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee; (c) such holder or holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request; (d) the Trustee for 60 days after its receipt
of such notice, request and offer of indemnity has failed to institute any such
proceeding; and (e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the holders of a majority in
principal amount of the outstanding Notes.
The Indenture provides that the holders of not less than a majority in
aggregate principal amount of the outstanding Notes shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; provided, however, that (a) such direction shall not be in conflict
with any rule of law or with the Indenture or expose the Trustee to personal
liability; and (b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
The Indenture provides that the holders of not less than a majority in
aggregate principal amount of the outstanding Notes may on behalf of the holders
of all the Notes waive any past Default and its consequences, except a Default
(a) in the payment of the principal of, premium, if any, or interest on any
Notes, or (b) in
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respect of a covenant or provision of the Indenture which cannot be modified or
amended without the consent of the holder of each outstanding Note affected.
The Company is also required to notify the Trustee within 5 days of the
occurrence of any Default or Event of Default.
The TIA contains limitations on the rights of the Trustee, should it become a
creditor of the Company or any Subsidiary, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that if it acquires any conflicting
interest it must eliminate such conflict upon the occurrence of an Event of
Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the obligations
of the Company and the Guarantors with respect to the outstanding Notes
discharged ("defeasance"). Such defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by the
outstanding Notes, except for (i) the rights of holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due, (ii) the Company's obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment, (iii) the rights, powers, trusts, duties and immunities of
the Trustee, and (iv) the defeasance provisions of the Indenture. In addition,
the Company may, at its option and at any time, elect to have the obligations of
the Company and the Guarantors released with respect to certain covenants that
are described in the Indenture ("covenant defeasance") and any omission to
comply with such obligations shall not constitute a Default or an Event of
Default with respect to the Notes. In the event covenant defeasance occurs,
certain events (not including non-payment, bankruptcy and insolvency events)
described under the caption "Events of Default" will no longer constitute an
Event of Default with respect to the Notes.
In order to exercise defeasance or covenant defeasance, (i) the Company must
irrevocably deposit with the Trustee (or another trustee satisfying criteria set
forth in the Indenture), in trust, for the benefit of the holders of such Notes,
cash, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amounts as will be sufficient (in the opinion of a
nationally recognized firm of independent public accountants), without
consideration of reinvestment of interest of such U.S. Government Obligations,
to pay the principal of, premium, if any, and interest on the outstanding Notes
(except lost, stolen or destroyed Notes which have been replaced or paid) to
maturity or redemption, as the case may be; (ii) the Company shall have
delivered to the Trustee one or more opinions of independent counsel to the
effect that (A) the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance, as the case may be, and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance, as the case may be, had
not occurred (which opinion, in the case of defeasance, shall be based upon a
private letter ruling by the Internal Revenue Service or a change in applicable
Federal income tax law occurring after the Issue Date), (B) the trust resulting
from such defeasance or covenant defeasance will not be an "Investment
Company" within the meaning of the Investment Company Act of 1940 unless such
trust is qualified thereunder or exempt from regulation thereunder, (C) the
trust funds will not be subject to any rights of holders of Indebtedness of the
Company other than the Notes and (D) assuming no bankruptcy of the Company
occurs between the date of deposit and the 91st day following the deposit and
that no holder of the Notes is an insider of the Company, after the 91st day
following the deposit the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (iii) no Default or Event of Default relating to
bankruptcy or insolvency shall have occurred and be continuing on the date of
such deposit or at any time during the period ending on the 91st day after the
date of such deposit; (iv) such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under,
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any other material agreement or instrument to which the Company is a party or by
which it is bound; (v) the Company shall have delivered to the Trustee an
officers' certificate stating that the deposit was not made by the Company with
the intent of defeating, hindering, delaying or defrauding any other creditors
of the Company or others; (vi) no event or condition shall exist that would
prevent the Company from making payments of the principal of, premium, if any,
and interest on the Notes on the date of such deposit or at any time during the
period ending on the 91st day after the date of such deposit; and (vii) the
Company shall have delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent (other than
conditions requiring the passage of time) to either defeasance or covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when (i) either (a)
all the Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes which have been replaced or paid, and Notes for whose payment
money has theretofore been deposited in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been delivered to the
Trustee for cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation (except lost, stolen or destroyed Notes which have been
replaced or paid, and Notes for whose payment money has theretofore been
deposited in trust by the Company and thereafter repaid to the Company or
discharged from such trust) have been called for redemption pursuant to the
terms of the Indenture or have otherwise become due and payable, and the
Company, in each case, has irrevocably deposited or caused to be deposited with
the Trustee funds in an amount sufficient to pay and discharge the entire
indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for the principal of, premium, if any, and interest to the date of
such deposit; (ii) the Company has paid all other sums payable under the
Indenture by the Company; and (iii) the Company has delivered to the Trustee an
officers' certificate and an opinion of counsel each stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company, the
Guarantors and the Trustee with the consent of the holders of not less than a
majority in aggregate principal amount of the outstanding Notes; provided,
however, that no such modification, amendment or instruction may, without the
consent of the holder of each outstanding Note affected thereby: (i) change the
Stated Maturity of the principal of, or any installment of interest on, any Note
or reduce the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change the coin or currency in
which any Note or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment after the Stated
Maturity thereof (or, in the case of redemption, on or after the redemption
date); (ii) reduce the percentage in principal amount of the outstanding Notes,
the consent of the holders of which is required for any waiver of compliance
with provisions of the Indenture or Defaults or Events of Default thereunder and
their consequences provided for in the Indenture; (iii) modify any of the
provisions relating to supplemental indentures requiring the consent of holders,
except to increase any such percentage of outstanding Notes required for such
actions; (iv) except as otherwise permitted by the covenant described under the
caption "Mergers, Sale of Assets, etc.," consent to the assignment or transfer
by the Company of any of its rights and obligations under the Indenture; or (v)
modify any of the provisions of the Indenture relating to the subordination of
the Notes or the Guarantees in a manner adverse to the holders. In addition, no
such modification, amendment or instruction may, without the consent of the
holders of not less than 75% of the aggregate principal amount of the
outstanding Notes, modify the obligations of the Company to make and consummate
a Change of Control Offer in the event of a Change of Control or make and
consummate an Asset Sale Offer with respect to any Asset Sale or modify any of
the provisions or definitions with respect thereto.
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The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
GOVERNING LAW
The Indenture and the Notes are governed by, and construed in accordance with,
the laws of the State of New York without regard to its principles of conflicts
of law.
CERTAIN DEFINITIONS
Following are certain of the definitions utilized in this description of the
Notes:
"Acquired Indebtedness" means Indebtedness of a Person (i) assumed in
connection with the acquisition of assets or secured by the assets so acquired
from such Person or (ii) existing at the time such Person becomes a Subsidiary
(other than any Indebtedness incurred in connection with, or in contemplation
of, such asset acquisition or such Person becoming a Subsidiary). Acquired
Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Subsidiary.
"Affiliate" means, with respect to any specified Person, (i) any other
Person which, directly or indirectly, is in control of, is controlled by or is
under common control with such specified Person or (ii) any other Person who is
a director or officer (A) of such Person, (B) of any subsidiary of such Person
or (C) of any Person described in clause (i) above. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct or cause the direction of management or policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing. Neither the Initial Purchaser nor any of
its Affiliates shall be deemed to be an Affiliate of the Company or of any
Subsidiary or Affiliate of the Company.
"Asset Sale" means any sale, issuance, conveyance, transfer, capital lease
or other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of (i) any
Capital Stock of any Subsidiary (other than to the Company or a Wholly Owned
Subsidiary) other than directors' qualifying shares; (ii) all or substantially
all of the properties and assets of any division or line of business of the
Company and the Subsidiaries (other than to the Company or a Wholly Owned
Subsidiary); or (iii) any other properties or assets of the Company or any
Subsidiary (other than to the Company or a Wholly Owned Subsidiary),
individually or in the aggregate, for more than $3,000,000, other than in the
ordinary course of business; provided, however, that a sale, transfer or other
disposition of assets that are obsolete or surplus to the business of the
Company and the Subsidiaries, as determined reasonably and in good faith by the
Board of Directors of the Company or the applicable Subsidiary, as evidenced by
a resolution of such Board of Directors, shall not constitute an Asset Sale.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the remaining
term thereof (whether or not such lease is terminable at the option of the
lessee prior to the end of such term), including any period for which such lease
has been, or may, at the option of the lessor, be extended, discounted from the
last date of such term to the date of determination at a rate per annum equal to
the discount rate which would be applicable to a Capital Lease Obligation with a
like term in accordance with GAAP. The net amount of rent required to be paid
under any lease for any such period shall be the aggregate amount of rent
payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance,
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taxes, assessments, utility, operating and labor costs and similar charges.
"Attributable Value" means, as to a Capital Lease Obligation under which any
Person is at the time liable and at any date as of which the amount thereof is
to be determined, the capitalized amount thereof that would appear on the face
of a balance sheet of such Person in accordance with GAAP.
"Average Life" means, with respect to any Indebtedness, the quotient
obtained by dividing (i) the products of (a) the number of years from the date
of the transaction or event giving rise to the need to calculate the Average
Life to Stated Maturity of such Indebtedness to the date, or dates, of each
successive scheduled principal payment of such Indebtedness multiplied by (b)
the amount of each such principal payment by (ii) the sum of all such principal
payments.
"Capital Lease Obligation" means any obligation that, in accordance with
GAAP, is required to be classified and accounted for as a capitalized lease. The
principal amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation determined in accordance with GAAP and the
Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due in respect of such obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations, or other equivalents (however designated) of such Person's
capital stock whether now outstanding or issued after the Issue Date.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, or if at any time after the execution of the Indenture such
Commission is not existing and performing the duties now assigned to it under
the TIA, then the body performing such duties at such time.
"Common Stock" of any Person means any and all shares, interests,
participations, or other equivalents (however designated) of such Person's
common stock whether now outstanding or issued after the Issue Date.
"Consolidated Income Tax Expense" means for any period, as applied to the
Company, the provision for federal, state, local or foreign income taxes of the
Company and the Subsidiaries for such period as determined on a Consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, without duplication, for any period,
as applied to the Company, the sum of (a) the interest expense of the Company
and the Subsidiaries for such period as determined on a Consolidated basis in
accordance with GAAP including, without limitation, (i) amortization of original
issue discount, (ii) the net cost under Interest Rate Contracts (including
amortization of discounts), (iii) the interest portion of any deferred payment
obligation, (iv) accrued interest, (v) non-cash interest payments and (vi)
commissions, discounts, and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, plus (b) the interest portion of
Capital Lease Obligations paid or accrued by the Company and its Consolidated
Subsidiaries, plus (c) amortization of capitalized interest, plus (d) for
purposes of clause (y) of the definition of "Fixed Charge Coverage Ratio"
only, the product of (i) the amount of all dividend payments on any series of
Preferred Stock of the Company or any Subsidiary (other than dividends paid in
Qualified Capital Stock) that are, without duplication, paid, accrued or
scheduled to be paid or accrued during such period times (ii) a fraction, the
numerator of which is one (1) and the denominator of which is one (1) minus the
current effective consolidated federal, state and local tax rate applicable to
the Company, expressed as a decimal.
"Consolidated Net Income (Loss)" means, for any period, the net income (or
loss) of the Company and the Subsidiaries for such period as determined on a
Consolidated basis in accordance with GAAP, adjusted, to the extent included in
calculating such net income, by excluding without duplication (i) all
extraordinary gains or losses; (ii) any net income of any Person if such Person
is not a Subsidiary, in which the Company or any Subsidiary has an interest,
except to the extent of the amount of any dividends or distributions actually
paid in cash to the Company or a Subsidiary during such period, but not in
excess of the Company's pro rata share of such Person's net income subsequent to
the Issue Date; (iii) net income (or loss) of any Person combined with the
Company or any Subsidiary on a "pooling of interests" basis attributable to
any period
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prior to the date of combination; (iv) any gain or loss, net of taxes, realized
upon the termination of any employee pension benefit plan; (v) net gains or
losses in respect of dispositions of assets other than in the ordinary course of
business; (vi) the net income of any Subsidiary to the extent that the
declaration of dividends or similar distributions by such Subsidiary of that
income is not at the time permitted, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulations applicable to such Subsidiary or its
shareholders.
"Consolidated Rental Payments" of the Company means, for any period, the
aggregate rental obligations of the Company and the Subsidiaries (not including
taxes, insurance, maintenance and similar expenses that the lessee is obligated
to pay under the terms of the relevant leases), determined on a Consolidated
basis in accordance with GAAP, payable in respect of such period (net of income
from subleases, not including taxes, insurance, maintenance and similar expenses
that the sublessee is obligated to pay under the terms of such sublease),
whether or not such obligations are reflected as liabilities or commitments on a
Consolidated balance sheet of the Company and the Subsidiaries or in the notes
thereto, excluding, however, in any event, (i) that portion of rental payments
by the Company or any Subsidiary in respect of Capital Lease Obligations which
was included in Consolidated Interest Expense and (ii) the aggregate amount of
amortization of obligations of the Company and its Subsidiaries in respect of
such Capital Lease Obligations for such period which were included in
Consolidated Interest Expense.
"Consolidated Tangible Net Worth" means, with respect to the Company, the
shareholders' equity of the Company and the Subsidiaries, less goodwill and
other intangibles, determined on a Consolidated basis in accordance with GAAP.
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a correlative meaning.
"Default" means any event or condition which is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) so long as any amount is
outstanding or any commitment remains in effect under the Senior Secured
Facility, all Indebtedness under the Senior Secured Facility; and (ii) any other
Senior Indebtedness which, at the time of determination, has an aggregate
principal amount outstanding of, and/or any commitments to lend up to, at least
$10 million and is specifically designated in the instrument evidencing such
Senior Indebtedness as "Designated Senior Indebtedness" by the Company and as
to which the Trustee has received written notice of such designation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Capital Lease Obligations" means the Capital Lease Obligations of
the Company and the Subsidiaries outstanding on the Issue Date, after giving
effect to the application of the net proceeds of the Old Notes.
"Existing Operating Lease Obligations" means the Operating Lease
Obligations of the Company and the Subsidiaries outstanding on the Issue Date,
after giving effect to the application of the net proceeds of the Old Notes.
"Fair Market Value" means, with respect to any asset or property, the value
that would be obtained in an arm's-length transaction between an informed and
willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"Fixed Charge Coverage Ratio" means the ratio of (x) the sum of
Consolidated Net Income, Consolidated Interest Expense, one-third of
Consolidated Rental Payments, and Consolidated Income Tax Expense plus,
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without duplication, all depreciation, amortization and all other non-cash
charges (excluding any such non-cash charge constituting an extraordinary item
of loss or any non-cash charge which requires an accrual of or a reserve for
cash charges for any future period), in each case, for the Four Quarter Period,
of the Company and the Subsidiaries on a Consolidated basis, all determined in
accordance with GAAP to (y) Consolidated Interest Expense and one-third of
Consolidated Rental Payments for the Four Quarter Period; provided, however,
that in making such computation in clause (y), the Consolidated Interest Expense
attributable to interest on any Indebtedness computed on a pro forma basis and
bearing a floating interest rate shall be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period; and
provided, further, however, that such ratio shall be calculated (a) in
connection with the incurrence of any Indebtedness giving rise to the need to
calculate the Fixed Charge Coverage Ratio on a pro forma basis, on the
assumption that such Indebtedness had been incurred on the first day of such
Four Quarter Period, (b) if applicable, the proceeds therefrom had been used to
repay, on the first day of such Four Quarter Period, Indebtedness actually
repaid with such proceeds, (c) in the case of acquisitions which occurred during
such Four Quarter Period or subsequent to such Four Quarter Period and/or prior
to the date of the transaction giving rise to the need to calculate the Fixed
Charge Coverage Ratio on a pro forma basis, on the assumption that such
transaction occurred on the first day of such Four Quarter Period, (d) in the
case of the incurrence of any Indebtedness during such Four Quarter Period or
subsequent to such Four Quarter Period and on or prior to the date of the
transaction giving rise to the need to calculate the Fixed Charge Coverage Ratio
on a pro forma basis, on the assumption that such transaction occurred on the
first day of such Four Quarter Period; (e) in the case of any Four Quarter
Period that includes a quarter preceding or including the Issue Date, on the
assumption that the Acquisitions and the Offering and the application of the net
proceeds therefrom had occurred on the first day of such Four Quarter Period;
and (f) in the case of any disposition of assets during such Four Quarter Period
(or subsequent to such Four Quarter Period and/or prior to the date of the
transaction giving rise to the need to calculate the Fixed Charge Coverage
Ratio) which would require pro forma financial information with respect to the
Company under applicable accounting rules of the Commission or which results in
the assumption, repayment, defeasance or discharge of any Indebtedness, on the
assumptions that such disposition had occurred on the first day of such Four
Quarter Period with the appropriate adjustments with respect to such disposition
being included in such pro forma calculation, and that any Indebtedness assumed,
repaid, defeased or otherwise retired in connection with such disposition was
also retired on such date.
"Four Quarter Period" means the four full fiscal quarters ending on or
prior to the date of the transaction or event giving rise to the need to
calculate the Fixed Charge Coverage Ratio.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, which are in effect on the
Issue Date.
"Guarantees" means the guarantees of the Notes by each of the Guarantors
pursuant to the Indenture and any additional guarantee of the Notes to be
executed by any Subsidiary.
"guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Indebtedness of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase of payment of) such
Indebtedness of such other Person (whether arising by virtue of participation
arrangements, by agreement to keep well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring the obligee of such
Indebtedness in any other manner of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "guarantee"
used as a verb shall have a correlative meaning.
"Guarantor Senior Indebtedness" means, with respect to any Guarantor, the
principal of, premium, if any, and interest (including interest, to the extent
allowable, accruing after the filing of a petition initiating any proceeding
under any state, federal or foreign bankruptcy laws) on any Indebtedness of such
Guarantor (other
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than as otherwise provided in this definition), whether outstanding on the Issue
Date or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Guarantee of such
Guarantor. Notwithstanding the foregoing, "Guarantor Senior Indebtedness" does
not include (i) Indebtedness evidenced by the Guarantee of such Guarantor, (ii)
Indebtedness that is subordinate or junior in right of payment to any
Indebtedness of such Guarantor, (iii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to such Guarantor, (iv) Indebtedness which is
represented by Redeemable Capital Stock, (v) any liability for federal, state,
local or other taxes owed or owing by such Guarantor, (vi) any accounts payable
to trade creditors created, incurred or assumed by such Guarantor in the
ordinary course of business in connection with obtaining goods, materials or
services, (vii) Indebtedness of such Guarantor to a Subsidiary, (viii) other
than as provided in clause (vii), amounts payable on any Indebtedness of such
Guarantor to, or guaranteed by such Guarantor on behalf of, any holder of more
than 5% of the outstanding Common Stock of the Company (treating all classes of
common stock as one class for this purpose), director, officer, or Affiliate
(other than any Person described in clause (ii)(B) of the definition thereof) of
the Company or to or on behalf of any employee of such Guarantor for
compensation (except for an Indebtedness evidenced by any debt securities of
such Guarantor purchased by such shareholder, director, officer, employee or
Affiliate after such debt securities have been registered under the Securities
Act, provided that such debt securities rank senior in right of payment to the
Guarantee of such Guarantor and the issuance of the securities was permitted by
the covenant described under the caption "Certain Covenants--Limitation on
Indebtedness"), (ix) that portion of any Indebtedness which is issued by such
Guarantor in violation of the Indenture; provided, however, that in the case of
the preceding clause (ix), any Indebtedness issued to any Person who had no
actual knowledge that the incurrence of such Indebtedness was not permitted
under the covenant described under the caption "Certain Covenants--Limitation on
Indebtedness" and who received on or prior to the date of issuance thereof an
opinion of counsel (which opinion may, as to matters of fact rely upon a
certificate from an officer of the Company) to the effect that the issuance of
such Indebtedness would not violate such covenant shall constitute Guarantor
Senior Indebtedness and (x) Indebtedness of such Guarantor representing a
guarantee of Subordinated Indebtedness of the Company or any other Guarantor or
a guarantee of Indebtedness that ranks pari passu with the Notes.
"Indebtedness" with respect to any Person means, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities, now or hereafter outstanding
(other than amounts under letters of credit for which cash has been reserved or
segregated in an account with the issuer or obligee, and letters of credit
issued in connection with insurance of the type required by the provisions of
the Indenture), (ii) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments (other than those payable to government
agencies to defer the payment of workers' compensation liabilities, taxes,
assessments and other similar obligations), (iii) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (iv) all Capital Lease Obligations
of such Person, (v) all Indebtedness referred to in clause (i), (ii), (iii) or
(iv) above of other Persons and all dividends of other Persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, (vi) all guarantees of Indebtedness by such
Person, (vii) all Redeemable Capital Stock of such Person valued at the greater
of its voluntary or involuntary maximum fixed repurchase price exclusive of
accrued and unpaid dividends, (viii) all obligations under Interest Rate
Contracts and currency exchange contracts of such Person other than the net
costs thereof included in Consolidated Interest Expense, and (ix) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (i) through (viii) above. For
purposes
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of this definition, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which the amount of
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the Fair Market Value of such
Redeemable Capital Stock, such Fair Market Value shall be determined in good
faith by the Board of Directors of the issuer of such Redeemable Capital Stock.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability under any contingent obligations at such date that such Person
would have upon the occurrence of the contingency giving rise to the obligation;
provided, however, that the amount outstanding at any time of any Indebtedness
issued with original issue discount shall be the full amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP.
"Interest Rate Contracts" means interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate insurance,
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates.
"Investment" means, with respect to any Person, directly or indirectly, (i)
any advance, loan or other extension of credit or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others) any other Person, (ii)
any purchase or acquisition by such Person of any Capital Stock, bonds, notes,
debentures or other securities (whether by merger, consolidation, amalgamation,
sale of assets or otherwise) issued or owned by any other Person, (iii) any
guarantee or assumption of any Indebtedness or any other obligation of any other
Person (except for an assumption of Indebtedness for which the assuming Person
receives consideration at the time of such assumption in the form of property or
assets with a Fair Market Value at least equal to the principal amount of the
Indebtedness assumed) and (iv) all other items that would be classified as
investments (including, without limitation, purchases of assets outside the
ordinary course of business) on a balance sheet of such Person prepared in
accordance with GAAP. Notwithstanding the foregoing, the purchase or acquisition
of any securities of any other Person solely with Qualified Capital Stock shall
not be deemed to be an Investment. Investments shall exclude extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices and travel advances made to employees in the ordinary course of
business. The amount of any Investment shall not be adjusted for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"Issue Date" means the date the Notes are originally issued under the
Indenture.
"Lien" means any lien, mortgage, charge, pledge, security interest, or
other encumbrance of any kind (including any conditional sale or other title
retention agreement and any lease in the nature thereof) or any agreement to
give any of the foregoing.
"Net Cash Proceeds" means, with respect to any Asset Sale, (i) the gross
cash consideration received by the Company or any Subsidiary in connection with
such Asset Sale (including payment made in respect of deferred payment
obligations when received in the form of cash or cash equivalents), minus (ii)
the sum, without duplication, of (A) the amount of fees and commissions
(including investment banking fees), legal, title and recording tax expenses and
other costs and expenses incurred in connection with such Asset Sale, (B)
federal, state, local and foreign tax liabilities actually paid or to be paid in
connection with such Asset Sale (after taking into account any reduction in tax
liability due to available tax credits or deductions and any tax sharing
arrangements), (C) appropriate amounts to be provided by the Company or any
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Subsidiary, as the case may be, after such Asset Sale, (D) the amount of
liabilities which are required to be paid at the time or as a result of such
Asset Sale out of the proceeds thereof, and (E) amounts required to be deposited
by the Company or any Subsidiary into escrow in connection with such Asset Sale.
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"Operating Lease Obligations" means any obligation of the Company and the
Subsidiaries on a Consolidated basis incurred or assumed under or in connection
with any lease of real or personal property which is not a Capital Lease
Obligation.
"Permitted Holder" means (i) BancBoston Ventures, Inc., (ii) all other
stockholders of the Company as of the Issue Date, (iii) an employee benefit plan
of the Company or any of the Subsidiaries, or any participant therein, (iv) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any Subsidiary or (v) any Permitted Transferee of any of the
foregoing Persons.
"Permitted Indebtedness" means (i) Indebtedness of the Company and the
Subsidiaries under the Senior Secured Facility, in an aggregate principal amount
at any one time outstanding not to exceed $30 million; (ii) Indebtedness of the
Company pursuant to the Notes and the Indenture and each Guarantor pursuant to
its Guarantee; (iii) Indebtedness of the Company or any Subsidiary outstanding
on the Issue Date not to exceed the amount outstanding on such date as specified
on a schedule to the Indenture; (iv) Indebtedness of the Company or the
Subsidiaries (excluding any Indebtedness referred to in clause (i) above or
clause (v) below), the proceeds of which are utilized solely to purchase, or
Capital Lease Obligations incurred solely in respect of the acquisition of,
tractors or trailers together with any equipment appurtenant thereto used by the
Company and the Subsidiaries in the ordinary course of business; provided,
however, that the sum of (x) the aggregate principal amount of Indebtedness
incurred under this clause (iv) which is outstanding at any time and (y) the
aggregate principal amount of Existing Capital Lease Obligations remaining
outstanding at such time, shall not exceed $35 million; (v) Indebtedness of the
Company or any Subsidiary in an amount not to exceed $10 million (which may be
incurred under the Senior Secured Facility or otherwise); (vi) Indebtedness of
the Company or any Subsidiary incurred pursuant to Interest Rate Contracts to
the extent the notional principal amount of any such Interest Rate Contract does
not exceed the amount of Indebtedness to which such Interest Rate Contract
relates; (vii) Indebtedness of any Wholly Owned Subsidiary to the Company or any
other Wholly Owned Subsidiary or Indebtedness of the Company to any Subsidiary;
(viii) any renewals, extensions, substitutions, refundings, refinancings or
replacements of (x) any Indebtedness described in clauses (ii) or (iii) of this
definition and (y) any other Indebtedness which, at the time incurred, was
incurred in compliance with the paragraph under the caption "Certain Covenants--
Limitation on Indebtedness," including any successive renewals, extensions,
substitutions, refundings, refinancings or replacements, so long as such
renewal, extension, substitution, refunding, refinancing or replacement (A) does
not result in an increase in the aggregate principal amount of the outstanding
Indebtedness being so renewed, extended, substituted, refunded, refinanced or
replaced (plus the amount of any premium required to be paid under the terms of
the instrument governing the Indebtedness being so renewed, extended,
substituted, refunded, refinanced or replaced) or, in the case of renewals,
extensions, substitutions, refundings or replacements of any revolving credit
facility, does not result in an increase in the maximum committed amount of such
facility; (B) does not reduce the Average Life to Stated Maturity of such
Indebtedness and, in the case of any extension, renewal, refunding, refinancing
or replacement in part of the Notes, does not change the Stated Maturity of any
payment of principal thereof to a date earlier than the Stated Maturity existing
at the time of such extension, renewal, refunding, refinancing or replacement;
and (C) is incurred by the Person liable for the Indebtedness being renewed,
extended, substituted, refunded, refinanced or replaced; provided, however, that
the Company may incur Indebtedness to refinance Indebtedness of the Company or a
Subsidiary; provided, further, that subclause (B) of this clause (viii) will not
apply to any renewal, extension, substitution, refunding, replacement or
refinancing of any Senior Indebtedness, (ix) any guarantee of the Notes by any
Subsidiary required by the covenant described under the caption "Certain
Covenants--Limitation of Guarantees by Subsidiaries" and (x) Indebtedness of the
Company or any Subsidiary incurred in respect of performance bonds, bankers'
acceptances and letters of credit in the ordinary course of business, including
Indebtedness evidenced by letters of credit issued in the ordinary course of
business consistent with past practice to support the insurance or self-
insurance obligations of the Company or any Subsidiary (including to secure
workers' compensation and other similar insurance coverages), but excluding
letters of credit issued in respect of or to secure money borrowed.
"Permitted Investment" means (i) Investments in any of the Notes, (ii)
Temporary Cash Investments and (iii) Investments in Wholly Owned Subsidiaries
that are Guarantors.
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"Permitted Junior Securities" means any securities of the Company or any
other corporation that are equity securities or are subordinated in right of
payment to all Senior Indebtedness, that may at the time be outstanding, to
substantially the same extent as, or to a greater extent than, the Notes are so
subordinated as provided in the Indenture.
"Permitted Transferees" means, with respect to any Person, (i) any
Affiliate of such Person, (ii) the heirs, executors, administrators,
testamentary trustees, legatees or beneficiaries of such Person, (iii) a trust,
the beneficiaries of which, or a corporation or partnership, the stockholders or
general or limited partners of which, include only such Person or his or her
spouse or lineal descendants, in each case to whom such Person has transferred
the beneficial ownership of any securities of the Company, (iv) any investment
account whose investment managers and investment advisors consist solely of such
Person and/or Permitted Transferees of such Person and (v) any investment fund
or investment entity that is a subsidiary of such Person or a Permitted
Transferee of such Person.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any Capital Stock of
such Person, whether now outstanding or issued after the Issue Date, which is
entitled to any preference or priority over shares of any other class of shares
of such Person in respect of the payment of dividends or the distribution of
assets upon liquidation.
"Public Equity Offering" means an underwritten primary public offering of
the Common Stock of the Company, or of a corporation that is the direct owner of
100% of the outstanding Voting Stock of the Company and the owner of no other
material amount of assets (other than those incidental to such ownership),
pursuant to an effective registration statement under the Securities Act, which
public equity offering results in gross cash proceeds to the Company of not less
than $25 million.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, (i) either by its
terms, by the terms of any security into which it is convertible or exchangeable
or otherwise, is or upon the happening of an event or passage of time would be,
required to be redeemed (in whole or in part) prior to the final Stated Maturity
of the Notes or is redeemable (in whole or in part) at the option of the holder
thereof at any time prior to such final Stated Maturity, or (ii) is convertible
into or exchangeable for debt securities at any time prior to such final Stated
Maturity.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Subsidiary of any property, whether owned by the
Company or such Subsidiary at the Issue Date or later acquired, which has been
or is to be sold or transferred by the Company or such Subsidiary to such Person
or to any other Person by whom funds have been or are to be advanced on the
security of such property.
"Senior Indebtedness" means the principal of, premium, if any, and interest
(including interest, to the extent allowable, accruing after the filing of a
petition initiating any proceeding under any state, federal or foreign
bankruptcy laws) on any Indebtedness of the Company (other than as otherwise
provided in this definition), whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Notwithstanding the foregoing,
"Senior Indebtedness" does not include (i) Indebtedness evidenced by the
Notes, the Exchange Notes or the Guarantees, (ii) Indebtedness that is
subordinate or junior in right of
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payment to any Indebtedness of the Company or any Subsidiary, (iii) Indebtedness
which, when incurred and without respect to any election under Section 1111(b)
of Title 11, United States Code, is without recourse to the Company or any
Subsidiary, (iv) Indebtedness which is represented by Redeemable Capital Stock,
(v) any liability for federal, state, local, foreign or other taxes owed or
owing by the Company or any Subsidiary, (vi) any accounts payable to trade
creditors created, incurred or assumed by the Company or any Subsidiary in the
ordinary course of business in connection with obtaining goods, materials or
services, (vii) Indebtedness of the Company to a Subsidiary, (viii) amounts
payable on any Indebtedness of the Company to, or guaranteed by the Company on
behalf of, any holder of more than 5% of the outstanding Common Stock of the
Company (treating all classes of common stock as one class for this purpose),
director, officer, employee or Affiliate (other than any Person described in
clause (ii)(B) of the definition thereof) of the Company (including, without
limitation, amounts owed for compensation) and (ix) that portion of any
Indebtedness which at the time of issuance is issued in violation of the
Indenture; provided, however, that in the case of the preceding clause (ix), any
Indebtedness issued to any Person who had no actual knowledge that the
incurrence of such Indebtedness was not permitted under the covenant described
under the caption "Certain Covenants--Limitation on Indebtedness" and who
received on or prior to the date of issuance thereof an opinion of counsel
(which opinion may, as to matters of fact, rely upon a certificate from an
officer of the Company) to the effect that the issuance of such Indebtedness
would not violate such covenant shall constitute Senior Indebtedness.
"Senior Representative" means the agent bank under the Senior Secured
Facility or any other representatives of the holders of Designated Senior
Indebtedness, as the case may be.
"Senior Secured Facility" means one or more secured credit agreements to be
entered into by the Company or the Subsidiaries and any and all renewals,
extensions, substitutions, refundings, refinancings or replacements of such
facility. Without limiting the generality of the foregoing, the term "Senior
Secured Facility" shall include any amendment, amendment and restatement,
renewal, extension, restructuring, supplement or modification to any Senior
Secured Facility and all refundings, refinancings and replacements of any Senior
Secured Facility, including any agreement (i) changing the maturity of any
Indebtedness incurred thereunder or contemplated thereby, (ii) adding or
deleting borrowers or guarantors thereunder, so long as borrowers and issuers
include one or more of the Company and the Subsidiaries and their respective
successors and assigns, (iii) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder, provided that on the date
such Indebtedness is incurred it would not be prohibited by the covenant
described under the caption "Certain Covenants--Limitation of Indebtedness",
or (iv) otherwise altering the terms and conditions thereof in a manner not
prohibited by the terms thereof.
"Significant Subsidiary" of the Company means, as of any date, any
Subsidiary that, together with its subsidiaries and each Defaulting Subsidiary
(as defined below), (a) as of the end of the most recently completed fiscal
quarter immediately preceding such date, owned at least 5% of the Consolidated
assets of the Company, as such assets would appear on a balance sheet of the
Company and the Subsidiaries prepared on a Consolidated basis in accordance with
GAAP, or (b) for the most recently completed fiscal quarter immediately
preceding such date, accounted for at least 5% of the Consolidated Net Income of
the Company for such fiscal quarter. "Defaulting Subsidiary" means any
Subsidiary with respect to which an event described under clause (vi) or clause
(ix), as applicable, of the first paragraph under the caption "Events of
Default" has occurred and is continuing, determined as if the reference therein
to the words "Significant Subsidiary" were a reference to the word "Subsidiary."
"Stated Maturity" when used with respect to any Note or any installment of
interest thereon, means the dates specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable, and when used with respect to any other Indebtedness, means the date
specified in the instrument governing such Indebtedness as the fixed date on
which the principal of such Indebtedness or any installment of interest is due
and payable.
-89-
<PAGE>
"Stockholders Agreement" means the Stockholders Agreement dated as of
November 15, 1995, among the Company and certain of the Company's stockholders
and any amendments thereto or modifications or replacements thereof.
"Subordinated Indebtedness" means (i) Indebtedness of the Company which is
subordinated in right of payment to the Notes and (ii) Indebtedness of any
Subsidiary which is subordinated in right of payment to the Guarantee.
"Subsidiary" means any Person a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof, in
each case, maturing within 360 days of the date of acquisition thereof, (ii)
investments in time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by a
bank or trust company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States having capital, surplus and undivided profits aggregating in excess of
$300,000,000 and whose debt is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act) or any money-market fund sponsored
by any registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above and (iv) investments in commercial
paper, maturing not more than 270 days after the date of acquisition, issued by
a corporation (other than an Affiliate or Subsidiary of the Company) organized
and in existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time as
of which any investment therein is made of "P-2" (or higher) according to
Moody's or "A-2" (or higher) according to S&P.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
Person (irrespective of whether or not at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which
(other than directors' qualifying shares) is owned by the Company or another
Wholly Owned Subsidiary.
-90-
<PAGE>
SELLING NOTEHOLDERS
The table below sets forth certain information with respect to the Selling
Noteholders. The New Notes set forth therein are being included in the
Registration Statement of which this Prospectus forms a part pursuant to the
Registration Right Agreement. The Company will not receive any proceeds from
the sale of New Notes by the Selling Noteholders.
<TABLE>
<CAPTION>
Aggregate Principal Amount
Name of Selling Noteholder of New Notes Owned
-------------------------- --------------------------
<S> <C>
BancBoston Investments, Inc.(1)............ $10,000,000
Michael L. Lawrence(2)..................... 1,000,000
Carol Beauchamp(3)......................... 900,000
William P. Scales(4)....................... 900,000
Dunbar Associates, Inc. (5)................ 400,000
Michael Crowe(6)........................... 300,000
-----------
Total............................ $13,500,000
===========
</TABLE>
_______________________
(1) Affiliate of BBV, which owns approximately 43% of the Company's
outstanding Common Stock and a warrant to purchase additional shares
representing approximately 10.3% of the outstanding Common Stock.
(2) Chairman, President and Chief Executive Officer and Director of the
Company.
(3) Spouse of Richard Beauchamp, Director of the Company and Chief
Executive Officer of ART.
(4) Director of the Company and Chief Executive Officer of CBS and Scales.
(5) A corporation owned by the spouse of Michael Langevin, a Director of
the Company.
(6) Director of the Company and Chief Executive Officer of W&L.
BOOK ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the New Notes initially will be
represented by a single, permanent global certificate in definitive, fully
registered form (the "Global Note") . The Global Note will be deposited on the
Closing Date with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of a nominee of DTC.
New Notes issued to any person who is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act will be issued in registered
certificated form ("Certificated Securities"). Upon the transfer of any such
Certificated Security made in compliance with the prospectus delivery
requirements of the Securities Act, such Certificated Security will, unless the
transferee requests otherwise or the Global Note has been previously exchanged
in whole for Certificated Securities, be exchanged for an interest in the Global
Note.
-91-
<PAGE>
THE GLOBAL NOTE
The Company expects that pursuant to procedures established by DTC (i) upon
the issuance of the Global Note, DTC or its custodian will credit, on its
internal system, the principal amount of Notes of the individual beneficial
interest represented by such Global Note to the respective accounts for persons
who have accounts with DTC and (ii) ownership of beneficial interest in the
Global Note will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Such accounts initially will be
designated by or on behalf of the Initial Purchaser and ownership of beneficial
interests in the Global Note will be limited to persons who have accounts with
DTC ("participants") or persons who hold interest through participants.
So long as DTC or its nominee is the registered owner or holder of the New
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the New Notes represented by such Global Note for all
purposes under the Indenture. No beneficial owner of an interest in any Global
Note will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture.
Payments of the principal of, premium, if any, and interest (including
Additional Interest) on, the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any paying agent of the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest (including Additional Interest) in
respect of the Global Note, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Note as shown on the records of DTC or its nominee. The
Company also expects that payments by participants to owners of beneficial
interest in the Global Note held through such participants will be governed by
standing instructions and customary practice, as is now the case with securities
held for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell Notes to persons in states which require physical delivery of
the Certificated Securities, or to pledge such securities, such holder must
transfer its interest in the Global Note in accordance with the normal
procedures of DTC and with the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of New Notes (including the presentation of New Notes for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in the Global Note are credited and only in
respect of such portion of the aggregate principal amount of Notes as to which
such participant or participants has or have given such direction. However, if
there is an Event of Default under the Indenture, DTC will exchange the Global
Note for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers banks,
trust companies and clearing corporations and
-92-
<PAGE>
certain other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants")
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Initial Purchasers or the
Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Note and a successor depositary is not appointed by the Company
within 90 days, Certificated Securities will be issued in exchange for the
Global Note.
PLAN OF DISTRIBUTION
The New Notes received by the Selling Noteholders as a result of the
Exchange Offer may be offered for sale from time to time at market prices
prevailing at the time of sale or at negotiated prices. This Prospectus may be
used from time to time by each Selling Noteholder to offer the New Notes
registered hereby for sale in transactions in which such Selling Noteholder is
or may be deemed to be an underwriter within the meaning of the Securities Act.
Brokers, dealers and agents participating in the distribution of the New Notes
offered by Selling Noteholders may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of such New Notes may be deemed to be underwriting discounts and
commissions under the Securities Act.
LEGAL MATTERS
Certain legal matters regarding the validity of the New Notes offered
hereby have been passed upon for the Company by Bingham, Dana & Gould, Boston,
Massachusetts.
EXPERTS
The consolidated balance sheet of AmeriTruck Distribution Corp. as of
December 31, 1995 and the consolidated statements of income, stockholders'
equity and cash flows for the year ended December 31, 1995, included in this
Prospectus, have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The combined balance sheet of W&L Services Corp. and Subsidiaries and
Thompson Bros., Inc. (the Predecessor Company) as of December 31, 1994, and the
combined statements of income, stockholders' equity and cash flows for each of
the two years in the period ended December 31, 1994, included in this
Prospectus, have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The consolidated statements of operations, stockholders' equity and cash
flows of W&L Services Corp. and Subsidiaries for the year ended December 31,
1993, referred to in this Prospectus, have been referred to herein in reliance
on the report of Deloitte & Touche LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing. On November 23,
1994, W&L informed Deloitte & Touche LLP that they had been dismissed as the
independent accountants for W&L and its subsidiaries. The report of Deloitte &
Touche LLP referred to above did not contain an adverse opinion, disclaimer of
-93-
<PAGE>
opinion, qualification, or modification as to uncertainty, audit scope or
accounting principles. There were no disagreements between W&L or its
subsidiaries and Deloitte & Touche LLP in the periods referred to above or in
subsequent interim periods preceding their dismissal on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to the satisfaction of Deloitte & Touche LLP,
would have caused it to make a reference to the subject matter of the
disagreements in connection with its report. On November 21, 1994, W&L engaged
Coopers & Lybrand L.L.P. to act as the principal independent accountants for W&L
and its subsidiaries. This change was approved by the Board of Directors of W&L.
-94-
<PAGE>
AMERITRUCK DISTRIBUTION CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants F-1
Report of Independent Accountants F-2
Consolidated Statements of Income for the three years
ended December 31, 1995 F-3
Consolidated Balance Sheets at December 31, 1995 and
1994 F-4
Consolidated Statements of Cash Flows for the three years
ended December 31, 1995 F-5
Consolidated Statements of Stockholders' Equity
(Deficiency) for the three years ended December 31, 1995 F-6
Notes to Consolidated Financial Statements F-7
Consolidated Statements of Operations for the three months
ended March 31, 1996 and 1995 (unaudited) F-20
Consolidated Balance Sheets at March 31, 1996 and 1995
(unaudited) F-21
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and March 31, 1995 (unaudited) F-22
Notes to Consolidated Financial Statements
(unaudited) F-23
</TABLE>
-95-
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
AmeriTruck Distribution Corp.
We have audited the consolidated balance sheet of AmeriTruck
Distribution Corp. (the Company) as of December 31, 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for
the year then ended. We have also audited the combined balance sheet of W&L
Services Corp. and Subsidiaries and Thompson Bros., Inc. (the predecessor
company) as of December 31, 1994 and the related combined statements of
income stockholders' equity, and cash flows for each of the two years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We
did not audit the financial statements of W&L Services Corp. and
Subsidiaries as of December 31, 1993 and for the year then ended, which
statements reflect total revenues constituting 53 percent of the related
combined total for the year ended December 31, 1993. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for W&L Services
Corp. and Subsidiaries, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated and combined financial statements referred to
above present fairly, in all material respects, the financial position of
AmeriTruck Distribution Corp. at December 31, 1995 and its predecessor
company at December 31, 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
March 21, 1996
-F-1-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
W&L Services Corp. and Subsidiaries
Hickory, North Carolina:
We have audited the consolidated statements of operations, stockholders' equity,
and cash flows (not included herein) of W&L Services Corp. and Subsidiaries for
the year ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
W&L Services Corp. and Subsidiaries for the year ended December 31, 1993 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Hickory, North Carolina
April 8, 1994
-F-2-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Operating revenue $102,846 $80,087 $72,783
-------- ------- -------
Operating expenses:
Salaries, wages and fringe benefits 32,463 23,639 21,590
Purchased transportation 26,564 23,504 21,236
Operating supplies and expenses 14,786 10,038 10,246
Depreciation and amortization of capital leases 7,407 5,815 5,158
Claims and insurance 4,471 3,169 3,000
Operating taxes and licenses 3,145 2,436 2,050
General supplies and expenses 3,675 2,465 2,207
Amortization of intangibles 475 656 658
Gain on disposal of property and equipment (425) (283) (335)
---- ---- ----
Total operating expenses 92,561 71,439 65,810
-------- ------- -------
Operating income 10,285 8,648 6,973
Interest expense 4,993 3,422 3,641
Other income, net 385 205 219
--- --- ----
Income before income taxes and extraordinary item 5,677 5,431 3,551
Income tax expense 2,496 2,317 1,248
-------- ------- -------
Income before extraordinary item 3,181 3,114 2,303
Extraordinary item, loss on early
retirement of debt, net of taxes $16 (23) - -
--- ------ -------
Net income $ 3,158 $ 3,114 $ 2,303
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-F-3-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
December 31,
-------------------
1995 1994
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,286 $ 1,617
Accounts receivable, net 12,269 8,300
Prepaid expenses 4,057 1,229
Repair parts and supplies 844 595
Deferred income taxes 960 406
Restricted cash -- 2,033
Other current assets 941 --
-------- -------
Total current assets 34,357 14,180
Property and equipment, net 67,191 33,069
Goodwill, net 32,705 6,465
Other assets 6,282 531
-------- -------
Total assets $140,535 $54,245
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Current portion of long-term debt $ 10,566 $ 9,580
Accounts payable and accrued expenses 12,071 4,054
Claims and insurance accruals 1,852 908
Other current liabilities 499 989
-------- -------
Total current liabilities 24,988 15,531
Long-term debt 107,769 19,869
Deferred income taxes 7,773 5,957
Other liabilities 1,822 400
-------- -------
Total liabilities 142,352 41,757
-------- -------
Commitments and contingencies (Note 10)
Redeemable preferred stock -- 2,000
-------- -------
Stockholders' equity (deficiency):
Common stock, $.01 par value, 3,278 issued
and outstanding 33 --
Additional paid-in capital -- 11,963
Loan to stockholders (1,435) --
Accumulated deficit (415) (1,475)
-------- -------
Total stockholders' equity (deficiency) (1,817) 10,488
-------- -------
Total liabilities and stockholders' equity
(deficiency) $140,535 $54,245
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
-F-4-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,158 $ 3,114 $ 2,303
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of capital leases 7,407 5,815 5,158
Amortization of intangibles 475 656 658
Gain on disposal of property and equipment (425) (283) (335)
Provision for deferred income taxes 1,074 933 515
Provision for doubtful accounts 224 114 106
Other, net 881 2,517 1,274
Changes in current assets and liabilities, net of effects from
acquisitions:
Accounts receivable, net (325) (2,237) (443)
Prepaid expenses (1,199) 4 129
Repair parts and supplies 22 (147) (67)
Other current assets 1,652 857 (808)
Accounts payable and accrued expenses (791) 144 391
Claims and insurance accruals 406 433 (121)
Other current liabilities (527) 500 (83)
-------- -------- --------
Net cash provided by operating activities 12,032 12,420 8,677
-------- -------- --------
INVESTING ACTIVITIES
Payments for acquisitions, net of cash acquired (18,258) -- --
Purchase of property and equipment (15,399) (2,632) (2,652)
Proceeds from sale of property and equipment 3,520 1,013 2,458
Other, net (557) (91) --
-------- -------- --------
Net cash used in investing activities (30,694) (1,710) (194)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 103,427 9,954 2,319
Repayment of long-term debt (49,011) (19,461) (10,022)
Distribution to controlling stockholders (17,361) -- --
Redemption of preferred stock (2,000) (1,000) (500)
Other (2,724) (215) (270)
-------- -------- --------
Net cash provided by (used in) financing activities 32,331 (10,722) (8,473)
-------- -------- --------
Net increase (decrease) in cash 13,669 (12) 10
Cash and cash equivalents, beginning of period 1,617 1,629 1,619
-------- -------- --------
Cash and cash equivalents, end of period $ 15,286 $ 1,617 $ 1,629
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-F-5-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficiency)
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
Total Stock-
Common Additional Loan to Accumu- holders'
Shares Common Paid-in Stock- lated Equity
Outstanding Stock Capital holders Deficit (Deficiency)
----------- ------- ----------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 11 $ 361 $ 939 $ - $(4,990) $ (3,690)
Issuance of stock to key employee in
accordance with the share compensation
plan - - 14 - - 14
Dividends on preferred stock - - - - (270) (270)
Issuance of 766 shares of preferred
stock as dividends - - - - (766) (766)
Net income - - - - 2,303 2,303
----- ----- -------- ------- ------- --------
Balance, December 31, 1993 11 361 953 - (3,723) (2,409)
Dividends on preferred stock - - - - (376) (376)
Conversion of no par value common stock
to $.01 par value common stock - (361) 361 - - -
Issuance of 490 shares of preferred
stock as dividends - - - - (490) (490)
Conversion of 8,812 shares of preferred
stock into common stock 9 - 8,812 - - 8,812
Issuance of common stock 9 - 161 - - 161
Contributed capital - - 1,676 - - 1,676
Net income - - - - 3,114 3,114
----- ----- -------- ------- ------- --------
Balance, December 31, 1994 29 - 11,963 - (1,475) 10,488
Dividends on preferred stock - - - (187) (187)
Loans to stockholders - - - (283) - (283)
Issuance of common stock 2 - 1,152 (1,152) - -
Distribution to controlling stockholders - - (15,583) - (1,778) (17,361)
Issuance of common stock to controlling
stockholders 2,173 22 (22) - - -
Issuance of common stock for acquired
companies and minority stockholders 1,074 11 2,490 - (133) 2,368
Net income - - - - 3,158 3,158
----- ----- -------- ------- ------- --------
Balance, December 31, 1995 3,278 $ 33 $ - $(1,435) $ (415) $ (1,817)
===== ===== ========== ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
-F-6-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Nature of Operations
AmeriTruck Distribution Corp. and its wholly-owned subsidiaries generally
operate in specialized areas of the transportation services industry including
time-sensitive delivery, special handling, unconventional pick-up and delivery
times, in-house logistic services, dedicated fleets and temperature control.
Principles of Consolidation
The combined financial statements include the accounts of AmeriTruck
Distribution Corp. and its wholly-owned subsidiaries ("AmeriTruck" or the
"Company"). AmeriTruck was formed in August 1995 to effect the combination of
six regional trucking lines (the "Acquisitions"): W&L Services Corp. ("W&L"),
Thompson Bros., Inc. ("TBI"), J.C. Bangerter & Sons, Inc., ("Bangerter"), CMS
Transportation Services, Inc. and certain related companies ("CMS"), Scales
Transport Corporation and a certain related company ("Scales") and C.B.S.
Express, Inc. ("CBS" and, collectively, the "Operating Companies"). Prior to
the Acquisitions, W&L and TBI had certain common stockholders who controlled
approximately 87 percent of the common equity of W&L and TBI on a combined
basis (the "Controlling Stockholders"). In addition, the Controlling
Stockholders control approximately 67 percent of the outstanding common stock
of AmeriTruck after the consummation of the Acquisitions. Therefore, the
Controlling Stockholders on a combined basis have been treated as the acquirer
for purposes of accounting for the Acquisitions. With respect to the
acquisitions of W&L and TBI, their acquisitions are accounted for as a
purchase by the Controlling Stockholders of the stock of the remaining
stockholders of W&L and TBI (the "Minority Stockholders"), who owned
approximately 13 percent of W&L and TBI on a combined basis. The accompanying
AmeriTruck consolidated statements of income and cash flows for the years
ended December 31, 1995, 1994 and 1993 reflect W&L and TBI combined historical
results and cash flows for such periods, Bangerter results and cash flows
since August 1, 1995, and CMS, Scales and CBS results since November 1, 1995.
The accompanying AmeriTruck consolidated balance sheet at December 31, 1994
reflects only W&L and TBI combined historical amounts while the AmeriTruck
consolidated balance sheet at December 31, 1995 also includes Bangerter, CMS,
Scales and CBS assets and liabilities as adjusted by purchase accounting. The
Operating Companies are the principal subsidiaries of AmeriTruck. All
significant intercompany accounts and transactions have been eliminated.
Separate financial statements of the Company's subsidiaries are not
included because (a) all of the Company's direct and indirect subsidiaries
have guaranteed the Company's obligations under the Indenture, dated as of
November 15, 1995 (the "Indenture"), among the Company, such subsidiaries (in
such capacity, the "Guarantors"), and the Bank of New York, as Trustee, (b)
the Guarantors have fully and unconditionally guaranteed the 12 1/4% Senior
Subordinated Notes issued under the Indenture on a joint and several basis,
(c) the Company is a holding company with no independent assets or operations
other than its investments in the Guarantors and (d) the separate financial
statements and other disclosures concerning the Guarantors are not presented
because management has determined that they would not be material.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the periods presented.
-F-7-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies (continued)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in demand deposits
and short-term investments with original maturities of 90 days or less. Cash
equivalents are stated at cost, which approximates market value.
Prepaid Expenses
Prepaid expenses primarily consist of tires in service. The cost of new and
replacement tires is capitalized and included in prepaid expenses when placed
in service, and then amortized on a straight-line basis over their estimated
useful lives. Estimated useful lives range from 10 to 24 months.
Repair Parts and Supplies
Repair parts and supplies consists of fuel, tires until placed in service,
tubes, replacement parts and supplies and are valued at the lower of average
cost or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of 3 to 10 years for
revenue and service equipment, 10 to 30 years for structures, 4 to 10 years
for leasehold improvements, and 2 to 10 years for furniture and office
equipment. Major additions and betterments are capitalized, while maintenance
and repairs that do not improve or extend the life of the asset are charged to
expense as incurred. Gains and losses on dispositions are included in
operating income.
Goodwill and Other Intangibles
Goodwill represents the excess of the acquisition costs over the fair
value of net identifiable assets of businesses acquired and is amortized on a
straight-line basis over 40 years. Accumulated amortization of goodwill at
December 31, 1995 and 1994 was $1,333,000 and $1,066,000, respectively. Other
intangibles, which primarily consist of financing and other costs associated
with business acquisitions, are included in other assets and are amortized
over the life of the financing agreement.
The realizability of goodwill and other intangibles is evaluated
periodically as events or circumstances indicate a possible inability to
recover their carrying amount. Such evaluation is based on various analyses,
including cash flow and profitability projections that incorporate, as
applicable, the impact on existing company operations. The analyses
necessarily involve significant management judgment to evaluate the capacity
of an acquired operation to perform within projections. Management believes
that no significant impairment of goodwill and other intangible assets has
occurred.
Claims and Insurance Accruals
Claims accruals represent reserves for estimated costs to repair and
replace damaged goods resulting from cargo claims. The Company is primarily
self-insured for these damages. Insurance accruals reflect the estimated cost
of claims for bodily injury and property damage, workers' compensation and
employee health care not covered by insurance. These liabilities for self-
insurance are accrued based on claims incurred and on estimates of both
unasserted and unsettled claims which are assessed based on management's
evaluation of the nature and severity of individual claims and on the
Company's past claims experience.
-F-8-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies (continued)
Revenue Recognition
Freight revenues are recognized upon the delivery of freight.
Reclassifications
Certain prior year information has been reclassified to conform to the
current year presentation.
2. Acquisitions
As discussed in Note 1, AmeriTruck was formed in August 1995 to effect the
combination of the Operating Companies. AmeriTruck acquired all of the
outstanding common stock of the Operating Companies, except Bangerter, in
exchange for shares of AmeriTruck's common stock and the payment of $35.0
million in cash of which $17.4 million is reflected as a dividend to the
Controlling Stockholders for accounting purposes. All of the outstanding
common stock of Bangerter was acquired for a cash purchase price of $86,000
and a contingent deferred purchase price of up to approximately $1.3
million. The acquisitions of Bangerter, CMS, Scales and CBS were accounted
for by the purchase method. The excess of the purchase price over the fair
values of the net assets acquired has been recorded as goodwill. The net
purchase price was allocated as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Property and equipment, net $ 13,951
Goodwill(1) 26,106
Other assets 7,955
Long-term debt (18,341)
Other liabilities (10,687)
--------
Purchase price, net of cash acquired $ 18,984
========
</TABLE>
(1) Includes $2,033 related to the excess of the purchase price over the fair
values of the net assets acquired from the minority stockholders.
The accompanying consolidated financial statements include assets,
liabilities and financial results of Bangerter since August 1, 1995 and of
CMS, Scales and CBS since November 1, 1995. The unaudited pro forma
operating results of the Company for the years ended December 31, 1995 and
1994, as if the Acquisitions had occurred on January 1, 1994, are presented
below (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Operating revenues $150,171 $146,103
Operating income 16,083 16,867
Income before 1,929 2,344
extraordinary item
Net income 1,906 2,344
</TABLE>
These pro forma results have been prepared for comparative purposes only
and include pro forma adjustments for conformed depreciation lives and
salvage values among all of the Operating Companies and certain other
adjustments, including adjustment of the effective tax rate to the expected
rate of AmeriTruck. They are not necessarily indicative of the results of
operations that might have occurred had the Acquisitions actually taken
place on January 1, 1994, or of future results of operations of the
consolidated entities.
-F-9-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
2. Acquisitions (continued)
In May 1995, W&L acquired substantially all of the assets of Dietz Motor
Line (Dietz) for a purchase price consisting of cash consideration of $1.6
million and assumption or payment of certain liabilities including debt,
wages and claims. Total liabilities assumed totaled $1.2 million. The
purchase price resulted in an excess of cost over net assets acquired of
$282,000. The results of operations of Dietz have been included in the
Company's operations from the date of acquisition.
In February 1996, the Company, through CMS, purchased (the "Purchase")
certain assets of Freymiller Trucking Inc. Freymiller had been the subject of
a Chapter 11 bankruptcy proceeding in Oklahoma. Pursuant to the Purchase, CMS
purchased certain specific automobiles, computer hardware and software,
furniture and fixtures, rights to the trade name "Freymiller", existing spare
parts, tires and fuel, rights under certain leases, certain leasehold
improvements and shop equipment and installment sales contracts relating to
tractors and trailers sold by Freymiller out of the ordinary course of
business (with all of the foregoing referred to as the "Assets"). The Company
also negotiated with Freymiller's lenders and lessors to purchase
approximately 185 tractors and approximately 309 trailers previously operated
by Freymiller for approximately $14 million. An additional 80 trailers were
leased for a seven year period. In exchange for the Assets, the Company paid
approximately $2.7 million in cash at closing and assumed approximately $2
million in existing equipment financing. In addition, the Company assumed a
lease for Freymiller's maintenance facility in Oklahoma City. Except as
provided above, the Company did not assume any obligations or liabilities of
Freymiller.
In connection with these transactions, the Company purchased real
property in Oklahoma City, Oklahoma from Freymiller's Chairman of the Board,
President and Chief Executive Officer, for approximately $1.1 million in
cash. The Company has also agreed to purchase real property from the same
individual for $400,000 as a possible replacement of the maintenance facility
currently leased by the Company. These assets will supplement the Company's
existing temperature-controlled operations.
3. Other Income, Net
Other income (expenses) consists of the following for the years ended
December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ----- -----
<S> <C> <C> <C>
Interest income $ 359 $ 189 $ 155
Amortization of financing fees (38) - -
Miscellaneous, net 64 16 64
----- ----- -----
$ 385 $ 205 $ 219
===== ===== =====
</TABLE>
-F-10-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
4. Income Taxes
Income tax expense excluding the extraordinary item, was as follows for the
years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $1,301 $1,188 $ 620
State 121 196 113
------ ------ ------
1,422 1,384 733
------ ------ ------
Deferred:
Federal 706 788 391
State 368 145 124
------ ------ ------
1,074 933 515
------ ------ ------
Total $2,496 $2,317 $1,248
====== ====== ======
</TABLE>
A reconciliation of the federal statutory income tax rate to the effective
income tax rate, excluding the extraordinary item, rate was as follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal tax benefit 5.6 5.1 4.8
Nondeductible expenses 5.0 3.2 2.7
Change in valuation allowance - (1.9) (8.1)
Nondeductible interest - 1.9 -
Other, net (0.6) 0.4 1.8
---- ---- ----
Effective tax rate 44.0% 42.7% 35.2%
==== ==== ====
The components of deferred tax assets and liabilities at December 31 were as follows (in thousands):
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization $(8,316) $(5,694)
Prepaid items and other (791) (531)
------- -------
Total deferred tax liabilities (9,107) (6,225)
------- -------
Deferred tax assets:
Accrued expenses and reserves 1,350 477
Net operating losses and tax credits 944 113
FICA assessment and interest - 70
Deferred revenue previously recognized for tax - 14
------- -------
Total deferred tax assets 2,294 674
------- -------
Net deferred tax liability $(6,813) $(5,551)
======= =======
Current deferred income tax asset $ 960 $ 406
Noncurrent deferred income tax liability (7,773) (5,957)
------- -------
Net deferred tax liability $(6,813) $(5,551)
======= =======
</TABLE>
-F-11-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
4. Income Taxes (continued)
The Company has available at December 31, 1995, an alternative minimum tax
(AMT) credit carryforward of $259,000 to offset future regular tax
liabilities. The AMT credit carryforward has no expiration date. The benefit
of the tax credits is recognized in continuing operations for accounting
purposes. The Company also has available state net operating losses of
$58,000. The state net operating loss carryovers will expire between 1998 and
2009 .
The Company has available at December 31, 1995, unused Bangerter
preacquisition operating loss carryforwards of approximately $1.3 million
which expire between 2006 and 2011. These preacquisition carryforwards may be
used only to offset future taxable income, if any, of Bangerter and may not be
used to offset future taxable income of any other member of the group with
which the Company files a consolidated return. The amount of preacquisition
tax loss carryforwards available to offset future taxable income will be
subject to limitation, due to the ownership change under Internal Revenue Code
Section 382. The Company will be required to pay tax in any year in which
Bangerter's taxable income exceeds the ownership change limitation,
notwithstanding the existence of tax loss carryforwards. The amount of the
preacquisition carryforwards which may be applied in any one year is limited
by the Internal Revenue Code to the lessor of Bangerter's taxable income or
approximately $84,000.
5. Accounts Receivable
AmeriTruck maintains an allowance for doubtful accounts based upon the
expected collectibility of all accounts receivable. Allowances for doubtful
accounts of $406,000 and $211,000 were recorded at December 31, 1995 and 1994,
respectively. Driver advances and employee receivables of $203,000 and
$123,000 were included in accounts receivable at December 31, 1995 and 1994,
respectively.
For the year ended December 31, 1995, the Company's largest customers were
Smith's Food & Drug, the U.S. Postal Service and Curtin Matheson Scientific
which accounted for approximately 12 percent, 8 percent and 7 percent of its
pro forma combined revenues, respectively. No other customers accounted for
more than 5 percent of the Company's pro forma combined revenues for 1995.
6. Property and Equipment
Property and equipment at December 31 was as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenue equipment $ 80,764 $ 44,529
Structures 3,359 2,271
Service equipment and other 1,348 510
Office furniture and equipment 913 790
Land 816 736
Leasehold improvements 568 458
-------- --------
Total property and equipment 87,768 49,294
Accumulated depreciation and amortization (20,577) (16,225)
-------- --------
Net property and equipment $ 67,191 $ 33,069
======== ========
</TABLE>
Property and equipment includes gross assets acquired under capital leases of
$12,139,000 and $9,158,000 at December 31, 1995 and 1994, respectively.
Related amounts included in accumulated depreciation and amortization were
$3,972,000 and $2,629,000 at December 31, 1995 and 1994.
-F-12-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
6. Property and Equipment (continued)
During 1994, W&L changed its estimate of the useful lives and salvage values
for certain revenue equipment, the effect of which decreased operating income
by approximately $155,000 for the year ended December 31, 1994. During 1995,
TBI also made a change to be consistent with W&L in its estimated useful lives
and salvage values for certain revenue equipment, the effect of which
increased operating income by approximately $360,000 for the year ended
December 31, 1995. These changes in estimates were made to more accurately
reflect future service lives and salvage values of the equipment.
7. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following at
December 31, (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accounts payable - trade $ 5,387 $ 1,713
Payroll and owner operator pay 2,044 1,085
Accrued interest 1,821 372
Taxes other than income taxes 603 62
Other 2,216 822
-------- -------
Total $ 12,071 $ 4,054
======== =======
</TABLE>
8. Long-term Debt and Related Agreements
Long-term debt consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Senior Subordinated Notes due 2005 with an interest rate of 12.25% (net
of unamortized discount of $1,387) $ 98,613 $ -
Obligations collateralized by equipment maturing through 2005 with
interest rates ranging from 5.95% to 16.5% 9,405 19,378
Capital lease obligation collateralized by equipment maturing through 2000
with interest rates ranging from 7.1% to 13.0%. 8,654 7,186
Accounts receivable financing agreement with an interest rate of prime plus
2.5% (11.0% as of December 31, 1995), 829 520
Obligation collateralized by real property maturing 2000 with an interest rate of 10.0% 645 -
Obligations maturing through 2005 with interest rates ranging from 6.0% to 11.0% 189 171
Stock purchase agreement note with an interest rate of 18.0% - 1,835
Covenant not-to-compete note with an imputed interest rate of 11.5% - 359
-------- -------
118,335 29,449
Less current portion 10,566 9,580
-------- -------
Total long-term portion of debt $107,769 $19,869
======== =======
</TABLE>
-F-13-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
8. Long-term Debt and Related Agreements (continued)
Aggregate long-term debt (including current portion), maturing during the
next five years and thereafter is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1996 $ 10,566
1997 5,929
1998 2,764
1999 421
2000 8
Thereafter 98,647
--------
$118,335
========
</TABLE>
In November 1995, AmeriTruck completed a private placement of $100 million of
Senior Subordinated Notes due 2005. The Subordinated Notes were exchanged for
publicly registered Subordinated Notes in February 1996. As of December 31,
1995, the Company has applied or intends to apply the net proceeds as follows:
(1) an estimated $35 million to fund the cash portion of the consideration
for the Acquisitions: (2) an estimated $6.6 million to purchase or replace
tractors and trailers which were leased as of September 30, 1995; (3) an
estimated $33.8 million to repay equipment loans due between November 1995 and
February 2002 with interest rates ranging from 7.3 percent to 16.5 percent at
September 30, 1995; (4) an estimated $15.0 million to acquire equipment held
under capitalized leases due between November 1995 and October 1999 with
imputed interest rates ranging from 7.6 percent to 13.4 percent; (5) an
estimated $1.0 million to repay borrowings under a revolving line of credit
secured by accounts receivable with an interest rate of 11 percent at
September 30, 1995 that matures in August 1997, at which time it converts to a
term loan maturing in 2002; (6) an estimated $900,000, net of taxes, for debt
extinguishment costs relating to the repayment of debt and the revolving line
of credit referred to above; (7) an estimated $2 million to redeem all
outstanding shares of TBI's Series A Redeemable Preferred Stock (including
accrued dividends); and (8) an estimated $300,000 for working capital. As of
December 31, 1995, approximately $14 million of the aggregate long-term debt
and capital lease obligations listed above had not been paid. The Company
plans to repay such obligations with the unutilized proceeds from the
Subordinated Notes.
The Subordinated Notes mature on November 15, 2005 and are unsecured
subordinated obligations of the Company. These notes bear interest at the
rate of 12.25 percent per annum from November 15, 1995, payable semiannually
on May 15 and November 15 of each year, commencing on May 15, 1996. The
Subordinated Notes are subject to optional redemption on the terms set forth
in the Indenture.
NationsBank Credit Facility
In February of 1996, the Company entered into a Loan Agreement and related
documents (collectively, the "NationsBank Credit Facility") with NationsBank
of Texas, N.A. ("NationsBank") pursuant to which NationsBank has committed,
subject to the terms and conditions of the NationsBank Credit Facility, to
provide a $30 million credit facility to the Company. Borrowings under the
NationsBank Credit Facility can be used for acquisitions, operating capital,
capital expenditures, letters of credit and general corporate purposes.
Pursuant to the NationsBank Credit Facility, NationsBank has agreed to provide
a $30 million revolving credit facility, with a $7,000,000 sublimit for
letters of credit, maturing on February 1, 1998, at which time the revolving
credit facility will convert into a term loan maturing on February 1, 2003.
Borrowings under the NationsBank Credit Facility bear interest at a per annum
rate equal to either NationsBank's base rate or equal to the rate of interest
offered by NationsBank in the interbank eurodollar market plus an additional
margin ranging from 1.5 percent to 1.75 percent based on the Senior Funded
Debt Ratio of the Company. The Company also pays a letter of credit issuance
fee and a quarterly unused facility fee.
-F-14-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
8. Long-term Debt and Related Agreements (continued)
The Company's obligations under the NationsBank Credit Facility are
collateralized by substantially all assets of the Company and its subsidiaries
and are guaranteed in full by each of the Operating Companies. For purposes
of the Subordinated Notes Indenture, such borrowings under the NationsBank
Credit Facility constitute Senior Indebtedness of the Company and Guarantor
senior indebtedness of the Operating Companies.
The NationsBank Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative and negative covenants, including a limitation on the incurrence
of indebtedness and a requirement that the Company maintain a specified Senior
Funded Debt Ratio and Fixed Charge Coverage Ratio.
Volvo Credit Facilities
In February 1996, the Company and the Operating Companies entered into a
Loan and Security Agreement, a Financing Integration Agreement and related
documents (collectively, the "Volvo Credit Facilities") with Volvo Truck
Finance North America, Inc. ("Volvo") pursuant to which Volvo has committed,
subject to the terms and conditions of the Volvo Credit Facility, to provide
(i) a $10 million line of credit facility (the "Volvo Line of Credit") to the
Company and the Operating Companies, and (ii) up to $28 million in purchase
money or lease financing (the "Equipment Financing Facility") in connection
with the Operating Companies' acquisition of new tractors and trailers
manufactured by Volvo GM Heavy Truck Corporation. Borrowings under the Volvo
Line of Credit are secured by certain specified tractors and trailers of the
Company and the Operating Companies (which must have a value equal to at least
1.75 times the outstanding amount of borrowings under the Volvo Line of
Credit) and are guaranteed in full by each of the Operating Companies.
Borrowings under the Volvo Line of Credit bear interest at the prime rate.
The Volvo Line of Credit contains customary representations and warranties and
events of default and requires compliance with a number of affirmative and
negative covenants, including a profitability requirement and a coverage
ratio.
The Equipment Financing Facility is being provided by Volvo in connection
with the Operating Subsidiaries' agreement to purchase 400 new trucks
manufactured by Volvo GM Heavy Truck Corporation between March 1, 1996 and
June 30, 1997. The Operating Subsidiaries have agreed to utilize such
facility for at least the first 200 of the new trucks. The borrowings under
the Equipment Financing Facility are collateralized by the specific trucks
being financed and are guaranteed in full by each of the Operating Companies.
Borrowings under this facility bear interest at the prime rate. The Equipment
Financing Facility contains customary representations and warranties,
covenants and events of default.
For purposes of the Indenture, the borrowings under the Volvo Credit
Facilities constitute Senior Indebtedness of the Company and Guarantor Senior
Indebtedness of the Operating Companies.
Refinancing Agreement
On June 9, 1994, W&L entered into an agreement with the First National Bank of
Boston, BancBoston Ventures, Inc. (''BBV'', the preferred and majority common
stockholder), TBI and two finance companies whereby the parties agreed to
refinance W&L's debt to Bank of Boston in accordance with certain terms and
conditions. In general, Bank of Boston agreed to a specified pay-off amount
and contributed the remaining debt balance to the capital of the Company. In
addition, BBV exchanged its preferred stock for W&L common stock.
This transaction repaid Bank of Boston $10,523,000 which was outstanding as of
December 31, 1993 by entering into three new debt agreements. These debt
agreements consist of a note payable to a finance
-F-15-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
8. Long-term Debt and Related Agreements (continued)
company, an accounts receivable financing agreement, and a note payable to TBI
which has been eliminated in consolidation. Additional borrowings under these
agreements totaled $8,695,000, with Bank of Boston contributing $1,676,000 to
additional paid-in-capital of the Company.
9. Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities reflected in the consolidated
financial statements approximates fair value due to the short-term maturity of
these instruments.
The fair value of the Company's long-term debt of $118,806,000 at December
31, 1995, as compared with the carrying value of $118,335,000, was calculated
by discounting future cash flows using an estimated fair market value interest
rate. The interest rate used for the Senior Subordinated Notes was the
December 31, 1995 quoted market price. The rate for all other debt was
estimated based on rates obtained by the Company at the end of 1995.
10. Commitments and Contingencies
Self-Insurance
The Company is primarily self-insured for all collision damages to revenue
equipment. In addition, the Company is self-insured for liability coverage
up to its deductible amounts which vary among the Operating Companies.
Furthermore, the Operating Companies act as self-insurers for workers'
compensation in several states in which the deductible is as high as
$400,000.
Leases
The Company leases various equipment and buildings under capital and
noncancelable operating leases with an initial term in excess of one year.
As of December 31, 1995, future minimum rental payments required under
these capital and operating leases are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------ ------
<S> <C> <C>
1996 $4,963 $2,989
1997 3,157 2,307
1998 1,000 901
1999 349 494
2000 2 397
Thereafter - 1,318
------ ------
Total 9,471 $8,406
======
Less amount representing interest (817)
------
Present value of minimum lease
payments $8,654
======
</TABLE>
Rental expense for operating leases was $1,718,000, $927,000 and $919,000
for the years ended December 31, 1995, 1994 and 1993.
The Company also leases revenue equipment from owner operators and leasing
companies under various short-term cancelable operating leases. Rental
payments are based on per mile charges or on a percent of revenue
generated through the use of the equipment.
-F-16-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
10. Commitments and Contingencies (continued)
Letters of Credit
As of December 31, 1995 and 1994, respectively, the Company had various
outstanding letters of credit totaling $1,829,000 and $1,533,000. These
letters of credit were mainly issued to insurance companies in conjunction
with coverage obtained.
Environmental Matters
Under the requirements of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and certain other laws, the Company is
potentially liable for the cost of clean-up of various contaminated sites
identified by the U.S. Environmental Protection Agency ("EPA") and other
agencies. Bangerter has been named as a defendant in a lawsuit alleging that
Bangerter is a potentially responsible party with respect to removal and
remediation cost at a site located in North Salt Lake City, Utah. It is the
opinion of management and counsel that the probable exposure to Bangerter is
approximately $40,000. It is reasonably possible that Bangerter could be
required to pay up to $85,000. Such expenses as may be associated therewith
are not expected to have a material adverse effect on the financial position,
operations or liquidity of the Company.
The Company is a defendant in legal proceedings considered to be in the normal
course of business, none of which, singularly or collectively, are considered
to be material by management of the Company.
11. Redeemable Preferred Stock
In 1988, the Company issued 4,200 shares of 10 percent, W&L redeemable
preferred stock. In addition, the Company reached agreements with Bank of
Boston (an affiliate of the preferred stockholder, BBV), in June 1989 and
1990, each resulting in the issuance of an additional 500 shares of 10
percent, W&L redeemable preferred stock for $500,000 to the Company's
preferred stockholder. Dividends on each share of W&L preferred stock accrue
cumulatively on a daily basis at the rate of 10 percent per annum on the
liquidation value thereof and are payable in equal quarterly installments in
arrears on the last day of March, June, September and December of each year,
commencing March 31, 1989. With written consent of the majority stockholder
(which is also BBV, the preferred stockholder), the Company may pay all or any
portion of accrued and unpaid preferred dividends by issuance of additional
shares of W&L preferred stock having an aggregate liquidation value equal to
the accrued and unpaid dividends plus all accrued and unpaid interest thereon.
The Company exercised this option and issued 490 and 766 shares, respectively,
in payment of accrued and unpaid preferred dividends during 1994 and 1993,
respectively.
The Company was required to redeem all outstanding shares of W&L preferred
stock at $1,000 per share (liquidation value) plus accrued but unpaid
dividends as follows: 350 shares on the last day of March, June, September and
December, commencing December 31, 1993, until all W&L preferred stock has been
redeemed. During the year ended December 31, 1994, all shares of W&L preferred
stock were converted into W&L common stock.
The TBI redeemable preferred stock, par value $1, authorized 3,500 shares,
had issued and outstanding 2,000 shares at December 31, 1994, and 3,000 shares
at December 31, 1993. TBI preferred stock has a liquidation value of $1,000
per share (aggregate liquidation stock has preference of $2 million and $3
million at December 31, 1994 and 1993, respectively) on which there is a
dividend rate of 10 percent per annum from August 1, 1993 through July 31,
1995, and a dividend rate of 12 percent per annum after August 1, 1995. The
dividends were to be paid when and as declared by the Company's Board of
Directors. If the dividends were not declared and paid as scheduled, they were
to accrue interest at 2
-F-17-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
11. Redeemable Preferred Stock (continued)
percent per annum more than the current dividend rate. In 1994, 1,000 shares
of outstanding preferred stock were redeemed and in 1995 all remaining shares
were redeemed.
12. Capital Stock
AmeriTruck is authorized to issue 4,875,000 shares of Class A
Common Stock, $.01 par value, 4,875,000 shares of Class B Common Stock, $.01
par value and 1,775,000 shares of Class C Common Stock, $.01 par value.
AmeriTruck had 1,883,000 shares of Class A Common Stock and 1,395,000 shares
of Class C Common Stock issued and outstanding at December 31, 1995. The
holders of Class A Common Stock have one vote per share. The holders of Class
B Common Stock do not have any right to vote except as may be provided
pursuant to the Delaware General Corporation Law. The holders of Class C
Common Stock have one vote per share and normally vote together with the
holders of the Class A Common Stock as a single class. In addition, the
holders of Class C Common Stock have additional voting rights under certain
circumstances.
In November 1995, the Company's Board of Directors and stockholders approved
the Company's 1995 Stock Option Plan (the "1995 Plan"), which provides for the
grant of incentive stock options and nonstatutory stock options to employees,
and for the grant of nonstatutory stock options to consultants, of the Company
and its subsidiary corporations. A maximum of 928,000 shares of Class A Common
Stock, $.01 par value, ("Common Stock") are currently reserved for issuance
under the 1995 Plan. The option price per share may not be less than the fair
market value of a share on the date the option is granted, and the maximum
term of an option may not exceed 10 years. As of December 31, 1995, options to
purchase approximately 200,000 shares of Common Stock had been granted and
were exercisable at an exercise price of $4.00 per share (approximate fair
value at date of grant), and options to purchase approximately 728,000
additional shares of Common Stock were available for future grants.
In consideration for its advisory services in connection with the
Acquisitions, upon consummation of the Acquisitions the Company issued a
warrant to BBV exercisable after February 15, 1996 but prior to February 15,
2003 for 375,000 shares of common stock at an exercise price of $4.00 per
share (approximate fair value at date of issuance).
Two directors of the Company have issued separate promissory notes to TBI
and W&L, in the original principal amount of $1.2 million in connection with
the purchase of capital stock of TBI and W&L. This stock was subsequently
converted into shares of the Company's common stock in connection with the
Acquisitions. Each of the promissory notes is secured by these shares and is
payable in one installment which is due on October 10, 2005. Each of the
promissory notes bear interest at the rate of 6.77 percent per annum, such
interest being payable at maturity.
13. Employee Benefits
Certain of AmeriTruck's Operating Companies sponsor defined contribution
401(k) retirement savings, pension or profit sharing plans. W&L's retirement
savings plan covers all employees who meet certain eligibility requirements.
W&L matches employee contributions up to a maximum of 2 percent of an
employee's annual compensation. TBI's profit sharing plan covers nondriver
employees. TBI also has defined contribution pension plans covering mail and
nonmail drivers, which provide for hourly contributions for the first 40 hours
of driving per week for nonmail drivers and hourly contributions for the first
40 hours of driving per mail route per week for mail drivers. CMS's and CBS's
profit sharing plans cover substantially all eligible employees meeting
certain age and service requirements. Contributions to TBI, CMS and CBS
profit sharing plans are at the discretion of the Board of Directors. The
Company's expense was $903,000, $911,000 and $784,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
-F-18-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
14. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 4,315 $3,000 $2,771
Income taxes (net of refunds) 2,812 1,247 610
Property and equipment financed through 13,063 7,726 9,968
capital lease obligations and other debt
</TABLE>
15. Subsequent Event
Effective April 16, 1996, CMS amended its Articles of Incorporation to
change the name of the corporation to "AmeriTruck Refrigerated Transport, Inc."
-F-19-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1996* 1995*
----- -----
<S> <C> <C>
Operating revenue $44,784 $20,203
------- -------
Operating expenses:
Salaries, wages and fringe benefits 14,094 6,160
Purchased transportation 10,776 5,642
Operating supplies and expenses 8,062 2,623
Depreciation and amortization of capital leases 2,985 1,453
Claims and insurance 1,681 879
Operating taxes and licenses 1,449 592
General supplies and expenses 1,815 624
Amortization of intangibles 235 122
Gain on disposal of property and equipment (187) (25)
-------- -------
Total operating expenses 40,910 18,070
------- -------
Operating income 3,874 2,133
Interest expense 3,699 675
Other income, net 37 41
------- -------
Income before income taxes and extraordinary item 212 1,499
Income taxes 93 617
------- -------
Income before extraordinary item 119 882
Extraordinary item, loss on early retirement of debt,
net of taxes of $154 (230) -
-------- -------
Net income (loss) $ (111) $ 882
======== =======
</TABLE>
* Comparisons between periods are affected by acquisitions - see Note 2.
See accompanying notes to consolidated financial statements.
-F-20-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,886 $ 15,286
Accounts and notes receivable, net 19,538 12,269
Prepaid expenses 6,561 4,057
Repair parts and supplies 1,071 844
Deferred income taxes 1,046 960
Other current assets 894 941
-------- --------
Total current assets 30,996 34,357
Property and equipment, net 88,761 67,191
Goodwill, net 32,482 32,705
Notes receivable 1,367 -
Other assets 7,595 6,282
-------- --------
Total assets $161,201 $140,535
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Current portion of long-term debt $ 5,509 $ 10,566
Accounts payable and accrued expenses 13,991 12,071
Claims and insurance accruals 2,313 1,852
Other current liabilities 569 499
-------- --------
Total current liabilities 22,382 24,988
Long-term debt 131,047 107,769
Deferred income taxes 7,854 7,773
Other liabilities 1,846 1,822
-------- --------
Total liabilities 163,129 142,352
-------- --------
Commitments and Contingencies (Note 4)
Stockholders' equity (deficiency):
Common stock; $.01 par value; 3,278 shares
issued and outstanding 33 33
Loans to stockholders (1,435) (1,435)
Accumulated deficit (526) (415)
-------- --------
Total stockholders' equity (deficiency) (1,928) (1,817)
-------- --------
Total liabilities and stockholders'
equity (deficiency) $161,201 $140,535
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-F-21-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996* 1995*
----- -----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (111) $ 882
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization of capital leases 2,985 1,453
Amortization of intangibles 235 122
Gain on disposal of property and equipment (187) (25)
Provision for deferred income taxes (61) 50
Other, net (280) 361
Changes in current assets and liabilities:
Accounts and notes receivable, net (5,914) 2,053
Prepaid expenses (1,637) (373)
Repair parts and supplies 12 (39)
Other current assets 58 (11)
Accounts payable and accrued expenses 1,762 1
Claims and insurance accruals 461 (19)
Other current liabilities 70 (367)
-------- -------
Net cash provided by (used in) operating
activities (2,607) 4,088
-------- -------
INVESTING ACTIVITIES:
Purchase of Freymiller assets, net of liabilities
assumed (18,128) -
Purchase of property and equipment (9,587) (1,590)
Proceeds from sale of property and equipment 1,200 162
Other, net (261) -
-------- -------
Net cash used in investing activities (26,776) (1,428)
-------- -------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 29,448 1,521
Repayment of long-term debt (13,465) (3,423)
-------- -------
Net cash provided by (used in) financing
activities 15,983 (1,902)
-------- -------
Net increase (decrease) in cash and cash equivalents (13,400) 758
Cash and cash equivalents, beginning of period 15,286 1,617
-------- -------
Cash and cash equivalents, end of period $ 1,886 $ 2,375
======== =======
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 1,015 $ 644
Income taxes 96 653
Property and equipment financed through capital
lease obligations and other debt 110 915
</TABLE>
* Comparisons between periods are affected by acquisitions - see Note 2.
See accompanying notes to consolidated financial statements.
-F-22-
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ACCOUNTING POLICIES AND INTERIM RESULTS
The December 31, 1995, 1994 and 1993 consolidated financial statements
for AmeriTruck Distribution Corp. ("AmeriTruck" or the "Company") and its
wholly-owned subsidiaries includes a summary of significant accounting
policies and should be read in conjunction with these unaudited interim
consolidated financial statements. The statements for the periods presented
are condensed and do not contain all information required by generally
accepted accounting principles to be included in a full set of financial
statements. In the opinion of management, all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the
financial position as of March 31, 1996 and December 31, 1995 and the
results of operations and cash flows for the three-month periods ended
March 31, 1996 and 1995 have been included. The results of operations for
any interim period are not necessarily indicative of the results of
operations to be expected for the entire year. Certain prior year data has
been reclassified to conform to current year presentation.
Separate financial statements of the Company's subsidiaries are not
included because (a) all of the Company's direct and indirect subsidiaries
have guaranteed the Company's obligations under the Indenture, dated as of
November 15, 1995 (the "Indenture"), among the Company, such subsidiaries
(in such capacity, the "Guarantors"), and The Bank of New York, as Trustee,
(b) the Guarantors have fully and unconditionally guaranteed the 12 1/4%
Senior Subordinated Notes due 2005 ("Subordinated Notes") issued under the
Indenture on a joint and several basis, (c) the Company is a holding
company with no independent assets or operations other than its investments
in the Guarantors and (d) the separate financial statements and other
disclosures concerning the Guarantors are not presented because management
has determined that they would not be material.
2. ACQUISITIONS
AmeriTruck was formed in August 1995 to effect the combination of six
regional trucking lines in November 1995 (the "Acquisitions"): W&L Services
Corp. ("W&L"), Thompson Bros., Inc. ("TBI"), J.C. Bangerter & Sons, Inc.,
("Bangerter"), CMS Transportation Services, Inc. and certain related
companies ("CMS"), Scales Transport Corporation and a certain related
company ("Scales") and C.B.S. Express, Inc. ("CBS" and, collectively the
"Operating Companies"). Prior to the Acquisitions, W&L and TBI had certain
common stockholders who controlled approximately 87 percent of the common
equity of W&L and TBI on a combined basis. In addition, these stockholders
control approximately 67 percent of the outstanding common stock of
AmeriTruck after the consummation of the Acquisitions. Therefore, these
common stockholders of W&L and TBI have been treated as the acquirer for
purposes of accounting for the Acquisitions. The accompanying AmeriTruck
consolidated statements of operations and cash flows reflect only W&L and
TBI combined results and cash flows for the three months ended March 31,
1995.
In February 1996, the Company, through CMS, purchased (the "Purchase")
certain assets of Freymiller Trucking Inc. ("Freymiller"). Freymiller had
been the subject of a Chapter 11 bankruptcy proceeding in Oklahoma.
Pursuant to the Purchase, CMS purchased certain specific automobiles,
computer hardware and software, furniture and fixtures, rights to the trade
name "Freymiller", existing spare parts, tires and fuel, rights under
certain leases, certain leasehold improvements and shop equipment and
installment sales contracts relating to tractors and trailers sold by
Freymiller out
-F-23-
<PAGE>
2. ACQUISITIONS (continued)
of the ordinary course of business (with all of the foregoing referred to
as the "Assets"). The Company also negotiated with Freymiller's lenders and
lessors to purchase approximately 185 tractors and 309 trailers, previously
operated by Freymiller, for approximately $14 million. An additional 80
trailers were leased for a seven year period. In exchange for the Assets,
the Company paid approximately $2.7 million in cash at closing and assumed
approximately $2 million in existing equipment financing. In addition, the
Company assumed a lease for Freymiller's maintenance facility in Oklahoma
City and certain routine executory business contracts. Except as provided
above, the Company did not assume any obligations or liabilities of
Freymiller.
In connection with these transactions, the Company purchased real
property in Oklahoma City, Oklahoma from Freymiller's Chairman of the
Board, President and Chief Executive Officer for approximately $1.5 million
in cash. The Assets and this real estate will supplement the Company's
existing temperature-controlled operations.
3. LONG-TERM DEBT
NationsBank Credit Facility
In February 1996, the Company and the Operating Companies entered into
a Loan Agreement and related documents (collectively, the "NationsBank
Credit Facility") with NationsBank of Texas, N.A. ("NationsBank") pursuant
to which NationsBank has committed, subject to the terms and conditions of
the NationsBank Credit Facility, to provide a $30 million credit facility
to the Company. Borrowings under the NationsBank Credit Facility can be
used for acquisitions, operating capital, capital expenditures, letters of
credit and general corporate purposes. Pursuant to the NationsBank Credit
Facility, NationsBank has agreed to provide a $30 million revolving credit
facility, with a $7 million sublimit for letters of credit, maturing on
February 1, 1998, at which time the revolving credit facility will convert
into a term loan maturing on February 1, 2003. Borrowings under the
NationsBank Credit Facility bear interest at a per annum rate equal to
either NationsBank's base rate or the rate of interest offered by
NationsBank in the interbank eurodollar market plus an additional margin
ranging from 1.5 percent to 1.75 percent based on the Senior Funded Debt
Ratio of the Company. The Company also pays a letter of credit issuance fee
and a quarterly unused facility fee. Borrowings under the NationsBank
Credit Facility were $25.4 million at March 31, 1996.
The Company's obligations under the NationsBank Credit Facility are
collateralized by substantially all assets of the Company and its
subsidiaries and are guaranteed in full by each of the Operating Companies.
For purposes of the Indenture, such borrowings under the NationsBank Credit
Facility constitute Senior Indebtedness of the Company and Guarantor Senior
Indebtedness of the Operating Companies.
The NationsBank Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative and negative covenants, including a limitation on the
incurrence of indebtedness and a requirement that the Company maintain a
specified Senior Funded Debt Ratio and Fixed Charge Coverage Ratio.
-F-24-
<PAGE>
Volvo Credit Facilities
In February 1996, the Company and the Operating Companies entered into
a Loan and Security Agreement, a Financing Integration Agreement and
related documents (collectively, the "Volvo Credit Facilities") with Volvo
Truck Finance North America, Inc. ("Volvo") pursuant to which Volvo has
committed, subject to the terms and conditions of the Volvo Credit
Facilities, to provide (i) a $10 million line of credit facility (the
"Volvo Line of Credit") to the Company and the Operating Companies, and
(ii) up to $28 million in purchase money or lease financing (the "Equipment
Financing Facility") in connection with the Operating Companies'
acquisition of new tractors and trailers manufactured by Volvo GM Heavy
Truck Corporation. Borrowings under the Volvo Line of Credit are secured by
certain specified tractors and trailers of the Company and the Operating
Companies (which must have a value equal to at least 1.75 times the
outstanding amount of borrowings under the Volvo Line of Credit) and are
guaranteed in full by each of the Operating Companies. Borrowings under the
Volvo Line of Credit bear interest at the prime rate. The Volvo Line of
Credit contains customary representations and warranties and events of
default and requires compliance with a number of affirmative and negative
covenants, including a profitability requirement and a coverage ratio.
The Equipment Financing Facility is being provided by Volvo in
connection with the Operating Companies' agreement to purchase 400 new
trucks manufactured by Volvo GM Heavy Truck Corporation between March 1,
1996 and June 30, 1997. The Operating Companies have agreed to utilize such
facility for at least the first 200 of the new trucks. The borrowings under
the Equipment Financing Facility are collateralized by the specific trucks
being financed and are guaranteed in full by each of the Operating
Companies. Borrowings under this facility bear interest at the prime rate.
There were no borrowings under the Volvo Credit Facilities at March 31,
1996.
The Equipment Financing Facility contains customary representations
and warranties, covenants and events of default. For purposes of the
Indenture, the borrowings under the Volvo Credit Facilities constitute
Senior Indebtedness of the Company and Guarantor Senior Indebtedness of the
Operating Companies.
4. CONTINGENCIES
Bangerter has been named as a defendant in a lawsuit entitled The
---
Ekotek Site PRP Committee v. Steven M. Self et al., Civil No. 2:94CV277K
-------------------------------------------------
(U.S. District Court Utah, Central Division), alleging that Bangerter is a
potentially responsible party with respect to the removal and remediation
cost of The Ekotek Site, located in North Salt Lake City, Utah. The suit
alleges that hazardous waste generated by Bangerter, together with
substantial volumes of additional hazardous waste generated by numerous
other businesses, were taken to the site by a waste disposal firm engaged
by Bangerter. It is the opinion of management and counsel that the probable
exposure to Bangerter is approximately $40,000. It is reasonably possible
that Bangerter could be required to pay up to $85,000. The Company cannot
predict with any certainty that it will not in the future incur liability
with respect to environmental compliance or liability associated with the
contamination of additional sites owned or operated by the Company and the
Operating Companies, sites formerly owned or operated by the Company and
the Operating Companies (including contamination caused by prior owners and
operators of such sites), or off-site disposal of hazardous material or
waste that could have a material adverse effect on the Company's
consolidated financial condition, operations or liquidity.
-F-25-
<PAGE>
4. CONTINGENCIES (continued)
The Company and the Operating Companies are a party to litigation
incidental to its business, primarily involving claims for personal injury
or property damages incurred in the transportation of freight. The Company
is not aware of any claims or threatened litigation that might have a
material adverse effect on the Company's consolidated financial position,
operations or liquidity.
5. OTHER INCOME, NET
Other income (expenses) consist of the following for the three
months ended March 31, (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest income $ 155 $ 42
Amortization of financing fees (113) -
Miscellaneous, net (5) (1)
----- -----
$ 37 $ 41
===== =====
</TABLE>
6. SUBSEQUENT EVENT
Effective April 16, 1996, CMS amended its Articles of Incorporation to
change the name of the corporation to "AmeriTruck Refrigerated Transport, Inc."
_______________________________________
-F-26-
<PAGE>
================================================================================
No dealer, salesperson or other individual has been authorized to give
any information or make any representation not contained in this Prospectus in
connection with the offering covered by this Prospectus. If given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer, or a solicitation
in any jurisdiction where, or to any person to whom, it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus, nor any
distribution of securities made hereunder shall, under any circumstances, create
any implication that there has not been change in the facts set forth in this
Prospectus or in the affairs of the Company since the date hereof.
____________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Available Information.................................... 2
Prospectus Summary....................................... 3
Risk Factors............................................. 10
The Company.............................................. 15
The Acquisitions......................................... 15
Acquisition of Freymiller Assets......................... 16
Use of Proceeds of New Notes............................. 17
Capitalization........................................... 18
Unaudited Pro Forma Combined
Statement of Income..................................... 19
Selected Combined Financial Data......................... 22
Management's Discussion and
Analysis of Financial Conditions and
Results of Operations................................... 26
The Industry............................................. 33
Business................................................. 36
Management............................................... 49
Certain Transactions..................................... 55
Security Ownership of Certain
Beneficial Owners and Management........................ 61
Description of Certain Indebtedness...................... 63
Description of the New Notes............................. 64
Selling Noteholders...................................... 91
Book Entry; Delivery and Form............................ 91
Plan of Distribution..................................... 94
Legal Matters............................................ 94
Experts.................................................. 94
Index to Financial Statements............................ 95
</TABLE>
================================================================================
[LOGO]
AMERITRUCK
DISTRIBUTION CORP.
12 1/4% Senior Subordinated Notes
due 2005, Series B
------------------
PROSPECTUS
------------------
May ___, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by the
Company in connection with the issuance and distribution of the New Notes
pursuant to the Prospectus contained in this Registration Statement. The
Company will pay all of these expenses.
<TABLE>
<CAPTION>
Approximate
Amount
-------------------
<S> <C>
Securities and Exchange Commission registration fee...... $34,482.76
Accountants fees and expenses............................ $40,000*
Legal fees and expenses.................................. $40,000*
Exchange Agents fees and expenses........................ $ 5,000*
Printing and engraving................................... $15,000*
Miscellaneous expenses................................... $15,517.24*
------------
Total............................................... $150,000*
=========
</TABLE>
- ----------------------
*Estimates
Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any persons, including directors and officers, who are
(or are threatened to be made) parties to any threatened, pending or completed
legal action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of their being directors or officers of the
corporation. The indemnity may include expenses, attorneys' fees, judgments,
fines and amounts paid in settlement, provided such sums were actually and
reasonably incurred in connection with such action, suit or proceeding and
provided the director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, in the case of criminal proceedings, provided he had no reasonable cause to
believe that his conduct was unlawful. The corporation may indemnify directors
and officers in a derivative action (in which suit is brought by a stockholder
on behalf of the corporation) under the same conditions, except that no
indemnification is permitted without judicial approval if the director or
officer is adjudged liable to the corporation. If the director or officer is
successful on the merits or otherwise in defense of any actions referred to
above, the corporation must indemnify him against the expenses and attorneys'
fees he actually and reasonably incurred.
Article VII of the Company's By-Laws provides that the Company shall
indemnify its officers and directors to the fullest extent permitted by Section
145.
<PAGE>
II-2
Item 15. RECENT SALES OF UNREGISTERED SECURITIES.
On November 15, 1995, the Company sold to the Initial Purchaser, in an
action exempt from the registration requirements of the Securities Act of 1933,
as amended, pursuant to Section 4(2) thereof, $100,000,000 in aggregate
principal amount of its Old Notes, less the Initial Purchaser's discount of
$1,971,900. In accordance with the agreement pursuant to which the Initial
Purchaser purchased the Old Notes, the Initial Purchaser agreed to offer and
sell such securities only to "qualified institutional buyers" (as defined in
Rule 144A under the Securities Act), to a limited number of institutional
"accredited investors" (as defined in Rule 501(A)(1), (2), (3), (4), (6) or (7)
under the Securities Act) and pursuant to offers and sales that occur outside
the United States within the meaning of Regulation S under the Securities Act.
Pursuant to the Agreement and Plan of Reorganization, dated as of
October 20, 1995, the Company issued a total of 3,278,003 shares of its Common
Stock to 25 stockholders of the various companies acquired by the Company,
pursuant to Section 4(2) of the Securities Act.
Except for the transactions described above there have not been any
recent sales of unregistered securities.
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
*3.1 Certificate of Incorporation of the Company, as amended.
*3.2 By-laws of the Company, as amended.
*4.1 Indenture for the Notes, dated as of November 15, 1995,
among the Company, the Guarantors named therein and The Bank
of New York, as Trustee (including form of Exchange Note).
*4.2 Purchase Agreement dated as of November 10, 1995 among the
Company, the Guarantors named therein and the Initial
Purchaser.
*4.3 Registration Rights Agreement, dated November 15, 1995,
among the Company, the Guarantors named therein, and the
Initial Purchaser.
*4.4 Form of Exchange Note (included in Exhibit 4.1).
*5 Opinion of Bingham, Dana & Gould as to the validity of the
securities being registered (including consent).
*8 Opinion of Bingham, Dana & Gould as to certain tax matters.
*10.1 Agreement and Plan of Reorganization, dated as of October
20, 1995 (including the amendment thereto dated as of
November 14, 1995 and including all exhibits thereto).
*10.2 Stock Contribution Agreements, dated as of October 20, 1995,
among the Company and the stockholders of each of the
Operating Companies, respectively (each included in Exhibit
10.1).
*10.3 Stockholder Agreement, dated as of November 15, 1995, among
the Company and each of its stockholders (included in
Exhibit 10.1).
*10.4 Registration Rights Agreement, dated as of November 15,
1995, among the Company and each of its stockholders
(included in Exhibit 10.1).
*10.5 Warrant to Purchase 375,000 Shares of Common Stock of the
Company, dated as of November 15, 1995, issued to BancBoston
Ventures Inc.
*10.6 Employment Agreements among the Company and/or certain of
the Operating Companies and each of Michael L. Lawrence,
Paul L. Bangerter, Richard Beauchamp, Michael J. Crowe,
Kenneth H. Evans, Jr., William P. Scales and Randy Thompson.
*10.7 1995 Stock Option Plan of the Company.
<PAGE>
II-3
**10.8 Loan and Security Agreement, dated February 21, 1996,
between Volvo Truck Finance North America, Inc. ("Volvo")
and the Company and certain of its Subsidiaries
**10.9 Financing Integration Agreement, dated February 21, 1996,
between Volvo and the Company and certain of its
Subsidiaries
**10.10 Loan Agreement, dated February 1, 1996, between the Company
and NationsBank of Texas, N.A.
**10.11 Asset Purchase Agreement, dated as of January 5, 1996,
between CMS Transportation Services, Inc. and Freymiller
Trucking, Inc., as debtor and debtor-in-possession
**10.12 Consulting and Non-Competition Agreement, dated as of April
1, 1995, between Thompson Brothers, Inc. and Dunbar
Associates, Inc.
12 Computations of ratio of earnings to fixed charges.
*16.1 Letter from Deloitte & Touche LLP regarding their dismissal
as independent accountants of W&L Services Corp. and
Subsidiaries.
*16.2 Letter from Grant Thornton LLP regarding the change in
accountants by J.C. Bangerter & Sons, Inc.
*21 Subsidiaries of the Company and Jurisdictions of
Incorporation.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Deloitte & Touche LLP
*23.5 Consents of Bingham, Dana & Gould (contained in its opinions
filed as Exhibit 5 and Exhibit 8 hereto).
*24 Powers of Attorney (see signature pages).
*25 Statement of eligibility under the Trust Indenture Act of
1939, as amended, on Form T-1 of The Bank of New York, as
Trustee under the Indenture.
27 Financial Data Schedule
*99.1 Form of Letter of Transmittal for New Notes.
*99.2 Form of Notice of Guaranteed Delivery for New Notes.
*99.3 Letter to Brokers.
*99.4 Letter to Clients.
*99.5 Instruction to Registered Holder and/or Book Entry Transfer
Participant from Beneficial Owner.
*99.6 Guidelines for Certificate of Taxpayer Identification Number
on Substitute Form W-9.
- --------------------
* Previously filed.
** Incorporated by reference from the Registrant's Current Report on Form
8-K dated May 3, 1996.
(b) Financial Statement Schedules.
None.
Item 17. UNDERTAKINGS.
S-K 512(a). 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:
<PAGE>
II-4
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act;
(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;
(2) That, for the purpose of determining any liability
under the Securities Act, 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.
S-K512(g). (1) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i)
that is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of section 10(a)(3) of the Securities Act and
is used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes 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.
S-K512(h). Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Securities Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities 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
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one
<PAGE>
II-5
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all the requirements for filing on Form S-4 and has duly caused this
Post-Effective Amendment No. 1 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fort Worth,
State of Texas, on the 31st day of May, 1996.
AMERITRUCK DISTRIBUTION CORP.
By: /s/ Kenneth H. Evans, Jr.
--------------------------------------------
Kenneth H. Evans, Jr.
Chief Financial Officer and Treasurer
<PAGE>
II-7
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 1 to the Registrant's Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------- --------------------------------------------- ------------------
<S> <C> <C>
* Chairman of the Board, President and Chief May 31, 1996
- ---------------------------
Michael L. Lawrence Executive Officer (Principal Executive Officer)
and Director
/s/ Kenneth H. Evans, Jr. Chief Financial Officer and Treasurer (Principal May 31, 1996
- ---------------------------
Kenneth H. Evans, Jr. Financial and Accounting Officer) and Director
* Director May 31, 1996
- ---------------------------
Richard A. Beauchamp
* Director May 31, 1996
- ---------------------------
Michael J. Crowe
* Director May 31, 1996
- ---------------------------
William Greenwood
* Director May 31, 1996
- ---------------------------
William P. Scales
* Director May 31, 1996
- ---------------------------
Randy Thompson
* Director
- ---------------------------
J. Michael May
</TABLE>
______________
* By: /s/ Kenneth H. Evans, Jr.
--------------------------
Kenneth H. Evans, Jr.
Attorney-in-Fact
<PAGE>
II-8
SIGNATURES
Each of the Guarantors, pursuant to the requirements of the Securities
Act of 1933, as amended, certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-4 and has duly caused
this Post-Effective Amendment No. 1 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Fort
Worth, State of Texas on the 31st day of May, 1996.
J.C. BANGERTER & SONS, INC.
By: /s/ Kenneth H. Evans, Jr.
--------------------------------------
Name: Kenneth H. Evans, Jr.
Title: Treasurer
C.B.S. EXPRESS, INC.
By: /s/ Kenneth H. Evans, Jr.
--------------------------------------
Name: Kenneth H. Evans, Jr.
Title: Treasurer
AMERITRUCK REFRIGERATED TRANSPORT, INC.
By: /s/ Kenneth H. Evans, Jr.
--------------------------------------
Name: Kenneth H. Evans, Jr.
Title: Treasurer
SCALES TRANSPORT CORPORATION
By: /s/ Kenneth H. Evans, Jr.
--------------------------------------
Name: Kenneth H. Evans, Jr.
Title: Treasurer
SCALES LEASING COMPANY, INC.
By: /s/ Kenneth H. Evans, Jr.
--------------------------------------
Name: Kenneth H. Evans, Jr.
Title: Treasurer
<PAGE>
II-9
THOMPSON BROS., INC.
By: /s/ Kenneth H. Evans, Jr.
---------------------------------------------
Name: Kenneth H. Evans, Jr.
Title: Treasurer
W&L SERVICES CORP.
BEST WAY MOTOR LINES, INC.
BILLINGS TRUCKING CORPORATION
W&L MOTOR LINES, INC.
BLS INVESTMENTS, INC.
CAS SERVICES CORP.
CAS TRANSPORTATION, INC.
FRONTIER FREIGHT, INC.
By: /s/ Michael J. Crowe
---------------------------------------------
Name: Michael J. Crowe
Title: President of each of the foregoing
<PAGE>
II-10
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 1 to the Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------- --------------------------------------- -----------------
<S> <C> <C>
* President of J.C. Bangerter & Sons, Inc. May 31, 1996
- ---------------------------- (Principal Executive Officer)
Name: Paul L. Bangerter
/s/ Kenneth H. Evans, Jr. Treasurer of J.C. Bangerter & Sons, Inc. May 31, 1996
- ---------------------------- (Principal Financial and Accounting
Name: Kenneth H. Evans, Jr. Officer)
* President of C.B.S. Express, Inc. May 31, 1996
- --------------------------- (Principal Executive Officer)
Name: William P. Scales
/s/ Kenneth H. Evans, Jr. Treasurer of C.B.S. Express, Inc. May 31, 1996
- --------------------------- (Principal Financial and Accounting
Name: Kenneth H. Evans, Jr. Officer)
* Chairman of AmeriTruck Refrigerated May 31, 1996
- ---------------------------- Transport, Inc. (Principal Executive
Name: Richard A. Beauchamp Officer)
/s/ Kenneth H. Evans, Jr. Treasurer of AmeriTruck Refrigerated May 31, 1996
- --------------------------- Transport, Inc. (Principal Financial
Name: Kenneth H. Evans, Jr. and Accounting Officer)
* President of Scales Transport May 31, 1996
- --------------------------- Corporation (Principal Executive
Name: William P. Scales Officer)
/s/ Kenneth H. Evans, Jr. Treasurer of Scales Transport May 31, 1996
- --------------------------- Corporation (Principal Financial and
Name: Kenneth H. Evans, Jr. Accounting Officer)
</TABLE>
_______________
* By: /s/ Kenneth H. Evans, Jr.
--------------------------
Kenneth H. Evans, Jr.
Attorney-in-Fact
<PAGE>
II-11
<TABLE>
<S> <C> <C>
* President of Scales Leasing May 31, 1996
- ---------------------------
Name: William P. Scales Company, Inc. (Principal Executive Officer)
/s/ Kenneth H. Evans, Jr. Treasurer of Scales Leasing May 31, 1996
- ---------------------------
Name: Kenneth H. Evans, Jr. Company, Inc. (Principal Financial and
Accounting Officer)
* President of Thompson May 31, 1996
- ---------------------------
Name: Randy Thompson Bros., Inc. (Principal Executive
Officer)
/s/ Kenneth H. Evans, Jr. Treasurer of Thompson Bros., Inc. May 31, 1996
- ---------------------------
Name: Kenneth H. Evans, Jr. (Principal Financial and Accounting
Officer)
* President of each of W&L May 31, 1996
- ---------------------------
Name: Michael J. Crowe Services Corp., Best Way
Motor Lines, Inc., Billings
Trucking Corporation, W&L
Motor Lines, Inc., BLS
Investments, Inc., CAS Services
Corp., CAS Transportation, Inc.,
and Frontier Freight, Inc.
(Principal Executive Officer)
/s/ Kenneth H. Evans, Jr. Treasurer of each of W&L Services May 31, 1996
- ---------------------------
Name: Kenneth H. Evans, Jr. Corp., BLS Investments, Inc.,
CAS Services Corp., CAS Transportation,
Inc., and Frontier Freight, Inc.
(Principal Financial and Accounting
Officer)
* Treasurer of Best Way Motor May 31, 1996
- ---------------------------
Name: Pat Burch Lines, Inc. (Principal Financial and
Accounting Officer)
Accounting Officer)
</TABLE>
____________________
* By: /s/ Kenneth H. Evans, Jr.
----------------------------
Kenneth H. Evans, Jr.
Attorney-in-Fact
<PAGE>
II-12
<TABLE>
<S> <C> <C>
* Treasurer of Billings Trucking May 31, 1996
- ---------------------------
Name: Pat Burch Corporation (Principal Financial and
Accounting Officer)
* Treasurer of W&L Motor May 31, 1996
- ---------------------------
Name: Pat Burch Lines, Inc. (Principal Financial and
Accounting Officer)
</TABLE>
____________________
* By: /s/ Kenneth H. Evans, Jr.
--------------------------
Kenneth H. Evans, Jr.
Attorney-in-Fact
<PAGE>
II-2
<TABLE>
<CAPTION>
(a) Exhibits. EXHIBIT INDEX PAGE
-------- ------------- ----
<S> <C> <C>
*3.1 Certificate of Incorporation of the Company, as amended.
*3.2 By-laws of the Company, as amended.
*4.1 Indenture for the Notes, dated as of November 15, 1995,
among the Company, the Guarantors named therein and The Bank
of New York, as Trustee (including form of Exchange Note).
*4.2 Purchase Agreement dated as of November 10, 1995 among the
Company, the Guarantors named therein and the Initial
Purchaser.
*4.3 Registration Rights Agreement, dated November 15, 1995,
among the Company, the Guarantors named therein, and the
Initial Purchaser.
*4.4 Form of Exchange Note (included in Exhibit 4.1).
*5 Opinion of Bingham, Dana & Gould as to the validity of the
securities being registered (including consent).
*8 Opinion of Bingham, Dana & Gould as to certain tax matters.
*10.1 Agreement and Plan of Reorganization, dated as of October
20, 1995 (including the amendment thereto dated as of
November 14, 1995 and including all exhibits thereto).
*10.2 Stock Contribution Agreements, dated as of October 20, 1995,
among the Company and the stockholders of each of the
Operating Companies, respectively (each included in Exhibit
10.1).
*10.3 Stockholder Agreement, dated as of November 15, 1995, among
the Company and each of its stockholders (included in
Exhibit 10.1).
*10.4 Registration Rights Agreement, dated as of November 15,
1995, among the Company and each of its stockholders
(included in Exhibit 10.1).
*10.5 Warrant to Purchase 375,000 Shares of Common Stock of the
Company, dated as of November 15, 1995, issued to BancBoston
Ventures Inc.
*10.6 Employment Agreements among the Company and/or certain of
the Operating Companies and each of Michael L. Lawrence,
Paul L. Bangerter, Richard Beauchamp, Michael J. Crowe,
Kenneth H. Evans, Jr., William P. Scales and Randy Thompson.
*10.7 1995 Stock Option Plan of the Company.
</TABLE>
<PAGE>
**10.8 Loan and Security Agreement, dated February 21, 1996,
between Volvo Truck Finance North America, Inc. ("Volvo")
and the Company and certain of its Subsidiaries
**10.9 Financing Integration Agreement, dated February 21, 1996,
between Volvo and the Company and certain of its
Subsidiaries
**10.10 Loan Agreement, dated February 1, 1996, between the Company
and NationsBank of Texas, N.A.
**10.11 Asset Purchase Agreement, dated as of January 5, 1996,
between CMS Transportation Services, Inc. and Freymiller
Trucking, Inc., as debtor and debtor-in-possession
**10.12 Consulting and Non-Competition Agreement, dated as of April
1, 1995, between Thompson Brothers, Inc. and Dunbar
Associates, Inc.
12 Computation of ratio of earnings to fixed charges.
*16.1 Letter from Deloitte & Touche LLP regarding their dismissal
as independent accountants of W&L Services Corp. and
Subsidiaries.
*16.2 Letter from Grant Thornton LLP regarding the change in
accountants by J.C. Bangerter & Sons, Inc.
*21 Subsidiaries of the Company and Jurisdictions of
Incorporation.
23.1 Consents of Coopers & Lybrand L.L.P.
23.2 Consent of Deloitte & Touche LLP
*23.5 Consents of Bingham, Dana & Gould (contained in its opinions
filed as Exhibit 5 and Exhibit 8 hereto).
*24 Powers of Attorney (see signature pages).
*25 Statement of eligibility under the Trust Indenture Act of
1939, as amended, on Form T-1 of The Bank of New York, as
Trustee under the Indenture.
*99.1 Form of Letter of Transmittal for New Notes.
*99.2 Form of Notice of Guaranteed Delivery for New Notes.
*99.3 Letter to Brokers.
*99.4 Letter to Clients.
*99.5 Instruction to Registered Holder and/or Book Entry Transfer
Participant from Beneficial Owner.
*99.6 Guidelines for Certificate of Taxpayer Identification Number
on Substitute Form W-9.
- --------------------
* Previously filed.
** Incorporated by reference from the Registrant's Current Report on Form
8-K dated May 3, 1996.
(b) Financial Statement Schedules.
None.
<PAGE>
EXHIBIT 12
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratio amounts)
(unaudited)
<TABLE>
<CAPTION>
Twelve Months Ended December 31
--------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes and
extraordinary item $ 819 $(1,282) $3,551 $ 5,431 $ 5,677
------ ------- ------ ------- -------
Fixed charges:
Interest expense and amortization of debt
discount and premium on all
indebtedness 3,571 3,438 3,783 3,598 5,039
Portion of rent under long-term
operating leases representative of an
interest factor 1,203 826 306 309 573
Preferred stock dividend
requirements of consolidated subsidiaries 1,109 1,139 1,224 1,486 188
------ ------ ------ ------- -------
Total fixed charges 5,883 5,403 5,313 5,393 5,800
------ ------ ------ ------- -------
Earnings before income taxes and
fixed charges $6,702 $4,121 $8,864 $10,824 $11,477
====== ====== ====== ======= =======
Ratio of earnings to fixed charges 1.14x * 1.67x 2.01x 1.98x
====== ====== ====== ======= =======
</TABLE>
*The Company's earning were insufficient to cover fixed charges by $1,282
for the year ended December 31, 1992.
<PAGE>
-2-
EXHIBIT 12
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratio amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996* 1995*
----- -----
<S> <C> <C>
Earnings:
Income before income taxes and $ 212 $1,499
extraordinary item
Fixed charges:
Interest expense and amortization
of debt discount and 3,699 675
premium on all indebtedness
Portion of rent under long-term
operating leases 380 49
representative of an interest
factor
Preferred stock dividend
requirements of consolidated - 50
subsidiaries ------ ------
Total fixed charges 4,079 774
------ ------
Earnings before income taxes and fixed $4,291 $2,273
charges ====== ======
Ratio of earnings to fixed charges 1.05x 2.94x
====== ======
</TABLE>
* Comparisons between periods are affected by acquisitions -- see Note 2
contained in the unaudited Notes to Consolidated Financial Statements.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this post-effective Amendment No. 1 to
the registration statement of AmeriTruck Distribution Corp. on Form S-4 of our
report dated March 21, 1996 on our audit of the consolidated financial
statements of AmeriTruck Distribution Corp. as of December 31, 1995 and for the
year then ended, and the combined financial statements of W&L Services Corp. and
Subsidiaries and Thompson Bros., Inc. (the Predecessor Company) as of December
31, 1994 and for the two years then ended. We also consent to the reference to
our firm under the caption "Experts".
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
May 31, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this post-effective Amendment No. 1 to
Registration Statement No. 33-99716 on Form S-4 of AmeriTruck Distribution Corp.
of our report dated April 8, 1994 (relating to the consolidated financial
statements of W&L Services Corp. and Subsidiaries as of December 31, 1993 and
for the year then ended) appearing in the Prospectus, which is part of this
Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Hickory, North Carolina
May 31, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
AMERITRUCK DISTRIBUTION CORP'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<CASH> 15,286 1,617
<SECURITIES> 0 0
<RECEIVABLES> 12,675 8,511
<ALLOWANCES> (406) (211)
<INVENTORY> 844 595
<CURRENT-ASSETS> 34,357 14,180
<PP&E> 87,768 49,294
<DEPRECIATION> (20,577) (16,225)
<TOTAL-ASSETS> 140,535 54,245
<CURRENT-LIABILITIES> 24,988 15,531
<BONDS> 118,335 29,449
0 0
0 0
<COMMON> 33 0
<OTHER-SE> (1,850) 10,488
<TOTAL-LIABILITY-AND-EQUITY> 140,535 54,245
<SALES> 0 0
<TOTAL-REVENUES> 102,846 80,087
<CGS> 0 0
<TOTAL-COSTS> 92,561 71,439
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,993 3,422
<INCOME-PRETAX> 5,677 5,431
<INCOME-TAX> 2,496 2,317
<INCOME-CONTINUING> 3,181 3,114
<DISCONTINUED> 0 0
<EXTRAORDINARY> (23) 0
<CHANGES> 0 0
<NET-INCOME> 3,158 3,114
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
AMERITRUCK DISTRIBUTION CORP'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE-MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,886
<SECURITIES> 0
<RECEIVABLES> 20,061
<ALLOWANCES> (523)
<INVENTORY> 1,071
<CURRENT-ASSETS> 30,996
<PP&E> 113,086
<DEPRECIATION> (24,325)
<TOTAL-ASSETS> 161,201
<CURRENT-LIABILITIES> 22,382
<BONDS> 136,556
0
0
<COMMON> 33
<OTHER-SE> (1,961)
<TOTAL-LIABILITY-AND-EQUITY> 161,201
<SALES> 0
<TOTAL-REVENUES> 44,784
<CGS> 0
<TOTAL-COSTS> 40,910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,699
<INCOME-PRETAX> 212
<INCOME-TAX> 93
<INCOME-CONTINUING> 119
<DISCONTINUED> 0
<EXTRAORDINARY> (230)
<CHANGES> 0
<NET-INCOME> (111)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
