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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______________to__________________
Commission file number 33-99716
AMERITRUCK DISTRIBUTION CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2619368
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
City Center Tower II, Suite 1101, 76102
301 Commerce Street, Fort Worth, Texas (Zip Code)
(Address of principal executive offices)
(817) 332-6020
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
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AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
Part I FINANCIAL INFORMATION Page
----
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 11
Part II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1997* 1996* 1997* 1996*
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenue $89,489 $62,823 $205,444 $161,145
------- ------- -------- --------
Operating expenses:
Salaries, wages and fringe benefits 29,282 19,826 68,812 51,951
Purchased transportation 22,221 16,697 49,865 40,769
Fuel and fuel taxes 10,493 7,111 25,431 19,126
Operating supplies and expenses 6,737 3,509 14,364 9,983
Depreciation and amortization of
capital leases 5,299 3,930 13,031 10,150
Claims and insurance 3,576 2,343 8,103 6,067
Operating taxes and licenses 2,206 1,369 4,872 3,534
General supplies and expenses 4,997 2,818 10,483 6,469
Building and office equipment rents 579 454 1,512 1,140
Amortization of intangibles 561 310 1,226 808
Gain on disposal of property and
equipment (60) (182) (120) (437)
Restructuring charge - - 7,184 -
------- ------- -------- --------
Total operating expenses 85,891 58,185 204,763 149,560
------- ------- -------- --------
Operating income 3,598 4,638 681 11,585
Interest expense 5,728 4,523 15,001 12,166
Amortization of financing fees 184 124 455 359
Other income, net (64) (134) (231) (424)
------- ------- -------- --------
Income (loss) before income taxes and
extraordinary items (2,250) 125 (14,544) (516)
Income tax provision (benefit) (742) 757 (4,799) 470
------- ------- -------- --------
Loss before extraordinary items (1,508) (632) (9,745) (986)
Extraordinary items, loss on early
retirement of debt, net of taxes of
$120 and $154, respectively - - (243) (230)
------- ------- -------- --------
Net loss $(1,508) $ (632) $ (9,988) $ (1,216)
======= ======= ======== ========
</TABLE>
* Comparisons between periods are affected by acquisitions - see Note 2.
See accompanying notes to consolidated financial statements.
1
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AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997* 1996*
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 906 $ 734
Accounts and notes receivable, net 45,584 29,001
Prepaid expenses 12,185 7,735
Repair parts and supplies 1,969 1,092
Deferred income taxes 1,467 1,467
Assets held for sale 6,092 -
Other current assets 2,378 1,388
-------- --------
Total current assets 70,581 41,417
Property and equipment, net 124,348 103,801
Goodwill, net 58,713 39,399
Other assets 12,560 8,031
-------- --------
Total assets $266,202 $192,648
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current portion of long-term debt $ 27,294 $ 11,988
Accounts payable and accrued expenses 27,197 13,557
Claims and insurance accruals 3,367 1,684
Other current liabilities 589 593
-------- --------
Total current liabilities 58,447 27,822
Long-term debt 206,573 157,338
Deferred income taxes 3,641 8,571
Other liabilities 5,874 2,741
-------- --------
Total liabilities 274,535 196,472
-------- --------
Commitments and contingencies (Note 5)
Redeemable preferred stock 3,053 -
Stockholders' equity (deficiency):
Common stock; $.01 par value; 4,230
shares and 3,503 shares issued
and outstanding, respectively 42 35
Additional paid-in capital 2,838 898
Loans to stockholders (1,401) (1,880)
Accumulated deficit (12,865) (2,877)
-------- --------
Total stockholders' deficiency (11,386) (3,824)
-------- --------
Total liabilities and stockholders' $266,202 $192,648
deficiency ======== ========
</TABLE>
* Comparisons between periods are affected by acquisitions - see Note 2.
See accompanying notes to consolidated financial statements.
2
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AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1997* 1996*
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (9,988) $ (1,216)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation and amortization
of capital leases 13,031 10,150
Amortization of intangibles 1,226 808
Gain on disposal of property
and equipment (120) (437)
Provision (benefit) for
deferred income taxes (4,799) 470
Extraordinary items, loss on
early retirement of debt,
net of taxes 243 230
Restructuring charge 7,184 -
Restructuring costs paid (2,103) -
Other, net (861) (337)
Changes in current assets and
liabilities, net of effects
from acquisitions:
Accounts and notes receivable, net (8,138) (10,634)
Prepaid expenses (1,938) (1,577)
Repair parts and supplies (363) (152)
Other current assets 31 (353)
Accounts payable and accrued
expenses 3,256 3,208
Claims and insurance accruals (2,603) 704
Other current liabilities (129) 66
-------- --------
Net cash provided by (used in)
operating activities (6,071) 930
-------- --------
INVESTING ACTIVITIES:
Purchase of Freymiller Assets,
net of liabilities assumed - (18,821)
Payments for acquisitions, net
of cash acquired (17,139) (8,383)
Purchase of property and equipment (4,718) (20,146)
Proceeds from sale of property
and equipment 5,022 5,760
Other, net 358 829
-------- --------
Net cash used in investing activities (16,477) (40,761)
-------- --------
FINANCING ACTIVITIES:
Revolving line of credit, net 30,435 28,840
Proceeds from issuance of
long-term debt - 17,236
Repayment of long-term debt (11,863) (18,786)
Proceeds from issuance of
redeemable preferred stock 3,000 -
Proceeds from issuance of
common stock 2,000 -
Other, net (852) (903)
-------- --------
Net cash provided by
financing activities 22,720 26,387
-------- --------
Net increase (decrease) in cash and cash
equivalents 172 (13,444)
Cash and cash equivalents,
beginning of period 734 15,286
-------- --------
Cash and cash equivalents,
end of period $ 906 $ 1,842
======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 11,692 $ 8,963
Income taxes 55 174
Property and equipment financed
through capital lease
obligations and other debt 277 10,258
Noncash consideration for
acquisitions 1,000 -
</TABLE>
* Comparisons between periods are affected by acquisitions - see Note 2.
See accompanying notes to consolidated financial statements.
3
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AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ACCOUNTING POLICIES AND INTERIM RESULTS
The 1996 Annual Report on Form 10-K 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 this Form 10-Q. 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 September 30, 1997 and
December 31, 1996, and the results of operations for the three-month and nine-
month periods ended September 30, 1997 and 1996, and cash flows for the nine-
month periods ended September 30, 1997 and 1996 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 separate
financial statements would not provide additional material information that
would be useful in assessing the financial composition of the Guarantors.
2. ACQUISITIONS
AmeriTruck was formed in August 1995 to effect the combination of six
regional trucking lines in November 1995: W&L Services Corp. ("W&L"), Thompson
Bros., Inc. ("TBI"), J.C. Bangerter & Sons, Inc. ("Bangerter"), CMS
Transportation Services, Inc. and certain related companies, Scales Transport
Corporation and a certain related company ("Scales") and C.B.S. Express, Inc.
("CBS"). Prior to these 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 controlled
approximately 67 percent of the outstanding common stock of AmeriTruck after the
consummation of these acquisitions. Therefore, these common stockholders of W&L
and TBI have been treated as the acquirer for purposes of accounting for these
acquisitions.
In June 1997, AmeriTruck purchased all the outstanding stock of Tran-Star,
Inc. ("Tran-Star") which was owned by Allways Services, Inc. The purchase price
of $2.6 million included $1.6 million in cash and a $1 million note payable.
Tran-Star is a carrier of refrigerated and non-refrigerated products.
Headquartered in Waupaca, Wisconsin, Tran-Star operates primarily between the
upper midwestern U.S. and the northeast and southeast, with terminals in Etters
and Wyalusing, Pennsylvania. The Company is currently coordinating Tran-Star's
activities with those of the other carriers within the refrigerated group. See
Notes to Consolidated Financial Statements-Note 3. Restructuring Charge.
In May 1997, AmeriTruck purchased the capital stock of Monfort
Transportation Company ("Monfort") and Lynn Transportation Co., Inc. ("Lynn"),
both subsidiaries of ConAgra, Inc. ("ConAgra"). The purchase price of $15
million was paid in cash.
4
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Monfort and Lynn operated primarily as in-house carriers for the red-meat
division of Monfort, Inc., a ConAgra subsidiary, and the poultry and turkey
divisions of ConAgra Poultry Company, a ConAgra subsidiary. The Company entered
into a Transportation Services Agreement with subsidiaries of ConAgra. The
ConAgra subsidiaries have agreed to tender freight from Monfort, Inc.'s red-meat
division, ConAgra Poultry Company's poultry and turkey divisions and Swift-
Ekrich, Inc.'s processed meats division in designated lanes and minimum annual
volumes. The term of this agreement is four years, with pricing fixed for the
first two years and adjusted prices in the third and fourth years. The Company
is currently coordinating Monfort and Lynn activities with those of the
refrigerated group. See Notes to Consolidated Financial Statements-Note 3.
Restructuring Charge.
The Tran-Star, Monfort and Lynn acquisitions were accounted for using the
purchase method of accounting. Accordingly, the purchase price was allocated to
the assets acquired and liabilities assumed based on their estimated fair values
at the date of acquisition. The total purchase price including cash, note
payable, miscellaneous acquisition costs and liabilities assumed was $42.0
million for Tran-Star and $35.2 million for Monfort and Lynn. The excess of the
purchase price over fair values of the net assets acquired has been recorded as
goodwill. The Tran-Star net assets acquired were as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable, net $ 6,653
Property and equipment, net 25,315
Goodwill 7,007
Other assets 2,981
Long-term debt (28,916)
Other liabilities (10,270)
--------
Net assets acquired $ 2,770
========
</TABLE>
The Monfort and Lynn net assets acquired were as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable, net $ 3,805
Property and equipment, net 15,138
Goodwill 12,209
Other assets 4,087
Long-term debt (14,201)
Other liabilities (5,669)
--------
Net assets acquired $ 15,369
========
</TABLE>
The following unaudited pro forma operating results of the Company for the
nine months ended September 30, 1997 and 1996, reflect the Monfort, Lynn and
Tran-Star acquisitions as if they had occurred on January 1, 1996.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1997 1996
--------- --------
<S> <C> <C>
(In thousands)
Operating revenue $284,620 $300,345
Operating income (after restructuring
charge of $7.2 million in 1997) 2,389 21,384
Income (loss) before extraordinary items (11,117) 2,265
Net income (loss) (11,360) 2,035
</TABLE>
These pro forma results have been prepared for comparative purposes only
and include pro forma adjustments for conformed depreciation lives and salvage
values 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, 1996 or of future results of operations of the
consolidated entities.
Pro forma operating income during 1997 decreased partially as a result of
the restructuring charge of $7.2 million taken during the second quarter of 1997
in connection with these acquisitions and the reorganization of the acquired
refrigerated carrier group.
Management believes that the freight networks of the refrigerated carriers,
independently operated, did not have the critical mass necessary to compete
efficiently in the changed refrigerated markets. To address this issue, the
Company is integrating these operations into one network. The
5
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traffic lanes awarded by ConAgra subsidiaries in the Transportation Services
Agreement, representing approximately $27 million of additional annual revenue
in excess of the amount provided to Monfort and Lynn by ConAgra historically,
were selected because of their contribution to an efficient nationwide
refrigerated freight network. Furthermore, ConAgra, which represents more than
50 percent of Monfort's revenue, is contractually committed to restore business
volume and rates paid Monfort to the approximate levels that existed during the
first half of 1996.
During the third quarter of 1997, the Company and ConAgra have been
coordinating efforts to bring the Transportation Services Agreement to the
contractually committed volumes and prices. However, these volumes have not yet
been attained. Management estimates that all of the complex issues surrounding a
business relationship of this magnitude, in excess of $50 million per year in
total revenue, will be worked out during the fourth quarter of 1997, including a
possible extension of the Transportation Services Agreement terms.
In addition, Tran-Star's operating income declined by $2.5 million as it
experienced deteriorating operating results. Included in operating expenses for
the first half of 1997 were merger related expenses of approximately $700,000
and increased maintenance expense of approximately $500,000 related to deferral
of its normal tractor replacement cycle. The Company has been taking delivery
of tractors to replace half of Tran-Star's fleet.
During the third quarter of 1996, AmeriTruck purchased all of the
outstanding stock of KTL, Inc. ("KTL") for a purchase price of $8.1 million in
cash and 225,000 shares of Class A common stock of AmeriTruck valued at
$900,000. KTL is a trucking company founded in 1983 which specializes in the
truckload transportation of refrigerated commodities and less-than-truckload
shipments requiring expedited, timed-delivery services. At the time of
purchase, KTL operated approximately 140 tractors and 300 trailers and employed
approximately 300 persons, of whom 240 were drivers and many of whom operated as
two-driver teams.
The KTL acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values at the
date of acquisition. The total purchase price including cash, common stock,
miscellaneous acquisition costs and liabilities assumed was $21.9 million. The
excess of the purchase price over the fair values of the net assets acquired has
been recorded as goodwill.
In February 1996, the Company, through CMS Transportation Services, Inc.,
purchased certain assets of Freymiller Trucking Inc. ("Freymiller") in order to
supplement its existing temperature-controlled trucking business. Freymiller
had been the subject of a Chapter 11 bankruptcy proceeding in Oklahoma. 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 "Freymiller 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 Freymiller 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.
6
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In April 1996, CMS Transportation Services, Inc. changed its corporate name
to "AmeriTruck Refrigerated Transport, Inc." ("ART"), and the distribution
functions previously conducted under the corporate name "CMS Transportation
Services, Inc." were continued as a division of ART. In addition, in June 1996,
the business operations of CBS, a general freight carrier (which then operated
under the name "CBS Express, Inc."), were transferred to Scales. In December
1996, the distribution functions of the CMS Transportation division of ART were
transferred to CBS and its name was changed to "CMS Transportation Services,
Inc." ("CMS"). The CMS Transportation distribution business currently operated
by CMS is sometimes referred to below as the "CMS distribution business" and the
business operations previously operated under the name CBS Express, Inc. and
transferred to Scales are sometimes referred to as the "CBS Express business."
The Company's principal subsidiaries currently are W&L, TBI, Bangerter,
CMS, Scales, ART, KTL, AmeriTruck Logistics Services, Inc. ("ALS", formed in
January 1997 to broker freight), Monfort, Lynn and Tran-Star (the "Operating
Companies"). All significant intercompany accounts and transactions have been
eliminated.
3. RESTRUCTURING CHARGE
With the addition of Tran-Star, Monfort and Lynn to the AmeriTruck
organization, the Company is organizing into three operating groups to
better serve its customers. The AmeriTruck Refrigerated Carrier Group is
being formed to offer nationwide, truckload refrigerated service. This new
company will combine the resources of TBI, Bangerter, ART, Tran-Star,
Monfort and Lynn. The AmeriTruck Specialized Carrier Group is being formed
to service customers with unique needs in transportation and distribution.
This group includes W&L, the largest U.S. hauler of new furniture, CMS,
serving the medical distribution industry, Scales, offering premium, short-
haul dry van service, and ALS, a freight property broker. The AmeriTruck
Regional LTL Group offers less-than-truckload, refrigerated and non-
refrigerated service. The lead carrier in this group is KTL, offering
service to and from the Florida market.
In connection with the above reorganization and to eliminate the duplicate
facility and employee costs related to the recently acquired entities, the
Company announced a plan in the second quarter of 1997 to restructure its
refrigerated carrier group. The Company recorded $7.2 million in
restructuring costs, which included $2.3 million for employee termination
costs, $4.2 million for duplicate facility costs, including the impairment
of certain long-lived assets, and $650,000 of other costs. In addition, the
Company transferred $6.7 million of property and equipment to assets held
for sale. As of September 30, 1997, the Company has liabilities of $1.3
million related to the restructuring charge. The Company may incur
additional pre-tax restructuring costs during the last quarter of 1997.
4. LONG-TERM DEBT
FINOVA Credit Facility
In May 1997, the Company and its subsidiaries entered into a Loan and
Security Agreement and related documents (collectively, the "FINOVA Credit
Facility") with FINOVA Capital Corporation ("FINOVA") pursuant to which
FINOVA has agreed to provide a $60 million credit facility to the Company.
The initial borrowings under the FINOVA Credit Facility were used to
refinance the Company's prior credit facility with NationsBank of Texas,
N.A. Additional borrowings under the FINOVA Credit Facility can be used for
acquisitions, capital expenditures, letters of credit, working capital and
general corporate purposes. Pursuant to the FINOVA Credit Facility, FINOVA
has agreed to provide a $60 million revolving credit facility, with a $10
million sublimit for the issuance of letters of credit, maturing on May 5,
2000 (subject to additional one-year renewal periods at the discretion of
FINOVA). The FINOVA Credit Facility is also subject to a borrowing base
consisting of eligible receivables and eligible revenue equipment.
Currently, the Company's borrowing base supports borrowings of
approximately $59.8 million. Revolving credit loans under the FINOVA Credit
Facility bear interest at a per annum rate equal to either the prime rate
plus a margin equal to 0.75 percent or the rate of interest offered in the
London interbank market plus a margin equal to 2.75 percent. The
7
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Company also pays a monthly unused facility fee and a monthly collateral
monitoring fee in connection with the FINOVA Credit Facility. Revolving credit
loans under the FINOVA Credit Facility were $52.5 million at September 30, 1997
and were primarily used for refinancing borrowings under the Company's prior
facility with NationsBank of Texas, N.A. and to fund the 1997 acquisitions.
Available borrowings were $2.7 million at September 30, 1997, as there were $4.6
million in letters of credit outstanding.
In November 1997 the Company amended the FINOVA Credit Facility to increase
both the total amount of the FINOVA Credit Facility to $64,000,000 and the
borrowing base availability thereunder (the "Temporary Overadvances"), in each
case for a period not to exceed 120 days. The amendment to the FINOVA Credit
Facility provides for the payment of a $180,000 fee in connection with the
Temporary Overadvances as well as an additional $180,000 fee in the event that
the Temporary Overadvances are not terminated within 60 days. The Temporary
Overadvances bear interest at 11% per annum for the first 60 days, and
thereafter, if the Temporary Overadvances shall not have been terminated all
outstandings under the FINOVA Credit Facility will bear interest at 1% over the
rate otherwise applicable to such advances until the end of the 120 day
Temporary Overadvance period. In connection with this amendment to the FINOVA
Credit Facility, the Company also issued $1,000,000 in Subordinated Notes (the
"1997 Notes") to certain existing stockholders. The 1997 Notes bear interest at
a rate of 14% per annum and mature on April 1, 1998. The 1997 Notes may be
converted in connection with a private equity placement providing gross proceeds
to the Company of at least $10,000,000 (the "Qualified Private Placement") on
the same terms as those offered to other investors in the Qualified Private
Placement. In connection with the 1997 Notes, the Company issued to the
purchasers of the 1997 Notes warrants to a number of shares of the Company's
common stock equal to the aggregate outstanding principal and interest on the
1997 Notes at the time of exercise divided by 2 (the "1997 Warrants"). The 1997
Warrants become exerciseable in the event a Qualified Private Placement does not
occur prior to April 1, 1998, and the exercise price would be paid by surrender
of the applicable investor's 1997 Note. The Company has also agreed that, in the
event a Qualified Private Placement has not occurred by March 31, 1998, the
Company will pay an affiliate of BancBoston Ventures Inc., a stockholder of the
Company, a management fee in the annual amount of $100,000. The Company intends
to use the availability from the Temporary Overadvances and the proceeds from
the 1997 Notes to pay interest due in November 1997 on the Subordinated Notes
and for general corporate purposes.
The Company's obligations under the FINOVA Credit Facility are
collateralized by substantially all of the unencumbered assets of the Company
and its subsidiaries and are guaranteed in full by each of the Operating
Companies. For purposes of the Indenture, the borrowings under the FINOVA Credit
Facility constitute Senior Indebtedness of the Company and Guarantor Senior
Indebtedness of the Operating Companies.
The FINOVA Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative, negative and financial covenants, including a limitation on the
incurrence of indebtedness and a requirement that the Company maintain a
specified Current Ratio, Net Worth, Debt Service Coverage Ratio and Operating
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. As of September 30, 1997, the Operating
Companies have pledged collateral which provides for a $9.5 million line of
credit. Borrowings under the Volvo Line of Credit bear interest at the prime
rate. The Volvo Line of Credit
8
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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 was provided by Volvo in connection with
the Operating Companies' agreement to purchase 400 new trucks manufactured by
Volvo GM Heavy Truck Corporation. 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.
At September 30, 1997, borrowings outstanding under the Volvo Line of Credit
were $9.4 million with available borrowings of $100,000. The outstanding debt
balance under the Equipment Financing Facility was $3.6 million at September 30,
1997; however, available financing under this facility is less than $1 million
as financing was also obtained through operating leases.
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.
5. COMMITMENTS AND CONTINGENCIES
Transamerica Lease Facility
In July 1997, the Company received a commitment letter from Transamerica
Business Credit Corporation ("TBCC") to provide the Company and its subsidiaries
with an arrangement to lease up to 300 new 1998 model tractors (the "TBCC
Lease"). The line under the TBCC Lease will not exceed $22.8 million based upon
a per vehicle cost of $76,000, subject to an unused line fee of one percent if
the Company leases all 300 of the new trucks but does not use the entire line.
The lease term is 48 months and is subject to a terminal rental adjustment
clause at the end of the term. The Company will treat this lease as an
operating lease for accounting purposes. Terms of the arrangement were set
forth in a Master Lease Agreement dated as of August 14, 1997. As of September
30, 1997, the Company had leased 25 trucks under this agreement.
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. 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 sites owned or operated
by the Company and its subsidiaries, sites formerly owned or operated by
the Company and its subsidiaries (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.
9
<PAGE>
6. OTHER INCOME, NET
Other income consist of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1997 1996 1997 1996
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Interest income $ 57 $ 128 $ 185 $ 414
Miscellaneous, net 7 6 46 10
----- ----- ----- -----
$ 64 $ 134 $ 231 $ 424
===== ===== ===== =====
</TABLE>
7. REDEEMABLE PREFERRED AND COMMON STOCK
In conjunction with the 1997 acquisitions of Monfort, Lynn and Tran-Star,
the Company issued 3,000 shares of Series A Redeemable Preferred Stock and
727,272 shares of Common Stock with warrants to certain existing
stockholders, directors and executive officers of the Company. The
Preferred Stock was issued at a $1,000 per share for a total purchase
price of $3.0 million. Dividends on each share of the Preferred Stock
accrue cumulatively on a daily basis at a rate of 5 percent per annum on
the liquidation value thereof, provided that the rate will increase to 10%
per annum upon the earlier of the date of a disposition event and November
15, 1998. The dividends are payable in kind on the last day of each fiscal
quarter. The Company will redeem all of the Series A Preferred Stock
outstanding on December 31, 2005 at a liquidation value of $1,000 per
share. The Common Stock, along with detached warrants for 1,500,000 shares
of Common Stock, was issued for $2.75 per share ($.01 par value) for a
total purchase price of $2.0 million. The detached warrants can be
exercised any time prior to May 23, 2007 at $2.00 per share.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following analysis should be read in conjunction with the consolidated
financial statements included in Item 1 - "Financial Statements." Results for
the three and nine months ended September 30, 1996 include W&L, TBI, Bangerter,
the CMS distribution business and Scales (including the CBS Express business)
for the entire periods, the results of ART, as it relates to the Freymiller
Assets, since February 5, 1996 and the results of KTL since July 1, 1996.
Results for the three and nine months ended September 30, 1997 for the Company
include the results of W&L, TBI, Bangerter, the CMS distribution business,
Scales (including the CBS Express business), ART, ALS and KTL for the entire
1997 periods. The results for Monfort and Lynn have been included since June
1997 and for Tran-Star since July 1997.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1996
Net Loss
For the quarter ended September 30,1997, the Company had a net loss of $1.5
million compared with a net loss of $632,000 for the same period in 1996.
Results for the third quarter of 1997 were negatively impacted primarily by
increased costs associated with repairs to Tran-Star's older fleet of tractors
now being replaced, costs associated with transitioning to a Common Computer
System, and increased interest costs.
Revenues
Third quarter revenues for 1997 improved $26.7 million, or 42 percent,
compared with the third quarter of 1996. Tran-Star generated $16.6 million and
Monfort and Lynn generated $14.3 million in revenues in the third quarter of
1997; however, a decline in volumes at ART partially offset the additional
revenue generated by these acquisitions.
Expenses
The following table sets forth operating expenses as a percentage of
revenue and the related variance from 1997 to 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, VARIANCE
-------------------- INCREASE
1997 1996 (DECREASE)
--------- --------- ----------
<S> <C> <C> <C>
Salaries, wages and fringe benefits 32.7% 31.6% 1.1%
Purchased transportation 24.8 26.6 (1.8)
Fuel and fuel taxes 11.7 11.3 .4
Operating supplies and expenses 7.6 5.6 2.0
Depreciation and amortization of
capital leases 5.9 6.3 (.4)
Claims and insurance 4.0 3.7 .3
Operating taxes and licenses 2.5 2.2 .3
General supplies and expenses 5.6 4.4 1.2
Building and office equipment rents .7 .7 -
Amortization of intangibles .6 .5 .1
Gain on disposal of property and
equipment (.1) (.3) .2
Restructuring charge - - -
---- ---- ----
Operating Ratio 96.0% 92.6% 3.4%
==== ==== ====
</TABLE>
Salaries, wages and fringe benefits for the third quarter of 1997 increased
1.1 percentage points as a percent of revenue. This increase is primarily due
to an increase in driver wages, which occurred because Company drivers were used
more extensively and owner operators used less extensively than the prior year.
11
<PAGE>
The increase is also due to an increase in salaries at the corporate location as
a result of continued development of support staff necessary for the acquired
companies. The acquisition of Tran-Star, which has primarily a company-driver
work force, also contributed to the increase.
Purchased transportation costs decreased 1.8 percentage points as a percent
of revenue when compared with the third quarter of 1996. The decrease is due
primarily to the acquisition of Tran-Star at the end of the second quarter of
1997, which has primarily a company-driver work force.
Fuel and fuel taxes during the third quarter of 1997 increased 0.4
percentage points as a percent of revenue. This increase is due to the
acquisition of Tran-Star at the end of the second quarter of 1997, which has
primarily a company-driver work force, thereby increasing the percentage of
company drivers versus owner operators in the overall fleet. The impact of this
increase from Tran-Star was partially offset by lower fuel prices during the
third quarter of 1997.
Operating supplies and expenses increased 2.0 percentage points as a
percent of revenue. This increase is primarily due to the acquisition of Tran-
Star, which had an older fleet of tractors requiring more routine maintenance.
These tractors are currently being retired and replaced by new tractors. In
addition, trailer coordination, in absence of a common Computer System, was less
effective than expected and resulted in higher trailer costs.
Depreciation and amortization of capital leases decreased as a percent of
revenue by 0.4 percentage points when compared with the prior year quarter,
primarily due the acquisition of used assets from Tran-Star, Monfort and Lynn.
General supplies and expenses for the third quarter of 1997 increased 1.2
percentage points as a percent of revenue when compared with the same period in
1996. This increase is due to increased professional and consulting fees
resulting from increased driver recruitment and advertising and added costs for
system and mobile communications, which the Company anticipates should be
partially offset in the future by improved operating efficiencies, although no
assurances can be made in this regard.
Interest expense increased $1.2 million for the quarter ended September 30,
1997 over the same period in 1996. Interest on the revolving lines of credit,
which were used to fund acquisitions, were the primary contributors to this
increase.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net Loss
For the nine months ended September 30,1997, the Company had a net loss of
$10.0 million compared with a net loss of $1.2 million for the same period in
1996. Results for 1997 were negatively impacted primarily by a charge of $7.2
million to restructure the Company's refrigerated carrier group and an increase
in interest costs. The net loss in both 1997 and 1996 includes extraordinary
items, loss on early retirement of debt, of $243,000 and $230,000, net of taxes.
These losses related to the write off of deferred financing costs in 1997 with
respect to the Company's prior senior credit facility with NationsBank and to
early retirements related to the use of proceeds from the Company's Subordinated
Notes offering in 1995, which were used in part to retire debt in 1996.
Revenues
Revenues for the first nine months of 1997 improved $44.3 million, compared
with the first nine months of 1996. This increase is due to 1997 revenue of
$16.6 million from the Tran-Star acquisition, $19.7 million from the Monfort and
Lynn acquisitions, and $15.4 million for the first six months of 1997 from the
KTL acquisition. This increase was partially offset by a decline in volumes at
ART.
12
<PAGE>
Expenses
The following table sets forth operating expenses as a percentage of revenue and
the related variance from 1997 to 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, VARIANCE
-------------------- INCREASE
1997 1996 (DECREASE)
--------- --------- ----------
<S> <C> <C> <C>
Salaries, wages and fringe benefits 33.5% 32.2% 1.3%
Purchased transportation 24.3 25.3 (1.0)
Fuel and fuel taxes 12.4 11.9 .5
Operating supplies and expenses 7.0 6.2 .8
Depreciation and amortization of
capital leases 6.3 6.3 -
Claims and insurance 4.0 3.8 .2
Operating taxes and licenses 2.4 2.2 .2
General supplies and expenses 5.1 4.0 1.1
Building and office equipment rents .7 .7 -
Amortization of intangibles .6 .5 .1
Gain on disposal of property and
equipment (.1) (.3) .2
Restructuring charge 3.5 - 3.5
---- ---- ----
Operating Ratio 99.7 % 92.8% 6.9%
==== ==== ====
</TABLE>
Salaries, wages and fringe benefits for the nine months ended September 30,
1997 increased 1.3 percentage points as a percent of revenue. This increase is
primarily due to an increase in driver wages, which occurred because Company
drivers were used more extensively and owner operators used less extensively
than the prior year. The increase is also due to an increase in salaries at the
corporate location as a result of continued development of support staff
necessary for the acquired companies. The acquisition of Tran-Star, which has
primarily a company-driver work force, also contributed to the increase.
Purchased transportation costs decreased 1.0 percentage points as a percent
of revenue when compared with the nine months ended September 30, 1996. The
decrease is due primarily to the acquisitions of KTL in the third quarter of
1996 and Tran-Star at the end of the second quarter of 1997, which have
primarily company-driver work forces.
Fuel and fuel taxes increased 0.5 percentage points as a percent of revenue
when compared with the first nine months of 1996 due to the acquisitions of KTL
in the third quarter of 1996 and Tran-Star at the end of the second quarter of
1997, which have primarily a company-driver work force. The increase was also
due to lower miles per gallon as a result of severe weather in the first
quarter of 1997.
Operating supplies and expenses increased 0.8 percentage points as a
percent of revenue. This increase is primarily due to the acquisition of Tran-
Star, which had an older fleet of tractors requiring more routine maintenance.
These tractors are currently being retired and replaced by new tractors. In
addition, trailer coordination, in absence of a Common Computer System, was less
effective than expected and resulted in higher trailer costs.
General supplies and expenses for the nine months ended September 30, 1997
increased 1.1 percentage points as a percent of revenue when compared with the
same period in 1996. This increase is due to increased professional and
consulting fees resulting from increased driver recruitment and advertising and
added costs for system and mobile communications, which the Company anticipates
should be partially offset in the future by improved operating efficiencies,
although no assurances can be made in this regard.
In connection with AmeriTruck's plans to organize into three operating
groups and to eliminate the duplicate facility and employee costs related to the
recently acquired entities, the Company announced a plan in the second quarter
of 1997 to restructure its refrigerated carrier group. The Company recorded
$7.2 million in restructuring costs, which included $2.3 million for employee
termination costs, $4.2 million for duplicate facility costs, including the
impairment of certain long-lived assets, and $650,000 of other
13
<PAGE>
costs. The Company may incur additional pre-tax restructuring costs during the
last quarter of 1997. See Notes to Consolidated Financial Statements--Note 3.
Restructuring Charge.
Interest expense increased $2.8 million for the nine months ended September
30, 1997 over the same period in 1996. Interest on the revolving lines of
credit, which were used to fund acquisitions, were the primary contributors to
this increase.
CONTINGENCIES
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. 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 sites owned or operated by the Company and
its subsidiaries, sites formerly owned or operated by the Company and its
subsidiaries (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 nine months ended September 30,
1997 was $6.1 million compared with net cash provided by operating activities of
$930,000 for the nine months ended September 30, 1996. The increase in cash used
from operations of $7.0 million was primarily attributable to an increase in net
loss, the resulting impact of deferred income taxes and cash used for
restructuring in 1997.
During the third quarter of 1997, the Company and ConAgra have been
coordinating efforts to bring the Transportation Services Agreement to the
contractually committed volumes and prices. However, these volumes have not yet
been attained. Management estimates that all of the complex issues surrounding a
business relationship of this magnitude, in excess of $50 million per year in
total revenue, will be worked out during the fourth quarter of 1997, including a
possible extension of the Transportation Services Agreement terms. This process,
in addition to the ongoing reorganization of the refrigerated group, has caused
the Company to fall short of its original cash flow plan for the second half of
1997.
The Company's current business plan indicates that it will need additional
financing to pay down the temporary extension of credit by FINOVA and carryout
its growth strategy. Accordingly, the Company intends to raise additional
financing in 1997, and has retained an investment bank to assist it in
completing a Qualified Private Placement. In the event that a Qualified Private
Placement does not occur the Company may amend its current strategy by selling
equipment and reducing operating levels. Management believes that borrowings
available under the credit facilities, additional equity and asset sales should
be sufficient to cover anticipated future cash needs.
Redeemable Preferred and Common Stock
In May 1997, the Company issued 3,000 shares of Series A Redeemable Preferred
Stock and 727,272 shares of Common Stock with warrants to certain existing
stockholders, directors and executive officers of the Company.
14
<PAGE>
The issuance was made in conjunction with the 1997 acquisitions and gross
proceeds totaled $5 million. See Notes to Consolidated Financial Statements--
Note 7. Redeemable Preferred and Common Stock.
FINOVA Credit Facility
In May 1997, the Company and its subsidiaries entered into a Loan and
Security Agreement and related documents (collectively, the "FINOVA Credit
Facility") with FINOVA Capital Corporation ("FINOVA") pursuant to which FINOVA
has agreed to provide a $60 million credit facility to the Company. The initial
borrowings under the FINOVA Credit Facility were used to refinance the Company's
prior credit facility with NationsBank of Texas, N.A. Additional borrowings
under the FINOVA Credit Facility can be used for acquisitions, capital
expenditures, letters of credit, working capital and general corporate purposes.
Pursuant to the FINOVA Credit Facility, FINOVA has agreed to provide a $60
million revolving credit facility, with a $10 million sublimit for the issuance
of letters of credit, maturing on May 5, 2000 (subject to additional one year
renewal periods at the discretion of FINOVA). The FINOVA Credit Facility is
also subject to a borrowing base consisting of eligible receivables and eligible
revenue equipment. Currently, the Company's borrowing base supports borrowings
of approximately $59.8 million. Revolving credit loans under the FINOVA Credit
Facility bear interest at a per annum rate equal to either the prime rate plus a
margin equal to 0.75 percent or the rate of interest offered in the London
interbank market plus a margin equal to 2.75 percent. The Company also pays a
monthly unused facility fee and a monthly collateral monitoring fee in
connection with the FINOVA Credit Facility. Revolving credit loans under the
FINOVA Credit Facility were $52.5 million at September 30, 1997 and were
primarily used for refinancing borrowings under the Company's prior facility
with NationsBank of Texas, N.A. and to fund the 1997 acquisitions. Available
borrowings were $2.7 million at September 30, 1997 as there were $4.6 million in
letters of credit outstanding.
In November 1997 the Company amended the FINOVA Credit Facility to
increase both the total amount of the FINOVA Credit Facility to $64,000,000 and
the borrowing base availability thereunder (the "Temporary Overadvances"), in
each case for a period not to exceed 120 days. The amendment to the FINOVA
Credit Facility provides for the payment of a $180,000 fee in connection with
the Temporary Overadvances as well as an additional $180,000 fee in the event
that the Temporary Overadvances are not terminated within 60 days. The Temporary
Overadvances bear interest at 11% per annum for the first 60 days, and
thereafter, if the Temporary Overadvances shall not have been terminated all
outstandings under the FINOVA Credit Facility will bear interest at 1% over the
rate otherwise applicable to such advances until the end of the 120 day
Temporary Overadvance period. In connection with this amendment to the FINOVA
Credit Facility, the Company also issued $1,000,000 in Subordinated Notes (the
"1997 Notes") to certain existing stockholders. The 1997 Notes bear interest at
a rate of 14% per annum and mature on April 1, 1998. The 1997 Notes may be
converted in connection with a private equity placement providing gross proceeds
to the Company of at least $10,000,000 (the "Qualified Private Placement") on
the same terms as those offered to other investors in the Qualified Private
Placement. In connection with the 1997 Notes, the Company issued to the
purchasers of the 1997 Notes warrants to a number of shares of the Company's
common stock equal to the aggregate outstanding principal and interest on the
1997 Notes at the time of exercise divided by 2 (the "1997 Warrants"). The 1997
Warrants become exerciseable in the event a Qualified Private Placement does not
occur prior to April 1, 1998, and the exercise price would be paid by surrender
of the applicable investor's 1997 Note. The Company has also agreed that, in the
event a Qualified Private Placement has not occurred by March 31, 1998, the
Company will pay an affiliate of BancBoston Ventures Inc., a stockholder of the
Company, a management fee in the annual amount of $100,000. The Company intends
to use the availability from the Temporary Overadvances and the proceeds from
the 1997 Notes to pay interest due in November 1997 on the Subordinated Notes
and for general corporate purposes.
The Company's obligations under the FINOVA Credit Facility are
collateralized by substantially all of the unencumbered assets of the Company
and its subsidiaries and are guaranteed in full by each of the Operating
Companies. For purposes of the Indenture, the borrowings under the FINOVA Credit
Facility constitute Senior Indebtedness of the Company and Guarantor Senior
Indebtedness of the Operating Companies.
The FINOVA Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative, negative and financial covenants, including
15
<PAGE>
a limitation on the incurrence of indebtedness and a requirement that
the Company maintain a specified Current Ratio, Net Worth, Debt Service Coverage
Ratio and Operating 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. As of September 30, 1997, the Operating
Companies have pledged collateral which provides for a $9.5 million line of
credit. 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 was provided by Volvo in connection with the
Operating Companies' agreement to purchase 400 new trucks manufactured by Volvo
GM Heavy Truck Corporation. 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.
At September 30, 1997, borrowings outstanding under the Volvo Line of Credit
were $9.4 million with available borrowings of $100,000. The outstanding debt
balance under the Equipment Financing Facility was $3.6 million at September 30,
1997; however, available financing under this facility is less than $1 million
as financing was also obtained through operating leases.
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.
Transamerica Lease Facility
In July 1997, the Company received a commitment letter from Transamerica
Business Credit Corporation ("TBCC") to provide the Company and its subsidiaries
with an arrangement to lease up to 300 new 1998 model tractors (the "TBCC
Lease"). The line under the TBCC Lease will not exceed $22.8 million based upon
a per vehicle cost of $76,000, subject to an unused line fee of one percent if
the Company leases all 300 of the new trucks but does not use the entire line.
The lease term is 48 months and is subject to a terminal rental adjustment
clause at the end of the term. The Company will treat this lease as an
operating lease for accounting purposes. Terms of the arrangement were set
forth in a Master Lease Agreement dated as of August 14, 1997. As of September
30, 1997, the Company had leased 25 trucks under this agreement.
Capital Expenditures and Resources
For the nine months ended September 30, 1997, the Company had proceeds from
property and equipment dispositions in excess of capital expenditures of
$304,000, excluding the 1997 acquisitions of Monfort, Lynn and Tran-Star,
compared with capital expenditures, net of cash proceeds from dispositions, of
$14.4 million for the nine months ended September 30, 1996, excluding the
purchase of the Freymiller Assets. During the first nine months of 1996 and
1997, the Company purchased new tractors and trailers to
16
<PAGE>
replace older equipment. The majority of the 1996 purchases were financed
through debt; whereas, the 1997 acquisitions were primarily financed through
operating leases.
During 1997, the Company has ordered approximately 530 new trucks,
including the remaining Volvo trucks. Approximately 500 of these new tractors
will replace existing tractors. These purchases include new equipment for the
recently acquired companies. These equipment purchases and commitments will
likely be financed primarily with operating leases.
In June 1997, AmeriTruck purchased all the outstanding stock of Tran-Star,
Inc. ("Tran-Star") which was owned by Allways Services, Inc. The purchase price
of $2.6 million included $1.6 million in cash and a $1 million note payable.
Tran-Star is a carrier of refrigerated and non-refrigerated products.
Headquartered in Waupaca, Wisconsin, Tran-Star operates primarily in between the
upper midwestern U.S. and the northeast and southeast, with terminals in Etters
and Wyalusing, Pennsylvania. The Company is currently coordinating Tran-Star's
activities with those of the refrigerated group.
In May 1997, AmeriTruck purchased the capital stock of Monfort
Transportation Company ("Monfort") and Lynn Transportation Co., Inc. ("Lynn"),
both subsidiaries of ConAgra, Inc. ("ConAgra"). The purchase price of $15
million was paid in cash.
Monfort and Lynn operated primarily as in-house carriers for the red meat
division of Monfort, Inc., a ConAgra subsidiary, and the poultry and turkey
divisions of ConAgra Poultry Company, a ConAgra subsidiary. The Company entered
into a Transportation Services Agreement with subsidiaries of ConAgra. The
ConAgra subsidiaries have agreed to tender freight from Monfort, Inc.'s red meat
division, ConAgra Poultry Company's poultry and turkey divisions and Swift-
Ekrich, Inc.'s processed meats division in designated lanes and minimum annual
volumes. The term of this agreement is four years, with pricing fixed for the
first two years and adjusted prices in the third and fourth years. The Company
is coordinating Monfort and Lynn activities with those of the refrigerated
group.
The Tran-Star, Monfort and Lynn acquisitions were accounted for using the
purchase method of accounting. Accordingly, the purchase price was allocated to
the assets acquired and liabilities assumed based on their estimated fair values
at the date of acquisition. The total purchase price including cash, note
payable, miscellaneous acquisition costs and liabilities assumed was $42.0
million for Tran-Star and $35.2 million for Monfort and Lynn. The excess of
the purchase price over fair values of the net assets acquired has been recorded
as goodwill.
During the third quarter of 1996, AmeriTruck purchased all of the
outstanding stock of KTL, Inc. ("KTL") for a purchase price of $8.1 million in
cash and 225,000 shares of Class A common stock of AmeriTruck valued at
$900,000. KTL is a trucking company founded in 1983 which specializes in the
truckload transportation of refrigerated commodities and less-than-truckload
shipments requiring expedited, timed-delivery services. At the time of
purchase, KTL operated approximately 140 tractors and 300 trailers and employed
approximately 300 persons, of whom 240 were drivers and many of who operated as
two-driver teams.
The KTL acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values at the
date of acquisition. The total purchase price including cash, common stock,
miscellaneous acquisition costs and liabilities assumed was $21.9 million. The
excess of the purchase price over the fair values of the net assets acquired has
been recorded as goodwill.
In February 1996, the Company, through CMS Transportation Services, Inc.,
purchased certain assets of Freymiller Trucking Inc. ("Freymiller") in order to
supplement its existing temperature-controlled trucking business. Freymiller
had been the subject of a Chapter 11 bankruptcy proceeding in Oklahoma. 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
17
<PAGE>
and trailers sold by Freymiller out of the ordinary course of business
(with all of the foregoing referred to as the "Freymiller 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 Freymiller 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.
In April 1996, CMS Transportation Services, Inc. changed its corporate name
to "AmeriTruck Refrigerated Transport, Inc." ("ART"), and the distribution
functions previously conducted under the corporate name "CMS Transportation
Services, Inc." were continued as a division of ART. In addition, in June 1996,
the business operations of CBS, a general freight carrier (which then operated
under the name "CBS Express, Inc."), were transferred to Scales. In December
1996, the distribution functions of the CMS Transportation division of ART were
transferred to CBS and its name was changed to "CMS Transportation Services,
Inc." ("CMS").
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 revolving credit facilities, the Volvo Line of
Credit and the FINOVA Credit Facility, which has given AmeriTruck the ability to
pursue acquisitions that the Company could not otherwise fund through cash
provided by operations. In addition to revolving credit Facilities, the Company
may finance its acquisitions through equity issuances, seller financing and
other debt financings. However, any acquisitions will be subject to approval by
FINOVA and meeting the tests for debt incurrence under the Indenture for the
Subordinated Notes.
In June, the Company completed the acquisition of Tran-Star and in May the
acquisition of Monfort and Lynn. See "Capital Expenditures and Resources" above
for additional information regarding these acquisitions.
The Company is a holding company with no operations of its own. The
Company's ability to make required interest payments on the Subordinated 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.
OTHER MATTERS
Inflation and Fuel Costs
Inflation can be expected to have an impact on the Company's earnings.
Extended periods of escalating costs or fuel price increases without
compensating freight rate increases would adversely affect the Company's results
of operations. According to a Department of Energy survey, reported by the
American Trucking Association, the average price of diesel fuel for the nine
months ended September 30, 1997 was virtually unchanged from the average price
for the nine months ended September 30, 1996. The Company's fuel prices are
slightly below the national average due to the Company's ability to buy fuel at
volume discounts. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Expenses."
18
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FORWARD LOOKING STATEMENTS AND RISK FACTORS
From time to time, the Company issues statements in public filings
(including this Form 10-Q) or press releases, or officers of the Company make
public oral statements with respect to the Company, that may be considered
forward-looking within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. Such forward-looking
statements in this Form 10-Q include statements concerning future cost savings,
projected levels of capital expenditures and the timing of deliveries of new
trucks and trailers, the Company's financing plans, the Company's ability to
meet its future cash needs from borrowings under its credit facilities, equity
financings and from cash generated from operations, the Company's Transportation
Services Agreement with Subsidiaries of ConAgra, driver recruitment and training
and the Company's pursuit of opportunistic acquisitions. These forward-looking
statements are based on a number of risks and uncertainties, many of which are
beyond the Company's control. The Company believes that the following important
factors, among others, could cause the Company's actual results for its 1997
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: the
adverse impact of inflation and rising fuel costs; the Company's substantial
leverage and its effect on the Company's ability to pay principal and interest
on the Subordinated Notes and the Company's ability to incur additional
financing or equity to fund its operations, to pursue other business
opportunities and to withstand any adverse economic and industry conditions; the
risk that the Company will not be able to integrate the Operating Companies'
businesses on an economic basis or that any anticipated economies of scale or
other cost savings will be realized; the ability of the Company to identify
suitable acquisition candidates, complete acquisitions or successfully integrate
any acquired businesses; competition; the ability of the Company to attract and
retain qualified drivers; and the Company's dependence on key management
personnel.
These and other applicable risk factors are discussed in more detail in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
other filings the Company has made with the Securities and Exchange Commission
and are incorporated by reference.
19
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is 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 affect on the
Company's consolidated financial position, operations or liquidity.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.4 Master Lease Agreement, dated as of August 14,1997,
between the Company and Transamerica Business
Credit Corporation.
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
B. Reports on Form 8-K
On July 11, 1997, the Company filed a report on Form 8-K in connection
with the acquisition of Tran-Star. On August 6, 1997, the Company filed
an amendment on Form 8-K/A.
Items 2, 3, 4, and 5 of Part II were not applicable and have been
omitted.
20
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERITRUCK DISTRIBUTION CORP.
By: /s/ Michael L. Lawrence
---------------------------------
Michael L. Lawrence
Chairman of the Board and
Chief Executive Officer
By: /s/ Kenneth H. Evans, Jr.
---------------------------------
Kenneth H. Evans, Jr.
Treasurer and Chief Financial and
Accounting Officer
Date: November 14, 1997
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
EXHIBIT INDEX
Page
Exhibit Number Description Number
- -------------- ----------- ------
10.4 Master Lease Agreement, dated as of
August 14, 1997, between the Company
and Transamerica Business Credit Corporation
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
<PAGE>
Exhibit 10.4
MASTER LEASE AGREEMENT
Lessor: TRANSAMERICA BUSINESS CREDIT CORPORATION
RIVERWAY II
WEST OFFICE TOWER
9399 WEST HIGGINS ROAD
ROSEMONT, ILLINOIS 60018
Lessee: Ameritruck Distribution Corp. and Co-Lessees as identified in
paragraph 36
301 Commerce, Suite 1101
Fort Worth Texas 76102
The lessor pursuant to this Master Lease Agreement ("Agreement") is Transamerica
Business Credit Corporation ("Lessor"). All equipment, together with all
present and future additions, parts, accessories, attachments, substitutions,
repairs, improvements and replacements thereof or thereto, which are the subject
of a Lease (as defined in the next sentence) shall be referred to as
"Equipment"; provided, however, mobile communications and satellite tracking
systems installed shall not become part of the Equipment unless specifically
provided otherwise on a "Schedule" (as defined below). Simultaneous with the
execution and delivery of this Agreement, the parties are entering into one or
more Lease Schedules (each, a "Schedule") which refer to and incorporate by
reference this Agreement, each of which constitutes a lease (each, together with
all addendums, riders, schedules, and exhibits thereto, a "Lease") for the
Equipment specified therein. Additional details pertaining to each Lease are
specified in the applicable Schedule. Each Schedule that the parties hereafter
enter into shall constitute a Lease. Lessor has no obligation to enter into any
additional leases with, or extend any future financing to, Lessee.
1. LEASE. Subject to and upon all of the terms and conditions of this
Agreement and each Schedule, Lessor hereby agrees to lease to Lessee and Lessee
hereby agrees to lease from Lessor the Equipment for the Term (as defined in
Paragraph 2 below) thereof.
2. TERM. Each Lease shall be effective and the term of each Lease
("Term") shall commence on the date of execution of the applicable Schedule and,
unless sooner terminated (as hereinafter provided), shall expire on the Purchase
Date specified in each Schedule; provided, however, that obligations due to be
performed by the Lessee during the Term shall continue until they have been
performed in full.
3. RENT. Lessee shall pay as rent to Lessor, for use of the Equipment
during the Term, rental payments equal to the sum of all rental payments
including, without limitation, security deposits, and interim rents payable in
the amounts and on the dates specified in the applicable Schedule ("Rent'). If
any Rent or other amount payable by Lessee is not paid within ten days after the
day on which it becomes payable, Lessee will pay on demand, as a late charge, an
amount equal to 5% of such unpaid Rent or other amount but only to the extent
permitted by applicable law. All payments provided for herein shall be payable
to Lessor at its address specified above, or at any other place designated by
Lessor.
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4. LEASE NOT CANCELABLE; LESSEE'S OBLIGATIONS ABSOLUTE. No Lease may be
canceled or terminated except as expressly provided herein. Lessee's obligation
to pay all Rent due or to become due hereunder shall be absolute and
unconditional and shall not be subject to any delay, reduction, set-off,
defense, counterclaim or recoupment for any reason whatsoever, including any
failure of the Equipment or any representations by the manufacturer or the
vendor thereof. If the Equipment is unsatisfactory for any reason, Lessee shall
make any claim solely against the manufacturer or the vendor thereof and shall,
nevertheless, pay Lessor all Rent payable hereunder.
5. SELECTION AND USE OF EQUIPMENT. Lessee agrees that it shall be
responsible for the selection, use of, and results obtained from, the Equipment
and any other associated equipment or services.
6. WARRANTIES. LESSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN
OR CONDITION OF THE EQUIPMENT OR ITS MERCHANTABILITY, SUITABILITY, QUALITY OR
FITNESS FOR A PARTICULAR PURPOSE, AND HEREBY DISCLAIMS ANY SUCH WARRANTY.
LESSEE SPECIFICALLY WAIVES ALL RIGHTS TO MAKE A CLAIM AGAINST LESSOR FOR BREACH
OF ANY WARRANTY WHATSOEVER. LESSEE LEASES THE EQUIPMENT "AS IS." IN NO EVENT
SHALL LESSOR HAVE ANY LIABILITY FOR, NOR SHALL LESSEE HAVE ANY REMEDY AGAINST
LESSOR FOR, ANY LIABILITY, CLAIM, LOSS, DAMAGE OR EXPENSE CAUSED DIRECTLY OR
INDIRECTLY BY THE EQUIPMENT OR ANY DEFICIENCY OR DEFECT THEREOF OR THE
OPERATION, MAINTENANCE OR REPAIR THEREOF OR ANY CONSEQUENTIAL DAMAGES AS THAT
TERM IS USED IN SECTION 2-719(3) OF THE MODEL UNIFORM COMMERCIAL CODE OR SIMILAR
STATUTE ("UCC"). Lessor grants to Lessee, for the sole purpose of prosecuting a
claim, the benefits of any and all warranties made available by the manufacturer
or the vendor of the Equipment to the extent assignable.
7. DELIVERY. Lessor hereby appoints Lessee as Lessor's agent for the sole
and limited purpose of accepting delivery of the Equipment from each vendor
thereof. Lessee shall pay any and all delivery and installation charges.
Lessor shall not be liable to Lessee for any delay in, or failure of, delivery
of the Equipment.
8. RENEWAL. So long as no Event of Default or event which, with the
giving of notice, the passage of time, or both, would constitute an Event of
Default, shall have occurred and be continuing, Lessee may renew a Lease on the
terms and conditions agreed upon by Lessee and Lessor. Lessee shall request a
renewal in writing to Lessor not less than one hundred eighty days prior to the
expiration of the applicable Lease. The Rent shall be determined by Lessor by
using the projected fair market value of the Equipment on an "In-place, In-use"
basis as of the commencement of such renewal term.
9. PURCHASE OPTION. So long as no Event of Default or event which, with
the giving of notice, the passage of time, or both, would constitute an Event of
Default, shall have occurred and be continuing, Lessee may, upon written notice
to Lessor received at lease one hundred eighty days before the expiration of a
Term, purchase all the Equipment covered by the applicable Lease on the date
specified therefor in the applicable Schedule ("Purchase Date"). The purchase
price
2
<PAGE>
for such Equipment (the "Purchase Price"), shall be its fair market value on an
"In-place, In use" basis, as mutually agreed by Lessor and Lessee, or, if they
cannot agree, as determined by an independent appraiser selected by Lessor and
approved by Lessee, which approval will not be unreasonably delayed or withheld.
Lessee shall pay the cost of any such appraisal. On the Purchase Date for any
Equipment, Lessee shall pay to Lessor the Purchase Price, together with all
sales and other taxes applicable to the transfer of the Equipment and any other
amount payable and arising hereunder, in immediately available funds, whereupon
Lessor shall transfer to Lessee, without recourse or warranty of any kind,
express or implied, all of Lessor's right, title and interest in and to such
Equipment on an "As Is, Where Is" basis.
10. OWNERSHIP; INSPECTION; MARKING; FINANCING STATEMENTS. Lessee shall
affix to the Equipment any labels supplied by Lessor indicating ownership of
such Equipment. The Equipment is and shall be the sole property of Lessor.
Lessee shall have no right, title or interest therein, except as lessee under a
Lease. The Equipment is and shall at all times be and remain personal property
and shall not become a fixture. Lessee shall obtain and record such instruments
and take such steps as may be necessary to prevent any Person from acquiring any
rights in the Equipment by reason of the Equipment being claimed or deemed to be
real property. Upon request by Lessor, Lessee shall obtain and deliver to
Lessor valid and effective waivers, in recordable form, by the owners, landlords
and mortgagees of the real property upon which the Equipment is located or
certificates of Lessee that it is the owner of such real property or that such
real property is neither leased nor mortgaged. Lessee shall make the Equipment
and its maintenance records available for inspection by Lessor at reasonable
times and upon reasonable notice. Lessee shall execute and deliver to Lessor
for filing any UCC financing statements or similar documents Lessor may request.
11. EQUIPMENT USE. Lessee agrees that the Equipment will be operated by
competent, qualified personnel in connection with Lessee's business for the
purpose for which the Equipment was designed and in accordance with applicable
operating instructions, laws and government regulations, and that Lessee shall
use every reasonable precaution to prevent loss or damage to the Equipment from
fire and other hazards. Lessee shall procure and maintain in effect all orders,
licenses, certificates, permits, approvals and consents required by federal,
state or local laws or by any governmental body, agency or authority in
connection with the delivery, installation, use and operation of the Equipment,
the absence of which, individually, or in total, would not have a material
adverse effect upon the business of Lessee.
12. MAINTENANCE. Lessee, at its sole cost and expense, shall keep the
Equipment in a suitable environment as specified by the manufacturer's
guidelines or the equivalent and meet all recertification requirements, and
shall maintain the Equipment in its original condition and working order,
ordinary wear and tear excepted. At the request of Lessor, Lessee shall furnish
all proof of maintenance.
13. ALTERATION; MODIFICATIONS; PARTS. Lessee may alter or modify the
Equipment only with the prior written consent of Lessor. Any alteration shall
be removed and the Equipment restored to its normal, unaltered condition at
Lessee's expense (without damaging the Equipment's originally intended function
or its value) prior to its return to Lessor. Any part installed in connection
with warranty or maintenance service or which cannot be removed in accordance
with the preceding sentence shall be the property of Lessor.
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<PAGE>
14. RETURN OF EQUIPMENT. Except for Equipment that has suffered a
Casualty Loss (as defined in Paragraph 15 below) and is not required to be
repaired pursuant to Paragraph 15 below or Equipment for which the Lease has
been renewed pursuant to Paragraph 8 above or purchased by Lessee pursuant to
Paragraph 9 above, upon expiration or termination of the Term of a Lease, or
upon demand by Lessor pursuant to Paragraph 22 below, Lessee shall contact
Lessor for shipping instructions and, at Lessees own risk, immediately return
the Equipment, freight prepaid, to a location in the continental United States
specified by Lessor. At the time of such return to Lessor, the Equipment shall
(i) be in the operating order, repair and condition as required by or specified
in the original specifications and warranties of each manufacturer and vendor
thereof, ordinary wear and tear excepted, and meet all recertification
requirements and (ii) be capable of being immediately assembled and operated by
a third party purchaser or third party lessee without further repair,
replacement, alterations or improvements, and in accordance and compliance with
any and all statutes, laws, ordinances, rules and regulations of any
governmental authority or any political subdivision thereof applicable to the
use and operation of the Equipment. Except as otherwise provided under Paragraph
8 or 9 hereof, at least one hundred eighty days before the expiration of any
Term, Lessee shall give Lessor notice of its intent to return the Equipment at
the end of such Term. During such one hundred eighty-day period, Lessor and its
prospective purchasers or lessees shall have the right of reasonable access to
the premises on which the Equipment is located to inspect the Equipment, and
Lessee shall cooperate in all other reasonable respects with Lessor's
remarketing of the Equipment; provided, however, that nothing herein shall
require Lessee to unreasonably interrupt or delay any shipments in transit or to
incur any unreasonable empty miles in connection with any such inspection or to
unreasonably disrupt Lessee's business. The provisions of this Paragraph 14 are
of the essence of the Lease, and upon application to any court of equity having
jurisdiction in the premises, Lessor shall be entitled to a decree against
Lessee requiring specific performance of the covenants of Lessee set forth in
this Paragraph 14. If Lessee fails to return Equipment when required, the terms
and conditions of the Lease shall continue to be applicable and Lessee shall
continue to pay Rent until the Equipment is received by Lessor.
15. CASUALTY INSURANCE; LOSS OR DAMAGE. Lessee will maintain, at its own
expense, liability and property damage insurance relating to the Equipment,
insuring against such risks as are customarily insured against on the type of
equipment leased hereunder by businesses in which Lessee is engaged in such
amounts, in such form, and with insurers satisfactory to Lessor; provided,
however, that the amount of insurance against damage or loss shall not be less
than the greater of (a) the replacement value of the Equipment and (b) the
stipulated loss value of the Equipment specified in the applicable Schedule
("Stipulated Loss Value"); further provided, however, that Lessee shall have the
right to self-insure the Equipment against loss or damage (but not liability
insurance). Each liability insurance policy shall provide coverage (including
contractual and personal injury coverage) of not less than $1,000,000 or the
amount required by law, whichever is greater for each occurrence, name Lessor as
an additional insured and be primary as respects of any other insurance. If
Lessee fails to insure the Equipment as required, Lessor shall have the right
but not the obligation to obtain such insurance, and the cost of the insurance
shall be for the account of Lessee due as part of the next due Rent. Lessee
consents to Lessor's release, upon its failure to obtain appropriate insurance
coverage, of any and all information necessary to obtain insurance with respect
to the Equipment or Lessor's interest therein.
4
<PAGE>
Until the Equipment is returned to and received by Lessor as provided in
Paragraph 14 above, Lessee shall bear the entire risk of theft or destruction
of, or damage to, the Equipment including, without limitation, any condemnation,
seizure or requisition of title or use ("Casualty Loss"). No Casualty Loss
shall relieve Lessee from its obligations to pay Rent except as provided in
clause (b) below. When any Casualty Loss occurs, Lessee shall immediately
notify Lessor and, at the option of Lessor, shall promptly (a) place such
Equipment in good repair and working order; or (b) pay Lessor an amount equal to
the Stipulated Loss Value of such Equipment and all other amounts (excluding
Rent) payable by Lessee hereunder, together with a late charge on such amounts
at a rate per annum equal to the rate imputed in the Rent payments hereunder (as
reasonably determined by Lessor) from the date of the Casualty Loss through the
date of payment of such amounts, whereupon Lessor shall transfer to Lessee,
without recourse or warranty (express or implied), all of Lessor's interest, if
any, in and to such Equipment on an "AS IS, WHERE IS" basis.
16. TAXES. Lessee shall pay when due, and indemnify and hold Lessor
harmless from, all sales, use, excise and other taxes, charges, and fees
(including, without limitation, income, franchise, business and occupation,
gross receipts, sales, use, licensing, registration, titling, personal property,
stamp and interest equalization taxes, levies, imposts, duties, charges or
withholdings of any nature), and any fines, penalties or interest thereon,
imposed or levied by any governmental body, agency or tax authority upon or in
connection with the Equipment, its purchase, ownership, delivery, leasing,
possession, use or relocation of the Equipment or otherwise in connection with
the transactions contemplated by each Lease or the Rent thereunder, excluding
taxes on or measured by the net income of Lessor. Upon request, Lessee will
provide proof of payment. Unless Lessor elects otherwise, Lessor will pay all
property taxes on the Equipment for which Lessee shall reimburse Lessor promptly
upon request. Lessee shall timely prepare and file all reports and returns
which are required to be made with respect to any obligation of Lessee under
this Paragraph 16. Lessee shall, to the extent permitted by law, cause all
billings of such fees, taxes, levies, imposts, duties, withholdings and
governmental charges to be made to Lessor in care of Lessee. Upon request,
Lessee will provide Lessor with copies of all such billings.
17. LESSOR'S PAYMENT. If Lessee fails to perform its obligations under
Paragraph 15 or 16 above, or Paragraph 23 below, Lessor shall have the right to
substitute performance, in which case, Lessee shall immediately reimburse Lessor
therefor.
18. GENERAL INDEMNITY. Each Lease is a net lease. Therefore, Lessee
shall indemnify Lessor and its successors and assigns against, and hold Lessor
and its successors and assigns harmless from, any and all claims, actions,
damages, obligations, liabilities and all costs and expenses, including, without
limitation, legal fees, incurred by Lessor or its successors and assigns arising
out of each Lease including, without limitation, the purchase, ownership,
delivery, lease, possession, maintenance, condition, use or return of the
Equipment, or arising by operation of law. Lessee agrees that upon written
notice by Lessor of the assertion of any claim, action, damage, obligation,
liability or lien, Lessee shall assume full responsibility for the defense
thereof. Any payment pursuant to this Paragraph (except for any payment of
Rent) shall be of such amount as shall be necessary so that, after payment of
any taxes required to be paid thereon by Lessor, including taxes on or measured
by the net income of Lessor, the balance will equal the amount due hereunder.
The provisions of this Paragraph with regard to matters arising during a Lease
shall survive the expiration or termination of such Lease.
5
<PAGE>
19. ASSIGNMENT OF LESSEE. Lessee shall not, without the prior written
consent of Lessor, (a) assign, transfer, pledge or otherwise dispose of any
Lease or Equipment, or any interest therein; (b) sublease or lend any Equipment
or permit it to be used by anyone other than Lessee and its employees or its
wholly-owned operating subsidiaries and their employees and independent
contractors; or (c) move any Equipment from the location specified for it in the
applicable Schedule, except that Lessee may move Equipment to another location
within the United States provided that Lessee has delivered to Lessor (A) prior
written notice thereof and (B) duly executed financing statements and other
agreements and instruments (all in form and substance satisfactory to Lessor)
necessary or, in the opinion of the Lessor, desirable to protect Lessor's
interest in such Equipment. Notwithstanding anything to the contrary in the
immediately preceding sentence, Lessee may keep any Equipment consisting of
motor vehicles or rolling stock at any location in the United States and may
utilize the Equipment in its regular business to and from points in Canada.
20. ASSIGNMENT BY LESSOR. Lessor may assign its interest or grant a
security interest in any Lease and the Equipment individually or together, in
whole or in part. If Lessee is given written notice of any such assignment, it
shall immediately make all payments of Rent and other amounts hereunder directly
to such assignee. Each such assignee shall have all of the rights of Lessor
under each Lease assigned to it. Lessee shall not assert against any such
assignee any set-off, defense or counterclaim that Lessee may have against
Lessor or any other person.
21. DEFAULT; NO WAIVER. Lessee or any guarantor of any or all of the
obligations of Lessee hereunder (together with Lessee, the "Lease Parties")
shall be in default under each Lease upon the occurrence of any of the following
events (each, an "Event of Default"): (a) Lessee fails to pay when due any
amount required to be paid by Lessee under or in connection with any Lease; (b)
any of the Lease Parties fails to perform any other provisions under or in
connection with a Lease or violates any of the covenants or agreements of such
Lease Party under or in connection with a Lease; (c) any representation made or
financial information delivered or furnished by any of the Lease Parties under
or in connection with a Lease shall prove to have been inaccurate in any
material respect when made; (d) any of the Lease Parties makes an assignment for
the benefit of creditors, whether voluntary or involuntary, or consents to the
appointment of a trustee or receiver, or if either shall be appointed for any of
the Lease Parties or for a substantial part of its property without its consent
and, in the case of any such involuntary proceeding, such proceeding remains
undismissed or unstayed for forty-five days following the commencement thereof;
(e) any petition or proceeding is filed by or against any of the Lease Parties
under any Federal or State bankruptcy or insolvency code or similar law and, in
the case of any such involuntary petition or proceeding, such petition or
proceeding remains undismissed or unstayed for forty-five days following the
filing or commencement thereof, or any of the Lease Parties takes any action
authorizing any such petition or proceeding; (f) any of the Lease Parties fails
to pay when due any indebtedness in excess of $1,000,000 for borrowed money or
under conditional sales or installment sales contracts or similar agreements,
leases or obligations evidenced by bonds, debentures, notes or other similar
agreements or instruments to any creditor (including Lessor under any other
agreement) after any and all applicable cure periods therefor shall have
elapsed; (g) any judgment over $1,000,000 shall be rendered against any of the
Lease Parties which shall remain unpaid or unstayed for a period of sixty days;
(h) any of the Lease Parties shall dissolve, liquidate, wind up or cease its
business, sell or otherwise dispose of all or substantially all of its assets,
make any material change in its capital structure or lines of business, amend or
modify
6
<PAGE>
its name, merge or consolidate with any other entity other than one of the Lease
Parties, suffer any loss or suspension of any material license, permit or other
right or asset necessary to the profitable conduct of its business, fail to pay
its debts as they mature, or call a meeting for purposes of compromising its
debts; (i) any of the Lease Parties shall deny or disaffirm its obligations
hereunder or under any of the documents delivered in connection herewith; (j)
there has been a change in control, as defined in the Indenture Agreement dated
November 15, 1995 among Ameritruck Distribution Corp. and the Guarantors Party
named therein and The Bank of New York, as Trustee; or (k) that the capital
stock of the Lease Parties becomes subject to any judicial or statutory lien not
discharged within (60) days, or becomes subject to any lien, security interest
or encumbrance, except in connection with a pledge of stock to FINOVA Capital
Corporation as security for a line-of-credit facility or any replacement
thereof. After receipt of notice of default from Lessor, Lessee will have (15)
days to cure any default other than the default for Lessee failing to pay when
due any amount required to be paid by Lessee under or in connection with any
Lease.
22. REMEDIES. Upon the occurrence and continuation of an Event of
Default, Lessor shall have the right, in its sole discretion, to exercise any
one or more of the following remedies: (a) terminate each Lease; (b) declare
any and all Rent and other amounts then due and any and all Rent and other
amounts to become due under each Lease immediately due and payable; (c) take
possession of any or all items of Equipment, wherever located, without demand,
notice, court order or other process of law, and without liability for entry to
Lessee's premises, for damage to Lessee's property or otherwise; (d) demand that
Lessee return any or all Equipment to Lessor in accordance with Paragraph 14
above, and, for each day that Lessee shall fail to return any item of Equipment,
Lessor may demand an amount equal to the Rent payable for such Equipment in
accordance with Paragraph 14 above; (e) lease, sell or otherwise dispose of the
Equipment in a commercially reasonable manner, with or without notice and on
public or private bid; (f) recover the following amounts from the Lessee (as
damages, including reimbursement of costs and expenses, liquidated for all
purposes and not as a penalty): (i) all costs and expenses of Lessor
reimbursable to it hereunder, including, without limitation, expenses of
disposition of the Equipment, legal fees and all other amounts specified in
Paragraph 23 below; (ii) an amount equal to the sum of (A) any accrued and
unpaid Rent through the later of (1) the date of the applicable default or (2)
the date that Lessor has obtained possession of the Equipment or such other date
as Lessee has made an effective tender of possession of the Equipment to Lessor
(the "Default Date") and (B) if Lessor resells or re-lets the Equipment, Rent at
the periodic rate provided for in each Lease for the additional period that it
takes Lessor to resell or re-let all of the Equipment; (iii) the present value
of all future Rent reserved in the Leases and contracted to be paid over the
unexpired Term of the Leases discounted at five percent simple interest per
annum; (iv) the residual value of the Equipment as of the expiration of the Term
of the applicable Lease; and (v) any indebtedness for Lessee's indemnity under
Paragraph 18 above, plus a late charge at the rate specified in Paragraph 3
above, less the amount received by Lessor, if any, upon sale or re-let of the
Equipment; and (g) exercise any other right or remedy to recover damages or
enforce the terms of the Leases. Lessor may pursue any other rights or remedies
available at law or in equity, including, without limitation, rights or remedies
seeking damages, specific performance and injunctive relief. Any failure of
Lessor to require strict performance by Lessee, or any waiver by Lessor of any
provision hereunder or under any Schedule, shall not be construed as a consent
or waiver of any other breach of the same or of any other provision. Any
amendment or waiver of any provision hereof or under any Schedule or consent to
any departure by Lessee herefrom or therefrom shall be in writing and signed by
Lessor.
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<PAGE>
No right or remedy is exclusive of any other provided herein or permitted
by law or equity. All such rights and remedies shall be cumulative and may be
enforced concurrently or individually from time to time.
23. LESSOR'S EXPENSE. Lessee shall pay Lessor on demand all costs and
expenses in protecting and enforcing Lessor's rights and interests in each Lease
and the Equipment, including, without limitation, legal, collection and
remarketing fees and expenses incurred by Lessor in enforcing the terms,
conditions or provisions of each Lease or, upon the occurrence and continuation
of an Event of Default.
24. LESSEE'S WAIVERS. To the extent permitted by applicable law, Lessee
hereby waives any and all rights and remedies conferred upon a lessee by
Sections 2A-508 through 2A-522 of the UCC. To the extent permitted by
applicable law, Lessee also hereby waives any rights now or hereafter conferred
by statute or otherwise which may require Lessor to sell, lease or otherwise use
any Equipment in mitigation of Lessor's damages as set forth in Paragraph 22
above or which may otherwise limit or modify any of Lessor's rights or remedies
under Paragraph 22. Any action by Lessee against Lessor for any default by
Lessor under any Lease shall be commenced within one year after any such cause
of action accrues.
25. NOTICES; ADMINISTRATION. Except as otherwise provided herein, all
notices, approvals, consents, correspondence or other communications required or
desired to be given hereunder shall be given in writing and shall be delivered
by confirmed facsimile telephone transmission, overnight courier, hand delivery
or certified or registered mail, postage prepaid, if to Lessor, then to 13760
Noel Road, Suite 1100, Dallas, Texas 75420, Attention: Division Operations
Manager, with a copy to Lessor at Riverway II, West Office Tower, 9399 West
Higgins Road, Rosemont, Illinois 60018, Attention: Legal Department or such
other address as shall be designated by Lessor to Lessee. All such notices and
correspondence shall be effective when received.
26. REPRESENTATIONS. Lessee represents and warrants to Lessor that (a)
Lessee is duly organized, validly existing and in good standing under the laws
of the State of its incorporation; (b) the execution, delivery and performance
by Lessee of this Agreement are within Lessee's powers, have been duly
authorized by all necessary action, and do not contravene (i) Lessee's
organizational documents or (ii) any law or contractual restriction binding on
or affecting Lessee; (c) no authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by Lessee of this
Agreement; and (d) each Lease constitutes the legal, valid and binding
obligations of Lessee enforceable against Lessee in accordance with its terms.
27. FURTHER ASSURANCES. Lessee, upon the request of Lessor, will
execute, acknowledge, record or file, as the case may be, such further documents
and do such further acts as may be reasonably necessary, desirable or proper to
carry out more effectively the purposes of this Agreement. Lessee hereby
appoints Lessor as its attorney-in-fact to execute on behalf of Lessee and
authorizes Lessor to file without Lessee's signature any UCC financing
statements and amendments Lessor deems advisable.
8
<PAGE>
28. FINANCIAL STATEMENTS. Lessee shall deliver to Lessor: (a) as soon as
available, but not later than 120 days after the end of each fiscal year of
Lessee and its consolidated subsidiaries, unqualified audited financial
statements, including the consolidated balance sheet, income statement and
statements of cash flows and shareholders equity for Lessee and its consolidated
subsidiaries (the "Financial Statement") for such year, reported on by
independent certified public accountants; and (b) as soon as available, but not
later than 60 days after the end of each of the first three fiscal quarters in
any fiscal year of Lessee and its consolidated subsidiaries, the Financial
Statements for such fiscal quarter, together with a certification duly executed
by a responsible officer of Lessee that such Financial Statements have been
prepared in accordance with generally accepted accounting principles and are
fairly stated in all material respects (subject to normal year-end audit
adjustments).
29. CONSENT TO JURISDICTION. Lessee irrevocably submits to the
jurisdiction of any Illinois state or federal court sitting in Illinois for any
action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, and Lessee irrevocably agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
Illinois state or federal court.
30. WAIVER OF JURY TRIAL. LESSEE AND LESSOR IRREVOCABLY WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
31. FINANCE LEASE. Lessee and Lessor agree that each Lease is a "Finance
Lease" as defined by Section 2A-103(g) of the UCC. Lessee acknowledges that
Lessee has reviewed and approved each written Supply Contract (as defined by UCC
2A-103 (y)) covering Equipment purchased from each "Supplier" (as defined by UCC
2A-103 (x)) thereof.
32. NO AGENCY. Lessee acknowledges and agrees that neither the
manufacturer or supplier, nor any salesman, representative or other agent of the
manufacturer or supplier, is an agent of Lessor. No salesman, representative or
agent of the manufacturer or supplier is authorized to waive or alter any term
or condition of this Agreement or any Schedule and no representation as to the
Equipment or any other matter by the manufacturer or supplier shall in any way
affect Lessee's duty to pay Rent and perform its other obligations as set forth
in this Agreement or any Schedule.
33. SPECIAL TAX INDEMNIFICATION. Lessee acknowledges that Lessor, in
determining the Rent due hereunder, has assumed that certain tax benefits as are
provided to an owner of property under the Internal Revenue Code of 1986, as
amended (the "Code"), and under applicable state tax law, including, without
limitation, depreciation deductions under Section 168 (b) of the Code, and
deductions under Section 163 of the Code in an amount at least equal to the
amount of interest paid or accrued by Lessor with respect to any indebtedness
incurred by Lessor in financing its purchase of the Equipment, are available to
Lessor as a result of the lease of the Equipment. In the event (other than lack
of sufficient income by Lessor), Lessor is unable to obtain such tax benefits
for any reason, is required to include in income any amount other than the Rent
or is required to recognize income in respect of the Rent earlier than
anticipated pursuant to this Agreement, Lessee shall pay Lessor additional rent
("Additional Rent") in a lump sum in an amount needed to provide Lessor with
9
<PAGE>
the same after-tax yield and after-tax cash flow as would have been realized by
Lessor had Lessor (i) been able to obtain such tax benefits, (ii) not been
required to include any amount in income other than the Rent and (iii) not been
required to recognize income in respect of the Rent earlier than anticipated
pursuant to this Agreement. The Additional Rent shall be computed by Lessor,
subject to verification by Lessee. The Additional Rent shall be due immediately
upon written notice by Lessor to Lessee of Lessor's inability to obtain tax
benefits, the inclusion of any amount in income other than the Rent or the
recognition of income in respect of the Rent earlier than anticipated pursuant
to this Agreement. The provisions of this Paragraph 33 shall survive the
termination of this Agreement.
34. GOVERNING LAW; SEVERABILITY. EACH LEASE SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF ILLINOIS. IF ANY PROVISION SHALL BE HELD TO BE INVALID OR
UNENFORCEABLE, THE VALIDITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS SHALL
NOT IN ANY WAY BE AFFECTED OR IMPAIRED. LESSEE ACKNOWLEDGES THAT LESSEE HAS READ
THIS AGREEMENT AND THE SCHEDULE HERETO, UNDERSTANDS THEM, AND AGREES TO BE BOUND
BY THEIR TERMS AND CONDITIONS. FURTHER, LESSEE AND LESSOR AGREE THAT THIS
AGREEMENT AND THE SCHEDULES DELIVERED IN CONNECTION HEREWITH FROM TIME TO TIME
ARE THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES,
SUPERSEDING ALL PROPOSALS OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ALL OTHER
COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF.
35. SECURITY DEPOSIT. Lessee shall pay to Lessor a security deposit in the
amount of 20% of the Equipment Cost (as shown on the Schedule) (the "Security
Deposit"). The Security Deposit shall be held by Lessor, unless applied as
provided herein, until termination of the Lease and full performance of the
obligations of Lessee under the Lease. Upon the occurrence of an Event of
Default, and notwithstanding a subsequent cure of such Event of Default, Lessor
may apply the Security Deposit to the obligations of Lessee under the Lease, in
the manner chosen by Lessor. Upon complete performance of and payment of the
obligations of Lessee under the Lease, and provided Lessor has not previously
applied the Security Deposit as herein provided, the Security Deposit shall be
returned to Lessee.
36. The term "Lessee" as used in the Lease and related documents shall
refer to Ameritruck Distribution Corp., Ameritruck Equipment Corp., J.C.
Bangerter & Sons, Inc., CMS Transportation Services, Inc., Ameritruck
Refrigerated Transport, Inc., KTL, Inc., Scales Transport Corporation, Thompson
Bros., Inc., W & L Motor Lines, Inc., Monfort Transportation Company, Lynn
Transportation Co., Inc., and Transtar, Inc., individually and collectively.
Notwithstanding anything the contrary contained in the Lease or any document
executed in connection therewith, each Lessee shall be jointly and severally
liable for any and all liabilities and obligations of Lessee arising under or in
connection with the Lease.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Master Lease Agreement to be duly executed by their duly authorized officers
as of this 14 day of August, 1997.
AMERITRUCK DISTRIBUTION CORP., AND EVERY OTHER CO-LESSEE UNDER THE MASTER LEASE
By: /s/ KENNETH H. EVANS, JR.
-----------------------------------
Kenneth H. Evans, Jr., on behalf of each Co-Lessee
Title: Executive Vice President of Ameritruck Distribution Corp., and Treasurer
------------------------------------------------------------------------
of all other Co-Lessees
-----------------------
11
<PAGE>
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 Nine Months Ended
September 30, September 30,
------------------ -------------------
1997* 1996* 1997* 1996*
--------- ------- --------- --------
<S> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes and
extraordinary items $(2,250) $ 125 $(14,544) $ (516)
------- ------ -------- -------
Fixed charges:
Interest expense and amortization of
debt discount and premium on all
indebtedness 5,728 4,523 15,001 12,166
Portion of rent under long-term
operating leases representative of an
interest factor 930 374 2,331 1,133
Redeemable preferred stock dividend
requirements 56 - 80 -
------- ------ -------- -------
Total fixed charges 6,714 4,897 17,412 13,299
------- ------ -------- -------
Earnings before income taxes and fixed
charges $ 4,464 $5,022 $ 2,868 $12,783
======= ====== ======== =======
Ratio of earnings to fixed charges /(1)/ - 1.03x - -
======= ======= ======== =======
</TABLE>
/(1)/ The Company's earnings were insufficient to cover fixed charges by
$2,250 for the three months ended September 30, 1997. The Company's earnings
were also insufficient to cover fixed charges by $14,544 and $516 for the nine
month periods ended September 30, 1997 and 1996.
* Comparisons between periods are affected by acquisitions -- see Note 2
contained in the unaudited Notes to Consolidated Financial Statements.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERITRUCK
DISTRIBUTION CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 906
<SECURITIES> 0
<RECEIVABLES> 46,837
<ALLOWANCES> 1,253
<INVENTORY> 1,969
<CURRENT-ASSETS> 70,581
<PP&E> 159,431
<DEPRECIATION> 35,083
<TOTAL-ASSETS> 266,202
<CURRENT-LIABILITIES> 58,447
<BONDS> 233,867
3,053
0
<COMMON> 42
<OTHER-SE> (11,428)
<TOTAL-LIABILITY-AND-EQUITY> 266,202
<SALES> 0
<TOTAL-REVENUES> 205,444
<CGS> 0
<TOTAL-COSTS> 204,763
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 174
<INTEREST-EXPENSE> 15,001
<INCOME-PRETAX> (14,544)
<INCOME-TAX> (4,799)
<INCOME-CONTINUING> (9,745)
<DISCONTINUED> 0
<EXTRAORDINARY> (243)
<CHANGES> 0
<NET-INCOME> (9,988)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
